THE OTAGO DAILY TIMES TUESDAY, JULY 23, 1935. BANKING AND CURRENCY

Otago Daily Times, Issue 22630, 23 July 1935, Page 8

THE OTAGO DAILY TIMES TUESDAY, JULY 23, 1935. BANKING AND CURRENCY

Too seldom in recent years in New Zealand has a highly-placed banking authority been heard in defence of the institution that he represents. It has long been the fashion for critics of every imaginable shade of political belief and of doubtful status as economic theorists to assail the banking system as the root cause of financial instability in this and other countries. There is, as the Minister of Industries and Commerce said at the annual meeting of the Chamber of Commerce last night, a tremendous amount of ignorance about banking. The most fantastic theories on the control of credit and the general principles of banking practice have been advanced and have found acceptance by unthinking people, or by those whose judgments are clouded either by ignorance or prejudice. Such advocates of the unorthodox and the unsound in the conduct of banking are invariably a minority section of any community, but so persistent are they in their advocacy of the changes they consider necessary for the proper ordering of society that the task of exposing fallacy and humbug in their teachings has to be seriously undertaken. Until quite recently the banks in New Zealand have appeared curi-

ously reluctant to accept a responsibility which, to most people, would seem to be peculiarly their own —that of helping to form an enlightened public opinion on the subject of banking and the vitally important functions of the banks in the maintenance of a sound internal economy. The address delivered by Sir James Grose last

night therefore gains in significance if it implies a determination on the part ’of the banks to be heard at last on a subject on which they have for too long observed an impolitic silence.

Sir James Grose, in that portion of his interesting address to which we refer, spoke of the growth of “ insidious and harmful propaganda advocating the socialisation of credit and the nationalisation of the Dominion’s banking system.” He was able without any difficulty to dispose of the nonsensical charge that the banks, deliberately and for their own purposes, restrict the issue of credit. Banking, after all, is a business, conducted primarily for profit but with a proper regard for the interests of both shareholders and clients. No one can cavil at that. It should be obvious also to the dullest mind that it is not in the interests of any bank to refuse to do business with those with whom it is safe and profitable to deal. Sir James Grose was at pains to point out one very elementary fact—that the greater the amount of sound advance business a bank can attract to itself the greater are its profits. It is not easy to see how the captious, theorist can reconcile this simple truth with the strange conviction that the banks are deliberately restricting credit. There is much more in Sir James’s address that will repay careful study by those who may not have fully comprehended the principles upon which banking practice in New Zealand is firmly established. To those who urge that banking should be under the absolute control of the State he addresses a pertinent question: “ Shall the banks, with all their deposits, be turned over to politicians for manipulation, or shall the experienced officers of the banks in every community continue as the responsible trustees of the earnings and savings of the people of New Zealand ?” Some of those who are loudest in the advocacy of nationalisation of banking are the readiest to fling at the general body of politicians the taunt of incompetence in other administrative spheres. There is a strange logic in such reasoning. Sir James Grose does not speak lightly when he declares that safety would have to be sacrificed before it would be possible for a nationalised banking system to do more than the present trading banks are doing in providing credit for industry and commerce. Sir James Grose offered, also, some valuable observations on conditions essential to any large-scale revival in trade and industry. He reiterated the argument, advanced also by the retiring president of the Chamber, in favour of the breaking down of Protectionist barriers which are obstructing the free flow of commerce between one country and another. He touched briefly, too, on the pressing need for currency stabilisation, a problem which has now definitely forced itself on the attention of all the great trading nations of the world. New Zealand has experienced, as have other countries, the disturbing effects of fluctuating currency values, than which probably no other manifestation of the depression has done more to destroy confidence and slow down the momentum of recovery. It is doubtless strictly true to say, as Sir James Grose said, that a move toward the stabilisation of currencies “ is one direction in which substantial progress will yet be made in solving the immense problem of lost prosperity.”