The Oxford Observer. PUBLISHED WEEKLY. SATURDAY MARCH 27th 1897 A STATE BANK AND A NATIONAL CURRENCY.

Oxford Observer, Volume VIII, Issue VIII, 27 March 1897, Page 2

The Oxford Observer. PUBLISHED WEEKLY. SATURDAY MARCH 27th 1897 A STATE BANK AND A NATIONAL CURRENCY.

The stock objection to a National paper currency is, "Ob, you can't make wealth with a bale of paper and a printing press." This is — due to the popular ignorance of any distinction between "money" and the "wealth." Money is one of the tools of trade aud commerce, and any country that is without a currency of its own must; continually borrow, for the mere purpose of being supplied with a medium of exchange. Money, to tbe social organisation, is what blood is to the physical one. Therefore, as I consider that the establishment of a State Bank and the issue of a National currency is quite . within the range of practical politics, and compatible with financial soundness aud honesty to our creditors. I propose to show we might avoid future borrowing, carry, on a vigorous public works policy, give financial aid to seHlers, and provide the colony with a plentiful supply of the medium of exchange, by using inconvertible State notes instead of English sovereigns. The best way of showing what might be done io the future is by illustrating what ought to have been done m the past. Let us first consider the Governnisni's recently inaugurated system of giving financial aid to settlers. They went to the English money market, and borrowed a million and a half m m gold (or gold credit) at 8£ per cent. Before the settler can obtain the money he requires, his land or ? property has j to be securely mortgaged to the Gov-. ernment, Therefore, it is the land which forms the basis of security on whicJi the whole transaction rests. Now, instead of borrowing this gold at 8£ per cent, and charging the settler 5, why

should not the following mode of procedure have been carried out? The Government to have m readiness a million and a half of State, notes, which could be made legal tendpr at issue, and which the settler could obtain at lor 1£ per cent.— just enough to pay the expenses of administering the department. By this method, the settler would obtain cheap money, and the Government would save the 3£ per cent, the j now pay for the English gold. In answer to the objection that the notes would be deemed valueless, I assert that the asset which created the negotiable value of the note icoyld \>e the land mortgaged to the Government. If the security of the land mortgaged .is good enough for the. English capitalist to lend his gold upov, it certainly ought to he good enough for the Government to issue an inconvertible State note vpon. Another way m which State notes might be put m circulation is by using them to pay for the contracts on all future works. The present financial method of carrying on a public work* policy by means of loans is so manifestly absurd, that it is marvellous that it should be tolerated by a sane people. Under it, the public works of a colony do not really belong to the State or the people, but to the public creditor — the person who supplies the medium of exchange. Let us take. as a simple illustration the common place example of supplying any of our large towns with a drainage and sewage system. The first thing that is generally done by the niunicipial authorities is to raise a loan. Now, what is this required I for ? Nothing else but ip. obtain a sufficiency of the medium.-of exchange to pay the skilled and manual-labour as the work goes on. 'A sewer ova wharf, harbour- works or a railway >. whtn completed, -is so much ivealth created ivhich did not evist before. Money is required mostly for the purpose of liquidating tin's wealth, so that each person working at it can receive the value of his labour. Does it not appear ridiculous, that when the people of the Colony decide to produce by their labour wealth of a most useful and necessary kind, they should first have to give over the ownership of that public work to bond-holders living out of the country, and pay a continual tribute to those people — m the form of interest — for supplying them with a medium of exchange? With public works carried on by a State note issue — i.e. under a system of public credit, instead of as at present, ■public indebtedness — the following process would be carried out : First, when the public work was decided on and sanctioned by Parliament, Government would /provide the medium for financing ifc, by having m readiness a number of State notes, equal m amount to the proposed expenditure, say, £100,000. The contracts and arrangements for construction would proceed m the usual manner. As the work went on, the workmen and officials would be paid m these notes, which, being legal tender, would circulate as money through the whole community. When the work -was completed, the country would be m possession of a valuable public work without having to pay one penny interest; and the volume of currency ivould have been increased by £100,000. Moreover, the completed work, whether-, ib "s^as railway, harbour work, sewage system, or wharf, would then belong to the people of New Zealand, and not to the British bondholder. . ' * ■ - The adoption of this method is not m- any- way unjust to the public creditor. It does not m any way involve ; repudiation of the gold debt -we have incurred. The debts we have ebntracted to pay m gold, will have to ba met. It merely places us m a position to avert any further borrowing for thu construction of public works. And when we have stopped borrowing, we

shall be m a better position to pay what we already owe. As it is highly probable that the next policy which is brought before the country will contain a proposal to raise a new loan, it will be well for the electors to give the preceding theory their earnest consideration.