NATIONAL BANKS.

Otago Witness, Issue 904, 27 March 1869, Page 2

NATIONAL BANKS.

Numberless projects have been made for the establishment in these colonies, in one form or other, of Government Banks. The idea that a National Bank must be a very good thing, if it can only be established on a sound basis and conducted with discretion, is ineradicable in the minds of many who dabble in Political Economy and yield themselves up to the seductions of what iscalled the Currency Question. A National Bank for New Zealand has been afavourite scheme vqith some of those who occupy prominent political positions among us at the present time. Their leading idea, we believe, has pjwyß beep that the credit of the

Government — that, is, of the community as a "whole— might be usefully brought to hear for the benefit of the individual. One of our Wellington contemporaries has recently projected a very different scheme. In his proposals, if we understand them aright, it is the Government that is to reap the benefit by gathering into its own. hands the idle capital of individuals.- The idea at the foundation of this scheme is plausible enough. While the colony is paying comparatively heavy rates of interest upon the loans it has been obliged to raise, vast sums of money are constantly lying unprofitably, or yielding but very small interest, as deI posits in private banks. If the owners of these deposits could be arranged! with, if their money could be placed at ! the command of a Government already heavily in debt and growing daily more needy, it would — — well, it would be a very comfortable arrangement for the Colonial Treasurer. Whether any more important benefit to the colony would arise from it, is open to doubt. We can see very plainly how it might suffer considerable loss, through the facilities for extravagant expenditure which it might afford.

Starting with the fact that the total debt of New Zealand exceeds seven millions sterling, our contemporary directs our attention 'to the distribution of the burdens of the colony.' How this distribution is to be effected through the special apparatus laid before us, is not explained. We are reminded that we have already two establishments of the Government, possessing a monetary character — the Post Office Savings Bank and the Money Order Office. These, with the treasuries and sub-treasuries at the different ports, it is proposed to * consolidate ' into a National Treasury or Money Office. All the monetary transactions of the Government should pass through this office — an inevitable result, we should fancy, of the consolidation of those offices through which they do at present pass. It is then suggested that the National Treasury should issue its own notes. Notes ' payable in coin ' is the phrase adopted by our contemporary when approaching the subject ; but when his explanations are complete we find that ' payable in coin when convenient' is really intended. Either the issue of the notes or the payment in coin — it is not clear which —is to be ' subject to limitations laid down by law, which nothing but a vote of both Houses of Parliament with the assent of the Governor could alter.' Ten pounds sterling per head of the population of the colony, is proposed as the limit of issue. Taking the present population in round numbers at 200,000, an issue of L 2,000,000 in notes is to be made, which, our contemporary adds, ' would be two millions of mo net/, the interest of which at 8 per cent, would be LICO,OOO.' Where 'this interest is to come from he does not state — it is a profit as chimerical as the I idea that these notes would become j money simply because they were issued from the National Treasury. If the Government pays away its own notes in settlement of accounts due by it to private individuals, it will in fact have a certain extra credit accorded to it, to be measured by the average interval between the issue of the notes and their ultimate presentation for payment. If it can be shown that, but for this extra credit, the Government would always be in the position of having to borrow money to meet current payments, and to pay 8 per cent, for the accommodation ; and if there were no necessity to keep any coin on hand to meet the liability created by the issue of the note, then, the National Treasury would be able to make such a profit i upon its note issue as our contemporary | contemplates. The former of these coni tingencies is, we hope, not likely to be | chronic in New Zealand. The latter is partly provided against by our projector in the scheme itself. He goes on with the remarkable admission that * the amount of specie which should be retained in the Bank's coders should bear some proportion to the circulation of notes.' toy ©w own part, we are jr-

dined to think that the notes of a NewZealand National Treasury would not be likely to circulate very freely even in New Zealand itself, unless the law insisted on every note being represented in the ' Bank's coffers ' by an equivalent in coin. Our contemporary estimates the good nature of thfi public at a higher figure than we do. The fact that ' a Bank representing the Government Treasury could never fail to pay eventually,' would in his opinion warrant a license to issue notes to four times the extent of specie held to represent them. The confusion of ideas here is probably between the quantity of coined gold which should prudently be kept at hand to meet all exigencies of ordinary demand for the 1 conversion of notes after the latter have been accepted by the v public as good securities, and that basis of issue which alone could secure for them such a reputation. The reference to paying ■^eventually ' is not a very encouraging feature of the scheme. Many people in Otago have painful recollections associated with certain Bank notes which it is nevertheless believed are certain to be paid * eventually/ To pass to other features of the scheme. We are told that this National Bank should not be a 'Bank of Discount.' Its profits are to be made ' by transacting the business of the Government ; by note circulation; by operations in the public funds under certain restrictions ; by exchanges ; and by making advances, out of deposits, upon goods to a safe amount hypothecated to the Bank and shipped to England.' Now, unless some more special benefits than the mere profit arising from such transactions can be shown as likely to accrue, we cannot see a single reason why the Government should embark in the business of banking any more than in that of sheep farming. In fact, the latter would be the easier to take up, for banking is essentially the business of capitalists — a class among whom the Government of New Zealand is not likely to take rank.