THE RESERVE BANK

Poverty Bay Herald, Volume LXIII, Issue 19024, 26 May 1936, Page 16

THE RESERVE BANK

PURPOSE OF ITS FUNDS NEED TO BE KEPT LIQUID “It seems to me that the idea of the Government evidently has of utilising the resources of the Reserve Lank in various directions is wrong m principle and may easily defeat the duel purpose for which the bank was established, said Mr. A. A.- Ross, president of the Auckland Chamber of Coniineice. "In addition to the lands created by the bank by the issue of notes, the trading banks lodge with it certain deposits free of interest. These are used to purchase sterling credits. Indications point to the fact that the Government appears to think it can use these credits to finance' anything it considers deniable. It may Ire legitimate to do so, but to limited extent only. The fund the Reserve Bank lias built up constitutes its reserve. The bank is a reserve bank and its justification is its reserve, which must be kept in a fairly liquid condition to meet any situation that might anse in a time of financial crisis. If the reserve is to be tied up in all sorts of things, such as financing a deficit to the dairy fanneis Q r various public works, the unds are no longer in a liquid state and, tlieiefoie, no longer in a condition essential foi a reserve bank." ___