BANK OF NEW ZEALAND

Te Awamutu Courier, Volume 71, Issue 6138, 19 September 1945, Page 5

BANK OF NEW ZEALAND

Sir, —Your correspondent J. T. McBeth is not correct when he states “ the Government possesses all the powers and machinery for a managed currency—that the power of expanding or contracting credits now and has been for a loner time with the Government; and tKe trading banks are merely distributers of credit in accordance with the policy of the Government.” This is the crux of the whole controversy. For instance, suppose the Government spends, say. five million pounds through the Reserve Bank for public works, housing, or other projects; this money as it is paid out finds its way back to rhe trading banks through contractors and business houses, and thus this Reserve Bank money goes to swell the reserves of the ‘trading banks with the Reserve Bank, and is available by them for further credits of five million pounds. The Reserve Bank holds the reserves of the trading banks on deposit, and they are withdrawable by them as required; so it can be seen that the Government does not at present have the power to control trading banks. Your correspondent Mr Edhouse must be very simple if he believes that the trading banks can create credits by a stroke of the pen without cost *or risk to themselves, on which they earn high interest. If such was the case why would they restrict credits during a depression ? as he also states. On the face of it. business would be easier to get then, and with no cost or risk and higher profits they would be fools not to expand credits to the limit. Can he not see that ? He aiso complains about the high cost of boots and shoes, and the reason for a great part of the expense should be clear to him—Government ta&es. A handle of beer will cost himg/Zd,. and out of this amount the Government gets 3£d; so when he finds that, any article is high priced he -should try to find out how much is taken by the Government in taxation, and he will have anived at the main solution of the problem. This idea of the Government taking over everything and issuing in a land flowing with milk and honey is a delusion so far as New Zealand is concerned. There is no objection to social security as such, but surely all who pay special taxes for this purpose should receive the same treatment; not as in the present method—the more you pay in taxes towards social security the less chance you have to benefit from it. State housing is quite a good objective, but State tenants should pay the full rents, which would be from 15s to 20s more per week than they are paying now. Actually the occupiers of private houses are making up the difference or, in other words, the general community is paying a subsidy to keep the rents down. Under the same conditions of taxation, etc., no Government can compete in business, and, unless where it has a monopoly, Government in business usually means higher prices. The reason is not far to seek.—l am, etc., REALIST.