MONETARY SYSTEM

Taranaki Daily News, 28 April 1934, Page 7

MONETARY SYSTEM

TREASURY OFFICIAL’S VIEW. STATEMENT TO COMMITTEE. A statement setting out the factors governing the volume of credit in New Zealand, and explaining how deposits are created and extinguished and generally how the banking machinery operates, was presented to the Parliamentary Monetary Committee on Wednesday by Mr. B. C. Ashwin, second assistant secretary to the Treasury. In summing up his examination of the monetary system, Mr. Ashwin said that the only conclusions to be drawn from the facts were as follow:— 1. That the de facto system is and always has been a sterling-exchange standard. , 2. That it has centred round an approximate fixed par of exchange between the British and the New Zealand pound. 3. That our external trade is cleared through London, and the London balances of the banks are the chief factor in regulating the volume of credit in New Zealand. 4. That the banking habit is strongly developed in New Zealand and notes and coins are very subsidiary, being used for little beyond payment of wages, petty disbursements, and till-money. fi 5. That the legislative restrictions

on the note-issue haVe been quite inoperative, as the demand has always been considerably less than the maximum amount the banks were in a position to issue. 6. That the volume of credit has regulated the note-issue, and not vice versa.