The Temuka Leader SATURDAY, SEPTEMBER 27, 1884. NATIONAL BANK OF ISSUE.

Temuka Leader, Issue 1244, 27 September 1884, Page 2

The Temuka Leader SATURDAY, SEPTEMBER 27, 1884. NATIONAL BANK OF ISSUE.

Mr John Bathgate, on last Wednesday evening, delivered a lecture in Dunedin on the above subject. Mr Bathgate is eminently fitted by his training for dealing with this subject intelligently. If we mistake not, hf> occupied a position in a Bink in the Old Coantry ; he was Manager of the B»nk of Otago iu this colony ; he was a Minister of Justice ; a District Court Judge, and represented Roslyn in the late Parliament. A man who has filled these offices ought in all fairness to be credited with ability, and we are sure few will deny that he possesses an average share of it. We feel, therefore, a pleasure in finding bo able a man taking up a subject so important, and mast express our regret at Roslyn returning so worthless a man as Mr Ross to Parliament in his stead. The report of Mr Bathgate's lecture in the Otago Daily Times appears to be yery much condensed, but from it we learn many truths. He commences his lecture by attributing the depression to the failure of the Glasgow Bank in 1878, and shows that the Banks from 1879 to 1881 reduced their discounts by £2,500,000, other busines by £500,000 and their note circulation by £IOO,OOO. Thus in two years the Banks put on the screw to the extent of £3,100,000, or about £6 10s for every man, woman and c)iild of the then population. Mr Bathgate is perfectly right in attributing the depression to the failure of the Glasgow Bank, but there is a little information connected with this which he does not supply. He sajs that the Banks got frightened at the time, and in consequence of that put the screw on. That i 6 not what happened. The pressure vias brought about in this way : At that time the Bank of New Zealand had borrowed largely from small depositors in England, Ireland and Scotland ; these depositors were frightened by the failure of the Glasgow Bank, and rushed tho Bank of New Zealand in London. In order to meet the demands tlius made on it, the Bank of New Zealand sent round the " Colorado Beetle," and screwed the money out of New Zealand colonists. As soon as the other Banks found the Bank of

New Zealand putting on the screw, | they also commenced to squeeze, and thus the depression was caused and j thousands were ruined. Such a thing | as this could not happen if we bad a State Bank, because it would have such security at its back that no one would ever think of doubting its stability. It is on this point we think that Mr Bathgate makes a mistake. Of course it may be that the report does not convey the correct idea of his meaning, and that in consequence we do not understand him thoroughly. So far as we can gather he only proposes that the State shall issue notes instead of giving the Banks power to issue them. If this is the meaning he intends to convey, we think that, although it is a step in the right direction, he does not go far enough. We had a Bank of Issue in this colony before, and it was abolished ; and anyone who now suggests its reestablishment is met with the taunt of " a printing press and a bundle of paper." TLiB cry is unjust, but it is a powerful one, and it has frequently frightened persons who have put forth the idea of Government paper money. It is argued that the paper would depreciate in value and its holdprs would lose by it, and in support of this the greenbacks of America are given as an instance. The notes which Mr Bathgate proposes to issue would undoubtedly be as good as gold, but at the same time there would be a prejudice against them. The way to disarm those who cry out about " the printing press and bundle ot paper," and also to remove this prejudice, is to establish a State Bank exactly on the same lines as the present Banks have been started. The terms are very liberal. The present Banks have power to issue £8 in notes to every £ in coin they possess, and if a State Bank is started on these lines no one could complain, for he would be met at once by the reply that the National Bank had gold to meet all demands in the same proportion os other Banks had, besides having the 6tf>te at it« back as security. And this Bank should take only the business of local bodies, real estate owners, and such accounts as would be safe, and if it did this it would compel the other monetary institutions to lower their rate of interest. Whether Mr Bathgate would go to this extent we are not in a position to say, but we feel that nothing which does not break up the " trades union " which exists between the banks, and which does not regulate their conduct, can effectively meet t!io requirements of the colony. In making these remarks wo do not i undervalue in the least the good work Mr Bathgate is doing. He gave some information to his hearers which ought undoubtedly to set them thinking seriously. " From the history of the wretched past" he says, " we know that we could not trust our existing banking institutions. Twice in 20 yebrs they have failed us in times of need, anri by locking up the gold tln-m----selves led the country into five years of chronic panic. With one or two exceptions they were all branches of foreign companies, who made New Zealand their happy-hunting-grounds. There were no Directors to appeal to. There were only Local Managers, who were under the control of an invisible Inspector." He then pointed out the danger of giving these banks the power to issue notes, and said " the people of New Zealand by accepting promises to pay, lent these strangers £3,000,000 without interest, while wo, ourselves, go to the London market and borrow money at 4 per cent." This is a powerful argument in favor of a Notional Bank, and we wonder at the stupidity of those who hold the power in their hands to allow it to go on. Mr Bathgate might have added to this that they make us pay 9 per cent, interest on these notes, and that they get the use of the money we borrow in England also, and charge us 9 per eent for it. We trust Mr Bathgate will continue to agitate this subject, but we should feel better satisfied with him if he went to the length indicated above. At any rate he may count on our support. It may be feeble, it may not be able to advance the cause much, but at the same time when this is the only paper in New Zealand which has given editorial advocacy to the matter, it. does not deserve to b« despised. If everv paper took up the subject and helped it along it would soon become law. We feel convinced that if the question were put to the people of this district, " Bank or No Bank," nine-tenths of them would be in favor of the Bank, and all through having the matter brought so frequently before their notice, We trust other papers will take it up, for it is the only possible means of removing the depression from the colony. CHEAP MONEY. The few remarks we made some time ago with regard to Mr J. H. Newlyn's pamphlet on cheap money, has induced one of those associated with him to write to us the following letter : TO THE EDITOR. Sir, —In a recent issue of your paper I noticed a leading article dealing with Mr Newlyn's scheme, which has been before the public since the middle of May last. As I was at the meeting at which the hrst proposal was made, and as I had previously heard nothing of any similar proposal id New Zealand, 1 gave Mr Newlyn credit for some originality and joined with others in inducing him to elaborate his scheme, which I own he has done in a way that has pleased and surprised many who, like myself, had Yerj' crude ideas as to how his scheme could be put into shape. But I for one would be sorry to see Mr Newlyn obtaining the credit due ; to any other gentleman, and 1 therefore ask you to be kind enough to mention in

a future issue of your paper the actual cute of any New Zealand newspaper in which the idea originated in its application to this colony,—l am, etc, W. H. E. Chertsey. On the 29th May, 1879, an artiele written by Mr J. M. Twomey appeared in the Geraldine County Chronicle on the subject. His proposal was then something similar to that which Mr Newlyn makes now ; the only difference being that Mr Newlyn proposes to borrow in England, whereas Mr Twomey suggested that an association should be started on the building society principle that would borrow and lend in the colony. The subject was subsequently referr?d to by the same writer on frequent occasions in the limaru Herald, the dates of which can be had by taking the trouble of looking up the files. About the month of January last a letter appeared in the Patea Mail suggesting that the Government should borrow money at 4 per cent, and lend it at 5 per cent. Mr J. H. Clayton, who is at present editor and proprietor of the Ashburton Mail, was then editor of the Patea Mail, and will doubtless be able to give "W. H. R." the date. This letter was copied into the Wanganui Herald, and it was there we saw it. I his proposal of State Loans lias been going on for years in Ireland, but we at once saw it could not be done in this colony and discarded it. The Financial Statement of Sir Julius Vogel, in which he states that We are paying 5.33 per cent, interest for money, proves conclusively that Mr Newlyn's scheme is a moral impossibility. In April last we published in this paper an article pointing out that the high rate of interest was the cause of the depression, and ever since ve have been advocating a National Bank. On the 2dth of June Mr Twomey published an address on the National Bank scheme to the electors of Gladstone. On July 7th the Rev. T. -Jasper Smythe asked Mr Sutter, at Pleasant Point, if he would be in favor of the Government borrowing money in England at 4 per cent, and lending it to farmers at 5 per cent., and on July lO'h the same gentleman published a letter in the Timaru Herald on the same subjec. On July 14th, in a report of Mr Iwomer's speech in the Timaru Herald, the matter was again referred to, and pointed out. to be impracticable. Since then it has been a frnitful subject for discussion in the. newspaper?. We have gone to all this trouble to give our correspondent dates, but we fail to see what object he can serve by finding out these facts. We are sorry we have not been able to give. him more of the dates, but we have put him on the right road if he wishes to follow up the investigation. Mr Newlyn may possibly believe himself the originator of the scheme, and he may be so far as he is concerned. We trust that j Mr Newlyn and his friends will apply ' their talents and energies to a National Bank, and give up the idea that thu State is going " to back their bill," for it would not do it. Under Mr Newlyn's scheme, at the very best, money could not be lent at less the" H •r" r •'. without terminal annuities, but it a National Bank were established it could lend money at 4 per cent, easily. It would therefore be better to back up a substantial thing than to follow a will-o'-lhe-wisp idea.