STATE BANK.

Temuka Leader, Issue 5752, 10 December 1908, Page 2

STATE BANK.

It was not the expectation of making great profits out oi paper money that led me a quarter oi a 'century ago to 'advocate a State Bank. My idea was to reduce by its means the price of 'money.. At, that time farmers were paying 7 to 10 per cent interest [on mortgages, and this was keeping them poor. • It is true that I 'advocated that the State Bank should possess the sole right of issuing paper money, but it ehould keep one gold sovereign in reserve for every three pounds paper money it issued. This was my mistake ; it came of reading political economy, but now I know better. I do not set muoh value on paper money at \ all, and tho State requires no gold reserve as security for it. The whole country is suilieient security, and no ono would ever dream of dishonouring a State Bank pound note. >

But" enough has been said on tho subject of paper money at present. My original proposals were publishod on the 21th of June, 1881, and from them I take the principal planks in my scheme as follows : "' 1. Buy the Bank of ITew Zealand, "take over its officers, and place "it under tho direction of a '•' Board independent of political " influences, and thus the ma- " cliinery would at onco bo in ! " full working order. A,s tho Goi " vcrnmeut and farmers' accounts "are the mainstay of that bank, " it would be willing to sell when '' these accounts were taken from " it. As its property consists of '" cash (about ono million and a "half) and buildings, there would " lie no difficulty. "2. lies trie I tho operations of the " bank to the accounts of tho " Government, local bodies, far".mors, etc., and such safe ac- " counts, and leave merchants " and tradesmen to other banks. " I. Enable farmers to pay off their '"mortgages and borrow from the Government Bank." Emm this it will bo scon that my original scheme briefly put was to buy (he Bank of New Zealand ; place it under the direction of a board independent of political influences, and by its means force down the rate of interest. .1 pointed out that about t/2,0(>0,00() was its market value Hum. and that it had about £1,500,000 cash which of courst formed the greater part of its.property ; therefore in buying the bank the State would merely buy money. Ten years afterwards, | the State had to pledge the credit of the country to the tune of about £5,000,000 to keep the Bank of New Zealand from tottering to the ground, and at the present time the State is responsible for £1,'500,000 of the bank's capital. Y,ou will see, therefore, that the State is to-day involved to -almost the same amount as 1 suggested ii: ISS-.1, and the sum and

substance of it all is that we have tho Ji'abity of a Stato Bank, but not its profits or advantages. My second suggestion was to place the Bank under the 'direction of a nonpolitical board, and 1 have shown already that that has been done, and that it has been a _great success, and now there remains for me to prove only that-the rate of interest could be forced down and controlled bv a State Bank. <

CHEAP MONEY

To secure cheap-money for farmers by bringing down the rate of interest was the object 1 had in view in proposing to establish a State Bank. 1 held then, and T hold now that it did not matter to farmers who lent them the money, so long as they got it cheap, money obtained from banks or private individuals so long as it was cheap was as good as any other monev. But the great question involved i,-, GOULD THE GOVERNMENT IIA,VE BROUGHT DOWN" Til 10 rati: of interest and kept it down by mean's of a state p.axk. ax i) would that have obviated the necessity for borrowing the cg. 000.000 raised eor adyances to settlers? That is (he crux of the whole. thin»-. The answer is that with .C1,500,(M) the Government hrou»hl down the price of money in 18!)o-. On the .Slst of March last the Bank of New Zealand had in its eoll'ers money belonging (o the people of New -Zoa.aml as follows :-

Bearing inleresl | .r,7-',lU'» Not. bearing interest r>.:VJl,ui*> (lovernnieni. deposits I .T'l^/.Hl'.!

(.biaratileed by Covernmeni I .UIKHMHI Share;; owned by Government adii.CtKi

Tola I fi:'..i d:;>:j:i Tells on the ."► I -.t of last March (he Be.nk of New held in its roli'ers over T!M,imh>,iiiih ~i ( |„. n i on ,. v ~f d,,. prop!..' of (his country, over £7,(KH 1,1)00 of which ci,.( i( no inlcrest, and now 11 ask this <|iies(ion ; IF TDK GOVilunmlnt \vi:hi-: abli-; TO BRING DOWN Till". PRICK OF MOXKY ■V. I'i'M f I.:.i!i),lion BORROWED IX LONDON, I ASK ANY SANK MAN OiU I.I) NOT TDK GO\FRXMKNT FOWL DOWN 'nilv BBICK OK MO.NKY WITH TDK POWKR OF A STATK BANK HAYING £F.', ,iH)O,t>KO OF TIIK PKOPLK'S MONKY AT ITS COMMAND •'. No sane man can hesitate lor one moment on this point. The answer must be "Yes," TI|K GOYKRN.MKNT COLLI) fI.VYK OONTROI.LKD the price ,„• II|(IU , V all along hy M KAN'S OF A STATK BANK, and it could have kept it controlled, AND AS t'llKAl' MOXKY WAS ALL THAT WAS WANTKD IT COFLD lI.WK SKCLKKD IT. AND TDK NKOFSSITY FOR BORROWING SLY MILLIONS FOR ADYAN't'KS TO SKTTLKKS WoLLI) lI.VVLi BKKN OBVIATKD. Willi r«gaul to obviating the nece-siiy for borrowing, I shall have more (~ - a y on (hat point an other lime, and meantime I will content inyo-ji with -ayiug that the principal v.de.' I -■•! on a Slate Baal i ilia! i! would P.. (1 money maiTei and eoiij ro| j 1., lined,a----lion:-'. ■

As an iir-ta lee, I may direei aI I eiitiou Io what the Dank of Fnglnul ilid about a year iago duritur tlieb.inkine panic in America. The banks of America wauled gold, and they were oti'enng a very iiie'i rale of interest for it ill Fngland. Tin; consequence w,-i> that immense sums of <n>\i\ were rujdiii'j- tlair way to America, where tlie rat.. of in|ei'e-t was liieh. The Dank of F.iej!..|)d ,-uw th,, dangi.'r ••! a panic in hngl.ind in iiui-'eq'uence of <.. mm h ■•• old leaving it . and so a.- t • -lop (hi money leaving the country it rai.-eil the hank i.,te of inOie-l t,, 7 p.-r cent . The oihrr banks had (■>

■jo ii|i wilh it. and (lie con-c,|i|.aice ,\.i., that l In; people were -ati-lied with tile tat.i ut iai.'J. ! 'ley got at lionii'. and deno-ited tin- money in iheii- own bank-. A- -0.. u a- the loi in pa ed, and tiling ; -el I led .low n io normal ■ ..ndil nui . I he rale ~t inl. i-,. I .-am.- d.e.\ n a: . i in. I'y .henihi I he Bank of tacjlajid in all ijM'o-

faability/fi'aved the country from the disastrous effect's of a banking panic, I and thi* i-woiild of course beconio a functio&iof a State Bank. Speaking of the Bank of Eng%ud it may be'said that its notes pass as 'gold-ion the ''/Continent of Europe be-j cause they.: have State guarantee behind them. The bank has lent to the Government £11,000,00.0, and is authorised, to issue notes to this amount. It also issues notes -against other securities which it holds, and some £-20,000,000 of gold which it holds in its coders. Tho authority from which I quote is 'r.ather old, and alterations may have taken place lately, but the real truth ■ is that the State guarantees given in the manner referred to, notes of the bank ipass as gold. . - /