State Banking.

Taranaki Herald, Volume XLIX, Issue 11817, 14 November 1901, Page 2

State Banking.

. There was a very good attendance at the Town .Hall on Wedijesday evening, when Mr H. G. Ell, M.H.R., . lectured on State banking. His [ Worship the Mayor (Mr E. Dockrill) .presided, and briefly introduced the speaker Mr Ell, who was warmly received, at once got into his subject, and throughout it was evident that his listeners were in entire sympathy with the sentiments enunciated. TKe currency — the medium of exchange — was the life-blood of commerce, and it must be stable. There was alarm expressed at the constant growth of our national debt ; but ie was necessary to have roads, bridges, and cheap transit for our produce,- and for this we must ha\ij money— credit. At present we wereactually paying away one-third of the revenue of the country as interest on this borrowed money It was certainly an alarming state 'of things, when one considered that the amount of -this borrowed money was ever increasing. Mow, when we raised a loan from the English money lender there was no more coin put into circulation, there was no addition to our currency. The loan was simply written to our credit and th-» Government operated on the loan by means of cheques. The speaker quoted McLeod, the great banking authority, to show that a man's credit at the bauk was as good as cash— he gets as much benefit from it as if it were gold or paper currency. In fact " banking credit is [capital." Therefore it was not necessary, in order to carry on Government works, to have a State issus of gold or paper for every loan rais cd. It was quite sufficient to have a credit, which could be operated on in the usual business manner. Banks simply create credit. What is the backing to their currency ? Mot gold. If a crisis came we should have a repetition of what cook place in 1893. The banks would rush to the State for assistance ; and thai fact, and the fact of the State bei-i^ able to help shows that the State is the proper banker. There would be absolute safety from crises if tho State were behind the currency. Mr Ell quoted several instances of the State coming to the assistance oi' private banking concerns to prove .that the State was the only safe support for the currency'! Referring to the greenbacks of America ana the. French paper money, he explained that'in both cases depreciation arose from the fact that the countries were . passing thrqugh a perio.l of ■ great disquiet and revolution when the issues were made. Also, the American paper money was limited in its power. It was not legal tender for certain dues. This wo 11.1 naturally cause depreciation. IL« quoted oumerous instances to show that under proper safeguards State issued paper money could always maintain its face value. Some people had an idea that you must maintain, large . stocks of gold behind the currency . to make it stable. Tim was obviously unnecessary. He pointed to the fact that our casri deposits in the colony were 21f millions sterling and yet Behind thai there was -only 4J million in notes and coin. In New Zealand during the past" 26 years we had paid 40 millions as interest on our public debt. This was to some extent alarm.nj when we" knew that our debt warcreeping up every year. On the million -loan for the North Island Main Trunk Railway, raised in 18R3, £420,000 was paid by 1899 as interest. If the banks could utilise ou>resources by creating credit, surciy it. was better we should create our own credit, and save the interest. During the past seven years tho Bank of New Zealand had creat,'ed on Treasury Bills a credit to the Government which involved a payment of £234,484 in interest. This was the present system, and if a private institution, with little capital, could work so successfully, so could a State bank If 'the Government would only apply the system in connection with loans t,o local bodies and advances to settlers such an institution would amply fulfil its functions. In reply to questions, Mr Ell said that if a pa nip arose and peopk rushed to. the State BarA and -asker* for payment in bullion whiph the deposits of co;n were insufficient to meet, the difficulty would be got over by the State making paper money a legal tender, which would have to bte accepted, Mr Ell theni suggested that n " State Bank and Currency Reform Leagu? " should be formed in New Plymouth, as had been done at Ha-wera-and Ini?lewood. by which proposals of the Government relating to loan matters could be watched. -:A hearty vote ol thanks was passed to, the lecturer, and it was carried as a resolution " that in the opinion of this meeting, the question of. establishing a State Bank it worthy of the careful consideration of'th3 Government of this colony."