BANK OF ISSUE.

Timaru Herald, Volume XLIII, Issue 3576, 17 March 1886, Page 3

BANK OF ISSUE.

TO THE EDITOR OP THE TIIfAETf fiEUAID. Sib, — Mr Turnbull m his reoont speech objected to a Bank of Issue because no ono would fake, its notes ; and the Premier, at Christchurch characterised ft as '< utter nonsense." In your article of Saturday you say, "Notes on tho Algato Pump, or Bank o£ Elegance would be as acceptable to tho public" I am not sorry to see a Bank of Issue condemned, because it is possible people may now copie round to take up the schema which I have bo persistently advocated. Still I am rpndy to defend a Bank of Issue, becauso it is tho first step towards my own schenjo. Tho first thing wo ought to do, I think, is to understand what a Bank of Issue means. I am not going into all tho details proposed by tho Hon. Mr Bathgate's Bill, as it would take up more space than I could expect to get. Tho short definition of a Bonk of Issue is a Government Bank, haying the exclusifo

right of issuing papor money. Mr Gladstone, > Mr Goachcn, Mr Platt, and every' great ■ financier who has spoken or written on the : subject, havo all agreed that tho right to ' issue paper money belongs exclusively to the i Government. Even Sir Frederick Whittaker i (a Director of tho Bank of Now Zealand), i the Hon. Mr Stevens, and others who i opposed the Bill m tho Legislative Council, ■ last session, all admitted that the right to • issue paper monies was indisputably tho proi rogative of tho Crown. This right past Governments have handed over to the Banks of . tho colony, and for this privilege the Bankß • pay a tax of 2 per cent. The Government of I England allow some banks to issue notes, : but they charge them 3 per cent for them. ; Mark this. In England, where the rate of discount varied from 2 to 4 per i cent, the Banks pay o tax of of 3 per I cent for the privilego of issuing notes ; ■ m New Zealand, whore the rato of discount is i from Bto 10 per cent, tho Banks only pay a : tax of 2 per cent. Is this right? If tho , Banks m England pay 3 per cent, the Banks • here ought to pay at least 7 per cent. Past > Governments have thus played into the handß i of tho Banks m giving them power to make i money out of paper, and tho object of a Bank . o£ Issue is to secure to the colony the profits '. accruing from paper money. Tho noto circui lation of this colony is about £1,000,000, and ; we thus lend to tho Banks that sum at 2 per i cent, whilo we pay about 5 per cent m . England for money. Bank of Issue notes would, therefore, bo secured by tho whole i colony. Even the present Banks would havo ; to share m the security, and they would bo i valuable for 20s m tho £ so long as the colony was able to pay its debts. To mo it i appears absurd to say that such notes would . not be acceptable to tho general public. r Surely the whole colony is better security i than any Bank. A British colony has never i yet become bankrupt ; thero ia scarcely a month m tho year that we do not hear of , Banks smashing up. Mr Turnbull wants to borrow £6,000,000, i and it is supposed that Mr Stout is favouri able to a much larger loan. What havo they ■ to offer for tins enormous loan but pieces of papor, secured by the colony? In tho name ■ of common sense if they think the peoplo of . this colony would not accept £1,000,000 of i paper money secured by themselves, how can they expect foreigners to lend them i £10.000,000 on the same security ? I may be told debentures bear intovest, and Buuk notes do not. Bunk notes are not expected to bear interest, they aro only mediums of exchange. And now I wish to eliow that something must bo dono to avert bankruptcy. I will ■ take Mr Turnbull's figures, although I think l matters are even worjo than he painted them, l lie tells us that we must find £1,000,000 a i yoar to send to England m tho shape of interest, and I think he understated it if wo . tako into consideration tho balance of trade . agninatus. Let it bo remembered that this . must be gold for our bank note 3 will not do iv , England. Now the question is what aro . our means of getting up this £4,000,000 , annually. Mr 'l'urnbull told us that the value of imports was half a million more than our exports. According to the statistics o£ New Zealand, tho average for , tho last ten years ba3 been over £1,500,000 a year, but I shall take Ms i own figures again. All the gold, and all the , wool, and the grain ami the other things we • send out of this colony, go to pay for the drapery, sugar, tea, etc., wo bring into it, and we have to pay half a million of money besides. It is evident, therefore, wo cannot get a red cent from that quarter. Then, m the name of common senso, where are we to i get it? Mr Turnbull estimates that rei mittance men, and persons coming iuto tho colony, bring into it half a million a year ; but that ia swallowed up m the half a i million that is required to pay for our imports. Then where is tho means of paying £■1,1)00,000 annually ? Our Bunks, taken • altogether, have not £2,000,000 of coin, uncl if you turned the pockets of the colony inside out, you would not find much more than ■ £2,000,000 m them. Let us open our eyes to tho stern realities which surround us. The only means we havo of paying the £-1,000,000 a year is to borrow it, and wo shall have to . continue to borrow it until we burst, or else change our way of doing business. We hear i a great deal of frothy trash about paying interest out of loan. All tho lo:ina wo have ever had have gono tv pay interest, and all tho loans wo shall raiso will go the fiinio way. Mr Turnbull told us we had borrowed i'iH.OOO/JOO. That money ought to be somewhero m tho colouy still, but ia not ; there is only £2,000,000 of monoy m tho colony. Where has it gone ? lias it not gono to pay interest on loans ? And now wo find ourgelves coinpcllod to borrow morxt to pay interest, and tho moro wo shall borrow the deeper and deeper wo get into the mire, till at last, liko America once, no ono will lend us a cent. Of eourso I cannot expect that anything I say can havo a9 much weight us tho utterances of representative rucu like Messrs Stout nnd lurnbuli, neither do I oxpect them to urgua tho point with me. But I ask the public to examino facts for themselves. Let thorn see. First : Havo wo to tend out of this colony £1,000,000 of money a year ? Second : Do our imports swallow up our exports, and if so, what means havo we of paying this £1,000,000 ? Third : Can wo pay it without borrowing ? Fourth : Will borrowing increase tho sum we Ijave to send out of tlia colony, and ultimately tynd us m bankruptcy? Fifth : Is there- no means of averting our impending rain ? ■ Sixtli : Aio wo to lio down quietly until tho banks and money-lenders swallow us up ono after tho other ? There is only ono way out of tho difficulty, but as this letter has gono bpyoncl the limits I intended already, I shall not trouble you with any further remarks at present. If you do me tho favor of publishing this letter, I will, with your permission, submit to you my scheme for getting out of the difficulty. I am, &c, J. M. Twomet. Temuka, March 15lh, 183 G.