WHAT IS CREDIT?

Timaru Herald, Volume CXXXIV, Issue 18822, 10 March 1931, Page 4

WHAT IS CREDIT?

To the Editor of the “ Tlmaru Herald.” Sir,—We regret that we cannot compete with “Economist” in the use of such language as: “Impressive circumlocution to convey the idea of unchallengeable erudition,” which is his definition of our modest attempt to define “credit.” This was attempted because so much has recently appeared in our newspapers about credits,” etc.—also the statement by your local M.P. that “if the Government had a majority on the Board of the Bank of New Zealand we could get all the credit we want.” The word “credit” as used by these advocates obviously means to obtain advances. It i 3 no use for “Economist” to accuse us of trying to create confusion, as that is obviously incorrect. We stated that “credit” is only another form of borrowing, you get to-day what you have 10 pay back to-mor:ow This is a true definition, though the word has other meanings when used in other senses which were not under discussion. Credit is based on the belief that at the appointed time a debtor will meet his obligations in full. In default of credit every transaction would have to be for cash or an exchange . Nothing that “Economist” can say will after this fact. Someone has to put up every penny of the money we get on credit. He says: “The banks use national credit and the people use bank credit. If the banking business succeeds the banks pocket the profits, if it fails the people bear the loss.” Surely this is about as good an instance of confusing public opinion as you would have. What are these terrible banks? They are a collection of small investors. What money do they handle? The money of the people entrusted to them. If the banks succeed who gets the profits? The small people who have put their moderate savings into bank shares, who are by far the largest proportion of shareholders. “Agricola’s” letter, in your issue of March 2nd, shows this with regard to the banks of New South Wales. The other banks here and in England show the same results. The banks do not use national credit, they can only depend on their own resources and the people’s money entrusted to them for investment. “Economist” says that we made ‘much ado” about the suggestion that the Savings Banks of this country should become the basis for a start of national banking. This is simply untrue, because we do nothing of the kind. The League Is perfectly aware that this suggestion has been recommended and that there is much to be said for it, if a State Bank is to be started. But we again repeat that State Banks must be run on sound lines just like any other banks, or else they will not have the. people’s confidence, and without that confidence they won’t attract the people’s savings. The comment we made with reference to Mr Carr’s statement about Savings Bank, was to refute a charge which he made against the Welfare League of having “interfered” with the Post Office Savings Bank, which was a plain untruth, and as it was uttered without any excuse it must have been deliberate. If “Economist” desires to discuss this question of credit with us, let him stick to facts and not misrepresent what we have written—and also let him disabuse his mind of any nonsensical ideas that we use “impressive circumlocution or make any claim to “unchallengeable erudition.” —We are, etc.,

NEW ZEALAND WELFARE LEAGUE. Wellington, March 7.