MONETARY PLANS.

Star (Christchurch), Volume LXVI, Issue 20239, 24 February 1934, Page 9

MONETARY PLANS.

Major Douglas Appears Before Committee. APPROPRIATION OP ASSETS. (Special to tlie “Star.") WELLINGTON, February 24. Called together at short notice to enable Major Douglas to give evidence, the Parliamentary Monetary Committee met to-day. There was a representative attendance, including Mr M. J. Savage, Leader of the Opposition, a number of Wellington Members of Parliament and Dr Campbell Begg. of the New Zealand Legion. Major Douglas submitted a written statement of his proposals relating to New Zealand, and his cross-examination became highly interesting, when it was concentrated, as mainly happened, on the point of the appropriation of banking assets. Major Douglas suggested that every bank should make an annual sworn statement of its assets as on its books, and also a statement of the market value of such assets, as valued by an independent authority. When it was found that the balance-sheet valuation was lower than the market valuation, the difference should be transferred to an account called the Number 1 Suspense Account. All profits earned by the bank over the amount necessary to pay a 6 per cent dividend should be transferred to a Number 2 Suspense Account. Reduction of Overdrafts. Major Douglas proposed that 50 per cent of the amount in the Number 1 Account should be applied to a reduction of overdrafts debited to the banks’ customers on a pro rata basis, while 75 per cent of the amount in the Number 2 Account should be applied to the reduction or reimbursement of interest paid on overdrafts. “ Would this not be confiscation?” suggested Mr A. J. Murdoch, M.P., a member of the committee. “ There is an old Spanish proverb that he who robs the robber earns 100 years’ remission,” retorted Major Douglas, who, when the laughter had subsided explained that this was not his opinion, but an old proverb. • The Hon Downie Stewart: You feel that your scheme is justified because you are robbing the robbers? Major Douglas: If you put these organisations into a position in which, whether they have any conscious, desire or not. they are in fact in the position of recipients of unjustifiable wealth. Mr Stewart asked if witness in his writings accepted the fundamental British principle that one did not dispossess another without compensation. Major Douglas: I am not proposing to dispossess any man. Mr Stewart asked witness to consider the case of small people who bought bank shares at market price. Would he not be taking away half their capital at once? Collapse of Banking System. Major Douglas: I think my answer would be that as things are going at present, there is no possibility whatever of the present banking system continuing for any considerable length of time, even three or five years, without a complete catastrophe and a complete breakdown in the existing system. In that case I am not taking anything away; I am preserving half his capital. Mr Stewart: That is on the assumption . that your view of the banking position is correct. Mr Stewart in complicated crossquestioning sought to demonstrate to witness that the banks paid half of their dividends from the investment of reserves, and that such reserves were an accepted feature of the banking system. “ The object of your limitation, queried Mr Stewart, “is to prevent the banks distributing dividends of 1 2& to 15 per cent?” Distribution of Profits. Major Douglas: The profits of the banks are partly distributed in the form of actual money dividends, and they are partly put to disclosed and undisclosed reserves, which are not represented by money at all. They are represented by correct or incorrect price values, which are not represented by money. Mr Stewart: You are aware that very wealthy men prefer to work on overdrafts, and they would share in the reduction of overdrafts. Major Douglas: This is not in any sense a class question. I would not object because everybody was almost equally hit by the banking system. Mr Ste-wart: I find it difficult to come to grips on the question because you spoke of securing profits to the general public, and wiping off overdrafts to the general community. Major Douglas: My definition of the property of the general public might not agree with the orthodox acceptance of it. I would want to establish that, and the way to make the most of the practical use of those facilities which do physically exist. Central Reserve Bank. Major Douglas was invited to give his view of New Zealand’s Central Reserve Bank System. “ I regard the prime objective of this bank,” he said, “as being one move in the project to take the control of finance out of the hands of the Government of the country in which it is created and link it up with international methods.”