"THE BANKING YEAR”

Wanganui Chronicle, Volume 75, Issue 118, 21 May 1932, Page 6

"THE BANKING YEAR”

Sir, —Your correspondent, “Practical Thinker” contradicts, with an air of authority, my statement that temporary finance provided by the banks to tho Government has not cost the banks a postage stamp. “Practical Thinker’s” illustration of what actually happens in such transactions, quotes the bank handing over 100 of its own £1 notes to the Government in exchange for £lOO Treasury bills. This transaction, writes your correspondent results in a liability as follow: Note tax upon £lOO notes. £4

10s per cent.; income tax 8-9« i upon £2OO, being total of above £lOO liability and £lOO assets, 17s 6d per cent.: £5 7s 6d per cent, plus the cost of printing 100 £1 notes and the cost of the necessary records, etc, bringing the total cost up to 6 per cent, or more. This extraordinary bit of reasoning and illustration belies your correspondent’s nom-de-plume as a practical thinker. Surely he does not expect your readers to believe that tho banks arc philanthropic institutions for their rates of interest averages 4 to 4J per cent, (a special rate for the Government) for Treasury bills. According to vour correspondents, fantastic reasoning and illustration it costs tho banks 6 per cert, or more. Perhaps your correspondent may explain the £4.000,000 worth of Treasury bills held in London (lately funded into a long-term loan) if such bills wore given in exchange of £1 bank notes. A more absurd contention I have never hoard. Any student knows that tho Government mortgages its credit when it gives Treasury bills—for ‘he privilege to write cheques against the credit created and given to the banks gratis. This credit is really the New Zealand farmers’ credit, represented in the true wealth produced by them, but unfortunately monopolised by the banks. The farmers (too late, I am afraid) are beginning to apprehend the position but arc handicapped with many of their leaders—retired farmers —also tho press, that support the present banking practice, owing to their interests as shareholders in the bank-. further study of the banking fig ures revpnls tha t Government seen lilies he’d by the banks have considerably increased of late years, last year in particular. whereas the note issue has gradually diminished so that today them are less bank notes in circulation than Government seeuritie.,. The confident assertion that the banks give in exchange 100 of their Cl notes for £lOO Treasury billJs so much moonshine and only exists in the fantastic mind of your correspondent. This fa No assertion absolutely cuts awav Um who’o of ‘‘Practical Thinker’s” 6 per cent, cost or more to the banks to finance Government Treasury bills. I am, etc., P. E. TINGEY.