THE BANKING YEAR

Wanganui Chronicle, Volume 75, Issue 125, 30 May 1932, Page 6

THE BANKING YEAR

Sir,—1 Rm nt a complete luM lo understand why your correspondent "k “Quid Nunc” persists in nrisrepre- » seiiting my views,. J. have never questioned the banks paying note tax oi income tax on notes in circulation. What I have emphatically denied )• that the banks do not give in exchange for Government Treasury bills th* equivalent in value with the pouud notes. I challenged your correspondent to give one authority ror their doing so. If my contention is correct, your readers will see how ridiculous is th& argument of your correspondent that the banks pay note tax out on notei that were never in circulation. As previously pointed out, but conveniently avoided by “Quid Nunc,” Government securities. Treasury bills, given to tho banks arc in excess of bank notes circulation., This fact surely is an evidence of tho fallacy that banks give exchange their notes for Treasury bills. Your correspondent “Old Guard,” in his able and critical review of the controversy, shows conclusively that the Government received not bank notes but a bank credit against which it may draw cheques. My company often receives money from the Government Treasury but never bank notes. Thia money is in the form of a cheque, lake all other business houses, wo do not cash them for notes, but they ara simply credited and debited accordingly in the bank books. This method of not. cashing tho cheques from the Tros* surv is a great saving to the banks. It. is perfectly obvious that your correspondent is unaware of tho main reason necessitating the Government to issue Treasury hills, viz., to finance Budget ricficit. Further, that the Issue of Treasury bills involves nn increase in the public debt, ns pointed out. by the report of the Economic Committee, “When this debt is increased on liecount of the Budget deficit there ree ho no immediate provision from earn ing assets for payment nf interest end sinking funds. ... ” “If Quid Nunc” still persists »» affirming that the hanks in renderinf this service of issuing credit against Treasury bills nt a cost of 6 per rent or more, nnd nre only receiving 4 t< 14 per cent., then it is futile in con Gntrng tho correspondence.—l am. etc P E. TINGEY.