CURRENCY REFORM
SPECIAL NOTE ISSUE BUSINESSMEN ADDRESSED MR P. TINGEY'S SUGGESTION “The Central Reserve Bank of New Zealand, by its very •constitution, will be tying our New Zealand pound to sterling, and is it conceivable, in the light of Great Britain’s monetary experience, to expect stability?” asked Air I’. Tingey during an address to the Wanganui Chamber of Commerce at its monthly meeting held last, night. There was a full attendance of members, who listened with interest to a proposal Mr Tingey had to suggest in connection with New Zealand’s financial system, and a special note issue. “The question may be asked, ‘What is sterling he continued. “Gustav Cassel, in his latest book, ‘The Crisis in the World’s Monetary System,’ writes that the banking official circles ‘continually refuse to give a clear and definite answer to this most important and most -atural question.’ Sir Otto Niemeyer, the expert who advised the Government, and whose advice was followed in the main, was very anxious that the gold in New Zealand should be taken over by the Reserve Bank and exported to Britain, and credited to the Reserve Bank in sterling.
“This polJcy of the New Zealand Central Reserve Bank will certainly court disaster, whereas from rights embodied in the Bill, New Zealand with its surplus sterling balances could and should buy gold in the British market. Under present conditions, sterling balances in London are a liability owing to the high exchange, the importers considering it an imposition and financial in’convcncncc. All losses by the banks dealing with exchanges are indemnified by the Government.
“Assuming that our sterling balances at the close of the export season will reach £12,000,000, therefore £3,000,000 would be paid by the Government from the consolidated fund. The farmers have been paid by the banks the extra exchange of 25 per cent, and it is only right and proper that the banks should be reimbursed. It is interesting to note that the payments by the banks have not been in gold, nor banknotes, but simply ciphers, figures in their ledgers, transfered credit, at least 98 per cent, of which is represented by cheques which represent the real wealth that has been produced. Gold to be Bought. “I would suggest that, to get over the difficulty of the importers having to pay high exchange, the Central Reserve Bank buy gold and lodge it for safe keeping with the Bank of England against the gold issue and the New Zealand Reserve Central Bank’s legal tender notes. Assuming the gold value at £12,000,000, notes could be issued on a basis of 25 per cent, to 40 per cent, extra. This, on a basis of 25 per vent, would equal £15,000,000. The freight would be a mere bagatelle if it would be necessary to print them in England. The notes could be of various denominations, interest free.
“This method of planned money, anchored to gold, equated with real wealth that has been produced, would bo given to the banks for currency purposes. Another great advantage for this procedure would be that the Government could remove the note tax against the banks, which, in turn, •could revert buck to the days when they made no charge for keeping customer’s accounts. This would bo a quid pro quo.
“Under the proposal we can summarise the position as follows: (1) It would remove the necessity of the high exchange; (2) the producers would have no cause for •complaint, for they would still be paid in New Zealand currency as at present 25 per cent, over sterling level of prices; (3) the British manufacturer also would not complain as it would put him on a better economic footing to compete for New Zealand markets; (4) the New Zealand manufacturers would welcome the proposal to remove the exchange, as he would be able to import more raw materials, and the effect of more interest free notes in circulation would create more demand; (5) the trading banks would welcome the proposal for it will remove note tax, approximately £250,000, and also the cost of issue; (6) the people would welcome the change of their accounts being exempted from the annual charge of £1; (7) the Government would not only save £3,000,000 less £250,000. a net saving of £2,750,000, but could do awav with the financing of Treasury bills, now costing millions. Would Reduce Taxation. “A continuance of a year or two with favourable sterling balances in London, such sterling balances to purchase gold with the issue of legal tender notes against the gold, would soon bring about reduced taxation, for taxation would and could be used to reduce the When 1 placed these views before one of Wanganui’s authorities on banking economics, ho expressed the opinion that the banks would not be able to absorb the notes over and above the average note holdings of the six trading banks, roughly £6,500,000. It would not be necessary to try to absorb the total of £15,000,000 by immediate circulation. Provision could bo made for public works to bo financed, not by taxation, but with legal State Central Reserve Bank notes. “The retirement, when necessary, could be used by buying or taking over the gold hold by the trading banks, paying them market rates with State legal tender notes. The gold could be sent to Britain and the proceeds of the sale invested in giltedged securities and the returns earmarked for the liquidation of New Zealand’s external debt. “ If, instead of reiving on bank credit, wo could create our own money originating in goods and services, we would not only have the best money in the world, but would soon get rid of unemployment. The Central Reserve Bank can be a power for good by the regulation of vredit to equate goods and services. This credit must be represented in value as a monetary policy, with local currency that would stabilise New Zealand’s internal price level. If the Government and the Central Reserve Bank decided that the internal price level should equal that of 1929. then it would be necessary to issue 40 per cent, against the gold holdings purchased with sterling balances. This policy would fulfil one of
the main functions of the central banking by preventing undue fluctuations in the internal price level.” Some discussion took pbvee on the conclusion of Mr Tingey’s remarks, and it was decided that he should be met by the chamber’s finance committee. who would discuss the question with him. He was heartily thanked for his address.
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Bibliographic details
Wanganui Chronicle, Volume 76, Issue 287, 5 December 1933, Page 4
Word Count
1,083CURRENCY REFORM Wanganui Chronicle, Volume 76, Issue 287, 5 December 1933, Page 4
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