The Wanganui Chronicle WEDNESDAY, APRIL 8, 1936. BANKING AND THE DEPRESSION

Wanganui Chronicle, Volume 79, Issue 84, 8 April 1936, Page 6

The Wanganui Chronicle WEDNESDAY, APRIL 8, 1936. BANKING AND THE DEPRESSION

'pHE Opposition could not claim that the way they ran tin banking system has been to the credit of the country oi Hie world, because the country had experienced five years oi economic blizzard. Thus did .Mr. A. C. Sexton deliver himsell during the debate on the Reserve Bank Amendment Bill. Tht statement is not interesting* because Air. Sexton said it, but foi the reason that so many people are repeating- it, and have been repeating it for several years, ['he pity of it all is that the position is not so simple as the statement assumes, and consequently, instead of helping, it hinders a proper elucidation of tin problem. In the first instance, the Opposition did not run the banking system of this country, much less did the Government of New Zealand at any time aspire to run the banking system oi the world. It could not even do that because there is not one system, but many systems, in the world. .How Air. .Sexton, and those who think like him, can hope io place the blame for the depression upon the shoulders of the hanks, is one of those mysteries which possibly will never be cleared up. There is no effort to analyse the position as it developed hi any one of the major countries of the world. The evidence is available to any student of banking for examination ; it has been published in convenient form, and comparative study is possible. No evidence is produced to reveal that any banking system was responsible for the reduction in prices which came about, towards the end of 1929. No attempt is made to substantiate the bare assertion that the banks contributed to the debacle. If banking technique is defective in any particular, then none 'will be more pleased to have it discovered than the bankers themselves: for the simple reason that the banks 1 hroughout the world have suffered tremendous losses, both of capital and profits, through the oncoming of the depression. 1 here is as much logic in making such statements as -Mr. Sexton puts forward, as declaring that the guttering- of a house is responsible for an exceptional flood taking place. The banking system is only the canalising of the credit of the country, but if people borrow and misuse that -which they borrow by producing more than that for which there is an effective demand, then prices must fall. Even an increase in the amount of available credit will not stop the fall in prices. In so far as the banking systems of the world were concerned, they were mainly aiming to offset and arrest the fall, and it is safe to assert that had there been no credit system in operation the dislocations in the economic sphere would have been much greater than they were. There need be no doubt that the banking systems of the United States of America, of the United Kingdom, of Australia and New Zealand, actually cushioned the shock of the depression in so far as each was able to do so. The effort broke down hi the I idled States because of the. smallness of the individual banks but that does not get over the fact that the trading- banks oi New York entered the market -with extensive credit facilities when private lenders were quitting it towards the end of 1929. In the United Kingdom bank action was well harmonised bj reason of the existence of large banks which canalised the credit of the country and avoided forced liquidations where that was possible. A major depression is not the result ol one cause, and bank ing may be one of the contributing- factors or it may not be t factor at all: so to blame the banks, or worse still, those who do not run them, for what many elements have brought about is simply tu take a holiday from sound reasoning.