BANK AND MONEY

Waikato Times, Volume 115, Issue 19203, 13 March 1934, Page 7

BANK AND MONEY

(To the Editor.) Sir. —Your correspondent “Interested” lias raised some inleresling points in regard to the creation of money by the banks. The wrUer can agree with “Inlenyted” up To the point where Jig questions the soundness of the new money under certain conditions. A little reflection should convince your correspondent that the securities upon which the new money was based would remain quite sound so long as the banks maintained an even flow of credit. On the other hand, if for reasons known only to themselves they decide on a policy of restriction or deflation, we call it, by reduction of overdraft limits, the securities will certainly depreciate. This is one of the causes of the present so-called “depression.” We are all familiar with, or remember, the sudden demand in 1930 for reduction and complete repayment of overdrafts. The local hanks are not the chief offenders in tho present crisis. I'lie arch criminals are the Bank of England and' the Federal Reserve Bank of New York. To get back to the illustration used by your correspondent: A owes to tlie bank £SOO, which he probably has to repay by a certain date, unless special arrangements were made, as in the case of the Hospital Board cited by me a week or so ago. A has to start and earn with his machine £SOO to repay the bank—that is, withdraw £SOO from the “common pool” of purchasing power, plus G per cent, interest per annum; and no money was created by the bank to meet that interest charge, so say £25 has to be pirated from money created for other industries. An example of what Major Douglas terms a B cost, and one of the causes of that intense competition between individual and individual and nation and nation to recover “financial” costs, all because our present banking system does not create sufficient money to “equal” financial costs. The repayment by A of £SOO means the total destruction of that money as surely as if 500 notes had been burned. A provided the security by his own hard work, the hank put a monetary value upon it. charging 6 per cent, for their bookkeeping—an extortionate charge, in my opinion—about 1 per cent, should meet, actual costs.

However, there is an important point in connection with the above transaction. As "Interested” points out, In the minting of gold practically no charge is made, being regarded as a community service. The banks, on the other hand, regard cheque money (and it is just as good as any other)

!ns theirs, and charge wlial they like ‘for il. Tliis fs where, or how, the I “Stale’s” sovereign right to the issue I and control of money has been usurped 'by the banks. The real wealth of the country, to which everyone contributes, is the base for the issue of “hank credit,” of which well over 90 per cent, of modern money consists. \Ye have l’n New Zealand six private mints issuing money, “hit or miss style”, without any regard to the , well-being of the nation as a whole. | This must be stopped at the earliest j possible moment. The banks imagine 1 they lend their deposits, but that j theory has been blown out long ago. •All tiie actual money circulating in jXew Zealand is about £7,000,000; the ] limit of the note issue is £15,500,000; i yet a banking witness before the j Monetary Commission stated there j was over £70,000,000 on deposit in ! the various banks. The banks created i it all by writing figures in their ledgers ! against’ securities of all sorts, created jby the community, and if everybody | went on the same day and demanded jeash, we call ft (it is only paper j quite satisfactory) the banks will ! not pay out. They have been insolvent l'n that sense for many years. The hanks are entitled to adequate payment for services ren- : dered, but not to get “something for nothing”—in fact, they have collared ! the whole world by merely writing figures in their ledgers.—l am, etc., R. G. YOUNG. Gordonton, March 9, 1934.