BANKING SYSTEM.

Waikato Times, Volume 117, Issue 19545, 6 April 1935, Page 9

BANKING SYSTEM.

(To the Editor.) Sir,—-I have-driven the New Zealand Welfare League from one suggestion to another, until it now comes to one that has never ibeen in dispute —namely, that a deposit is a debt by the bank to the individual conoerned. As another contributor pointed out, deposits are accepted and interest paid for controlling the spare money of the community. It is untrue to say that deposits are "used" by the trading banks. The deposits are merely figures in a ledger, but serve as a "smoke screen" to hide the costless nature of money from the public. The suggestion that the banks lend their deposits is oarefully fostered In interested ciroles. Deposits expand or contract with banking policy; Each bank loan is a creation of new money, and its repayment automatically destroys it. Hence the "fatal flaw" in the existing monetary system, which is steadily destroying it. • A simple reason: The mining company taking iron ore out of the ground is working on bankcreated money. On the sale of its produot—say, pig iron—it repays the bank, thus destroying the money that was put into cirdylation during the manufacture of its p'roduct. Yet the implement merohant must recover those costs from the .public in the Anal prioe—an impossible task. The 'New Zealand Welfare League would be better employed in carefully studying this real problem than in attempting to maintain the present obsolete system.—l am, etc.,

AGRICOLA. Hamilton, April 4, 1935.