OVERDRAFT INTEREST.

Waikato Times, Volume 118, Issue 19631, 18 July 1935, Page 9

OVERDRAFT INTEREST.

(To the Editor.)

Sir, —It is. difficult to believe that Mr W. J. Hodgson is really unable to understand how deposits can be built up to any extent by repeated use of a limited amount of cash. If Mr Hodgson lends me a £5 note I will owe him £5. If I return him this note as payment for a cow I will still ■ owe him £5, though I have returned him the noto that created the debt. Mr Hodgson may then relend me the note, which will thus have created a debt of £lO, a debt that will stand till repaid, though the note may be used any number of times for other work and create any number of other debts. Similarly, as I have already shown, cash may enter banks to .create deposits, w'hich are simply loans to banks; and If this cash Is returned to the public, not by way of repayment of deposits, but as payment to the staffs or for other service, it will toeoome available for the creation ol further deposits, I must remind Mr Hodgson that what is at issue Is the question whether our “system" provides us with sufficient money to repay our advances, plus interest, without the creation of fresh advances of larger amount; and I have shown that our “system" has actually provided us . with .; sufficient money to create deposits.of an aggregate value of £118,000,000 while our advances total only £-13,235,000. Thus we could, by withdrawing a portion of our deposits, repay the whole of our advances, with all interest owing on them, and retain a balance of £74,000,000. Unless Mr Hodgson can make at least some effort to meet these facts I fail to see what purpose could bo served by further discussion with him.—-I am, eto., J. JOHNSTONE. Manurewa, July 16, 1935.