LONDON FUNDS.

Waikato Times, Volume 119, Issue 19945, 23 July 1936, Page 9

LONDON FUNDS.

(To the Editor.) Sir, —In order to answer “Perplexed's” question as to how the £22,000,000 surplus sterling came into the Government’s possession we gave a simple example of a straightforward deal. Its very shortness is no doubt tlie reason why your correspondent is puzzled. If he will refer to Section 4 of the Banks Indemnity Act, 1932, he will the position. When the sterling proceeds of export sales exceeded the London requirements of the hanks for sale to importers or others the Government, under this Act, purchased that surplus, and in payment it gave Treasury hills, which were really promises to pay, not actual casli payment. Interest was charged on these hills until they were retired by cash or its equivalent. This happened after the Reserve Bank took over the Government’s account, which was in credit. The hanks did not charge or receive interest on llie £125 (New Zealand) paid to the exporter. It was an outright payment for goods supported by documents. For instance, suppose your correspondent, as an -exporter, sold his documents to his hank, surely lie would not expect to have to pay inte'rest on the credit balance which was his as a result of the sale. In no case could any bank gel, interest on Ihe Treasury hills and at the same time on the amounts paid for exports. There was no double .interest on the transaction. —We arc, etc., N.Z. WELFARE LEAGUE. Wellington, July 21.