THE BANKING ISSUE

Bay of Plenty Beacon, Volume 9, Issue 15, 16 October 1945, Page 4

THE BANKING ISSUE

Sir ? — Your correspondent Mr Alexander like Lord Beaverbrook is only about 14 years out of date. The Bank. of England has b£eii functioning as< a State, department since 1931. The Bank of England is a Central Bank and there is no point in the proposal to take the Bank over since it has been under the complete control of the Government since 19,31. Like so many people Mr Alexander does not understand the issue. Banks cannot and do not create credit—only the Government can create credit and under the present banking system in New Zealand the policy of the Trading Banks is controlled by .the Government per medium of the Reserve Bank. Since we now have the whole of the machinery to enable the Government to regulate the volume of money so that the Government can expand or contract credit as it wills then the whole crux of the banking issue reduces' itself to this. If a ruling political party obtains • the sole right to decide who is to obtain credit or if any single board council or institution obtains this' power then democratic government will become impossible. Under the competitive system no single individual institution, council or board has the sole right of decision for the Trading Banks compete for business. It seems to me fundamental that policy must be left with the Government (wliich is now the position-) and the distribution of credit in accordance with that policy must be left to the competitive system. In no other way can democratic government be preserved. Yours etc., J. T. McBETH.