A NATIONAL CURRENCY.

Press, Volume LXVIII, Issue 20493, 11 March 1932, Page 16

A NATIONAL CURRENCY.

TO THE MITOS OI THS TOSS*. . Sir, —The letters- appearing in The Press during the last few days' urging- an issue of national currency stippoited only by the national credit • deserve more than passing notice. . I am aware that such would be regarded by the banking authorities as unorthodox, and an intrusion upon banking prerogatives, and for that reason would be termed inflation/ and ' feared by a timid Government bound by tradition. But it not be forgotten that it is admitted by all economists that the world's travail to-day is • doe either to a defective currency system, or to a mishandling of it, and for ■either or both of these things the big 'button of the world are responsible. 4 Also, whatever the dangers and evils of inflation may be, is anybody prepared ■ to terms of millions the.appaßine loss and suffering brought about by too. policy of; deflation deliberately planned by the world's' banking heads? In saying this I do not intend to reflect on our local bankers, who are mere cogs . in wheels, and not tie power which turns them. To hark back to: a Government issuo . of currency notes to. be made legal tender and backed" only by the national " credit—l'believe that such an issue properly controlled is the right way in- ' part to i meet unemployment within the | -The dangers of a Government ,'istfae of credit—call it inflation if you 'like—are'not in the issuing but in the wis® or foolish administration whether , iby apending or lending of the credit so ! -'.created. The amount of the issue] „ 'should be governed by Act of Parlia- " ment, but its administration should b9 ientirely in the hands of a National Currency Control Board - consisting of able . tmen ontside political influence. > ,_Such credit should.be extended only jto projects promising a minimum re{turn of, say, 4 per cent., and the whole • iof the productive income less cost of 'administration should be applied to (redeeming'the Treasury notes in circulation. Thus a created enterprise i earning 4 per cent, /net would pay for 'itself In 25 years. Aa illustrations of sound and unsound i objects in the expenditure of national ieredit, let us suppose first that Christchurch and Lyttelton are not yet connected by rail and tunnel. Can any- • one prove that a national issue of • c Treasury notes to xnpet the cost of labour and loeal material required for this purpose would be unsound inflation? H «o, he can dub me a lunatic! If on the other hand the credit were 'created to sink in the mouth of the Waimakariri, which , expenditure will never return a penny of income, I fully " 'agree this would be foolish and dangerous inflation. : A further instance of a wiso and 'proper purpose for the issue of national credit notes was the restoration of Napier. By this means Napier might, have' be«n almost rebuilt by this time without risk of loss to the Government and at an enormous saving to the individual sufferers • by the earthquake.—Yours, etc, • SIMPLE SIMON. Christchurch, March 10th, 1932. • SO Tjqc SDITOB OF TH* PRESS. ■ Siry—ln. reply to "Truth' Seeker" may IX give tike following answers in a some- . 'what-erode form owing to pressure of time:— ,(1) Tj»e i internal currency suggested t (in »y letter differs-from ordinary cur- ' |roney in this, that it could not be tbanked excepting; with the Government. a *°" une "OfUd be relatively small, jUML Mwould.'be issued in the main to Immom who were- unlikely to accumuany great amount of it. Such eavwg* could be deposited only in the o*vmrMn*nt Savings Bank and a term VttlM Mire to be set before they could in. the form of ordinary

currency. Recognised trading firms would have the option of replacing their accumulations at a much shorter notice and all the issue -would have to be returned to and be replaced by the Government, who would again circulate it in the original way. It is in effect a loan issue by the Government, secured on national credit and setting free for more urgent purposes a proportion of public' money. It could not pass ultimately into private bonds. The case is quite: different when an external loan is negotiated. A great deal of it passes into private hands and accumulates in the form of deposits, by trading firms, contractors, and others, and may not be circulated again for years, and then possibly in some"other country. (2) As our overseas obligations are gradually discharged, it might be possible to extend the use of internal currency. Our present note issue is of course only a token issue, but it does not fulfil certain requirements. (3) A deposit of £.IOOO in gold enables a bank to increase its note issue. The bank issue is based on the amount of Government securities, bullion, and coin-in-its possession, but it must hold these to the extent of one-third of its note issue. Certain payments may be required to be made in gold, but the vast proportion of depositors will accept notes. (4) The possession of gold by! the banks ia a guarantee which is shared equally by all the depositors. But no bank at the present time would print more notes because a- gold deposit was made. Notes are issued in accordance with the requirements, of trade, and at the present time banks have ample notes to meet these requirements. l If these notes were in circulation, the. need for an internal . currency would; not be obvious, though it would'still exist, and there would be no unemployment problem. But their circulation is a, matter for business men and private persons, and I must leave it at thaf.—Tours, etc., CITIZEN. ' March 10th, 1932. P.S. —May I draw attention to a printer's error in my letter of Thursday, where "pints were taken" is given instead of ''hints were taken." TO TITB EDITOR 0* -THZ FBSSS.- • Sir, —I have read with interest the many reports and letters appearing ■ your estimable paper, but have as yet failed to see any criticism of the central banking scheme and control of currency involving a new systejn of currency for internal use under scientific control. What I should like to know is for what reasons will these schemes fail to function in the way their advocates say they will function? It is obvious that the currency, system is entirely.on a wrong basis when it fails so lamentably to meet the needs of society as jt is doing to-day. A new system is advocated by our Economists, with a central -bank. I have: studied the question as far as an ordinary man in' the street' can/ and I tan't see .anything wrbrig" with the proposition. Yet, one gathers there must bo many arguments against it. ■ Would some one or more of your readers who know these arguments ventilate them through your columns and help myself, flmd I feel sure many others in a similar position, to understand the question more clearly.—Yours, etc., . TRUTH. Hanmer Springs, March 10th, 1932.