LABOUR AND MONETARY POLICY

Press, Volume LXXI, Issue 21409, 27 February 1935, Page 7

LABOUR AND MONETARY POLICY

msnd of the people. Cheques, which are used for about 90 per rait, of the community's I transactions, 3re practically currency. If millions of new not.es or "new money" were !.o be paid out to fanners or unemployed it would very soon result in a greater accumulation of notes in the vaults of the banks, besides incurring the dangers of inflation. The better circulation of present currency is what is wanted. The lack of circulation is a result rather than a cause of the depression. The creation of more currency, therefore, would not remedy our trouble.—Yours, etc., N.Z. WELFARE LEAGUE. "Wellington. February 25. 1935.

TO THE EDITOR OF TUB PRESS. Sir. —Mr Allardyce asserts that the Reserve Bank, with a capital of £500,000, created £22,000,000 new money to assist the Government out of a difficulty with the trading banks. This is not a correct statement of the position. . The Reserve Bank, in addition to £500,000 subscribed capital, had £1,000,000 reserve from the State. It also had transferred to it about £25,000.000 sterling balance hold to the credit of the Government jn London. The Government actually had this credit in London as a backing for the credit established here and made available for use in New Zealand through the Reserve Bank. There was no creation of new money, as your correspondent and Mr Langstone have stated. The theory that the present difficulties would be solved by the issue of more currency—or discs—has been frequently emphasised by certain writers and speakers, but they overlook the fact that there is no shortage of currency in New Zealand. There is ample currency to carry on the business de-