A STATE NOTE" ISSUE.

Dominion, Volume 3, Issue 881, 29 July 1910, Page 6

A STATE NOTE" ISSUE.

■ "NO -ADVANTAGE TO NEW ZEALAND." ; VIEWS OF.MB. w: ERASER, M.P. . Asked .yesterday .'by: a -Dominion reporter how he ..thought :a State note issue would affect New Zealand, Mr. \V. Fraser, M.P. for AVakatipu, stated that the position was.as follows:— "The banks here pay the Government S per 'cent for the Tight to' issue notes, and- so far as can be gathered they, aro in no way anxious to retain that issue. There is little or nothing in it for them. Tho question then arises: What is the State going, to gain by. , taking over the note issue? It would lose in' (he-first place tho 3 per cent, it is now getting. It is apparent from what has transpired that tho Commonwealth, in. adopting a- note issue,- must keep 25 per cent, in gold, for the .£7,000,(100 of notes, which doubtless represents the amount the banks of the Commonwealth had kept in circulation." In addition, Mr. Fisher proposes to keep 100 per cent, of gold for any note issue beyond the £7,000,000. "We should have io do the samo thing if wo adopted a State note issue in New Zealand. That would be 25 per cent, on £1,600,000, which is about the present amount of our note circulation. If notes were issued beyoud that we should have to keep 100 per cent, of gold for the extra amount, because if any more notes than tho amount stated were put out tho holders might come back at' any moment and demand gold. The 25 per cent, of gold would represent a cost of 1 per rent., the Government would lose tho 3 per cent, now paid by the banks, and in addition -there would be about a half per cent, to be expended on the cost of tho issue and the general administration. This would mean that a State note issue would' cost the country ih per cent., so it would be cheaper for New Zealand to borrow than to go in for a State note issue. The Commonwealth will not lose so much, as there the banks were paying only 2 per cent, for the right to issue notes. j "The one point that is not clear is whether or not Mr. Fisher is, compelling the Australian banks to take a certain number of the State notes. Ho may insist that the banks shall hold a certain number of notes before they can call upon tho Government, for gold. The one point -that is of' advantage in a State note issue is that. during a possible finanoial crisis the Government could guarantee- the notes for a certain period even if there were not a sufficient gold reserve against them."