NEW ZEALAND COMMERCE AND BANKING.

Globe, Volume IV, Issue 478, 29 December 1875, Page 2

NEW ZEALAND COMMERCE AND BANKING.

To the Editor of the Globe. Sir, —ln the hush that follows the electioneering, the public mind may turn to the ideas that I offered it on that 15th December, 1875. 1. There never was a profit, nor wide and profuse expenditure, without a cause. 2. At present we have the expenditure, and a measure of profit too. 3. But the cause is not in ourselves, not by manufacture, not out of the soil altogether (though partly of course) but out of loans. 4. Where are these loans? Part are spent, and have gone round through the land fund, through the deposits of Provincial Governments, and of contractors into the b?nk; part are deposited by the General Government in the bank. 5. The loans are not in the bank now; they are lent out to trade. Look at f the Government Gazette; you w'U need no other proof. 6. Trade is walking on stilts, but the stilts have to be taken away to be buried in iron rails, locomotives, equipments, interest. 7. In all sound banking, the capital of the concern, and its coin and bullion bear a proportionate relation to the circulation and discounts. 8. When a Bank does a business .fifteen times as large as its capital, I, as a banker, say on my own judgment, “ that there is a very disproportionate relation between its capital, its coin and bullion and its deposits,” and all sound intellects must endorse that.

9, How would you mend all that ? For I hold it the most foolish thing for a politician to do as Mr Stevens has done—point vaguely to a danger, and say “ you must be content with the husks”—a politician needs more courage than any other man in the world.. To face a cannon’s mouth, a fool in his foolhardiness can do. To face a nation’s danger in opposition to that nation, in opposition to its governors, to probe its difficulty calmly, to provide a remedy, to force the severe physic down the throat of a nation. That is the task of a hero.

10. The difficulty is now clearly before us. The loans are raised. The railways are in hand. The stilts will be wanted from trade. Can anything be devised—any elastic scheme —that shall prevent this sudden and universal prosperity caused by heavy loans to trade, and the sudden and universal reaction, when the heavy loans are called in and remitted ? Yes ! something can be done to cure the evil, and to prevent its recurrence, because the same thing has already occurred before in the great railway period of English history. 11. Remedy. Some say, “ Keep a larger reserve of coin and bullion.” That means don’t use the loans for trade. The advice is too late. But there are other objections to it. Fools say, never mind. It is all right now; bother the future. I say, adopt the Bank of England charter as nearly as you can. Have a regular funded debt for trust purposes, and for investment of reserves of companies, convertible through the London Stock Exchange. 12. Proposed adaptation of Bank of England chai ter.

a. Let the bankpay its capital £1,000,000 into the New Zealand Treasury as a guarantee of good faith, and receive from the Government (as the Bank of England does), 8 per cent per annum—£Bo,COO a year. b. The Governor of the bank and its twenty-four directors to be responsible to the Ministry, and to be paid by Government. c. The bank to be divided into two distinct departments, viz, Bank of Issue and Commercial Bank. d. The notes of that bank to be legal tender to everybody, except to the bank itself. e. Let the issue of notes be based upon—(l.) The amount of any debt due to the bank by Government. (2,) The amount of coin and bullion on hand. (3.) The value of the convertible securities they hold. (4.) To a defined value over and above that, standing on land sales, rail and telegraph profits, stamp and other revenue when necessary. (5.) The bank to be affiliated as a Branch of the Bank of England. f. Let the issue be controlled by the exchanges, and a discretion based upon the weekly returns, and the state of trade and the Treasury. g. Let the accounts be gazetted weekly, and consolidated monthly, quarterly, and annually. 13. The commercial bank would have its profits from—(l.) Its capital—£Bo,ooo a year. (2.) Nearly payment of governors and 24 directors. (3.) Its rest. (4.) Bills. (5.) Agency, (6.) Circulation, (7.) Commission. (8.) Exchanges. (9.) Bullion (buying and selling). (10.) Public and private deposits, used for discount, &c.(11.) Collecting revenue, paying divlde’ds. (12.) Management of Funded Debt. I shall take up the question of a Funded Debt in another paper. J. W. TREADWELL, Formerly broker on London Stock Exchange.