The Guardian And Evening Star, with which is incorporated the West Coast Times. THURSDAY, AUGUST 18, 1927. BANKING SYSTEMS.

Hokitika Guardian, 18 August 1927, Page 2

The Guardian And Evening Star, with which is incorporated the West Coast Times. THURSDAY, AUGUST 18, 1927. BANKING SYSTEMS.

The system of bunking in operation an various parts of the world is naturally of great interest, f'/r on the value of the system depends the prosperity of nations. Apropos this .subject at a luncheon of the British Engineer's Association recently Air Reginald .McKenna , Chairman of the Alidlaud Bank, spoke of tlio hanking system of Great Britain. His .speech constituted an appeal for inquiry into the subject with a view to ascertaining il another method would not he more advantageous to the nation. He said that of late years a large number of countries had reformed their central banking institutions with the single idea of providing an elastic currency by economy in the use of gold, the effect having been to give greater freedom to the central bank in the control of credit. The countries that have instituted such reform include Albania. Austria, Chile, Colombia, Caeeho-Slo-vakia, Danzig, Esthonia, Ecuador, Germany. Hungary, Latvia, Lithuania, Pern, Poland, Russia and South Africa. Not one of these, lie said, had copied the Bank of England, hut had adopted a. system which was similar to that of the Federal Reserve Board of the United States. He suggested, therefore, that the circumstances showed there was still something to inquire about and something to learn. Air ArcKcnna was, perhaps, most convincing in his explanation of the reason why America changed its hanking system. In 1007 the customary decennial crisis in American finance reached such an exceptional pitch that the Americans determined upon reform. Alemhers of a Commission went all over the world inquiring as to what would he the proper control of tlie credit of the country. In examining the Bank of England they had a model of what was then said to he the best method, hut after nearly Tour years of inquiry they reported in January, 1012, and in 1013 the Federal Reserve Act was passed in the United States. It can he granted that the Federal Reserve system is the host for the purpose of the United States, but it does not follow that it would he the best for Britain. The system of the Bank of England lias boon tested over a great number of years. There are doubtless weak points here and there, hut the opinion of most practical hankers and financiers is that it is the host for our purpose. Conditions fcmdop which financial transactions are arranged in America and here differ materially. and it is possible that if America adopted tho British system adverse effects would result, and vice versa. In regard to tho point that many countries in lato years hare adopted a system similar to that which obtains in America it will ho noted that out of the sixteen countries mentioned probably ten have suffered in the past from seriously depreciated currencies, and in some cases the depreciation still obtains. This means that such countries have not sufficient gold cover for their note circulations, and the prospect of their obtaining adequate gold resources is probably very remote. Such countries, therefore, have been virtually compelled to adopt a system which does not require the holding of a large amount of gold. It has not yet been proved that Albania, Columbia, Latvia, Lithuania, etc. have adopted the best system of central hanking, and even ns regards tho United States it might be contended, says a London financial journal, that America has yet to show that the Federal Reserve system will adequately deal with a financial crisis such as that experienced twenty years ago. In New Zealand we are also groping after substitutes or variations of the ordinary banking system to find ways and moans of securing 'more money for trading, and in particular cheajSeif money. Rural credits and agricultural banks are spoken of, but in the end it is all a matter of solvency. The essential matter after all is more production combined with thrift to produce more wealth, and there should be concentration in that direction to orercome Artificial means

soon run their course and cause inconvenience and .stringency and financial trouble.