PRINTING NOTES

Hokitika Guardian, 27 January 1928, Page 1

PRINTING NOTES

TO PAY OFF LOANS. WARNING 10 AUSTRALIA. Almost simultaneously with the announced closing date of the Australian conversion loan of £36,000,000 the Australian note issue has been increased by £3,400,090. Tho total on January 2 was £51,793,226. In the same period the gold holdings increased by £5C0,162. Seasonal requirements may have rendered an expansion ot £500,000 necessary. That was the seasonal expansion a year ago. The balance, £2.400,000, ot tile new issue is made in order to pay for the portion of the maturing loan of £59.600.000. not subscribed by the public. either through conversion or by cash subscriptions. The propohtion of gold holdings against the notes is now 41.67 per cent, as against a proportion of 13.60 on December 12. The lninumiim of gold required by the Australian Notes Act is 25 per cent. In commenting upon this particular increase in the note issue the Sydney ’Moaning Herald” ’remarks!: The increase in the fiduciary issue note issue by £2.909.000 —the remaining £-500.000 of the increase is covered by the increase in the gold holdings—to complete the payment of the loan falling due on December 15. illustrates the

danger of a central reserve bank which has the right of issue, being controlled by Government, or being under any political influence whatever. s',; long as the Government- controls there is the temptation for that Government to use a printing machine to overcome pressing financial difficulties and the use on each occasion renders the issuing authority less resistant to tin* temptation to make similar use cf a printing machine on occasion m the future. An increased note issue results in increased prices, which may be good for traders for some time, but which all the time are bad for the consuming public. flow long will the addition to the issue made during the past three weeks remain in circulation ? Ihe hanks will not be called upon in terms of their underwriting agreement to take up (ill the middle of the month the portion of the loan not subscribed by the public. When they do take .up the unsubscribed portion the clearings should set in favour of the Commonwealth Bank, and that hank will then have the opportunity to retire the increase in the fiduciary issue made during the past three weeks. The decision of the bank on the matter will be looked for with anxiety by all who realise tlit? imoortam-e of keeping the currency sound.