To the Editor of the New Zealander.

New Zealander, Volume 3, Issue 122, 31 July 1847, Page 2

To the Editor of the New Zealander.

Sir:— ld reading over the despatch of Earl Grey, relative to the Currency, and your observations thereon, you have broached some opinions connected therewith, which are at variance with established facts. < You state, that " it would be impossible to give a fixed value to foreign lilver coin. "—lt is well known to all connected with the trade of South America, from whence dollars have been constantly exported, that the value of these dollars has been regulated by the price of Bullion; it is equally well known, that the price of Bullion has not varied more than 5 per cent, for the past twenty years. It is likewise clearly ascertained, that the Mexican, Spanish, &c. Dollars have not suffered the least debasement for twenty years. Under these Circumstances, the syitt m that was followed'in South America, in giving a price to Dollars for shipment, might, with more or less variation, be pursued here. The custom was to deduct aboift ,4J per cent, from the London price, viz.— l percent, for freight — \\ per cent for iusuiance— l per cent, for brokerage on sale and petty expenses, and 1 per cent, for risk of loss. Considering the increased distance from London, 10 per cent, might be deducted here from the London value, which deduction would much more than defray^ any increased expense in the freight and insurance, and any risk of a fall in pr co ; in fact, I am couvmce'd, that with this deduction, werr there a direct trade with London (which in the course of events must come), all the foreign coin would be shipped off. You likewise appear to infer, that the issue of paper mouey will have the effect of raising prices of every thingl; so long as this paper jV redeemable in specie, no such permanent effect could follow. That the issue of Government paper money (it properly managed), will be of great benefit to the future interests of New Zealand, is, I think apparent to every body who was embarked in foreign trade in 1836. Those who were embarked in the foreign trade from England m that year, kuow full well, that whilst the specie in the Bauk of England was decreasing below its average ratfo, the Directors of that Bank expanded the issues of paper, in order to give a temporary rise to tallow, in which the Directors had speculated. This expansion of issue did create a temporary enhancement, sufficient to secure some of the Directors from loss ; but at the sarae,time, it rendered much more save the commercial crisis which afterwards ensued. Jt is but right that those who witnessed the effects of these measures, should recommend a system to he adopted which would not be liable to the same abuses, and which would give to the community at large, the profits derivable' from issues {of paper, which otherwise would centre in individuals. The system of the Government issuing paper money, is not a novel one— it has been acted upon in the Brazil and in Buenos Ayres, for years. In Brazil the whole currency of the country is carried on in Government paper money and copper coin ; the latter forming a very small proportion of the circulating medium* The paper dollar circulated for about 30d., and it was irredeemable except in copper coin, which said copper coin was nut worth intrinsically, more than lOrf. ; the paper mouey thus circulated, amounted to about £2,000,000, upon which if we estimate the nett profits k at 4 per cent, there would be a clear gain to the community of £80,000 per annum. The issue of paper for some years, was neither increased nor diminished, and its ! value iti consequence for eight years, did not vary more than 2 per cent. If the staple export of the country advanced 20 per cent, the effect of this advance was seen in the exchange advancing 5 per cent, or more, and if likewise the staple export declined, the exchange declined in a ratio corresponding to the previous advance. The currency having no intrinsic value, the exchange upon London was the barometer which indicated every variation in the value of the exports. Having witnessed therefore, the effects of the derangement of the currency in England, in 1836* the coiiNictioti is forced upon me, that were the Government alone to become the issuers of paper money, it wou'd prevent that inordinate speculation which the Directors of private Banks are too apt to indulge in. It is also I think, clear that eventually there would be a considerable profit to the community from the Government monopolizing this branch of business. While we are without a private Bank, no time ought to be lost in at least making the effort—in examining those men whose varied experience may throw some little light upon the subjectin balancing and combiuing their different opin.ous, and in extracting therefrom, some steady and decided course of action. In my own humble opinion, the issue of paper mouey ought to be on a small scale first, the whole be redeemable in specie : afterwards, when the effects of this issue are seen, and the de-

mandi of the place ascertained, let a sum be issued corresponding to that demand and no more. The expense of carrying into effect sncti an operation would be trifling, for it is to be presumed that the Colonial Treasurer would willingly give a portion of his time for the furtherance of a measure which would redound to bis own credit if properly managed, and at the same time benefit his adopted country. I am, Sir, yours, &c.

VIATOR. Auckland, July 29, 1847. [We thank our Correspondent for bis observations, and we are at all times open to correction. On referring, however, to our hurried notice of Lord Grey's Despatch, we are unable to perceive that any opinions broached therein, aie at variance with established facts. With respect to' the difficulty of giving a fixed value by proclamaiiou, to the various ■ denominations of fore gn silver coin, we may observe that sach is not a matter of fact, but a matter of opinfon. ,' Viator" likewise seems to limit his consideration to dollars, forgetting that any foreign silver is admissible,, and that' of. infinite variety, both in name and standard. For instance, we are all acquainted with the general circulation of the Preach five franc piece in this very place. Witti respect to the occa^ipjialule.Ujwetnent even of Dollars, we ans^v^rTTKaTlhereisTgentieinaii' in* this settlement, who has suffered by it, having bought a quantity (Peruvian we believe) at Lima, which when sold at Liverpool, were discovered to be light, and to have been so coined. If " Viator" be curious about the matter, « c could obtain for him more accurate details. WitH respect to the necessary connection of rise in prices with issue in paper money, tre are aware that it has been disputed, notably by Mr. Tooke, in his •« Inquiry," but it still remains matter ' of opinion, and of opinions strongly preponderating on one side. Butwp. may perhaps be al.iowed to hint, that our Correspondent's letter is a little beside the question. We are not called upon here to decide upon the abstract merits of a certain system of banking, but whether the measure proposed, he suitable to New Zealand $ ami whether it be worth our while to risk being experimented upon. One word more* When our Correspondent writes, that " while w« r are without a Private Bank, no time ought to be lon iv making the effort," he seems to fall into the same error as Lord Grey, in overlooking the existence of a town called Wellington, with a Bank in it, and ' paper money galore— Ed. N. Z.]i