LEGISLATIVE COUNCIL. Tuesday, 17th August, 1847. (Continued from our last) Paper Currency Bill.

New Zealander, Volume 3, Issue 128, 21 August 1847, Page 2

LEGISLATIVE COUNCIL. Tuesday, 17th August, 1847. (Continued from our las t) Paper Currency Bill.

The Colonial Treasurer rose to move the socond reading; of this bill, and said that lie would not occupy the time of the Council with many observations on it* He would say however, that the measure appeared to him to be just, and ona that was necessary to be adopted* There could be nothing objectionable in the issue of paper money, inasmuch as such a currency was issued in nearly all parts ot the world, and was found to be a cheap and convenient circulating me* dium ; and 6urely if it was admitted that the Government should have the regulation of the coinage and issue of metallic money— -it was us necessary that the) 1 should have the control of the paper currency. Indeed he thought that the piinciple was incontrovertible. It was much better for the security of the inhabitants of a countiy that the care and regulation of the currency should be in the hands of government than under the management of private individuals or companies, who had only theii own pioh'ts in view, and not the general interests of the public. He was not prepared to answer the arguments of the petition which had just been read, as it had only come before him now at the eleventh hour—* indeed he did not expectmny such opposition to the measure asjthe petition had presented,) for he had spoken to several person* out of doors on the subject of the bill, and they had given their opinion in favor of it. The honorable member concluded by moving the second reading of the bill, Mr. Brown thought, that the bill now before the Council, was perhaps the most important measure Unit line! yet come before the Legislative Council ot this colony. Its object was nothing less than to produce an entire change in the currency or circulating medium of the colony, and conlrt not, fail in producing the most important clfcctN, not merely in our own community, but also in our relations with Sydney and the neighbouring colonies. It wits a measure, he contended, founded upon the most abstruse speculations of political economists, which, so far from being generally recognised as true, were still a subject of warm dispute. Under these circumstances, it was not to be expected, perhaps, that any very clear comprehension of the principles of the bill could be entertained here j far less could it be expected that any new light could be thrown upon the subject. However deficient in the knowledge of the true priuciplcs upon which the measure is based, the honourable member contended, that there could exist hut little dilliculty in estimating clearly its practical results on this colony;; which would sufficiently enable the Council to form a satisfactory opinion upon the merits of the measure before the Council. He could not help remarking, that the circumstances under which it was introduced,, were very anomalous. Unlike other measures whicli, have been uruught before the Council, the present was introduced, not for the purpose of remedying, some acknowledged grievance— not for the purposeof supplying some well-known defect in our* institutions—but was inertly a polititico-economlc experiment. He thought, if on that ground alone/ the Council might not feel warranted in rejecting it, tho*. more especially, as it had been so warmly recommended by Earl Grey : yet the fact of its being such, an experiment, woulcl justify the Council in looking the more narrowly into it, aud giving due weight, at least, to every objection that might be fairly, urged against it. lie expected to receive tins justice, and that the measure would be permitted to rest upon its own merits alone, ami not forced through the Council by the mere superiority of voting power, possessed by the Government. The despatch from Earl Grey, upon which the bill was founded, was very 1 specious, nut most fallacious, and fiillv satisfied the honourable member that the noble Earl rccoln mending the measure, had a most superficial nnd imperfect knowledge of the subject himself, and seemed to huve framed ttie despatch altogether upon the viewi and opinions of others. Ona first perusal of the despatch, the honourable member admitted having been very favourably impressed with the proposed measure ; but>nller mature reflection, he had altogether changed his opinions.. It was well known,, remarked the honourable mem-

her, that the currency, or circulating medium had been warmly discussed for the last thirty or forty years, and still seemed as far from being; settled as ever. While some maintained that it ought to be a metallic cur--encv, so as never to be m excess,} or liable to much fluctuation; others again, thought that paper formed the best circulating medium, both on account of its extreme cheapness, # as well as for its great convenence in commercial transactions. Whichever of these viaws might be the more correct, the fact at least was, that paper had been adopted in preference to the other, and had been in use for a great number of vears It had not been adopted merely on the suggestion of theorists: but had grown up with the commerce of the coontry, and was essential to its prosperity. At various periods of our hislory, there had occurred severe commercial crises, spreading rom and devastation over' great numbers of the community. The attention of thinking men had been drawn to the subject with the view of discovering the cause of these commercial convulsions} and parliamentary enquiries had also been instituted for a similar purpose— the result was, that a pretty general opinion came to be entertained, that the evils sought for, were to be found in the over-issues of paper money by bankers ; and as a natural consequeuce, that the issues ot such paper should be taken out of their hands, and placed under the sole direction of the Government, so that paper and gold might be made to bear an exact relation to each other, by issuing the one only in return for the other The bill before the Council seemed u> have been recommended by Eat 1 Grey, in order to attempt to trv the experiment in this colony,- thinking perhaps, if it succeeded here, it may safely be tried m other places. It is generally admitted, remarked the honourable member, that, in o/der to prescribe efficiently tor any disease, it is necessary to be first thoroughly acquainted with the cause of the complaint; and it did apoear to him, that there were many good reasons tor believing, that the commercial disasters in question, though certainly connected with, were not to be ascribed to the over-issuing of paper money as the prime cause: it seemed to him to lie a little deeper in hflm n nature, and might be traced to °ver;specul.Uion • a result of that sanguhrf, hopeful disposition, the soul of commerce, leadinsJ&hen well regulated, to the best results : but too frejfcntly ending in disappointment and disaster. To Juopt a practical illustration-* trader or manufacturer supposes that there will arise at the end of a short period, a great increase in the demand for his goods. He accordingly applies to his banker for the loan of £5000 to enabfe him to augment his stock of goods. When the period arrives, he finds his calculations have been altogether erroneous, and he not only is ruined himself, but spreads the disaster over many others connected in business with him. But it is not the over-issues of Bank paper that can be charged with the ruinl; it is the mistaken calculations ot the speculator alone : the paper is merely an instrument in his hands, and might, under other circumstances, have been turned to the very best account. For it might be easily supposed that his calculations had been well founded, and if so, not only would he have ftreatly encreased his own property, but would also have greatly added to the happiness and prosperity of others connected with him. In this case, therefore, the banker's paper had done as much good as in the other case it had done barm— clearly proving it a mere passive instrument in the hands ot him who uses it-amUertainly not the cause of commercial disasters, as generally supposed. When a commercial crisis does happen, it is to be particularly observed, that it may affect two parties,- 1st. those who borrow the money, along with all those connected with them ; andly, the baukeis, or those who lend the money. It may be easily shown that the first class are still as liable to become sufferers under the plan proposed by the government, as under the old system. But it is believed, with some show of reason, that the evils arising from the second class of failures, may thus be entirely prevented by' the government becoming the solelissuers of paper money. The risk might be perhaps a little diminished, but certainly not annihilated. Because the bankers, or money dealers, under the new system, would, of course, still lend their money to j speculators and people in business, as before, and both parties would therefore be liable to the same disasters, j The honourable member further contended, that if it weie ctrtain that over speculation and commercial entes were caused by over-issues of paper money by the banker-., government could not prevent similar results by taking the complete control of the issues themselves. Becnuse, if the government issue the full circulation of the country— bay 20 milhons-aud exchange the'r paper for that amount of gold, the government cannot, of course, keep that money lying ulle in a box, but would be obliged to lend out that money to responsible •Darties, on obtaining the requisite security for repayment. Tliis money would find its way into the hands of the bankers, who would just lend it in the same , way they did their own notes ; consequently, the circulatiou would thus be in excess, it would be doubled, and even tripled, if commercial speculation should demand it. But should the speculations under the new system turn out to be bad, the min would equally overtake both the borrowers and the bankers or lenders, as under the old system. Nay, there would •be the additional disadvantage, that, as all the paper would be issued from the National Bank, and only convertible at the central establishment, it would uot be known in what quarter the over-issues and o\ergpeculation was taking place— all which the local banker readily detects from his notes being at once returned npon.him, and he provides theuecessary remedy. This'shows thatEarl Grey Is quite wrong in the statement which he makes in his despatch, that •♦ the ibsu' ing of paper money has no proper connexion with banking.'^ It has a very proper and intimate connexion with it. In addition to these .objections to the eeneral principles of the bill, the honourable member stated, that there were some special and peculiar objections to its introduction into this colony: 1st. By sending away the gold obtained for the government paper, out of the country for envcstinent m a neighbouring colony, as contemplated, the credit of the government could be destroyed at any time, either by the natural cause of a sudden demand for fold to export for goods, or by a combination of a few individuals for the same purpose, 'ilus would certainly he the result, should fresh disturbances arise among the native population, ns many people would at once demand their gold, in order that they might jit least be prepared 10 leave the country by the first opportunity: *ndly, The state of the native population would alone afford a good ground of objection to the bill, inasmuch as they entertain the gieatest dislike to such paper money; it is altogether unsuitable for themj it would be very unfair and Jimpotolitic force ir upon them, and they could not be specially exempted from the operation of the measure— Srdly, Perhaps the strongest objection which the community heie entertain to the measure arises from the tendency which it will certainly have of prerenting a proper banking establishment from coming to this settlement. It is well known that such an establi&l.nient was on the eve of coming, and if they have hitherto refrained on account of the small amount of business to be done here, it is not likely they will come now, when the one half of their profits would be at once cut off by the proposed measure. The want of a bxuk is most severely felt in this community ; its commerce is completely languishing; such an establishment is justly deemed a matter of the very greatest impoitance, and any measure that would prevent it, deeply to be regretted.— 4thly, Earl Grey in his despatch states his belief that there are already no .vested interests here to prevent the introduction qt the proposed measure, and appears therefore most unaccountably to have overlooked the existence of banks both in Wellington and Ne son. having vested interests to aflarge extent, which'he (Mr. Brown) thought it would be most unjust to sweep away. The settlers moreover had the stiongest interests in supporting these bankt, and we should not be justified in passing the present bill so deeply to their injuryi'without consulting them or permitting them to be heard on the subject, sthly, |

There exists no present grievance to remedy or anticipated evil to counteract by the present bill ; and seeing that it involves such important consequences, it ought not to be thrust upon the community, by way of mere experiment alone. Seeing that the measure was there* fore wrong in principle, and being quite unsuited to the circumstances of the colony : not wanted : altogether experimental, and involving as it does the commercial prosperity of the colony, it ought at once to be abandoned. The hon. member concluded, by moving as an amendment, that the bill be read a second time this day six months, The Colonial Secretary said that he could not quite agree with the opiii'.nn of his honorable friend opposite, that) tli» measure was an experiment. Il had been tried in England as far as the circumstances of the country would admit, and its adoption to the fullest extent tiieie had been prevented, only by the existence of v?ated interests. Such interests hardly exist in ibis colony, and if they do in the case of the branch of the bank at the southward, of which he had some doubts, they would be met on the same terms as they had been in similar cases jn England. The piesent moment therefore must be the most favorable on that account for introducing the measure into this colony. In order to appreciate fully the necessity or propriety of the measure itself, it would be requisite to advert to the causes which had led to its adoption iu England. Two great evils hud riseif up in consequence of the use of paper money issued by companies and individuals which have been freely acknowledged by all parties and much complained of. The first was the excessive and iu some cases forced issues of paper mone) during times of apparent prosperity, thereby encouraging undue speculation, and then again its sudden withdrawal during times of difficulty, w lien the accomodation it afforded was most wanted. Tiiis evil affected almost ent.i ely the mercantile interest which thus suffered ftoin two operations of opposite kinds but arising from the same system. The second evil < d the lailuie of banks entailing often - o it jjss and misery to the lower classes, in cons>ci]UvMice of their holding the notes of banks, stopping payment, not like merchants when in pursuit of speculation when such losses might have entered into the calculation of the holder, but in tiusting to their being a repiesentation of so much propei ty or specie. This last class of sufferers were entitled to the most especial care and protection of government that could be afforded them. With a view therefore chiefly to prevent these evils, such a measure as this was introduced, into the Imperial Parliament, and i although the experience of its operation has \ been but short, yet so far as it goes it has been favorable. The principles of banking and finance are not easily understood, and the most acute and experienced men, 'aave confessed themselves deceived iu their calculations respecting changes and the operation of new measures in these mat* ters, but it would be equally wrong to trust to no result that has appeared to be confirmed by experience as to receive every plausible theory as well fuqnded. The prin«iples on which this measure is founded appear to have been suppoited by the great majoiity of pra«tical men at home, and therefore may be leceived with more confidence here. Besides the benefits the public Mill derive- from this measure Ly placing the papei currency under the control of government, and the security it will give to the holders of Notes; thete are other advantages such us the profits to be deiived fioin the investment of three louitlis of the specie exchanged for the notes. This may be fairly estimated at not less than four per cent, and it is much more reasonable that this advantage should be enjoyed by the public as a whole, than by private individuals. — It h is always been considered the duty of a Government, and has. been generally the practice to provide a metallic currency as a circulating medium, and when a currency assumes the form of paper, there appears no good reason why it should follow a different lule. Paper money has done much we all know for the prospeiity of the colonies as well as'for England ben>el), and in intt oducing it into this colony, cei tainly the mode which has received the sanction of the wisdom and experience of the Imperial Parliament should be preferred. The Governor said that perhaps he might be allowed to »ay a word or two, by « ay of explanation, et that early stage of the debate, without going into any arguments upon the geneialprin ciple of the bill, il appeared to him that the opposition which had been given to the I ill was chiefly directed against the 90th clau-e, and against the disturbance of vested interests, alleady existing in the colony. With regard to the 20th clause he would say that he himself was entirely guiltless of any such intention as vvm $H forth in, the proviso appended tu that clause j— his learned fiiend the Attorney General haU introduced that very objectionable proviso, perhaps unwittingly, but as his learned friend was opposed to the bill, one might almost imagine, that he had done so in order to make an unfavorable impression against it— and so render it the more unpopular,— however it happened, he had certainly transmuted that which was a mete suggestion into .durable metal by a certain alchemy of his own. - The proviso at the end of the 30th clause stated " that no such investment shall be made in the colony of New Zealand." Now he (the Governor) was of opinion that the funds of the bank could be much more profitably invested within New Zealand than else\vheie,-and consequently he was totally guiltless of the introduction of that proviso — indeed, were he not Governor of the Colony, he should himself be a petitioner against such a regulation. He quite : agreed with the honorable member Mr. Brown that vested interests in the South should be respected : he had prepared a resolution which he had intended to submit to the Council when the.y were in committee on this bill, to the effect that Government bank.notes, bearing small interest, bLould bejissued to the bank at Wellington, which should be substituted for their own notes, and circulated iu their stead. By such means he had hoped to save the bank at Wellington from inconveniences arising out of this bill. Having shown to the Council that a miltake had crept into the bill, relative to sending the gold out of the colony ;— and also that there was no intention to interfere with vested interest iji ihe colony, lit now trusted that the Council \\ ould neither hurriedly adopt the mea-' sure, nor hastily throw it out j but that they

would ditcuss its merits in committee ami give the public time to express theii views upon it, and then, if the Council thought fit, they might reject it on its third reading. The Attorney General said tkat he had come down t» the Council entertaining a strong opinion against the Bill, and he must say that nothing he had yet heard, had altered his opinion upon it. If it had beeu founded upon admitted principles of political economy, — if a similar measure had been already tried elsewhere, and had successfully stood the test of experience,— or if New Zealand had not already been subjected to the experiment of a Government Paper Money, he should j have felt the greatest hesitation in offering any opposi ! tion to the measure, coming before them as it did, at | the suggestion, and on the recommendation of H. M. Secretary of State. But, under the actual circumstances of the i,ase, and entertaining the strongest opinion of the impolicy of the measure, he felt that he should not be doing his duty as a member of the council, if he refrained from expressing his opinion upon it. Not intending to enter at any length into the consideration of abstract principles, he would at once relieve the council from all apprehension of having inflicted on them a speech upou the abstruse doctrines of the currency question; when so much difference of opinion existed a.nongst the ablest men on this subject, it would be presumptions in him to enter into it at large, either with the view of altering the opinion of others, or of justifying his own. A more debated, debatable, and . unsettled question could not be proposed for discussion. The highest authorities were still at issue upon it,— not upon secondary points, but upon first principles.— What shall be the standard of value, was still a debated question, — Gold, Silver, and Corn, had each its advocates ;— whether the cunency of a country should con* sist of the precious metals,— of paper, — or of a combination of the two, was yet a matter of controversy. With should a difficult subject to deal with, he could not but feel some embarrassment. On the one band, to bandy arguments with statesmen, and political economists, on the principles of the question, would justly render him liable to a charge of ridiculous presumption, —to assent to so important a measure, simply on the suggestion of another, would on the other hand, be an abandonment of his functions as a member of the Council. Upon any political question in the abstract he would willingly deter to ihu judgment of English statesmen and political wriien. As to the applicability of any measure to the condition and circumstances of Great Britain, he would not even venture to offer an opiuion. But, as to the applicability of any measure whatever to New Zealand, he (the Attorney General,) would yield in judgment to no man living personally unacquainted with the country, and with the nature and condition of its people. Taking then a practical view of the subject, he would endeavour to explain the grounds on which he thought that this measure should not be passed into a law. As had been already stated by the lion, member, Mr. Brown, it was the opinion of •ome of the leading statesmen of the day, that the issue of paper money by private banks was the cause of excessive speculations, and ruinous fluctuations in prices,— it was also believed by many that it was impossible by any regulations or restrictions whatever, to •ontiol over issues, so long as private banks were allowed to issue their own paper, and that the only effectual means of remedying the evil was by wholly prohibiting the issue of private paper, and by establishing a single bank of issue, under the management and control of the government. The bill now before the Council was framed upon these views. It wholly prohibited the making and issuing of paper money by private banks or individuals,— it authorised the establishment of a single bank for the issue of paper money, convertible into cash on demand,— and it placed that one bank under the control of the Colonial Government. The principal questions then for the Council to consider, appeared to him to be,— Were the principles sound on which this bill was founded 1 were its provisions expedient and effective? and, were the conditions and circumstances of New Zealand such as to call for, or admit of, its application to this country ? In the first place, then, was it an admitted fact that the issue of paper money by private bankers was the cause of excessive speculation, and great fluctuations of prices ? Hfcwould admit that such was the opinion of many emiijfllt statesmen and political writers, to the truth of which he (the Attorney General), was inclined within certain limits, to subscribe. Still, it was not by any means an undisputed fact. On a recent occasion when the subject of the Bank Charter was under discussion in the Hou&e of Commons, an lion, member strenuously endeavoured to convince the house, and proved, from a carefully prepared statistical table, that in the years in which the issue of paper money by private bankers had been greatest, speculation and fluctuation in prices had by no means been excessive, at the same time, for the same purpose, quoting the example of France to shew, that, during the period when the circulating medium of that country had been almost wholly metallic, fluctuations in prices had been unusually great, and •peculation excessive. Considering the origin of the measure now before them, the Council would be somewhat surprised to learn that this hon. member, was Mr. Benjamin Hawes, the member for Lambeth, and the present Under Secretary of State for the Colonial Department 1 Again, was it an admitted fact, that there were no means of checking over issues of paper money by private bankers, except by a total prohibition? It was true that perhaps the ablest practical statesman of the day, and many with him, held to that opinion. " What has been the result of unlimited competition in the United Stites ?" asked Sir It. Peel in the debate alluded to. •' In the United States, the paper circulation was supplied, not by private bankers, but by Joint Stock Banks, established on principles, apparently the most satisfactory. There was every precaution taken against insolvency. Unlimited responsibility of partners, — excellent regulations for -the publication and credit of accounts,— immediate convertibility of paper for gold. * * * When the principle of free competition was left unchecked, then came, notwithstanding professed convertibility, immoderate issue of paper, extravagant speculation, and the natural consequence,— suspension of cash payments and complete insolvency." But what was said on the other side of the question ? Why, two of the most eminent authorities on Political Economy— Ricardo and Adam Smith— both, strongly maintained that immediate convertibility into gold at the will of the holder, was, in itself, a sufficient check against over issues of private paper money. And what was the opinion.of another authority on this subject—not a theorist— bur, a practical man 1 .- Why, he •thought " the Legislature rightly interfered not to regulate the amount in circulation." * • * "It seemed to him a most unsound principle to attempt to limit speculation by limiting a particular form of credit." • * * It seemed to him that nothing was more absurd than to limit the number of those engaged in Banking." * * * " Sir Robert Peel," he said, " proposed to do, what he , thought the most objectionable part of his plan— to do away with the issue of notes by private banks ;" And who, the Council might enquire, was the author of the opinions thus decidedly expi essed ? Why no other than a third occupant of the Colonial Office— Mr. Charles Buller, lhe member of Liskeard ! It must be evident then to the Council that the expediency of prohibiting the issue of paper money by private banks was far from beingan admitted point. Then, again, as to tin expediency jof establishing a single. bank of iisuc under the control of tke Government.

He believed that Sir R. Peel and others were In favor of such a project. But what was the opinion of the Under Secretary of State for the Colonies.— "To the establishment of a single bank of issue/' said Mr. Hawes, "I conceire there are insuperable objections."" And ogain, " Anything that tends to connect the Stale with banks has always been productive of disastrous consequences. * * * I wish, therefore," said he, " to be understood emphatically to protest beforehand against the establishment of a single bank of issue." He, the Attorney* General, quoted the opinions of Mr. Howes and Mr. Buller, not that they were the highest authorities on the currency question, but to shew that, amongst piactical statesmen there were great differences of opinion on the tubjcrt, and that that Department of the State, from which t his measure emanated was " divided against itstlf." But, would the establishment of a bntik under the management of the Government afford a certain guarantee against over issues of paper t What had been the history of banks in connection with the State ? On that subject he would eite a passage from the work of an eminent political economist ; and little did he think, when, ten or twelve years ago, he had made the note in question, that he should ever have himself witnessed the very coujse, so distinctly described. If the passage h« was about to -quote af» fected other members as it did himself, it would crcat* on their minds a deep impression. "How a paper money of some kind," said the writer, " may be made to produce the effect of debasement, can thus biiefly be demonstrated. Suppose a Sovereign to establish a bank upon the principle of a deposit and to raise by force, or on loan, all the money of his people. This lie might deposit in his treasury in order to pay his foreign troops •, and for every guinea, or shilling, thus raised, he might give a note, token, or duplicate, in. exchange for which, he promises to return the money pledged, eiiher on demand, or on a future day. Before the day comes, he privately creates new notes or duplicates, as like the former as possible, with the same stamp of authority. No one can see a difference — no one is acquainted with the actual amount in the treasury. They cannot be weighed— they increase gradually, from day to day, and their effect is slowly perceived in the rise of prices. Land grows dearer— bread rises constantly— wages cannot keep pace with it— the poor starve— the rich find their incomes inadequate to their expenditure. All this has passed for years, wiihout any one suspecting the cause. The truth is, the monarch has been secretly debasing his money—violating his compact— infusing daily, not a base metal, but a quantity of bad faith into his new paper coin i But as bad faith is a quality of which no subject ca» suspect his monarch, a few calculators only discern it but no one speaks out and the notes continue in circulation. At length the demands of the State increase rapidly. With the rise of prices, the demands of the State increase— the pay of the army becomes insufficient The army demands an increase— paper money must be.issued, atid prices still increase. This exact course nearly had been run by all the nations ef Europe, England only excepted." And he (ihe Attorney General) would now ask was this an imaginary picture ? or was it necessary to gu so far tor an illustration ? His hot), trend, the Colonial Treasurer had said, that the government was a responsible body. If he (the Attorney General) had the same conhMeuce iu governments, as hishon. friend much ot his opposition to this bill would have no existence. But had not the experiment of a government paper mouey been already tried in New Zealand itself, at.d with what lesult ? On the 18tb May, 1844', au ordinance was passed authorising the issue of colonial debentures, with a proviso, in express terms, that the amount of such debentures, tobe outstanding at any one time, should uot' exceed the sum of £15,000. In the short ptriod of 18 months, — in the mouth of November 1845, it appeared from an official statement in the Gazette, that debentures to the amount of .upwards ol«£30,00O had been usued, anil were then outstanding, and thus, that mure than double the amuuut provided iu the ordinance, and authorised by the law, had been issued by the government. He would not dwell upou the loss of debentures— the supposed forgeries— their grtat and rapid depreciation, and on the other incidents of their short lived career^ but lie would confidently appeal to the council whether, with such au example before them, they could feel any assurance that the establishment of a single bauk of issue, couU atford a guarantee against immoderate issues ot government paper money. The hon. member on his left had alluded to the unusual manner iu which this measure had beeu brought before the council, and he, (the Attorney General) concurred fully in the honorable member's observations on the subject* Was the monetary coudition of the colony such as to call for legislative interference ? Was there an existing evil ? aud was the billjbroug-ht forward to remedy it? Nothing of lh& kind had been affirmed by its most zealous supporters. On the contrary, the origin of the bill was tobe found, not iu the Council, uot in the local government, not even iu the colony of New Zealand, —but, avowedly, at tbe very antipodes. A despatch from England recommending the adoption of such a measure had recently reached the colony, that despatch had been formally Lid upon the table, and in the courie ot a few days had beeu followed by lh* present bill. The Council were aware that by the recent act of Parliament, for making provision for the government of the, New Zealand islands, H«r Majesty was empowered to constitute a General Assembly, and that to the General Assembly so to be constituted, special powers of legislation were given, upon certain specified subjects; and, amongst olheiv '• for regulating the current coin ot the said islands, or ihe issue therein of auy bills, uoles, or other paper currency." The Count il were also aivaie that the Queen had accordingly issued a new charter of government for the colony. Looking to the un~ teuled and distracted condition of New Zealand since its foundation, —seeing its many struggling settlements, with little community of niteiest or iee»ing between them,— its small European population, and, comparatively powerful uative race, with little iu common between the two ; he, (the Attorney General) could well conceive that a minister might pause before conferring upon the small Eiuopeau minority, full aud unfettered powers of govern .nent over the whole of the colony, and over both races of its Inhabitants. He could conceive, a minister willing to confer such power, doing so with certain restrictions aud limitations. He could conceive that a minister who thought that the paper, us well as the metallic cuireucy of a country, should beundtfr the control of the government, uri^ht well withhold from a popularly constituted colonial legislature, the power oJ legislating on ibe subject of the currency. But what perplexed him was this, that the .same minister who had in express terms, conferred upon the General Assembly the power of legislating on that subject,— had, on the very eve of the existence of that assembly, suggested legislation on the subject, by the government, a< at present constituted. He, (the Attorney General) would now refer to what had fallen irom his Excellency as to the provisionmade in thebill,that the coin received iu.excuaugt for notes, should be mvested out ot tb« colony. Now he must say, that that provision had not been inserted by him iuthe bill inadvertently— nor, of course, with

the view of raising an opposition to the bill. It appeared to him to be a (undameutal principle of the measure, that all the cash received for notes, not required for the current business of the bank, must if invented at interest, be invested out of the colony , or, if detained in the colony, must be buried or deposited for safe custody, and kept out of circulation. If invested at interest in the colony, of course it would again get into circulation, and aug mot the amount of the circulating medium. Prices would, of course, rise, and effects would be produced ue.er fora moment contemplated: and thence it was, that to tamper with the currency, was m,e i»f the most dangerous measures that could be undertaken. But it might be urged, he was not sure that the argument had been used, that this measure was expedient, apart from all other considerations, on the ground that it would be profitable to (he colony in a pecuniary point of view. It was main, taiued by the advocates of a paper currency, that At possessed the recommendation of cheapness, because the cost of a metallic currency being considerable, the value of the interest upon the amount, would be saved by the use of paper. Now, if the cash received for paper under the proposed measure must be invested out of the colony, would the change to a mixed currency turn out a profitable transaction. Looking to the necessary cost of the establishment-"— the salaries of managers and clerks-risk of loss and fraud, and the cost of transit and insurance— would all tins be more than covered hy the amount of interest received on the amount invested ? And, lastly, lie concurred in the view taken by the honorable member on his left, of the probable effect of this measure if it became law, on the establishment in the colony of private banks. There rould be no doubt that the establishment of private hanks would be certainly discouraged by it-, and he, the Attorney-General, thought the measure impolitic on that ground alone : he should much prefer to see a private bank in every settlement in the colony, rather than one general bank of issue under the direction and control of the colonial government. If an excessive i«sue of the paper of this government bank should take place, the whole colonv would be involved in rum. lbe evils, on the other hand, of the new issues of a private bank would be confined to the district id which it might be placed. This much, however, be must •ay for the bill, that he had spared no labor and palm in making it safe and effective. If it should be the will of the Council to proceed with it, he would aid to the best of his ability in improving u. And, should ii pass into a law, he would, as a loyal uibjeot and an officer of the Crown, as m duty bound, give it his support. But, in its present s>age, but from the desire expressed by hi* Excellency that its fate should not be finally determined, until it had passed through committee, Iip should have supported the amendment. Still, believing the measure to be questionable in principle— unprofitable in practiceimpracticable hi operation— and uncalled tor in fact —he could never regard it otherwise than with the strongest opposition. Mr. Merriman lose to observe tlmt little remained for him to say, after the able speeches of the Attorney General and Mr. Brown, but that lie could not help viewing the measure proposed as a mere experiment to be tried at the expense of the New Zealand colonists. That theie was no intermission of change, no breathing time allowed ; tbat we wete buffetted about as if onr welfare was utterly disregarded by the Diother country. The lion, member then proceeded to make some observations relative to the old debentures, and remaiked that the experience which we already had of them, had uiven the country a decided distaste for Government paper of any kind. He had seen one of ■,hem haw ken* about the town tbat very morning, without meeting a purchaser. Tbat government paper was al a discount, while the private bank of Auckland had taken up, or already provided for the pajment of every one of their notes. The Governor said that he rose with some degree of diffidence to reply to what had been advanced in opposition to the bill, and he hoped the Council would indulgently bear with him, while he endeavoured to answer the objections urged by the lion, and learned members who had preceded him. He had not beard any of the arguments which were just used against the nr.easure, belore ne entered the Council, and therefore he was obliK ed to meet three opponents without the advantage of much previous reflection. Before proceediug however, he would beg that any words he had made use of jocosely, in reference to his learned friend the Attorney General, should not betaken amiM,— fer he did not intend to say anything that might hurt the feelings ot anv one, or cause offence. He would now remark in the first place, that if he had wished for arguments in favor of the bill, he cyuld have had none more satisfactory and conclusive than those which had been used against it thioughout, by its opponents. The hon. member Mr. Brown, had said that the measure would have the effect of altering the circulation of the colony. Now, he (the Governor) contended that no such effect could ensue from the bill i but quite the contrary. For instance, in the north, at the present time, the circulation was metallic, which, should this bill pass, would be substituted by government paper j in the south, bank notes were in circulation,— and these also would be replaced by the government bank notes,— but in neither case would there be a greater amount issued, than there were coin or notes to represent, and consequently the amount of money in circulation could not be increased or diminished The hon. member had stated a practical illustration of the effects of private banking, and had pointed out the manner in which commercial disasters were frequently brought about, by mistaken calculations of hazardous speculators. Now, nothing that could have been adduced, could have so triumphantly convinced his mind of the necessity of having the banking transactions of a country under the control of the government ; or else, tbat if private banks were permitted, they should be bound to make no greater issues of their paper, than so much only as they bad specie to represent. The hon. member had matauced the probable casualty of a native disturbance, causing a demand on the bank lor cold by persons who might wish to be prtpare'd to leave the country. Now he (the Go tremor,) would state to the Council, the course he would pursue, in the event of such a casualty if he were a holder of ihebe government notes He would learn the numbers of every note he possessed, and take care to have them leuisiered ia several places, and weie he after

wardi to lose them, he would immediately make it known, and his demand for their value would be recognised, — and so he would incur less danger of loss than had he been possessed of gold instead of notes ; he therefore thought that the hon. member's objection v» as another arguiriont in favor of the bill. The objection that the paper money would be unsuited to the native population, had certainly some weight with it at first sight 5 but then there would be no necessity of offering it to the natives. Our dealings with them could be carried on, as heretofore, with specie. But if this was an objection against the issue of government paper, the same might also be urged, but in a greater ratio, against the issue of notes, by private banks Another objection urged against the measure, was its tendency to disturb vested interests, and in guarding those interest* he was prepared to go the whole way with the lion, member, Mr. Brown. A regulation could be easily made to save the bank now in opeiation at Wellington, from inconvenience or low. He was afraid however that the diaft of the bill which he had sent to Wellington, would raise a prejudice against the whoie measure, as it contained the objectionable provisions befoie referred to. Another argument used against the bill was, that it was not intended to remedy any existing evil } but lie would ask the Council was New Zealand a part of the British Empire? If so, then had not our rulers a right to adopt such measures as were calculated to prevent evils arising in a new country like this, out of a system which experience hud proved to be the cause of many and great disasters in •ther places. His learned fiiend the Attorney General had said that there always existed much diffeienee of opinion in high quarters, upon the subject of currency. Now he, the Governor would ask, what question in these days had not become the subject of controversy, and which did not meet with talented advocates on both sides 1 Again his learned friend had quotedjin opposition to this measure the opinions of two gentlemen on the subject of currency and banking; but these opinions were uttered in the year 1844 $ and the views of those gentlemen having since altered, it only proves that they have arrived at their present conclusions from a close observance of the practical working of the old system and the new. Another objection raised, was that as the government of this colony had ouce already issued more paper than they were authorised by an ordinance to do, that it would be dangerous to give them thesame power again. But a« this was once unfortunately the case with the government of the country, was it not more than probable that private banks, having the power to issue would abuse that power to a greater extent than it was possible for the Government to do. It was also urged that the bill would have the effect of preventing other banks from establishing themselves in New Zealand, as their profits would be diminished by the Government bank. Possibly such might be the case— and if so, the colony would derive the benefit of the profits or its own banking transactions, to which the colonists would have a better 1 ight, as a m hole, than any private individual — for whatever amount of profit would accrue from the bank, it would to that extent lighten the general taxation. It was said that the private bank at Auckland, which had ceased its opeiations, had wound up its affaiis, and redeemed all its notes, while Government debentures still remain on the hands of the public ; aud it was argued from this that notes of private banks were more to be relied on than Government paper. But he, the Governor, had heard from undoubted authorto* lhati a great number of these debentures njRl been issued by the Governmeut in order to saVe the credit of the very bank that hud been named j it was thus easy for that bank to meet ils liabilities, at the expense of the colonists, and the injury of another bank in the colony. He had now endeavoured, although labouring under great disadvantages, to reply to most of the objections that had been urged agaiust the bill ; he hoped that the council would not discard the measure before they had given it a patient consideration, for he believed it t» be one of the greatest boons that could be confert ed on New Zealand,—its object being simply to guard the interest of the public by giving the sole power to the government to issue a paper currency, the test of the extent of which currency would always amount of specie in the country. The Colonial Treasurer said that to his mind, His Excellency had so ably combated and triumphantly overcome all the objections raised against the bill, that he considered it unnecessary to attempt any further reply. He would simply content himself by observing t at he was not only^ unshaken in his opinion, that so important a transaction as that of issuing and regulating the currency of a country should be solely entrusted to the responsibility of the government, and that a paper cunency so regulated would be, the most economical, and serviceable that could be put in circulation,— but, that after hearing all i that, was said on both sides, he was now more fully convinced of the value of the bill, than he had been when he first rose to move its second reading. . __ „ The Governor suggested that as Mr. Brown's amendment had not been seconded, the Council might now go into committee on the bill, and improve its clauses as they proceeded. Mr. Merriman thought that the learned Attorney General had seconded the amendment, else he would most certainly have done so. However, if it was not out of order, he would beg leave to second the amendment of the bon. member Mr. Brown. The Governor hoped that the amendment would not be urged i the bill might be allowed to pass into committee, where it could be pruned and adjusted to suit the wishes of the community, and if it should not ultimately satisfy hon. membeis, they would have the opportunity of voting against its third reading. Mr. Blown said that he had no idea of withdraw ing bis amendment ; should his Excellency's wishes be acceded to, and the bill be allowed to go into committee without opposition, then the Council would be supposed to have agieed on the principle of the bill, and this was what he wished to avoid. He had no time to throw away in discussing the several.clausesof a mea-

sures which he believed to be wrong in principle; but if his Excellency was anxious to delay the fate of the measure, and allow time for its consideration, he had no objection to go into the arguments urged in favor of it, and discuss them, seriatim. The Attorney General could see no good purpose to be obtained by the hon. member pressing his amendment, for in the event of a division, it must be lost. Out of a feeling; of deli- | cacy, owing to what bad fallen from his Excellency tespecting himself, in connexion with the framing of the bill, he felt it to be his duty to vote for the second reading of it. Mr. Brown said that he was the more anxious that a division should take place, in order that the vessel about to sail for Sydney, should carry with her intelligence of the result, so that those who had, he believed, some notion of establishing a branch bank here, might know that there were at least two members of that Council opposed to the present measure. The Governer could easily imagine that if there were found heie, a profitable field for banking speculations, it would very soon be oc- ' pupied, and he did not «ee how the delay ol intelligence for another vessel, woo Id retard the arrival of any bank that might be expected. Mr. Brown pressed his amendment, aud the gallery was cleared for a division. Ou the Council chamber being re-opened, the Governor announced the result'of the division to be— For the second reading 4 For Mr. Brown's amendment - 2 Majority - - - 2 The further proceedings of the day were reported in our Wednesday's paper.