[From the "Wellington Independent," August 14.]

New Zealander, Volume 3, Issue 132, 4 September 1847, Page 4

[From the "Wellington Independent," August 14.]

Having inserted in to-day's paper, the despatch which Lord Grey has recently addicssed to the Governor of this colony, upon the subject of a Government Paper Currency, we deem it advisable at once to make a few remarks upon it, both with a view of eliciting the opinions of those most conversant with this very difficult and intricate question, and also of warning the Local Government against any hasty legislation upon u subject of such paramount importance to the interests of this mercantile community ; although we cannot avoid expressing our fears that Governor Grey may have already forced an Ordinance, (based upon the principles contained in the despatch), through the Legislative Council, as we have reason to believe that the subject is n sort of hobby with his Excellency, who entertains an exaggerated notion of the profits which the government may dei ive from a paper issue. If the same eouise has been pursued in regard to this, as to all otherqucstions,— -if the Council have on this, as on all former occasions, legislated without consulting those most intimately acquainted with the subject, — ifit has still religiously adhered to its practice ofdis carding and shutting out all evidence calculated to throw Tight upon the subject-matter under its consideration, then we may with confidence predict, that a measure will have been passed, which will not only entail a heavy expence upon the government, but will prove altogether unsuited to the present circumstances of the colony, and in all probability fraught with danger to those eugaged in mercantile affairs. Whether his Excellency himself recommended the establishment of Government Banks of Issue, we have no means of ascertaining ; but it is sufflciently evident that LorJ Grey, when he penned his despatch, had not received any accurate information respecting the currency of this colony, or any other point counected with the banking system established here. Otherwise his lordship would not have made the following remarks:— " Siucc the recal of the debentures which were issued by Capt. Fitzroy, { am not aware that any description of paper money, has been in circulation in the colony, but judging from what has taken place in oth r British colonies, I can entertain no doubt tliat with the increase of trade, a demand for such a cheap aud convenient medium of exchange will speedily -rise. Nor do 1 see any objection to the creation of a paper currency; on the contrary,— provided it is properly regulated, 1 am of opinion that such a mode of economising capital, where capital is so greatly wanted, must be ex ceedingly advantageous."' Now if such a statement had been true, we should willingly admit that a currency Bill might fairly have been proposed, and might possibly have proved a boon to the colony ; but unfortunately, the chief assertions in the extract above quoted, are (as we shall shew), strangely at variance with the facts. Instead of the debentures having been recalled in the proper and usual acceptation of the term,— we have been made the victims of one of the mpst shameful and fraudulent impositions ever practised apon a people by an unprincipled and bankrupt Kovcfnment ; for after j having been compelled, illegally compelled by the government to take its debentures as a legal tender, we ' have seen, that no sooner was the colony thoroughly deluged with them, and their value consequently reduced to next to nothing, thnn the very government that issued, repudiated them, and refused to receive them in payment of the Customs' dues, Sec. Moreover when the home government, believing that only 15,000/, of debentures had been thrown into circulation, granted that sum to our present Governor, for the purpose of redeeming them, his Excellency wheu he found on his arrival in the colony, that more than 45,000/. had been issued, refused to iucur any responsibility, and contented himself with offering to pay, off one fourth of the debentures in specie, and the remainder in irredeemable (funded) debentures, bearing interest at the rate of 8 per cent, per annum. We have also seen that the Government compelled those who were forced by their necessities to suumit to these terms, to relinquish a year's interest, on the pitiful, and in our opinion illegal plea, that the government were not bound to pay interest upon the fractional part of a year, not even upon 864 days. Besides this, those parties who refused to be thus defrauded, aud who still retain the original Debentures, in the. hope of obtaining redress from the home government, have been some time since, informed, we understand, by the local Executive, that no interest will be allowed upon their debentures, as long as they remain unfunded; although the unfunded debentures only bear, accordiujj to the terms specified on the lace of them, 5 per cent interest, while the funded bear 8 per cent. We must candidly confess that this attempt to force parties to exchange the original debentures which only bear 5. per cent, for others bearing a much higher rate of interest, is, to say theleast, exceedingly suspicious, and" not calculated to establish any confidence in the good faith aud ultimate intentions of the government, or to make the settlers willing to confide to a government, which has shewn such a disregard of all its obligations, the sole power of issuing a paper currency. Thus at this moment, upwards of 30,000/. of the trading capital of this colony has been extracted and locked up by the go veruraent in these unavailable debentnres. And yet in spite of these mcts, Earl Grey talks of the debentures having been recalled! ! Fiom the assertion "that no description of paper money lias been in circulation in the colony," it would appear that Lord Grey is not aware that banks have been established in the southern settlements from their very foundation, that they issue notes payable in specie on demand, and have negociated large advances lor the present government ; these banks being branches of one of those principal banking establishments in Sydney, to whose custody the funds to be obtained from the proposed paper issue are recommended by his lordship to be confided. n - , We must also demur to the concluding part of, the extroct above quoted, viz.: " that such a mode of economising capital, where capital is so greatly wanted, must be exceedingly advantageous, &c." for if the Government take our gold in exchange lor notes, we cannot conceive how we can possibly T»e the richer, though we strongly suspect that the capital thus obtained would not be invested in the manner proposed, but would be applied to the purposes ot the government, which would vary the amount ot the paper issued, not according to the real wauls of the commnnity, but according to its own necessities. Most assuredly our capital would not be increased, if one fourth part only of the specie were retained in the colony to cash the notes, and the remainder transmitted to Sydney for investment there. If the government be determined to inflict this third series of debentures upon us, we would submit that it would be infinitely safer and more advantageous to invest the funds, (insteaddof sending them to Sydney), in Governor Grey's funded debentures, thereby releasing so much .capital at present unavailable, and saving the government the t per cent interest. This mode at all events would increase our capital, and probably prevent our being doubly shaved, Another leason urged by Lord Grey in favor of this proposed scheme, viz., the profit to be realized by government, from the paper issue, seems altogether tallucious, for we understand that the average circulation of the banks in the southern settlements does not exceed 7000/. if wt allow an equal amount for the north* j

cm district, (and it would not be greater with a bank of deposit and exchange, which we believe, will shortly be established at Auckland,) the total average circulation will be 14,000/. If in accordance with Lord Grey's letter, we deduct one fourth of this som, which would be rctainfd in specie, viz., 3,500/., we leave 10,500/. to be invested in the Sydney batiks, not one of which, by the way, allows interest upon deposits ; but supposing this sum invested at 5 per cent, the government would realize the sum of 525/.— a sum not sufficient to defray the expense of a single establishment. It must however be observed, that as there is at present no bank of deposit and exchange established in tbe north, the circulation would in reality, be much greater; but then the same rule, (via. , the retention of one fourth in specie), would not apply, for a much larger amount of specie would then be required : for example, let us take the deposits of the banks in the southern settlements, at 30,000/., and suppose an equal amount to be held by the colonists in the north ; u considerable por- : tion of this amount might be exchanged for notes, but when a ship arrived, or an opportunity offered of remitting to Sydney or elsewhere, a proportionate demand for specie would be made on the bank; for it must be borne in mind that the available capital in this country consists of a large Government and Commissariat expenditure, which may be considered merely as funds in trunsitu; and until "our exports approximate to our imports, aud the difference has only to be arranged for in specie, our funds aud circulation ought to be easily convertible, and of a strictly exchangeable nature. Under the present circumstances of the colony therefore, it is perfectly evident that this proposed bank of issue would find itself continually drained of its specie, which would be shipped off to the other colonies, and would have to be replaced at a considerable expense, unless the Bank of Issue were in connection with a Bank of Deposit and Exchange, with credit to value, in all countries to which we may trade. Otherwise, this hall-bauk, like a vessel with cargo and ballast all on one side, must surely upset. Another objection to the scheme is,—that as banks are only to be established at Auckland and Wellington, a manifest injustice would be done to the other settlements, which would soon be inundated with, to them, an inconvertible paper currency, which would in a ! measure prove useless to them, unless vessels were to ! proceed to Wellington or Auckland, to exchange the i notes for specie. , Although we have thus stated our objections to the ptoposed scheme, under existing circumstances, yet we admit that it is the duty of government to watch narrowly all establishments issuing paper money, and to take care that such »otes be readily convertible iuto current coin or exchange— not into such as the present bill enact, viz., dollars, rupees, 5 frank pieces, and what not,— which would probably neither be received in payment for goods, nor l)y the bank for exchange on Sydney or elsewhere. Whether our objections are sound or not, none can deny that it is iucumbent upon the local government not to meddle with so delicate and importanta question as that of the currency, without first ascertaining the views and opinions of the merchants, traders, and others, practically versed in the subject.