New Zealand Spectator, AND COOK'S STRAIT GUARDIAN. Saturday, August 21, 1847.

New Zealand Spectator and Cook's Strait Guardian, Volume III, Issue 215, 21 August 1847, Page 2

New Zealand Spectator, AND COOK'S STRAIT GUARDIAN. Saturday, August 21, 1847.

We published last week Lord Grey's despatch recommending the creation of a Paper currency in this colony to be issued on the credit of the Government. His lordship, conceiving that in a new colony such a mode of economizing capital, by establishing on correct principles a cheap and convenient medium of exchange, must be exceedingly advantageous, and with the view of averting the distress and ruin caused by those monetary reactions which have been witnessed within the last few years in Australia and in the United States, and with, less severity in England, proposes to establish in New Zealand a colonial Paper currency, which shall be a legal tender for all sums exceeding forty shillings, arid wKich "should be made payable either in-gold- at the English mint price," or in silver, receiving the coins'of.differ^ent nations (excepting, British silver) at the rated value assigned them in the Proclamations from time to time issued under the authority of the Lords- Commissioners of the Treasury." The issue of a sufficient quantity of this Government paper to meet the wants of the colony being complete, it is recommended that one fourth of the sppcie received in exchange for it should be retained to meet any demands for payments that might be made, and the remainder transmitted to Sydney, and deposited with one of the principal banking establishments there at interest, which would go towards defraying the expenses of managing the Paper currency, and the surplus if any towards the general expenses of the colony ; — all other paper payable on demand in New Zealand to be strictly prohibited. The above is a brief outline of Lord Grey's proposed plan ; we will proceed to offer a few remarks on some of the principal points connected with it. The circulating medium has often been compared to the life blood, which by its healthy action gives vigour to the human frame, and there are several particulars ' which contribute to bear out the ana'ogy. In either case, a sufficient amount adapted to the wants of the body in which it circulates insures the greatest energy and activity ; excess leads to sudden disorders, inanition to general feebleness and prostration of strength. It is not therefore to be wondered at that the public should always feel a lively interest in any measures relating to so vital a principle as the currency of a country, because any injudicious interference on the part of the Government may materially affect each man's property and prospects, and by disorganising commercial relations produce general distress. In regarding the system which Lord Grey seeks to introduce, we believe the proposed Paper currency, conducted on proper principles, will confer a benefit on the colony. It is immeasurably superior to Captain Fitzroy's debentures, for they were an inconvertible paper currency issued in defiance of the Churter of the colony, and of the Instructions under the Royal Sign Manual. Tt is greatly to be preferred to the notes of the Union Bank of Australia, the present paper currency of the Southern settlements, and which it is intended to supersede, because it is to be issued on the credit of the Government, which ought to be greater than that of any private company however wealthy, and because it is to be payable either in gold at the English mint price (which is not the case with the notes of the Union Bank)., or in silver coin of other nations to be regulated by Proclamation with reference to the pound sterling : and it establishes gold as the standard of value in New Zealand. It is an attempt tv) assimilate the currency of the colony to that of England, in which gold is the standard of value, and the notes of the Bank of England are made a legal tender. In the same way the public will be allowed to regulate the currency for itself through the action of the exchange, because it can always exchange this Paper for the precious metals, and the circulation beyond a certain fixed amount can only be increased by increased payments into the Bank of Issue of gold and silver in exchange for Paper. Care

must be taken, however, in the practical management of the Institution, to prevent a constant drain on the Bank by the continual demand for gold in exchange for Paper, which, unless provided for, may lead to serious embarrassment. Hitherto the drafts of the Local Government on the British Treasury for the service of the Southern settlements have been negociated through the medium of the Union Bank of Australia, and during the last twelve months no less a sum than £1500 has been paid to that establishment in commission, besides a further sum of £2 1 6 in the September quarter of 1 846, entered as having been paid to the Bank, including interest. This sum is a diiect tax on the community. It is the price paid for allowing the Bank to exchange their paper for Government paper, and this sum with other profits realized from its transactions in these settlements (deducting the expenses of management) is remitted to England to pay the dividends of its shareholders. The Parliamentary grant for New Zealand for this year is £38,865, the commission on this sum, if negociated through the Union Bank, would amount to £1943. Now if, in connection with the proposed Bank of Issue, the Governor were to direct the issue of Treasury Bills in amounts to suit the convenience of parties desirous of remitting to England or Sydney, it is more than probable that the whole amount would be disposed of at par or a slight premium. In the former case a saving would accrue to the community of 7 per cent, or £2720, — of 5 per cent, paid by the Government to the Bank on the negociation of Treasury drafts, and 2 per cent, paid by merchants and others to that institution for the bills they require to remit to their correspondents. The adoption of this course would, we believe, obviate the difficulty we have alluded to, and would prove the source of real stability and usefulness in the proposed Bank of Issue. The British Government require to remit to this colony £38,000 ; instead of paying as heretofore the Union Bank 5 per cent, on the transaction, the local Government would dispose of their drafts on the Treasury, which would be absorbed by the requirements of the commercial community, j and in return for the payments made for these drafts would issue their paper currency redeemable in gold or silver. In this operation, supposing the bill to be purchased at par, the Government would save 5 per cent., as we have shown, the person remitting would save 2 per cent., which would enable him either to sell cheaper, or by the additional profit obtained by this saving, encourage his correspondent to make further consignments. An objection has been raised to the proposed plan, that by only establishing banks at Auckland and Wellington, the Govern- j ment paper would become an inconvertible paper currency in the other settlements, but such an objection is easily obviated by making the Bank of Issue a department of the Colonial Treasury, and by authorizing the Sub -Treasuries of the different settlements to exchange the paper on demand for specie. Lord Grey over estimates the difficulty of introducing this paper currency among the natives. They are, it is true, a cautious and suspicious race ; but if they found these notes were readily received among the settlers, and could be readily exchanged for " money gold," any mistrust on their part would be entirely obviated. The natives at the North, as we are informed, received Captain Fitzroy's debentures in payment without difficulty, and were holders of them to a considerable amount at the period of their recall ; there can be little doubt then of their accepting a currency such as that now contemplated , besides the difficulty is not found to have any weight with the notes of the Union Bank, and would therefore not affect the circulation of the proposed issue. His Lordship is also in error in calculating on any profit to be derived from the investment at interest of the surplus specie with any of the Banking Establishments at Sydney. It is one of the anomalies of banking in this hemisphere, that although the rate of discount is more than double thatrwhieh obtains iir

England or Scotland, no interest on deposits is allowed. This we conceive to be one of the radical defects in the system at present pursued by the banks of deposit. The two distinguishing features of Scotch banking are the system of cash credits, and that of allowing interest on deposits. According to a Parliamentary Report of 1826. (quoted by M'Culloch) the aggregate amount of the sums deposited with the Scotch bankers in that year was about £20,000,000, a great proportion of which was in sums of from £10 to £200. If similar facilities were afforded in New Zealand to newly arrived immigrants, they would be productive of the greatest benefit to the community. The new comer would have a place of security in which to deposit his capital, and would receive moderate interest, while time would be given him to obtain information and mature his plaqs, before engaging in any Jbusiaess;> the necessity ,Q'£imraediately*«mploying capital in the hope of obtaining a profitable return has forced many to embark in inconsiderate speculations which have ended in misfortune and loss. Lord _ Grey appears also to have mistaken the causes which have led to the commercial disasters in New South Wales, and from which this settlement has in some degree suffered, and to have confounded them with those which have operated in England, and still more extensively in the United States. We believe the monetary crisis in New South Wales to have been produced, not by an over -issue of paper by the Banks, the cause of the panics and failures in England and America, but in a I great measure by excessive speculations and overtrading, arising from the too great facility of credits afforded by the Banks in extending their discounts, and their subsequent sudden contraction of them ; and the same causes have operated also in this settlement m producing similar effects, though in a~ less degree. «■ In the above remarks we have .considered some of the advantages likely to arise from" Lord Grey's proposal and the objections that ~ may be urged against it. According to the principle enunciated by his lordship, we believe a Paper currency established on the credit of the Government and payable on . demand in gold or silver to be superior to any which has yet been in circulation in this colony, and if the bills drawn by the Local Government on the Treasury are offered to the public in sums suited to its convenience, they would be absorbed by the commerial wants of the community, and a saving, as we have previously shown, of 7 per cent, effected, which would be a clear gain to the public : the present system in effect taxes its industrial resources to this extent, and acts H3 a drain on the colony for the benefit of the shareholders of the Union Bank. - This Institution at present exists in the Southern settlements as a monopoly to which the public submit for the security and convenience it offers, but there will not be a more unequivocal sign of the commercial prosperity of this Province, than when a reduction is made in the present high rate of interest and discounts, and the commercial wants of the community invite the establishment of another Bank. We had intended, in conclusion, to make a few remarks on some strictures- recently - published in the Independent on Lord Grey's proposal, but when the writer of them is so ignorant of the subject as to term the proposed issue a third series of deben- ' tures, thereby confounding a convertible currency payable on demand in gold with Captain Fitzroy's inconvertible paper, he scarcely deserves a serious refutation, and a correspondent in the same journal, under the signature of "No Class Advocate," has so clearly exposed his statements as to render further comment superfluous.

The case of D. Riddiford, Esq., v Hohepa Kopen, for which a summons was granted on Monday by the Resident Magistrate, was amicably settled by the parties without the necessity of a reference to the Magistrate.

A company of the 65th Regiment under the command of Lieut. M'Gregor bas been stationed &t Fort Richmond,

A considerable number of settlers were attracted by the first performance of the Band on Thorndon flat last Wednesday ; the public are greatly indebted to Colonel Gold for affording them so agreeable a recreation.

A specimen of the Massacre Bay limestone, brought by Mr. Varnham. may be seen near Mr. Loxley's store. It is of a hard quality, and appears very well adapted for building purposes. We understand it can be procured in any quantity in lengths of six feet and a foot in thickness, and vessels may load within a few yards of the shore.

Wellington Savings Bank. — Mr. Catchpool, Rev. R. Cole, Mr. J. C. Crawford, and Mr. M* Donald, the Managers in rotation, will attend to receive deposits at Messrs. Johnson & Moore's store, from seven to eight o'clock on Saturday evening, the 21st August, 1847; and at the Union Bank of Australia, from twelve to one o'clock, on Monday forenoon, the 23d August.