LEGISLATIVE COUNCIL. (Continued from No. 231.) Tuesday, 17th August, 1847.

New Zealand Spectator and Cook's Strait Guardian, Volume IV, Issue 233, 23 October 1847, Page 4

LEGISLATIVE COUNCIL. (Continued from No. 231.) Tuesday, 17th August, 1847.

The Attorney-General said that he had come down to the Council entertaining a strong opinion against the Bill, and he must say that nothing he had yet heard, bad altered his opinion upon it. If it had been 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 have felt the greatest hesitation in offering any opposition to the measure, coming before them a* it did, it the suggestion, and on the recommendation of her Majesty's Secretary of State. But, under the actual circumstances of the case, and entertaining the strongest opinion of the impolicy of the measure, he felt lhat 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 cuter 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 upon the abstruse doctrines of the currency question ; when so much difference of opinion existed amongst the ablest men on this subject, it would be p.esumptuous 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, debateable, 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 currency of a country should consist of the precious metals, — of paper, — or of a combination of the two, was yet a matter of controversy. With such a difficult subject to deal With, he could not but feel some embarrassment. On the one hand, to bandy arguments with statesmen, and political economists, on the piinciples of the question, would justly tender 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 defer to the judgment of English statesmen and political writers. As to the applicability of any measure to the condition and circumstances of Great Britain, he would not even venture to offer an opinion. 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 hon. member, Mr. Brown, it was the opinion of some 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 restriction! whatever, to control over issues, ao 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 1 principles sound on which this bill was founded ? were its provisions expedient and effective ? and were the conditions and circumstances of New Zealand such as to ca'l 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 ? He would admit that such was the opinion of many eminent 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 House of Commons, an hon. 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 show, that, during the period when the circulating medium of that country^ had been almost wholly metallic, fluctuations in prices had been unusually great, and speculation 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 ! 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 States V asked Sir R. 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 — but, a practical man. 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 expressed ? Why no other than a third occupant of the Colonial Office — Mr. Charles Buller, the member for 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 being an admitted point. Then, again, as to the expediency of establishing a single bank of issue under the control of the Government. He believed that Sir, R. Peel and others were in favour 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 conceive there are insuperable objections." And again, " Anything that tends to connect the State 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 (tne Attorney General) quoted the opinions of Mr. Hawes and Mr. Buller, not that they were the highest authorities on the currency question, but to show that, amongst practical statesmen there were great differences of opinion, on the subject, and that that Department

of State, from which this measure emanated, was " divided against itself." Bat, Would the establishment of a bank, under the management of the Government afford a certain guarantee against over issues of paper ? What had been the history of banks in connection with the State ? On that subject he Would cite a passage from the work of an eminent political economist; and little did hi think, when, ten or twelve years ago, he had made the note in question, that he should ever have himself witnessed the very course, so distinctly desciibed. If the passage he was about to quote affected other members as it did himself, it would create on their minds a deep impression. " How a paper raoftey of some kind," said the writer, " may be made to produce the effect of debasement, can thus briefly 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 he might deposit iv 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, either 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, without any one suspecting the cause. The truth is, the monarch has b *en secretly debasing his money — violating his compact — infusing daily, not a base metal, but a quantity of bad faith into his new paper coin. But as bad faith is a quality of which no subject can 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, and prices still increase.' This exact course nearly had been run by all the nations of Europe, England only excepted." And he (the Attorney General) would now ask vvas this an imaginary picture ? or was it necessary to go so far fotf an illustration ? His hon. friend the Colonial Treasurer had said, that the Government was a responsible body. If he (the Attorney General) had the same confidence in Governments as his hon. friend, much of his opposition to this bill would have no existence. But had not the experiment of a Government paper money been already tried in New Zealand itself, and with what result ? On the 18th May, 1844, an ordinance was passed authorising the issue of colonial debentures, with a proviso, in express terms, that the amount of such debentures, to be outstanding at any one time, should not exceed the sum of £15,000. In the short period of 18 months, — in the month of November 1845, it appeared from an official statement in the Gazette, that debentures to the amount of upwards of £30,000 had been issued, and were then outstanding, and thus, that more than double the amount provided in the ordinance, and authorised by the law, had been issued by the Government. He would not dwell upon the loss of debentures — the supposed forgeries — their great and rapid depreciation, and on the other incidents of their short lived career, but he would confidently appeal to the Council whether, with such an example before them, they could feel any assurance that the establishment of a single bank ot issue, could afford a guarantee against immoderate issues of Government paper money. The hon. member on his leit had alluded to the unusual manner in which this measure had been brought before the Council, and he, (the Attorney General) concurred fully in the hon. member's obseivatious on the subject. Was the monetary condition of the colony such as to call for legislative interference? Was there an existing evil ? and was the bill brought forward to remedy it ? Nothing of the kind had been affirmed by its most zeal6us supporters. On the contrary, the origin of the bill was to be found, not in the Council, not in the local Government, not even iv the colony of New Zealand, — but, avowedly, at the very antipodes. A despatch from England recommending the adoption of such a measure had recently reached the colony, that despatch had been formally laid upon the table, and in the course of a few days had been followed by the present bill. The Council were aware that by the recent act of Parliament, for making provision for the government of the New Zealand islands, Her Majesty was empowered to constitute i General Assembly, and that to the General Assembly so to be constituted, special powers of

, legislation were givetf, liporf ftrfifc iptStiffirf subjects; arid, tifatittgaf titbertj w f df/ fegula> ing the cutrent coin* 6f the 1 saM i'slaflfliV dr lfci ' issue therein of any bill*, ntitcf, off othWjftti per currency." The Courlcil Were"*!** aWfrr that the Quedn had accordingly isstitfd 4 ttW charter of government fot the 1 toTony. L6t*ing to the unsettled and districttd fdtiditidtt of New Zealand since its foii nditidri,— stein'g' its many struggling settlements, witfi littte community of interest 6r feeling between tHeftf, — its small European population 1 , itrid c'dntparatively powerful native race, witti little in common between the 1 two ; he (tne Aiidfhtf General) could well coUceive that a ritfrilstW might pause before conferring übbn the* tftirail European minority, full and itmet'teted $oWers of government over the 1 whole of the 1 c'blony, and over both races' of its inhabitants'. He could conceive a minister willing' id dtfnfef such power, doing so with certain resirictidftt and limitations. He could conceive' (bit A minister who thought that the papt?, as well as the metallic currency of a country, should be under the control of the GrbVerrimint, might well withold from a popularly constituted colonial legislature, the power dt legislating on the subject of the currency. t 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, — bad, on the very eve of the existence of that assembly, suggested legislation on the subject, by the Government, as at present constituted. He, (the Attorney General) would now refer to what had fallen fiom his Excellency as to the provision made in the bill, that the coin re- . ceived in exchange for notes, should be invested out of the colony. Now he must say* that that provision had not been inserted by him in the bill inadvertently — nor, of course, with the view of raising an opposition to the bill. It appeared to him to be a fundamental principle of the measure, that all the cash received for notes, not required for the current business of the bank, must if invested 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 cir* culation< If invested at interest in the colony* of course it would again get into circular tion, and augmeut the amount of tha circulating medium. Prices would of course rise, and effects would be produced never for a moment contemplated : and thence it was, that to tamper with the currency* was one of the most dangerous measures that eeuM be undertaken. But it might be urged, he was not sure that tbe argument had beeri used, that this measure was expedient, apart from all other considerations, on the ground that it would be profitable to the colony in a pecuniary point of view. It was maintained by the advocates of a paper currency, that it possessed the-re-commendation of cheapness, because- the cost of a metallic currency being considerable, tbe value of the interest upon tbe amount, would be saved by the use of paper. Now, if th* 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 establishments— the salaries of managers and clerks — risk of lost and fraud* and the cost of transit and insurance — would all this be more than covered by the amount of interest received on tbe amount invested ? And, lastly, he concurred in the view taken by the hon. member on hi* left, of the probable effect of this measure if it became law, on the establishment in the colony of private banks. There could be no doubt that the establishment of private' bank* would be certainly discouraged by it ; and h&, the Attorney General, thought tbe me** sure impolitic on that ground alone: he should' much prefer to see a private bank in every settle*-' ment in the colony, rather than one general . bank of issue under the direction and control of the colonial government. If an excesiivi issue of the paper of this government bank should take place, the whole colony would be involved in ruin. Tbe evils, on the bther hand, of the new issue's of a private bank would be confined to the district ift whflh it might be placed. This much, however,! frf must say for the bill, that he had spared no labour and pains in making it safe and effective. Jf it should be the will of the Council to proceed with it, he would aid to the best of his ability in improving it. And, should it pass into a law, he would, as a loyal subject, and an officer of tbe Crown, as in duty bound, give it his support. But, in its present stage, but from the desire expressed by bis Eidellency that its fate should not tie finally determined, until it had passed through committee, he should have supported* the amendment. Still, believing the measure to be questionable in principled-unprofitable iv practice— im^ practicable in operation — and uncalled flrf in fact — he could never regard it otherwise than with the strongest opposition.