STATE BANK.

Taranaki Daily News, Volume XXIII, Issue 269, 14 November 1901, Page 2

STATE BANK.

LECTURE BY MR. H. G. ELL, M H.R. There was a very fair attendance at ' the Town Hall on Wednesday even- ' ing, when Mr H. G. Ell, M.H.R. for ; Ohristchurch city, delivered a li-cture on " Banking and the currency," and its connection with local bodies loans 1 in New Zealand. The chair was taken by the Mayor, Mr E. Dockrill, who briefly introduced the lecturer. I Mr Ell, on rising, was greeted with | applause. He was glad to see so many youog electors present. The subject I was a dry one, but one nevarthole s 1 which was of the great?ss interest. The currency —the medium of exchange —was the life-blood of commerce. It should be stable, and sufficient, and we < could not now go back to the old system of barter. It was necessary to havr cheap credit; that i=, cheap money, there were often complaints that the national debt was mounting up But «e must have good roads, bridges, etc., and cheap means of transit for our produce. At present we had to pay one third of our revenue to pay interest

on our national debt. Then there were further loans authorised to be raised, and on these iuteresb would have to be paid. But we must have road*, etc., and for these we must have credit, or, to use the popular phrase, i money. When loans were raised from 1 the English money lender, we, at pre-j sent, had no more gold or notes—currency -in circulation. The Government operated the loans by means of cheques. The loans were thus back credits. The speaker quoted from McLeod, the great banking authority, who stated that the business man reaped as much benefit fr ( om his bank credit as if it were gold or paper currency. Therefore it was not necessary, in order to carry on Government works, to have a State issun of gold or paper—it waa quite sufficient to have a credit, which could be operated in the ordinary business manner. But if the present happy state of things in New Zealand were upset, apd a condition of things similar to that of 1893 arose the banks would all rush to the Government for protection. The remedy therefore was for the State to be behind the currency. Prior to 1666 the currency was a Government one, but then it came into tbe hands of private banking firms operating for profit. From that time to 1891 there were 56 suspensions of private banking firms. Mr. Ell then referred to instances in which tbe English Government had had to come to the assistance of banking firms to tide them over their troubles, and allow them to suspend payments in gold. Coming to New Zealand, he said that as soon as tbe people knew that the State was at the back of tbe bank they were inspired with confidence. This showed that the State was absolutely the only safe support for the currency. Referring to the greenbacks of America and the paper money of France, he pointed out their depreciation arose from the fact that the countries were passiog through times of war when the issues were made, and the iesues were excessive. But he also pointed to iesues in history showing that the State could issue paper money whijh would maintain its face value, when within reasonable limits. The issues of paper by the American colonies were good until the English Government reduced their legal tender amount. In Pennsylvania the notes were issued to the farmers, and as they came in were destroyed. This lasted 40 years, during which time the farmers paid no interest: on the mouey. Referring again to gold, Mr Ell said the public did not bother about coin, as the batik note was considered just as good, beiog quite stable. As to the State assuming the functions of banking, srme people were disloyal enough to say the Government was not to he trusted Bub we had extended our Government functions considerably in New Zealand, and he referred to the Advances to Settlers Office, Savings Bank, etc. Our cash deposits in the colony were 21| million sterling, and yet our actual coin was only 4| millions. The name of " deposit" gave rise to much misconception. A bank deposit was a thing deposited as a credit, in a batik. He then went on to explain the free deposits of the Bank of New Zealand and the Post Office Savings Banks. Our currency rested and circulate* upon confidence, and if a panic took place the deposits could not be paid out; in coin. Mr Ell then went on to show bow the banking business was carri-d out in Canada, Sweden, and Belgium. In New Zealand duriog the past seven years 14 millions had been paid out in interest on the public debt, and this was to some extent alarming when we knew that our debt was steadily creeping up. The interest on local bodies loans, public debt and Treasury bills amounted to .£2,319,700. On tbe million loan for the North Island Trunk railway in 1899 £420,000 was paid in interest. If the banks could utilise our resources in this manner by creating a credit we could do i 1; for ourselves, And the Premier was to blame for not improving this stite of things. The Minister for Railways stated tbat nearly X 600,000 was required for interest on railway loans. It the Manawatu railway were bought it would cost the colony £33,000 per annum in interest, He hoped to sea lower freights put on farmers' produce. He hoped members would vote according to what was right, and not according to party, when the question of the MaDswatu railway came up. As to Treisury bills, £230,000 worth had been issued. That is, the b.nk ha<! granted the Government credit to this amount, and the shareholders and management said this bad been a success. The management was prsc-icnlly a State one, and it was hoped shortly to.be able to pay interest to shareholders. Therefore, a State bank coul I work as successfully and save interes* to the taxpayers. During the past seven years the Bank of New Z'almd had cn ated a credit to the Governnr nt which involved a payment of £234,484 in interest. This was the pre-ent extern, and if a private institution, with little cipital, could work so successfully, so could a State bank. If the Government would only app'y tl>o >ys tem in connection with loans to lo'c ] bodies and advaucs to s°fc'-lers such »n institution would amply fjlfjl its functions.

Mr EH then inoiimted his willing- ! ness to answer question*', and resumtd | his seat amidst applause. In reply to que-tions, Mr E'l said that if a panic arose and people rushed to the State Bank and asktd tor Payment in bullion which the deposits of coin were insuffie'ent to meet tli difficulty would be got over by thci State making paper money a legal Render, which would bava to be accepted. The English Government at present accepted payment of insert st of loan moneys in goods. Persons going to other countries in which our currency was not legal tender, would

get over the difficulty in the usual manDer —by means of drafts. Mr Ell then suggested that a " State Bank and Currency R.-form League" should be formed in New Plymouth, as had been done at Hawera and IngleI wood, by which proposals of the Government relating to loan matters i cou'd be watched.

Mr Alls*orr.h moved a hearty vote of thanks to Mr Ell for his lecture. He had always supported the idea of a S ate B uk, and trusted time would educate the people t i ir,« advantages. When the Guvemmeut went to the assistance i f the Bank cf New Zealand, it should have gone further, and taken complete control. In his opinion, only one bank should issue notes. | Mr G. Tisch seconded tbe motion, which was carried by acclamation. Mr Riggall then moved, " that in the opinion of this meeting, the question of establishing a State Bank is worthy of the cueful consideration of the Government of this colony." Seconded by Mr Frethey, and nrried.