The Temuka Leader THURSDAY, APRIL 2, 1885. CHEAP MONEY PROPOSAL.

Temuka Leader, Issue 1322, 2 April 1885, Page 2

The Temuka Leader THURSDAY, APRIL 2, 1885. CHEAP MONEY PROPOSAL.

In a previous issuo we promised to refer to Sir Julius Vogel's proposal respecting Cheap Money. No one can accuse us of being opposed to Cheap Money for farmers. We bpye originated the idea and have consistently adhered to v. In criticising the proposal made by Sir Julius Vogel, therefore, it cannot be said that we aro actuated by any motives other than those which spring from a desire to do the best, and it is because we believe hii way is not the best, that we hesitate to give it our approval. Taking the first paragraph of his memorandum to the papers be sa)t " A company authorised by Parliament may apply to the Governor from time to time to guarantee debentures to an amount not exceeding the amount authorised by Parliament i to be borrowed by such Company." This is fearfully confusing. From it we gather that there must be a company authorised by Parliament, but who is to take the initiative in its formation is left to the imagination. The only reasonable construction that can be put on ibis is that there shall be formed by the people a company which, before it can do anything at all, must obtain the sanction of Parliament. As Boon as this authorisation is obtained from Parliament the Company must apply to the Governor to guarantee their debentures j in the English market, or, in other words, to the Government to back the bills of the Company. People in this district who have had something to do with floating small companies to establish local industries will quickly see how difficult and costly the first step is. Next there is the sanction of Parliament to be got, but we are not told how. In whatever way this sanction is to be got it is bound to be expensee and troublesome, and as Parliament sits only three months every year delay must frequently be experienced, while on the otber hand Parliament may refuse its sanction after the Company had gone to all this trouble and expense. After Parliament has given its sanction the Company must apply to the Governor to guarantee their debenture in the English market. This done the money is raised, and the Company proceeds to lend it. If Sir Julius Vogel wanted to put special difficulties in the way he could not hava gone about it more effectually. First of all, before Parliament will guarantee—for the authorisation to be obtained from Parliament must amount to a guarantee' —the debentures of the Company, it must be dearly proved that the Company has capital equal in value to the amount of the loan sought to be raised. Now where is this capital to come from ? Will the present race of money-lenders take shares in the company, or the merchants who have enough to do to look after their own overdrafts, or farmers who owe little or nothing on their farms ? The first-named would be more than human if they countenanced such a proposal ; the merchants, who are crushed down by the weight of an exorbitant rate of interest, see nothing in the proposal to bring the rate of interest to a reasonable level, and consequently cannot feel disposed to risk their money in such an enterprise ; the farmers who are independent of money-lenders are not benevolent enough to risk their own properties in what will do them no good. There remains therefore only those who are already in the hands of the Philistines to take shares in the Company, and, if we mistake not these are the people Sir Julius Vogel had in his mind's eye as shareholders when he sketched this scheme. Can tbeee start a Company ? Will they have sufficient capital to do so, while their merciless masters —the money-lenders—have their hands upon their throatp. Let us suppose that A. B. and C. take it into their hands to promote a Company for such purposes as Sir Julius Vogel suggests. What will be their first step ? First, they must value their properties, deduct from it the amount of their liabilities, and the residue ie all they hava to invest, or, more strictly speaking to pawn, with the proposed Company. A.'b farm is worth £souohis mortgage, and other liabilities amount to £3OOO, leaving him £2OOO to put in the Company. B. and G. are somewhat similarly circumstanced, while many others who who would become members of the Company have literally nothing after paying their debts. Now, will A. B. and C. and the others who are so deeply involved have the moral courage to attempt to float a company having for its object the reduction of the rate of interest ? Will they not be afraid lest the money-lenders should come down on them with such a crushing blow that they would be ruined ? It would take some time to float a company, get the authority of Parliament, raise the loan, and have it ready to lend out hero, and in the meantime the money-lenders could play havoc with such members of the Company as fell into their claws. We thiuk that w« have not at a!I over estimated the difficulties in the way so far, but after all these ore minor matters compared with other objections to the scheme. For instance, Sir Julius Vogel thinks he cau borrow at 4£ per cent, and lend at between 5 and 5| per cent. In his recent financial statement Sir Julius Vogol said the Government was paying at the rate of s.33—that if, about 5£ per cant, for the loans, Now the Government borrowed the money at. i per cent, and expenses, etc., have raised llio interest to per cent;

but what is the expense of the Government to those which the company would hare to provide for ? There would be the cost of floating tlu Company, tha coßt of valuing- propertiei, lawyers' expenses, the cost of raising the loan, the cost of administration, etc., all of which must be paid out of the loan and must be put on in addition to the interest. If expenses, commissions, etc., have raised the Government loon interest from 4 to s£, as the financial statement asserted, what must be the interest payable on a loan raised at A\, to which must be added the cost of floating a company, carrying it through Parliament, raising the loan, and paying secretaries, managers, lawyers, raluers of land, and so forth ? This is a problem which no one could answer, for unless we make a great mistake the expenses would bs considerable. Sir Julius Vogel's proposal will not do, and nothing will do except a National Bank. A National Bank would make the other bunks bring down the price of money all round, and merchants and farmers would be benefitted ; it would keep tbe money in the colony instead of being drained away by absentee bank shareholders ; it would be a source of revenue ; it would be safe ; all would be benefitted by it, and under it the colony would prosper. But we are afraid th*Jt thfa red herring which Sir Julius Vogel .has drawn across its scent will result in people being misled.