The Temuka Leader SATURDAY, NOVEMBER 20, 1886. NATIONAL BANK.

Temuka Leader, Issue 1515, 20 November 1886, Page 2

The Temuka Leader SATURDAY, NOVEMBER 20, 1886. NAT IONAL BANK.

Ik returning to the discussion of the Don. J. W. Downer’s speech in opposition to the National Bank Bill in the South Australian House of Assembly, we find ourselres relieved of the necessity of dwelling on the relative merits of convertible and inconvertible paper money by the fact that the bon. gentleman has adopted the former as the basis of his calculations. The next statement be makes is characteristically obscure. He says : “Many members and many of the public generally have an idea that the Bank of England is a State Bank, and have a mistaken notion both of tbe circumstances nnder which the Bank of England originated and the position in which it is at present,” How the Bank of England originated nearly 200 hundred years ago has nothing to do with tbe present discussion ; the position it occupies now is what we are concerned with. He says; “ The Bank of England originated through tbe mischief which the Crown had been doing through the forfeiture of the money of tbe subject over which the Crown bad control.” Owing to the extraordinary use tbe hon. gentleman makes of the English language we cannot understand hi» meaning, but we know that the Act of Parliament says tbe Bank was established so that persons might “voluntarily advance the sum of fifteen hundred thousand pounds towards carrying on the war with France.” The Bank started with s capital of twelve hundred thousand pounds, and the balance was raised by subscription. But what has that to do with ns now ? Mr Downer, although denying that tbe Bank of England is a State Bank, takes good eare not to discoss it. Still it is a fact that a share of the Bank of England belongs practically to the Government. In 1884, the Bank of England was by an Act of Parliament divided into departments : one a banking and tbe ether an issue department. The issue department practically belongs to tbe Government. In the year above mentioned the Government owed the Bank of England £11,015,100, and this was declared by an Act of Parliament to be a debt due to the issue department, and accordingly notes to that amount were allowed to be issued against the debt. This has since been increased to £15,000,000, and thus the Bank is allowed to issue £15,000,000 in notes, for which it has no gold. These £15,000,000 in notes practically belong to the Government, which gets the profit on them. Practically, therefore, the issue department of the Bank of England is a National Bank of Issue, from which the Government reap the profit. Mr Downer took care not to enter into this question, but went on to condemn the system of “ issuing notes on any other basis than gold.” As we have shown, the Bank of England issues notes on the basis of tbe debt of England. Is not this a most extraordinary thing : the notes of the Bank of England which are issued on the security of the debt of England pass even on the Continent? Yet Mr Downer says notes issued on the security of land will not pass. Mr Downer’s reasoning, therefore, is that England’s debt is better security than Australian land property. In proof of bis assertion, Mr Downer gives, several in- i

stances. The first he refers to is the Sooth Sea Scheme, which is generally known as the “Sooth Sea Bubble.” How any man in a sane state of mind could quote the Sooth Sea Bubble as an argument against a National Bank is incomprehensible ! First of all, the South Sea Bubble was not a Government undertaking ; it was a private financial enterprise got op for carrying on trade in the South Seas. It was started in 1711—that is, 175 years ago—to back up the national credit, but five years subsequently its privileges were.extended, and its capital expanded to £11,746,844. It was attended with wonderful prosperity, until its successes made it rush into the mad speculation of taking over the whole of England’s National Debt at 5 per cent. Competition with the Bank of England compelled the Company to make an advance of £7,567,000 on its terms with regard to taking over the National Debt, which it did on Feb. 2,1720. Horace Walpole, who was backing up the Bank of England, then began to attack it, characterising it as a “ dangerous lure to decoy the unwary to their ruin in the pursuit of imaginary wealth.” As off•hoots of the Company several pure swindles rose up ; one was for suppressing piracy, another for distilling oil from sunflowers, another for making quicksilver malleable, and another Company wanted £2,000,000 for a speculation which would be revealed after the money was got. The authority from which we quote says that by legal action the Company swept off 86 minor swindles at one stroke. The South Sea Company was the most extraordinary instance on record of what any institution can do so long as the public repose confidence in it, Its stock rose from 77 to 1000 per cent.; its successes intoxicated people, and only for the base swindles of which it was the victim it might have been in existence to-day. When the people saw it had lost so much by swindles confidence was lost in it; Walpole once more attacked it, and the crash succeeded. Now, that is an outline of the South Sea Bubble, and we ask, What bearing has it on a National Bank? It a private speculation rained by swindling. It was to all intents and purposes a private banking company, the very converse of a National Bank, Mr Downer next refers to the Mississippi Scheme, the story of which is the exact counterpart of the Sonth Sea Babble, except that the Mississippi Scheme was a French undertaking. It was another mad •peculation got up to relieve Louis XIV, of bis financial difficulties. It was started at a time when paper money bad depreciated to 70 percent, in France,yet the new speculation restored confidence for a time, and brought back extraordinary prosperity. Like the South Sea Company, it went to the wall because of tbe swindles. But where is the analogy between private speculation of this kind and a National Bank ? There is none I We shall have to deal another time with this question.