8.—3.

means the public paid a second time for the Hall, do you agree with that ? —lt might be correct to say they paid twice over because they might have paid the amount expressed in those notes twice over, but the second time they paid it over in those notes the purchasing-power of the number of notes would be less, so the real amount they paid would not be double, but it is quite possible that they paid more for the Hall than it was worth. What I mean by that is that probably the sacrifices of the people, if they sacrificed —we are talking about a nebulous thing now—would have been less if a loan had been borrowed outside and goods generally sent to the other country in exchange for the goods and services that came in. Supposing they had been satisfied with the first operation. They put the £5,500 into general circulation, erected the Market Hall and left it at that, let the stall-holders have the stalls free of charge. What would have been the result, would it have been good, bad, or indifferent ?—lt would have been good, bad, or indifferent according to the circumstances. lam not very anxious to talk about the thing concerning which experts seem to be in some doubt and under some speculation, but if the amount of money in circulation was sufficient at the time, before this extra was issued, and if there was no return to the former amount of currency and circulation, no alteration in the velocity of circulation, no increase in the quantity of goods or services or satisfactions, I should say that the extra amount of money would be redundant and the people would be paying for the Hall, especially people with debts owing to them and so forth. They would be getting back less purchasingpower than that which they had borrowed and to that extent they would be paying for the Hall. So far as the value of your opinion is concerned, I can assure you that as the accredited representative of the six banks operating in New Zealand your words carry a great deal of weight ? —lt was for that reason that I would rather not say much about a thing concerning which very few people seem to have an accurate opinion. It is of particular value, because the next point I wish to suggest to you is that the banks, having a monopoly of the creation of money here in New Zealand —I want to ask you how the banks put that money into circulation ?—ln the first place I do not consider that the banks create money. I look upon creating as to make something out of nothing. For instance, if banks issue money and that money is in circulation that money is a liability of the banks. Yes, we will say then that the banks issue money ? —Yes, that will do. If the banks issue money where do they obtain it to issue ? —There, again, we are back to the bank's resources. A bank with no assets at all would, I consider, not be in a position to issue money, although if it had Government fiat or authority it might be able to express by way of issuing notes the purchasing-power that exists in the security, the exchange value of the security. But security is not money you see, is it ?—No, nor are cheques. I know, we all know, that a great deal of money is intangible and in the correct technical sense it cannot be manufactured ; it cannot be made. An intangible thing cannot be made, and yet, for the purposes of clarity, it is a convenient word to use, to manufacture or to make money. We understand that, but if you prefer some other word we will try and think of one. Originators, shall we say the originators of money ? —lssuers of currency. It is more than currency ? —Currency is the wider term, the more generic term. Currency usually means legal tender ? —No. Dr. Sutch : Not at all. Captain Rushwort-h.] I am not talking in expert terms ; I am talking in the terms of the circles in which I move ?—All right, it means whatever you understand by it, but in accordance with this definition currency is the wider term and includes the whole issue, bills, postal orders, and cheques, and so forth, so would you mind using the word " currency." That would be rather complicated because I have never heard bills called currency before \— If they are current. However, that is immaterial for the moment. We will stick to the general term " money " still using Walker's definition ?—That means we leave out of account cheque currency ? If you like. We will still stick to Professor Walker's definition and previously you agreed that the banks have a monopoly of the issuing of that money. Now, will you tell me how the banks put that money into circulation? — And we are using Walker's, definition, therefore we do not include the drawing of cheques on banks. lam not trying to make it difficult, but I must clarify my terms. You have it before you ; it is on page 13 of your own statement. How do the banks put that money into circulation? — First, I will explain what I mean by that. Money, as defined by Walker, is coins, token coins, and bank-notes ; we will not include Treasury notes because there are none, just bank-notes and coinage. And credit ?—No. Only legal tender and coinage is money, otherwise it is not in accordancs with this definition that it is being accepted without reference to the character or credit of the person who offers it and without reference to the intention of the person who uses it. The credit, of the person who draws a cheque is a vital factor. Keeping your own definition in mind, can you tell me how the banks put money into circulation. May I assist you by saying that, excluding the comparatively small amount that they spent in wages, salaries, purchase of furniture, and suchlike things, the only way in which a bank can put money into circulation is by a loan. Is that right ? —I want to clarify that. You are referring to bank-notes now, legal tender ? Bank money ? —That is legal-tender notes —legal-tender notes in accordance with this definition. lam doing this to enable me to help you. If I tell you something lam not clear about, it will not be helping you. Can the banks put their own bank money into circulation in any way other than by loan ? —They can allow a person to withdraw a cheque from a deposit account, and he can cash a cheque drawn on a deposit account.

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