8.—3.

If everybody paid oft' debts would there be any money left ?—That is hard to say ; you would have to collect the amount of debts with the amount of money in circulation and the amount of deposits in various forms. If all the loans were paid off, the great bulk of our money would cease to exist ?—Yes. And that money would have been applied in freeing properties in debt or persons indebted ; there would be no money ?—How, but there would, there would still be left the money that the bank possessed to buy bullion with, that is about all. What I should say, roughly speaking, the amount of money still in circulation would probably remain in circulation and those people who owed money to banks would not have to pay the banks. Why ? —Because you say debts are paid when they owed money. You are visualizing a case of debts repaid | —If this did happen, those who had owed money to the banks would not have to pay it and the banks would have no claims owing to them for that reason. On the other hand, since the financial obligations to their depositors are debts, necessarily your visualization includes the elimination of all deposits. If we were all free of debt the banks would have no loans out, would they I—No.1 —No. They would have no loans out; all the money would be remaining in circulation. Only for this situation New Zealand would be practically devoid of all money. Do you think that money can exist freely without debt ?—Would you mind if I read a portion from a summary by McLeod which would make the subject of money and debt clearer. That gives the view by that economist that there must be debt money. Even in the old times when there was only coin in circulation there must still have been debts, because the coin must have been borrowed from some one else. Quite so. Mr. Fus sell: So that you do not eliminate debt by having an entirely metallic currency. Captain Rushworth.] We talk about debt between the community and the issuing authority; in this case it is a debt between the community and the banking system. You said this morning that in your opinion the monetary causes were not at the root of the world depression or the trouble here in New Zealand, was that so I—l1 —I consider that is so. You suggested that it was lack of confidence that was the real trouble ; do you really think that it is lack of confidence I—lt is lack of confidence on the part of potential spenders who could spend and do not spend. Who are they ? Are they here in New Zealand ?—ln New Zealand there are £70,000,000 on demand deposit; those who could spend this do not; if they do not the result is that the total amount of deposits is larger than the total amount of advances —tbis would be on account of lack of confidence largely —lack of demand as a result of lack of confidence that the money is not actually spent. Do you think that there is still the amount of money that there was, say, four years ago I—l would have to compare figures to see if there is the same volume of money ; at the present time there is a very large volume of money. The Minister of Finance told us in the House the taxable returns show that the national income has dropped from £150,000,000 to £90,000,000 a year, a difference of £60,000,000 a year ?— That is the total income, not the volume of money. I know that, which rather suggests that lack of confidence is hardly the explanation 1- —Lack of confidence is largely the explanation ; people who can spend do not, the conditions at present overseas and the fall in prices for our products that we export and the fact that more bales of wool and more pounds of butter are necessary to pay for a given quantity of goods from overseas are reasons for our decreased prosperity in New Zealand. Who are these wicked people who have caused such a lot of trouble through their losing confidence here in New Zealand ; are they the ones that have put their money on deposits ?—I would not call any people wicked who have put their money on deposit and thereby caused the trouble. If the depression is caused by lack of confidence, surely those who are suffering from that lack of confidence have caused the depression I—l1 —I should say that persons or sets of individuals who cause lack of confidence would be responsible. The lack of confidence is the effect, not the cause. That is better ; I agree. I thought that you said the cause of depression was the lack of confidence. It was the effect of the depression ? —Yes, the effect. [Mr. Fussell illustrated how an immediate cause might at the same time be an effect of a prior cause.] You do not suggest then that lack of confidence is the cause of the trouble ; it is one of the instruments ? —Lack of confidence immediately causes the trouble, but the lack of confidence is caused by something else. Lack of confidence has had the effect of encouraging people to place on fixed deposit in the banks moneys that they would otherwise have made available for investment in industry ?—I should say the fact that people in general feel that by investing their moneys in production or other activities they would not make a profit —they would make losses. You said, I understand, that there are no avenues for investments I—Did I say " no " avenues ; few are satisfactory avenues, there are some. I know what you mean ; I fully agree there are no avenues for investment just now I—l1 —I would not go so far as to say that ; the investment in the Reserve Bank shares was a very welcome one. When you talk of lack of confidence you mean really lack of confidence of people to put their money into industry, but they have confidence in the banks absolutely ?—I should say that the people have confidence in the banks, which is well merited by the banks. They have confidence in the banks because it is the only safe investment at the present time ? — I would not say the only safe investment. They have confidence in the banks because the banks are confidence-worthy, and they are trustworthy, and they conduct their business on sound lines ; they make provision for bad years as well as good years,

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