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The Pamphlet Collection of Sir Robert Stout: Volume 58

State Banks

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State Banks.

vignette of horseshoe hanging upside down

Gisborne: Printed and Published by John Baldwin, at the Office of the Poverty Bay Independent.

July, 1886.
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State Banks.

TThe following paper, treating upon a subject which has such a vital bearing upon the great scheme of social and political economy which is at the present time engaging the attention of all intelligent men throughout the world, was read at a meeting of the Gisborne Working Men's Political Association, and deemed by them worthy of publication.

In laying the paper before the public it is scarcely necessary to state that it is not for one moment to be criticised as an exhaustive treatise upon such a wide and extensive subject, but if it should contain sufficient matter to induce the reader to look into the subject, or to assist the thoughtful man in arriving at a defined and definite opinion on this all important subject, the writer's end and aims will be attained, as he has little doubt but that, under those circumstances his humble labors will indeed bear "golden fruit," and he will have done something towards ameliorating the condition of a class of his fellow beings who now labor under so many disadvantages born of those huge monopolies and privileges which are now solely enjoyed by one favored class, and of which the hydra-headed Banking institutions of the present day is one of the most prolific factors.

John Sandlant.


Mr. President and Gentlemen,—It is but fair to state that I am largely indebted to various sources for the statistical information contained in this paper. No object would be served by any further apology.

The attention of the world at the present I time is largely engaged by an overwhelming depression which pervades amongst the industrial classes to an alarming extent. To search out its cause and cure has engaged the diligent attention of thoughtful minds, and I many, in the logical sequence which a question of this nature presents, have wandered in the bye ways of doubt and perplexity without having in any way advanced one single idea that had in itself any relative value as the exponent of any measure calculated to relieve the industrial classes from the effects of these oft recurring depressions.

A large portion of the fair face of nature spread: out in all the plenitude of its powers of production, which should under the fostering care of strong hands and willing hearts is now waste and unused, through the dog in the manger spirit evinced by those whose duty it is to frame just and wise laws, whose force shall act with an equal impartiality upon all that may be within the radius of their operation.

It has been truly said that money is the root of all evil. Mature reflection pursued on the lines of cause and effect shows that the contingent cause of the many evils that affect society are directly attributable to it. Not that money in itself can be said to be an evil, such an assertion would be simply absurd. The evils are in the laws of distribution by which it is governed. To search out and enquire into these laws shall be my endeavor, and since statistics must furnish the facts with which I propose to deal, it shall be my study to furnish those that, to my mind, will not only show the cause of these depressions and their contingent evils, but will, in the sequence that follows, declare a remedy.

To suppose for a moment that any remedy, however, complete, would be hailed with joy, or much less if at all received in the present abnormal conditions of society would be a useless waste of time, (for why) because selfishness, page 4 that much developed characteristic of humanity, is a vital power that moves the ambitions to strive and rise in the social scale, and is likewise an all prevailing element in human nature, whose proclivities swamp all its nobler faculties, a devilish trait that has no pity for aught that will not pander to its requirements, divested of which would then hold out a reasonable hope of the immediate adoption of a course that would relieve society from the effects of these depressions, fairly attributed to the greed of foxy financial operations, encouraged by the unwise legislation of those who are entrusted with the Government of the people, and apparently controlled by a monied ring, whose riches have been unlawfully acquired by a series of manipulations that cannot be classed in any higher scale than legalised theft.

The signs of the times declare that the whole matter is fully understood by the more enlightened of the industrial classes, and that also a spirit of inquiry is pervading the minds of those whose intelligence is not so far advanced, but who are alive to the fact that a radical wrong has been, and is being inflicted, and with a set determination to see that wrong set right.

If ought were wanting to convince those who have to bear the burden of taxation without any of the ameliorating conditions which the monied classes enjoy, an example is furnished in the amount of gold and silver possessed by the various States, and which may be said to represent the accumulations of the ages. The two metals in gold and silver comprise in all three thousand three hundred millions. Now the world cannot do business on that amount. The gold and the silver does not furnish a sufficient means of exchange, and so advantage is taken of this fact to rob society. It requires ten times the amount of gold and silver that is in existence, or thirty-three thousand millions. to conduct its commercial transactions, so that twenty-nine thousand millions of paper money are required for distribution, which are principally made up of bonds, debentures, exchange bills, and bank notes. All this technically speaking may sound very bewildering to the uninitiated, but is not, when viewed in the light of common sense. Bills of exchange are mainly used by merchants in the interchange of commodities, and also in other ways. Bonds and debentures, unlike bank notes, are not convertible into gold by the ordinary method of procedure, but may be sold by the owner with all the rights and privileges appertaining thereto, and are thus rendered both convertible and transferable. This method is much prized, and that for reasons that explains itself as being more convenient than gold, in being less bulky and risky in transfer, are thus used as a medium of exchange in an easy and convenient form, and are often sold at from £1 to £5 above pur for gold.

This method is not so new, neither is banking so modern as some may suppose. Ancient Greece had her bankers, or money changers; they were called trapezitæ. from trapeze, or table. A similar name, mensarii, from mensa a table, was applied to a money dealing class at Rome, these being appointed by the State, whilst private bankers were known by the name of argentari, from argentum silver money. Modern banking took its rise in Italy in the 12th century, in whose cities the whole trade of Europe was then centred. The first public hank of which we have any record was that of Venice. It was established as early as the year 1171, during the Crusades, for the purpose of giving assistance to those expeditions. On that occasion the Government forced its wealthy citizens to deposit their gold and silver in the bank, and became responsible for the deposits. The whole capital was in fact a public loan, the funds of the bank being made use of by the Government. In the early period of its operation it was strictly a bank of deposit, and the funds were not withdrawn when deposited, but the depositor had a credit at the bank for the amount deposited, and made payments by transferring his credit to another instead of paying money. This bank was brought to such perfection as no bank since eetablished has attained, or has worked so successfully or beneficially, or had in it such sound principles for the attainment of what should be the ends and aims of finance. The Bank of Venice was essentially a State Bank. Of all the banks that ever existed or was ever established the Bank of England is the most important. It combines the functions of a bank of deposit, discount, and circulation, and is by far the largest monopoly the world ever saw, and let us hope ever will see. What are really the facts regarding this institution are little understood by the public. If they were, it would soon cease to exist in its present form. The notes issued by this powerful corporation for the week ending 18th April, 1883, was thirty six millions seventy-eight thousand seven hundred and fifteen, or about 34 of notes to one of gold, which afford? the bank not only special but tremendous privileges. The following statements gleaned from statistics in reference to this matter should convince you, more especially when! we take into consideration that but a comparative small portion of gold is in circulation, and therefore is not used as a currency It may be safely affirmed that much less, but page 5 say one thousand millions in all, is in circulation, which inference leaves the astonishing fact declared that thirty-two thousand millions of the world's currency and medium of exchange is provided for and worked by bills of exchange, bond and bank notes. As a further comparison, I would now draw your attention to the exports and imports of Great Britain, which are annually seven hundred and thirty-two millions. Her money transactions through the clearing house yearly are six thousands of millions. The profits that are charged yearly on income tax are six hundreds of millions, besides one hundred and fifty millions annually paying death duties, to say nothing of landed property; in all about eight thousands of millions. Now, the statistics of the Bank of England show that not more than two millions of bullion are weekly withdrawn to carry on this enormous traffic, or one hundred of millions of bullion yearly. This clearly proves that seven thousand nine hundred millions of business transactions are yearly carried on in Great Britain by a paper currency and exchange, or in other words £1 of gold is used to £79 of notes. Further it is a noticeable fact that when the withdrawal of bullion amounts to two millions weekly it is very liable to raise discounts from £4 to £5 or £6 per cent, and why, because bullion is the credit on which trade lives. Now, the Bank of England carries on its business on the strength of the State guarantee. This is its sole power. If therefore the State guarantee is thus beneficial to the Bank of England, why could and would not it be alike beneficial to itself as a State banking institution, which would go very far towards relieving society from a gross and fraudulent oppression, fraudulent to the interests of society as opposed to the interests of private corporations.

The relative conditions of paper money and gold coin is further shown by a reference to the Bank of England returns for the years ending 1847, 1857, and 1866. Had not the Bank Act on those occasions been suspended by the Government in favor of an increased paper currency the Bank of England must have suspended payment. This arose partly from an undue appreciation of gold, and partly from an insufficient exchange medium not being in circulation to meet the imperative demands of trade. In the year 1847, with a liability of thirty-five millions, the assets were thirty-nine millions, of which nine mil-lions seven hundred and eighty-eight thousand were bullion. In 1857, with a total liability of forty millions four hundred and sixty-eight thousand, of which only eight millions seven hundred and eighty-eight thou-sand were bullion, and in 1866 the liabilities were fifty million five hundred and eighty-eight thousand, of which seventeen million four hundred and sixty-eight thousand were bullion. This statement is a matter for reflection, as I shall presently show. On these occasions the error did not consist in the suspension of the Bank Act by the Government in favor of an increased paper money circulation in order to facilitate trade, but in allowing of its control by a private corporate body, whereby it became a monopoly. If then the commercial transactions of Great Britain are yearly eight thousand of millions, and these transactions are nearly conducted by a paper currency, and the issue of money from the Bank of England ranges from a circulation of 32 of paper note money to one of bullion or gold, why not acknowledge the fact and not allow the manipulation of a paper currency by private corporations which not only endangers public prosperity but has in it that which is subversive and destructive to the peace, happiness, and welfare of society. These assertions are at once proved, first by statistics and then by calculation. Statistics show that a depression periodically occurs in exact ratio with the interest charged. Take as an example of the principle involved—A banker is allowed by the State for a merely nominal consideration to issue two of paper to one of bullion he may or is supposed to possess. On this principle the six different private banks in New Zealand, holding two millions of bullion, could issue four millions of paper money. It may be suggested that these banks never issue to the amount allowed. The Bank of England returns show that their relative issues much exceeds in the proportion of paper note issue to the issue of a gold currency. Now these four millions of paper note issue become interest bearing bonds to these banks directly they are issued. Some may say, "Yes, but they are as good as gold." This does not relieve society from their burden for evil, neither would such answer be to the point. It is easy to show how little, if tested, these notes may be relied on. Since then, by the act of issue, they become interest-bearing bonds, let us see how they react upon society. When £5 per cent is charged a depression will occur about every ten or twelve years, that is when worked in conjunction with profits arising from discount on bills of accommodation, varying in the rate of time with the charge made for discount. The Bank of England returns for 1847, 1857, and 1866 convincingly prove the truth of this statement. These depressions were by the unthinking attributed to the scarcity of money, but were not; in reality depressions are the offspring of interest and page 6 the revertionary powers of interest. So then the two millions of bullion held by the six different Colonial banks by the addition of four millions of paper note issue, which the possession of this two millions of bullion empowers them to employ, would if fully used at £5 per cent, give them a capital of eight million in a little over fourteen years, and that without using any of the coin lying in the coffers of these banks, and this result is obtained without taking into consideration or account the profits arising from the discount on bills which would much more than pay the expense of management. The Bank of England paid £10 10s per cent to its shareholders for the year ending 1882, and as money there is lent at a comparatively low rate of interest, we may fairly conclude that the profits arising from discount on bills is very large. Now, both the interest charged on loans and discount on bills in the Colonies is much higher than that instanced by the foregoing, and no doubt largely accounts for the very high percentage paid by the six different Colonial institutions to the shareholders, and since both at Home and abroad, in Britain or New Zealand, these unjust profits are extracted from and contributed by the industrial classes, very materially increases to them the costs of the necessities of life. It is therefore both unreasonable and unjust that the peace and welfare of society should be marred and trammeled by the undue advantages which these private bank notes issue monopoly most undoubtedly possess.

A review of the question is here necessary to get at the real facts, and also in order to lead up to the proposition, I shall, bye-and-bye, advance with a view to the adoption of a State Bank; and further, will not only sustain the foregoing conclusion, as held in relation to the Bank of England, but as held in relation to Colonial banks, but with much more alarming results. The notes issued by these six different private corporations in New Zealand cannot be said to be a legal tender. The statistics of these banks show that their notes have no security behind them in time of panic. Yet, by the issue of paper money, these corporations are enabled to secure much of the accumulation and wealth of labor and property. A national currency should be maintained without risk to the interest of labor and property, and also to those who hold these notes. This could be done with advantage to the state on which this duty is imperative. With the notes of these six different private institutions, it is not so, as they cannot be said to be a legal tender. On the 31st December last the deposits in these banks not bearing interest was four millions, and six and a half millions bearing interest. The amount of; bullion held by them at that date was two millions, so that in the event of a panic eight out of every ten of the holders of these notes could not be paid in gold, but would have to abide the issue of liquidation. Take the Glasgow Bank as an example, whose note issue was not so large in proportion of the issue of paper to gold as that in the Colonies, and therefore should have a sounder basis, but whose manipulations in stock am Colonial lands were notorious, and so arranged by the inner ring that when the bank was held in liquidation could not be reached, and its deluded shareholders were ruined. Six millions of money on that occasion failed to be made good, and should it eventually pay the demands of all those to whom it stands indebted would not compensate its shareholders for the years of anxiety, suffering and trouble they have endured, and which may be fairly charged to the dishonesty of those under whose control and direction it was placed. This is not to say that banks are not useful institutions, but that their organisation should be such as will protect the interests of society. With a State Bank, such a circumstance could not possibly arise. I do not wish to be understood as referring to Colonial banks that their assets would not be sufficient, but as instancing the difficulty there would be in getting at them. This system of banking then endangers finance, besides securing other undue and unjust advantages. Let us travel a little farther in order that this matter may be fully explained, and this cursed evil exposed. Colonial banking statistics show that as high as £16 and over £17 per cent, has been paid to the holders of Colonial bank stock, which, by the revertionary law of interest, would double their capital in four and three quarter years. So then the four millions of paper money which the possession of two million of bullion empowers these six different banking institutions to issue as a medium of currency, if fully worked, at the rate of £16 per cent., would give them a capital of eight millions in four and three quarter years, without taking into account its bullion, which may be fairly added thereto, and would make it ten millions, less working expenses.

The profits arising from such a source of wealth would more than pay the interest, &c., on the present Colonial debt, besides furnishing another source of wealth. Need we wonder at depressions under such conditions. They must of necessity come, and page 7 are the scourge of society. Need we wonder at exceeding poverty existing side by side with fabulous wealth. The owners of such wealth, to my mind fraudulently taken, have no sympathy with the masses on whom this falls with oppressive force. Their business is to feed avarice and gratify the vanity of being rich, but alas at what an expense to society. Our rulers are largely responsible for these evils, either through ignorance of facts or careless indifference to the demands of reason. They have so outraged every principle of common sense as to render them in the highest degree obnoxious to a disgusted people, whose confidence should no longer be placed in aught that wittingly or unwittingly sustains craft, duplicity, or fraud. Both experience and enquiry show that gold is little used in the operations of trade, and that paper, or the confidence the public place in a paper currency, is the trading medium. As long as land is convertible property and a paper currency is controlled by private corporate bodies, these evils must exist and increase. The only remedy is a State Bank and nationalisation of the land. Will this work? Experience proves it will. Venice, the Queen of Commerce, started a National Bank; its money consisted of gold and paper. The State stood behind the paper, and made it better than gold. From the year 1171 to the invasion of Venice by Napoleon no depression in financial matters ever occurred. For the space of six hundred years the Venetians used the paper money freely as a tool of trade, and for which they paid no interest. Her palaces declare her grandeur and magnificence; her history her freedom and the freedom of her people from poverty until the ruthless hand of the stranger marred her peace and welfare. Our Post Office as a public institution shows that what concerns the State as a whole should be conducted by the State. Its success, both financially and otherwise, is undoubted.

Having shown the relative conditions which a paper and gold currency occupy to each other, and that the use of a paper currency to the gold employed in the commercial transactions of the world are 1 of gold to 32 of paper as a currency, and having examined their relative conditions as regards Colonial banks, I purpose to pursue the inquiry no further than to show how these conditions may be used to subserve the establishment and working of a State Bank.

Any who have studied financial questions must be in some measure conversant with the issue of greenbacks by the United States Government. Although the system under which these bank notes were first issued was very crude, yet they were very beneficial in their operatins in that, by the use of these greenbacks the Americans were enabled both to gain and keep their independence. It was owing to the greenback note issue lacking the essential of a full legal tender in not being made receivable in payment of all public and private dues that it was not a complete success. This omission on the part of the United States Government depreciated their value to as much as 70 below par, which enabled speculators to dump them into Wall Street and abide their time. It came in the year 1878. In that year by Act of Congress they were made a full legal tender, and were accepted in payment of all public dues and private debts, and now practically form the currency of the United States, whose national debt to the amount of one hundred and seventeen millions is represented by them. These greenbacks pass current in the banks of that country on a par with gold, and pay no interest. How different to the national debt of New Zealand, many of whose rulers seem to have little or no conception of what the ends and aims of finance should be; and as regards Sir J. Vogel's public works scheme and his financing qualities, it convinces me that he has about as much notion of the right thing as Balaam's ass had of a pot of soup, and since human nature likes humbug, he has succeeded in humbugging them to their hearts content. Carlisle has said most men are fools. History confirms his opinion. What a contrast Sir Julius presents as a politician to that grand old man Sir George Grey—who loves the people and toils for their liberties and their freedom. May a lasting peace cover his head with a crown of glory forever. The actions of Sir George Grey will live in the history of New Zealand both with respect to her politics and her finance, which latter he started on such a basis as his far-seeing wisdom and the demands of society will approve, that will give him a memory in the far-off future, which should be the end and aim of all noble lives.

Guided then by the financial experience of the past, and furnished with the relative conditions in which paper and bullion, as a medium of exchange, are employed, suggests a mode of procedure that will meet every requirement of the case. Starting out on the assumption that what as a currency is made legal by the State, is the currency of that State. In order to effect this a State Bank must be established, and its currency declared by Act of Assembly, a full legal tender. Let its issue be, say one million five hundred thousand, the amount the State page 8 now propose to borrow, one million of which shall be in the form of inter-convertible notes of the specific value of £1, £5 and £10 notes, as many of each as would suit the interelations of trade. Such notes of issue not to be convertible into gold on demand in any State Bank, but shall be interconvertible with State bonds of the value of £20, and of £100. Such bonds not to be convertible into gold for the term of seven years, but shall bear such interest as expediency may suggest, and made transferable to facilitate the operations of trade. By this method a purchaser of a Government bond of the value of £20 would, at £5 per cent., be entitled to the yearly interest of £1 on his £20 bond. Likewise, a purchaser of a £100 bond to the yearly interest of £5 on his £100 bond. Such interest to be made payable quarterly, and if used as a circulating medium shall be stamped with a certified stamp, to show that the interest for the quarter has been paid to the last holder thereof. This plan would encourage colonial investors to operate in Government bonds, which is undeniable security, and by being transferable would answer admirably as an exchange medium, and as there are ten and a-half millions lying on deposit in Colonial banks, the security for which seems very questionable, would give the Government tremendous success directly the principle action and intention was understood. By this process the Government would secure the control of vast sums at a nominal cost, which could be largely employed on reproductive work and relieve society from an unbearable burden on the cost of foreign loans. I have proposed that one third shall take the form of bonds that will practically answer all the conditions of trade, and since the third, or in other words, 500,000 shares and of these bonds will bear interest, say £5 per cent., would reduce the cost of interest on the whole to one third of £5 per cent. So that five hundred thousand of transferable bonds would float one million five hundred thousand of paper money, which, backed by the State, would at once rise to par with gold, and even above it, and reduce the interest on the whole amount to £1 13s 4d per cent., besides answering what should be the end and aim of finance.

No financinl or industrial depression could possibly arise under these conditions so long as their issues were kept within the demands of trade, but must be kept up to that, and as this scheme has in it the principle of self-adjustment, would need in that respect but little supervision, because as the bonds were purchased the Government could issue in-controvertable notes, with bonds in sufficient quantities to meet supply and demand. This medium of exchange could also be used to pay Government employees and other works of State, and since one-third pays no interest, which private bank notes do, is desorving of consideration for the State. Money of this nature could also be lent out by the State to owners of land, but should not bear a higher rate at interest than would pay expenses of management. Under any other condition, the revertionary power of interest is sure to injure, in corresponding ratio to interest charged, the prosperity of the people—and sooner or later would depression come. Major Atkinson's and R. Stout's idea of economy and the blue shirt period are silly and unbecoming to men of their assumed standing. Nature is bountiful; let all enjoy her blessings that earth may be a paradise, and the hearts of men rejoice in the joy of peace and plenty. Assistance could also be given to any who wished to take up a perpetual lease in such quantities as they judged would suit their means, always supposing that the radius of land acquired by them was within reasonable limits, the quality and situation being likewise considered, and a proof given that the means they possessed and proposed to employ was sufficient to induce the State to give reasonable assistance if any need should arise. This course would draw many from centres of population in the encouragement held out as offering sufficient inducement to employ the energy and capital they possessed, besides largely increasing the sources of employment to those who had no other means of gaining a subsistence.

The science of Government should long since have taught those whose ambition has been to rule, with no result but complete failure, that the end and aim of finance, more especially when a paper currency is employed as an exchange medium, should not be a monopoly, which serves no object but to feed avarice, when its aim and object should be to further the conditions of society as a whole and not as a part, in an ever increasing prosperity. Sir J. Vogel has said that a grave difficulty surrounds the establishment of a State Bank, in the fact that these private banks in the Colony have a perpetual charter to issue notes, and would require a large indemnity. Right here I tell him that the rights of society stand first, and the will of society stands next, and that no indemnity should be paid to these corporations for the loss of what they call their right, to rob society by continuing this false and blasting private note issue whose blight has eaten out of many the life-blood of hope and happiness. Had page 9 Sir J. Vogel as much honesty as some of his other developments there would he in him something to admire and respect. In admitting as he has done, and which common sense would compel any to do who were possessed of its attributes, that a State Bank ha I in it all that contained the elements of success, plainly shows that he is convinced that a paper note issue controlled by private corporate bodies is a wrong to society, and, since a paper money medium is a necessity, should be regulated and controlled by the State. Interest should no longer gather the harvest of labor and rob industry of its reward. It is the offspring of fraud, violence, and idleness, whose instincts destroy all the noblest aspirations of the soul—a black curse that overhangs the prosperity of the people and robs them of all its sunshine—a very devil clothed in purple, who sits enthroned on bitterness and wrongs, smiling at the prolonged agony of the masses held in its insatiable grasp. Whilst science is advancing in every walk of life, the science of Government is returning to the age of the Pyramids—monuments of oppression, violence and wrong. Echo says where is the moral force of those who are entrusted with the guidance of the St te? Has avarice and ambition over-balanced any redeeming qualities they may have possessed? If so, history will furnish to them a monument of derision, whose whisperings will clothe conscience with the insatiable greed of an unsatisfied longing that will ring its change in the far off future as the disturbing element to abiding peace. Before social life can attain unto the hightest good the science of Government must be moralised by a devotion to the interests of humanity, and although this may compel supporters of the present form of administration to abandon many of their most cherished illusions, yet would relieve conscience from many needless fears, and furnish to them a firmer foundation of happiness than can be obtained by appealing to the worldly philosophy of vanity or riches.

It has often been a matter of wonder to the unreflecting that banking corporations grow very rapidly rich. Unusual facilities for this are afforded them. The amount of gold that has been collected from off the various Colonial goldfields have amongst others been a veritable source of wealth. Vast quantities of gold have been sold to these banks and paid for by a paper currency. Take as an example for every £1,000 worth of gold purchased by the banks and paid for by notes, which is invariably done, practically gives them £3,000—and is in fact virtually making a present of the gold got in the country to foreign capitalists for almost nothing. They have acquired immenoe sums by this system as of manipulation, which has impoverished the country. All the wealth of her productions, whether of gold, wool, grain, &c., are being paid to these privileged corporations, who are revelling in wealth and luxury, sinfully acquired from the hard-working toilers of New Zealand, whose afiairs, if directed with honest ability and energy, would be the most prosperous country on the face of our fair earth. By similar methods landed property is fast becoming a hank monopoly. By manipulations of private property with paper note money—advanced as loans—they are practically reducing society to an abject though refined slavery, and it is therefore the imperative and urgent duty of society to stamp out this scourging evil.

It has been advanced that a State paper issue would injure our inter-relations of trade with other countries. Such argument is but a shallow artifice never put forth to any or by any that possess ordinary intelligence. The exports and imports of New Zealand are nearly equal, and the exports could be profitably and legitimately increased to much above her imports by the intelligent use of the means which nature and our surplus labor has furnished to our hands. It is well known that inter-trading relations are carried on by bills of exchange, and that interest and debentures on bonus may be paid with the ordinary productions of a country. A State Bank never interfered with the commerce of Venice, but much increased her advantage. Its adoption by America, in so far as its national debt is concerned, is but a go-between to its ultimate and final adoption in all its details in that country. None but those who are mainly concerned in sapping the life-blood of society will or have attempted to uphold the system of banking as practised by private note issue monopolies in contradistinction to a State Bank. Again, none will question who are capable of sound judgment, the security offered by the State. Instance its Life Insurance business as opposed to the security of private insurance companies. These societies, like all other private corporate bodies, have surrounding them an atmosphere of doubt, born of past experiences, which invests them with more or less insecurity that can in no way be chargeable to a Government life insurance investment. This principle of security will certainly give it an immense success through this undoubted advantage of which it is really possessed. The most potent reason or objection that has or can be raised against the adoption of a State Bank we may therefore page 10 proceed without fear to examine, and it will be found, like all the other objections raised against it, utterly worthless. It is that a State Bank would not pay gold on demand for notes, which private banks do. Now, as before said, the deposits in the Colonial banks of New Zealand were, on the 31st of December last, about ten and a half millions, the builion they then possessed about two millions. In the event of a panic eight out of every ten could not be paid in gold, but would have to abide the issue of liquidation. This says ranch. Again, the commercial transactions of Great Britain are yearly eight thousands of millions. This shows, as regards Great Britain, the circulation of a paper currency is one sovereign to 79 of paper money, which plainly proves that confidence and not gold is the trading medium. Taken this in relation to a State Bank clearly declares that the assets of the State are much superior to the assets of any corporate body, embodying as they do as a security the whole body politic both in property and the recurring operations of taxes thereon, and as such is reckoned and received by foreign capitalists not only as a sufficient but the very best security for their investment.

Again, any who have studied finance have loudly praised both the utility and usefulness of our Post Office Savings Banks, and not without reason. These institutions have proved an unmitigated blessing to many as an incentive to both industry and carefulness. The deposits in these various banks have already reached the respectable amount of over one million six hundred thousand. These deposits are a most convincing proof of the confidence the people place in a national institution. These savings banks would answer admirably as a basis on which to build up a State Bank, and could as necessity demanded extend their operations at little public cost. To start with, machinery and plates for notes could be provided at less cost than £1,000, so that little provision is needed to give the matter effect. An Act of Assembly by which notes and bonds were declared a legal tender for any public or private debt would meet every requirement of the case.

It may be asked what form of note would best suit. This is not imperative, but I may, by way of experiment, suggest the following:—

By Act of Assembly it is hereby declared that this interconvertible note of the value of £1, £5, or £10, as the case may be is a legal tender for any public due or private debt in the Colony of New Zealand, and may be paid and received as such.

By order of the Assembly.

And with respect to interest-bearing bonds I would suggest that they read somewhat as follows:—

By Act of the Assembly it is hereby declared that this transferable Bond of £20 (or more) shall bear interest at £5 per cent from the date of purchase, and shall not be convertible into gold on demand at any State Bank in New Zealand until after the expiry of the time specified in the terms of this agreement.

By order of the Assembly.

This mode of banking would relieve society from untold hardships. Paper currency as a private bank monoply is an outrage, and must be stopped. It cramps the business relations of a man with his fellow, and defrauds labour of its hard earnings, wrings tears of bitterness from the widow and the orphan, and sends willing hands to and fro in the land in search of employment, and lets loose upon society a vagabond class who keenly feel their position, but cannot help themselves. For why, because the owners of property to whom they look for labor, wherewith to obtain an existence, have to wring from it all they can to pay interest on the loans obtained from these bankers, whose tool is paper money. It is not easy to satisfy these financial gourmands, who are only too ready to devour if their unjust demands are not satisfied. So that these conditions of finance are so overwhelming that, unless it is speedily stamped out, will echo from settlement and city, from high-ways and bye-ways, from slums and allies, one wail of rage and vengeance that will shake the foundations of Government to its centre to it? complete destruction.

Why should any Government outrage every feeling of prudence and humanity by furthering the interests of a small section of society, who have no claim to any virtue than can or will command respect. By the the aid of paper money monopolies have been formed, and nearly all the best available and get-at-able land has been acquired by them at a merely nominal cost, and been so manipulated that railways have been run through them at the public cost, increasing their value in many instances sixty fold. It is this that will dam the Public Works scheme in the eyes of any who have understanding for ever. What has given titles that are but nick names to a few makes many slaves to poverty and want. Had those railways been constructed under such conditions as ordinary intelligence should have suggested to those who presume—I say advisably presume—to have the directive ability, they would have given them a name, and both the honor page 11 and thanks of prosperity in the living memorial of an accomplished fact, not as a burden as these railways now stand, but as a blessing to society.

By the use of such means as the foregoing farmers with moderate capital, were induced, and not forced to invest with them, because available land could not be had otherwise that would suit the necessity and way to a market. The surrounding conditions of such investments were invariably so hard that numbers of them were robbed, not only of the capital they had invested, but of the improvements they had made, and turned out beggars. By these actions they have first robbed the State of any improved value which the forming of railways through these lands gave to them. Then, by hard conditions drove those who invested with them off those lands that they might filch others who took them up, who, in their turn, were invariably outwitted. These, with other evils of which they are the fathers, has destroyed producers and forced them into towns to swell the lists of the unemployed. Such proceedings on the part of these foxy knaves is becoming so well understood that men with any capital, and brains to keep it, will not have ought to do with land from them lest they fall into their clutches, and since they are a power it is almost impossible to get land at a reasonable cost that has anything in it in point of situation or quality. If any would get available land the matter is only compromised by dealing with them at their own prices. I speak this as a truth gleaned from inquiry and observation. A State Bank and a system of perpetual leaseholds are the true remedies. Against their adoption all the powers of wealth and villainy are leagued. It is therefore the duty of society to demand those rights which nature, God and common sense declares righly belongs to them, and since some have contended against perpetual leaseholds I intend to give in a pamphlet (Land O) an account of what led me to suggest, in a letter, the idea of perpetual leasing to one of the Commissioners of Crown Lands, and further some details that will open the eyes of the public. Perpetual leasing carried out on its original scheme is a freehold to all from one generation to another in its fullest and complete sense, since it would perpetuate the cause of justice and harmony.

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