A Commentary—The Australian Crisis.

The action of the Australian banks is a fitting commentary and argument of the soundness and wisdom of the principles which support the "numerary system of currency."

When all finance was in a state of utter collapse and ruin, when the banks had no resource from their own system (say they were sol-vent as far as securities go), what did they do? Applied to the State to make their private paper notes—the convertible note promising gold on demand—a legal tender by law; that is, they wanted the principles of a national currency applied to aid their private necessities. The Government were not able to pay gold on demand any more than the banks could; but the Legislature can do more, it can decree by law what shall be the currency, the medium of exchange; this principle the New South Wales Legislature betrayed in making certain private bank notes legal tender, by the Bank Issue Bill!

But this alone would not meet the situation, for there was no currency sufficient to carry on exchanges and trade, and some £4,000,000 of current credits of traders was locked up in the suspended banks, so by a further betrayal of the principle the Legislature passed another hybrid Bill—the Current Accounts Bill— page 27 empowering the issue of £2,000,000 treasury notes to ostensibly relieve those holding current credits in the suspended banks, but probably (and of necessity) to put some currency in circulation, for the monstrous absurdity of the situation was that during all this time millions of money required for the currency of the country were locked up in the coffers of the suspended banks.

Notwithstanding that the Government had now laid on their shoulders, liabilities of £10,000,000 to £12,000,000 of money, which in case of mishap the taxpayer would have to bleed, nothing of a statesmanlike national policy had been attempted to permanently and effectually arrest the effect of this financial disaster in the "falling prices," which would necessarily ensue just the same as before; and if this policy of expediency is allowed to fulfil its destiny, its effect will be greater "falling prices," commercial and social ruin, and retardation of progress for twenty years to come.

By their actions however both the Legislature and the banks have admitted the principles of State control—the principles of value—the principles of law. But here was the wrong—the power which the Legislature put forth in passing these Acts in the interests of the banks to sustain the tottering edifice of a "banking currency system," which has outraged both equity and economic law, they should have done in the interests of the people, by a broad and comprehensive policy; it was not the reconstruction of banks, but the reconstruction of monetary systems, not only here, but world over, which was peremptory, or a world-wide collapse will sweep them away.

The New South Wales Legislature have dealt with effects when they should have grasped and dealt with causes. Influenced by the fancied interests of bankers and capitalists they have attempted expedients, when they should have trusted principles, and on them laid the foundation of a monetary policy for the public good by passing "a National Currency Bill," making the "state note" the sole legal tender—the money of the country—the currency—and—abolishing all private bank note issues, and also demonetising gold and silver (except tokens for change) to the position of mere merchandise. The Treasury could then have promptly issued say £6,000,000 or even £7,000,000 of Interim Treasury notes, to displace the remnant of the currency which was in circulation before the hank suspensions, amounting to about £5,000,000, and consisting of private bank notes and gold.

The volume of the Currency in the National Note being rather increased would have maintained prices slightly rising above the present price-level, and would have stimulated productive and commercial activity and trade, and consequent prosperity. Except the quantity retained for foreign service requirements, the gold now valueless for money—about three and a-half millions—would be exported, and imports of greater national utility received for it, and this exchange of a costly and unproductive commodity for real wealth would be an absolute gain.

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When the Department of the Currency or State Bank had been organised (for Government business only), and the machinery for issuing the "State Note" Currency had been perfected to guard against counterfeiting, the Interim Treasury Notes could have been called in, and the permanent "State Notes," representing suitable amounts, substituted.

After the issue of the £6,000,000 or £7,000,000 permanent "State Notes" the number should have been specifically limited to that amount, and the future control, registration, regulation and limitation relegated to Commissioners, appointed by and responsible to Parliament alone, so that when population and commerce had increased and expanded, requiring further expansion of the Currency, Parliament alone could sanction the necessary increased issue of "State Notes," in ratio to the expansion of commerce.

The only question on which there was any doubt—if the N.S.W. Legislature had adopted a National Currency—was whether the Currency should be a Federal or State measure, whether each State should have passed a separate Act—by concerted action or agreement—but on the same principles—or by Federation of the Australian States on the subject of Currency, and the Commissioners of Currency from each State meeting annually in Parliament in one or alternate States on Currency questions.

Unless there be a prospect of complete Australian Federation, each State should have its own independent monetary system. Of course so long as the Currency is controlled, as at present, by the banks, the monetary system must be Federal, hence the anxiety of the banks to make it so, and as the "Measure of Value" is now only known to the banking powers, the banks thus control the Government, instead of the Government controlling the banks—but a "National Currency" should not be Federal unless under complete Australian Federation.

The Currency of any country should be National not Inter-National.

"Any system of money that is common to several countries subjects the entire internal business of each of them to all the disasters originating in the political or financial mismanagement of the Government, or the political disturbances, follies, misfortunes, or reckless speculations of the inhabitants, of any one or all the others." [Report U.S. Monetary Commission, 1876.]

Von Scholtz, an eminent German jurist and financier says: "It would constitute an act of treason to sign away the independence of a State in reference to money."—London Times,February, 1886.

Also letter of J. G. Fitche to the Russian Government, "on the necessity of independent currency to progressive States."

The International Conference of 1878 came to a similar conclusion.

But the united wisdom of the Australian Premiers in conference failed to see that the real cause of the financial collapse laid deeper than the surface, that they could find no better recommendation than to copy the American system, which itself is tottering before its most page 29 certain fall, can only be answered in the great Chancellor Oxenstein's reyly to his too modest son: "Nescis mi flli quantulâ scientiâ gubernatur mundus."—(My son you know not with what little wisdom the world is governed).

The real cause is that which is now affecting the whole world. Anyone can read the handwriting on the wall in "Falling Prices," the beginning of the end.

The machinery of a vampire monetary system has run down for the superstition of gold—The end has come—But no physical or economic law ordains that gold is the only money or measure of value; on the contrary, the highest civilisations of the world did not use gold or intrinsic moneys; not for lack of ample supplies of these metals, but from economic reasons they adopted a scientific system which avoided the political and social dangers attending their use as money, and from conviction that they were an insecure foundation on which to rest the industrial and social superstructure of a great State.

Considered by itself, it does not matter what is the material of the State money—the State note is symbolic, not intrinsic, its value being due to the whole number of such State notes which the State may emit. This is the supply. The demand is the need of the public for money wherewith to pay debts, taxes and fines, and to make purchases. The relation between this supply and demand is value— the value of the "State notes" in commodities, or the value of commodities in "State notes."

Reviewing the foregoing, it is apparent that had the Legislature risen to the occasion, and stood firmly on the rock of scientific principles, making their sole aim—as statesmen—the good of the common-weal—they should have given to the people a National Currency. This would have placed the country—by its action—in a financial position of present safety—without fear for the future—it would have given them the power to sustain "prices," and to check the necessity for calamitous realisation of immense liabilities. Having rested their industrial, productive and social future on a stable and permanent foundation, they could have looked with serenity from their pedestal of security—independent of the rest of the world—and beheld the monetary convulsions, the industrial collapses, bankruptcies, revolutions, and perhaps bloody wars which may accompany the solving of the forthcoming "Monetary Problem" in probably every country in the world during the next year or two—except China, and perhaps Russia, Brazil, Austro-Hungary.

As to banks themselves—as it is necessary in the interest of the commonweal to abolish a monopoly which has hitherto given them enormous power and wealth, but which has often overwhelmed themselves, as well as the country in general disaster they must conform their business to the National interests—would have ensured to themselves a more secure future—it would have enabled them to right their liabilities in their good time, without dread of doing so under further "falling prices"—But the future economic condition of the country would have been beyond their control, the loan market and page 30 securities alone would have remained perhaps still affected, and that only temporarily; but prices and the currency would have been in safety under the regulation and control of the State, and for ever free from future financial disasters, so long as the principles of limitation and regulation were maintained by the integrity and power of the State.

"The failure of efforts under Revolutionary and Despotic Governments to establish paper money systems, have no significance whatever. No such efforts have ever been made under free institutions firmly established—without which perfection in money—or any other system which effects the general welfare is impossible. The failures of one age often become the established measures of the next. Every progressive movement of mankind has been tedious and toilsome, and has been accomplished only through trial, suffering and repeated failures."—[Report U.S. Monetary Commission of 1876.]