The Pamphlet Collection of Sir Robert Stout: Volume 72
It is painful to have to explain self-evident details. The scheme would work as follows:—Say the Premier has stamped notes to the value of £100 and placed them to his credit in the bank, and in comes a man who has a cheque for £100 to cash to pay wages. The banker would have to give this man gold if he had no notes, but he has the £100 lodged with him by the Premier. The banker hands to this man the £100 in notes stamped by the Premier and keeps his gold in his coffers; they are paid away in wages, and they pass from hand to hand. This is the way the whole of the note issue would be absorbed by the people within a few days of being stamped. Then the notes would not be lying idle in the bank; they would be in the hands of the people, and it is the people who could demand from the Government payment in gold for them. The people would never demand payment in gold from the Government, and consequently the notes would pass as gold within New Zealand. Immediately the notes were issued the banks would owe the Government £1,000,000, but the people who would hold the notes would owe the banks exactly the same amount. Say the Government then drew cheques until it exhausted the £1,000,000, the banks would owe not one penny, but the people would still owe the banks £1,000,000. What is still more extraordinary is that the resources of the banks would not be disturbed to the amount of one penny by all these transactions, because as soon as they paid the cheques of the Government the same money would come into their coffers immediately. For instance, supposing the Minister of Lands paid £10,000 to the owner of a large estate, the latter would immediately place the cheque to his credit in the bank. The money would not leave the banks, and no disturbance would be caused. The payment of interest on our loans has nothing to do with this. The interest would be paid as heretofore, just exactly as if no change had occurred. Our exports at present provide the gold for that purpose, and they would still provide it.
J. M. Twomey.