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The Pamphlet Collection of Sir Robert Stout: Volume 79

State Issue and Paper Money

State Issue and Paper Money.

Let us briefly consider what precedents we have for the establishment of a State Bank of our own and the issue of paper money. The first precedent we have of the use of paper money is that in the case of the Hank of Venice. Paper currency issued by this Bank was circulated throughout Europe safely and soundly for the long period of 600 years, the Hank of Venice becoming ruined only when that marvel Napoleon conquered Venice. Excepting that extraordinary crisis, it is recorded of that Bank that no ordinary crisis, such as we are accustomed to, ever materially affected it during the whole of its long period of activity. Furthermore, history points to this fact, that a judicious use of paper money enabled Europe to carry on war—we are not advocating war, far from it; we are merely setting out the extra disadvantages of the time—for a period of six centuries, no less, In issuing its paper money, then, the Bank had faith in itself, faith in its people, and faith in its securities.

Then there is the case of the American Civil War. There was not sufficient Gold available for President Lincoln, so that he and his Cabinet decided to issue paper money with which to carry on the war. The Act for a paper issue passed Congress in the form that it would be a legal tender for anything. The Senate, or Upper House, unwisely altered this so that interest on Government bonds held by the State and Customs duties were to be paid in Gold. Congress not being strong enough to resist this, the Act passed accordingly, and the prestige of the paper money was injured at its inception. Despite this fact, Lincoln carried on a four years war, fed and clothed his troops, a million of men, and paid for all war material with the paper money. Alas, it is a sad tale to relate, that subsequently the Gold-bugs got to work and effectually ruined holders of this paper money. It was to the Gold-bugs' interests to do this, and they did it without hesitation. In order to effect it Bankers conspired together and lobbied Congress till they of an Act passed which suited them. That paper money, mark well, interfered with bankers' profits in the shape of interest, and they worked until they got interest attached to the paper money. We must seriously and now ask ourselves whether we are going to allow the question of wealthy bankers' profit is interest to further dominate our currency to our poverty and ruin. We must ask ourselves right here and now whether we shall control our currency or allow our currency to control us, to our ruin. So surely as it is to the capitalists' interest to perpetuate this scheme of interest and money-lending, which interest he reaps from the industry of the toiling and sometimes hungry masses, so surely is it to our interest to make away with that interest, and to promote a system of free untaxable money; untaxable, that is, by being non-interest bearing. Free page 5 money means real freedom to us; it means true liberty for us. Not the kind of "Liberal" liberty meted out to us to-day in the shape of increasing interest-payments and increasing taxation. No, not this kind. Not the kind that our "Liberal Government" is treating us to, and which, in its past twenty years of power, has piled up our national debt to alarming proportions, and cause us to groan under our burden of taxation and interest payments,

In this way the bankers and capitalists lobbied in Congress. The bankers and their agents first depreciated the paper issue, named the Greenbacks, then in circulation, by refusing to receive them over their counter at their full face value. They reduced these notes from time to time when receiving them in payment. When these interest-mongers had reduced the face value of the Greenbacks in the money market as low as they dared, they then lobbied in Congress and got a law passed that any man bringing 10,0000. dollars' worth of Greenbacks into the treasury would see them burned before his face, and receive back a bond bearing 6 per cent, interest upon their full faced value of the notes burned, although they had bought them in some instances, and others received others by way of trade for perhaps half their value in the public market. Then several hundred millions worth of-dollars in paper was withdrawn from circulation among the poorer people by this system, making the buying power of the poor poorer, and the rich richer in their cursed interest upon the innocent Greenback. Then a howl went up but nothing was done. Here, then, we see a people made in debt to their own money, and paying interest on burnt paper through their sublime ignorance.

We have had the spectacle of a Silver boom in the United States. The Gold-bugs interfered, and the capitalists of New York, London, and Paris, per medium of one Mr. Ernest Seyd. got into touch with members of the American Congress, and successfully destroyed Silver as a standard of coin. This at once threw the whole work of currency upon Gold, and the appreciation of Gold quickly set in. Alas, then, for the people, with Silver as a token only—as copper with us—their purchasing power was delimited, and they suffered accordingly. As no debt over £2 could be paid for in Silver, a panic followed. But let us draw the curtain on that action of the Gold-bugs and its appalling consequences. By the way this Gold standard was forced upon the millions of India, a shocking crime. The destandardising of Silver was equivalent to blasting their food crops.

Both friends and opponents are in the habit of advancing the objection that paper money will not pay a foreign debt. No one ever contends that paper money was ever intended to circulate out of the country in which it is issued. English paper notes do not, except to a very limited extent, circulate out of Great Britain, In cases where they do, exchange has to be paid for this concession into the currency of a new country. They only ease where Government Bonds have been used in the payment of a foreign debt. In that of the indemnity paid by France to Germany after the war of 1870-1871. Even in this case it was only a mutual agreement between the Powers concerned, and did nothing towards establishing a precedent.

Take again the case of a large trading firm in possession of some thousands of the Dominion's paper notes, in which to pay their foreign creditors. All that is necessary is for the State Bank in New Zealand to issue a draft for the required amount on their agents in London. It is then simply a matter of simple bookkeeping for the English creditor to secure the money owing to him.

It must be remembered that under the proposed system the State will be the only Gold buyer, and thus would have no difficulty in building up a sufficient reserve to meet all requirements. Still another page 6 case: a worker or small business man has by thrift accumulated a few hundreds of State notes. He wishes to leave for another country. All that is necessary for him to do is to deposit his notes in the local Bank, which for a small charge will grant him a letter of credit, which he can immediately utilise in the new country. In New Zealand to-day there is a Bank doing business; fully 75 per cent, of their shareholders are non-resident, and can at any moment withdraw deposits for the purpose of speculation in other countdies. No such position could [unclear: exi] under a State Bank system. The same argument applies to any industry or undertaking in which the interests of the general publican involved. A very pertinent instance of this is offered by the purchase of the Cheviot State in Malborough. Vendors received [unclear: a] money whatsoever, but were paid in Government Bonds, of which tit holders draw the interest. The payment of this interest is no conecte of the State, since the amount was added unto the rental of the lane and has proved no burden to the individual farmer. Such industry as the Union S.S. Company, Parapara Iron Field, Taranaki of Field, would be acquired on equally advantageous terms, and would prove no burden to the State.

It seems strange that our labour leaders for the last 20 years have to entirely ignored these crucial questions, and have devoted themselves to the petty problems, which would solve themselves if the more important matters were put on a more satisfactory basis. As far as steamship facilities are concerned. Western Australia has provided as object lesson, which is well worthy of imitation in New Zealand.

The fail of the B a stile was the first substantial intimation which Louis and his nobles had of the French Revolution. One of the chief causes which led up to this revolution was the currency question, is was the scarcity of the circulation of Gold and Silver amongst the people, a scarcity which affected alike the peasant, the farmer, and the merchant. Against this revolution the Powers sent all their armies. The President of the French Republic, Carnot, finding himself without Gold and Silver with which to raise forces to meet the invaders, had resort to a paper money issue. These were termed assignats, and with these he defended France, by paying his French soldiers, etc. Mark the sequel. Pitt, being Premier of England, established four factories, employing 400 men, for the manufacture of counterfeit assignats. These in millions he caused to be smuggled into France, and in that one terrible blow the French paper money was destroyed. In this we find a further proof that it is by the most extraordinary means only that paper money can be destroyed.

Let me draw your attention now to a striking instance of the work of paper money, and its success when no extraordinary means of interfering with it are adopted. The inhabitants of Guernsey (one of the Channel islands) badly wanted a market-place. Having no money with which to build and establish it, but confident that whet once it was built it could be very profitably let they decided to issue paper notes, such notes to pass as currency throughout the island (4,000). With these, then, the necessary buildings were erected, and when finished the whole was profitably "let. The income from the property was applied by the Committee in redeeming the paper money. This was done with such good effect that in the course of a few years the total issue of paper money was redeemed, and the people thus gol their valuable market-place free of either interest or taxation. Just think of this, and think how our Public Works, our Roads, and our Railways could be built by the same system, and without our being taxed. Why is it not done? It is because we allow the Gold-bugs; to dominate the position and to burden us with taxation. We are in page 7 the hands of the coin-lenders, who grow fat upon the wealth which they accumulate from our honest toil. Against that let us glance at the process and system of the purely Gold and Silver standards.