l6() PRESIDENTIAL ADDRESS — SECTION F. 



in Natal. Uniformity is one of the chief requisites of paper 

 money, and on that ground alone the right of issue should not 

 be extended. If existing banks are allowed to retain their 

 issues, the size and colour of each denomination of the notes 

 should be determined by the Department of Finance. It is 

 more doubtful whether separate issues for each Province should 

 cease. It would certainly be more convenient for the public. 

 It might well be argued that as the sovereign is the same in 

 all Provinces, those who are permitted by the State to manufac- 

 ture substitutes for sovereigns should be prepared to pay out 

 sovereigns in exchange for the notes, either in Bloemfontein, 

 Capetown, Durban, or Pretoria. What increase in the reserves 

 would be necessary to make this possible, only the banks could 

 estimate. Possibly, though it scarcely seems probable the 

 increased cost of holding gold would be so great as to make 

 issues unprofitable. Clearly it would involve enormous waste 

 to keep sufficient gold at every branch to meet possible demands ; 

 but it might be possible to keep gold at these centres. This 

 cost would in itself act as an additional check against over- 

 issue. The objection to the custom of circulating notes in any 

 Province, irrespective of their place of issue, is that in a period 

 of expansion a larger quantity of notes may be put into circulation 

 if the ofifice of exchange is far distant. The surplus would not 

 return to the banks so readily for extinction. Thus, when the 

 period of contraction set in, there would be a greater total demand 

 on the ultimate reserves. In a crisis the banks might insist on 

 their right to convert the notes only at the ofifice of issue, 

 and the delay in conversion would aggravate the evils of a crisis. 

 The ideal is an issue legal tender throughout the Union, and 

 convertible on demand at one office in each Province. If this 

 is not practicable, the notes issued in each Province should 

 be legal tender only within that Province, and should be con- 

 vertible within it. 



The issue of notes by Government, directly or indirectly, 

 would make it more practicable to have a uniform paper currency, 

 legal tender throughout the Union, and convertible at one ofifice 

 in each Province. The Government need not aim at making 

 any large profit on its note issue, and can therefore afford to 

 keep larger reserves. It may be well to repeat that the object 

 of a paper currency is not primarily, as is often supposed, to 

 provide " a free loan to the public by the public," but to provide 

 a convenient medium of exchange for the industry of the nation. 

 State issues have been wrongly used during the war in the vain 

 hope of obtaining a loan without someone having to pay for it. 

 But now that this great incentive to overissue is past, it may 

 be well to examine again the advantages of making paper 

 money Government obligations. The chief arguments in favour 

 of Government issues are that they ensure uniformity, that the 

 State can afford to keep larger reserves, and that the profits 

 from the monopoly of issue should go to the public, and not 



