Kennc of Reriein, !0/i/06. 



S^ate Banks v. State Bonds. 



363 



keep a 5 or 10 per cent, basis of specie? Would 

 it not be much safer and more profitable for a State 

 to issue, use and lend at interest, through its State 

 Bank Department, its own State Bank paper money, 

 than to Iwrrow, use, and pay interest on the paper 

 money of private banks? Is it not much more 

 dangerous for Governments to issue £100 deben- 

 tures in " boundless quantities"? 



The following [laragraph from the " Financial 

 and Banking Record of New York." June 23rd, 

 1887, proves how the public credit can l>e used for 

 the public benefit instead of for the profit of stock 

 jobbers and shareholders: — "The creation of the 

 Belgian railways was Ix-gun with a limited Treasury 

 surplus, but the entire cost was paid for l>y redeem- 

 able non-interest hearing notes, representing the 

 property as if in defjosit, having a genuine basis of 

 value, forming a considerable part of the circulating 

 medium of the country, for which a sinking fund 

 was provided from the net proceeds of the rail- 

 way." (The Belgian Government recently adver- 

 tised tickets, available for 15 days over the whole 

 2530 miles of the State railways, for i8s. c;d. '.) 



On the other hand. \ew Zealand is an object 

 lesson in bad finance. With a population of less 

 than a million, able to produce all the necessaries 

 of life, and having since 1853 exported to the value 

 of o\er 330 millions, she has created a public delit. 

 including debts of lfx:al Ixjdies, of over 65 millions, 

 of which over 50 millions is owing outside the 

 colony. All the best of the public lands have lieei' 

 sold, and the money squandered away. The total 

 value of the public property, including the remain- 

 ing Crown lands, educational lands. Church lands, 



jmblic buildings, railways, telegraphs, harbours, 

 etc., is set down in the New Zealand Year B(X)k at 

 less than 50 millions. So that " our State railways," 

 and every other State thing, really belongs to the 

 money-lender, and interest has to Ik? paid on it ! 

 Ccwnmon sense sa)s that with nearly four millions 

 of coin in the banks, l;esides that which is in circu- 

 lation, the colony cannot reijuire more sovereigns. 

 Yet last year the public debt increased by over two 

 millions. The bank returns of March, 1905, showed 

 that the five New 2Sealand banks had a note-circula- 

 tion of nearly a million and a-half, and deposits 

 amounting to over 20 millions, of which two mil- 

 lions were Government dejiosits. Now, if deposits, 

 cheques and notes " perform all the same functions," 

 and are " in all respects equal to the creation of so 

 much additional capital," why should not the Go- 

 vernment withdraw its two millions of deposits, and 

 use it as a 5 per cent., or 10 per cent, specie basis 

 for the creation of as much additional capital as 

 the colony requires? Why should New Zealand be 

 dependent upon the London money market and pri- 

 vate banks? Why should not New Zealand finance 

 her railways and public works as Belgium did her 

 railways? Why should not a State Bank provide 

 capital out of its profits "to harness the rivers" to 

 develop her mining and manufacturing resources, 

 and to extinguish the public debt? Why should 

 private bank-shareholders be allowed to make pro- 

 fits of over _;^8oo,ooo a ye^fr out of the paper cur- 

 rency of the colony, while all the coin in the banks 

 really Ixlongs to the depositors? Why should the 

 people Ix^ taxed to pay interest on loans of imagi- 

 nary sovereigns ? 



[Dr. Watkin writes to say that lie thinks tlie lines 

 in "The Land of Silence," referring to the Supeiin- 

 tendeiit of the Melbourne Institution having had little 

 experience a.s a teacher, cast a reflection on that 

 gentleman and on the Board of Directors. Dr. Wat- 

 kin explained that the Superintendent has absolutely 



nothing to do with the teaching of the children, that 

 his province is confined to the " business and domestic 

 management of the Institution." Tlie criticism there- 

 fore falls harm'ess, although an outsider is probably 

 to be iraidoned for imagining that the duties of Super- 

 intendent covered a wrider field. — Editor.] 



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