4th Parliament · 1st Session
Mr. Speaker took the chair at 10.30 a.m., and read prayers.
Debate resumed from11th August (vide page 1472), on motion by Mr. Fisher -
That this Bill be now read a second time.
.- When the debate was adjourned last night, I was pointing out that there are two groups, of considerations to be studied in dealing with this great question. What we have to ascertain is whether by making the proposed change we shall give our currency greater stability, elasticity, and convertibility, or as much, or less, than it has now. That is one group of considerations ; the other is whether the new currency will be as suited to the needs of our people, -our commerce, and our great producing industries as is the present currency; and whether the community will gain any direct benefit in pounds, shillings, and pence from the change. Stability, elasticity, and convertibility’ form a sort of economic trinity ; elasticity cannot be dissociated from stability, or convertibility from the other two. Each is dependent on the others. If anything is done to lessen the elasticity of the issue, the time will come when, under certain conditions, its stability also will be affected, and, similarly, if we lessen the convertibility, there will be occasions when the stability will be affected. Stability, elasticity, and convertibility hang together. As to whether the proposed change will adversely affect the shareholders of our banking corporations, let me say that I do not think that it will, or, if it does, only so slightly so as to be. not worth considering. I do not think that the opposition to the measure on the part of the great financiers of Australia is based on the opinion that the institutions which they control will suffer directly by the change ; the sole question with them is whether the new currency will be better and more suited to the needs of the community than that which we have now. I hope to be able to show that the new currency will not be less stable than that which we have at present, except so far as its stability may be affected by its lack of elasticity, and, under conditionswhich may easily ‘ arise, its comparative inconvertibility. Under existing conditions it will not be less stable than the present currency, but it will not be more stable. The Prime Minister has admitted that it . will not be as elastic or as convertible as the present currency ; therefore, under cond’tions which, may easily arise, it will ‘ be less stable. Secondly, I shall try to show that the new currency in its very nature will not be as suited to Australian conditions as that which we have at present, and, thirdly, that the change will not put pounds, shillings, and pence into the pockets of the taxpayers.
– Does not the honorable member mean into the Treasury ?
– I admit that, at first, the Treasurer will obtain command of a certain sum of money, . -but in the long run the taxpayers will not be any- better off by reason of the change. Before proceeding further I wish to remove misconceptions, which, as they prevail widely throughout Australia, may exist to some extent in the minds of honorable members. The honorable member for Calare had a good deal to say about the “ paper money “ issued by the banks, and, in the minds of 999 of1,000 men one meets in the street, the idea prevails that bank notes are paper money. They are not paper money.
– In 1902 and 1903 the people of New South Wales found that they were paper money.
– I shall deal with that crisis presently. Bank notes are not paper money, but a paper credit, and there is a wide and fundamental economic difference between the two. The Prime Minister in introducing the Bill quoted from Mr. Shiels, and I interjected that I objected, not to what Mr. Shiels had said, but to the way in which his words were being used.
– It amounted to misrepresentation.
– I do not think that there was deliberate misrepresentation on the part of the Prime Minister, but the manner in which Mr. Shiels’ language was used amounted to a misrepresentation of his views. What he said was this -
I have reached certain conclusions upon some matters, but I have acquired a strength of conviction amounting almost to religious sentiment on this matter, that no Legislature and no nation is wise that does anything to tamper with or vitiate its currency. I say that the first commandment in currency, over-riding all things else, is this - Keep the breed of your money pure; have no half-caste system. History is lurid with warnings as to the catastrophes brought upon nations by deviating from the straight path in these matters. Wherever notes have been issued, either against land or credit (here they are to be issued against credit), disaster has occurred.
I wish to draw attention to this distinction between paper money and paper credit, because when we have this issue we shall have a half-caste system, a currency based partly on gold and partly on credit. To the extent that they are based on gold, it is perfectly true that these notes are a paper credit, but to the extent that they are based on the credit of Australia and made legal tender, they are not a paper credit, but a paper money.
– With the best of security behind it.
– The honorable member says that the issue has the best of credit behind it.
– I said the best of “ security.”
– Nevertheless, security is credit. Under certain conditions and causes which lead to the stability or otherwise of a paper issue of money, the credit of the issuing party is not even remotely associated with the stability of those notes, whether or not the notes remain at par, or, in other words, whether or not the market price of the gold is equal to the mint price of gold. Honorable members seem to lose sight of the fact that, altogether outside the question of the credit of the party issuing the notes, conditions arise which affect the stability of the issue, and determine whether it remains at par or not ; and we have only to go to history for scores and scores of instances. We remember how John Law put his theories into effect; and to the extent to which this issue is based on the credit of Australia it is Lawism pure and simple. When Mirabeau was introducing his measure in France, he said -
The assignats represent . . . the most secure of all the provisions, the land on which we tread. . . . It is thus alone you will pay your debts, pay your troops, advance the revolution. . . . This paper money can never become redundant.
– Does the honorable member believe in that?
– No, I do not.
– It is a wonder !
– When Carlyle was writing on this subject, years afterwards, he uttered the bitterest satire on this pronouncement of Mirabeau, in a conversation between two men in the streets of Paris. From this I read -
Said one to a hackney-coachman, “ What fare ? “ “ Six thousand livres,” answered he ; some three hundred pounds sterling, in paper money.
– That is somewhat familiar. Does the honorable member say that Law’s scheme, as originated, was unsound ?
– That is enough for me !
– Law’s theory on banking and on paper credit is perfectly sound ; there was no sounder man in the whole economic world than Law on these two points. But when it comes to paper money–
– The honorable member speaks with some authority !
– I speak on the authority of others, not my own ; honorable members will find that the words I have just used are the words of MacLeod, than whom I do not think there is a sounder economic writer. Speaking from memory, I think that MacLeod says of Law that there was no one sounder on the question of banking and paper credit, but that there was no one more unsound on the question of paper money. When Law started off he stuck to his theories on banking and paper credit, and had he always gone along those lines he- would have been one of the greatest benefactors his great country had ever seen. But in France he made a new departure altogether, and started on his theories of paper money, and that is where his whole scheme broke down. We have only to read in the history of France what was the result of those theories. I have been led away by the interjection of the honorable member for Maribyrnong, to make it clear that the question of the credit of the party responsible for any issue is, at times, under certain conditions, not even remotely associated with the question of the stability of the issue itself. That; I think, is absolutely substantiated by the great economic writers who have already been quoted in this Chamber; and I do not desire to deal further with that phase. There is a great difference between paper credit and paper money; and I desire to touch for a moment on the proposal to makethese notes legal tender. Of course, we all understand that in Australia, under this new currency system, we shall have a double system of legal tender; we shall have the half-caste system, which is the very one that Mr. Shiels so strongly protested against. That is why, when the Prime Minister was quoting Mr. Shiels, I, with a clear recollection of what that gentleman said, interjected that I did not object to his being quoted, but that I did object to the way in which his words were being used. So far as I can read the Bill itself, it seems to me that the notes are legal tender at the Treasury, though I do not know whether that is the intention of the Prime Minister.
– The proposal is that the notes shall be legal tender to all persons, except at the Treasury.
– The Bill does not so provide.
– We shall make it clear.
– The Queensland Act clearly states that the notes of that State are not legal tender at the Treasury, just as the Bank of England notes are not legal tender at the Bank of England ; and if that be the intention, it should be so stated in clear words.
– It will be made quite clear.
– I am glad to have that assurance from the Prime Minister.
– And the honorable member will see that, as an additional precaution, the Treasury is forbidden to pledge the notes for credit.
– I desire, for a few moments, to touch on the question of currency. The honorable member for Angas, when he was speaking the other day, made it clear that our currency is a peculiar one - that it is not the same as that of a great many other nations. The Australian currency is, I think, almost peculiar to Australia; the same conditions do not prevail in any other part of the world, as far as I know.
– It is very much the Scotch system.
– That is true; but we have to remember that our currency is widely different from that of other parts of the world. There is a popular impression that a currency is limited to the actual coin of the realm and notes ; but it is nothing of the sort, because the currency includes every negotiable instrument. The Government cannot control the whole of the currency - it is not within their power or possession. Every time we sign a cheque, we add to the currency for the time being, So long as we do not write the words “ not negotiable,” across a cheque, we may cross it in any way we like, and it will remain a part of the currency ; but the moment we do write those words, the cheque is not part of the currency, because it is no longer current in the realm.
– What was the origin of the practice of cheques?
– We should have to go a long way back to find the actual origin.
– Bits of leather torn out of a hide.
– No doubt, in their present form, cheques have been gradually evolved in commerce ; and in Australia they have entered far more largely into the currency than in any other nation I know of. This is important, as I shall show presently, because it is very difficult to compare our currency with the currencies in Europe, particularly those of France, Germany, and Russia, where they are almost entirely confined to notes. There is just the same practice in America ; and we can hardly draw a comparison between Australia and those countries, owing to the difference of conditions. We shall at once, I think, realize the necessity for the Government, controlling the metallic currency. We all understand the necessity for an absolute standard by which the value of commodities shall be judged ; and I do not think I need go further into that question. We have first to find the primary reason fothis proposed issue, and we shall find it in the primary reason which has underlain, no matter what the pretensions, every Government issue that history records, and that is, Government needs. We can go back pretty well as far as history takes us and find practically similar proposals. Nobody will suppose that this sort of what I may. term national alchemy has anything about it peculiar to this country or this period - nothing of the sort.
– Can we not improve on the experiences of the past?
– Certainly, and that is a reason we should be shy of adopting the present proposal. If we go back into history, we find, even in ancient Greece, similar proposals. Greek history records two or three of a similar kind, but the one I remember is that in the case of a tribe called the Klazomenians, who had troops to pay. Their idea of currency, or rather of a note issue, was to collect all the gold from the people, who, of course, then kept it in private hordes, and to issue to those people pieces of iron to which were given precisely the value of the gold taken. That, I think, is the earliest instance in history of this class of currency; and these were the bank notes or State notes of that period.
– What period was that?
– I think it was something like 1,200 years b.c. I mention this in passing to show honorable members that this proposal is nothing new. It is nearly as old as the history of man. The Go’vernment in proposing to get this gold from the bank coffers are not really taking a sixpence from the banks. They are taking the gold out of the pockets of the people of Australia. At the period in ancient history to which I have referred there were no banks, and people kept their money in private hoards. Now we put our money in the banks instead of keeping private hoards, and the gold reserves which the banks hold belong not to the banks but to the depositors. Thus the Government are taking the money out of the hoards which the banks hold in trust for their depositors. I know there are some people whom we meet in the street who are overjoyed at the fact that these great institutions are going to have these huge hoards of money taken out of their coffers.
– The honorable member must mix with queer company.
– I take it that what I hear in the street is common talk in a great number of places. At any rate I know that that idea is prevalent. The Government are taking this money, and it is not necessarily to be returned in the proportion that it is to be taken from each bank.
– Does the honorable member say that there is a pound in gold for every pound of deposits in the banks ?
– I do not, but I think I can show that the figures quoted by the honorable member for Calare last night were, to say the least of them, very misleading. I do not object to the figures, because they are indisputable, but I do object to the way in which the honorable member used them, just in the same way as I did not object to the Prime Minister’s quotation from Mr. Shiels, but I did object to the way he used it. Although the honorable member for Calare showed that the book assets of the banks are only £10,000,000 in excess of their total liabilities, what he did not tell us was that against the ,£94,607,742 of other liabilities they hold securities for practically double the amount. He did not tell us that these figures represented advances made against property of double the value, and that is where the whole of his argument broke down. Instead of the assets of the banks being in reality only £10,000,000 on the books in excess of their liabilities, as a matter of fact their assets represent over £100,000,000 in excess of their total liabilities. I mention that to show how figures can be used in an absolutely misleading way in a debate of this sort. Honorable members must bear in mind, when making the comparison, that the total assets of our banks for FEe purposes of security over and above their total liabilities actually amount to more than £100,000,000. I wish to pass on now to the great question of whether the Government should make an issue of this sort. The honorable member for Calare last night used a quotation from an eminent political economist, who is entitled to the deepest respect of this House. I commend to the Prime Minister the very passage from which the honorable member quoted.’ I begged the honorable member last night to continue the quotation. I do not know where he got it from, but probably he gleaned it from a series of extracts from the works of eminent authorities on political economy, culled for the express purpose of backing up a proposition of this sort. I do not know whether that is so, but I want to give the House that passage from Mill word for word, and to point out that Mill is the particular economic authority who condemned a State note issue, and this form of issue in particular.
– Where did the honorable gentleman get the extract from Carlyle which he read this morning?
– From Nicholson’s work, I think . the second volume, but I quoted it to-day from a newspaper extract. I have the original here also. The source from which one gets an extract matters very little, so long as one does not use it in a way unjustified by the context, and so give it a meaning which the author never intended.
– Exactly what the honorable member did this morning.
– I did not. In regard to Mill, I shall start exactly where the honorable member for Calare started -
The exclusive privilege, therefore, of issuing them, if reserved to the Government or to some one body, is a source of great pecuniary gain. That this gain should be obtained for the nation at large is both practicable and desirable ; and if the management of a bank-note currency ought to be so completely mechanical, so entirely a thing of fixed rule, as it is made by the Act of 1844, there seems no reason why this mechanism should be worked for the profit of any private issuer, rather than for the public treasury.
Now let me go on -
If, however, a plan be preferred which leaves the variations in the amount of issues in any degree whatever to the discretion of the issuers, it is not desirable that, to the ever-growing attributions of the Government, so delicate a function should be super-added’; and that the attention of the heads of the State should be diverted from larger objects, by their being besieged with the applications, and made a mark for all the attacks which are never spared to those deemed to be responsible for any acts, however minute, connected with the regulation of the currency.
I wish to give the whole of this passage, because the writer lays down several most important principles. He says -
It would be better that treasury notes, exchangeable for gold on demand, should be is- . sued to a fixed amount, not exceeding the minimum of a bank-note currency ; the remainder of the notes which may be required being left to be supplied either by one or by a number of private banking establishments. Or an establishment like the Bank of England might supply the whole country, on condition of lending fifteen or twenty millions of its notes to the Government without interest, which would give” the same pecuniary advantage to the State as if it issued that number of its own notes.
I propose to explain what it is that Mill says in those passages. I do not want to confuse honorable members’ minds, if such a thing were possible, but wish to make the issue clear so that my line of reasoning may become theirs, and that I may, if possible, carry with me on this issue those free and open minds which the Prime Minister told us every honorable member in this House is entitled to have on the question. First of all, Mill laysdown two great principles. He says that the profit from this mode of currency belongs to the State, and that the responsibility for the stability of the issue belongs to the Government. Those two things in our present banking laws we have already fully secured. We have placed upon bank notes a tax which practically takes the whole of the profit out of their issue. Hon orable members will find that the consensus of banking opinion is that the banks reap no pepuniary advantage directly from the issue of bank notes, after paying the tax.
– The honorable member for Calare does not know that.
– I gathered from the honorable member’s remarks last night that he was not aware that the banks pay a tax on their note issue. We do gain a profit from the issue for the State, and,, secondly, we have secured the stability of the issue by our legislation, and so discharged our responsibilities to. the people under that head. We have ‘discharged that responsibility inasmuch as we have made the notes a first charge upon the assets of the banks.
– -What is the good of the first charge when the bank has closed its doors?
– If it is a question of ultimate stability in regard to banking, or in regard to this particular issue, surely we have it just as much in the present bank note issue as in the proposed State note issue. I wish to take from this very Bill one concrete example of the truth of what I say. What is the actual effect of working out the bank note issue and the present State note issue of Queensland? On one day the banking companies of the Commonwealth are called upon, under ‘ this Bill, to redeem the whole of their paper, and they will be able to do so. On the other hand, however, it is absolutely necessary to give the Government of Queensland time to redeem its paper. Provision for that is made in the Bill itself. The banks of issue could redeem every scrap of their paper to-morrow, but the Government find it necessary to give Queensland time to redeem its paper. If the question involved is as to the ultimate stability of the banking institutions, I make bold to say that every note issued by them would be met before Queensland could meet her present issue. So far as the question of ultimate stability- is concerned, the balance is in favour of the banking companies’ issue, rather than that of the Queensland State Government.
– Does the honorable member think that the security of a private banking company is equal to that of the nation?
– I have already spent some time in explaining to the honorable member that the question of credit, in certain circumstances, does not enter into this consideration. Let me return to John Stuart Mill. In the chapter to which I have referred, he was discussing the bank note issues of England, and we need to follow him very carefully, because his reasoning is exceedingly close. He says -
If the management of a bank note currency ought to be so complete and mechanical, so entirely a thing of fixed rule-
Do honorable members say that a bank or a State note issue ought to be purely mechanical, and absolutely fixed? Is that the ground which they take up?
– The honorable member is placing a wrong interpretation upon Mill’s words.
– I am not. He goes on to say -
If the management of a bank note currency ought to be so completely mechanical, so entirely a thing of. fixed rule, as it is made by the Act of 1844, there seems no reason why this mechanism should be worked for the profit of any private issuer, rather than for the public “Treasury. If, however, a plan be preferred which leaves the variations in the amount of issues in any degree whatever to the discretion of the -issuers, it is not desirable that to the evergrowing attributions of the Government so delicate a function should be superadded.
I think that honorable members will admit that one of the fundamental characteristics of either a State or a bank note issue is that it should be, not mechanical or fixed, but elastic. This is simply Mill’s reasoning, and he does not say that he is in favour of either one or the other. Those ;who have been quoting Mill in regard to this matter have been reading extracts, without giving the context, which shows the closeness of his reasoning as between a fixed issue and - what we believe is right and proper - an elastic issue. He shows that, in the case of a fixed issue, the Government may make such an issue to a certain extent, and reap the whole profit, but he does not say that that is desirable. What he does say is that if the plan which we all prefer, and which, no doubt, he too preferred, although he does not say so - the plan of adopting an elastic rather than a non-elastic- paper currency is followed “
– What is the honorable member quoting?
– I am quoting from John Stuart Mill’s Principles of Political Economy, Book III., chapter 24, paragraph 5, page 408. Mill here is comparing a fixed issue with an elastic issue, such as we prefer. He says that when you have an elastic issue, which is one of the essential features of a note issue, that elasticity should not be committed into the hands of any Government, good, bad, or indifferent. I come now to the application of Mill’s theory in the passage I have quoted. There, honorable members will find that Mill, believing that the profits of the issue should go to the Government, suggests for that purpose - and this is a most important point - that the minimum of the bank issues should be issued in the form of Treasury bills. To secure the profit, he says that that is what must be done. Provided those bills were covered by a certain amount of gold, no one would object to that being done. I believe that such a procedure would be perfectly legitimate, but we have secured the very same effect in a different way. Mill proposed to secure the profit to the State by the issue of a certain amount of Treasury bills to the minimum of the bank note issues, but we have secured that profit by creating a tax on bank notes. Mill goes on to point out that to secure the necessary elasticity, the remainder of the issue must be left to the banks, because it is not desirable “ that to the ever-growing attributions of the Government so delicate a function should be superadded.” We have there, from Mill’s own pen, a condemnation of this particular issue. Here we have an issue that is to be absolutely fixed, save in so far as the Treasurer can add to it later on by gold. I am going to show presently, I hope, that under certain conditions that would be extremely difficult. Mill says that to secure the profit to the State the Government has a perfect right to issue Treasury bills to the extent of the minimum of the bank note issue; but under this Bill we are to have practically a duplication of the maximum of the bank note issue. I do not know that it is necessary for me to dwell longer upon this particular passage. I think that I have shown very conclusively that Mill is the very last authority who should be quoted in support of a Government State note issue and of this proposed issue in particular. I mentioned earlier in my speech that our banking system is practically a duplication of the Scottish system, and I wish now to refer to the history of that system. Honorable members no doubt are aware of its actual rise, and to that therefore I need not refer. I do not wish to go back further than 1765. In that year the foundation of the present Scottish banking law was laid. The law upon which our particular banking business is practically based was the Scottish law of 1765, and it is very remarkable that since that time the notes of the Scottish banks have never been below par. A similar statement cannot be made in respect of the financial history of any other country.
– It can.
– I do not think so.
– On general principles the honorable member for Richmond’s statement is correct, but actually it is slightly in error. I can speak from experience. The City of Glasgow Bank notes were once below par.
– I am going to refer to the City of Glasgow Bank.
– Its notes were only temporarily below par, and that was owing to the action of a few people who did not understand the real situation.
– That is another matter.
– At all events the statement is not material to my point. I repeat that the Scottish bank notes have never been below par. There have been three notable failures in the history of Scotch banking, and those, so far as my memory serves me, are the only failures of . importance. They were those of the Ayr Bank in 1772, the Western Bank in 1857, and the City of Glasgow Bank in 1878. It is worth noting that the history of these three failures shows that they were brought about by a complete departure, so far as discount and matters of credit are concerned, from the generally accepted system of the rest of the Scotch banks. But what happened ? When those banks stopped payment the other banks actually stepped in and took up the whole of their issues. Turning to the history of Ireland, particularly that of Dublin, and the history of England at the end of the eighteenth and the beginning of the nineteenth century, we find that the notes of both countries, notwithstanding the undoubted credit of the institutions which issued them, were considerably below par. I think that the rate of discount as between Dublin and the Continent at one time was, as against Dublin, 23 per cent., while it was nearly as much as against London. In other words, it was between 4s. and 5s. in the pound. I am not going to enter “into the reasons which led to those issues being below par, because that would take me away from my subject; but 1 point again to the fact that during the great convulsions caused throughout Europe by the Napoleonic wars, Scotch notes stood as a rock.
– Bank notes in England went down to 14s. 6d.
– I have stated that notes in England, Wales, and Ireland at that time went below par. I did not know that they fell below 16s. 6d., but am glad to have the correction, because it emphasizes the contrast with the Scotch notes, which remained at par, as the highest economic authority shows. The Scotch bank notes remained at par, because - and it is also the case in Australia - they were a first charge on the assets of the banks. Mr. David Finlayson, wHo, if my memory serves me, was manager of the Union Bank at the time of the crisis in 1893, told the Banking Commission of 1905, whose evidence was quoted last night by the honorable member for Calare that, owing to the notes being a first charge on the bank’s assets, the public preferred them to gold. It has been stated, by way of interjection during my speech, and during those of others, that instances have occurred in Australia in which persons have parted with bank notes for less than their face value, and the Prime Minister said just now that in Scotland bank notes had been sold below par. I would remind the House that, so long as there are fools and knaves in this world, notes will, under certain conditions, be sold below par. .The fool gets frightened, and the knave, knowing that there is no cause for fear, buys his notes from him, and thereby reaps a profit. That will happen as often under a State as under a bank note issue.
– Not at all.
– It must be within the recollection of every honorable member that there was a run on the Adelaide Government Savings Bank, although there was no ground for distrusting the security of its deposits. The public is not to be controlled in times of panic, and panic fear will affect the value of a State note issue just as it affects the value of a bank note issue. I was surprised to learn, however, that Scotchmen have been ready to part with £1 notes for less than £1. I thought that those who hailed from the Land of Cakes prized the bawbees too highly to do that. To me it is strange that a Scotchman should have introduced this measure.
– It was a Scotchman who introduced the Queensland measure.
– I am aware of that, but such action does not accord with Scotch characteristics. Being half a Scotchman, I should know that.
– Which half is speaking now ?
– The Scotch half. I am half Scotch and half Irish, a pretty good mixture. I expected honorable members to deny the truth of the ‘assertion of Mr. Finlayson, that during the crisis of 1893 the public preferred the notes of his bank to gold.
– There are some sensible persons in the community.
– No doubt; I am particularly conscious of the fact this morning, and was about to point out that, in times of crises, when there is a run on a bank’s coffers, the right to issue notes provides a safety valve which the bank may legitimately use to stave off trouble. Let me quote an eminent authority on that point. Mr. MacLeod says -
A very important distinction, however, was to be observed between a demand for gold for domestic purposes, sometimes great and sudden, caused by temporary failure of confidence, and a drain arising from an unfavorable condition of the foreign exchanges ; that a judicious increase of accommodation was the proper remedy for the former phenomenon, but a diminution of its issues the correct course to adopt in the latter.
The fact that the issuing of notes provides a safety valve in times of crises is one -of the justifications of the action of the New South Wales Government in making bank notes legal tender in 1893, because it enabled the banks to issue their notes more freely.
– Does the honorable member think that the making of the bank notes legal tender at that time was a good thing to do?
– What about a fixed currency ?
– It had no bearing on the question of fixed currency. There is a great difference between making bank notes legal tender temporarily, and making them legal tender permanently, the first being justifiable, and the other unjustifiable. During the crisis of 1893, the banks were able to increase their note issues by nearly £800,000. As every one knows, after a bank crisis the business of a country drops, discounts and advances stop, and the bank notes naturally return to the banks, and are automatically redeemed. That cannot occur with a State note issue, which is, to all intents and purposes, fixed. The beauty of a bank-note issue is that, while it admits of the greatest possible expansion during crises, immediately the trouble is over, and the resources of the country are curtailed, the issues are automatically reduced.
– Will not the issues under this Bill be reduced automatically ?
– I am about to show that the opposite result may be expected. In dealing with the stability of currency, we must bear in mind -extreme possibilities; it is not enough to take into consideration the normal condition of affairs. At present, Australia is on the crest of a wave of prosperity, and probably will feel the proposed change of currency very little, if at all. But what would happen if the Empire were involved in a great war, and we were suffering from a drought, extending over wide areas? In all probability there would be a crisis. Gold would be unobtainable. The case of the Adelaide Government Savings Bank shows that we cannot count on the common sense of the community when a panic occurs. At such times we must be prepared for most extraordinary occurrences, and the proposed currency is not as well calculated to meet such perils as that which we have now.
– The statement about panics occurring in times of difficulty is unfortunate, because Australians have always been free from panic in time of difficulty.
– I was not attempting to throw any aspersions on the Australian character, but to deal with human nature as we find it.
– The statements are contrary to history, as witness 1892.
– I do not think so. We have in history instances of the wildest panics, and we cannot afford to blind our eyes to eventualities.
– I am not speaking of currency, but pointing out that the Australian people were never more steady than in 1892.
– But a good many in the streets sold notes for less than their face value.
– Not in 1892.
– I am only dealing with the question in view of possibilities, and urging that we must be prepared for eventualities whenever they may arise. What will be the result under the conditions I have pictured? There could be only one thing for the Government to do, namely, make the paper inconvertible. The Prime Minister, in introducing the measure, congratulated us on the fact that we were free from panic - that he was launching the proposal on a smooth sea, in a time of peace. But it will be in time of panic that this Parliament will be called together to amend the measure; and then the Government will either have to repudiate the currency or make it inconvertible. If, then, there be no State bank, we shall feel the pinch even more than under present circumstances.
– But does the honorable member not realize that in a time of great panic this Parliament would similarly be called upon to take the same action with regard to the notes issued by the banks ?
– I have endeavoured to show that that would be infinitely preferable to what is proposed now, and that it is absolutely justified on sound economic principles. The history of Australia absolutely justifies the position I have taken up, namely, that a bank note issue under those conditions is infinitely preferable to a State issue. We are told by the Prime Minister that there are to be Treasurybills ; but if we have the conditions I have pictured, could the Prime Minister cash the bills for gold ? Everybody knows that gold, in those circumstances, could only be obtained at a great discount that would land Australia in infinitely greater loss than it is possible to contemplate under the present system. Here the question of elasticity attacks at once the stability of the issue. As T showed when I started, the stability of the notes rests on their elasticity under certain conditions; and. inasmuch as the bank issue is more elastic than a State note issue cou’ld’ possibly be under those conditions, the former is consequently more suitable. I now pass on to the question whether the issue proposed is as suited as the present issue to Australian needs. What are the actual facts ? I desire to quote just, one passage from Nicholson in his second, volume. . I have not the actual particulars, but if honorable members will turn to the writer’s work on economics, and look at the chapter on the Scotch currency, they will find the quotation I am about to read. It is -
It has also allowed the Scottish banks to set up branches in places to which, under the English system, banking could never have penetrated.
That is to say, the system adopted by theScotch banks enables them to have branchesin practically every corner of Scotland, whereas the conditions in England, under a fixed note issue, make” it impossible to do that at a profit. In the case of Australia, the banking returns show that for some considerable time past the note issuehas been ,£3,500,000. The Prime Minister, when speaking, put the figures now at £4,250,000; and I may say that I havenot had the means of bringing my figuresexactly up to date. We must remember, however, that it is absolutely necessary for the banks to have till money. The twentyone banks of Australia have 1,737 branches, which, as in the case of Scotland, havebeen rendered possible by the present system of note issue. Any one with experience of country banking must know thegreat preponderance of notes that the banks hold, so far as actual cash is concerned; and we can all appreciate the reason why notes are desired in the country districts. If we take the average issue at .£3,500,000, and the proposed maximum issued by theGovernment at ,£7,000,000, there is left «£3>5°°>°°o to meet the needs of the banksfor till money; providing, of course, that the banks take up the whole of the issue.
– The Bill does not say that the issue shall be ,£7,000,000 straight away - that is the maximum.
– I am aware of that; and the honorable member’s interjection considerably strengthens my contention. With the number of branches at 1,737, we shall have, if -,£3,500,000 remains about the maximum note issue, as at present,. £2,015 in notes as till money for each branch. That is, on the average ; and I contend that it is not enough to carry on the banking system in Australia as we have it to-day. If the banks do not take up the whole of the issue, then, of course, there will be less till money ; and, on the figures which the Prime. Minister gave us, there will be only ,£1,583 for this purpose at each branch. 1 have pointed out how, with a fixed note currency in England, it is not possible to carry on country branches at a profit, as in Scotland.
– Very few of the -country branches in Australia are carried on at a profit, owing to ruinous competition.
– The honorable member is the first to inform me that a bank is a -charitable institution. I have had considerable experience in one of the largest - <the Bank of New South Wales - and I can assure the honorable member that, so far -as I am aware, that bank does not continue to carry on any branch at a loss.
– What was the ^honorable member’s position in the bank?
– I held a number of positions, and was, for some time, at Kalgoorlie j though I do not think this has anything to do with the question before jus. In any case, I think I know what I -am talking about. Notwithstanding his position in the bank, however humble, there is no officer who is not acquainted with, and does not take an absolute pride in, (the profit which each branch is able to show at the end of a half-year; there is not an officer, from the junior upwards, who does not know, to the last sixpence, the profit which his branch has made.
– And in return for very small salaries !
– That does not affect the loyalty of those officers to the institution. However, I was contending that the proposed State issue is not so suited to Australian needs and conditions as is the present banking system. The banks at present keep considerable numbers of notes at the country branches ; and these notes cost nothing beyond the mere printing and manipulation, until, of course, they cross the counter., when they become part of the circulation of the country, and liable to the existing tax. And it is absolutely necessary that the banks should have a considerable reserve of notes. It is not possible to work on a few pounds, particularly as clause 11 of the Bill compels the bank? to issue a certain amount to any customer who comes along. My point is that the proposed issue will not give the banks suffi- cient notes for their purposes ; and if there is any branch, as suggested by the honorable member for South Sydney, which is carried on at a loss, that will be the first to go. The proposal of the Government, if -carried out, will lead to a curtailment of banking facilities in our country districts. Honorable members may say that Queensland is not an instance of that, but it is. I know from my own knowledge that if different conditions existed in Queensland there would be a good many more branches of banks in that State than there are today. Honorable members will find that the country districts which need banking facilities most and to which they mean most will be the first to suffer under this Bill. I hope honorable members will consider that contention with an open mind.
– There are three banking companies trading in a place where I know there are not a hundred settlers.
– That may happen in places where the banks have a few large estates on their books, because it would pay them handsomely.
– They seem to open up pretty freely in Queensland.
– At any rate, it is my belief that this note issue will lead to a curtailment of banking facilities in country districts.
– Does the honorable member think that the banks will close their country branches because the State takes over the control of the note issue?
– I contend that it will curtail country banking -facilities, as the issue is not sufficient to meet the needs of the country banks. If the Prime Minister’s figures are right, his issue will give only £1,583 of notes in each bank on the average as till money, and that is not sufficient. [ wish to refer to the convertibility of the notes. The Prime Minister said that he expects the. banks of Australia to cash the notes of the Government practically to an unlimited extent. That is to say, when a customer comes to the bank for accommodation of that sort, the banks are expected to simply hand over the gold. That is an unreasonable contention. Those who have had to do with the handling of gold know that it is a very costly thing to move about. If the banks are put in the position of haying to hand over gold whenever a customer comes along, and have to draw their gold all over Australia to the point of shipment where it is needed, it is going to cost the banks a good deal, and I do not think they will do it. Unless the Government are prepared to put a depot in each capital, or make arrangements with some particular bank to cash the notes. T do not think the banks will cash them to an unlimited extent. If there- is only one place where the Government are prepared to redeem their notes, I think it will lead the banks to adopt one central place of exchange, and establish one central clearing-house. I am not sure about that, but it is my impression. If the Government wish to make the issue truly convertible, they had infinitely better follow, as far as possible, the French plan, and give the public every facility for cashing the notes. When the honorable member for Angas was speaking, I think it was the honorable member for Herbert who interjected that his statements were not correct. The honorable member for Angas said that the Bank of France had 357 branches, that the cash reserve was about ^r.50,000,000 - I am quoting purely from memory - and that the Government issue through the Bank of France could be cashed at any one of its branches. I have since taken the trouble to look up the particulars, and have found that the honorable member for Angas was perfectly correct. Under the law which established the Bank of France, it is bound to establish a branch in every Department of France, whether it pays or not, to redeem the notes, and has to keep sufficient gold to do so at any time. I think that is quite a sufficient answer to the honorable member for Herbert. The reason why the French system has been such a great success up to a certain point, is the fact that the whole of the currency in France is practically in notes. Cheques are hardly used there at all. There is an enormous note currency, and the Government, through the Bank of France, have established behind it an immense gold reserve equal to about 85 per cent, of the actual issue, while the notes are readily convertible in every part of France. That is an excellent system which we might well follow, but it at once wipes put every possibility of profit from the note issue. Let me touch next on the question of profit. I think I have shown, at all events to my own satisfaction, if not to the satisfaction of honorable members opposite, that my contentions are correct, and that the comparisons which I have made between banknote issues and State-note issues are in favour of the banks as against the State. Then’ comes the question of what we are going to make in pounds, shillings, and pence.
– Not much.
– I admit that at once. I doubt whether it will be anything at all. When we take into consideration what the country is making out of the note tax, what Queensland is making out of her note issue, the probable actual cost of administration, the gold reserve which the Government have to place against their notes, and the extent to which the credit of the country is pledged, and which, of course, cannot be fully used so long as that gold reserve is kept there ; when we also take into consideration the fact that we shall lose considerably through the Postal Department on account of people sending these notes through the post, instead of using postal notes, on which, at .present, the Government charge a poundage - and the loss of revenue from that source is bound to be considerable-
– But the Government are no: here 10 tax the people. That is not the business of a Government.
– I am simply endeavouring to show that the Government are not going to make anything out of the note issue. When we sum up those expenses and losses, and place against them the £4,000,000, which, I think, will be the limit that the Government will actually be able to use, particularly if they establish gold reserves, as they unquestionably will have to in the long run, at the different centres, we shall find that the balance of advantage is against, and not for, this proposal. If the Government had simply continued the present issue, and, as they are certainly able to do, taken over the whole of the banking law of Australia, and imposed the note tax themselves, and had then gone on the market and borrowed ,£4,000,000, the taxpayer of Australia would have been better off than he will be under this scheme. There would also be this great difference, that instead of the credit of the country being pledged to the extent of ,£7,000,000”, it would be pledged to the extent of only £4,000,000. I have endeavoured to show to honorable members that the conditions are clearly against the Government issue, and for the present bank issue. I have tried to prove that the Government issue is not more stable, that it is not as elastic, not as readily convertible, not so suited to our needs, and not more profitable. Then what is the reason for it? Why are we introducing it? What is the gain?
– National control.
– Have we not national control through the laws of the country? Surely we have just as much through our banking legislation as we can have it through an agency of this description. If the balance is in favour of the existing form of currency, and against the form which the Government propose to introduce, why the change ? It may look, to the ordinary man in the street, and I dare say it does, an excellent scheme. The long and the short of it to him appears to be that he is going to borrow a lot of money without any interest. But the primary cause for this issue, as it has been the primary cause of every State note issue that has ever been known, is Government need. Let us honorably acknowledge that need. Let us go on to the London market and borrow the money. Let us pledge the credit of Australia for less than this proposal means, and put into the pockets of the taxpayer more, using only those means which, I venture to say, will commend themselves to every financier throughout the world.
– Do not spoil your speech by making a wrong statement. In 1893 the Queensland Government did not make its issue for State necessities.
– I did not say anything about the issue of Queensland and State necessities.
– The honorable member said that every country that had issued State notes had done so because of State needs.
– I admit that I said that Government need was the primary cause of State note issues.
– I am sure the honorable member did not want to make an incorrect statement.
– I had not the slightest intention of doing so. I desire, in conclusion, to quote to the Prime Minister one of the most famous of his countrymen, whom I am sure he used to believe in, if he does not believe in him to-day. I refer to Sir Walter Scott. He had a great deal of good Scotch horse-sense, and when England was attempting to do in regard to Scotch banking what is being attempted in Australia in regard to Australian banking, he said -
Here stands Theory, full of deep and mysterious combination? of figures, the least failure in which may alter the result entirely, and which you must take on trust ; f nr who is expected to go through and check them?
There lies before you a practical system -
That is their own - successful for upwards of a century. The one allures you with promises, the other appeals to the miracles wrought on your behalf. The one shows you provinces the wealth of which has been reaped under her management ; the other a problem which has never been practically solved.
Here in the history of Australia lies the irrefutable proof of the stability and solidity of our present currency. We have only to turn to the history of Australian currency to see what it has been. I ask honorable members, therefore, to turn from this proposal, which rests upon theory, and to stand firmly by that currency which time and trial have proved to be adapted to our own use.
– The honorable member for Richmond, who has just resumed his seat, has set forth, I presume, nearly ill the objections to this Bill of which he could think. Doubtless those which did not occur to him will be put before the House by others of his party who follow him. 1 take no exception to the honorable member’s treatment of the subject. Anything that relates to the trade, the commercial soundness and credit of the community, is deserving of the most careful consideration, and ought not to be treated indifferently by any man who claims to be regarded as a well-wisher of his country. There seems, however, to be something more than a suspicion that the indictment levelled against this Bill is being overdone. It is certainly highly coloured. In some respects, perhaps, a -prima facie case may be made out against a note issue, but I do not think it can be sustained. This is a Bill to extend our powers in relation to the currency that we have under the Constitution. We have heard to-day, and we have read in the press for a long time, a great deal about the dangers of a State note issue. It is declared that there is something about paper currency that makes the very suggestion of a State note issue, if not immoral, economically unsound, and a positive menace to society. It may be that such a charge can be sustained, but we must remember that it is made by those who usually denounce as unwise every enterprise on the part of the State. Throughout this debate those who do not believe in the extension of the functions of the State will he found, no doubt, taking the same position in regard to this proposal that they do in respect of all others. If. for the sake of example, we proposed to nationalize the sugar or any other industry, most of the reasons that have beer urged against a Commonwealth note issue would he urged against that proposition by the critics of this Bill. We have heard, of course, of a number of shocking examples of States that have tried this experiment and have failed. We have been told that America, France, and other countries exhibit the deplorable effects of a State paper currency. We are asked to believe that what happened in their case must necessarily happen in all ; and that the risk of depreciation of, and financial disturbance through, a State paper currency are infinitely greater than with privately issued paper. When we are told these things we are entitled to ask whether they are borne out by facts. I do not think that history will declare that this is so. lt is perfectly true that the French revolutionary assignats went down to a very lowpoint, and that the pre-United States notes also depreciated greatly, yet they did ‘not sink to zero. I have not, indeed, heard of a State issue depreciating to such an extent as to be worth absolutely nothing. On the other hand, we all have heard of cases, and have good reason for remembering them, which occurred, not in another hemisphere, but here at our very door, where bank notes inscribed “twenty shillings,” “one hundred shillings,” or “one thousand shillings,” were not worth a fractional part of the lowest coin ever minted.
– That was before bank notes were made a first charge on the assets.
– It was when they were in circulation, and were accepted in good faith by people who had parted with property to the extent of the face value of these notes issued by a private institution, and were, therefore, creditors of the institution to that extent. They were in circulation at a time when the law of creditor and debtor was such that the creditor, holding the acknowledgement of the institution to the extent marked on the document, thought he could recover his debt in full, but was met, not only by a point-blank refusal on the part of the debtor to pay anything, but with a wolfe face on the part of the law, which enabled the debtor to repudiate his debt. I think it only right to remind the House of circumstances that transpired in Australia during the great financial crisis of 1893. Although dimmed bv the passing of years, they have been seared upon the minds and fortunes of thousands of our fellow citizens whose lives have been blighted and ruined by them.
– The honorable member could safely say tens of thousands.
– The Prime Minister is perfectly right. I wish also to remind honorable members that the Australian banking crisis of 1893 was, in proportion to the volume of credit and the number of people, the greatest the world had ever known. According to the Australian Insurance and Banking Record, a journal certainly not biased against the banking institutions of Australia, and which may be regarded as an unimpeachable authority -
The British crises of 1837, 1847, ‘857, 1866, 1878, and 1890, were, relatively to the business of the country, of limited extent.
These crises occurred in Great Britain, the greatest commercial country in the world. There was no issue of State notes, yet there was a series of crises at irregular intervals, beginning at the end of the eighteenth century, and extending far into the nineteenth. Those crises occurred under a system of credit and paper currency, in no sense of the word impaired by intrusion of the State. They were great crises, shaking the foundations of credit and carrying confusion and ruin to the farthest corners of the British Empire.
Yet the greatest of them - that of 1866 - brought into liquidation or temporary suspension only about ^55,000,000, a small sum compared with the vastness of the wealth of the United Kingdom.
The amount of credits involved in the Australian crisis of 1893 was ^133,000,000. By comparison this great British crisis was insignificant alongside the 1893 Australian crisis. The British to the Australian is as’ .£55,000,000 is to 36,000,000 of people, so is .£133,000,000 to 3,250,000 of people. That is a bald statement of fact, and nothing further is necessary to convey the actual position to honorable members and to the electors of this country. Under circumstances which the Opposition consider ideal, a crisis did occur here, the. like of which the world had never seen, and I hope will never see again. One of the consequences of it was that twelve banking institutions reconstructed. “ Reconstruction “ is like that blessed word “ Mesopotamia,” full of soothing influences, but in plain words it meant repudiation of a present liability. Noteholders and depositors - and some cases were worse than others - were either treated as new shareholders and came in with the crowd, or else were put off - some for ten and some for twenty years. I am not going to dwell upon this. I am not going to say that the cause of the crisis lay in any mismanagement. I am simply reciting the fact that in this country a crisis did occur that was unexampled in extent, in its disturbance of commercial and financial transactions, and in the deplorable effects upon a very large number of people. It was followed by panic or hasty legislation unequalled in the history of the world. As a consequence, banking institutions were permitted to repudiate their liabilities and to start afresh in a way no other debtor is permitted to do. As to these reconstructions, let me quote from 27;« Australian Insurance and Banking Record of 18th May, 1893, page
What. all dreaded followed the closing of the Federal Bank in the space of about two months. The Commercial Bank of Australia suspended payment. That it fought to the last is plain from the figure’s which have come round from London. At the date of its suspension, its holdings of coin and bullion amounted to
This is a very interesting commentary on the allegation that the reserve for which this Bill provides is an insufficient guarantee -
And it held debentures to the value of £125,000, its reserves thus being £847,000. On the other hand, the Government deposits (a first charge) amounted to £425,000, leaving £422,000 available in cash to meet demands. From current account holders in the colonies, ,£1,375,000, colonial fixed depositors £3,600,000, and British fixed depositors £5,100,000. The amount of bills receivable and other advances was £11,200,000.
While the bank’s liabilities in connexion with current accounts amounted to £1,375,000, and in connexion with fixed deposits to £8,700.060, it had only £422,000 with which to meet them. As to the reconstruction, this authority says -
That the directors, in the face of the impending disaster, by resolving to try reconstruction, adopted the best possible course, must, we think, be beyond all doubt. But it was unfortunate, in our opinion, that they should have adopted a scheme of reconstruction which, while possessing a considerable amount of merit, appears to be harsh in its conception, and creative of preferences where preferences are contrary to the abiding principles of equity.
That is the reluctant verdict of a partisan upon a scheme of reconstruction which violated every principle underlying the basis of commercial credit. So much for the ideal system of our critics, as we have known it in Australia. Let us now look elsewhere. It is not singular that in all countries there have been panics, and, as the honorable member for Richmond said, in times of panic people are beyond reason, and do the, most amazing things. All panics, monetary or otherwise, are due to the failure of confidence. An audience in a theatre loses all self-control at an alarm of fire, because its sense of security and confidence is shaken. Given this disturbance of . confidence, and panic will arise under any system. But is there evidence in support of the contention that confidence is more nearly impregnable under the present conditions than it would be under those which we wish to bring about ? Countless illustrations show that in the past there have been wild bursts of want of confidence which have threatened the whole commercial fabric of the nation with destruction. It is asserted that the paper currency of the Commonwealth will be more liable to depreciation, and conduce to financial panic, but no facts have been advanced in support of that contention.. The real reason for the opposition to this Bill is not difficult to discover. Ninetynine out of the hundred reasons offered for the rejection of our proposal have their origin in the fact that great advantages now accrue to private persons and institutions from having the right to issue paper money. It is no doubt very convenient for the banks to be able to issue paper money, but they can afford to regard the measure as a comparatively trivial invasion of their privileges, because paper currency is not limited to notes. It is not so much what is here proposed, as what may come later that causes uneasiness. When the honorable member for Richmond was speaking of the inelasticity of the proposed note system in comparison with the present system, which adapts itself so beautifully to the expansion and contraction of trade, he overlooked the fact that the great bulk of our commercial transactions are carried through not by means of a metallic or paper currency in the ordinary sense of the term, but by means of credit. The honorable member for Angas, during his worldwide survey of this question, went to Amsterdam and Hamburg to illustrate the practice of bankers and merchants in the eighteenth century in this respect. But it is a trite observation that credit transactions stand in relation to metallic and paper currency transactions in the proportion of at least 10 to i, and that the banking institutions carry on their business on the assumption that 10 per cent, of currency will be ample for their needs. The Bill will not affect the right of banking institutions to carry on the banking business of the country, because banking is quite distinct from currency, as is currency from banking. In England, with one or two exceptions, no bank has the right to issue paper money. The Bank of England, so far as it is a bank, does not issue paper money ; it is divided into a bank of issue and a bank for banking purposes proper. All the other banks carry on their business without issuing currency. It was the intention of the Bank Act to prevent them from working as banks, but it was found that bankers carry on their transactions not with currency but with credit. That is, with bills and other acknowledge ments other than bank notes. What is the basis of security for the currency? On page 597 of an article entitled, “ Basis of Security for National Bank Notes,” taken from the Annals of the American Academy of Political and Social Science, volume III., it is stated that -
Without stopping to inquire as to the natural source of authority for the enactment of such laws, it is sufficient to take notice of their universality, and’ of the fact that all bank note issues purport to be made by and under the sovereign authority of the State.
In reply to what has been said about the increased liability to panic with a State note issue, let me quote the dictum of an eminent authority on banking, who, in his day, was considered to be very sound. The reference is to Lord Overstone’s Tracts, page 280. Speaking of the liability of panic in connexion with the issue of paper money, the writer says -
Such panics as are supposed in this case have usually, if not invariably, originated in a bad state of the paper circulation ; and a regulation which shall secure a perfectly safe and sound system of paper circulation will, by doing 30, greatly reduce the probability of the occurrence of such a panic.
It has been stated in the press that our banks have a note issue of about £3,735,000, and a gold reserve of £28,000,000, or seven sovereigns for every £1 note, but that is not a correct presentation of the facts. In New South Wales the general creditor of the banks is entitled to have their assets marshalled in his favour, the noteholder coming in after he has been satisfied.
– Under what Statute is that preference given?
– The law, since the lapse of an Act in 1895, which provided that assets should be ear-marked to provide for a note issue, or that the noteholders should have preference, is as I have stated it. Panics have nearly always occurred in connexion with money that has been de posited at call, and are due to a shrinking in the volume of credit. Nothing more effectively provokes a banking crisis than a shrinkage in the volume of credit. When credit shrinks there is a restriction in banking operations, and a tendency to demand gold. Then deposits at call are withdrawn. Lord Overstone says on this subject -
Institutions to receive . the deposits of small capitalists, and allow an interest upon them, are no doubt highly convenient and beneficial to the public ; but it admits of very reasonable doubt whether it is a safe or an expedient system to prevail throughout a country, of holding those deposits to an immense amount, payable, not on moderate notice, but immediately on demand ; an obligation which, if the demand be made by the mass of depositors simultaneously, it would obviously be impossible to fulfil.
That is a condemnation of the banking practice universal in this country of holding deposits on call. The banking returns for the quarter ending 31st March this year show that the notes in circulation are£3,375,664 ; the deposits not bearing interest, , £52,715,134; and the coin and bullion held, , £28,995,084. It is. very obvious that, so far as the deposits at call are concerned, it is a mere question of who shall get in first - the depositors or the noteholders.
– The note-holder has a preferential claim.
– That is so in Victoria, but in New South Wales there is no such law.
– My impression is that in New South Wales the notes are a first charge.
– To the full extent of the notes?
– Yes; that is my impression.
– My information is to the contrary ; but if it be as the honorable members says, the note-holder can only get the advantage by sacrificing the depositor at call. If the notes are ear-marked, the holder is paid £1 for £1, and, if not, he comes in along with the rest of the creditors ; and in the latter case he must be in first, or stand pari passu with the other creditors. In New South Wales, I understand, the general creditor has the right to have the assets of the bank marshalled; and, in that case, the man who is not entitled under that law, fares badly. The very same arguments that can be used against the paper currency can be used against the metallic currency; and Lord Overstone points out that -
The difficulty under consideration is not created by the substitution of a paper for a metallic currency - it is not a difficulty peculiar to a paper currency, but will equally exist with a metallic circulation.
That is perfectly clear. Honorable members speak as though paper currency alone were liable to depreciation, and gold were an immutable and everlasting thing, the -value of which was fixed by some Divine being, and so free from all the vicissitudes that clog commerce. The fact is that the value of gold and silver has fluctuated widely. It is well known that prices -to-day, for instance, are as much as ten times higher than they were in the fifteenth or sixteenth centuries. Is that not because there is no fixed relation between gold and prices? We say that the price of gold remains constant, but it is only constant because we express gold in terms of gold. In the same way the price of wheat may be said to be constant - that is, a bushel of wheat is always a bushel of wheat. We say that a sovereign is worth a sovereign now and was worth a sovereign five years ago; but a sovereign now will not buy so much as it did then, because the prices of commodities have gone up while the price of gold has gone down - for the same reason that the price of paper goes down, namely, because there is too much in the market. It is seen, therefore, that the argument that paper money is liable to depreciation applies equally to gold. And it certainly applies to silver, because, practically every piece of silver we have contains only onethird of its face value, public confidence being relied on to the extent of two-thirds or 66 per cent., and silver has depreciated greatly in our own time. Both gold and silver, so far from maintaining their level, have fluctuated. An article in Everybody’s Magazine shows that gold, as compared with wheat, has fluctuated 61 per cent, in thirteen years, and, as compared with a -multiple of thirty commodities, has fluctuated 30 per cent. A sovereign now is not worth so much as a sovereign was worth -thirteen years * ago by one-third. It has been said that the reserve of 25 per cent, proposed by this Bill is grossly insufficient.
– The whole question is whether £1 in gold will buy as much as £t in paper with no gold behind it.
– The honorable member has not emerged from the troglodyte stage of finance ; he does not realize that the busi ness of the world is not carried on by gold, but by credit ; and that gold is the sign that we yet distrust one another. Gold is never used, except in times of panic, or for national adjustments; and the volume of the world’s trade, in comparison with the gold, is about 1,000 to 1, at the very least.
– What has that to do with the question?
– The honorable member asks whether £1 in gold will buy as much as £1 in paper; and I reply that it all depends on whose name is at the bottom of the paper.
– Nothing of the kind !
– If the name of Rockefeller is at the bottom, the paper will buy as much ; but, no doubt, if the name be that of the “honorable member for Parramatta, it will not. Does any one mean to say that Rockefeller has £90,000,000 in gold? I do not suppose that, if America were ransacker] from one end to the other Rockefeller could withdraw from circulation enough gold to cover £3,000,000 or £4,000,000. The real fact is that Rockefeller’s wealth consists of credits; he is a creditor to the extent of his wealth.
– On what does his credit rest?
– The honorable member does not understand the simplest element of the banking problem.
– I understand perfectly well that the Attorney-General is revealing his ignorance just now.
– The honorable member for Parramatta can understand only two things - himself, and everybody in relation to himself.
– That is more than the honorable member understands.
– At any rate, the honorable member is quite unable to understand even the terminology of this discussion, and it would.be very much better if he refrained from interjecting. I was about to say, in reply to the objection as to the insufficient basts of gold, that the Bank of England, in practice and in fact, has not a greater one. The latest return in regard to the Bank of England, dated 12th December, 1908, showed that it had its own notes in circulation to the amount of £28,713,186, while notes of other banks represented £437,906, showing a total note circulation in the Old Country of £29,151,092. To meet its notes, the Bank of England had £56,336,000, made up of £11,015,100 of Government securities,£7,3434,900of other securities, and £37,886,000 of gold and bullion. Lord Overstone says -
The proper reserve of bullion is usually considered as one-third of the Bank of England’s circulation, which is itself about one-half of the paper circulation of the Kingdom. Consequently, the bullion seldom, even at an ordinary full period, exceeds one-sixth of the paper circulation.
In Australia, bank notes play a much less important part than in some countries ; Here, cheques and other instruments of credit are used much more as the medium of exchange, and, consequently, we have a more elastic and effective currency - because they really are a currency - than in many countries, and, so far as cheques are concerned, than in England.
– What is the date of the book from which the AttorneyGeneral has quoted ?
– It is a book by Lord Overstone, who is dead.
Sitting suspended from 1 to 2.15.p.m.
– In reply to the honorable member’s interjection as to the length of time that has elapsed since the opinion quoted by me was given, it is perfectly proper to point out that the major pprtion of the opinions quoted this morning by the honorable member for Richmond were offered during a period synchronous with or very little after that of the authority which I have quoted, because John Stuart Mill was at his zenith in the middle of the nineteenth century. The theory and practice of banking so far as basic principles are concerned, have been long settled, and where these have been modified in modern times it has been in the direction necessitated by the tremendous expansion of credit, and consequent greater liability to crises. There is, therefore, very much greater reason why in practice the control of all currency, and, so far as that is possible, of all credit, should be confined to one body. I will quote one further remark of Lord Overstone, the authority to whom my honorable friend took exception because he was dead, to the effect “that the issue of paper money should be confined to one body.” I come now to the consideration of State issues of paper money and their alleged liability to greater dangers from panic and depreciation. The honorable member for Richmond said last night that the three characteristics of the bank note issue were greater stability, greater security, and greater elasticity. Asto stability, which I apprehend is the first essential in currency, or in any medium of credit or exchange, since national credit must be the sum of all individual credit, to say that the credit of individuals islikely to inspire greater confidence thanthe credit of the nation is to argue that the whole is less than its part, which, on the face of it, does not appear to be sound. The real cause for crises and’ runs upon -banks is that the people’ lose confidence in the institution or inits credit; that is to say, they no longer believe in the tangible record of thetransaction, which, whether it be in gold,, silver, or paper, is, after all, merely a record - an equivalent which in metallic currency more nearly approximates to thevalue of the transaction, but. which is never quite a full equivalent. The whole thing, in such cases depends upon the confidence of the public. The honorable member for Parkes, who has had experience in finance, knows perfectly well that no institution could carry on business as a bank for twenty-four hours if its clients did not have confidence in it. The cause of crises is. that the people for some reason or other lose confidence. There may be an excellent reason for this, or there may be none. It may be purely a panic induced by Insufficient causes. Now on the face of it an issue backed, controlled, and owned by the State is less liable to such panics thanan issue of private individuals. It is absurd to say that the credit of Australia isnot good for . £7,000,000, or rather for the difference between , £7,000,000 and 25 per cent, of it, which is to be the lowest minimum of reserve. No one can seriously contend that the credit of this country., which has been sufficient to induce the money lenders of Great Britain to advance £250,000,000, and is to-day sufficiently ample to enable them to lend as much more,, would not be sufficient to stand an extra load of , £5,500,000.
– I do not think anybody has expressed a doubt as to Australiabeing sound for £7; 000, 000.
– Then upon what grounds are we to suppose that the people will question the validity of the issue? On the face of it, the Australian note will be a promise to pay on demand £5, £1, or ios., as the case may be. Doubt arises only when a man, looking at a note or cheque, says, “ That is all right, but I should like to see the colour of his money.”
In the country districts one may more readily see at work the causes that lead to panics. In the back parts of the country a cheque is passed as legal tender from hand to hand, and it may have a dozen indorsements, and pass through fifty hands, before it reaches the bank.
– What critics are doubtful about is not the solvency of Australia, but the advantages of the proposed scheme
– What possible adverse effect can there be ? The solvency of a man must be measured by the whole of his credit, and not by any part of it. It has been distinctly alleged in the press and elsewhere that one of the consequences of this undertaking will be to penalize the working classes. It has been said that some American politician made a statement to the effect that it is the poor by whom all fluctuations of the currency are felt most, and one of the consequences of this Bill, pictured by a very imaginative writer in the press, was that a man would need a barrow-load of these notes in order to buy a pound of butter. That means that, although there is no reflection cast upon the ability of Australia to always pay something in the pound, still there is a doubt, which has been expressed in terms this morning, as to whether she will be able to pay 20s. in the£1. Now we are told by the honorable member for Parkes that there is no question of the security of the Commonwealth note issue. Honorable members opposite approach this question from such a number of points that it does not seem sufficient to them to establish beyond all possible doubt the stability and security of the proposed Australian note issue. At present I am dealing with the three points of security, stability, and elasticity enumerated by the honorable member for Richmond. There may be a dozen other points which the honorable and learned member for Parkes can enumerate. As to stability, I apprehend that a State issue is in that regard beyond question greater, better, and more assured than that of any private individual. The position of the banks to-day is that while they are liable for £57,000,000 of notes in circulation and deposits at call, they have only £28,000,000 to pay them with, whereas, on the face of it, under this scheme, Australia as a nation is asked to meet at the very outside . £5,500.000 with all her resources, and with every man perfectly assured that he, too, is a co-operator in the business. Are we to say that, so far as stability and security are concerned, the resources of Australia will not be more than ample to safeguard the notes from depreciation? Can there be in the minds of the most timid any doubt as to the absolute security behind these State notes? No depreciation can be possible in view of the safeguards provided, and that brings me to what I conceive to be the one defect of the measure - a defect which the Prime Minister has introduced in an excess of caution, and in order to placate those gentlemen who profess to foresee a state of things when Australian notes would come to the debased level of the French assignats during the Revolution. It is declared in the measure that there must be a gold reserve of pound for pound for all notes issued beyond £7,000,000. I admit at once that that limits the elasticity of the issue. You cannot put an unlimited amount of paper on to the market unless after you have reached £7,000,000 you have pound for pound as a backing.
– It provides for elasticity, because elasticity is not only expansion, but also contraction.
– That provision imposes a restriction which, whether it be good or bad for the elasticity of the issue, is ceitainly an effective assurance of security.
– The Bank of England has to provide pound for pound after £14,000.000.
– I do not deny that.. After all, we might throw these authorities, MacLeod, Jervons, Overstone and the rest, to the winds, if honorable members opposite like to say that none of them - many of them being dead - know anything about this business, and come down to affairs as we know them to-day. Take the example of Canada. She has a measure of this kind, with a 25 per cent. gold basis up to . £6,000.000, or 30,000,000 dollars, but of that security only 15 per cent, need actually be in gold, the rest being in approved British securities. British securities are very excellent things, but they are not gold. The honorable member for Richmond said that during all the Napoleonic wars, British consols stood at par. but he forgot the fact that in 1797 they fell as low as 57. In Canada, then, there is an issue of £6.000.000 with a backing of 15 per cent, gold and 10 per cent, of approved British securities, and a hacking, of pound for pound for everything above , £6,000,000.,
A note issue was introduced in Canada in, I think, about 1870, and has been modified by subsequent legislation in the direction of which I spoke for about twenty years. There have been no crises that I know of in that .country; certainly none that can be. atttributed to the State note issue. It is to Canada that we are always asked to look. Canada is constantly held up to us as the very ideal of all which we ought to follow. . It has had a steady stream of immigration and is said to be an ideal country, where private enterprise roams in happy freedom, and everything is delectable. Yet Canada, unhappily for our friends of the Opposition, offers us just the very illustration of most successful application of this very principle. Let us look nearer home. The Victorian Royal Commission on State Banking, in 1895, reported that -
Evidence was tendered by gentlemen possessing financial experience and others having special knowledge, that a State issue of notes under proper safeguards would provide an absolutely unimpeachable currency. The resolutions of the conference of bankers in Sydney were of material assistance to the Commission in furnishing suggestions as to the lines upon which a State note issue should proceed. . . . Your Commissioners, believing that the State should have the sole right to issue paper as well as metallic money, do not see how this principle could be applied under control representative of State and private interests, as proposed by the Conference. . . . Your Commissioners, therefore, recommend that the Stale Bank should have the exclusive right to issue notes to he legal tender within the colony.
The Commissioners therefore recommended that the State should control and be the sole issuer of paper money -
That the State Bank should have the exclusive right to issue, notes to be legal tender within the colony. … A reserve of gold to the extent of 25 per cent, of the whole issue should be held. This it will be seen would provide a special gold reserve to a very large amount which practice does not obtain with respect to the present private note issue, your Commissioners having been informed by bank manager’s evidence that no gold was earmarked against their issue.
That was the sworn evidence of bank managers who appeared before the Commission of inquiry. In the course of evidence, according to the report, it was shown by Messrs. D. Finlayson and H. G. Turner, both practical bankers -
That the trading capital of their banks was the difference between their coin and bullion and their total liabilities. This difference represented credit expressed by paper in one form or another, and this credit really amounted to the confidence of the community in the institutions. According to this theory and practice of credit, private banks therefore rely upon the confidence of the public expressed in this manner for their profits.
No private institution is, or can be, immune from those frightful outbursts of panic that inseparably attach themselves to modern financial methods, and can be mitigated - I will not say wholly removed - only by the erection of the supreme power of the State* In the State should be vested this one power, without which it is perfectly impossible for modern society to carry on a solitary commercial or financial transaction. Without money - without credit, especially- we should be reduced in twenty years to a state little better than barbarism. If there is one point more clearly established than another it is this : that it is upon the fabric of credit that everything in civilized life is reared, and credit ought to be securely based upon the reputation, the stability, and wealth of the whole community. The Prime Minister said that this was not a banking measure. While that is so, it is perfectly clear that it is related very closely to that function, the exercise of which the State will have to consider very seriously in the immediate future. In considering notes in relation to their effect upon prices and upon market fluctuations, it is to be remarked that there is nothing about a paper currency of this kind that does not attach to metallic currency. Anything that depreciates a paper currency will depreciate a metallic currency when that paper currency is issued by the same authority.
– To the same extent?
– It will be sympathetically affected. What my honorable friend has still in mind is his point as to the £1 of gold and the £1 of paper.
– I have, and I am going to stick to it.
– We cannot push gold or anything else below its value, whatever that value is. But we are speaking now of currency, and currency fixes a standard,, not of value, but of price. The consequence is that if we are going to measure bv one commodity the value of other commodities, then that commodity remains by the standard constant; but, compared with the commodities, it varies. If we are going to express the price of gold in the terms of commodities, then gold varies as other things do. If we express the value of gold in terms of gold, then gold does not vary. The honorable member for Parramatta asks whether the value of metallic currency can be, or is, depreciated.
– I did not say that.
– The honorable member asked whether it was affected to the same extent as a paper currency. If he asks me, so far as gold is concerned, under a mono-metallic standard, I must reply in the negative ; but as to silver, I reply at once in the affirmative. As to gold, the facts are that during the last few years - and indeed the last few months - in America, gold, compared to a multiple of commodities, has depreciated to such an extent that holders of a fixed quantity of gold are no longer able to secure in exchange the quantity of commodities that could previously be obtained. That is the true test of the measure of value. Five years ago a man in the United States could buy for, say, £3, a certain quantity of twenty or thirty commodities which he required, but he cannot buy that quantity now. What has happened in America, and to a lesser extent elsewhere, is that for come reason or other gold, and, indeed, all currency - because paper has suffered exactly the same - has depreciated to an extent varying from 20 to 30 per cent. I have here MacLeod’s monumental work, which is admittedly the standard authority, upon The Theory of Credit. In it this matter is treated exhaustively. From it, it appears perfectly clear that the part played by notes is insignificant compared with the part played by other paper credits in the shape of bills and promissory’ notes, which are really the main vehicle upon which commercial transactions are raised. In his introduction MacLeod quotes two sayings of Demosthenes -
There being two kinds of wealth - money and general credit - the greater is credit, and we have it.
If you were ignorant of this, that credit is the greatest capital of all towards the acquisition of wealth, you would be utterly ignorant of it.
The whole of his book is directed towards showing that while it is necessary to have a gold reserve, it is neccessary only for the purpose of acting, as it were, as a basis upon which the edifice of credit can be erected.
– That is the point which I have been trying to get out all along.
– The honorable member reminds me of a boy trying to get worms out of a small bottle with the hind leg of an elephant. He is utterly unable to get out anything except by chance. The part played, according to MacLeod, by a gold reserve is that it is a guarantee of good faith. What does that mean? It means this : That when you do not know a person, you are not inclined to take his cheque. There are places in this city where even members of this august assembly are not personally known. .An honorable member might go to one of those places and say, “ I am Mr. So-and-so,” at the same time tendering his cheque in payment of goods. The reply in such circumstances would be, “ Yes, that is all very well, but we do not know you, and we cannot take your cheque.” It is in these pleasant little interludes of life that gold is useful. Yet, in general, commercial transactions are conducted upon credit. In ninety-nine - cases out of a hundred a merchant in England, in sending his goods out here, trusts to a piece of paper. In ninety-nine cases out of a hundred he sends out his goods to Australia, and we buy them on credit. Our credits are balanced against British credits, the international clearing-house, so to speak, balances them, and if there is anything outstanding an adjustment is made either by fresh credits or by gold. With respect to this issue, we have heard something as to the inability of men in remote parts to cash our notes. We are told that a man might be in some part of Queensland where he couLd not get a Commonwealth note cashed, and would have to come down to Melbourne for that purpose. That, after all, would not be a very serious matter, for I have known men to come to Melbourne upon a smaller excuse at a peculiarly appropriate time in the year - at Cup time, for example. The point I wish to make, however, is that the position has always been the same. That is to say, if a man in the middle of Queensland likes to refuse to change a Bank of New South Wales note no one can compel him to do so, and the holder must come down to New South Wales to get it changed. In the same way if it were a note issued by the Bank of Victoria, he would have to come to this State to cash it.
– He could send the notes down here to be cashed.
– Of course he could. But that, at all events, is the theory; in practice it never really happens, and notes are cashed all over Australia, as these will be. For twenty years - from 1797 onwards - the Scotch banks would not cash one of their notes. They did not cash a note for twenty years, and MacLeod, at page 735, points to that as an instance of what credit, when established by reputable and reliable persons, can accomplish. When credit is practically unshakeable, the community does not ask for gold, and the Scotch banks established such a reputation as substantial and reliable institutions that for twenty years no one brought an action against them for refusing to redeem their notes in cash. The notes passed from hand to hand, and were never questioned, suffered’ no depreciation, and occasioned no financial disturbance. MacLeod says -
When the Bank of England was directed to suspend payments in 1797, the Act did not extend to Scotland. But the Scotch banks met and agreed to refuse all payment of their notes in cash ; and this they maintained during the whole course of the war. And though they were liable to an action for so doing, no action was ever brought against a Scotch bank during the whole period. Thus for twenty years the whole commerce of Scotland was carried on without the use of a single guinea.
– England won her wars against Napoleon with paper.
– I wish to point out to what extent business is carried on without the use of gold, and, in doing so, to answer the objection that our proposed gold reserve is not sufficiently large. When the Bank of Scotland was established, it was able to maintain a note circulation of ^£50,000 on a gold reserve of ,£10,000, and, as I have shown, for twenty years no one in Scotland demanded cash for notes, though in that country there is as large a proportion of persons who are keen after the bawbees as anywhere in the world. The Scotch banks never had a larger gold reserve against their circulation than 20 per cent., whereas we propose to keep a reserve of 25 per cent. The joint stock banks of England keep, on the average, cash to cover 12 per cent, of their liabilities, their ratio of credit to assets being 8 to 1, taking into consideration their total, and not merely their note liabilities. In Scotland, where the credit system is more highly developed and organized, the banks find a reserve of ,£4,500,000 in gold sufficient for liabilities of ,£95,000.000, a ratio of credit to gold of 23 to 1. The joint stock banks of England do not, as a rule, issue notes, there being only about ,£480,000 worth of -such notes in circulation against the Bank <of England’s issue of ,£28,000,000 worth.
In 1797, the English bank notes fell to 14s. 6u. MacLeod says, page 1104 -
In 1814 there were 900 country banks pouring forth torrents of paper currency ; and these torrents of paper, combined with the excessive issues of the bank itself, at last reduced the bank note to 14s. 6d.
The value of the English notes fell then just as the value of gold would fall now here in Melbourne if there were suddenly put into circulation some millions of sovereigns more than were needed. Gold is not exempt from the law which governs prices. Our notes will be depreciated only if there are more of them than are needed. At the present time there are in circulation in Australia about .£3,735,000 worth of bank notes, and there were in circulation this time last year over ,£4,000,000 worth, so that we ‘ provide for a working margin of more than 50 per cent., and give a fair amount of elasticity for the busy seasons of the year. If we issue ,£7,000,000 worth of notes, and that is more that the community needs, what will happen will be, not the depreciation of our paper currency, but the pushing of gold out of the market. This gold will be used for other purposes, a very desirable thing, the ideal condition being that in which little gold is used in metallic currency or stored up, because it is nearly all in use.
– Gold may be forced out of the country.
– We have to consider gold, not only as a factor in the currency, but also as a commodity. In so far as our exports are limited by the need of keeping gold here for circulation, the country is impoverished. Could a paper currency be safely substituted for a gold currency, we should every year be able to send away more gold, and, to that extent, we should gain. But this, of course, cannot be done. Australia is one of the world’s suppliers of gold, which we export as we export wheat or wool. If wheat were a medium of exchange, the more we had to keep here for purposes of exchange the less we should have to export. In America, one can deposit gold in the Treasury, and obtain a certificate which will be a legal tender for the payment of taxes, or other debts, throughout the United States. To the extent to which our paper currency displaces gold up to ,£7, 000, 000, the country will gain. A 25 per cent, gold reserve is a conservative provision, and greater than is made by any bank in this country today, because bank reserves are not reserves against note issue only, but against total liabilities at call. Whether the banks earmark sums to cover their note issue, and fail to make the same provision for their deposits on call, or whether they treat all their liabilities alike, the possibilities of a financial crisis are equally great and imminent. With a State note issue not exceeding £7,000,000 we shall be working on a sound, but, in my opinion, almost too conservative, basis. Beyond that, we shall have to go pound for pound, and it would need a considerable stretch of the imagination to suppose that there was any risk involved in issuing a pound note against a gold sovereign. I do not wish to dwell on this matter much further, but shall merely deal with one other phase, and then conclude. It has been said that the real object and intention of this Bill is to raise a loan without paying for it.
– That is what the Labour newspapers say is the purpose.
– I never read those newspapers, or any with which I agree. I regularly read the Argus. What on earth is the use of talking with people with whom you agree?
– The Labour newspapers, in articles, have said that the Government are going to raise a loan without paying interest.
– If that be so, it is only a change from A to B. The question’ is not whether there shall be a loan without paying for it, or no loan, but whether we or somebody else shall have that loan. If I have to say whether the banks shall have a loan without paying for it, or whether the State shall have it, I support the case of the State every time, and with Louis XIV., say, “ Z’ tai c’est moi! “
– That is Jack Cade’s argument.
– My honorable friend’s historical land-marks seem to be scattered in amazing confusion along the highways of time. I have a most imperfect recollection of Jack Cade - nothing beyond that he was a man who made violent speeches, with whom other people apparently did not agree, and that he was in a minority, a truly pitiable situation, entitling him to my full sympathy. Further, I may point out that Jack Cade, like Lord Overstone, and other great men, is dead, and so does not count. The State has a right to be the custodian, and is the best custodian, of the people’s money. If we are getting a loan without paying for it, we are getting it on exactly the same .terms as are the banks ; and if it is right for them, it is right for the State. The banks are getting a loan of £52,715,134, in the shape of deposits on call, without paying for it. A pass-book of a depositor on call, and a bank note, are exactly in the same position in this respect; that is to say, a bank note is an instrument which, like a deposit on call, is payable on demand. Both cart be repudiated; both are instruments entitling the holder to payment on demand. lt is estimated that not more than onethirtysixth of the total amount of deposits on call is ever required from day to day in banking business ; in other words, on any one day one- thirty- sixth of the total amount is sufficient to hold as margin for callers under normal circumstances, and, as that which is drawn to-day is paid in to-morrow, there is practically only floating capital to that amount necessary. On what other basis do banks carry on operations, but the money which they get partly without interest and partly with interest? On the deposits of £^74,000,000, which they hold at interest, they pay 3 per cent, or 3^ per cent., while for the rest they pay nothing. But the point is really that there is nothing in the Bill which establishes a dangerous principle, or involves risk to any human being in this country. No working man need fear that, owing to his being paid in State notes, the value of his week’s labour will be subject to depreciation, because State notes are, on the face of things, ten times safer than any other notes. Is has been said that the paper money of States has been subject to depreciation, and so it has ; but not to such’ an extent as privately issued notes. We have been eye-witnesses of and sufferers by the greatest financial crisis this world has ever seen, considering the volume of credits involved, and the size of the population. In banking, as in all other businesses, as in this one of paper currency, it is perfectly clear’ “that all depends on management. We may manage a State bank or a’ State issue in such a way as to involve disaster, but that is also the case with a private bank of issue. There is nothing inherently wrong in Government management, because we can see State institutions to-day better managed, both from the point of view of the Government and the public, than areprivate institutions. We, on this side, believe in extending the functions of the
State in very many directions. We believe that the only method by which .the public can be safeguarded in many respects is by putting the State - that is the whole body of the people - into the position which some few individuals occupy now. The Bill is put forward as an exercise of our power to deal with the currency, and it is based on equitable, sound, and conservative principles. It aims at doing that which ought to have been done long ago, and which has been done with success in Queensland and in Canada, that country to which we are asked to look and blindly follow ; and I feel perfectly sure that, in its application, it will prove beneficial to the best interests of this country.
.- I have listened with great respect to the rather long speech of the AttorneyGeneral, which purports to be in support of the Bill, but which, I venture to say, in view of much of his matter and the authorities and extracts he quoted, is quite irrelevant to the issue before us. The honorable gentleman at the outset of his remarks laid great stress on the banking and financial disasters of 1892-3, when there were failures and re-constructions, which he described in very strong terms. But, however disastrous and unfortunate those -events may have been, they were not in any way associated with, or caused by, the issue of paper money by financial institutions. Those disasters were, I believe, caused by an unfortunate over speculation, and by that ‘ development known as the “land boom. ‘ ‘
– That makes the case for this note issue all the stronger.
– The disasters were not brought about in any way by an excess of note issue by the banks, or any failure or inability on their part to meet their issue. This Bill does not deal with banking generally, and that fact is admitted by the Attorney-General. The measure is not intended to prevent injudicious or reckless banking, but merely deals with the issue of paper money; and, therefore, the causes of the failure of the banks in 1892-3, which we all deplore, have nothing to do with the Bill.
– The disasters affected the value of the banks’ notes.
– The assets of the banks were quite sufficient to meet their notes, and if the holders, instead of being panic-stricken, and selling the notes, had waited for a realization, they would have been paid 20s. in the pound. In every time of panic note-holders and depositors, whether in private banks or a State bank, are found to sell rather than wait for a proper distribution under the law. I remember that on that occasion I held some notes in the Oriental Bank, and, becoming startled by the rumours that were about, I foolishly sold them at 17s. 6d. ; and, I have no doubt, there were others equallyfoolish. The time came, as we know, when that bank was able to meet the demands in full. The Attorney-General said that history affords no proof of the danger of the State issue of notes ; but the honorable gentleman must have forgotten or ignored the experiences of the original colonies in America before the Union, and also the failure of the Government issues in France, Russia, and Italy, and in the South American Republics, particulars of which I hope to have an opportunity of giving later on. It is well that we should keep steadily in view a consideration of the leading features and proposals of this Bill. I desire to draw attention to them in an emphatic manner. The first is to prohibit private institutions issuing paper money payable to bearer; the second is to give a monopoly of such issues to the Commonwealth ; the third is to make them legal tender ; the fourth is to compel private institutions, under a penalty, to circulate such notes without any consideration whatever being given to them, or, in other words, to compel private institutions to utilize all their existing organizations and ramifications of business agencies throughout Australia to circulate Commonwealth notes without getting a penny in consideration foi such distribution. It seems, however, thai notwithstanding the sweeping character of those proposals, they are regarded by some honorable members merely as a preliminary to, or an instalment of, future legislation.
Ministerial Members. - Hear, hear !
– In other words, the proposals have as an ultimate object the annihilation of the existing banking system and the substitution of a Commonwealth monopoly. Do honorable members opposite cheer that?
– The honorable member did not hear any one cheer it.
– I regard the Bill as injurious, not only in its immediate effects, but also as offering a menace of even more detrimental changes in the future. I wish to draw attention to the great banking and financial organizations established under the existing law in Australia, which it is now proposed either to seriously prejudice and affect, or ultimately to displace and supersede. The note issue for which the present Australian banks in five of the States are responsible amounts to the sum of only £3,735,667. I obtained those figures yesterday from the Commonwealth Statist, so that they are of the latest date. They certainly do nut show a very large, inflated, or ambitious note issue. I should like now, in juxtaposition to them, to place immediately before honorable members the assets which stand in the possession of the banks. First, they have a reserve fund amounting to £9,985,627, which, I am informed, is represented by what are known as liquid, or what the honorable member for Angas calls fluid, assets, in the shape of Government securities and so on, which may be readily converted into coin in order to pay debts. In addition to those fluid assets the banks have in specie or coin no less than £27,646,500, and also bullion to the amount of £1,348,584, being a total of ,£28, 995, 084, or nearly £^29,000,000 sterling, in coin and bullion alone, which, added to the liquid assets, make a total of nearly £40,000,000 sterling. No doubt those assets would be the most easily and readily available for the liquidation and payment of those £3,735,667 in notes ; but, by the law of Victoria, at any rate, the bank notes which have been issued in this State are a first charge, not merely against the specie and coin and liquid assets, but also against the whole of the assets of the banks.
– And the deposit liability is £120,000,000.
– I am merely dealing now with the security which note holders have in Victoria, that security including the landed assets and also the un- called capital of the banks. In New South Wales, whilst the note holders rank equally with the other creditors in the distribution of the assets generally, they have as against the shareholders absolute unlimited liability for the payment of their notes. Although a bank may be formed in New South Wales with a limited liability generally, still all the shareholders are liable to their last shilling for the payment of the bank notes issued in that State, and some authorities are of opinion that that security is even greater and better than the security offered under the Victorian law in the shape of a first charge against all the assets. I have not had time to investigate the law in the other States outside of Queensland, but I believe, generally speaking, the law of South Australia, Western Australia, and Tasmania contains provision for the protection of note-holders, nearly as valuable and substantial as that offered by the law of Victoria and New South Wales. Those laws, no doubt, have been introduced of recent years, and since the country had that, terrible warning and lesson of the bank, crises and collapses of 1893. As regards the operation of banking in Australia since those memorable and disastrous events, I believe it is the opinion of banking authorities not ‘only in Australia, but in all parts of the world, that our banking system, as established in the light of ‘the experience of those events, is an example to the wholeworld for stability and business aptitude, and calculated to inspire that public confidence so necessary in connexion with thecurrency and business operations of financial institutions. Such being the position of the Australian banks under the existing law, and such being the foundation of paper currency of Australia in recent years, there appears to be no justification for, and no strong argument in favour of, the revolutionary changes now proposed to be introduced bv this Bill. The AttorneyGeneral in the course of his lengthy, but very clever and able, speech, whilst quoting numerous authorities and discussing abstract propositions in banking law and learning, did not give any grounds for anticipating any great improvement, or any improvement at all, upon the existing banking system. Nor did he show that the Commonwealth would be able to realize any substantial gain over and above the gain which has been realized under State law by the imposition of a bank note tax. I realize, in common with other honorable members that it is the right and duty of the Government of any country to supervise its currency, and, if necessary, to control and regulate it, and to see that private individuals or private institutions do not exploit such an important franchise, and so important an agency as the currency for their own benefit only, without the public generally having a voice in its use and application, and, if, .necessary, also a share in the profits derived from its utilization. When I was a lad in this country the Democrats of those days strongly advocated a bank note tax. That was one of the popular cries of the early days of the Liberal and Democratic party in Victoria, and we have lived to see the day when a bank note tax is the law of the land in the whole of the Australian States, or, if not a bank note tax, a tax in some form equivalent thereto. By the adoption of a law of that kind the nation has not only a voice in the regulation of the currency, but also a share in the utilization of a national franchise. I admit that it is now open to examination and scrutiny as to whether the nation can best assert its rights and privileges in that direction, merely by regulating and taxing the currency, or by taking it over altogether and monopolizing it to the exclusion of private individuals and agencies. I venture to say that a much stronger case ought to be made out in favour of this revolutionary change to Commonwealth monopoly,’ and the displacement of private individuals and institutions than has been made out in the course of this debate. The case so far presented, although involved in the quotation of a large number of authorities more or less relevant, has been comparatively weak. It has not been shown up to the present that there is any national emergency demanding a change, or any immediate or prospective danger to be apprehended from the continuance of the existing system, or that there is any prospect of a greater gain under the new proposal, to warrant the introduction of this measure. In Australia, under the law as amended by recent legislation, the bank note system, sometimes called the paper currency, has had for its foundation a full gold cover for the notes, which has enabled them to be kept at par. The Austraiian banking system may now well be said to be modelled, mainly on the lines of the Scotch system, which was referred to by the honorable member for Richmond in his very interesting and able speech. Financial authorities say that it may be questioned whether the whole world could have furnished a model better suited to our conditions. By the Act of 1844 the Scotch banks of issue were allowed to maintain a. circulation equal to the average of the current year, and to extend it beyond that limit only so far as covered by coin. Under that system it has been a sacred principle with Scotch bankers that like liabilities must be covered by like assets. Hence a large proportion of their funds have always been held in cash, or invested in easily realizable securities. I wish now to make a few more extended remarks upon the functions of the State in matters of currency. It may be said that it is the right and the duty of the :State to regulate note issues, and to see that they are properly conducted. In the
United Kingdom, so far as English common law and legislation are concerned, it is one of the prerogatives of the Crown to mint specie and establish a standard of value. It has never been regarded as the duty of the Government to supply the money required for the currency. It has merely to fix an exact test of standard value. The great Governments of Europe, as well as the Democracies of America, have experienced the folly of embarking on an enterprise so foreign to the functions of government, and so liable to abuse. Bancroft, in his History of the United States, says -
History cannot name a statesman who has gained enduring honour by causing the issue of paper money.
The profits of paper currency accrue from the use of gold, whilst the notes covered by the gold remain in circulation. The profits of a note issue arise from the opportunity of using unclaimed gold. That is the only justification for the issue of notes under this Bill. I apprehend that it will give the Government an opportunity of using the gold which it obtains from the banks by the sale of these notes. It is expected that the banks will be compelled to buy Commonwealth Australian notes to the extent of, say, £[4,000,000 sterling, and that sum will flow into the Treasury. Under this Bill, the Government will be compelled to set aside only ,£1,000,000 of that ,£4,000,000, or, in other words, onefourth, as a reserve fund, and will claim no doubt the privilege of using the remaining £3,000,000 for any purpose demanded by Parliament. In the face of this fact the Government and their supporters disclaim any intention of using the funds so obtained as borrowed money. They repudiate the principle of borrowing, and yet in this way they will obtain £[4,000,000 from the banks, set aside ‘,£1, 000, 000 as ‘ reserves, and use the remainder for Commonwealth purposes. Surely that will be only a loan by another name.
– Without interest.
– A loan without interest, and a loan unaccompanied with any provision for a sinking fund. A time may come when the creditors represented by the note holders may demand payment of the whole of these notes.
– And all the resources of Australia will be available to meet them.
– That reminds me of the expression of members of the Labour party some time ago, that the whole of the resources of Australia would be available for the defence of the Empire. But of what value is such an expression unless accompanied by cash available for devotion to the purpose?. Cash is one of the most important instruments by which we can enforce our determination either to defend the Empire or to pay our debts. What will be the use of talking of our having all the resources of the Commonwealth at the back of the issue if our note holders are knocking at the Treasury door asking for sovereigns, and we have no sovereigns to give them?
– And the Government of which the honorable member was a member proposed to go to London to borrow £2,000,000 to build a Dreadnought.
– Our loan proposal was accompanied by a scheme for a sinking fund. We did not indefinitely defer the time of payment.
– Order. The honorable member must not discuss that matter.
– I have been drawn aside by the interjection. This scheme for floating a loan by way of a bank note issue is unaccompanied by a proposal for a sinking fund, such as would attach to a straight-out loan. I wish honorable members now to follow me in endeavouring to distinguish between a bank note, issued by a banking institution, backed up by paid-up capital, liquid assets and specie, and a Treasury note, without any sinking fund behind it, and only onefourth of the issue in gold reserve. A bank note is a promise to pay in gold on demand. Such a note properly represents industrial wealth in the course of exchange. A Treasury note, not backed up by gold, cannot, however, be said to represent industrial wealth in the course of ‘exchange, nor can debentures or securities such as consols be said, in view of the deferred payment, to be equivalent in realizable power to bank notes. The credit of a bank note depends ‘on the certainty of there being gold to pay it. The authorities say that paper substitutes for gold must have the same elements of stability as gold itself. That is why the bank notes issued by the banking institutions of Australia during the last fifteen years have had the same stability as gold. The people know that there is in the treasury of those institutions plenty of gold ready and available to meet them. Paper money must involve the absolute right to gold - must be payable in gold on demand. The essentials pf a note issue are, as the honorable mem ber for Richmond has pointed out, stability, convertibility, and elasticity. The advantage which a good banking institution enjoys over a Government institution in respect of the issue of notes payable on demand may be shortly stated. Good banks, such as the strong and magnificent financial institutions of Australia have at their command all the ramifications of the financial resources of the country. They have various branches operating, and in communication with, so to speak, the fountains of national wealth - receiving money on deposit, and lending and investing it. That is their business. They have thereby an access tocoin, bullion, and liquid assets more general than any Government could possibly possess. I suppose it would be unthinkable for the Government of a country to enter into the business of banking on the same lines, to the same extent, and so successfully as do these private institutions. A Commonwealth bank of deposit” and issue is a mere dream on the part of some enthusiastic politician.
– We shall have it within three years.
– I do not think that that dream will ever be realized. The attempt may be made, but I do not think that the advocates of a National Bank will be more successful than have been the advocates of National Banks in other partsof the world, most, if not all, of which have been calamitous failures.
– Name them.
– I shall do so later on. The reason why financial institutions, have greater powers and possibilities of succeeding with a note issue, and in banking generally, is that their experience gives them greater aptitude for such undertakings. It is their special business. Their success is the result of a specialization of functions. No Government could ever hope to become so successful in the issue of notes, and in the management of a general financial business as are the leading banks of Australia, or, say, the Bank of England. Even the Bank of England’ whilst intimately associated, and having confidential relations with, the Government of Great Britain, is not in any way responsible to it in its operations, nor are the directors under an obligation, or in any way bound to obey the orders of the Government. I should like now to point out someof the dangers of making paper money legal tender. This Bill not merely arrogates to the Commonwealth a monopoly of issuing paper money as a substitute for gold, but proposes to attach to that paper money the attribute of legal tender. That attribute has never been claimed by any of the private banking institutions in British communities, with the exception of the Bank of England. That bank has the right of legal tender to a certain extent, and subject to certain conditions, but not one of the other banking institutions in the British Empire has had conceded to it this attribute of legal tender attaching to its notes. It speaks volumes for the convertibility, reliability, and stability oi the note issue of the Australian banks at the present time that, notwithstanding that they were never legal tender, the banks have gone on building up a fabric of financial credit, financial resources, and utility that must command the admiration of all Australia, as it does the admiration of financiers all the world over. How did those institutions acquire that power and influence in financial matters without asking for the attribute of legal tender to their notes? It was because their notes were backed by public confidence. They inspired public confidence. Public confidence was inspired by the knowledge that the banks were well managed, and that there was gold behind the notes. The banks of Canada have been enabled to increase their note issue year after year, notwithstanding that it is not legal tender, and that it has to compete with the Dominion note issue, which is legal tender. Furthermore, the banks are required by law to hold at least 40 per cent, of their reserves in Dominion notes, and to keep Dominion notes in their tills, to be paid when demanded. The bank-note circulation of Canada, notwithstanding the disadvantages under which it is placed compared with the Dominion note issue, represents £[15,867,761, while the Dominion issue represents only £[15,624,648, some of which is not actually in circulation, being in the vaults of the banks.
– About £[12,000,000 worth is in circulation.
– These facts show the public confidence in the soundness of the private financial institutions. In my opinion, it is dangerous to confer on a national note issue the attributes of legal tender, because that is a stage towards making the notes an inconvertible currency. If it has not been necessary, in order to insure the acceptance of bank notes, to make them legal tender, it should not be necessary to give to notes which have behind them the credit of the country the attributes of legal tender; though no State issue has yet been launched which could exist, even for a limited -period, without being made a legal tender, and without attempts to suppress bank issues. Why is it that bank issues are kept in circulation, although not legal tender, and Government issues are not? And why is it proposed by this Bill to displace the bank issue, which is not a legal tender, with a Commonwealth issue, which will be? If the Commonwealth notes will be as acceptable as they should be, with the Commonwealth credit behind them, the community will gladly accept them in place of bank notes ; but evidently the Government does not think that they will be acceptable, and therefore wishes to make them legal tender, and to penalize the banks should they refuse to keep them in their tills for payment on demand. Up to the present time, very little has been said on the question of legal tender, which in the Coinage Act is defined to be the tender of payment by sovereigns, and, to some extent, by silver. To sovereigns and silver it is now proposed to add Commonwealth paper. For my part, 1 think that it would be unjust to compel persons to accept paper for gold. So long as the Government remains solvent, its paper money will be taken without compulsion, and without being legal tender. President Garfield, quoting Secretary Chase, who was afterwards Chief Justice of the United States, said that -
Legal tender notes are the devil made manifest in paper, for no man can foresee what mischief they may do when they are once let loose.
The dangers of paper currency are evidenced by the safeguards with which its issue is generally surrounded. This danger is admitted by the Bill in the provision for a gold reserve. For every £[i-note issued beyond the limit of £[7,000,000, there must be a reserve of a sovereign. That provision is an admission that to allow an unlimited issue of paper money would be unsafe. The danger of a paper currency lies in the risk of inflation or over-issue, the money derived from the sale of the paper being absorbed from use for purposes of profit, leaving insufficient gold. The ease with which paper money displaces gold has led to extravagant abuses of paper currency and wild schemes by merchants, bankers, and Governments. The Attorney-General says that there is no proof in history of. danger from a State issue of paper money..
I have taken the trouble to summarize the number of historical illustrations of the risks of such issues in the experience of various countries. Here I would like to say that, although we naturally respect the opinions of political philosophers and theorizers, I believe that more reliance can be placed on historical examples than on mere theories or philosophical speculations. I remember that my attention was drawn to the paper-money problem in my preliminary studies of the Federal question, :when I first came across the history of the numerous financial disasters and panics which occurred in many of the original thirteen colonies of America before the Union. I shall not go into details.
– It is the details we require - details alter, cases.
– To give details would make my address too long, and I can only refer the honorable member to the history of Mr. John Fiske, where the details of that critical period of American history may be found.
– So much depends on whether the issues were unlimited, and so forth.
– I must leave the honorable member to read the summary of Examples given in the Annotated Constitution of the Australian Commonwealth. In nearly the whole of the States there was great trouble and loss on account of the issue of paper money under the authority of the various Governments. Mr. Fiske, at page 168 of his work, says -
By 1786, under the universal depression and want of confidence, all trade had well-nigh stopped, and political quackery, with its cheap and dirty remedies, had full control of the field. In the very face of miseries so plainly traceable to the deadly paper currency, it may seem strange that people should now have begun to clamour for a renewal of the experiment which had worked so much evil. Yet so it was. As starving men are said to dream of dainty banquets, so now a craze for fictitious wealth in the shape of paper money ran like an epidemic through the country. There was a Barmecide feast .of economic vagaries; only now it was the several States that sought to apply the remedy, each in its own way. And when we have threaded the maze of this rash legislation, ve shall the better understand that clause in our Federal Constitution which forbids the making of laws impairing the obligation of contracts. The events of 1786 impressed upon men’s minds more forcibly than ever the wretched and disorderly condition of the country, and went far towards calling into existence the needful popular sentiment in favour of an overruling central government.
Mr. Fiske goes on to give particualrs of the trouble in each State, and on page 169 says -
Only two States out of the thirteen - Connecticut and Delaware - escaped the infection, but, on the other hand, it was only in seven States that the paper money party prevailed in the Legislatures. North Carolina issued a large amount of paper, and, in order to get it into circulation as quickly as possible, the State Government proceeded to buy tobacco with it, paying double the specie value of the tobacco. As a natural consequence, the paper dollar instantly fell to seventy cents, and went on declining.
He goes on to give the experience of South Carolina, Georgia, Virginia, and Pennsylvania.
– In Pennsylvania the issue was eminently successful.
– In that State, in 1785, there was an issue of $1,000,000 in bills of credit, but these were not made a legal tender.
– That is what I say - if the notes are made a legal tender they cannot succeed. Benjamin Franklin said that the Pennsylvania paper money was the most successful the world had ever seen.
– But under the Bill before us the notes are to be a legal tender.
– With a limitation, and they are convertible into gold at the Treasury.
– The evils of paper money in the American colonies before the Union were so great that there was a universal demand for a Federal Constitution. One of the strongest arguments advanced, in addition to the commercial argument, in favour of the Union was the necessity for a National Legislature, capable of controlling the currency and of suppressing the unlimited use of paper money. When the Constitution was framed a clause provided clearly that no State should issue paper money or make anything but gold and silver legal tender. The framers of the Constitution, in prohibiting the States from issuing paper money, and in not granting the Federal Government itself the direct power to do so, and to make such money legal tender, were under the impression that Congress would not have that power; and the first decision of the Supreme Court of the United States on the point was to the effect that the power did not lie with Congress. But a second decision by the Supreme Court on this momentous question went to the extent of holding that Congress, in the time of war, and in the exercise of its war power, could issue paper money and make it legal tender ; and there was a third decision to the effect that paper money could be made legal tender, not only in time of war, but in the exercise of the borrowing power. Many grave comments have been made on these contradictory decisions, and it has been said that the action of the Supreme Court in solemnly reversing its first decision constitutes a serious stain on the escutcheon of that tribunal. This latter decision was attributed by some to political considerations; and I shall presently show the results of the issue of these “greenbacks,” as they were called during the civil war. In view of the challenge of the AttorneyGeneral as to the citation of the lessons of history, it is only, fit and proper that a summary of the effects of the issue of paper money by various Governments should be placed on record. In France, in 1706, assignats were in circulation to the face value of £[1,800,000, 000. They were only worth one-thousandth part of their normal value, that is, £[1,800,000. In other words, there was a loss of £[1,798,200,000 to the public. The authority for my statement is Conant’s History of Modern Banks of Issue, page 49. In the Argentine Republic, in 1899, there remained in circulation £[56,000,000 worth of Government paper currency which had been issued through the banks. This had been exchanging at the rate of 464 paper for too gold. The exchange value fluctuated, and gradually fell away to 227 paper to 100 gold by 1899. In 1899 the conversion rate was fixed by law at 44 centavos gold for each paper peso or dollar. The loss to the public on redemption was £[33,600,000. Particulars will be found in the United States Mint Report for 1909. In Italy corruption between Government officials and banks gave rise to illegal issues. Subsequently there were further forced issues to provide the Government with funds, which, in 1894, added to the depreciation. In 1895 1,000,000,000 lire, or £[40,000,000, in the banks’ depreciated paper currency, issued under State direction, remained in circulation. Conant refers to this on pages 29, 30, 36. In an article in Harper’s Weekly, 12th October, 1895, Mr. Atkinson computes the transfer of profits from wageearners to speculators or capitalists, as the result of the legal tender laws of the United States in the seven years 1862-68, at $7,000,000,000. This will be found in. Conant, page 356. In Kentucky the bank of the Commonwealth of Kentucky was created by the State Act of 29th November, 1820. . By 22nd March, 1822, its notes fell to 62J cents on the dollar. Again my authority is Conant, pages 331-2. In Alabama, in 1820,. a State bank was chartered. The crisis of 1837 led to an investigation of the discounts, and it was found that $6,000,000 were worthless. Confidence inthe paper money, “ supported by the faith and credit and wealth of the State” suddenly collapsed, and with it the whole structure of business* and credit in Alabama. The State Constitution of 1867 provided - ‘ ‘ The State shall not be a stockholder in any bank, nor shall the credit of the State ever be given or loaned to any banking company or association or corporation.” The reference will be found in Conant, pages 333-4. In Mississippi, the Bank of Mississippi was established in 1838 by the State. $48,000,000 of loans were never paid, and the $23,000,000 of notes on deposit were never redeemed. Again I refer honorable members to’ Conant, page 334. In Illinois the circulation of the State Bank of Illinois, incorporated in 182 1, did not exceed $300,000, but within three years the notes fell to 25 cents on the dollar. They were based on the credit of the State. My authority is Conant, pages 336-7. In Tennessee a State bank was authorized in 1820, which issued $1,000,000 in inconvertible notes in loans of $500 each upon reals estate mortgages worth double the amount. The notes quickly dropped below par, and the bank closed in 1832. Conant refers to this on page 337. In Russia, State notes to the face value of £[97,000,000 were redeemed at the rate of .£7 for £2 of new issue. This case will also be found in Conant, page 237. The Sydney Morning Herald,* of nth June of the present year, stated that the new issue is now exchanged for 12s. in the £[1 of face value. In Austria, in 181 1, £[100.000,000 of Government notes were redeemed in new notes at the ratio of one old for one new.. The new notes subsequently depreciated to one- third, of their value. Conant refers to the case on page 213. I should be glad to have leave to continue my speech next week.
Leave granted ; debate adjourned.
– In moving -
That the House do now adjourn, 1 desire to state that the first business on Tuesday will be the second reading of the Land Tax Assessment Bill. I hope that the debate will be continued on Thursday. After that measure has been brought before the House the Bill with which we have been dealing this afternoon will be again considered, and I am hoping that we shall dispose of it on Tuesday or Wednesday. I appeal to honorable members to restrict their speeches as far as. possible. I do not ask them to refrain from speaking, but I may remark that I remember that a pleasure of a similar kind was passed through in another Parliament in two sittings.
– There were special financial circumstances then.
– In other words, there was not time to range over the whole history, of the world. I remind honorable members, also, that the House will meet at 10.30 on Wednesday morning.
Question resolved in the affirmative.
House adjourned at 4.14 p.m.
Cite as: Australia, House of Representatives, Debates, 12 August 1910, viewed 22 October 2017, <http://historichansard.net/hofreps/1910/19100812_reps_4_56/>.