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Wednesday, 26 March 1941

Senator MCBRIDE - Is the honorable senator's difficulty here any greater than it is in the party room?

Senator DARCEY - Yes, for in the party room I have to deal with reasonable men, whereas in this chamber I am up against conservatives on the government benches who have a good deal to answer for in this crisis. Honorable senators opposite smile when I make the most serious statements, but there is no doubt that government is finance and finance is government. The money with which to carry on the war must be expended, but the raising of it is my greatest concern. We were told when the first war loan of £20,000,000 was floated that the money would be raised through the agency of the Commonwealth Bank in conjunction with the private banks, but when I asked a question on notice about how much was raised through the Commonwealth Bank and how much through the private banks the information was refused. We eventually got the information from the press. I am at a loss to know why we have to depend on the newspapers for information which we have the right to expect direct from the Government. I was told to-day that the interest rate on treasury-bills was 1^ per cent, for three months accommodation, but those treasury-bills can be discounted at any time by the trading banks.

Senator McBride - But not at par.

Senator DARCEY - The reply that ] was given to-day was that the Commonwealth Bank and the Treasury fix the rate of interest on treasury-bills. The bills can be taken back to the bank, but they are not, because they are deposited and counted as cash reserves against which further treasury-bills can be financed. The process of multiplication goes on. "When legislation to reimburse the Commonwealth Bank to an amount of £750,000 advanced to the Apple and Pear Marketing Board was before the Senate last session, I asked whether the bank had charged any interest for the accommodation and was told that it had charged 3% per cent. I then asked why interest had been charged in view of the fact that the interest would come back to the Commonwealth Government as part of the profits of the bank, my view being that the whole process involved unnecessary book-keeping. That transaction proves that the Commonwealth Bank can lend money to the Government free of interest. Recently, the manager of the Bank of New South Wales regretted that his bank was receiving only 10s. per cent, on treasury-bills financed in England from its London funds, whereas it was receiving 35s. per cent, on treasury-bills in Australia. If that bank can lend money at 10s. per cent, in London it should be compelled to lend it in Australia at a much cheaper rate than it does. An attempt was once made to allow members of the general public in Australia to subscribe, in the same manner as they do in England, to the issue of treasury-bills, but the worth of the attempt was nullified when the minimum subscription was fixed at £10,000. The banks still hold a monopoly because very few private citizens can find £10,000. Moreover private citizens have to contribute cash, whereas the banks pay for treasury-bills by cheque in the same way as they pay for interest-bearing bonds.

Senator McBride - Private subscribers to loans also pay by cheque.

Senator DARCEY - Yes, but their cheques must have the backing of funds in the bank.

Senator McBride - That also applies to the banks.

Senator DARCEY - That is not so. The last two annual statements from the Commonwealth Bank about the note issue show that the banks hold only £15,000,000 worth of notes and yet are able to invest. £20,000,000 in one loan.

Senator Dein - .What are the deposits in the savings banks worth?

Senator DARCEY - On another occasion Senator Dein asked me how close deposits were to advances and I then told him that the banks regard the loans they make as deposits. That is why the ratio between the two is so close. It should be axiomatic that if a bank holds £50,000,000 worth of deposits and lends £5,000,000 it should have only £45,000,000 left, but it does not work out that way. Lord Derby, the greatest coal-mine owner in England and a representative of orthodox finance, addressing an English school said that as soon as this war was over the battle for markets must start again with the same inevitable result of more war. According to the London Times Germany so far seemed to have no serious difficulty in financing the war. Years ago I told the Senate that Germany had been using national credit for five years and that that accounted for its huge strength. Great Britain has not yet used its national credit. Although under the Attlee bill it could take over every bank in England, it is not doing so. Questions in the House of Commons about finance remain unanswered in the same way as do my questions on the same subject in this chamber. According to the Parliamentary Debates of the House of Commons -

Mr. J.Wilmot, Labour member for Kenji ington, asked the Chancellor of the Exchequer the average rate of interest and the total amount paid by way of interest, issued since 1st September, 1939, and the corresponding figure for the similar period a year before? Sir John Simon. - For treasury-bills issued from 1st September, 1939, to 4th May, 1940, as a result of public tender the average rate was £1 9s. Gd. and the total amount of interest paid was £7,225,957. For the period from 1st September, 1938, to 4th May, 1939, the corresponding figures were 15s. lOd. and £2,359,224.

Had Britain been using national credit instead of borrowing from the private banking system, that great interest bill would have been averted. If at the beginning of the war this Government had had sufficient pluck to use national credit we should have saved the £600,000 in interest on the £20,000,000 war loan. I concede that tha Loan Council is not a legislative body, but it is in that council that the protest against paying interest on money required for war purposes should have been made.

Senator HERBERT HAYS (TASMANIA) - Can the honorable senator tell me any country where money is obtainable free of interest ?

Senator DARCEY - Yes, Germany to start with.

Senator Herbert Hays - Why, Germany is plundering other countries.

Senator DARCEY - The London Times itself says, as I said five years ago, that so far Germany seems to have no serious difficulty in financing the war. It goes on to say -

Nothing is ever heard of the necessity to increase taxation, compulsory saving, or the issue of enormous war loans. Quite the contrary. Recently one important tax was abolished, savings bank deposits are increasingly large. Hitler seems to have discovered the secret of making something out of nothing -

Hitler is using national credit. The only people who make something out of nothing are the private bankers.

Senator McBride - The honorable senator mentions the London Times as being the source of his information, but omits to say "who wrote the article.

Senator DARCEY - It is an editorial. I do not speak at random. The editorial continues - and to have evolved a system based on perpetual motion. The secret is the use of national credit. The State controls the banks. Monetary policy is subservient to national interests.

In Australia the national interest is subservient to the private banks. I repeat what I said two years ago, that Australia is governed by the associated banks with the assistance of the Menzies Government.

Senator McBride - There is no truth in that.

Senator DARCEY - It is true. The honorable senator cannot controvert it.

Senator McBride - I do controvert it.

Senator DARCEY - Then tell me why the whole of the first war loan was floated through the private banks. The only description that can be applied to that loan flotation is that the Menzies Government conspired with the private banks to enable them to create £30,000,000 out of nothing. There is a difference between giving credit and creating credit. The banks have the sole right to create credit; that accounts for their strength and for the proportions of our national debt to-day. All money created by the banks becomes real money because the banks inaugurated the system by which their credit becomes equal to gold. Actually no money reaches the Treasury. The Minister representing the Treasurer should know that. What happened in England under the Johnson bill?

Senator McBride - Tell us what happened in Alberta.

Senator DARCEY - That is a foolish question but I shall answer it. Alberta is the only country in the world which is paying off its national debt, reducing taxation and developing the land.

Senator McBride - The honorable senator would believe anything if he believed that.

Senator DARCEY - It is a pity that the Minister will not believe any one in this chamber with honesty of purpose. On several occasions I have offered to supply him with official documents published in the province of Alberta. I often wonder if it is worthwhile saying anything here at all. Since I started as a lone wolf in this chamber, four State parliaments, commencing with the United Australia party State of South Australia, have passed resolutions supporting every word which I have said in this chamber on finance. I can prove that by giving the names of the States and the dates on which the resolutions were carried. The Minister laughs at what I say, but I assure him that it is not a laughing matter. I have seen the agenda of the Country party for the approaching election in South Australia, and on it there are five resolutions dealing with this matter. The resolutions advocate the action which I have long supported in this chamber.

Senator Herbert Hays - The States have not taken any action to give effect to the resolutions.

Senator DARCEY - They cannot. They can only make protests against the unsound policy of the Menzies Government. If two more States carried similar resolutions the Government would he unable to laugh it off because it would mean a line up of all States in the Commonwealth. It is time the Government took some notice of the resolutions that have been carried. Hundreds of public meetings have been held, and resolutions have been passed and forwarded to the Government.

Senator Herbert Hays - The State governments have never made representations to the Commonwealth Government.

Senator DARCEY - They are not in a position to advise the Commonwealth Government. They can only pass the resolutions. If any one thinks that I can be choked off with a smile when I speak on finance he is making a big mistake. For two-and-a-half years I have been advocating financial reform in this chamber, and so long as I have strength enough to stand up, smiles will not stop me.

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