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Friday, 1 May 1942

Senator DARCEY (Tasmania) . - Recently, I received a letter from the Treasurer (Mr. Chifley) setting out replies to questions which I asked in this chamber on the 26th March. My first question was -

What is the total amount of inscribed stock sold since the present Government has been in officer

The Treasurer's reply was -

Statistics are not now kept of the issues of inscribed stock as distinct from treasury bonds. The total amount of stock and bonds sold since this Government assumed office is £82.480,000. This does not include stock and bonds issued in connexion with the conversion of matured securities.

It is very hard to understand why statistics are not kept, as the two issues are entirely different. They carry different rates of interest, and this is the first time that I have seen them lumped together. My second question was -

What is the total amount of treasury-bills issued in the' same period?

The Treasurer's answer was £48,550,000, which goes to prove that the present Government has already increased the national debt by £131,030,000. My third question was -

Is it a fact that the private banks were not permitted to purchase bonds in the recent loan?

The reply was -

The private trading banks are not now permitted to subscribe to Commonwealth loans without the consent of the Commonwealth Bank. No such permission was given in regard to the recent £35,000,000 loan."

Unless the Government continues to issue inscribed stock and treasury-bills to meet its commitments, only two avenues of obtaining revenue are left, namely, taxation and national credit. I understand that there is also a regulation which prevents private banks from granting overdrafts to people to enable them to purphase government bonds. From time to time I have questioned this method of raising money for war purposes. In my opinion it is a constitutional crime. The ever-increasing volume of money extracted from the pockets of citizens of Australia has grown to such a gigantic figure that directly or indirectly, every man, woman or child has to bear a share of the burden. It is time that some attention was devoted to the unconstitutional aspect of Commonwealth taxation, because even if this financial evil has become, by usage and custom, an integral part of our economic system, there is no necessity to continue it if it can be proved that taxation is not only unconstitutional but also unjust, unfair, and unnecessary. Every authority must readily agree that the only constitutional power for the creation of money is the Government, and that this power should naturally include everything that is used as money. We find from experience that by means of taxation and loans the Government obtains the money which it has a constitutional right to create. In the past the Government has confined itself to the creation of metallic currency, and it was not until the advent of the Commonwealth Bank that it took over the creation of paper money, namely, Commonwealth Bank notes. As paper and metallic currency cover less than 1 per cent, of our financial transactions, it is clear that the remaining 99 per cent, is dealt with by those very useful institutions, the banks, and in this respect it will be admitted readily that the trade and commerce of the world could not function without the agency of the banking system. Thus, through their administration, the banks have taken to themselves the general control of the financial system, and, through the operation of that system, the general control of our economic life. Therefore, 99 per cent, of our money is outside the constitutional control of the Government. At this stage, it may be difficult to visualize Australia being free from taxation and loans, but if we go back to the beginning of these things, we learn that our first governments and financial advisers decided, quite wrongly from a constitutional point of view, to take from the people .the very money which the Government has the only constitutional authority to create. Had our governments always retained as their' exclusive prerogative the creation of money and the credit which is used as money, Australia to-day would be debt and taxation free, and the physical ability of the people to produce goods and services would have been the deciding factor in determining the amount of new money required to be created without interest. The proper functioning of the Commonwealth Bank now gives to Australia a sound constitutional opportunity to lighten the load of taxation and loans. The Commonwealth Bank is not so much a bank as it' is Australia's accountant-general. The late Sir Denison Miller started this great bank without capital. An advance of £10,000 from the Commonwealth Government was all that was necessary, because, as Sir Denison Miller stated on many occasions, it had the total wealth of Australia behind it. What the monetary value of this total wealth may be has never been determined accurately by our government statisticians, but is known to be more than £5,000,000,000. Although during the 30 years of the existence of the Commonwealth Bank it has never been been allowed to function to its maximum capacity, it has produced some remarkable results, particularly (hiring the past two years. The following figures are taken from the balance-sheet of the Commonwealth Bank which I have in my possession: -


During the same period, government and municipal advances, including treasury-bills, made by the nine trading banks increased by £53,000,000 - from £46,000,000 to £98,000,000. The profit made by the Commonwealth and the Commonwealth Savings Bank for the half -year ended the 30th June, 1940, amounted to £1,075,155 15s. 2d., or more than £2,000,000 per annum. Some years ago, when the then Treasurer, Mr Casey,introduced a bill providing for the establishment of a Commonwealth mortgage bank, he proposed to sell £30,000,000 worth of inscribed stock and debentures in order to raise the necessary capital. Actually, it was not necessary for him to sell debentures or inscribed stock at all, because all this capital was already in hand. That waa something which was put over him by the private banks. The present way of raising money . is a national tragedy. On the 30th June, 1939, the Commonwealth Bank held the following securities : -


On the 30th June, 1940, those securities had been reduced to -


That represents a net reduction during the year of £19,616,660. During the same period governmental and municipal advances by the nine trading banks increased by £21,600,000- from £22,100,000 to £43,700,000. Treasury-bills increased by £14,400,000- from £23,900,000 to £38,300,000. The total increase amounted to approximately £35,000,000. Why should treasury-bills be issued to the banks? They are merely undated promissory notes, and the banks have the right to go to the Commonwealth Bank at any time and change them for notes. I remember the chairman of the associated trading banks saying on one occasion that he was sorry that the interest that he received for treasury-bills in London was only 10s. per cent., whereas in Australia he could get 30s. per cent. from the Commonwealth Government. That is the manner in which the private banks have managed the financial affairs of this nation. During the period which 1 have mentioned, the interest paid by the citizens of the Commonwealth to the nine trading banks amounted to £972,000 made up by 3½ per cent. on securities totalling £21,600,000, and l½ per cent. on treasury-bills totalling £14,400,000. This amount of nearly £1,000,000 per annum is added to taxation, whereas if it were provided bythe Commonwealth Government, it would be deducted from taxation as all profits from the Commonwealth Bank go to Consolidated Revenue, national debt reduction, or reserved funds. During the same period, government and municipal advances made by the Commonwealth Savings Bank increased by £263,841- from £141,149,782 to £141,413,623. I have urged on many occasions that our national credit should be fully utilized. The following is a system for utilizing national credit which has been prepared by one of Australia's leading accountants -


(Profits are not shown for the sake of clearness, but they do not materially affect the position. )

(   1 ) The private banking system issues a non- interest bearing loan of £1,000,000 to industry for production of consumption goods. It mokes a charge for its services.

(2)   As the bank merely monetises the national credit for this purpose, it issues a debenture, secured upon its assets, for £1,000,000 and lodges it with the Commonwealth Bank. It is not permitted to make any advances without issuing such a debenture.

(3)   As this debenture represents future national assets in the form of additional consumption goods, the Commonwealth Bank also issues a debenture, secured upon its new asset, for £1,000,000 to the nation's financial representative, the Commonwealth Treasurer.

(4)   Industry sets to work and in the course of producing the goods distributes £1,000,000 among the general public.

(5)   and (6) Industry then sells the goods to the general public for £1,000,000 and receives the money in prices.

(7)   Industry repays its loan to the private banking system.

(8)   Theprivate banking system redeems its debenture for £1,000,000 lodged with the Commonwealth Bank.

(9)   The Commonwealth Bank redeems its debenture for £1,000,000 lodged with the Commonwealth Treasurer.

Result. - The Commonwealth Treasury has £1,000,000 of new money (credit) to spend on munitions of war which is absolutely debt and interest free. In times of peace this would be spent on ordinary expenses of government, and redemption of old bank created debts, thus eliminating the necessity of taxation. All money paid in cancellation of bank debts is itself cancelled.

Debate interrupted.

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