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Wednesday, 6 May 1942

Since the introduction of the new financial policy, requiring the private trading banks to pay surplus earnings into a special deposit account with the Commonwealth Bank, about £37,000.000 has been so accumulated and is in this account, carrying interest at the rate of 15s. per cent.

A government spokesman claimed to-day that had this money not compulsorily been deposited with the Commonwealth Bank it would have been used in two ways -

(   1 ) In advances to the public by overdrafts carrying a maximum interest of 5 per cent. ; or

(2)   Investment in warloans at3¼ per cent. By advancing this money to the public, the banks would have created a tendency towards secondary inflation, and would have been able to make large profits as the result of Commonwealth war expenditure.

Use of £40,000,000 by the banks for their own private enrichment could have resulted in a secondary inflation of about £100,000,000.

The spokesman added that the private banks were co-operating fully with the Commonwealth Government in its war-time policy.

If this policy has been in operation for only a few months, and the banks have accumulated surplus profits amounting to £37,000,000, we have another illustration of the enormous profits the banks are able to make; but I think that the newspaper statement is entirely misleading. I should like to know in what way this £37,000,000 is held. It cannot possibly be in the form of money, because the whole of the associated banks between them hold only a little over £15,000,000. I have always backed my statements on finance by reliable authorities. Following is a statement made by Sir Vincent C. Vickers in November, 1939: - " Unless we can contrive to design and establish an improved and reformed financial system, which is the first essential towards a new and better economy in our own country, no satisfactory outcome of the war is possible." " it would have been wise to have expended some of our energies in strengthening our home defences by placing democracy in an impregnable position under a money-machine managed and controlled by its Government and worthy of the public confidence." (The Daily Mirror, 24/10/41.)

Sir VincentC. Vickers, November, 1939, after 22 years a Director of Vickers Ltd., a Director of the Bank of England from 1910 to 1919. and a Deputy-Lieutenant of the City of London, has lifted the lid off the Bankers' Box of Tricks in his book Finance in the Melting Pot. " I hold views," he says, " which the London Press would not publish. Let us recognise that great social change is coming to this country also, and that a serious social upheaval, even in this country, is not impossible; that prompt action only can ensure that the future shall bring reform and not revolution. " I have watched for ten years every move, every wriggle, of financial policy; I have seen the effects of the greatest financial blunder the world has ever known - our return to the gold standard after the war. " It is mainly the money system which is dragging us back, because it remains fundamentally as it was a hundred years ago. As long as the present system is allowed to remain unchanged, nothing can permanently alter the present tragic state of affairs or resolve this devastating economic paradox. " It is the 'same story wherever you turn. Reform and Progress, development in every field of human activity is being held up by want of money and the persistence of an outdated money system."

In a book written just prior to his death, viz., Economic Tribulations, he says - " If once we can decide what it is that constitutes a barrier between the producer and the consumer, whilst both remain dissatisfied, we shall have discovered not only the main cause of the world's discontent and of the existing enmities and jealousies among the nations, but at the same time the true road to the peace of the world."

Of the "Enemy Within " he says: "Are we now fighting to uphold Freedom and Democracy, or are we fighting to uphold and strengthen the dictatorship of international finance? But this world power, with ite permitted control of the national money supply and with its support of a monetary system that has plunged every nation into the miseries of irretrievable debt and the world into economic strife should not be underestimated."

Last week I told honorable senators that the latest dividends declared by five banks in Great Britain were 14 per cent., 18 per cent., 16 per cent., 12 per cent., and 15 per cent., respectively. If we continue under the present financial system we shall be faced with a great disaster and financial ruin.

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