Promise to Pay by Robert McNair Wilson

Author:Robert McNair Wilson
Language: eng
Format: azw3, epub
Publisher: Omnia Veritas Ltd
Published: 2015-06-13T04:00:00+00:00

VI Remember The Moratorium

The International Banker developed further his humanitarian views when he was called by the Government to advise them about the crisis and the way of preventing trouble in the future.

‘‘The lesson,’’ he said, ‘‘that I draw from the recent financial panic in this country is that we have been trying to grow rich at the expense of the rest of the world. We saw a chance of profit and seized it without regard to the needs of our neighbours. There was a wild orgy of spending, of borrowing; prices rose to fantastic heights and expectations of profit assumed grotesque proportions. Wages mounted up and a standard of living far above our means was indulged in. Now that the bubble has burst we are realising that no nation can afford to get out of touch, out of step, with its neighbours.’’

The Chief Minister nodded approval but the Home Minister displayed a less accommodating temper.

‘‘If the banks had refused to lend so much money,’’ he said, ‘‘the boom would not have attained such dimensions.’’

‘‘I agree. The Home Bankers ought to have raised their rates of interest long before they did.’’

The Home Minister frowned.

‘‘On the other hand lending stopped just when a great mass of goods was coming on to the market, that is to say, when more, and not less, money was needed.’’

‘‘There had been gross over-production. The goods could not, by any means, have been sold at home. It was essential to bring about a fall in prices in order to get the goods into foreign markets and so save the producers from ruin.’’

‘‘Suppose you had created more buying power for the home markets... ’’

‘‘No, sir. Allow me, sir, to question your assertion that bankers create money. What we lend is our credit, the good name which honest dealing has built up and advertised. This credit is valuable only so long as we refrain from any action likely to shake it. It is valuable by reason of our knowledge of borrowers and their businesses, a knowledge difficult to acquire and costing much money in its acquisition. Why, sir, any man may set up as a banker. Any man may lend his credit. But there is credit and credit. Why does the public seek eagerly for one man’s credit, give goods and service for it and take it in exchange for debt? Clearly because that credit is big with value. Why is another man’s credit worthless? Because it has no value. Surely a man may sell the field he has tilled or the business he has created for what it is worth to his fellows?’’

This speech won the approval of the Chief Minister who nodded gravely. But the Home Minister frowned once more.

‘‘People borrow your IOUs,’’ he said, ‘‘solely because they believe these promises can be converted into gold.’’

‘‘No, sir. Everybody knows that a big run on a bank must break it.’’

‘‘You are suggesting that what you lend is well worth the price asked for it.’’ ‘‘Evidently, since people continue to pay the price we ask.

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