Dáil Éireann - Volume 88 - 17 July, 1942

Committee on Finance. - Central Bank Bill, 1942—Fifth Stage.

Minister for Finance (Mr. O Ceallaigh): I move:—

That the Bill do now pass.

Mr. Dillon: I understand that the Opposition intended to say something on this Bill, but if they do not, I want to say something.

General Mulcahy: We intend to say something, but we shall let you go ahead.

Mr. Dillon: I put forward an admirable amendment on the Report Stage, but it was not of a character apparently which permitted its consideration on that Stage——

An Ceann Comhairle: Nor on the Fifth Stage.

Mr. Dillon: ——because I cannot aspire to insert anything into the Bill which is not already there, but I want to ask some questions. When this Bill passes, we shall have a central bank. There is only one issue in connection with the whole of this central bank question which is of real significance. Only one issue of principle has arisen in the course of this discussion. The rest of the legislation seems to be directed towards administration and the only issue of principle which I have been able to detect is: who owns credit money in this country? Is it the private property of the joint stock banker, or does it belong to us, the people of Ireland?

An Ceann Comhairle: I do not think that is in the Bill.

Mr. McGilligan: That is why it is being criticised.

An Ceann Comhairle: On the Second Stage, Deputies may state what they desire to see in the Bill. On the Fifth Stage, debate is confined to the Bill as it stands.

[928] Mr. Dillon: I propose to suggest to the Chair that the presumption contained in this Bill is that the credit money of this country is the private property of the merchant bankers of Ireland.

An Ceann Comhairle: The Deputy is setting off on a theory to which there certainly will be two sides.

Mr. Dillon: I am sure there will, and I am going to prove mine, and let the other fellows try to prove theirs. That is what a deliberative assembly is for.

An Ceann Comhairle: On this Stage, Deputies are limited to criticism of the actual Bill.

Mr. Dillon: That is the very thing I intend to do. I now allege that what is enshrined in this Bill, as amended on Report, is the statement implicit that credit money is the property of the joint stock bankers of this country. I challenge that implicit statement and I now propose to disprove that contention. This is the last occasion upon which we shall get an opportunity of ventilating this point, and if it is not ventilated now, it may very well be disregarded for our time in this country and that would be a disaster for our people.

There are two methods of rebutting the contention that credit money here belongs to the Irish people. One is the method of denying its existence, and that, as I understand it, is the position of the Leader of the Opposition. The position taken up by the Leader of the Opposition and by those who think with him is that a banker lends the money of his depositors and shareholders and nothing else, and that, therefore, the public have no concern with the activities of a bank, other than their personal dealings with it. I propose to submit to the House that, far from that being true, the day the banker gets established, the least of his business is the lending of his money or that of his depositors and shareholders, that that represents only one-tenth of his activities and that the remaining nine-tenths of his total activities consists in lending and dealing in a commodity called credit money [929] which he creates on the strength of the fact that he is functioning in a community consisting of law-abiding men who maintain, by their several individual exertions, a stable community. This conception is so revolutionary to many persons who have never given any study to banking that a large number of people, without examining the evidence, simply throw their hands in the air and say that it could not be true; but the astonishing fact is that it is true, and, by the mercy of Providence, these facts were made manifest and placed forever on record in the evidence of the Committee on Finance and Industry which sat under the chairmanship of Lord MacMillan in 1931, and the minutes of whose evidence have been reported. On the seventh day of that inquiry, there appeared before that commission, Mr. Frederick Hyde, managing director of the Midland Bank, Ltd.

An Ceann Comhairle: The Deputy has gone wide of the Bill.

Mr. Dillon: I am not, Sir.

An Ceann Comhairle: The Chair is the judge of whether he is or not.

Mr. Dillon: I am talking about credit money and I want to demonstrate what credit money is. I say that it is the very heart and soul of the Bill— where the ownership of that credit money lies. I say that the Bill places that ownership with the joint stock bankers. I contend that it is our property and surely I am entitled to claim that it is? On what other Stage can I deal with it. I am saying that what is in the Bill is the allegation that that money belongs to the bank. I am claiming it now for myself and my fellow-citizens. Is that not in order?

An Ceann Comhairle: Neither vehement protest nor contradiction of the Chair puts him in order.

Mr. Dillon: But relevance does.

An Ceann Comhairle: The Chair is the sole judge of relevance. The Deputy tabled an amendment which was ruled out of order. Is he not dealing with that amendment now? [930] An amendment which was ruled out may not be debated on the Fifth or other Stage.

Mr. Dillon: I am not referring to the amendment.

An Ceann Comhairle: It is contrary to Standing Orders to interrupt the Chair. The Deputy brings in documents to prove a theory which he advanced at length on Committee Stage but further advocacy is not in order on the Fifth Stage. Any Deputy might with equal right allege that other theories are embodied in this Bill explicitly or implicitly and a day could be spent in theorising. The legitimate discussion is limited now and to attempt to prove the theory of bank created credit is irrelevant on this Stage.

Mr. McGilligan: I understand that the amendment which you referred to was an amendment which dealt with credit money.

An Ceann Comhairle: Quite.

Mr. McGilligan: I understand that that was ruled out because something contrary to it was in the Bill.

An Ceann Comhairle: Not quite.

Mr. McGilligan: It was against the principle of the Bill.

An Ceann Comhairle: It was ruled out because it sought to introduce a very big principle on Report Stage and was not related to any section of the Bill.

Mr. McGilligan: I suggest that the contrary is in the Bill. That was the background of the ruling given by the Chair, and I suggest that contrary matter can be discussed and is something that is clearly in the Bill.

An Ceann Comhairle: Perhaps the Deputy would indicate what section.

Mr. McGilligan: I take it that it is in the section dealing with the general functions of the bank—Section 7.

An Ceann Comhairle: Section 7 contains nothing about bank created credit.

[931] Mr. McGilligan: There is a reference there to deposits that may be acquired, rediscounting, etc. Surely that is credit.

Minister for Local Government and Public Health (Mr. MacEntee): There is no reference whatever to that in the Bill.

General Mulcahy: Might I refer you, Sir, to column 30 of the Official Report of the 26th May, 1942 ?

An Ceann Comhairle: On ?

General Mulcahy: It refers to the powers given under Section 7. I questioned the Taoiseach and I said:

“Now the Taoiseach reminds me that it has been said or implied already that the central bank will not create credit. Can we put it out of our discussions, can we take it that none of us has any doubt about the matter, that, in fact, the central bank cannot possibly create credit?”

The Taoiseach replied: “I would not say that.” I then asked the Taoiseach whether he suggested that it could create credit, and he replied: “It can.” I again asked him how it was intended that the central bank would give credit, and he replied:

“There are certain powers here which would have the effect of causing an expansion of credit. If these powers were sufficiently big to be able to have a complete influence on the subject, then I would be in favour of the Deputy's approach; but I think that if you were to put in the words the Deputy suggests, it would mean that you believe that the central bank, despite any counteraction that might be taken, any action taken in an opposite direction, would be able to expand and contract credit. I do not think that would be the actual situation.”

He implied that the powers that are in the Bill were sufficient, or at least did have the effect of enabling the central bank to create credit, and that there were external forces that might try to counteract it.

[932] An Ceann Comhairle: That is not the point advanced by Deputy Dillon. If the Deputy wishes to argue that such powers should be vested in the bank, well and good. That is quite a different matter from setting out to expound and prove a theory on which there are divergent views. It is surely possible to contend that the bank should have that power without proceeding to establish a controversial theory. That would be purely theorising, and is quite a different matter from the question to which Deputy Mulcahy refers.

Mr. Dillon: Why does the Chair desire to restrict my liberty in this discussion? Surely this is the place to determine whether there is a valuable asset in existence, and if there is, to whom it belongs. I am stating that this Bill is evidential of the fact that the Government knows of the existence of this invaluable asset, and admits the proprietorship of the joint stock banks, and, acting on that assumption, legislates for a central bank. My submission is that that is wrong, that that property is ours, and that legislation should be based on the assumption that the property belongs to us. It is all very well to say: “You must not say so.” Why should I not? I am the elected representative of 8,000 people. Is it simply because my voice is a single voice that it is condemned to be silent? If the Fine Gael Party or the Labour Party want to say something——

An Ceann Comhairle: If the Deputy wishes to question the ruling of the Chair, there is a means of doing so.

Mr. Dillon: I am not questioning the ruling of the Chair. I am putting an important matter before the House. Surely to goodness I am entitled to do that. If any Party in this House wants to advance a certain theory, who challenges its right to do so? I do not know what Standing Order prevents their doing so. I never heard anyone allege that a Deputy must accept what is printed in a Bill. I am advancing the theory that here is something valuable, that here is something which the central bank should have control [933] of. I am trying to persuade the Dáil that it is not the property of the joint stock banks. That it is my property and the property of other citizens. Surely that is relevant?

An Ceann Comhairle: The Deputy should realise that this is the Fifth Stage of the Bill. The Deputy spoke at length on that theory in Committee. The Deputy may advance his argument about the use of this credit but should not set out to prove the ownership or reality of such credit.

Mr. Dillon: At least I may establish the existence of credit money.

Mr. McGilligan: I find that both the Taoiseach and the Minister for Finance very specifically referred to this matter on the Committee Stage. In column 34 of the Official Report I find the following statement by the Minister for Finance:—

“Credit can be expanded or created ... by a variety of ways set out in Section 7.”

He goes on to argue——

Mr. MacEntee: That is quite a different thing.

An Ceann Comhairle: Deputy Dillon proposes to prove here and now the existence and ownership of bank created credit which is quite a different thing from the utilisation of such credit.

Mr. McGilligan: I understand that the Minister for Finance said that it was in the Bill and I suggest that puts it in order.

An Ceann Comhairle: I wish Deputies would realise that this is the Fifth Stage on which it may not be in order to develop what the Taoiseach or other Minister said on the Second Stage. On the Second Stage no stop was put to Deputies' expression of views.

Mr. Cosgrave: Unfortunately.

An Ceann Comhairle: The Deputy may state that such credits should be availed of, but may not set out to prove this theory of its creation. That [934] was canvassed to great length on another Stage; the battle should not be resumed now.

Mr. McGilligan: May I take it that the dicussion is whether the central bank has or has not power to create or extend credit ?

An Ceann Comhairle: If it is in the Bill.

Mr. McGilligan: It is in the Bill and the matter was dealt with by the Minister for Finance as reported in column 35 of the discussion on the Committee Stage. The Minister there is reported as having said:—

“Under sub-section (h) it has power to make loans or advances to banks or other credit institutions. There are several ways that it can expand credit, within limits admittedly, and there are counter steps that can be taken in certain directions by the joint stock banks.”

That is the point, I understand, Deputy Dillon is on.

An Ceann Comhairle: Deputy Dillon is out to prove a theory.

Mr. McGilligan: I do not know what is in Deputy Dillon's mind, but I took it from one phrase of his that he is out to say it is a wrong thing to allow the joint stocks banks to be able to control the restriction or expansion of credit, and the Minister for Finance said on that section that the bank has certain powers with regard to that matter. I suggest that the question as to what their powers are is open for discussion.

An Ceann Comhairle: The Chair has said nothing to the contrary. The Chair objects to Deputy Dillon's clear statement that he intends to prove the correctness of a certain theory; quite a different matter.

Mr. Dillon: I am out to prove now (1) that credit money exists; and (2) that that credit money belongs to us and not to the joint stock banks, and that we and not the board of directors of the joint stock banks should be the [935] authority to determine what is to be done with that asset.

An Ceann Comhairle: The Chair is not prepared to hear the Deputy on the validity of the theory on which certain argument is based, a matter that was debated for many hours.

Mr. Dillon: I wish to direct the attention of the House to question No. 871, where Mr. Frederick Hyde, managing director of the Midland Bank, describes the accounts of the Midland Bank. He said:

“I had perhaps better say first of all what are the figures that we aim at, because we do not always succeed in hitting exactly the figures that we are striving for. We say that we want to keep about 11 per cent. of cash.”

At question 906, the Chairman asked:

“The operations of the Bank of England, as the central bank responsible, of course, for the ultimate supply of credit, affect you as the distributor of credit?”

To that question, Mr. Hyde replies:

“It affects our base, and as we are always striving to keep 11 per cent. of cash against deposits, if you increase the total of cash by £1,000,000 we should go on lending or buying bills until we have increased the deposits by £9,000,000, and the £1,000,000 has been absorbed.”

General Mulcahy: What date was that?

Mr. Dillon: 9th January, 1930, at question 906. He goes on to say:

“We should do that unless something were to happen to stop us from doing it. That is to say that our desire to keep our funds employed will always mean that we should go on with our operations so long as we have a surplus to deal with. When we lend that surplus it does not destroy the surplus; it comes back to us, taking the banks as a whole, [936] from some other quarter; so we have still got it to lend, but we have only nine-tenths instead of ten-tenths, and next time we have only eight-tenths instead of nine-tenths, and so it goes on, until we have reached a figure nine or ten times the original cash base.”

Now, are those words proof enough to put this question beyond doubt, that, in so far as the transactions of the joint stock banks of this or any other country practising what is commonly known as the British banking system are concerned, one-tenth of the funds they handle consists of cash, the shareholders' capital and the depositors' loans, and that nine-tenths of what they earn their money on is money that they call into existence in our name? Having called it into existence in our name, they charge our Government 3½ per cent. for the loan of it, and they charge citizens in our name 5 or 6 per cent. for the loan of it. I want to ask this House why Oireachtas Eireann, in the Central Bank Bill, adopts as its own the doctrine that there is some holy right in the joint stock banks of this country to demand from the people and the Government payment for the use of credit money which exists only in their imagination?

I do not want to be taken as advocating any radical or reckless course of financial procedure. I am fundamentally strongly conservative ; all my personal interests would suggest the most conservative possible line of thought for the protection of my own personal property in this State, but it seems to me utterly fantastic that this nation should allow itself to be dominated and deluded by an obsession which I am quite convinced was created and sustained by financial interests in the great international financial centres in the world over the last 60 or 70 years for the purpose of securing for themselves a larger portion of the world's wealth than in justice or in equity they were entitled to. I do not want this House to imagine for a single moment that I advocate the expropriation of the joint stock banks. I do not. I do not want this House for a moment to imagine that I envisage some revolutionary [937] change in our banking system overnight, because I think on investigation it will probably transpire that no such revolutionary change is desirable or requisite from the point of view of any section of the community of this country. But what is vital is that we should know the truth, and, with that knowledge, firmly resolve that this vast bulk of money should be used not primarily to earn profits for any agent who happens to be handling it, but primarily to serve the interests of the Irish people in facilitating exchange, stimulating production, and ensuring employment for the largest possible number of our people. Credit, it cannot be too often repeated, has many of the characteristics of dynamite.

Prudently used it can discharge many valuable functions, recklessly employed it can destroy the whole fabric of the State. I think the analogy, between the use of dynamite in a coal mine and the credit of the community, is close. Dynamite skilfully used in a coal mine can produce a great abundance of riches for the people in the form of excavated coal if used by skilled miners in a proper way, but carried in the same coal mine, with the same purpose, by a foolish person it can precipitate disaster, not only upon the foolish person who brought it there but on associates who risk themselves in his company and, at the same time, the property it was designed to produce, will all be lost in the collapse of the mine. Similarly credit prudently used can achieve immense blessings for our people, but employed along the lines sometimes advocated by “dafties” who write in the Standard, Catholic so-called, and certain other periodicals of that character, can bring the whole of this State crashing down about our ears. It is for that reason that I attach fundamental importance to having a statement from the Government as to their attitude on this fundamental principle. If Oireachtas Eireann leaves it firmly fixed in the minds of our people that it accepts as true what I choose to describe as Sir Walter Leaf's views of banking credit, i.e. that the bankers lend nothing but [938] their own money and that of their depositors, then the public are going to look for leadership in this vital matter to the “crack-pots” and “dafties” who want to use credit for the purpose of blowing up the whole State.

If our Oireachtas Eireann, representing all Parties, will make it manifest to our people that they fully appreciate the true nature of money, that they fully appreciate their stewardship as the elected representatives of the people, that they are restricted in dealing with it only by consideration for the public good, and that they regard themselves fully entitled in strict justice, to deal with credit money any way they like, and regard themselves as restricted by no suggestion, and that this credit money is the private property of any individuals in the State, then it places us in the moral position of saying to the people not to let crack-brained schemes be foisted on them. No responsible person in the State has any delusions about the matter. The sole use of credit and the money of the State is for the service of the people and any use to which it might be put which conflicts with that is immoral and wrong and should be prevented by the Government of the day. Then we stand in a moral position before the people which entitles us to demand that our people should reject unsound principles put before them.

An Ceann Comhairle: Will the Deputy relate that to the Bill ?

Mr. Dillon: My criticism of this Central Banking Bill is that it does not seem to adopt that line of independence that it should adopt, but that rather it seems to imply in its contents that it acknowledges that private ownership of credit money is in the joint stock banks. I am warning the Government that if our people get the belief that we in Oireachtas Eireann accept that view then their leadership will be, as I say, the crackpots who write in the so-called Catholic newspapers, who think that the use of credit can be availed of as a plaster for every ill, and that it can be applied recklessly and prudently without any relation to the ill. I want to ensure [939] that leadership in that extremely vital sphere of our national life should be retained by Oireachtas Eireann, where it belongs.

The only way we can keep it here is by demonstrating to the people that in this House there is well informed and wide awake opinion in this vital matter, and that we are ready to deal with it as it should be dealt with, if and when the necessity arises. From what the Taoiseach and the Minister for Finance have said I suspect that they have greater sympathy with what I am now putting forward than they deemed it expedient to express. Why do they not deem it expedient to say what they think? What is this mysterious power that imposes discreet silence on them? I never heard of any man doing any harm by speaking the truth. I am perfectly convinced that the Minister for Finance, the Taoiseach and his colleague in this fundamental matter are in agreement with me. Why do they not say so? If they did, all views on this extremely important subject would be laid on one side, and the whole discussion which is at present of a fundamental character, could move on a plane of tactics and strategy as to how best to use the credit money of the community.

I deliberately abstained from dealing with any other aspect of this legislation that is about to pass into law because, in my judgment, until that is finally determined no aspect of the banking problem can be properly pursued. I most strongly urge the Minister for Finance not to let the Bill leave the House without a clear declaration from him as to what in his judgment represents the true ownership of that credit money. Mr. Frederick Hyde said he would expand £1,000,000 cash into £9,000,000 deposits. He would continue to expand credit so long as a cash basis was provided for him to do so. I want the Minister for Finance to say clearly and explicitly to whom in his judgment that credit money belongs. The bankers say, I have no doubt honestly if misguidedly, that it belongs to [940] the joint stock banks. I believe that Oireachtas Eireann should say clearly and explicitly that credit money belongs to the people of Ireland, and that under our direction it should be so used, and that those who handle it as bankers are not its owners but its trustees for the people of Ireland and must ultimately render to the people an account of their stewardship.

General Mulcahy: After the discussions that have taken place on this Bill during its passage through the House, we have learned a little more of the Government's mind on the matter of currency and credit than we could learn from reading the original Bill. I do not know whether all they have in mind has been added in the amendment. What has rather overshadowed the whole debate is the feeling on the part of members of the Government who have spoken, that they do not know how to use the credit that exists here in order to do the work that is required, and that they do not know how to protect the credit that exists from the dangers that exist outside. In other words, while the Government are very strong for economic nationalism and self-sufficiency and on what is one of the fundamental weapons for dealing with our economic situation, they seem to become completely helpless in view of the way we are mixed up with the outside world. Section 6 of the Bill sets out, in dealing with the general functions and duties of the bank, that they shall take such steps as the board may, from time to time, deem appropriate and advisable towards safeguarding the integrity of the currency and ensuring that in what pertains to the control of credit the constant and predominant aim shall be the welfare of the people as a whole. On the question of the welfare of the people, as a whole, I take the phrase of Mr. Carter Goodrich, representing the United States at the International Labour Conference at New York. He said:—

“To-day the leaders of the free peoples see more clearly than ever that ‘the daily life of working folk’ is the central concern of public policy.”

[941] I take that as summarising the situation fairly well. In present circumstances, I take a sentence quoted from Mr. Seán Lemass, incorrectly described as Minister of Economic Defence, in the report by the Acting Director of the International Labour Office. In his report, the Acting Director says:—

“In Ireland, Mr. Seán Lemass, Minister of Economic Defence, has stated that ‘in laying plans for post-war reconstruction, the primary aim must be so to organise ourselves and the national resources at our command that poverty and all the social evils that arise from it shall be eliminated and no other claims can have priority over that’.”

I accept that as the primary consideration which the central bank should have in effecting their predominant aim —the welfare of the people as a whole. I do not want to argue to whom credit belongs. I asked Deputy Dillon the date of the quotation which he read and he said January, 1930. I think I pointed out before that many people in close, practical touch with the financial affairs of Great Britain have said very emphatically that, in monetary affairs, more than in most affairs, there has been a revolution in thought and in practice during the past ten years. Deputy Dillon thinks that we can have what credit we want on the 10 per cent. or 11 per cent. cash basis. I quite agree with the Taoiseach when he said that one of the difficulties the banks here have in giving credit is that they do not know to whom to give it. I agree that there is any amount of money available here but that it is not being used. If we are to look after the welfare of the people as a whole, the Government must make up their minds to use some of the credit available, even on the present cash basis, in order to carry out investment work in the country. It is perfectly clear that industrialists and even agriculturists, in present circumstances, are not able to provide the employment that would maintain our people as a whole and enable them to bring up their families. Deputy Dillon insists that we shall work on the basis of the 11 per cent. cash expansion but, in the revolution of thought and practice [942] that has gone on and, particularly, in the revolution in practice which has obtained since the emergency, while the 10 per cent. or 11 per cent. cash relation to deposits has been kept, the cash basis is no longer the causal factor. I quote again what I quoted from The Economist of 16th November, 1940:—

“Though it is permissible to doubt whether the immediately responsible officials are fully aware of the true import of their policy in effecting given adjustments in the volume of bank cash through the appropriate open market operations, there can be no doubting the fundamental reversal in causal sequence which has taken place. The new procedure of working from the given volume of credit which the authorities regard as necessary to meet the circumstances of the day, to the appropriate amount of bank cash is not altogether revolutionary.”

What is causing the creation of credit to-day in Great Britain is that the Government wants credit for certain important things connected with the welfare of its people and the bankers simply create the cash to sustain that credit. The article goes on:

“It is only since September, 1939, that the adjustment of cash to the needs of the Treasury has become open and unashamed. We may hope that the objectives which the new technique will be called upon to serve in future will be more constructive than the deficit financing of to-day. But there should be no retreat from the principle involved. It is improbable that we shall allow ourselves to go back to a position where the amount of available credit is dictated by a total of bank cash itself determined by factors, such as the output of new gold, over which we have no complete control.”

The credit is there and can be got. We need not waste time over the question as to who owns it. We want to see that it is used and we want to know who is going to use it and how it is to be used. We cannot maintain our people and look after their welfare [943] except on the basis of the production carried on in the country. Above all other times, this is a time when we want increased production. If that production cannot be carried on through ordinary machinery, the Government has to step in. The main trouble in the present situation is that the Government do not know how to step in. There are various ways in which the Government can provide employment and assist agriculture and education. On the agricultural side alone, both with regard to our present and future positions, we have to take cognisance of what people suffering under such difficulties as the British are suffering are doing. On that subject, I should like to quote again from the Times to show the extraordinary amount of development and instructional work of that particular kind which is being done by various agricultural committees in Great Britain. A sample was given in the Times of what was being done by the Surrey War Agricultural Committee:

“Every county war agricultural committee has now set up a demonstration sub-committee which includes practical farmers, members of agricultural education staffs and members of agricultural firms who are accustomed to dealing with the farmers' problems.”

On the demonstration given at Surrey, it says:—

“This was an ambitious affair, staged with the help of Imperial Chemical Industries, Limited, and covering a wide field from hedge clearing with a powerful American tractor and “bull-dozer” to silage making, setting tractor ploughs, wireworm control, mechanical potato planting, straw pulp and re-seeding pastures. The effect on the mind was indeed rather confusing and the visitor needed to be very clearheaded to find out what really concerned him. But this first big demonstration showed how much scope there is for such educational work on the practical side....”

At any rate, the money is there, if the [944] interest can be arranged satisfactorily. What stood out in my mind—if something else stood out in Deputy Dillon's mind—in the course of this debate, was the importance of the rate of interest and the utterly haphazard machinery that the Government had for influencing the position of credit.

The Minister for Finance challenged me on some of the statements I made with regard to the rate at which credit is being obtained in Great Britain. In column 84 of Volume 87, No. 4 of the Official Debates, he said:—

“But for 90 per cent. of it—I cannot give an accurate figure—they are paying 3 per cent.”

And when he went into it later, in column 205 of the 27th May, he gave certain particulars of borrowings in 1941 and said:—

“About 25 per cent. was obtained from treasury bills, and bank deposits. As the Deputy mentioned last night, there are very low rates of interest there, but the balance of 75 per cent. was obtained at 3 per cent.”

I want to direct the attention of the Minister to Hansard, page 478, 21st of April, 1942, where, in answer to a Parliamentary Question, Sir Kingsley Wood gave a summary of transactions from the 3rd of September, 1939, to the 31st March, 1942. I am changing the order somewhat in order to divide them up in moneys borrowed at 3 per cent., 2½ per cent. and 1⅛ per cent. I want to put that information in relation to the Minister's suggestion that, in 1941, 75 per cent. of the British Government's borrowings were at 3 per cent. Those borrowings, from September, 1939, to March, 1942, were:—At 3 per cent.: Funding Loan, £120,000,000; National Defence Loan, £120,000,000; War Loan, £302,000,000; Savings Bonds, £666,026,000; Defence Bonds, £432,227,000; National Savings Certificates, which I am putting at 3 per cent., £452,901,000, making a total of £2,093,154,000 at 3 per cent., or 35.5 per cent. of the total amount of money borrowed during the period. Under borrowing at 2½ per cent., I put in [945] National War Bonds, £1,316,327,000, or 22.5 per cent. of the total. At 1⅛ per cent. I put the Floating Debt, £2,144,795,000 and Tax Reserve Certificates, £191,515,000, a total of £2,336,310,000. Therefore, on the figures given by Sir Kingsley Wood on that date, 40 per cent. of the total borrowing of the British Government during the period of the war was at 1⅛ per cent.; 22.5 was at 2½ per cent. and only 35.5 was at 3 per cent. It bears out more closely what outside writers on the situation are saying— and proving by their figures, I think— that Great Britain is fighting this war on 2 per cent.

On that question, I raise again the query why we had to pay 4½ per cent. for £1,000,000 to enable local authorities to cut turf. The rate of interest is the most important thing and, in that connection, you must come back to the question why we have to pay 1 per cent. on deposits here. We must change that completely, if we are to deal in a satisfactory way with the present situation.

On the question of rates, I would re-quote from The Economist of the 23rd August, 1941, page 223:—

“A long-term tendency has exhibited itself for the demand for bank credit to decline. Industry and commerce, in so far as they are not self-financing, increasingly prefer to raise their finance by methods other than the short-term bank advance. A bank is to an increasing extent becoming an institution which holds the current cash of the public and lends it to the Government. The joint stock banks are approaching the state from which the Bank of England started: their main liability is the circulating medium of the public and their main asset is a fixed loan to the Treasury. That being so, the time is approaching when a recasting of the traditional structure of interest rates will be necessary. If it is argued that the rate of interest paid by the Treasury to the banks should be increased, because otherwise the banks will not be able to afford the costs that the holding of deposits involves, that amounts to a claim that the State should subsidise [946] the depositor. It would be far more reasonable to require him to pay the cost of the services he enjoys.

We get back to the statement attributed to the Minister for Industry and Commerce that

“in laying plans for post-war reconstruction, the primary aim must be so to organise ourselves and the national resources at our command that poverty and all the social evils that arise from it shall be eliminated and no other claims can have priority over that.”

We should not have the situation here where people are allowed to draw huge sums of money out of the cash that is available and expect to get 1 per cent. on them for doing simply nothing. They may say it is not their fault, but while we are on a parity with the £ and while we are so influenced by the danger of the syphoning over here of the huge expansion of money in Great Britain, disturbing our situation here, and while bank rates are as at present in Great Britain, we can no longer afford in respect of idle money to continue paying the substantially large amount of 1 per cent. that we are paying for deposits.

So that even while the Government drifts on, still unable to make up its mind how the credit of this country can be used in the present situation, I think active steps will have to be taken to see that this idle money is not pampered, cared-for, and paid for in the way in which it is being paid for at the present time.

It is, no doubt, difficult to suggest what could be done, but I should like to make a passing reference to another matter, and that is the discrepancy that has arisen so definitely between the expansion of money here and the expansion of money in Great Britain. It is difficult to see what can be done, but there is a very serious danger there, particularly when we take into consideration that the expansion of money that is going on here is, very largely, not related to any additional employment or any additional production that is taking place here: that a very large part of the expansion is [947] taking place here as a result of wages earned by our people over in Great Britain and coming back here, and that an unknown and probably very large amount is coming over here simply as investments in real estate, or some other things like that, by people who have obtained or earned their money in Great Britain. These are matters that must be reviewed and sized up at once, so that any serious development in that direction will not have gone to any alarming extent before some plans are made to deal with it.

I have no complaint about the position in which we stand, say, in parity with the British £. I think that nearly everybody in this country has always stood for stable exchanges, and I do not think that, after our experience in economic dealings with outside, we are the people, or this is exactly the time, to start shaking the exchanges up and down, one way or another, thinking that we could take any advantage out of it.

Therefore, I have no serious objection at the present time to the position which leaves us copper-fastened to the £, but there is a number of things operating that might make it a very serious matter if we could not shift, as I say, and one is the great expansion of money in Great Britain as against the lack of expansion here, and particularly when some of the expansion here is not normal expansion. There is also the serious factor, I think, that the terms of trade seem to be running against us. Our import price index figure for 1939 was 89.4, while for 1941 it was 156.9. Our export price index in 1939 was 95.0, while in 1941 it was 147.8. So that, as between the import and export price indices, the terms of trade are running against us to the extent of 14.7 as between 1939 and 1940. If we compare the average figure for 1939 and January, 1942, which is the last figure we have here, then it is running against us to the extent of 20.9 points. I am not quite clear exactly how that affects us in relation to the desirability of being at parity with the £ or not, but [948] I submit that there is a tendency there that ought to be taken into consideration as one of the factors in the situation which might dictate action of one kind or another.

Again, I simply want to emphasise that we have in this country, apparently, all the credit that we are likely to be able to use at the present time, but we have not the mentality on the part of the Government that would see that they will get that credit at a proper rate, and we have not any great idea on the part of the Government as to how they should use that credit. The position with regard to this Bill is really, to some extent, that we are setting up a new section to the School of Higher Learning. In light vein, I suggested to the Taoiseach, at one particular point during the debate on the Committee Stage, that that is what he was doing. Well, such as it is, I say that the sooner it was set up the better, because if you do assemble the proper type of people to consider these matters, they may help to clear up the confusion of mind that exists on the part of the Government at the present time, and we may be in a position to use the very great credit that this country undoubtedly has.

Parliamentary Secretary to the Minister for Finance (Mr. Flinn): I intervene—I hope quite briefly—for the purpose of trying to call attention to a rather simple and practical point, the elucidation of which, in my opinion, may tend to clear up a good deal of the obscurities on matters of theory which, apparently, are disturbing the House. There has been a great deal of very interesting theoretical discussion on this matter, but in many cases people have been using words in different senses, as distinct from getting down to brass tacks. My difficulty in relation to all these things is that it is the practical thing you are going to do that matters, as distinct from the theories that are behind your action. For instance, in no controversial sense whatever, I would take up the statement of Deputy Mulcahy in which he says that while there is any amount of credit available, what [949] is lacking, apparently, is the mentality and the intelligence, either of the Government or otherwise, to use that amount of credit. He pleaded that the Government, and anyone concerned in the matter, should actually come down to brass tacks and find a means of using the very large amount of credit which, he says, is in fact available. He took, as an example, agriculture. I immediately became very interested because I know the difficulty of deciding what to do, as distinct from what to wish, in those matters. He quoted, apparently with approval, certain things that were done in Surrey in relation to the mechanisation of agriculture. Now, what part of that mechanisation of agriculture does Deputy Mulcahy think the Government should, in practice, adopt in this country in relation to agriculture?

General Mulcahy: I did not speak of it particularly as mechanisation, but as showing the energy, the work, and the amount of money they are putting into what suits them.

Mr. Flinn: Exactly—the amount of energy! I am not questioning that at all. Now, it is the easiest thing in the world to appeal to people to be energetic, to do something, but it is a much more difficult thing to say to anybody what to do. The only particular example that Deputy Mulcahy took in relation to agriculture was its intensive mechanisation.

General Mulcahy: The Parliamentary Secretary is quite wrong, and I think that if he refers to my statement, he will see that I simply took that as a picture of what they are doing.

Mr. Flinn: The Deputy took that as a picture of what they put all that energy into. There is no difficulty at all in appealing for energy. What are you going to do with all this indefinite amount of credit which is available? “A, B, C, D, E and F? These definite things I recommend shall be done.” There is no difficulty at all in appealing for goodwill to use that money. The thing is to find the method of doing [950] it. What I do suggest, in all cooperation, is that Deputy Mulcahy now formulate for himself what he thinks the Government should do with £100,000,000 of that credit which he says exists.

General Mulcahy: Does the Parliamentary Secretary not agree that credit does exist?

Mr. Flinn: As a matter of fact, I do. I think that is a mere matter of mechanism, and that we can deal with it. My difficulty at the moment is to find those precise ways in using credit which will not destroy, in the process of use, more than they create. That is a very hard saying. I am asking the Deputy, and any other Deputy who is practically interested in this question, to come down out of the clouds of exhortation as to energy, enterprise and initiative, and to say: “Given £100,000,000 of that credit this is what I recommend you shall do.”

General Mulcahy: Will the Parliamentary Secretary agree that we ought to get it at less than the 4½ per cent. for turf production?

Mr. Flinn: I will agree to that also. That is the point which I am now coming to as brass tacks. There is a demand at the present moment in this country to know why turf costs 64/- a ton in Dublin. It is a perfectly right and proper demand, one which, I think, the people are entitled to press right home. They are doing a good service in pressing it home. There is that demand just as there is a demand that that cost shall be analysed so that we shall know where the whole of it is going, why it is going, and whether, in its division over the different channels into which it flows, that division is a right division. In the same way, in my opinion, there ought to be the same practical objective inquiry into the cost of the service which is undoubtedly being rendered by the financial and banking institutions of this country in the servicing of credit and industry. There seems to be a sort of feeling of interdict—a holy of holies—that there are certain things you must not know, and must [951] not inquire into. I want to know—I think the country is entitled to know and that a very definite service will be paid to the community when it does know — the actual out-of-pocket expenses involved in the service which is given by the banking and financial institutions in the servicing of credit.

Now, I think it will be agreed— whether 4½ per cent. is too high or too low, whether 1 per cent. on deposits is too high or too low, whether in fact, some particular places at different times may or may not receive all the credit they require, or whether, conversely, as during the last war when money was poured out recklessly in the enhancing of the value of land, too much credit is not being issued at certain times—that a service is being done by those institutions, and that they have to receive in return for it at least the minimum out-of-pocket expenses involved in performing that service, plus a reasonable return upon their investment, regarded simply as an investment. The question as to whether that is being done and how it is being done—how those expenses are being divided—is one of the deep, dark mysteries into which ordinary people are not, apparently, permitted to peer. The expenses of the banking institution are the 1 per cent. interest on their deposits referred to by Deputy Mulcahy which he regards as excessive. Their income is very largely the 4 per cent., the 3 per cent., the 5 per cent. and the 8 per cent. in various cases related to different matters which they charge as interest upon the loans they make which the Deputy thinks is excessive.

The balance between those two things should be represented by a legitimate expense and a legitimate profit, and what I am suggesting is that one of the things we want to investigate is whether the expenses which are being charged to meet that gap are all minimum expenses, and whether or not the profit which is being charged in addition to those expenses is, in fact, a legitimate profit. It is not easy for the layman to answer either of those questions. There is [952] certainly no information in the possession of the layman, or available to him, which will enable him easily to answer those questions.

As to expenses, we do not know anything. We do know that you have half a dozen banking institutions in the same small town. You have an overlapping of branches of all sorts and kinds. That may or may not be a right and proper thing, but it is a matter of legitimate criticism and of legitimate interest for investigation by the ordinary person in the community who has to pay the expenses when the time comes. When you come to a profit of 13 per cent. or 14 per cent., maintained over a period of years, and when you have to try to trace that back through the bonus shares and watered capital which is taking place, it is very difficult for the ordinary person to find out what, in fact, is the profit which is at the time being paid on the original capital put into institutions of that character.

Why I am raising that particular point is because it has been mixed up with, and is being gravely confused with, theoretical consideration. You have heard in this House controversial and controverted quotations as to who creates credit, how much credit there is, and what is credit. It is alleged that for 10 per cent. of cash—and what cash means to-day in a bank the Lord only knows—there is raised a structure of ten times that amount of credit, and that on that ten times amount of credit is being charged 3 or 4 per cent. interest.

If that general statement is true, then there should be 30 or 40 per cent. being earned on the basis of the original cash. Is that happening? If the total amount which is being got by the banking institutions is not more than their legitimate outgoings in expenses plus a legitimate profit upon their capital, then whether they get that as interest upon ten times the credit or as interest simply upon their own investments is a matter of indifference. The total amount which is represented by their legitimate outgoings and legitimate profit has to be obtained. It is in order that that prejudice [953] may be removed, that any misunderstanding which may exist in this matter may be set at rest and removed, that I do think it is time that we had a “show down” on the actual expenses, the out of pocket expenses of the banking institutions and the service which they render to the community.

In the same way, the only thing I want to say on the subject of parity and the rest of it is again of the same objective character. When in pre-war times the values as between different currencies varied, they varied within very narrow limits; they varied within predictable limits and with predictable seasonality. You knew the dollar would depreciate relative to the pound and the pound would appreciate relative to the dollar at different periods in the year, due to what we knew of the nature of the trading exchanges which would take place between these countries at different times in the year; and over a considerable period of time practically no change was made except that due to those variations in commercial interchange.

Starting with the last war, when there was an extraordinary expansion of money without goods behind it, and following the last war, when there was a huge amount of nominal money being brought into existence and played about with in the form of reparations, promises of reparations, and interest on promises of reparations, extraordinary things happened as we know with the currency values of France, Germany and other countries.

Since then there is no question about it that forces have been in operation in changing the relative values of currencies, one to another, other than the mere balance of commercial exchange which previously operated. So far as pre-1914 considerations were concerned, the pound varied, as I have said, in the way that suited the general commercial interest and condition of the people of England. The suggestion that it was manipulated in any necromantic manner I personally do not believe. It varied, without any relation [954] or regard to our interests, in as intelligent a manner as the British financial system could do it for the benefit of their own people. In other words, at that period there were seasonal and other small variations in the value of money for considerations which were irrelevant to this country, but which were not necessarily hostile. They had no relevance to this country in so far as they were concerned predominantly with the interests of a purely industrial country and, therefore, they could not have any necessary relevance to the variation which would have been imposed if one was simply looking at it from the point of view of an agricultural country.

What I want to make clear is that there was no relevance, but whether there was an actual damage is a matter of fact, and it is a matter which I have never yet seen investigated. I remember a very able paper written by a late and very lamented member of the staff of the Department of Industry and Commerce, Mr. Barrington, before the Statistical Society of Ireland, on the Irish farmer regarded as an economic man. Looking back over a period of years, he examined the conduct of the average Irish farmer from the point of view of what a theoretically capable and intelligent man, under the actual circumstances of his life, would have done in relation to his land, and compared that with what the Irish farmer had done, and he came amazingly well out of the calculation; a purely theoretical and academic examination of the conduct of the Irish farmer faced by the actual variations of conditions and prices over a period of years, and what use he had made of his land and resources, looked at simply from that point of view.

Again what I am suggesting is that somebody should take any period of our economic history, take the variations in the value of money relative to commodities, take the variations in the exchange values of the £ and other currencies, compare them with our actual circumstances and see whether on the whole the variations which have taken place have been in fact to our disadvantage or otherwise. It will be [955] only an accident that they were to our benefit. It will be only an accident that they were to our detriment. But whether those variations were, in fact, a benefit or a detriment, no man in this country knows at the present moment and no competent person has ever investigated and set on record.

I think the first time that my mind was turned to questions of this kind, in relation to Ireland at any rate, was a great many years ago when, wandering past some old bookstalls in the North of England, I came across a pamphlet, Bi-Metallism and the Irish Land Question, by Archbishop Walsh, a document which I recommend to the consideration of every Deputy who wants to understand the extent to which money variations and the rest of it can affect a particular case. His contention was that the increase in the value of money—I am going back now 50 years—relative to commodities upset the whole finances and purpose of the Land Acts in this country and that in entering into an obligation to pay in gold—because at that time people did not calculate in anything but gold as a basis—over a period of 80 years annuities on land, we were doing a thing which was fundamentally foolish. Archbishop Walsh at that time was in favour of linking together gold and silver for the purpose of preventing inflation, because silver was practically a commodity varying in consonance with other commodities at that time—a linking together of these two for the purpose of ensuring that when we entered into an obligation to pay over 80 years an annuity for land, we would be entering into an obligation to pay something which bore a constant relation to the amount of produce which, with ordinary industry, we could, over that period, get from that land, instead of entering into a speculation which meant that if the annuity in one year would be the equivalent of two cows, in another year it might be the equivalent of ten.

I am solely concerned with the practicalities of this matter. I think the theoretics of it could be talked about [956] from now to the Day of Judgment. There are practical things that can be done. There is practical information that can be got, and that practical information ought to be got and those practical things ought to be done. For instance, take a very simple case. At the present moment, our holdings, rightly or wrongly, of what are called sterling assets, are leaping towards the skies. Those figures are being published, but they are being published three months after date and are then the average of the previous three months. Why? Is there any particular reason why we should not know them earlier? What I suggest is that there is a whole lot of vital information, statistics and the rest of it, which the community ought to know, which ought to be put at their disposal. We ought to know facts in relation to certain things, ignorance about which is undoubtedly tending to build up prejudice. Whether deposits should have 1 per cent. paid on them, whether loans should have 3 per cent. paid on them, does depend upon the cost of servicing all that money and getting it into circulation. It is a matter which the community ought to know, and it is for that purpose that I have intervened in the hope that those practical pieces of information which could be made available should be in the possession of those who want legitimately to use them and so that investigations of such questions as the effect of the variation of particular currencies on our lives can be entered upon.

The one other matter that I would stress, and I think it was stressed by Deputy Mulcahy, is the complete lack of security which now exists in old beliefs in relation to financial theories. I remember the managing director of the Bank of England, some eight years ago, saying that capitalism as we have known it has ceased to exist; that conventions of the kind which we thought were rocks, have ceased to exist. We will have to prepare ourselves for all sorts of new ideas. When this very excellent body, this very promising body which has been adumbrated in this Bill, the committee of investigation into financial [957] and other things, is set up, I sincerely hope that it will consist of a very considerable proportion of men who are not going to be bound by those conventions, who are prepared to recognise that conditions are changing, that things will have to be done in a different way and that some of the ten commandments of conventional finance will have to be departed from.

I speak as one who has been fundamentally a conservative in economic and financial affairs. I believe, however, in the doctrine that those things that are wrong must be removed from a structure in order that the things that are right in that structure may remain. The bad wood may have to be cut out, defective material and defective theory may have to be destroyed, in order that the fundamental things will remain, because the fundamental things are not going to be changed by ten wars.

Everything is going to seem as if it were in a state of chaos after this war. The walls of the temple are being shaken in every sense and meaning of the term. You are going to have disturbance, revolution, chaos of all kinds, but out of it the simple fundamental things will re-emerge as strong as ever they were. Again, it is industry, hard work, honesty and seeking to deliver the goods, that will produce results. But, however currencies may be shaken, and however conventions of all sorts and kinds may appear to be wrecked, the simple things will emerge again and, in a generation from now, all these things, however big they may now seem, will have disappeared just like a shower of rain.

So far as we are concerned, I am anxious that we shall ascertain as objectively as possible the facts that matter in relation to our finance and currency; that we shall accept those facts and work on them and, instead of a whole lot of wishful thinking, instead of a whole lot of great hopes without any foundation, that we shall each of us try to formulate, at whatever risk to our reputation afterwards, a series of things which we think could be done and should be done in preparation for the new world into which we are heading.

[958] Mr. McGilligan: It is very interesting to hear the Parliamentary Secretary presenting himself here to-day in this mood of inquiry and in a special mood of detachment from all these banking problems that fall for consideration on this Bill. I think when he asks for some concrete example of what the use of credit might do, he ought to be subjected to the discipline which Dickens talked of as having taken place in Dotheboys' Hall. When a boy was asked to spell window and spelt it w-i-n-d-e-r, he received a clap on the ear and was sent out to clean the building. The Parliamentary Secretary wants to know what credit could be useful for. In the debates at which he was not present on this matter one thing emerged and that was that local authorities were charged 4 per cent. in connection with a five months advance of something short of £1,000,000—and the Parliamentary Secretary wonders whether credit could not be usefully availed of. The Parliamentary Secretary presides over the greatest mess that the Government has yet accomplished— and that is saying a lot—and one of the things that emerged in respect of that mess is that local authorities, for a five months advance of something like £1,000,000, were charged at the rate of 4 per cent. and that was in relation to a thing, the selling price of which the Government guaranteed and the selling price of which, under the Parliamentary Secretary's auspices, is at a point that is making the people clamour for at least an explanation, if they cannot get economy.

The Parliamentary Secretary also wants to know if someone would only investigate and explore the mystery of banks and find out whether in fact their accounts are properly kept and whether we can see the true cost of the service they render to the community. Apparently he does not know that the Government, at the threshold of which he stands, have investigated that problem. We know that the banks astounded the community by announcing they were going to ask for an extra sum for the servicing of ordinary accounts. The Minister [959] originally held that matter up and then allowed them to have their charges. Surely there must have been an investigation of the costings of the banking system in relation to that matter, or were the Government just prepared to set general profits aside and say: “We will segregate the small matter of the cheques and the keeping of the small accounts and we will allow them to have their extra remuneration”? I suggest that the Government, of which the Parliamentary Secretary is something of an adherent, must have already investigated that matter. It is no mystery to them and he should ask them to allow him into the mystery that they have investigated, to which, apparently, they have found the answer.

I do not think anybody will be deceived by this pretence of detachment and open-mindedness on the part of the Parliamentary Secretary in this matter. The Parliamentary Secretary encroached on this matter of finance, credit, additions to our currency or to our credit, and of the inflationary effect they were having. There was an explanation of that matter, not very clear and not very complimentary to the Parliamentary Secretary, given by the Taoiseach yesterday, when the Parliamentary Secretary was absent, and he comes here again, questing and querying to know whether this matter of the parity of exchange, the inflationary effect of the expansion of credit, has been investigated and thinks if we could all get together although there might be some difference of opinion, we would find general agreement in such matters. He seems to take his lessons quickly, not by the impact of reason, but only of discipline upon himself.

In connection with this Bill, I have this chief objection to it, that if it had been introduced 25 years ago people might have said that it was not too badly out of date then, but it is now thrown to a somewhat disillusioned and dissatisfied people, at a time when the minds of people all over the world have got concerned with this matter of credit and whether credit is or is not a public matter, and whether it should [960] any longer be tolerated in the hands of private institutions or what are the varying degrees of control that should be established over this matter. At such a time the Government come in here and give us this Bill. I say that 25 years ago it would have been regarded as somewhat out of date; to-day it is an anachronism. Yet, a one-time revolutionary Government come here with this as the best thing they can do for a disillusioned community, that is conscious of its underdevelopment and conscious also, from what it has heard from outside, that there is some slack at any rate to be gathered up in these matters of credit control.

Fatigue is sometimes said to be the beginning of political wisdom. That is applied to the really out and out revolutionary. There is said to be always a limit to the extent of human endeavour and when people have spent themselves in revolutionary projects, fatigue comes. We did not know the depth of the revolutionary feeling in the Government until we saw the extent of the fatigue that has come upon them in this matter. What do they give us? An opposition to the theories—to the practice—obtaining nearly over the wide world. We are handing over whatever are the powers of the central bank. The reason I am not so disturbed over the particular method of control contained in this is because I do not think this central bank has any great powers. But, in any event, under the framework upon which a central bank is being erected here, we establish a control. The control is a governor, to be appointed by the Government, three directors from the banks and a possibility of five others and, when they are appointed, the governor is there for seven years and the others are there for five, and this House loses all control over them except in so far as it will, by a specific piece of legislation, set up a new system, but there is no link preserved between the Parliamentary authority or the Government and this association —no bridge as between them. There may possibly be induced some co-operation as between the two but, as far as legislation goes, there is no [961] necessity for even co-operation as between the ruling authority in the country and the bank.

The bank governor only leaves if he is disqualified under certain conditions or else if the other members of the board unanimously request him to leave, and the conditions with regard to the directors are much the same, except, I think, that they can only be disqualified. So, we establish eight or nine men—a maximum of nine. We do not know how they are going to be picked. No information has been given to us as to the qualifications that are going to be looked for in them. An amendment asking that certain things might be required of them was rejected and the Government are at large with regard to six out of the nine. Once they are appointed, for seven years as far as the governor is concerned, and for five as far as the others are concerned, after the preliminary period we lose all control over them and whatever functions they have in regard to the very vital matters of expansion or contraction of credit or any control they may have over interest rates—they have no control over the rate of exchange— whatever control they may have in these other matters, that is completely and entirely outside this House.

I have read before and I return to it, the statement made by Mr. Crowther in connection with the situation with regard to central banks. I am paraphrasing one part of what he has said. He said that in the post-war period, when there were so many examples of central banks being dominated by the disastrous financial policies of Governments, there came a re-action, there came rather a move, in which banks had to be divorced from any sort of Government association and then he continues:—

“There has been a reaction from these views. Private ownership of central banks may mean their ownership by, and control in the interests of, rich bankers or industrialists to the exclusion of the interests of the community as a whole. Since this is still a matter of acute political controversy in many countries of the [962] world, it must be enough to say here that, whether or not the State owns the central bank, it must necessarily exercise a considerable measure of control over it.”

—Where is the control we have over this bank—

“This follows inevitably from the very large and important powers which the central bank possesses.”

That takes away from my argument, because this Bill does not give the central bank very important powers—it denies them in the main.

“In fact”,

this writer continues,

“the modern tendency is for the State to own the central bank but for the actual control to be in the hands of a governor or a board appointed for a period of years, and more or less independent of political domination during that period. The dispute is, in any case, a somewhat artificial one. The importance of banking policy for the community at large is fully recognised nowadays, and no responsible Government, whatever its political complexion, could afford to surrender so large a portion of the attributes of sovereignty to an autonomous body.”

At one part of that, Crowther, being conservative, takes a particular line, but he comes back to the matter in the end—

“that no responsible Government, whatever its political complexion, could afford to surrender so large a portion of the attributes of sovereignty to an autonomous body.”

This is nearly an autonomous body. Certainly, for the period I have spoken of, it is an autonomous body, except in so far as it can be said of any institution in the State, no matter how free it may be, that the Government, by legislation, can at any time come down upon it. We are setting up an institution, and we set up that more or less autonomous body. With regard to the matters which these people have to deal with, I want to give one other [963] quotation. After reciting how power has got into the hands of a certain section of the community, the particular document goes on to say:

“This domination is most powerfully exercised by those who, because they hold and control money, also govern credit and determine its allotment, for that reason supplying, so to speak, the life-blood to the entire economic body, and grasping in their hands, as it were, the very soul of production, so that no one can breathe against their will.”

If we were setting up a real central bank, then it must be remembered that what we are doing is handing over, to whatever that particular set of individuals may turn out to be, the life-blood by which the entire economic body lives and giving them such a hold on the very soul of economic life that no one can breathe against their will. If this bank had the powers that central banks ordinarily have, that is what we are giving to nine individuals, and, once we establish them for seven years or five years, we lose our control over them. We set them up for good or for ill, and we say farewell to the control of those who hold the life-blood of the community, the credit upon which the State relies, the function of credit-working which has become recognised more and more as being at the very roots of all development of industry, agriculture and any form of production. I get away from that last quotation, which is from one of the Encylicals, to the last pamphlet I have here—a report by the Federation of British Industries, which is surely not to be regarded as an extreme type of body.

Mr. Dillon: Would the Deputy say what is the document from which he has been quoting?

Mr. McGilligan: The Encyclical “Quadragesimo Anno”. This is a pamphlet called “Reconstruction.” It is a report by the British Federation of Industries and they have just a paragraph on monetary and financial policy, in which they say:—

“The decisions of the Government [964] on this range of questions will depend partly upon international and partly on national considerations and developments. It is considered premature at this juncture to raise specifically points dealing with this problem, but the federation would at a later stage wish to formulate and express its views when there is a firmer basis upon which to build than exists to-day. Two things are agreed: Firstly, all plans for international trade are rendered precarious if they are subject to constant and violent exchange fluctuations; secondly, financial policy must be based primarily on the needs of industry and commerce. The Federation of British Industries desires to reiterate the view it expressed many years ago, that finance should be the servant of industry and not the master. The primary objective of monetary policy should be (1) to provide maximum employment; (2) to maintain prices at a figure at which production can be carried on with reasonable profit; and (3) to promote stability in the price structure and balanced production, both within the home market and in the field of international exchange at large.”

At this point, the federation makes the submission that

“although it is premature to attempt to arrive at decisions on financial and monetary policy, it is recognised that this is an essential element in reconstruction both national and international; special importance is attached to stability of exchanges and to future financial policy being based primarily upon the interests of industry and commerce.”

And the scheme by which that will operate will be through the ordinary joint stock banks in England, governed by the Bank of England, and the situation here will be that it will be the ordinary commercial banks, with some little impact on them by the central bank, but in so far as that central bank has control or any effect on the main things, it is again the Bank of England.

[965] The Government set out to give to the people of this country a new institution. It was to be one of the new progeny of liberated Mother Eire. We have analysed it here, and it turns out to be another of the boarded-out children of the Bank of England. We accept that position; we say we are tied to that position—and I do not mind people saying that is the situation as it has developed at the moment and there is no way of shaking ourselves free, but so far as the Bill is concerned, we never look to the day when we can get free and we never apparently even contemplated circumstances in which we might be driven to make some change. If that change is to be made, it will require new legislation. The bank would not even be given the power, should the necessity arise, to vary the rate of exchange. We simply take the old section of the 1927 Currency Act and we tie ourselves to the position that British money and our legal tender notes must be freely interchangeable, and although people like the Parliamentary Secretary, in pessimistic mood, may see a crushing of British finance, there is no question, notwithstanding all that, of establishing of what was described in The Economist long ago as an independent steering gear for our own currency. We simply tie ourselves on and have no independent steering gear of our own. We are attached to another moving concern and that, at a time, when it was said to be rather wallowing about in very rough seas.

Mr. Crowther, speaking of central banks at another stage, analysed some of the circumstances in which banks find themselves and ends up with this:—

“This is a pessimistic conclusion to our survey of the scope for banking control. It would be less than frank not to acknowledge it as such. But it does not mean that nothing can be done. On the contrary, there is room for a vast improvement in the theory and practice of banking policy. Few central banks are sufficiently aware of their responsibility for the material welfare of their fellow citizens. Fewer still are equipped to reach wise and prompt [966] decisions, and having reached them, to apply them by every means in their power. One of the tasks of the immediate future is to increase the responsibility of the central bank, to induce it to concentrate its powers on the quest for equilibrium, to act not merely in periods of crisis, but at all times as the governor and safety valve of an economic mechanism which is constantly prone to get out of hand.”

Are we giving any great concentration of powers in this to this group of people? If we are not, we are doing a still more dangerous thing in handing over powers to this group of eight or nine individuals whom we shall elect and to whom we shall then say goodbye for several years. Have we, in fact, given them any concentration of powers? Do we give them any chance of being responsible for the material welfare of their fellow-citizens? Do we think they are so equipped that they can reach wise and prompt decisions? Will they have any significant matter upon which to take a decision, whether it be wise or not?

There is one other volume which deals with credit and I quote from it because it brings me near the point which was so much in opposition—the forward point of view which has been expressed in certain parts of the House. A section of the book deals with banks and industry, that is with commercial banks and not central banks, and it says:—

“It is not enough, however, that banks should merely be safe places where people can place their deposits. They are, in addition, the chief providers of credit, without which industry cannot carry on. And, because they are the chief providers of credit, they must be in close touch with industry, watching its needs and helping its progress.”

Then, this significant phrase occurs:—

“The safety of bank deposits is of little value if it leads to a curtailment of industrial credit and so to economic stagnation.”

We are not industrially so far developed that it is unwise for us to stop [967] and ask whether there is stagnation, and whether the stagnation has been caused by any halt in the provision of bank credit.

A point put which has loomed largely in the debate here is the safety of bank deposits. We are told that there is a dilemma. Of course there is something of a dilemma between the point of security and the point of advance because, if the advance goes too far, it becomes a risk. Speaker after speaker has referred here on the question of the safety of bank deposits, to the great record which the Irish banks have. They have a great record but one wonders has no harm been done by over insistence on the safety of bank deposits. The safety of deposits is not exactly the final aim in banking. I wonder have we too great a standard on that, aiming at too great stability and too great security? I remember when I was investigating electricity matters, having it suddenly thrust upon me that the practices followed in that matter in this country were far behind the standards observed elsewhere. I found in that connection that it was well known amongst engineers that, on the Continent and in America, in regard to such matters as bridge building or any schemes of an engineering type, those who followed British practices were certainly playing for safety, but that they were piling up expenses against themselves that only wealthy countries could stand. I heard engineers debate that aspect of the matter and it was pointed out that, in such projects as bridge building, after every allowance had been made for stresses and strains, there had always to be a multiplication for a safety factor and the safety factor that the British employed was far in excess of the factor employed by any of these other countries.

In regard to electrical development, I found that if we were to follow the British practice while we could proceed with that development on lines which would satisfy all these tests, it would be so shockingly expensive that the development could hardly take place. We, therefore, moved away from these standards and we adopted [968] a standard more in keeping with that observed in some of the newer countries. Nobody can say that electrical development along these lines has been carried through at any great detriment to the country. Remembering all these things, one is inclined to ask whether by too great an insistence on the security of bank deposits we are not sacrificing a great deal of good that might be spread over an impoverished community by pursuing too closely one of the objectives of banking, the security of deposits. I do not say that deposits should be risked; I simply ask should it not be possible to relax some of the standards of security so as to give under such conditions as may seem proper, some better aid to the community when they very definitely need it.

On that matter, I spent some weeks past in investigation on a committee set up to consider the question of the provision of credit for the members of the agricultural community. The scheme propounded for credit in the name of Senator Counihan still stands and will be promulgated by members of this Party when the proper opportunity arises. Although the scheme was not favoured by all those with whom I came in contact, I think I can state without any breach of confidence that there was agreement that there was a problem of credit affecting farmers in the country.

There was disagreement as to the size of the problem and there was definite disagreement as to the way it should be met, but that there was a problem nobody doubted. As to the fact that there is going to be post-war, or in preparation for the post-war period, a still bigger problem, there was no doubt in anybody's mind. That credit was part of the solution of it was certainly contended. Senator Counihan through his plan tried to meet that problem and various other people definitely agreed. On that, there is bound to be disagreement, but there is no necessity to go into it now.

I said on another occasion that if we can keep ourselves aloof from the war, we cannot keep ourselves aloof from [969] the new ideas the war is creating, nor can we hope to keep this community of ours so much in the backwater that it will not be affected by the new schemes of which the world is thinking. All over the world people are saying that if democratic institutions win through this war, they have got to win through the post-war period as well. They have got to do this by giving better standards of living to the people living in these communities so that they may not in the future look longingly at the hectic period when another system held sway. All over the world plans are being thought out for adjusting wages to the cost of living. Schemes are being considered as to how best a reasonable standard of living can be maintained for the community generally. Many people are seeking, in terms of nutrition, to ascertain what is required to keep people in a sound state of health and to have that as a standard on which to base productivity.

Then schemes are being discussed in regard to industry. People are considering whether ever again the great mass of production in the world will be handed back to private enterprise, whether the community will ever again relax its hold on such essential things as coal, transport, etc. People are thinking of what is the best way of promoting enterprise on the security and stability of Government backing. When it comes to international matters there are schemes on foot, whereby the old system of blocked exchanges will never be allowed to recur, schemes whereby nations will bulk their purchases through some such institutions as an investment corporation, and under which, if a nation sells goods to another country, it will be obliged to accept in payment other goods from that country. All these matters hinge on to the big question of credit. It is the life-blood, as was said in the Encyclical, of the community in trade. Here we are in this country in the year 1942 with all these examples of what other countries have done, and our only contribution to a study of these problems is to set up a bank with a board consisting of a governor, who shall hold office for seven years [970] and a number of directors who shall hold office for five years. We throw them adrift from the Government and shun them because we think it would be a temptation to Governments which are financially embarrassed if they are too closely in touch with the monetary world.

There is a great temptation, it is suggested, because they may play havoc with the private banks in the effort to expand credit. Of course that may happen, but let nobody think that the central bank will be able to stand against any Government that comes in here and that is dishonestly-minded. Such a Government will change the system if it wishes, and introduce a system that will be miles away from this.

I suggested to the Government at a very early stage of this that there should be some touch between a central authority on the monetary side and the State—those who represent the State; those who represent the community. We could have spent our time valuably here trying to find out what was the proper relation to establish between that authority and the State. We could have discussed here, pro and con, what are the systems in vogue in other countries, and whether we could adopt them and make some sort of institution of our own out of them, doing it with our eyes open to the dangers, trying to protect against the dangers, but at the same time trying to get some of the advantages which other countries have got. But fatigue has overcome the Government.

It is not merely that they are resting on their oars. They have sunk back through the years, at least 25 years, when they give us as our new solution in the year 1942 the handing over of the function of controlling credit in the interests of the community to this group of people. What the personnel is to be only the Minister and his colleagues know. All I know is that when we establish them we lose our control over them. That is what the House has decided on. The only thing that pleases me in that connection is that, having given that group of people their independence, their autonomy, so that [971] they cannot be disturbed except through the unanimous recommendation of their colleagues or permanent ill-health, it is possibly a good thing that we have so narrowly limited the powers of those individuals with regard to banking, currency and the expansion of credit.

There are three marks by which any good central bank can be known; one is that they have some control over credit, its expansion and contraction; the second is that in some way or another—and the more immediately they can do it the better—they can affect interest rates; and the third thing is that they can control the exchange rate as between currency in the country and its value outside against whatever it is to be exchanged for. Judged by those three criteria, this is not a central bank. It is the Currency Commission recreated, with the consolidated note issue taken from them. Why any Government, in the year 1942, should have thought it desirable to foist that upon the people and call it a central bank I do not know. But if it has not been explained what the defects of that institution are at the moment, the defects will be found out in practice. We have been told by the Taoiseach and the Minister for Finance that that institution can affect the expansion and control of credit. I doubt if they can; practice will show. The Minister has tried to show that there are some such powers; we will see how they operate. Of course when we come to ask the Minister eventually why, when at a particular moment the need arises, the bank does not act, then the Minister can say: “It is too bad, but the House took a decision when we appointed those people, and they are outside our control.” Under this Bill, we are saying goodbye to a central bank. As far as the community is concerned, we are saying goodbye to the control of credit that most central banks operate for the benefit of the community, under communal guidance, in other countries.

Mr. Cogan: I am glad that I gave way to Deputy McGilligan. He has made a speech which showed more progressive and clear-headed thinking [972] upon economic and financial matters than any speech which we have heard in this House for a considerable time. This Bill stands condemned because in the first place it puts the control of the central bank outside this House, outside the Government and the Parliament of the nation. It stands condemned also because it fails to give to that central bank control over the expansion of credit and rates of interest which it is essential that a central bank should have. It will be said, and indeed has been said, that that Bill is at least a step in the right direction; that it is some advance on the condition that prevailed before it was passed; that it at least sets up some form of central bank. But I hold that a Bill which purports to effect a reform, and which does not in reality bring about any reform, does more harm than good, because it delays the carrying through of a really effective reform.

It has been said in favour of placing the central bank outside the control of the Government that the same applies to the judiciary in this country, and that it is desirable that they should be independent. There is no comparison whatever between the judiciary and the directors of the central bank. The courts have no function in regulating, determining or controlling national policy. The directors of the central bank will have a very important function in controlling the economic and financial policy of this country. Because they have that function—a function which enables them to override any action of this House, and to hold up any progressive measure initiated by this House—it is desirable that this House should have direct control over them. Under this Bill, that control has been deliberately placed outside this House and beyond the reach of the Government. Again, this Bill gives the central bank no real power to expand credit, and no real power effectively to influence rates of interest.

Deputy Mulcahy yesterday sought to amend Section 7 of the Bill so as to give effective power to the central bank. If he had succeeded in getting that amendment through, I am afraid [973] it would have caused apoplexy amongst some of the orthodox financiers of this country. We might have heard of their being removed to a mental hospital, or that they were fleeing from the country. There is no doubt whatever that if the power that he sought to give to the central bank had been given it would have fundamentally altered this Bill; it would have changed it from being a bad Bill into being a good Bill. It would have made it a measure under which the central bank, if it so desired, could influence rates of interest and provide for an expansion of credit. Deputy Dillon sought to waste the time of the House by disputing the ownership of banking credit. That question is not of real importance, because whether the banks own credit or not—and everybody knows that they do not—currency and credit are so important that it would be the duty of the State, if it considered it necessary, to take over control. What could we do if we had under this Bill real control over the expansion of credit ? I have argued that the real thing we should do is to raise the income of those who are producing essentials in food and fuel. I repeated that so often that the Minister for Finance accused me of playing the same tune all the time, the tune that the old cow died of.

Mr. O Ceallaigh: Was I not right?

Mr. Cogan: No, because the cow is not dead yet.

Mr. O Ceallaigh: The Deputy did his best to kill her.

Mr. Cogan: I believe when the Minister made that suggestion that by the old cow he meant the agricultural industry. That old cow is not dead yet, but she is dying under the operations of the present Government and the financial system. The old cow is not dead ; she has still a kick left, and the Minister might find out that before very long. There is only one way of bringing prosperity to this country, and that is to remove the disparity that exists between the income of those who produce food and fuel, and [974] the income of those who are fiddling around, pretending to be busy, but really contributing little towards the prosperity of the State. Until the income of those who are directly producing food and fuel is brought up to the level of those who produce comparatively little there will never be prosperity here. The only way to bring the income of those engaged in the production of food and fuel to the level of those not so engaged, is by spending more money on agriculture and on food production. There can be no expansion of prosperity without expansion of credit. The British and other Governments engaged in war could not expand production in war industries without expanding credit.

We cannot expand production here until we increase the income of those engaged in agricultural production by spending from £10,000,000 to £20,000,000 more on agriculture. The Minister may ask how is that money to be raised. It cannot be raised by taxation of the present national income. It must be raised by borrowing. We cannot borrow now because the rates of interest would be too high. In addition to that, those who at present control finance if they do not approve of that policy might say: “We will not allow you to have that money.” They could hold up such expenditure because if the Government floated a loan for the development of agriculture they might say that they would not subscribe. Under Section 7 of this Bill the central bank has no power to take up such a loan. Therefore the power of expanding credit is not vested in the central bank, and, the appointment of directors as well as control of the central bank, is put beyond the reach of Parliamentary or Governmental control.

Mr. O Ceallaigh: In a way I rather regret that the Final Stage of this Bill happened to be taken on a day that was probably not the most convenient day for most Deputies, some of whom have been called away.

Mr. Byrne: There is very little interest in the Bill when there are only five Deputies in the House.

[975] Mr. O Ceallaigh: I do not think that is correct. There has been a great deal of interest in this Bill, but we did not see much of the Deputy during its progress.

Mr. Byrne: I was here the whole time.

Mr. O Ceallaigh: The Deputy has not contributed one sentence that would make the Bill a better one.

Mr. Byrne: I was here to learn.

Mr. O Ceallaigh: The Deputy had the opportunity to learn, but he had not the courtesy of attending or speaking on the Bill, and consequently he has no right to criticise the absence of anybody else.

Mr. Byrne: It is a pity——

An Ceann Comhairle: Order!

Mr. O Ceallaigh: Many Deputies who spoke helped the Bill, and if the Deputy had the ability he could have spoken, then he might criticise other people. It is regrettable this stage happened to be taken on such a day, because I am satisfied that many Deputies would wish to contribute to this debate, many to criticise the Bill and, perhaps, some to say a word in its favour. We had serious and interesting contributions to-day from Deputy Dillon, Deputy Mulcahy and Deputy McGilligan. Deputy McGilligan expressed pretty freely his dissatisfaction with this measure that is now in the concluding stage. Likewise Deputy Mulcahy was not satisfied, but not dissatisfied to the same extent, perhaps, as Deputy McGilligan. I do not know whether Deputy Mulcahy or Deputy McGilligan spoke for their Party. I rather think that they did not pretend to speak the views of the Party, because at different stages we had contributions from the leader of their Party, indicating that he did not hold their views, certainly not the views of Deputy McGilligan, and, to some extent, not those of Deputy Mulcahy either, on many of the important sections. It is an important Bill, and one that ought to be—and, generally speaking, was—discussed in an atmosphere [976] removed from the normal bitter Party tone to which we have become accustomed in this House.

General Mulcahy: I resent the statement that other measures are discussed in this House in a bitter Party way.

Mr. O Ceallaigh: Mostly.

General Mulcahy: The Minister is unjust to the House.

Mr. O Ceallaigh: I am not—and particularly in the last year.

General Mulcahy: I urge the Minister to deal with the Central Bank Bill.

Mr. O Ceallaigh: I am not maintaining the Deputy was in that mood to-day, but Deputy McGilligan was.

General Mulcahy: In what mood ?

Mr. O Ceallaigh: Party mood.

General Mulcahy: Bitter Party mood?

Mr. O Ceallaigh: Decidedly, making all the political capital he could out of it for purposes that I suggest are not justified. That was not the atmosphere generally in the discussions.

General Mulcahy: I suggest to the Minister that in discussions on the Central Bank Bill there has not been the slightest suggestion of Party spirit.

Mr. O Ceallaigh: There was in some speeches on more than one stage of the Bill, certainly.

General Mulcahy: I am glad the Minister did not mention it until now.

Mr. O Ceallaigh: It is true of most of the measures and Estimates discussed here.

General Mulcahy: There might be more of a Party attitude in it than the Minister suggests.

Mr. O Ceallaigh: I am not saying that it is all on one side. I am not suggesting that, but I suggest that where it has occurred—and it has occurred pretty frequently in recent [977] months—it did not begin this side of the House. However, let us get away from that. I want to mark and to mark with emphasis the different opinions that have been expressed on this measure by leading members on the Front Opposition Bench. We had Deputy Cosgrave taking the attitude that things were well enough, that they should be left alone and that there was no necessity for a Central Bank Bill. What he said practically was that the Currency Commission was there doing the work, making a good job of it, so why change it ? Deputy McGilligan took a contrary view, and so did Deputy Mulcahy, to some extent. This Bill does, as I believe, make a big contribution to important developments in the financial and economic life of the community, or gives the opportunity to do so. Deputy McGilligan thinks that this Bill is 25 years behind the times.

I said on other stages of this Bill that, situated as we are and as our financial institutions are, I had failed to discover, and therefore had not put into the Bill any means by which we could institute a central bank that could control completely credit and currency here. I frankly admit that I have not found a remedy for that position. It would be desirable and wise that we should have a central bank that would have complete power, like other central banks, to control currency and credit. But that is not possible in the circumstances in which we find ourselves—circumstances which arise out of our long and intimate financial and economic association with Great Britain, the institutions which have grown out of that situation and the method by which they have grown, with liabilities and assets on one side and on the other. In addition, we have the factor that, much against our will, our country is partitioned. All these considerations render the situation most difficult and it has baffled me so far, to find any complete remedy. I am obliged to confess that, at present, I can see no machinery which we could adopt which would give a central bank set up in this country the power completely to control credit and currency.

I freely admit that some Deputies on [978] the Opposition benches—and, particularly, on the front bench—contributed valuable help by speech and amendment. Generally speaking, that help has contributed to making this Bill a better Bill than it was when introduced. I cannot say that Deputy McGilligan distinguished himself by offering any serious amendment that would make the Bill a more efficient instrument for doing the things that he says are essential if this central bank is to have any power at all over credit and finance and the cost of credit and money here. Deputy McGilligan spoke at length of the absence of power in the proposed central bank. I do not remember one amendment in his name that definitely set down in black and white the additional powers he thought should be given to the bank. I should have been glad to see down in black and white from him a definite proposition.

General Mulcahy: He despaired of the Bill from the start.

Mr. O Ceallaigh: He criticised at length to-day, again, the nature of the board and the powers of the Government over the board. He did not put down any amendment at any stage to suggest another type of board that would be more effective in achieving the object he had in view. He was not here to move many of the amendments he did put down. It is true, as Deputy Mulcahy says, that he expressed disapproval of the Bill from the beginning. He did make a number of criticisms and pointed out where he thought it should be changed here and there. If he were serious and were doing his duty fully as a Deputy, anxious to make it a better Bill, as some other Deputies did, he should have put down his propositions in black and white and have them debated. He did not do that except in regard to matters of minor importance. In the case of most of these amendments, he was not here to move them.

I think that the Bill is a very considerable contribution towards the setting up of a central bank that will have a very large measure of power to control and expand credit. I do not think that anybody can deny that that power is contained in the Bill. [979] Deputy Dillon raised a question as to who will own that credit—the bankers or the people. So far as credit can be regarded as a commodity—as it is regarded by some people—that commodity, like every other commodity, will be under the control of the Oireachtas and will be governed by the authority given by the people to the Houses of the Oireachtas. The central bank will have power to watch over and guard the finances, currency and credit of the country. Definite power is being taken in the Bill to keep that body in close contact with the Minister for Finance of the day, so that he will be advised in case of any danger or emergency. Even without any danger or emergency, the Minister will be in close contact, by statute, with the financial authority, that is, with the board of the central bank, and will be kept informed and advised, from day to day or from month to month, as to any developments and changes which may be necessary.

As I have said before, this Central Bank Bill is not the last word on central banking in this country. It is an important contribution to the development of central banking here but, no more than any other Bill passed through this House at any time, it is not necessarily the last word on the subject. If the Minister for Finance is advised, after due examination of all the circumstances by the board of the central bank, that further powers are necessary and that further steps should be taken to control financial operations, I have no doubt the Minister of the day would, if he thinks it wise, come to the Dáil and ask for those further powers. At any rate, there is full power for the Minister to consult frequently with the board and be advised on any developments that may be necessary hereafter.

Many people are of opinion that central banks can do marvels, that by some kind of monetary manipulation all the evils from which we suffer can be made to disappear, as if by the waving of the wand of a central bank board. I have no delusions as [980] to what this central bank will be able to achieve. I hope it will secure the stability that Deputy McGilligan thinks so little of, but which I think is a valuable asset to us. I hope it will secure that the good name of our banking system, of our bankers and of our people generally in financial matters, will continue to develop and be made even more manifest. The bank can help in a variety of ways, perhaps, to reduce the cost of credit here. That would be a very important and very useful function.

Without donning the mantle of prophet, as Deputy McGilligan did to-day, I agree that we may be faced with very difficult situations here after the war, and even before it ends. We may be obliged to face changes of a radical kind in the economic sphere. I am hopeful that, before the necessity to face such changes arises, the board of the central bank will have had time to examine the whole financial structure here and advise the Government of the steps necessary to make our economic future secure, so far as that can be done through the control of credit and finance.

Deputy McGilligan quoted Mr. Geoffrey Crowther several times to-day. I have paid some attention to the writings of Mr. Crowther; they are worthy of study by anybody interested in credit and central banking. However, I do not think even such an authority on monetary affairs as Mr. Crowther would be satisfied that banks can do the things that Deputy Dillon—and, to some extent, Deputy McGilligan—suggested they can do. I might quote one short paragraph, and apply it to these two Deputies, from this authority, on whom Deputy McGilligan places such reliance. It is from page 47 of Crowther's An Outline of Money:

“Thus the bank does not ‘create’ money out of thin air; it transmutes other forms of wealth into money. Even the mediaeval alchemists never hoped to make gold out of nothing; their highest hope was to transform lead into gold. The banker's power is not even so great as this, for he cannot change a worthless substance into a valuable one. But he can [981] turn immobile wealth into the mobile (or ‘houid’) form of wealth known as money. He takes the immobile wealth as his asset and gives his I O U (which is money) in exchange. This is the very essence of the banker's business.”

On the next page, dealing with the same topic, Mr. Crowther says:—

“ ‘Creation’ is thus hardly an exact description of the method by which bank-money comes into existence, and it should never be used without the qualifications that have been discussed being borne in mind. Before a bank can ‘create’ fresh money, it must have cash equal to at least 10 per cent. of the contemplated ‘creation’.”

That will give some satisfaction to Deputy Dillon. Mr. Crowther goes on to say:

“Even then the money cannot come into existence without being used to acquire some real wealth for the bank, or without increasing the bank's liabilities which are payable in cash or on demand. But even when these qualifications are fully allowed, the banks' power still remains an enormous one. There are limits to their actions, but within those limits the banks retain a very large power to determine both the quantity of money in existence and the persons into whose hands it shall be placed.”

The power attributed to central banks by the author of that book is given, to a certain extent, to the central bank we propose to set up under this Bill. It is limited, as I have said already, by circumstances here and by circumstances over which we have not complete control. I hope that credit that can be expanded and that can be created will be expanded or created for the service of industry in this country—industry, even including agriculture. Up to the present, this Government or the last Government have had no difficulty in securing loans in this country. We have had no difficulty in securing credit for State purposes. Our people are people who are thrifty, we have had large savings here, and [982] whenever it has been necessary to call on those savings for the service of the State, the people have readily responded, and so have the banks. People may differ as to what we have had to pay for that credit and the use of that money, but in relation to the cost of money elsewhere, generally speaking, I do not think it can be said that we have paid unnecessarily highly for the credit that has been advanced to us here by our people or through the banks.

Deputy McGilligan quoted, I think, from some report of the Federation of British Industries, that finance should be the servant of industry, not the master, and I agree. I agree that it should be the duty of finance to be at the service of the State for whatever useful purposes the State requires to use it. I agree that it is the duty of finance and of financial institutions here as well as elsewhere to help the State to provide employment and, so far as the Government of the day think wise or proper, to help in every way to improve the lot of the people and the lives of the people. For all these purposes it is right and proper that money should be asked for, and made available by the financial institutions within the State. As I have said, so far as the financial institutions here have been asked, up to the present, to provide credit and moneys for these purposes, they have not been denied.

As Deputy McGilligan stressed, our banks, for long periods, have had the name of being very safe, reliable institutions. I agree with Deputy McGilligan that the safety of bank deposits is not the sole reason for the existence of the banks, nor has it been the sole reason for the existence of the banks in this country, but I do not agree with Deputy McGilligan in making light of the desire for safety and the desire for security. Because of the desire for safety, and because of the safe way that our deposits and our savings have been managed and controlled by the banking institutions of this country and by the bankers, we have reached a position, the value of which Deputy Cosgrave has so often stressed in the course of the discussions [983] on this Bill. We have reached that position, and I would not like to do anything that would take away from the good name that we have got here in that regard. I should not like to see us getting away from safety and security, even in connection with the developing of industry in this country, to such an extent that we might undermine the secure position that we now enjoy and might reach the position that was reached 12 or 14 years ago in the United States of America, where so many thousands of banks closed their doors within a period of 12 months. I am glad that the banking institutions here have such a good name, and I hope they will continue to deserve it, but I do believe that it may be necessary, in the difficult times to come, that credit should be more easily and more readily made available and, perhaps, more cheaply, too.

I believe that the central bank that we are setting up will help to achieve these objects. It is not, as I say, the last word on the matter. It is a beginning: to set up institutions here such as most other countries already enjoy. It is a step that is bound to have important reactions sooner or later on our whole financial and, perhaps, economic development, but the powers, such as they are, belittled as they are by Deputy McGilligan and some others, are important powers, powers which, used wisely and prudently, will be of great advantage and service to the State and the community, and which, placed in the hands of prudent men, can be of very great value in the future development, even in dangerous and difficult times, of the economic, financial and industrial life of this country.

Question put and declared carried