Central Bank Bill, 1942—Second Stage.

Question proposed: "That the Bill be now read a Second Time."

Tar éis a thuruis fhada dhuamhair tríd an Dáil tá an Bille seo á leagadh fé bhráid an tSeanaid anois chun go n-aontóidh siad leis. Ar an mbealach dó tríd an tigh eile rinneas athruithe maithe móra ar an mbun-Bhille. Admhuím go fonnmhar go bhfuaras congnamh mór chun feabhas do chur air mar a bhí sé ar dtúis. Cé gur rí-fhada is gur géar an díospóireacht do rinneadh air, ba léir gur mhian le gach uile dhuine teacht ar an réiteach ab fhearr ar na fadhbanna líonmhara do nochtadh.

Ba mhaith liom anois trácht beag gairid a dhéanamh ar an gcuma inar fhás an bhancaereacht cheannais san aimsir seo agus ar chuid de na cúiseanna ba bhun leis an bhfás san. Leis na blianta fada anuas, o am éigin i bhfad roimh an gcogadh atá anois ann, tá ag síor-mhéadú ar an gcuristeach a dhéanann rialtaisí ar fuaid an domhain ar chúrsaí eacnamaíochta. Tá daoine ann adéarfadh gurb ionann an Bille seo agus an cur-isteach san do dhéanamh ar chúrsaí airgid chó maith. Ní bheadh, ámh, dearcadh dá shórt ceart ar fad. Deireadh rialtoirí agus rialtaisí riamh is i gcomhnaí gur chuid dá réimhcheart píosaí monaidh agus scruith a dtíortha féin fé seach do thabhairt amach.

De bharr córais bhancaereachta nuaaimseardha d'fhás ní bhíonn ina phíosaí monaidh ach beagán beag den airgead iomlán a bhíonn i gcúrsaíocht. D'fhéadfaí airgead bainc a thabhairt ar fhurmhór an airgid sin. Diaidh ar ndiaidh iseadh chuaidh an nóta bainc i dtreise agus is iomdha bliain d'imigh thart sarar fhéad sé cúrsú chó héascaidh saoráideach le píosaí monaidh agus muinín do mhúscailt ag na daoine ann. Nuair a tháinig san b'éigean don Stát cur isteach ar an gcúrsa agus slánchoimeád dlíthiúil áirithe do chur i bhfeidhm maidir le nótaí bainc do thabhairt amach agus do chaomhnadh. Tháinig as fás breise na bancaereachta go bhféachtar ar thaiscí bainc mar shórt áirithe airgid díreach mar a féachtar ar nótaí bainc. An méadú tháinig ar uimhir na dtaiscí agus ar uimhir na seiceanna a húsáidtear chun íocaíochtaí ilghnéitheacha dhéanamh, is mó go mór fada é ná an méadú ar líon na nótaí bainc, na bpíosaí airgid agus na nótaí dlí-thairgthe a thugann Stáit amach. Má thagann as athruithe ar mhéid an airgid bhanc-dhéanta go méadóidh no go laghdóidh soláthar an uile shaghas airgid, déanann san deifir do réimhcheart an Stáit maidir le píosaí monaidh agus nótaí dlí-thairgthe do thabhairt amach. Mar sin de, de bharr na bhforbairtí i mbancaereacht na haimsire seo níorbh fholáir don Stát ina lán cásanna comhachta nua do ghlacadh chuige féin chun oibriú agus rialáil do dhéanamh ar mhéid an chreidiúnais bhainc i gcoitinne. Dá bhrí sin is féidir a rá, i dtaobh Bancanna Ceannais agus údaráis monaíochta eile do bhunú chun bancanna tráchtála do mhaoirseacht agus do rialáil, go dtáinig sé go do-sheachanta as na forbairtí agus na hathruithe ilghnéitheacha thárla i gcúrsaí bancaereachta agus monaíochta.

Fás diaidh ar ndiaidh fás na bancaereachta ceannais agus ní hiontuigthe go riachtanach gur fhás sí san aon tslí amháin sna tíortha úd is túisce ina raibh Bancanna Ceannais. Ní raibh sna Bancanna Ceannais is sine ar dtúis ach bancanna tráchtála ach thárla go ndearna Bancanna Ceannais díobh ar ball de bhuadh a dtábhachta agus a mórcháile.

I gceann an naoú aois déag is beag tír san Eoraip ná raibh banc inti agus ceart aige chun nótaí do thabhairt amach chó maith le príbhléidí agus feidhmeanna speisialta. Tar éis cogadh na mblian 1914-18 bhí córais mhonaíochta agus airgeadais a lán de Stáit na hEorpa á suathadh go mór. Le linn bheith ag iarraidh an tréchéile go léir a tháinig do shocrú ba ró-léir an gá bhí le córas bancaereachta ceannais. Mhol Códháil Airgeadais Eadarnáisiúnta i mBruiséal i 1920 do gach tír ná raibh Banc Ceannais cheana aici ceann do bhunú chun córais mhonaíochta do dhéanamh agus do choimeád daingean do-chorraithe agus fós ar mhaithe le comhar eadarnáisiúnta. An Chódháil Airgeadais a comóradh i nGenoa i 1922, mholadar san freisin go mbunófaí Bancanna Ceannais ag tíortha ar mhian leo nóteisiúint fhónta aon-chineálach do bheith acu agus urlámhas do choimeád ar a gcúrsaí airgeadais féin. Luigheadh air sin arís ag Códháil Eacnamaíochta an Domhain i 1933. Is fiú a thabhairt dar n-aire gur bunuíodh trí bancanna ceannais ar fhichid i dtrí stáit fhichid idir 1921 agus 1936. Fágann san go bhfuil banc ceannais dá chuid féin le fáil i nach mór gach aon tír ar fuaid an domhain mhóir a bhfuil tábhacht ag baint léi o thaobh na heacnamaíochta.

An Coimisiún Airgid Reatha so againne atá ag cólíonadh roinnt d'fheidhmeanna bainc cheannais cheana féin is amhlaidh a bunuíodh é tar éis do Choimisiún Bancaereachta na bliana 1926 san do mholadh. Thuig an Coimisiún san nárbh fhéidir féachaint ar na conclúidí shroiseadar i dtaobh puintí tábhachtacha áirithe mar chonclúidí do-athruithe agus go gcaithfí iad d'athscrúdú uair éigin de bharr an athruithe ar na coinníollacha eacnamaíochta ar a rabhadar bunuithe agus, i dTuarasgabháil Mhionlaigh ón gCoimisiún, moladh coimisiún fiosrúcháin eile do bhunú i gceann cúig mblian. An Coimisiún Bancaereachta cuireadh ar bun i mí na Samhna, 1934, ghlacadar as láimh a leithéid sin d'athscrúdú do dhéanamh. Mholadar comhachta breise thabhairt do Choimisiún an Airgid Reatha agus banc ceannais ceart do dhéanamh de, rud atáim a thairgsint a dhéanamh anois.

I feel I am right in assuming that Senators are sufficiently conversant with the main contents of the Bill to enable me to dispense with a detailed analysis. I shall confine myself to the circumstances and events which led up to the preparation of the Bill.

The Currency Commission, which already performs some central banking functions, such as the issue of legal tender notes, was set up following the recommendation to that effect by the 1926 Banking Commission. This commission appreciated that its conclusions on a number of important points could not be regarded as final and that they would require reexamination in the course of time as a consequence of the change in the economic conditions on which they were based, and the establishment of a further commission of inquiry after an interval of five years was recommended in a minority report submitted by the commission. Such a review was undertaken by the commission set up in November, 1934, which reported in March, 1938 and recommended that the Currency Commission should be given additional powers and transformed into a central bank proper.

The main additional powers which the 1938 Banking Commission recommended should be given to the new banking institution may be mentioned briefly:—

(1) to rediscount bills of exchange and to make advances against the collateral of Government securities to commercial banks and other credit institutions;

(2) to fix minimum rates for these transactions and to publish them from time to time;

(3) to buy and sell fixed-interest-bearing securities of a gilt-edged character, subject to the condition that any Irish Government securities so bought should have been outstanding for at least two years;

(4) to receive non-interest-bearing deposits from public authorities, banks and other credit institutions.

Under existing provisions our commercial banks are able to obtain legal tender notes from the Currency Commission against the surrender of sterling assets. As all Irish banks possess large sterling holdings, they can readily obtain whatever amounts of Irish currency they may require. That is the reason why the absence of other methods of obtaining funds from the Currency Commission has not created any difficulties for the banks.

It is desirable, however, that in addition to being able thus to secure legal tender notes from the central bank commercial banks should also be able to secure accommodation not necessarily in the form of notes but by way of credit in the books of the central bank through the rediscounting by the bank of commercial and agricultural bills and through the granting by the bank of advances against specified securities. This form of credit accommodation is often more convenient than the receiving of legal tender notes to the same amount.

In no country in the world does the banking system normally possess enough cash to meet all its potential liabilities. If all the depositors wanted to withdraw their deposits at the same time in the form of cash the banks could not provide the cash. But normally all depositors do not want to do this at the one time. At certain times of the year, e.g., at the end of the month when cash is drawn for salary payments or at the end of the half-year when various dividend or tax payments have to be made, or during the holiday, harvesting or marketing seasons there is a heavy drain on the cash reserves of the commercial banks. Moreover, in times of intense business activity or when the balance of current payments moves against a country and thus reduces the basis of bank credit, the strain caused by the regularly recurring factors just mentioned is aggravated and may sometimes cause a crisis. In the absence of a central bank each of the commercial banks would have to carry an excessive and unremunerative amount of cash reserves to meet periods of financial strain or other emergency; whereas with the central bank to fall back on at such times a substantially smaller cash reserve is sufficient.

In the case of an emergency, whether arising externally or internally, it would be most advantageous that the central bank should have the necessary powers to meet any currency requirements by an extension of credit against assets other than those normally eligible to be exchanged for legal tender notes. For example, in the event of an international crisis that caused a freezing-up of gilt-edged securities in the London Stock Exchange coinciding with a crisis affecting one or more banks in this country, it is desirable that the Irish central bank should, in such circumstances, be able to act as lender of last resort. Banking crises have fortunately been spared to this country, but it is essential to provide for all contingencies. A central bank, therefore, performs the essential duty of providing the necessary cash and credit against acceptable securities at all times, but especially in times of necessity.

Power to rediscount first-class commercial bills and bills drawn or issued for agricultural purposes or based on live stock as well as other bills is accordingly proposed for the monetary authority in this country.

The quantity of commercial bills available of a type which would be eligible for rediscounting is small, the reason being that business here, as indeed in a great number of other countries, is to an increasing extent being financed by bank overdrafts and not by bills that are repaid at maturity. A number of such bills is, however, available and it is proposed that the central bank should be empowered to rediscount them. To widen the field of eligibility, the period of maturity of bills which may be accepted has been lengthened to one year for agricultural bills, and six months for other bills. A provision has also been added to enable the central bank to rediscount Exchequer bills and bills of local authorities. Provision for the rediscount of these two types of bills was not recommended by the Banking Commission. The Government and Dáil Eireann, however, felt that their inclusion was desirable in order to extend, as far as possible, the types and volume of bills to be rediscounted. Exchequer bills, or Treasury bills, as they are generally called elsewhere, are eligible for rediscount by most central banks. Bills of municipal authorities are also eligible for rediscount by a number of central banks.

In addition to rediscounting of bills, it is proposed that the monetary authority be empowered to make advances against the collateral of Government securities, large amounts of which are held by our Irish banks. The exercise of the power of rediscounting bills and making advances against specified securities will not necessarily be reserved for contingencies such as I mentioned earlier. The central bank will publish its interest and discount rates and specify the conditions on which it is prepared to grant accommodation, and it will then be for the commercial banks to approach the central bank if they require such accommodation.

Even when no extensive business is done by a central bank in rediscounting bills or making advances, the fixing and publishing of a discount rate is still a fact of special significance. When the commercial banks are approached by persons who have agricultural bills or commercial bills of exchange to discount, and when the central bank has published its rediscount rates for such types of bills, the commercial banks concerned will, of necessity, have regard to the periods and rates of rediscount quoted by the central bank.

When bills are rediscounted and advances against Government securities granted to other credit institutions, the initiative is taken by those who wish to obtain facilities from the monetary authority. When the latter intervenes on its own initiative to purchase or sell bills or Government securities such interventions are known as open market operations. Action of this kind has for its purpose the influencing of general credit conditions. It may be prompted by several different reasons, and the actual object of any particular operation will depend on the conditions obtaining at the time.

There are times—such as a period of depression—when the monetary authority deems it necessary deliberately to expand the cash basis of the whole banking system. It does so by buying securities in the stock exchanges, thus transferring cash to somebody else. If the seller is a bank, then that bank's cash reserve is increased, while its liabilities are unchanged, and it is, therefore, in a position to lend more freely. Even if the seller is not a commercial bank, the cash received by him is eventually deposited with his particular bank, and thus increases the cash reserve of that bank. The net effect will be that deposits and cash reserves will expand, and the commercial bank or banks concerned will thereby be in a position to lend more freely and to set the wheels of trade and industry in motion again.

These operations may be used by the central bank to provoke expansion or contraction in loans granted by commercial banks, or changes in the interest rates charged, or for both these purposes.

As I mentioned already, the 1938 Banking Commission recommended that any Irish Government securities should be outstanding for two years before being bought by the central bank. The purpose of this was to prevent any possible inflationary financing through too easy access by the Government to the central bank. Objection was raised in Dáil Eireann to this restriction, and amendments to have it removed entirely were moved by some Deputies. The Government gave full consideration to the proposed amendments, and decided to meet the unofficial amendments proposed as far as possible. Accordingly, Ministerial amendments were moved, deleting the requirement that Irish Government securities must be outstanding for two years, and providing instead that the central bank may buy Irish Government securities or any securities of public authorities which have trustee status and have been offered for public subscription or tender before being bought by the central bank, and which are officially quoted on the Dublin and Cork Stock Exchanges. Before any security is quoted on the stock exchange, one of the factors considered under the present rules is whether two-thirds of it have been subscribed by the public. This is to ensure that the reactions of the investing public to the new security are fairly well tested before it is officially quoted. Ample savings exist in this country to facilitate borrowings by the Government, by local authorities, and any others desiring to raise loans. While such savings exist, there is no need for the Government to borrow directly from the proposed central bank. When the latter buys or sells Government securities, it does so for the purpose of influencing general credit conditions rather than to facilitate the Government. At the same time, there is no broad or active market in this country for Irish Government securities, and it is desirable that the central bank should not be unduly hampered by restrictions on the types of Government security in which it may deal. In the circumstances, it is felt that the present wording of the relevant paragraphs in Section 7 of the Bill is sufficiently wide and at the same time provides certain necessary safeguards.

When the commercial banks obtain credits from the central bank directly through the rediscounting of bills or granting of advances, or indirectly through the open market purchase of securities by the central bank, they may request the central bank to give them legal tender notes out of such credits in the central bank's general fund. Thus the central bank may be required to furnish legal tender notes against domestic assets, and not against those sterling assets normally accepted by the Legal Tender Note Fund. Moreover, under Section 3 of the Currency (Amendment) Act, 1930, the central bank will also have power to accept securities other than sterling for the purpose of the Legal Tender Note Fund.

A number of Deputies proposed that the provisions of this section of the 1930 Act should be amended to enable the central bank more easily to issue legal tender notes against domestic assets. As Senators are, no doubt, aware, that section provides that the Currency Commission must be unanimous in requesting the Minister for Finance to make an Order adding any new form of assets to those in which the Legal Tender Note Fund may be held. The Minister for Finance may then make the necessary Order which, in turn, has to be specifically ratified by both Houses of the Oireachtas. Various opinions were voiced regarding these rather restrictive provisions. Some Deputies wished to remove the requirement of a unanimous vote; others wished to remove the requirement of ratification by both Houses of the Oireachtas. After full consideration of the various viewpoints and of the issues involved, the Government decided that two alternative ways of proceeding might be permitted. This was accepted by the Dáil and the following are the alternative courses now available—(1) on a unanimous request by the central bank board, the Minister for Finance may make the necessary Order which will not require to be specifically ratified by both Houses of the Oireachtas before becoming operative. It will be necessary, however, to lay any such Order before both Houses; (2) if a majority of the Currency Commission or the central bank board request the Minister for Finance to make an Order and if the Minister agrees to do so, that Order must be specifically ratified by both Houses of the Oireachtas.

For reasons of convenience, safety and economy, it has become the custom for commercial banks to maintain deposits and cash reserves with their appropriate central banks. Among various other advantages for commercial banks, this practice facilitates the settling of inter-bank payments by appropriate transfers in the books of the central bank. The Bill as originally introduced provided, and still provides under paragraph (1) of Section 7, that the bank may "keep the accounts of any bankers' clearing".

Irish banks have already their own arrangements for settling claims and payments between themselves. This Bill does not disturb these arrangements, but it has been considered necessary to empower the central bank to perform this function if, in the opinion of the board, after due consideration, circumstances make it expedient that the commercial banks should effect their clearances through the central bank. The necessary powers are now conferred in Section 50 of the Bill.

During the debates in Dáil Eireann, a number of Deputies stressed the desirability of providing explicitly that the central bank should have power to conduct research into monetary and credit problems, to publish results of such research work from time to time and, for this and other purposes, to establish and maintain contact with other central banks. Section 8, which was introduced on Report Stage, makes the necessary provision for these various purposes.

Different, and sometimes rather contrary, views were put forward in Dáil Eireann regarding the relationship between the central bank, the Government and the Legislature. On the one side, it was held that there should be a provision similar to that in Section 10 of the Reserve Bank of New Zealand (Amendment) Act, 1936, which says that

"it shall be the general function of the Reserve Bank, within the limits of its powers, to give effect, so far as may be, to the monetary policy of the Government as communicated to it from time to time by the Minister for Finance".

On the other side, the suggestion was made, and unofficial amendments were put forward in support thereof, that the central bank board should advise the Minister for Finance from time to time regarding the effects of State policy on monetary, credit and economic affairs. I myself felt that a provision similar to that in the New Zealand Act referred to would be detrimental to the independence of the central bank and that the second suggestion mentioned went rather too far in the other direction. It is desirable and, indeed, it is expected that there will be the closest co-operation between the Government and the central bank, and any advice or suggestions tendered by the central bank will, certainly, be given the serious consideration which they will merit, coming from so responsible a body. The Oireachtas is the ultimate source of the central bank's power and authority, but, as there is no direct contact between the Oireachtas and the bank, it is considered essential to have some link such as that provided in Section 6 (2) between the Minister for Finance and the board.

This Bill has, as I have stated, been the subject of very detailed examination and discussion in Dáil Eireann. Moreover, copies of it have now been available for over seven months and the reports in the Press of the discussions in the Dáil will have conveyed to Senators a good deal of information about the more important provisions included in it. I have, therefore, confined myself to giving a short resume of some of the main provisions of the Bill as introduced in Dáil Eireann and to giving in some detail an explanation of the changes which were made as a result of the discussion on the Committee and Report Stages.

Some critics of the Bill in the other House considered certain provisions detrimental to the interests of the commercial banks and a number thought other provisions too novel. The contrary criticism was advanced against the Bill by other Deputies who complained that the central bank will not have the more extensive powers of controlling credit and monetary affairs possessed by some central banks elsewhere. The first answer to this criticism is that there is no standard pattern for a central bank. Great differences are found as regards both the organisation of central banks and the functions given to them in different countries. Just as the systems of commercial banking vary from country to country, so do those of central banking. It must also be borne in mind that certain operations permitted under the statutes of an individual central bank abroad may rarely or, perhaps, never be undertaken in practice. The particular functions of a central bank in one country may not necessarily suit in another country where different circumstances obtain. For instance, a number of States whose central banks have rather extensive powers are debtor States, as compared with this country which is in the position of a creditor State. Powers have to be given in debtor States to enable the respective central banks effectively to conserve supplies of foreign exchange or prevent undue credit-expansion by commercial banks. In this country, the general plea is for more extension of credit to various kinds of borrowers and the provisions of Section 49 of the Bill have, as one aim, the encouraging, where appropriate, of more loans by our commercial banks within the State.

The huge amount of liquid sterling assets held in our commercial banks places them in a peculiar position in regard to central banking control, but as, happily, it is universally acknowledged that their management of their business has been generally wise and prudent, it is not necessary to compel them by law to keep minimum cash reserves with our central bank in a manner similar to that which obtains in some other States.

In times of war and emergency, trade and industry become very much affected by the disturbed conditions and these effects are, in due course, transmitted to monetary and banking spheres. Warring countries tend to decrease their exports and to look for increased imports. These disturbances produce drastic changes in the foreign trade of all countries and upset the balance of payments. The amount of foreign exchange available for trading with certain countries is not always sufficient to cover the cost of the imports required from such countries. Rates of exchange with foreign currencies suffer severe jolts, and it generally becomes necessary to establish a system of exchange-control in almost every country, whether belligerent or neutral. The need, accordingly, arises to ration the amount of available exchange—allocating it to essential imports. A further object of the exchange control system is to prevent depreciation of the external value of the currency of the country imposing the control.

The most serious financial danger always encountered in times of war and emergency is that of inflation. Prices of imported materials and commodities first increase, resulting, in time, in increases in the price of internally-produced materials and commodities. Incomes and receipts of certain classes of the community rise; there is additional Government expenditure on armies and armaments and the monetary circulation, in general, increases.

Any one of these disturbing changes is liable to produce repercussions on a country's monetary system and may demand that immediate action be taken by the responsible monetary authority. The cumulative effect of a combination of such changes may have far-reaching results unless strong counter measures are taken. Some of these measures usually fall to be performed by a central bank, and, without such a bank, we in this country are not effectively equipped to meet the contingencies which I have described. I may add as an example that when it became necessary, at the start of the present emergency, to establish a system of exchange control, the administration of the system had to be undertaken by the Department of Finance—a function which would, probably, have been assigned to a central bank if one were in existence here.

I stated earlier that, in order to provide for the event of an international crisis causing a freezing up of the external assets of commercial banks and coinciding with a domestic crisis affecting one or more of these banks, it was considered desirable, even before the present emergency, that an Irish central bank should be available to act as lender of last resort. The possibility of such an international crisis occurring is ever so much greater in war time than in peace. As the establishment of a central bank was considered desirable and necessary in normal times, it is doubly so now, and it is only prudent that we should try to be prepared for every possible contingency in the present critical times.

I do not know whether the mood of general apathy that seems to have come over the House is due to the weather, or to the fact that everybody is perfectly satisfied with Government policy with regard to this Central Bank Bill, or to the fact that people, perhaps rightly, think that our fortunes in the next few months or years will be much more affected by the weather in the next three or four weeks than they are likely to be by whether or not this Central Bank Bill becomes law in the near future. Nevertheless, the Second Reading Stage of this Central Bank Bill does provide one with certain opportunities for making certain general remarks about national policy over the last eight or ten years and with reference to what we think or believe national policy should be in the more immediate future.

I find myself, rather to my surprise, to have been advocating the establishment of a central bank some eight years ago at a time when the Government were still prepared to carry on within the four corners of the existing system. It might interest the House if I read some of the words which I then wrote advocating the establishment of a central bank. On page 100 of theThe Nemesis of Economic Nationalism the following appears:—

"It is amazing to me that the State has not yet done anything to create a national short-term money market. The first step in that direction is to turn the Currency Commission into a central bank. The function of such a bank, in addition to regulating the legal tender currency, is to give leadership to the ordinary banks in the practice of a national credit policy, which is in the interests of the banks themselves as well as of the nation. The establishment of a central bank does not involve any departure from the rigid sterling parity of the Irish £. Indeed, if our banks were not already immensely strong in sterling resources, the rigid equivalence of the Irish £ to the £ sterling could not be secured without the existence of a central bank to pool and mobilise the reserves."

I pointed out, in the circumstances that then existed, that if a central bank were created it would be possible to borrow nominally at short-term, but actually at a lengthy term, the means of acquiring, for public use and national development, considerable capital assets, and indirectly giving a considerable amount of much-needed employment, while engaging in the process of trying to adapt the national economy to the very difficult economic conditions in which we then found ourselves.

The circumstances then were entirely different from what they are now. It was a time of world peace; it was a time of acute economic depression; it was a time when consumer goods were glutting the markets of the world and when anyone prepared to buy goods in the world markets and prepared to encourage imports and pay for them with sterling or any other kind of assets would have been regarded as a benefactor of the human race. If, at that time, the State had established a central bank and adopted a liberal monetary policy and borrowed millions for the purpose of national reconstruction and readjustment, it would have been a policy which would have shown some definite results and made some material difference to the economic structure of the nation in the last eight or ten years.

Borrowed from whom?

From the general public, through a mechanism which in these times would be inflationary, but which, in those times, would have been anti-deflationary. However, we are not concerned with those times, but with these times, and I must say, as things now are, that the possible uses of a central bank have been greatly diminished by the circumstances of the times, and it does not seem to me to make much difference one way or the other whether we establish a central bank or not. This Bill is honestly, I think, intended to be the effort of the Government to implement what they regard as the principal recommendation of the Banking Commission which functioned so effectively and investigated our affairs so thoroughly during the four years from 1934 to 1938. While that is so, the surprising thing to me is that the Government do not appear to realise that that report, in its opening chapters, and indeed in its major contents, was an implied criticism of nearly everything the Government had been doing in the way of economic and commercial policy during the years of their existence, since 1932. It was a criticism, the full significance of which was only intelligible to one who could read between the lines, because naturally a Banking Commission of that kind has to be exceedingly polite and the members of it do not like to say in so many words, as I would say in this House, what they think about the economic policies of the Government which had appointed them.

It is not possible now to give effect to the report of the Banking Commission, in so far as that commission condemned most of the commercial and economic policies of the Government between 1932 and 1938. I wish it were possible. If it were, we probably would have a national income of some £20,000,000 a year more than we now have. But that is now a thing of the past. After that drastic criticism, implied, if not expressed, of economic and commercial policies, the Banking Commission Report—I am referring to the Majority Report—proceeds in a rathernon sequitur kind of way to argue that, of course, we must establish a central bank. Having proved to the satisfaction of any normal person that in our special circumstances a central bank was not by any means necessary, it goes on to argue that, nevertheless, we must have a central bank, and the principal reason which appears to have been given is that central banks are the fashion; all self-respecting national States have central banks; it is the “done” thing, as they say in the language of schoolboys; it is a necessary trapping of national sovereignty and therefore we must have a central bank. Personally, I have no objection to central banks, and I think this central bank may possibly be quite a useful institution when it gets going, especially if it develops enough prestige to be able, by its sheer influence and the respect in which it is held, to keep this and all future Governments on sane lines of national economic policy.

The Bill in its first form, in the form in which it reached the other House, was to my mind one of the most amazingly conservative pieces of proposed legislation that one could possibly imagine. It positively oozed monetary orthodoxy of a late Victorian kind, and I could not understand it, coming from a Government whose record in the matter of economics, at any rate, has not been one of orthodoxy, but rather one of persistent heresies, of sinning, as it were, "with a cart rope," to use a Biblical expression. But perhaps a thing which is not capable of any rational explanation is capable of some psychological explanation. The Government is probably subconsciously aware of its various sins of economic omission and commission during many years and now is in the mood in which people approaching their latter end are disposed to "make their soul." This Bill, is, I think, largely a soul-making experiment on the part of the Government which is, perhaps, contemplating, with some pleasure, the possibility of going to that land where all good Governments finally go, and meanwhile this Central Bank Bill, which exudes orthodoxy at almost every pore, is a very good way, psychologically speaking, of negativing any of the heresies of which the Government may have been guilty during its eight or ten years of life. It is a kind of swan-song of monetary orthodoxy, crowning a lifetime of economic heresy.

I personally am a bit of a heretic myself, and my chief complaint about the Government's policy is not so much that they are heretical or not heretical, but that they do not seem to know how to mix their orthodoxies and heresies in the right proportions at all stages of their career so as to get a result which will commend itself to the common sense of ordinary people like our fellow-citizens. It does not negative a record of economic heresies to suddenly blossom out as an apostle of monetary orthodoxy. In fact, so far as my own feelings are concerned, I would have been more than a little of a monetary heretic ten years ago, but a good deal less of an economic heretic than the Government has been. Perhaps I have said enough by way of being nasty, and I really do not want to be nasty in this matter, but one has to do something to liven up a debate which, I hope, will become even livelier when I have finished.

There is one thing which has to be remembered in this central bank business, and I think the Government have wisely remembered it, although they have not emphasised it in the course of their speeches or in any sections of the Bill. It is that we are legislating in this Bill for a banking system which operates only partly within the area over which the Oireachtas has jurisdiction. In other words, we are legislating for an Irish banking system which operates in 32 counties of which we govern only 26. One of the things we must remember about Irish banking is that, in spite of Partition, there remains a certain organic unity of Irish banking in the island as a whole. There is, of course, a close relationship between Irish banking and British banking, but I think there is a higher organic unity in Irish banking as a whole than there is between Irish banking and British banking. At all events, in Irish banking, North and South, there is a very important degree of unity, in the sense that there is interchangeability of personnel between North and South, and a consciousness of the country as a whole in the management of all our principal banks, and that, I think, is a state of affairs we would hate to put an end to.

It is an aspect of unity which continues to survive, even if in many other respects Partition has gone pretty deep between North and South. In fact, if any suggestion were made to break up the unity of Irish banking, to partition it as other things have been partitioned, it would be a suggestion of somewhat the same character as if the Church of Ireland were to hand over jurisdiction over the Six-County area to the Archbishop of Canterbury, just to conform to the political partition of the country, or if the other Church, the Church of the majority, should make a similar transfer of jurisdiction to Cardinal Hinsley. In other words, it would be sheer financial blasphemy to do anything which would disrupt Irish banking and partition it into two distinct entities, one functioning in Northern Ireland and the other functioning down here, and I rejoice that this Bill does nothing of the kind, and I am quite certain that the Government would be the last people in the world to want to do anything of the kind.

This Bill is, I think, an honest attempt, within the limitations of the people making it, to implement the substance of the report of the Banking Commission in so far as it concerns the establishment of a central bank. That report is very emphatic about the necessity of maintaining parity between the Irish £ and the sterling £, and it stresses the importance of the existence of sterling assets in the possession of the monetary authority as a means of guaranteeing that parity between the Irish £ and the sterling £. There are two conditions for the permanent maintenance of parity between the currency of one country and the currency of another country. One of them is a purely technical condition and the other a more fundamentally important economic condition. From the technical point of view, if parity is to be maintained, there must be some national institution like the Currency Commission, or the proposed central bank, which is prepared at all times to buy and sell Irish £s in exchange for sterling £s, andvice versa, without limit, and it must have a substantial cushion of reserves of these sterling assets with which to operate because, naturally, it can only sell sterling assets to the extent to which it has sterling assets to sell.

We are fortunate, or perhaps from some people's point of view, unfortunate, in having a very big cushion of sterling assets which, directly or indirectly, can be made available for the monetary authority to support the value of our currency and maintain it at par with sterling. But—this is a point which was emphasised in the report of the Banking Commission—having too big a cushion of sterling reserves to maintain the value of our currency enables us to maintain for years a policy which is undermining our creditor position, withdrawing by degrees those external assets, and creating a permanent lowering of the value of our national currency unit in comparison with the external unit, without anything happening to compel us to modify that policy. Something of that kind was going on between the years 1932 and 1938, when fundamental economic conditions were operating which were making the Irish £ in fact less valuable from a long term point of view than the sterling £, though that situation was concealed by the fact that the sterling cushion was so big, and that the monetary authority was prepared to use that sterling cushion to maintain the parity of exchange between the Irish £ and sterling.

I think, in that connection, the Banking Commission Report referred to the experience of other countries like New Zealand, which have a much smaller cushion of sterling assets, and when they begin to "outrun the constable", as they have occasionally done, they are immediately brought up against the fact that their currency becomes depreciated in terms of the external standard, and that they have to make the necessary readjustments in national policies or in the value of their currency before they go too far away. In our case, the sterling cushion is so big that we can go a very long way indeed out of permanent economically well-founded parity with sterling, and yet maintain parity with sterling so long as we are prepared to use this large cushion of sterling assets in the technical way in which currency commissions do use such assets.

I hope I have made that point clear, but perhaps it would be better illustrated by the story of the optimist who fell out of a twentieth storey window in New York, and, as he was passing the tenth storey on his way down, said: "Well, thank God, nothing has happened yet." Now, between 1932 and the outbreak of the present war, we were falling from real, permanent, economically-founded parity with sterling, but nothing happened because of that big cushion and the fact that we were prepared to use it; whereas, if we had fallen the whole way—the intervention of the war prevented that—the final collapse would have been more serious because we had so far to fall; whereas, if our situation had been similar to that of a country with only a small cushion, we would have only a short distance to fall, and would have been brought up against a hard economic collapse without anything very serious happening to us. That, perhaps, is more of theoretical than of practical interest, but it is a point worth bearing in mind.

The other condition without which you cannot have permanent parity between the currency of one country and the currency of the other country which it uses as its external standard, is an economic condition, and that, as applied to our case, is that the Irish £ should continue to buy a representative parcel of goods and services of much the same real content as the sterling £ buys, taking one with another. Now; that means that what is called the national price and income structure of this nation would have to be geared to the national price and income structure of the other country whose currency we use as the standard, namely Britain. Some one once asked: "What is a £?" If you begin to think about it, the answer to that question does not always leap to the eyes. Personally, I think the most convenient answer to it is that a £ is a claim on a £'s worth of goods and services. It follows from that definition that the purchasing power of your £ depends on the price at which goods are available in the community and at which services are rendered in the community. In other words, it depends on what is conveniently called the price and income structure within the community. That being so, if we want to have permanent conditions of parity with an external standard, we have not only to have some sort of institution which will fulfil the technical conditions of that parity, but also to maintain such a price and income structure within that parity as will make the Irish £ continue to buy much the same real content of goods and services as the £ of the country with which we seek to keep ourselves at parity.

Some people seem to regard it as a kind of act of national humiliation that we should keep our currency at par with the currency of Britain, but personally I regard it as an act of national self-discipline, and one which free peoples willingly impose on themselves, here and elsewhere. It is a badge of national self-respect and good faith, not a badge of slavery, and even the big nations of the world—the Britains and Americas and Frances in normal times—like to have, as assets backing their legal tender money, things which have a value outside their own frontiers, and a value which can always be counted on, things like gold, which can always be freely exported and command a known fixed price in other countries in all normal times. It is a part of the general nature of the case —I am not going into the reasons for it at the moment—that every £ of bank money in circulation—and, of course, we know that bank money constitutes by far the greater part of the money that does circulate and legal tender only a small part—can be transformed into legal tender money at the demand of the depositor, and it is a part of the process of national self-discipline that legal tender money should only be issued—I do not like the word "issued" because it suggests some mysterious process, when all it really means is that it should only be used to buy—by the monetary authority to buy assets which can readily be sold abroad at a fixed price known beforehand. Consequently, gold or foreign exchange, or sterling balances—the principal form of foreign exchange to us—is the obvious thing which should be bought by the legal tender notes issued by our monetary authority. The reason for that is that those notes should only be used to buy something which can readily be sold abroad in case it should ever happen that there should be a pressure on that monetary authority to redeem those notes, because in that case the authority would have at its disposal assets readily saleable abroad like gold or sterling balances with which those notes could be immediately redeemed, and, in that way, it would maintain its primary function of preserving the external value of the national currency. That, I think, is the principal monetary policy which the Banking Commission rightly emphasised and which the Government have rightly enshrined in this Bill. I have nothing but approval of the fact that that is so, but at the same time I think it is worth while drawing attention to that.

The point is that foreign balances, gold and so on, can only be obtained by a country, and made available for its monetary authority, by the legitimate processes of trade, by giving some real value in exchange for these classes of assets. Elsewhere legal tender notes have often been created by a stroke of the pen of a Minister for Finance or one of his principal officials. Now, we know how popular is the stroke of the pen which signs our currency notes with people who collect that form of autograph. At the same time, it is not the kind of thing that should be over-indulged in by a Government which wishes to maintain the solvency of its national currency. So long as the legal tender notes are issued only, or mainly, in exchange for external assets commanding a fixed value abroad, then you have solved the problem of maintaining the parity of your currency with the external standard so far as the technical conditions of that are concerned.

There are those who criticise the fact that our currency is anchored to sterling on a fixed basis but I say that it is, to use the American slang term, a "whale" of a fine anchorage. Some of you may possibly remember the story—I think it is one of the Arabian Nights tales—of the sailors who landed on what they thought to be an island and proceeded to light a fire. It turned out to be a whale of an island and the effect of the fire on the whale was to make it suddenly resume its course towards whatever part of the world it was going to, but the sailors were naturally somewhat perturbed. Someone may think that our anchorage to sterling is to that kind of whale. Well, even so, I still maintain that it is a whale of a fine anchorage. We are all so closely linked with sterling, that we have to pursue our pre-destined journey along with it, whether we like it or not, and we may as well proceed there, comfortably resting on the whale's back, as wallowing in the sea at varying distances from the whale's tail, as we would be, if we attempted to have a variable parity with sterling.

There is another aspect of this unquestioned parity with sterling which I think has not been adequately discussed. I said before that it was very desirable from the national point of view, the 32-county national point of view, that the essential unity of Irish banking should be preserved. Now the unquestioned parity of our currency with sterling currency is an essential condition of the preservation of that unity of national banking. I shall try to make that as clear as I can. We are familiar with the fact that under our banking system there is no close balance between sterling assets and sterling liabilities. Liabilities in Éire greatly exceed assets in Éire while assets in sterling terms greatly exceed liabilities in sterling terms. Some of these sterling assets are doubtless Northern Ireland assets which would become domestic assets if the country as a whole were reunited. That may be, but even in that event, there would probably be a surplus of sterling assets over sterling liabilities. If this were a united country, a 32-county nation, there would be nothing anomalous in a bank having mainly liabilities in the agricultural South and mainly assets in the industrial North. That situation would be quite normal and not open to any national objection. I think it would be undesirable that anything should be done on the lines of Section 49, or in any other way, which would penalise any Irish bank for having most of its assets in Northern Ireland and most of its liabilities in the 26-county area.

With reference to the unquestioned parity of sterling being an essential condition of the unity of Irish banking, we will suppose that we had a variable exchange between the Irish £ and the sterling £ whether that variableness took the form of appreciation or depreciation of our currency unit in terms of sterling. In that event, our banking system, north and south, would be dealing in terms of two different currencies, having variable and unpredictable value relationships in terms of one another. There are banks which deal in two different currencies, like the exchange banks of the far East which have got sterling assets as well as Chinese dollar assets, etc. In such a case it is axiomatic that the bank in question should have a close balance between its assets in each of the different currencies; otherwise, owing to an unforeseen change in the relative value of one or other of the assets, it might suddenly find itself bankrupted or equally it might find itself making huge speculative profits. That is a situation which no conservatively managed banking system could afford to contemplate. It is axiomatic that a banking system, functioning in terms of varying currencies, must keep its assets and liabilities in terms of each currency closely balanced. Bearing that in mind, if we had a variable and unpredictable value relationship between the Irish £ and sterling £, it would immediately follow that the Irish banks would have to reduce their sterling assets to the measure of their sterling liabilities and equally reduce their liabilities in Éire to the measure of their assets in Éire. That necessary change could in practice only be made under present conditions if our Irish banks sold their surplus sterling assets to depositors from Éire, to persons or institutions domiciled in Éire, who had deposits in these same banks.

Now, that would mean that nearly £100,000,000 worth of sterling assets— profit-making assets—now owned by the Irish banks, would have in some way or other to be sold to depositors in the Irish banks, and that would deflate the balance sheets of our Irish banks very considerably and wipe out a large part of the profit made by such banks—if indeed it did not make them completely bankrupt concerns—and would certainly confer no benefit on either bank depositors or bank shareholders, or even on persons seeking to borrow from the banks. So for that reason, if for no other reason, it is absolutely essential that the unquestioned parity of the Irish £ with the sterling £ should be maintained.

There seems to be a real dilemma running through this whole business of Irish banking, which the Minister himself is probably more conscious of than most people. It is extremely difficult to unscramble eggs, and it is extremely difficult to disentangle our Twenty-Six County banking system from the Thirty-Two County banking system, or indeed the Irish banking system as a whole from British banking as a whole. There is a dilemma running through this whole business from the point of view of how far it will be possible for this central bank, when established, to control Irish banking at all. For a central bank to control the associated banks, it is necessary that the central bank should be able to determine the amount of cash, or cash equivalent, which is in the possession of the associated banks, and, further, it is necessary that the associated banks should always operate on a fixed ratio of cash reserve to total liabilities. Now, if we look up the statistics which are published by the Currency Commission, we will find, I think, that in 1936 cash in the Irish banking system amounted to about 1/13th of total liabilities, and if you look up the statistics published in January or April—I am not sure which—1942, you will find, I think, that cash in Irish banks amounted to one-eighth of total liabilities. In other words, there is no fixed ratio between cash and total liabilities but, apparently, our Irish banks are able to vary the ratio between cash and total liabilities, or have to accept a variation in that ratio and cannot maintain any fixed ratio.

Actually, I think, what happens is that the banks lend all that they safely can here in the home market, and they invest, in more or less long-term sterling securities, the assets they possess over there, except that since the present emergency began they have tended to increase very substantially the amount they keep in cash or in the form of money at call and short notice in the London money market. Anyhow, it seems to be the case that our banks do not operate at any fixed ratio of cash to total liabilities, and, consequently, one of the conditions which would be necessary for them to be controlled by a central bank here does not seem to operate. In other words, if a central bank here were to put £5,000,000 in the way of our associated banks, it does not in the least follow that our associated banks would be able to increase their deposits to ten times £5,000,000 or £50,000,000, or indeed by any predictable multiple of that £5,000,000. The increase of cash in our banking system in recent years has been due to what is called the "favourable" trade balance in the present emergency period, and the failure of bank liabilities to expand in any multiple degree is due to the conservatism of the Irish banks and the high standard of security that they require from all would-be borrowers. So it seems then that the real cash basis of the Irish commercial banks is the plaything of the trade balance between our country and Britain, and is consequently completely outside the control of the central bank.

Now, the maintenance of parity requires that the Irish banks should always be able to turn their sterling balances into legal tender notes or deposits at the central bank. That is essential if we are to maintain parity between Irish money and sterling money, but this very fact, and the fact that the Irish banks command such considerable sterling resources, deprives the central bank of any real control over the cash basis of the Irish banks. They can get all the cash, all the legal tender money of our area, that they want by simply bringing sterling assets to the central bank, or to the Currency Commission as it now is, and demanding legal tender notes in exchange, and we cannot get away from this condition of affairs without running into the other horn of the dilemma and abandoning parity with sterling. If you abandon parity with sterling, then the banks would not have the same facility in getting Irish legal tender notes in exchange for sterling assets, and they would be somewhat loath to rely on that particular source of Irish legal tender money: in fact, they would have to break up their whole business into two more or less self-contained departments—separate legal entities—each one functioning almost independently of the other, and they would have to rely more on domestic assets as a means of acquiring legal tender notes in Éire—in the Twenty-Six County area—and that would give the central bank more control over their cash basis, but at what price?—at the price of the complete disruption of Irish banking, following on the breaking away from parity with sterling.

If, then, it is almost impossible for the central bank to control the cash basis of credit in the commercial banks, we might inquire whether it is possible for it to, as it is called, create credit. A good deal of talk took place in the other House about the creation of credit, but I do not know whether anyone took the trouble to point out that in order to create credit it requires two parties, a borrower as well as a lender, and here we have a central bank, but hardly any person or institution in the country is legally empowered to borrow from it. The only persons or institutions who are legally entitled to borrow from it direct are the associated banks, and in the actual circumstances of the case they are about the last people who will have any occasion to borrow from the central bank. So that the central bank, as an institution for the creation of credit, is hedged about with such conditions and restrictions that it is not in a position ever to be able to create any credit actually. It is true that under Section 7, and as part of what is called open market operations, it might occasionally buy Government securities of a stock exchange character, but that is also hedged about by restrictions, and it is quite evidently not the intention that the bank should lend direct to the Government.

As a matter of fact, if you wanted the central bank to be a real engine for the creation of credit there is only one way in which to do that and that is by empowering the central bank to lend money direct and outright to the Government. Now, in the ordinary way, I am not an enthusiast for that kind of easy finance for public purposes. But, personally, in preference to the very objectionable method proposed in Section 49 for compelling the associated banks to have deposits in the central bank, I would very much rather have a limited power to lend direct to the Government, limited to, say, £2,000,000 per year and a maximum of £10,000,000. If the central bank was authorised to lend direct to the Government to a maximum of £10,000,000 over a period of years, then that would be a definite creation of credit and that money, as it got into circulation, would become deposits in the central bank to the credit of the associated banks and, to a certain extent, you would get the associated banks to become more accustomed to the idea of having deposits in their own central bank and in that way, perhaps, give the general banking system a somewhat more national orientation.

I do not propose to discuss this at any length just now, but, at a later stage, in connection with the Committee Stage, I should like definitely to say that I dislike Section 49 intensely, and in preference to it I would much rather that the central bank had a limited power to lend direct to the Government, and that, if my dislike to Section 49 should eventuate in Section 49 being eliminated, then I would enthusiastically advocate the other amendment. On the other hand, if in spite of all I can say against Section 49, nevertheless it stands part of the Bill, I would still find myself giving theoretical reasons why the central bank should be allowed to lend a certain amount of money to the Government. But if Section 49 still stood, I would be disposed in that case to vote against my own amendment. My difficulty arises partly because Section 49 comes very much after Section 7, and my attitude to my amendment to Section 7 would likely be governed by the fate of my own amendment to Section 49. I only mention that now to let the Minister know what is in my mind for future reference.

Now we come to another, and one of the last questions I propose to discuss, and that is: can the new central bank really prevent inflation? The fact that it is legally debarred from lending direct to the Government is a very negative power of preventing inflation. It keeps one inflationary door shut. But there are lots of other inflationary doors, some of them wide open. As a matter of fact, I doubt very much whether borrowing direct from the central bank in our circumstances under present conditions would be any more inflationary than borrowing direct from the commercial banks, which is contemplated and practised.

The principal result of borrowing direct from the central bank would be that the commercial banks would obtain deposits in the central bank by a very easy process, and, without any persuasion, the Government would get a certain amount of money on which they would have to pay no interest whatever. I do not think that the commercial banks would be in the least likely, judging by their past record, to multiply by five or ten, or any other multiple, in the way of additional loans to customers, the amount of new cash reserves they would acquire in that kind of way. Probably what they would do would be to regard their deposits in our central bank as part of their non-profit-making cash reserves and to invest some proportion of their sterling assets in long-term sterling securities bringing them in perhaps 3 per cent., which formerly they were content to leave in the London money market at 1 per cent. or thereabouts. I do not think our economy here would be inflated as a result of the banks electing to hold a few extra million pounds in the form of 3 per cent. war loan, or whatever it is, in preference to the form of money at call and short notice.

Now, there are real dangers of inflation threatening our economy and most of them are outside the control of this central bank, or indeed any possible central bank, and they require a different technique for their control. In fact, one of the principal services which this central bank may hope to render, when it exists, is that its directorate should study these and other important matters and inform the Government that there are these various dangers and what are the proper methods by which these dangers may be counteracted. For example, here is one of the various inflationary factors operating on our economy. We have workers with families in Éire, but now working or serving in England and remitting money for the maintenance of their people at home, money which is not balanced by any corresponding imports of goods from England. That operates as an inflationary factor. Then we have the failure to balance the Budget, That, to a certain extent, operates as an inflationary factor. No central bank can compel the Government to raise by taxation or by the borrowing of savings all the money necessary for balancing the national Budget if the Government do not choose to do so.

I think the principal factor operating in our economy now tending to bring about an inflationary situation arises from unbalanced exports. It is a similar phenomenon to the wage remittances from England. We have a situation in which whatever agricultural surpluses we do not consume at home have to be exported, and we do export them and are very glad to get whatever we can for them from the other side; and a situation in which it is difficult, if not impossible, for our industries to import all the raw materials they would like and extremely difficult to import all the consumer goods of various kinds that we would like because of the restrictions that exist on the other side. Now, in that situation, where you have unbalanced exports and, consequently, a piling up of sterling assets, those assets have reflected themselves in the increasing sterling balances which are shown in the balance sheets of our Irish banks. The people who export these goods, the various interests connected with the export trade, naturally regard their monetary receipts from exports as part of their income and they spend them as such on whatever goods and services are available in our community or economy. But, in doing so, they are inflating the national price level within the economy, unless other people within our economy withdraw from expenditure as income and use for the purpose of acquiring sterling securities an amount of money equal to the amount of these unbalanced exports.

In other words, receipts from unbalanced exports are inflationary and the only way I can see under present conditions in which their inflationary effect can be counteracted is if other people throughout the economy buy sterling securities to an extent equal to the amount of unbalanced income arising from unbalanced exports. In that case the savings of some people in the country would balance the expenditure of the export interests that derive their incomes from selling goods abroad. In theory, perhaps, there is one other possible way, but it is by no means practical politics, and that is if the State should not only balance the annual Budget but tax people more than enough to pay for all the services of the State, and use the additional income for buying 3 per cent. British War Loan. I do not see the Minister or the Government doing that kind of thing.

Incidentally, the appearance of our bank balance sheets would be altered if individuals should elect to hold these interest-bearing sterling assets instead of leaving them to the banking system. To negative the inflationary effect I have in mind here it would be desirable that the increment of sterling assets acquired in recent years by the banking system should be bought from the banking system by individuals or institutions domiciled in this country.

In that case they would disappear out of the bank balance sheets altogether, the banks would not suffer from a plethora of sterling balances, and the difference would be that, instead of the banking system owning the sterling assets, they would be owned by individuals domiciled in the country and, so far as they acquire these sterling assets, their action would tend to prevent the inflationary effect on our price levels that I have been trying to explain. Incidentally, such procedure, tending to diminish sterling assets in the control of the banking system, would tend to increase the potential control over our banks which might be exercised by the new central bank when it comes into existence. The real control of inflationary tendencies, which are not by any means confined to Éire, has little or nothing to do with central bank procedure. It requires rigid rationing and price control of most consumer goods, thus enforcing the saving of surplus incomes because their possessors cannot find anything which they can legitimately buy. Not only must prices of consumer goods be controlled, but wages also must be controlled on account of the effect which the increase would have on prices. Further, a system of priorities has to be adopted, limiting the demand for capital goods for civilian purposes, thus limiting the income that would be created by the making of capital goods or of profiteering in them when scarce.

These are the real ways in which inflationary tendencies are controlled and they are not directly related to the possible activities of a central bank, though doubtless the directorate of a central bank would be able to give valuable advice with regard to the various ways in which the State should exercise the power to prevent inflation and all the other evils which are incidental to a war-time situation.

The general feeling I have about it is that this Bill can contribute little towards a solution of our emergency difficulties. As a permanent measure it is designed to provide for a future which we cannot foresee, which doubtless accounts for the large amount of eyewash which the Bill contains. We certainly need much eyewash if we are to see in the dark future the dim shape of things to come. While I do not anticipate very dramatic or catastrophic results from the functioning of the central bank, I appreciate the fact that the Government realises the possible value which a body of this kind might have in the way of investigating, from a non-Party point of view, problems of social, economic and monetary interest, and making the results available not only for the Government but for the public. It is also desirable that the directorate of the new bank should be so constituted that its prestige would command respect not only from the Government, but even from the Labour Party. If that be so, directly or indirectly, the existence of the bank might mark the beginning of a new and brighter era.

This Bill, which has been submitted for a Second Reading, has caused profound disappointment and disillusion amongst those of us who believed that the present Government really meant what they said—that they were sincere in their desire to put into force and to give legislative effect to the lofty principles indicated by them in regard to monetary policy—before the people placed them in power ten years ago. It would be futile now, and I do not think any useful purpose would be served, to quote to any great extent the speeches and pronouncements of those who now form the present Administration in regard to these matters when they constituted the principal Opposition Party. I do not think I would be exaggerating or doing the slightest injustice in saying that at that time they were constantly asserting that the monetary policy then being pursued by Deputy Cosgrave's Administration was rapidly dragging the country down to economic destruction. We were told that if we were ever to grapple with and seriously make an effort to deal with the economic and social ills which then afflicted us—and which, unfortunately, still remain to shock our social conscience—then a reversal of that policy was absolutely imperative, if any progress was to be made in the formidable tasks of dealing with the problem of poverty arising from unemployment, the clearing away of the slums in our urban and rural areas, and the restoration to the people of the country of the real ownership of their own land. Personally, I feel as convinced now as I was then that the solution of these problems, the full and effective development of our natural resources, the provision of useful work for our people in their own interest and in the country's interest, and the stemming of the tide of emigration, are all incapable of achievement without effective monetary control.

I have no desire to be unfair to the Minister or the Government, and far be it from me to wish to accuse them of deliberately desiring to perpetuate the present economic and social disorders, but I do feel sincerely that the Central Bank Bill has nothing in it that will make any contribution towards eradicating or even mitigating these evils and these disorders. It would be interesting to know what has occurred since the present Government came into power to alter their views in regard to this important matter. Ten or 11 years ago we were constantly being told that the then existing bad conditions in our economic and social life were due to our financial subjection to England, that when the Free State Government decided to tie up its currency with British currency and to permit Irish banks to maintain their English entanglements, it destroyed with one blow the greatest benefits secured by the Treaty between this country and Great Britain.

That sounds very familiar.

We were told at that time that poverty and depopulation persisted because in financial matters the same conditions prevailed as before the Treaty, and we were told too that when the Irish people struggled for independence they did not do so for mere spectacular reasons, but also that they might be in a position to check and to harness in the interest of the public good the forces which had produced depopulation and poverty in the past. We were also told of the dangers to which our people were exposed by reason, not only of our attachment to sterling, but of the short-sighted policy of the Anglo-Irish banks in investing their depositors' funds in British securities. Yet, we find enshrined in this Bill all the elements we were told ten or 11 years ago made not only for our economic and financial subjection, but the factors which we were then told threatened the very existence of the State itself.

It is, I submit, a far cry from the lofty ideals adumbrated at that time to the proposals embodied in the Bill before us. Based as it is on the Majority Report of the Banking Commission, it could not be otherwise than a very tame measure, and, however much it may be asserted to the contrary, I feel convinced that it will not only have the effect of strengthening the power and the security of the money interest in Ireland, but will also have as its main function the preservation and the association—and, consequently, the subordination—of our currency to that of Great Britain.

In the explanatory notes supplied with the Bill to members of the Oireachtas it was stated that the Government has decided to set up a monetary authority possessing the usual powers and functions associated with central banking, and that the Bill accordingly proposed to establish a central bank and to dissolve the Currency Commission. I respectfully submit that the Bill before the House gives little indication that it is intended to confer on the proposed central bank any of the powers and functions—and does not furnish it with the machinery for the effective use of such powers and functions—which are ordinarily associated with institutions of this kind.

In so far as I understand it, if there is one function more than another that is performed by central banks everywhere, it is the control of foreign exchange, the determination of the exchange rate between home currency and foreign currency. That function, however, is denied to the proposed central bank in the Bill before the House. Our exchange rate is fixed by statute—it is fixed by Section 47 of the Currency Act of 1927—so that, strangely enough, we are, I think, the only people in the world who fix by statute the rate at which our currency will exchange with that of another country. New Zealand and Australia long since have scorned the notion that their currency should be linked to sterling on a parity basis, or that their exchange rate should be settled by statute. On the contrary, both these Dominions authorise their central banks to vary the rate of exchange in terms of sterling in so far as the economic needs of their respective countries require that that rate should be varied.

It would appear, therefore, that the present Bill is merely a rechristening of the old Currency Commission, a bulwark set up by the previous Administration against the potential attacks of those who would destroy the British banking system, a system that has held this country in pawn to England for over a century. That that conception of the Bill is an accurate and a fair one, and that that policy is continued and perpetuated in the present Bill, is borne out by the comments made in theEconomist, in its issue of the 14th March, 1942. In the course of its remarks that journal went on to say:—

"The new central bank is likely to be little more than the existing Currency Commission under a new name; it would be more accurately described by the old-fashioned title of ‘Bank of Issue'."

And, again, in the same issue it said:—

"The currency of Eire is based on sterling.... There is no suggestion in the Bill that any change is contemplated in the present basis of the Irish currency."

Thus, we find that what was regarded as a danger to our people in 1931—the link with sterling—is looked upon as their sheet-anchor in 1942. Listen to what Mr. MacEntee, speaking on the link with sterling, and as reported in theIrish Press on the 29th September, 1931, said:

"Even before that Party went into the Dáil its members had directed public attention to the dangers to which our people were exposed by reason, not only of our attachment to sterling, but of the short-sighted policy of the Anglo-Irish banks in investing their depositors' funds in British securities.... The Free State Government under Mr. Cosgrave has been on the side of Britain. The Anglo-Irish bankers have been on the side of Britain. The Currency Commission has been on the side of Britain."

I should be glad if the Minister could tell us what has occurred in the intervening years to lessen the dangers which threaten our people by reason of our attachment to sterling. All the elements that desire the continued integration of our currency with that of Britain are pleased with this Bill. The sigh of relief which emanated from the LondonEconomist when it assured its subscribers here and in Great Britain that “the institution envisaged by the present Bill will certainly do no harm to the soundness of the currency and banking system of Eire,” is significant enough in itself. We may be certain that, when that journal referred to the soundness of our financial system, it really meant “soundness” in so far as Great Britain and her interests were concerned.

Every device that this Government and its predecessors tried has failed to solve our social and economic ills. In the midst of all the many changes that have taken place in the last 20 years in our political and social relationships, our economic system remains practically unaltered, and the financial link with sterling remains exactly the same. The fact that it will be the main function of the central bank to keep our currency integrated with that of Great Britain destroys any utility that that institution might otherwise have.

It passes understanding why this Government, which came into power on a promise to deal with the monetary system to the advantage of the Irish people, should be so hesitant now to make the new—and, I suggest, the only sure—approach to a solution of our social and economic problems. Surely, they will admit that the essentials of a sound economic system are that it should serve the welfare of the people as a whole; and surely, too, they must realise that that condition cannot be fulfilled by the maintenance of the link with sterling, having regard to the fact that the administration and control of sterling must, naturally, be in the interests of Great Britain.

Deputy O'Loghlen, in his Banking Commission Minority Report No. III., pointing out that agriculture both in England and Ireland has in the past been sacrificed to other interests, holds —page 635, paragraph 7—that:—

"...the assumption which runs through much of the Majority Report that the effect of keeping Irish monetary policy in step with English policy will be of benefit to this country, is not only not proven, but, on the contrary, is completely at variance with the facts disclosed by the economic history of Ireland since 1800."

He further points out—page 638, paragraph 9—that:—

"The English currency is managed by the Bank of England and the British Treasury, and is, of course, managed to suit British interests. The Banking Commission of 1926 recommended, and my colleagues repeat the recommendation, that the Irish currency should not be managed by any Irish authority to suit the particular needs of Ireland, but should be attached at a fixed parity to the currency of Great Britain, and should follow in whatever direction Great Britain will lead. This is, in effect, to hand over the management of the Irish currency to the Bank of England and the British Treasury. Professor Gregory put the matter very clearly two years ago when he wrote in ‘Sterling Bloc Supplement,'London Daily Telegraph, July 8th, 1932:—

‘For we must not ignore the fact that it is difficult to conceive of the United States or France being willing to subordinate their domestic currency policy to the views either of the British Treasury or of the Bank of England, and this is what is implied by formal adherence to the sterling group.'

"There is, of course, no direct interference"—continues D e p u t y O'Loghlen—"but there cannot be the slightest doubt that Professor Gregory was right in 1935 when he said that, when a country attaches its currency to sterling, it subordinates its domestic currency policy to the views of the authorities who manage sterling."

Surely, this surrender and this subordination to another country in financial matters is a most degrading and disadvantageous position for this country to be placed in. Why are we told, in effect, that we must not have the powers of monetary self-protection possessed by the Dominions? Why must we continue to be passively dragged up and down as the divergent interests of Great Britain dictate? Other people may hold differently, but, to me, it is certainly an act of national humiliation.

Having regard to the lofty ideals professed in the past by those who are now promoting this Bill, one can only feel ashamed and sorry that they should have so meekly abdicated, and failed to exercise their right to establish a real central monetary institution that would regulate our own credit and provide the necessary money to promote the social and economic welfare of the community and the interests of agriculture and industry.

New Zealand, on the advice of a director of the Bank of England, established a central institution for regulating its own credit, and the Australian Commonwealth retained its right to fix their monetary unit at the point consistent with their own price level at the appropriate time.

It does, therefore, seem strange that, when the Government here was faced with the alternative of choosing between regulating the quantity of money so as to maintain parity with sterling, or to regulate it so as to maintain full employment at home, and remedy the disorders that trouble our social and economic life, they chose the former course.

Their attitude in this respect is in striking contradistinction to the stand taken by the Government of New Zealand in April, 1936, when it declared that the control of currency and credit was a prerogative of the State, and that it was unthinkable that this control should remain in private hands.

They stated that the aim of their economic and monetary policy was:

"To organise an internal economy distributing the production of services of the Dominion in a way that will guarantee to every person able and willing to work an income sufficient to provide him and his dependents with everything necessary to make a home."

In the Minority Report No. I of the Banking Commission, and to which I had the honour to append my name, the view was expressed that:

"...the monetary system cannot be approached as an isolated problem, divorced from one's social outlook and ideals. The fundamental issue is whether one is satisfied or not that the present system should continue with adjustments of relatively minor importance. For our part, we are of opinion that the disease of our industrial system is so deep-seated that a drastic remedy is urgently required."

The disease in our industrial system, I submit, is no less deep-seated now than it was then, and having regard to the fact that, as the question of money is one of life and death to thousands of ordinary people in our country and that the volume of credit is at present determined by the Bank of England, and, apparently, will continue to be determined in the future—as the central bank envisaged in the Bill before us will be merely a satellite of the Bank of England—it is hardly to be wondered at that a feeling of despair is manifesting itself at the failure of the Government to avail of the opportunity to provide us with a financial system that will serve the needs of the community.

The new bank will merely continue to perform its functions in the same manner as these functions were performed by the Currency Commission, thus ensuring a continuance of those social and economic conditions which, as I have already said, shock, and will continue to shock, the social conscience of all who have the welfare of the State at heart.

The bank is bound, having regard to the views expressed in the Majority Report of the Banking Commission, and which are being implemented by its establishment, to look with disfavour on any proposal to make credit easy, to reduce the cost of money, or to expand credit up to the point where unemployment will disappear.

Notwithstanding the pious aspiration expressed in Section 6 of the Bill—"that in what pertains to the control of credit, the constant aim shall be the welfare of the people as a whole"—it is difficult to detect anywhere in the Bill any real powers that would enable the proposed central bank effectively to carry out the very fine ideal expressed in that phrase taken from the Constitution.

And how could it be otherwise, when, as we are told, the Bill had its origin in a report which put forward the gloomy prognostication that, taking into account the possibilities of emigration, no notable increase in Irish population could be expected to occur during the next quarter of a century; that the policy of subsidising housing schemes was extravagant and wasteful and that it should be abandoned; that they disapproved of the State borrowing for revenue purposes; and that they disapproved of the policy hitherto pursued in regard to land division?

It was no wonder that theTablet was constrained to say:

"The primal mystery—a mystery that has never been solved—was why Mr. de Valera ever entrusted the task of reporting on his policies to a body of men notoriously so unsympathetic towards them."

Unless I misinterpret the significance of these strictures it would appear that, having decided it was natural and inevitable that the Irish people should emigrate, they framed their policy to fit into a scheme in which vast numbers of the people would remain in penury until they left the country, and that it would be foolish to plan any social or economic measures that would interfere with this regular outflow of our people to the big industrial centres of Great Britain and America. If these are the premises on which the Central Bank Bill is based, then I submit there can be very little hope of curing the disease so deep-rooted in our whole economy—both industrial and agricultural.

I am opposed to this Bill because it makes no provision that the monetary authority established under it will be amenable in reality to the authority of the Oireachtas. I am opposed to it because it contains no provision for removing the limitation on the issue of currency by the Irish monetary authority, imposed by the Currency Act of 1927. I am opposed to it because I see no possibility whatever that the central bank can, within the framework of the Bill before the House, discharge the function and the duty of safeguarding the integrity of the currency, or of promoting the welfare of the people as a whole.

I am opposed to this Bill because there is nothing, either explicit or implicit, in it that holds out any hope that the central bank will be used as a means of adjusting our financial system to the end that we may be able to secure full employment as well as a full and proper utilisation of our natural resources. And, finally, I am opposed to it because it offers no solution for the problem of poverty arising from unemployment; no solution for the continued depopulation of the country; and no indication that it can eradicate that hunger and distress which are the lot of so many of our people.

Is cosúil go bhfuil an bun ag tuitim as an díospóireacht so ar an tslighe ar thuit sé aisti thíos ins an Dáil. 'Sé an deacracht atá ann maidir le díospóireacht ar an adhbhar so go bhfuil sé roint teicniciúl agus dá mbeadh daoine le claoidhe le adhbhar na díospóireachta i gceart is beag a d'fhéadfaidís a rádh air. Pé'r bith fad a baineadh as an díospóireacht ins an Teach eile, agus is dóigh, pé'r bith fad a baineadh aisti ins an Teach so go dtí seo, baineadh aisti é mar gheall air go raibh daoine ann a chuir síos ar cheisteanna nar bhain go díreach leis an mBille. Is fíor é nach féidir trácht a dhéanamh ar an airgead gan, ar shlí eicint, ceisteannaí móra eile a bheith ar intinn agat. Is fíor é go bhfuil baint ag an airgead le mórán chuile rud a bhféadfaimís smaoineamh air. Ag an am chéadna ba cheart go mbeadh an tuisgint againn an deifríocht idir an phrímh-cheist agus na mion-cheisteanna agus go bhféadaimís claoidhe leis an bprímh-cheist. Dá ndéanaimis é sin, is cinnte go mbeadh an díospóireacht an-ghearr ar fad.

Is maith liom gur tugadh an Bille isteach. Sé an truaigh nar tugadh an Bille isteach i bhfad ó shoin. 'Sé an t-aon phíosa dlighe dár tugadh isteach san Oireachtas le deich mbliana a raibh aon spéis agam ann ar fiú trácht air. Ní hé go gceapaim ar shlighe, go rabh gádh leis an mBille go dtí seo; ní hé go gceapaim go ndéanfadh banc ceannais mórán deifríocht sa tír dá mbeadh sé ar bun roimhe seo, acht go rabh imnidhe orm i gcomhnuidhe go dtiocfadh an t-am a mbeadh gádh leis. Thuigeas i gcomhnuidhe, ó'n méid staidéir a bhí déanta agam i gcúrsaí airgeadais, gur mór an cheist ar fad í. Níorbh fhéidir le aon duine amháin ná le aon bheirt í phléidhe go hiomlán agus moltaí iomlána a dhéanamh na taoibh. An rud ba mhaith liom agus an rud a déanfaí anois fé'n mBille seo; go gcuirfí ar bun sórt coiste nó sort buird de dhaoine taobh amuigh de chúrsaí poilitidheachta, daoine a mbeadh scil mhaith aca i gcúrsaí airgeadais, daoine, ag an am gcéadna, a mbeadh sé le rádh fútha go raibh gnaoi aca ar an náisiún so agus nach mbéadh de chúram ortha ach fiosrú a dhéanamh ar cheisteanna airgeadais agus geilleagair agus go ndéanfaidís molta do thabhairt don Riaghaltas d'réir an fhiosrúcháin sin.

Sin é an tairbhe a fheicim ins an mBille. Tá gach comhacht ins an mBille a theastuigheann le banc ceannais iomlán a chur ar bun, banc ceannais chomh hiomlán agus chomh comhachtach agus atá ar bun i dtír ar bith eile. Is ar éigin is féidir leis an mbanc fa láthair, agus is ar éigin a b'fhéidir leis ins an am atá caithte, feidhm a bhaint as na comhachtaí sin. An rud mór a dhéanfas an scéim seo; go gcuirfidh sí an coiste sin ar bun agus go bhfuighmíd an chomhairle agus má thagann an t-am go mbeimíd i ndon feidhm a bhaint as na comhachta atá aca nó, má ceaptar go bhfuil gádh le breis comhachta, na comhachta do thabhairt nó aon rud eile a dhéanamh a comhairleófar dúinn i dtaoibh cúrsaí airgeadais a rachadh chun soileas na tíre.

I find it rather difficult, on this occasion, as I have often found it before, to speak on this matter in English at all, for the reason that all my work in connection with economics and in connection with monetary matters is done in Irish. Since I went to the University in Galway, now 14 years ago, not one student ever came to me to discuss a matter in English. Whether it was to consult me about buying a hurley stick or to consult me about a subject for a thesis, not one student, boy or girl, ever spoke to me in English. All my work is done in Irish, and because of that I find a certain difficulty in saying what I want to say on these things in English. I would much rather go on speaking in Irish.

However, I want to say this, that I am glad that this Bill has at last reached the Seanad, and I hope the Seanad will give it a speedy passage to the Statute Book. My one regret about it is—not that I would desire to see public discussion in any way curtailed — that six valuable months have been lost and, perhaps more, since the Bill was introduced in a discussion that, while to an extent it was useful, was on the whole of very little use. The original Bill has been changed. I am very glad that the changes have been made and incorporated in the present draft, but it would have made no difference, or very little difference, to have left them out. What is important in connection with this Bill is that the board of directors is going to be set up. The board will be charged with the duty of considering monetary policy with a view to securing the best interests of the people of the country. That is what is important.

I would like to have seen this Bill introduced ten years ago. I am sorry that its introduction has been delayed for so long. At the same time, I can quite sympathise with the Government, faced with making changes in regard to monetary matters, being cautious, and submitting the matter for the consideration of experts. I can sympathise with their being slow to act and to introduce a Bill of this kind. The trouble about the Bill, as I have said before is that for most people it is very difficult to keep to the Bill itself. The Bill provides an opportunity, in an indirect way, for a discussion of all kinds of matters, all kinds of proposals that are not directly concerned with the Bill, and it is because a good deal of that kind of discussion has been allowed that the real merits of the Bill have been obscured.

Senator Johnston referred to the fact that he does not think the central bank will be able to do very much. I agree with him that, as things are at the moment, a central bank will make very little difference. Whether it will be of very much value to us or not depends a good deal on circumstances over which we have very little control. It will depend very much on the outcome of the present conflict.

At this point I would like to say that I do not believe that the idea of a central bank originated in the Banking Commission, because I know that members of the present Government had been thinking of the idea of a central bank for a long time before that commission was actually set up. They realised the complexity of the matter, and while I would have liked that they would have taken their courage in their hands and gone on with the central bank, still, as I have already said, I can quite sympathise with their attitude in considering the matter carefully and referring it to a body of experts for their opinion. But whether the Banking Commission had reported in favour of the setting up of this central bank or not, I believe that this Central Bank Bill would have come along. It may seem a small point but it is no harm to mention it because, due to a certain kind of campaign carried on for some time with a view to discrediting the Banking Commission and its members, an effort is being made to discredit this Bill as being the child of the Banking Commission. It is not, in my opinion, strictly the child of the Banking Commission. It would have come before us whether the Banking Commission reported in favour of it or not.

There has been a fair amount of criticism of the majority report of the Banking Commission. There are many things in that report which I do not like but it is a great pity that, in the interests of financial and economic policy, and education on these matters, the majority report of the Banking Commission did not get more objective consideration than it received. Criticism of the report was, undoubtedly, called for but I cannot see why the report or its signatories should have been subjected to so much abuse. Commissions generally work in an atmosphere far removed from the difficulties of administration and from responsibility. I do not believe that commissions are set up to shelve problems. In the course of their work and in their reports, commissions aim at the ideal. While we all strive for the ideal, we ought to realise how hard it is to attain it. We all realise how often we have to take roundabout ways to get even a little of the distance towards the achievement of the ideal. The Banking Commission worked at a time when there was cause for uneasiness—the period from 1934 to 1938. Even the most optimistic of us did feel a certain amount of uneasiness as to what was likely to be the outcome of the struggle then taking place. I can understand that, if the Banking Commission were working under more normal conditions, many of its conclusions would have been somewhat differently coloured.

One evening in the Dáil I heard the Minister for Finance say—Deputy Cosgrave, I think, agreed with him—that the study of the Banking Commission reports was something in the nature of a penance. These reports contain the results of an enormous amount of hard work and research, and I only wish that, in the interests of the country, more people would impose upon themselves the penance of studying them. The conclusions arrived at in many instances in the Majority Report are not to be taken as evidence that disaster is upon us. The hardest thing I would say about them is that they are just warnings of possible danger. Many of them were timely warnings of dangers likely to beset us if we were not more careful. There was not, nor is there, any need to become jittery with regard to some of the conclusions of the Banking Commission. I do not agree with a number of the conclusions to which the commission came, but the truth of many of them, if things were to work out on the lines on which they were then moving, could not be contested. I say that in all sincerity.

I do not propose to examine the Banking Commission's report, but I should like to give one example of what I have in mind. The Banking Commission drew attention to the decline that had occurred in the sterling assets of the country during the period the commission was operating. It pointed out the dangers inherent in a continuance of that decline in our sterling assets. It is very hard to reject their conclusions that there were dangers—and serious dangers—to the country in a continued decline of these assets. The commission pointed out—I find it hard to avoid going into a number of matters that would lengthen out this debate and, ultimately, might not be very helpful—the results that were likely to follow if this country were to fall back on its savings instead of living and securing industrial development out of current income and savings. There is no doubt that such a policy held certain dangers. We can quite understand a man who has money saved using that money to tide him over a "rainy day," but we would have no hesitation in agreeing that it would be very unwise of that man to cease working, become unthrifty and proceed to live on his savings. In effect, that is what is pointed out in the conclusions of the Banking Commission in this connection—that there was a certain danger to the country if we were to go on using our assets for development instead of securing development out of current savings. It was quite right that we should have been warned as to the danger.

Arising out of these references to the Banking Commission, it seems to me it is about time that some one of us, whether we like the commission or not, should pay some little tribute to the members of it for the enormous amount of work they put into it. They were given, and did, a thankless job. Every word put into the reports of that commission, the majority report and the three minority reports was, I believe, designed to render the highest possible service to this country. I think some little tribute is due also to the people who gave such considerable thought to the monetary problems of the country, who prepared memoranda and came, many of them at great inconvenience to themselves, in order to give whatever evidence and help they could to the members of the commission. The reports themselves and the minutes of evidence that have been published have been of tremendous value. I should like to take this opportunity of tendering, belated though it may be, my best thanks to those who were connected with the commission.

While I am on this question of the Banking Commission, I should like to say how very much I regret that one member of the commission, a colleague of my own in the National University, has been singled out for so much undeserved attack and abuse. The gentleman to whom I refer is Professor O'Brien. I do not agree with Professor O'Brien on many things, but I regret very much that he should be singled out in order to be made the butt of these attacks. I want to pay tribute to his standing as a scholar and an economist. It is only fair to acknowledge the sympathy and patience with which he approaches every problem put before him. I remember when I was a student in University College, Dublin, how often I had discussions with Professor O'Brien on matters connected with national economics. I can never forget his kindness and patience. I well remember his advice, always to stick to my idea so long as I believed it was right. Always there was the suggestion: "You may be right and I may be wrong." Professor O'Brien has been appointed on every important commission in this country since the State was established. Whether we like his views or not, the one thing that cannot be questioned is his sincerity, his desire to do all that he possibly can in the interests of the people of Ireland.

On a point of order. Has this any relation to the Bill before the House?

Leas-Chathaoirleach

I find it very difficult to see what relation it has.

I agree with the Chair and with Senator Foran that it has not very much to do with the Bill, but I think I am entitled to refer to the Banking Commission Report, and if it is a matter of privilege I would like to claim the privilege of making that passing reference to a very distinguished Irishman and member of the commission. I do not intend to pursue the matter further, but I think it is only fair that I should pay that little tribute to a man who has been, in my opinion and in the opinion of many, unfairly assailed and abused.

It is very hard to say much on this Bill. I approve of it fully. I thought that there might be some statements made in the course of discussion that I might, as it were, get my teeth into and give my views on, and perhaps help to clear up misunderstandings. But there was practically nothing said here to-day against the Bill. Senator Johnston suggested that the Government might have borrowed millions to be utilised for national development. I respectfully submit to the Senator that millions were obtained by the Government directly, and millions were made available indirectly, for investment in this country. The Government certainly had my support in the line they took to create as many opportunities as possible in the country for investors. That they did not create more opportunities was hardly their fault. At any rate it is not true to say that the Government failed to secure millions, directly or indirectly, for investment in industry.

I said that if a central bank had existed ten years ago, the Government might safely have borrowed £10,000,000 from it for the purpose of national development.

The word "orthodoxy" has been used very often in this discussion. One trouble I have about the word "orthodoxy" is, what does it mean? I think it means right thinking, right teaching. Who is going to tell us——

The Chairman could, if he liked.

Anyway it is a pity we could not get some other word. It always comes back to this, that each person who starts to discuss this matter thinks he is right and everybody else is wrong.

Senator Campbell was worried as to the difference between the Cosgrave Government and the present Government in regard to this question of finance. I do not know what their views were ten or 15 years ago with regard to novel monetary developments, but the difference that I have seen between the two Governments, and the reason which led me to support the one as against the other, was that the present Government realised that it ought to be possible to provide an outlet in this country for the use of some of the moneys accruing to it, instead of these moneys being sent abroad. I have no objection to these moneys going abroad if we cannot find use for them here. The question then arises: having regard to what has been done, what else would you do? What would you do here with these surplus funds which are finding their way into investments in Britain? What further opportunity for their utilisation would you create here and how would you use them? I have the feeling that, following the appointment of a board such as is contemplated to guide the central bank, investigation of these matters is one of the most important things which can be undertaken. It will investigate and will be in a position, as a result of its specialised investigations, to tell us what further projects are worthy of our support.

There is very little use in talking about what has been done in New Zealand and Australia and what has been done in Ireland, especially when you speak of these matters in a very general way. The circumstances are very different in these countries from the circumstances in Ireland. The Minister has pointed out that in respect of a central bank, there is no special pattern. Circumstances are so different in every country that it is almost useless to attempt to make a comparison. But if one were to take the case of New Zealand, one may ask what really was achieved there. One would like to have a discussion on it. But I do agree that if you were to start an inflationary policy in this country in the morning you would achieve, over a short time, certain apparent advantages but in due time you would discover that you would have to pay dearly for whatever advantages you achieved for a short period, and that, I am afraid, is, in effect, what happened in New Zealand.

There was, furthermore, this advantage for New Zealand, that, shortly after they embarked on their monetary policy, conditions in world markets improved to such an extent that things did become better for them at home, but we are likely to believe that the advantages which accrued from that improvement in world conditions accrued because of certain manipulations of monetary policy at home. As a matter of fact, we know that when it did come to the point New Zealand had to go abroad—the very thing they thought they would be able to avoid —and had almost to go on their knees to the Bank of England and ask them to provide them with the wherewithal to get over certain difficulties.

It has been very difficult, as I have pointed out, to say very much on this stage of the Bill. For the rest, I merely want to say again that it is not so much that the Bill would have been very much use in the past or that it is of very much use now, but that it does seem to me to be well that the powers incorporated in the Bill should be there because we do not know the moment they may be needed. Above all, I am pleased because the Bill provides for the setting up of a board of directors—and if the board is of the right type, advantages are bound to accrue from it—which will be charged with investigating and consulting with and advising the Minister on matters of economic and social policy. I welcome it and I believe it will be of great advantage ultimately.

We might argue as to the power of the bank to influence rates of interest and one thing and another, but we should be arguing somewhat in the dark. It will be, I suppose, six or 12 months before we shall get any definite inkling of what this bank really may be able to do. It will be six months or 12 months before the preliminary investigations are completed and before it will be in a position to give the Minister any indication as to whether he should go on with projects he should like to go on with, or whether it is advisable in the interests of the country that other people should go on with projects which occur to them as being worthy of promotion; but because this Bill provides for the setting up of this board—and, as I say, everything depends on the type of people put on the board—and because the power is in the hands of the Minister for Finance to appoint that board, I welcome the Bill and I hope it will get a speedy passage, so that the board can be appointed and can get on with its work.

There are a few comments I want to make on the last statements of the previous speaker. In his references to New Zealand, he made the very sweeping statement that New Zealand had to go on her knees to the Bank of England to set herself right. I do not think that statement is quite correct. I think a different purpose entirely was served on the occasion of the visit of Mr. Nash to England. I believe that all debts imposed on New Zealand in the early stages of its existence were wiped out through the action of Mr. Nash. It was not a case of his going on his knees but of his going with his fists clenched so that his country was relieved of the dead weight of debt which hung on it for many years. I am open to correction on this point.

You will be corrected, Senator.

I think we may leave it at that. For the life of me, I cannot make out what all the pother was about this Bill and why so much time has been wasted on it. I believe the Bill is simply one to preserve thestatus quo, if that were necessary, in our international money relations. I do not think it was necessary, and it appears to me to be a bit of eye-wash to cover up a want of courage on the part of our Ministers in dealing with this question. Reference has been made to the Minister of Finance of another country, and I think that if the same courage were shown here as was shown in that country, if we had had a courageous Government which took its courage in its hands and said: “We must have this,” not only would the £15,000,000, or whatever the sum was, be wiped out eight years ago, but the payment of £10,000,000 which we had to make to another Government would not have been necessary. It might have been a bold thing to do, with a great big stick hanging over our heads, but I maintain that it would have been the natural and proper and patriotic thing to do. What is the result of all those attempts at maintenance of integrity? This central bank has no power. I have searched through the pages of the Central Bank Bill, and, except for paper power, they have not the slightest power to maintain the integrity of the pound. How can they have? It can only be maintained by the goodwill of the predominant partner. As Dr. Johnson, the famous lexicographer, said: “The English would only touch our money matters for the purpose of robbing us.” That was true then, and it is true to-day, and there is no use in bowing down under this threat that if we do not maintain the integrity of the pound the world is lost to Ireland. It is not lost to Ireland; Ireland will go on, as it has gone on for 700 years. The Irish pound was not always able to look the English pound in the face; neither was the English pound able to look the American dollar in the face at one time. After the last war the English pound was not able to look the dollar in the face, and the result of the attempts at maintenance of integrity there was that there were 2,500,000 unemployed for many years. The main industries of England were ruined by those attempts to maintain integrity.

Notwithstanding all the high-minded notions set forth in Clause 6 of our present Bill, it would seem that the attempt to maintain integrity here during the last ten or 15 years has resulted in something like what occurred in England after the Great War. We have a country undoubtedly impoverished. We have hundreds of thousands of our people compelled to avail of emigration for the purpose of keeping body and soul together. We have the land going out of production. I see Senator McEllin smiling. I am aware that production is very great at the moment, but it has not succeeded in keeping our rural population on the land. They are still going away in thousands every year. We have the production, but we have not the wherewithal to buy the production. We have to subsidise our products, to be sent and sold at an uneconomic price in England, while our own people go hungry. There is a parallel in history when, a century ago, our barns were bulging with wheat and our people were starving. The same thing holds to-day. We have home help, home assistance, charity, to a greater extent than ever before. We have malnutrition on all sides. What is the use of talking about production, then, when our produce is going out of the land and we are getting merely scraps of paper instead? If we were getting something tangible——

Has this something to do with the Central Bank Bill or the fact that the Irish pound is worth 20/- English?

There is no use in talking about production if we have not the means to feed our people. The farmers are not getting a price; therefore the workers cannot eat—all in the interests of the integrity of the pound. It is time that we got away from that, and looked matters straight in the face. Senator Buckley made some extraordinary statements. I have read somewhere that this Bill was founded on the majority report of the Banking Commission. It is interesting to note who constituted the majority. I think nine out of the 21 members signed that majority report. Who were they, and what were their qualifications?

I think more than nine of the members signed the majority report.

There were 21 altogether. I think nine out of the 21 signed it without reservation.

Sixteen out of the 21. Nine would not be a majority.

That is right. If we take those people, we find that they were very able gentlemen in their own special sphere of life.

Will the Senator read the names?

Mr. Brennan was one; Mr. Cooke was another; Mr. McElligott was another, a great friend of Ireland; Mr. O'Brien was another; Mr. John O'Neill was another, and so on.

What is wrong with those gentlemen?

I did not say there was anything wrong with them. Mr. Jacobsson was another; and Mr. Eason was another.

And the Bishop of Raphoe, I think, was another.

Yes—all most estimable gentlemen, but, if you take the first eight of those, they were bankers, financiers, civil servants, who had little contact with the people. Another one of those gentlemen signed the Treaty, but came home and voted against it at the behest of his political friends.

That was a bit of a somersault.

Was not Mr. Barton on it?

He was one of the gentlemen who signed the report.

Leas-Chathaoirleach

I suggest that the Senator might pass from a personal discussion of the signatories of the Banking Commission report.

I would say, with all due respect, that those gentlemen who signed the majority report were not so highly qualified as to induce the Government to introduce a Bill based on their recommendations. We have been told that thestatus quo has been entirely preserved by the Bill; that there is not the slightest danger to the banks, or to Sir John Keane or to anybody who has money in the banks. I am sure that gives Sir John Keane the greatest pleasure. I say that the Government ran away from their plain duty by not standing up to the Governor of the Bank of England, Senator Sir John Keane, the millers and the financiers.

Business suspended at 6 p.m. and resumed at 7 p.m.

We on these benches cannot support this Bill. Some of the reasons I have already given, but there are others of even a more definite character. One of them is that it does not provide that the monetary authority will be amenable to the Oireachtas. The monetary authority will be amenable to forces operating from other quarters over which we have no control and over which the board that is supposed to be set up by this Bill will have no control, as far as I know. If that is so, I do not see what progress can be made from the position to which we have already attained. There is a limitation on the volume of currency, as embodied in the Act of 1927, which may be operated by this bank. There is no provision made as far as I can see—the Bill is an elaborate one and perhaps I have failed to grasp all its details—for the removal of that limitation, to enable the bank to provide increased currency when the necessities of the nation require it.

I have already pointed out that it does not appear to be the function of the bank or to be within the powers of the bank to maintain the integrity of the currency and thereby do something for the welfare of the people. One thing above all it does not do, and that is to make provision for the development of a national economy, such an economy as would provide full employment for the people of this country, prevent that involuntary emigration which we look on so placidly and which is going on every day before our eyes. We cannot prevent it unless we make provision in this Bill for the development of a national economy peculiar to our own country. That national development would refer in great measure to the rural population. No matter what we may say about production in the country or the tilling of the land, the rural population is leaving the land, and if that tendency should continue, there is certainly no hope for the towns.

The function of the land is to provide the towns with a new population and to provide purchasing power for the industries of those towns. In the present Bill I do not see that any provision has been made towards that end. It is stated, although it was challenged here this evening, in the explanatory note that the Bill springs from the determination of the Government to give effect to the report of the Banking Commission of 1938, that is, to set up a monetary authority possessing the usual powers and functions associated with a central bank. As far as I know, one of the usual powers associated with any central bank of which we have any knowledge is the regulation of the exchanges between the country in which it is set up and other countries. I am quite cognisant of the difficulties that would confront the Government at the present moment in making a change in our currency.

I think, however, that that provision should be put into the Act, whether it is utilised at the present moment or not, and that it should be kept in stock for future use and for the time when the national economy of the country might call for such use to be made of it. I think that even in countries closely allied to England, such as Australia and New Zealand, that holds, and that there is power to regulate the exchanges. Perhaps that might be difficult for our banks in Eire at the present moment, as they are divided into two sections, one section in the North and the other in the South of the country. There may be difficulties there, but I think that that should not deter the Government from embodying the principle in the Bill with a view to implementing those provisions.

It should be referred to, and I think we cannot emphasise it too strongly, that an unfortunate statement crept into the report of the Banking Commission. That statement is in paragraph 188 of the report and is as follows:

"The commission has first of all reviewed the trend of population and found on the basis of available information, taking into account the possibilities of emigration, that no notable increase in the Irish population can be expected to occur during the next quarter of a century and that the continuance of a decline cannot be disregarded."

Now, when a body of men approaches the formation of a Bill based on that thesis: that considering the present circumstances—that is, in 1938—no development or no increase in the population of Ireland can take place within the next quarter of a century, I say God help Ireland. It is based, then, on the idea that Ireland cannot afford to keep them, and it cannot afford to keep them because the integrity of the pound is not maintained.

I would point out that the view upon which they have based the Bill is contrary to Christian teaching. It is contrary, at least, to Catholic teaching because, inRerum Novarum, which is much quoted by other countries, both Christian and otherwise, it is the duty of the Government of a country to make sure that the laws and institutions, the general character and administration of the commonwealth, should be such as of themselves to realise public well-being and private prosperity. Now, with regard to the laws and public institutions, the banking institution is one of our great public institutions, if not the greatest. We have the law, the Army, Justice, and so forth, but the banking institution is the life-blood of the nation through its credit facilities. It is one of the greatest public institutions that we have, and if that is the doctrine or philosophy that that public institution starts out with, the philosophy underlying this Bill, which means the continuation of that system, then I say that it is wrong, and I could quote others along the same lines.

Now, here was another thing that came out in that majority report, the report that was signed by 16 out of 21. It was evident that the majority report came from a quarter that believed that the subsidising of housing was not a thing to be approved of. The Minister has been very generous in the subsidising of housing, but he has done so, as far as my reading goes, against the express wishes of the people on whose report this Bill was founded, and I think the Bill should be abandoned. Again, the same people disapproved of the Government borrowing for revenue purposes. I wonder where the Minister would be if he had not recently borrowed for purposes akin to that? In other words, these people want the Budget balanced no matter where the money comes from or who is to pay. That is the suggestion from the people upon whose report the Bill was founded. A more extraordinary thing still is that they did not approve of land division. Parts of the report show that they did not approve of land division. It is no wonder, then, that they state that no improvement could be expected in the population of the country for the next quarter of a century if their doctrines are followed, and it would appear that it is their doctrines that we are following.

Now, the kind of banking institution visualised by that majority report was that there should be no suggestion that it should control the volume of money or no suggestion that it should hold the reserves of the commercial banks as is done in most countries where central banks are established. In fact, there was no suggestion either— although I understand it was introduced at a later stage—as to the discounting of bills.

That is not true.

That is not true? Well, I am sorry. I know that it came in afterwards. I think that the welfare of the people is not being considered in this Bill, and I do not see anything in it that will help the rural population. The economic consequences of the Bill, I think, will be that matters will go from bad to worse—all in an effort to preserve this neutrality, so to speak, because the idea will be that nobody can do anything except they put down an English pound or borrow a pound from England for the purpose of the banking fund or a similar fund. I have nothing more to say. I wish I could make a more definite suggestion, but I think the time will come when the Government will have to take their courage in their hands and do something better, because as long as we are linked as we are to international finance, we will not see much improvement in the condition of this country.

I wonder whether anyone listening to this debate could ever guess what we were supposed to be talking about? I think that the Minister himself is in no way to blame. There was an immense discussion in the Dáil—a kind of midsummer madness, as someone suggested to me— in which they talked and talked on this Central Bank Bill, but in all that they talked over a long period I do not think they ever succeeded, in their wildest flights, in getting as far away from the Bill as we have got away from it this afternoon. This is a Bill to set up a central bank, and, as the Minister himself stated in the Dáil, it is not a Bill of very great importance. The Minister for Finance said in the Dáil that he made no great claims about the Bill, that it was of some value but that it was not of considerable value. In my opinion that is a very fair statement of what the Bill is, and I think I have given the Minister's statement correctly. It is for the setting up of a central bank which differs in no great way from the Currency Commission set up in 1927. The Bill has, of course, certain additions, as distinct from the Act of 1927. It has one of the usual Fianna Fáil window-dressing additions. For example, Section 6 says that "in what pertains to the control of credit, the constant and predominant aim shall be the welfare of the people as a whole." That is merely a piece of window-dressing. I think the words occur in the Constitution, where indeed they have no meaning. I think they have no meaning here either. No Government should set up any machinery in the State except for the welfare of the people. It is quite unnecessary to put in a phrase of that kind. I suppose it is intended to have a certain political value. One thing that this Government have done since they came into office is to increase the costs of banking to the banks themselves. I think there is a slight increase in this Bill over the increases heretofore imposed in various Budgets.

This Bill, in spite of what has been suggested, does not aim at increasing the volume of production. It takes no positive steps to increase credit or give cheaper credit and it bases our currency more firmly and more exclusively than before on British banking. In this Bill we are linked to sterling more firmly than we were in the Currency Act. On that, one would like to know what precisely a certain type of criticism aims at. Senator Campbell, like the Leader of the Labour Party in the Dáil, quoted pronouncements of one Deputy Seán MacEntee before he became Minister, in which he said, of course, the usual political stuff about breaking the link with English currency and so on. Senator Campbell did not make any endeavour to prove why Deputy Seán MacEntee was right in 1931, and how the present Minister for Local Government, who happens also to be a Deputy Seán MacEntee, is wrong new in supporting this Bill. That is what really one would expect Senator Campbell to do, or Senator Cummins, or somebody else. The situation appears to be that the Labour Party want to take up now certain of the cries which Fianna Fáil people had before they came into office. It is quite possible that after a period of nine or ten years doing an immense amount of harm, as the present Government has done, the Labour Party might work itself round to the position of recanting some of their wildest cries at the moment.

I should like to see, in so far as this Bill is criticised for not controlling credit and not giving us any possibility of an expansion of credit or of lower interest rates, amendments put down so that those who want to discuss the matter calmly and who are as interested in the social conditions of the people, in the improvement of agriculture and in the improvement of industry as the Government or the Labour Party, or anybody else, can discuss this calmly. Finance is not a matter on which one should make what one might call cross-road speeches. There is no use in telling us that there is no machinery in this Bill for doing certain things unless some effort is made to prove that a Bill of this character, or this Bill altered by amendments, could in fact effect important improvements in our social and economic conditions.

I have a feeling that this Bill certainly is not an engine or a piece of machinery to meet post-war conditions. It is not intended, for example, to get certain methods of production and a certain amount of production going, even though at the moment that production might be uneconomic. But I have a feeling that there are a number of people who backed certain theories before and found they lost and, instead of sitting down now to see what is wrong and how we can put ourselves right, they want to start another hare, and the new hare apparently is credit and a new financial arrangement. I should like to be convinced that fundamental changes would be for our good and not retrograde and putting us back. There are various matters in this Bill which will fall for discussion in Committee and I should like to see, by way of amendment on the Committee Stage, proposals for getting certain things done which have been advocated.

Senator Campbell seems to have a child-like belief in everything Fianna Fáil said before they came into office. I think he and the Labour Party displayed a certain amount of child-like belief in them after they came into office. The Labour Party and the Fianna Fáil Party backed tariffs as a cure-all for our ills. That cure-all, even before the war broke out, proved to be a failure. Another banner is now waved and, if it were put into operation, might prove to be as illusory a solution as tariffs were. I feel that we ought to get something more concrete than we have got so far. For example, Senator Cummins said that this Bill is contrary to Christian teaching. I think that is a foolish idea.

I said that the sentiment which underlay the Bill was contrary to Christian teaching.

We will have to talk Irish. We do not understand that English language. The Bill is not contrary to Christian teaching, but the sentiments underlying the Bill are. There are no sentiments underlying the Bill. This is brought in by a Finance Minister who has not any sentiments. No Finance Minister ever has. They do not have sentiments. I suggest that it is foolish to tell us that the sentiments underlying this Bill are unchristian. The Minister for Finance may be extremely incompetent, he may be entirely wrongheaded and ill-advised; but it is absurd to say that he is not a Christian any more than myself and Senator Cummins. This kind of argument about this Bill or any other Bill will get us nowhere. I heard the Minister for Finance himself rise in his place in the Dáil to claim that he represented a great Catholic Party, to imply that nobody else was a Catholic but himself. He would not do it now. Those days are gone and we are not making any remarks of that kind now. We have gone through that particular phase.

This Bill is merely a consolidation of the Currency Commission. It will give them somewhat more power—not very much. From reading the debate in the Dáil it seemed to be an extraordinary debate, because only one member of the Fianna Fáil Party spoke and he did not give a particularly enthusiastic benediction to the Bill. The speaking was nearly all done by the Taoiseach and the Minister for Finance. The Taoiseach expects from the Bill leadership of the other banks by the central bank, and, what Senator Buckley particularly emphasised this evening, advice and assistance. We are getting research done into financial problems and assistance is expected from this particular bank. There is not much more in it.

I wonder what exactly the board of directors of the bank will be like. There are to be nine people on it. Three must be bank directors selected from a panel of six put up by the banks; two may be civil servants, and there will be four others. The Minister will have a majority on the bank at all times, and the Bill endeavours to make the board, by tenure of office, independent of the Minister. But our experience of Ministerial appointments to boards is not too happy a one. For this particular board one wonders what particular type of person the Minister has in mind. I should like to raise another matter on a suitable occasion. I do not think it will arise in Committee, because there is no section dealing with it in the Bill. But I should like to ask the Minister whether he has given any thought to the question of how this particular bank is to be staffed; whether it is by patronage, by nomination, by examination, or by what method. That is something which concerns the whole of us.

I do not want to delay the House. I simply want to emphasise that the Bill is not, as the Minister says, of considerable value, although it is of some value. It is not startling, it is not new. It is not a powerful weapon. It leaves things much as they were. It will do no harm. One can gather even from the praise given to it by its sponsors that it has not got potentialities for doing very great good. If it is intended that a different kind of measure, that a substantially different measure should be before us, I think we ought to have amendments put down which will enable us in Committee to discuss other methods. If that were done, then the discussion here could be fruitful and helpful in regard to the decision one would arrive at.

I should like to say that I hope the Seanad will not spend a great deal of time discussing the Second Stage of this Bill. I do not think we would achieve any useful purpose by doing so, as any function we could usefully employ now would be in trying to elucidate points that will arise. Personally, I regard this Bill as rather a piece of machinery, and as an experiment which it has been decided to try, and the only useful work we can do is to try to make it as good as we possibly can. Personally, I do not think that very much can definitely be known as to the actual functioning of the bank. I believe this will, to a large extent, depend on personnel, and on the practice which will grow up. Whether it will become an extremely important part of the machinery we have will depend on the character of the directors, on the work which develops on the use which the Government may make of it, the extent to which, in a more or less friendly way, the Government makes it aware of Government policy and intentions 12 months ahead, and the extent to which it can fit in with and generally advise it. I read a great deal of the debates in the Dáil. I do not intend to discredit them when I say, quite truthfully, that I felt hopelessly bewildered after I read three-fourths of these debates, and I doubt very much if much of a useful purpose was served by them. I could not help feeling that it would be a pity if we had largely a repetition, as sometimes occurs, of these debates in the Seanad. When you have a Bill dealing with an institution like a central bank it is more or less inevitable that people will refer in some form to the general grievances that people feel with regard to banks generally. I went with a gentleman who was visiting this country, and who has since become a Prime Minister, to visit a prominent member of the present Government who was asked what he thought of the Douglas Credit Scheme. He answered that he was enormously impressed by it but that when he examined it carefully he found that what he was most impressed with was not the scheme itself but the criticisms of the present system. I am inclined to think that that is what many people feel about this Bill. When you see new proposals, because you do not understand them, you feel that things are not satisfactory.

Any honest man will admit that there are things that are not satisfactory in the present banking system. People ask why cannot the new Bill remedy all the things which seem to them to be grievances, and they want them dealt with in black and white. The power of the new central bank would be limited and the more it is tied by strict regulations the more the probability that in fact its possibility for usefulness is lessened. For my part I am not a bit in favour of adding new phrases which are supposed to indicate the functions of the bank. In practice it will probably consult its lawyers and that will quite likely have an upsetting effect on what was intended. Reading through the speeches that were made in the Dáil, and having listened to the speeches made here, I could not help wondering if it occurred to anyone, and particularly to Senator Cummins who said we are in the hands of international financiers, that pretty much every theory has been knocked on the head by this, the bloodiest war, that ever took place, that colossal damage is being done, that resources are being destroyed, that people are starving and that at the end of the war—which must stop some time—some effort will have to be made to try to remedy the situation. It is not going to be met either by orthodoxy or unorthodoxy. It is going to be met by facing the problem, seeing what ought to be done and trying to make finance fit in with what is necessary. I do not think anybody could at present sit down and say what ought to be the financial policy of this country next year. The most that can be done is to assist in facing the situation when we have to face it. I do not want to discuss the war, but it seems obvious that a victory of one side would mean a financial crisis for us, in view of the assets that we hold on the other side. If, on the other hand, you have a victory for the allied nations they will be bound to face up to an enormous reconstruction programme, for themselves and for those associated with them, to say nothing about the need for reconstruction in the nations which may be defeated. We will not be able to stand out of that. Even if we were to try to do so, it would be the height of folly. In some way our programme and our finances will have to fit in, if we are allowed, with whatever is being done by means of international cooperation.

I think that anything like complete self-sufficiency will not be tried again in the lifetime of any of us. If there is not some method by which barriers would disappear and there would be co-operation for reconstruction then we will have chaos. If there is no such co-operation, as a little nation, we can only try to do our best. If there is cooperation we ought to be allowed to co-operate and, if possible, to play our part. I say that because I believe that some Government, I hope not far ahead, will have to face this problem, and anything that it is tried to do in a Bill of this kind which would hinder the new bank from being of assistance would be a mistake. I am not very hopeful that the bank to be created now can be of very much assistance to the Government to-day. My attitude to the Bill is very largely that of Senator Buckley, and I agree with everything he said that has direct relation to it. The Senator said it would be six months before the Bill could be operated. I think it will be much longer. You cannot set up a fully-functioning institution in anything like six or 12 months, and it would be a great mistake to expect too much in such a short time.

I shall not keep the House very long, as this is the Second Reading, and I agree with Senator Douglas that most of the points should be dealt with on the Committee Stage. There is a reason for this Bill, in that it is one of the first attempts to implement any part of the Banking Commission Report of 1938. That report is a remarkable publication and, though its investigations were based on the finances of a very small State, it gave Mr. Per Jacobsson and Mr. Gregory, and those who worked with them, the opportunity of writing a textbook to cover the problems of Government finance, which is read now in very many places, both large and small. It dealt with two things—the international aspect of a central bank, and the national. So far as our international status in the world is concerned, our finances are not really so important as to justify a central bank, as we cannot affect international monetary adjustments. So long as the allied nations are in their present position, and we are tied to sterling, and so long as we have only one customer, the business of the bank from a national point of view can be very little more than routine, particularly as it will be almost completely controlled by the Government.

Apart from these general considerations, there are three major points which I would just mention now and which will be discussed more fully on the Committee Stage. First of all, there is the fact that there is no obligation whatever on the Minister to consult or inform the board. He can ignore it absolutely and entirely on major subjects which he does not wish disclosed for political reasons. Secondly, there is the possibility that, in the future, some other Minister for Finance, not so worldly wise as the present incumbent of the office, may ignore the advice of the bank. We had an example of this at our last meeting here, in another sphere of Government activity, where a Minister, with advice from all over the country, took no steps whatever to follow it. Some Minister for Finance may misuse the facilities which the bank is capable of providing for national finance. In the third place, I would like to know about the advantages which will, or will not, accrue to our producers, the farming community, from the steps which the bank may be able to take indirectly in providing credit for that community.

In regard to the first point, as I propose to put down an amendment on the Committee Stage, I will only say now that, unless the monetary authority is given adequate consideration and is aware of the trend of prospective legislation even months before the policy is to be developed, they will not be able to carry out the duties and functions laid on them and they will be entirely ineffective from the national point of view. My next point deals with the greatest of several possible dangers—the misuse of the bank's assets by excessive lending to an improvident Government. I think there are both chapter and verse of this happening in other countries on the Continent, with very serious consequences, such as the reduction of Government credit, apprehension by investors as to the monetary situation, and the movement of savings elsewhere —a thing which has had to be countered in the most inconvenient way by currency restrictions. All these things must be considered, and I see no provision in the Bill to safeguard a situation of this kind when we may, in the future have a Minister less conservative than the Minister we have in the House to-night.

Finally, I would appreciate the Minister's views on the effect which the operations of the bank will have in easing the credit for our producers, the farming community. Industry, which we all know serves only the home market—our exports in that line are infinitesimal—is maintained, during the term of office of the present Government, by tariffs and subsidies and by the manipulation of prices. On the other hand, agriculture, after feeding this country, has to compete with the markets overseas and with the prices ruling, without adequate assistance. Certain assistance has been given, I admit, but not to the same extent as has been afforded to industries brought into being in recent years. Therefore, it is not in as sound a position as regards production costs as industry. We hear on every side of the preoccupation of the farming community as to whether they can be given a "favoured nation" place—whether they can get some credit at a price in relation to the cost of production, in order to maintain the export trade in the only thing we can naturally produce.

Ba mhaith liom cómhgáirdeachas do dhéanamh leis an Aire mar gheall ar an mBille seo, agus an tosach i nGaedhilge. Ba mhaith an comhartha é agus tá súil agam go leanfar go minic len a dheaghshompla. Tá a fhios againn uilig, ins gach taoibh den tSeanaid, nach mbéidh sa mBille seo nuair a bheidh sé ibhfeidhm, ach ina dhlighe shealadach. Tá an saoghal ag athrú, agus an nidh atá feiliúnach fé láthair ní bhéidh sé feiliúnach fá dhein bliadhain nó dhó.

Tá daoine sa tír seo agus tá siad ana-chliste agus an-eolasach fá ghnaithí airgid agus ceisteanna achrannacha, ach níor tugadh aon léirgeas dóibh leis an saoghal ibhfad rómpa a fheiceáil. Níl a fhios agam an bhfuilim in órdú nó as órdú le bheith ag trácht fán gCoimisiún a bhí in a shuidhe na blianta a bhí an Cogadh Cánach ar bun in Eirinn. Léigh mé an cunntas do chur furmhór an Choimisiúin sin ar fáil. Cheapadar go mbéadh Cogadh na gCánach ar bun i gcomhnuí, do réir an chunntais, ach taréis leith-bhlian bhí an cogadh sin socruithe. Cén mhaith clisteacht agus eolas bheith ag duine nuair a bhéadh an t-eolas curtha ar neamh-nidh thárla an saoghal bheith ag athrú? Má fhoghluimeann an t-é atá ar scoil rud bun os cionn is measa a bhéadh an scéal aige i ndeira an ama ná mar a bhéadh i dtosach báire. Caithfidh duine dul ar aghaidh leis an saoghal agus ní mór don náisiún déanamh mar an gcéadna.

I was hoping that somebody in this House would be a little more provocative, and that the debate would, perhaps, be more of the character of the debate in the other House so that I might answer, so to speak, indirectly, some of the very wild and extravagant statements that were made in the other House, especially in regard to the creation of credit and the functions of credit. Before I pass to that, I should like to deal for a moment with a remark that was made by Senator Campbell. The Senator speaks with authority. He sat, I think, for four years on the Banking Commission, and had an opportunity of hearing, first-hand, all the arguments that were made there and all the evidence that was considered with regard to the whole business of currency and finance. He comes here and simply condemns in wholesale terms the present system on which our currency is based. I could understand his condemnation if he had some alternative to offer, but all he states is that our currency is based and controlled by the Bank of England, and that as long as our currency is in that form no betterment can be expected either in the general conditions of trade or in the conditions of the working classes in this country. What are the facts? What control is the Bank of England exerting over our currency to-day? Our currency is in Irish pounds, and to get those Irish pounds all that is necessary is to supply sterling in exchange. There is no limit to the quantity of sterling available at present, and there is ample currency in Irish pounds to meet the demands that the commerce and trade of the country may need. As evidence of that we know that our currency circulation has increased by some 50 per cent. since the war broke out. If the Senator could show that there was a restriction of currency, or any suggestion of deflation in our policy, I could see some force in his argument, but his general statement, which may perhaps be of political value to those who know nothing, that we are under the heel of the Bank of England means nothing in fact, because it is not true.

I was interested in, and paid attention to, what the leader of the Labour Party said in the other House, that we are in a humiliating position in that, by statute, our currency is backed by sterling, and that there was no other country in the world, I think he said, that was in that position. I am not so sure that if he looks at the currency basis in Egypt that he will not find it is absolutely on that basis. But, surely, in a matter of this kind Parliament is the authority, and Parliament should be supreme. Since when have the Labour Party abandoned their democratic creed and belief in the power of Parliament? Surely there is nothing humiliating or wrong in this important matter of our currency—it is more than mere currency because it affects the whole savings of our people —that Parliament should have the last say in anything so serious as to alter the backing of our currency, which might affect our price levels and the value of our savings. The Senator, when dealing with this matter, should have told us what line he would take or what suggestion he would make in the way of an alternative. Does he suggest that our currency should appreciate or depreciate in terms of sterling, and does he consider what that would involve? It is quite possible, taking our trade to-day, that if our currency was free, our currency would appreciate in terms of sterling. That would involve a reduction in the cost of the production of our exports. I cannot believe that the Senator's Party would favour a policy of that kind.

It would mean a change in prices.

And the costs of production would have to come down in sympathy with that. I have been puzzled all along in this debate to know what is in the minds of so many who talk about the creation of credit. In the Dáil we had some general indication of what some Deputies thought. It seemed to be in the direction of ample and generous lending by the banks: that the banks do not lend enough, and that in some way the central bank should increase the volume of money lent to the community. Well, the banks have never hesitated to lend where their obligations to their depositors could be fulfilled. We have heard general statements to the effect that the banks refuse to make advances, but the fact is that the banks are only too anxious to lend where the security is satisfactory. In fact, in this country, the banks have never lent as much as they should like. The banks are only too anxious to lend more if there is a demand for credit from credit-worthy borrowers. I find it difficult to see how the central bank can help the credit situation. In countries where the central bank assists credit it does so by rediscounting bills or by buying securities. It puts more money at the disposal of the banks in order to enable more lending to take place. It comes to the rescue of the banks by increasing their cash to enable them to lend more. That situation has never been reached in this country. The banks have never been in want of money to lend where the demand for loans was justified. On that main and primary function, I fail to see where the central bank could in the past, or in the present, have assisted the credit situation in any way whatever.

With regard to rates, the central bank has no power to make the rates by which the banks lend. By means of its discount rate it can influence, remotely, the discount rates of the banks, but otherwise the banks are free agents entirely in their lending rates. That brings me to deal with the charges that have been made from time to time regarding the "excessive rates" charged by the banks. We have not had much said about that to-day, but it has been said frequently and I know it will be said before this debate concludes. We have these bank rates described as "usurious". On what criterion is anybody going to condemn the bank rates? I can say that the rates of my tailor, my grocer or any other person who renders me service are too high, but the rates have to be based on some criterion. If it comes to a question of excessive profits, did not a Department of Government recently examine bank profits and say that they were not unreasonable? I ask what service to the community has not increased in cost within the past three years, save interest rates? Bank rates have not, I think I am right in saying, increased by one fraction since the war. The banks alone stand out as institutions that have not increased their interest charges. I know it will be said that they have imposed charges. I need not develop that. Sixty-seven per cent. of the banks' customers are unaffected by these charges and they are only charges for work done. The maximum is 30 guineas and that applies only in the case of customers for whom a great deal of work is done and is based on the actual amount of work that has to be done.

Senator Johnston dealt with a certain point which was enlarged upon at great length in the Dáil—that is, the 10 to 1 basis by which credit is supposed to be increased. As this question of the creation of bank credit is a very important matter and it is rather hard to be quite clear about it, I should like to deal rather closely with it. It has been freely stated in the Dáil, and it has been stated in this House, that the banks can create unlimited credit at will—"out of the void" was the phrase used in the Dáil—and that the creation of such credit involves merely a book entry on which interest is earned. An examination of banking methods shows this view to be entirely erroneous.

Any creation of credit is reflected in banking deposits and I propose to examine the nature of such deposits. Bank deposits, which, for the present purpose, include credit balances, fall, generally speaking, under two heads— (a) those which originate in bank advances and may be called bank credit money, and (b) those which arise independently altogether of a bank advance. These latter comprise such items as dividend warrants, money set free in the time of the present emergency by the sale of stocks which cannot be replaced, remittances from America, proceeds of the sale of investments and, last but not least, individual savings. It is these latter which provide the cash that makes it possible for banks to create the former. Bank advances may be given either in the form of permission to overdraw or in the form of a loan, overdrafts being the more usual form in this country. Against the total of these deposit liabilities and notes, the bank has to retain corresponding assets and experience has shown that these assets must, for prudence, be held in the following ratios—(1) cash, 10 per cent.; (2) money at short call, 15 per cent.; (3) investments, 25 per cent.; (4) advances, 50 per cent. These ratios, of course, vary with the class of trade and the circumstances of each country but, generally speaking, it is never safe to increase the ratio of advances above, say, 55 per cent. or to reduce the ratio of actual cash below 10 per cent. The heavy disaster among American banks some years ago was mainly due to too high an advance ratio—in other words, to overlending.

It has been freely stated by, at least, one Deputy in the Dáil and it has been stated by a member of this House that banks can maintain a credit structure on the basis of 10 per cent. of cash— in other words, that for every £10 cash a bank holds it can lend £100. That view is entirely wrong. It must be understood that this 10 per cent. cash is only one item in the credit base. A further 40 per cent., divided between money at call and investments, is generally necessary, leaving only 50 per cent. of the total assets available for advances. When 50 per cent. is reached, no further loans can be made until more cash is available. In other words, if a bank adopts the 50 per cent. ratio of advances, only half the bank's deposits are the outcome of bank credits. Moreover—and this is important—when such cash is forthcoming, only an amount equal to that additional cash can be lent if the 50 per cent. advance ratio is to be maintained. Senators will thus see that the suggestion regarding power to lend ten times the cash is absurd. It arises from a confusion of thought. The correct position is that £100 cash, together with other assets in the proportion already stated, will sustain a £1,000 of deposits—a very different matter from £1,000 advances. The absurdity of the theory of loans amounting to ten times the cash is apparent if applied to the actual figures of an existing bank.

During the passage of the Central Bank Bill through the Dáil, it was frequently asserted by Opposition, Labour and Independent Deputies that the commercial banks possessed power to create credit in practically unlimited volume, that they should be deprived of this power, which was the prerogative of the people, and that it should be exercised for the benefit of the State by the central bank or, alternatively, by the commercial banks, on behalf of the State, at nominal cost. The arguments were grounded on the theory that upon a cash basis of, say, £10, a bank could, with perfect safety, raise an inverted pyramid of credit to the extent of ten times the amount, namely, £100, and that it could do so without cost to itself, as the transaction did not involve the lending of cash but was merely an entry in the books. It may not be unprofitable to examine the effect of this unqualified theory in its practical application to a commercial bank. For this purpose, the recent balance sheet of a bank is taken as the basis of this examination. The figures I propose to give are actual: capital, £500,000; reserve, £740,000; notes, £526,000; deposits, £12,251,000; profit-and-loss balance, £60,000.

On the other side, the assets consisted of £1,723,258 cash; that is, 13.5 per cent. actually in cash. Investments represented £6,764,297. It had a small amount of other securities. It had bills and advances to the extent of £5,279,753; that represented 41.5 per cent. of its assets and advances. The bank premises totalled £143,233. It will be noted that the ratio of cash to notes and deposits amounted to 13.5 per cent., somewhat above the ordinary empirical ratio or the ratio on which banks usually work. The proportion of advances to notes and deposits amounted to 41.5 per cent., the latter showing that the bank was underlent according to present standards. The bank could lend up to 50 per cent. but it could not get borrowers for more than 41.5 per cent. According to the unqualified theory, the bank could with perfect safety have made loans amounting to ten times the amount of the available cash; that is, it could have lent £17,230,000. According to the theory to which Senator Johnston referred to-day, the bank could have lent £17,230,000, ten times its available cash. It could have lent £11,953,000 more than it had lent at the time.

Assuming that the latter sum were placed to the credit of the Government, what would be the immediate position? It was suggested that where a bank underlent the Government should be given the additional amount. Assuming that this money was lent to the Government, the immediate position would be that the capital would be unaltered, the reserve would be unaltered and the notes and deposits would be unaltered, but the Government would have deposits to the amount of £11,953,000, that is, the additional loan that the theorists say could be made available to the Government. The cash and investments would be unaltered, but the advances would be increased by £11,953,000. That is the first step in the working out of the theory. The bank would have £11,953,000 more liabilities and advances in the form of a Government loan.

It will be noted that the cash ratio falls to 6.9 per cent., whereas the proportion of advances to direct liabilities rises to 69.6 per cent. The fall in the ratio would necessitate the sale of £750,000 of investments in order to bring the cash up to £2,473,000, or 10 per cent. of direct liabilities. The first thing the bank would have to do would be to get the 10 per cent. ratio restored and it would have to sell £750,000 worth of investments for that purpose. Pursuing the unqualified theory, the latter step would place the bank in a position to create additional credit amounting to £7,500,000, necessitating further adjustment in the cash position. I am not going to pursue that; I am going to take it on the basis of the £11,953,000. The theory that you could lend a further £7,000,000 when you brought the cash up to 10 per cent. is so absurd that I will not pursue it.

Confining the examination to the original credit of £11,953,000, it may be assumed that the credit would be drawn off by the Government and lodged with its bankers, who would claim the amount from the lending bank; the latter would then be faced with the certainty of losing its cash, amounting to £2,473,000, its remaining investments amounting to £6,183,000, and calling in £3,297,000 of its advances. The position then would be that the bank would be without either cash or investments. That is the position to which that theory would lead you. You would have the bank without cash or investments and the next thing it would have to do would be to put up its shutters.

I want to avail of this opportunity to deal with this thing because that theory is most misleading. That theory has gone round and the banks are blamed. The whole argument, based on the 10 per cent. theory, is that the banks are not discharging their duty to the community because they are not creating this fantastic volume of credit, which examination shows would be quite impossible.

I do not think I said the bank could lend ten times the amount of its cash reserves. I said, as a matter of fact, the Irish banks did not maintain the same kind of fixed relationship between cash reserve and total liabilities that British banks seem to maintain.

Is the Senator contending that the British banks make loans to nine times their cash reserves?

I did not say any such thing. I said the British banks normally work on the basis of 10 per cent. of total liabilities, which is quite a different thing.

Quite so. I understood the Senator to suggest that if you had £100 cash you could create advances of £1,000.

I certainly said nothing of the kind.

I apologise to the Senator for taking him up wrongly. It was freely stated and argued at great length in the Dáil that that was possible and it was mainly because of what was said in the Dáil that I took the trouble to clarify the position. Talking of the function of credit as it can be exercised by the central bank, I do not see how the central bank will be able to do very much to influence or increase the credit of the State. So far as I can understand the arguments, there is a general idea that the central bank will be able to provide in volume for all kinds of Government schemes. As I have implied from Senator Campbell's speech, with a properly constituted central bank there need be no unemployment because there will be some means of creating money to give ample wages to everybody and to stimulate production on a vast scale.

That leads me to make certain remarks on the necessity of keeping the central bank independent of Government control. In New Zealand legislation has gone a considerable distance in what the Banking Commission here said was a very dangerous direction. The Banking Commission said that the greatest safeguards should be taken to ensure that the central bank was independent of Government control. In that connection I should like to read an extract from a book on central banking by the Deputy-Governor of the Central Bank of South Africa. This is the extract:

"History is full of examples of inflation and currency depreciation resulting from credit creation on behalf of the State. In fact, experience has shown that heavy Government borrowing, either directly from the central bank or indirectly through rediscounts, is the easiest means, and sometimes the only means, of bringing about substantial inflation. In this respect, therefore, it is also not just a coincidence that the degree of expansion of central bank credit for Government purposes has had some relationship with the extent of currency depreciation.

"It is to be hoped that, as has happened in the past, the process will soon be reversed again in the direction of less Government pressure and dependence on the central bank. In this connection it is gratifying to note that, of the five new central banks established in Argentine, Salvador, India, Canada and New Zealand, only the last-named was free from substantial restrictions on the making of advances to the State, or the holding of Government paper generally. It is likewise gratifying to observe that, with the exception of the Reserve Bank of New Zealand and the Bank of Canada, statutory provision has been made in the other cases for a large measure of independence. This is important, as history has demonstrated on various occasions the need for political independence on the part of the central bank in order that it may be in a position to offer strong resistance to unsound demands of the State."

That is why I am a little apprehensive of the constitution of the board as proposed in the Bill. It will be possible for five members, of which two will be civil servants, to out-vote the chairman and the three banking representatives. I feel that, while the central bank is new and rather inexperienced, it should be possible for the will of the three banking representatives and the chairman to prevail, if it came to a direct issue. That is why I feel it is dangerous to have three Government nominees and two civil servants, who will have to act under the directions of their Ministers, able to control a majority on the board on an important issue. I realise that in most cases these things do not come to a direct vote of that kind, that, generally, these matters are settled by argument, but in the last resort that is the position which would arise, and I regard it as distinctly dangerous.

I cannot agree with Senator Campbell that this Bill merely reinforces British control of banking here. I think the Senator said that the old British banking system is unaffected by this measure. That is not so at all. There are certain features of this Bill which the banks dislike very much. There is Section 49, which takes power to impose compulsory deposits on the banks if they fail to do certain things, which I hope to show, on Committee Stage, they cannot do. Generally, I do ask the Minister to consider whether this penalty or this threat of compulsory deposits is the best way to secure co-operation between the central bank and the commercial banks. The commercial banks, I need scarcely say, will be only too anxious to co-operate in any way they can with the monetary authority. In the nature of things, their business must be closely interconnected, and it does seem a pity that it should be necessary to have these penal powers, even if they are not exercised, implicit in the Bill.

The same applies to extern clearances. This power to compel the banks to clear their English cheques through the central bank is a new feature. It is true that it is permissive and may never be exercised, but it is a dangerous power. It is associated again with the question of minimum deposits, false deposits, and it is a power to which the banks strongly demur. I would not like the House to think on the basis of the statement of the Labour Party, that the banks are not concerned in any way about this Bill, and that the Bill is a nice and easy measure to reinforce their present position.

When this question of credit and the dangers of credit is really examined, the real creator of credit is, of course, the State, through the power to issue currency, and we see it now actually expressed in a very great increase in the total volume of circulation. That is the basis upon which credit is expanded. In times of war, we see deposits rise, owing to the enormous amount of extra Government spending, and, on the basis of these increased deposits, the banks, of course, can, if the demand exists, create more credit. The real origin of credit creation—the unhealthy credit creation which I suggest the Labour policy implies—is Government borrowing on unbalanced Budgets, followed by a big increase in circulation and increased bank deposits, and, on the strength of that, more lending.

That is the real danger which we ought to prepare against and which I hope the Government will consider some means of guarding against, even to the extent of a modification of the powers which the Bill proposes to give to the central bank. I am especially apprehensive of that section which enables the central bank to participate practically in new issues. The precautions contained in that section are so very meagre and so easily evaded that I doubt whether they are of much value. That is a real danger which I hope the House may see its way to guard against on Committee. I do not think I have anything more to say; I shall have a good deal more to say on the Committee Stage; but, in the meantime, I hope the Government will see its way to grant certain amendments to make this Bill less dangerous in its operation.

This is a subject which people like me enter into with fear and trembling. We know very little about the ramifications and intricacies of finance, and after hearing Senator Sir John Keane, we find ourselves still in the wilderness. I do not think he added anything to our knowledge of finance. I was rather struck by the line he took and by his rather old-fashioned conservative attitude towards the measure. Senator Sir John Keane and those interested in banking are very important factors when any big social measure is under consideration by the Government. These people almost decide the fate of thousands of our people who are in poverty and want. When any measure of social reform involving considerable expenditure is under discussion, the first question asked is: where is the money to come from? The Government may decide to float a loan, but the banks decide what the terms are to be.

The banks do not decide at all. The Government can go to the public for a loan, independently of the banks, but if the banks are underwriters, they naturally must have a say in the terms on which they will undertake that obligation.

Quite so, but we know the influence of the banks on the old people who have money as nest-eggs. They are warned not to put that money into this rather risky speculation. I do not see anything in this Bill which will remedy that state of affairs. We are informed that this Bill is largely the result of the findings of the Banking Commission. Let us look at that. The Banking Commission sat at a time of peace and considerable prosperity in the world. The evidence had been taken four years before this report was issued. It was taken in an atmosphere entirely different from that which exists to-day. I suggest that this Bill is anæmic; it is not strong enough to deal with the situation that immediately confronts us. An entirely different system of finance will have to be adopted in this and every other country to meet the wastage that has gone on for the past three and perhaps more years. Our system will have to fit in with a new universal financial system. The old system has gone. This Bill tries to bolster up and continue a system which is entirely worn out, and which has completely failed in the present crisis in other countries. Let us suppose that there was some measure of social reform in England involving an expenditure of several thousand million pounds for the uplifting of the nationals of that particular country, an appeal being made to the banks to advance that money to build up real wealth, real assets in the country, can anyone visualise what the response of the banks would be? Where is the money to come from? Our people and our Government are going to be tied up in that way by this Bill.

Why cannot the public provide the money?

Who is providing the money in England now?

Public savings.

There never were thousands of millions of pounds available. Posterity is finding it, if I may put it that way.

The banks are issuing it.

The banks are issuing it certainly, but they are putting it on posterity.

Posterity will not carry it.

That, in brief outline, is how we visualise this Bill. It is not at all adequate to meet what we believe is immediately in front of us. Before I conclude, I should like to say that Senator Sir John Keane gave us arésumé of the balance sheets of some of the banks, but I did not notice anywhere in that return any account of the unclaimed balances. I am told it runs into several millions.

A fairy tale.

Perhaps the Senator can tell us what it runs into. I am told that there is a general accumulation of unclaimed balances running into several millions of pounds. That is there to be exploited by the banks. It was never accounted for, so far as I know, in their balance sheets. Can the central bank do anything about that? I want to put that point to the Minister. Is that money ever to be made available for the people? Does the central bank propose to do anything about that? Will they have any power at any stage to take over that money and use it for the benefit of the State? Briefly, those are the points which occur to me in regard to this Bill.

I do not know if, at this late hour, I would have intervened at all but for having had the advantage of hearing what Senator Sir John Keane had to say. In a way, I am not like some of the other people who have spoken; I do not think that anything which can be done with currency or credit will be, in this country or in any other country, a substitute for hard work, hard thinking, and sound planning, if the country is to be built up. My approach to the whole question involved in this Bill is the sort of approach which, perhaps, the comparatively uninformed ordinary man would have to this question which has been made such a difficult and complex problem for all of us by the people who have been handling it for a very long time. They have made it very difficult even for themselves to explain to us. I confess quite frankly that I sat here all day expecting to receive a considerable amount of enlightenment from the scholars, but there is still a great deal which I feel I do not understand about the problem.

Taking the Bill as it is, I regard a particular few lines in Section 6 as the fundamental thing in the whole measure, where it says that the bank 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." I think that is a big problem which this Bill should try to solve—the welfare of the people as a whole. What I have been searching for in the Bill is the means that are to be employed towards achieving that end.

As far as I am concerned, I recognise that money is the most vital part of the whole mechanism of human society. Of all the things which we seem to need in order to hold society together, money is the most vital and important. The management and regulation and control of money profoundly affect the lives and fortunes of all men everywhere. They make for conditions that give us either peace or war. I have no hesitation in saying that the mismanagement and misuse of money by those who, in our generation and in the preceding generation, had control of it, have given us the conditions which exist to-day. They have disturbed the peace; they have created unnatural conditions of life for all men. They have assisted unnatural development and retarded proper development. They have created revolutionary conditions in society everywhere, in every continent. The facts of life as we see them to-day, as we read of them and hear of them, are the product of all this mismanagement. That is my view; I am open to conviction on the point.

But in a way we, too, have made our own contribution in this country over a considerable period to the kind of world chaos that exists at the moment. What has been our part in all this production, management, control and use of money? Over a very long period in this country, we have been producing and selling goods and we have reached the position to-day that, living only in a kind of way, not living that full life or not having anything like that type of national development which was possible for us here, we have managed over a period of years to accumulate a surplus equivalent to £300,000,000 in sterling which we did not use. Some people regard that as a magnificent achievement, something of which we should be immensely proud. They believe that this great possession can save, not only our bodies in this world, our national life and our race, but our souls in the next world. They seem to forget that, while we have succeeded over a period of years in accumulating this thing which we call money, and sending it out to a foreign country, side by side with that sort of building-up, if you like, we were breaking down in another way in the sense that our population has been falling and our productive effort has been declining, until at the moment we look very much like a dying race. Personally, I am not at all satisfied with that position. I am quite satisfied, looking out on the green fields, the bogs, and the people who live in these places, that we have within this island possibilities of very considerable development. We have natural resources that we have never yet, even partially, tapped. We have as fine a people, physically, as there is anywhere in the world. We find that many of the neighbouring races are incapable of reproducing themselves. Our stock need not decline at all, in proportion to the fall in population elsewhere but, nevertheless, we can only say for ourselves that, should present conditions continue, the Irish race and the Irish nation must cease to exist. I can see nothing at all to applaud in a condition where we have, over a given period, built up considerable savings in a foreign land when side by side with that our people are also being driven to emigration.

When one asks oneself how has this been brought about, I cannot help feeling—and again I am open to conviction on this point—that the real truth is that the people who manage our money for us, the people who were doing our banking for us, recognised that London was the money centre of the world, and they were attracted very much by London, much more by London than by Dublin and still more by London than by the midlands or centres on the west coast. This money, banked in England, was used by the great financial corporations and trusts in England from the English point of view. The English had a very clear conception of the kind of life and civilisation which they wanted to build up. They made up their minds that they would build up a great industrial empire and their conception of the right way to do that was to carry on the development of those parts of the world where the soil could be most easily exploited, and from which cheap food could be brought in to feed their people in the great industrial centres. Part of our Irish money was used by these British financiers to exploit the soil of the western hemisphere from north to south. The interest on those great loans was paid back to those financial trusts in the shape of food sent across the seas in ships owned by Britain and landed in these islands at a price far under that which it cost the farmers here to produce these goods. Side by side with exporting this capital and taking to ourselves great credit for having built up sterling assets in England, we permitted such assets to be used by the financiers in Britain to exploit the soil of America, to create dust bowls in the Middle West and to have food produced which was sent into these islands to compete against the produce of our own farmers at a price level far under anything at which we could possibly hope to send goods into that market. That is the position in which we find ourselves at present. That is the result of the pursuit of the particular financial policy which I think our banking system and our banking scheme fed very sympathetically.

I now ask myself whether it is in the national interest to continue such a policy, or whether it is something for which we must take great credit to ourselves. In my view, it is not. I think it has been disastrous for us. I am looking to this Bill to see what there is in it that is going to change all that. I am one of the people who, over a number of years, have pleaded consistently in this House for better facilities for cheap credit to develop our agriculture. I do not want cheap credit for agriculture in order to create dust bowls here, to create a situation where the soil of millions of acres will be blown away into the beds of rivers to such an extent as to raise the beds of these rivers above the level of the cities through which they flow. Anybody who knows anything about all this financial manipulation, anybody who has read theRape of the Earth, by Jacks and White, or such other books, will realise the disastrous consequences of the financial exploitation to which the world has been subjected by that policy.

There is no dust blowing about this harvest. We have plenty of rain instead.

I think it is very important that we should look into our problems and try to relate them to the problems of other people. This whole question of monetary policy is of such vital importance for all of us in all our lives that we must try seriously to study and understand it. I am always seeking for enlightenment on it. When I attempt to address myself to this Bill —I am open to conviction and I am always anxious for further knowledge —and when I come to ask myself how we propose to deal in future with the problems which face us, my conviction is that we want considerable credit expansion here, and that there is a considerable amount of development we could undertake. In my judgment we could put £100,000,000 into Irish agriculture over a period of years.

That may not be done in accordance with the point of view which Senator Sir John Keane would put before this House. The profit-making urge may not make it possible for commercial banking institutions in this country to give money in such a way as will enable them to make very considerable profits on the lending, but we here in the Oireachtas, and the Government, have not to be concerned so much about the profits which commercial banking institutions may make as about the kind of life and society, and the conditions of peace, order and progress which they are making it possible here for this generation and future generations to enjoy by the proper control of credit and the proper management of money.

This measure, in my opinion, has certain considerable faults. It is making provision for the issue of credit, but I cannot understand why the Minister has done this in such a roundabout way. Neither can I understand why it is necessary that our currency must have the backing of sterling— must have the backing of British securities rather than Irish securities. I am not going to argue that we cannot have a considerable expansion here on the basis of British securities. I know that we can. I know that on the basis of your £300,000,000 you can extend here beyond anything which we may require, but what I am concerned about is this. Suppose that to-morrow some catastrophe occurred and our £300,000,000 were swept away and we wanted to engage in some constructive work: is it to be argued that before we can proceed to issue credit to our people for any constructive effort, whatever it may be, we have got to find British securities in order that that may be possible, and how are the British securities to be found in that event? They can only be found by Irish farmers and Irish producers selling their goods to Britain and getting sterling in exchange, and with this sterling as the backing they can go on then and issue what credit it is possible to issue against that backing. It is a very strange thing that you can sell goods to Britain and get sterling and, when you get it, issue credit, and yet you cannot issue credit against the goods. I do not understand that at all, and I should like the Minister to explain why that should be.

We have got £300,000,000 in sterling that has accumulated over a number of years through the sale of cattle, pigs, sheep, poultry, butter, eggs, and perhaps certain industrial products such as those of Messrs. Guinness, and against that we can issue credit far beyond our demands or our requirements, and if we had the goods here available we cannot issue credit against them.

Supposing you could not sell the goods, how would you issue credit?

Supposing you could not sell the goods in England?

I am not speaking of where you would sell them, but suppose you could not sell them?

If we could not sell them in England, we could not get the sterling to back our currency, and, apparently, if we cannot get the sterling, we cannot issue credit at all. That only accentuates the importance of the point I am trying to make, which is this: why have our Irish people so little confidence in our own future? After all, what are British securities? In the last analysis, British securities can only be translated into the confidence which you have in the people of Britain being able to earn such incomes in the future, in the country or in some other way, that, after paying their costs of living, they will have something as a surplus by which they will be able to carry on their machinery of government and honour their debts. I am not a pessimist about the future of England. I am not numbered, and I do not want to be numbered, amongst those who believe that it is going to be a fine thing for life and civilisation on the habitable globe if the people of England should go under. But life in Britain, whether the war is won or lost or whether there is a draw, is going to be a very different life from that which they have enjoyed for the last 100 years. When the war is over, all their foreign securities will long be gone. The interest on the capital which was shipped to her from every part of the world will be no longer forthcoming, and the capacity of her people at home in her own industries to produce goods and sell them and have a surplus after the cost of living is paid for is going, in my judgment, to be such a colossal task for her that her credit cannot possibly be any higher than our own. If I want credit, I cannot understand why it is not possible to base it on the securities and hopes and confidence of our own people in the things which we possess and the goods which we can produce and exploit in our own island, and I honestly would like to know the answer to that, because it certainly is not clear to me.

It is a terribly important point, in my judgment. I am not arguing that against British securities you cannot issue very considerable credit—much more than we can absorb at the moment, at any rate—but I cannot understand why we should make such a confession of the national inferiority complex as to write down in an Act that only British securities can be accepted. Of course, in certain clauses of Section 7 we make provision to do all sorts of things, such as "discounting bills of exchange which are, in the opinion of the board, first-class commercial bills and mature, in the case of bills drawn for agricultural purposes or based on live stock, in not more than 12 months", and so on. We talk about "buying, holding or selling securities of any public authority", but the extraordinary thing, again, is that the bills or securities of a public authority can only be bought when they have been quoted on the stock exchange in Dublin or Cork. There you are right up against this question again of the profit-making urge determining whether money is or is not going to be forthcoming for any possible national development which the State and the nation would regard as good and essential. A corporation may require or demand certain moneys. They may go, as some municipalities went some time ago, to the banks, but they did not find the banks amenable. They may try to issue stock, but they have to await the attitude of the public, and the public are going to determine this by the rate of interest. It does not matter whether it is for the development of housing, the development of land, the development of drainage or the development of bogs, the test as to whether the money will be forthcoming or not is what interest the public are going to get when the stock is quoted on the exchange.

I do not know whether the Government can decide that the welfare of the people as a whole is going to be served by waiting to see what the profit-makers in the community, the people who are blessed with considerable wealth, are going to decide about the worth of a stock before the central bank can come in to handle the stock, and I believe that in many ways many lines of healthy national development will be and must be held up because of that method of the issuing of credit.

I move the adjournment of the debate.

Debate adjourned accordingly.
The Seanad adjourned at 9 p.m. until 3 p.m., Thursday, 24th September.