I am sorry to have to ask the Minister this technical question. I understood from what he said in the Dáil that these bonds were to be terminable by him in 1962. What I really wanted to ask him was—he gave us an explanation in the Dáil that there was not enough of them registered—what is the position about the British Government's guaranteed series of Land Bonds which are much more numerous? There was also a reference in the case of that issue to the same year, 1962. If the Minister has not the information at this late hour, I shall not press him about the matter, but the British bonds are much more numerous.
Finance Bill, 1957 (Certified Money Bill) —Committee and Final Stages.
They are not affected by this, of course.
I know. I was just wondering why, if these Land Bonds which, I think, were issued to a total of 10,000,000, are being dealt with in this way, what is the intention, or is any intention being expressed at all, about the British Government's guaranteed series of Land Bonds which cover the bulk of land purchase legislation since the change of Government in 1922? If the Minister has not got the information, it is all right.
There is no change. The option remains as it was.
The option to go on until the year 2004?
I think so.
It is not intended to change it?
I think the option will probably be taken.
I just wanted to explain the exact meaning of the point I made the other night about the currency and financial system. I could have referred simply to the currency system, but anybody might well have replied that the currency system was working admirably, that people could pay debts and take payments without any difficulty. It was the effect of the present currency system on the commercial banks that I was concerned about. The fact that the commercial banks have to make this payment in cash in London for the ordinary notes that circulate in this country is gradually putting the commercial banks into an impossible position from the point of view of their liquidity ratio. By a coincidence, the Central Bank Report came to us the morning after I raised the point. By far the most interesting paragraph in it relates to this matter.
Perhaps I might explain. The number of legal tender notes and coin in circulation in March, 1957, was £78,500,000. In the middle of March, the amount of cash was £19,000,000. That is the cash in the banks within the State. Out of the total amount of money circulating amount the country, there was only a sum of £19,000,000 in the banks themselves. The rest was in the pockets of the people, in the tills of the merchants and in the homes of the farmers. That was a fairly good period to take, unlike, say, Christmas, when the banks go in for a certain amount of window-dressing, when they are preparing their statements to make them look a bit better. In that respect they are no different from anybody else.
The fact that there was a sum of £78,000,000 in circulation as compared with £42,000,000 ten years ago, that the ratio is only one to four, means that if we have another period of inflation within the next few years—and it seems to be hinted at—the banks will again have to put up £5,000,000 or £6,000,000 in London. In the normal course, that will result in their having £1,500,000 cash in their own tills here; the other £3,500,000 is lost out through the community.
Despite some of the reports, I was not concerned to condemn in any way the commercial banks. In actual fact, I have great sympathy with them in this matter. It surprises me that they have not raised it already. Maybe they have done so with the board of the Central Bank. We are coming to the end of the road in this matter because of the way it ties up the credit system within the community and because of its effect on the banks and business generally. These notes have to be paid for in cash in London. This cash is got by exports. Your previous savings have to be disgorged by the banks and passed over by the Central Bank. The banks do not have the money themselves. They have about a quarter of it. The amount varies at certain times of the year, but roughly it is a quarter or one-third. Accordingly, they are not in a position to make loans within the system here.
The Minister made a point to-day— a good point—that if you have too many loans, you have increased imports, but I think you can have within the system itself an expansion of credit which would not involve imports. This is too late in the night to argue that discussion, but I am convinced you could have it. That is a matter on which there would be two opinions.
As well as being late, it is not strictly in order.
I want to explain, because of the fact that my reference to the currency and financial system was primarily that the system of currency was creating difficulties for the commercial banks in relation to the internal credit system here. I want to emphasise that I feel that the currency system is out of date. This is confirmed by paragraph 58 of this year's Report of the Central Bank, where, in relation to the bank's duty to provide for the integrity of the currency, it is stated:—
"No difficulty has arisen until recently to impede the discharge of this duty because the commercial banks have hitherto had at their disposal ample external reserves to purchase from the Central Bank Irish currency as required and to meet the demands of their customers for external finance."
The two are competing against one another. I am not so much concerned about that. What I am concerned about is the effect it has had upon our financial system here. That was what I meant primarily when I said it was out of date, although I know it is out of date in other respects also. I want to thank you, Sir, for allowing me to clarify the matter.
I just want to make two short references to what the Senator has said. Firstly, if our balance of payments were right and if we were sure it would keep right, we could take a chance; but we would want to watch the situation. Secondly, I quite agree that under certain circumstances more loans could be made without any danger. For instance, if a loan is made for productive purposes, it would not have an inflationary effect.