HC Deb 21 January 1941 vol 368 cc31-2
67. Mr. Loftus

asked the Chancellor of the Exchequer whether he will consider the adoption of the proposal of the Federal Reserve Board of the United States of America designed to prevent inflation, namely, that all issues of Government loans must be sold to individuals and corporations but not directly subscribed to by banks so that these loans will be financed by money already in existence and not by the creation of bank credits?

Sir K. Wood

The Government have fully recognised ever since the outbreak of war the importance of raising money out of savings by their loans. Subscriptions by banks on their own account as part of their normal investment policy are not inconsistent with this principle and, as such, are an important contribution to the war effort.

Mr. A. Bevan

Does it not make a contribution to inflation?

Mr. Loftus

Does not my right hon. Friend think that the main cause of inflation in the last war was the creation by the banks of money for subscriptions to loans and will he take steps to avoid that now?

Sir K. Wood

I have read the Memorandum which my hon. Friend has sent on this matter. It is not a matter with which we can deal by way of question and answer.

Mr. Glenvil Hall

May we have a categorical answer in the House of Commons?

Sir K. Wood

Perhaps my hon. Friend will put the question down.

Mr. Woodburn

Will the Minister look into the matter, as obviously payment of interest to the banks is a book-keeping entry which can be done equally well by the Government?

Sir K. Wood

If the state of a bank's assets is such that it can, as part of its normal investment policy, contribute to Government loans, such contributions are, as I have said, an important contribution to the war effort.

Mr. Charles Williams

Has not the time come to realise that it is a complete illusion to believe that the banks can create money?

Mr. De la Bère

Does not the whole matter want a great deal more thought?