Our bank - Our money

Bernard Hickey’s heretical call for the Reserve Bank to ‘print money’ (NZ Herald, Feb 26) doesn’t go far enough. Yes, the Reserve Bank should create credit (the vast majority of our money supply is electronic) to fill the gap between incomes and prices, and to build and repair vital infrastructure – not just in a crisis, but as a sovereign duty, permanently.

New Zealand, although rich in resources, has a growing underclass and a widening gap between rich and poor. This lack of equality comes with huge costs in health, crime, and the sheer waste of human potential, a burden that we all bear. We will never return to any kind of general prosperity until this is addressed.

Further, the income gap will continue to widen as long as current economic orthodoxy reigns supreme. Speculators will get richer, huge corporations will gobble up small and medium businesses, and publicly owned assets will fall into private hands. Third World diseases and social problems will be commonplace. It is happening already.

‘Inflation’ is a bogey-man sent to frighten us if we dare to suggest creating our own money supply. The fact is, we have had inflation on a rampant scale ever since neo-liberal policies were forcibly adopted in the 1980s. What you could purchase for $50 in 1965 will cost you over $800 today – cost inflation created by banks out of thin air.

The low inflation percentages bandied about today are carefully selected ‘baskets’ that exclude items that are the target of speculators (e.g. housing during the bubble) and include imported goods that flood the country on the ‘free market’ ride. We have inflation right now – just ask anyone with children to feed how much food has gone up in the last two years.

‘Eroding savings’ is another bug-bear that doesn’t stand the light of day. Money was created to exchange, not save. Saved money is not working for anyone except speculators and banks. Money should be creating assets, purchasing goods and services, feeding families. People who want to hoard their money should pay for someone to look after it.

A vital element of creating our own money supply, rather than borrowing from overseas, is that the Reserve Bank can lend to the government interest-free. Thus, when a loan is paid down, the money is removed from the system – deflation. Meanwhile the money used to build assets and repair infrastructure also creates more jobs, putting money into more hands, which goes to local businesses, who pay wages and replenish stock. Suppliers are paid, producers are paid, and everyone pays a bit of tax. It’s a win-win, and what is not paid is interest to overseas fat-cats.

It’s our bank, and it should create our money supply. It's a no-brainer, really

Hickey and the Big Kahuna

Bernard Hickey should get together with Gareth Morgan; one has the daring, heretical call for the Reserve Bank to ‘print money’ (NZ Herald Feb 26) and the other maintains, shockingly, that we should all be paid a basic income.

And why not? There is no doubt that people on the lowest incomes are struggling to make ends meet. Overcrowding, Third World diseases, crime, domestic violence – all of these are symptoms of deepening poverty. They are exacerbated by the media: seeing what you don’t have and some else does only makes your situation seem worse. Publishing the Rich List rubs salt in the wounds of poverty.

Gareth Morgan recognises that not only would families benefit from a universal basic income, but their local business communities would too. And the envy of the ‘haves’ that the ‘have-nots’ are getting a handout would disappear, because everyone will get it.

But how to pay for it? Enter the heretical Mr Hickey. He has called for the publicly owned Reserve Bank to do the job it once did and ought to do now: create the money New Zealand needs to function, without resorting to borrowing from overseas banks at interest.

This is where the plan must depart from orthodox economics: no interest should be charged on this created credit being lent to the government. In this way, while enabling all New Zealanders to live in prosperity and dignity, and collecting the resulting taxes as money changes hands and strengthens communities, an eye could be kept on inflation as loans are paid down.

Democrats for social credit call for an independent Monetary Authority to manage this exchange, and keep control of the money supply, increasing or decreasing it as needed. It is generally accepted that such responsibility is too dangerous to leave in the hands of politicians.

So, Mr. Morgan, may I introduce Mr. Hickey? I think you have a lot to discuss.

The year in review

One of the most important issues for New Zealand this year has been alcohol reform. It is very much an economic issue, as well as a social one. There is no question that alcohol costs this country a shocking amount in poor health outcomes, domestic and public disturbances, road accidents and deaths. The loss of productivity, that magic bullet that economists and politicians are continually banging on about, ought to make the issue of alcohol reform an urgent one for the Government.

However, alcohol makes some people a lot of money. Alcohol manufacturers and distributors are big corporate entities, as are the supermarket chains whose profits rely on alcohol sales. In a Bill hundreds of pages long these groups are uncurbed, and some are actually exempted from any regulations stated in the Bill. With huge public demand for effective alcohol reform (9000+ submissions), the Government has found itself between an economic rock and a socially demanding hard place, and has put off considering the toothless Bill. Perhaps the hope is that public demand will have waned after the election, with all the excesses of the Rugby World Cup behind us. Let us hope otherwise.

We have encountered a number of other issues through this year: local government changes, student loans, supporting children and changes to the tax system. Most of these Bills or papers attempted to save the Government money by squeezing individuals and small businesses, either through cutting costs or reorganising processes. The Budget proved more of the same.

Income sharing, a laudable attempt to recognise the vital unpaid work caring for children that so many women do, failed to gain traction partly due to the already huge and unnecessarily complex tax system we are burdened with. The discussion document Making Tax Easier was entirely about IT, and nothing to do with the iniquities and loopholes that allow money marketeers to escape basic taxes like GST, which the poorest families cannot. For me, making tax easier would be to abolish GST in favour of a very small financial transactions tax (FTT) implemented on withdrawal so that speculators could not avoid it. Now, that's a broad-based tax.

Most recently there has been some mainstream media discussion about gender pay equity, a welcome change. Thanks to the foot-in-mouth outpourings of Alasdair Thompson, facts all too familiar to women in the paid workforce are being aired in public. Our public service makes a poor showing, and the challenge is to keep the issue to the fore now that Mr. Thompson is no longer a useful target.

A potential economic threat to all aspects of our society is the Trans Pacific Partnership Agreement. This and similar trade agreements have been found to include clauses that privilege multinational corporations and reduce the democratic sovereignty of signatory nations. We are likely to lose Pharmac to the giant drug companies, and even alcohol reform will be hampered by trade agreements. The tobacco lawsuit against the Australian Government is a timely warning that the corpocracy that Professor Doug Sellman warns about is upon us.

Meanwhile, the casino of stock markets and currency traders continues unabated, with the NZ dollar one of the most volatile and profitable currencies going. Orthodox economics dictates that while stock values are rising and bank profits in the black, the economy is all right. Blinkered National Party thinking that places faith in ‘market forces’, and chooses to ignore the dangerous, widening gap between rich and poor, will be the driver of another worse downturn, one we can’t blame on earthquakes in Christchurch.

It's not too late for monetary reform

"What I want to know is: why do we keep borrowing from overseas-owned commercial banks at interest (for which we have to borrow more to pay) when we can legally create our own money supply, at nil interest, through the Reserve Bank of New Zealand? All it would take is a directive from the Minister of Finance, and we could create enough funds to do anything in this country that we want. Public assets could be paid for only once. Commercial banks could access credit at cost only, to on-lend to businesses. Health and education could be fully funded, and goodbye to surgery waiting lists and the student loan debt mountain. What are we waiting for, Armageddon?"

This has appeared on the opinion page of Stuff, as a comment on the self- and bank-serving opinion piece by Tony Alexander, chief honcho at the BNZ, who is quite comfortable with a 10% annual increase in consumer debt. Well of course he is - his bank and it's buddies make more money that way. Never mind the increasing poverty, the near fatal damage to the productive sector and the real economy, and the ongoing poisoning of Mother Earth. The banks won't stop milking us until we are dead and can't pay anymore. Then what will they do for slaves?

Open letter to Gareth Morgan

To Gareth Morgan - millionaire, globe trotter and rational being.

Dear Mr. Morgan,

Congratulations on your independent study of the science surrounding climate change. You have shown yourself to be a truly rational being − that is, one who can, in the face of overwhelming evidence, change his mind.

You are also considered to be an expert on the economy, no doubt because you have been successful at making money within the current system. As a rational man, you might like to apply the same sort of objective investigation to the economic crisis as you applied to the environmental one.

Here are a few points I urge you to consider:
• The economy and the ecology are inextricably linked. It is tempting to think of climate change and other environmental problems as annoying, expensive distractions, but in reality they are central to our survival as a nation and a species.
• Einstein said “We cannot solve our problems with the same thinking we used when we created them.” This means that continuing with the present economic system is not rational.
• There is a direct correlation between “economic growth” and “carbon emissions” − the lines on a timeline graph are identical since the Industrial Revolution. The belief in unchecked “growth” as a valid method of economic recovery without considering the environmental cost is not rational.
• The effect of the current economic recession will be to put more and more wealth into fewer hands. The rest of us are increasingly relegated to debt slavery, unemployment and potential mass starvation, on a planet host that is rapidly being poisoned. This is not rational, even from the long−term point of view of the lucky few. Who will be left to buy their products and maintain their lifestyles? How will their obscene wealth help them when the seas engulf our coastal cities and arable land becomes desert?
• Are human beings doomed? As the most “successful” species the biosphere has had the misfortune to produce, will we self−destruct through an irrational belief in our right to consume no matter what the cost to our fellows and our planet host? Mother Earth, it should be noted, is not known for saving her dominant species. She will survive in spite of us.
• On a more positive note, it is well documented that human beings, having reached a level of comfort and prosperity that allows for happiness, do not increase their happiness quotient the richer they become beyond that level. In addition, humans who have reached that same economic level, are likely to produce fewer offspring, theoretically relieving the pressure on the planet’s resources. They are more likely to establish stable communities with high literacy, low crime rates and good health, all of which enhance economic performance. It is therefore rational to adopt an economic system that ensures the greatest number of people on the planet achieve this level of prosperity/happiness.
• Further to the last point, transferring wealth from the very rich to the poor through taxation has not been found effective in achieving the aforementioned prosperity/happiness. Widespread ownership, of homes, farms and small to medium businesses, has in the past delivered prosperity/happiness in many countries, yet we are increasingly going in the opposite direction: wage and debt slavery, disenfranchisement and misery for an increasing number globally, not to mention the destruction of our last remnants of virgin forest and other ecosystems.

Here are some books I urge you to read:
• How Many Lightbulbs Does It Take To Change A Planet? By Tony Juniper, 2007; published in Great Britain by Quercus.
• We Hold These Truths − The Hope of Monetary Reform by Richard C. Cook, 2008−09, published in the US by Tendril Press.
• Courage to Change, by Les Hunter, 2002, published in New Zealand by Harbourside Publications.
• Payback − Debt and the Shadow Side of Wealth by Margaret Atwood, 2008, published in London by Bloomsbury Publishing.

You, who are not subject to undue political influence, or distracted by the need to scratch a living for your family, are in a unique position to address this problem. Please, Mr. Morgan, apply your rational mind and your considerable resources to a study of the economy in the way you did for climate change. Find a way, right here in New Zealand, that we can change economic direction for the sake of all mankind and for our planet.