The Reserve Bank Governor, Dr. Allan Bollard, stated in his media release, 30 July 2008 that ‘… we cannot all pass on the higher costs to our customers or employers. If we do try to pass it on, then monetary policy will respond.’ By making this statement Bollard has finally accepted that orthodox economic polices are based on faulty doctrine.
Orthodox economic polices are based on a doctrine, which defines the relationship between income and prices. J. M. Keynes, a British economist, advanced theories on macro-economics which still form the basis for policies applied today.
In his General Theory of Employment, Interest and Money Keynes states: ‘Provided it is agreed that income is equal to the value of current output… all of which is conformable to common sense and the traditional usage of the great majority of economists…’
In other words In the process of producing goods and services there is sufficient incomes available to pay for the market price of those goods.
Mr Bollard now quite clearly recognises this as wrong. He threatens “monetary policy will respond”, if genuine costs are factored in to prices. If he still thought Keynes was right he would accept, that as costs flows are generated an equivalent income flow is also generated – no inflation – therefore no need to threaten his brand of monetary policy.
Allan Bollard obviously recognises the shortfall in purchasing power and knows that this shortfall is currently filled with interest bearing debt.
It must be devastating to all business owners to hear the Governor tell them they cannot pass on into prices the legitimate increase in their cost of their production.
I do not agree with the fundamental doctrine of today’s economic theories. It is glaringly obvious that income does not equal the value of current output, as witness the overwhelming number of families in New Zealand, and indeed all over the world, who must borrow to exist. Goods would remain on the shelves unsold, without the expensive credit issued by commercial banks.
Show Me the “Monetary Reform” David Cunliffe! Following Phil Goff’s release of Labour’s Finance Manifesto today, David Cunliffe has said in a New Zealand Labour Party press release : “Labour is backing the drive for more high value exports with monetary reform ...” I challenge David Cunliffe, Labour’s Finance Spokesperson, to front up and explain what he means by the term ‘monetary reform’. If he means replacing toxic debt-based commercial bank credit with social credit, as the sole means of money coming into existence and continuing to exist – issued in the public interest, to serve the common good - then I would endorse his definition. And if he accepts that it’s crazy for our government to borrow from foreign lenders, with interest, when we could use the publicly-owned Reserve Bank of New Zealand as an independent statutory monetary authority with the sole power to create, issue, and cancel New Zealand’s money, then I applaud his endeavours. But if Mr. Cunliffe thinks ‘mo
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