Monetary Justice

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 q...

It’s not the “Big picture” – it’s the rotten canvas Brian Gaynor (Herald, Saturday June 28) says ‘None of our political leaders seem to have a big picture vision or any idea how to reverse this long term under performance.’ I disagree - as important as the big picture is, it will never come to much if it is painted on a rotten canvas. New Zealanders have never suffered from an absence of visionary political leadership, have always had a pretty good idea of what they want as a country and have never had an economy that has been rudderless. New Zealand’s political visionaries, with their big pictures, have just been painting their dreams on the rotten canvas of debt and compounding interest. We have a desperate drive for growth, decades of current account deficits, a never ending need for taxation and rates and the unavoidable boom-bust cycles. We are unable to achieve a stabile and prosperous economy. There is the difficulty of funding a generous superannuation scheme, the impossib...

"Financial Institutions ... create credit" - so sayeth Michael Reddell and Cath Sleeman in their joint article (Some perspectives on past recessions) in the latest Reserve Bank of New Zealand Bulletin, June 2008 vol. 71 no.2. The full quote on page 14 is as follows: "Deregulation gave financial institutions the freedom to create credit, without much experience in actually doing so. A significant portion of the new credit, fuelled by the inflows of foreign funds attracted by New Zealand’s relatively high interest rates, was used to finance speculation in the share market and the property market." Imagine the benefits which could be gained if a financial institution had made such new credit available for productive purposes. And imagine yet again the further benefits that could've been gained, if that financial institution had made the new credit available at its cost of production - a mere 1% or less.

Food, housing, education and transport costs have increased. Easy access to affordable and timely health care remains a difficulty. Why is it, on the one hand, Business, Local Bodies and Government can increase their cost structures and our budget burdens with ease, while on the other hand, they struggle to increase our incomes? Any increase in income or reduction in our rates or taxes are merely token gestures - they never catch-up and the gap between increasing prices and our purchasing power gets ever wider. It is about time a political party discovered the answer! No - it is about time a political party with the answer, was supported by New Zealanders to become the government! Check out: http://www.democrats.org.nz/ and http://www.johnpemberton.co.nz/

Oil can be bought and sold many times over, even before it comes out of the ground, but eventually oil will run out. Its scarcity factor can be managed simply by turning on and off the taps. Other commodities have had their day in the sun but one by one are replaced by the next opportunity for speculation. Money, on the other hand, is different in one key way - it can be created out of thin air at very little expense and will never run out. Those who are in control of the money creation process have quietly gone about their business - Creating money; Turning the money taps on and off; Speculative buying and selling of money - for centuries.

Tax cuts - no longer a monkey on Cullen’s shoulder. Budget 2008 has seen the tax cut monkey effectively removed from Michael Cullen’s shoulder. The removal, though, has exposed another – the high interest rate monkey. The high interest monkey was formally placed on Dr Cullen’s shoulder, not by the National Party or any of the other opposition parties in parliament, but by Michael Cullen himself. He placed it there when he said ‘More joy likely in falling interest rates than Budget relief.’ - NZ Herald 16 May 2008.” The DSC agrees with that but warns that the high interest monkey Dr Cullen now carries will cause more grief than the tax cut issue ever did. Another quote from Michael Cullen, in the same issue of the New Zealand Herald, actually says it all: ‘If you are sitting, say, in Auckland on a $400,000 mortgage, a 2 percent drop in interest rates is $150, $160 a week or more’. Tax cuts are fine but are of a miniscule benefit to us compared to the gain a low interest rate policy ...

The credit habits of Generation Y have been explicitly explored in todays New Zealand Herald following a report from Veda Advantage, New Zealand's largest supplier of credit information. Associated Budgeting Consultants Network chairman, Darryl Evans is quoted as saying "I believe living in debt is a learned behaviour.....at the moment I'm working with four generations of the same family. That says something". Darryl Evans said that he was'nt surprised at any of the report's findings. Well nor am I! Generation by generation our people have been getting further and further into debt. None of us can escape the burden of debt, it does not matter how financially literate we are. One way or another every New Zealander is servicing debt, whether it be their own debt or the debt loaded on the prices they pay for goods and services. And of course we pay tax to service the government's debt and we pay rates or rent which helps service local government debt...