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.
New Zealand's Central Reserve Bank is STATE owned. Despite that, instead of being used for the benefit of its owners, the people of New Zealand, successive Governments have: Allowed the foreign-owned trading banks to create and issue nearly all of the nation's money supply and claim it as their own. Notes and coins make up less than three percent of the money in circulation. Ninety seven percent of our money supply is on loan to us at interest from those banks. Actively encouraged banks to charge "rental" for this money at some of the highest interest rates in the developed world. Used high interest rates as a blunt lever to control inflation, while agreeing to exclude the resultant costs from the Price Index, so that their cost-inflationary effects do not allow pensions and awards to compensate for these. Deliberately used interest rate fluctuations to maintain an unemployed "pool" of about four percent of the workforce in order to hold down wage rates. Fa
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