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Thursday, 15 October 2009

Letter to Editor

Government borowing for ACC

Brian Reiersen
North Shore City

Dear Sir/Madam

The Government borrowing $250 million per week offshore because of shortfalls in the tax take; ACC accounts and the like is crazy. These are Kiwi dollar shortfalls and not overseas transactions, so why are we incurring foreign debt? The Reserve bank should fund these shortfalls internally avoiding further deteriations in our standard of living caused by crippling interest payments on overseas debts.
The trilllions created out of thin air by the BIS, Bank of England and The US Federal Reserve in the corporate bailouts highlight money creation by privately owned banking cartels, these moneys did not exist until they were borrowed into existence. As Abraham Lincoln famously stated on money creation...
"The Government should create, issue, and circulate all the currency and credit needed to satisfy the spending power of the Government and the buying power of consumers. The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government's greatest creative opportunity. By the adoption of these principles . taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity."

.... but of course these are the sentiments that attracted a bullet to him.

It is time to put money creation back into the hands of the people instead of the Private Banksters who have enslaved mankind with debt and taxation for 200 plus years.Virtually every entity in the world is mortgaged to these financial parasites.



pmj said...

Brian is 100% right. This is the "elephant in the room" that nobody talks about because they assume that the way we have done things in money creation is the right way. Nothing could be further from the truth. The cruelty and ruthlessness that has been perpetrated on humanity would make your blood run cold if we could but see it. If you or I created money the way the banking system did it would be called counterfeiting and we would be thrown in the clink. The banks do it with impunity with the fractioanal reserve system.

Anonymous said...

This is the biggest problem facing our society today, the problem is that the majority of people aren't aware of money creation and manipulation which makes most of us nothing more than hamsters in on a wheel. The sooner we make people aware of this the sooner we can change it. We need control of our own money supply and creation.

Anonymous said...

So how would it work?

B said...

The Reserve Bank is not empowered to print money and give it to the Government to fund the shortfall in tax take. There is a good reason for this. If the Government could print money for itself, it would. This would cause inflation, undermining the integrity of the NZ currency and destroying the NZ economy.

While the Reserve Bank can print money (and control money supply through the OCR), it is mandated to do so only to control inflation and keep prices and the NZ economy stable.

The objections to the fractional banking system are usually liquidity based and or arise from the indirect nature of the Central Bank's control over money supply. These problems are not fixed by giving the Government a license to print as much money as it wants.

Steve Baron said...

Let's look at how Greg Mankiw, an esteemed University Professor and economist explains how money creation works and then see if it throws a different light on the issue. I think we all want a better monetary system but how we get there and how we present the case can be two different things.

"At first, the creation of money by fractional reserve banking may seem too good to be true because it appears that the bank has created money out of thin air. To make this creation of money seem less miraculous, note that when a bank loans out some of its reserves and creates money, it does not create wealth any wealth. Loans from the bank give the borrowers some currency and thus the ability to buy goods and services. Yet the borrowers are also taking on debts, so the loans do not make them any richer. In other words, as a bank creates the asset of money, it also creates a corresponding liability for its borrowers. At the end of this process of money creation, the economy is more liquid in the sense that there is more of the medium of exchange, but the economy is no wealthier than before."

I think the important point to take from the above explanation is that no one, even the banks, are any wealthier from this process.

This process is called the money multiplier effect. If a government sets a 10% reserve ratio then $100 can become $1,000. So in effect it is still the government, and not banks, controlling the money supply by the reserve it sets. The other ways a Reserve Bank controls the money supply is through open-market operations and the discount rate. All very in-precise because of time lags etc and why central banks don't always get it right. Neither do they have control over how much banks decide to loan or how much households decide to save.

Even with 100% reserve ratios it simply means there will be less money circulating or available to be borrowed so this money will have to come from some other avenue, and as Major Douglas suggested, probably a National Dividend. But I still see this as six of one and half a dozen of the other, so to speak.

So again, I think Social Crediters and monetary reformers are barking up the wrong tree when they come at it from the angle that banks, and allowing the banking system to create money, is wrong. The money multiplier effect is not as important as needing to be focusing on how the government should get money into the system when society needs it and how to get it there without incurring a cost (interest) to society when it does so, therefore creating a gap that can never be filled. (not to mention incurring unnecessary debt).

There is no big conspiracy here! It is simply the way things work. Can it be improved? Of course it can and a lot of what Major Douglas says is most likely to help.

However, as 'B' said, simply printing is not the answer.

JGR said...

I would like B to explain why Reserve Bank money should be any more inflationary than that created by the trading banks.
In the days of reserve ratios, yes. A bank could create, say, 20 times as much as it received from the R.B.
It does not need this basis now.