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Real Monetary Reform

Written By: - Date published: 10:45 am, June 16th, 2014 - 142 comments
Categories: debt / deficit, Economy - Tags: , ,

The most important thing that needs to be learned is that money is nothing. Or, to be more precise, money is a tool that can be used to distribute the resources available to a society. In and of itself it has no value nor does it have a physical representation (i.e, it’s not gold). Specifically, money is not a medium of exchange but a symbol of exchange and because of this the cost of money, usually presented as interest, should be zero.

The second thing to realise is that money only works if it’s moving. When it’s moving it’s creating work and distributing the nation’s resources. When it’s sitting still, such as in a bank account, it’s not moving and thus not creating work or moving resources. Now a lot of people will dispute that and say that the money in a bank account is being loaned out but, as the Bank of England has recently shown, that is wrong. Banks create the money that they loan out which means that the money in a bank account is just sitting there doing nothing.

The third thing is that as money is spent into the economy it also needs to be taken back out so as to prevent excess inflation from over accumulation of money. Inflation reduces the use of money as a tool because it reduces money’s value as a symbol of exchange. Inflation will be caused as people look for a lot of things to buy increasing consumption and also pushing us into unsustainability. People will also start to look at community wealth that they can buy which will give them a residual income such as National’s sale of our power generating facilities or housing to be rented out. This latter action inevitably results in a vicious circle of over accumulation and increasing poverty.

The fourth thing is that foreign money is worthless in the local economy as it’s only useful for buying resources from its issuing country. This means that borrowing money from overseas does nothing to make local resources available to the economy – in fact, it does the exact opposite as importation of foreign resources pushes out the use of local resources. Essentially, to make NZ resources available requires NZ currency.

The Problem

At the moment our high interest rates, compared to the rest of the world, are causing hot money from offshore to flood into NZ seeking the higher returns available. This, in turn, pushes up the value of the NZ$ on the foreign exchange which causes exports from NZ and employment to decrease thus lowering the productive activity of the country. That hot money has to go somewhere and get a return and manufacturing and development are risky so the banks make it easier to get home loans which increases the number of dollars chasing the limited supply of housing pushing up house prices. And remember, that money isn’t actually being loaned out, it’s being used as the base for the private banks to create money and the banks create it in multiples of what they have. Use of the higher interest rates and having reserve ratios is supposed to limit the amount of money that banks can create by decreasing peoples desire to loan money but that, as we’ve seen, doesn’t work.

So what we have is an influx of money pushing up house prices but not an increase in productive economic activity due to the returns to owning houses being higher and less risky than the returns to actually making stuff. Increasing house prices encourages an increase in spending as people use their houses as income by taking out higher mortgages on them. All of which results in increased inflation across the board but a higher inflation in house prices.

The Solution

What we need to do is stop the hot money flowing into NZ driving up the value of the NZ$ and stop the private banks from creating money which drives up inflation. The solution comes in many parts but is relatively simple: Make NZ$ available at 0% interest and have no fees.

The first part is that the government creates its own money to support its budget spending the money into the economy. This money would be used to support services where direct charging doesn’t work such as health, infrastructure, education and R&D. This spending would be counter balanced by taxes that increase or decrease as needed. This tax rate movement would, effectively, replace the OCR and so we could expect movement in it on a similar six weekly cycle. The movement in the tax rates would be governed by the Reserve Bank of NZ (RBNZ) but the tax thresholds and the ratios of tax rates between them would be set by government legislation. Local councils would fund their spending the same way but I’m of two minds if they should have their own regional reserve bank or if the functions of the RBNZ be extended to them. Either could work.

The second part involves the private banks. They would be banned from creating money ex nihilo as they do now and the RBNZ would no longer be the Lender of Last Resort. The banks would thus be limited to only loaning out money that they had on deposit for that purpose thus removing the massive increase in money entering the system and pushing up inflation, especially the house price inflation, that we have now.

The third part is a state bank which creates the money it loans out ex nihilo. This bank will make both mortgages and business loans available to the public. It will neither charge interest or fees and will be supported through general taxation. The loans will have strict conditions on them thus limiting money creation through regulation rather than, as at present, through interest. As any default would have to be soaked up through general taxation this bank would have to have a close working relationship with the RBNZ.

The fourth part is state departments that charge directly for the services that they provide. Such services would include a state provided insurance, Accident Compensation, Solid Energy and others. These would be able to create money so as to pay to provide their services while charging enough to remove that money from the system. These departments would be instructed to run at cost so that they’re not pulling excessive amounts of money out of the system in the way that the private profit system does.

Conclusion

Most importantly, as money would be openly directly created by the government to bring about the use of the countries resources as needed it would obviate the need for savings and foreign investment. It would also decrease the government borrowings to zero as they would no longer need to borrow which would eliminate the billions of dollars wasted in interest that the government presently pays out yearly.

Interest rates would, over time, reduce to zero thus decreasing the value of the NZ$ on the foreign exchange as the only people purchasing the NZ$ would be those people who wanted to buy NZ made products and not the speculators who only look to the relatively high interest rates. This would boost our exports and thus create more work.

The total removal of interest bearing debt based money, which only benefits the rich, would significantly boost the economy. It would do this through reducing the money going to the privately owned banks (most of which goes to Australia) and thus increasing the money that stays in the New Zealand economy. As interest payments decrease to zero over time we would also see a reduction in prices as interest is removed from them.

Draco T Bastard

142 comments on “Real Monetary Reform”

  1. Will@Welly 1

    Draco, your synopsis harks back to the days of the first Labour Government. A tick from me.

    • Gosman 1.1

      The first Labour government did not set up any State owned bank, only nationalised the BNZ in 1945, and did not stop commercial banks from charging interest. How did they follow the prescription identified?

      • mikesh 1.1.1

        I think the 1st Labour government promised to nationalise the banking system but balked at nationalising the Australian owned banks. Many Labour supporters, who had been influenced by the writings and teachings of Major Clifford Douglas, were disappointed at their falure to do so and, in 1954, broke away to form the Social Credit Political League.

        • Colonial Viper 1.1.1.1

          Ahhh thanks for that interesting bit of history

          Labour has always, either through necessity or lack of vision, always deferred too much to the oligarchs of capital and finance.

  2. Tracey 2

    Thought provoking alternative. As long as power lies with those who benefit from the way things are…

  3. Enough is Enough 3

    For this to ever see the light of day we would require a violent revolution to overcome the status quo.

    • One Anonymous Bloke 3.1

      No. What we’re in now is a violent revolution. The violence comes in the form of poverty and is perpetrated with ruthless indifference.

      It’s time to put an end to it.

      • Colonial Viper 3.1.1

        Unchecked corporate capitalism is a revolutionary force – Karl Marx was quite right about that. It will rewrite the language of society, corrupt its politics and leaders, undermine the institutions of the state and of democracy, and commoditize and monetize everything that people hold dear – the environment, their relationships, workers, each other as human beings.

        Peaceful civil resistance which holds the moral high ground as sacred is the only way to push back.

      • Tracey 3.1.2

        “Eat The Rich”
        Aerosmith

        Well I woke up this morning
        On the wrong side of the bed
        And how I got to thinkin’ About all those things you said
        About ordinary people
        And how they make you sick
        And if callin’ names kicks back on you
        Then I hope this does the trick

        ‘Cause I’m a sick of your complainin’
        About how many bill
        s And I’m sick of all your bitchin’
        Bout your poodles and your pills
        And I just can’t see no humour
        About your way of life
        And I think I can do more for you
        With this here fork and knife

        [Chorus:] Eat the Rich: there’s only one thing they’re good for Eat the Rich: take one bite now – come back for more Eat the Rich: I gotta get this off my chest Eat the Rich: take one bite now, spit out the rest

        So I called up my head shrinker And I told him what I’d done Said you’d best go on a diet Yeah I hope you have some fun And a don’t go burst a bubble On the rich folks who get rude ‘Cause you won’t get in no trouble When you eats that kinda food Now their smokin’ up the junk bonds And then they go get stiff And they’re dancin’ in the yacht club With Muff and Uncle Biff But there’s one good thing that happens When you toss your pearls to swine Their attitudes may taste like shit But go real good with wine [Chorus]

        Wake up kid, it’s half past your youth Ain’t nothin’ really changes but the date You a grand slammer, but you no Babe Ruth You gotta learn how to relate Or you’ll be swingin’ from the pearly gate Now you got all the answers, low and behold You got the right key baby but the wrong key ho, yo

        Believe in all the good things That money just can’t buy Then you won’t get no belly ache From eatin’ humble pie I believe in rags to riches Your inheritence won’t last So take your Grey Poupon my friend And shove it up your ass! [Chorus]

        Eat the Rich: there’s only one thing they’re good for Eat the Rich: take one bite now – come back for more Eat the Rich: don’t stop me now I’m goin’ crazy Eat the Rich: that’s my idea of a good time baby

      • Enough is Enough 3.1.3

        Yes -It is time to put an end to it.

        How?

        • g says 3.1.3.1

          enough is enough: ref how?

          by being the change you want to see..

          by sharing what you have.
          not bartering or trading but sharing.

          by volunteering some time, especially youth or community groups.
          do not wait for the man to implement change.
          the revolution will not be televised

          also thanks draco for the post

  4. One Anonymous Bloke 4

    Having heard for the last thirty years what “would” happen if we drank lots of neo-liberal kool-aid, I’m wary of any untested hypothesis that employs similar rhetoric.

    • Lanthanide 4.1

      Agreed.

    • Colonial Viper 4.2

      What “similar rhetoric”?

      Draco’s suggestions are plain language ones where the English words actually mean what they mean in the dictionary. That’s a huge advance on the kind of economics that the neolibs push.

  5. thatguynz 5

    +100. Great article Draco. Very similar to the New Chicago Plan with healthy doses of North Dakota Bank et al interwoven. It’s a travesty that there is not a politician in this country that would have the chutzpah to go down this path..

  6. Wreckingball 6

    “The second thing to realise is that money only works if it’s moving. When it’s moving it’s creating work and distributing the nation’s resources. When it’s sitting still, such as in a bank account, it’s not moving and thus not creating work or moving resources. Now a lot of people will dispute that and say that the money in a bank account is being loaned out but, as the Bank of England has recently shown, that is wrong. Banks create the money that they loan out which means that the money in a bank account is just sitting there doing nothing.”

    What a load of rubbish. The banks can only “make money” when they have a certain amount of deposits. They can’t simply make more and more money without taking more deposits to meet capital adequacy requirements.

    The financial illiteracy of that post is as astounding as it is disturbing.

    • Colonial Viper 6.1

      What a load of rubbish. The banks can only “make money” when they have a certain amount of deposits. They can’t simply make more and more money without taking more deposits to meet capital adequacy requirements.

      The RBNZ will loan the banks whatever shortfall in reserves they find that they have at the end of each day. There’s never any problem with getting sufficient reserves, on demand.

      In other words, no bank ever has to turn down a loan or mortgage approval because they are “short of reserves.”

      Never happens.

      Therefore: Draco is right and you are wrong.

      Your financial illiteracy is disturbing,

      • Wreckingball 6.1.1

        The RBNZ will loan the banks any shortfall in reserves – right…

        1) when will that loan be repaid? Eventually you will need real deposits to increase banks reserves – you can’t just print money and let the RBNZ prop up the banking sector.
        2) costs will increase as the RBNZ will want a return on its lending – thus increasing costs for banks.

        The argument promulgated here – that money sitting in a bank is doing nothing – is bottom of the barrel stuff. It is absolute rubbish – irrefutably so.

        • thatguynz 6.1.1.1

          Wreckingball – I’d suggest stopping before you demonstrate any more ignorance… Do your own damn research before you make a failed attempt to refute others.

        • Colonial Viper 6.1.1.2

          The RBNZ can generate NZD anytime it wants. It is a sovereign issuer of NZD. The RBNZ doesn’t need those loans to be repaid and it certainly does not need to earn “interest” on the loans.

          The argument promulgated here – that money sitting in a bank is doing nothing – is bottom of the barrel stuff. It is absolute rubbish – irrefutably so.

          There is hardly any money “sitting in a bank.” 98% of the money “sitting in a bank” are merely electronic book keeping entries in a spreadsheet.

        • Draco T Bastard 6.1.1.3
          1. Technically, it won’t be. Out financial system ensures that we must continue going further into debt.
          2. Which the bank then pushes on to its customers

          The argument promulgated here – that money sitting in a bank is doing nothing – is bottom of the barrel stuff. It is absolute rubbish – irrefutably so.

          It’s been refuted – thoroughly. Again, see what the BoE says on it.

      • Tracey 6.1.2

        if everyone withdrew their deposits this afternoon, do banks have cash on hand to pay out?

        • Wreckingball 6.1.2.1

          No.

          • Tracey 6.1.2.1.1

            ” … banks can only “make money” when they have a certain amount of deposits. They can’t simply make more and more money without taking more deposits to meet capital adequacy requirements.”

            But they can take money to make money without being able to repay on demand… So tge system is kind of stacked now. In the banks favour.

          • Phil 6.1.2.1.2

            Wrong.

            The RBNZ requires registered banks to have a positive mismatch ratio for 1-week and 1-month horizons.

            In layman’s terms, what that means is that a bank has to know for the next week and month what:
            (a) its outgoing commitments are
            (b) it expects to receive in payments
            (c) its liquid asset holdings are (i.e the value of the government bonds and other cash-like assets the bank owns).

            Banks are required to have a positive mismatch at all times. That means they always have to have enough incoming funds and on-hand cash to cover their outgoings.

      • Gosman 6.1.3

        Imagine a situation where banks operate in a country where the government does not Control the money supply. The question you have to ask if the Reserve Bank can’t make up any shortfall how will banks generate money?

        • mikesh 6.1.3.1

          Banks used to do so anyway, and this was fine provided customers continued to have confidence in the bank’s ability to repay its depositors. However a loss of confidence on the part of depositors would usually cause a run on the bank and the bank would go broke, causing much hardship for its customers.

          • Colonial Viper 6.1.3.1.1

            As long as emergency ‘repo’ arrangements are set up between banks, and with additional funding facilities through the Reserve Bank, there will not be a problem with this.

            The problem is when banks get distracted away from their core business of providing loans and credit to the wider society, into massive speculation and leverage.

            Edit – I’ll add why this is so. It’s because within a nation’s banking system there is almost no net change of funds when there is a traditional run on a bank. A rumour goes out say that ASB is going under – people shift their money from ASB to BNZ. No probs – its still within the NZ banking system.

            What really fucks things up nowadays is capital flight – when funds leave a country’s banking system altogether.

    • Draco T Bastard 6.2

      What a load of rubbish. The banks can only “make money” when they have a certain amount of deposits.

      1. The Bank of England disagrees with you and I think they probably know better than you
      2. I also said that the banks use their deposits as the base for the money that they create and
      3. If they don’t have the necessary reserves at the end of the day the Reserve Bank pops up as the Lender of Last Resort and ensures that they do

      The banks create our money and then charge us interest for the privilege of using it. You’re own financial illiteracy is the problem getting in the way of us changing to a better system.

      • Colonial Viper 6.2.1

        3.If they don’t have the necessary reserves at the end of the day the Reserve Bank pops up as the Lender of Last Resort and ensures that they do

        Also, this is what the global shadow banking system does i.e. help finance banks.

      • mikesh 6.2.2

        I incline to the opinion that money on demand deposit should be regared as belonging to the customer, with the banker acting merely as a sort of trustee. The bank would then hold the money purely for the use of the depositor and not for relending. Of course the bank would be entitled to charge a fee for this service.

        • Colonial Viper 6.2.2.1

          Negative interest rates are coming.

          Savers have been penalised by ZIRP and now that NIRP is on the horizon it will get worse.

          Of course the bank would be entitled to charge a fee for this service.

          I don’t think so. Why would you allow the bank to charge you money for minding a spreadsheet entry (your account value)?

          • mikesh 6.2.2.1.1

            Presumably you charge for the services you provide to someone.

            • Colonial Viper 6.2.2.1.1.1

              What service?

              Its your money. You give your money to the bank for them to use how they see fit, you’re the one doing them a very big favour. Not the other way around.

      • Phil 6.2.3

        If they don’t have the necessary reserves at the end of the day the Reserve Bank pops up as the Lender of Last Resort and ensures that they do

        This is a fundamentally incorrect interpretation of lender of last resort (LoLR). The RBNZ, as LoLR, does not intervene in the market each day, or often at all. The LoLR exists to lend in times of crisis, to avoid the prospect or consequences of a bank run on the rest of the economy.

        In New Zealand, the systems works like this:

        Each bank has a deposit with the RBNZ, of somewhere in the vicinity of $100m to $1b-ish in what is called a settlement account.

        As you and I make transactions, the banks keep a running total of who owes whom. For example, if a BNZ customer buys a haircut from a Westpac hairdresser, the two banks keep track of the fact that BNZ now owes Westpac cash (because BNZ has taken the money out of their customer account, and Westpac has credited it into the hairdresser’s).

        At the end of the day*, all the banks tally up the payments their depositors made to each other, and ‘net-off’ to work out who owes whom. If all the Westpac customers, combined, paid $500m to BNZ customers, and BNZ customers paid $550m to Westpac, the two banks would work out that BNZ needs to give $50m in cash to Westpac.

        This is where the settlement account comes in to play. Banks hold enough cash in their settlement account to pay their bills. The RBNZ does not act as a lender here – it’s up to each of the banks to know who owes whom and transact accordingly.

        What happens if BNZ is short of cash? Well, another bank must be sitting on more cash than it knows what to do with. This is because the settlement account system is, basically, closed – if BNZ pays out all its cash, it MUST be sitting with other banks in the settlement system, because it can’t really go anywhere in the short term. What happens is that the other banks then offer to lend cash back to BNZ, for interest.

        As the normal course of business resumes the next day, BNZ pays back the loan. If they have ongoing shortfalls in cash, over a sustained period of time, that is when the LoLR might come into play.

        • Settlements in New Zealand are progressively moving to ‘real time gross settlement’ throughout the day, rather than relying on one end-of-day block.
        • Colonial Viper 6.2.3.1

          Thanks for your clear explanations.

          Is there a particular reason that settlements don’t appear to occur in the weekend? Does the process require continuous human oversight?

          I always found it rather dodgy that when you pay a retailer by EFTPOS or credit card on Saturday, that same retailer does not get those funds until Mon night/Tue morning…yet as a shopper your account shows the withdrawal immediately.

          My assumption being that someone is “holding on to” those monies.

          • Phil 6.2.3.1.1

            s there a particular reason that settlements don’t appear to occur in the weekend? Does the process require continuous human oversight?

            The system is largely automated, but still requires some human input. I’m not sure of all the details, but my guess is that real-time settlement will eventually include weekends, if it doesn’t already.

            I always found it rather dodgy that when you pay a retailer by EFTPOS or credit card on Saturday, that same retailer does not get those funds until Mon night/Tue morning…yet as a shopper your account shows the withdrawal immediately.

            Often when people make this comment to me, they’re referring specifically to interest. As in “the money leaves my account on Saturday, and i’m not earning interest on it any more. But it doesn’t show up in the retailer’s account until Monday, so they bank has ‘free’ money for two days.”

            Actually what happens is a bank will record the transaction in the retailers account as occurring on the Saturday, and start paying interest to it immediately. I think the delay in ‘clearing’ the funds for further transactions is a carry over from a legacy issue that comes from the bad old days of cheques.

        • mikesh 6.2.3.2

          “if BNZ pays out all its cash, it MUST be sitting with other banks in the settlement system, because it can’t really go anywhere in the short term. What happens is that the other banks then offer to lend cash back to BNZ, for interest.”

          Unless of course the other banks think the BNZ is a bit shaky, in which case they could refuse to lend them their surplus cash.

          • Phil 6.2.3.2.1

            Unless of course the other banks think the BNZ is a bit shaky, in which case they could refuse to lend them their surplus cash.

            They way they’re likely to do that is through interest rates – they’ll charge BNZ more for borrowing money overnight than they will for lending the same amount to, say, ANZ.

            That is, in my opinion, the most important reason interest rates exist – they’re a measure of relative risk.

            • Draco T Bastard 6.2.3.2.1.1

              They way they’re likely to do that is through interest rates – they’ll charge BNZ more for borrowing money overnight than they will for lending the same amount to, say, ANZ.

              One of the observed bank actions in 2008 was that they stopped lending to each other no matter the interest rates.

              That is, in my opinion, the most important reason interest rates exist – they’re a measure of relative risk.

              That’s what we’re told but it’s obviously a load of bollocks else people would always have different interest rates on their mortgage rather than the same ones. Also, the OCR wouldn’t work to constrain interest rates.

              • Phil

                One of the observed bank actions in 2008 was that they stopped lending to each other no matter the interest rates

                Partly correct. Unsecured inter-bank lending dried up completely.

                The secured lending markets, like short term repurchase agreements between NZ banks (where we agree that I give you a government bond today and you give me cash, and tomorrow we make the reverse transaction) and Covered Bonds remained largely open for business.

                That’s what we’re told but it’s obviously a load of bollocks else people would always have different interest rates on their mortgage rather than the same ones.

                Respectfully, the only bollocks here is your misunderstanding of risk management and pricing.

                Mortgages, and to a lesser extent any personal or ‘retail’ loans are managed on a portfolio basis. That means the risk and pricing is averaged across a pool of loans. We also have differentiation through high-LVR penalty rates (a higher loan to value is riskier than lower). The discounts or special deals offered to high quality clients are amortised across the life of the loan and contribute to the real rate of interest paid by a client.

                Commercial loans are priced individually, based on the credit assessment and due diligence a bank undertakes. They’re virtually all priced on a base-rate plus risk-margin basis.

                Also, the OCR wouldn’t work to constrain interest rates.

                The OCR constrains interest rates by setting the ‘risk free’ base rate. Opportunity cost does the rest. As in; BNZ could lend (i.e. deposit with) the safest financial institution in the country (the RBNZ) at 3.25%. Or, BNZ could lend to a commercial competitor, via a repurchase agreement for a slightly higher rate, or could lend to a business, farm, or household. All those other rates are influenced by the underlying ‘risk free’ OCR. The margin over the OCR is basically the extra return BNZ expects to get as compensation for taking on a higher level of risk.

                The reverse is also true. As a depositor, I could put my money with a bank, or a credit union, or a finance company. Each of these organisations will be charging different rates because my money is not equally safe in them.

            • Colonial Viper 6.2.3.2.1.2

              That is, in my opinion, the most important reason interest rates exist – they’re a measure of relative risk.

              Given that a bank’s internal situation is often highly opaque (even to insiders), there is no way that this “relative risk” can be correctly priced.

              Greek, Spanish, Italian 10 year government bonds are all sitting at near record low interest rates right now. Is that because the relative risk of those countries is actually at record lows, is it merely perception, or is it market manipulation?

              10 year Greek govt bonds were at 5% at the end of 2009. Just 3-4 months later their yield had risen 600-700 basis points. In other words, the markets were playing catch up with reality, big time, making interest rates a rather poor and lagging indicator of what was actually going on.

              • Phil

                Given that a bank’s internal situation is often highly opaque (even to insiders), there is no way that this “relative risk” can be correctly priced.

                That’s what an independent rating agency like S&P or Fitch is for. :)
                In New Zealand we also have, in my personal opinion, a pretty good registered bank disclosure regime.

                But, you can only price risk with the information you have at hand. However, that information is more than just a balance sheet showing that the Greek government is running out of money. Information also takes the form of sentiment and commitment and expectation.

                For instance, a couple of years ago (maybe much earlier?) S&P downgraded the USA from AAA to AA. That’s a pretty serious signal, for the world’s reserve currency, that not all is well. You would, absent any other information, expect interest rates for US treasury debt and bonds to rise. But they didn’t. They fell. Why?

                Because the market correctly understood that a credit rating downgrade was exactly the kick in the pants the US needed to start the ball rolling on balancing the books. The market took the long term view that the US economy would be better off, because of this downgrade, and priced risk accordingly.

                • Colonial Viper

                  That’s what an independent rating agency like S&P or Fitch is for. :)

                  You even said that with a straight face, ignoring all the evidence from 2004-present that the major global banks work hand in glove with the ratings agencies and that the independence of their AAA ratings is, to put it mildly, questionable.

                  You would, absent any other information, expect interest rates for US treasury debt and bonds to rise. But they didn’t. They fell. Why?

                  Because the market correctly understood that a credit rating downgrade was exactly the kick in the pants the US needed to start the ball rolling on balancing the books. The market took the long term view that the US economy would be better off, because of this downgrade, and priced risk accordingly.

                  Sounds plausible from the assumption of a “rational” market, but it’s also completely incorrect. ZIRP was not a decision of the market, it was a policy of the Federal Reserve, and it enforced it by trading bonds and other assets to achieve the interest rate levels it wanted.

                  exactly the kick in the pants the US needed to start the ball rolling on balancing the books.

                  So, a couple of years down the track, how is this going? Was the market right?

  7. RedLogix 7

    Draco.

    Mostly an excellent approach – but I would ask how you would deal with the ‘time value’ of money?

    For instance if I lend you $1000 today – I am foregoing the utility of spending the money today, for the expectation that you will repay me some time in the future – which is worth somewhat less.

    This discounted future value is normally compensated for by charging interest on the loan.

    • vto 7.1

      an equity stake in the enterprise

      • Lanthanide 7.1.1

        If people want an equity stake in the enterprise, they can already do that.

        I’d actually rather keep $1,000 in my pocket, than lend it to you for you to spend, with the compensation to me being “equity in a company” that may or may not go bust (and face it, most businesses go bust and fewer still become particularly profitable).

        • vto 7.1.1.1

          I understand that, but it misses the main thrust of what Draco outlines above and that is the problems caused by interest-bearing debt money. That main problem being its ponzi-scheme nature and thus unsustainability ….

          As for having no option but to take an equity stake or keep it in your pocket – fine, that is the risk taken. It is much fairer though and more importantly aligns the interests of the financier and the enterprise, which leads to far greater sustainability.

          This is nothing new and is, I understand, how much of the rest of the world operates its own financial systems…… systems which do not blow apart like ours

          • Colonial Viper 7.1.1.1.1

            Lanth & RL: no one is asking you to lend your money at no interest. You’re not a sovereign issuer of the currency.

            There is no reason why the government bank could not lend money to start up businesses at 0% interest, perhaps in exchange for a small ownership share.

            (Cue dancing cossacks music)

            edit I see DTB has made the point about the state bank doing this lending at 0%, not private individuals or private banks.

      • Draco T Bastard 7.1.2

        Why would anyone loan any money under those conditions when it’s possible to go to the state bank and get the money at 0% interest?

        • vto 7.1.2.1

          Yes of course. But how would they assess which enterprises to lend to? Same way as now? And if an enterprise could not raise said money from the state lender, what would the open market provide as an alternative if interest was banned? Or would it be banned? (it should be for reasons outlined just above – ponzi nature, unsustainability, and non-alignment of lender and borrower interests).

          Also, do you know the history of financial systems which have interest banned as usurious?

          • Draco T Bastard 7.1.2.1.1

            But how would they assess which enterprises to lend to?

            I would expect some sort of rules around a viable business plan.

            And if an enterprise could not raise said money from the state lender, what would the open market provide as an alternative if interest was banned? Or would it be banned?

            Chances are that they would be able to but I don’t suggest banning interest. Just making it so that it’s damn near impossible to do so.

            Also, do you know the history of financial systems which have interest banned as usurious?

            From my reading of David Graeber’s Debt: The first 5000 years no society has yet been able to ban interest completely which is why I’m suggesting a system where it would be damn near impossible for an individual to charge interest rather than using prohibition.

            • Gosman 7.1.2.1.1.1

              How would you assess if a business plan was viable or not or at the very least HOW risky it is?

              Currently businesses can raise capital via various methods which enable them and investors to manage risk and return factors. Your proposal seems to do away with this. In essence the riskiest business ideas under your proposal will cost the same as the least riskiest.

              This will likely encourage high risk business ideas which may or may not be a good thing. Remember the GFC was caused by mispricing risk.

              • tracey

                why would the method of assessment be any different to today? Just because little or no interest is to be charged doesnt change the analysis of whether a business is high, medium or low risk?

                So, you do the assessment, that doesnt change, what changes is your preparedness to take on the risk versus interest compensation.

                • Gosman

                  What you fail to comprehend is that risk has a price and that price is usually reflected in the cost of capital such as interest. If you don’t price risk you remove a large impediment to people pursuing risky activities that could cause a massive collapse at some stage.

                  • tracey

                    no, i comprehend that but if you re read your post you made two distinct points.

                    How to assess risk
                    And
                    How to get a return on risk

                    You seem to constantly turn a blind eye to the constant economic collapse we experience cyclically under the current system

                  • Draco T Bastard

                    What you fail to comprehend is that risk has a price and that price is usually reflected in the cost of capital such as interest.

                    No it doesn’t. What interest is really for is so that some people get a return without actually doing any work.

                    If you don’t price risk you remove a large impediment to people pursuing risky activities that could cause a massive collapse at some stage.

                    Nope. Some enterprises will fail, some will succeed. Things’ll average out over time.

                    The big point is that even if an enterprise does fail we still end up with some value from it anyway.

                    • Gosman

                      How do you price risk in your model? You might not think the current system does it well but it at least makes an attempt to do so. Your model seems to treat risk as having no major impact. That ignores that given the same cost of capital there is greater incentive to engage in risky business practices as the chance of return is greater for the same costs of raising the funds.

                    • Draco T Bastard

                      How do you price risk in your model?

                      I don’t because there is no need to do so. If the business fails then the excess money would be taken out through taxes instead of through loan repayments. I mentioned that in the post.

                      That ignores that given the same cost of capital there is greater incentive to engage in risky business practices as the chance of return is greater for the same costs of raising the funds.

                      And those people will also be taking the greater risk of becoming bankrupts unable to form a business and probably have difficulty being hired.

                      And the present interest system doesn’t price risk anyway – it’s prices peoples greed.

                    • Gosman

                      How would bankrupts get capital? They might have a viable business idea remember.

                    • Draco T Bastard

                      How would bankrupts get capital?

                      I expect that they wouldn’t – until the bankruptcy is discharged. Pretty much exactly the way it is now in fact. There are some changes I’d make but that’s beyond what this post is about.

                    • Phil

                      What interest is really for is so that some people get a return without actually doing any work.

                      That’s a very narrow view of interest. A wider (and generally accepted) interpretation is that interest is what your receive as the quid-pro-quo for foregoing utilizing that money for some other personal fulfillment or benefit.

                    • Draco T Bastard

                      A wider (and generally accepted) interpretation

                      I remember ads that used to say, x number of people can’t be wrong as if the number of people buying the product was a testimonial about how good the product was. This is, of course, a fallacy and, as the GFC proves, it’s a fallacy that applies to mainstream economics.

                      That said, with the government providing 0% interest money there’s no reason for people to forego spending their money.

                • mikesh

                  Normally a lender will be more prepared to take a risk if the interest is at a greater rate.

                  • tracey

                    which is a fascinating idea given i get charged almost exactly the same rate for my mortgage despite having 65% equity, as all those who couldnt scrape together a deposit.

                    I am trying to point out the current system is flawed and skewed heavily to banks. Gosman and others post as though its a great system. Its great, but for a very select few.

                    • mikesh

                      “which is a fascinating idea given i get charged almost exactly the same rate for my mortgage despite having 65% equity, as all those who couldnt scrape together a deposit.”

                      Risk is probably not the only factor controlling interest rates, and may well be a negligible factor where housing is concerned. However I’m neither a banker nor an actuary so I don’t know the answer to that problem.

                  • Colonial Viper

                    Normally a lender will be more prepared to take a risk if the interest is at a greater rate.

                    Yeah? That may have been true in the good old days. But the example during the GFC is that the big banks took all the profit, and passed all the risk on to the public purse.

                    • mikesh

                      “But the example during the GFC is that the big banks took all the profit, and passed all the risk on to the public purse.”

                      I don’t think anybody is claiming that this what ought to have happened.

                    • Colonial Viper

                      Sure, but it is what DOES happen in the financial system today. You see the “capitalists” of today aren’t anything of the sort. Capitalists are supposed to believe in competition and “creative destruction”, not Too Big To Fail and all the benefits for none of the risks.

                      And in doing so they have created a fragile financial system which Draco has correctly identified that we need to get the hell out of – or at least put up a couple of solid firewalls between.

              • mikesh

                Banks don’t invest in businesses, proprietors do; though the proprietor my have to borrow in order to be able to do so. Usually the bank will insist on some form of collateral for the loan.

              • Draco T Bastard

                How would you assess if a business plan was viable or not or at the very least HOW risky it is?

                Did you see the bit about a viable business plan?

                In essence the riskiest business ideas under your proposal will cost the same as the least riskiest.

                You assume that risk needs to have a cost which it doesn’t.

                BTW, interest rates don’t really reflect risk anyway. If they did then the OCR wouldn’t work.

                This will likely encourage high risk business ideas which may or may not be a good thing.

                Possibly but that’s not a problem.

                Remember the GFC was caused by mispricing risk.

                No, the GFC was caused by the banks creating lots of money which then went looking for high return financial speculation.

                • Colonial Viper

                  You assume that risk needs to have a cost which it doesn’t.

                  Yep – and why should riskier technology and entrepreneurial ventures cost more when their upside and contribution to society is so much greater if they do work?

                  Further there is no riskier venture than the basic sciences research that government has traditionally carried out. Why should that cost more when it is usually the most valuable activity in the long term, for both businesses and society as a whole?

                  The problem in our current set up is that almost everyone defaults to the lowest risk investments – collecting a rental portfolio.

                  • Draco T Bastard

                    The problem in our current set up is that almost everyone defaults to the lowest risk investments – collecting a rental portfolio.

                    QFT

                  • tracey

                    many very innovative people with great ideas didnt get rich from them, the bank or the first shark with the money did, disproportionately to the creativeness.

                    Your post is much more than a trite +1 to me but am struggling to express it.

                    • Gosman

                      Let’s break down how fundamentally screwed up this idea is.

                      By not pricing risk via charging interest anybody willing to start up a business will have an incentive to look to go for higher risk investments. There is little financial penalty if they decide to make the next wonder gadget versus producing something plain and simple regardless that most new products or services fail. Even if it did fail the person could borrow more free money to pay off the old debt and start a new riskier business. In effect they would be doubling down on a loss.

                      To avoid this the only option would be to restrict the supply of free capital via a rationing system. That will inevitably open itself up for abuse and corruption. Whoever decides the criteria for what business ideas get funded will have enormous power. They will have the temptation to allocate based on reasons other than an economic return.

                      The people who receive the free capital can look to make money from it just by lending it to those poor saps who didn’t meet the criteria. They would of course charge them exorbitant amounts of interest especially as what they were doing would be illegal presumably.

                      In the end you would get the same system as you have now but worse because it would be controlled by political rather than economic means.

                    • Colonial Viper

                      I think Gosman is against this new idea even though he claims it’ll end up the same as things are now.

                      Really, that’s silly.

                      Also, Gosman, why are you against people taking big business risks in order to make big business successes?

                      If a start up fails and $100K goes down the drain, who cares – especially if it had the chance to be the next Google or Nokia?

                      And anyways that $100K gets paid out into the economy to employees and subcontractors etc. which is no bad thing.

                    • Draco T Bastard

                      Even if it did fail the person could borrow more free money to pay off the old debt and start a new riskier business.

                      Nope, wouldn’t be able to do that. It’s not free money – it may not have interest on it but it does come with consequences.

                      They will have the temptation to allocate based on reasons other than an economic return.

                      You mean like the ratings agencies that were taking money from the banks to give AAA ratings to bundled mortgages?

                      The people who receive the free capital can look to make money from it just by lending it to those poor saps who didn’t meet the criteria.

                      And end up in jail for a very, very long time.

                    • Gosman

                      What’s the consequences? The government taking control of assets to recoup losses. Worked a treat with SCF. However even if you think that would discourage money lenders charging interest outside the system (it wouldn’t) there is still the problem of how you control is dispersal in the first place. Too much control by central government and you run the risk of constricting credit in places that need it. Too little and then there might be too much lent at any one time to too many risky ventures leading to asset price bubbles and a collapse. This is not a new idea either. It has been tried in numerous places with the inevitable economic collapse that accompanies it. This is because it ignores several economic fundamentals.

                    • Draco T Bastard

                      What’s the consequences? The government taking control of assets to recoup losses. Worked a treat with SCF.

                      Well, we got some of the money back so not a total loss. Of course, SFC shouldn’t have been bailed out in the first place.

                      However even if you think that would discourage money lenders charging interest outside the system (it wouldn’t) there is still the problem of how you control is dispersal in the first place.

                      You haven’t answered why anyone would go outside the system to pay interest when they can get it with 0%.

                      Too much control by central government and you run the risk of constricting credit in places that need it.

                      You should probably read the post. I’ve gone to quite a bit of effort to have it so that the government doesn’t have too much control.

                      Too little and then there might be too much lent at any one time to too many risky ventures leading to asset price bubbles and a collapse.

                      We get that now. Perhaps you noticed the GFC that happened, and some say is still happening, a few years back?

                      This is not a new idea either. It has been tried in numerous places with the inevitable economic collapse that accompanies it. This is because it ignores several economic fundamentals.

                      No it hasn’t and the paradigm that ignores economic fundamentals is the financial system that we have now.

    • Wreckingball 7.2

      Good question RL.

    • Draco T Bastard 7.3

      I suspect that you won’t be lending out any money then. I don’t see a problem with this. It is, after all, quite easy to save up $1000.

    • mikesh 7.4

      It is perfectly reasonable to charge interest in that situation. Interest is really only problematic if it is charged on money created from nothing.

      • Draco T Bastard 7.4.1

        Nope. Interest is a problem no matter what form of money creation prevails (see Piketty). It’s just worse when money is created in such a way so that more money needs to be created to pay for it.

        • tracey 7.4.1.1

          have you read anything on islamic money lending with its no ibterest premise. Does it work in practice or do they just find ways to fudge it

          • Colonial Viper 7.4.1.1.1

            Various savings pools in NZ are a good, albeit partial, answer and some have been around for many years.

            • tracey 7.4.1.1.1.1

              cooperative bank?

              • Colonial Viper

                I don’t know about them any more. What I hear is that since a former Westpac guy got put in at the top, they have been treating their staff and customers worse.

                The savings pools are a different concept to a bank altogether, though.

          • Draco T Bastard 7.4.1.1.2

            Have read anything specific but I understand that Islamic banks charge a fixed administration fee. Couldn’t say if it works or not.

            • Colonial Viper 7.4.1.1.2.1

              Yeah it works but its just a fudge around not charging interest on the quantity of the loan itself and instead putting it down to an ‘adminstration fee’.

        • mikesh 7.4.1.2

          “Nope. Interest is a problem no matter what form of money creation prevails (see Piketty). It’s just worse when money is created in such a way so that more money needs to be created to pay for it.”

          Not necessarily. If interest received is spent back into the community no extra money needs to be created in order that the interest be paid. This is why state owned banking is a better option than a privately owned banking system. The state can ensure that monies received as interest are respent, whereas a private bank will probably retain some of its earnings for the purpose of relending.

          • Draco T Bastard 7.4.1.2.1

            And a state owned bank can also run at cost and be supported by taxes so that it doesn’t have to charge interest. Remember, my suggestion was that the bank create the money it loans out ex nihilo.

            • mikesh 7.4.1.2.1.1

              This is true of course, but is there any reason why it should be run at the taxpayers’ expense. Why not allow a state bank to pay its way and perhaps provide the state with a bit of profit which can be used for everyone’s benefit. The absence of interest leaves the system open to corruption, when obtaining a loan will depend on having the right connections, and perhaps the willingness to pay a backhander to the loan officer.

              Not all government services should be free. In some cases a user pays approach is fairer.

              • Draco T Bastard

                This is true of course, but is there any reason why it should be run at the taxpayers’ expense.

                Yes. It’s a service needed by everyone and the cheapest, most efficient way of funding that service is through taxes.

                Why not allow a state bank to pay its way and perhaps provide the state with a bit of profit which can be used for everyone’s benefit.

                Profit is a dead-weight loss and tends to invite corruption and selling it to the private sector.

                The absence of interest leaves the system open to corruption, when obtaining a loan will depend on having the right connections, and perhaps the willingness to pay a backhander to the loan officer.

                Steve Keen has an interesting video up somewhere where he explains how the present system is open to corruption because of the interest. Quite simply, the banks are incentivised to create excessive amounts of money which they do. Then there’s the deals done behind closed doors such as the LIBOR scandal and I’m sure we can find significant of backhanders as well. In fact, I believe that’s what the $1000/hr prostitutes were doing on Wall Street.

                Screaming ZOMG, Corruption!!!111! really isn’t cutting it considering just how corrupt the present system is. Yes, we’ll need to do something about corruption but we need to be doing that anyway.

                Not all government services should be free. In some cases a user pays approach is fairer.

                I addressed that in the post as well but banking isn’t one of them due to the above reason.

                • Colonial Viper

                  In fact, I believe that’s what the $1000/hr prostitutes were doing on Wall Street.

                  That is no way to describe the traders from Goldman Sachs and JP Morgan.

                • mikesh

                  “Yes. It’s a service needed by everyone and the cheapest, most efficient way of funding that service is through taxes.”

                  Not everybody needs to borrow. You are advocating a system in which those that don’t borrow are subsidizing those that do, given that everybody pays the taxes that support the bank.

                  • Draco T Bastard

                    It seems that no matter what we do we can’t get away from subsidies, i.e, Rio Tinto, Warner Bros, SkyCity.

                    In this case I believe that everyone needs the service available whether they use it or not. As in, just in case they want to use the services it’s better for it to be available rather than priced out of their reach which I think happens far more than we really want it to in the present system of fees and interest. And considering that mortgages are available through it most people would be using it.

                    So, in this case, I think the subsidies would be justified.

                    As an addendum and outside of this post: I’d also advocate for the state bank to run the entire electronic payments system as a monopoly (It’s presently a duopoly owned by the major banks).

      • Colonial Viper 7.4.2

        Virtually all the money in circulation was “created from nothing”

        • Colonial Viper 7.4.2.1

          And Draco hasn’t even started talking about the pseudo-cash which makes up a huge amount of the economy at the moment i.e. credit

          • tracey 7.4.2.1.1

            credit cards didnt enter greece until the 80′s and almost no one had mortgages.

            • Colonial Viper 7.4.2.1.1.1

              And that wasn’t a situation the neolibs and international bankers were going to let stand…

              • tracey

                it was a mindset that had to be changed, and within 30 years smug capitalist apologists are mocking greeks for being lazy and greedy

                • Colonial Viper

                  Greek political leadership sold out their own people. Forget the barbarians at the gate, it’s the traitors from within who look like your countrymen and sound like your countrymen who are the most dangerous. (eg Douglas, Caygill, Prebble, Bassett et al)

  8. Chris Good 8

    Excellent post Draco

    Wow! Irony of irony of ironies. The old Social Credit were right in advocating this after all. Where are they when we need them??

    Actually – they are still around:
    http://www.democrats.org.nz/

    Perhaps someone should vote for them?

    • Gosman 8.1

      I think they managed to get in to power in Zimbabwe.

      • Colonial Viper 8.1.1

        Oh, dangling around the old Zimbabwe trope again are we Gossie? You really need to learn that the more you dangle that well worn irrelevant distraction around, the less credibility you have.

        And that’s saying something.

      • mikesh 8.1.2

        The Zimabwean situation was completely different. There the government borrowed and then was unable to repay the loans so were force d to create money to do so. This led to inflation which fed on itself and rapidly accelerated. Repayments of the original loans should have been rescheduled but Mugabe upset Western governments with his land policies so they refused to reschedule. It should be noted however that those land policies were probably not unreasonable.

        • Colonial Viper 8.1.2.1

          The Zimbabwe govt also destroyed the productive capacity of the nation via violence, corruption, land confiscation and incompetence. These are elements which are usually needed for a real currency collapse to occur.

          • mikesh 8.1.2.1.1

            The whites, when they colonised the country, grabbed the best land, probably without paying for it. The government, not unreasonably, decided to take it back. This seems to have been unwise, but it is easy to be wise after the event.

            Actually I think the British originally promised to compensate the settlers for any land relinquished, and then reneged on the deal, apparently on the grounds that the Zimbabwean government was flogging the relinquished land off to its cronies. Well, maybe they were, but that was the Zimbabweans’ business and nothing to do with the British, who should have honoured their promise.

            • Colonial Viper 8.1.2.1.1.1

              The rights and wrongs of colonial transactions are less important than competence and productivity in this instance. Taking the farms off the Whites – OK if you are going to do that in the name of reparations or whatever, at least know how to run and manage the farm so that it keeps producing. Etc.

    • mikesh 8.2

      Actually Major Douglas’s ideas were not particularly original; and in fact some of his thinking seemed pretty muddled (eg the A+B theorem). Unfortunately this allowed vested interests to label Socred as monetary cranks advocating “funny money” and “tooth fairy economics”. They probably should have continued to promote their ideas through lobbying rather than become a political party, since that only politicised those ideas.

  9. dimebag russell 9

    vote howard the duck for president.
    the all nite party.
    do you take credit cards.
    yes yours.
    gimme.

  10. Populuxe1 10

    Ahhh, I thought I smelled the mephitic whiff of the Social Credit theory barely masked by some cheap perfume. And lo, the same criticisms hold.
    Loans are not created ex nihilo and the trust/risk taken by/effort of the lender deserve to be compensated, hence interest – yeah sure much of that is going to the bank, but some of that is going to the people whose deposits form the real money the bank is lending. Otherwise you remove the incentive.
    The only major difference between this ammusing Gedankenexperiment and the econovoodoo of Social Credit (correct me if I’m wrong, it’s a lot to digest) is that you accept that the economy is dynamic rather than static as in the original Social Credit model – ie, you accept that banks print money on the basis of predicted output growth. If you eliminate that to defuse the boom/bust cycle, which is what I think you want to do, basically that is the same shitty old Social Credit.
    And I’m not entirely clear on this but it does seem to be that you might be equating wealth and money, which from an economic perspective they are not – ie cash and deposits vs properties and stocks. To create – which is what I think this is – an economic model based around free, centrally produced wealth is to assume that goods and services can be produced without cost – which of course they can’t.
    Even if what you are suggesting did work, it would only be a very short term bandaid before resulting in hyperinflation as in Germany, Ecuador, Hungary, Argentina, Brazil and Zimbabwe. You can only do so much moving around deckchairs on the Titanic – ie printing money and insider training that is magically not insider trading because it’s the state doing it and the state is always benign blah blah blah because ultimately the central bank needs refinancing and the currency needs to be based on something.
    And yeah, I know you’re quite keen on the whole elimination of personal responsibility and the collectivisation of economic initiative, but ewww yuck.

    • Draco T Bastard 10.1

      Loans are not created ex nihilo and the trust/risk taken by/effort of the lender deserve to be compensated

      Yes they are and no they don’t.

      Otherwise you remove the incentive.

      Don’t need incentive to get people to loan out money when the government can loan out money without such incentive.

      If you eliminate that to defuse the boom/bust cycle, which is what I think you want to do, basically that is the same shitty old Social Credit.

      Are you saying that we need a boom/bust cycle?

      And I’m not entirely clear on this but it does seem to be that you might be equating wealth and money, which from an economic perspective they are not – ie cash and deposits vs properties and stocks.

      Nope, I never do that. I’m quite aware that money is not wealth, that it is not a resource. In fact, I seem to recall saying that right at the top of the article.

      Even if what you are suggesting did work, it would only be a very short term bandaid before resulting in hyperinflation as in Germany, Ecuador, Hungary, Argentina, Brazil and Zimbabwe.

      There wouldn’t be any hyper-inflation because there would be rules/regulations preventing it. Specifically, rules regarding availability of the nations resources and the destruction of money created.

      …the currency needs to be based on something.

      Under this system the currency is based upon the real economy.

      And yeah, I know you’re quite keen on the whole elimination of personal responsibility and the collectivisation of economic initiative, but ewww yuck.

      That would be National and Act.

      • Colonial Viper 10.1.1

        Weird, Pop1 seems to have totally missed the last 5 or so years of central bank money printing – trillions upon trillions of dollars of new money, created ex nihilo, and injected into the financial system at massively low interest rates to the favoured big banks.

        …the currency needs to be based on something.

        Wow…the bankers got over this little naïve idea by the turn of the 20th Century, people shouldn’t keep propagating it.

        But it is a very interesting question to ask – what is the value of the USD based on, today? You see, everyone assumes that it has value, which in itself lends the currency value as it is in demand.

        But is there any real value there and if so, what is it based on, and if it is based on something, how robust against change is that basis?

        • Populuxe1 10.1.1.1

          I haven’t missed the last five years of Quantative Easing – it was supposed to be temporary and a response to a crisis, it is not printing money and has never been intended as a status quo deal.

          Clearly something needs to be done with the economic model, but Keynesianism with some modifications (a return to the gold/silver standard for example) is perfectly sufficient without making it the state’s job to do what the banksters are doing now.

          • Colonial Viper 10.1.1.1.1

            In what sense is QE not “printing money” (other than literally – they create this money using keystrokes to electronically credit accounts, not by firing up the printing presses).

            • Populuxe1 10.1.1.1.1.1

              Even if I agreed with you, it’s still a shitty basis for an economy. Neither QE or printing money are reliable or constructive for a healthy economy.

              • Draco T Bastard

                Even if I agreed with you, it’s still a shitty basis for an economy.

                It’s not the basis for the economy, it’s the basis for the financial system. The basis for the economy is the resource sand skills available to a nation.

                The problem we have at present is that our financial system is based upon money created by banks that the banks then charge interest on. This system is both unstable due to it’s propensity to drive bubbles and unsustainable due to it’s need for ever more growth.

    • mikesh 10.2

      The German inflation was caused, not only by the printing of money, but also by speculators shorting the mark, believing that its value would fall as a result of the government printing the stuff. I think the government had to print money because of the need to pay the egregious reparations demanded by the “victors” after world war I.

      • Colonial Viper 10.2.1

        Yes and those reparation demands were in gold and hard commodity products, not in the currency of the German government.

        • Populuxe1 10.2.1.1

          Because those demanding reparation, while perhaps demanding too much, weren’t stupid.

  11. Populuxe1 11

    Yes they are and no they don’t.

    Your personal ideological fantasies aside about glorious revolution, looting people’s houses under the pretext of wealth redistribution and money growing on trees, that’s bullshit.

    Don’t need incentive to get people to loan out money when the government can loan out money without such incentive.

    Actually the government ultimately does have to justify itself to the taxpayer, because basically unless you’re going to take out huge fucking loans you can’t print money forever (he said gesturing at a list of countries who have tried) without creating hyperinflation. But hey https://www.youtube.com/watch?v=JqowmHgxVJQ

    Are you saying that we need a boom/bust cycle?

    No, but I don’t think we need hyperinflation either

    Nope, I never do that. I’m quite aware that money is not wealth, that it is not a resource. In fact, I seem to recall saying that right at the top of the article.

    Glad we cleared that up then.

    There wouldn’t be any hyper-inflation because there would be rules/regulations preventing it. Specifically, rules regarding availability of the nations resources and the destruction of money created.

    Oh rules – well that’s all right then. Because no one ever breaks rules. And of course nothing loves obeying rules as much as Mother Nature – she’s as predictable as clockwork is Mother Nature, supply shock never happens. LOL. I mean, gosh, you don’t suppose some of those other countries had rules to prevent hyperinflation too?

    Under this system the currency is based upon the real economy.

    No, it’s based on Social Credit. Which doesn’t work because you can make sommat out nowt.

    That would be National and Act.

    That would be you too and far moreso than NACT.

    • Draco T Bastard 11.1

      looting people’s houses under the pretext of wealth redistribution and money growing on trees, that’s bullshit.

      Good job I didn’t suggest any of that then isn’t it?

      because basically unless you’re going to take out huge fucking loans you can’t print money forever (he said gesturing at a list of countries who have tried) without creating hyperinflation.

      Can you please tell the private banks and the governments that.

      Which doesn’t work because you can make sommat out nowt.

      I never suggested you could. I suggested that money, created by the government and not bearing interest, be used to pay people to do stuff like mining, R&D, teaching etc and that that money would be balanced by taxes. Also, so as to encourage innovation, people would be able to borrow money, created by the government and not bearing interest, to start private enterprise. This loan would be paid back as the business became successful else it would be removed from the economy by taxes in the case of a default.

      As you can imagine, this system doesn’t lend itself to hyperinflation.

      And, yes, people break the rules. This is why we have an enforcement process.

      Supply shocks happen for two reasons:

      1. Politics
      2. Collapse of the monetary system

      Not much we can do about the former and I’m redesigned the monetary system to try and prevent the latter.

      • Populuxe1 11.1.1

        Good job I didn’t suggest any of that then isn’t it?

        “Hyperbole is the use of exaggeration as a rhetorical device or figure of speech”

        Can you please tell the private banks and the governments that.

        People have. Repeatedly. No idea why you think you can do it too. And what the Bank of England does is Quantative Easing, not printing more money (which amusingly enough was the accusation levelled at the Greens when they suggested QE), and that can only be done to a point because it involves the buying up of assets in the form of gilts from pension funds and insurance companies, which in turn those private sources purchase other assets of higher value like corporate bonds and shares. You can’t do that forever either, which is why the BofE doesn’t do it very often.

        I never suggested you could. I suggested that money, created by the government and not bearing interest, be used to pay people to do stuff like mining, R&D, teaching etc and that that money would be balanced by taxes. Also, so as to encourage innovation, people would be able to borrow money, created by the government and not bearing interest, to start private enterprise. This loan would be paid back as the business became successful else it would be removed from the economy by taxes in the case of a default.

        Which rather ignores the complicated and expensive infrastructure required to do things like mining, R&D and teaching in the first place that is already funded out of taxes. Or are we going to stop improving and maintaining that? You can’t just wave your hands around and say it will all come out of taxes because tax revenue is dependant on the amount of money circulating in the economy in the first place. Next we’ll be inventing pole taxes and window taxes and bedroom taxes and dog taxes just to generate revenue to prop the whole snake oil act up. It just sounds like you’re trying to create a circle when all you’re going to get is a spiral. “Oh, speculators about perpetual motion, how many vain chimeras have you created in the like quest. Go and take you place with the seekers after gold.” – Leonardo da Vinci.

        As you can imagine, this system doesn’t lend itself to hyperinflation.

        Well, true, you might get stagflation instead.

        And, yes, people break the rules. This is why we have an enforcement process.

        Corruption exists wherever there are power and high stakes, problem is that given your system is so much lest robust than the standard Keynesian and Neoliberal models that the inevitable corruption is going to be far more destructive. Allow me to introduce North Korea.

        Supply shocks happen for two reasons:
        Politics
        Collapse of the monetary system

        You forgot the basic reason – supply and demand. For instance, a major disaster of the kind that happens all too frequently takes out vital production, or you get a second Irish potato famine, or the mineral deposit you thought might be there turns out to not be there or isn’t as big as you thought it was, or suddenly China is making it far more cheaply than you are, or your fisheries collapse. Strangely enough it’s not all about bloody buggery bits of paper – sometimes it’s real world. Boom! Stagflation. Of course some of that magic money you’ve been throwing at R&D might result in a paradigm-shifting technological advance resulting in a positive supply shock, which isn’t much better.

        Not much we can do about the former and I’m redesigned the monetary system to try and prevent the latter.

        No you haven’t, you’ve waved your hands, said “Abracadabra” and come up with some preposterously cosmetic scheme to make Social Credit look vaguely plausible by shifting the goal posts and propping it up with your fairy money that ultimately turns back into leaves.

        • Draco T Bastard 11.1.1.1

          And what the Bank of England does is Quantative Easing, not printing more money

          There’s no difference.

          Which rather ignores the complicated and expensive infrastructure required to do things like mining, R&D and teaching in the first place that is already funded out of taxes.

          No it doesn’t. Again, I said that in the post.

          You can’t just wave your hands around and say it will all come out of taxes because tax revenue is dependant on the amount of money circulating in the economy in the first place.

          Yes I can because, once the money is spent into the economy, it can be taxed out again. Really fucken simple.

          Corruption exists wherever there are power and high stakes, problem is that given your system is so much lest robust than the standard Keynesian and Neoliberal models that the inevitable corruption is going to be far more destructive.

          No, it isn’t. In fact, I figure it would be more robust simply because the private banks would no longer be allowed to create money as they do now. Basically, the money supply would be more constrained.

          and propping it up with your fairy money that ultimately turns back into leaves.

          It’s far less fairy money than what we have now as it would thoroughly be based upon the productive economy rather than overly inflated house prices that are driven upwards by the banks printing money. And it would actually prevent the exponential accumulation that interest causes that Piketty has described.

          • Populuxe1 11.1.1.1.1

            There’s no difference

            Actually there is. Quantative Easing is intended to bypass the banks entirely for a short period while printing money is just putting more into them. It’s still just a hack.

            No it doesn’t. Again, I said that in the post.

            And if wishes were horses, beggars would ride. Aside from the monumental hubris of speaking about enterprises in which you are not expert, and I am having horrible flashbacks to those empty factories in Eastern Europe that now require millions invested if they are to become productive.

            Yes I can because, once the money is spent into the economy, it can be taxed out again. Really fucken simple.

            Too fucken simple actually. Economies are not closed systems. Again, behold North Korea, or for that matter, Muldoon’s New Zealand.

            No, it isn’t. In fact, I figure it would be more robust simply because the private banks would no longer be allowed to create money as they do now. Basically, the money supply would be more constrained.

            So why is the Central Bank creating money any better or constrained than private banks supposedly doing it? Regulation? LOL The assumption that the state is any more a combination of Mary Poppins and Father Christmas than the private sector bastards are, is purely ideological.

            It’s far less fairy money than what we have now as it would thoroughly be based upon the productive economy rather than overly inflated house prices that are driven upwards by the banks printing money. And it would actually prevent the exponential accumulation that interest causes that Piketty has described.

            You might as well call it what it is, Social Credit, and what you have outlined is the economic equivalent of Lysenkian biology. By all means shift the emphasis off housing speculation – bubbles of any kind are to be avoided – but an update of Keynesianism is more than adequate to the task without trying to revive something as debunked as Social Credit. And it is Social Credit – it’s shameless you don’t just call it that, and all the rules and faith in the world is not going to change that.
            http://www.econ.canterbury.ac.nz/personal_pages/eric_crampton/danks.pdf

            And that’s entirely without getting into the kind of authoritarian regime you’d need to impose to get it off the ground in the first place.

            • Colonial Viper 11.1.1.1.1.1

              Actually there is. Quantative Easing is intended to bypass the banks entirely for a short period while printing money is just putting more into them. It’s still just a hack.

              Incorrect. Funds from QE go to the Fed’s Primary Dealers which include JP Morgan, Goldman Sachs, Deutsche Bank, BNP Paribas, Nomura and HSBC. There is no “bypassing the banks.”

              Too fucken simple actually. Economies are not closed systems. Again, behold North Korea, or for that matter, Muldoon’s New Zealand.

              You’re quite, but not completely, wrong here.

              Economies are not closed systems true, just like the human body is not a closed system. But in order to maintain integrity, identity and function there do need to be clearly delineated borders, boundaries and careful limitations of flows.

              Because no one likes soiling their pants, puking all over the road and bleeding from the eyeballs as per a fully open and uncontained “system”.

              • Populuxe1

                Yes, ok, stochastically, indirectly it does go to the banks – and it doesn’t often work, so I really don’t see why you’d want to create an economy based on it.
                http://www.bbc.com/news/business-24614016

                Better soiling their pants and puking all over the road as per a fully open and uncontained “system” than dying of toxic shock – however I don’t advocate for a free and open market which is why I keep saying “Keynesian economics with a few tweaks is perfectly adequate” but for some reason your confirmation bias seems to tune that out.

            • mikesh 11.1.1.1.1.2

              John A Lee borrowed 50 million from the reserve bank to finance his state housing projects. It is interesting that he later referred to this as “social credit”, while what we think of as Social Credit he called “Douglas Credit.” The latter he refused to have a bar of.* I don’t think he undertood that his “borrowing” was in effect creating money, and was precisely the sort of thing Major Douglas was advocating. It was also a form of Keynesianism. It should be noted also that it worked.

              *See Simple on a Soapbox by John A Lee.

            • Draco T Bastard 11.1.1.1.1.3

              So why is the Central Bank creating money any better or constrained than private banks supposedly doing it? Regulation?

              Because it’s not incentivised by interest the way private banks are and, yes, regulation.

              You might as well call it what it is, Social Credit

              It doesn’t matter if it resembles another system. Hell, it actually resembles the present system – the only thing that’s been taken out is interest.

              And that’s entirely without getting into the kind of authoritarian regime you’d need to impose to get it off the ground in the first place.

              You have to completely ignore the authoritarianism in present system to be able to make that statement which proves your lack of intellectual integrity.

        • thatguynz 11.1.1.2

          Pop, given you call Draco’s idea “fairy money” what is your definition of “money” today? What is its intrinsic value?

          • Populuxe1 11.1.1.2.1

            It’s worthless, but it would be just as worthless in Draco’s system and even less functional.

  12. mikesh 12

    In a stable economy the printing of money doesn’t increase the money supply because the same amount is being taken out through taxation as is being injected by printing and spending. In theory if you know the velocity of money you know what rate of taxation will be needed. If the velocity is 3, for example, a million dollars injected will give rise to four million dollars of income; therefore a 25% tax rate will remove the original million. And a goverment of course doesn’t just spend a million and leave it at that. Government spending is continuous so there will always be money in circulation in such a system.

    One of the problems with a system based entirely on gold is that there is tendency for people to hoard gold thus reducing the velocity and sending the economy into depression. In the system above hoarding can be countered by government overspending.

    • Populuxe1 12.1

      When you can show me a “stable economy”, I will show you a unicorn

      • mikesh 12.1.1

        My example was oversimplified for explanatory purposes. That should have been obvious to anyone but the demented.

      • Draco T Bastard 12.1.2

        England prior to the industrial revolution with growth of around 0.01% and no inflation.

        Now show me a unicorn.

  13. Draco T Bastard 13

    And the US Supreme Court has just made it vitally important and inevitable that all countries will start to create their own money without interest and stop borrowing.

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    Mana | 27-08
  • Internet MANA – Waiariki Road Trip: 29, 30, 31 Aug 2014
    The Internet MANA Road Trip hits Waiariki this weekend. It would be great if all MANA members in Waiariki could especially attend the public meetings and show their support for our Waiariki candidate Annette Sykes. Confirmed speakers Hone Harawira (except Taupo), Annette...
    Mana | 27-08
  • First home buyers $200 a week better off with Labour
    A couple earning around $75,000 a year would be $200 a week better off buying a two bedroom terraced Labour KiwiBuild home instead of an equivalent new build under National’s housing policy, says Labour Leader David Cunliffe.  “National’s policy to...
    Labour | 26-08
  • Another Day – Another big power profit
    The latest profit announcement from Genesis Energy shows that the power company was sold for a song to the detriment of the country’s power consumers, says Labour’s Energy spokesperson David Shearer. “A net profit of $ 49.2 million follows hard...
    Labour | 26-08
  • Labour embraces the rainbow
    Labour will work hard to ensure all New Zealanders enjoy the freedom to grow up and live their lives in dignity and security. Labour’s Rainbow policy, released tonight in Wellington, focuses on International Relations, Human Rights and Education....
    Labour | 26-08
  • National gets fast and loose with the facts
    In their desperation to make it look as though they are doing something about the housing crisis, National is playing fast and loose with the facts, says Labour’s housing spokesperson Phil Twyford....
    Labour | 26-08
  • Labour will drop power prices for Kiwi families
    New Zealanders will get cheaper power prices under NZ Power, says Labour Leader David Cunliffe. “The electricity market is clearly broken. With falling demand for electricity, prices should be going down. Instead prices are going up and companies are extracting...
    Labour | 26-08
  • Labour: Promoting sustainable tourism
    Ensuring New Zealand’s clean, green status continues to be an international tourism benchmark and reviewing MBIE’s oversight of the tourism sector will be on the radar under a Labour Government. Releasing Labour’s Tourism policy today, spokesperson Darien Fenton said tourism...
    Labour | 26-08
  • Skills shortage a result of National’s complacency
    The fact that there is still a severe shortage of skilled tradespeople, despite a growth in the number of apprentices, is a result of National’s failure to plan and develop the workforce, Grant Robertson, Labour Employment, Skills and TrainingSpokesperson says."The...
    Labour | 26-08
  • How much tax does John Key pay compared to a minimum wage worker?? – Mint...
    MANA Movement Economic Justice spokesperson John Minto is calling for a radical overhaul of New Zealand’s taxation system with calculations showing that a minimum wage worker pays a ten times higher tax rate than the Prime Minister. o Minimum wage...
    Mana | 25-08
  • Labour’s culture of science and innovation
    Labour will create a culture of science and innovation in New Zealand that will be the envy of the world, says Labour’s Innovation, Research and Development spokesperson Megan Woods. “Labour believes that good science lies at the heart of a...
    Labour | 25-08
  • Improving life for our new New Zealanders
    New Zealand’s international standing as a community that encourages and fosters all cultures will be bolstered under a Labour Government with an upgrade of the present Office of Ethnic Affairs to a Ministry. Releasing Labour’s Ethnic Affairs policy, spokesperson Phil...
    Labour | 25-08
  • South Auckland housing crisis
    National’s HomeStart package is nothing more than a political stunt designed to beguile South Auckland voters, said Labour’s Pacific Affairs spokesperson Su’a William Sio. “Few working Pasifika and Maori workers in South Auckland will be able to buy their own...
    Labour | 25-08
  • Home buyer subsidy discredited in Oz
    Treasury advised against National’s policy of ramping up home buyer subsidies after it was discredited in Australia because it pushed house prices even higher, Labour’s Housing spokesperson Phil Twyford says. “Documents released under the OIA (attached) show Treasury advised the...
    Labour | 25-08
  • Nursing hours explain turnover and high-stress culture
    A staff survey supports concerns nursing staff at Dunedin Hospital are under increasing pressure and that the emergency department is in a critical state, says Labour’s Associate Health Spokesperson David Clark.  “An ED nursing survey at Dunedin found that 80...
    Labour | 24-08
  • Underhand tactics prove case for axing donations
    Revelations that schools are using underhand tactics to coerce donations from cash-strapped parents further highlights the need for Labour's plan to increase funding so they aren't dependent on contributions from parents, Labour's Education spokesperson Chris Hipkins says. “By law New...
    Labour | 24-08
  • National applies band-aid to housing crisis
    The Government’s flagship housing announcement is a band-aid approach that will push up prices rather than solve the housing crisis, says Labour Leader David Cunliffe. “House sales to first home buyers have collapsed as a direct result of the Government’s...
    Labour | 24-08
  • Climate change focus on the now for the future
    A Labour Governmentwill put in place a comprehensive climate change strategy focusing on bothmitigation and adaptation, establish an independent Climate Commission andimplement carbon budgeting, says Labour Climate Change spokesperson MoanaMackey."This is about future-proofing our economy. Making the transition to alow-carbon...
    Labour | 24-08
  • Labour’s 21st century transport pledge
    The next Labour-led Government will create a 21st century transport system for New Zealand that promotes the most efficient and sustainable combination of transport options, says Labour’s Transport spokesperson Phil Twyford. “Labour will rebalance the Government's transport spending away from...
    Labour | 23-08
  • Housing under National: the facts
    1.       House prices in Auckland Council valuations indicate Auckland house prices have gone up by one-third over the last three years. (Auckland Council) The average Auckland house price has gone up by nearly $225,000 since 2008, up over $75,000 in...
    Labour | 23-08
  • Labour irons out low income tax issue
    The increasing casualisation of work has led to many New Zealand families being disadvantaged through the tax they pay, Labour Leader David Cunliffe says. "Many low paid workers are having to work two or three jobs to make ends meet...
    Labour | 22-08
  • Cornered Government comes out swinging
    The National Government is so desperate to keep its dead-in-the-water expert teachers policy alive, it has refused to rule out forcing schools to participate through legislation, Labour’s Education spokesperson Chris Hipkins says. “John Key today attacked the Educational Institute for...
    Labour | 22-08
  • Pacific people continue to go backwards under National
    A report from Victoria University highlights the fact that Pacific people are continuing to go backwards under a National Government, said Labour’s Pacific Affairs spokesperson Su’a William Sio.  “The report shows the largest inequality increases were in smoking, obesity, tertiary...
    Labour | 22-08
  • Wellington transport plan needs to keep moving
    The failure of the Transport Agency to properly look at alternatives to the Basin Reserve flyover is not a good reason for further delays to improving transport in Wellington, Labour MPs Grant Robertson and Annette King say. “The Board of...
    Labour | 22-08
  • Labour’s focus on inequality, kids and better job prospects
    Tackling child poverty and removing barriers to people working part time to enhance their prospects of moving into a fulltime job are highlights of Labour’s Social Development policy. Releasing the policy today, spokesperson Sue Moroney said while part-time work was...
    Labour | 21-08
  • Political staff should give answers under oath
    The Inspector General of Security and Intelligence should use her full statutory powers to question witnesses under oath about the leak of SIS information, says Labour MP Phil Goff. “Leakage of confidential information from the SIS for political purposes is...
    Labour | 21-08
  • High dollar, hands-off Govt sends workers to dole queue
    The loss of up to 100 jobs at Croxley stationery in Auckland is devastating news for their families and the local Avondale community, Labour’s Employment, Skills and Training spokesperson Grant Robertson says. “The company’s inability to compete in international markets...
    Labour | 21-08
  • National’s flagship education policy dead in the water
    National’s plan to create executive principals and expert teachers is effectively dead in the water with news that 93 percent of primary teachers have no confidence in the scheme, Labour’s Education spokesperson Chris Hipkins says. “The fact that teachers are...
    Labour | 21-08
  • Dunedin will be a knowledge and innovation centre under Labour
    Dunedin will become a knowledge and innovation centre under a Labour Government that will back local businesses, support technology initiatives and fund dynamic regional projects, Labour Leader David Cunliffe says. “Nowhere has the National Government’s short-sightedness been more apparently than...
    Labour | 21-08
  • Inquiry into SIS disclosures the right decision
    Labour MP Phil Goff says the Inspector-General of Intelligence and Security has done the right thing by launching an inquiry into the disclosure of SIS documents about a meeting between himself and the agency’s former director-general. “This inquiry is necessary...
    Labour | 20-08
  • Labour – supporting and valuing carers and the cared for
    Placing real value on our elderly and the people who care for them will be a priority for a Labour Government, Labour Leader David Cunliffe says. Releasing Labour’s Senior Citizens policy today David Cunliffe promised that a Labour Government would...
    Labour | 20-08
  • By Hoki! It’s Labour’s fisheries policy
    A Labour Government will protect the iconic Kiwi tradition of fishing by improving access to the coast, protecting the rights of recreational fishers and reviewing snapper restrictions, Labour’s Fisheries spokesperson Damien O’Connor says. “Catching a fish from the rocks, beach...
    Labour | 20-08
  • Mighty River – Mighty Profits – Mighty hard to swallow
    Mighty River Power’s profit increase of 84 per cent is simply outrageous, says Labour’s Energy spokesperson David Shearer. “Demand for electricity is flat or declining yet the company has made enormous profits. It is the latest power company to celebrate...
    Labour | 19-08
  • Collins’ actions were wrong, not unwise
    John Key’s moral compass remains off-kilter as he cannot bring himself to declare Judith Collins’ actions outright wrong, not simply ‘unwise’, said Labour MP Grant Robertson. “Under pressure John Key is finally shifting his stance but his failure to condemn...
    Labour | 19-08
  • The Press Leaders Debate – proof a newspaper can kill the internet
    No more beersies for you Mr Key. Seriously – was the Prime Minister drunk during this debate? I am so sickened by what passed as a Leaders debate, I will make this review short and vicious. Everyone involved in putting...
    The Daily Blog | 02-09
  • Voting starts tomorrow!
    On the telly, in the papers, on the Net, billboards on almost every street corner – it’s hard to miss the fact that there’s an election coming up. Everyone’s trying to win your vote on Election Day, September 20, (this...
    The Daily Blog | 02-09
  • Collins inquiry a whitewash before it has even started
    The farce whitewash that Key is trying to push through here for the inquiry into Judith Collins role in a hit on the SFO should enrage any NZer, regardless of how they vote. Whaleoil won’t be forced to appear, it’s...
    The Daily Blog | 02-09
  • Press Leaders Debate – Round 2 – 7pm tonight
    This debate is live in a Town Hall, Key has done well at these in the past, but since the hate politics exposed in Dirty Politics, expect real fury directed at Key. My guess is that Key will attempt to use whatever he...
    The Daily Blog | 02-09
  • MANA hit speed wobbles – why Annette Sykes will win Waiariki
    MANA are my favourites. But of late, their transition from crawling to sprinting has hit some speed wobbles. Hone’s and Pam’s aggressive attitude towards the media recently is very understandable in light of how connected many of the media were to...
    The Daily Blog | 02-09
  • Soz Cam – PaknSave boycott of whaleoil continues – time to start a boyc...
    Cam is so carcinogenic now, not even his mates in the Tobacco Industry are talking to him any longer. I suspect only the Israeli Defence Force propaganda department are paying for content on whaleoil now. Cam says that PaknSave have dropped their problems...
    The Daily Blog | 02-09
  • The Rock Fuels NZ Roastbuster Rape Culture
    This is making me feel pretty uncomfortable. Here we have an instance of Jono and Ben posing like “exposed celebrities”. But do you know what I’m seeing? I’m seeing two dudes who basically “roasted” a woman online (exposed pictures of...
    The Daily Blog | 02-09
  • GUEST BLOG: Kate Davis – Why beneficiaries need advocacy
    There are times when I am wrong. I was wrong recently when someone suggested to me that AAAP should be eligible for government funding to continues its advocacy work. That was before. Before dealing with advocacy on a weekly basis...
    The Daily Blog | 01-09
  • TheDailyBlog September Political Poll Has Been Kicked Off
    The Daily Blog’s August poll has concluded and the September poll has been kicked off, asking readers: What party will you likely vote for at this year’s General Election? You will see this month’s poll in the right-hand sidebar of...
    The Daily Blog | 01-09
  • GUEST BLOG: Kelly Ellis – Jamie Whyte, leave that poor seal alone!
    Worse than showing mere lip service to Rainbow inclusion, ACT leader Jamie Whyte showed stunning arrogance when appeared at a candidates debate on rainbow issues hosted by the Auckland University Students’ Association last Thursday. The stunning hypocrisy was evident as...
    The Daily Blog | 01-09
  • Right wing can’t help but use scum
    Some people have been shocked that the traditional right wing party in New Zealand politics is so deeply embedded with scum like the blogger Whale Oil. We need not be so surprised. It takes a certain type to support the...
    The Daily Blog | 01-09
  • EXCLUSIVE: National’s Ohariu candidate admits contact by Simon Lusk
    . . Wellington, NZ, 31  August – At a meet-the-candidates public meeting in the Rongotai Electorate, National’s Ohariu candidate, Brett Hudson, confirmed that he had been approached by “a mate”, who passed on a message from  National Party operative, Simon...
    The Daily Blog | 01-09
  • Coalition for Better Broadcasting – Auckland Broadcasting Debate 2014
    Coalition for Better Broadcasting – Auckland Broadcasting Debate 2014...
    The Daily Blog | 01-09
  • Petition for Governor General of New Zealand to Investigate all the allegat...
      Now we see the inquiry will be a whitewash, that is secret, won’t be consulted with the Opposition, will have limited scope and will ignore Nicky Hager’s book, we must demand the Governor General step in and demand an...
    The Daily Blog | 01-09
  • Ashburton, 1 September 2014
    I NEVER WENT BACK to Aramoana after the killing. I had been a frequent visitor to the tiny seaside village back in the late 1970s and throughout the 80s. Its tall cliffs and broad beaches providing a colourful backdrop to...
    The Daily Blog | 01-09
  • Checkmate in 1 move – how could Slater have known what was in OIA request...
    And now we get down to the final few moves before checkmate. If the following investigation is right, how could Slater and Collins have known what was in the Secret Intelligence Service Official Information Act request that hadn’t been released...
    The Daily Blog | 01-09
  • The Edge Posts Naked Photos Of Jennifer Lawrence Without Consent
    Today the Edge website – owned by Media Works – published fully naked photographs of Jennifer Lawrence without her consent. It is not OK to publish naked media of any woman without her consent, full stop. It is absolutely disgusting...
    The Daily Blog | 01-09
  • Bomber, Laila and Maggie – a highlight from Auckland Broadcasting Debate ...
    Bomber, Laila and Maggie – a highlight from Auckland Broadcasting Debate 2014...
    The Daily Blog | 01-09
  • Jeremy Wells’ Mike Hosking rant on Radio Hauraki: Today, how good was I i...
    Jeremy Wells’ Mike Hosking on Radio Hauraki...
    The Daily Blog | 31-08
  • Maggie Barry slags Laila Harre & blogger, audience erupt
    The Coalition for Better Broadcasting held their public meeting in Auckland last night and it became a fiery shouting match when Maggie Barry decided to slag Laila Harre and me off. 250 people packed into the Pioneer Hall off High...
    The Daily Blog | 31-08
  • It has to be a full independent public inquiry and Key MUST front
      You know things are bad when images like this start appearing in the media.  It isn’t a ‘left wing conspiracy’ to point out the over whelming evidence of what is clearly a right wing conspiracy! If it looks like a conspiracy, sounds like a conspiracy...
    The Daily Blog | 31-08
  • Political Party social media stats – National playing Dirty Politics on s...
    Interesting data from friend of the blog, Marty Stewart, on social media likes and it shows an interesting question that post Dirty Politics should probably get asked…   …it’s interesting that Key has so many personal followers.  One wonders if...
    The Daily Blog | 31-08
  • The depth of the National rot and the compliance of our news media
    I’m so tired. Aren’t you? I don’t want to read the news anymore. It’s awful and I feel ashamed of it. We live in a country that people all over the world would give an arm, a leg; their life...
    The Daily Blog | 31-08
  • Conservative Party candidate links smacking ban with suicide, sexually tran...
    If Chemtrails, faked moon landings and climate change denial weren’t enough, welcome to your new Minister for Spanking,  Edward Saafi... The anti-smacking law is to blame for youth suicide, youth prostitution and even sexually-transmitted infections, a leading Conservative party candidate...
    The Daily Blog | 31-08
  • A brief word on the canonisation of Matthew Hooton
    Before we all start the canonisation of Matthew Hooton, let’s consider some home truths here shall we? While the Wellington Ruminator Blog, the blog who was previously mates with Judith Collins, now seems to have a crush on Matthew Hooton… …I...
    The Daily Blog | 31-08
  • A brief word on undercover cops in bars
    Dunedin police booze operation labelled ‘creepy’ Undercover police officers drank in Dunedin bars as part of an operation targeting liquor licensing offences. While police said the inaugural operation was a success — with most bars found compliant — the Hospitality...
    The Daily Blog | 31-08
  • Judith Collins press conference
    Judith Collins press conference...
    The Daily Blog | 31-08
  • GUEST BLOG: Angry Lawyer – Collins, Odgers, Williams and legal ethics
    We deserve better lawyers than Judith Collins Three of the worst offenders exposed in Dirty Politics are lawyers: Judith Collins, Cathy Odgers, and Jordan Williams. What Nicky Hager exposed them doing would be out of line for anyone, but from...
    The Daily Blog | 31-08
  • GUEST BLOG: Pat O’Dea – Necessary Defence
    Increasingly climate change is becoming the main fracture line between political parties. Where political parties stand on climate change defines political parties and movements like no other issue. The Mana Movement like the Maori Party it sprang from, came out...
    The Daily Blog | 31-08
  • Why it is all over for John Key
    Image: Melanie D I’ve been confident that National will lose this election and that our focus should be on what a progressive Government needs to establish as its agenda in the first 100 days. Past that point, the establishment pushes back...
    The Daily Blog | 31-08
  • A brief word to everyone who voted National in 2011
    I received this interesting email from a National Party supporter today… …let me say this to anyone who voted National last election – you should be ashamed by what has been revealed and what your vote ended up enabling but...
    The Daily Blog | 31-08
  • EXCLUSIVE: Déjà Vu All Over Again: John Ansell confirms his participation...
      THE MAN BEHIND the Iwi-Kiwi billboards that very nearly won the 2005 election for Don Brash and the National Party has confirmed his involvement in businessman John Third’s and former Act MP Owen Jennings’ campaign to drive down the...
    The Daily Blog | 31-08
  • Public Broadcasting Auckland debate 6.30pm tonight now with Colin Craig &am...
    The Coalition for Better Broadcasting debate on public broadcasting happens tonight at 6.30pm in Auckland at the Pioneer Women’s Hall, High Street, Auckland City.  In the light of Dirty Politics and the manipulation of the media, public broadcasting is more important for...
    The Daily Blog | 30-08
  • Winners & Losers in Collins sacking plus what’s the latest on Slater...
      Make no mistake, there was no way this was a resignation, it’s a face saving way out for Collins, she was sacked.  My understanding is that National internal polls are haemorrhaging and that the powers that be within National...
    The Daily Blog | 30-08
  • Third party propaganda attacks incoming Labour-led government
    . . Further to a report by Daily Blogger, Chris Trotter, on receiving information regarding planned attack-billboards, the following billboard is highly visible to traffic on the southbound lane of the Wellington motorway, just prior to the Murphy St turn-off....
    The Daily Blog | 30-08
  • Labour wins the Internet
    I’m sure I’m not the only one who tried to vote online for the leaders debate and couldn’t because the website was down. The next option was the txt vote, 75c a pop of course. So I’m not surprised that...
    The Daily Blog | 30-08
  • GUEST BLOG: Anjum Rahman – Rotherham and the need to challenge willful bl...
    I haven’t been following the events in Rotterham too closely.  I’ve read about the basic issues and the culture of silence that stopped action been taken even after complaints were made.  That culture of silence is incredibly familiar, and described...
    The Daily Blog | 30-08
  • Review: Hairspray
      Oh Hairspray! What fun! Somehow I managed to miss the movie when it came out, I had no idea really what it was about though I felt it had a vague relation to High School Musical. In retrospect, that...
    The Daily Blog | 30-08
  • Mounting global pressure against Timor-Leste’s ‘death sentence’ media...
    East Timor’s José Belo … courageous fight against ‘unconstitutional’ media law.Image: © Ted McDonnell 2014 CAFÉ PACIFIC and the Pacific Media Centre Online posted challenges to the controversial ‘press law’ nine months ago when it emerged how dangerous this draft...
    The Daily Blog | 30-08
  • GUEST BLOG: Curwen Rolinson – Spies, Lies and When Campaigns Are Fried
    Like most of the rest of the nation’s political classes, I was eagerly affixed to TV One from 12:30 on Saturday afternoon to witness the downfall of Judith Collins.Whenever we witness the crumbling of a titan of the political landscape...
    The Daily Blog | 30-08
  • BREAKING: Whaleoil crushes Crusher
    Judith ends up shooting herself A new email has been released suggesting that Collins was attempting to undermine the head of Serious Fraud Office with the help of far right hate speech merchant Cameron Slater. Unbelievable!   She has been forced...
    The Daily Blog | 30-08
  • BREAKING: Rumours Judith Collins gone at lunchtime
    Brook Sabin first of the mark with rumours Judith Collins is about to resign – PM announcing a statement at 12.30pm… …Paddy follows… …Vance confirms..   …if Collins is gone by lunchtime, it will be because the PM understands the...
    The Daily Blog | 29-08
  • BREAKING: UPDATE on DIRT ALERT!
    Thanks to the information passed to Chris Trotter by “Idiot/Savant” from No Right Turn it is now possible to identify at least some of the persons involved in this latest example of attack politics. What follows is Chris’s response to Idiot/Savant’s timely assistance: Well done...
    The Daily Blog | 29-08
  • Comparing burning puppets, hip hop lyrics and drunk student chants to black...
    Watching the mainstream media try and obscure Cunliffe’s surprise win in the leaders debate  is a reminder the Press Gallery is in depressed shock. The current spin line from the Wellington bubble media in the wake of Dirty Politics is that...
    The Daily Blog | 29-08
  • Why has it all gone quiet on Charter Schools?
    They’re one of ACT’s flagship policies and the National Party have been gung ho in supporting them. So how come we’re not hearing Hekia Parata, Jamie Whyte, Catherine Isaac, et al singing from the rafters about what a resounding success charter...
    The Daily Blog | 29-08
  • Moment of Truth – September 15th – Auckland Town Hall
    Moment of Truth – September 15th – Auckland Town Hall...
    The Daily Blog | 29-08
  • EXCLUSIVE: Dirt Alert! Are the Greens and Labour about to become the target...
    WE’VE SEEN IT ALL BEFORE. In 2005 pamphlets began appearing all over New Zealand attacking Labour and the Greens. For a couple of days both the parties targeted and the news media were flummoxed. Who was behind such an obviously...
    The Daily Blog | 29-08
  • The Donghua Liu Affair: the Press Council’s decision
    . . 1. Prologue . The Donghua Liu Affair hit  the headlines on 18 June, with allegations that David Cunliffe wrote a letter in 2003,  on  behalf of  business migrant, Donghua Liu. Four days later, on Sunday 22 June, the...
    The Daily Blog | 29-08
  • The difference between Cunliffe & Key in the debate
    It was with much interest that I watched the leaders debate on Thursday night.  I watched with an open mind, always happy to have my opinion changed.  Maybe John Key is all the wonderful things that many say about him,...
    The Daily Blog | 29-08
  • GUEST BLOG: Denis Tegg – When Did We Agree To Our Data Being Shared with ...
    New shocking evidence has emerged from Edward Snowden’s trove of documents about a program called ICREACH under which data collected by the GCSB is shared with 23 US spy agencies. Under new sharing agreements which appear to have commenced immediately after...
    The Daily Blog | 28-08
  • Independent Epsom Candidates ‘One Strike’ Crime Policy
    Best wishes to all of those who live in Epsom, Mount Eden, New Market, Remuera and of course the rest of New Zealand....
    Scoop politics | 02-09
  • Large majorities of NZ First voters would prefer Labour deal
    67% of those who voted for New Zealand First at the 2011 general election would prefer Labour to lead a coalition government if one is needed after September 20’s general election....
    Scoop politics | 02-09
  • Jointly owned urban development agency for Christchurch
    “Given the strategic importance of the Canterbury rebuild, it is logical that the transition from emergency governance arrangements is overseen by the Prime Minister’s office, but to maintain momentum in the city centre an expert development agency...
    Scoop politics | 02-09
  • Collins inquiry at best a Band-Aid, a permanent fix needed
    Collins inquiry at best a Band-Aid, a permanent fix is needed The Public Service Association (PSA) says the inquiry into Judith Collins’ behaviour must be accompanied by a process to restore the lost trust between Ministers and public servants if...
    Scoop politics | 02-09
  • Association welcomes new Chief Executive
    “The New Zealand Police Association is pleased to announce the appointment of Heather Verry to Chief Executive. Heather picks up the mantle from Chris Pentecost, who recently retired from this position,” Police Association President Greg O’Connor said...
    Scoop politics | 02-09
  • Young Voters Want Politicians to Grow Up
    Young voters want answers to the questions that directly affect them – but it seems as much as anything, they want politicians to grow up....
    Scoop politics | 02-09
  • Climate Voter election debate to get big audience
    Auckland, 2 September 2014 - Tickets to tomorrow night’s first-ever Climate Voter election debate have sold out but an online audience will also get to see the event live....
    Scoop politics | 02-09
  • The Edge show disregard for consent
    The Edge has shown complete disregard for consent, for women’s bodies and in doing so has contributed to the wider issue of rape culture in New Zealand says specialist sexual violence prevention organisation, Sexual Abuse Prevention Network. Yesterday,...
    Scoop politics | 02-09
  • The Rock is Fuelling New Zealand’s Roastbuster Rape Culture
    The Rock are still displaying without-consent images of Jennifer Lawrence and other celebrities online. They are making fun of this without-consent action, saying that she was "asking for it", etc. They appear to be supporting this kind of...
    Scoop politics | 02-09
  • HRLA Condemns Murder of Filipino Human Rights lawyer
    Attorney Rodolfo R. Felicio, a member of the National Union of Peoples Lawyers , was gunned down while working on a land dispute in Rizal, east of Manila. Two caretakers of the disputed land were also injured in the attack....
    Scoop politics | 02-09
  • SFO lays charges for procurement fraud
    Two individuals have been charged in the Auckland District Court today with Crimes Act charges laid by the Serious Fraud Office for alleged fraud against Mighty River Power Limited relating to procurement for the Company’s Southdown power station....
    Scoop politics | 02-09
  • Commitment to lifting wages good for New Zealand
    The Service and Food Workers Union has applauded the Green Party workers’ policy announced today....
    Scoop politics | 02-09
  • Sykes: There’s Only One Poll That Counts
    “One of the oldest sayings in politics is that there is only one poll that counts – the one on Election Day – and that’s the one that I am focusing on” remarked the MANA Movement candidate for Waiariki, Annette...
    Scoop politics | 02-09
  • Winston Peters Shown up by the Civilian Party
    Even the satirical 'Civilian Party' has now offered the Taxpayers’ Union more credible figures for the ' Bribe-O-Meter ' than Winston Peters’ New Zealand First. The Taxpayers’ Union Bribe-O-Meter now includes, National, Labour, the Greens,...
    Scoop politics | 02-09
  • Further criminal investigation into CTV Building collapse
    Police has today confirmed it will be advancing the criminal investigation into the collapse of the CTV building in February 2011....
    Scoop politics | 02-09
  • Greens policy to restore link between effort and reward
    The Green Party’s new workers policy articulates an alternative to wage repression and job insecurity based on restoring the link between effort and reward, according to FIRST Union. The core tenets of the policy include implementing an $18 minimum...
    Scoop politics | 02-09
  • Greens workers policy supported by union movement
    The CTU is supporting the Green Party’s policy launched today focused on improving life for working New Zealanders. “This policy shows the Greens commitment to collective bargaining as the best and fairest way to improve workers terms and conditions. It...
    Scoop politics | 02-09
  • Research Scholarships for Cannabis Treatments
    Medical cannabis research will be boosted by $140 million if the Aotearoa Legalise Cannabis Party is elected on September 20. Pediatric epilepsy treatment will be one of the main priorities for the research scholarships....
    Scoop politics | 01-09
  • Ngai Te Rangi Change to Tribal Elections
    Ngai Te Rangi has begun a postal vote of beneficiaries to change the way representatives are elected to the two Ngai Te Rangi tribal organisations....
    Scoop politics | 01-09
  • Greens’ commitment to pay equity welcomed by workers
    The Public Service Association (PSA) says the 58,000 workers they represent will benefit from the announcement by the Green Party of a commitment to pay equity and to a living wage for core public servants and contractors....
    Scoop politics | 01-09
  • Real People Powering Real Policy
    New Zealanders from all walks of life have helped the Internet Party create a full platform of strong, progressive and realistic policies that will create a better future for everyone, says leader Laila Harré....
    Scoop politics | 01-09
  • University of Canterbury to help with forestry safety
    The University of Canterbury is to launch a new research project to make sure New Zealand’s new forestry roads are safe and are established with minimal environmental impact....
    Scoop politics | 01-09
  • Time to get serious about ending homelessness!
    New Zealand needs a comprehensive set of policies that address the housing and support needs of homeless people as well as significantly increasing the supply of affordable, good quality houses and flats....
    Scoop politics | 01-09
  • Hundreds to join domestic, sexual violence march
    Several social service providers from across New Zealand have come together to call for an end to the epidemic level of domestic and sexual violence in New Zealand....
    Scoop politics | 01-09
  • Students helped with debt repayments
    New Zealand students now living in Australia are being reminded not to ignore their student loan debt as Inland Revenue expands its latest tool to help with repayments....
    Scoop politics | 01-09
  • Launch of GenderNeutral.co.nz website
    GenderNeutral.co.nz are excited to announce the launch of their new website, GenderNeutral.co.nz ....
    Scoop politics | 01-09
  • Factory farming debaters to look chicken in the eye
    MPs participating in a panel discussion about factory farming will come face-to-face with a real live hen, rescued from the claws of the intensive farming industry. Hettie the Hen will demonstrate to the MPs what little space is afforded to...
    Scoop politics | 01-09
  • Leadership stands strong behind Internet MANA relationship
    “There is now, and always will be, a range of views about many issues within our movement and members are free to express them, but Georgina’s views on Kim Dotcom are not shared by the MANA Movement leadership or the...
    Scoop politics | 01-09
  • Personal Statement by Matthew Hooton
    Personal Statement by Matthew Hooton 1 September 2014 For Immediate Release “This morning I made comments on Radio New Zealand’s Nine to Noon programme about an attempt by staff in the Prime Minister’s Office to interfere in the appointment...
    Scoop politics | 01-09
  • The Worm turns down for John Key
    John Key struggled to coax The Worm above the line in Thursday’s Leaders Debate, according to Roy Morgan’s Reactor, the original Worm. John Key struggled to coax The Worm above the line in Thursday’s Leaders Debate, according to Roy Morgan’s...
    Scoop politics | 01-09
  • The Edge Posts Naked Photos Without Consent
    The Edge website, owned by Media Works have published fully naked photographs of Jennifer Lawrence without her consent....
    Scoop politics | 01-09
  • Statement from the Governor-General on Ashburton Shootings
    The Governor-General, Lt Gen The Rt Hon Sir Jerry Mateparae, has expressed his deep shock following the shooting of three people in Ashburton today....
    Scoop politics | 01-09
  • Update on IGIS inquiry into release of NZSIS information
    In recognition of the public interest, the Inspector-General of Intelligence and Security, Cheryl Gwyn, took the unusual step of providing an update during the course of an inquiry and confirmed today that she would be summoning a number of individuals...
    Scoop politics | 01-09
  • An Open Government Plan developed in secrecy
    The State Services Commission sent NZ’s Open Government Action Plan to the international Open Government Partnership (OGP) Secretariat on 31 July. The countries involved in the OGP since its inception - from the UK and US to Indonesia and Brazil...
    Scoop politics | 01-09
  • KiwiRail; another year older and deeper in debt
    That is a lot of money and there are lessons that need to be learnt before we pour in another $1 billion....
    Scoop politics | 01-09
  • Fonterra China Deal Demands Safe Supply Chain
    The future success of Fonterra’s deal to sell infant formula in China [1] requires all milk it uses be safe and for Fonterra to secure its supply chain from contamination by GE DNA and pesticide residues. There is now significant...
    Scoop politics | 01-09
  • HRC praises Auckland mum for speaking out
    Race Relations Commissioner Dame Susan Devoy has praised an Auckland mother of four who went public after humiliating treatment by staff at The Warehouse....
    Scoop politics | 01-09
  • Southern DHB refers disputed issue to Serious Fraud Office
    Following advice from forensic investigation firm Beattie Varley Limited, Southern District Health Board has referred the expenditure at the centre of its long running dispute with South Link Health to the Serious Fraud Office. The parties have been...
    Scoop politics | 01-09
  • The Letter 1 September 2014
    Last night’s TVNZ Colmar Brunton poll puts the left and right 60 MPs each. United and the Maori Party say they will go with the side that gets to 61 MPs. ACT just needs just 1.3% or 28 thousand Party...
    Scoop politics | 01-09
  • Shopping Giveaway Harmless Fun For Kids
    Family First NZ is rubbishing claims by critics including Gareth Morgan that the New World ‘Little Shop’ promotion is harmful for kids, and says that kids should be allowed to be kids. “Children love acting like their parents and pretending...
    Scoop politics | 01-09
  • Red Cross launches employment service for former refugees
    New Zealand Red Cross is encouraging employers to give refugees a fresh startwith the launch of Pathways to Employment, a nationwide work assistance service....
    Scoop politics | 01-09
  • EDS welcomes Labour’s Conservation Policy
    The Environmental Defence Society has welcomed Labour’s Conservation Policy including the key objective of halting the current pattern of indigenous biodiversity decline within ten years....
    Scoop politics | 01-09
  • Poverty is falling and income inequality is not rising
    “A Roy Morgan poll shows that the issue people are most concerned about is income inequality. This just goes to show how the persistent repetition of a lie bewilders the public. Income inequality is not in fact rising. And the...
    Scoop politics | 01-09
  • Rotary NZ responding to Fiji water and sanitation issues
    Clean water and sanitation are vital to health. In Fiji Rotary New Zealand have been targeting 22 communities that are experiencing severe hardship mainly because they don’t have access to clean water for their drinking, cleaning and cooking needs....
    Scoop politics | 01-09
  • Work & Income shooting a Tragedy
    Kay Brereton speaking on behalf of the National Beneficiary Advocacy Consultancy group says; “Two people shot and another wounded, this is a tragedy and our deepest sympathy goes out to the family and whanau of the victims, as well as...
    Scoop politics | 01-09
  • 1080 Poison Deer Repellent not Effective – Farmers
    Four deer have been found dead within a farmer's bush block, after an aerial 1080 poison drop applied with deer repellent. The drop was part of a 30,000 hectare drop across the Northern Pureora Forest Park....
    Scoop politics | 01-09
  • Employment Charter will strengthen migrants’ rights
    Establishing an Employment Charter for construction companies is a critical step to strengthening the rights of migrant workers that are fast becoming the face of the Christchurch rebuild, according to an alliance of union groups. The charter has...
    Scoop politics | 01-09
  • Global March For Elephants and Rhino
    It’s a trans-national business that funds terrorist organisations, fuels conflict in Africa, and poses environmental, development and security challenges. The illegal wildlife trade is also a lucrative business, generating an estimated USD$20 billion...
    Scoop politics | 01-09
  • New series of videos aimed at disengaged youth
    From the people who brought you 'NZ Idle' (NZ's favourite web series about an artist on the dole) comes a new series about election time: Choice Lolz....
    Scoop politics | 01-09
  • Picket Of Leaders Christchurch Debate
    KEEP OUR ASSETS PICKET OF LEADERS CHRISTCHURCH DEBATE TUESDAY SEPTEMBER 2nd, 6 p.m. ST MARGARETS COLLEGE, SHREWSBURY STREET, MERIVALE...
    Scoop politics | 01-09
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