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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 | 10-09
  • Eliminating Poverty – Sir Edmund Hillary Collegiate, Otara | Internet MAN...
    A campaign to Eliminate Poverty, Feed the Kids, build more houses, and create thousands of new jobs, was outlined by Internet MANA at a public meeting in Otara this evening. When MANA and the Internet Party first sat down to...
    Mana | 09-09
  • Housing in Waiariki – Sykes
    Fact:  Under this National-Maori Party-ACT-United Future Government 61% of Maori in Waiariki do not own their own home and nearly 70% of Maori rentals in Waiariki pay $200 or more per week. “Maori in Waiariki have low rates of home ownership...
    Mana | 09-09
  • Charter school crisis shows time to axe costly experiment
    Dysfunction from day one at a Northland charter school shows it is time to dump this costly and failed experiment by the National-ACT Government, Labour’s Education spokesperson Chris Hipkins says. “Te Kura Hourua ki Whangaruru received $27,000 in government funding...
    Labour | 08-09
  • Labour will crack down on loan sharks
    A Labour Government will crack down on predatory loan sharks by making it illegal both to charge exorbitant interest rates and to exploit uninformed borrowers, Labour’s Consumer Affairs Spokesperson Carol Beaumont says. Labour today released its Consumer Affairs policy which...
    Labour | 08-09
  • Let’s do the FEED before the weed
    “Last week I put out a very strongly worded email to my colleagues about an online promotion about cannabis law reform” said MANA leader and Tai Tokerau MP, Hone Harawira “and I stand by that criticism today.” My concern was...
    Mana | 08-09
  • TE KAEA and NATIVE AFFAIRS live to fight another day
    “I understand that both the chair of the Board of Maori Television, Georgina Te Heuheu, and new CEO, Paora Maxwell, are now saying that my comments this morning about their plans to cut Te Kaea and Native Affairs, were wrong, and that...
    Mana | 08-09
  • How come the PM only pays 2.8% of his income in tax – Harawira
    “Before John Key talks about the piddling tax cuts he plans for low and middle income families today he needs to explain why he only pays 2.8% of his income on tax while a minimum wage worker pays 28% tax,”...
    Mana | 07-09
  • THE DEATH OF INDEPENDENCE FOR MAORI TV
    “If what I’m hearing is true, tomorrow Maori Television Service (MTS) will dump its news programme, Te Kaea, and staff will lose their jobs” said MANA Leader and MP for Te Tai Tokerau, Hone Harawira “and the Minister of Maori...
    Mana | 07-09
  • Labour recommits to Pike River families
    An incoming Labour-led government will do everything possible to recover the bodies of the Pike River Miners and return them to their families, says Labour Leader David Cunliffe. “This tragedy and its aftermath has left the families of the 29...
    Labour | 06-09
  • Voting has started and still no tax plan or fiscal budget for voters to see
    "Even though voting for the election has already begun, National still refuses to provide any details of its proposed tax cuts. And Bill English admitted this morning that he won’t provide any specifics until after the election", Labour’s Finance spokesperson...
    Labour | 06-09
  • National’s partners’ tax plans cost at least $42 billion
    If National forms the next government its partners’ tax plans will cost the country at least $42 billion, and maybe as much as $50 billion, wreaking havoc with the books, says Labour’s Finance spokesperson David Parker. “National claims to be...
    Labour | 05-09
  • Labour: Providing more opportunities for young Kiwis
    A Labour Government will ensure every young Kiwi under the age of 20 is given the opportunity to be in work, education or training, and plans to develop a conservation apprenticeship scheme to help do that, Labour’s Youth Affairs spokesperson...
    Labour | 04-09
  • Candles out on teachers’ slice of birthday cake
    Today may be Novopay’s second birthday, but there’s little to celebrate, Labour’s Education spokesperson Chris Hipkins says. “Novopay has cost the taxpayer tens of millions of dollars already, and the cost is still climbing....
    Labour | 04-09
  • National’s blatant broadband pork barrelling misses the mark by a country...
    National’s blatant pork-barrelling ICT announcement today should reinforce a growing sceptical electorate’s view that they are all about the gift wrap and not the present, Labour’s ICT spokesperson Clare Curran says. “Instead of addressing the real issues - the woeful...
    Labour | 04-09
  • More evidence of the need to clean up the system
    The latest release of emails and messages between disgraced Minister Judith Collins and blogger Cameron Slater are more evidence of the urgent need to clean up politics, Labour MP Grant Robertson says. "This new evidence confirms a near constant flow...
    Labour | 04-09
  • Labour commits to stable funding for voluntary sector
    A Labour Government will establish long-term funding and streamline contract accountability for community and voluntary groups, says Labour’s spokesperson for the sector Louisa Wall. Announcing Labour’s policy for the community and voluntary sector, she said this would give much greater...
    Labour | 04-09
  • Better trained and skilled workforce under Labour
    Labour is committed to a skilled workforce that benefits businesses as well as their workers, and will increase workplace training to improve productivity and drive innovation, Labour Leader David Cunliffe says. “Labour believes the Government should support New Zealanders into...
    Labour | 03-09
  • Labour will make renting a better option
    Labour will provide greater security of tenure for renters, and build more state and social housing, says Labour’s housing spokesperson Phil Twyford. “Labour believes every kid deserves a decent start in life. That means a warm, dry and secure home....
    Labour | 03-09
  • At least 15 new taxes under National
    John Key is the last person to talk about creating taxes, presiding over a Government that has imposed at least 15 new taxes, Labour Leader David Cunliffe says. “John Key tried a novel line in the debate last night claiming...
    Labour | 03-09
  • Labour will strengthen New Zealand’s democracy
    A Labour Government will act quickly to protect and enhance New Zealand’s reputation as one of the most open and least corrupt countries in the world, Labour Leader David Cunliffe says. “The health of any democracy is improved by greater...
    Labour | 02-09
  • MANA Movement says tax cut on GST must be first priority – Minto
    “If Prime Minister John Key has money available for tax cuts then cutting GST must be the first priority”,  said MANA Movement Economic Justice Spokesperson John Minto. GST is a nasty tax on low-income families”, said Minto. “People in the...
    Mana | 02-09
  • The Maori Party’s Mana-Enhancing Relationship with National – Minto
    “First we had Cameron Slater and David Farrar backing Labour’s Kelvin Davis bid to unseat MANA Movement Leader and MP for Te Tai Tokerau Hone Harawira.  Now we have Slater writing a pro-Te Ururoa Flavell article on his website, Whale...
    Mana | 02-09
  • 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...
    Mana | 02-09
  • Local communities critical to Civil Defence
    Labour will focus on empowering New Zealand communities to be resilient in Civil Defence disasters, says Labour’s Civil Defence spokesperson Clare Curran. Announcing Labour’s Civil Defence policy, she says that Labour will work with schools, voluntary agencies and community groups...
    Labour | 02-09
  • Labour looks to long-life passports, gambling harm review
    A return to 10 year passports and a review of gambling laws are highlights of Labour’s Internal Affairs policy released today. “More than 15,000 New Zealanders signed a petition calling on the Government to revert to the 10 year system...
    Labour | 02-09
  • MANA Movement 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 vast majority...
    Mana | 01-09
  • Rebuilding the New Zealand Defence Force
    A Labour Government will make it a priority to rebuild the capacity of the Defence Force to carry out the tasks expected of it, says Labour’s Defence Spokesperson Phil Goff. Releasing Labour’s Defence Policy today he said the NZDF has...
    Labour | 01-09
  • Speech to Canterbury Chamber of Commerce
    Today I'm going to talk about our policy package to upgrade and grow our economy and how we turn that growth into a foundation for a decent and fair society. But first I want to address the issue of our...
    Labour | 01-09
  • Commission of Inquiry must have bipartisan support
    The Labour Party is drafting terms of reference for a Commission of Inquiry, Labour’s Shadow Attorney-General David Parker says. “It is abundantly clear there is a need for an independent Commission of Inquiry, chaired by a High Court Judge, into...
    Labour | 01-09
  • Rapid Transit to unclog Christchurch
    Labour will build a 21st century Rapid Transit system for Christchurch, says Labour Leader David Cunliffe. “The long delayed recovery of Christchurch hinges on a modern commuter system for the city. “We will invest $100 million in a modern rail plan...
    Labour | 31-08
  • Labour’s commitment to public broadcasting
    A Labour Government will set up a working group to re-establish a public service television station as part of our commitment to ensuring New Zealand has high quality free-to-air local content. “We will set up a working group to report...
    Labour | 31-08
  • Live blog: Bainimarama takes early lead in Fiji’s election
    Pacific Scoop’s Alistar Kata reports from yesterday’s voting. By Alistar Kata of Pacific Scoop in Suva Prime Minister Voreqe Bainimarama took an early lead in provisional results in the Fiji general election last night. With provisional results from 170 out...
    The Daily Blog | 17-09
  • Has The NSA Constructed The Perfect PPP?
    Former intelligence analyst and whistleblower, Edward Snowden – speaking live to those gathered at the Auckland Town Hall on Monday September 17, 2014. Investigation by Selwyn Manning. THE PRIME MINISTER JOHN KEY’s admission on Wednesday that whistleblower Edward Snowden “may...
    The Daily Blog | 17-09
  • No way – Key admits Snowden is right
    After claiming there was no middle ground. After claiming there was no mass surveillance. After calling Glenn Greenwald a henchman and a loser. After all the mainstream media pundits screamed at Kim’s decision to take his evidence to Parliamentary Privileges...
    The Daily Blog | 17-09
  • Bad luck National
    ...
    The Daily Blog | 16-09
  • The incredible changing John Key story on mass spying – why the Moment of...
    While the mainstream media continue to try and make the Moment of Truth about Kim’s last minute decision to prolong his battle against John Key past the election into the Privileges Committee, the reality is that the Moment of Truth...
    The Daily Blog | 16-09
  • GUEST BLOG: Curwen Rolinson – Themes of the Campaign
    There’s one area of a political campaign that just about everyone, at some point, falls afoul of. The campaign song. I’m not sure quite why it is, but it seems to be almost impossible for political parties to come up...
    The Daily Blog | 16-09
  • GUEST BLOG – Denis Tegg – The NSA slides that prove mass surveillance
    The evidence presented by Glenn Greenwald and Edward Snowden on The Intercept of mass surveillance of New Zealanders by the GCSB is undeniable, and can stand on its own. But when you place this fresh evidence in the context of...
    The Daily Blog | 16-09
  • Ukraine, United Kingdom, Ireland, Scotland
    The Ukrainian civil war discomforts me. It seems to me the most dangerous political crisis since the Cuban missile crisis of 1962. And it’s because of our unwillingness to examine the issues in a holistic way. We innately prefer to...
    The Daily Blog | 16-09
  • John Key’s love affair with a straw man – the relationship intensifies
    John Key’s love affair with the straw man is now a fully-committed relationship. It’s now the first love of his life. Sorry Bronagh. Yesterday I pointed to Key’s constant assurances that there is no mass surveillance of New Zealanders by...
    The Daily Blog | 16-09
  • A brief word on why Wendyl Nissen is a hero
    Wendyl Nissen is a hero. The sleazy black ops attack on her by Slater and Odgers on behalf of Grocery Council chief executive Katherine Rich is sick. All Nissen is doing in her column is point out the filth and...
    The Daily Blog | 16-09
  • She saw John Key on TV and decided to vote!
    . . NZ, Wellington, 15 September – ‘Tina’* is 50, a close friend,  and one of the “Missing Million” from the last election. In fact, ‘Tina’ has never voted in her life.  Not once. In ‘Tina’s’ own words, politics has...
    The Daily Blog | 16-09
  • Eminem sues National Party for unlawful use of ‘Lose yourself’ bhahahah...
    …ahahahahahahahaha. Oh Christ this is hilarious… National Party sued over Eminem copyright infringment US rapper Eminem is suing the National Party for allegedly breaching copyright by using his song Lose Yourself in its campaign advertisements. The Detroit-based publishers of Eminem’s...
    The Daily Blog | 16-09
  • Are the Greens about to be snookered by a Labour-NZ First Government?
    I wrote last week that it was smart politics that the Greens pointed out they could work with National, the soft blue vote that’s looking for a home in the wake of Dirty Politics isn’t going to Labour, so the...
    The Daily Blog | 16-09
  • BLOGWATCH: Fonterra join 2Degrees and boycott Whaleoil
    In the wake of Dirty Politics, advertisers are pulling their advertising out of Whaleoil. PaknSave, Evo Cycles Pukekohe, Localist, 2 Degrees, Fertility Associates, iSentia, NZ Breast Cancer Foundation, Maori TV, Bookme.co.nz, Dobetter.co.nz and the Sound are now joined by Fonterra...
    The Daily Blog | 16-09
  • PM Key accused of allowing secret ‘spook’ cable sensors to spy on citiz...
    Pulitzer prize-winning journalist Glenn Greenwald (left) and Kim Dotcom at the “moment of truth” political surveillance meeting in Auckland last night. Image: PMW By ANNA MAJAVU of Pacific Media Watch NEW ZEALAND Prime Minister John Key has been accused of...
    The Daily Blog | 15-09
  • Fiji pre-election ‘politics’ blackout stirs media protests, frustration
    BLACKOUT DAY – Monday, day one of the “silence window” in Fiji leading up to the close of polling in the general election at 6pm on Wednesday. And this is under the draconian threat of a $10,000 fine or five...
    The Daily Blog | 15-09
  • “Now the work of movements begins”: government corruption, media bias, ...
    I am so tired of the dirty politics of the National government, aren’t you? I am tired of John Key and his pathetic attacks on award-winning journalists who have spent their careers fighting and digging for truth and good. The...
    The Daily Blog | 15-09
  • Moment of Truth review, smoking guns and the awful coverage by the NZ msm
      There were queues unlike any the Town Hall has seen, 1000 were turned away once it became full…     …full to the rafters. The energy and atmosphere within the room was extraordinary, and it begun…   …Glenn Greenwald...
    The Daily Blog | 15-09
  • Why Maori TV’s Te Tai Tokeraou Poll will be proved wrong
    If Hone Harawira had a dollar every time the media wrote off his chance of winning Te Tai Tokeraou, he would have more money than Kim Dotcom. Remember the by-election? Hone was 1 point ahead of Kelvin in an exact...
    The Daily Blog | 15-09
  • September 15 RNZ interviews – and then the Moment of Truth
    . Acknowledgement: Emmerson . 15 September – Leading up to the Moment of Truth public meeting this evening, these Radio NZ interviews are worth listening to; . Alt link . Alt link . Alt link . Alt link . Alt...
    The Daily Blog | 15-09
  • Live Stream: Moment of Truth Tonight 7pm
    Live Video Stream by eCast: The Daily Blog will Live Stream the Moment of Trust public meeting from 7pm. The meeting will feature Glenn Greenwald, Kim Dotcom, Robert Amsterdam, and a very special guest…...
    The Daily Blog | 15-09
  • The proof Key lied about GCSB mass surveillance
    And we start getting to the evidence that proves Key has lied about mass surveillance. The article by Glenn Greenwald is out and it is beyond damning… Documents provided by NSA whistleblower Edward Snowden show that the government worked in...
    The Daily Blog | 15-09
  • A brief word on the Ede-Slater emails
    Every day I have rushed to read the paper to see if a breaking story on the Ede-Slater emails had broken yet. They haven’t. Day after day, where are these emails? We know Rawshark sent the emails to David Fisher...
    The Daily Blog | 15-09
  • The email that proves Key is a liar
    This is the Email proving Key knew about Kim Dotcom before he claims he did… “We had a really good meeting with the Prime Minister. He’s a fan and we’re getting what we came for. Your groundwork in New Zealand...
    The Daily Blog | 15-09
  • Henchmen
    Henchmen...
    The Daily Blog | 14-09
  • Why it simply isn’t credible that Key stepped in and shut down the mass s...
    Key’s staggering admission that yes there was a year long business model by the GCSB to mass spy on all of NZ but  that he stepped in and shut it down after Cabinet had signed it off just sounds like make...
    The Daily Blog | 14-09
  • John Key’s love affair with a straw man
    Politicians like putting up straw men for the purpose of self-righteously knocking them over. Prime Minister John Key has a particular straw man he loves to punch over. He raises it whenever he’s asked about mass surveillance of New Zealanders...
    The Daily Blog | 14-09
  • John Armstrong turns on Glenn Greenwald
    Where does a mediocre journalist like John Armstrong get off attacking a journalist with the credibility of Glenn Greenwald as he has in his ridiculous column today? Armstrong has the audacity to try and play the terrorism card to justify why...
    The Daily Blog | 14-09
  • GUEST BLOG: Denis Tegg – Which of John Key’s many statements on the GC...
    We already have Glenn Greenwald’s assertion on The Nation that John Key has misled New Zealanders as to whether the GCSB has engaged in mass surveillance of Kiwis. But Key has made many other statements about the GCSB’s powers and...
    The Daily Blog | 14-09
  • Election 2014: Numbers and Faces
    Democratic politics is a game of numbers and faces. How can we translate the numbers into the 120 or more faces that will be in the next Parliament? Below is my prediction of a likely result: 120 people, divided by...
    The Daily Blog | 14-09
  • Scotland the brave
    The possibility that Scotland will vote for independence this Thursday has panicked the British establishment. An unholy alliance of Tory, Labour, Liberal and corporate leaders has resorted to fear-mongering and bullying on grand scale in a last ditch effort to...
    The Daily Blog | 14-09
  • Why Key’s denials sound so off and why Dotcom’s fight is all our fight
    The shrillness of Key is the issue. His denials just too forced and rehearsed. Key has gone from Hollow Man to Shallow Man with his lashing out at Pulitzer Price winning Journalist Glenn Greenwald by calling him a ‘henchman’. This...
    The Daily Blog | 14-09
  • Letters to the Editor – Spies, Lies, Five Eyes, and other matters on a S...
    . . Sharing a few thoughts and observations with newspaper editors around the country… . from: Frank Macskasy <fmacskasy@gmail.com>to: Sunday Star Times <letters@star-times.co.nz>date: Sun, Sep 14, 2014 subject: Letter to the Editor . The Editor Sunday Star Times . Our...
    The Daily Blog | 14-09
  • Letters to the Editor – Spies, Lies, Five Eyes, and other matters on a Su...
    . . Sharing a few thoughts and observations with newspaper editors around the country… . from: Frank Macskasy <fmacskasy@gmail.com>to: Sunday Star Times <letters@star-times.co.nz>date: Sun, Sep 14, 2014 subject: Letter to the Editor . The Editor Sunday Star Times . Our...
    The Daily Blog | 14-09
  • As TDB predicted, Labour to use universal super fund to buy back assets and...
    Greens about to be snookered again?   As The Daily Blog has pointed out several times now, Labour will use a universal super fund to buy back NZs assets in a bid to offer Winston a legacy project… Labour plans...
    The Daily Blog | 13-09
  • A lesson in caring for our most vulnerable
    Some of the comments on this article make me sick. Because I am so very much over people who think they are better than others because things have gone their way in life and think those who aren’t as functional...
    The Daily Blog | 13-09
  • GUEST BLOG: Anjum Rahman – Please vote positive
    One of the features of campaigning is the meet-the-candidates event.  As an opportunity to present policies to the voter, they aren’t the best vehicle but still serve a useful purpose.  The problem is that there are too many candidates and...
    The Daily Blog | 13-09
  • For this who don’t vote this election
    For this who don’t vote this election...
    The Daily Blog | 13-09
  • Where does Key get off abusing a Pulitzer prize winning Journalist like Gle...
    We are seeing the Dirty Politics PM today when Key decided the best way to counter the Glenn Greenwald claims of GCSB mass surveillance was to denigrate Greenwald… Prime Minister John Key says he will prove Glenn Greenwald’s claims by the...
    The Daily Blog | 13-09
  • Teflon Man No More
    . .   On 26 August, as Nicky Hager’s expose on New Zealand’s right wing politics hit public consciousness and confirmed our worst fears, I wrote, “Dirty Politics” has achieved more than simply revealing  unwholesome machinations between National party apparatchiks,...
    The Daily Blog | 13-09
  • Dear mainstream media – regarding Key’s promise to resign if GCSB expos...
    Dear Mainstream media. How’s it all going? I would like to acknowledge the deep depression many members of the Press Gallery are going through as their boy Key looks less and less likely to win. I appreciate how a loss...
    The Daily Blog | 13-09
  • It’s official: ACT’s Jamie Whyte is several-sandwiches-and-a-salad sho...
    .   . There aren’t very many times I agree wholeheartedly with our Dear Leader – but on this occassion I believe he spoke for those 99% of New Zealanders for whom common sense is as natural as breathing air....
    The Daily Blog | 13-09
  • ‘I’ll not be intimidated … by cowards’, says Fiji death threat jour...
    Fiji Sun’s Jyoti Pratibha … death threats via fake Facebook profiles. Image: Pacific Scoop THE PARIS-based media freedom advocacy organisation Reporters Sans Frontières and the Pacific Media Centre have condemned threats and intimidation against political reporters this week covering Fiji’s...
    The Daily Blog | 12-09
  • Glenn Greenwald on TV3s ‘The Nation’ – Everyone remember when Key pro...
    Glenn Greenwald has just given his first NZ interview on TV3s ‘The Nation’ and what he had to say was incredibly damaging. Glenn is here for Kim Dotcom’s Moment of Truth on Monday and what he has just had to...
    The Daily Blog | 12-09
  • What will soft National vote do, why Colin Craig will be a focus in final w...
    In what has been the most unpredictable elections of our time, the final week promises more shocks and bombshells than World War One trench warfare. We have the media who still have the Rawshark emails that detail the Ede-Slater exchanges....
    The Daily Blog | 12-09
  • Would a National-Conservative Party reduce rights to an abortion? Legalise ...
    With the possibility of a Conservative-National Party coalition looming, let’s consider the impact of this new hard right religious Government on social policy. We know Conservative Party candidate Edward Saafi, believes the inability to legally bash your kids is responsible for teenage prostitution, teenage pregnancy and...
    The Daily Blog | 12-09
  • ACTs solution to crime – more guns?
    How insane are the ACT Party? Honestly? Their solution to crime is to arm every shop keeper with a sawn off shotgun??? “Criminals are well aware that shopkeepers are defenceless and are taking advantage of this in brutal robberies. What...
    The Daily Blog | 12-09
  • John Key’s gift to teenage girls…
    Yesterday I was at the MANA Movement policy release on “Predators on Poverty” in the Otahuhu Shopping Centre. Successive Labour and National governments have left vulnerable communities on their own to face these merciless thieves who prey on the poor...
    The Daily Blog | 12-09
  • Poverty denial – Where does National get its advice from?
    National is displaying a quite inadequate understanding of their own policies and worrying inability to respond to criticism. When John Key trots out his old, tired example of how ‘work pays’ on Morning Report this week to justify leaving 260,000...
    The Daily Blog | 12-09
  • Education reformers mean well, so what’s the problem?
    The thing about education reformers is that, mostly, they mean well. Whether it’s charter schools, National Standards, Teach First, or another reform, many people involved have good intentions.  They want to improve things, try something new and innovate, they say. The thing...
    The Daily Blog | 12-09
  • Pregnancy Help Welcomes Green Party Packs for Newborn Babies
    Pregnancy Help applauds Metiria Turei acknowledging that “for many parents the birth of a new child is a highly stressful and financially straining time” and the desire for every child to thrive....
    Scoop politics | 17-09
  • McVicar Welcomes ASA Decision
    Napier Conservative Party Candidate Garth McVicar welcomes the Advertising Standards Authority’s decision to not uphold the pamphlet complaint of Robert Johnson, Campaign Manager for Napier Labour candidate Stuart Nash. The ASA acknowledged that one complaint...
    Scoop politics | 17-09
  • Whyte: In 12 months’ time, here is what will matter
    In three days’ time I will be elected along with a number of ACT MPs. I think the media will be surprised and ask how it happened?...
    Scoop politics | 17-09
  • Internet MANA Will Grant Special Residency to Edward Snowden
    Internet MANA will put the case to the new government to welcome global surveillance whistle blower Edward Snowden, granting him safe passage and residency in New Zealand....
    Scoop politics | 17-09
  • Ten millionth traveller uses SmartGate
    The 10 millionth traveller to pass through SmartGate, Customs’ automated passenger processing system, was greeted by Customs Manager Passenger Operations, Peter Lewis today at Auckland International Airport....
    Scoop politics | 17-09
  • Key vs. Cunliffe: Final Live NZ Election Reactor 7pm Tonight
    John Key and David Cunliffe go head to head for the last time tonight and you can decide who wins by driving the worm. This is the last live Election Reactor covering the debate tonight at 7pm on TV One....
    Scoop politics | 17-09
  • Offenders Get Road Safety Message
    Wellington Community Corrections partnered with emergency services, government agencies, organisations and Kapiti Coast District Council to deliver an innovative road safety programme to 70 community-based offenders at Southwards Car Museum on Tuesday 16...
    Scoop politics | 17-09
  • Proposed law to decriminalise Abortion
    http://images.tvnz.co.nz/tvnz_images/news2011/politics_news/12/q_a_interview__list_mp_jan_logie_n2.jpgRight to Life is disappointed that the Green Party is refusing to provide a response to the seven very important questions that have been addressed to Jan Logie, spokesperson...
    Scoop politics | 17-09
  • Election 2014 Will Be Costly
    The Taxpayers’ Union has today released the final update for its ' Bribe-O-Meter ' election costing website in the lead-up to Saturday’s general election. Taxpayers’ Union Executive Director Jordan Williams says:...
    Scoop politics | 17-09
  • Roy Morgan Poll September 17
    John Key set to win narrow election victory on Saturday as Labour/Greens slump puts Winston Peters in powerful position as NZ First surge to 8% Today’s New Zealand Roy Morgan Poll shows National (46.5%, up 1.5%) set to win a...
    Scoop politics | 17-09
  • Wahakura Package would provide warm welcome for babies
    The Greens Wahakura Welcome package announced yesterday is a wonderful example of child-centred policy which would help all children get a fair and equal start in life, says Child Poverty Action Group. CPAG health spokesperson Innes Asher says,...
    Scoop politics | 17-09
  • TPPA a Sellout to American Corporate Greed
    New Zealand will become a permanent prisoner to the United States’ greed and global arrogance if the Trans-Pacific Partnership Agreement (TPPA) isn’t stopped, warns Internet MANA....
    Scoop politics | 17-09
  • Wintry showers and blustery winds for Election Day
    As we head towards the weekend, it is time to look at what the weather will be for New Zealand's "Have Your Say" Day....
    Scoop politics | 17-09
  • New national secretary announced
    The PSA is pleased to announce the appointment of Erin Polaczuk to the role of national secretary....
    Scoop politics | 17-09
  • Public Secotr & TISA: On the cusp of something very special?
    Is the National Party keeping some things out of sight in case they frighten the electorate? Here is some worrying evidence that this may be the case....
    Scoop politics | 17-09
  • MPI ups yacht biosecurity ante
    Yachts arriving in Northland from overseas this season will face greater biosecurity scrutiny, says the Ministry for Primary Industries (MPI)....
    Scoop politics | 17-09
  • iPredict Election Update
    John Key’s National Party now has an 88% probability of leading the next government , most probably with the support of NZ First, according to the combined wisdom of the 8000+ registered traders on New Zealand’s predictions market, iPredict. There...
    Scoop politics | 17-09
  • Crowdfunding to Save Native Fish
    NZ Landcare Trust is offering an exciting project designed to assist native fish, as part of the launch of a new global crowdfunding category called 'The Landcare & Environment Collection.' This exciting step, aims to help raise funds and support,...
    Scoop politics | 17-09
  • New methods needed to reach non-voters
    Non-voters are much heavier users of the internet than those who do vote, while 43 per cent of non-voters say they never read a newspaper according to research released today by the Election Data Consortium....
    Scoop politics | 16-09
  • Parties sent home with report cards
    More than 2000 New Zealanders came together to run a full page ad in the Herald today asking all Parties what they will commit to do to clean up politics. The answers are in, and ActionStation has graded Parties on...
    Scoop politics | 16-09
  • One in 10 Kiwis want Winston Peters to Run the Country -Poll
    New Zealand First leader, Winston Peters has seen his personal popularity reach a three-year high in the final 3News/Reid Research poll ahead of Election Day....
    Scoop politics | 16-09
  • Shut Down This Govt Not Kaiti WINZ
    "I’m going to make it as hard for you to get help as I can" is Paula Bennett’s message to the people of Kaiti said MANA candidate Te Hāmua Nikora today in response to the news that National will close...
    Scoop politics | 16-09
  • New methods needed to reach non-voters
    Non-voters are much heavier users of the internet than those who do vote, while 43 per cent of non-voters say they never read a newspaper according to research released today by the Election Data Consortium....
    Scoop politics | 16-09
  • Conservatives Break Through 5% Threshold
    Reports in today’s Dominion Post that the Conservative Party is polling at 6% in Nationals internal polling are not surprising says the Conservative Napier candidate Garth McVicar....
    Scoop politics | 16-09
  • The MANA Plan for Beneficiaries and Income in Waiariki
    Median Personal Income for Waiariki is $21,700. Over 13,000 Maori who live in Waiariki rely upon a form of government benefit including the Unemployment Benefit, Sickness Benefit, Domestic Purpose Benefit and the Invalids Benefit....
    Scoop politics | 16-09
  • IGIS: No Indiscriminate Interception of NZers’ Data Found
    “As part of my role as Inspector-General, I review whether the GCSB complies with the restrictions upon interception of New Zealanders’ communications and with the requirement to intercept communications only for authorised purposes. That review...
    Scoop politics | 16-09
  • Conservatives Break through 5% Threshold
    Reports in today’s Dominion Post that the Conservative Party is polling at 6% in Nationals internal polling are not surprising says the Conservative Napier candidate Garth McVicar....
    Scoop politics | 16-09
  • Hundreds of Students Turn Out for Political Debate
    With only a few days left before the general election, over 500 Victoria students packed the central Hub space on campus today to listen to a political debate on student issues organised by the Students’ Association. Victoria University of Wellington...
    Scoop politics | 16-09
  • Ex-prisoners make most of mentoring to make most of life
    It’s not every day that an organisation triples a programme in size, but PARS Inc (formerly known as the Prisoners’ Aid and Rehabilitation Society of the Auckland District Inc) has managed to do just that with their Community Mentoring Scheme,...
    Scoop politics | 16-09
  • Unscrupulous worker highlights why 90-days works
    Federated Farmers believes the experience of a husband and wife farming team in Taranaki underscores why the 90-days provision is so important to small businesses. “Yesterday a member called 0800 FARMING to alert us to a guy doing the rounds...
    Scoop politics | 16-09
  • Eye to Eye Uploaded
    Leading Maori broadcaster and political commentator Willie Jackson previews Eye to Eye Uploaded, a multi-platform series of interviews that he’s aiming to put in front of media radars next year....
    Scoop politics | 16-09
  • Party Rankings against Inequality
    Revealed: which party will do the most to reduce New Zealand’s growing inequality crisis...
    Scoop politics | 16-09
  • Maritime Union backs change of Government
    The Maritime Union says a change of Government is required to deliver secure jobs and decent wages for New Zealand workers....
    Scoop politics | 16-09
  • Green Party package for newborns welcomed
    16 September 2014 Media Release The New Zealand College of Midwives has welcomed a policy announced today by the Green Party which would provide a package of essential items for every newborn baby. The College is a non partisan organisation...
    Scoop politics | 16-09
  • ALCP Release Election Manifesto
    The Aotearoa Legalise Cannabis Party has released its manifesto in the lead up to the election on Saturday....
    Scoop politics | 16-09
  • Election Daily Update #9
    John Key’s National Party appears to have received a major boost from last night’s “Moment of Truth” event, according to the combined wisdom of the 8000+ registered traders on New Zealand’s predictions market, iPredict. Despite no major changes...
    Scoop politics | 16-09
  • Eminem Publishers Sue New Zealand National Party
    Detroit-based music publishing companies sue National Party for damages for unauthorised use of song in election campaign advertising...
    Scoop politics | 16-09
  • Parties Back Rethink of WINZ Shared Care Parenting Laws
    Overwhelming Majority of Parties Back Rethink of WINZ Shared Care Parenting Laws. Press release- Fifty Fifty Campaign, 16 September 2014 National is the only political party willing to defend the way WINZ treats separated parents who share their kids...
    Scoop politics | 16-09
  • Parents Smacking Down Prime Minister
    "John Keys failure to deliver on his promise to change the anti-smacking law is costing National votes, and helping the Conservative Party," says Colin Craig....
    Scoop politics | 16-09
  • Political Debate on Family Violence – Video & Audio
    The Dunedin Collaboration Against Family Violence was happy to host a political debate on Family Violence chaired by Professor Nicola Atwool of the University of Otago. Family Violence is a huge problem in our community and we invited representatives...
    Scoop politics | 16-09
  • Greens Take Nanny State To A New Level
    Family First NZ is labelling the Green’s ‘welcome package’ for newborns policy as wasteful and misdirected. “This policy is taking ‘nanny state’ to a new level but indicates just how much the Greens want to intervene in family life,”...
    Scoop politics | 16-09
  • 2,100 people send message about dirty politics
    2,100 people have signed their name to a full-page open letter featuring in the New Zealand Herald this Wednesday. The letter is designed to send a message to politicians that dirty politics is an important election issue....
    Scoop politics | 16-09
  • Are DoC manipulating Rat Numbers?
    Ban 1080 Political Party co-leader Bill Wallace says there are serious rumours DoC has changed their rat counting technique to cover up the lack of the mythical “Rat Plague” claimed by the Department in Kahurangi National Park, and also that...
    Scoop politics | 16-09
  • Average Full time Student Is in Financial Distress
    A new survey has found that nearly half of all full time students are in significant financial distress....
    Scoop politics | 15-09
  • Key and Cunliffe, research revealed by Ancestry.com.au
    Contrasting family histories of John Key and David Cunliffe, revealed by research from Ancestry.com.au....
    Scoop politics | 15-09
  • Revelations a Damning Indictment of Key’s Honesty
    The Prime Minister’s honesty is now central to the election, says Internet Party Leader Laila Harré, following the revelations of whistleblower Edward Snowden that there is mass surveillance of New Zealand citizens by the GCSB....
    Scoop politics | 15-09
  • Organisations Have ‘Duty of Care’ for Players says Law Firm
    Concussion injuries in amateur and professional sporting arenas are currently highly topical. Concussion potentially appears to have been implicit in the recent death of a young player in Northland....
    Scoop politics | 15-09
  • Media Release from Closing the Gap on Health and Housing
    “Inequality is the biggest problem facing New Zealand at the present time” says Peter Malcolm National Secretary of Closing the Gap. It underlies many of our social ills, poverty, lack of trust, an economy that could do much better, and...
    Scoop politics | 15-09
  • Expanding Whānau Ora – a bottom line for Māori Party
    Leaving the best to last, the Māori Party has launched its Whānau Ora policy today following a fun family event at Te Ore Ore Marae in Masterton last night. “When we change what happens in our homes, we change what...
    Scoop politics | 15-09
  • Colin Craig’s Incredible Claims Continue
    Hot on the heels of a Conservative Party candidate proposing to double the price of a bottle of wine, Colin Craig has come up with an even more fantastic idea to buttress his uncosted tax policy....
    Scoop politics | 15-09
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