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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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    Greens | 23-07
  • Extent of job losses at Invermay remain hidden
    Despite growing concern in the agriculture and science sectors, both AgResearch management and the Minister responsible are continuing to hide the true extent of job losses at AgResearch’s Invermay campus, Labour’s MP for Dunedin North David Clark says. “Science and...
    Labour | 23-07
  • Tōku reo, tōku oho oho, tōku reo, tōku mapihi maurea – MANA launches ...
    “MANA is launching its te reo Māori policy this morning ahead of the first reading of the government’s Māori Language Strategy Bill this afternoon”, saidMANA deputy leader and candidate for Waiariki, Annette Sykes. “MANA’s policy is based on a love...
    Mana | 23-07
  • Connectivity Upgrade to close digital divide
    Labour will close the digital divide with its Connectivity Upgrade to ensure all New Zealanders can be part of a growing, more connected economy and have the right to access quality broadband, Labour Leader David Cunliffe says.  “The digital revolution...
    Labour | 23-07
  • New parents deserve support – Labour will deliver
    ...
    Labour | 23-07
  • National refuses meeting with Maui’s advocates
    National has refused a briefing from a group of Maui's dolphins experts, whose research shows 80 per cent of New Zealanders want greater protection for the critically endangered dolphin, the Green Party said today.Dolphin campaigner Gemma McGrath and marine scientist...
    Greens | 23-07
  • MANA Tamaki send a challenge to Labour
    “Labour should set the agenda and purposely do something positively controversial once a week”, said MANA candidate for Mt Albert, Joe Carolan. “A good start would be for all Labour Auckland MPs and members to join the Justice for Palestine...
    Mana | 23-07
  • We must act to save our dolphins
    A new report makes it clear for the urgent need to protect Maui’s and Hector’s dolphins while arguing  it is clear that there is no need for further research, says Labour’s Conservation spokesperson Ruth Dyson.  “Labour backs the public call...
    Labour | 23-07
  • School told to manipulate national standards data
    Parents can have little confidence in the Government’s National Standards after an Auckland school was told to manipulate its data so it added up, Labour’s Education spokesperson Chris Hipkins. “Valley School in Pukekohe was advised in an email from the...
    Labour | 23-07
  • Regional economies must have tailored plans
    News that up to 114 jobs could be lost from Fonterra’s Canpac plant in Hamilton reinforces the need for a government plan to build resilient regional economies, Labour’s MP for Hauraki-Waikato Nanaia Mahuta says. “The Canpac site has effectively responded...
    Labour | 23-07
  • Auditor General slams Shared Services project
    The Auditor-General’s Office could not have been more damning about the 18 months spent on the Central Agency Shared Services (CASS) project at the Finance and Expenditure Committee this morning, says Maryan Street, Labour’s State Services spokesperson.  ...
    Labour | 23-07
  • Fonterra job losses a massive blow to Waikato
    The potential loss of up to 114 jobs from Fonterra’s Canpac plant in Hamilton is a massive blow to the Waikato region which has already lost hundreds of jobs, Labour says. Labour’s Social Development spokesperson and Hamilton-based list MP Sue...
    Labour | 23-07
  • Basin flyover decision an opportunity for capital
    The decision to reject the proposed flyover at the Basin Reserve must be taken as an opportunity to properly fund Wellington’s transport future and must not be used as an excuse to take resources away from the capital, Wellington Labour MPs...
    Labour | 22-07
  • National out of touch with the regions
    John Key is out of touch with regional New Zealand if he believes tinkering with council regulations will restore opportunities to small towns, Labour Leader David Cunliffe says. “While the regions are crying out for sustainable growth and job opportunities,...
    Labour | 22-07
  • Flyover rejection a victory for sustainable transport
    The rejection of the proposed Basin Reserve flyover by a Board of Inquiry is a victory for sustainable transport in Wellington and paves the way for other alternatives to be given a fair hearing, Wellington Labour MPs Grant Robertson and...
    Labour | 22-07
  • Reo Māori Policy Launch
    MANA will be launching its Reo Māori policy at 10am Thursday 24 July, at Matangireia (the old Māori Affairs Select Committee room at Parliament). We will also be addressing our concerns regarding the Minister of Māori Affairs Māori Language Strategy...
    Mana | 22-07
  • Basin Flyover decision victory for common sense
    The Green Party welcomed the Environmental Protection Authority's draft decision announced today not to allow the $90 million Basin Reserve flyover in Wellington to proceed."Both popular and expert opinion opposed the flyover. The proposal was expensive, unnecessary and would have...
    Greens | 22-07
  • Loss Leading could destroy Kiwi lamb’s reputation
    Meat companies that supply supermarkets and sell New Zealand lamb as a loss leader in the United Kingdom should lose their access to this valuable quota market, said Labour’s Primary Industries spokesperson Damien O’Connor. “Our reputation as a Lamb producer...
    Labour | 22-07
  • Ae Marika! 22 July 2014
    The big storm has gone, but the damage that it did and the saturation levels that it reached meant that smaller storms quickly overwhelmed roading, and water-flow systems again in the north. And although certain individuals are talking up the...
    Mana | 21-07
  • 2014 Roger Award nominations now open
    The Roger Award is for The Worst Transnational Corporation Operating in Aotearoa/New Zealand in 2014 Nominations are now open please visit the website to nominate the worst TNC in Aotearoa. You will need to include reasons why you think your...
    Mana | 21-07
  • Labour will revive the regions with new fund
    The next Labour Government will co-develop Regional Growth Plans for every region of New Zealand and will invest at least $200 million in a fund to create breakthrough opportunities for jobs and sustainable growth, Labour Leader David Cunliffe says....
    Labour | 21-07
  • Speech to Local Government New Zealand
    Speech to the Local Government New Zealand Conference 2014 Read our full regional development policy Download Introduction Early in my time as an MP I went for a long walk on a windswept Kare Kare beach with Waitakere mayor Bob Harvey. We talked...
    Labour | 21-07
  • Stop Israeli State Terror – Rally and March this Saturday 26th July, Aote...
     The humanitarian crisis in Gaza is getting much worse and the world is marching in unprecedented numbers. New Zealanders spoke out strongly last Saturday with a march of 5,000 people in Auckland (see picture below) – the biggest march ever...
    Mana | 21-07
  • NZ needs to assist UN with aid for Gaza
    The New Zealand Government should support the United Nation's efforts to raise money to assist humanitarian aid for the people of Gaza, the Green Party said today.The United Nations Relief and Works Agency for Palestine Refugees (UNRWA) has made a...
    Greens | 21-07
  • INTERNET MANA ROAD TRIP- LEG 2
      WAIKATO / TARANAKI / MANAWATU-WANGANUI  Tuesday July 29th, 6pm | RotoruaDistinction Hotel, Fenton Ballroom, 390 Fenton Street, Rotorua  Wednesday July 30th 6pm | HamiltonWaikato University, Price Waterhouse Coopers Lecture Theatre, Gate 7, Hillcrest Rd Hamilton  Thursday July 31st, 6pm |...
    Mana | 21-07
  • Road fix needed now, not later
    Northland’s roading system is in chaos and needs fixing fast, Labour List MP Kelvin Davis says.  “According to NZTA’s 10 year funding data every area of Northland has had a decrease in NZTA funding since 2008...
    Labour | 20-07
  • KiwiSaver innovations needed to build wealth
    The innovative changes to KiwiSaver suggested by the Financial Services Council today will be seriously considered by Labour as part of plans to make KiwiSaver universal, Labour’s Finance spokesperson David Parker says. “Universal KiwiSaver is an essential part of Labour’s...
    Labour | 20-07
  • Greens announce 20 hours free ECE for two year olds
    The Green Party today announced that its key social platform for this election will be to tackle child poverty and inequality by ensuring every child in New Zealand has enough to thrive.The Green Party will make a series of policy...
    Greens | 20-07
  • MANA Pasifika Says NO To Discrimination
    Vice Chairperson of MANA Pasifika James Papali’i  feels for Ms Tupou and her children after they were served with trespass orders from their  local swimming pool in new market. With no warning or explanation from the pool staff Police ordered...
    Mana | 20-07
  • MANA Movement policy release – Economic Justice – John Minto
    Address notes from Mana Economic Justice Spokesperson and co-vice President John Minto to Economic policy launch in Kelston – 2pm, Sunday 20 July 2014. Reducing inequality and giving everyone a fair go MANA Movement’s policy prescription for a rich man’s...
    Mana | 20-07
  • One-sided reporting on the Middle East Conflict
    The following was sent to New Zealand Herald, Fairfax Media, Radio New Zealand, Television New Zealand, TV3, Radio Live and ZB Network. We are writing to all of you because there are well established patterns of reporting which seem to have been adopted by New Zealand...
    Mana | 20-07
  • So we can’t feed the kids, the poor OR the sick now?
    Let me get this straight. We can borrow $10 billion in tax cuts over the last 6 years for the richest NZers, but we can not feed the kids, the poor or even the sick now? Revealed: Warning over hospital food...
    The Daily Blog | 26-07
  • Kim Dotcom has said it, Laila Harre has said it and now David fisher says i...
    Fascinating piece by David Fisher in the NZ Herald breaking down how many opportunities the Government had to listen to officials and stop KDC entering the country and concludes KDC should never have been allowed in… It prepared papers for the...
    The Daily Blog | 25-07
  • You, Me and the GCSB Public Meetings
      The GCSB and TICS legislation rushed through Parliament by John Key represent the largest erosion of civil liberties this country has seen since the 1951 Waterfront Lockout. In the post Snowden world we now know a mass surveillance state operating...
    The Daily Blog | 25-07
  • A feminist takedown of Whale Oil
    Whale Oil does it again. How many more times is he going to attack and discredit Tania Billingsley publicly? In a short blog published on Wednesday ‘Nothing to be sorry for‘ Whale Oil also known as Cameron Slater, is defending John Key...
    The Daily Blog | 25-07
  • GUEST BLOG: Curwen Ares Rolinson – New Zealand First – We’ll Be Back
    Earlier this week, Bomber penned a missive which set out in some detail why he thought my people, New Zealand First, wouldn’t be making it back into Parliament later this year. Being a pugnacious, vindictive sort who’d never let such an...
    The Daily Blog | 25-07
  • The changes teachers DO want
    “Oh you teachers, you just want everything to stay the same – what’s wrong with choice?  Bloody teachers.  Typical that you don’t want testing – trying to hide that you’re all useless. What about our poor kids?  Gnash gnash rant rant...” That’s...
    The Daily Blog | 25-07
  • A feminist take down of Whale Oil
    Whale Oil does it again. How many more times is he going to attack and discredit Tania Billingsley publicly? In a short blog published on Wednesday Nothing to be sorry for Whale Oil also known as Cameron Slater, is defending John Key...
    The Daily Blog | 25-07
  • On so called Labour Party ‘distractions’
    The right wing of the Labour Party are constructing a narrative that Labour need to stop chasing distractions and focus on the real issues that matter and not these silly GCSB, inequality, domestic violence, media bias, TPPA issues. It is...
    The Daily Blog | 25-07
  • Selfies: Labour’s Electorate MPs are at it again
    IT’S A LITTLE TRIANGLE of grass at the corner of Rewa Street and Mt Eden Road, ideal for election hoardings. Wandering along Mt Eden Road last Saturday morning to our weekly appointment with the brunch menu at Orvieto, my family and...
    The Daily Blog | 25-07
  • Well, well, well – Jonathan Coleman did know about FBI interest into Kim ...
    Last years GCSB Town Hall meeting in Auckland Oh dear, the cover up and lies are starting to fall over now aren’t they… Coleman knew of FBI interest in Dotcom pre-residency decisionGovernment minister Jonathan Coleman knew the FBI was interested...
    The Daily Blog | 24-07
  • Why You Must March Against Factory Farming This Saturday, 12pm
    The rally this Saturday is critical because this is the FIRST TIME IN NEW ZEALAND HISTORY that a major party has agreed to ban all intensive factory farming practices. The Labour party, the Greens, Internet-Mana, the SPCA, SAFE and other...
    The Daily Blog | 24-07
  • Astronaut tweets photo of explosions over Israel and Gaza from space
      This is what a war zone looks like from space: From aboard the International Space Station, German astronaut Alexander Gerst tweeted this image as the station passed over Israel and Gaza in what he called ‘his saddest photo yet’....
    The Daily Blog | 24-07
  • When Firstline are focusing on flag burning rather than dead Palestinian ch...
    The IDF are butchering children in UN schools this morning and what’s the big issue on TV3s Firstline? Flag burning. How pathetic, and what a slap in the face to Mike McRoberts who is currently risking his life in Gaza...
    The Daily Blog | 24-07
  • ‘Victim’ vs ‘Terrorist’
    ‘Victim’ vs ‘Terrorist’...
    The Daily Blog | 24-07
  • Petition asking TVNZ to stand Hosking down as election moderator jumps to o...
    In just a day the petition calling on TVNZ to replace Hosking as the election moderator has jumped to over 2500, you can sign it here. The defence that the Right are trying to run here is that John Campbell...
    The Daily Blog | 24-07
  • When the mainstream media go feral: the descent into sheer farce, according...
    . . It had to happen, I guess… The media pack-campaign against Labour Leader David Cunliffe has managed to  plumb new depths of absurdity. On TV3, on 24 July,  TV3/Tova O’Brien ran this report on their 6PM News bulletin, about...
    The Daily Blog | 24-07
  • Coalition for Better Broadcasting: MIKE HOSKING FOR PM?
    Yes indeed. Mike Hosking is for the PM. And now he’s able to do even more as moderator (or should that be immoderator) of TVNZ’s election debates. Here at the Coalition for Better Broadcasting we feel it’s pretty safe to say that...
    The Daily Blog | 24-07
  • The lie that “There is no alternative” to neo-liberal economic policies
    Supporters of President Maduro in Venezuela rally   Since the 1980s we have had drubbed into our heads that there was no alternative to the economic and social policies unleashed at that time. It even had it’s own acronym – TINA. The...
    The Daily Blog | 24-07
  • A Kanaky tale of mining skulduggery and environmental courage
    Florent Eurisouké … still campaigning against mining. Photo: Del Abcede/PMC David Robie also blogs at Café Pacific AN EXTRAORDINARY story of mining skulduggery and a courageous struggle by indigenous Kanak environmental campaigners has been captured in a poignant new documentary,...
    The Daily Blog | 24-07
  • UNBREAKING: The list of questions Mike Hosking will use in first TVNZ leade...
    “Good evening ladies and gentlemen and welcome to the first TVNZ leaders debate being held live in the gloriously beautiful Sky City ball room. It’s such a beautiful building boys and girls, we are so blessed to have Sky City...
    The Daily Blog | 24-07
  • Internet Party Party review
      I have been to A LOT of political party functions in my time, and they tend to be dull affairs at the best of times but what is happening with Internet MANA is something quite exciting. I went to...
    The Daily Blog | 24-07
  • Dear Seven Sharp – after learning Hosking will be the leaders debate ...
    I have to be honest, I had made the decision last night  to accept Seven Sharp’s hastily offered opportunity to appear on their show after I savagely criticised the bullshit whitewash story they did on John Key’s favourite far right hate speech...
    The Daily Blog | 23-07
  • National refuses meeting with Maui’s advocates
    MIL OSI – Source: Green Party – Headline: National refuses meeting with Maui’s advocates Wednesday, 23 Jul 2014 | Press Release This is another reminder that the National Government does not care about the survival of the Maui’s dolphin National...
    The Daily Blog | 23-07
  • Message from CTU President Helen Kelly
    MIL OSI – Source: Unite Union – Headline: Message from CTU President Helen Kelly Dear MikeThere’s only 43 days until September 3, when voting in the General Election starts. The last day to vote is September 20.Thanks heaps for signing...
    The Daily Blog | 23-07
  • MANA Tamaki send a challenge to Labour
    MIL OSI – Source: Mana Movement – Headline: MANA Tamaki send a challenge to Labour Posted on July 23, 2014 by admin in Joe Carolan, Press Releases“Labour should set the agenda and purposely do something positively controversial once a week”,...
    The Daily Blog | 23-07
  • We must act to save our dolphins
    MIL OSI – Source: Labour Party – Headline: We must act to save our dolphins A new report makes it clear for the urgent need to protect Maui’s and Hector’s dolphins while arguing  it is clear that there is no...
    The Daily Blog | 23-07
  • School told to manipulate national standards data
    MIL OSI – Source: Labour Party – Headline: School told to manipulate national standards data Parents can have little confidence in the Government’s National Standards after an Auckland school was told to manipulate its data so it added up, Labour’s...
    The Daily Blog | 23-07
  • Regional economies must have tailored plans
    MIL OSI – Source: Labour Party – Headline: Regional economies must have tailored plans News that up to 114 jobs could be lost from Fonterra’s Canpac plant in Hamilton reinforces the need for a government plan to build resilient regional...
    The Daily Blog | 23-07
  • Auditor General slams Shared Services project
    MIL OSI – Source: Labour Party – Headline: Auditor General slams Shared Services project The Auditor-General’s Office could not have been more damning about the 18 months spent on the Central Agency Shared Services (CASS) project at the Finance and...
    The Daily Blog | 23-07
  • Fonterra job losses a massive blow to Waikato
    MIL OSI – Source: Labour Party – Headline: Fonterra job losses a massive blow to Waikato The potential loss of up to 114 jobs from Fonterra’s Canpac plant in Hamilton is a massive blow to the Waikato region which has...
    The Daily Blog | 23-07
  • Basin flyover decision an opportunity for capital
    MIL OSI – Source: Labour Party – Headline: Basin flyover decision an opportunity for capital The decision to reject the proposed flyover at the Basin Reserve must be taken as an opportunity to properly fund Wellington’s transport future and must...
    The Daily Blog | 23-07
  • Indonesia: New President Widodo must make good on human rights pledges
    MIL OSI – Source: Amnesty International NZ – Headline: Indonesia: New President Widodo must make good on human rights pledges Indonesia’s new President Joko Widodo must deliver on campaign promises to improve Indonesia’s dire human rights situation, Amnesty International said....
    The Daily Blog | 23-07
  • Communities in Sierra Leone turn their backs on female genital mutilation
    MIL OSI – Source: Amnesty International NZ – Headline: Communities in Sierra Leone turn their backs on female genital mutilation While activists gather in London to discuss strategies to tackle female genital mutilation, communities across Sierra Leone have been taking...
    The Daily Blog | 23-07
  • The Gambia: Activists mark 20 years of iron-fisted repression
    MIL OSI – Source: Amnesty International NZ – Headline: The Gambia: Activists mark 20 years of iron-fisted repression The Gambian government must abolish the laws and iron fisted practices that have resulted in two decades of widespread human rights violations,...
    The Daily Blog | 23-07
  • A blog from the front lines of Palestine: It’s time for a new narrative
    I don’t know if I follow trouble or if trouble follows me, but somehow I seem to have found myself near one of the world’s hotspots again. The difference this time is that instead of sitting in some obscure location,...
    The Daily Blog | 23-07
  • GUEST BLOG: Michael Wood – The Path Ahead
    It’s well established that Labour has had a difficult couple of weeks. Getting back on to a successful path requires our focus to shift from looking inwards to outwards, heightened discipline, and inner conviction. While my assessment of New Zealand...
    The Daily Blog | 23-07
  • Employers liquidating companies to avoid paying minimum entitlements
    Across the union movement we have seen a number of documented cases now where companies are liquidating their business in order to avoid their legal obligations, in terms of paying the minimum entitlements to their workers. The most recent example...
    The Daily Blog | 23-07
  • GUEST BLOG: Joe Carolan : Positively Controversial
    The protest in Auckland last weekend that the NZ Herald claimed was attend by only a hundred people. Labour should set the agenda and purposely do something positively controversial once a week. A good start would be for all their...
    The Daily Blog | 23-07
  • Come on TV3 News – you are better than regurgitating Israeli propaganda
    Say it isn’t true TV3 News, you are seriously bitching about this???? The leader of the Mana Party, Hone Harawira, has supported flag burning at a pro-Palestinian march in Auckland at the weekend. Mana Party flags can be seen in...
    The Daily Blog | 23-07
  • The brutal siege of Palestine
    70 years ago the Jews of Europe suffered as much as any people can suffer. The Nazis set about ethnic cleansing and sent 6 million to their death. Today we watch in horror as Israel, the Jewish homeland created after...
    The Daily Blog | 23-07
  • When the mainstream media go feral: A tale of two holidays
    . . The recent non-story on David Cunliffe’s three day holiday should be proof-positive that the mainstream media (msm) is fixated on pumping out as many “bad news” reporting as can be generated by a headline-seeking; advertising-driven; lazy corporate-media system....
    The Daily Blog | 23-07
  • Canterbury housing crisis a moral, economic, health, education, and social ...
    Can they build it? No they can’t.  Occasionally I come across people who don’t believe me when I say there is a housing crisis in Christchurch.  Despite all the evidence to the contrary.  Even when I tell them that every...
    The Daily Blog | 23-07
  • Respected world visionaries of the past speak out on Israel
    Respected world visionaries of the past speak out on Israel...
    The Daily Blog | 23-07
  • From Here To There: How did Labour become so hopelessly lost?
    WRITING ABOUT the Labour Party these days puts me in mind of the joke about the American tourist and the Irish farmer. Seems there was this American tourist driving down a narrow lane in the heart of Ireland. He needed...
    The Daily Blog | 23-07
  • Oh NOW everyone thinks the ABCs are up to no good?
    Goodness last months June seems like years away doesn’t it? In June I pointed out a move by the ABCs to destabilise Cunliffe was under way. For pointing this out, Labour Party bloggers Rob Salmond and Lynn Prentice rushed to put...
    The Daily Blog | 23-07
  • Dear Seven Sharp – I have little interest in appearing on your show so th...
    After savagely critiquing Seven Sharp for trying to whitewash the repulsive history of a far right hate speech merchant like Cameron Slater yesterday, Seven Sharp have contacted me and offered to do a profile on me. Here is their email…...
    The Daily Blog | 23-07
  • Basin Flyover decision victory for common sense
    MIL OSI – Source: Green Party – Headline: Basin Flyover decision victory for common sense Tuesday, 22 Jul 2014 | Press Release “Both popular and expert opinion opposed the flyover. The proposal was expensive, unnecessary and would have undermined the...
    The Daily Blog | 22-07
  • CPAG Newsletter July 2014
    MIL OSI – Source: Child Poverty Action Group – Headline: CPAG Newsletter July 2014 22 July 2014 New child poverty data nothing to celebrate New data released by the Ministry of Social Development  indicates people living below the poverty line are worse...
    The Daily Blog | 22-07
  • Hotel ordered to pay $80,000 in outstanding wages
    MIL OSI – Source: Unite Union – Headline: Hotel ordered to pay $80,000 in outstanding wages An Auckland hotel has been ordered by the Employment Relations Authority to pay nearly $80,000 in outstanding wages to two employees. Filipino couple Abraham...
    The Daily Blog | 22-07
  • Rising interest rate and dollar driving manufacturing exports back to Globa...
    MIL OSI – Source: CTU – Headline: Rising interest rate and dollar driving manufacturing exports back to Global Financial Crisis levels The Council of Trade Unions is calling on the Reserve Bank not to raise interest rates on Thursday. “Another...
    The Daily Blog | 22-07
  • The Nation 26,27 July: Flavell & Harawira, Joe Hockey
    On The Nation this weekend…. With the Maori seats primed to play a pivotal role this election, Torben Akel reports from the key battlegrounds and meets the top contenders. Then the Maori Party co-leader Te Ururoa Flavell and Mana Party...
    Scoop politics | 25-07
  • Announcement of New Zealand First Candidate for Rangitīkei
    New Zealand First has endorsed Dr Romuald (‘Rom’) Rudzki as the candidate for the Rangitīkei Electorate in the 2014 General Election....
    Scoop politics | 25-07
  • Labour Offer Len Brown a Hotel Tax
    The Taxpayers’ Union is slamming the Labour Party's plan to allow councils to levy new 'pillow taxes' and regional petrol taxes. Reacting to this afternoon’s NZ Herald report Jordan Williams, Executive Director of the Taxpayers’ Union ,...
    Scoop politics | 25-07
  • Cell phone evidence a first
    Cell phone evidence a first Evidence gathered solely from a cell phone has been used for the first time to convict a Hastings man for possessing child sexual abuse pictures. Michael Lawrence Worsnop, a 29-year-old orchard worker pleaded guilty to...
    Scoop politics | 25-07
  • New Zealand Aid Worker Helping in Gaza
    A New Zealand Red Cross nurse working in Gaza says she has never experienced anything like the current conflict in her long aid work career....
    Scoop politics | 25-07
  • Parking officers deserve safety at work
    The union representing the Auckland Transport parking officer severely beaten on July 17 says everyone has a right to go about their job without fear for their safety....
    Scoop politics | 25-07
  • Caritas Aotearoa NZ to provide Gaza humanitarian aid
    Caritas Jerusalem is providing medical assistance, food and other necessities to the thousands of vulnerable people affected by the escalating conflict in Gaza, and Caritas Aotearoa New Zealand is contributing an initial $20,000 to support the humanitarian...
    Scoop politics | 25-07
  • ALCP challenges parties to support Charlotte’s Web
    The leader of the Aotearoa Legalise Cannabis Party Julian Crawford is calling on all other political parties to state their position on using cannabis oil to treat pediatric epilepsy....
    Scoop politics | 25-07
  • Oxfam accepts cheque from Pacific Corporation Foundation
    Oxfam New Zealand has accepted a cheque for almost $1000 today from the Pacific Corporation Foundation toward recovery efforts in the Solomon Islands, following April’s flash flooding that left thousands homeless....
    Scoop politics | 25-07
  • Draft report and decision – Pūhoi to Warkworth proposal
    The Ara Tūhono – Pūhoi to Wellsford Road of National Significance: Pūhoi to Warkworth section Board of Inquiry has released its draft report and decision....
    Scoop politics | 25-07
  • New Zealanders willing to pay tax to protect dolphins
    A report released this week shows a large majority of New Zealanders want Maui’s and Hector’s dolphins protected and they are prepared to pay for it....
    Scoop politics | 25-07
  • Stop Smart Meters
    “The Democrats for Social Credit Party (DSC) wholeheartedly endorses the Stop Smart Meters campaign for a moratorium on installations of smart meters until the technology is proven not be a risk to health, and until home owners are given a...
    Scoop politics | 25-07
  • Maori Roll Electors Urged to Vote Strategically
    Voters enrolled in the seven Maori electorates must learn to maximize their influence by voting strategically, according to the Maori Party candidate for Te Tai Tokerau, Rev Te Hira Paenga....
    Scoop politics | 25-07
  • Politicians Ignore Families’ Concerns on Street Prostitution
    Family First NZ says that politicians are ignoring the concerns of families, lack the will to take appropriate action, and are happy to drag the ongoing problem of street prostitution into the next parliamentary term....
    Scoop politics | 25-07
  • Plunket celebrates Te Wiki o te Reo Māori
    Plunket is proud to celebrate Te Wiki o te Reo Māori (21-27 July), with Plunket people across the country among several thousand New Zealanders taking part and increasing their kete of knowledge in te reo....
    Scoop politics | 25-07
  • Coleman must quit or be sacked over Dotcom case
    Immigration New Zealand has done the right thing in distancing itself from Jonathan Coleman’s claims that ministers were not aware of FBI involvement in Kim Dotcom’s residency application, says the Internet Party. Internet Party leader Laila Harré...
    Scoop politics | 24-07
  • Auckland Councillors, Not Emperors
    25 JULY 2014 Responding to the NZ Herald report that Auckland Councillors have voted to keep their ratepayer-funded business class travel perks, and considered new rules that would have exempted councillors from Auckland City's parking charges, Taxpayers’...
    Scoop politics | 24-07
  • Cunliffe Looks Dodgy Lunching with Sex Offender
    Conservative Party Leader Colin Craig says that David Cunliffe's social meeting with a known sex offender while on holiday "looks pretty dodgy."...
    Scoop politics | 24-07
  • Taxpayers’ Union Back LGNZ Calls For Greater Transparency
    The Taxpayers’ Union is backing Local Government New Zealand’s calls for the Official Information Act to be extended to cover the Local Government Commission. Union Executive Director, Jordan Williams, says:...
    Scoop politics | 24-07
  • Lecture series to provide insight into 2014 election
    Could National’s refusal to reform MMP lead to the defeat of the government? Is the media providing voters with the information they require to make an informed electoral decision? What directions might John Key’s leadership take if he secures...
    Scoop politics | 24-07
  • National Rally Against Factory Farming
    Animal advocates and members of the public all over New Zealand will unite for a ‘National Day of Action Against Factory Farming’ Saturday, tomorrow 26 July in response to two recent exposés that showed horrific conditions on pig factory farms....
    Scoop politics | 24-07
  • Women in Politics Finds Support at Conference
    Women in Politics, a brand-new organisation for New Zealand women in political office, was met with overwhelming support at the 2014 Local Government New Zealand Conference held this weekend in Nelson....
    Scoop politics | 24-07
  • The Government’s Fresh Water Policy – REVISITED
    Fresh water quality is the latest area to be in the sights of Gareth Morgan and his research organisation The Morgan Foundation. They enlisted a group of 16 scientists to help them review the government’s new fresh water policy....
    Scoop politics | 24-07
  • Restoration of Post-graduate Allowances to be Key Issue
    As students prepare for the early voting that will take place on all university and many polytechnic campuses next month, the restoration of post-graduate allowances, removed by the current government in 2013, is emerging as a key election issue....
    Scoop politics | 24-07
  • Honesty for Taxpayers
    ACT has a new proposal to make our democracy more accountable. The proposal may seem small but it could be the most significant idea in this election....
    Scoop politics | 24-07
  • Mike Hosking for PM?
    The Coalition for Better Broadcasting is adding its voice to the many appalled at TVNZ’s choice of Mike Hosking as moderator for the upcoming political debates....
    Scoop politics | 24-07
  • ‘Party Party’ Hitting the Right Notes
    The “sold out” sign has gone up at the Internet Party’s concert in Christchurch tonight. A capacity crowd of 1000 will be at The Foundry for the Party Party concert, part of a major national musical tour aimed at getting...
    Scoop politics | 24-07
  • New Electoral Commission Campaign Launches This Weekend
    New Electoral Commission Campaign Launches This Weekend More non-voters than ever before say they don't feel like their vote is worth anything, or that their opinion matters. It's a trend that concerns the Electoral Commission, and the reason for...
    Scoop politics | 24-07
  • Umere says ‘taihoa’ on Māori Language Strategy
    A Maori Language advocacy group, Umere, is calling for a rain check on the Māori Language Strategy Bill, which is being introduced to parliament this week. "The submissions on the MLS have been released by Te Puni Kōkiri and they...
    Scoop politics | 24-07
  • High cost of GP visits still a barrier for older children
    Free doctor's visits should be extended to all children under 18 as GP charges are a significant barrier for low income families, says Child Poverty Action Group....
    Scoop politics | 24-07
  • David Cunliffe happy to hide sex offender’s identity
    ..:: For immediate release ::.. 24/07/14 David Cunliffe happy to hide sex offender’s identity - (and in fact enjoy lunch with them)...
    Scoop politics | 24-07
  • More kids in Southland and Otago are achieving
    Clutha-Southland National candidate Todd Barclay says the Public Achievement Information for 2013 shows New Zealand children are doing better across the whole education system....
    Scoop politics | 24-07
  • Flavell mistaken
    In response to Mr Flavell’s tirade this afternoon Conservative Party Leader Colin Craig advises "Mr Flavell is simply mistaken in his comments."...
    Scoop politics | 24-07
  • High cost of GP visits still a barrier for older children
    Free doctor's visits should be extended to all children under 18 as GP charges are a significant barrier for low income families, says Child Poverty Action Group....
    Scoop politics | 24-07
  • Taxpayers’ Union Lay Complaint with Speaker
    The Taxpayers’ Unio n has written to Parliament's Speaker, the Rt. Hon. David Carter, asking him to step in and investigate the claims on the WhaleOil blog that taxpayers’ money is being improperly used for Mana Party election campaign hoardings....
    Scoop politics | 24-07
  • MANA launches te reo Māori policy
    “MANA is launching its te reo Māori policy this morning ahead of the first reading of the government’s Māori Language Strategy Bill this afternoon”, said MANA deputy leader and candidate for Waiariki, Annette Sykes....
    Scoop politics | 24-07
  • Candidate welcomes award of platinum exploration permits
    Clutha-Southland National candidate Todd Barclay has welcomed the Government’s decision to award Lynx Platinum Limited two exploration permits in Southland. Mr Barclay said the minerals industry is an important part of New Zealand’s economy...
    Scoop politics | 24-07
  • Pokie spending and numbers continue to drop
    Pub and club gaming machine expenditure in the year ended June 2014 fell 2.4 per cent from $826.3 million to $806.2 million. There were also fewer licence holders, gambling venues and gaming machines compared with 12 months earlier. Licence holders...
    Scoop politics | 24-07
  • New Zealand Police to assist in MH17 victim identification
    New Zealand Police is sending three Disaster Victim Identification (DVI) specialists to the Netherlands to assist in the international effort to identify victims from the MH17 tragedy....
    Scoop politics | 24-07
  • Oil Spill Response Strategy available for consultation
    Maritime New Zealand (MNZ) is inviting comment on its draft updated New Zealand Marine Oil Spill Response Strategy....
    Scoop politics | 24-07
  • Police response to IPCA report on Rewa investigation
    Police accept the findings of today's IPCA's report regarding its investigations into offending by Malcolm Rewa in Auckland in the 1980s and 1990s....
    Scoop politics | 23-07
  • Well-known kiwis sign on to stop ivory trade
    Today the Foreign Affairs, Defence and Trade Select Committee will consider a complete ban on the ivory trade in response to a petition by Auckland teacher Virginia Woolf and policy analyst Fiona Gordon....
    Scoop politics | 23-07
  • Commonwealth Games are not being captioned in New Zealand
    As members of the Captioning Working Group, The National Foundation for the Deaf and Deaf Aotearoa New Zealand call for broadcast captioning of the 2014 Commonwealth Games...
    Scoop politics | 23-07
  • Majority of Commonwealth countries are already republics
    The Glasgow Commonwealth Games are here and it's a common misbelief that a Kiwi republic would mean that New Zealand would have to leave the Commonwealth. In fact, nothing could be further from the truth....
    Scoop politics | 23-07
  • Police handling of Rewa Investigation
    Although an Independent Police Conduct Authority inquiry has identified some faults with a series of investigations conducted by Police into offending by Malcolm Rewa, there is insufficient evidence that any of these impacted on the ability of Police...
    Scoop politics | 23-07
  • IPCA findings on Police handling of Rewa Investigation
    Good morning everyone. I’d like to begin today by explaining that this is an informational press conference and that I will not be taking questions at its conclusion. The reason for that is the report’s findings are the result of...
    Scoop politics | 23-07
  • Pay It Back Ms Hauiti
    Responding to the Newstalk ZB report that disgraced MP Claudette Hauiti is refusing to confirm whether or not she has reimbursed taxpayers for misuse of her Parliamentary 'P-card', Taxpayers’ Union Executive Director, Jordan Williams, says: “Ms Hauiti...
    Scoop politics | 23-07
  • RSA thanks NZ for $1.7m collected during Poppy Appeal
    The RSA today announced that over $1.7 million was donated to the 2014 Poppy Appeal for the support of veterans, ex-service men and women and their families in need....
    Scoop politics | 23-07
  • Students encouraged to be brave and never give up
    Students encouraged to be brave and never give up if they want to 'make it happen'...
    Scoop politics | 23-07
  • New Zealanders want to pay more to protect dolphins
    A report released this week shows a large majority of New Zealanders want Maui’s and Hector’s dolphins protected and they are prepared to pay for it....
    Scoop politics | 23-07
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