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Taxing choices

Written By: - Date published: 12:40 pm, July 21st, 2008 - 85 comments
Categories: election 2008, national, tax - Tags:

There are four options open to National regarding the tax expectations it will deliver large tax cuts ($20+ per person a week = $3 billion+ a year) additional to Labour’s.

a) fail to meet those expectations by offering small cuts. Who would vote for a one-trick pony that won’t do its trick?

b) cut taxes funded by cutting government waste. There simply is not waste on the scale needed; National’s waste-o-meter stands at just $3.3 million.

c) cut taxes funded by cutting spending. National has not announced any spending cuts it would make and, by my count, has already guaranteed to maintain or increase 90% of spending. Unless National breaks its promises (which it could do by tricks like keeping spending at the same nominal level, letting it fall after-inflation and population growth.), it can’t fund tax cuts from spending cuts.

d) borrow to pay for tax cuts. National has already signalled it will increase debt to 25% of GDP. That means increasing debt by about $10 billion, which would cause huge inflation. Problem is, the public doesn’t like government borrowing. There’s a way around that though have the SOEs borrow and pass on the money in dividends to the Government. That wouldn’t make the government’s debt increase, it would show up in the books as lower asset worth. Another trick is using public-private partnerships: these are just a fancy form of borrowing the government gets captial up front and the private moneymen make the profit from rents in the longrun.

Which option do you think National will choose? I’m picking them to fund lower than expected tax cuts by increasing debt (one way or another) while arguing that the money is coming from cutting waste.

85 comments on “Taxing choices”

  1. mike 1

    We’ll have to wait and see but it will interesting to see which avenue labour choose for their Student vote bribe just before the election.

  2. higherstandard 2

    How about option e

    Ask Winston to find some money for Tax cuts just remember he’ll deny that there’s any money there at least three or four times before he produces it out of left field.

  3. monkey-boy 3

    I reckon they will borrow to finance tax-cuts.
    Thank goodness Michael Cullen would never do such a thing.

  4. Draco TB 4

    I reckon National’s tax cuts will be paid for primarily by borrowing with a significant portion paid for through PPPs. They will result in both unemployment and inflation possibly hitting double digit figures.

  5. Quoth the Raven 5

    National’s announced that they want random checking of retirement homes now. So that’s more new government spending and bureaucracy from National just like the new prison they want.

  6. T-rex 6

    And the 1.5bil broadband package Quoth.

    Still waiting to hear about the 4 lane national highway.

    Bet John consulted those paragons of independent land transport insight on that one – Fulton Hogan.

  7. deemac 7

    anyone else see the cringe-making clips of Key on the Unofficial History of NZ prog last night?

  8. Phil 8

    d) … Problem is, the public doesn’t like government borrowing.

    Here’s a very simple way National can ‘sell’ debt funded tax cuts to the electorate.

    “Average kiwi” effective mortgage rate: 8.42% – even though advertised interest rates are heading down, people are still re-fixing at much higher interest rates than 3-5 years earlier, so this is still going to go a lot higher before it starts to come down.

    Government bond interest rate: 6.05% (roughly)
    In the current climate, as investors continue to move to “quality” assets, this is likely to fall further.

    On $10b borrowing, debt-funded taxcuts would save ‘average kiwi’s’ $200mln every year if they put the cut toward paying off their mortgages. I like the sound of that, and I expect when explained in that manner, so will the public in general.

  9. T-rex 9

    Phil, that won’t work, because the bank won’t let you change the rate of repayment on your mortgage like that.

    If you negotiate a mortgage, you also negotiate the rate at which your going to amortize it. If you want the ability to pay back faster and then borrow against it you need to get a rotating equity element, and you’ll pay the current floating rate for the privaledge.

    If you think about it it’s pretty obvious why this has to be the case.

    When you take a fixed rate fixed term mortgage, you’re hedging against interest rate shifts. The bank is accepting the risk that the rates will increase (they start losing money). They’re not going to give you the ability to duck out of it when the rates reduce. That’s the cost you agree to shoulder in return for certainty.

    The reason government bonds are lower interest is because they’re deemed low risk. A house – slightly less so (about 2%/annum less in fact).

  10. LC 10

    I prefer option c. It’s non inflationery, and easily done.

  11. T-rex 11

    LC – What a relief. Which services would you cut?

    It’s only easily done if you don’t think the services in question are providing any benefit.

    That said, I wonder how long we’re going to have to pay high salaries for the top public service jobs before the theory bears fruit and they actually start attracting top people to justify the pay packages.

    Sad reality? Probably never – at least not if private sector is anything to go by.

    Conclusion? Competence is only vaguely correlated with pay. So there’s nothing to be lost by cutting salaries.

  12. Aj 12

    A combo of borrowing and re-jigging working for families.
    Also, a lot of sleight of hand talk about what the words “$50 tax cut for the person on the average working wage” means.

    Will require gymnastic definitions of ‘average’ working’ ‘tax cut’ ‘working’ and also the difference between getting it all at once as oppsoed to over the three year electoral cycle.

    Captcha – hard to believe? ‘sheep communication’

  13. ants 13

    Labour has increased government spending by 26 billion a year since they got in. There is craploads to be cut from that.

    No need for your doomsday prophecies – just cut some of the phenomenal waste. The good part is that the inflationary pressures caused by the current government will reduce also.

  14. LC 14

    T-rex, yes I beleive that our public servants are costing us too much. There is scope for reducing salaries. And Chief Executives get paid too much for what is in effect administrating monopolies.

    So I see some scope in reducing public service spending so that we can readily support our core services. As an example some of our Head Offices for Government departments are in high value areas, and have first rate fit outs. This must stop. Move them out closer to the people that they must serve. Basic furniture only.

    In this way no core services would be cut, and the public servants would be closer to the people that they are to serve. It would also be a great boost to morale to see our public servants leading the way in reducing expenses. I wouldn’t want to see any savings passed back to higher paid people as I beleive that the lower paid need a hand especially with rising food and petrol.

  15. Phil 15

    ‘Rex

    You’re absolutely right on the fixed mortgage thing. But, nearly half of all mortgages, by value, are due for repricing in the next year, so it doesn’t seem like a problem to me.
    http://www.rbnz.govt.nz/statistics/monfin/rbssr/rbssrpartE/data.html

    “The reason government bonds are lower interest is because they’re deemed low risk”.

    Yes, but the whole point of my sales pitch is that it IS cheaper. In a holistic national sense, why pay more than you need to for something (in this case; paying for money, via interest) that you’re going to buy anyway?

  16. T-rex 16

    Hmm… I’m just not sure it makes sense. Is there any functional difference between what you’re proposing and leaving tax rates as they are but offering mortgages to homeowners at whatever the government bond rate is?

    Because I don’t think there is.

    So you might ask – why doesn’t the govt do that? I’m not really sure… it seems like one of those things I’d have to think about pretty hard, and having thought about it pretty hard I’m still not sure it’d make sense. I mean I understand about cost of capital, and risk/return, but… hmm. Odd.

    I mean, basically, if you’re theory was sound then what’s to stop you and I and a couple of other people going down to treasury and asking to borrow 200mil in govt bonds and buying houses with it? The answer to that is the answer to why it doesn’t make sense I think.

    And I’m pretty sure the answer relates to who is assuming risk.

    Lets say we take on foreign debt to deliver a tax cut. What’s securing that debt? What’s guaranteeing we can pay it back and aren’t just putting ourselves on a downward spiral?

    Hmmmmmmmmmm.

    Okay – all this is based on the premise that government bonds are cheap debt isn’t it? If that’s flawed, none of it makes sense.

    Are they? I mean, they pay a tiny amount of interest if you buy them, but is it possible to borrow at the same (or similar) an interest rate?

    Obviously it relates to risk – govt bonds pay bugger all interest because they’re seen as being near risk free.

    Does that mean if you could demonstrate a near-zero risk borrowing plan that you could borrow at those rates? Lets say borrowing 20% of the value of a house, and using your entire equity as security.

    You can’t do that through a bank… why not?

    Are banks just totally screwing us? Kiwibanks 5 year loan rate is 9% at the moment – are they expecting the OCR to remain in that sort of territory for that long, or are they just incredibly conservative? Even bigger question – as an SOE, does it even matter? Kiwibank can borrow from the govt at the OCR. If people pay more than the OCR through mortgages, the difference goes to the govt as profit, balances the budget, and reduces the tax take (theory people, theory!). So should we even care? Just don’t borrow from overseas banks, because then we lose out on the margin!

  17. dk 17

    Wouldn’t increasing GST be another option?

  18. The question is not ‘what would you do’, but ‘what do you think National will do’?

    -They won’t raise GST. ‘Kiwis are overtaxed’, remember?
    – They’ve not said they’ll cut any spending and have guaranteed to maintain or increase over 90% of it.
    – They’ve not identified any signficant waste to cut.

    Phil. That would be massively inflationary and you’ve got to service the interes on this pile of debt that you’re envisaging growing by astromic amoutns each year. $200million a year is only a dollar a year a taxpyer. Plus, “if they put the cut toward paying off their mortgages” – there’s your problem right there.

  19. T-rex,

    This is scary; you are actually beginning to think for yourself.

    OK So this is how banks “make” money:
    When you go to a bank for a mortgage you sign a contract. In this contract you promise the bank that you pledge the house and whatever it takes to pay back the loan.
    The bank puts a negative number on its books and a positive number on yours. Bingo, they just made money out of nothing. No real money actually chances hands. The bank doesn’t really give you money. They don’t have money to give to you. They don’t run a risk, only you do. They are getting interest for printing money they don’t have. Pretty good scam if you ask me. The system? A privately owned Federal Reserve, fractal banking and fiat money not based on anything of real value like gold.
    Watch: http://aotearoaawiderperspective.wordpress.com/interesting-videos/documentaries/what-is-money/ ” Money as debt.

    I started growing my own food after watching this and damn it’s cheap. No inflation whatsoever.LOL

  20. T-rex 20

    The bank does give you money. If you go to a bank for a mortgage and use it to buy a house, they give you 300k or whatever. The fact that you then choose to give that 300k to the previous owner of the house is between you and them. The bank didn’t just make the money up, they’re borrowing it from someone else. And it’s real money, the person you give it to can go and spend it on beer or cars or tiny little world trade centres or whatever.

    I can understand how it all holds together and makes sense, I just don’t understand why we just accept so many losses in the system. Maybe there just aren’t that many. The banks aren’t making money off high interest rates are they? They’re having to pay it out too. The margin is pretty low.

    Have you got an alternative T? One that still allows borrowing and currency rather than just tiny little insular communities filled with altruists?

  21. T-rex 21

    Also, I don’t understand the problem people have with fiat money. What difference would it make if the money was based on gold? You could take it in and trade it for gold? What the hell would you do with it?

    I’d far rather have a government guarantee a currency through the work of its citizens than I would have a lump of worthless metal guarantee its value (or lack thereof). A character in one of my all time favourite books made the comment “Gold is the corpse of value”. I couldn’t agree more, which is why I refuse to invest in it.

  22. T-rex 22

    Isn’t the solution just not to borrow? Or at least not at interest. That may even mean “don’t offer credit”.

    Done. Nobel prize please. Only not.

    I’m going to go away and think for a day.

    That’s the first video I’ve seen on your site that’s actually been internally consistent T. I hope it’s not just because my background in economics is much weaker than in engineering.

  23. Draco TB 23

    …fiat money not based on anything of real value like gold.

    Gold based monetary systems are a problem for at least two reasons, 1) There isn’t enough gold in the world to adequately represent all the money and 2) $100 dollars printed on gold or paper has the same value but the gold itself could be worth more or less. If it’s worth more then that $100 is going to be melted down and sold on the bullion market removing money from the economy causing deflation.

    Saying that fiat money has nothing backing it is wrong as well – It’s backed by the productivity of the nation printing it.

    Money: An abstract representation of perceived value.

    The bank didn’t just make the money up, they’re borrowing it from someone else.

    No, they really are just printing it. They need to maintain minimal reserves of money but they do loan out more than they have. If a bank has $1,000,000 deposited with a 10% reserve you can expect $10,000,000 to enter the economy. If a bank doesn’t have enough cash to cover its liabilities at the end of the day then they will borrow the rest from the reserve bank at the OCR. The reserve bank is willing to loan out an infinite amount of money at the OCR. To try to prevent too much money entering the system and thereby pushing up inflation the reserve bank increases the OCR so that the cost of money is prohibitive.

    People complain about government spending pushing up inflation but the reality is that most of the inflation in the economy is caused by our banking system.

  24. Draco TB and T-rex,

    I totally agree with you. I have one golden ring with a diamond cut by my grandfather. I wear it always and would not sell it for the world.
    Gold holds no value to me other than in this memento. Let the Rothschild’s and the Rockefeller’s sit on and be damned with it.
    I also have nothing against fiat money, in fact we are working on a local fiat currency over here.

    What I do have something against is that a privately owned banking cartel is granted the right to print money to lend to us and make obscene profits off it.

    The Federal Reserve system is a scam and is robbing honest hard working people of the wealth they generate in the real world.

    The bankers are buying up real assets with funny money and that system is collapsing.
    This is what Jefferson had to say about bankers:

    President Jefferson predicted, ‘If the American People ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around (the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.’

    The western world “owes” the privately owned banks some $ 57 trillion. They own us.

    At this moment 8000 houses a day are being foreclosed in the USA alone. That’s right; 8000 families a day loose their homes and the number is rising. There are bank runs in the US.
    The US is the worlds biggest debtor and disintegrating as we speak.

    Western civilisation as we know it is collapsing and we are not told this in our main media.

    Don’t believe me just google the numbers and find out for yourself.
    They are organising sleepover car parks for ex-middle class people who live out of their car al over towns in the US and tent camps are starting to pop up.

    Read the $ 5 trillion dollar mess: http://money.cnn.com/2008/07/11/news/economy/fannie_freddie.fortune/index.htm

    Fannie Mae and Freddy Mac are the two biggest mortgage lenders and are owed $ 5 trillion dollars, but those debts are leveraged to over $ 50 trillion dollars. Do you have any idea of the mayhem the inevitable collapse of these two giants is going to cause in the financial system? They can’t keep propping up the bankrupt system by just “inventing” money. the dollar as the worlds reserve currency is collapsing and the only way they can keep control is if they attack Iran to keep control over the oil resources. It really is that bad.

    By inflating the money supply they are robbing all of us depending on a wage from whatever we have tried to build up. It really is time to get off their grid. This is not theory this is our new reality.
    And no I have no other answers then it’s time to look at our neighbours and build up communities from the ground. There is no quick fix, there is no “go past start and collect 200 dollars”.
    We’re fucked.

    This is what we are doing: http://www.transitiontowns.org.nz/

    T-rex

    Thank you for taking the time to watch Money as debt. It shook me to the core. I actually had a couple of e-mail exchanges with the guy who made the movie. I hope you will point others to it as well.

    If you want to know more about the Banking history this is a good documentary: http://aotearoaawiderperspective.wordpress.com/interesting-videos/documentaries/the-money-masters/
    If you google Federal reserve privately owned you will find several court verdicts stating that the FR is privately owned.

    NZ citizens lost their say in the NZ dollars when Don Brash came up with the Federal Reserve Act in 1989 and the than Prime minister (Labour I’m sorry to say) signed the act. The US citizens lost their say in 1913 with the act of exactly the same name The Federal Reserve Act of 1913.
    There is nothing Federal about it and there is no Reserve. We have been had big time.

    This is why I don’t think that a $ 50 million Banker, who actually advised the New York Federal Reserve from 1999 until may 2001 in a four man strong upon invitation only committee, turned politician is a good idea.

  25. T-rex 25

    I’m cautiously supportive of most of what you say except for this: “By inflating the money supply they are robbing all of us depending on a wage from whatever we have tried to build up. It really is time to get off their grid. This is not theory this is our new reality.
    And no I have no other answers then it’s time to look at our neighbours and build up communities from the ground. There is no quick fix, there is no “go past start and collect 200 dollars’.
    We’re fucked.”

    That makes no sense. True wealth is the product of peoples work and intelligence, and it’s all around us. The allocation is just stuffed. Solution? Come up with a better system, gain popular support for it, then declare the existing one null and void.

    How stupid is it that people get kicked out of their houses so the house can be empty. RAGE.

    We’re really being robbed doubly – first by the debt, then again by the failure of the people who leech of the system to create any actual wealth.

    Very messed up. And I don’t even have debt.

    I think most people spend their whole lives trying to work out how to operate within the limitations of systems, and never think about the systems themselves.

  26. Hi T-rex,

    Amazing we are actually agreeing on really scary stuff. Nice.
    I’ll get back to you on this one but Tuesdays are working bee days and we have an orchard to plant and then of to our friends to help with garlic and other chores that need doing. LOL. We eat almost for free all year around. And no it’s not altruism but it makes sense out here to organise and get stuff done. It is amazing what 8 people can do in a day.

    Captcha: Messenger or. Hm?

  27. Oh, by the way T-rex
    I had to drive 325 km the other day and i took the car with the Hydroxen cell. it had 150 on the meter and the car never did more than 450 km under the best of circumstances. When I came back I had 475 on the meter and still just under a quarter of a tank. Hubby drove to work the next day and he added another 90 km to it. It was an amazing drive, food barely pushing the pedal and flying by at an average of 90km an hour. (I also try to get fuel economy by moderating my speed.

    He added a pre heater for the gas part and that also helps in fuel economy. I had to cross the Kaimai’s and even that was not a drain on the fuel I used. We have a recurring electrical fault which causes the engine to miss when wet sometimes and that was costly when that occurred because you have to keep pushing the pedal down. I would have come home with almost half a tank if that hadn’t happened.

    C: answered SYMBOLISM. LOL

  28. Draco TB 28

    We’re really being robbed doubly – first by the debt, then again by the failure of the people who leech of the system to create any actual wealth.

    I think most people spend their whole lives trying to work out how to operate within the limitations of systems, and never think about the systems themselves.

    Most people have absolutely NFI how the system is designed to keep a very select few rich and in unaccountable power. The money system really has been designed by the bankers over the last few centuries and they’ve designed it to benefit themselves. It’s designed, quite simply, to take from the poor and give to the rich. As Henry Ford said, “If the people knew how the money system worked there would be a revolution by morning”.

    What needs to be done to correct the imbalance (The present system is imbalanced – why else do you think it keeps crashing?) is:
    1.) Fractional reserve banking needs to be outlawed.
    2.) Government guarantee of the private banks needs to be stopped.
    3.) The reserve bank needs to stop loaning money to private banks.
    4.) Government bank which has 0 interest and 0 fees where the deposits are guaranteed by the government.
    5.) 0% interest home loans and startup business packages supplied by the reserve bank.

    T.eve:
    You’ll probably like Peter Kropotkin’s Conquest of Bread. I had difficulty with some of what he said until I read Adam Smith’s Wealth of Nations and he pretty much confirmed what Kropotkin had said.

    We really don’t need the rich. They keep telling us we do simply to keep us in the chains that keep them rich.

  29. Draco TB,

    Thanks for those links I’ll definitely read the conquest of bread

  30. T-rex 30

    Bad news Trav – my prophecy “I hope it’s not just because my background in economics is much weaker than in engineering.” came true.

    Fractional reserve banking makes good sense I think.

    The video was misleading in several ways according to my understanding.

    1) I don’t think the banks DO just make money. They lend out many times what they hold in “central bank money”, but I think that’s a good thing – what is the point in money sitting in the bank?

    2) They don’t have some sort of ‘interest multiplier’ effect going on. They profit they make is only proportional to the marginal interest rate, which in part covers their required fractional reserves.

    The video presents the situation as follows (or at least this was my initial understanding of the presentation, and I suspect yours):

    Assume fractional reserve ratio of 10:1, interest rate of 10% and 9% respectively.

    1) Andy deposits $100 in the bank.
    2) The bank uses the fractional reserve system to use this $100 they have from Andy to give out $1000 dollars in loans.
    3) The bank pays Andy $9/annum on his $100
    4) The bank collects $100/annum on the $1000 they gave out in loans.

    That is not the reality of it. The bank doesn’t ‘make’ money up. It’s just a way of keeping track of a long chain of debt.

    1) Andy deposits $100 in the bank
    2) The bank, using a fractional reserve ratio of 10:1, loans out 91% of this money, keeping 9% in reserve (10:1 fractional reserve).
    3) The bank pays andy $9/annum on his $100
    4) The bank collects $9.10 on the $91 they were able to loan out.

    This makes hugely more sense than my original understanding, and doesn’t seem unethical at all (though you could obviously debate what the interest rates ought to be).

    I’m still trying to understand how… OHHH, that’s how.

    The video said that if a collection of “bank creators” invested $1111.42 (or whatever it was) then they could give out $10k in loans. That is crap. They don’t have $10k, and it doesn’t just appear. They could give out about $1k in loans, keeping 10% in line with their fractional reserve obligations.

    So as far as I can tell for now, unless there’s some flat out deceit going on in what I’ve been reading (which I think is unlikely – given that if your system was an accurate representation no economy could work and no currency would have any value) then it seems like it makes far more sense than a fixed reserve system ever could.

    Consider a true fixed reserve – a bank could never lend money, no one could earn credit, and no one could collect interest. How can you borrow from a bank which must, itself, hold assets equal to the entire value of deposits placed with it. You can’t.

    Pleased to hear the car is going well for you. I look forward to an MPG figure that’s the result of a controlled test!

  31. Vanilla Eis 31

    T-rex – the confusion appears to have arrived at the point between where your explanation stops and where Eves picks up;

    It’s been a while since basic economics, but the theory is that any money lent out will inevitably find it’s way back to the bank, which they can then lend 90% of again.

    eg: A bank has 100k in deposits. They loan 90k (keeping the 10:1 ratio) to someone who uses it to buy a house. The person who receives the 90k for their house then deposits it in the bank.

    The bank can then loan out 81k of that 90k, ensuring they still have 10% retained.

    The cycle continues, and economists magically appear at the 10x value of deposits loaned out.

    I know the model is simplistic, thats why it’s a model. Neither of you is technically wrong, except that in reality it would be extremely rare for a bank to be in a position where it was able to loan that much money, so they miss out on some delightful profits.

    Being a bank is practically a licence to print money, but you still have to work it well to succeed. I’m not aware of what the required fractional reserve is in NZ, but it’d be interesting to do the maths sometime.

  32. T-rex 32

    I understand that, was hoping I wouldn’t have to continue the explanation because it takes much more time, but nevermind – all in the name of clarity right!

    As is the usual with these stories, we’ll use alphabet names. Andy, betty, charlie, donna, eddie, fiona, harry, juliet.

    1) Andy gives bank $100.
    2) Bank loans betty $91.
    3) Betty gives $91 to Charlie for a tv.
    4) Charlie gives bank $91
    5) bank loans donna $82
    6) donna spends $82 on dinner at eddies
    7) eddie gives bank $82
    8 ) Bank loans fiona $73
    9) fion… ok, fuckit, we’re stoping at fiona with $82 in her pocket.

    Now lets look at the total money in circulation, owed to the bank, and owed to people by the bank.

    The bank owes money to Andy, Charlie, and Eddie – totals $273

    Betty, Donna, and Fiona owe the bank – totals $246

    Bank has $27 in reserve (as appropriate for its assets and debts).

    So the banks paying interest on $273, and collecting interest on $246.

    It’s just the circulation of money. It’s not like Andy gave them $30 and they gave $300 to betty. They can’t give out what they don’t have.

  33. Vanilla Eis 33

    Err, yes. Plus the fact that real life doesn’t work like that – Charlie keeps $20 in cash, or buys some ‘cash services’ and all of a sudden your multiplier drops dramatically.

    The model is a load of bollocks in practice, or thats my intuition. I didn’t pay much attention in 130. Penny Profit got dry pretty quickly.

  34. T-rex 34

    Yeah, but it doesn’t actually make any difference to the banks profits whether charlie keeps $20 or not. The only time the bank loses is when they’ve got money invested that’s NOT also loaned out. Which is where interest rates come in. If no one is borrowing money, they drop interest rates to such a point that people start to borrow. Or withdraw their deposits and spend them on something directly.

    What’re your thoughts trav?

  35. Draco TB 35

    I think banks in NZ are presently at about 30:1 IIRC from a newspaper article a few months back (the banks were boasting that they weren’t anywhere near their reserve limits). What multiplier they can get to is listed somewhere in the Basel II accord. Pretty sure they range from 35:1 to 100:1 – been awhile since I looked and that sites difficult to search through.

  36. T-rex,

    I found this link.(Ha, I finally took the time to read the FAQ list.deuh)

    I reckon you are the mr. Gullible in the story.
    A nice guy who finds it hard to believe there is any real evil in this world.
    Like me until 5 years ago when I met real evil and had to fight for my life with a piece of scum out to destroy me an mine and for whom my kiwi husband and I actually had to give up our business and our live in Holland and relocate to this beautiful country (Something I’m strangely grateful to said piece of scum for).

    I have lived in a thriller T-rex and it taught me well.
    Do I see evil behind every tree? No, but I refuse to close my eyes again and pretend all is well in the world because it isn’t.

    Now for the banking business. Can a bank create new money ad infinitum. No.
    Can a bank create money based on the reserve it has. Yes.

    See the link above. That was the whole purpose of the video.
    The goldsmiths found out that on the whole only 10 % of the people wanted their gold back so the bankers figured they could give out ten times more notes than the gold they had in their vaults.

    That is the bottom line of the fractal banking system.
    Mr. Gullible brings his wages (real wealth generated by mr. Gullible) to the bank and based on that real money the bank can loan out 10 times more. Because only 1 in 10 people will ever want to have their money cash in the hand.

    However that is not the point I’m trying to make.

    The point I’m trying to make is the fact that privately owned banks are doing this.

    We the workers, farmers, entrepreneurs generate real wealth with our toil and bring that money to a private institution which speculates with that money. We get a small interest on our savings but pay a much larger amount of interest when we borrow money to buy say a house. The bank loans you, based on the real wealth we generate, a previously none existent sum to buy that house and you pay interest on that.

    All based on the 10 % premise.

    So why are privately owned banks allowed to do this? If you or I did this we would go to jail for counterfeiting.

    Because it suits our rulers.

    Why? Because instead of raising taxes (always a very unpopular) they issue bonds to the banks for money and do what it is Governments do and we the people pay back those loans plus interest to the privately owned banks. That is were a great deal of our tax money goes to, not to good works and infrastructure but to the leeches we call bankers.

    By the way the 10:1 multiplier is way out already and there is much less in reserve these days. this is because the privately owned Federal Reserve is actually allowed to conjure money our of thin air to rescue banks that are at risk of collapse when it cannot meet it’s obligations.

    Does this sound like fraud to you? It does to me.

    So they would not do this because they are nice honest people and it is reasonable for them to charge interest because they are after all running a risk lending you Joe Schmuck money that perhaps he might not be able to pay back?

    Mr. Gullible if you believe that, I’ve got a nice rain forest in the middle of the Sahara desert I would like to sell to you.

    The fact that John Key wants to borrow money in order to finance whatever it is he wants to finance rather than finance it from our earnings tells me based on my understanding of how banking works that he feels no compunction about indebting the New Zealand people even further to his paymasters and as such has not come back to help us the NZ people but to help his “former” bosses to the real wealth this country possesses i.e. its real world assets and its real world resources and the Kiwi’s be damned.

    On the car testing:

    a voluminous study conducted by an army of “experts” that “conclusively proves” that the sky is green should never be more convincing to a person then a quick look up.

    You seem to labour under the impression that I should proof something to you and the only way I will be able to do so is by having an army of “experts” conduct a voluminous study that will conclusively proof or disproof my assertion.

    I don’t. I’m not trying to sell you or convince you of anything.

    I drive a car (Honda Civic) that previously could drive no more than 430-450 km per tank. I come home with 475 on the clock and a little under a quarter of the tank still full, my husband adds another 90 km on the odometer before he has to fill her up again.

    Looking up I see the sky is blue (well, not at the moment but you get my drift)
    I’ve got all the proof I need mate, I’m happy with my savings and what you do with that information is up to you.

    Did you know that Halliburton’s subsidiary KBR was tasked in 2006 with building hundreds of strange, empty, guarded detention centres.

    Now why would they do a silly little thing like that?
    Are they scared perhaps the sheeple will wake up one day?

  37. Lukas 37

    traveler you lost all credibility when you ever had (not much i suspect) when you said that banks create money that doesn’t exist

  38. T-rex 38

    T – Sorry to hear about your first hand experience with evil.

    I am not naive. That is why, when I hear about something like this, I actually go and find out about it rather than just going “oh I’m sure that’s not the case, the govt will look after us”.
    It just turns out, that in this case, the author of that video you showed me is either stupid or lying.

    Banks do not create money. THINK ABOUT IT. How could they? The moment they tried they would devalue the currency by 10:1. Inflation isn’t running that high. That link you sent me is complete garbage. Anyway, I’m not going to get into another 9/11 debate with you, but suffice to say that your “transition town” is a wonderful idea, but ultimately you better be damn sure you can create more wealth within it (maybe you can) than you could by actively participating in the economy, because otherwise you’re going to get left behind by growth. The end of oil will not be the end of growth.

    As for your car: Just don’t expect me to take you remotely seriously until you do such a test. Aerodynamic drag is proportional to the cube of velocity, so by driving at 90kph rather than 100kph alone you’ll reduce your aerodynamic losses by 27%. If your numbers are accurate you’ve got roughly 20% more range than you usually would.

    Abracadabra.

    I’m sure the hydroxy booster is helping your engine run cleaner, and a fuel pre-heater will help a little too, but at the end of the day your previously stated ambitions of “getting away from oil completely” are the pipe dream they always were. Get an electric car.

  39. Aargh, I give up.
    There are none so blind that do not want to see.

  40. T-rex 40

    And a little knowledge is a dangerous thing.

  41. Right up your ally you patronising dick

    Really sound physics by Berkeley physicist Richard A. Muller stating that gasoline was what? 15 times more explosive than TNT. LOL. Sounds about right wouldn’t you say, in your world that is. And yet, we can buy the stuff everywhere. Oh and a North Korean test nuke released much less energy than the 911 attacks.

    Oh, and the buildings pancaked. Yep, we saw it clearly,layers and layers of pancaked floors. Uh oh, no we didn’t. We saw pyroclastic clouds of dust and pulverisation.

    OH Ooops: “For administrative purposes, JASON’s activities are run through the MITRE Corporation, a non-profit corporation in McLean, Virginia, which contracts with the Defense Department.”

    Another shill bought an paid for.

  42. lukas 42

    oh great… now we are being lectured on how 9/11 was all a big conspiracy of the Americans so that they could invade Iraq to keep the price of oil down…. oh wait, just looked out the office window at the petrol station

  43. T-rex 43

    I just came up with a new conspiracy theory T.

    The people who are really getting away with huge scams in the world invent crackpot conspiracy theories as decoys. People like you chase after them and ignore what’s really going on.

    You really ought to take his course.

    As the the energy content of gasoline.

    Gasoline: Energy/Ton = 44 GJ
    TNT: Energy/Ton = 4 GJ

    The difference is the rate of delivery of energy, or power. TNT has very high power delivery. Gasoline’s is relatively low, because it doesn’t contain an oxidiser, but can be increased if aerosolised. Look up Fuel-Air explosive.

  44. Phil 44

    “The goldsmiths found out that on the whole only 10 % of the people wanted their gold back so the bankers figured they could give out ten times more notes than the gold they had in their vaults.

    That is the bottom line of the fractal banking system.
    Mr. Gullible brings his wages (real wealth generated by mr. Gullible) to the bank and based on that real money the bank can loan out 10 times more. Because only 1 in 10 people will ever want to have their money cash in the hand.”

    Trav,

    This type of banking occurs in two places – history classes, and tinpot dictatorships.

    The French under the stewardship of Richelieu back in the days of Louis XIII’s reign is probably the best historical example of this, and Mugabe’s Zimbabwe is a current one.

    Google “Capital adequacy ratio”

  45. Pascal's bookie 45

    The current U.S. economic expansion is the first in 60 years that may end before many Americans have recovered from the last slowdown. Annual family incomes adjusted for inflation have grown just 0.8 percent since the end of 2001 even as the economy expanded an average 2.7 percent a year, leaving households little cushion to absorb higher food and fuel prices.

    “The average family hasn’t made up for lost ground,” said James Glassman, senior economist at JPMorgan Chase & Co. in New York. “We’re discovering people aren’t protected from inflation like they used to be.”

    bloomberg

    I sure hope they enjoyed their tax cuts.

  46. Phil 46

    Actually Trav, here’s another one for you:
    http://www.rbnz.govt.nz/statistics/monfin/rbssr/rbssrparta/data.html

    Total NZ Registered Bank funding
    that is: deposits from you, me, businesses, foregin entities etc:
    $303b
    (A1.5 + A3.3)

    Total NZ Registered Bank lending
    that is, lending to you me and all the other plebs for mortgages, lending to businesses, lending to foreign entities etc:
    $311b
    (A10.7 + A11.3)

    In what world does 303:311 equal a 1:10 ratio?

  47. T-rex 47

    Cheers for the stats Phil.

    It is interesting that their lending EXCEEDS their deposits – for example a fractional reserve system would (by my understanding) result in (lets say a 30:1 reserve is used) in $290b lent for $303b desposited, with a $13b reserve, but either way the general principle is obvious.

    Well trav? Any comment on this or the gasoline-vs-tnt thing?

  48. T-rex 48

    Got it now – you stopped adding too soon phil. Total liabilities equals total assets through contributions as necessary from associates. Assets held in reserve to ensure ability to meet instantaneous liabilities gives the fractional reserve ratio.

  49. Phil,

    You should check out the laws which the USA Congress has voted on with regards to the Constitution and it’s citizens rights. The USA is a tinpot dictatorship.

    I’ll get back to you on the stats.

    T-rex

    Yes, I agree with you about the gasoline TNT thing. Which is why a Physicist arguing that Gasoline delivered the explosive force necessary to explode the Twin towers into a pyroclastic flow in 10 seconds flat is ludicrous.
    In some cases Steel beams the weight of Boeings 747’s were flung into buildings across the streets with enough force to penetrate concrete walls of these other office buildings. The explosive energy was violent enough to sling these huge beams over distances of more than 60-70 meters sideways. Most of the Kerosene had burned of in the first minutes so were did the energy come from that allowed the beams to do what they did?

  50. T-rex 50

    I’ve addressed that in my response to you in a previous thread, so will not do so again here, save for to say “gravity”.

  51. No gravity is when something falls to the ground.
    It is not gravity when a steel beam weighing many many tons flies laterally out of the centre of a building penetrating another building more than 70m away, staying airborne for 8 sec. That is called an explosive event.

  52. By the way T-rex have you ever heard about the “spire”.
    This was part of the inner core beam structure of the North tower still standing after the rest of the tower had pulverised.
    After a few seconds this massive 200m. high construction evaporates into thin air. It doesn’t fall over due to gravity, it literally dissolves into dust to blown away by the wind. Here you can see it slow motion.

    Love this html stuff

  53. T-rex 53

    Take it to the other thread T, and while you’re there have a read of the stuff I wrote about the equivalent explosive force of two skyscrapers hitting the ground near the bottom here.

  54. Are you promoting the pancaking theory T-rex?

    That theory is untenable and would if it had at all be able to have happened been a much longer process. However it violates all three laws of motion so let’s forget about that one.

    The video’s show that nothing actually hits the ground at great weight. Less than 3% volume of the towers actually hit the ground at ground zero. The buildings were pulverises from the top down, and there are over a hundred aural histories recounting several serious explosions from the bottom up before planes hit the buildings.
    And here is more testimonies

  55. djp 55

    trav, Informative posts, thanks

    I had’nt seen that spire dissolve before.. also liked the way you describe fractional reserve bilking

  56. T-rex 56

    Jesus wept

  57. T-rex
    Why don’t you have a look at the Magically dissolving spire , it’s only a couple of seconds and I would like you take on it. How come 200m steel beams weighing tonnes can dissolve in mid air to dust and blow away with the wind.

    Cheers, djp glad to be of service. I hadn’t seen it before either but I was in Tauranga at a forum about 911 and a physicist by the name of Bob Anderson showed it to us. 70 people showed up for that presentation and apart of one lady they were all up and running on the subject. Quit impressive. I mean Tauranga. LOL.

  58. T-rex 58

    Travellerev, you’re thread jacking again, the discussion was on tax so fractional reserve banking was relevant enough. Take it to the other thread (I linked to it above) and I’ll reply there although you won’t like what I’ve got to say.

  59. Actually it was you T-rex saying you didn’t want to have another 911 discussion again. I was happy to stay on topic, you just didn’t like what I was saying and you tried to bully me by playing the 911 Conspiracy nut card hinting at the fact that I was just a nutter on the Federal reserve too and now that someone else thanks me for the information I gave you are bullying me again by playing the thread jack card.

    You ask me about opinions and I do the same to you. I am happy to engage and give arguments as to why your arguments don’t hold water but when I ask you to do the same you react by bullying. For your info everybody has moved on to fresher fields and newer articles so get of your moral high horse OK.

  60. Lew 60

    Ev, if T-Rex explicitly said he didn’t want another 911 discussion, how is your starting one his thread-jack?

    L

  61. T-rex 61

    “Actually it was you T-rex saying you didn’t want to have another 911 discussion again” – You appear to have missed the irony inherent to your quoting me here.

    I didn’t bully you. You’re just defensive, because you’re always wrong. This means you resort to name calling (as above – I gave a carefully reasoned explanation and you responded with your usual 12 page rant calling me a gullible sheep).

    Just a handy summary list for you of things you’ve been wrong about in this thread, which you almost never own up to.

    1) Fractional reserve banking – It doesn’t work how you thought it did either in theory OR in practise (as Phil kindly showed). You are wrong, and your video is a total crock.

    2) Your car – You have no grasp of experimental method or what a valid result actually is, and whenever I point on the flaws in your reasoning you just throw all your toys out of the cradle and, once again, resort to name calling.

    3) The energy content of gasoline – First you misinterpreted what the physicist was saying, then you accused me of being an idiot. You then started trying to attribute the pancake collapse theory to me, despite the fact that it’s already been discounted by the very people you claim to be guilty of conspiracy.

    4) The magic dust spire – It doesn’t disolve, you moron, it FALLS. You can SEE IT FALLING. Of course there’s dust in the air, did it ever occur to you there might be debris on it? You know, from the building that just fell down around it? What do you think happened to it – it was blown up? You think the evil conspirators planted explosives right up the entire middle of the building without anyone noticing? Muh.

    5) The flying beams – You think the energy came from an explosion when it obviously came from the collapse. You keep referring to laws of motion when it’s plain that you have only the vaguest grasp of them. Gravity is the force which does work on a falling mass, converting potential energy to kinetic energy. When something smashes into the ground, that potential energy is released. When you drop an egg onto a tile floor, it breaks and egg flies in all directions. You don’t need any explosives.

    By all means, talk some more, and I’ll add to my list.

    Actually I won’t. I just used up all my patience again. You are a total sucker and believe anything some idiot with a handycam and ten minutes up their sleeve shows you, while steadfastly failing to actually use your brain and ask “but…”. I don’t mind it when people question things as the result of new evidence, but you don’t. You just leap after any conspiracy that rears its head without doubting for so much as a moment the logic behind it.

  62. Hi Lew,

    Still think Depleted uranium is a good idea? Or was that Phil?
    Oh no they all sound the same. Patronising and pompous.

    Did you read my answer to T-rex? Oh no, you don’t have to because this fun yey, a group troll!

  63. T-rex 63

    Good question Lew: Because I tricked her into threadjacking! Muwhahahaha. It’s because I’m either a pawn or shill of BigOil (as evidenced by my tireless advocacy of electric vehicles) and am trying to discredit her and her friends disruptive hydrogen perpetual energy machine. When I’m not busy doing that I’m trying to defend banking cartels (like above, where I first questioned and then examined the systems they use) or discrediting 911 conspiracy theorists (which I confess to, proudly, but am SO tired of).

    See?

    All believers get their own magic talking unicorn.

    You’ll never see or hear him, because he’s invisible and really shy. And also has no mass, because otherwise CIA explosives would make him fly through walls 70m away. Dang ol’ CIA explosives.

  64. T-rex 64

    There you go again Trav – you invariably cast the first stone. Lew was perfectly polite to you, so you rip into him for being patronising and pompous.

    The problem we have is that it’s hard to remain nice when you’re totally abusive yourself and also so poorly informed it’s offensive.

    Let’s make a deal – we’ll be less patronising if you’ll be less dumb. You go first.

  65. Lew 65

    Ev: Lump me in with the Geneva Convention haters just because I’m calling you out for being unreasonable, then, it makes you look entirely sensible and sane.

    Yes, I did read your answer to T-Rex. My question stands. Feel like answering it, or are you just going to continue playing the victim?

    T-Rex: I’m all too familiar with True Believer Syndrome, sadly.

    L

  66. You guys are unbelievable.

    Here’s another documentary about the history of the New York Federal Reserve. Not that you will be watching it because Hey you know it all.

    In about a years time you are going to be thinking about this and wonder were it all went wrong. After the US attacks Iran, Fanny Mae and Freddy Mac have collapsed taking with them the entire western Financial system. Perhaps it will be when the first video’s appear off Americans being carted off to the FEMA detention centres by the drove and when Martial Law is openly invoked. Or perhaps it is after the tenth bank collapses in the states and it becomes clear that the Australian banks aren’t as stable as you thought and all of a sudden your savings have disappeared. Or after the Kiwis have elected Slippery John and Merrill Lynch and their Corporate buddies come to clean up New Zealand after which JK disappears to his Hawaii apartment. I will, with the utmost relish, say,”I told you so. LOL.

    Sad,sad people.

  67. Lukas 67

    Trav…you are blind if you think that the “beam” ‘disappears’ it clearly falls through the dust clouds that are there…may I humbly suggest a trip to the optometrist tomorrow instead of wasting your time on those not job theories you have going on?

  68. T-rex 68

    Trav, every time someone points out the gaping flaws in one of your theories you respond with something like “OH yeah? Well what about HALLIBURTON THEN WIZE GIY?”.

    That is called a hit and run. You are like Key.

    Banks are collapsing because they’ve lent money on high risk investments (mortgages that grossly exceed both the value of the asset and the ability of the holder to pay) and they are not getting the money back. It is grossly negligent lending, and corrupt. But once again you have no idea what you’re talking about.

    Go and put your near boundless energy towards something useful and I’m sure you’d acheive great things. As it is you’re just annoying. I think you’ve actually achieved anti-credibility; things are more likely to be true if you say they’re not.

  69. I can’t wait until the I told you so moment. LOL.

    T-rex did you mean the Halliburton that moved it’s headquarters to Dubai in 2006 and which happily dealt with Iran even though the US Administration was accusing it of all things ugly. Or the Bush family who is preparing an exit after the 2008 elections.

    Did you know by the way that granddad Bush was involved in a oh oops a “conspiracy” to overthrow the US Government in order to install a dictator a la Hitler and that he continued to finance and do business with Hitler and even made a profit of slave labour in Concentration camp Auschwitz?.

    George H.W. Bush worked for and headed one of the most conspiratorial organisations in the world the CIA
    In fact this memo confirms he was working for the CIA on the day of the Kennedy assassin oh and he had breakfast with Osama’s brother Shafig bin Laden. LOL.
    In fact the next day on 9/11 2001 Safiq was the guest of honour at the annual Carlyle meeting. The Carlyle group is one of the biggest war profiteers of the Afghanistan and Iraq war’s. In fact Carlyle was tasked with the rebuilding of Iraq.

    I’m sure it’s all coincidental you know, not a conspiracy in sight and all that but you know it sort of makes you think doesn’t it?
    The Bush’s sure do seem to have a penchant for “Cospiracies” don’t they?

    As for me being believable, if you don’t mind I will let the hits on my site do the talking and they seems to be steadily on the rise.
    Also the thank you’s of djp make it clear there is a need for information. You are the only what, four middle aged pakeha males having a go at me.
    So I don’t feel in the least daunted by your sad attempts to bully me into silence.

    For those of you who wanted to know why my comments without fail trigger a snigger fest from these four perhaps you would like to inform yourself with this video about the capitalist conspiracy

    If only to find out why even Hanover finance(former Elders bank were John Key learned the ropes of the Foreign exchange trade) collapsed yesterday.

    Captcha:B’way vigilance. LOL

  70. For those of you who want to learn how the international bankers elite set the western world up for collapse,
    this is a good start.

  71. T-rex 71

    No, I meant the other Halliburton LOLOLOLOL.

    Can you please go and spout this ceaseless tirade of crap on your OWN website (since it’s so popular).

    God. You’d be laughable if you weren’t so f*cking intrusive.

    “You are the only what, four middle aged pakeha males having a go at me.”

    First off, wrong in my case. Secondly, what the hell difference would it make? You’d still be just as stupid and just as wrong if we WERE all members of the same demographic group.

    OMG!WTF!LOLZ! THE GOVERNMENT IS FAKING A MOON LANDING! QUICK EV, ONLY YOU CAN EXPOSE THEIR CONSPIRACY LOLZ GO GET THEM LOLOLOLOMGCATZ!

  72. T-rex 72

    “On July 3, Kiwibank cut its key three-year rate to 8.79 per cent, citing strong growth in deposits to fund lending.

    http://www.stuff.co.nz/4629071a13.html

  73. lukas 73

    “”You are the only what, four middle aged pakeha males having a go at me.’

    First off, wrong in my case. Secondly, what the hell difference would it make? You’d still be just as stupid and just as wrong if we WERE all members of the same demographic group.””

    trav…im still in my 20’s…I plan on living much further than 50 so I don’t qualify for middle aged and ditto to rex’s second point

  74. T-rex,

    Yep, It’s the comfort zone. Who’s the sensitive little man then.

    Lucas

    I’m sorry to hear that you are so young. So young and already behaving like you’ve seen it all.

  75. lukas 75

    I guess things were much better in your day?

    Shame you are very naive and gullible for an old person

  76. T-rex 76

    “Yep, It’s the comfort zone. Who’s the sensitive little man then.”

    What are you ON about you crazy woman?!?

    Big fish in the tiny pond of your co-conspirators who can’t see their own hands in front of their faces unless Dylan Avery points them out in slow mo for you. The moment you have to talk to anyone who can question your totally flawed conclusions you abandon your arguments and retreat to insults.

    From now on I’m only going to talk to people at risk of being warped by your reeducation attempts, talking you you is a waste of time.

    GOD you’re stupid.

    wait for the mensa reference…
    |
    |
    |
    \/

  77. Phil 77

    Trav,

    In your last four posts, about half of the hyperlinks don’t work.

    I for one could use a good laugh (I have some popcorn somewhere around here too…) and would like to watch the links.

  78. Phil,

    Which links don’t work. I’ll replace them.

    T-rex,

    Shush shush, don’t get so exited. Little man.

  79. lprent 79

    T & T: I’m unable to decide if I should tone your debate down or not? While I understand the nature of the discussion….

    The level of personal ‘abuse’ keeps rising. It may give others bad ideas about what can be done on the site

  80. Yeah and guys, if you’re going to have multi-day debates can you do it on a thread that was long anyway? See, the blogosphere rankings work partly on the average comemnts in your longest thread each week… when burt and r0b went on at each other for 200 comments last month, that was awesome. Turned a 120 comment thread into a 370 comment thread. Good boost for our rating.

  81. T-rex 83

    Lynn – it’s ok, I’m done.

  82. Phil 84

    Trav, the ones that don’t show the little pointy hand. Wave the mouse over them and you’ll see the ones I mean

  83. T-rex 85

    I tried Steve! But apparently saying “let’s take this to the other thread” is bullying. Kind of like “let’s not have another one of those conversations”.
    I’m such a bully. Behold my head, it be drooping with shame.

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