“That this House considers that the continued issue of all the means of exchange – be they coin, bank-notes or credit, largely passed on by cheques – by private firms as an interest-bearing debt against the public should cease forthwith; that the Sovereign power and duty of issuing money in all forms should be returned to the Crown, then to be put into circulation free of all debt and interest obligations…” | Overview of how money is created in NZ | And from our UK sister organisation |
Following are links to podcasts of 30 minute Kim Hill interviews on National Radio:
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with economist and former currency trader Raf Manji on 12th November 2011.
http://www.radionz.co.nz/national/programmes/saturday/audio/2502425/raf-manji-money-and-the-economy.asx or http://podcast.radionz.co.nz/sat/sat-20111112-0810-raf_manji_money_and_the_economy-048.mp3
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with documentary maker Ross Ashcroft on the 5th May 2012 whose film The Four Horseman will be playing in Auckland and Wellington.
http://www.radionz.co.nz/national/programmes/saturday/audio/2517815/ross-ashcroft-renegade-economics.asx or http://podcast.radionz.co.nz/sat/sat-20120505-0812-ross_ashcroft_renegade_economics-048.mp3
What's all the fuss about?
“Of all the many ways of organising banking, the worst is the one we have today” Mervyn King, Governor of the Bank of England.
Speech on 25 October 2010 titled "Banking: From Bagehot to Basel, and Back Again" - page 18.
The numbers in your bank account were created by Australian banks (and to a lesser extent Kiwibank), not by the NZ government. Hard to believe? Ask Martin Wolf from the Financial Times – as Britain operates under the same system:
"How does it happen?
In 1844 the British Government made it illegal for anyone to print their own bank notes.
Under New Zealand law the Treasury is the only issuer of notes and coins. But these laws haven't been updated to account for the fact that almost all money now is electronic.
Because of this loophole, banks worldwide now have the power to create money, effectively out of nothing.
What should we do?
We need to move from a debt-based financial system (fractional reserve banking) where virtually all of our money supply (98%) is borrowed into existence and bears interest, to one of full reserve. Fractional reserve banking requires permanent growth in the economy which is not possible in a world of finite resources.
Herman Daly, former Senior Economist at the World Bank, endorses full reserve banking during an interview for the forthcoming documentary: Critical Mass.
Who creates money now?
- How does money get into the economy?
- How much benefit do banks get from creating money?
- How much of a cost do we pay?
Under the current system the power to create money in New Zealand belongs to Australian banks: Westpac , ANZ National , ASB (owned by the Commonwealth Bank of Australia), and the BNZ (owned by the National Australia Bank Ltd) who have a 92% share of the New Zealand banking market.
The three domestic-owned banks are relatively small as Kiwibank has a market share of 3.7 per cent, TSB Bank 1.3 per cent and Southland Building Society just 0.8 per cent.
The TSB, The Southland Building Society, the Co operative bank (formerly the PSIS) and Building Societies do not operate within the Fractional Reserve Banking System and only loan out the money they have on deposit.
The numbers in your bank account were created by Australian banks (and to a lesser extent Kiwibank), not by the NZ government.
How does money get into the economy?
Banks create new money (the numbers in your bank account) when they make loans. As the Bank of England says, "When banks make loans they create additional [bank] deposits for those that have borrowed the money." the Bank of England Quarterly Bulletin, 2007 Q3.
This means that nearly every dollar in the economy today was created when somebody went into debt. All the money that we need to trade, to buy food, and to run businesses, must be borrowed from the profit-seeking banking sector, at a huge cost to us, and a massive benefit to them.
Refer to the four minute 15 sec clip from our sister campaign in England “Positive Money UK” on "A simple solution to the debt crisis".
How much benefit do banks get from creating money?
In 2008 registered banks in New Zealand made 3.26 billion in profit while the combined profit of the remainder of the NZX 50 (less the banks listed on the NZX 50) made 2.89 billion. (source: NZMEA – 2008 figures).
Approximately 95% of the banks’ profits leave New Zealand for Australia and beyond.
How much of a cost do we pay?
This system works great for the banks, but not so well for us.
When Fonterra has a good year up to $1 billion above the expected payout is injected into the economy and New Zealand has a good year. Imagine if year on year $3 billion was injected into the economy. That is one of the lost opportunities for New Zealand which will be remedied with the proposed system.
It's the reason why:
- The average NZ adult owes $97,000 (including mortgages) almost 200% of the average salary
- 16.5% of the average family's income ($75,000 based on two incomes) will be spent on interest on this debt.
- Government debt now adds up to almost $12,500 for each adult in NZ, costing every two adult household approximately $1,600 in interest each year.
- In 1980, the average cost of a house was roughly 2.5 times the average household income. In 2007, a house cost roughly 6 times the average household income.
It's the major (but hidden) contributor to problems like poverty, debt, environmental breakdown, economic instability and other issues.
We have a simple solution to these problems - just fix the way banking works and we fix money, and remove some of the root causes of many other social and economic problems.