verview of how money is created in NZ
Is Money at the root of our big economic and social problems?
Campaign featured on prime time TV (7min)
IMF working paper explained (35 min)
Following are links to podcasts of interviews on National Radio:
A 13 minute interview on BBC radio four with Ben Dyson, the founder of Positive Money UK.
What's all the fuss about?
“Of all the many ways of organising banking, the worst is the one we have today” Sir Mervyn King, former 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 out of thin air 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:
This money creation process by the banks creates distortions in our economy and is the main contributor to rising house prices. We propose that the Reserve Bank issues our money supply, rather that private banks.
A Working Paper by the IMF titled The Chicago Plan Revisited - released in August 2012 provides a good background on the current system and on page 5 describes banks being able to generate their own funding as "an extraordinary privilege that is not enjoyed by any other type of business".
The IMF Working Paper endorses the recommendations from the Chicago plan and our campaign and our solution is based on the Chicago plan.
The one hour You Tube documentary reveals how money is at the root of our current social and economic crisis.
"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.
Why Should I Worry?
The impact of increasing debt levels may be lost on a lot of people. Follow this link to find out how it affects you.
What should we do?
We need to move from a debt-based financial system (money creation by private banks) where virtually all of our money supply (98%) is borrowed into existence and bears interest, to one of full reserve. Money creation by private banks requires permanent growth in the economy which is not possible in a world of finite resources.
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 SBS Bank just 0.8 per cent.
The TSB, The SBS Bank, the Co operative bank (formerly the PSIS) also create money in the act of lending whereas Credit Unions 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?
The Bank of England quarterly bulletin (March 2014) explains how money is created. Whenever a bank makes a loan, it creates a deposit in the borrower’s bank account, thereby creating new money. The bank says that this differs from the story found in some economics textbooks.
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 2015 registered banks in New Zealand made a profit of $5.17 billion which is $1,100 profit for every man, woman and child in New Zealand.
Approximately 95% of the banks’ profits leave New Zealand for Australia and beyond. This is a huge drain on our economy.
In 2008 registered banks in New Zealand made $3.26 billion in profit while the combined profit of the remainder of the NZX 50 back then (less the banks listed on the NZX 50) made 2.89 billion. (source: NZMEA – 2008 figures)
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.