Saturday, 30 March 2013

"absorption point" New Zealand's finest economist John Bell Condliffe was onto the banking pyramid scam 1930.

Bankers Pyramid Scam Is No New Thing For New Zealand Or the World.

John Bell Condliffe is one of the most decorated economists this New Zealand has ever produced. Below I have included his Biography and some very telling statements in regards to the detrimental impact of foreign credit upon our internal economy.

John Bell Condliffe was born in Melbourne in 1891 and came to New Zealand at the age of thirteen. He took his M.A. with First Class Honours in Economics at Canterbury University College, worked for a time in the Customs Department and the Government Statistician's Office and was appointed Lecturer in Economics at Canterbury University College in 1916. He enlisted the same year, went to France and after the armistice was a research student at Gonville and Caius College, Cambridge where he was awarded the Sir Thomas Gresham Studentship. During his absence on military service his position was filled by Sir Douglas Copland, who rose to distinction as Professor of Economics at Melbourne University.
Condliffe became the first Professor of Economics at Canterbury University College in 1921, succeeding Sir James Hight who held the Chair of History and Economics until the Chairs were separated in September 1919. In 1927 he resigned the Chair to become the first Research Secretary of the Institute of Pacific Relations in Honolulu. In 1931 he joined the secretariat of the League of Nations and wrote the first six issues of the League's World Economic Survey. After two years as Professor of Commerce in the London School of Economics he became professor of Economics at the University of California from 1940-1958. On his retirement he served for two years as Adviser to the National Council of Applied Economic Research in New Delhi and then joined the Stanford Research Institute until 1970.
He wrote several books on New Zealand, the most important being New Zealand in the Making (1930), The Welfare State in New Zealand (1960), and te Rangi Hiroa: The Life of Sir Peter Buck (1972). In 1939 he was awarded the Howland Prize by Yale University, and in 1960 the American Political Science Association awarded him the Wendell L. Wilkie Prize for The Commerce of Nations. Condliffe returned to Christchurch in 1973 to participate in the centennial celebrations. As an Erskine Visiting Fellow he delivered four lectures at the University of Canterbury which were to be subsequently published under the title Defunct Economists (1974).

Excerpts from New Zealand In The Making, A Survey of Economic and Social Development, by Professor JB Condliffe 1930
Chapter 4 Borrowing For Development;
Page 291;
It is not possible to estimate to what extent this decline is traceable to inflation of values due to excessive borrowing. So many factors are at work in the economic structure of the Dominion that the mere coincidence of heavier borrowing and falling productivity is not necessarily proof that the one causes the other. Both may be due, or partly due, to a common cause, such as the rising price level reaching a point about 1910 where speculation was encouraged to an unprofitable point. The fact that a similar check to productivity appears to have taken place in Australia under somewhat different conditions should call for caution in attributing the New Zealand phenomenon to purely local causes.
The whole problem affords an interesting example of what Stamp has called "economic stimulus". The fact that productivity declined heavily in the only similar period of heavy borrowing and active speculation in New Zealand's history, the period of the Vogel boom from 1879 to 1880, leads one to suspect that there is a point beyond which an undue amount of stimulant decreases instead of increasing productivity. Economists in Australia and New Zealand have developed the theory of an "absorption point" beyond which immigration causes a disturbance of economic equilibrium. It is fairly obvious that there is a similar absorption point at which the importation of borrowed capital sets in motion forces of speculation and unsettlement which more than counteract the extra productivity to be expected from improved equipment. New Zealand has ignored that absorption point with unfortunate results in her two periods of boom, the years following 1870 and the years following 1910.

Chapter 10 - Economic Functions Of Government 
Pages 326-27;
To many readers (and apparently the majority of people in New Zealand) this system by which currency and credits movements are regulated in accordance with economic necessity by skilled bankers, will appear more sensible than any proposals for political control or semi-political control through a state bank. It is at any rate perfectly clear that successive New Zealand Governments for more than thirty years have been, and still are, in a position to dictate the policy of the largest bank in the country, but have not taken any steps to do so. The public finances might have been relieved, the bank might have been given a monopoly of credit and note issues, the margin between borrowing and the lending rate itself might have been manipulated for political purposes, the margin between buying and selling rates of exchange might have been narrowed, and those rates might have been manipulated also. If the Bank of New Zealand had taken action along any of these lines the competing banks most have followed suit or lost business.
In practice the Government nominees on the board of directors have acted with fullest freedom along lines that are ultra-orthodox and conservative. Banking in New Zealand therefore, has been as unfettered as if the Government had not owned an important interest in the largest bank. It is in fact less fettered than in most countries. The various Acts and Charters carefully limit the right of note issue in accordance with the tradition of the mid-nineteenth century, when the unregulated issue of bank notes was chief cause of banking failures. There is no statutory recognition of the enormous change that has taken place in the development of credit issues and the relatively minor importance of bank-notes in a modern credit system. In the issuance of credit the bankers of New Zealand are regulated only by their own good sense and banking tradition.

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