Wednesday, 20 March 2013

New Zealand farm sales to foreigners objection not about nationality of buyers but about legitimacy of banking practice. updated

New Zealand farm sales to foreigners objection not about nationality of buyers but about legitimacy of banking practice. updated

Bank's need to prove we could ever repay in the normal course of business or we need to stop handing over our necessity of life resources under false pretenses!

In answer to a letter from Byron Dale in 1982 John M. Yetter Attorney-Advisor Dept. of the U. S. Treasury said;

“Money that one borrower uses to pay interest on a loan has been created somewhere else in the economy by another loan.”

The above statement makes clear that the essence of the current method by which the private banking system issues the money supply of most every nation including New Zealand is not dependent upon the relending of the deposits of savers but the creation and extinguishment of loans.

Korda Mentha the receivers on behalf of the banks holding the Crafer farm debt contracts are calling the shots on the terms and conditions of who the Crafer farms should be sold to ensure maximum return to the banks.

My question after anyone giving due consideration to the information contained below is, why would we be allowing banks to dictate anything when many figures at the highest level in New Zealand have admitted that the private banking system has been operating in a fraudulent and predatory manner?

Former New Zealand Reserve Bank Governor 1988-2002 Don Brash has said;

(Nov 1996 reply to information request letter to David Coote)

"Commercial bank deposits are created by banks’ lending. When a bank makes a loan, it will, in the first instance , deposit the proceeds to the borrowers account. Of course, the the borrower invariably raises funds to spend them, so the proceeds (deposit) typically will end up in a bank account of someone other than the borrower – often at another bank than that which made the loan. However, it remains that bank loan transactions ultimately lie behind the deposit balances that banks hold. By influencing interest rates, the Reserve Bank is able to influence the rate of growth in bank lending and hence the rate of (bank deposit) money growth."

(Feb 2012)“ Every form of recognised money today is the obligation of some central bank”

(April 2009 ) “Banking crises are not new of course – they have been a recurring feature of the economic landscape for many decades, indeed for centuries. There have been scores of banking crises even since 1945, though of course none with such far-reaching impact as the present one.”

“There was also a failure to understand the complexity of, and risks involved in, many of the products which were widely traded in recent years. This failure was almost certainly widespread both in senior management and on bank boards.”

“Perhaps the greatest need is to make bank failure a realistic option for banks which are today seen as “too big to fail”.

"Under present arrangements, some banks are too big to be allowed to fail, and that has been amply demonstrated in recent months. The problem is that too many bank directors and bank managers have traded on that belief, and will continue to trade on that belief. They have operated on the basis that they can take very large risks (sometimes even larger than they were aware of): if their gambles pay off, they reap very substantial personal rewards, and rewards also for their shareholders; if their gambles do not pay off, they may still reap substantial rewards in the form of “separation payments”; shareholders may get hurt, but at least depositors will be bailed out by taxpayers. That is a totally unsatisfactory situation. I have some sympathy with the view of Nassim Nicholas Taleb, the author of The Black Swan, who earlier this month wrote “Nothing should ever become too big to fail… Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and risk-bearing”.

Allan Bollard the current New Zealand Reserve Bank Governor since 2002 said in his book titled -CRISIS- One Central Bank Governor & The Global Financial Collapse – published Sept 2010;

“In self-interest, banks may encourage New Zealanders to take on more debt than is good for them individually or deliver more external liability than is good for the country.”

“The worlds financial system and the worlds economy are inextricably linked; a banking crisis hurts growth in the “real economy”

“The New Zealand business sector had been suffering. Profits were down across the board, staff lay-offs were in progress, investment had halted and firms were finding it hard to get funding. This was worsened by the banks’ response to the crisis, which had been to cut lending, abandon committed lines of credit and impose onerous terms and conditions on banking covenants.”

“Another governance worry related to the power and competence, or lack thereof, on the part of banks chief risk officers and risk committees. These officers assess the possible outcomes from any deal and decide whether the risks are acceptable under the banks mandated policies. We were now hearing about cases where risks had been miscalculated, procedures bypassed and officers overruled, all in the race for higher earnings.”

“Bad debts had started to emerge on their lending books. Most of these concerned small businesses or farms where borrowers had over-committed themselves at a time of high property and farm prices.”

“In the case of some of the agricultural defaults, we felt that certain banks had been over-optimistic and under-analytical in their lending, and we moved to tighten some of the relevant capital requirements for the future.”

John McDermott Deputy New Zealand Reserve Bank Governor said 5 May 2011;

“The crisis had also prompted a revival of interest by central banks in money and credit, whereas in previous decades central banks had paid less attention to monetary and credit aggregates”

“Overall, there has also been a recognition that credit growth over the past decade was excessive and a potential risk to financial stability given the build-up in leverage and rising asset prices that accompanied it. We are continuing to build our understanding of money and credit at the RBNZ, and its inter-relationship with both sectoral financial decision making and potential risks for the banking sector.”

Michael Cullen former Minister of Finance in Labour Government said (April 2012) in terms of the big banks, there has always been “a degree of pretence” around the idea the government didn’t stand behind them. “If they were systemically important in reality the government couldn’t afford to let them fall over. But no Minister of Finance is ever going to say that as Minister of Finance. It’s only when they’re old and clapped out and out of a job that they can actually say that.”

Michael Hudson former balance of payment analyst for massive international banker Chase Manhatten and decades veteran of international level supply side of money included this in a paper he presented at an Institute For New Economics conference attended by many high level economists throughout the international spectrum held in Berlin over weekend of 12-15 April 2012;

The fraudulent conveyance principle
“A broad guideline for writing down debts was developed more than two centuries ago in the American colonies. British speculators and sharpies eyed the rich farmlands of upstate New York and refined the practice of making loans to farmers against their crops. Their strategy was to call in loans at an inconvenient time (e.g., just before harvest), or simply to loan the farmer more than could realistically be repaid in the epoch’s low-surplus economy. They then would foreclose.

To cope with this problem, the colony of New York passed the Fraudulent Conveyance law. This was retained when New York joined the United States, and remains on the books today. Its principle is that if a lender makes a loan that the borrower cannot reasonably be expected to pay off in the normal course of business – that is, without forfeiture of property – the loan should be declared null and void, and the debt cancelled. The legal assumption is that such a loan was a ploy to gain control of property pledged as collateral, over and above simply earning interest.

The aim is to keep debts within the ability to pay, by placing an obligation on bankers and other creditors to make viable loans rather than covert property grabs. This principle has two major implications for today’s debt-strapped economies. It was cited in the 1980s as a defense against corporate raiders buying out stockholders with high-interest “junk” bonds. Victims of debt-leveraged buyouts claimed that there was no way that the loan could have been expected to be paid in the normal course of business and subject to existing employee contracts without selling off assets and, as noted above, downgrading their pension contracts with employees. The aim was to loot the company and leave it a bankrupt shell. The best-known recent case is the suit brought by Chicago Tribune employees against the real estate magnate Sam Zell who drove the company bankrupt and emptied out the Employee Stock Ownership Plan to pay his creditors. About half such ESOPs typically end up in bankruptcy through such financial sleight of hand.

The Fraudulent Conveyance principle may be applied to the public sector with regard to pressure brought on debt-strapped governments to sell off public enterprises to pay debtors. This situation is much like that of colonial farmers in upstate New York. Banks and bondholders have lent governments credit as if this were risk-free. This was done in the belief that if these governments have difficulty paying bondholders – especially in foreign currency – the IMF and other Washington Consensus institutions will step in and lend governments the foreign exchange to pay private-sector bankers, or simply strong-arm the sovereign debtor into paying, willy-nilly. Bondholders and banks are thus in the position of the British financial sharpies making ostensibly reckless loans in the belief that the local sheriff and other colonial officials would back up their property grab.”

So, I ask is the New Zealand National Party Government’s repeated accusations that New Zealand society is racist an intentional diversion away from the real core issue of banking practice they are reluctant to tackle?

Should the New Zealand Government revalue those properties based on the income that those properties can be expected to create in the normal course of business of dairying, as the banks should have from the beginning and offer them to New Zealand residents at cheaper rates of interest via Kiwibank.

Also reinstate the Land Aggregation Act that the National Government at the behest of banking sector proponent Ruth Richardson repealed in 1995. In the founding days of New Zealand there were two ideas in regard to land holdings that were promoted as being in the wider public interest. The quarter acre section being the minimum size as it would allow the household a reasonable level of self sustainability. And, a law regulating a maximum size of land any entity could own to prevent the landed elite and tenant peasant class system that had predominated so many other nations and keep alive the equal economic opportunity farming legacy for future generations of Kiwi’s.

As the receivers on behalf of the banks had stipulated that the farms be sold as a whole making it much harder for local citizens to afford we surely cant help but wonder if the interests of the senior elements of international private banking are that of the long-term interests of wider New Zealand society, and if not why we would keep pandering to them?

In November of 1996 then Reserve Bank Governor Don Brash was asked in an information request letter;

Pre 1961, I understand the New Zealand Governement could issue its own credit and control the terms of repayment ( interest rate, etc.) for major projects such as Hydro-electric schemes, etc. Is this correct?

Don Brash replied ” It is correct, and remains the case today.”

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