Wednesday, 6 March 2013

New Zealand’s proud history of pushing for an honest money system and monetary, banking and credit reform.

New Zealand’s proud history of pushing for an honest money system and monetary, banking and credit reform.

Compiled by Iain Parker 2012
Note – Normal text is written by Iain Parker. Italics are book excerpts as named. Bold text are points of importance;

Michael Joseph Savages (First New Zealand Independent Labour Party Prime Minister 1935-40) said in his 1920 maiden speech to Parliament;

The Government should create a state bank , and use the public credit for the public good as an alternative to borrowing overseas”

Twice Prime Minister of Canada – William Lyon Mackenzie King – spanning most of period 1921 – 1948 said in 1935;

Once a nation parts with the control of its currency and credit, it matters not who makes that nation’s laws. Usury, once in control, will wreck any nation. Until the control of the issue of currency and credit is restored to government and recognized as its most conspicuous and sacred responsibility, all talk of the sovereignty of Parliament and of democracy is idle and futile.”

Read on to find out what these two esteemed leaders were refering at the same period of time yet oceans apart and what relevance it still has upon our society today?

Many monetary, banking and credit reformers throughout New Zealand’s history have been able to agree that the cause of inequality, disparities of wealth and poverty among plenty has been a mathematical systemic wealth transferring pyramid scam of a banking system. But thus far have sadly lacked any viable cohesion of sufficient consensual agreement upon a solution.

Firstly, I will produce the irrefutable proof that the total repayment of debt is collectively impossible from the day it was born under the current international banking model. That there is always less currency of any form in circulation than what is owed to the financial sector as interest bearing loans. Thus a few insiders will win by design, a few more players will win by luck, but for most the the unaddressed compounding interest collectively marches them straight into debt peonage or debt enslavement. No different to a casino designed and owned by the house to favour the house by mathematical certainty. Only this is a casino that the populous have no choice but to play on a daily basis as it is decreed that its chips are the only thing accepted as payment of taxes.

This document from the New Zealand Bankers Association – Banking in New Zealand Fourth Edition published 2006, we can quite clearly ascertain that the bankers representatives quite clearly admit to the fact that there is never enough money in any form of currency in circulation to repay credit loaned by the financial sector;

From Chapter 4 The Creation Of Money And Credit;

The Traditional View of the Process
The traditional view of the process of creating money and credit is based around cash(i.e. Notes and coins)as the most basic form of money in a modern economy. A deposit with a bank represents a claim on it for a specific amount of cash. By acting as financial intermediaries and by providing non-cash means of settling transactions, banks and other financial institutions create more deposits and more credit than there is cash.
The process by which money and credit are created begins with a cash injection, represented by the cash injection arrow in Figure 4. We discuss the sources of such cash injections later in this chapter.
Money and Credit Aggregates
The creation of money and credit is relevant to banks primarily because it is the process by which their assets and liabilities are created. The Reserve Bank and the government have a wider interest in the total amount of money and credit in the economy. This includes the money and credit created by non-bank financial institutions in addition to that created by banks…….
The level of domestic credit exceeds the total level of cash and deposits as measured by the M3 money supply. This is because financial institutions fund their lending both by borrowing overseas and from other non-deposit sources(e.g., capital) in addition to using deposits.

As made clear in the following Jan 2010 Official Information Act reply from New Zealand Minister of Finance Bill English the cash injection referred to by the New Zealand Bankers Association above is the very same monetised debt we receive in electronic form from the privately owned primary bond exchangers that is then introduced into our domestic system via government expenditure to become our primary monetary base which then goes on to be expanded as even more created credit issued as interest bearing loans by domestic institutions that the international institutions often also have majority shareholding interests in;

Office of Hon Bill English

Deputy Prime Minister Minister of Finance
Minister for Infrastructure
1 8 JAN 2010

Dear lain Parker
Thank you for your Official Information Act request, received on 27 November 2009. You asked a”number of questions about the nature of government bonds; as well as about the nature of money and the banking system.
1. Could you please tell me what a Government Bond is and what role it plays in our economy?

As you point out on page 7 of your submission, New Zealand government bonds are wholesale, New Zealand dollar denominated, fixed-term debt securities. They are secured by a charge upon and are payable out of the revenues of the Crown. Cash received by government bond issuance is used to fund goods and services provided by the government, e.g. roading, hospitals and welfare payments. Government bond yields provide an indication of the “risk free” rate of return in an economy and provide companies and households a benchmark with which to compare returns against those of alternative investments.

2. Could you please tell me who in the world of high finance, as Primary Bond Dealers, has the right to buy or monetise government debt bonds before they decide if they do or don’t on sell them on the secondary bond market?

New Zealand does not have “Primary Bond Dealers.” The term “Primary Bond Dealers” refers to institutions that, for example, trade directly with the United States Federal Reserve, where they are required to participate when the Federal Reserve holds securities auctions. In New Zealand, the nearest equivalent institutions are called registered tender counterparties. The main difference between the US and New Zealand is that registered counterparties are eligible but not required to participate in government securities tenders.

To qualify for registration as a tender counterparty, an institution must have a minimum credit rating of A-/A3, or have their obligations guaranteed by a parent entity with a minimum credit rating of A-/A3, or be a Crown financial institution.
Tender counterparties are primarily either New Zealand or Australian incorporated banks.

3. Are the Primary Bond Dealers private or publicly owned institutions? That is not those that buy bonds on the secondary bond market, but the Primary Bond Dealers?

Tender counterparties are primarily private sector banks.

4. Could you please tell me what they use to buy our government bonds and if that medium of exchange existed before we pledged to pay it back with attached interest out of the future taxes of the nation or was it an electronic debt book entry, not anyone’s existing savings, but an electronic book entry that brings into circulation new money?

People purchasing government bonds must do so with New Zealand dollars. Settlement of the transaction between the purchaser and the Crown is by electronic cash transfer rather than physical cash. All else being equal, bond purchases result in a reduction in settlement cash balances of the banking system (either at commercial banks, the Reserve Bank or both) as cash is transferred to the Crown.
An explanation for how this cash may originally be created is included in the answer to question 5 below.

5. Is it true that in excess of 90% of the money supply in circulation in New Zealand entered circulation as interest bearing debt owed to the banking network?

It is correct that most of the money supply in New Zealand has been created by the banking sector. This is done through the process of financial intermediation. Commercial banks, and other financial institutions, take deposits from members of the public and firms who wish to hold cash in the form of bank deposits. They then lend to individuals and firms who want to borrow — in the form of mortgages or business loans. This process serves to channel funds between savers and borrowers. It also shifts the risk of lending from individual savers to the banks, thereby reducing the risk of lending.
This process of intermediation involves the commercial banks lending a greater value of funds than the cash they reserve to meet expected deposit withdrawals. This is done because at any one time only a fraction of depositors will want to withdraw their funds. Banks therefore need to keep only a fraction of their deposits in reserve in order to meet those demands. Because the banks lend more than the total amount of cash held in reserve in the system, credit is created – thus increasing the money supply.
The exact proportion depends on the definition of the money supply. Using the most common definition of the money supply as M2 (i.e. currency held by the public + balances in cheque accounts + all other business or personal deposits that are available on demand), the October 2009 data show that the part not accounted for  by currency held by the public is 95%.
Data on money aggregates can be found on the RBNZ website at:
http://www.rbnz.govt. nzlstatistics/monfin/cl /data.html.  

6. Prime Minister Key, could you please describe your activities as a member of the Advisory Board of the Foreign Exchange Committee of the US Federal Reserve between 1999-2001?

I refer you to the reply from the Office of the Prime Minister.

7. Could all please advise me if the US Federal Reserve and the Bank of England are privately owned institutions that sit within their respective governments or publicly owned institutions within their governments?

I refer you to the following pages on the websites of the Board of Governors of the Federal Reserve and the Bank of England respectively for this information:

8. Could you please explain to me the role and relationship of the American Financial institution — Northern Trust — in regard to it being appointed custodian of our own NZ Debt Management Office?

The New Zealand Debt Management Office (NZDMO) has appointed Northern Trust as global custodian for NZDMO fixed income assets. The appointment followed a competitive tender exercise which was completed in 2008. Custodian duties provided by Northern Trust for the NZDMO are standard for financial institutions and include: the provision of trade settlement services; safekeeping of assets; and other administrative functions.

9. Could you please tell me if in New Zealand, a “new” mortgage at issuance, before it becomes tradable, is loaned to a borrower by a registered bank, is that mortgage created as a debt book entry account, not anyone’s existing savings, but an electronic debt book entry creating “new money”?

The creation of a new residential mortgage will generally result in new money (bank deposits) being created. The bank grants a new loan to a purchaser, who uses the cash to buy property from a vendor. The vendor then may spend or save the proceeds boosting deposits in the financial system.

You also ask for a list of the names of the officials who contributed to this reply. I am
withholding these names in full under s.9(2)(g)(i) of the Official Information Act — to maintain the effective conduct of public affairs through the free and frank expression of opinions.

You have the right to ask the Ombudsman to review my decision.

This fully covers the information you requested. I hope you find this information useful
Yours sincerely
Bill English
Minister of Finance

Government Securities (Bonds and Treasury Bills) are currently issued and exchanged for the created credit of the private primary bond exchangers then pledged to be repaid out of future taxes of the borrowing nation. Many countries now have debts in excess of their level of sustainable natural resources to support enough commerce to ever tax enough to repay the ever compounding debt. The bankers are now insisting, just like pawnbroker shops, that the borrowers transfer real assets into ‘custodian’ banks such as Northern Trust, so they are easily at hand when the inevitable debt repayment crisis occurs.

You can forget about the tender process mentioned being of some sort of consumer protection in the decision of just which one of these ‘custodian’ banks you are going to pay to inevitably remove your necessities of life from you, as they are generally all cross-owned by the private primary bond exchangers.

That made clear we will now continue with the expose of the impact it has had upon the social and economic development of New Zealand. At a time in history at the end of WW1 leading into the Great Depression when perhaps more citizens than ever had become more widely aware than ever of the crimes committed against humanity by the privately designed and controlled international banking network, and what was to come if they went unimpeded, and not long after the Independent Labour Party had been formed in New Zealand(1909), another group of banking system reformers became internationally prominent from the 1920′s onward. The C H Douglas Social Credit movement were just as fully financially literate in the area of Monetary, Banking and Credit Systems, and thus the need for reforms. They however had some different ideas to those of the Labour Movement as to just what form those reforms should take.

C H Douglas defined ‘Credit’ as an ‘estimate of capacity to pay money’, I feel it is not wrong to define Productive Public Credit and C H Douglas Social Credit as two denominations of money. Many founding Labourite’s believed in introducing the Primary Monetary Base by spending it into circulation without private bankers compounding interest attached to build public infrastructure that provided the necessities of life made available free by nature as a public service. That portion of the Primary Monetary Base backed by the productive assets it created could remain in circulation as a grant providing the means of exchange for the citizenship and a store of value without causing inflation or having to risk ‘investing’ it to prevent inflation eroding its future value. There would then be a secondary level of Public Credit for worthy projects that would would be taxed or have a ‘simple’ interest attached to cover only the cost of administration of the monetary system and extinguish sufficient money from circulation as to suppress inflation should it occur.

Any simple interest would be significantly less than the usurous compounding interest charged under the present regime and any taxes significantly less having not to seek the means of repayment of ever increasing interest repayment caused by compounding interest, and the price of goods and services significantly reduced by reducing the cost of compounding interest factored into pricing. National internal economies would be able to balance themselves to the benefit of as many citizens as possible with exports being the secondary consideration, not the primary consideration as under the current foreign debt stimulus, export led repayment model that is an impossibility by mathematical formula.
C H Douglas put forward the evidence that there was a lack of purchasing power for the wider citizenship compared to what was able to be produced because of the current monetary system, especially after the increase of machinery in the production process. 

The ‘Gap’ as he referred to it was laid out in what he called the A + B Theorem. This was disputed by the financial spin doctors at the time, but after many decades of ‘Globalisation’ when the world, due to modern technology, is the smallest it has ever been, I say it takes little proving today given the fact that under the current compounding interest based debt regime growth has never over the long-term, apart from anomalies such as war and after bankruptcy imposed asset sales, exceeded the debt needed to unlock it. An estimated 24,000 people a day still die of starvation when the corporate inventory lines are full of food.

C H Douglas main ideology plank was working out just what the ‘gap’ was in dollar terms, then dividing that sum by the population, then spending Social Credit into circulation without the private bankers compounding interest as what he called a National Dividend, just like a ‘shareholder’ in a corporation all citizens were to get a share of the nations unlocked wealth as the event of the machinery age made their labours less required to help unlock that wealth. The National Dividend was to be issued without any work test.

Before Social Credit became a political party in its own right in 1953 Social Creditors used to inhabit the ranks of most political parties in New Zealand. Although the Independent Labour Party were very close in the need banking reform ideology, most of its members questioned the stability of issuing large amounts of Social Credit into the populous and counting on the populous not to go on a consumer binge that would still lead to internal disparities of wealth that would be as destabilising and as inflationary as the status quo. They also had their concerns about the lack of a work test out of concern that if everyone could get money without working many might choose not to.

New Zealand Independent Labour Party’s Productive Public Credit And C H Douglas Social Credit Are So Very Similar with few differences. Sadly those few differences have stagnated the effectiveness of the monetary, banking and credit system reform movement of New Zealand at a time when they need to be more effective than ever.

C H Douglas wrote this of the situation in – Break Down Of The Employment System – 1934

It will usually be found that when the quasi-practical objections have thus been disposed of, the objector discloses his real position, which is what he calls a moral objection, that he hates the very idea that anyone should be comfortable in this world without being made very uncomfortable in the process. Some years ago I had the experience of discussing these proposals with Mr and Mrs Sidney Webb, and after disposing, one after the other, of the objections raised to the feasibility of the scheme, I was met with an objection with which, I confess, I found myself wholly unable to deal, and I recognize that objection in the Labour Party Report on the Douglas proposals.”

Michael Joseph Savages (First New Zealand Independent Labour Party Prime Minister 1935-40) views as chronicled in – From The Cradle To The Grave – by Barry Gustafson 1986

Pg 146 – Savage read and quoted Keynes, and agreed wholeheartedly with Keyne’s suggestion that ‘the first necessity was that bank credit should be cheap and abundant’ if the economy was to be expanded and unemployment overcome. But he wanted a more of a permanent solution than Keyne’s subsequent suggestion of increased public investment financed through a budget deficit as a means of offsetting a temporary decline in private investment, thus maintaining or stimulating consumption and………

Pg 147….production in the short term. Savage believed in increased government expenditure on social welfare, public works, guaranteed prices to farmers and minimum wages to workers as a means of increasing consumption, demand and economic activity. But he also believed in balancing the budget as far as possible through supplementary, graduated, direct taxation; restrained borrowing; and credit creation.
Nor was Savage convinced that the answer to New Zealand’s economic problems lay in the monetary mechanism suggested by Douglas and the Social Credit movement, though he certainly shared their basic assumption that what was physically possible should be financially possible. Lee and some other Labour Mps, notably Langstone, Parry, Mason and Carr, found Douglas’s critique ‘identical with that of the Labour Party’ and Douglas’s National Dividend scheme similar ‘in every sense’ to Labours policy of increased and redistributed purchasing power. Savage, though not as critical as Holland, who believed Social Credits solution ‘would mean disasterous inflation’ had serious reservations and joined Holland in stating publicly that the Labour Party ‘ does not accept the Douglas scheme’.
Douglas emphasised a continuous creation and injection of credit to bridge what he claimed was a permanent gap between purchasing power and production, not a temporary flaw in the distribution of adequate means of exchange. Douglas also wanted an economic system that would provide the basis for individual freedom and a move away from the growing concentration of power in the hands of government, big business, banks and trade unions, all of which he regarded as conspiring against the people as a whole. Social harmony would only be possible when all the ‘useful people’ were able to enjoy the wealth they created, and that in turn would only be possible when the hidden but real government, the banks, had their financial powers stripped from them and new economic mechanisms were created to increase and distribute money and credit.
Savage, however, argued that the creation of extra currency and credit was useless and even dangerous if not accompanied by a redistribution of purchasing power and balanced by increased production. He admitted that ‘ The Douglasites have an idea that is atleast a step out of the orthodox rut, and to the extent that it is going to cause people to think we should welcome it, but to my mind it does not bridge the gap from where we are now to a free circulation of commodities, and that is the object of currency and credit generally.’
While Savage pressed for an increase in credit, therefore, he made it clear that, in his opinion, an increased supply of money on its own was insufficient; the use to which that money was put was all important. Savage believed that ‘ the careful use of public credit through the existing banking machinery for the purpose of national construction was paramount. what is wrong with the monetary system,’ he argued, ‘is that there is……

Pg 148….insufficient money finding its way into the pockets of the mass of the people, because I believe definitely that so long as private individuals control finance they control everything else. Banking has become an integral part of industry, and the bankers govern the situation, and whatever steps may be taken by Parliament to relieve or assist industry may be nullified by refusal of credit by those controlling it.’
Savage concluded, reflecting the influence of Fisher and Soddy rather than Douglas, ‘I do not know that there is much wrong with the present banking system except the control of it. That is what matters in the finish.’ Only when the state, not private banks, control the money supply could it be expanded when necessary and directed into productive not speculative areas of the economy. Only then, Savage believed, could there be stable, sustained sensible growth in the economy. ‘Parliament can, and should, be the master in financial affairs,’ asserted Savage, and by Parliament he meant the whole of Parliament, not ministers using regulations that led to ‘comparative autocratic Government’ or commissions and boards not directly responsible to the voters.
Savage believed that credit creation, which would supplement not replace taxation and loans, would be non-inflationary only if ‘carefully applied to reconstruction purposes’ and used ‘wisely and economically.’ Over dependence on or excessive use of any single method of funding government expenditure – excessive taxation, excessive borrowing, excessive credit and currency creation – were all equally objectionable and as dangerous in Savages view as an insufficient supply of purchasing power.‘Artificially created credit must be guarded against’, especially, because it was no ‘remedy for a condition which is often due rather to insufficient collateral security, a fall in prices, or unsatisfactory farming.’

So there we have Savage in disagreement with Douglas. It must be said it would appear a rather confused and contradictory Michael Joseph Savage at times. Perhaps that is why the next excerpt from the book – Simple On A Soap Box – by John A Lee 1963 proves that he differs and disagrees with both Savage and Douglas as to how public credit should be issued. It must be noted that Barry Gustafson implied John A Lee totally agreed with C H Douglas Social Credit when from his own writings below it is clear he did not;

Pg 133 – As the 1928-35 economic crisis receded the electorate remained pronouncedly conscious of monetary theory, of rates of interest and of development by State credit rather than by recourse to higher borrowing rates. The British Labour movement had the same lively awareness. G. D. H. Cole, Arthur Henderson and many other socialists who rejected the Douglas Credit mythology had become genuine social creditors. I distinguish between social credit and mystical Douglas Social Credit. The clamour for more intelligent use by the State of its own resources and for lower interest rates continued across the world, in the wake of the depression, until it was submerged in the clamour of the Second World War.
Our caucus resolution not only ordered exchange control but also that there should be no increase in the interest rate without the consent of caucus. But we did not trust the Old Man or Nash. Labour movements the world over had not recovered from Ramsay MacDonald’s and Philip Snowden’s determination to place the gold value of the pound above a life-time’s loyalty to Labour (even though the gold standard was abandoned a week later). During the election the Old Man at his vast evangelic meetings had made emotional affirmations, between the cheers, of his determination to use the “internal credit of the people” for public works, indeed for “loan-free public works”, and had repeated assurances that Labour intended to reduce interest rates for public development.
But from the moment the M.P.s returned to their homes inspired news paragraphs started to suggest a return to orthodoxy to deal with our exchange crisis, a greater rate of interest to attract funk deposits, and maybe a lesser use of credit in New Zealand, a policy which contradicted everything Labour had…..

Pg 134……..said about money since 1928. All this was easy for Walter Nash to swallow, but not for the rest of us. We knew that, sentimentally, the Old Man was with us, that he always talked our way, but we knew that in fact he would defend whatever brief Walter Nash put into his mouth. Any suggestion of a credit squeeze was abhorrent to us.

Pg 53 – During a budget debate in the depth of the depression Savage, Nash, Parry and McCombs had tabled a resolution in caucus. They wanted the Labour Opposition in Parliament to move that a certain sum of money be borrowed on the security of the unemployment fund and used to alleviate distress. The time had arrived for a challenge. I became very active and lobbied every Labour M.P. I ensured a big caucus attendance.
We would move, as an alternative,that credits be advanced by the Government-owned Reserve Bank so that we could invest our materials and idle man-power surplus in socially-owned construction. We could see no reason at that moment for borrowing at a rate of interest. Surely the time had arrived for an Issue of credit. Australian Labour was talking `issue’; in Britain tracts on money reform were flowing from Labour pens. In a world of plenty the dispossessed had no money. Even Roosevelt, later, talked our language. We thought the moment had come for the people to claim rights of issue for their own bank. The goods existed, why not create credits?
Caucus, when it met, divided in a bitter debate in which Savage organised the advocates of borrowing and I the faction in favour of the state issue of credit. Caucus was was adjourned four times. I think every member insisted on speaking. At the third meeting Harry Holland, then Leader of the Party, espoused our cause. I saw M.P.s taking their coats off to one another in that caucus, so bitter did the conflict become. The Savage-Parry-Nash-Fraser-McCombs resolution went down to a humiliating defeat, only Fred Jones of Dunedin South supporting the resolution. Nearly thirty Labour M.P.s voted for credit issue including Harry Holland himself. We moved accordingly in Parliament.
Out of that debate had come a new finance policy in which, I am convinced , Nash never believed. In 1935 the Labour Party affirmed that the Government should have sole right over the issue and control of new credit. But in the meantime Holland had died. Savage, the oldest surviving private and deputy, had become Labour Leader and was on the road to the Prime Ministership. He never forgave me the humiliating defeat I had organised. Prior to that caucus Savage used to tell everyone, both publically and privately, that I would be one of the first chosen in a Labour Cabinet. After the defeat I knew that only a caucus vote would compel Savage to accept me. He became unfriendly from that day on.

Pg 58 – Factory production had become unprofitable. I wanted to see money issued for essential works until production flowed once more. I did not want to take over factories. I did want us to take over banking and the issue of credit. I did want us to use our credit to finance work so long as unemployment existed. I objected to New Zealand being made bankrupt because prices had fallen overseas. We should maintain our own price level and with it solvency. This attitude to price was indeed the genesis to our guaranteed price scheme. Twenty other voices in caucus urged the same thing I did.
But alone, perhaps, I sensed that if we issued internal credits and did not establish exchange control and import selection our credits would create demand for imports in excess of our London funds and create a financial crisis which would bring the Labour Government to its knees when it set out to renew London loans. To me exchange control and import selections, so that we could control the flow of credits and imports and maintain a reserve, was absolutely essential to socialist financial policy.

Pg 68 – I am sure that much of Labour’s success is a consequence of good or bad times. Labour was good for business after Nationalist bad business. The average Labour MP did want to restore purchasing power to the masses and that was in itself a fruitful idea. But there were no ideas as to how to change or gradually transform the economic system so that increased production could spell expanding incomes and greater leisure and fewer depressions by breaking the cursed cycle of capitalist inflation-deflation. For half a century Labour in Britain, Australia, and New Zealand had talked of socialising ‘the system’ but when the moment came for modest doses of the socialism for which the electorate had granted a mandate Labour either did not know or where there was knowledge, did not have the courage to make changes.

Pg 77 – A few days later the PrimeMinister sent for me again. Nash had come up with a proposition. We will make you the Under-Secretary in charge of housing. You will handle housing business as though you were a Minister. You will present housing to Cabinet, you will deal with housing business in Parliament. Walter will be your Minister, but he will be going to England by the time you get started and it will be up to you. We will introduce legislation the moment Parliament settles down. No one will get in your way.”
Will money be available from the Reserve Bank?” I asked.
This was a contentious Party issue. With tens of thousands of men on relief work the Labour Party, Nash and Fraser apart, believed that the funds of the Reserve Bank should be used for essential capital works until available men, machinery and materials were being fully employed. We wanted to undo the politically enforced Banker’s deflation. Nash wanted to stabilise deflation. We did not want to create money when men, materials and machinery were being fully engaged; at that point we believed the cost of works should be met out of revenue. But we were not prepared to create debt as long as goods, machinery and men were idle. That was the moment to use public credit.
Money will be made available from the Reserve Bank.” The Prime Minister made the promise.

Pg 90 – Although the power to underwrite and arrange fresh borrowings has been availed of rather than the power to make new issues, except where the issue is an overdraft, such as has been arranged for the dairy industry account, one definite issue has been arranged for. The Government has instructed the Reserve Bank to make five million pounds worth of credit available for housing purposes. These funds will be drawn upon by the Housing Account of the State Advances Corporation. All the funds so advanced will be used to create new assets in the form of houses and a straight out issue of money for the creation of such assets was considered justifiable. The instruction to the Reserve Bank, according to the Hon. Mr. Nash’s statement to Parliament, specifically prohibits the Reserve Bank from negotiating the sale of any portion of this issue, so that the whole issue is to be new money upon which the interest earned will belong in its entirety to the State. And the houses, of course, will belong to the State.

Pg 91 – In the halfway house of socialism-capitalism the evils of both systems are likely to afflict us if we are not careful. Labour must stimulate the production of such quantities of goods as are necessary to New Zealand’s welfare at an even higher standard. Capitalism cares only that the transaction yields a cash profit. To use a money machine to only create capital works and leave consumption goods to private finance is dangerous. Hence at some stage Labour must give effect to the Prime Ministers intention of making credit available to secondary industry. Production that may not be profitable at the overdraft rates of the trading banks may be so socially desirable as to necessitate freeing it from the profit system so that quantities can flow to the extent required by the nation.
(Incredulously John A Lee who had contributed so much to the Labour Party and kept them on track to keep their promise of needed fairminded financial system reforms would go on to be thrown out of the party by union leaders who became all powerful due to acquiring the compulsory union block vote at Labour Party conferences and who Lee had criticised for gaining so much for contributing so little);

Pg 178 – Preparations were being made for the 1940 Conference; branches were appointing delegates in record numbers. I could count my friends by the hundred. Branches were three to one behind me (apart from areas where Catholic Action groups had intervened because of the rumour that I opposed the Old Man’s conversion). They sent me unsolicited promises of support.Dr. McMillan thought my article a good one and printed 1,000 copies of Psychopathology in Politics which he intended to distribute to Conference.
Some members of the National Executive, behind my back, grew active. Up till then there had been no card vote in the Labour party of the type that existed in Britain. Unions were allowed at Conference a number of votes proportionate to their membership. To this end their leading delegates were provided, at the opening of Conference, with a card showing the number of votes each could poll on behalf of his union. But full voting power could only be exercised if all the union’s branches were represented at Conference by delegates. Now a move was started to allow union presidents and secretaries to poll the full vote of a federation without such representation and without evidence that its members had been consulted.
James Roberts and David Wilson brought forward a proposal to allow the full card vote in such circumstances. The Party’s constitution clearly provided that alterations to the constitution had to be notified to branches by prior remit. Roberts and Wilson proposed to amend the rules by providing for the card vote in the Executive Report with which Conference opened. Endorsement of the Report would automatically amount to acceptance of the new provision. This was clearly a means of amending the constitution never contemplated. I knew that the jury was being…..

Pg 179 ……..loaded against me before Conference, but I was powerless. A member of the Labour party cannot apply to a Supreme Court for an injunction to prevent an illegal alteration of the rules, even when he knows the change is being made in order to hang him.
They altered the rules regarding the composition of the jury after your trial was started,” a judge of the Supreme Court was to say to me later.As Conference drew near, so did Savage’s death while the Standard still assured Party members that he was in full charge of business. The daily press, however, was beginning to suggest that the Prime Minister’s condition was critical. Some of my following began to desert me. One member had written telling me he thought Psychopathology in Politics was one of the best things I had done and hoping that I would not “run away from its truth”. He went to earth as fast as political heels would carry him. It had taken him a lifetime to become an M.P., so who am I to judge him ?Nor did he ever raise his voice publicly afterwards, although he sent me many private and friendly communications. I do not blame him. The card-vote magnates were to be powerful in possession of tens of thousands of unconsulted votes of their members many of them conscripted into their unions by the compulsory legislation.
Intransigent as ever, Dr. McMillan wired from Dunedin that he had been informed that the Prime Minister’s life could only last a matter of days or even hours, and that an attempt would be made to end my political life.As Savage showed signs of dying before conference ended, Fraser made up his mind that I had to be expelled before Savage died.
Expulsion from the Labour Party is much like excommunication from the Communist Party or the Mediaeval church. The world is invited to spit upon the sinner. He has passed beyond the portals of decent treatment.

Pg 162 – My reason for telling the truth about the Old Man was not any wish to be a hero. I have never wanted to be one. Whenever I have heard young children recite:
For how can men die better than facing fearful foes,” I have always mentally interjected, “ In bed, of old age, at peace.” I remember the day I won my D.C.M. At Messines. The line was held up, men went to earth. I jumped up. It was the only thing to do. No doubt an odd one had jumped up before me and had fallen with a gut full of machine-gun bullets. I jumped up because forward was the only way. As I jumped up to run I heard a voice, despite the thunder of the guns, say, “There goes a fellow for the V.C.” an observation that had not the slightest bearing on my conduct. I would not have risked a finger for twenty V.C.s. What I did was merely commonsense.

Pg 275 – If capitalists are still afraid of Labour as a conspiracy to overturn the profit system let them sleep in peace! The trade union magnates plan big unions and want power within their organisations. They do not inspire the Labour Party to action. They are only hangers on. They have rich appetites, they are more like the cartoonist Edgar Dysons fat man than the capitalists themselves. The idea that they are capable of a revolutionary conspiracy is unbelievably funny. Union secretaries are the new conservative class; they hate agitation. They love unions so big that the controllers are beyond reach of the rank and file, safe from criticism.

Pg 276 – Is Labour a conspiracy? Labour these days accepts the existing system. The only case that Labour puts forward is about how tax proceeds shall be shared. The present important task of Labour, and I am not belittling it, is to humanise the capitalist system, not to socialise or control it. Most of the M.Ps these days know nothing of capitalism or socialism. They have never read a tract on the capitalist crisis. Their loyalty is not to an idea, but to machine, to a job as an M.P.
end excerpt

So as the New Zealand Independent Labour Party head down the path to become the imposters they are at present, who would not currently seem to have a clue of their long lost founding ideals that are even more needed today than ever for the very same reasons. To the point that Private Public Partnerships as a means of finding money to build public infrastructure sits officially in the economic policy section of its 2008 election manifesto.
At the point it had become clear that Labour had abandoned its Productive Public Credit reform credentials it appears that both Public Creditors and C H Douglas Social Creditors gravitated to the only remaining option, the Social Credit Party. They had some great success before the advent of Mixed Member Proportional(MMP) voting system. Polling 21% of the vote in the 1981 election but only winning two seats in Parliament, a major reason MMP came about by national referendum vote.

In my studies of the monetary, banking and credit systems, before I knew of the New Zealand Labour Party’s history of Productive Public Credit, I stumbled across the modern spin off of the original Social Credit Party, now the Democrats for Social Credit(DSC). Before knowing what I now know, I stood for DSC as a candidate for Taranaki King-Country in the 2008 election. An experience I don’t regret as I thought they were the only credit reform option in the nation at the time with any history and infrastructure, and I met some of the most decent civic minded tireless people you would ever wish to have in your trench.

The sad thing is, knowing what I now do of the wider history of credit reform in New Zealand, I am amazed that Social Credit did as well as they did over the years given the factional rift in the party over just what form that credit reform should take, that of Labourite Public Credit basis or that of C H Douglas Social Credit including a National Dividend Payment without a work test. Also disagreement over the practicality of a Financial Transaction Tax(FTT) The Party in my personal opinion is stalemated to the point of probably never again gaining traction.

In my personal opinion I now deem Productive Public Credit as far more viable an option over that of C H Douglas Social Credit. At the risk of offending those I never wish to, but know it must, I feel that the clinging to the fundamentalist ideas of C H Douglas have made the Social Credit Movement easily ridiculed by co-operatives of predatory foreign lenders. I also believe that Productive Public Credit if implemented alleviates the need for FTT, thus could put the debate to rest. I feel this allowed the likes of Bob Jones to easily dent DSCs popularity so much so that it contributed to the Party voting to change its name to the Democrats in 1985.

All credit reformers know the importance of having your own national bank with its own clearing house software for transfer, payment and settlement to deliver your own public credit money through. The Democrats must be congratulated for their part in the formation of KiwiBank in 2001 when they were part of the Alliance Party in coalition Government with Labour in 1999. The Alliance Party broke up toward the end of the term. The Democrats renamed themselves the the New Zealand Democratic Party for Social Credit or Democrats for Social Credit in short.

New Zealand, 2011, is facing its darkest hours at the hands of the international private banking network and their subsidiary multinational corporations and knowing what I do now of the history of credit reform in New Zealand I feel the best hope of success of ever having any success in the urgent time frame needed is for every credit reformer with a knowledge of monetary, banking and credit systems, in the interest of credibility, drop the C H Douglas Social Credit and hammer home to the grassroots of Labour in a concerted campaign the founding ideals of the Labour Party that are even more needed today than ever for the very same reasons.

Any MP that can be proven to have read the irrefutable proof of the current co-job pyramid scam of a financial system we are subjected to and continues to ignore or support it will have an articulate money reformer put up against them at the next election. Anyone MP who challenges the con-job pyramid scam for what it is will be supported.

Michael Joseph Savage explaining John A Lee’s State Housing Scheme funded by Productive Public Credit, the National Opposition Leaders remarks after it was done and Walter Nash’s comment twenty seven years to late should assist anyone wondering just how to articulate such an incomprehensible proposition for someone with no financial system knowledge whatsoever in order they might be able to understand it;

Man to Man by Tom Skinner 1981 – Michael Savage explained the State housing scheme to Tom Skinner of the (New Zealand) Federation of Labour as such;

Pg 45 – “I was with Joe on one occasion when he began chatting about the ramifications of the Governments State Housing Scheme. He told me … how the construction of those houses created assets in a productive way. The Government created the money through the Reserve Bank at a moderate rate of interest to cover the contract price, which paid for materials, tradesmen’s wages, the purchase and development of the land and all the other essentials required to finish the house. On completion the house was transferred from the Housing Division of the public works department to the State Advances Corporation – in effect from one department to another. The corporation was the renting agency responsible for selecting the tenants, collecting rents and maintaining the house and the property. The philosophy was that as the money was created for productive purposes no loss could occur if it were not repaid from one department to another. Meanwhile, during construction, tradesmen had been paid wages which had been spent and absorbed into the economy. But it was solid money backed by the creation of assets. People had been kept fully employed while the government built homes for the people.
Tom Skinner;
While Joe spoke I began suddenly to grasp the Labour philosophy related to the creation of credit. It set me off thinking about money and what it meant to the economy. The Government, figuratively speaking, could rub a state house debt out of the books because a building stood in its place. But money created by the banks in order to gain profits in the form of interest was the other side of the coin. It was unproductive, inflationary creation of money if unmatched by equivalent goods and services…..”
I have read and believe that monetary mismanagement is the greatest evil of our time. It breeds injustice, increased costs and, as the root cause of inflation, it diminishes the value of our money. Governments should carry out their pre-election promises and take the necessary steps to reform the monetary system. It can be done only by making the State the sole authority for the issue of currency and credit….. unfortunately, in this area politicians seem to be abysmally ignorant of elementary financial and economic truths.”

From The Cradle To The Grave – A biography of Michael Joseph Savage (First New Zealand Labour Party Prime Minister 1935-1940) by Barry Gustafson 1986;

Pg 198-9
The National Opposition (1936) was astonished by the use of Reserve Bank credit for housing, which disregarded traditional principles of budget finance. Forbes (George Forbes ex Prime Minister 1930-5 Great Depression era) admitted confidentially to Stewart (William Downie Stewart Jnr – Finance Advisor);
This places them in a unique position, the houses after erection carry no interest on capital cost, and for instance a thousand pound house can be let for 5s per week and be a financial success. The millenium seems to have arrived and it makes one wonder why we had to struggle in the bog, when there was such an easy way out of our troubles, houses, after being built with the highest paid workers in the world, at the lowest cost heard of, makes our policy of orthodox finance seem almost prehistoric.”

In July 1962 the leader of the Labour Party, the Rt. Hon. W. Nash, made a lengthy statement in which he said;
Consistent with the needs of a sound economy, the State should create and use credit at the cost of issue for purposes of approved capital development. We are satisfied that the use of Reserve Bank Credit, within the limits set out is not only justified, but has already contributed much towards the Nation’s economic well-being.”
Thus, 27 years too late, Nash accepted the policy on which Labour was elected in 1935.

Surely now the onion is beginning to peel to such an extent that even the slightly financially literate can now see, as opposed to sense, that something is just not right!
The exchange between New Zealand Prime Minister John Key and Leader of the Opposition Phil Goff earlier this week (November 9 2010) regarding the NZ dollar was very enlightening:
Labour leader Phil Goff earlier reiterated his party’s proposals on monetary policy, saying it should not just be reliant on the current objectives and the current tools.
Clearly the [NZ] dollar is at such a high level that it’s helping to destroy the manufacturing industry in this country at the moment,” Goff said.
We have to take that seriously and I would expect the government, with its army of bureaucrats, to have some answers, so far we've seen none,” he said.
Key later retorted that Goff was talking about the same ‘army of bureaucrats’ that worked for Labour when it was in power.

The above is very insightful in openly disclosing that the monetary and economic advisory bureaucrats overlap governments. In fact many have been behind the scenes for several decades. Research back even further you will discover that unto 1951 we had an upper house referred to as the Legislative Council. For most of its existence it was the conduit of the London Colonial Office made up in the main of members of the financial sector including the private owners of the patriotically named Bank of New Zealand – Thomas Russell and Frederick Whitaker who were involved in many well documented legislative abuses and Maori land grabs to line their own pockets that all of society are struggling to fix unto this day.

After New Zealand had suffered the indignity of two receiverships at the hands of our foreign bankers in 1961 and 1984 Rob Muldoon who was very aware of the historical predatory actions of the banking elite included the below excerpt on page 34 of – The New Zealand Economy, A Personal view, by Rob Muldoon 1985 – which was very much an account of his attempts to prevent what occurred then and is again occurring now. If anything Rob Muldoon was guilty of the most I would suggest it was underestimating the depth and breadth of their global influence:

We announced that we would be joining the International Monetary Fund and the World Bank and a principal reason was that it would give us access to drawing rights. Although this had not been in our election policy, we carried out our policy by appointing various advisory bodies in the economic field, the principal one being the Monetary and Economic Council, a three member council with supporting staff which had the task of advising the Government on matters of economic policy, but most importantly, the right to publish its advice, in various forms, with various amendments to its composition and order of reference, the Monetary and Economic Council and its successors have continued up until the present time.”

The successors to the Monetary and Economic Council that Muldoon wrote of are what we now know as the Treasury which encompasses all monetary and economic central advisory agencies. Many of the bureaucrats involved in the receivership and structural adjustment programs of 1984, imposed by the international bankers ‘heavies’ the IMF, are still there today. Those ‘reforms’ breached our walls and allowed the unfettered free market to charge in. Those that colluded with them then have never stopped in their choice to suck up to the foreign raider over protecting wider society for personal gain.
Those bureaucrats hoodwinked an almost completely financially illiterate 5 th Labour Government in their last shot at the helm. They all but carried on their merry way to total control. They will no doubt be beside themselves with glee that they now have one of their own back at the helm.

In recent times we have seen numerous headings of Ireland Mourns Loss of Sovereignty. Article’s that sum up the aftermath of when a nation is loaned excess created credit by the financial sector to what is mathematically physically repayable.

Upon entering circulation that monetised debt is then channeled into the personal accounts of the very same banks subsidiaries and their collaborators via ‘rigged games’ within the ‘game’ of ‘financial quackery’ with the debt obligations being transferred to the public via the taxation system. Privitising the profits and socialising the losses.

What is alarming is the part that our current Prime Minister John Key played in the hollowing and gutting of Ireland whilst a senior executive at the financial institution Merrill Lynch. Even more alarming is that in 2005 he expressed just how much he wants New Zealand to follow Ireland’s example in an interview with New Zealand Herald’s Fran O’Sullivan:
Why not have an offshore banking industry based here?” he asks.In the right conditions you could attract 200 banks to register here – each with a CEO and staff. You could attract insurance companies. Bring back lots of Kiwi accountants and lawyers. Single out clusters – such as high-class yachts – or other special sectors as the Irish did.”
Key is clearly on a roll as he lists the options New Zealand could explore if it decided to abandon outdated ideology and take a more pragmatic approach to growing the economy.
The former investment banker knows what he is talking about.
As head of global foreign exchange for investment giant Merrill Lynch he shifted a considerable amount of his business to Ireland in the mid-1990s to take advantage of a 10 per cent tax rate for foreign investors.
The investment was a runaway success.
We transferred across the aircraft leasing business, the complex interest rates derivatives business, the entire back office for global foreign exchange and a huge chunk of private clients’ business,” says Key.

Just in case you thought John Key has changed his mind on turning New Zealand into the next party central money laundering tax haven for his banking buddies, you had best think again. In another article by Fran O’Sullivan December 2 2010 John Key again showed his true colours when observed at an international business forum:

Key is confident New Zealand will be able to attract financial funds to place their back office administration here saying a chief executive of one of the world’s most powerful banks had told him: “If you are prepared to zero-rate foreign funds that are not invested in NZ, we’re going to move $2.5 billion of funds here in two years because you’re 50 per cent cheaper than Australia.”

But there is hope right? Labour will use the current glaringly obvious discrepancies to cease the moment and go on the offensive in the wider national common interest, sadly I wouldn't threaten to hold your breath until it happens. When I suggested to David Cunliffe that he should expand his Monetary and Economic Council to include the very well credentialed Michael Hudson, David C Korten, Margrit Kennedy and pursue the very founding ideals of the labour party even more needed today than ever for the very same reasons, that of monetary, banking and credit system reform, he basically replied that we must be very careful upon who's advice we act and that he listens to many people, specifically mentioning current IMF Chief Economist Olivier Blanchard.

Olivier Blanchard is very relevant to this post. In a recent interview on CNBC he made some very insightful comments including supporting nation’s vulnerable to large unpredictable capital flows taking capital flow control measures.
He sadly also very much supports the current ‘orthodox’ using the cost of interest upon money to influence the level of demand whilst completely ignoring the issues surrounding quantity of money in circulation.

The bottom line I suggest is the fact that you can't do anything that will cause eventual capital flight and physically reduce money in circulation without having a means of replacing the sustainable and needed portion of it. This I suggest can not happen until you take back your sovereign right to issue your own money supply.

The above point is currently emphasised due to the fact that all money is currently monetised debt and people currently paying down debt is physically reducing the amount of money in circulation. Infact if there was no debt under the current monetised debt primary money base with compounding attached system, there would be no means of exchange but barter or raid.

That is why nothing can or will change until we take back control of the right to issue our own money supply. But then we too will no doubt find out personally just how not free the supposed free-world really is?

I think the best thing we could immediately put in place, in the interim to full monetary, banking and credit system reform, would be to legislate that no foreign currency exchanged into New Zealand dollars can be exchanged back out for a minimum 12 months.

Globally speculative financial quackery has to be removed from commerce!

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