Wednesday, 24 July 2013

People of New Zealand lied to about how money works by almost everyone who is anyone.

Hopefully this contain enough intellectual grunt to embolden any public representative that truly has a deep sense of greater common good to do the right thing?

Those who believe John Key, the former New Zealand Prime Minister, was the financial Messiah, that came home from greater learning in far off lands, to lead all his people to the promised land of financial freedom, please stop and think a bit. John Key was leader from 2008 - 2017, but did anything really got any better for our nation as a whole?

You will observe (below) that John Key has quite clearly between years 2011 – 2012> not only changed his stance on just what currently circulates as New Zealand's money supply, but unless he is being deceitful, does not know of from who it comes or under what terms and conditions?

For any public servant of any ilk to remain so incompetent with the level of information that is now 'out' about the internal dynamics of the international supply side of money, is inexcusable.

Diedre Kent said 13/6/2012 to New Zealand Labour Party Economic Executive member David Cunliffe;
“It was the Savage Government which spent all that money into existence during that period from 1935 through the forties. This is an entirely different sort of money from debt-based, bank-created monopoly money we are so dependent on.” 
to which Cunliffe replied;
“Diedre - very interesting point and I agree that we need to do that. David Parker(another member of the New Zealand Labour Party Economic Executive) and I are both thinking about the issues.”

When I Iain Parker said to John Key 24/11/2011
"You having been to the very heart of international high finance" before I could get another word in he proudly proclaimed "yes". I then went on to ask if he agrees that every dollar in New Zealand originates as interest bearing debt owed to private lending institutions, to which he stated “no” as seen here on video - http://www.youtube.com/watch?v=obVvLhVctrI

Nek minute! (a private New Zealand joke.)

New Zealand Prime Minister and former international investment banker John Key said 17 November 2012;

“Our (Govt) debt to GDP levels by then will top at just under 30 percent - in other words - um -we'll be relatively lowly indebted compared to countries like America and Europe - but I put it to you we are a small open economy - we have high levels of private sector debt - we -Mum and Dad - have borrowed that debt effectively from foreigners because their local bank has sourced that from foreigners.
end quote

John Key said 6 May 2013;
"It hasn't been like we haven't been prepared to use the balance sheet. But we're a small country. We're an open, trading nation. We have considerable private sector debt and we're relying on foreign savings to finance our future. On that basis, if we are excessive with our spending and therefore build up debt, then eventually some generation of New Zealanders are going to have to pay that back," Key said.
End quote

John Key's reference to "Foreign savings" when considering the level the debate (proven below) has moved on internationally at the very highest levels, in regards of the pyramid aspects of global high finance, for any public representative to continue to keep the people of New Zealand in the dark, is at the very least completely incompetent, at the very worst, it is someone who has sold his fellow citizens down the river to ride on the coat tails of a private banking crime ring for personal enrichment, as opposed to using his knowledge to defend the equal economic opportunity of wider society?

Mr. Alan R Holmes - worked for 33 years at the Federal Reserve Bank of New York - where from 1965 to 1979 he was manager of the Federal Reserve System Open Market Account. In that position, he was responsible for the creation of money in the United States - said June 1969;
“The idea of a regular injection of reserves-in some approaches at least-also suffers from a naive assumption that the banking system only expands loans after the System (or market factors) have put reserves in the banking system. In the real world, banks extend credit, creating deposits in the process, and look for the reserves later.”

Lord Adair Turner – in 2008 became Chairman of the Financial Stability Authority (FSA) of England - made a keynote speech at The Institute for New Economic Thinking (INET) annual plenary conference in Hong Kong (April 7-4-2013) entitled - Private Debt and Fiat Money: Lessons from the crisis and from some old economic texts – in which he said;
"Banks are different, and I think this is a crucial insight that we often miss but which Fisher, Symons and Friedman really focused on. It is often said in general text books or discussion's 'what do banks do?' and you will often hear this description 'well they take deposits and they intermediate it to investment' This is a lousy description of what banks do. The idea that banks intermediate a pre-existing set of liquid asset savings is wrong!. Banks simultaneously create new private credit and new money."

Mervyn King – Former Governor of the Bank of England 25 October 2010 said;
“For a society to base its financial system on alchemy is a poor advertisement for its rationality. Change is, I believe, inevitable. The question is only whether we can think our way through to a better outcome before the next generation is damaged by a future and bigger crisis. This crisis has already left a legacy of debt to the next generation. We must not leave them the legacy of a fragile banking system too.”

Alan Greenspan – Former United States of America Federal Reserve Chairman 29 August 1997;
“It is important to remember that many of the benefits banks provide modern societies derive from their willingness to take risks and from their use of a relatively high degree of financial leverage. Central bank provision of a mechanism for converting highly illiquid portfolios into liquid ones in extraordinary circumstances has led to a greater degree of leverage in banking than market forces alone would support.”

Robert H. Hemphill, credit Manager of the Federal Reserve Bank of Atlanta stated 24 January 1939;
"If all the bank loans were paid no one would have a bank deposit and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money we are prosperous: if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon."

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.”
end quote

Vincent Cartwright Vickers - Governor of the bank of england 1910 – 1919.
Excerpts from - Economic Tribulation - published 1941;
“I who write this, need no proof of the importance of the money system upon the very lives of the people and even to the future existence of the British race, so long as that system fills the position which it now holds in our National Economy.........

This world power, with its permitted control of the national money supply and with its support of a monetary System that has plunged every nation into the miseries of irretrievable debt and the world into economic strife, should not be underestimated......
In short, it has begun to be generally realised that the free vote of the people no longer insures democratic government except in name, and that the widespread influence of money, of finance, and of ‘big business’, and, above all, of international finance with its impartial patriotism, not only dominates governmental policy, both national and international, and affects the lives and livelihood of the people, but has very nearly succeeded in converting our boasted democracy into what is virtually a financial dictatorship.......

In the question of what steps should be taken to put matters right, I can only suggest the general direction in which our future policy should point; for I myself do not believe that there exists any perfect cut-and-dried scheme which is likely hereafter to be adopted, lock, stock, and barrel, as our future monetary system. Moreover, there are many other technical and psychological considerations which would be necessary in order to achieve peace and contentment amongst the people. The main objectives however, should include:-
- State control and State issue of currency and credit through a central organisation managed and controlled by the State.
- Any additional supply of money should be issued as a clear asset to the State; so that money will be spent into existence, and not lent into existence.
- The abolition of the Debt System where all credit is created by the banks and hired out at interest to the country.

Centre For Central Banking Studies Bank of England - Primary Dealers In Government Securities Markets - Handbooks In Central Banking No6 1996
Of course, setting up a primary dealer system should not be undertaken in isolation from the authorities establishing a market-oriented monetary policy, developing a well-functioning money market and following a reasonably steady and predictable issuing policy, without which no-one is likely to embark on dealing in government securities or to make a regular profit out of it. And for some countries in transition at least, it should be recognised that the normal development of a primary dealer system will be out of existing banks according to the "universal bank" model; primary dealers should not necessarily be thought of as stand-alone securities firms on the "anglo saxon" model........
In Australia, Germany, Japan, Netherlands and New Zealand there are no formally designated primary dealers, although in these countries a group of firms do collaborate in the allocation and proper development of the market in an informal way.
End quote

The Truth about Banks

IMF FINANCE & DEVELOPMENT, March 2016, Vol. 53, No. 1

http://www.imf.org/external/pubs/ft/fandd/2016/03/kumhof.htm

To summarize, our work builds on the fundamental fact that banks are not intermediaries of real loanable funds, as is generally assumed in the mainstream neoclassical macroeconomics literature. Rather, they are providers of financing, through the creation of new monetary purchasing power for their borrowers. Understanding this distinction has important implications for a host of practical questions......

Practical implication

Many policy prescriptions aim to encourage physical investment by promoting saving, which is believed to finance investment. The problem with this idea is that saving does not finance investment, financing and money creation do. Bank financing of investment projects does not require prior saving, but the creation of new purchasing power so that investors can buy new plants and equipment. Once purchases have been made and sellers (or those farther down the chain of transactions) deposit the money, they become savers in the national accounts statistics, but this saving is an accounting consequence—not an economic cause—of lending and investment. To argue otherwise is to confuse the respective macroeconomic roles of real resources (saving) and debt-based money (financing).

The Bank of England is one of the senior most international financial institutions in the world. This from its March 2014 quarterly bulletin;
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

• This article explains how the majority of money in the modern economy is created by commercial banks making loans.

• Money creation in practice differs from some popular misconceptions — banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits.

• Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits.
end

Banking in New Zealand Fourth Edition - published by the New Zealand Bankers Association in 2006 - makes it very clear that presently every dollar of currency circulating in New Zealand's money system originates as an interest bearing loan of credit owed to a private owned lending institution. That supplies brand new credit and currency that did not already exist. Domestic banks act as a middleman organiser for larger foreign banks. There is no third party, ultimately only the lender and the banking institutions that sit at the end of the wholesale credit supply discount chain.

Chapter 4 - The Creation of Money and Credit - is especially enlightening;

https://issuu.com/iainparkerpubliccreditorbust/docs/nzba_banking_in_new_zealand_fourth_

THE CREATION OF MONEY AND CREDIT

what Actually Happens in reality, although the process outlined in the previous sections could occur, cash balances in bank vaults no longer act as a constraint on bank lending in the way that they might have up until the latter part of the 20th century....... 
in such an environment, there is still scope for a bank to expand its lending and create credit, but it is dependent on there being net inflows of funds into the banking system as a whole. These inflows of funds may come from depositors from outside new Zealand (and we have seen significant inflows of funds from such sources in recent years), or from the government making net deposits of funds into the banking system (through its fiscal policy, as outlined below).

We also have a situation where, since 1985, new Zealand banks have not had any specific reserve requirements applied to their deposit liabilities. This means that, in theory, banks could keep on creating credit and expanding their loan portfolios indefinitely. in such an environment, it is the cost of credit, based upon the costs that banks have to pay to raise the deposits, that becomes the constraint on the quantity of credit that is created. 
end


The Reserve Bank (RBNZ) is starting to more openly tell the truth of the nations colonial era money system funding structures that we still suffer. 

Which means they are beginning to feel an increase in wider public knowledge and how it will look if they keeps hiding behind lies.

This paper: 

http://www.rbnz.govt.nz/financial-stability/financial-stability-report/fsr2015-11/implications-of-global-liquidity-developments-for-new-zealand

Titled - Implications of global liquidity developments for New Zealand - from the Nov 2015 Financial Stability Report, is the closest to the whole truth I have yet seen from the establishment, in regards to the fact that every unit of NZ credit or currency (not just significant proportion as it says) can be traced back to originating somewhere in the NZ economy as a loan of interest bearing credit owed to a non NZ Government, foreign lending institution, and that the OCR follows external influence, not leads;

"There are three key channels through which New Zealand could be affected by declining market liquidity: the impact on New Zealand banks’ funding markets; the impact on short-term interest rates and monetary policy implementation; and the impact on the New Zealand government bond market.

New Zealand banks fund a significant proportion of their balance sheets by accessing offshore wholesale debt markets. They do this by borrowing in foreign currency, then ‘swapping’ this back into NZD. Conditions in global financial markets are therefore an important determinant of New Zealand bank funding. New Zealand banks tend to focus on the primary market (new issues) rather than the secondary market for debt. Hence, funding liquidity is of more immediate importance than market liquidity. Funding liquidity refers to the ability of the banks to raise debt as required at a reasonable cost. Reserve Bank discussions with bank treasurers suggest that funding liquidity conditions have deteriorated somewhat in 2015, owing largely to greater market volatility caused by events such as the Greek crisis mid-year and recent turbulence tied to China.

New Zealand banks typically use market makers to help facilitate the foreign currency swap leg involved in borrowing from offshore. Market makers take the other side of the transaction with New Zealand banks (providing NZD in exchange for foreign currency that the banks have raised), while charging a spread. This spread has widened as costs have increased for the institutions providing these market making services for the reasons described above. Overall, the cost increases have been manageable thus far, but this highlights the flow-on effects of changes in market liquidity to New Zealand entities seeking offshore funding."
end

Dr Alan Bollard Governor of the Reserve Bank of New Zealand 2002 - 2012. Published a book 1 Sept 2010 - Crisis: One Central Bank Governor and the Global Financial Collapse
Pg 96
The Bank of International Settlements is an important institution, acting as a sort of central bank for central banks. Set up in 1930, originally to facilitate German World War 1 reparations, it has a checkered history but today offers modern banking services and provides a forum for central bankers.
Pg 20
Banking practices differ around the world, but we ensure ours meet international standards. These are set by a somewhat shadowy group called the Basel Committee on Banking Supervision. Comprised of representatives of large countries( not including New Zealand ), the group meets in Switzerland at the Bank of International Settlements (BIS).
Pg 183
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.
Pg 157
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.
end quote


New Zealand Minister's of Finance Official Information Replies re Money System Structures.

Sorry to tell you that in most cases politicians in the front office are only swallowing and regurgitating second hand summarised information supplied by 'officials' out in the back office. Below are several examples of the admissions of this practice from both former Minister of Finance Michael Cullen and present Minister of Finance Bill English;

(Please note the 2007 dates of the Michael Cullen Official Information Act reply and the line of questioning in it by Iain Parker over a year ahead of the 2008 global credit crisis and consider how correct his allegations stack up against the findings of the 2011 final report of the US National Commission On The Cause Of The Financial And Economic Crisis In The United States at this link here;
http://www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf )


On the 13th May 2007, I asked these questions of Minister of Finance Michael Cullen;
Regards minister Cullen,
I am requesting for as long as records have been kept, an annual breakdown of the number of trust funds that have been investigated as to their legitimacy, the number of funds that were found to be shams, and the number of individuals who were prosecuted for setting up trusts as shams?

Also, to your knowledge Sir, is it correct to say that under the system referred to as "money creation" that the very rich and powerful privately owned banks that are stakeholders in the collective privately owned institutes US Federal Reserve and the Bank of England, have been entrusted with the ability to create money out of fresh air as bits on a computer, then lend it to governments and commercial banks as interest bearing debt, as long-term loans known as Bonds, which have the interest payable on this counterfeit principle secured against the future taxes of the nation?
yours
Iain Parker

May 2007;
Regards MR Cullen,
I am still awaiting your explanation of the international monetary lending system, especially confirmation that our Govt Bonds are long-term loans from the private stakeholders of the US federal reserve and the Bank of England, who have the ability to create the principal of these loans out of nothing, that is the money is neither created by labour, productivity or is convertible to tangible assets?
Thank you
Iain Parker

I then received a reply from Michael Cullen 19 June 2007;

Dear Iain Parker
In your email of 13 May 2007 you asked whether privately owned banks in the UK and US have the ability to create money in the form of bonds issued to their governments.

As I have no responsibility for any institutions in the UK or US I am unable to comment on the process of creating bonds in those countries. However, I am able to explain the situation that applies in New Zealand.

In New Zealand, our central bank, the Reserve Bank, is wholly owned by the crown. Its institutional direction is explicitly set through the Reserve Bank of New Zealand Act 1989(the Act), and for monetary policy in an ancillary agreement between myself and the Governor of the Reserve Bank, known as the Policy Targets Agreement. The act has limited the governments ability to finance expenditure through credit creation; in the past , governments borrowed from the Reserve Bank to finance a portion of their deficit. (This way of financing government expenditure persisted until a Labour government was elected in 1984).

In effect, this meant that the government printed money to pay for its expenditure instead of raising taxes or borrowing from the private sector. While this method of financing can be used to pay for infrastructure or social services like health, ultimately the process tends to be inflationary. This type of borrowing was one of the main factors behind New Zealand's very high rates of inflation in the 1970's.

As a result, the Act sets out that the primary purpose of the Bank is to ensure stability in the general level of prices. More specifically, the Policy Targets Agreement states that the Reserve Bank Governor must keep inflation within a band of 1-3 percent over the medium term. The main tool the Governor has to keep inflation within this band is the Official Cash Rate (OCR).

Issuing of bonds is an accepted method of financing investment. Regardless of where a bond originates, it is essentially a certificate of indebtedness. The New Zealand government, through the Debt Management Office, maintains a programme of bond issuance to finance its investment programme. There are no requirements on the Reserve Bank to purchase these bonds, although it may from time to time when necessary to meet its objectives. The financial reporting requirements of the Public Finance Act provides for the public disclosure of all
financial transactions between the government, the Reserve Bank and the wider economy, and ensures that I and the Reserve Bank are accountable for the outcomes.
I trust this has helped to answer your question.
Yours sincerely
Hon Dr Michael Cullen
Minister of Finance

- I would like to add a foot note here. Michael Cullen states above - "The financial reporting requirements of the Public Finance Act provides for the public disclosure of all financial transactions between the government, the Reserve Bank and the wider economy, and ensures that I and the Reserve Bank are accountable for the outcomes". - yet if you read the State Sector Act 1988 then go to the website of the New Zealand Securities Commission, you will discover that the CEO of the Securities Commission has almost autonomous power to issue exemptions to multinational corporations that circumvent our protecting financial regulations, including a disclosure exemption to the New Zealand Debt Management Office that makes a mockery of the above statement. At the time of printing, if you go to internet web address -
http://www.seccom.govt.nz/notices/summaries/2004/ - then scrolled down to find - Securities Act (Crown Wholesale Debt Securities) Exemption Notice 2004 -
This exemption prevents the NZDMO from having to openly disclose that a bunch of privately owned foreign central banks have a monopoly on the issuance and on selling of our Government Bonds.

I sent this email to Minister of Finance Michael Cullen 4 September 2007 ;
Regards Dr Cullen,
1) I am seeking any information now eligible for release, regarding the secret Memorandums of understanding, or Structural adjustment programs imposed upon us by the IMF/World Bank during the restructuring of our(NZ) nations debts or what was essentially liquidation, in 1961 and 1984?
2) To your knowledge, the money used by registered bond traders, who are the only ones eligible to purchase the larger blocks of our govt bonds, all of whom are the private stakeholders of what is referred to as the "Central banking system", to your knowledge does this so called "Power money" have any net tangible backing, or is it merely created as digital bits on a computer, then loaned into the system as interest bearing debt, only given its value by the promised repayment out of the future taxes of the nation.?
Yours sincerely
Iain Parker

I received this reply from the Acting Minister of Finance Trevor Mallard 2 October 2007 ;

Dear Iain Parker
Thank you for your letter which was received on 5 September 2007 concerning an Official Information Act request. You requested:
1) I am seeking any information now eligible for release, regarding the secret Memorandums of understanding, or Structural adjustment programs imposed upon us by the IMF/World Bank during the restructuring of our(NZ) nations debts or what was essentially liquidation, in 1961 and 1984?
2) To your knowledge, the money used by registered bond traders, who are the only ones eligible to purchase the larger blocks of our govt bonds, all of whom are the private stakeholders of what is referred to as the "Central banking system", to your knowledge does this so called "Power money" have any net tangible backing, or is it merely created as digital bits on a computer, then loaned into the system as interest bearing debt, only given its value by the promised repayment out of the future taxes of the nation.?

New Zealand joined the IMF and the World Bank in 1961. There was no financial crisis in New Zealand at the time and New Zealand did not restructure its debt as a result of joining. There are no secret memoranda of understanding and no structural adjustment programmes were imposed on New Zealand. All the documents related to the decision to join the two institutions are publicly available from Archives New Zealand.

In June 1984, New Zealand drew down its Reserve Tranche at the IMF. The Reserve Tranche is essentially a countries foreign currency deposit with the IMF and can be drawn on at any time for balance of payments reasons without requiring approval from the IMF board. There is no conditionality attached to such a drawing and so no structural adjustment programme was imposed.

Once again, all relevant documents are publicly available at Archives New Zealand.
Accordingly, I have decided to refuse your request under section 18(d) of the Official Information Act 1982 - that the information you requested is or will soon be publicly available.

In response to your second question, registered bidders in New Zealand government Bond tenders purchase New Zealand government bonds using cash which they get from their shareholders, from profits on their operations or from borrowing against future income. Please note that bidders may purchase bonds on their own behalf or on behalf of other investors. The bonds are issued on behalf of the Crown by the New Zealand Debt Management Office (NZDMO). The Reserve Bank conducts the bond tenders as agent for the NZDMO. When the bonds mature, the Crown repays them with funding from a variety of sources, such as its cash surplus, revenue from taxation and other sources or by undertaking new borrowing. Interest on the bonds is paid from the same sources.
This fully covers the information you requested.
Yours sincerely
Hon Trevor Mallard
Acting Minister of Finance.

On the 5 October 2007 I sent this reply to Trevor Mallard;
Regards Hon Trevor Mallard,
could you please advise me, as to whether you researched and provided this answer yourself, thus are prepared to stake your present and future political reputation on it, or was it provided by one of the many State Sector advisers at your disposal. If the latter is the case, could you please provide me with the name and department of the author.
Thank you
Iain Parker

I then received on 10 October 2007 this reply from Michael Cullen;
Dear Mr Parker
I have received your email regarding the answer to your Official Information Act Request which was signed out by the Hon Trevor Mallard in my absence.
I am satisfied with the contents of the reply that you received from my acting minister. This request was dealt with under the standard procedures for replying to requests under the Act.
In this case, the draft reply was prepared on my behalf by Andrew Turner, Head of Portfolio Management at the Treasury.
Yours sincerely
Hon Dr Michael Cullen
Minister of Finance

Former New Zealand Labour Party Minister of Finance Minister of Finance - 10 December 1999 > 19 November 2008 - Michael Cullen - said this in 2012;

'Govt wouldn't let the big banks fall over'

And in terms of the big banks, he says there has always been "a degree of pretense" 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."

Yet New Zealand Labour still put Michael Cullen up on a pedestal and New Zealand National Party appoint him to run government departments in preparation for privitisation, go figure?


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:
http://www.federalreserve.gov/Qf/pf.htm
http://www.bankofengland.co.uk/about/leciisIation/leciis.htm

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


Another case of New Zealand Government throwing its arms in the air in regards to financial frauds they clearly know the banking sector is committing against the citizens and businesses of honest enterprise of New Zealand.

Here are the details of an email conversation between the New Zealand Minister of Finance Office and a New Zealand citizen in regards to an article about money system funding structures they had read in a newspaper.

The discussed article can be read in full at the bottom of the email conversation transcript.

From: Anita Schurmann
Sent: Thursday, 4 June 2015 6:03 a.m.
To: bill.english@national.org.nz
Subject: Money Creation

Dear Bill English
As you are the minister of finance I recommend that you read this article which recently appeared in the Otaki Mail.
http://otakimail.co.nz/outside-the-box-challenging-convent…/
I expect you are aware that banks are allowed to create money from nothing and lend it out at interest. In the past most people in NZ were unaware or didn’t believe that banks did this. However, as more and more people now understand and are realizing that this is going on, I believe it is time to change legislation to stop this unlawful behaviour. Money should be created for public good to facilitate trade, and should not be under the control of private corporations to make a profit. As you are probably aware this current monetary system is the main reason why the world economy is in such crisis. It is time to change the system for the good of all people. If New Zealand takes the lead in this are the rest of the world will most likely follow, as people throughout the world have had enough of the corporate controlled system that is destroying our world and our communities. Please let me know when you intend to change the law so creation of money is under the control of the democratically elected government rather than private companies.
Yours sincerely
Anita Schurmann
Office of Hon Bill English
14 July 2015

Dear Anita Schurmann thank you for your email 4 June 2015 in which you raised concerns about the the Government allowing banks to create money on their own through the system of fractional reserve banking.

The system discussed in the article you refer to, is one that has been considered at times as the role of financial institutions hs evolved. Irving Fisher suggested a possible structure and approach to your suggestion in the Chicago Plan, eighty years ago, and there are some theoretical advantages that may result from a system set up in this way, including better control of business cycle fluctuations.

However, the transition to such a system would be hugely coomplex and is inherently fraught with great risks. We would wnt increased certainty and evidence regarding the benefits before change could even be considered, and the luck of such a system in any developed market economies makes such evidence hard to obtain.

Equally, the current monetary system allows for the provision of credit, which serves a very important function in allowing people to smooth their consumption over time and allowing firms to invest in productive capital.

Finally, it is not entirely clear whether it would be possible to move to the system outlined in the 'Chicago Plan' without an intensive global shift in monetary regimes. If New Zealand were to be a first mover, it is unclear what the effects would be for trade and the exchange rate in a small, open economy.

Yours sincerely

Hon Bill English
Minister of Finance

New Scientist magazine - 22 October 2011
An analysis of the relationships between 43,000 transnational corporations has identified a relatively small group of companies, mainly banks, with disproportionate power over the global economy.
Swiss Federal Institute of Technology in Zurich, is the first to go beyond ideology to empirically identify such a network of power. It combines the mathematics long used to model natural systems with comprehensive corporate data to map ownership among the world's transnational corporations (TNCs)...........
"In effect, less than 1 per cent of the companies were able to control 40 per cent of the entire network," says Glattfelder. Most were financial institutions. The top 20 included Barclays Bank, JPMorgan Chase & Co, and The Goldman Sachs Group.
End quote

Joseph Stiglitz Former World Bank Vice President and Nobel Laureate in Economics is finally admitting your can not achieve longterm social outcomes from just tweaking the entirely interest bearing private loan based money supply pyramid scam.
He is now joining the likes of other senior elements of the international supply side of money such as Michael Hudson and David C Korten who have been 'out' for decades now saying there needs to be fundamental reform.

Compare recent speeches (below) by John Key & Bill English - to the facts (above) and think if they 'add up' - pun intended;

Bill English – New Zealand – Minister of Finance - Speech to Trans-Tasman Business Circle
12 July 2013

Bill English 2013 Budget
Volume 690, Week 42 - Thursday, 16 May 2013
[Sitting date: 16 May 2013. Volume:690;Page:10017. Text is incorporated into the Bound Volume.]

Key, John: Budget Statement — Budget Debate
[Sitting date: 16 May 2013. Volume:690;Page:10030. Text is incorporated into the Bound Volume.]


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