Friday, 12 September 2014

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; )

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?
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 - - 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:

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.
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.…/
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

Here is the article in full that is being discussed in the email exchange;

Outside the Box — challenging conventional thinking and offering new perspectives about our world

Let’s Change our Money-as-Debt Problem
By Amanda Vickers June 2015

You’d think that the most important aspect of a sovereign nation would be for its Government to have sole rights to issue its country’s money supply. But not so: this function has been appropriated primarily by privately owned banks. “Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.” — Bank of England Quarterly Bulletin (Q1, 2014)*

Our nation’s money comes in to existence through debt. As more money enters the economy, the more debt we have (Government or private). Counter-intuitively, what benefits the individual does not benefit the nation as a whole. In fact, if we all repaid all our loans, there would be 98% less money left in the economy because, as it turns out, only ~2% of our nation’s money supply is issued by the RBNZ — as notes and coins.

So there you have it. Banks create our nation’s money supply when credit is drawn (monetized), destroy money when loans are repaid, and profit immensely from the interest charged on the loans. Most bank profit is obtained from the difference between interest we pay for these loans (created credit) and the interest they pay out for the corresponding deposits. The four big banks in NZ were making record profits in 2014, with ~4.3 billion dollars heading offshore to Australia and beyond. This is hard-earned New Zealander’s money leaving our real economy, and being transferred to the private banking sector.

Sovereign money advocates term this concept “economic rent” and claim that private banks, seeking to maximise profits, shouldn’t be “renting” money to Government, businesses and citizens of a free, sovereign country. This growing money supply and these growing debts are also secured by NZ’s assets, resources and labour force (you).

If we had a Government issued money supply requiring banks to have 100% reserves for money they lend, we would see dramatic improvements in our economy. We could have both less debt and enough money to thrive. The International Movement for Monetary Reform proposes just this and has gathered a huge following since the 2008 global financial crisis.

This “sovereign-money” proposal proved itself when it was modeled by the International Monetary Fund**. Their analysis showed that the benefits of 100% reserve banking would be: dramatically reduced public and private (net) debt levels (because money creation no longer requires simultaneous debt creation), better control of business cycle fluctuations, complete elimination of bank runs, output gains of 10% and that inflation can drop to zero without posing problems for the conduct of monetary policy.

It is great the IMF analysis has concluded something that also seems intuitive and logical. Sovereign money advocates extrapolate further that the outcome would also be far reaching throughout our economy and our lives. They say it could also improve: the inequality gap, child poverty, housing bubble control, student debt, state asset sales, job security, local businesses performance (due to the 10% higher output gains), budgets for local community projects and facilities, health care and education.

It’s not a bad outcome for one law change: 100% reserve banking. The irony is that the law would change to how most people think it actually works now — where our Government issues the nation’s money supply. It simply requires updating the 1844 Bank Charter Act, which forbade banks from printing notes. If only they’d included something to prevent ledger balance accounting tricks, creating credit — which they have done to this very day!

One obstacle is the general lack of understanding about how the monetary system really works by both the public and many politicians. There is also a fair amount of inertia and political resistance to the reform. The change is a big one, so is therefore daring and challenging. Some politicians fear sovereign money because it may affect NZ’s Standard and Poor’s (S&Ps) credit rating. S&Ps may mistrust the Government thinking they would simply issue too much money too easily, causing an inflationary crisis, creating a currency devaluation, which would in turn affect trade.

Realising the importance of “why” we should address a problem, motivates people to find the “how”. Money reform advocates found it was not rocket science. Their solution could work in much the same way that the RBNZ independently oversees monetary policy now. A democratic, transparent and accountable body (Monetary Policy Committee) could independently separate the function of money issuance from money spending. They would be tasked with the role private banks have now: creating and destroying the nation’s money supply. This could be done exactly as needed — debt free — within inflationary limits. Our government would also have greater control over where and how our money is spent, and would be able to steer the economy with greater precision.

Here’s a thought: if this scenario was already the status quo, and it was now proposed to turn our nations’ money supply over to commercial corporations (banks), whose mandate it is to maximise profit, as debt-based money, there would be pandemonium on the streets!

Money is an abstract concept — designed by humans to serve humanity’s needs. Let’s make it do this well. It is not a law of nature to have a debt-backed money system: it can be redesigned. The present design is not working well, and as Albert Einstein said, “insanity is doing the same thing over and over again and expecting a different result”.

Please support politicians embracing sovereign money and share this information — an excellent source of further material is Positive Money NZ (, the NZ chapter of the International Movement for Monetary Reform (
*(“The reality of how money is created today differs from the description found in some economics textbooks. 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.” — Bank of England. However, the result is similar: when making loans, new money enters the economy, whichever method one has been taught)

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