Posts Tagged ‘New Zealand’

Why Borrow When You Can Print?

October 1, 2012 Leave a comment

Positive Money is a movement in the UK and NZ campaigning to remove the power of money creation from the hands of private banks. Their solution to the global debt crisis is to empower governments to create debt free (hence interest free) money out of nothing and spend it directly into the economy. It boils down to this idea - Why borrow when you can print?1

Over in the U.S., key proponents of government issued debt-free fiat money are Bill Still, the producer of The Money Masters & 2012 Libertarian Presidential Candidate and Lyndon LaRouche, an 8-time presidential candidate. Still considers the current debt-based money a form of slavery and gold-backed money as the ultimate centralization of the money power - in the hands of “those few best able to buy up the commodity serving as the monetary base”.

No Gold

Given the choice between the current system where governments borrow money from private banks (who created it out of nothing and charging interest which has to be paid from tax payers’ hard earned money) and the Positive Money system where governments create the debt-free money outright, it seems a no-brainer that it should be the latter.

For a nation like New Zealand, where its central bank (RBNZ) owns zero ounces of gold, any form of gold-backed money is not even an option. Hence, empowering the government to create debt-free money backed by nothing seems to be the only way out of the public debt spiral. But will it work?

One of the main objections to such a system is the fear of monetary inflation, leading inevitably to price inflation. While we can’t trust the bankers, what makes us think we can trust the politicians and the government of the day not to print the currency into oblivion? To overcome this fear, proponents of the Positive Money system in NZ have suggested that

decisions on changes in the money supply will be made not by elected politicians but by an independent body (the Monetary Policy Committee). Politicians will have no influence whatsoever on the amount of money that will be created.

So far so good, but unlike the money whose quantity the committee is tasked to control, members of this “independent body” cannot be created out of thin air! They have to be either:-

  1. appointed by an authority or
  2. elected into office directly.

Therein lies the problem. If we adopt the model of judicial appointments in NZ, the Executive branch of government would be the authority. While NZ has been fortunate that its judicial appointments have so far been relatively free of party political considerations, the same cannot be said of many countries, including Malaysia and the US. Appointees report to and are often beholden to the appointing authority. If, on the other hand, members were appointed by parliament or were elected directly, we’re back to square one - campaigns, funding, media. Who controls these influences the outcome.

Assuming the appointment or election process were totally free of “political considerations” or vested interests, what is there to prevent such a high profile Monetary Policy Committee from being subject to and influenced by intense lobbying, considering the fact that the fate of the nation’s economy & politics hinges on its decisions.

I see a mirror image of the 12 FOMC members meeting behind closed doors controlling the money supply in the US. Are they not appointed directly and indirectly by the President and confirmed by the Senate, and are supposed to be independent? In fighting against Ron Paul’s Audit the Fed bill, did Bernanke not emphasized that he prefers to keep it the way it is to protect the Fed’s independence? It doesn’t take a brain surgeon to figure out the Fed’s independence or its lack thereof.

Notwithstanding the above-mentioned challenges, being the first to implement such a system under the current environment where all national currencies are debt-based may make NZ stand tall among other indebted nations. I can see the PIIGS nations salivating! As the first nation issuing debt-free money in modern times, the government’s interest-bearing debt at just over 20% of GDP could be rapidly brought down to zero. Tax payers’ money can be channeled to the rebuilding of Christchurch instead of ending up in the coffers of private banks, most of them Australian owned anyway. Debt-laden local councils can be funded directly from federally created new money, thereby lowering rates and improving services.2

The list of merits goes on and on….. until gold is brought into the equation.

Central Banks’ Gold

For reasons best known to the RBNZ, the nation’s reserves in gold remains at zero after the last of its 22,505 oz of gold was sold in 1989, while the rest of the world’s central banks have turned net buyers of gold since the financial crisis. Many have been aggressively pilling up on their gold reserves.

A case in point is Russia. They had the foresight to be steadily accumulating gold as reserves years before the 2008 financial crisis struck.

While China does not report its gold reserves as transparently, it’s widely known that it is silently converting part of its US$3 trillion reserve into hard money in the form of the yellow metal. As the world’s largest gold producer, none of the locally mined gold is allowed to be exported while reports pop up every now and then about massive gold imports through Hong Kong. They’ve even started scrapping the golden barrel of cash-strapped North Korea with a total import of 2 tons over the past year. The Voice of Russia recently reported that “China wants to increase gold reserves six-fold“.

India’s central bank was one of the first to reverse the trend with its massive 200 tons purchase from the IMF way back in 2009, creating a sharp spike and and a sustained rise in the price of gold.

And it’s not just the giants. According to the World Gold Council, central banks of other countries that have been stacking gold include Argentina, Bolivia, Mexico, Sri Lanka, Bangladesh, Thailand, Philippines, South Korea, Kazakhstan, Turkey and Ukraine, Estonia, Malta, just to name a few, not forgetting the repatriation of Venezuela’s 211 tonnes of gold last year. Paraguay became the latest central bank buyer, sharply boosting their gold reserves from a few thousand ounces to over 8 tonnes.

Across the ditch, Australia has been sitting tight on their 80 tons watching their reserves in gold rise steadily.

It is evident that central bankers are placing increasing importance on the role of gold as part of a nation’s reserve. Why? They are not telling. Why is RBNZ not hoarding any gold? They are not telling either.

All we need is one, just one major player to announce that they are pegging their national currency to gold for existing debt-based fiat currencies and the proposed debt-free fiat currencies to be dropped like hot potatoes in favor of the new gold-backed currency. This is especially so after the world has witnessed the disastrous failure of a 40-year global experiment with debt-based fiat currencies.

Bear in mind that the once almighty US$, the global reserve currency following the Bretton Woods agreement after WW2, is currently under threat. Its petro-dollar status is also under threat, and significantly so by the same nations stock pilling gold at a frantic pace.  The competition (by China, according to WikiLeaks cable) for the next global reserve currency is underway among the economic powerhouses, and a gold backing may just tip the balance.

All other smaller countries have not much choice other than to be prepared to go with the flow.


While the debt-free money concept is the way to go, perhaps it should be just the first step towards sound money whose quantity is regulated directly or indirectly by something tangible rather than press statements from a small group of people meeting behind closed doors.



1 Don Richards of Positive Money NZ wrote to Bill English, Minister of Finance seeking a meeting to present the proposal. Here’s the Minister’s reply and Don’s response.

2 Sue Hamill of Positive Money NZ’s submission before the select committee on the Local Government Act 2002 Amendment Bill 27-1.

Additional Resources

  • This short clip by Positive Money UK explains the process of money creation out of thin air using mortgages & housing as an example.
  • If your curiosity over the subject of money creation was piqued by this video, consider reading “Modern Money Mechanics” – by The Federal Reserve Bank of Chicago. It may change your thinking about what to do with your money.


From Canada to NZ, and everywhere in between, people are waking up!

June 4, 2012 Leave a comment


From Canada to NZ, and everywhere in between, people are waking up! Waking up to the fact that the existing global monetary & banking system is seriously flawed. Many would even go as far as saying it is a fraud. Unless governments the world over change the way national currencies are created and managed, it is a mathematical certainty the system will collapse like a house of cards. Here’s a small collection of voices explaining the flawed or fraudulent system together with their calls for change and your personal action.

Canada: Victoria Grant, a 12-year-old Canadian spoke at the inaugural Annual Public Banking Conference in Philadelphia, April 27&28 2012. She called for monetary reform and her contention was that governments, not banks, should create and lend a nation’s money. Why should governments borrow money from private bankers and pay compounding interest on the debt when that money never existed in the first place, but was created out of thin air by the bankers. Watch Victoria’s interview on RTamerica.
New ZealandPositiveMoneyNZ is a campaign to move NZ from a debt-based economy to one that operates with a full reserve in which money has been issued debt-free and interest-free. A draft bill “Reserve Bank of New Zealand (Creation of Currency) Bill” has been crafted to get the initiative going. Watch this short video explaining the problems behind the existing monetary system, how YOU have been affected and why a total change is required.
UK: We now have a Debt Crisis because almost every pound we need in our economy must first be borrowed by us from a high street bank, and banks don’t need to have any real money before it can make a loan to someone. To end this crisis, stop banks from creating new money and let the government, through the Bank of England, create debt-free money instead. PositiveMoneyUK, formed in March 2010 is campaigning against the deep flaws in our current monetary system.
USA: Congressman Ron Paul, the champion of small government and sound money (gold & silver) is at the forefront of the campaign to “Audit the Fed” and to “End the Fed”. Going by the enormous crowdsall along his campaign trail, Americans have finally awoken to the truth behind Thomas Jefferson’s famous quote “And I sincerely believe, with you, that banking establishments are more dangerous than standing armies…”Watch more “End the Fed” grassroots campaigns.
Congratulations for coming so far down the page! Relax and reward yourself with this final video - Every breath you take, every move you make, we’ll be watching you - Ben Bernanke.

If all this is new to you, it’ll do you good to study the materials in the order they are listed below.

  1. What is Fractional Reserve Banking
  2. Crash Course on Banking, Finance & Economy – By Chris Martenson
  3. Central Banking & the Federal Reserve System
  4. Financial Repression – What is it and how does it silently steal from you
  5. Calm Before the Storm



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