The irony of the 21st century is that while we can produce all kinds of material things better and cheaper to the point that we are satiated, we have not learned how to transfer resources tied up in making yet more unnecessary consumer items, to producing more and better publicly provided goods like health, state housing, state education, public transport and environmental protection-- things that we so desperately need. We require a different mindset-- free markets cannot deliver on these social needs. (What nonsense is being talked at the moment about the free market solving the housing crisis). Nor can free markets provide a fair income and wealth distribution. Lets direct more of our underemployed labour force, away from areas like retail, or fanciful self employment, into providing the things we need while actively seeking a distribution of income and wealth that enables everyone to have the basics of life. Thanks for getting this discussion going Bryan
Susan, what kind of jobs are you thinking of... For the under employed that is... Just wondering. Farm related? Yes to technology and innovation.. What else? 🤔
I am alarmed at how so many look to self-employment as a way out of unemployment and how many start-up businesses fail. How many are wasting time in shops serving a handful of customers to face eventual and inevitable bankruptcy? More training programmes in the many aspects of healthcare, education, food production, local government services etc could direct our labour resources better. But this requires deliberately increasing the role of the state in funding these,accepting it requires higher taxes on high income and wealth groups
Yes. It would be wonderful to bring about the change without the wars or the guillotines. Problem is how get everyone to understand that it is in everyone’s best interest to change to a system that cares for everyone’s basic needs first.
Yes! Instead of the stupid 'trickle down' theory (read: flood up), we need a programme that includes an automatic financial transfer tax, tiny for low incomes, but capturing the big trades like property purchases and NZX. We also need a universal basic income. Please don't tell me it would cost too much - that's too much like raving about the debt on new housing without factoring in the value of the actual assets created.
If every adult had the same income as we Supers get, and any paid work was taxed at 25% and going up proportionally, there would be less crime, better health and education outcomes (kids would have breakfast!), and more spending in small to medium businesses. Pressure on the health system would drop, and Work and Income would become just Work. (So much cheaper to run when you don't have fraud investigations or worry about who is cohabiting with whom.) And every dollar that anyone spent would have a transaction amount of half a cent or whatever automatically sent into Reserve Bank coffers. The Reserve Bank could ditch the 'Reserve' and be the Bank of Aotearoa. We don't have to send billions of dollars in commercial bank profits overseas - we don't like the Australians that much!
We could also dump GST, which is basically a poor tax. Trials of a universal basic income have been run all over the world. And guess what? People don't lie around drinking and gambling with their 'free' money - they make better choices, like buying healthier food for their families, retraining, volunteering or starting small businesses based on their talents.
Another idea - why not respond to money risks by shortening the borrowing terms instead of raising interest rates? Right - I'll stop now.
Great read Bryan, perhaps with the next Labour lead govt (2yrs time) the Greens & TPM will initiate the social, environmental and fiscal changes we need, just as seymour is enjoying with 8% of the vote.
Bryan, so true! Please share your blog/article with Chris Hipkins . I'm sure he is open to hearing from others re Labour's new direction. (something needs to change! ) I've written to him. Heard back from the secretary. I had long email discussion with Geoffrey Palmer. I will send you the relevant papers he wrote to you by email.
I so agree, Bryan. The Labour Party’s unwillingness to create real social change, their bailing out of taxing the wealthy, their focus on supporting business against investing in health, housing and education - and those dealing with poverty - was a huge source of disappointment and frustration.
Only when the Green Party will be the biggest you will see the changes needed. Their manifesto points out well how change is going to be achieved but will the general public see that or forever vote for same old same old?
I agree Bryan. It’s a woeful situation. Our European ancestors came here for a fresh start in a country with no social classes, and would be devastated to see what has resulted less than 200 years later. Keep writing, keep influencing!
Michael Joseph Savage 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”
1933 manifesto wanted the state "to be sole authority for the issue of credit and currency" and in 1935 MP John A Lee wrote "The Labour Party affirmed that the government should have the sole right over the issue and control of new credit"
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 millennium 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.”
1954 Labour Party manifesto stated "Labour will take immediate and effective to ensure that the state will become the sole authority for the issuance of credit and currency. The public credit will be used to the fullest extent compatible with the public good"
In July 1962 the leader of the Labour Party, the Rt. Hon. W. Nash, who back in the 1930s was part of a group that resurrendered us to the foreign investment banks after John A Lee had led a break for freedom, 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.
1964 Labour Party manifesto stated "Labour believes that measures taken before credit is issued are more effective than restrictions afterwards."
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 pretence" around the idea the government didn't stand behind them.
"If they were systemically important in reality the government couldn't afford to let them fall over. But no Minister of Finance is ever going to say that as Minister of Finance. It's only when they're old and clapped out and out of a job that they can actually say that."
Yet New Zealand Labour still put Michael Cullen on a pedestal and New Zealand National Party appointed him to run government departments in preparation for privitisation, go figure?
New Zealand is so drowning in foreign privately owned investment bank debt, that presently is the basis of 93% of currency, grossly misalocated to non productive residential realestate, that when nature drowns us or shakes us with natural disasters we are stuck in the headlights like possums, with all our financial levers blocked.
The only way to unblock them and give meaningful relief to those who lost their livelihoods is a transfusion of Sovereign state owned public bank credit, not borrowed from foreign privately owned investment banks, because to simply restructure the present legally odious foreign debt with more foreign debt is like prescribing more blood sucking leaches to a patient that is already bleeding to death from having to many blood sucking leaches on them.
(RBNZ) What Is Money
Private money
Money that is created by private firms, such as commercial banks, is money that is like a promise from the private firm to pay the owner of the money what it states it is worth. This is private money. All private money is 'digital' or 'electronic' - you can only get it, spend it and store it if electronic devices are involved. If you have a bank account, the balance available to buy things is an example of private money.
Together, central bank money and private money make up all the money used in Aotearoa New Zealand. Private money is the most common type of money.
In New Zealand, 93% of money is private money (held in bank accounts) and 7% of money is cash (banknotes and coins).
Money tree
Central bank money is government-backed and issued by the central bank, the Reserve Bank of New Zealand. Cash is currently the only type of central bank money available to anyone. Cash is also the only physical money available in New Zealand. All private money exists digitally (as an electronic record). The diagram below shows the different types of money that exists—or that could exist—in New Zealand.
Our poverty compared to The Australian economy is largely the result of the Muldoon National Government abolishing the self funded compulsory Superannuation scheme and adopting the unsustainable scheme which has been diluted to today's version.
Australia kept theirs and has a huge investment base as a result.
Typical National, always take the short term fix and beggar the future.
The irony of the 21st century is that while we can produce all kinds of material things better and cheaper to the point that we are satiated, we have not learned how to transfer resources tied up in making yet more unnecessary consumer items, to producing more and better publicly provided goods like health, state housing, state education, public transport and environmental protection-- things that we so desperately need. We require a different mindset-- free markets cannot deliver on these social needs. (What nonsense is being talked at the moment about the free market solving the housing crisis). Nor can free markets provide a fair income and wealth distribution. Lets direct more of our underemployed labour force, away from areas like retail, or fanciful self employment, into providing the things we need while actively seeking a distribution of income and wealth that enables everyone to have the basics of life. Thanks for getting this discussion going Bryan
Susan, what kind of jobs are you thinking of... For the under employed that is... Just wondering. Farm related? Yes to technology and innovation.. What else? 🤔
I am alarmed at how so many look to self-employment as a way out of unemployment and how many start-up businesses fail. How many are wasting time in shops serving a handful of customers to face eventual and inevitable bankruptcy? More training programmes in the many aspects of healthcare, education, food production, local government services etc could direct our labour resources better. But this requires deliberately increasing the role of the state in funding these,accepting it requires higher taxes on high income and wealth groups
Yes, and not making masses of people redundant in all of these sectors!
Yes. It would be wonderful to bring about the change without the wars or the guillotines. Problem is how get everyone to understand that it is in everyone’s best interest to change to a system that cares for everyone’s basic needs first.
I think Brigid part of the answer is not giving up on making that case . Warer eventually wears down stone.
The current government is the result of the vote and one of two things, or maybe both:
1) The great negotiator, former CEO don't you know, is useless and folded in a desperate bid to be in power.
2) The compromises, to ACT & NZ First, were what National wanted to do all along but knew they could not campaign on.
Luxon is weak and useless...
Yes! Instead of the stupid 'trickle down' theory (read: flood up), we need a programme that includes an automatic financial transfer tax, tiny for low incomes, but capturing the big trades like property purchases and NZX. We also need a universal basic income. Please don't tell me it would cost too much - that's too much like raving about the debt on new housing without factoring in the value of the actual assets created.
If every adult had the same income as we Supers get, and any paid work was taxed at 25% and going up proportionally, there would be less crime, better health and education outcomes (kids would have breakfast!), and more spending in small to medium businesses. Pressure on the health system would drop, and Work and Income would become just Work. (So much cheaper to run when you don't have fraud investigations or worry about who is cohabiting with whom.) And every dollar that anyone spent would have a transaction amount of half a cent or whatever automatically sent into Reserve Bank coffers. The Reserve Bank could ditch the 'Reserve' and be the Bank of Aotearoa. We don't have to send billions of dollars in commercial bank profits overseas - we don't like the Australians that much!
We could also dump GST, which is basically a poor tax. Trials of a universal basic income have been run all over the world. And guess what? People don't lie around drinking and gambling with their 'free' money - they make better choices, like buying healthier food for their families, retraining, volunteering or starting small businesses based on their talents.
Another idea - why not respond to money risks by shortening the borrowing terms instead of raising interest rates? Right - I'll stop now.
I SO agree Katherine .👍
Great read Bryan, perhaps with the next Labour lead govt (2yrs time) the Greens & TPM will initiate the social, environmental and fiscal changes we need, just as seymour is enjoying with 8% of the vote.
Bryan, so true! Please share your blog/article with Chris Hipkins . I'm sure he is open to hearing from others re Labour's new direction. (something needs to change! ) I've written to him. Heard back from the secretary. I had long email discussion with Geoffrey Palmer. I will send you the relevant papers he wrote to you by email.
Thanks Annette
I'm reading from the same hymn book Bryan!
Change is overdue Bryan. The Opportunities Party is forming policy around social issues and looking for comment - https://www.top.org.nz/priorities
I so agree, Bryan. The Labour Party’s unwillingness to create real social change, their bailing out of taxing the wealthy, their focus on supporting business against investing in health, housing and education - and those dealing with poverty - was a huge source of disappointment and frustration.
Only when the Green Party will be the biggest you will see the changes needed. Their manifesto points out well how change is going to be achieved but will the general public see that or forever vote for same old same old?
Why don't we all flood Chris Hipkins with emails helping with suggestions for Labour's future direction?
Chris.hipkins@parliament.govt.nz
I agree Bryan. It’s a woeful situation. Our European ancestors came here for a fresh start in a country with no social classes, and would be devastated to see what has resulted less than 200 years later. Keep writing, keep influencing!
They brought the social classes with them
What the hell happened along the way?
Michael Joseph Savage 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”
1933 manifesto wanted the state "to be sole authority for the issue of credit and currency" and in 1935 MP John A Lee wrote "The Labour Party affirmed that the government should have the sole right over the issue and control of new credit"
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 millennium 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.”
1954 Labour Party manifesto stated "Labour will take immediate and effective to ensure that the state will become the sole authority for the issuance of credit and currency. The public credit will be used to the fullest extent compatible with the public good"
In July 1962 the leader of the Labour Party, the Rt. Hon. W. Nash, who back in the 1930s was part of a group that resurrendered us to the foreign investment banks after John A Lee had led a break for freedom, 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.
1964 Labour Party manifesto stated "Labour believes that measures taken before credit is issued are more effective than restrictions afterwards."
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 pretence" around the idea the government didn't stand behind them.
"If they were systemically important in reality the government couldn't afford to let them fall over. But no Minister of Finance is ever going to say that as Minister of Finance. It's only when they're old and clapped out and out of a job that they can actually say that."
Yet New Zealand Labour still put Michael Cullen on a pedestal and New Zealand National Party appointed him to run government departments in preparation for privitisation, go figure?
https://open.spotify.com/show/7KQTRNekNMcBLiiygTMVOV?si=1dlhsEvGTLieaVgCqqk6Fg&preview=coverart
Thankyou Bryan .
I stopped voting for Labour due to the resistance of a LAND TAX on all residential land to pay for much needed infrastructure and UBI .
They had the mandate and blew it !
New Zealand is so drowning in foreign privately owned investment bank debt, that presently is the basis of 93% of currency, grossly misalocated to non productive residential realestate, that when nature drowns us or shakes us with natural disasters we are stuck in the headlights like possums, with all our financial levers blocked.
The only way to unblock them and give meaningful relief to those who lost their livelihoods is a transfusion of Sovereign state owned public bank credit, not borrowed from foreign privately owned investment banks, because to simply restructure the present legally odious foreign debt with more foreign debt is like prescribing more blood sucking leaches to a patient that is already bleeding to death from having to many blood sucking leaches on them.
(RBNZ) What Is Money
Private money
Money that is created by private firms, such as commercial banks, is money that is like a promise from the private firm to pay the owner of the money what it states it is worth. This is private money. All private money is 'digital' or 'electronic' - you can only get it, spend it and store it if electronic devices are involved. If you have a bank account, the balance available to buy things is an example of private money.
Together, central bank money and private money make up all the money used in Aotearoa New Zealand. Private money is the most common type of money.
In New Zealand, 93% of money is private money (held in bank accounts) and 7% of money is cash (banknotes and coins).
Money tree
Central bank money is government-backed and issued by the central bank, the Reserve Bank of New Zealand. Cash is currently the only type of central bank money available to anyone. Cash is also the only physical money available in New Zealand. All private money exists digitally (as an electronic record). The diagram below shows the different types of money that exists—or that could exist—in New Zealand.
In full here:
https://www.rbnz.govt.nz/.../future-of-money/what-is-money
Our poverty compared to The Australian economy is largely the result of the Muldoon National Government abolishing the self funded compulsory Superannuation scheme and adopting the unsustainable scheme which has been diluted to today's version.
Australia kept theirs and has a huge investment base as a result.
Typical National, always take the short term fix and beggar the future.
Link doesn’t work?