Time To Start Talking Reforming The Banking System.
Wednesday, 17 May 2000
Our banking system is built on a lie. It is rotten at the core, and now we are called upon to hold our humanity high,
reach into the heart of the financial system and clean out the stinking rot.
We need our banking system, we need the security of knowing that our ``money-go-round'' is healthy and safe. To be sure,
New Zealanders are amongst the most sophisticated bank users in the world. It is important to dispel some fears and
doubts about what is being suggested and advocated in this release. At least these three points need clarification:
1) Money is essential. Bank reform does not mean bank removal. Our goal must be a healthy, fair and reliable financial
system so that we can all get on with our lives. We need bankers, and they need us.
2) The ``free market'' is essential, at least in the small. We do not want a command economy. The idea of a ``free
market'' is both applauded and derided by commentators and policy makers. The ideological free market that demands the
removal of all government controls, and sometimes even presumes to overturn the government itself, has had its day. But
the ``free market'' that advocates free and natural competition among small businesses is a very important ingredient of
any healthy economy.
3) Finally, we do not need an atmosphere of fear, secrecy and uncertainty. New Zealand Banking Reform challenges the
banking community, the Reserve Bank, Michael Cullen, and all the high priests of our financial system to explain to the
public how our banks really work. Hiding behind the usual stream of mathematical gobble-de-gook that emanates from these
sources is not enough. If the financial system is already healthy and sound, then there should be no reason not to shine
the burning light of clarity into every corner. If there is actually something wrong, we have a right to know, and to
The lie at the center of our financial system, ancient and venerated though it is, allows a select group of (foreign)
commercial banks that are registered with the Reserve Bank to create and control our currency.
We are told that the issue of money is strictly controled by the Reserve Bank, in the interest of the New Zealand
public, when in reality the Reserve Bank is fully aware that 98 per cent of our money has been created by commercial
banks, that act in the interest of their (foreign) shareholders. This system of banking is not new and nor is the
criticism of this system of banking new.
Consider the following two indisputably true facts:
1) As law abiding citizens of New Zealand, we are forbidden to create money. I would go to prison if my photocopier
started spewing dollar bills. We all know that only the sovereign government of New Zealand has the constitutional right
to pursue the profitable undertaking of providing us with money.
2) The Reserve Bank publishes a time series of the quantity of money in circulation and in bank deposits. As has been
observed often before, only two percent of that money is accounted for by the governments own money creating actions.
The rest has been created into existence by registered banks through the act of lending money.
But hang on, these last two paragraphs are in direct contradiction. What is going on? Someone needs to do some
Are the commercial banks responsible for the existence, and therefore the creation of 98 per cent of our money?
If so, then money is debt? When most people think of money as the answer to debt! ``If only I could just pay off my
debts so I can buy a new whatever'', we say.
The extraordinary fact is that the money that is lent to you to buy a car or house is not taken from somewhere else, it
is created out of thin air by the bank, by the stroke of a pen, or the click of a mouse.
This description of how our financial system works is not in dispute though the word “create” is according to orthodox
economics now old fashioned.
Meanwhile the ``creation of money'' is generally not an aspect stressed by the orthodox literature. Which is a bit
strange, considering the money supply grows annually at about five percent. Last year the Money supply grew, according
to Reserve Bank statistics, by six billion dollars. How can the money supply grow without someone creating money? By the
way, private debt grew in the same year by more than ten billion dollars.
It seems in fact that money is of two kinds. Government created money, consisting mainly of Reserve Bank notes and
coins, that circulates freely, are debt free and make up around three percent of the total stock of money. And then
there is the majority of our money, created though commercial banks lending bank credit (that is freely exchangeable
into government coins and notes) to our cash strapped society.
One of the strangest aspects of this system occurs when the government ``borrows'' money from private sector banks,
money that is freshly created by those banks so they can hand it over to the government.
Why should the government let the commercial banks create money and then borrow it back!? Normally the gross
miss-management of public finance, for the benefit of private individuals, is called corruption.
The money created by the government is debt free, and does not earn interest. The money created by commercial banks
earns interest that is, in effect, a tax or rent for the use of the money. Which kind of money do we want?
In the case of New Zealand that ``rent'' has led to our massive current account deficit. Around eight billion dollars a
year is sent off shore to service debt and pay dues to our foreign creditors. Creditors who have used our own Reserve
Bank Act to create the money they have lent us, and used to buy our property. Eight billion a year becomes $NZ 2000
dollars per person per year, or about $NZ 100 a week for a family of four.
In the Sunday Star of May 14, Don Brash was reported saying the he ``is wary of outsiders becoming involved in monetary
policy making''. What is he afraid of? His job? (maybe the jobless?) Foreign investors? Inflation?
NZ Banking Reform think he is ``wary'' of the general public becoming aware of the absurdity of our banking system. He
is afraid that the wonderful financial liberation that he has helped achieve for us will be exposed to be the fraud, the
dud that it is. That the ``New Zealand experiment'', instead of becoming a sparkling example of the new world order, has
actually exposed New Zealand to the injustice of the ``new world order''.
The Reserve Bank Act of 1989 had the conscious goal of separating forever ``finance'' from ``government''. The result
has been to place us hopelessly in debt, making our rich and beautiful land into an investment portfolio packer. We now
pay rent for our currency, rent to foreign banks, our indifferent overlords.
The Reserve Bank Act of 1989 was a daring and courageous piece of legislation. We can only assume that the people behind
it truly believed that it was good and just. But It was not good and just. It was a mistake, and now we should be
couragous enough to undo that mistake.
It is also good to remember that the eyes of the world will be on us as we conduct the Monetary Policy review recently
The same system of money supply that we suffer from also accounts for the incredibly devastating third world debt
situation. City of London bankers (for example), by un-shamefully lying about how much money they have, now live off the
proceeds from the financial enslavement of billions of people in Pakistan, Brazil, Indonesia, Mexico, Colombia, etc...
Towards the end of further discussing this issue and debating the nature of the Money Supply question New Zealand
Banking Reform has established a discussion email list at egroups.com.
To contact New Zealand Banking Reform:
To join the discussion group send a blank email to.
…or use the following link.