ADVANCE New Zealand
A new economic design for our political future

MEDIA RELEASE
Date: Thursday, 8 March 2007

History Repeats and Repeats and.....

On the front page of today’s business section of the NZ Herald (8/3/07) is a photo of a man who states he has no answer to the problem of inflation – apart from allowing the reserve bank governor freedom to grab the economy by the throat and choke a bit more life out of the farmers and exporters.

As a graduate in social and economic history Dr Cullen should have the capacity to realise playing silly buggers with interest rates has never in the past addressed the primary driver of inflation and won’t in the future.

Inflation, as Dr Cullen has admitted recently, is inherent in the system but because he is an apologist for a 300 year old concept of ‘sound money’ that is still the foundation for our 21st Century economy he cannot see the obvious solution.

The primary driver of inflation is the mechanism used to inject ‘money’ into the economy. Because the developed world has reached the point where virtually every dollar starts its life as an interest bearing debt, through that mechanism, there is a substantial and growing burden of interest impacting adversely on production, distribution and consumption.

The only way back from a potentially disastrous outcome is for our elected representatives (Parliament) to provide the economy with a mechanism which injects an appropriate level of ‘money’into the economy that does not have an interest component. That would effectively over time remove the debt factor as the primary driver of the inflationary process from the economy with obvious benefits for us all, including an end to the use by the R B of periodic adjustment of the official cash rate and the accompanying distortions thus created.

ENDS

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