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News and views from New Zealand

Dennis Dorney

As a founder member of the SA division of ERA, and now resident in New Zealand, I am pleased to be able to still receive copies of the regular ERA newsletter, but disappointed that there is nothing similar in NZ. Perhaps in this high tech world the computer-literate can find other ways of exchanging ideas. In the meantime I have succeeded in persuading the ERA editorial committee to allocate a couple of pages for news and views from NZ, so that we can find points of similarity (and, also importantly, points of difference) in the direction of economic debate in Australia and New Zealand.

If you are a New Zealand reader and want to contribute to the NZ section, send your contributions to John Hermann “for the NZ section”. I assume they will be published in the order in which they are received. Two pages are about 900 words. If contributors fail to fill that space, I have arranged to make up the deficiency. If we overflow the space, I guess it is the editors’ prerogative to decide whether or not to allocate more room.

To get the ball rolling, I will start by highlighting a recent increase in New Zealand of support for the concept of government creation of our money supply as opposed to the present system of bank creation of our money as debt with interest added. This is just bread and butter to ERA members and, as John Rawson said in the July-August edition of ERA review, the idea has been around as long ago as C.J. Douglas’ Social Credit philosophy.

Incidentally, the Social Credit movement still exists in NZ, represented politically by the Democrats for Social Credit ( Lobby groups have also recently formed, which support the ERA financial reform positions (even if unwittingly) but not necessarily the entire Social Credit philosophy. I am aware of Positive Money NZ (; as well as the New Economics Party (, which I think is linked with Deirdre Kent, author of “Healthy money; healthy planet” and it seems to share her passion for local currencies. I would be pleased to hear if there are other such groups. There is clearly a need to unify their efforts.

Finally there is support, surprisingly, from publications such as “The New Zealand Investor” ( and mainstream journalists. The following excerpts are from an article by Bernard Hickey. He writes a regular financial column for the New Zealand Herald, which politically is right wing. He also has a financial website (, so perhaps he is freelance and can get away with comments that would get in-house journalists sacked…….

I am about to commit economic heresy, but at least I’m in auspicious company and it’s something our own Reserve Bank and government has done before. It’s time the Reserve Bank of New Zealand started printing money and lending to our government to build houses and infrastructure, particularly in Christchurch.

Even a couple of years ago, this would have been unthinkable to say, even treasonous. I’m sure many readers will still believe such money-printing is dangerous madness guaranteed to debase the currency, create hyper-inflation and empower politicians to go on an even bigger spending spree. But we’ve been here before and right now our major trading partners are doing exactly this*. We should at least be talking about it.”

Back in the very early days of the Reserve Bank, shortly after the first Labour Government was elected in 1935, the bank lent money created out of thin air to the government and producer boards. It was used to build state houses and help fund exports of meat, wool and dairy products. The creation of the Reserve Bank in 1934 and the drive, led by Labour’s John A. Lee, for a state house-building programme led to the Reserve Bank being nationalised and starting to lend to the government.”

*You will notice that he is talking of quantitative easing here, which he concedes later is not the same thing at all, since the Reserve Bank’s lending to the Labour Government (at 1%, incidentally) generated real assets whereas quantitative easing generates no assets and simply degrades the money supply. He goes on to say ….

“Lending this new money directly to governments to spend immediately on infrastructure, goods and services would have been a much wiser idea. China did this most effectively.

The Reserve Bank has already said such a quantitative easing could be considered, but not yet because it has room to cut its official cash rate further towards 0 per cent from 2.5 per cent. But isn’t it better for our Government to be borrowing from its own central bank than from foreign banks and pension funds? Wouldn’t it be better employing the unemployed to build new houses and repair Christchurch’s infrastructure than to just sit back and let it happen? Wouldn’t it be better to print the money to fund the deficit than choose to sell public assets to do it? It would devalue our currency, but is that such a bad thing when we need to boost our exports?

The big question concerns inflation. At present, New Zealand’s inflation is under control and the experience in Japan is that money-printing over decades has not created inflation. Neither is it creating inflation in Europe or the US at the moment”*.

*At this point I think he has missed the point totally. The position of ERA and also of the Social Creditors remains, if I recall correctly, that the State is the only creator of the fiat money which underpins (or should underpin) our money supply. If so, that clearly does not devalue our currency. Devaluation is a characteristic of bank-created interest-added money and is in fact the only way bank debt can work. Bernard Hickey also does not see that devaluation and inflation are opposite sides of the same coin. Still, it’s a good start.

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