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Letter 4

[ Bioenergy ]  

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20 August 2001

The Editor


PO Box 33235



Dear Sir,


So once again the Reserve Bank of New Zealand has given definite confirmation that zero interest loans can be provided to local government (NSTA 14 August). This will be a revelation for some current councillors and some MPs. As to the reasons given by the Deputy Governor for not doing so, these are merely policy matters and such policies can be changed if there is enough persuasion from effective councils looking after their people’s interests and from voters themselves. Ratepayers should be able to celebrate this revelation. In North Shore City alone it would save them $41 million (on average) of interest cost burden each year over the next ten in connection with essential capital works. And the savings could go on after that.

I have written to Mr Sherwin (the Deputy Governor) to point out that most of the remarks in his letter to the Council seemed to be based on a presumption that such loans from the Reserve Bank would be additional money released so as to increase the money supply and its demand on "scarce" resources. Far from it. The Council intends borrowing the money from other sources and carrying out the works anyway. Those other banks will "create" the same amount of new money which will go into circulation when their loans are drawn down. So I have asked Mr Sherwin to revise the advice he has given to the City Council so that it can more constructively reflect the significant benefit of the scheme to the people.

By the way, don’t anyone try to say that trading banks lend out their depositors’ funds. When did any bank manager ask you if he could reduce your account so as to lend the money to someone else. Society "rents" its money from banks that create this lifeblood of the economy against security over assets. Yes it would be funny if it were not actually for real. Only some 3% of money is actual currency, the dollars and cents most people view as money. All the rest is created and issued by the operation of the private banking system. Don’t just believe me; look this up in Encyclopædia Britannica, an economics textbook by an astute author or read the Reserve Bank’s own publication.

I look forward to the possible savings for ratepayers being realised by those policy makers who should be responsibly managing public finances.



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