The Sovereign Money Solution

It’s time to take back control of our money

How the Sovereign Money solution would work for New Zealand

The Sovereign Money solution advocated by Positive Money is to have the Reserve Bank issue our electronic money as well as our notes and coins. The electronic money would be spent on infrastructure projects such as hospitals, roads and transport, or new schools, rather than being pumped into an overheated property market.

There would still be a place for private banks though. While they could no longer create money from nothing, they would have to attract deposits from those willing to invest. In this way loans from the private banks, once repaid would be available to be lent out again, thereby reducing the debt imperative. (This is the way most people think banks already work, and how credit unions actually work).

The boom and bust cycles would smooth out and the available money in the economy would rise based on increases in production of real goods and services, not on inflation of houses and farms. Unproductive debt would fall. New Zealand would move from a low wage economy to a high wage one.

Governments from the left could use the additional money to increase social services or pay off the student loan debt.

Governments on the right could use it to pay down the Government debt and reduce taxes.

We would no longer need to engage in risky offshore drilling or engage in fracking, or mining in our conservation estate to grow our economy – it would grow organically. There would be money for free education, proper schools, affordable health care, tackling climate change and a decent retirement income.

An International Monetary Fund discussion paper endorses a similar solution to the Sovereign Money one.  Here is a quote straight from the paper:

The benefits would be: dramatically reduced public and private (net) debt levels (because money creation no longer requires simultaneous debt creation), better control of business cycle fluctuations, complete elimination of bank runs, output gains of 10% and inflation can drop to zero without posing problems for the conduct of monetary policy.

Not only would the New Zealand economy thrive, individuals and families that are struggling to make ends meet under the current system would prosper.

Young people are saddled with student loans, they are expected to save for their retirement and raise a family. Those that can afford to buy a home will be burdened with a mortgage that will take thirty-plus years to repay.

They will be debt slaves to the banks for most of their adult lives and that is not the future for our children and grandchildren.

The Positive Money solution will provide families and individuals with extra money in their pockets as the economy grows organically without the need for increased debt.  Families will no longer need to choose between food or heating or doctors’ visits or paying the rent.

That is our promise. On a personal level there will be more money for households and at a national level we will have a sustainable future where everyone benefits, without the need to engage in risky ventures.

Inequality, families living in cars and child poverty will become a distant memory.

This is not a new idea.  New Zealand has done this sort of thing before. In 1936 the First Labour Government created money and spent it into the economy to finance the construction of thousands of state houses.

Tangible assets were created and people were put into meaningful jobs. Our social security system was implemented and New Zealand emerged from the first great depression sooner and in better shape than most nations.

We can return to prosperity simply by having the Reserve Bank create both our notes and coins and our digital currency. Now is the time for our politicians to seriously reform our money system.

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