A petition that promises a significant and dramatic improvement for the New Zealand economy was handed to Dr Deborah Russell, the MP for New Lynn, today.
“The petition, signed by over 5,000 New Zealanders, addresses our crippling level of debt as well as funding infrastructure projects that will energise our economy,” says Don Richards, National Spokesperson for Positive Money New Zealand.
“New Zealand’s financial system is approaching crisis point with household debt at 96% of our GDP. Our total debt passed the half trillion-dollar mark last year,” according to Richards.
“Our financial system is debt-based with our electronic money, which makes up 97% of our money supply, being introduced into the economy by private banks to finance loans and mortgages. Our Reserve Bank has been relegated to issuing 3% of our money in the form of notes and coins.
“There is no way to reduce our debt without harming our economy because the only way to increase our money supply is to take on more debt, which is unsustainable. To make matters worse the government is committed to reducing public debt, but this only transfers the debt burden onto the shoulders of households and business,” he says.
The petition provides a way out of our debt spiral. It asks the House of Representatives to give the Reserve Bank of New Zealand the sole ability to issue all New Zealand money, whether notes, coins, or electronic. With the Reserve Bank issuing all of our electronic currency as well, new money would be introduced into the economy debt-free and used to fund infrastructure projects.
“This is not a new idea,” says Richards. “In 1936, during the Great Depression, our Reserve Bank injected millions of pounds into our economy enabling the building of thousands of state houses and other worthwhile projects. In three short years we were able to get out of a bigger hole than the one we are currently in and finance systems that became the envy of the world.”
“While things have certainly changed since the 1930s, a 2012 IMF discussion paper titled The Chicago Plan Revisited endorsed a similar approach. According to their analysis, empowering the Central Bank (our Reserve Bank) to issue all money would smooth out the boom and bust cycles, eliminate the risk of bank runs and dramatically reduce both public and private debt. In addition, it would provide productivity gains of 10% and lower steady state inflation to zero.”
“Our petition promises to be a game changer,” concludes Richards. “It’s an important first step to having an economy that works for the benefit of all Kiwis, not just a few.”
A background paper provides detail on the proposed solution.