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Hi Joe
Further to John Rawson's remarks on the use of Reserve Bank Credit for
infastructure building works by the 1935-1949 Labour government of New Zealand,
from my historical research into that government,
The Bank of England expressed great disapproval of this
method of financing New Zealand's internal infrastructure developement. It,
therefore, took the unprecedented step in late
1938, supported by the British government, threatening to freeze all of New
Zealand's overseas exchange funds to which it had security rights, (New Zealand
was part of the Sterling area then) unless it discontinued the practice. This
put a temporary hold on the practice, but, in 1939, with the outbreak of
WW2, the Bank of England was in no position to continue to hold that threat over
NZ, because NZ was a reliable supplier of essential raw material for the war
effort. Consequently despite the enormous amount of expense, relatively
speaking, that the war cost NZ, the bulk of the war debt for NZ was to its own
Reserve Bank at a nominal interest rate. NZ had a balance of payments surplus
during the war years because of this. Demand for NZ products after WW2 continued
to exceed supply and it was not until the 1970's that NZ started to experience
balance of payment deficits. Significantly the end of the 1st labour government
in 1949 saw the downturn in the balance of trade with the advent of a series of
National governments that steadily reduced the strict monetary exchange rules
enforced by the 1st Labour government. However, ironically, it was the 3rd
Labour government 1972-75 that removed exchange rate controls, and it was
from that point onwards that NZ began to experience serious balance of trade
deficits. The swing to the extreme right during the 1980's and 1990's completed
the exchange rate "liberation", and NZ has never been able to post an overall
balance of trade surplus since then.
I trust this amplifies some of the detail
around the question
regards
Bill Mc Gunnigle
----- Original Message -----
Sent: Thursday, December 20, 2007 9:48
AM
Subject: RE: [socialcredit] Re: Article
by Richard Cook
Thanks Joe.
The first parts remain theory either way for me
and I keep an open mind until someone comes out with hard facts.
But your
comment on NZ is wrong. There was no debt attached to the use of Reserve Bank
credit for Government operations. It was new money issued for the purpose,
non-repayable. For local bodies and the Dairy industry, yes, you are
right. But the interest charged was only 1% and the finance probably
would not have been available elsewhere. Making this repayable meant that more
could be issued as it was returned, or alternatively made the debt bearable if
it was not. . This distinction is in accord with our present party policy
here.
I notice Richard has not replied to your comment on inflation, so try
this translation. "No more inflationary than any other issue of new
money from any source." That would, of course, include money issued by a
Credit Authority as per Douglas recommendation.
The issue over government
use of new money has nothing whatever to do with (demand pull) inflation. If
it is confined to the amounts needed to balance the prices of goods, there
should be none under either system. The critical point is that, in a
dictatorship, Government spends all new money into circulation and therefore
determines what shall be produced. We saw that in Soviet Russia., and to
some extent in Nazi Germany, both of which seem to have operated a form of
monetary reform. In a democracy, the public would be given at least some
of the new money to spend into circulation so that they get to determine what
goods shall be produced per economic democracy. However, in the modern
high taxation state, it would be ridiculous to pass all new money to the
public and then simply tax a large proportion back from them before it could
be spent.
It is a pity if great ideas are made ridiculous by slavish
adherence to totally impractical concepts
Regards.
John R.
Date: Tue, 18 Dec 2007 20:03:47 -0500
From: thomsonhiyu@shaw.ca
To:
socialcredit@elistas.com
Subject: Re: [socialcredit] Re: Article by
Richard Cook
(John Rawson wrote:-) So the whole reform constitutional
argument is based on the clause "To coin money"? It could be claimed
logically that, since coinage was the only form of money then, this was
intended to cover all money?
(Joe replies:-) But it wasn't the only form of 'money' then,
John.
(John Rawson:-) I note again your reaction to the Guernsey
story, but you have never given hard facts for your attitude. So far
there appears to be more evidence for this event than against.
(Joe replies:-) That story was thoroughly vetted on here, or
the predecessor list, quite some time ago. The ''States Notes", if I
recall correctly from what was determined in examining the issue
then, were redeemed by import duties. They weren't 'debt-free'
money.
(John Rawson:-) After all, why should anyone invent such a
happening in such an unusual place otherwise?
(Joe replies:-) There was a lot of propaganda
put forth by various 'monetary reformers', John. BC's own G. G
McGeer, a former Vancouver Mayor, who was later a MLA, a MP, and finally a
Senator, was one latter day one. He was aided and abetted by still
others who'd previously created 'facts' out of fiction to further their
own ends. The myth might grow and grow, but it's still
myth.
(John Rawson wrote:-) And would you argue that the
actions of New Zealand's first Labour Government in funding much of
infrastructure, state housing for homeless, and the dairy industry with
Reserve Bank credit at 1% is a myth?
(Joe replies:-) They 'primed the pump' with
deficit financing. That's all they did. It relieved
unemployment, and stopped the deflationary spiral that you were
in.
In a deflation it's hard to sell anything
other than essentials, for why would you want to buy anything today if you
felt you could get it cheaper tomorrow? And when prices have to be
lowered below financial cost to move existing product, there's no
inducement to produce any more.
So your government turned that around, and
when prices started to come up, then there's an inducement to buy
before they go higher. It's a quick fix, but it doesn't really solve
the problem. And when it's carried on for any length of time you'll
get an 'inflation' that'll negate its benefits. It is a crummy
substitute for Social Credit properly applied.
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