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Hi Joe
What you
have postulated is essentially correct. However the BofE never held substancial
amounts of NZ currency. NZ pounds were changed into
Pounds Sterling in NZ by the NZ Reserve Bank. NZ companies were required to
purchase Sterling from the Reserve Bank in order to undertake overseas
purchases, thus NZ currency never reached Britain. I
believe the pressure from the Bof E was from British Banks that, up until the advent of the Labour government, had monopolised loans
extended throughout the NZ economy. They found themselves in direct competition
with a government backed bank that could afford to offer loans at 0.5-1.0%.
Obviously they could not allow any other British Empire "colony" to follow NZ's
example, because a substantial amount of Britains
overseas earnings came from Banking "investments" in the form of loans to all
Empire colonies, hence the pressure. I am sure something similar was directed
towards Canada and Australia to force them to remain within the Sterling area
prior to 1939.
The position of the Bof E acting as the
the holders of overseas exchange for Empire and Commonwealth gave it a unique
position as banker for the Sterling area. It could therefore exert pressure on
those countries by withholding the
exchange reserves it held in safekeeping for Sterling area
countries. I am sure the BofE would have acted in this way no matter what, once
it became apparent that the NZ government had determined to become the master of
its own currency and foreign exchange rate. It was a necessary step for the Bof
E to maintain its financial control of NZ's developement against NZ government
efforts to become autonomous.
This is my interpretation of the actions
taken by the Bof E in 1938. Nevertheless I concede that there are still too many
"What ifs" and " If only's" in the whole senario. That all the negotiations have
been embargoed until 75 years after the event doen't help matters either.
Furthermore I suspect that once the time expires they will be reembargoed for a
further 75 years. This seems to be a common factor in these events.
regards
Bill
McGunnigle
--- Original Message -----
Sent: Friday, December 21, 2007 3:29
AM
Subject: Re: [socialcredit] Re: Article
by Richard Cook
Hi Bill (McGunnigle),
Many thanks for providing the background details in
regards to the New Zealand experience.
Could it be that what your first Labour Government
was attempting was tantamount to a continual 'devaluation' of the New Zealand
pound? (I don't know the answer to that, quite honestly, but it would
seem to me that might be the case.)
If that were so, then perhaps your main trading
partner, Britain, ran the risk that what had been acquired by the BofE
in New Zealand denominated funds through trade balance settlements, (instead
of a transfer of actual gold or silver), might quickly become progressively
worthless as effective demand for further NZ goods?
If such were the case, and its holdings of foreign
exchange reserves in NZ pounds were substantial, wouldn't it be likely that
the BofE would naturally try to discourage the new found 'financing' method
for Government infrastructure for that reason alone, if none
other?
Now I don't have the answers to that, and maybe I'm way
off track even in considering the issue that way. And if I am, I
hope anyone with greater knowledge in these matters will come in and set
me straight. But at the moment, that's what comes to mind.
If your first Labour Government could
have gone instead to some variant of the CPD mechanism, which, in
effect, makes each unit of NZ currency held capable of purchasing 'more' in NZ
goods and services, I wonder how the BoE would've viewed that? Other
considerations aside, wouldn't it be possible you might have had quite a
sudden 'trade boom' with Britain and found funding infrastructure a lot
easier?
It's always interesting to speculate what might have
happened when we ask "what if" or "if only" we'd done something differently,
but really, all things are so interconnected it would be almost impossible to
ever know.
Regards,
Joe
----- Original Message -----
Sent: Wednesday, December 19, 2007 9:12
PM
Subject: Re: [socialcredit] Re: Article
by Richard Cook
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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