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Message 5167     < Previous | Next >
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Subject:RE: [socialcredit] Re: Article by Richard Cook
Date:Friday, December 21, 2007  21:41:13 (+0000)
From:John G Rawson <johngrawson @.......com>
In reply to:Message 5161 (written by William Hugh McGunnigle)

Just a few miscellaneous additions to detail Bill Mcg. has given you.
I have been told by a close relation of one of them that there were 14 monetary reformers in the cdaucus of our first Labour Government, (52, I think, in a House of 80) which at that stage was NOT strictly socialist but better described as Humanitarian.  Not all were SC'ers. Legend has it that a year or two before the war, Nash, Minister of finance, was on the phone to the Governor of the Bank of England, who was warning him that NZ would sell no more lamb on the British market if they continued with their use of Res. Bank credit.  Leading reformer Jophn A. Lee, (also a war amputee and great orator) under whom we built state houses with our own money, was supposed to be at his elbow suggesting he tell him to get ..., while Nash was urging caution. Some fairly short time later Lee and the others were ousted or rendered ineffectual and the Party then embarked on a socialist path. As that failed, it turned hard right beyond even the conservative National Party in the 80's.
Its early policies entailed very strict import controls, which lasted well beyond the War.
Dairy products were subsidised and price controlled for a long time, again beyond the war period, which had a twofold effect, aiding the dairy industry (in addition to finance at 1% from the R B) and providing cheap food. Bread was under a similar scheme, and typical of socialists, the subsidy applied only to white bread.
Children in schools regularly got a half-pint of milk every day, although in some country areas parents made this into a cocoa drink in the winter.  This also went on through the war period.  From time to time, apples also were provided. I suspect this had much to do with high number of world championships and Olympic medals later gained by this country, proportionally to population. 
Nash later became a champion of the IMF etc., once claiming that he "belonged to the world..." rather than NZ.
Our present Minister of Finance claims to run a surplus every year, but you can log onto a statement that he intends to borrow two and a half billion dollars this year on Debt Management (NZ).
Regards. 
John R.



From: wmcgunn@maxnet.co.nz
To: socialcredit@elistas.com
Date: Fri, 21 Dec 2007 17:59:48 +1300
Subject: Re: [socialcredit] Re: Article by Richard Cook

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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