Gordon Campbell | Parliament TV | Parliament Today | News Video | Crime | Employers | Housing | Immigration | Legal | Local Govt. | Maori | Welfare | Unions | Youth | Search

 


Reserve Bank should hold off OCR increase

Reserve Bank should hold off OCR increase


Reserve Bank governor Graeme Wheeler should put a hold on any increase in the official cash rate on Thursday, says Democrats for Social Credit Deputy Leader and Finance Spokesman, Chris Leitch today.

Given the move by the European Central Bank to drop its own key deposit rate to under zero percent, and the consequent rise in the NZ dollar as overseas investors seek higher yields, any upward move in the OCR will only serve to further damage the NZ economy.

If Mr Wheeler’s main concern is the overheated state of the Auckland property market, he should recognise by now that higher interest rates are not going to have any significant effect on that problem, which is largely generated by unfettered bank lending for mortgages rather than for business investment.

Equally the quest for lower inflation is not going to respond to higher interest rates which are in themselves a major contributor to inflation.

He is obviously bereft of any solution, so it’s past time he investigated those provided in the International Monetary Fund report of August 2012 which analysed the proposal for monetary reform advanced by a number of leading U.S. economists that became known as the Chicago Plan.

Its lead authors, Irving Fisher and Henry Simons proposed a change to greater sums of government (Reserve Bank) issued money and claimed the following advantages for this plan:

(1) Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credit and of the supply of bank-created money.

(2) Complete elimination of bank runs.

(3) Dramatic reduction of the (net) public debt.

(4) Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation.

The IMF report states “By validating these claims in a rigorous, micro-founded model, we were able to establish that the advantages of the Chicago Plan go even beyond those identified by Fisher.

First, output gains are very large, approaching ten percent, due to a combination of lower real interest rates, lower distortionary tax rates, and lower monitoring costs in the banking system.

Second, the model provides a compelling answer to those who claim that giving the government the power to issue such a large stock of money would be highly inflationary. The opposite is true.

Not only does Fisher’s proposal not imply any increase in the stock of money held by the private sector, and therefore by construction no increase in nominal spending power, but furthermore it allows the government to achieve much lower steady state inflation without any risk of falling into a liquidity trap.”

Mr Wheeler should look at these more creative solutions and use the Reserve Bank he heads to provide low or no interest loans for local and central government infrastructure projects, and to stop the government borrowing $75 million each week from overseas banks.

Such action would result in stronger productive growth, significant job growth and put real money in the hands of consumers rather than credit card debt.

It’s time Mr Wheeler dragged our central bank into the 21st century and started using its capability for the benefit of all New Zealanders.

Ends

© Scoop Media

 
 
 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell:
On The Team Behind Trump's Throne

Forget the Putin factor. Daily, the team of charlatans, bigots and stunningly ignorant crackpots that Trump is appointing to head key federal agencies is just as alarming. These are positions with vast power and budgetary discretion over policies that stand to affect tens of millions of vulnerable Americans. Sad! More>>

 

Gordon Campbell: On Bill English, Abroad

If David Cameron was the closest thing John Key had to a political mentor, their successors also share a whole lot in common. Theresa May and Bill English were both propelled into the top jobs as the result of unexpected resignations, and without much in the way of credible competition from their colleagues... More>>

ALSO:

Pike River: Labour Bill To Override Safety Act For Mine Entry

“Bill English has been hiding behind the legal excuse that any attempt to re-enter the mine to recover the bodies might place the mine’s owner, Solid Energy Limited, and its directors in breach of the Health and Safety at Work Act 2015." More>>

ALSO:

Gordon Campbell: On Populism And Labour 2017

For many people on the centre-left, populism is a dirty word, and a shorthand for the politics of bigotry. In this country, it has tended to be equated with the angry legions of New Zealand First. Who knew they were not just a reactionary spasm, but the wave of the future? More>>

Oxfam: 30% Of NZ Owns Less Wealth Than Our Two Richest Men

The research also reveals that the richest one per cent have 20 per cent of the wealth in New Zealand, while 90 per cent of the population owns less than half of the nation’s wealth. The research forms part of a global report released to coincide with this week’s annual meeting of political and business leaders at the World Economic Forum in Davos, Switzerland. More>>

ALSO:

Hospitals: Resident Doctors Set To Strike Again

Despite discussions between the DHBs and NZRDA over safer hours for resident doctors progressing during the last week, the strike planned for next week appears set to proceed. More>>

ALSO:

Not So Super Fund: More Burning Ethical Questions For Steven Joyce

Greens: Radio New Zealand reported this morning that the New Zealand Superfund has $77 million invested in 47 coal companies that the Norwegian Government’s Pension Fund – the largest sovereign fund in the world – has blacklisted. More>>

Activism: Greenpeace Intercepts World’s Biggest Seismic Oil Ship

Greenpeace crew have made contact with the world’s biggest seismic oil ship after travelling 50 nautical miles on two rigid-hulled inflatables off the coast of Wairarapa... Greenpeace radioed the master of the Amazon Warrior to deliver an open letter of protest signed by over 60,000 New Zealanders. More>>

ALSO:

Gordon Campbell: Why Tax Cuts In 2017 Would Be A (Proven) Bad Idea

Ever since the world fell prey to the mullahs of the free market in the 1980s, no amount of real world evidence has managed dispel one key tenet of their economic faith. Namely, the idea that if you cut income taxes and taxes on small business, a wave of individual enterprise and entrepreneurial energy will thus be unleashed, profits will rise and – hey bingo! – the tax cuts will soon be paying for themselves ... More>>

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
More RSS  RSS
 
 
 
Politics
Search Scoop  
 
 
Powered by Vodafone
NZ independent news