Urgent call for Reserve Bank digital currency
New Zealand’s monetary sovereignty is under imminent threat from global technological developments. A timely submission before Parliament calls for an urgent review of our monetary system and the Reserve Bank’s role in it.
“The rapid emergence of private digital currencies such as Facebook’s Libra is a wake-up call. They have the potential to circumvent the primacy of the New Zealand dollar, competing with it in our own domestic market,” says Positive Money national spokesman Don Richards.
“The Reserve Bank needs to take direct control of all currency issued (both cash and electronic) and the payment system, and it needs to start acting now,” says Richards.
That’s the essence of the Positive Money New Zealand petition and submission that is now before the Finance and Expenditure committee.
Facebook’s corporate culture has been found wanting on a number of occasions and to have them in control of a portion of our money supply is a direct threat to our sovereignty, says Richards.
The big four Australian owned banks however create most of our digital currency and benefit hugely from the privilege. They have a profit imperative and put the money where they can maximise their returns and minimise the risks – housing. This starves the productive sector of much needed capital.
The Aussie banks have not showered themselves with glory either. In 2009 they created history with the largest settlement of $2.2 billion to the Inland Revenue to pay for tax avoidance claims over complex international "structured finance" transactions.
The ANZ Bank also fought for more than three years to keep its role in New Zealand's biggest Ponzi scheme (Ross Asset Management) quiet while both Westac and the BNZ have been pinged by the Reserve Bank for breaches of the banking regulations.
With other central banks looking at what to do once notes and coins are replaced by digital currency, it is time that our Reserve Bank showed some leadership. Rather than continue to allow private banks to issue our electronic money, the Positive Money submission would have the Reserve Bank issue our digital currency with the profits of this money creation process remaining in New Zealand, rather than disappearing across the Tasman.
New Zealand is also facing the prospect of negative interest rates in an effort to boost the economy. As the Aussie banks issue most of our electronic money as debt, the only way for our money supply to grow is for more people to take on more debt. Add to this the Government’s commitment to reducing its debt, and you can begin to understand why people will be forced to take on even more debt.
Nations around the world are experiencing these limits to the amount of debt that people can take on - despite record low interest rates. Rather than more of the same thing that does not work, we could instead try something that has worked in the past.
In 1936, during the first 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.
Our Reserve Bank can issue our digital currency free of debt and inject the money into infrastructure projects such as roads, schools and hospitals. This will free up valuable tax money to tackle the issues that stop New Zealand from reaching its full potential.
Our submission 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.”