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Reserve Bank loans for infrastructure best deal

Media Release

Thursday 16th October 2008
Reserve Bank loans for infrastructure are best deal

“Labour’s election promise to ‘borrow and spend New Zealand out of a depression’ is worthless if the funds are borrowed from any source other than the Reserve Bank” said Stephnie de Ruyter, Leader of Democrats for Social Credit.

“Although this promise is a tasty election tactic which calls on voters’ knowledge and memories of the first Labour government’s actions during the Great Depression, it must be noted that the wise Ministers of 1935 government utilised the credit facilities of the Reserve Bank to make interest-free money available for the extensive infrastructure projects which lifted New Zealand out of those dark years.

”Borrowing the money on the international money markets in the form of interest-bearing debt must not be an option. The resulting intergenerational debt would prove a significant burden to tax-payers well into the future. It’s not ethical to expect tomorrow’s tax-payers to service yesterday’s debts.

“Democrats for Social Credit support the development and maintenance of infrastructure for public good, not private profit.

“The smart money for infrastructure comes from interest free loans from the Reserve Bank of New Zealand” Ms de Ruyter said.

“The savings made by obtaining interest free loans from the Reserve Bank would address the issue of intergenerational equity. Currently, not only do the following generation pay their share of the principal but the interest costs they pay are often compounded on to the debt as well.

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“The DSC understands that creating new money for infrastructure loans increases the money supply. However, when the loan is repaid, the money is extinguished, thus reducing the money supply to what it was before such a loan was made. This extinguishing action prevents inflation.

“All banks create credit. The difference is simply that commercial trading banks employ a mechanism which creates credit as interest-bearing debt but the publicly owned RBNZ is able to do so interest free.

“The DSC believes the interest-free loans option offers the best deal for all New Zealanders” Ms de Ruyter.


ENDS

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