Reserve Bank Should Curb Money Creation By The Commercial Banks
Social Credit has called the action of the Reserve Bank to curb its purchase of government bonds off the private banks a sensible and responsible move.
Hand in hand with that it now needs to curb the avalanche of money creation that has been going on by the commercial banks.
Not doing so will allow the inflationary pressures in the economy to continue to increase.
Those commercial banks have been creating an average of $20 billion in new money every year, and that amount has almost doubled in the last two years.
The move by the ASB to increase mortgage rates is just cynical profit gouging, preying on the customers who have borrowed at the record low interest rates the banks have been offering and will effect not just home owners, but businesses, the very sector of the economy that needs to retain staff and ramp up production of goods and services to meet the demand in the economy.
ASB’s move will be quickly followed by the other banks, all of whom will be keen to increase their profits as well and are attempting to bully the Reserve Bank into lifting the Official Cash Rate.
Any increase by the Reserve Bank in the OCR will simply drive up interest rates even further, add to already record commercial bank profits and worsen the effect on borrowers.
The Reserve Bank needs to establish just who is in charge of the country’s financial system, itself or the commercial banks.
It should direct banks to channel a greater proportion of their lending into the business sector, providing working capital for businesses to expand, invest in new technology to overcome the shortage of workers, and increase production.
Falling into the trap of raising interest rates will exacerbate the problem, resulting in increased costs, reduced production and hardship for businesses and home owners.