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Finance Spokesman John Pemberton

Address to Conference August 2005

13 August 2005

Figures and have been taken from the websites for the Reserve Bank of NZ, The NZ Treasury, the NZ Debt Management Office and Statistics NZ as at the 31 March 2005

I cannot guarantee that I have all the debt figures …. And there is some cross over here and there between some of the categories …. But these figures are horrific enough!

We are a swimming in a whirlpool of debt that sucks us further and further under.

We have a population of about 4.1 million … that’s an average debt per person of about $73,000

For a family of four …. That means $292,000 …

If we pay an average interest rate on that debt of about 8% then the interest cost is about $25.00 billion dollars a year….. Or $6200 for each man woman and child.

….and back to the family of four that’s about $24,700…. Just imagine …. If we only slashed interest rates by half, our average NZ family would benefit by about $12,350.

Don Brash or even Rodney Hide could not produce tax cuts that would benefit the average NZ family by any where near that amount.

National is likely to give a tax cut package of $3 billion dollars …. We know it is not going to be spread evenly across all families ….. But let us say that it does ….. $3 billion means an average of $750 per man woman and child or $3000 for a family of four.

We know that there would be a price to pay for all of us if National came to power.

To fund the tax cuts…..to fund the promises on roading, police, the elimination of special taxes on racing……and to fund the promises yet to be announced … plus the amount necessary to meet Winston Peters bottom line conditions for a coalition …..

Don Brash will have to make huge cuts to health, education, benefits … or if not cuts then wider use of user pays charges.

GST could be increased, alcohol and tobacco excise taxes could do the same … He will give with one hand and take with the other.

We don’t want a bar of that, do we?

What about the surplus? Can’t he use that? …. No the surplus is all smoke and mirrors I’m afraid … the government is already borrowing $1.7billion dollars this year to cover a short fall.

Back to the idea of slashing interest rates, is it possible? Is it as simple as that?

A little while ago I put together a list of frequently asked questions (FAQs) and their answers……and I thank the Whangarei Branch for their input into the final draft.

They have been circulated in the conference packs to all of you.

The answers were designed to be a simple and brief way for anyone of us to answer anyone of those questions at public meetings, on the street or for that matter at a party.

Too often we want to sit people down at an all day seminar, and give them the whole chapter and verse. We don’t have the time …. They don’t have the time.

Those FAQs will pretty much answer the point about slashing interest rates … is it possible? Is it as simple as that?

Yes it is possible and yes it is as simple as that! ……. It is only a matter of policy that we operate in a high interest rate environment.

The Democrats for social credit have policies which will see the Government and Local Bodies access their finance from a very efficient and cheap source – the Reserve Bank of New Zealand, instead of using a very inefficient, expensive source – private commercial banks.

The Reserve Bank can issue overdraft finance, a revolving credit facility or whatever facility, we require as a nation, at rates as low as 1% or less and still cover its costs.

It has done so in the past and it will do so again in the future!

If they have forgotten how …… I will show them how …. Free of charge!

What does this mean in dollar terms?

Instead of Government having finance costs for the year ending June 05 of about $2.659 billion dollars it could be about $357 million.

Instead of local bodies having finance costs of about $213.5 million they would pay $28.6 million.

Just in those two areas alone each family of four on average could be better off by $2430 ($607per person) annually.

No cut in services! No extra taxes or service charges! Just a “hellava” lot more common sense!

Before I go any further let us make some things clear… we are replacing one inefficient source of finance with an efficient source. I am sure (Tongue in cheek) that Roger Douglas and Ruth Richardson themselves would appreciate the efficiencies gained and the costs saved. We are not, in this case, adding a new set of loans to the current ones.

Moving right along ……Having established that the Reserve Bank is a very efficient issuer of credit … then let us take the next step ….

The Democrats for social credit Government will then take steps to ensure that all primary credits entering into circulation come via the Reserve Bank.

The Reserve Bank will issue funds to the commercial banks for them to on lend, at a margin, to the customers in the normal fashion – utilising their lending skills built up over many decades.

The commercial trading banks will no longer be a source of primary credits; i.e. they will no longer have the right to expand or contract our nation’s money supply. They will become banks of deposit – temporary repositories for New Zealanders’ unspent incomes.

By historical accident, the right to manufacture and own our money supply has fallen into the hands of the financial institutions, which forces us continually further into debt. Our party is determined to return this right to create our money back to the people.

Currently (March 2005) 98.26% of our M3 money supply has been lent to us to use, for varying periods of time, at high rates of interest, by privately owned banks. All but a few of these banks are overseas owned and controlled.

1.74% (March 2005) of our nation’s M3 money supply consists of notes and coins, which have been issued to us to use without any interest being charged.

In March 1988 our M3 money supply was $43.101 billion. In March 2005 it was $151.409 billion. Somebody sure as hell has been printing a lot of money.

$108.308 billion was created at little or no cost, and leant to us to use, charging us a high interest rate in the process. The money supply was increased by a small group of privately owned banks, for the benefit of their shareholders, not us.

To reiterate, our intention is to replace this expensive, inefficient source of finance with a cheaper, more efficient source.

The benefit to New Zealanders, based on Reserve Bank interest of 1% and the commercial banks’ margin of 3%, would be a savings of $913 per individual or $3654 per family of four. Add that to the savings of Government and local bodies, and we get $1520 per person and $6080 per family. And we haven’t even tackled the issue of overseas debt.

Can you hear the screams of the orthodox economists? Well let’s just silence them, with simple logic … shall we?

The use of this Reserve Bank money will replace the use of an overdraft facilty currently sourced from a private bank…. It is not additional finance.

Because interest rates will be reduced drastically, financing costs loaded on to the price of goods and services will go down.

Money will only be issued relative to production and labour available, thus avoiding demand inflation.

And to those who moan that the demand for borrowing will reach overload because of the low interest rates, we reply that the rate of borrowing will be regulated by the rate of repayment, i.e. the loan term being shorter or longer as required.

Inflation is not always a simple process of too much money chasing too few goods. In the past, experience has shown that when credit squeezes are applied, inflationary pressures actually increase – for example, when our M1 money supply was reduced from 30% to 15% price increases rose from about 4% pa to 15% pa.

In years gone by we worried about imported inflation … today where would we be without our cheap Japanese imported cars …. TVs, videos, DVDs, I Pods imported from whatever market overseas.

Countries with cheap labour costs and poor environmental standards flood our country with their products. They entice our manufacturers to move to their country, produce the goods there, and then export them back to NZ.

Well, we live in a fool’s paradise I do believe. Without those cheap imports our inflation levels would be higher …. Just forgetting the rising price of petrol for now.

As with everything there is a price to pay … overseas debt and the need to service that debt. The figures presented earlier have our Government and Corporate overseas debt at $156.089 billion dollars ….

Statistics NZ say…that foreign investors earned between $2.8 billion and $3.2 billion per Quarter for the year ending March 05… lets just say $12 billion a year … at an interest rate of 7.5% or more … imagine getting rid of that burden … an average of $12,000 per family … we may not be paying the debts directly ourselves but those who borrow the money soon add it into the costs of goods they sell to us.

The exchange rate is also a problem as the rate is influenced by huge movements of money for speculative reasons rather than a true reflection of real trade between nations.

This is how the Democrats for social credit intend to rectify this.….. We will charge a variable surcharge on all New Zealand money transferred off shore or exchanged for other currencies. Speculative movements of money will cease. The surcharge will erode any margins made.

This surcharge will be known as the Foreign Transfer Surcharge.

Money collected from this mechanism will be used to reduce internal taxation and a proportion used to progressively pay back our overseas debt.

FTS automatically prevents the country from being swamped by overseas goods and services since the surcharge will rise to compensate any future imbalance… in the current account.

Bluntly, we can’t compete. We do many things so well that others can not compete with us in those areas. But if there is a real problem our proposal to make a charge on overseas exchange will help balance it out.

Whether we like it or not we must deal with this issue … and save a fortune in interest payments.

We have other policies such as Debt-free money, Reciprocal Trade, Financial Transactions Tax and our support for New Zealand owned Banks and the co-operative banking systems such as credit unions and PSIS. But these subjects can be discussed at another time.

Suffice to say, the core Democrats for social credit conviction is that whatever needs fixing, whether it be hideous pylons or child poverty, student debt or surgery waiting lists, tax cuts or power cuts, first and foremost the financial system must be adjusted.

With the slashing of interest rates and the return to democratic control of our money supply, we can fund education and health properly.

We can address pressing environmental issues such as Lake Taupo, or power for Auckland, and we can deal with business issues such as compliance costs and exchange rates.

Until then our nations debt will continue to be a burden to us and a gold mine to a select few.

The way I see it, New Zealand needs Democrats for social credit now more than ever.

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