Head Office: 42 Reyburn House Lane, Whangarei Ph 021 922098

Email: chris.leitch@socialcredit.nz Website: www.socialcredit.nz

Opinion – 16.03.21, by Chris Leitch

Why are taxpayers subsidising the banks?

Question - Why is it that taxpayers (including ratepayers who pay local taxes)
are providing guilt edged securities for the privately owned commercial banks
and then paying them interest, helping them to make massive profits for their
mainly American shareholders?
The banks purchase those securities (bonds) from the government - the
method it uses to borrow - which requires taxpayers to pay the interest.
The banks buy the bonds using digital money they create out of thin air, the
same process the Reserve Bank is using to create $128 billion right now.
Their profit will amount to a cool $4 to $5 billion every year - even at today's
low interest rates - a direct subsidy from taxpayers to bank shareholders.
What other businesses get that kind of subsidy from taxpayers?
Imagine the uproar if farmers were getting a subsidy like that - or
manufacturers.
Politicians like David Seymour or groups like the Taxpayers Union and the NZ
Initiative would have a field day decrying such subsidies, yet they're happy to
condone the banks getting them, without so much as a whimper.
Of course, if we were subsidising farmers or manufacturers, at least they
would be producing products of value for local consumption or export.
But what of value is the subsidy to the banks producing?
What's even worse is that their profits are exported to their overseas owners,
starving the local economy of much needed money and eating up valuable
overseas exchange which our farmers and manufacturers have worked hard
to earn through exports.
Farmers and manufacturers also employ lots of people, in the case of
farmers, in mainly rural communities.
Both groups provide a multitude of other businesses with downstream work.
Farmers directly employ staff on their farms and agricultural contractors,
trucking companies, fruit pickers, shearers, and so on, and indirectly,
equipment service and suppliers, freezing workers, produce packers, tanker
drivers, milk and cheese processors, port operators, shipping companies,
airlines and a host of others.
A similar list could be complied for manufacturers.
Meanwhile the banks are busy reducing staff and closing branches, putting
staff out of work - mostly in those same rural communities.
It’s no contest as to where subsidies should go if we’re going to be paying
them.
So what needs to change?
The government should stop selling bonds.
The Reserve Bank, which the government owns, has already proven, this
year, it can create new money.
That created money is buying government bonds off the banks so the
Reserve Bank is ending up holding large chunks of government bonds.
Effectively the Reserve Bank is financing some of the government’s
borrowing, but at a premium – adding an additional $11 billion to the profit of
the banks in the process.
The government could access the money it needs from its own bank without
any need to sell bonds to the private banks, imposing interest payments (and
loan repayments when the bonds mature) on taxpayers.
What most people fail to realise is that both options involve new money being
created. Commercial banks don’t lend money belonging to their depositors,
nor do they lend their reserves.
The idea that the Reserve Bank’s recently announced $28 billion ‘Funding For
Lending’ programme involves it lending money to the banks who will then on-
lend it to borrowers is a fairy tale.
They will simply add that to their reserves account at the Reserve Bank (on
which they get paid interest – another subsidy to the banks) and create
around 90% more in new money to lend out to their customers.
Government borrowing is tipped to reach $204 billion by 2024. Almost all of it
will be created out of thin air by banks.
Will we continue to let the commercial banks do it, depriving New Zealanders
of better healthcare, education, roads and rail, improved water quality, more
police on the beat, free dental care and free public transport?
Will we keep 250,000 children living in poverty and 41,000 people in a state of
homelessness because taxpayer money that could go on fixing those things is
siphoned off by the government in interest payments – direct into the vaults of
the banks and their overseas owners?
Our will we finally see sense and realise that our own Reserve Bank can
create that $204 billion instead, at zero interest, and most often without the
need for it to be repaid?
Local government needs could also be catered for by zero interest Reserve
Bank loans, although in the main, loan repayment would be necessary once
projects were completed.
Will we create our own money or let overseas privately owned companies do
it for us – and pay them for the privilege?
It’s an easy choice in my view, but the Minister of Finance appears unwilling
to bite the bullet and make the change.
If he really has the interests of Kiwis at heart he’ll do it – unlike Labour’s first
Finance Minister, Walter Nash, who used it a bit for housing, but mostly gave
it lip service only.
Grant Robertson needs to take his lead from a later Labour Finance Minister,
Roger Douglas, who boldly got on with making the changes he wanted.
Except that he delivered taxpayers into the hands of the banks.
Today, we need Grant Robertson to boldly deliver us out of them.
Doing so would make him Labour’s greatest ever Minister of Finance.