3 August 2014

Christchurch ratepayers should revolt against asset sales

Christchurch ratepayers should threaten the Council with a ratepayers' revolt if it tries to sell off any of its trading assets, Chris Leitch, Democrats for Social Credit finance spokesman told the Party’s 60th anniversary conference in Christchurch today.

The funding crisis being faced by the Christchurch City Council is being used by the Government and by merchant bankers Cameron Partners to deliver up another raft of profitable assets to overseas big business interests.

The funding the Council needs could be found in a heartbeat if the Government were to adopt the recommendations of a 2012 International Monetary Fund report.

The report published in August 2012 titled the “Chicago Plan Revisited” analysed a proposal by eminent economists Henry Simons and Irving Fisher, for the separation of the monetary and credit functions of the banking system.

They claimed that “Allowing the Government to issue money directly at zero interest, rather than borrowing that same money from banks at interest, would lead to a reduction in the interest burden on government finances and to a dramatic reduction of (net) government debt, given that irredeemable government-issued money represents equity in the common wealth rather than debt”.

The report says that under the Chicago Plan, “what would cease to exist is the proliferation of credit created, at the almost exclusive initiative of private institutions, for the sole purpose of creating an adequate money supply that can easily be created debt-free.”

What that means is that the government could fund Christchurch’s requirements from the publicly owned Reserve Bank at no interest rather than borrowing it from overseas owned financial institutions.

It could do so because all banks create new money out of thin air when they make loans.

The Bank of England confirmed this in its quarterly bulletin issued earlier this year “One common misconception is that banks act simply as intermediaries, lending out the deposits that savers place with them.”

“…..rather than banks lending out deposits that are placed with them, the act of lending creates deposits. Commercial banks create money.”

“Of the two types of broad money, bank deposits make up the vast majority - 97% of the amount currently in circulation. And in the modern economy, those bank deposits are mostly created by commercial banks themselves.”

So every loan made for a mortgage, for business to buy new equipment, for Councils for infrastructure projects, or to the government for it to spend, is created out of thin air.

Christchurch ratepayers should say No to rates rises, or to the selling of the assets that they, not the Council are owners of.

Only a ratepayer revolt will force the Government to see sense and provide the funding Christchurch needs at no cost to either ratepayers or taxpayers.

In Labour’s Christchurch heartland, voters should be well aware that this funding method was used by Mickey Savage’s 1935 government to fund the building of thousands of state houses, roads, and other infrastructure.

It’s time they forced the government to use it again to fund the rebuilding of Christchurch.

ENDS

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