Media Release

Thursday 1 December 2016

Graeme Wheeler is wrong

Democrats for Social Credit Finance Spokesman Chris Leitch is calling on Reserve Bank Governor Graeme Wheeler to correct statements made in the Bank’s Financial Stability Report released yesterday.

Mr Wheeler is contradicting his own bank publications with comments that “New Zealand’s banking system relies on offshore wholesale funding markets as a result of low levels of domestic savings”.

That statement is in direct contradiction to the quote from the Bank’s bulletin Vol. 71, No. 1, March 2008 which states “By far the largest share of money – 80 percent or more, depending on the measure – is created by private sector institutions - in practice, mostly registered banks”.

If that statement is correct, then banks don’t seek wholesale funding from overseas at all - they simply create the funds that they lend out.

The Bank of England in its Quarterly Bulletin 2014 Q1 reinforces the matter when it states “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 — the reverse of the sequence typically described in textbooks”.

So who is right – Mr Wheeler, or the publications issued by both the NZ Reserve Bank and Bank of England ?

I challenge Mr Wheeler to come clean and stop perpetuating the myth that banks lend out money deposited with them when clearly they don’t.

The suggestion that interest rates are going up as a result of higher offshore wholesale funding is therefore also wrong.

The banks are simply profiteering.

ENDS

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