MUST READ: Banks have created the speculative bubble and should be nationalised

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Probably only one number is needed to explain the current housing crisis.

In today’s NZ Herald there is a graphic that shows that in the year to January, 2021, the banks increased their loans for home mortgages by 35% to $6.36 billion. The previous year they increased loans by 16.4%. That is a 57% increase in just two years.

Most of the new lending went to speculators rather than new home buyers.

This is all a direct consequence of government policies that give almost complete free reign to banks to create and allocate debt without almost any control. This has been compounded by Reserve Bank printing money to buy bonds and drive down interest rates the offer banks virtually free money to lend to whoever they want.

It has created an extraordinary feeding frenzy by the property speculators.

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Prices as a direct consequence went up 12.3% in 2019 and 19.3% in 2020 and have continued to surge in the first few months of 2021.

The recently announced measures by the government to tweak this system by capturing some of the capital gain of some of these speculators with the changes to the so-called “brightline” test for tax liability, and reducing the ability to deduct interest off their loans against rental income over the next four years, while welcome will only marginally impact the extraordinarily inflated market.

Other measures included a few billion dollars more to help open up new land for private housing but this was described as so small it was almost a rounding error. And of course, any new private housing just becomes part of the market for future speculation. The “market” broken and can’t be fixed.

The only solution is to massively expand the building of qualily public, cooperatative and iwi housing until everyone one who wants a healthy home at an affordable rent with security of tenure can have one. Rent controls would be imposed on private landlords and high standards imposed. Then the private rent racketeers are driven out of business.

Housing would cease to be a thing for speculation.

New Zealand has now entered an economic recession. Recovery must be led by the government putting people and the planet before the pursuit of private profit. Public ownership and control of banking is the only way we can guarantee that the desperate search for profit by the criminals who own and control banking in New Zealand is ended and we can direct investments away from property speculation towards the social and environmental needs of people.

19 COMMENTS

  1. All too true, Mike.

    But since the government was captured by banks and corporations and opportunists long ago, and now acts as an agent for banks and corporations and opportunists, we cannot expect the government to do anything other than make matters worse -which is what governments have been doing for the past 40 years, at least.

    As long as politicians and bureaucrats are richly rewarded for taking WRONG actions they will continue to take WRONG actions.

    Sadly, we have to wait for the system to collapse before we can start making progress on ANYTHING of consequence.

    Collapse is coming.

    • It is difficult to get a man to understand something when his salary depends upon his not understanding it.

      Upton Sinclair

  2. We should stop the private banks creating money from nothing. We could set up state owned banks to do that, with lending guidelines set by government. Perhaps the the Australian owned banks would then close up shop and move out.

  3. Don’t blame the player blame the game. Successive governments have used property and pump and dump immigration to mask over NZ’s economic shortcomings. The current government shamelessly artificially inflated the property market for their own political gain in a “look how good we have done in little Aotearoa” media driven campaign. Now the shit is starting to hit the fan they are looking for scapegoats.

  4. Errant nonsense, whilst the banks are undoudtedly complicit and profiting off the housing shambles in NZ nationalising them, if it was even possible would tank, the NZ economy and cause massive pain to the population.

    • TAB
      Tell more
      When the first Labour Govt followed that path it brought NZ up out of the crap.
      No pain to the population just the private banksters who have a privilege inherited from the city of London, of creating new money out of this air. RBNZ states that private banks create over 97% of new money just with a few stroked on the keyboard.
      The biggest racket going protected by racketeers with deep pockets.

  5. The longer one leaves the financial sector untouched, the less it can be reformed.

    Money (like the legal system) is a public good that belongs entirely to public administration. Apart from a few neoliberal witch-doctors and business roundtable sects, nobody claims that finance could be left entirely to the market.

    But a variant of a “Public Private Partnership”, as the current financial system could also be called, also regularly proves to be expensive (since society bears the risks for private business) and is unsuitable.

    The race between regulators and private financial institutions is that of a rabbit and a hedgehog.

    Nationalization of the entire financial sector has to guide the future way. There is even a small infrastructure of cooperative banks and savings banks in New Zealand / Aotearoa that can be built on.

    • and https://www.rnz.co.nz/news/business/439067/westpac-bank-considering-sale-of-new-zealand-business

      Yet another example of “We’ll bloody show ya who’s boss little brother”

      “Westpac said the New Zealand operation was performing strongly, but the group was simplifying its total business, and consolidating its international operations.” Rhubarb rhubarb rhubarb

      And can you please take Jenny and Burton with you on the way out.
      Now is the time to say Goodbye-eeee

      • NZ banks are used as cash cows for their parent companies in OZ and offshore. Due to cost cutting they are becoming less and less functioning, with less people to do more work and reducing customer services.

        Banks make record profits from interest payments on mortgages. So they will lose a lot by the rental changes to interest. Many landlords will just pay off the mortgages if they can.

        I really hope NZ government don’t rush in and buy Westpac at some inflated sum, because NZ banks are due for an adjustment to their insatiable profits (by this interest announcement) and it is about time banks took less in NZ, and gave back.

        • No need to pay money to that scum.
          The Govt has Kiwibank which need to be brought under govt control as Jim Anderton wanted.
          All govt departments and institutions including power companies, should be banking with the NZ bank Kiwibank.
          It is a NZ govt owned back under a corporate framework which need to be simplified to plain govt ownership.
          Watch the people flock to a govt owned and guaranteed bank.
          Kiwisaver also need a directly govt owned player that people know will look after their money. the private fund managers at present gamble away with contributes money and charge them fees for that privileged. If they loose the lot than they walk away. Govts borrow money but may not need to at all with a growing Kiwisaver pool in their care. Taxpayers pay the management outgoings as the govt holds the money

          Mikesh again makes the point of a staste owned bank profitting the nation.
          We used to have The State Advances Corp which was govt owned and lent money to people and businesses. It not new but neo liberals got rid of it.

          we also had a State Insurance company keeping the others honest.

  6. How is anybody supposed to be able to afford a house, when your job is increasingly transient in NZ, and redundancy of employment is normal. With corporations posting record profits, and increasingly saving money by saving on labour costs by taking away employment conditions and replacing them with gig economy on contracts. Meanwhile various mechanisms of non paid work seems to be becoming more common as a new means of exploiting people.

    Unions should be ashamed! They seem to have largely given up on worker conditions in NZ, holding employers to account and now seem to be concentrating on foreign worker/beneficiary benefit entitlements instead.

    • SNZ
      At various times union membership in some employment was compulsory and unions were consolidated. There were various opinions surrounding that but as Union membership became relaxed then employers worked hard at reducing union numbers and power to hold employers to account.
      It was the power of the unions in the USA that forced the New Deal.
      United We Stand.
      To avoid union power the united bit gets demolished to the detriment of the workers and society as a whole.

  7. Fantastic Post @ Mike Treen.
    An insightful and intelligent appraisal of the banking cartels and your suggestions and solutions are exemplary.
    All I can come up with is a barrage of fuck words which have their place in the modern world of course, but, when a cool and calm approach is necessary I’m left wanting I’m afraid. Having written that, what little testosterone I have left still gets me to my feet from the fireside’s armchair.
    I have a deeply personal loathing of the banksters, the bnz in particular, and in regard to my family which is the subject of a book being written but in the meantime, the banks are the monsters in our midst and their best defence is to blend in. Allll cosy, snuggly hug’s.
    I see the westpac rats are attempting to run for it. Ever had a speeding ticket? Of course you have. Who hasn’t? You see who you paid the ticket through?
    There you go.
    Well done Mike Treen.

  8. If you look at how badly the disabled are being treated in this country should tell you the govt doesnt give a fuck about people per se unless you’re rich otherwise you get whatever you damn well want.
    This country has been fucking awful to grow up in as a Gen Xer, Got to watch the boomers pull up the carpet behind themselves and now they are feathering their retirement nests with the housing market.
    Its thanks to boomers our incomes are poor and living conditions expensive and now they are screwing us at the other end.

    • Mark from just over a generation ago when a worker on average wages could save buy a house and pay it off in 20 years or less, all on one wage; we have moved to a very different position with privatisation of govt functions, local councils being set up for more privatisation as CCOs now can’t be undone and further moves to privatise health increasingly and no doubt a second go at capturing the billions in ACC.

      It takes careful planning over a long period to set that agenda in motion.

      The Christine Holgate inquiry in OZ will either expose the privatisation agenda of be a cover up.

      After a well planned progressive eroding of the Ozzie Post Office leading towards privatisatioh the CEO had guts and blew the whistle.
      A political party that was committed, investigated behind the scenes, made it public and forced the Govt to run an Inquiry.
      Results – a very big win.

      https://citizensparty.org.au/media-releases/australia-post-inquiry-exonerates-christine-holgate.

      Many Kiwis contributed toward supporting the Oz Citizens Party in this debacle.
      When the shyster john kee sold of half of our energy sector in spite of a 67 % / 32% national referendum indicating Kiwis did not want their family jewels sold off to foreign investors, there should have been riots in the streets. But kee knew that Kiwis have been well indoctrinated to let govts do what ever the rich want.

      The Ozzies just showed how its done.

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