That’s what Bernard Hickey called our economics last week, and he’s correct.
Ruth Richardson is one of the people who started that ball rolling.
After increasing NZs poverty and stagnating our economy, she’s now the head of corporate propaganda astroturf group ‘the taxpayers union’ (TPU). TPU is part of the racket that’s looting our country. They are part of ‘the winebox crew’, that class of people and corporate managers who feel entitled to rip kiwis off and drive our nation into debt bondage and private ownership. They are what Plato called ‘wealth addicts’. He knew they were unfit to lead, but that they often took and held power, until overthrown.
TPU is the most well resourced group I see on the road, with the exception of ACT, and they tell a lot of lies about our economy and national debt. Why would they do this? Because knowledge is power, and NZ is a rich country being looted by liars. Lets follow the money.
Before we begin, let’s take a moment to remember, all human history and religion has considered greed a sin and the path to ruin. Yet in our ‘modern’ world greed has been sold as a virtue; even as it tanks our economies through debt bondage and irresponsible exploitation.
The reality that Treasury and the Taxpayers’ Union (TPU) don’t want you to know is this;
We are not ‘running out of dollars’. We cannot. Because our government is a currency issuer. But, at the most basic level, ‘Our’ money creating powers (RBNZ) have been removed, hidden, and denied by successive labour and national governments.
This, in turn, has left us at the mercy of a merciless and damaging aussie bankster cartel.
It is their monopoly of currency creation that is at the root of our economic woes.
You may or may not know this, but most NZD (97%) are created by commercial banks when they lend. You may find this difficult to believe, but its proven in Richard Werner’s 2014 empirical study (‘Can Banks Individually Create Money Out of Nothing?‘), and has been confirmed by The Bank of England, the RBNZ and the US Federal reserve.
Its worth noting, most of private money is created for counter productive ‘investments’, like blowing real estate bubbles instead of a productive economy. For economic deadweight.
Given the fact that banks create credit (money), why are we lied to, who benefits, and how does their bamboozle work?
The Basic Trick
Treasury frames the economy as a ‘shared household purse’.
This ignores private bank credit creation, which drives housing booms and busts, not public borrowing.
The OCR (Official Cash Rate) is used as the ‘most reliable tool’, but in reality it’s a blunt weapon that transfers income from households/SMEs to bank shareholders and bondholders (mostly foreign).
The household-budget myth justifies cutting productive public investment and keeping money creation in private hands.
Eventually our rising debt to these private banks is used to justify privatisation or underinvestment that leads to privatisation. Yet, if we owed it to ourselves (thanks to the magic of accounting) our debts would magically be assets in accounting terms.
Who Benefits?
Foreign-owned banks: record net interest margins during high OCR periods.
Landlords & asset holders: OCR cycles pump asset prices and lock in rents.
Bondholders: higher government interest payments mean public-to-private wealth transfers.
TPU donors: a permanently constrained public sector = more space for privatisation.
Who Pays?
Households & SMEs: squeezed by interest rates, starved of public investment. Future generations: not from ‘public debt’, but from failure to build productive assets.
The nation: persistent current account deficits (~5–6% of GDP) drain wealth offshore.
The Fix
Admit the truth about money creation: the real constraints are inflation, capacity, and the external account.
Use fiscal policy as the primary stabiliser, OCR as last resort.
Establish a NZ Development & Resilience Bank to direct credit into exports, renewable energy, resilience.
Replace crude debt limits with capacity-based fiscal rules.
Build shovel-ready pipelines for housing, infrastructure, and climate resilience.
Every politician, or government, who says “government finances are like a households” is a liar or a fool. You tell me, what do you think it is?
I think its a revolving door of corruption. There is a a magic money tree, its called the Reserve Bank of New Zealand, and we should really start farming it responsibly.
But we will have to recapture it from the banksters minions first.
Knowledge is power. Each one teach one. Tell your friends, and share this!
Tadhg Stopford is a Teacher and Historian.
I was taught that the bank’s money-creating ability was determined by the share of deposits they had to hold in reserve, although that was over 4 decades ago under Keynesian economics so I don’t know what current thinking says. I can see the logic of the Reserve Bank creating money for sound infrastructure investments although with the current idiots in charge borrowing money for tax cuts and the popularity boost of creating money for higher wages with no productivity boost I would be very reluctant to let any elected government make that decision.
Yes you are correct – banks have to hold certain amounts of deposits and other assets against any new money they create through loans. It’s usually a ratio of some sort – for example for every dollar on deposit the bank can create 5 new dollars in loans. The important point is that loans are not drawn from deposits – loans are always new money that is typed into existence on a keyboard.
Loans create deposits. A loan created for a house by one bank is a deposit at another bank – 5% of that deposit can then be held in reserve at the second bank. The credit creation is not determined by the 5% reserve.
Great article – you should watch some of Steve Keene’s lectures – he emphasizes – with data – the private sector debt cycle and how this is shaped by government deficits etc.
The household analogy is a bad one unless you consider the following – nearly every household understands that carrying massive amounts of debt to own a home is fine because it improves the standard of living for the debt holder in the long run.
Now consider that a government is like a household but it spans multiple generations – the government does not take on debt to acquire assets for a single generation – like a household – but for the upcoming generations as well – if it doesn’t then future generations go without.
In other words the government is borrowing to build the assets for the future not just the present because a government does not represent a single generation but all future generations as well.
Just the same as households – each generation takes on debt to pay for assets. If they don’t then they are renting the asset off someone else. The same for a country like NZ.
Which is a very long way of saying:
government deficit (spends more than it taxes) = private sector surplus – income and savings
From MMT – this is because the government creates new money when it spends according to an agreed budget (fiat) – taxes and bonds come afterwards and withdraw money from circulation. They don’t technically pay for anything the government does.
You only need t look at the money supply to see what is happening.
https://tradingeconomics.com/new-zealand/money-supply-m3 (set it to 10 years).
The money supply doubles every 10 years through banks creating mortgage debt, so house prices double every 10 years as twice as much money is available. And bank profits increase exponentially.
Couple with the fact the CPI has been screwed with so much, especially by removing the cost of land, the cost of existing housing, and the cost of servicing a mortgage (thanks Bolger and Shipley and of course Richardson), that there is no constraint on ever growing house prices and in addition, wages which are tied to CPI decline in real terms as the CPI does not measure inflation.
This is why you have to tax wealth and not income. But central banks and governments the world over are acting in cahoots, so nothing short of revolution will change anything.
Very true Tadhg. There’s a reason those nations and states where the Social Credit movement set up a REAL state bank for the interests of the people, and where that’s been able to be defended against our usurious enemies, are doing better.
Where did the Social Credit movement set up a bank? Canada?
This Government is racist,there is no denying this.
https://newsroom.co.nz/2025/08/20/whos-afraid-of-aotearoa/
Racism mmm – let’s not look away to other faults we are labelled with from money and banks; just concentrate. Because we don’t understand this ubiquitous stuff. We have a mayoral candidate in Nelson who promotes the idea of a moneyless economy. I’ve been involved with a Green Dollars system that worked quite well so know a bit to comment.
What is Tier 1 and Tier 2 in banking?
Tier 1 and Tier 2 capital describe two types of assets banks hold. Tier 1 capital is a bank’s core capital, which it uses to operate on a daily basis. Tier 2 capital is a bank’s supplementary capital, which is in reserve.
What Is A Tier 1 Bank? | Papaya Global
Papaya Global https://www.papayaglobal.com › glossary › tier-1-ban
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What is an example of fractional banking?
For example, if a person deposits $1,000 in a bank account, the bank cannot lend out all the money. It is not required to keep all the deposits in the bank’s cash vault. Instead, banks are required to keep 10% of the deposits, i.e., $100, as reserves, and may lend out the other $900.
Fractional Banking – Definition, How it Works, History
https://corporatefinanceinstitute.com › economics › fract
(Is that what we are led to believe but is not the actual system at all?)
…
Then there is the minimum reserve system; And the proportional reserve system for bank lending.
But the fractional reserve system is the most common apparently.
https://en.wikipedia.org/wiki/Fractional-reserve_banking
It is so useful to have money as a universal exchange unit with a known value. Money is like oil, easing the interactive transactions of people and enables things to be done. I have to do repairs on my house, have some money set aside, and know roughly what hourly rate the workers are being paid with an idea of the expected cost of materials. If I do an individual transaction I think it likely the worker will want at least $40 per hour to cover costs.
But government has a way of extracting taxes on projected earnings. Taking tax now on future earnings! But debt is okay with credit cards to help over falls in the necessary. Trouble is debt must be controlled. It is sadly amusing to hear gummint preach good husbandry while the whole trend is for them an councils to commit to premium projects paid off over decades plus interest. But they may be so expensive with costs fixed to enable these solid payments each year, that ordinary people don’t get any use or benefit of participating in events from them. And at a time with uncertain weather which enforces roofs on stadiums, with attendance offset by lowering wages and drops in employment, the burden on us all is real from these rigid planners amortising costs over 20 years say, when each three years a disaster swallows up any spare money, even basic household needs.
As our money goes down (disposable and discretionary) we will be weighted with this sisyphus-like burden – know that name as the right has it in mind for you.
Investopedia https://www.investopedia.com › ask › answers › 033015 › what-difference-between-disposable-income-and-discretionary-income.asp
Disposable Income vs. Discretionary Income: What’s the Difference?
Oct 14, 2024 Disposable income is what you have left over after taxes. Discretionary is what you have left over after taxes and necessities, such as a mortgage payment or rent.
Banking –
is legalised theft. a govt bank that’s not Westpac or any of the others is as conservative as it gets. if NZ can’t control it’s own currency – then who does?
I watched Willis having an orgasam on the news last night .She was like a kid in a candy shop because Z ENERGY WAS TAKEING A $3 loss on a block of butter and at the same time the reserve bank was cutting interest rates because the economy is tanking faster than she can sink two ferries .What a stupid woman ,why would every seller of butter want to take a loss of $3 on every block sold in the country and she truly believes it is her doing .We all know that when a country is booming interest rates are high and when not doing well interest rates are low .We are headed for lower rates because our economy is fucked .Low interest will not reverse the current shit economy because most people who are lucky to have a job are under employed .I spoke to a timber mill employee last week who told me his hours have been cut by 20% and the future is not bright because they now have more logs than they have plenty of logs to process but no one is buying timber because the government has ruined the construction industry .Also I now can buy a sheet of gib board for $30 less than two years ago because the greedy manufacturer has an over capacity and no one is buying .Fletcher building is running massive losses so how long before it goes to the wall now their mates in government have opened the flood gates to cheaper imported products that greedy people will import then have to dump on the market at a loss .
Excellent column.
I recommend Bernard Hickey’s interview on this https://www.youtube.com/watch?v=yiuI-WG3SPo – about an hour and a half, and very clearly explained.
conservatives should be ashamed of this government. when are some true leaders going to emerge from this party of cheap hacks.
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