GUEST BLOG: Chris Leitch – Robertson not in the cheerleading squad

Hardly any of them will admit it (apart from Richard Prebble, David Seymour and the Taxpayers Union, who claim we already have a Social Credit economy, but who are wrong) but a growing majority of the notable people in New Zealand’s economic sphere are advocating the adoption of a Social Credit economy.

Former Labour Finance Minister Sir Michael Cullen is the latest, calling for the Reserve Bank to use its money creation capability to fund the government directly, for investment in the economy. Currently that money creation capability is being used to benefit only the financial markets and wealthy investors, and is a significant factor in driving up house prices.

The principles of ‘sound finance’ and ‘balanced budgets’ have been the catch cry of a generation of neo-liberal economic commentators and finance ministers, even Sir Michael, but those concepts have largely been thrown out the window in the face of an economic storm where they no longer work (actually they never did).

As Winston Churchill said “No matter how beautiful the strategy, you should occasionally look at the results.”

Even National’s most recent economic appointee, Andrew Bayly, has jumped on the bandwagon with his criticism of the Reserve Bank’s action, despite such criticism having been strictly off limits for the entirety of National’s existence.

So who’s missing from the list of recently converted cheerleaders calling for adoption of Social Credit’s economic prescription.

The economists of the country’s major banks of course, because under a Social Credit economy their employing entities wouldn’t be getting all the help they are right now from the Reserve Bank to increase their already bloated profits. Those would undoubtedly be somewhat less.

Former ANZ bank chief economist, now independent, Cameron Bagrie has still yet to catch up, suggesting asset sales and pinching more off superannuitants.

But the major laggard is the Minister of Finance Grant Robertson, who is either so captured by Treasury that he’s not prepared to go against their advice, which is probably that he shouldn’t scare the horses (the financial markets) by breaking down the artificial Chinese wall between the government and the Reserve Bank and making use of its capacity in the way Labour’s greatest Prime Minister, Michael Joseph Savage, did in the 1930’s, or he’s still in election hangover mode, worried about giving the National Party and big business (whose large election campaign contributions are valuable to Labour), something to beat him around the head with.

Note to Grant, National have crossed over and want something done about the Reserve Bank.

So who is on the list of cheerleaders calling for adoption of Social Credit’s economic policy.

Sir Michael Cullen as noted above who is reported in a Stuff article on November 17th as saying ‘this could mean the Reserve Bank making changes to another one of its money creating schemes, called LSAP. This could be used to create money to buy Government debt on the primary market (fund the government directly).

Former National Prime Minister Jim Bolger had this to say on Radio NZ on July 15th “We need to bring a policy approach to address the enormous economic issues that New Zealand now faces with the Covid19 and all the spending that the government have engaged in – billions of dollars here in New Zealand that were just created by the Reserve Bank. We have to decide whether to follow traditional economics and pay that off over the next 20 years by austerity politics or we actually say we owe it to nobody – we created it, the Reserve Bank has created it, and we write most of it off.”

Former Australian Prime Minister and Treasurer, Paul Keating, is saying similar things about his central bank. In a letter to Australian media in September he criticised Australian Reserve Bank officials for lacking the courage to break with economic orthodoxy to allow monetary financing of deficit spending, and said they are too concerned about what other central bankers would think if Australia went down that path.

Then there are leading economists like Ganesh Nana, Senior Economist and Research Director of BERL, who said on Radio NZ’s Morning Report back in April “The government can borrow from the Reserve Bank. To be technical, it’s literally borrowing from itself. We should not close off any [options] just because somebody told us 30 years ago that it was bad.”

In an article in the Otago Daily Times in May he reinforced that, saying it was a “no-brainer”. “It’s been in the textbook a long time … It’s just another tool in the toolbox to use when sensible. And now is the time to use that, very definitely.”

Dr Geoff Bertram, former Senior Lecturer in Economics at Victoria University in an opinion piece in the NZ Herald in April agreed. “Issuing money in the current circumstances has impeccable support from mainstream economic thinking. In the current context it is the correct, most efficacious way to proceed. [Govt] should not be prisoners of outmoded, arch-conservative political doctrines.”

Strategy and risk consultant Raf Manji, a former investment banker, in a piece on Interest.co.nz in March wrote “What the Reserve Bank needs to do now is to make clear that it can and will purchase government bonds directly from the Treasury at 0%. These funds should be used to fund the current and forthcoming economic support packages.”

Shamubeel Eaqub, economist with Sense Partners, author and media commentator writing on Interest.co.nz on March & and speaking on TVNZ’s Sunday Programme in April “I don’t see why we don’t jump straight to the RBNZ buying bonds from Treasury direct. Central banks will have to step in
and buy these bonds.”

Commentators Bryan Gould and Bernard Hickey have been writing about it since 2012.

On Radio NZ National in March, Bernard Hickey said “There’s no reason why you don’t get the Reserve Bank to effectively print the money and lend it to the government, just as [it] did in 1935, when it lent money to the government to build state houses.”

In a televised election forum in 2017, former British PM Theresa used the phrase “there is no magical money tree.” Long time columnist Simon Wilson knows better, writing in his Herald column in early September “New Zealand has a money tree and you can find it in a building at the bottom of the Terrace in Wellington.

Adrian Orr, Governor of the occupier of that building, the Reserve Bank, in an interview with Bloomberg in April said he remains open minded about buying the nation’s debt directly from the state, “Direct monetization, I know, has been heresy, taboo for a long time, but it’s only a long time in our lifetime.” “It’s not a mysterious issue. It’s just not how we’ve run business.”

None of them acknowledge it’s Social Credit economic policy they’re advocating. Maybe they don’t know it is, or maybe they don’t want the ‘funny money’ tag that Social Credit’s political opponents tarred it with back in the 1960’s.

What ever the reason, it doesn’t matter.

What matters is that Grant Robertson heeds the calls of these economic heavyweights, throws off the shackles of Treasury and big business, and gets on with implementing their recommendations, because, just as in the 1930s following the depression, ‘funny money’ is what is needed to rescue the economy and build a more resilient one where inequality is no longer an issue.

Chris Leitch is the Leader of Social Credit