There is a magic money tree, Minister – Positive Money

Minister Chris Bishop is spinning a false narrative when he tells the people of Otago, and the nation, that there is no money to pay for the new Dunedin hospital. Bishop goes on to say that other hospitals would have to do without to enable the new build to go ahead. “Not so,” says Don Richards, the Spokesperson for Positive Money New Zealand.

“The Reserve Bank provided private banks and financial institutions with $55 billion dollars in 2021 and 2022 and there was no suggestion of a lack of money back then,” says Richards.

“Our Reserve Bank simply created the money, debt-free, and bought up $55 billion in bonds from the banks. This is our magic money tree, although the technical term used is Direct Monetary Financing” says Richards.

Rather than provide stimulus to the banks, Richards says the Reserve Bank money should fund public works such as the new Dunedin hospital as well as fixing up our failing infrastructure: roads, schools, bridges, water, etc.  It is much cheaper than any alternative, keeps our assets in New Zealand hands and we don’t have to send billions in interest payments overseas.

Direct Monetary Financing has been used responsibly in the past. In the 1930s, it funded the construction of thousands of state houses and supported farmers to export their produce, and in Australia their Reserve Bank funded their First World War expenditure. From 1930 to 1975 the Canadian Central Bank paid for their Second World War expenditure and built highways, airports, bridges, schools, hospitals, and other infrastructure.

Where there is capacity in the economy, Reserve Bank financing is not inflationary, as was proven in the Canadian experience where it was used extensively over a period of 45 years.

“There is a ‘magic money tree’, and the sooner the Government stops denying its existence and starts using Direct Monetary Financing responsibly, the better off New Zealand will be,” says Richards.