Monthly Archives: December 2012

Petrol tax will backfire on Government

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19 December 2012

Petrol tax hike for roads will backfire on government, says party

The announcement that an extra 9 cents excise tax on petrol will be to pay for the government’s Roads of National Significance will badly backfire on them, according to the New Economics Party.

Spokesperson Phil Stevens said that if an excise tax is tagged then it should be tagged for rail rather than roads, because road transport is not the future. He said ‘While it is important to put a correct price on fossil fuels to discourage their use, the public will know in their bones that the future isn’t expressways for more trucks. The future is rail and alternative transport fuels.’

‘When the Minister justified this hike by saying the CPI figure was the lowest for 13 years, noone is going to believe him. In fact our inflation figure is a not valid. It is artificially low because since 1999 the cost of land has been taken out of the CPI. Everyone knows that as land goes up, property prices rise and that means households pay more for their rents and mortgages. They know the real figure for inflation is much higher. Ask anyone with a mortgage where their household money goes,” he said.

For further comment phone Phil Stevens 06 326 9717 or 021 784 718

We write to the Minister of Finance about the IMF paper The Chicago Plan Revisited

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This week we wrote a letter to the Minister of Finance and look forward to the response

Dear Mr English

Re The IMF Paper ‘The Chicago Plan Revisited’

Our attention has been drawn to a working paper published on the website of the International Monetary Fund entitled The Chicago Plan Revisited by Jaromir Benes and Michael Kumhof and dated August 2012.

Its abstract reads as follows:-

At the height of the Great Depression a number of leading U.S. economists advanced a proposal for monetary reform that became known as the Chicago Plan. It envisaged the separation of the monetary and credit functions of the banking system, by requiring 100% reserve banking for deposits. Irving Fisher (1936) claimed the following advantages for this plan:

(1)           Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credit and of the supply of bank-created money.

(2)           Complete elimination of bank runs.

(3)           Dramatic reduction of the (net) public debt.

(4)           Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation.

We study these claims by embedding a comprehensive and carefully calibrated model of the banking system in a DSGE model of the U.S. economy. We find support for all four of Fisher’s claims. Furthermore, output gains approach 10 percent, and steady state inflation can drop to zero without posing problems for the conduct of monetary policy.

(There has also been a recent paper from the Bank of International Settlements site by the economist Borio http://www.bis.org/publ/work395.pdf, which calls for a rethink of the business cycle model and for significant adjustments to macroeconomic policies, and to an article in the Economist Dec 14, 2012, discussing that paper at http://www.economist.com/blogs/freeexchange/2012/12/reforming-macroeconomics)

We therefore ask you, as Minister of Finance:-

a) Are you aware of the existence of the IMF paper, the Chicago Plan Revisited?

b) Does your government agree that the four results outlined in this paper are desirable?

c) Does your government support the method used to achieve these four goals?

d) If you differ from the method outlined in the paper to achieve these four goals or argue with it in any way, could you outline your disagreement and how would you achieve these goals differently?

Yours sincerely

Deirdre Kent and Phil Stevens

New Economics Party