Author Archives: Deirdre

We launch a petition for Chicago Plan and against bank bailouts

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Petition on Banking Reform 

Petition extra information  (This is the all in one information a backed A4, which condenses the three which follow into one)

Stop-the-banks-from-stealing-your-money

The Chicago Plan Revisited summary

Who owns the Australian Banks

(Click on the above links for the petition form, the sheet of explanation you can hand out or sign the online petition)

The online petition is at http://www.avaaz.org/en/petition/Reform_the_banking_system_so_that_no_more_bailouts_are_ever_needed/?cHHSRcb. It has kindly been created by one of our supporters, Lewis Verdyn.

Remember online petitions don’t count in the actual numbers for the NZ Parliament as many will come from overseas, but they are noted in the cover sheet.

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Following the letter from the Minister of Finance, Hon Bill English regarding his opinions of The Chicago Plan Revisited, and where he said they were working on Open Bank Resolution, we have decided to launch a petition. We decided it was best to ask for a Parliamentary Enquiry so that New Zealand could take initiative to implement The Chicago Plan Revisited.

We don’t want either taxpayers or bank customers to have to bailout the banks in the event of a bank failure. We believe banks should be stable in the first place. That will take radical monetary reform and this has to be done internationally and simultaneously. Our petition is attached, along with a sheet of explanation.

Because we are liaising and working with other organisations wanting the same thing, we have created a Facebook page at http://www.facebook.com/pages/Petition-for-a-Parliamentary-Enquiry-into-making-banks-stable/420764948002065. Please like it and contribute to the discussion and information sharing there.

We also have an online petition (although it isn’t officially counted, the Parliamentary Office says to mention the number of online signatures we get on the cover page.) These signatures of course will come from all over the world. It is here

Also if you would like to see a 35 minute explanation of The Chicago Plan Revisited by one of the authors, Dr Michael Kumhof, you might like to visit http://youtube.googleapis.com/v/YnAtHbDptj8&hl=en_US&fs=1&

Minister of Finance’s reply to our letter on The Chicago Plan Revisited

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You will recall we wrote to the Minister of Finance on 18 December regarding the The Chicago Plan Revisited. We have now received a reply. It seems the Government no longer wants the taxpayer to bail a bank out in the event of failure, so it is setting in place this thing called the Open Bank Resolution (they say by 30 June) This is a process in which in the event of a bank failure, banks will be able to give your deposits a ‘haircut’. Any bank creditor is vulnerable. But burdening savers with this risk is no more desirable than burdening taxpayers. We want banks fundamentally structurally reformed so that there is no risk of a run on the bank. You see while banks have the power to create the money supply, if everyone came to the bank for their money at once there wouldn’t be enough for everyone.

Anyway we are contemplating our next step. We would far prefer the The Chicago Plan Revisited and want to make it work. It would have to be implemented internationally simultaneously and New Zealand should play its part in making this happen to protect us from financial contagion. Here is the letter

1 February 2013

Dear Deirdre Kent and Phil Stevens,

Thank you for your email of 18 December 2012 regarding the recent International Monetary Fund (IMF) paper on the ‘Chicago Plan’ by Jaromir Benes and Michael Kumhof.

Their paper has stimulated significant debate among economists. While some economists have supported the arguments made in the paper, others have questioned the desirability and the practicality of its proposals. For example, I refer you to a recent paper by Adair Turner, chairman of the Financial Services Authority in the United Kingdom, which discussed the Chicago Plan (http://www.faa.gov.uk/static/pubs/speeches/1102-at.pdf). Turner argued that even if implementing the plan was practical, it may not be ideal, given the role of private banks in risk pooling, maturity transformation and their ability to allow consumers to smooth their consumption through their lifetime.

Despite the issues relating to the feasibility of the plan, many of its aims are consistent with the Government’s policy objectives. As confirmed in the recent Half Year Economic and Fiscal Policy Update (HYEFPU), the Government is committed to reducing net public debt to below 20% of Gross Domestic Product by 2020. In addition the Policy Targets Agreement (PTA) signed with the new Governor of the Reserve Bank includes a commitment to take account of the efficiency and soundness of the financial system when setting monetary policy (http://rbnz.govt.nz/monpol/pta/4944840.html). The RBNZ Governor, Graham Wheeler’s recent speech also notes the Reserve Bank’s current work on developing macro-prudential policy instruments and an Open Bank Resolution system to maintain a stable financial system and minimise the damage to the wider economy in the event of a bank failure (http://rbnz.govt.nz/speeches/5005204.html).

Thank you for taking the time to write. I hope you have found my comments helpful.

 

Yours sincerely,

 

Hon Bill English

Minister of Finance

 

The challenge of sharing the use of the commons by tax policy

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Recently a friend who was writing a document for an organisation who is planning a new New Zealand asked me for a brief contribution on the commons.  Here is what I sent him:

Nature has provided the land we live on. This is the Commons we share by birth and everyone alive should have an equal right to access their share of the Commons. But everyone can’t occupy the same piece of land. Those, therefore, who use the best land should compensate the rest of us for the privilege they enjoy.

Henry George, Pierre-Joseph Proudon, Silvio Gesell and even Winston Churchill argued that work should be untaxed and the monopoly use of land should be taxed. The rise in land value as a result of government built infrastructure, the arrival of shops and businesses and organisations should be publicly captured. This income should be shared by all levels of government and some redistributed as a Citizens Dividend. The tax on land value is simple and cannot be evaded as you can’t hide land. The problem these days is finding a politically acceptable method of doing this. Property owners already pay a mortgage and rates and won’t accept a third payment on their land. Moreover it is the banks who capture a significant part of the rise in land value. Yet we must face this political challenge. The gap between rich and poor will keep widenening when we have a tax policy which favours landowners who reap unearned profit.

Other parts of the commons should also be shared. Private enterprise should not include private ownership of the elements of life. Everyone by right should have access to land, water, airwaves, fisheries, minerals, electromagnetic spectrum, any public utility such as a port, airport or the monopolistic rights to reticulate wires, pipes, roads and rails.

The principle is that we should pay for what we hold or take but not for what we do or make.

Change Tax Policy and Control Banks for Affordable Housing, says New Economics Party

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Change Tax Policy and Control Banks for Affordable Housing, says New Economics Party

January 31, 2013

Change Tax Policy and Control Banks for Affordable Housing, says New Economics Party

To get affordable housing we need a tax policy which favours investment in productive enterprises not housing, says the New Economics Party.

“If we don’t control capital coming into New Zealand and then don’t stop it going into housing through our tax policy, it’s no wonder we have a housing bubble in Auckland”, said Deirdre Kent, spokesperson for the New Economics Party. “And if we let the banks lend 100% on housing, we are asking for trouble.”

Freeing up land and changing the Resource Management Act is not working, she said.

“Banks are pushing money onto buyers and we effectively have a bubble which will eventually collapse. Wealthy Chinese are buying here to get their money out of China where they are clamping down on corruption. A lot goes into real estate.

No progress will be made towards affordable housing until land tenure is separated from buildings, according to the New Economics Party. Spokesperson Deirdre Kent said “Until we (move from income tax to imposing a full ground rent) impose a full ground rent – which can replace income tax as a source of revenue for Government – we won’t get any progress. “

She said that when homeowners just have to pay the price of the building, the price of the home is halved. “In Auckland where land is on average 60% of the property price, the price would drop even further if a full ground rent was imposed.”

“When property prices rise, it is almost solely because the price of land rises. Generally, the price of the house doesn’t rise. When the public captures the windfall from rising land prices instead of the banks and the private owners house prices will be finally contained,” she said.

She said some Auckland leasehold land fetched a ground rent of 5% at auction and this money should really be public money because it is the public who has paid for the services to that land in roads, schools, sewers and businesses.

“Others have recently been proposing solutions to affordable housing but they are just tinkering around the edges.”

For further comment phone Deirdre Kent 06 364 7779 or 021 728 852.

 

 

Review of Creating Sustainable Societies– The Rebirth of Democracy and Local Economies by John Boik 2012

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Review of Creating Sustainable Societies– The Rebirth of Democracy and Local Economies by John Boik 2012

John Boik, a cancer biologist from Los Angeles, is courageous and original. He faces the big issues of our time– financial, environmental, economic, social, and even technological threats – and presents a blueprint to solve them by opt-in grassroots solutions. Boik’s ideas are idealistic and refreshing and some of them have a practical appeal. A who’s who of the complementary currency and democracy movements commend the book and Bernard Lietaer wrote the preface. Boik advocates a token exchange system, a principled business model and collaborative governance and applies democratic principles to each. He envisages a network of principled businesses and a network of policy makers.

His blueprint could have a profound effect on national systems and whole populations. He describes an approach and technology that would allow citizens to voluntarily cooperate at the metro level in demonstrating new, sustainable financial, economic, and governance systems. The proposal for democratic self-governance can be demonstrated in a pilot scheme in a small group in one city. If it is as successful he hopes that the idea spreads quickly to every metro area in the U.S. and to cities in many other countries. He expects that the ideas on which it is based would start to influence state and national politics.

The book contains an excellent section on writing legislation, where he applies decision making processes of open source software development and his knowledge of genetics, with each round being more sophisticated than the last.

Though he advocates pilot schemes he is probably aware that top down solutions are part of the mix and when these solutions are creative and benign they are very powerful. One of the problems with reinventing society is that so few include resource-based taxation in their agenda.

The current political process has a lot going for it and we should retain what is effective. The process by which a new policy comes into being is first by public advocacy, controversy and finally by legislation? While Boik understands the growing role of the Internet in shaping public opinion, he doesn’t mention the role of the media in this matter. Elegant and simple legislative solutions always trump a patch-on solution. Politics at its best can be the most creative enterprise of all. The right policies send signals to businesses and avoids the artificiality of exceptions and of picking winners.

Boik is an American in an American society. While some states have referenda, the US doesn’t have proportional representation. Geoffrey Palmer’s introduction of Select Committees was a huge advance in democracy. This is not yet, I believe, emulated in the US. While New Zealand has much further to go in achieving better democracy, we at least are a small country and can constantly refine and improve what we have.  500 people actively participated in rewriting the constitution of Iceland, a country with only 350,000 people.

His idea of a local currency is the Token and he believes some should be diverted into investment and some into loans. However, the feasibilility of this idea will depend on the scale of the currency and maybe he underestimates its potential size. Of course we should use democratic means to choose which business to invest in. Some publicly owned banks are doing this already to some degree. Here again the role of legislation is underestimated. Good legislation will bring good investment decisions, just as well designed currencies will.

He acknowledges that housing accounts for 42% of consumer spending and that his proposed Tokens won’t help much with this.

Plaudits for his stimulating and original suggestion of how to change the world and rescue us just in time from total environmental and economic collapse. Consistent with his philosophy is publishing the book free as a pdf and allowing anyone to publish a hard copy of the book as long as they give 50% to the Principled Societies Project.)

An excellent short animated video, the first of four is now on the website associated with thisbook at http://www.principledsocietiesproject.org/local-financial-system-animation/.

 

Review by Deirdre Kent deirdre.kent@gmail.com

George Monbiot advocates land tax in Guardian article

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George Monbiot argues for land tax

It came as a bolt from the blue. Monbiot wrote an article for the Guardian in which he explains why land tax must be implemented. http://www.monbiot.com/2013/01/21/a-telling-silence/.

But for those UK Georgists who have been trying to persuade Monbiot for years it is due reward, since high profile advocacy moves debate along.

Monbiot says the loudest silence is about property taxes, that the Sultan of Brunei pays only £32 a month more for his pleasure dome in Kensington Palace Gardens than some of the poorest people in the same borough. He also quotes from Winston Churchill  “Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains – and all the while the landlord sits still. Every one of those improvements is effected by the labor and cost of other people and the taxpayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced. He renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is derived. … the unearned increment on the land is reaped by the land monopolist in exact proportion, not to the service, but to the disservice done.”

Michael Lewis on Iceland, Ireland and Greece is worth reading

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Review of Boomerang, the Biggest Bust by Michael Lewis. Penguin Books 2011

I didn’t read Michael Lewis’s The Big Short, or Liar’s Poker about the dark art of investment banking, but this one is surely immensely readable. Lewis is a ‘financial catastrophe tourist’, travelling to Iceland, Greece and Germany interviewing key people in each country’s unique version of the Global Financial Crisis. He obtains interviews with significant players – Prime Ministers, ministers of finance, officials in treasury, hedge fund managers, traders, economists. In Greece he interviewed the head monks of an ancient monastery which had played a such key role in the indebting of Greece.

If you can ignore the fact that the writer is an economist who is still believes that banks just lend depositors’ money rather than create the credit (understandable when you realise how hopelessly captured universities are these days by the banks), you will enjoy this romp through the financial stupidity outlining how Greece, Ireland and Iceland got into such trouble.

I read the chapter on Iceland twice because there is a move to bring the leader of the protestors Hordur Torfason to New Zealand. Torfason will explain how in 2011 Iceland arrested nine bankers together with the Prime Minister who allowed the madness to take place on his watch by privatising the banks, freeing up trade and lowering taxes. Lewis says “From 2003 to 2007, while the value of the U.S. Stockmarket was doubling, the value of the Icelandic stock market multiplied nine times. Reykjavik real estate prices tripled.” When the bubble burst, Iceland’s 300,000 citizens found they bore some kind of responsibility for the $100 billion in banking losses. The debt was 850% of their GDP.

Lewis has a nice way of writing mixing the factual stuff with well painted personal profiles and vivid stories. Warning: If you want to read this book in a public place, people will think you are reading porn. The sensual cover features wine glasses and a prostrate woman in a tight gold dress.