A Christchurch currency? An Auckland currency?

We have always had a policy of local authority issued currencies and whenever we have put out media statements they seem to have been picked up by at least some media.

The idea of a currency issued by a local authority for me is so exciting I can barely contain myself when talking about it. We have been working for some years with LETS systems and Timebanking and have in some cases been talking about a local currency sold into existence, modeling on Wara in Germany, Worgl in Austria in 1932-3 or the various German versions of this led by the Chiemgauer currency. Each has had a negative interest rate so there is an incentive to get rid of it.

I have recently re-read Silvio Gesell’s book The Natural Economic Order, or at least parts of it. Someone gave it to me when I was on a speaking tour of Australia a few years ago.  The book is online in English nowadays, which is great, because Gesell is a brilliant thinker and many have predicted he will have a huge influence in years to come. Gesell argues that in order to put money on the same basis as goods, it has to decay, rot, go out of date or rust at the same rate as goods. Then holders of money will no longer have an inordinate amount of power and withhold money when it suits them, while holders of goods are stuck with rusting iron, out of date newspapers, or rotting fruit.

So designing a currency with a negative interest rate will create money which a causes humans to act in entirely different ways. It turns money on its head. People will need to spend it and paradoxically, according to Bernard Lietaer, the author of many books on money, they tend to spend it on long term investments. Weird eh? But true. In the years between 1040 and 1280 Europe had such local currencies, (acting alongside a long distance currency for trading other goods). What happened was that they built cathedrals which turned out to be an investment in tourism for centuries to come.

The idea of a local authority issued currency isn’t new. The Mayor of Hamilton tried to introduce Rates Vouchers in the late seventies, but was thwarted. Nowadays if we issued such a currency we would have to decide whether it would be spent into existence, whether it could be bought with national dollars (monetary dialysis) or lent into existence from a council associated bank. Or could it be issued with a certain expiry date? Or a combination of all these? How in each case would inflation be managed? What would people spend their local dollars on if there was a penalty for hoarding it? Imagine you had sold your mother’s house, lived outside the area, but had to spend $200,000 in the area because it was in local dollars. Whew. That is an exercise for you.

So I will be taking a workshop on this topic at the upcoming Australasian Permaculture Convergence in Turangi and I have just uploaded a short video describing the issues we need to face. http://vimeo.com/39162430. Hope this works!

Local authority functions and finances and incentives for intimacy

Over the last couple of days we have had the announcement of impending legislation requiring local authorities to “stick to their knitting of supplying infrastructure, libraries and museums”.

The Prime Minister and the Minister of Local Government both imply that the activities of councils in looking after the social, environmental, economic and cultural wellbeing of the citizens are responsible for the extra cost burden and rising rates.

Not so. Last time I looked at the financial statements of our council I found that it is the infrastructure of sewerage, stormwater, water and roads which is taking up the bulk of the expenditure. Our own council plans to spend $100 million in stormwater infrastructure over the next 20 years for our town of 5000 inhabitants. They cite climate change as being one of the factors, together with a growing population and an ageing infrastructure. Our town is built over a swamp.

I don’t think the Prime Minister or the Minister of Local Government mentioned the extra expense in dealing with climate change. Nor did they mention the continuing growth of population in this country or the GST that ratepayers have to pay. And 12% of council’s expenditure is for servicing loans to private banks issuing them with money. Unnecessary when they could create their own Rates Vouchers (but that is another topic). But what strikes me most is when I think of this in association with today’s Listener article on the growing social trend of single person households. New Zealand it says now has 23 percent of households as single person households, this percentage is growing and it is a global trend.

OK so for every house we have water reticulation, sewerage reticulation, and stormwater management. Basic infrastructure, the council’s main expenditure. If the number of single person households is increasing and the population is increasing and the standards for sewage treatment and water quality keep rising, then it stands to reason the costs will keep rising.

For every extra dwelling that is occupied, there is a house, its furnishings, a fridge, a washing machine, a motor mower and probably a car. More purchases, more expense. Not the Council’s expense but it does add to per household expenditure if the trend is to single person households. But the council has to pave more roads. This means buying more bitumen, which being an oil based product, has already risen in price by 95% in the last decade. And the cost of pipes has risen fast.

I have yet to hear of a politician at local authority level who addresses the issue of how to economise on infrastructure investment through giving incentives for households to have more than one person occupying them. Already we have a welfare system which penalises intimacy. You get more income from WINZ if you separate. We all know why. A stupid welfare mess is part of the problem which can only be solved with a citizens income.

Given the realities of local authority finances, it stands to reason that political parties must build in incentives for efficiency in housing. Efficiency is what Nature does best. Nothing is wasted.

 

Land went out of the Consumer Price Index in 1999

Despite the fact that section prices tripled in fifteen years to 2007, land is not now included in the Consumer Price Index. This means that the official measure of inflation is unreliable as it is far lower than the actual figure.

Today I received a letter back from the Minister of Statistics, Hon Maurice Williamson. I had heard that land went out of the CPI but couldn’t remember when or why so I sent in an Official Information request. The Minister dates the letter 14 Mar 2012 and says “Dear Ms Kent

Thank you for your letter of 20 February regarding the exclusion of the price of land from the Consumers Price Index (CPI) basket of goods.

“I am advised by Statistics New Zealand that land (i.e. residential section) was included in the CPI until the June 1999 quarter. Following a review of the CPI in 1997 land was excluded, taking effect from the September 1999 quarter.

“The 1997 review by an external advisory committee confirmed the CPI’s main purpose as being informing monetary policy setting, and that the CPI should be focussed on the concept of “acquisition”. The reason given for excluding land from the CPI from 1999 was that it was considered to represent the investment component of home ownership (with dwellings representing the shelter component).

“The September 1999 quarter CPI information release explained it as follows: “A dwelling provides shelter over a long period of time. Over time land is not consumed and so can be considered to represent the investment component of home ownership. As investment expenses are outside the scope of the CPI the rebased CPI excludes expenditure on residential sections.”

“Information on the sale of land is available from QV (www.qv.co.nz) and the Real Estate Insititute of New Zealand (www.reinz.co.nz).

I trust this information meets your needs and thank you again for taking the time to write.

Yours sincerely

Hon Maurice Williamson

Minister of Statistics.

You can be assured I will write back to ask how inflation can be accurately measured when the price of residential sections is excluded. Every time a section rises in price it puts up the price of the property. So when someone buys property in the future, they will have to pay a higher prices than previous owners paid. This also means the total mortgages and the total money supply has to rise accordingly. When the money supply increases there is inflation. So it is not a small quantity we are talking about. We are neglecting a huge factor. The CPI cannot be taken as a valid measure of inflation and there is no reason to have any faith in it. The Productivity Commission said the price of residential sections tripled in the fifteen years to 2007.

Right now we are going through a period of fairly stable prices, but no doubt in the future the cycle will come around again and prices will rise.  The value of all residential properties in New Zealand was estimated by the Tax Review committee of 2007 to be $298 billion. This excluded land for commercial forestry, agriculture, industrial, commercial or mining or land owned by central or local government.

As Eisenstein says “Money is deeply and irretrievably implicated in the conversion of the land commons into private property, the final and defining stage of which is its reduction to the status of just another commodity that can be bought and sold.” After this letter, we could add to this “and used as an investment”.

 

Visitor levy Bill illustrates the commons of local authority infrastructure

Yesterday I happened to turn on a Parliamentary debate on a Bill called the Southland District Council (Stewart Island/Rakiura Visitor Levy) Empowering Bill. The legislation would give the council, whose rating basis is very small, the right to charge visitors up to $5 to pay for the island’s growing tourist infrastructure. It would be expected to raise about $250,000 a year.

I was heartened by this debate. Not only had the Select Committee had a very collegial discussion on it, but there was little opposition in Parliament, other than worrying that other councils might follow suit. I hope they do. Far North District Council could be one.

The infrastructure of roads, sewers, community halls, water, wastewater and stormwater is part of the local commons. It was built by the people and belongs to the people so the people have the right to charge others for the rent of it, no matter how temporary.

Our national built infrastructure of our roads, dams, power stations and electricity network is similarly part of our commons and should never be sold off. The sweat of our nation’s grandfathers is in those dams. The vultures are coming to get it, including the land. Those who would sell it are guilty of treason. And they are coming to Greece right now. Imagine selling off the Parthenon, the cultural commons of the Greeks.

Our land will increase in value with this new community facility

I am excited. We have a wonderful new gym which has been built by Te Wananga O Raukawa, the Maori university on the main road to the beach and I think, because it will attract so many top level basketball and netball games, it will be an asset to the small town of Otaki where we live. On the opening day today we had two top teams playing netball here and that will only be the start.

I am even thinking the value of our own land, less than 1km from the gym, might go up. It will over time and the land values in all the surrounding area will be affected as well, depending on how close they are to this new community amenity (and depending on how many businesses disappear as well). It is a very fine complex, described in the local paper as a world class facility. It came in under budget, on time and without debt, thanks to the great people at the Wananga.

So why should private landowners gain from the increase in land value? Most of us didn’t work to cause it. And those who don’t own property (plenty of renting in our town, plenty of poverty).That is stealing from the public purse. Land value taxes should be imposed so that the public recaptures all this privately accumulated value. That will only happen if rates are levied on land value not capital value and not with 70% of the rates being in fixed charges, as we have now. So we are far from that now and we have adopted the philosophy of user pays. This, because user pays is so convincing, is going to be hard to change.

This happens any time there is a new public facility. Everyone near the the terminal of the Waikanae Railway station benefited when the Paraparaumu line was extended to Waikanae (well it was that part of the cycle – their values didn’t go down while others did). So if a gym raises the value of our land, how much more would the railway coming to our town affect it!!

I just think of all the poor people in our town with no hope of ever owning land. It will widen the gap between rich and poor. And when land prices go up, the banks benefit,the money supply increases and we get inflation. No good for the poor!

We just have substantial challenge how to solve this politically.

What Greece needs is a land backed currency (and so does New Zealand)

I have just been listening to the most informative and important interview by Adrian Wrigley of the Systemic Fiscal Reform Group in Cambridge, UK.  Here it is: http://podcast.3cr.org.au/pod/3CRCast-2012-02-22-19953.mp3

Karl Fitzgerald of Earthsharing Australia interviewed him on the radio station http://3cr.org.au on a programme called The Renegade Economist.

To address the problems of Greece, and for other reasons, Adrian is studying the economic history of Germany during the early 20th Century, and says it is tragic that Economic History has been dropped from economics departments of universities because in history lies a lot of wisdom and knowledge. He describes what happened leading up the period of hyperinflation in 1923 and then what the German government did to solve it. They banned the private reserve bank from issuing currency for profit, formed a new reserve bank which issued paper money backed by mortgages and this stopped hyperinflation really quickly. It was called the Miracle of the Rentenmark. However, (as with Gesell inspired currency in Wørgl Austria some ten years later), the banks quickly stepped in. The Rentenmark was a danger to the status quo. A land backed currency is the big danger for the ruling classes.

However, like the other miracle, Wørgl, it only lasted a very short time. Soon the banks stepped in to have their way.

This is quite a long interview but full of fascinating facts. Well worth the time out of your day. It makes me realise that noone who really cares about monetary reform can turn a blind eye to the fact that the owners of banks will do anything to squash land backed currencies and kill them instantly. It reminded me of a time when I was writing my book and discovered that land tax went out at the same time as the private banks insisted that the NZ government use income tax instead. Before then we were reliant on just excise taxes and land taxes. And since then we have assumed that income tax is normal! Our money system is backed by income tax, not by land. The private banks, creating money for profit, have got that windfall. No wonder they are falling over themselves to lend to farmers.

It also reminded me of the struggle within the complementary currency movement to invent a currency backed by land. Everyone has talked about it, but to my knowledge it has never been done. It remains a dream. Now I can see why.

I hope you enjoy the interview. A lot of history in it. It is great on Greece too.

 

Amazing people join this website

Today I have been making a list of those who are registered on our site. They are awesome people.

We have people over a wide age range from 75 down to late teenagers. Three people said they trawled the internet trying to find a political party which seemed to address the issues they were worried about and had solutions they thought would work. Others hit upon it by accident.

We have many professions here from financial advisers to teachers, engineers, architects, lifestylers who practise permaculture, permaculture teachers, IT people who are fully aware of the challenges of peak oil and a wide range of other challenges. We have those who read Spontaneous Evolution by Bruce Lipton and Steve Bhaerman (remember Swami Beyondananda? He said “I have good news. There will, indeed be peace on Earth.. I sure hope we humans are around to enjoy it”. We have psychologists, a theology graduate, someone who built an electric car, someone who sells raw milk and someone who has been a leader in many sustainability organisations. We have members of Transition Towns from various places and a farmer who hates land tax policy. We have many who have read widely on the topic of money systems and a lot of people who have read my book Healthy Money Healthy Planet. Some have been to Christoph Hensch’s course on money in Christchurch. We have followers of Max Keiser, Bernard Lietaer, environmentalists, a pharmacist, an activist in the Occupy movement and an anthropology scholar.

Some have been involved in Green dollars in the past and many have been founding members of intentional communities and were once keen Social Credit Party, Values Party or Green Party voters. There is a keen land value tax man and someone connected with a church based Liberty Trust. We have Steiner School enthusiasts and daughters and sons of ministers in a church. Some are involved in coast care and river care. Some are interested in small business and entrepreneurship.  It goes on. Amazing people, leaders in thinking and that’s how it will be.

Collectively many of us believe, as Bruce Lipton and Steve Bhaerman write; “A miraculous healing await this planet once we accept our new responsibility to collectively tend the Garden rather than fight over the turf. When a critical mass of people truly own this belief in their hearts and minds and actually begin living from this truth, our world will emerge from the darkness in what will amount to a spontaneous evolution.”

So I have had my first interview with a radio station and it was a student radio station who picked up the piece on how Auckland needs an Auckland currency. It was fine, I enjoyed it. Every time you speak to the media it stimulates you to learn more so you can answer better the next time.

And I have been working still on thinking about how we can get a politically acceptable policy on land tax. Is to be a Location Value Covenant or a Land Value Tax? We need a policy which isn’t going to take ten years to implement. Every time I raise land tax someone says “Well that is political suicide”. But if I start talking about getting a policy based on existing contract law which means that instead of paying the banks for your house you pay the Council or Central Government, the reaction is different. If you pay Central Government, then will have enough revenue to drop GST and soon income tax.

Imagine a time when all landowners have to pay and nobody can gain advantage by taking their assets overseas or paying for an army of accountants who minimise their tax. Imagine a time when you can work all you want and don’t get penalised for it, but prices are low because there is no interest built into the price of goods, no GST and no income tax. More spending power. Imagine a time when we have thriving local economies because local authorities have issued a different sort of money, one that depreciates like the goods they represent. Imagine a time when people spend their local money in sustainable business investments rather than in speculating in land or simply banking the money and keeping it out of circulation. As Silvio Gesell says in his book The Natural Economic Order “Money is an instrument of exchange and nothing else”.

Last week both Laurence and I were interviewed by Rose Diamond in her A Whole New World Series