22 June 2007

On debt and currency

The New Zealand Reserve Bank made some headline recently, when the Governor said that we are not saving enough and there is too much debt. Two days later we read that the same Reserve Bank was gambling money on the international currency markets to influence the exchange rate of the NZ dollar. I felt compelled to write a letter to The Press, but it wasn't published.

Here is a much more polished version of what I wanted to say, by Peter Luiten. His letter was published in the Auckland Herald:

Your correspondents John Elliott and Peter Kelly point out with some passion that New Zealanders are at the mercy of overseas investment bankers.

At the heart of our financial woes is that we continue, against all sense, to let private interests create our money as debt: we mortgage ourselves deep to obtain it and ever deeper to pay for it. Our economy is not fuelled on debt - it is founded on debt. We are not in danger of becoming a serfdom - we are a serfdom already.

It doesn’t have to be this way. Interest is a completely unnecessary burden. There is nothing to prevent us creating our own money, and there is no reason why it should cost us to use it.

It is true that our Government is doing nothing about it. But any local body can make a start. Councils exist solely to promote the wellbeing of their communities and therefore have a mandate to prevent precious resources going to waste.

Local promotions make little sense when profits vanish offshore. Any community keen to stop its wealth draining into distant coffers has it within its power to create its own interest-free means of exchange.