fix the economy by cutting taxes for workers and businesses

Maximum N-a
"And when you are pondering all this just ask yourself -why would a supposedly sovereign government borrow money off a private bank at interest when it has the authority to create all the money it needs debt free??"

They don't. It's a myth.

since when has debt been good so its a myth that we have to pay off 84 billion in debt 40 years ago we had no debt at all free education and free hospitals so your saying we are better off now being in debt an paying for education and hospitals huh???

"so its a myth that we have to pay off 84 billion in debt "

Yes it is a myth. So called government debt doesn't get 'paid back'. These aren't loans as such.

They are more like a term deposit when you move money from your cheque account to a savings account.

They are non-government sector assets.

so your sayn that some of our taxes don't go towards paying off debt an the government didn't borrow money for some of
there plans that didn't work

Taxes don't pay for anything, it is money being removed or cancelled from the system.

The government doesn't take out loans. They sell bonds, which are bought with existing money. But they don't do it for spending purposes.

They say they do, but they don't. It's a hoax.

you got me scratching my head bud if taxes don't pay for anything where does the money come from to pay for hospitals roading other services have you got any evidence of this

John G is confused. He is both right and wrong but, unfortunately, has an unassailable belief in that which is wrong.

He's right in that taxes don't actually pay for anything - it's the actual resources used that is the real payment and money is merely the tool used to get those resources to move. This is why getting a return on investment is both physically impossible and a dead-weight loss. Taxes are a means to take money out of the system to prevent excess inflation and nothing more. I'd say that we've forgotten that but it's more that we've never been told that.

He's wrong about the money raised by governments selling bonds not being spent though and that is a big problem as it doesn't decrease the reserves in the system the way he believes it does. The only way to do that is through taxes and the rich prefer to have the money in their hands rather than have it cancelled the way it's supposed to be.

Derek Hoeta
"where does the money come from to pay for hospitals roading other services"

It comes from the government. The government issues the currency in the act of spending simply by marking up numbers in private bank accounts by computer key stroke.

Draco T Bastard
John G is confused.

I'm sorry but you don't understand endogenous money or the nature of high powered money vs bank credit.

We have a sovereign, fiat, floating exchange rate, non-convertible currency. The government is the monopoly issuer of the NZ$.

You need to start at that point and work your way through.

@johng1 im no rocket scientist bud but at a basic level if you borrow money then some where along the road you have to pay it back 1+1=2 if what your suggesting is true then can i borrow 84 billion off you an get the government to pay you back need to see some real evidence of that starting to find it real hard to believe what your saying

You're not the government, so you don't issue your own currency. You have to use theirs.

Bond sales are not the same as a bank loan where money is created. They are asset swaps from bank reserves that the government has spent into existence to term money. It just sits in a different asset category on the books. And the reverse happens when the bond matures.

I’m sorry but you don’t understand endogenous money or the nature of high powered money vs bank credit.

Actually, I do. Everything you say is contradictory and thus doesn't make any sense.

They are asset swaps from bank reserves that the government has spent into existence to term money.

No they're not. Bond sales are used by the government to raise money which they then spend back into the economy. This effectively increases the currency in circulation without increasing the amount of currency (Money as a commodity). The government doesn't have to do that - it could just issue the money. In fact, that's what they should be doing with taxes then cancelling out the money issued. Under this latter scenario the government deficit would equate to a growing economy.

But due to the fact that the bonds are actually a loan it's not a true deficit and so it doesn't grow the economy in the same way as the bonds have to be paid back with interest which will, eventually, crash the economy as a few people end up with all the money and a hell of a lot of interest owed to them that cannot be paid.

The first piece of the money system is government spending currency units into existence.

Start from that point and keep it in mind and perhaps you'll see where you're wrong. Bonds are money. Reserves for term deposits.

You need to learn about macroeconomic sectoral balance accounting and forget what the monetarists have taught you.

You're seeing a stock where there is a flow.

Derek Hoeta

http://softcurrencyeconomics.com/the-7-deadly-innocent-frauds-of-economic-policy/

Draco T Bastard
I’m sorry but you don’t understand endogenous money or the nature of high powered money vs bank credit.

"Actually, I do."

Yet on the other thread you were talking about money being a commodity.

So which is it?

@johng1 not sure cause like you said don’t understand endogenous money but i don’t have to if your sayn the government doesn’t have to pay that back then thats all i need to understand isnt it

Derek Hoeta
The public never ever has to pay off so called government debt.

@colinengland "But due to the fact that the bonds are actually a loan it’s not a true deficit and so it doesn’t grow the economy in the same way as the bonds have to be paid back with interest which will, eventually, crash the economy as a few people end up with all the money and a hell of a lot of interest owed to them that cannot be paid."

Given the system has been used for longer than you have been alive without crashing, your assertion seems to contradict reality.

If I'm forced to choose between you and reality, I'll trust reality.

@marcwhinery

Did you miss 2008? And the 1930s? And all the recessions in between and before?

The system has been crashing consistently for centuries.

@johng1

The present system treats money as a commodity. As something scarce that needs to be borrowed from those who have it. That is why the government sells bonds and pays interest despite the fact that it doesn't have to.

@colinengland I wasn't around for the 1930s, and for 2008, my stocks went up about 10% annually in that time. And my real estate holdings as well. There was no "crash" that was a lie to squeeze the poor into giving the "poor, innocent billionaires" more money.

Natural cycles are called "crashes" by those who have some ulterior motive. Some cycles are worse than others. The most recent can be traced to deregulations of banks. The cycle was due anyway, it was just made worse by banker fraud (unrelated to currency, but related to leveraging and such).

If all the loans and money isn't real, why were the banking crises so obvious and traceable?

Draco T Bastard

"The present system treats money as a commodity."

You're confusing the narrative with the operational reality.

@marcwhinery i agree marc the poor didnt feel no crash we still worked an had food to eat the only ones it affects is the rich poor rich there stock dropped 1% its the end of the world they are down to their last ten billion

@derekhoeta My favorite story of the "crash" was when the banks that were too big to fail in Iceland demanded government handouts, and Iceland said no. Some banks failed. Some didn't, but life went on. The vast majority of the time if a bank "fails" it's quickly bought by another, even without the government's intervention. We should have let all the "too big to fail" places fail. The impact would have been smaller than the billionaires assert. This was proved in Iceland.

In the US the "crash" was a tightening of lending so the banks could look responsible while paying billions in bonuses to executives which caused the crash. So, with less lending, buyers couldn't buy houses, so the prices fell. As lending increased after, prices rose. The "crash" was a temporary paper-loss of real estate. The loss of jobs and such didn't happen. 2008, the "crash" people can remember, wasn't a crash.

Natural cycles are called “crashes” by those who have some ulterior motive.

Our economy isn't natural and thus no natural cycles. That also means that you just dropped into the realms of logical fallacy: https://yourlogicalfallacyis.com/appeal-to-nature

If all the loans and money isn’t real, why were the banking crises so obvious and traceable?

I never said that the money wasn't real. As it's still accepted by the majority of people as a form of payment it's real enough. I've said that the private banks create too much of it and their propensity of charging interest on it thus causes an over accumulation in the hands of the few which then causes crashes. Of course, the latter would happen anyway with the charging of interest - it would just happen sooner and be worse if the banks weren't creating so much money.

@colinengland Banks don't create money. They just move it. Like a shell game, you get confused when it moves fast.

You've also assumed that because you can identify some fallacy, that the claim is wrong: https://yourlogicalfallacyis.com/the-fallacy-fallacy

Marc Whinery

Tens of millions of people around the world lost their jobs, trillions of dollars of middle class wealth was wiped out, millions of families lost their homes, pension funds were stripped and people are dying from the resultant poverty.

To suggest there was no crash is beyond absurd.

@johng1 Those who make up the statistics say so, but reality doesn't seem to fit the narrative fabricated by the billionaires. Yes, the middle class took the biggest hit. That's always how it goes. Even before the "crash" the middle class in the USA was shringking greatly. But in the "global" crash, the Chinese middle class kept growing.

Marc Whinery
@johng1 Those who make up the statistics say so, but reality doesn’t seem to fit the narrative fabricated by the billionaires. "

Go to Greece and see if you still think it's about 'made up' statistics.

Tens of millions of well paying jobs have been wiped out in the developed economies since 2008. That's just a fact.

So Greece, with no real international banking was the country hit hardest by a US "global" crisis, mainly centered in the financial sectors of the US and UK?

I don't see a causal link. It was always there, with Germany driving up the value of the Euro, and Greece wanting a weaker Euro to devalue their debt. It started long long before 2008.

Marc Whinery
"I don’t see a causal link. "

OK.

http://neweconomicperspectives.org/2011/10/mmp-blog-22-reserves-governement-bond.html
Bond sales provide an interest-earning alternative to reserves. We can say that short term treasury bonds are an interest earning alternative to bank reserves (as discussed earlier reserves at the central bank often do not pay any interest; if they do pay interest, then government bonds are a higher-earning substitute). When they are sold either by the central bank (open market operations) or by the treasury (new issues market), the effect is the same: reserves are exchanged for treasuries. This is to allow the central bank to hit its overnight interest rate target, thus, whether the bond sales are by the central bank or the treasury this should be thought of as a monetary policy operation.

Reserves are nondiscretionary from the point of view of the government. (In the literature, this is called the “accommodationist” or “horizontalist” position.) If the banking system has excess reserves, the overnight interbank lending rate falls below the target (so long as that is above any support rate paid on reserves), triggering bond sales; if the banking system is short, the market rate rises above target, triggering bond purchases. The only thing that is added here is the recognition that no distinction should be made between the central bank and the treasury on this score: the effect of bond sales/purchases is the same.

There is a surprising result, however. Since a government budget deficit leads to net credits to bank deposits and to bank reserves, it will likely generate an excess reserve position for banks. If nothing is done, banks will bid down the overnight rate. In other words, the initial impact of a budget deficit is to lower (not raise) interest rates. Bonds are then sold by the central bank and the treasury to offer an interest-earning alternative to excess reserves. This is to prevent the interest rate from falling below target. If the central bank pays a support rate on reserves (pays interest on reserve deposits held by banks), then budget deficits tend to lead banks gaining reserves to bid up prices on treasuries (as they try to substitute into higher interest bonds instead of reserves)—lowering their interest rates. This is precisely the opposite of what many believe: budget deficits push interest rates down (not up), all else equal.

Interesting @johng1

…it has always been true that bank lending decisions are not restrained by (or even linked to) the quantity of reserves held.

Banks lend to credit-worthy borrowers, creating deposits and holding the IOUs of the borrowers.

Yeah, banks create money. It's also interesting that the article points out that a government is not constrained by a lack of savings which is something that I've maintained for several years now.

@johng1 Interesting read, but unrelated to Greece. How did the US/UK (called "global" to extort places like Iceland) banking crisis cause any of the problems in Greece? That was the claim that I thought was under discussion.

Lecturing me on general economic theory, like that was my question may entertain the large contingent that like to assert that I'm wrong, but can't form logical arguments, but it doesn't address the point you made where you asserted Greece is having troubles because of the 2008 GFC. I've never seen anything that draws that link, other than the billionaire's reactions to 2008, squeezing all countries , and Greece, already in denial about a depression, couldn't cover it up anymore.

Existing problems get blamed on outside factors all the time. It's politics. Greece was in trouble long before 2008. That you don't follow international economics well enough to know that doesn't affect whether it's true.

But then, given this crowd, being well versed in such things is proof I'm overly influenced by the international bankers and their propoganda, and unable to form my own opinions, though that doesn't explain why that doesn't work when the mob here mindlessly lectures me.

Marc Whinery
It wasn't for you.

You can believe what you want to believe, Marc. About Greece and everything else.

Draco T Bastard

You might find this useful.

http://www.economonitor.com/lrwray/2014/07/01/debt-free-money-a-non-sequitur-in-search-of-a-policy/

@nicktaylor1 nick your assuming that my plan was the same as labours assumption is the mother of all fuk ups Nick you assumed wrong you should read my proposal and ask me about specific parts of it that you would like to question me on not make a wide sweeping statement on what you thought i meant

@derekhoeta Nick did address your post. Quite well I thought. Simply, he pointed out that cutting taxes doesn't work while increasing taxes does. What cutting taxes does is take money out of the economy as it gets accumulated by the rich who hoard it. This is one of the reasons why we need to tax the rich at 70% or better as well as having wealth taxes.

The big problem is that you, like most people, start off from the wrong assumption - that the workers and businesses pay taxes so that the government can afford to do anything. This wrong assumption needs to be changed.

What the economy should look like is the government creating money, spending it into the economy to cover essential things (food, health, banking, police, roads, etc). This gets the economy moving. Then the government would tax the money back out of the economy to destroy it. This makes the circle that you mentioned.

The government would run at a deficit to grow the economy and at a surplus to shrink the economy. The 'business cycles' that presently apply would cease to exist except in the rather minor private sector where they wouldn't cause so much damage to the economy as they do now.

Oh, and you're also making that other wrong assumption - that government is the problem. It's not - the private sector is as it's been given way to much of the economy.

@colinengland your doing alot of assuming your self draco your telling me instead of asking me how i come up with that idea

"What the economy should look like is the government creating money, spending it into the economy to cover essential things (food, health, banking, police, roads, etc). This gets the economy moving. Then the government would tax the money back out of the economy to destroy it."

That is the system we have. It is misunderstood and misused but it is the way it works.

The problem is how to get the political class to use the system to fit public purpose.

@johng1

That is the system we have.

Kinda. The existence of private bank credit breaks it though.

The problem is how to get the political class to use the system to fit public purpose.

Yes, especially considering that they're all under the misunderstanding that they have to borrow money to increase government spending.

" What cutting taxes does is take money out of the economy"

Say what?

@derekhoeta

your telling me instead of asking me how i come up with that idea

I didn't assume anything about it - it was fairly obvious in your post.

"Kinda. The existence of private bank credit breaks it though."

Not kinda at all. It IS the system. But you are getting your vertical and your horizontal confused.

I'm reading a lot of sweeping generalisations about 'taxes' in these comments. People need to be more specific if they want their comments to be of value. Not a lot of people talking about (real) job creation either.

I agree the trickle down theory was little more than a scam and that NZ borrowing money to stay afloat has to stop, hopefully before we get done like Ireland or Greece. (Check the attachment - src. wiki NZ Economy) And I believe that reducing income inequality is going to be good everyone.

That said, the way forward IMO would be to put money in the hands of those who need it most (they are going to put it back into the economy immediately). To raise the taxes of those who can afford it the most, particularly corporations. To chop away at any popular tax breaks that do not profit the economy by creating jobs, family trusts would be an example. I would also look to create new tax deductions to replace some of these which are aimed directly at bolstering the economic health of those communities which have it the hardest.

All in all it's still pretty vague though. I'm no economist. But from what I'm reading, neither are you guys.

Don't get me wrong, I do agree with most of your sentiments, but Internet party won't be getting a lot of say as to the specifics of economic policy for some time and from what I'm reading that could be a good thing. It might be a wise strategy to develop a set of economic goals for the party, a loose interim policy which reflects how you believe they might be achieved and then focus all your power on bringing about government transparency. A legible data model representing the NZ economy would eliminate many of your arguments and provide fact based insight to inform your economic policies.

And watch this:
https://www.youtube.com/watch?v=CKCvf8E7V1g&list=PLJyn53EBR6jKyfqggXkeCPdh1oUMMr7rO

=)

Kristian Thompson
"NZ borrowing money to stay afloat has to stop, hopefully before we get done like Ireland or Greece."

The NZ govt. does not borrow overseas as far as I am aware.

And the NZ government as a currency issuer can never be in Greece or Ireland's situation, as they are both users of a foreign currency i.e. the Euro.

As long as the government never borrows in foreign currencies, there is no question of solvency or shortages of funds for spending on whatever the government wishes to purchase.

It could solve the unemployment problem by purchasing all surplus labour via a government jobs guarantee.

The NZ govt. does not borrow overseas as far as I am aware.

A number of years ago a NZ government bond sale of $100m was bought up by a single offshore investor. That's the NZ government borrowing from offshore.

A $100 million what?

NZ$?

I like this idea that government creates money to boost the public good and then taxes it back to delete it. This has balance and appears sustainable.

fred look

The current fiat currency system can do exactly that. But we don't have the public and political awareness to use it well.

Neoliberalism and neoclassical economics has completely skewed the perception of what really is.

So how do we get rid of the neoliberals?