The Fallout from Brash’s Downfall
Don Brash’s attempt in the Herald a week or two ago to deny the accuracy of my account – also published in the Herald – of how the banks are not merely intermediaries but create out of nothing most of the money in circulation can be explained in two ways, but neither does much good for his reputation.
On the one hand, he might have known perfectly well that my account was accurate but nevertheless tried deliberately to mislead the Herald’s readers. Or, and perhaps more probably, he might genuinely have been ignorant of the true state of affairs.
In either case, my rebuttal – again in the Herald – of his assertion that I was “peddling nonsense” has a number of ramifications that are worth pursuing. For a start, here was one of our most high-profile public figures revealing that he was woefully ill-informed on a subject on which he was widely regarded as expert.
He had, after all, been the country’s top banker, and that is to say nothing of his eventual emergence as a “hard right” politician – leading first the National party and then Act, and only narrowly failing to become our Prime Minister in 2005.
As Governor of the Reserve Bank, he had been the principal champion and practitioner of the neo-liberal economic policies which became known as “Rogernomics”. Are we happy that our economic fortunes were entrusted to a single individual who understood so little of his subject, and that ministers applauded themselves for their disclaimer of any responsibility for the decisions he made?
His woeful attempt to deny what is now accepted must cast huge doubt on the continuing legacy of “Rogernomics” in our economic policies. The whole myth of prudent economic management under neo-liberal policies must be reconsidered in the light of what we now know is the banks’ self-interested creation (or “printing”) of billions of new money.
The frequent condemnations of any suggestion that governments might “print money” (unless it is “quantitative easing”, with the purpose of bailing out the banks) must now be viewed against the relaxed attitude towards the banks doing precisely that – day in, day out, and on a massive scale – for their own profit-making purposes.
An acknowledgment of the true role of the banks should lead us to reconsider many of the hitherto accepted nostrums in tackling economic problems. Inflation? No, not created by greedy workers claiming higher wages but by banks printing more and more money to boost their profits.
Housing unaffordability? No, not attributable exclusively to a shortage of supply but fuelled by the bellows applied to inflating house prices by billions of new money being created out of nothing by the banks to spend on house purchase. Those many well-intentioned people attempting to explain why house prices go on rising need look no further.
And what of the constant drag on our balance of payments as a result of the transfer every year back to Australia of the billions of dollars in profits made in New Zealand by our Australian-owned banks – profits made from the interest we pay on money created out of nothing by those banks? How did we allow this situation to develop? And should we let it continue?
Perhaps the most fundamental questions arise in respect of how long it has taken to bring the true state of affairs to public attention. Why have the media not blown the whistle long before now? Why is the revelation of the truth even now largely ignored, and even denied, by media outlets?
And what of our politicians? It is perhaps to be expected that politicians on the right might see it as in their interests to conceal and obfuscate.
But what of the left? Are they too timid or lacking in confidence or too imbued with neo-liberal convictions themselves to challenge an orthodoxy they profess to criticise and oppose? Are they really so frightened of losing the argument that they dare not take it on?
And are they so focused on winning approval from the guardians of neo-liberal orthodoxy that they are prepared, for the sake of staying in the good books of bankers and their ilk, to ignore the truth, and to fail thereby those who have no one else to defend their interests?
Bryan Gould
29 April 2017