Meet your future NZ First Minister!

July 22nd, 2014 at 7:00 am by David Farrar

I really don’t know what is more terrifying. A New Zealand Member of Parliament who thinks the Reserve Bank of New Zealand is foreign owned, or the fact she still insists it is after being corrected.

I look forward to seeing the NZ First list rankings next month.

The comments on Twitter are gold.

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59 Responses to “Meet your future NZ First Minister!”

  1. Keeping Stock (10,267 comments) says:

    Asenati Taylor is one seriously loose unit. She also had a running battle on Twitter yesterday with Tova O’Brien from 3News, which only serves to accentuate quite how deluded and abusive she is.

    I have no idea where Peters found her, but he should take her back and leave her. She even makes HIM look normal :D

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  2. flipper (3,950 comments) says:

    The arrogance of this freak is frightening. It is a cultural superiority thing for some of Samoan descent.

    But I recall that earlier this year she was demolished in the House by a National MP. Can’t remember whether it was Parata or Tolley. But it exposed the silly fool for what she is … and the RB episode is confirmation.

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  3. EAD (950 comments) says:

    The whole point of a Central Bank is to allow essentially unlimited credit expansion by privately owned commercial banks. Now with over 95% of New Zealand’s loans created out of thin air by foreign owned banks, it doesn’t matter that the Reserve Bank is under local ownership as all of the profits of our labour go overseas.

    We are essentially slaves to foreign banks – we spend all of our lives working to pay back loans and pay taxes which banks created out of thin air.

    So yes, Asenati Taylor is incorrect in saying the Reserve Bank is foreign owned, but in many ways, that is just splitting hairs.

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  4. Brian Smaller (4,007 comments) says:

    When she says the NZ reserve bank is run by foreign interests she probably means that in a way that requires wearing of a tinfoil hat.

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  5. Yogibear (361 comments) says:

    The Force is strong in this one.

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  6. EAD (950 comments) says:

    Hi,

    can the down-arrowers please point out where my analysis is wrong as I’m always keen to learn.

    FWIW, there is a great little organisation called “Positive Money NZ” that seeks to educate as many possible about the faults of our debt as money system and how it causes so many of our social ills.

    http://www.positivemoney.org.nz/

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  7. slightlyrighty (2,471 comments) says:

    http://apublicdefender.com/wp-content/uploads/2010/11/THE-STUPID-IT-BURNS-2.jpg

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  8. Nukuleka (301 comments) says:

    I hope the MSM is going to beat up Winston over this appalling gaff- he should be held accountable for his own party’s MP living in la la land! It’s time the wee man from St Mary’s Bay was given a taste of his own medicine. I wonder what the voters in East Coast Bays would think of this sheer inanity.

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  9. redqueen (553 comments) says:

    @EAD

    I’m still laughing, thanks for that! :) A good friend of mine has gone over to that and, believe me, he often sounds like he’s on a Koolaid cult trip nowadays.

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  10. NK (1,223 comments) says:

    Winston went apeshit when Jenny Shipley was appointed as a director to the Chinese bank that is opening here. But he was strangely silent when Ralph Norris was CEO of the Commonwealth Bank of Australia.

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  11. redqueen (553 comments) says:

    Anyway, back to reality, NZ First MPs are so much fun. Think how much we’ll miss them if they don’t get over the 5% threshold!

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  12. Tarquin North (256 comments) says:

    The scary part is she probably isn’t the only M.P with an I.Q similar to room temperature. Just look at the woman who replaced Aaron Gilmour. I can only imagine what populates the lower tiers of the Greens list, and Labour have Andrew Little! God help us. The worst one is at number four for ACT – a very good reason to give them a wide berth.

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  13. George Patton (348 comments) says:

    Seriously, she’s too dumb, erratic and clueless to be an MP. But telling the truth is just palagi oppression.

    Maybe she should stick to chanting about blowjobs instead.

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  14. OneTrack (2,981 comments) says:

    “Think how much we’ll miss them if they don’t get over the 5% threshold!”

    I’ll take that chance.

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  15. Simon (694 comments) says:

    The RBNZ is in effect quasi owned by the foreign shareholders of the banks.

    At very least foreign banks control the RBNZ process.

    National party supporters at least understand when the Greens / Labour want the State to set power prices that this is just wrong however cant make the jump that the State setting interest rates (just another price) is also wrong.

    State setting of any prices distorts markets. The RBNZ price setting greatly benefits the banks (at the expense of the wider economy). However as State setting of interest rates has been going on for so long NZ has become a massive debtor nation now at the mercy of in effect the banks directing the RBNZ and now also central government.

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  16. mikenmild (11,247 comments) says:

    I’m just amazed that Winston allows any of his MPs to operate Twitter accounts. Surely he should be the only one with anything to say.

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  17. EAD (950 comments) says:

    Interesting antidote redqueen,

    but in all seriousness, how many times have you stopped to think about money (you know, the thing most people spend most of their life trying to earn more of), how it is created and what are the implications of the way it is made?

    Here is a former credit Manager of the Federal Reserve on the process of money creation:

    “If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon.”

    alternatively, here is youtube video I have posted on Kiwiblog before that explains the same process which encouragingly now has over 2 million views (still a long way to catch up with the important subjects like Justin Beiber and the Kardashians though)!!

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  18. Cassius Dundee (6 comments) says:

    @mikenmild
    I’m amazed ANY MP is allowed to personally operate their social media accounts. At the very least, anything they intend to post personally should be cleared by the comms office.

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  19. nadir (98 comments) says:

    EAD: Two words “reserve ratios”

    Now stay way from the internet for a few days, you need to detox on the conspiracy theories.

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  20. nadir (98 comments) says:

    Simon: Please explain how the RBNZ is “quasi owned by the foreign shareholders of the banks”

    Here’s some help for you from the RBNZ FAQ page:

    “Who owns the Reserve Bank of New Zealand? Does it have shareholders?

    The Reserve Bank does not have shareholders. It is 100 percent owned by the New Zealand government, with any extra revenue that the Reserve Bank makes going back into the Crown accounts. The Reserve Bank is not a government department, but is a body corporate whose finances are included in the Crown accounts.”

    And here:

    http://www.rbnz.govt.nz/about_us/management_and_board/0092967.html

    Very happy to hear you provide a description of an alternative financial system that does away with the need for a central bank.

    Please don’t peddle your stupid conspiracy theories in public.

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  21. EAD (950 comments) says:

    Hi Nadir, do you know how reserve ratios actually work or are just using lazy ad hominems?

    When you put your money into a bank, the bank is required to keep a certain percentage, a fraction, of that money on reserve at the bank, but the bank can lend the rest out. For instance, if you deposit $100,000 at the bank and the bank has a reserve ratio of 10 percent, the bank must keep $10,000 of your money on reserve and can lend out the $90,000.

    In essence, the bank has taken $100,000 and has turned it into $190,000 by giving you a $100,000 credit on your deposits and then lending the additional $90,000 out to someone else.

    Now, if you take this out a little further, you will see that your original $100,000 can become $1,000,000 by the time it is all over. Here’s how:

    – You deposit $100,000 Your bank loans someone else $90,000
    – That person deposits $90,000 Their bank loans someone else $81,000
    – That person deposits $81,000 Their bank loans someone else $72,900
    – That person deposits $72,900 Their bank loans someone else $65,610
    – That person deposits $65,610 Their bank loans someone else $59,049
    – That person deposits $59,049 Their bank loans someone else $53,144
    – That person deposits $53,144 Their bank loans someone else $47,829
    – And so on

    Ultimately, your initial $100,000 deposit has grown into $1,000,000 with a 10 percent reserve requirement.

    Is the above a “conspiracy theory! or a conspiracy fact?

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  22. Nigel Kearney (971 comments) says:

    Now that she has learned the Reserve Bank is not an evil foreign bank, somebody should invite her to go to their office and open an account so she can have her salary paid into it.

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  23. Elaycee (4,356 comments) says:

    And the taxpayer pays this dopey bint $150k per year….. [gulp]

    This exchange should be copied / rolled out just before the election – to remind NZ voters what they could actually end up with if they vote for Winston’s outfit.

    Scary.

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  24. Rick Rowling (809 comments) says:

    Soooo, back on topic EAD et al.

    It doesn’t matter what Asinine Lole-Taylor thinks, a vote for NZ First is a vote for one man only.

    Sure, *he* gets wield several votes in parliament, but face it, you ain’t voting for a team. If he could put a dozen life-sized blow-up dolls on his list he would. And the blue-rinse brigade would still vote for their age-discriminatory perks.

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  25. nadir (98 comments) says:

    Really EAD. What does your example prove? How fractional banking works? Thats precisely the point but there are numerous limiting factors.

    First: You example assumes there are no other factors involved in monetary policy and banking.

    Secondly: deposits don’t create lending, lending creates deposits.

    Thirdly: 1/r

    Fourthly: Look at the dfinitions of and history of Money Supply statistics

    Lastly, do some reading rather than just viewing youtube videos. Rather than bore you with academic papers, heres a user friendly note from the BOE which I just googled up.

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  26. pidge (56 comments) says:

    The Reserve Bank exerts quite a bit of control over the commercial banks:
    – It runs the settlement system that handles the settlements between the banks each day ($4B+ in settlements daily)
    – It sets the requirements for the banks to operate in NZ. ANZ (I think) thought it could take its internal systems to Australia. RB found out, and insisted it maintained the ability to run the systems in NZ, otherwise ANZ would find itself no longer being a bank an NZ…
    – RB keeps in close contact with the banks, and a member of RB staff goes to meet with the banks regularly. One time a meeting was arranged with a bank, but for some reason the bank hadn’t been told. Apparently there was a certain amount of “bricks passed” on the part of the bank staff (“Oh, what have we done!”) until it they realised it was a regular contact meeting.

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  27. hj (6,855 comments) says:

    So a NZ First MP is proved wanting. National MP’s (on the other hand) tend to be of a higher quality in terms of their skills.
    But that doesn’t mean they are looking after NZ’s interests:

    While immigration played a key role in house inflation in the three years after 2001 (Reserve
    Bank 2007), it is unknown to what extent on-going immigration continued to drive price rises.
    The housing boom has meant good profits for many New Zealand companies supplying
    materials and building services, but it implies investors would rather invest in their country’s
    homes rather than its businesses (Bollard 2005). The high returns for property has attracted
    finance and reduced the capital available for productive investment (Moody, 2006). The
    consequence is investment is going in to industries with limited capacity to increase per capita
    incomes. For example, real estate and building are domestically bound and do not have the
    market potential of export industries. They also have less opportunity to increase productivity
    through new processes and products. The irony is, as these sectors grow, they have incurred
    skills shortages which in turn has increased demand for skilled immigrants. The Department
    of Statistics ‘Long Term Skill Shortage List’ of 28/3/2006 includes carpenter/joiner, plumber,
    electricians, fitter and turners, fitter welders; all indicative of a nation building its
    construction/property sector.
    There is a danger that a sector of the economy is being augmented that is totally reliant on a
    small domestic economy. Not only do these industries have limited potential for per-capita
    growth but ‘deriving growth via factor inputs such as labour places pressure on infrastructure
    such as transport and land supply, and ultimately have a further negative impact on growth
    (ARC 2005). Finally, as the sector gets larger, it gains in lobbying/political strength and can
    lobby for immigration regardless if it is the best interests of the economy as a whole.
    This
    could be seen in Canada where the development industry has lobbied hard for high sustained
    immigration levels (Ley and Tutchener 2001).

    Dr Greg Clydesdale Growing pains

    Government policies blamed for house prices

    Immigration and tax breaks for investment in residential property are being cited as the underlying causes of steep increases in the cost of housing over the past decade.
    New Zealand now boasts one of the highest rates of home unaffordability in the world as a result of prices rising far faster than incomes, and the government’s Savings Working Group blames that squarely on the policies of successive governments.
    Although “the favourable tax treatment of property investment” accounted for about 50% of house price increases between 2001 and 2007, the working group said, there was also strong evidence that rapid swings in immigration brought about price-rise “shocks”.
    There was a sharp spike in immigration in 2001, 2002 and 2003 and, said working group committee member Dr Andrew Coleman, it appeared that property prices did not fall anywhere near as greatly when immigration fell again.
    The report added that there was little evidence that immigration boosted local incomes. In fact, the need to build roads and schools meant that net migration contributed to the national deficit.
    “Migration is another issue that the government should investigate further,” the working group said. “There are indications that high immigration rates have pushed up government spending, house prices and business borrowing, and prevented necessary adjustments to the economy.”
    Coleman said the working group was not anti-immigration, but called on the government to investigate limits in the future, something Immigration Minister Dr Jonathan Coleman does not seem inclined to consider.
    In a statement to the Sunday Star-Times, Coleman said: “Department of Labour research shows there is no strong link between immigration and house prices and migrants provide a net gain to the New Zealand economy of around $1.9 billion a year. If migration stopped today, the economy would contract by 10% over 10 years.”

    http://www.stuff.co.nz/business/money/4622459/Government-policies-blamed-for-house-prices

    RBNZ slams the population ponzi
    http://www.macrobusiness.com.au/2014/04/rbnz-slams-the-population-ponzi/

    The reason NZ First stands alone is because immigration is Holy Writ on the left.

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  28. nadir (98 comments) says:

    oops: http://www.bankofengland.co.uk/publications/documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

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  29. hj (6,855 comments) says:

    If I was a National MP I’d feel dirty.

    In BNZ Chief Economist Tony Alexander’s weekly overview, Auckland house prices are set to move upwards nicely. Here are his 19 reasons why:
    3. The government is explicitly aiming to grow Auckland’s population as a means of achieving “agglomeration” benefits for economic growth which accrue from high interaction amongst economic players.

    http://www.davidwhitburn.com/blogs/auckland-house-prices-to-rise-over-10-in-2013/

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  30. 3-coil (1,215 comments) says:

    From the corrupt to the inept, NZ First have it covered with its ragtag freakshow of lunatic MPs.

    And National Party supporters claim they can work with this bunch??!!

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  31. EAD (950 comments) says:

    Hi Nadir

    oops – your paper you just linked to just discredited your entire argument. Right there in the 2nd paragraph, the paper says:

    “Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money”

    So I’ll state my first point again – we are slaves to the banks. We spend our lives working for money that a bankster created out of thin air.

    It is the most immoral system in the world once you understand how it all works and the consequences of it so I will spend my time shouting from the rooftops, even if it gets me alot of downticks on Kiwiblog or makes people think I’ve been “drinking the Koolaid” :)

    http://personalliberty.com/immorality-paper-money/

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  32. hj (6,855 comments) says:

    From the corrupt to the inept, NZ First have it covered with its ragtag freakshow of lunatic MPs.

    And National Party supporters claim they can work with this bunch??!!
    …….
    From the property peoples favourite party calling NZ First corrupt is a bit rich.

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  33. Manolo (13,518 comments) says:

    This poor, deluded and ignorant woman fully deserves Judith vote!

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  34. Pete George (23,436 comments) says:

    There was a spoof Lole-Taylor Twitter account (not sure if it’s still going) – most people have trouble working out which one is the joke. This was discussed by journalists yesterday, asking if the Tweets were legitimate or not.

    The real one is funnier, or it would be if it wasn’t operated by one of our elected representatives.

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  35. RightNow (6,973 comments) says:

    EAD: “We spend our lives working for money that a bankster created out of thin air.”

    The mortgage I took out for my house was money I never even saw and possibly only ever existed as data transferred between computers, yet I still have my very tangible house full of very tangible possessions, and my very tangible car parked on the very tangible drive.

    Amazeballs! All those things created out of thin air.

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  36. ChardonnayGuy (1,197 comments) says:

    You should hear her monumentally ghastly obsession about recriminalisation of street sex work, which appears to be a moral crusade for her and which Winston totally backs. It’s the subject of many a Scoop rant. And then there’s the matter of New Zealand First’s Manurewa electorate committee and her husband’s financial dealings…

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  37. hj (6,855 comments) says:

    IF YOU SEE only one film in the 2014 NZ International Film Festival see Alister Barry’s feature-length documentary, Hot Air.

    This chilling exposé of the strategy and tactics adopted by New Zealand’s largest industries to ensure that no effective action to combat climate change is ever undertaken in this country should be viewed by every voter.

    Hot Air constitutes one of the most persuasive arguments for radical, ruthless and rapid policy implementation on behalf of people and planet I have ever encountered.

    The documentary proves conclusively that if a government opts for “business as usual” politics, then it is “business” that usually always wins.

    http://bowalleyroad.blogspot.co.nz/2014/07/hot-air-delivers-cold-hard-facts-about.html

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  38. hj (6,855 comments) says:

    redqueen (448 comments) says:
    July 22nd, 2014 at 7:42 am

    Anyway, back to reality, NZ First MPs are so much fun. Think how much we’ll miss them if they don’t get over the 5% threshold!
    =======
    Not much chance of that:

    Journalist Andrea Vance:

    Peters’ ill-founded hysteria and anti-Asian agenda, are a regular feature of election campaigns.

    However, our poll suggests voters aren’t blaming migrants for the current housing crisis. They also have a strong handle on the true picture – with most able to correctly pick how many migrants make up the population.

    Even Peters own voters aren’t convinced by this old trick – 92 per cent of his supporters don’t rate immigration as a problem.

    – Stuff
    http://www.stuff.co.nz/national/politics/opinion/10187254/Immi-what-Hysteria-over-immigration-falls-flat

    Of course journalists are fallible too (much like Asenati Taylor albeit a matter of character in the former case).

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  39. hj (6,855 comments) says:

    As I understand it banks create money out of thin air in anticipation of value being created? However on a world scale this assumes that growth can continue where energy may be a limiting factor. Price is seen to determine value but this value changes according to the human condition so population is also a determinant of price (value) as the same resources are divided amongst competitors?

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  40. OTGO (538 comments) says:

    That woman is living proof that our parliament is too large. Cut 30 of them and we wouldn’t notice the difference.

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  41. alloytoo (526 comments) says:

    @EAD

    For goodness sake, stop trying to learn economics on Youtube.

    When a bank takes a deposit that cash is removed from the economy.

    Lets assume we have $100 cash and fractional reserve requirements of 10%

    1. $100 removed from the economy through deposit
    $10 Held in reserve.
    $90 returned to the economy through lending.

    2. $90 Removed from the economy through deposit
    $9 Held in reserve.
    $81 returned to the economy through lending
    .
    .
    .
    .
    67. 10c removed from the economy through deposit
    1c Held in reserve
    9c Returned to the economy through lending.

    After 67 rounds:

    Total deposits: $999.14
    Total lending: $899.23
    Total Reserve: $ 99.91
    Cash: 9c

    So, lending has created $899.23, but that lending was only made possible by deposits of $999.14.

    The difference between the lending and deposits is $99.91 held by the bank as a fractional reserve.

    Of the original $100 dollars only 9c remains as cash (rest in reserve).

    This serves to illustrate that the actual money in the economy, the actual cash that could be put to work buying and selling goods is actually reduced by putting it through the fractional reserve banking system.

    The total money “Created” by lending is less than the total money deposited.

    This is simple maths that could be done using a piece of paper and a pencil.

    Please stop peddling your nonsense.

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  42. Slipster (141 comments) says:

    alloytoo: “This serves to illustrate that the actual money in the economy, the actual cash that could be put to work buying and selling goods is actually reduced by putting it through the fractional reserve banking system.”
    —-
    This should also be rather obvious from the simple observation that, by investing some money, you take them out of everyday circulation. Pretty much basic facts of monetary and, in particular, banking parts of the way economy functions.

    p.s. Dear EAD, please – do follow the advice several people offered you already: Learn from the books and real education – not from YouTube snippets. Otherwise, you sound like a schoolboy in his first year of “sciences” trying to argue General Relativity with experts.

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  43. Rex Widerstrom (5,349 comments) says:

    Oh, Taylor’s entertaining so she’ll be missed if she doesn’t get clamped straight back on the taxpayer teat after this election?

    It doesn’t really matter because Winston does the actual decision-making?

    Aside from the sheer waste of salary, office rent, secretaries’ salaries, travel etc (since we’re talking economics) there’s an opportunity cost to having this vain and ignorant woman on our payroll. She, Prosser, Williams et al are occupying places that could be held by MPs (from whatever party) who’d understand the facts, contribute their best efforts to solving our problems, and work hard to better NZ.

    I’ve occasionally mooted a “basic facts test” as a necessary precursor to voting in a referendum, reasoning that no one has a right to inflict their ignorance on the rest of us. Perhaps that should be extended to selection as an MP.

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  44. nadir (98 comments) says:

    EAD – I suggest you read past the second paragraph. And then look up the terms “asset” and “liability” – maybe balance sheet too.

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  45. Pete George (23,436 comments) says:

    Winston seems to be defending her:

    @mizjwilliams 7s

    .@winstonpeters on Asenati’s tweets last night. “It may not be strictly accurate .. but it’s a solid inference”

    “Solid inference’ from Peters is like concrete from a bulls bum.

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  46. doggone7 (769 comments) says:

    There’s as much chance of Asenati Lole-Taylor being a Minister as there is of David Farrar acknowledging that this is another article under another hysterical headline.

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  47. EAD (950 comments) says:

    It is interesting to watch the blind anger, ignorance and self denial on this post. In everyone’s determination to have a go at this NZ First MP, they are letting their rage blind them to a truth so simple (either that or they are all paid shills for banks). They say all truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident. Looks like the truth about how our modern banking system works is somewhere between stage one and two :)

    @alloytoo:

    There are two very important point that you missed in your 11.09am post:

    1. $100 is deposited in the bank. $10 of this is held in reserve and $90 is returned to the economy through lending. So far, so good.

    However:
    1) $10 is held to cover a $100 deposit and $90 has been loaned back into the economy. There is therefore $190 in the economy – the bank has “inflated” the money supply by $90 by creating money out of thin air as both the depositer and lender have a claim to the $90. (Actually the truth is the depositer has no legal claim to the deposit because they have signed away ownership to the bank in return for the promise of interest payments at a future point of time that is why a deposit is a “liability” of the bank)

    2) When the banker created the $90 out of thin air, they also created an obligation to pay interest on this debt. Here is where the real problem lies as because the interest was never created, only the principle then the money supply must SHRINK as in order to pay back the interest. What really happens is that our debt must keep increasing as there is never enough money in the system to pay all the money owed back as interest on the principle. Here is the astounding fact I don’t expect you to be able to comprehend – IF EVERYONE IN NEW ZEALAND WERE TO PAY BACK THEIR DEBTS, THEN WE WOULD HAVE NO MONETARY SYSTEM AS THERE WOULD BE NO MONEY.

    This system is unstable and must crash as debt must keep growing exponentially and forever. This system had a heart attack in 2008 and got put on life support with QE and massive borrowing by governments around the world. It will crash even more spectacularly very soon and all the experts here will be saying “nobody could have saw it coming”. More fool them I say – they have been warned.

    http://www.zerohedge.com/news/2013-09-17/what-time-would-you-leave-party

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  48. PaulL (5,947 comments) says:

    @EAD: imagine that there isn’t a bank involved. Imagine I have $100 in my pocket. You ask for a loan. I loan you that $100. So now you have $100, and you owe me $100. Wow, we’ve just created money from thin air – since you have $100 that you can spend, and I have $100 that you owe me, there’s now $200 (since there’s no reserve requirement if I’m not a bank). Infinite money creation!!

    See if you can spot the obvious flaw in the logic, and then explain why it’s different when a bank acts as an intermediary.

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  49. EAD (950 comments) says:

    errrrrrr

    maybe because if I loan you that money directly then I can’t spend that $100 (i.e. money is transferred but not created) but if I have the money in the bank, I can spend that $100 whilst the bank has simultaneously created a new deposit (a loan) of $90 in someones account which they can also go an spend.

    See the flaw in your logic?

    The whole point of a central bank is to allow this infinite money creation (otherwise known as inflation) by acting as a lender of last resort and preventing bank runs if too many people try and withdraw their money at once.

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  50. Reid (16,227 comments) says:

    For those skeptical of EAD, here’s the Bank of England saying precisely the same thing.

    That’s right.

    http://www.bankofengland.co.uk/publications/documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

    Why do think Henry Ford said:

    “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

    ??

    Proving this is old news. And for those of us who’ve known it was old news, the real question for us, which apparently some are playing catchup on, is: why have they decided to come clean on it, now?

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  51. PaulL (5,947 comments) says:

    @EAD: OK, so there are three people involved. Me, you and Reid.

    I loan money to Reid, he owes me $100. He loans the money to you, so you owe him $100. Where is the money creation? I tell Reid that I want my $100 back. He needs to either get the $100 back from you, or he needs to borrow $100 from someone else.

    Consider the same situation with a bank in the middle. It’s the same, except that in addition to all the above, the bank also have to hold back $10, so they can only lend out $90. But in short, if all the depositers into banks were to ask for their deposits back then the bank would have to get the money back from all the borrowers. They aren’t inventing money at all, the money is only ever in one place at a time.

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  52. Reid (16,227 comments) says:

    Watch the vids and read that pdf Paul. Then you’ll get the answer to your question.

    It can’t be explained in less than ten thousand words. The 7:59 vid is one of the clearest if abbreviated explanations I’ve seen. The Bank of England paper indicates the same process is ubiquitous.

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  53. EAD (950 comments) says:

    PaulL – you say that “if all the depositers into banks were to ask for their deposits back then the bank would have to get the money back from all the borrowers”

    That statement sums up the paper money, fractional-reserve banking system in a nutshell – it is all a confidence-based trick. Once the confidence goes, the system collapses – can you imagine banks getting all their loans bank from borrowers in quick order if they demanded their deposits back all at once (remember these loans are generally tied up in long term assets like houses, business loans etc) It would be utter chaos and all the value you thought you had in your $1million house would be seen for what it really was……..an illusion.

    When this confidence goes, we will then have a debt collapse as all these illusions of wealth and security vanish (deflation) as assets and pensions etc are revalued and social breakdown ensues. We will then have a hyperinflation as the government tries to print its way out.

    The true reason why interest rates are so low around the world is not to “stimulate demand” as the politicians and MSM constantly tell you, but to maintain at least temporarily, the illusion of solvency as the economy (currency not created as a debt) is strangled by the exponentially increasing payments of interest.

    Have a read of my 9.04am link – it could well be the most important piece of work you ever read.

    EAD

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  54. lolitasbrother (636 comments) says:

    Amazed to see PaulL put up remarkably simplistic argument . I read the article Reid gave : this is one hard believers site EAD
    and they don’t take too many prisoners :
    http://www.bankofengland.co.uk/publications/documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

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  55. Simon (694 comments) says:

    This link as well.

    http://www.rbnz.govt.nz/research_and_publications/reserve_bank_bulletin/2008/2008mar71_1lawrence.pdf

    “In a modern economy, money can be created either by the
    central bank (the Reserve Bank, in New Zealand’s case) or
    by private sector institutions – in practice, mostly registered
    banks.”

    However would add that private banks can only create money through RBNZ co operation and over sight. In a free market the banks ability to create money would very limited.

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  56. Simon (694 comments) says:

    The other main way RBNZ creates money is through the expansion of its balance sheet. This is what it did over 2008 & 2009 as it purchased government stock.

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  57. stephieboy (2,693 comments) says:

    The myths behind factional reserve banking often finding factor by conspiracy theorists as explained here ,

    “It is relatively simple to start with. A bank must hold a certain amount of cash on hand from customer deposits, known as a “reserve requirement” regulated by the central bank, and loan out the remainder to generate revenue for the bank and depositors by charging interest on loans of that money. This is a primary way central banks control the amount of money supply to control inflation, while providing a cushion for operational risk by banks.”

    It is a haven, as I suggested ,for conspiracy theorist .but in a nutshell it represents an attempt to protect depositors from banks recklessly or fraudulently parting with their customers money. This used to happen frequently prior to fractional reserve banking Its a the heart of the Reserve banking system and serves to protect central banks customers from the cyclic downturns and runs on depositors money .
    Why its disliked is that is smacks of regulation especially from the fanciful Ron Paul and Austrian school types.

    http://rationalwiki.org/wiki/Fractional-reserve_banking

    A related topic is the Gold Standard again flavor of the month with the above mentioned types and equally subject to some bizarre and nutty ideas and beliefs . Foe example the question needs to be asked if the world went to the gold standard there would simply be enough gold to ago around to replace paper money for each nation.
    Furthermore Gold does not have any intrinsic value other than a subjective one to do with its inherent beauty and allure that the ancients discovered and prized .
    More here

    http://rationalwiki.org/wiki/Gold_standard_(economics)

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  58. PaulL (5,947 comments) says:

    EAD: it’s not a confidence trick, other than the bit where banks borrow short and lend long, and therefore rely on the fact that new people will give them deposits about as fast as old people redeem them (give or take the 10% reserve they’re required to hold). The point is that they aren’t really creating money any more than when two people loan to each other. There’s still only the same amount of money, it’s just being put to use instead of sitting around in a bank vault. (And, as an aside, if it were sitting in a bank vault, then it wouldn’t be earning interest. Banks can only pay interest because those they lend to pay them interest).

    The potential problem is when banks use their own capital (i.e equity) to create money, not when they lend out money that people have deposited with them.

    I don’t need to watch the video nor read the link. I have other things to do with my life that are more likely to have benefit – like, for example, drinking beer or watching TV.

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  59. alloytoo (526 comments) says:

    For goodness sake EAD, peruse an economics textbook:

    >1) $10 is held to cover a $100 deposit and $90 has been loaned back into the economy. There is therefore $190 in the >economy – the bank has “inflated” the money supply by $90 by creating >money out of thin air as both the depositer and >lender have a claim to the $90. (Actually the truth is the depositer has no legal claim to the deposit because they have >signed away >ownership to the bank in return for the promise of interest payments at a future point of time that is why a >deposit is a “liability” of the bank)
    ———————————————-
    The point is, that there is only ever a maximum of $100 cash available to transact. That $100 reduces as the bank retains a reserve. There is never $190 available to transact with, to buy goods and services.
    The banks don’t create money, they are clearing houses enabling those with excess cash to make it available to those that need it.
    ————————————————
    >2) When the banker created the $90 out of thin air, they also created an obligation to pay interest on this debt. Here is >where the real problem lies as because the interest was never created, only the principle then the money supply must >SHRINK as in order to pay back the interest. What really happens is that our debt must keep increasing as there is never >enough money in the system to pay all the money owed back as interest on the principle. Here is the astounding fact I don’t >expect you to be able to comprehend – IF EVERYONE IN NEW ZEALAND WERE TO PAY BACK THEIR DEBTS, THEN WE >WOULD HAVE NO MONETARY SYSTEM AS THERE >WOULD BE NO MONEY.
    —————————————————————————————————
    This illusion would hold true if money were based on a gold standard (as an example).
    Fiat money has no such basis, the total fiat money in circulation represents the value of goods and services in the NZ economy. The Reserve bank allows the money supply to grow to match the growth in the economy. In reality an exact match is hard to do, so it allows it to grow at a slightly higher rate than the economy, giving us a small nominal inflation rate. Nominal inflation is seen as better than deflation (when the value of goods and services increase faster than the money supply and result in money increasing in value), as deflation often results in hoarding, reduced investment in plant etc (See great depression and more recently the GFC).
    ——————————————————–
    >This system is unstable and must crash as debt must keep growing exponentially and forever. This system had a heart >attack in 2008 and got put on life support with QE and massive borrowing by governments around the world. It will crash >even more spectacularly very soon >and all the experts here will be saying “nobody could have saw it coming”. More fool >them I say – they have been warned.
    ——————————————————-
    The 2008 GFC (which was utterly predictable) was the result of the assumption of too much risk by (Especially American) lenders.
    (This has been attributed by some (Anton Rupert) to the normalization of profits after decades of super profits following the fall of the Soviet Union and the adoption of these regions of market economies, leading to the perception that the super profits were normal.)
    The American lenders had redistributed this risk throughout the world, and when the risky lending caught up with them, resulting in write downs, the world caught cold.
    Some markets with relatively strict regulation were not exposed to the risk however they found it difficult to secure funding as global lenders were hurting and unwilling to assume any risk. The resulting downturn in activity was due to a lack of money in global circulation to invest in productive activity. QE was a last ditch resort to inject some liquidity into global markets.

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