NZ Herald
  • Home
  • Latest news
  • Herald NOW
  • Video
  • New Zealand
  • Sport
  • World
  • Business
  • Entertainment
  • Podcasts
  • Quizzes
  • Opinion
  • Lifestyle
  • Travel
  • Viva
  • Weather

Subscriptions

  • Herald Premium
  • Viva Premium
  • The Listener
  • BusinessDesk

Sections

  • Latest news
  • New Zealand
    • All New Zealand
    • Crime
    • Politics
    • Education
    • Open Justice
    • Scam Update
  • Herald NOW
  • On The Up
  • World
    • All World
    • Australia
    • Asia
    • UK
    • United States
    • Middle East
    • Europe
    • Pacific
  • Business
    • All Business
    • MarketsSharesCurrencyCommoditiesStock TakesCrypto
    • Markets with Madison
    • Media Insider
    • Business analysis
    • Personal financeKiwiSaverInterest ratesTaxInvestment
    • EconomyInflationGDPOfficial cash rateEmployment
    • Small business
    • Business reportsMood of the BoardroomProject AucklandSustainable business and financeCapital markets reportAgribusiness reportInfrastructure reportDynamic business
    • Deloitte Top 200 Awards
    • CompaniesAged CareAgribusinessAirlinesBanking and financeConstructionEnergyFreight and logisticsHealthcareManufacturingMedia and MarketingRetailTelecommunicationsTourism
  • Opinion
    • All Opinion
    • Analysis
    • Editorials
    • Business analysis
    • Premium opinion
    • Letters to the editor
  • Politics
  • Sport
    • All Sport
    • OlympicsParalympics
    • RugbySuper RugbyNPCAll BlacksBlack FernsRugby sevensSchool rugby
    • CricketBlack CapsWhite Ferns
    • Racing
    • NetballSilver Ferns
    • LeagueWarriorsNRL
    • FootballWellington PhoenixAuckland FCAll WhitesFootball FernsEnglish Premier League
    • GolfNZ Open
    • MotorsportFormula 1
    • Boxing
    • UFC
    • BasketballNBABreakersTall BlacksTall Ferns
    • Tennis
    • Cycling
    • Athletics
    • SailingAmerica's CupSailGP
    • Rowing
  • Lifestyle
    • All Lifestyle
    • Viva - Food, fashion & beauty
    • Society Insider
    • Royals
    • Sex & relationships
    • Food & drinkRecipesRecipe collectionsRestaurant reviewsRestaurant bookings
    • Health & wellbeing
    • Fashion & beauty
    • Pets & animals
    • The Selection - Shop the trendsShop fashionShop beautyShop entertainmentShop giftsShop home & living
    • Milford's Investing Place
  • Entertainment
    • All Entertainment
    • TV
    • MoviesMovie reviews
    • MusicMusic reviews
    • BooksBook reviews
    • Culture
    • ReviewsBook reviewsMovie reviewsMusic reviewsRestaurant reviews
  • Travel
    • All Travel
    • News
    • New ZealandNorthlandAucklandWellingtonCanterburyOtago / QueenstownNelson-TasmanBest NZ beaches
    • International travelAustraliaPacific IslandsEuropeUKUSAAfricaAsia
    • Rail holidays
    • Cruise holidays
    • Ski holidays
    • Luxury travel
    • Adventure travel
  • Kāhu Māori news
  • Environment
    • All Environment
    • Our Green Future
  • Talanoa Pacific news
  • Property
    • All Property
    • Property Insider
    • Interest rates tracker
    • Residential property listings
    • Commercial property listings
  • Health
  • Technology
    • All Technology
    • AI
    • Social media
  • Rural
    • All Rural
    • Dairy farming
    • Sheep & beef farming
    • Horticulture
    • Animal health
    • Rural business
    • Rural life
    • Rural technology
    • Opinion
    • Audio & podcasts
  • Weather forecasts
    • All Weather forecasts
    • Kaitaia
    • Whangārei
    • Dargaville
    • Auckland
    • Thames
    • Tauranga
    • Hamilton
    • Whakatāne
    • Rotorua
    • Tokoroa
    • Te Kuiti
    • Taumaranui
    • Taupō
    • Gisborne
    • New Plymouth
    • Napier
    • Hastings
    • Dannevirke
    • Whanganui
    • Palmerston North
    • Levin
    • Paraparaumu
    • Masterton
    • Wellington
    • Motueka
    • Nelson
    • Blenheim
    • Westport
    • Reefton
    • Kaikōura
    • Greymouth
    • Hokitika
    • Christchurch
    • Ashburton
    • Timaru
    • Wānaka
    • Oamaru
    • Queenstown
    • Dunedin
    • Gore
    • Invercargill
  • Meet the journalists
  • Promotions & competitions
  • OneRoof property listings
  • Driven car news

Puzzles & Quizzes

  • Puzzles
    • All Puzzles
    • Sudoku
    • Code Cracker
    • Crosswords
    • Cryptic crossword
    • Wordsearch
  • Quizzes
    • All Quizzes
    • Morning quiz
    • Afternoon quiz
    • Sports quiz

Regions

  • Northland
    • All Northland
    • Far North
    • Kaitaia
    • Kerikeri
    • Kaikohe
    • Bay of Islands
    • Whangarei
    • Dargaville
    • Kaipara
    • Mangawhai
  • Auckland
  • Waikato
    • All Waikato
    • Hamilton
    • Coromandel & Hauraki
    • Matamata & Piako
    • Cambridge
    • Te Awamutu
    • Tokoroa & South Waikato
    • Taupō & Tūrangi
  • Bay of Plenty
    • All Bay of Plenty
    • Katikati
    • Tauranga
    • Mount Maunganui
    • Pāpāmoa
    • Te Puke
    • Whakatāne
  • Rotorua
  • Hawke's Bay
    • All Hawke's Bay
    • Napier
    • Hastings
    • Havelock North
    • Central Hawke's Bay
    • Wairoa
  • Taranaki
    • All Taranaki
    • Stratford
    • New Plymouth
    • Hāwera
  • Manawatū - Whanganui
    • All Manawatū - Whanganui
    • Whanganui
    • Palmerston North
    • Manawatū
    • Tararua
    • Horowhenua
  • Wellington
    • All Wellington
    • Kapiti
    • Wairarapa
    • Upper Hutt
    • Lower Hutt
  • Nelson & Tasman
    • All Nelson & Tasman
    • Motueka
    • Nelson
    • Tasman
  • Marlborough
  • West Coast
  • Canterbury
    • All Canterbury
    • Kaikōura
    • Christchurch
    • Ashburton
    • Timaru
  • Otago
    • All Otago
    • Oamaru
    • Dunedin
    • Balclutha
    • Alexandra
    • Queenstown
    • Wanaka
  • Southland
    • All Southland
    • Invercargill
    • Gore
    • Stewart Island
  • Gisborne

Media

  • Video
    • All Video
    • NZ news video
    • Herald NOW
    • Business news video
    • Politics news video
    • Sport video
    • World news video
    • Lifestyle video
    • Entertainment video
    • Travel video
    • Markets with Madison
    • Kea Kids news
  • Podcasts
    • All Podcasts
    • The Front Page
    • On the Tiles
    • Ask me Anything
    • The Little Things
  • Cartoons
  • Photo galleries
  • Today's Paper - E-editions
  • Photo sales
  • Classifieds

NZME Network

  • Advertise with NZME
  • OneRoof
  • Driven Car Guide
  • BusinessDesk
  • Newstalk ZB
  • Sunlive
  • ZM
  • The Hits
  • Coast
  • Radio Hauraki
  • The Alternative Commentary Collective
  • Gold
  • Flava
  • iHeart Radio
  • Hokonui
  • Radio Wanaka
  • iHeartCountry New Zealand
  • Restaurant Hub
  • NZME Events

SubscribeSign In
Advertisement
Advertise with NZME.
Home / Business

Chris Leitch: A social solution to the giant money merry-go-round

By Chris Leitch
NZ Herald·
6 May, 2021 05:28 AM4 mins to read

Subscribe to listen

Access to Herald Premium articles require a Premium subscription. Subscribe now to listen.
Already a subscriber?  Sign in here

Listening to articles is free for open-access content—explore other articles or learn more about text-to-speech.
‌
Save

    Share this article

    Reminder, this is a Premium article and requires a subscription to read.

Few of Richard Prebble's claims about Social Credit policy are actually correct, argues the writer. Photo / NZME

Few of Richard Prebble's claims about Social Credit policy are actually correct, argues the writer. Photo / NZME

Opinion

OPINION:

I suppose I should thank Richard Prebble for promoting Social Credit - except that few of the claims he makes about Social Credit policy or its economic views are actually correct.

The one correct claim he made about Social Credit is that one aspect of its policy is to make use of the Reserve Bank capacity to create credit and supply it to the Government at zero interest. His former party, Labour, used the Reserve Bank to fund the building of 30,000 state houses when it first came to power in the 1930s.

Since this time last year the Reserve Bank has again been creating credit, something that many economists, commentators, and our political opposition had always claimed was "funny money" and neither possible nor credible.

An article in the Sunday Star-Times in June 2020 did correctly quote me as saying that Social Credit had been vindicated in that regard, however the article then went on to say this "but that is served with an uncompromising monetary policy that sees QE (Quantitative Easing) as a cop-out."

Advertisement
Advertise with NZME.

"Social Credit demands the Government (through the Reserve Bank) directly creates the 'credit' to fund public spending, rather than living off the left-overs of the free market by continuing the conventional international practice of entirely funding its spending through taxation [and borrowing from the private sector]."

"One of Leitch's concerns with QE is that banks might cream a huge profit through the 'merry-go-round' of selling Government bonds to the Reserve Bank and then buying bonds from Treasury when it issues them to pay for the Government's $50 billion Covid-19 fiscal programme."

"Why not fund the spending direct, with a giant zero-interest loan from the Crown's balance sheet to itself, it asks?"

Advertisement
Advertise with NZME.

I was right. Banks are creaming a huge profit through the "merry-go-round" of selling Government bonds to the Reserve Bank. Over the term of the Bank's current QE round that profit will amount to roughly $11b – money that could have gone instead direct to the Government to spend on hospital emergency departments or helping alleviate poverty.

Meanwhile, the Government continues to borrow from those private banks – building a mountain of debt for future taxpayers to pay interest on and eventually have to repay - further money wasted that could have gone instead direct to the government to spend on hospitals, state housing or infrastructure.

Wasted because the Government could have got that funding from the bank it owns – the Reserve Bank – at zero interest and without the requirement to repay it. No debt or interest burden for taxpayers.

Reserve Bank Governor Adrian Orr. Photo / Mark Mitchell
Reserve Bank Governor Adrian Orr. Photo / Mark Mitchell

Despite what Prebble endeavours to suggest, Social Credit has never advocated unrestricted "money printing" by the Reserve Bank.

On the contrary. A key part of its policy is setting up a New Zealand Credit Authority with independence similar to the judiciary, accountable to Parliament as a whole. Its task would be to assess the economy, measure its unused capacity and labour capability, and determine how much new money the Reserve Bank could safely create without generating inflation – matching money-creation with goods and services.

That does not happen, however, with the additional credit that the commercial banks create – approximately $20b on average each year. That expansion of the money supply is totally unrestricted, yet Prebble is happy to ignore that fact. It is that unrestricted credit creation, essentially out of thin air, that is driving the speculation in property, shares and other assets, and putting houses beyond the reach of first home buyers.

Both the Government and the Reserve Bank are culpable in facilitating that abomination – the Government pandering to a newly acquired asset-speculator voter base, and the Reserve Bank in boosting bank profits through its purchase of bonds off them and its Funding For Lending programme.

Prebble's suggestion that what is happening now is Social Credit is like owning a petrol/electric hybrid vehicle, but never charging the batteries or running it on the electrics. While it is perfectly capable of being run on battery power, to claim that it's an EV when that capacity is never used is ingenuous, if not purposely mischievous.

Advertisement
Advertise with NZME.

What is ruinous is the current, mostly orthodox, economic management being used.

What could fix it is real Social Credit!

• Chris Leitch is leader of the Social Credit Party.

Save

    Share this article

    Reminder, this is a Premium article and requires a subscription to read.

Latest from Business

Premium
Shares

Market close: NZ shares flat as Australian regulator clears path for Fonterra consumer sale

10 Jul 06:22 AM
Technology

Top 5 takeaways from Samsung's super-slim foldable phone and watch event

10 Jul 05:00 AM
Premium
Energy

NZ's LNG import plan could cost up to $1b, report reveals

10 Jul 04:00 AM

Audi offers a sporty spin on city driving with the A3 Sportback and S3 Sportback

sponsored
Advertisement
Advertise with NZME.

Latest from Business

Premium
Market close: NZ shares flat as Australian regulator clears path for Fonterra consumer sale

Market close: NZ shares flat as Australian regulator clears path for Fonterra consumer sale

10 Jul 06:22 AM

The NZ sharemarket was steady, while the Nasdaq hit another record high in the US.

Top 5 takeaways from Samsung's super-slim foldable phone and watch event

Top 5 takeaways from Samsung's super-slim foldable phone and watch event

10 Jul 05:00 AM
Premium
NZ's LNG import plan could cost up to $1b, report reveals

NZ's LNG import plan could cost up to $1b, report reveals

10 Jul 04:00 AM
Number of Kiwis leaving for Oz in 2024 highest in more than a decade

Number of Kiwis leaving for Oz in 2024 highest in more than a decade

10 Jul 01:58 AM
Gold demand soars amid global turmoil
sponsored

Gold demand soars amid global turmoil

NZ Herald
  • About NZ Herald
  • Meet the journalists
  • Newsletters
  • Classifieds
  • Help & support
  • Contact us
  • House rules
  • Privacy Policy
  • Terms of use
  • Competition terms & conditions
  • Our use of AI
Subscriber Services
  • NZ Herald e-editions
  • Daily puzzles & quizzes
  • Manage your digital subscription
  • Manage your print subscription
  • Subscribe to the NZ Herald newspaper
  • Subscribe to Herald Premium
  • Gift a subscription
  • Subscriber FAQs
  • Subscription terms & conditions
  • Promotions and subscriber benefits
NZME Network
  • The New Zealand Herald
  • The Northland Age
  • The Northern Advocate
  • Waikato Herald
  • Bay of Plenty Times
  • Rotorua Daily Post
  • Hawke's Bay Today
  • Whanganui Chronicle
  • Viva
  • NZ Listener
  • Newstalk ZB
  • BusinessDesk
  • OneRoof
  • Driven Car Guide
  • iHeart Radio
  • Restaurant Hub
NZME
  • About NZME
  • NZME careers
  • Advertise with NZME
  • Digital self-service advertising
  • Book your classified ad
  • Photo sales
  • NZME Events
  • © Copyright 2025 NZME Publishing Limited
TOP