Here's how.

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Our Private banks have been creating and issuing our money for immensely high profits, that are effectively unethically derived. Banks will create the debt, which simultaneously creates the deposit in the borrower's account and their lending ledger is balanced.

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Private banks are not using savings as a security reserve, to justify the loans they generate.  They are simply creating loans they believe reasonable and thus entirely creating the money supply without restriction by the regulations the should control the lending standards.  On these loans, normal New Zealanders then repay both principal and interest to private bank owners, who profit from a lifetime of labour from normal New Zealanders. This is unethical that citizens labour in order to deliver massive annual private banking profits for transfer offshore.

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The interest and principal payable on mortgages - currently serviced by individuals for up to 30 years to life, in order to secure their homes - or serviced by companies hard-work for 10 years to grow their business - will be redirected to finance community services like health, education, pensions, a guaranteed 'living costs' payment for each citizen and a new structure to allow citizens clear and equal access to finance for development.

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Labour famously established this privatisation of our banking system and monetary power, while John Key famously appointed Maggie Barry to the state committee that investigated the non state financial sector, when she first came into parliament as a gardening expert. With no knowledge of the financing industry she questioned the appointed and he reassured her 'she'd do fine'.  Thus neither of the major parties have helped protect New Zealand's monetary power.

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The NZ government should take over any debt, where the money supply has simply been created by extending the debt and deposit simultaneously - i.e. we should investigate the structure and nature of each loan and recover control of all loans that were not made relative to savings on reserve.

Although operationally the loans create the savings, which boosts the economy through new spending power, ultimately the beneficiaries are private offshore banking owners, who should not really own a license that allows them to effectively tax New Zealanders for immensely high private benefit.

The Logic policy will be to investigate all bank loans extended, to ensure that they have operated by the strictest interpretation of their bank licenses and that our regulators enforce the rules for what's already on the books and in place.

New Zealand no longer operates the Fractional Reserve lending system as the currency is floating and the Fractional Reserve only applied to fixed exchange rate policies.

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Currently, all regulated members of the reserve bank can create $NZ bank deposits but this will change under Logic, to ensure that bank deposits which expend the money supply, can only be created by the New Zealand Reserve Bank.

New Zealand owned private banks would be fiercely monitored to ensure that they only lend their savings secured on deposit for a higher interest rate than what they pay, which allows for their operating costs to be covered and some potential for profit.  This lending is already regulated but their lending currency creates the savings account, which effectively expands our money supply for private use on every occasion; and yet the governments will not willingly expand the money supply for public use.  If you can see this discrimination clearly, then you’ll note the current governments will allow private banks to generate new money for the wealthy but will not generate new money to support those in need or less fortunate in society, when they just as easily can do this, without needing to tax or borrow.

We will also have less risk of inflation when we retain all lending control to be only the right of the government, where otherwise currently, our lack of regulation around banking, means that the four major Australian based, internationally owned banks, are transferring 2 in every 5 dollars of profit earned in New Zealand, offshore as foreign dividend profit payments to our offshore owners every year.

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Public Debt

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The creation of credit money for public spending that is both interest free and debt free can be generated to provide all social, infrastructure, development and investment needed by society.  This public, government spending is entirely at our discretion and not reliant on taxation or borrowing.  

Importantly, we do not need to issue securities to investors or banks offshore, in order to spend government money.  Yet this is what our major parties have been doing for years, redundantly and at some future potential risk, explained later.

We can instead simply issue government credit into accounts that are necessary to transact that government spending, like hospitals, bridge builders, woman’s refugee, aged care or the policy, without the need to issue securities nor attached to any other relationship to anyone else.  This money for the public benefit can be created, stand alone, be spent, incur no interest and be registered without debt; to whatever level we deem necessary to meet all of our needs.

We will spend our public budget, simply by crediting accounts at the reserve bank,  which are called reserve accounts.  Those accounts will be called 'govt. liabilities', the same as securities accounts currently are.  They are effectively the record of outstanding tax credits spent but not yet used to pay taxes, although that’s a technical complexity in terms of positioning this for a basic understanding of our monetary system.

A good example of this limitless (but reasonable) government spending potential occurred in 1935, where the government generated the funds required to build around 200,000 state houses. The money was printed and used to purchase the land, materials, equipment, built infrastructure and to contract all the labour necessary, by hiring architects, builders and plumbers.  The State Housing Department could then house all those in need with no debt owing and no interest to pay.  It is so easy.

For all the securities accounts we currently have, which have been created from first extending foreign dollar loans in NZ reserve accounts and then converting them to NZD securities which earn interest for the person who borrowed and then lent us the money back, that we went on to spend.  When the security expires, we then convert that sum back to foreign dollar amounts in reserve accounts and cancel the contract, effectively re-paying ourselves.  So the net effect is that through interest, we are left with a positive balance in a reserve account, which effectively can be money positively spent in the economy by the account holder and which is possibly so insignificant that we don't need to care about it.  So we effectively pay interest out on the foreign debt lent to us (that we created in the first place), but they pay interest on the foreign currency we lent to them; that we subsequently borrowed, etc.  It sounds confusing and unnecessary and that’s because it is.  What the point is that it all 'washes out' except for a small benefit to NZ, which is why it was done in the first place.  And it's all done via a swap contract that 'pairs off' all the foreign currency transactions yielding a net payment, again in our favor.  

All of these securities are effectively neutralize themselves because we lent to them and they lent back to us, paying out at a higher interest rate.  This applies to the public debt that was originally issued in a foreign currency and then 'swapped back' to $NZ.  The current obligation is to service that debt in $NZ, simply by crediting accounts at the Reserve Bank.  So it's functionally identical to simply have sold NZ securities with regard to debt service.

We have provided a 'free lunch ' income to them from taxes collected, which in more technical terms is a positive interest rate program - basic income for people who already have money - as it provides for interest payments to depositors.

We do not actually earn real money for selling government bonds, in order to then spend that perceived foreign currency on goods and services or is it all effectively meaningless because by persuading a guy to sign a contract, we end up paying them income for nothing but that signature.

It's less complicated as the foreign currency deposits come from the Reserve Bank selling $NZ and buying, for example, $US, which it would leave kept on deposit at the Federal Reserve in the US.

Risk

On the current basis, some may say that surely ever NZ dollar is backed by or linked to a foreign owned security or reserve account; which means foreigners effectively own all of our money.  However, in reality, we create each loan associated with each dollar and then change it from a reserve account to a securities account and spend it, and the contract signatory owns a few NZ tax credits or new money to spend, once the security expires, effectively.  Therefore, we do not owe the value of our country to any offshore moguls, through security contracts for foreign borrowing nor through debt we can never repay.

Clearly however, the securities and reserve accounts held at the Reserve Bank hold a mystery, risk and concern about buildups of wealth possibly held by foreign banks who’ve been creating our money supply since the late 80’s when Labour (unforgivably) privatised the right to create our money supply for private profit.

It is possible to assume that there is no risk from these reserve and security accounts, which may have trillions sitting in them, which can effectively be used as real cash, although they usually never are.  Yet as you contemplate why people would leave wealth simply sitting in accounts never doing anything with it, not seeking investments of a higher return or making use of it to buy goods and services; it is easy to conceive of another future agenda, that makes trillions in Reserve Bank accounts, look like a potential risk.  Although it is not debt technically, New Zealand does owe the holder of these accounts, real goods and services, or assets to this value, should they want to spend.  They may be limited by needing to find a willing buyer but with our current government demonstrating how easy it is for our foreign banks (large reserve and security holders) to sell up our independent New Zealand farmers, to new foreign farm owners, then it’s only a small leap, to assume that the security held over land and assets by New Zealand banks, leaves us at genuine risk that they will call up their securities, in order to create an unwilling but forced seller, from which they can use their trillions on reserve and security accounts to buy up the country.

Now the prudent answer around this is that policy and the right government would control this, but both the National and Labour government have proven themselves to be timid shadows lurking around the edges of the great power that is the foreign banks running our economy, creating our money and dictating our quality of life; while those governments think of new ways to tax us so as to take our disposable incomes away and creatively discuss how the should spend our austerity level public budget that they intentionally restrict so that children don’t get medicines, people die before they get operations and while waiting to die we must spend the majority of our time sitting in traffic and paying more and more on fuel to do so.  

The risk of leaving trillions in security and reserve accounts just sitting there, is that a future government, (if we may be cynical) was positioned as a proxy to win the vote, in order to act in the interests of a number of the majority reserve/security account holders; then they could change the law to require the government provide asset security for their reserve and security accounts and effectively privatising our taxation system to their benefit as the ISDS aspect of the TTP trade agreement already allows.   If a market crash is then engineered artificially, such as, if the banks who control our money supply and access to borrowing, then deliberately withdraw loans and we are forced (under the current incorrect system) as a nation to take on a massive new IMF loan, where they require as a term of austerity measures to increase their share of taxation revenue (under the current incorrect system), then they may require that we secure the loan with all government owned land and assets.

It would only take one document to establish asset security to back our reserve and security account (effective debts) worth trillions, in order to effectively sign over ownership of our country and globalise our nation as a corporation, which in many ways it effectively already is, and which the Paris Agreement and the TTP help to finish off.

One contemplates how radical it would be to put a time frame and allocation structure over the reserve and security accounts, which then required those foreign reserves to be spent in tranches, so that over the next 10 years, we eliminated them all, and boosted our local economy with their expenditure in regulated tranches.  One could also assume its better to let those sleeping dogs lie and instead use 'new' spending by the govt. to accomplish what we want to be accomplished and no longer issue those securities, nor continue pay interest on those accumulated; but let them sit dormant.

We would not simply cancel all reserves and securities held at the RBNZ over 10 billion dollars for example, as holdings of that size are institutional generally, so you'd be double taxing some corporation just because it's holding its after tax earnings in cash, in New Zealand.  It would effectively be illegal.

We could however begin by Investigating all existing securities established for the purpose of government, because they potentially cost us by delivering interest payments for others to buy our real value goods and services and assess what level of securities and reserve accounts above which, we would attempt to suppress use of through policy, above a certain level of excess value because their spending power could pose a future risk of too much foreign ownership or purchasing power of real goods and services.  The scenarios for this must be worked through to design an adequate policy to eliminate the risk of future governments changing the rules to sell out New Zealanders.

One could also say that even if those reserve balances were spent, that means they get shifted to whoever is the recipient of the spending.  The total balances always remain the same and equal to govt. deficit spending, however, it still could be conceived as a future risk, if under extreme circumstances, or subject to a new asset security document being issued; it gave these account holders the right to transfer masses of government assets into their name, and to use their private asset security agreements to bring stressed seller assets to market also.  

There are two outlooks on this issue.  

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Looking backwards to review, update and strengthen policy:

Some may think it is necessary to deal with the reserve and security accounts held by foreign owned banks, in NZ; which were generated unnecessarily to create government expenditure.  Bearing in mind that some of these securities and reserves accounts exist due to exchange of real goods and services; but others exist illegitimately due to the creation of money.  However, they are not a problem if they don't try to spend them as they are just a number in an account at the reserve bank and historically, these account holders never do try to spend them.  So these numbers sit in reserve accounts with zero effect on our economy, however yes, that potential threat of spending is possible.  

As a first step, The Logic Party, will investigate each of the reserve and securities accounts so that we may set appropriate policy responses, to manage any potential risk posed by those reserve sums.  It is important to understand that the holders of Reserves or securities accounts here, do not effectively own us or our private or government assets; as the tax credits are backed by nothing other than the future ability to spend or use them.   They own nothing and will require willing sellers to ever spend their tax credits or use the credits to buy real goods or services in NZ.  But some reserve account holders are banks, which do have asset security held over many properties and businesses in New Zealand, which is a conflict of interest.

Given the assumed risk, that some foreigners could have incredibly high reserves and securities here, which could eventually translate into unfair spending power.  Our policy solution to deal with this concern will transact, where The Logic Party will investigate to ensure there are no reserve or security accounts which represent an unethical lending structure.   If the total sums sitting on deposit are so high and if empowered to spend these sums, then the risk the sovereignty of New Zealand at the compromise of the New Zealand people, then we must eliminate that possibility through policy.

Looking forward: 

To operate by a new, ethical system

The immediate remedy to resolve this risk on all future government spending, in order to eliminate the profiteering from government financing, is to change that rate to a permanent 0 rate policy, much like japan has done for about 30 years.   This way, there's no interest to pay on the (new) debt, again as in japan. The 0 rate proposal goes a long way toward reducing income earned on financial assets.

It is important to note with relevance to Japan that with 0 rate policies they needed to run a higher budget deficit by increasing public spending or reducing taxes in order to boost their economy; however during their flat period, their investment into infrastructure was of incredible value for the population, but the investment value as expanded money supply was absorbed by the real people who were exchanging real goods and services, and as such, it absorbed into human potential to supply and consume; but importantly it did not cause inflation, regardless of the fact that public spending investment levels were incredibly high.

The expression ‘Quantitative Easing’ is a moot point.  It simply depends on how you 'expand money supply' and first you have to define 'money supply'  Most use a narrow definition of money that doesn't include govt. securities, so the results are of no consequence to the economy.  If you 'count' govt. securities as 'money' QE  does nothing at all, which is also what the results show.  All QE is like that. It's just a placebo.

The central govt. has the capacity to fund all of our social, development and infrastructure projects at any and all times.  it's just about political will. No change in the fundamental monetary institutional structure is needed.

The reserve bank will simply makes a loan, which creates the corresponding deposit and those credited with the money supplied, will begin spending.  So effectively we will stop issuing foreigners security accounts in order to issue public spending from this point forward.  If the interest rate is 0 it doesn't matter but it evidences that the government are running an unnecessary scheme.

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Interim change, if sharing power under MPP

The most important element to achieve this change, is for the government to secure control of all public and private debt extended in the country. It is important to take a view of changes that you could make within the current system, until such time that you held a majority government vote and could entirely fix the system.

Under the current system, this financial asset group will generate interest and principal repayments that are capable to service most of the public budget needs, with future capability to provide for all of the public budget needs.

In New Zealand, this choice is logical when considering that otherwise our 4 largest banks are owned by Australians and their 20 largest owners are only disclosed as anonymous shareholders from around the world, who received 2 out of every 5 dollars of New Zealand company profit generated last year, which they transferred offshore to benefit foreign owners rather than the New Zealand public.  It is better for every New Zealander to have the government own all the loans so as to provide free health care and education, than to allow foreign owners to withdraw the profits of New Zealand labor out of circulation each year.

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The Government will revoke the power of registered bank license holders to create the money supply, and convert all existing citizen, mortgage and business loans that were established through the banks unethically created billions in loans on their balance sheets for the benefit of private bank owners, were all transferred into public administration.

These private licenses to literally create 

money will be deemed out of date and cancelled; no longer enabling the wealthy bank owners to profit off lifetimes of citizens hard work.

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Although the Fractional Reserve Banking [FRB] system does not operate under a floated currency, The Logic system will use its structure as inspiration to return the value of this system to the benefit of each individual citizen under a new set of rules, rather than profiting a few private bank owners.

Extreme financial inequality is out of control in New Zealand, with the top 1% owning 50% the world's wealth, when half of the global population combined only own just 1%.  As the wealthy continue to crush the middle class and devastate the poor a decisive change is required to redistribute wealth away from those who now monopolise power over the system.

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Here is a rough example for New Zealand under the current system which restricts government spending unnecessarily but will not change until the Logic Party win majority power.  Thus, as an interim change profile:

The public budget is roughly 83 billion this year, including the interest cost to service public foreign debt also of 83 billion.

 The citizen's private debt is roughly 400 billion dollars currently, with 200 million of mortgages and 200 billion of personal and business loans.

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At a flat interest rate of 10% across all debt, the interest payments generated will provide 40 billion dollars in revenue.[acknowledging mortgage rates at 6% will be balanced by varied higher business rates up to and above 20%].

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In addition to this power of our existing private debt to generate 40 billion in public revenue from existing interest payments, the principal sum itself is interesting to consider plainly.

 Repayments of loan principal on 25 year mortgages, could generate 8 billion per annum and repayments on business or private loans with terms averaging 10 years will generate 20 billion dollars in annual principal repayments.

This totals a potential 68 billion dollars in interest and principal revenues possible once the government reinstates its natural right to own, issue and benefit from the license to create money by issuing debt for the nation's citizens to borrow.

Consider how simple debt creation by governments can be.  Creating debt is simply an invitation by the government to join our economic dance, which you accept with a guarantee that while at the party, you will pay the government cash money to service the value of their invitation.  The administration effectively prints money to issue you a loan and creates a debt, which you will work to repay and service interest on over time.  They are effectively giving you the right to access money in order to attain something you value before you earn that money. You then exchange the empowerment they can give you to access opportunity, with subsequent interest and principal repayments of real cash that did not previously exist for your direct benefit before access to that money was given. This cash now created then redirects to afford the provision of free health care and all other services that provide a great society. Effectively the money is created to enable investment that builds the economy and it is recaptured to reinvest in services that support the people who build the economy.

Importantly, in the short term the government will create the money to lend, just as banks  can create money to lend but as this system establishes overtime, with no limit to debt creation and lending, the government will theoretically establish its own cash reserves to lend without requiring new money creation, which will ensure that inflation naturally balances within this new economy.   [ However, it is also important to note, that inflation is a conscious decision of sellers through the supply chain, to increase the price on goods to earn a premium for higher value, quality or demand, thus inflation can be balanced with market prices.  Whether loans are extended by the government or borrowed from offshore banks, the money still circulates and the interest is still paid but the profit is enjoyed by the bank beneficiaries, not the people; so the government controlling the right to extend lending makes sense.

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The government can spend both the interest and principal repayment generated as this new sum of 'principal' money created and then repaid by the borrower, simply did not previously exist before the exchange.  While it becomes an asset as it remains a debt owed by a citizen, if the government then spends the asset, it neutralises its existence as it never existed in the first place and it was only generated by the power of authority vested in the government to allow that person to spend the money before they generated its real return through the sale of goods or services.

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On this basis it is worthwhile for the government to offer loans to foreign and national companies that offer unique value in innovation or health, in order to encourage them to establish here, with the incentive of a government loan to finance their growth or development.  This intentional increase in government lending will elevate interest and principal revenue, which will potentially enable the entire public budget to be financed by debt repayments.

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Currently, banking licenses allow banks to accept your house deposit, and generate a multiple of 5 or 10 times that amount as a loan, using their newly acquired ownership of your deposit to give you the loan within their right to create a multiple of an existing sum.  Then they profit from your interest payments for most of your life; simply because they have a paper contract license that allows them to extend that loan right based on the deposit you worked for.  While they are required to have the physical funds to pay out the loan upfront, over the years based on the advantage of these licenses to print money, they have established a habit of generating those loans with ease.  Thus private beneficiaries of mortgage payments are effectively taxing entire populations, simply because they hold these paper contracts that allow it.  It is essential that this right of private money creation is swiftly cancelled.

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The banks will continue with the similar operating structures to manage the money but will obviously require consolidation due to lack of competition.  This will cause some loss of employment and require less retail banking as outperforming competition will no longer be required, however, the opportunity and increased disposable income that this system change will generate for people, will supercede the loss  The extreme change would establish the beneficiaries of banking profits to be everyone in the country.

Once the state administers the power of banking licenses to generate new money with new loans, it will also be required to record the savings of the average citizen which were held in the bank.  Normal citizens will not be affected as their money will be extended as savings on the new public record.  However citizens will no longer earn interest on their savings but instead they will have the right to borrow a higher multiple of their sum saved and will need to select alternative investments.  This will shift the benefit of savings from earning interest to earning the right to borrow higher levels.

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