The Committee also said it was vital the "Australasian banks treat Australian and New Zealand firms on an equal footing."

Is that statement even the slightest bit testable? Is it possible that Australian and New Zealand firms might be treated differently because they face different operating environments? Y'know, what with being in different countries and all.

As for bank profits not falling much, all I'll say is come back in a years' time.

I'm going to set up a clothing factory to supply the Finance & Expenditure Committee members' brown shirts. I already sold one a few weeks back to Gerry to help him bring those dang power companies into line, and he said he looked real good in it.

And why has nobody on this committee got any sort of qualification: at least that's what I'm assuming, given none of them are very bright, or, versed in economics. You'd had thunk after making one big Betty of a Bubble, and bursting it so spectacularly, they'd be just a little less hasty wanting to create the next to destroy the next generation's savings.

So how many members on this committee, their salaries? I reckon we can start slimming down the size of government right here.

The committee said it "would expect that the banking sector would take on a greater role in sharing the burden of the current recession."

Oh superb. Look, the committee members are also recommending that the country do away with politicians perks: free air travel after leaving office, all the other baubles. All the perks are going so the parasites, sorry, politicians can 'share the burden of the current recession'. And only fair since they alone created it.

Parliament's Finance and Expenditure Committee members needs to get out of their cot and have a look at what has happened to many banks overseas. There are countries called Ireland, Iceland, USA and something called the EU where there have been banks falling over or where their governments have been putting in taxpayers money. This has not happened in New Zealand. Why?

I am pleased our banks are profitable. This brings stability. I have money with them and don't want to loooooose it. I bet the members of Parliament's Finance and Expenditure Committee put their money with finance companies. That is if they had the ability to earn and save any which I doubt.

We must be the only country in the world complaining that our banks are profitable. Most are currently complaining their banks are loss making, insolvent and close to failure

Selwyn: Your response is a political response. You need to take a financial/business approach.

Selwyn says: "The comments from the Finance and Select committee are about protecting New Zealand's Economic Sovereignty which it seems many with self interests are prepared to sell to the highest bidder".

The best way for a business to protect jobs and keep supplying it's customers is to keep making a profit. By the banks staying profitable they are protecting 'New Zealand's Economic Sovereignty'.

Selwyn says: "Comments about Brown Shirts and the like are very misplaced in this context and on this group of people. Have a look at who the members are (below), their qualifications, their party affiliations and ask "why did this group of people come to these conclusion after talking to Dr Bollard and Treasury officials".

The committee should have been talking to people who have lost money in finance companies (the finance companies were not profitable!) and people (especially business) who had money or loans in banks in USA, Ireland, Iceland, UK, EU and many others. The committee members (and then possibly people like Selwyn) would realise that profit is actually the lessor evil. New Zealand would be in a lot worse situation if our banks were making a loss like in the USA, UK, EU, Ireland, Iceland.

Parliament's Finance and Expenditure Committee is political...or put another way their comments will be populist rather than factual....
In the same way protectionism turned the '29 recession into a depression.

On the other hand, the banks must remain profitable for stabilyty...the question then is "how profitable" same as before or like most other companies have to down grade returns to shareholders.

And like other institutions/companies, if they make bad investments they have to carry the can...is this happening? , are banks maintaining previous profit levels in spite of 100% loans going belly up by having current lenders subsisting maintaining profit levels and then doing a spin blaming EVERYTHING on increased cost off shore?

If say Fonterra invests in a company in say China...and it goes belly up, who cares the can ? does Fonterra right the loss off or do they screw the consumer by creating a cartel with competitors to maintain profits and profit increases?

I think so...
Sure all the fundamentals show inflation hitting longer terms and rates reflect this.
BUT when all/most of other companies are showing declines in profits, and bank bad debts are rising it just doesnt follow that bank profits are still up.

There is a case for both sides and the answer is somewhere inbetween...and even if the answer is somewhere in between it still means the banks are screwing their customes....with an across the industry uniform polices of operation.

If the Committee wants to help the NZ consumer & taxpayer, then reduce taxes so we can by stock in profitable companies like these banks and then the dividends and any capital gains on share sales can be repatriated back to NZ and/or kept in NZ. It's that simple.

@Bernard

I have read and heard you discuss your views on whether the bank rates are too high, how its related to the overseas cost of borrowing etc etc.

Something I havn't heard you discuss is whether you think the floating rates get bundled in this also, or whether these could be considered something the OCR rate may have a bearing on. Im not a financial guy, so im wanting to know if the ocr would have an effect on this, or whether this money is also funded from overseas and from local deposits [which are requiring a higher rate at the moment]

Thx

Mark, how can The Maori Party, Labour Party, National Party and Act all be Brown Shirts.

Everyone of those parties, even ACT, believes the State takes precedence over me, and that I must, via the State, sacrifice my goals and aspirations to its welfare state, even though I have very few points of agreement with it, and I think a welfare state will always devolve down to a violent society.

Its interesting how you can dismiss entire sections of society

I'm not interested in the masses. The biggest atrocities in history have been on the justification of the masses. I am only concerned about my relationship with, and freedom from, the machinations of State. Any society based on the primacy of the individual, for whom the State is servant, cannot by definition fall victim to the such atrocities.

If the State has the power to control the banking sector, and thinks it is its place to do so, then I am not a free man from that State.

Do you not realise we have become beholden as a country to Corporate Bankers.

Not in a free market I'm not. Do you realise at the heart of your argument is that the Government should be 'controlling' the banking sector and keeping interest rates artificially low? Then what do you say to my retiree clients whose interest income has been halved over the last year?

As you say, you are a businessman, thus advocate the imposition of State to aid you: well what of those reliant for their living on interest income? Bit 'selfish' only wanting the State to be working for your interests isn't it?

This is precisely the problem when you invite the Big State into our lives Selwyn. Inequity and vested interest.

To me it's our right, to manage our country in the interests of our citizens. If something is not in the National Interest then why the hell would you do it.

As I've said on other threads, the 'common good' altar is a very bloodied one. I have no truck at all with patriotism, or any other form of tribalism - I am only interested in the freedom of the individual from the State. Achieve that with a written constitution enshrining the non-initiation of force, and we can finally leave behind all these barbaric archaisms such as 'the national interest'.

You're watching too many Cold War spy programs Selwyn ;)

As I recall it this recession started in the US sub-prime market after 7 years of a Republican Government that believed in and practiced minimal government interference.

Believed in, but most certainly never practiced. No government that believed in minimal government interference could have come up with Homeland Security .

Enjoy the movie!

You win on that one. I"ll just take a gift point on Bushes involvement in removing regulations that helped Enron. As I say extreams dont help.

Mark - you're on top form at the moment, keep up the good work.

Selewyn - Nobody is forced to use the services of the Aussie banks. I have my own business and I use TSB in Taranaki, so choice is available. How would you like it if a bunch of politicians told you what prices to charge for your goods/services and how much profit you should make?

I notice all the qualifications of the members of the Select Committee, Ph.D's, MBA's, LL.B's etc. and not one ounce of common sense. Let's face it all the politicians are trying to do is find someone to blame for the current problems, shame on them.

Finally some sane comments from our elected officials: Bill English says that Government can't control what banks charge, and anyone who doesn't like it can sort out their own arrangements:

http://www.stuff.co.nz/business/industries/banking-finance/2489491/Custo...

I think the Govn should stay out....banks are entitled to run a business as they see fit...and they are under pressure...its simply not fair IMHO for a bunch of incompetent pollies to blame the banks when it can be seen that the banks margins are under pressure and their losses are increasing. At least BE looks to be taking sense over this.....if a customer has options well they should exercise them....if the customer was silly enough to not keep options open well that was their choice....

regards

Maybe our Government should bank with Kiwi Bank rather than these off shore banks, Let Kiwi Bank profit and maybe than they may pass on these rates. Imagine every Government establishment ie, Parliment, IRD, Schools, Hospitals, Winz and the hundred or so more. Maybe Government makes the first step and other Kiwi's follow. That could make a difference and may make the banks become more competitive. Lets face it solutions come not with a bark but with fancy feet that walk the talk.

Les - you ask why we dont see our government legislate to protect us. We should further expect such a thing to happen given that the privately owned central banking network have insisted that we have nothing to fear by leaving them in control of the credit creation mechanism because there is in place a separation of powers that allows the peoples representatives to control the conditions of credit, thus the private bankers would not be able to turn what should be a system of service into a system of servitude.
Any attempt by any peoples representatives to attempt to implement their right to control the conditions of credit are met with economic sanctions by international institutes controlled by the central bankers. I ask you is the nation state dead and the world government at the core of the borderless banking empire so confident that they have the game won they are now coming out into the open?

From The Report of the Royal Commission on Monetary, Banking, and Credit Systems 1956
Pages 105-6;
Creation of Money and the Public Interest
434. Apart from the historical and legal aspects outlined above, the next question to be considered is whether it is in the public interest that the power to create and destroy money or credit should be withdrawn from the trading banks and reserved to the state or to institutions owned by the state.

435. The burden of the contentions of those who sought to deprive the trading banks of the power to create or destroy money was that the trading banks for their own profit sometimes expanded the money supply to an undesirable extent and so cause inflation, and in other circumstances, such as in times of economic depression, cause an undesirable reduction in the money supply by reducing advances.

438. There is, of course the possibility of bringing about necessary expansion of the money supply entirely by financing government expenditure from Reserve Bank credit, and by at the same time preventing trading banks from expanding their lending through a rigid application of the reserve ratio. We consider that the needs of industry and commerce for additional credit can be more conveniently and efficiently met by expansions of trading bank credit than by expansions of Reserve Bank credit. The trading banks in close touch with the multitude of industrial, commercial, farming, and other businesses and they are in a position to give attention to the needs of individual businesses.

Conclusion pages 107-8
445. The essence of the nature of the matter is that insufficient or excessive credit creation can have important repercussions on the whole economy and, for that reason, control should be exercised by the government through the Reserve Bank and, if necessary through the Bank Of New Zealand. Such control can be issued under existing legislation. Furthermore, the government has itself adequate powers to create money through the Reserve Bank or through the ownership of the Bank Of New Zealand.

446. To concentrate the whole of the trading-bank activities or the whole business of credit creation in a government monopoly of banking would, in the opinion of the Commission, lead to an undue and unnecessary aggregation of power in the hands of the Government. It would remove the highly desirable element of competition and it could not be expected to provide as good a banking service as the commercial community now enjoys.
http://socialcreditorbust.blog.co.nz/royal%20commission%20report%20banki...

These people have waited until they thought society had sufficient lack of institutional memory to remember their manipulated boom bust bankruptcy cycles, but luckily some value their freedom enough to pay attention.

This is one of rare moments when all politicians and relevant commentators agree, banks are making excessive profit. What's annoying is the way banks are trying to justify it, why they don't just say it: "we want more $$$", after all they are privately owned and driven solemnly by profit.
Iam puzzled why Kiwi bank is no longer competitive?

How come mortage rates are higher here then in Aussie, and their OCR is higher then ours?

Selwyn/Les,

Re: Kiwibank recapitalisation.

We put a proposal to Bill English along these lines (injecting new capital into Kiwibank) a few months ago.

We are still corresponding on the matter but it's fair to say that the government considers Kiwibank as an SOE and therefore independent operationally.

Of course we disagree with that statement.

Here is an article on the proposal by my colleague Lowell Manning

http://alt.economics.scoop.co.nz/?p=750

Lowell also has a paper due for presentation at the NZ Association of Economists conference in Wellington at the beginning of July.

In it a new debt model of the New Zealand economy will be revealed via a reworking of the Fischer Equation of Exchange.

http://www.nzae.org.nz/conferences/2009/programme.html

We hope that the paper will stimulate some serious debate about the construction and management of our debt economy.

Stay tuned. Maybe Bernard would like to cover it?

Raf, Les and all. Here is something to consider wiith regard to Reserve Bank and Monetary Easing

What's the difference between printing money and allowing foreign banks to flood the economy with foreign capital???? In both cases you are causing inflation but there are significant differences. One of differences of course is, what's put in can be pulled out at any time as in foreign capital and that's good and bad. But if we had effective Monetary Policy instruments that we were confident would get the 'inflation genie' back in the bottle "“ then we have significant new opportunities available. I think they are available, and we've discussed them in various threads on this website.
Firstly I am not sure its commonly known just how much extra money flows into New Zealand every time the OCR is above the average spread of foreign interest rates. It's a tidal wave of capital (Ref Berl graphs on the subject) yet our policy makers say we are taking money out of circulation (through increased interest rates which of course flow to profits of foreign owned banks) to control inflation. But it simply does not work as the last few years testify as bank profiteering via carry trade destroys our monetary policy.

Bollard correctly says he can't control the volume of money only on the cost of it and frankly even that's only a true statement when it suits the banks i.e. on the upswing in interest.

Put simply our monetary policy increases the inflation, pushing up property prices, creates the wealth effect (leading to more inflation), lending with abandon (low or zero deposits on property loans from the banks) and finally progressively pushing up the exchange rate. We have done this with both farms and housing. Farm debt is up 23% a year for the last ten years or an extra 31 billion in new foreign debt. You might have seen the 23% extra new farms every year? No! Oh that's right that's what you get with price stability controls rampant asset inflation.

So what we have now is not working and that's very, very clear. Now what happens if we print money and deposit it into Kiwi Bank?

Well we de-value our dollar (right now that's a good thing) we potentially stimulate the economy (right now that's a great thing) but we create a potential monster (uncontrolled inflation - but that can be controlled if some swallow their pride) as the economy recovers.

So my simple example
What would happen if we printed 10% more money and recapitalized Kiwi Bank to act as a sort of modern day DFC (lending only to credit worthy businesses in the productive economy)

"¢I.e. expand job creating businesses that design and manufacture goods and services and sell them into the global economy

* For simplicity let's say it's used for buying plant and machinery (from foreign markets) to address our appalling productivity issues.

* That the loans to business were fixed at housing interest rates for ten years

Surely if the production of goods and services expands by the same degree (10%) then have we actually created any inflationary pressure to deal with down the road? I suspect not.

In the mean time.
1. we have lowered the exchange rate
2. linked business lending into a strategic goal of economic development
3. potentially prevented good businesses from failing due to bank lending rations by sector
4. told existing trading banks that the rules have changed in favor of New Zealand's national interest. - like it or lump it.
This sounds way too simple.

raf, is this social credit back from the grave stuff or what?

Wally,

No. It's about reducing the cost of our money and not being in hock to other nations which is our current predicament.

Janet,

Sure your credit can be rolled but you are paying a fortune for it. I'm just giving an example. That's why the Fed extended currency swap lines to all the major central banks back in late 2008.

Selwyn, raf - there are several Key flaws in all this:

it's far too sensible.

it will tend to build NZ economic sovereignty.

it's not conservative enough to fit with the 'status quo' approach infused in NZ political thinking, to support..

NZ as an 'asset tax haven' meaning resultant lt lower inflation is not in asset holders interests.

Finally, pride needs to be swallowed:

English defies the evidence on monetary policy

at http://www.mea.org.nz/media/pressreleases.aspx

There are a variety of options that would work better than what we have now, it's not as though other choices are unavailable. Unless, some are willing to swallow their pride and lead that is.

The longer it takes to swallow the pride medicine, and we continue to maintain the 'status quo', the more sick we will ALL become.

Good stuff - please keep us posted on progress.

"...major imbalances in global trade and therefore consumption, funded by debt are not sustainable."
One point we most certianly agree on, Raf. Cheers.

Janet don't buy into the fear of change when the real fear is staying where we are. We have been let down by politicians being politicians and we now need leadership. I could care a less what party is in if i was sure they were acting in the National interest. The problem is we have serious vested interest groups that align with the banks interests.

Boomers are very happy with high asset inflation and high interest rates. To hell with the National good or our grandchildren's future. "I'm okay Jack and I don't want it changed by a bunch of do gooders"

That's a big bubble in New Zealand politics / demographics and so politicians tread very carefully. Bollacks to them all, as we desperately need leadership.

Joe average is in his little boat still in quiet water saying what a great country we live in, unaware there's a 90 meter waterfall around the next bend.

Wally,

So today I've been called a fuedalist, almost fascist, social creditor and now Kenyesian :-)

Actually I'm just looking for better ways to do things.

But it just shows what a fiendishly tricky subject this is and why it's so hard to get a decent debate on it.

Low interest rates aren't causing huge borrowing now are they? Why not? Because credit isn't avaliable which is why banks are constantly issuing new bonds in a variety of structures to keep their reserves up.

Basically there has been no control on borrowing in the last boom because interest rates were the omly tool being used to control it. I am suggesting we put limits on the money supply itself (ie instead of trying to control the mythical cpi number let's try and control the physical supply of money between certain parameters).

"I am suggesting we put limits on the money supply itself (ie instead of trying to control the mythical cpi number let's try and control the physical supply of money between certain parameters)."

Is that not was wriiten on back notes once..."redeemable in gold" or words to that effect?