More thoughts about transparency and corruption


Sounds good, doesn’t it?

Once again, I have cause to be proud of my homeland. New Zealand has finally overtaken Denmark to win the title of least corrupt country in the world, according to the organisation Transparency International.

Of course, I was keen to check out the full list of 180, and I have to tell you, I found some surprises. There was a certain predictability about the bottom placings: Iraq and Venezuela tied at 169, North Korea and Libya at 171, Yemen, Afghanistan and Syria ranking 175th, 177th and 178th respectively – which may be a true reflection of life in those countries, or a clear message that it doesn’t pay to rile up Uncle Sam. But I’m not here to debate that point.

Zimbabwe has risen to 157th=, after its armed forces staged a coup to overthrow dictator of 37 years, Robert Mugabe last year. Despite the country’s vast mineral wealth, including gold, diamonds and chromite, 80% of the population falls below the poverty line. Zimbabwe holds the world record for annual inflation, achieving the staggering rate of 89.7 sextillion percent in 2008 (I didn’t know there was such a number – but I learned that it’s 1 followed by 21 zeroes!), although the economic wizards in the military junta have reportedly reduced that to a relatively respectable 348%. So they must be pleased to find themselves climbing up the rankings.

Russia, on the other hand, won’t be proud of their placing at 135, especially since that puts them five spots behind Myanmar, currently making headlines around the world for ethnically cleansing their Muslim Rohingya citizens.

myanmar genocide

At least they’re open about it

“The U.N. special envoy on human rights in Myanmar said Thursday that the Myanmar military’s violent operations against Rohingya Muslims bear “the hallmarks of a genocide.” Nearly 700,000 Rohingya have fled their villages into Bangladesh since the Myanmar military’s crackdown following Aug. 25 attacks by Rohingya insurgents.” But I guess they’re being quite open about what they’re doing, so it doesn’t really count as corruption.

It’s not surprising, then, that the Maldive Islands, playground of the world’s glitterati, managed a ranking of 112, despite the ongoing state of emergency imposed by President Abdulla Yameen

“Yameen had cited threats to national security after the Supreme Court overturned criminal convictions against nine of his opponents and ordered their release.

He sent the army to storm the Supreme Court building and arrest the island nation’s chief justice and another judge on the top court’s bench. His estranged half-brother, former President Maumoon Abdul Gayoom, who has sided with the opposition, was also arrested. The three remaining judges on the Supreme Court then reversed part of their verdict on the release of Yameen’s opponents.”

At least Turkey managed to beat that lot – though President Erdoğan may feel his country deserves to be a little higher than 81st on the list; especially since China slotted in at 77, and South Africa at 71. Cape Town, as you may know, is currently getting unfavourable publicity, poised to become the first major world city to run out of water – although the crisis seems to be less of a problem for citizens with money.

Cuba was a surprise for me, coming in at 62, and Cyprus managed a commendable 42, my favourite number – though of course that’s “Greek” Cyprus, and needless to say, the Turkish enclave didn’t get a mention.

tax havens 2

And check their TI rankings!

By the time I’d got up to the 30s, my cynicism was starting to really kick in . . . so when I saw Costa Rica, tax-haven for the world’s mega-rich at No. 38, I wasn’t too surprised. Still, who’d have expected to see Botswana up there at 34, just behind Israel at 32, whose government has for years been ignoring UN requests to stop massacring Palestinians and invading their lands? Still, they’re pretty up-front about that too.

Which brought me to the 20s – and there was/were the United Arab Emirates, up with the elite of the world’s squeaky-clean at No 21!

“The UAE is the most densely migrant-populated country in the world. About 90 percent of the UAE’s 9 million people are foreign-born, most working on temporary employment contracts in a range of white-collar, blue-collar and service industry jobs. Only a handful of migrants have been granted citizenship since the country gained independence in 1971. Amnesty International and other humanitarian agencies have put a spotlight on the hardships migrant workers have faced, including exploitation of construction workers and unequal protection of women and domestic workers.”

Soooo . . . What do you make of all that? At the very least, you’d want to take a closer look at the criteria those “Transparency” people are using to make their assessments.

New Zealand was awarded No 1 spot, in spite of the following well-publicised facts:

  • * “Hundreds of drivers have had their licenses cancelled after a fraudulent licensing scam was uncovered; revealing [Ministry of Transport] staff had accepted bribes of up to $600 in exchange for a licence.”
  • A new plan has been put forward for the America’s Cup bases in Auckland by a company owned by some of the country’s richest businessmen who own 20 hectares of land at Wynyard Quarter and the Viaduct Harbour.” Some less wealthy citizens believe the plan will further develop Auckland’s downtown as an exclusive playground for the super-rich. I’ll be following that one with interest.
  • “Immigration NZ has completed an investigation [but not releasing their findings] into whether Kim Dotcom can be deported from New Zealand for failing to declare a dangerous driving conviction – but it’s refusing to say what the outcome is.

[Dotcom] entered the country on a special scheme intended to attract wealthy foreigners, giving three-years residency and a fast-track to citizenship to those who invested $10 million or more in New Zealand.

Documents obtained by the Herald through the Official Information Act showed NZSIS staff tried to block the residency application but dropped its objection after being told there was “political pressure” to let the tycoon into New Zealand.

At the time, the new residency scheme was having little success and – documents show – [Immigration Minister] Coleman was eager to get “high rollers” into the country.”

banks dotcom

ex-mayor Banks, Kim Dotcom and former PM John Key

Dotcom, as you may know, made wagonloads of money from various online businesses including his file-sharing website, Megaupload, arousing the ire of powerful figures in the United States. The US government then pressured their NZ counterparts to have him extradited, despite the fact that he is a citizen of Germany. Although known to have criminal convictions in Hong Kong and Germany, and to have served prison time in his own country, Dotcom was granted fast track residence in New Zealand in 2010. At the time of his application, he made several substantial “charitable” donations, one of which was a $50,000 contribution to the election campaign of former Auckland Mayor and Member of Parliament, John Banks.

Mr Banks faced criminal charges as a result, but claimed not to remember Dotcom’s financial assistance. Nevertheless, he was convicted in 2014 of filing a false electoral return. The conviction was subsequently overturned after Banks brought a witness from the USA to support his story (of amnesia?). However, it seems his righteous indignation went a little too far when he sought to get $190,000 legal costs awarded against Dotcom. In a recent Court of Appeal decision, the judge ruled that, although the original conviction had been reversed on a legal technicality, the court had stopped short of declaring Banks innocent – so no payment of costs was justifiable. Incidentally, after arriving in New Zealand, Dotcom had taken out a lease on one of the country’s most expensive houses, by coincidence no doubt, in the electorate of John Key, NZ’s Prime Minister at the time, and leader of the government which included John Banks.

  • The latest scandal rocking New Zealand’s ruling elite involves the venerable law firm, Russell McVeagh, among the country’s largest and most reputable. After some prevaricating, the partners have admitted that there had been shenanigans in the past involving some of their colleagues and young summer interns from the University of Auckland Law Faculty. There has been talk of interns selected for their physical attributes, required to sign confidentiality agreements, and engaging in sex acts on the boardroom table.

Complaints had apparently been laid by Auckland University on behalf of some of the students concerned, none of whom, however, want their names to be known for fear of retribution from their powerful assailants. Nothing corrupt about all that, of course. The interns were, after all, willing participants, I guess.

Nevertheless, it does make you wonder about Transparency International, and how they go about comparing and assessing levels of transparency and corruption in those 180 countries.

The TI organisation was apparently founded in Germany in 1993 by an interesting coterie of high-flyers including a former director of the World Bank, a lawyer for General Electric, a member of the US military intelligence establishment, and several high-ups in corporate banking and industry (Source: Wikipedia).

In spite of being clearly dependent on information from whistle-blowers, TI recently specifically refused support for Edward Snowden, one of the key informants for WikiLeaks. There has also been some discomfort expressed over how TI can maintain objectivity when it accepts large donations from large corporations (such as the $3 million paid over by Siemens Corp in 2008). The American chapter of Transparency International, TI-USA, was censured by its parent body after presenting Hilary Clinton with its Integrity Award in 2012. There has also apparently been some conflict with the TI people in New Zealand, though I haven’t been able to learn the exact details.

Well, ok, maybe the central powers at TI do seek to supervise the moral integrity of their branches abroad – but I read of another case involving a TI employee, Anna Buzzoni, having to leave the organisation after blowing the whistle on “questionable financial dealings” at TI’s Water Integrity Network.


Settled out of court in a case accusing them of deceiving investors and contributing to the 2008 world financial crisis

Who can you trust these days?

Certainly not the rankings provided by the world’s major credit rating agencies. The latest list published by Standard and Poors assesses New Zealand, with no manufacturing industry to speak of, and a tiny population, as AA,  a “High Grade” investment; and Turkey, with its booming economy and large manufacturing sector, as BB, “non-investment grade, speculative”. Still, maybe you’re better off not getting a good grade from those crooks:

In the spring of 2013, Moody’s and Standard & Poor’s settled two “long-running” lawsuits “seeking to hold them responsible for misleading investors about the safety of risky debt vehicles that they had rated”. The suits were filed in 2008 and had sought more than $700 million of damages. Settlement terms were not disclosed in both cases, and the lawsuits were dismissed “with prejudice”, meaning they cannot be brought again.

In the end, S&P settled for $1.5 billion – possibly feeling it was worth the money to avoid further negative publicity. Now it seems they are back dispensing credit ratings, and investors are happy to trust them again. Really?


What is money, and where does it come from?

One thing I can tell you for sure – it doesn’t grow on trees! But that doesn’t really answer the question. An article in the New Zealand Herald today caught my eye:

Show me the money: Reserve Bank reveals the ins and outs of printing cash

There is about five and a half billion New Zealand dollars circulating at the moment – in the country and offshore – and hundreds of thousands of notes being destroyed every week.

In 2016, the Reserve Bank destroyed 43 million notes, with a value around $1 billion.

The money is “granulated” down into “very small sort of confetti-sized bits of bank notes” then sent away to a specialised company that recycles them into plastic items one might find at home.

All this money being transformed into plastic on a weekly basis must be replaced.

print money

Thank God for Canada!

New Zealand money is printed much less frequently than it is destroyed, and it’s done overseas.

The notes are printed in Canada because it is not financially viable to run a printing factory in New Zealand. With money only ordered once a year at most, such a factory would lie unused much of the time.

Despite the increased use of Eftpos cards and online banking, the amount of New Zealand cash circulating here and overseas is growing, something that “around the currency world gets discussed a fair bit”.

There are a few “industry theories” on why the around $5.5b in cash is growing. One is that low interest rates means it doesn’t “hurt as much” to hold on to cash.

“You’re not losing interest revenue by holding it to any extent.”

Other reasons could include that New Zealand money was popular overseas, people using cash to avoid taxation, and using cash in the “dark economy” for illegal dealings.

But another thought was simply that increased spending led to increased needs for cash.

One way or another, the Reserve Bank has so far always had enough to circulate, and didn’t have “masses of unused notes sitting around”.


Well, I don’t know about you, but for me, this article raised more questions than it answered.


Everyone needs something to believe in

First of all, millions of dollars in “legal tender” are created and destroyed every year – so clearly those paper notes have no intrinsic value. In fact, they’re not worth the paper (or plastic) they’re printed on.

Second, NZ money is printed in Canada – and if that money factory is working all year round, I guess those Canadians must be printing money for a few other countries as well, yeah?

“New Zealand money is printed much less frequently than it is destroyed, [but despite this, and] “Despite the increased use of Eftpos cards and online banking, the amount of New Zealand cash circulating here and overseas is growing.” How so? Was there more cash in the past? And are people hoarding old banknotes? But the government keeps issuing new designs and the old ones become obsolete, so that can’t be true.

The Reserve Bank doesn’t have masses of unused notes sitting around but always has enough to circulate even at Christmas time when demand increases, and the “around $5.5b in cash is growing” all the time.

Smells fishy to me! Obviously, there’s something they’re not telling us. And it could be this:

It’s been estimated that notes and coins in all the world’s currencies represents about 8% of the total world money supply. What? Yes!

If you think you know what money is, and you’re happy now that you know it comes from Canada, I’ve got bad news for you. Even the best economist brains in the world can’t agree on what money is. But one thing I’m sure they will agree on – It doesn’t come from a printing factory in Canada.

What they’ll tell you, if you insist on a definition, is that there is a mysterious algebraic thing they call “M”. There used to be three of these things, M1, M2 and M3 – but now it seems another has been added: M0. Well, actually I think that was a con, because M0 is notes and coins, and all those other “M”s have actually been moved further up into the realms of virtual reality – bank overdrafts, credit card limits, futures, toxic mortgages, quantitative easings, and other stuff we mortals earning normal wages or salaries have no concept of.


Borrow money from your friendly local banker 🙂

Let me give a simple example. Just before a big commercial shopping event like Christmas, my bank texts me to say there is $20,000 waiting for me. All I have to do is send a text reply to a four-digit number, that $20,000 will magically appear in my account, and I can get on with the business of spreading good cheer to relatives and friends.

I never ask for it – but I can’t help wondering: Is that $20,000 sitting at the bank in a bag waiting for me, or do they give it someone else? What if I change my mind later and ask for it? Do they say, “Sorry, buddy, we gave it to Joe Bloggs”?

And I also wonder, how many other people around the world got the same offer from their banks? A thousand? Ten thousand? A million? What if we all take up the offer? What if we all don’t? Will they print more? Or shred the unclaimed millions?

Then there’s the small matter of debt. The United States of America is proud possessor of the world’s largest economy. It also happens that they are the world’s largest debtor nation. According to Wikipedia, on November 7, 2016, US total gross national debt stood at $19.8 trillion (about 106% of the previous 12 months GDP). I checked the US online debt clock at 10.23 last night, and found that their figure is nearly $70 trillion. Clearly it depends who’s measuring, and how they measure it. Whichever figure you decide to run with, it’s a sizable heap of money!

Well, the next question that arises is, who do they owe it to? I asked a mate at work who seems to know a lot about politics, economics and world affairs. “China,” he asserted confidently, “and Japan.” So, I checked them out.

Turns out that China’s “national debt” as of March 2016 (the most recent figure I could find) stood at the equivalent of $4.3 trillion. The same source informed me that Japanese “public debt” in 2013 passed the quadrillion yen barrier in 2013 (about $10.5 trillion at that time).


Looks like a tricky situation – and he’s not alone.

Government debt in the UK (ie not counting private and commercial borrowings) amounted to £1.56 trillion, or 81.58% of total GDP, and the annual cost of servicing (paying the interest on) this debt amounted to around £43 billion. The Conservative government pledged in 2010 that they would eliminate the deficit by the 2015/16 financial year. However, “the target of a return to surplus at any particular time was finally abandoned by the then Chancellor of the Exchequer George Osborne in July 2016”. And sad to say, until they start running a surplus, that debt’s only going to get bigger.

Evidently none of the world’s biggest national economies is in any position to lend money to their insolvent neighbours. Fortunately, we have banks that can come to the rescue. Fractional-reserve banking is the current form of banking practised in most countries worldwide. In a nutshell, this system allows banks to lend up to 90% of the money they have in deposits.

The beauty of the system, from the banks’ point-of-view, is that they don’t have to apologise to you when you go to make a withdrawal: “Oh, sorry, we loaned your money to John Doe.” You can have yours, and he can keep his – and the bank can collect interest on the new money it created.


Happy bankers 🙂

But what if we all go and demand our deposits at the same time? Luckily every country has an LOLR – which apparently stands for “Lender of Last Resort”, not “Laughing Out Loud, Really”). This is normally the country’s central bank eg the US “Fed”, or the Bank of England, which guarantee to bail out the too-big-to-fail banks when they get caught out, as in 2008.

And since we are assured that those central banks don’t have large stocks of money in their cellars, and tax-payer dollars are already insufficient to balance their government’s books, I guess that means they have to borrow more money from the private banks.

Either that or go cap-in-hand to the money printing factory in Canada. Think about it.

If you don’t think there’s a conspiracy, you’re not paying attention

An interesting article I came across in Time Magazine: “Why Smart People Still Believe Conspiracy Theories”

wall street conspiracyA coterie of academic stooges set out to prove that people who believe in “conspiracy theories” are of sub-normal intelligence. Unfortunately for them, their findings did not confirm their initial hypothesis – so they had to come up with another one, ie people believe what they want to believe. Which is probably equally true of people who insist that there is no conspiracy.

The researchers’ fundamental error was to assume that people who believe there is a conspiracy have no solid evidence to support their belief. Not true, guys and girls.

  • Take a look at the Roman Catholic Church. One huge international conspiracy to keep the poor in slavery.
  • Take a look at Wall Street and the world of international banking and finance. Another monumental conspiracy to hide the truth behind global economic imperialism.
  • Take a look at the United States political system. Another major conspiracy aimed at convincing poor Americans that they actually have a say in how their government rules the country.

trumps-favorite-mcdonalds-meal-is-a-catholic-conspiracyA few extracts from the Time article:

“Millions of Americans believe in conspiracy theories — including plenty of people who you might expect would be smart enough to know better.

Despite mountains of scientific evidence to the contrary, at least 20% of Americans still believe in a link between vaccines and autism, and at least 37% think global warming is a hoax*, according to a 2015 analysis. Even more of us accept the existence of the paranormal: 42% believe in ghosts and 41% in extrasensory perception. And those numbers are stable. A 2014 study by conspiracy experts Joseph Uscinski of the University of Miami and Joseph Parent of Note Dame University surveyed 100,000 letters sent to the New York Times and the Chicago Tribune from 1890 to 2010 and found that the percentage that argued for one conspiracy theory or another had barely budged over time.

Now, a study published online in the journal Personality and Individual Differences provides new insights into why so many of us believe in things that just aren’t true: In some cases, we simply want to believe.

The second study was similar but also sought to correlate belief in conspiracy theories and the paranormal with overall cognitive ability. To determine this, the people answered a number of questions that measured their numeracy — or basic mathematical skills — and their language abilities.

us democracyWhat’s most troubling — and a little mystifying — is the fact is that so many people in the studies score high on all of the rational and intellectual metrics and yet nonetheless subscribe to disproven theories. That’s the case in the real world too, where highly educated people traffic in conspiratorial nonsense that you’d think they’d reject. In these cases, the study concluded, the reason may simply be that they’re invested—emotionally, ideologically—in believing the conspiracies, and they use their considerable cognitive skills to persuade themselves that what’s untrue is actually true. If you want to believe vaccines are dangerous or that the political party to which you don’t belong is plotting the ruination of America, you’ll build yourself a credible case.”


*Interestingly US presidents and CEOs of large corporations seem to subscribe to this one!

Economic gobbledegook – and why the world is going to hell on a fast train

This is by some guy called Ambrose Evans-Pritchard, writing in the UK’s Daily Telegraph. Well, with a name like that you wouldn’t imagine he’d have missed too many meals in his life. He’s probably right in picking that it’s not a good sign for the future of the world when someone can pay $450 million for a painting, even if Leonardo da Vinci did paint it. Reading between the lines of overblown pretentious verbiage, I reckon he’s saying the world is in for another major financial crash, engineered by the same grotesquely over-paid, grasping, selfish “financiers” that brought us the last one.

Cy twomble

$46 million painting by Cy Twombly

Leonardo da Vinci has special cachet. What is striking about the Christie’s soiree in New York last week was not so much the US$450m ($661m) paid for his rediscovered Salvator Mundi but the prices fetched by everyone else.

Buyers forked out $46m for vermilion spirals from the Bacchus series by Cy Twombly, executed 12 years ago with a paint-drenched brush on a pole. Soothing sands called Saffron by Mark Rothko fetched US$32m.

The week’s haul at Christie’s and Sotheby’s topped US$1.5 billion, with Asian buyers snapping up Monets. Fernand Leger’s abstract Contrastes de Formes fetched US$62m.

It screams late-cycle liquidity, recalling Japan’s impressionist fever in the late Eighties before the Nikkei collapsed and the bottom fell out of the art market.

092216-best-paidBitcoin clinches the argument. It has risen more than 1,200 per cent over the past year to more than US$8000 – five times an ounce of gold – on a “greater fool” presumption.

This is not a criticism of blockchain technology. It will flourish. But you cannot yet buy and sell things in any meaningful way with cryptocurrencies worth US$180b.

Bitcoin will end badly, either when the Chicago Mercantile Exchange launches its futures contracts in two weeks and allows traders to short it, or when the global cycle turns. A runaway asset boom can last a long time when the G4 central banks are holding real interest at minus 1.5 per cent and spending US$2 trillion a year soaking up “safe assets”

And here’sAcademic bulls say the stock of central bank assets is still growing. Market bears counter that the flow is falling, which matters more to them. Hence the recent rout in high-yield credit. Junk bond funds saw the biggest outflows since 2014 last week.

A parallel retreat is under way in East Asia where US$800m of bond sales in steel, solar and palm oil were cancelled. These are minor tremors. What threatens the universe of stretched asset values is the return of US inflation. The boom is built on the premise that the Fed will bathe the global system with ample liquidity.


2015 figures for the UK

Yet that is precisely what is now in doubt as US unemployment drops to a 17-year low and the dormant Phillips curve reawakens. The New York Fed’s underlying inflation gauge has jumped to a post-Lehman peak of 2.96 per cent.

All it will take from now on is a single piece of hard data to confirm this trend and the markets will reprice interest rate futures abruptly, shaking the whole edifice of global risk appetite.

Staccato rate rises by the Fed would ignite a dollar surge, squeezing an estimated US$10.7t of offshore dollar debt. There is a further US$14t of global dollar debt hidden in derivatives and FX swap contracts, pushing the total to US$25t.

The Wolf of Wall Street

“Watching with wolfish concentration . . . “

I didn’t want to upload the whole pretentious, jargon-loaded article – just give you a taste – but here’s Evans-Pritchard’s conclusion:

“Major players in the City are watching with wolfish concentration. Bank of America says the air is getting thinner for risk assets but tells clients to stay with the “Icarus trade” as long as you can still breathe.

Mark Haefele, investment chief at UBS, says it is too early to bail out but the coming inflection point is “something we think about a lot”.

Inequalities are a result of low wages, based on big profits, financial swindles, multi-trillion dollar public handouts and multi-billion-dollar tax evasion

If you still have illusions about the American dream, thanks to sojourner for this:

Image: …Inequality is not a result of ‘technology’ and ‘education’- contemporary euphemisms for the ruling class cult of superiority – as liberals and conservative economists and journalists like to claim. Inequalities are a result of low wages, based on big profits, financial swindles, multi-trillion dollar public handouts and multi-billion-dollar tax evasion… …US corporations in […]

via How Billionaires Become Billionaires | Global Research – Centre for Research on Globalization — An Outsider’s Sojourn II (The Journey Continues)

What are we fighting for?

Country Joe And The Fish – Vietnam Song

Rock Cellar Magazine called it the greatest protest song of the Sixties, which may well make it the greatest protest song of all time.

Country Joe and the Fish performed it at the Woodstock Festival in 1969. Alter a word or two here and there (North Korea, Syria, Iraq for Vietnam, for example), and it’s as relevant today as it was nearly 50 years ago.

Well, come on all of you, big strong men,

Uncle Sam needs your help again.

He’s got himself in a terrible jam

Way down yonder in Vietnam

So put down your books and pick up a gun,

We’re gonna have a whole lotta fun.


And it’s one, two, three,

What are we fighting for?

Don’t ask me, I don’t give a damn,

Next stop is Vietnam;

And it’s five, six, seven,

Open up the pearly gates,

Well there ain’t no time to wonder why,

Whoopee! we’re all gonna die.


Come on Wall Street, don’t be slow,

Why man, this is war au-go-go

There’s plenty good money to be made

By supplying the Army with the tools of its trade,

But just hope and pray that if they drop the bomb,

They drop it on the Viet Cong.


And it’s one, two, three,

What are we fighting for?

Don’t ask me, I don’t give a damn,

Next stop is Vietnam.

And it’s five, six, seven,

Open up the pearly gates,

Well there ain’t no time to wonder why

Whoopee! we’re all gonna die.


Well, come on generals, let’s move fast;

Your big chance has come at last.

Now you can go out and get those reds

‘Cause the only good commie is the one that’s dead

And you know that peace can only be won

When we’ve blown ’em all to kingdom come.


And it’s one, two, three,

What are we fighting for?

Don’t ask me, I don’t give a damn,

Next stop is Vietnam;

And it’s five, six, seven,

Open up the pearly gates,

Well there ain’t no time to wonder why

Whoopee! we’re all gonna die.


Come on mothers throughout the land,

Pack your boys off to Vietnam.

Come on fathers, and don’t hesitate

To send your sons off before it’s too late.

And you can be the first ones in your block

To have your boy come home in a box.


And it’s one, two, three

What are we fighting for?

Don’t ask me, I don’t give a damn,

Next stop is Vietnam.

And it’s five, six, seven,

Open up the pearly gates,

Well there ain’t no time to wonder why,

Whoopee! we’re all gonna die.


Thanks to Dr Stuart Jeanne Bramhall for bringing the song to mind. Visit her blog The Most Revolutionary Act . . .

And Thom Hickey. If you haven’t visited his Immortal Jukebox, you really should!

Who is that economist working for?


If you believe that . . .

Economics has been called the dismal science. Well, “dismal” it may be, certainly in the way it is used to justify the gross inequalities in the distribution of our planet’s wealth – but “science”? Possibly a “human” science, ranking with other notoriously imprecise fields of human knowledge such as psychology and sociology.

I have noted previously that Alfred Nobel did not include economics in his list of prizes. Not only did he think it unfit to sit alongside the true sciences (physics, chemistry, physiology, medicine), he didn’t even consider it as objectively assessable as Literature and Peace!

Bearing that in mind, then, it seems to me that I have as much right as anyone to have my ideas on the subject taken seriously. It could even be argued that the views of a high profile rugby player in New Zealand have greater validity than those of a former Governor of my country’s Reserve Bank.

We are all aware that high-level sport these days is mostly about money, and economics has inserted its dismal finger so that honesty, fair play, clean living and sportsmanship now rank well down the list of priorities. The home ground of Istanbul’s Beşiktaş football club, formerly commemorating the republic’s second president and close friend of Mustafa Kemal Atatürk, has recently been rebuilt and reopened as the Vodafone Arena, commemorating . . . the power of money.

banksters-300x199It’s a brave sportsman or woman these days who can cite moral principles to his or her paymasters as Sonny Bill Williams has done in New Zealand. Williams has the advantage of being an extremely valuable property, moving seamlessly between two rugby “codes” (league and union) in a way that would once have been frowned upon. So, when he announced that he would not wear a team strip emblazoned with the logo of the Bank of NZ, he opened a can of worms. Williams is, apparently, a Muslim, and follows that religion’s injunction against usury – the lending of money at interest.

A columnist for the NZ Herald, Brian Gould, picked up on Williams’s moral stand, writing an opinion piece entitled “Banking should be under closer Government control”. Supporting the Muslim rugby player’s position, Gould said, Most people believe, and it is a belief assiduously promoted by the banks themselves, that the banks act as intermediaries between those wishing to save and those wishing to borrow, usually on mortgage. . . But this benign view of their operations is inaccurate and misleading. The banks do not lend you on mortgage money deposited with them by someone else. They lend you money that they themselves create out of nothing, through the stroke of a pen or, today, a computer entry.”

The next day, the Herald published a reply from a gentleman by the name of Don Brash insisting that both Williams and Gould were wrong.

“Mr Gould is not alone in peddling this nonsense, but that certainly doesn’t make it correct.

How the Fed works

How the banking system creates MONEY. Money is not wealth, especially if you have to borrow it at commercial interest rates. (Source: Time Magazine)

“The banking system does create money. When Bank A lends money to one of its customers, the customer may use those funds to buy something from somebody who banks with Bank B. Bank B then finds itself with an additional deposit, a part of which it can lend out to its customers (keeping some of the additional deposit as a liquidity reserve). So an initial loan may end up considerably increasing the total lending by the banking system.

“If individual banks really could create money by “the stroke of a pen or a computer entry”, as Mr Gould contends, why do they bother paying interest on deposits, why do they borrow funds from parent banks overseas, why do they borrow funds in the international market, why do they need to hold some funds in government securities as a liquidity reserve, why do some banks occasionally run out of money when customers lose confidence in them?

As well as being a former Governor of the Reserve Bank, I now chair the small New Zealand subsidiary of the Industrial and Commercial Bank of China, the largest bank in the world. It would certainly make life very much easier if we could, “by the stroke of a pen or a computer entry”, simply create the money which we lend out to New Zealand borrowers. Unfortunately, we can’t.” (My highlighting)


Would I lie to you?

So, according to Brash, Gould and Williams are wrong – but the banking system does create money. Huh? Look at the weasel words in the last sentence. OK, that’s not how they do it exactly, Don. And Bill Clinton did NOT have sex with that woman.

As I hinted above, Don Brash was Governor of New Zealand’s Reserve Bank from 1988 to 2002. He has held academic positions at several universities at home and abroad, sat in big chairs in large offices in several well-known banks, and even been involved in politics at the highest level. Clearly he, and the editor of the NZ Herald, and other naïve souls too for all I know, believe his words carry the power of gospel truth in matters of economics.

Look closer, though, and ask yourself if a guy who works at the upper levels of banking administration can possibly express publicly an unbiased view of the workings of the banking system.

Check the guy’s record, and you’ll see that he is a loser from way back. His first foray into politics was in 1980 as National Party candidate for the “safe” National seat of East Coast Bays. He lost, not to the main opposition Labour Party, but to an opponent representing Social Credit, a party whose main platform was exactly the view of banks expressed by Messrs Williams and Gould. That was a by-election. He failed to win the seat back in the General Election of 1981 and was dumped.

es514f00bfSomehow he managed to get himself elected as leader of the parliamentary National Party, despite his inability to actually win an electoral seat – holding the position from 2003 to 2006, then resigning from Parliament in 2007 to take up another academic post as economics guru.

He returned to politics in 2011 as leader of the right wing ACT Party, holding the post for seven months before resigning again after failing to make any impact in that year’s General Election. Clearly the average New Zealand voter is more perceptive than those who appoint general managers in banks or professors of economics at universities.

Brash is a hired lackey of the capitalist establishment, and a loser whenever he has offered his services to the New Zealand public. I’m not going to stoop to discussing his private life. If you’re interested you can get an overview on his Wikipedia page.