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Treasury and Reserve Bank suggest Social Credit solution

26 November 2020

by Chris Leitch, Leader

We challenge the government to take up the Monetary Financing option presented to it in an aide-memoire, titled “Quantitative Easing and Monetary Financing Compared”, back in May.

The report, jointly written by Treasury and the Reserve Bank, was presented to Finance Minister Grant Robertson and lays out the benefits of monetary finance and quantitative easing or QE.

The report says that Monetary Finance could be used to “meet specific funding needs of the Government at lower cost and with greater certainty than QE”.

We congratulate Treasury and the Reserve Bank on presenting to the government Social Credit’s sensible solution to finance the economic rescue package and other expenditure needs such as infrastructure.

As Social Credit has been at pains to point out, Monetary Financing could provide the funds the government needs at no cost, without saddling Kiwis with massive additional debt and interest, freeing up tax dollars to be spent on health, education, housing and poverty reduction.

In a Beehive press conference on August 17th, Mr Robertson admitted that over the coming decades taxpayers will spend billions of dollars paying off the government’s borrowing economic rescue package because “[that is] the way we manage monetary and fiscal policy in New Zealand.” “There is a separation.  There is an independence there.”

He went on to say “Certainly that idea has gained a bit of currency around the world but I am still confident that we have a system in NZ where we’ve got a functioning bond market where debt is managed well.”

Grant Robertson has clearly been happy that funding of the rescue package will continue to be done through an economic merry-go-round that will see a massive transfer of wealth from ordinary Kiwis to the mainly overseas shareholders of the country’s banks and investment funds.

Yet Treasury and the Reserve Bank have confirmed that it’s perfectly possible for the Reserve Bank to fund the government directly and then write off any debt, saving taxpayers billions – something called for by BERL chief economist Ganesh Nana – “The government can borrow from the Reserve Bank. To be technical, it’s literally borrowing from itself”.

Former Finance Minister Michael Cullen agrees, as does Economist Shamubeel Eaqub - “I don’t see why we don’t jump straight to the RBNZ buying bonds from Treasury direct”.

Former Senior Lecturer at the School of Economics and Finance at Victoria University Dr Geoff Bertram has joined the list of those calling for different financing saying “This is not wild radicalism. It is mainstream, even conservative, economics”.

That call has been echoed by economist Raf Manji and economics commentators Bernard Hickey and Bryan Gould, and former Australian Former Australian Treasurer, Paul Keating, is backing the call saying Australia’s Reserve Bank should buy government bonds directly from Treasury instead of on the secondary market.

In a letter to Australian media, he criticised Australian Reserve Bank officials for lacking the courage to break with economic orthodoxy and to allow monetary financing of deficit spending, and said they are too concerned about what other central bankers would think if Australia went down that path.

A similar accusation could be labelled at the Labour Government yet it was good enough for the 1935 Labour government to employ just such a mechanism to fund its massive state house building programme.


Instead of adopting this sensible funding option the government is borrowing billions through the sale of bonds to banks and other financial entities and investors.

Those wealthy investors will make a cool $11 billion profit from ‘clipping the ticket’ on those transactions, and taxpayers will foot the bill.

Additionally around $4 billion dollars of taxpayers’ money will be going every year to pay interest on government debt – money that could be spent on health services, solving the housing crisis by building rent to own homes, providing free dental care, or a multitude of other possibilities.

It's time for that stupidity to end and for the artificial arm's length Chinese wall between the government and the Reserve Bank to be pulled down in the same way the Berlin Wall was.

The self imposed appearance of the Reserve Bank not directly financing the Government is sheer economic madness in these unprecedented times and should end.

We would be happy to act as consultants to assist the government to put a new framework in place that would ensure the concern about politicians running amok with the money printing presses was addressed.


Ganesh Nana - Radio New Zealand Morning Report - 16.04.20 - Transcript attached. Link


Shamubeel Eaqub - and on TVNZ Sunday programme 19.04.20


Raf Manji -


Dr Geoff Bertram - and NZ Herald article 13.04.20


Michael Cullen -


Paul Keating -


  • Canada’s central bank purchases approximately 20 percent of government bonds issued every year on a regular basis.


  • The Commonwealth Bank (Australia’s central bank at the time) supplied the Australian government with funding for major infrastructure development. 


  • China finances the majority of its government owned companies and major projects like its Belt and Road projects from its central bank.

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