I heard an interesting group of speakers last
week, who really got me thinking about how we all understand and work with
money (or the lack of it!).
Allen Cookson, an ecological economist, noted
that money has been flowing out of NZ faster than it flows in for many years –
decades, even. I was surprised to see that this is not because of a
trade imbalance, but because most of our banks are overseas-owned, and they effectively
siphon large amounts of money out of the country every year.
Every time someone in New Zealand takes out a
loan, like a mortgage or putting something on a credit card, the bank credits
our accounts mostly with money they do not necessarily have so we can pass it on to the
person selling.
The interest we all pay on our debt is largely taken out of New Zealand
as bank profit. We have a high level of
this kind of debt and this means that each year we lose money to the countries in which the banks choose to report their profit in a classic trickle up pattern
Yes.
Trickle up. Contrary to what we keep being told, I’ve not
seen any examples of money trickling down
without the help of well-constructed tax systems. Mostly it trickles up – mainly because those with money
make money by investing it in things that give them more money back than what
they invested).
This means a few things.
- Interest payments cost New Zealand heaps, and as long as the system stays the way it is, and we keep doing as we’ve always done, we will never be able to clear our debt. From what I’ve read, this is one of the reasons why we are all working so much harder now, but not getting ahead. It is also part of the reason why there is an ever-increasing income gap.
- We need to look for ways that we can manage our debt better so that money stays within New Zealand for longer and is available for people to use and spend here.
- Attracting overseas investment may not be as good for us as our government would like us to think. In the short term, it may bring money into the country, but in the longer term, we are going to be sending that money back overseas to the investor and paying interest to them as well.
- Getting a loan from a New Zealand-owned bank (Kiwibank, TSB, SBS and the Cooperative banks are the only ones I know of) is better than getting one from the overseas-owned banks.
The speakers also talked about ways to stop this trickle up effect and to keep money in local economies. There are great ideas out there, all of which are already in use or developing around Christchurch. I'm going to have a go at explaining them in subsequent blogs.
