Something fishy at NZ Reserve Bank...

August 17, 2016

 

To: the secretary of Hon. Bill English, NZ Deputy Prime Minister

 

Dear Gabrielle,

thank You for the forwarded answer of the Minister English. The fact that NZ banknotes are repayable-on-demand is somehow surprising and make me think if those are legal tender or something else, like chips in a Casino.

Another question arise: with what can the Reserve Bank "repay" for banknotes ? Here is an insight from Wilelm Buiter: "...fiat money is an asset of the holder but not a liability of the issuer." and "...base money does not have to be redeemed ever, it does not constitute an effective liability...". More from him: " [The bank's] monetary liabilities are liabilities only in name, as they are irredeemable: the holder of base money cannot insist  at  any  time  on  the  redemption  of  a  given  amount  of  base  money  into  anything  else  other than the same amount of itself (base money). "
http://www.economics-ejournal.org/economics/discussionpapers/2007-8/file

Now, something fishy is going on, don't You think ? Else the liability is consolidated in the Treasury asset side of the balance or... the real profits of the Reserve Bank are masked by an accounting trick and there is an ongoing gigantic fraud against the NZ people.

I explored the issue in this document:
Seigniorage: The Honest Government's Guide to the Accounting of the Revenue from Money Creation
http://leconomistamascherato.blogspot.it/2016/07/banknotes-and-currency-are-liability-of.html

If The Minister would like to answer again and more appropriately on the issue, please let me know.

Kind regards,

Marco Saba

President at IASSEM


Answer:

August 18, 2016

Dear Marco Saba

On behalf of the Hon Bill English, thank you for your further email.  I have passed this on to the Minister for his information and consideration.

Thank you for writing.

Yours sincerely

Katy Greco-Ainslie

Private Secretary

Hon Bill English

Deputy Prime Minister

Minister of Finance

Minister Responsible for Housing New Zealand

 

 See also:

Chit-chat with Bill English, Deputy Prime Minister of New Zealand on seigniorage