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supply is under the control of the Reserve Bank … Banks do not create money.‘ 48
Richardson was later appointed a director of the Reserve Bank of New Zealand.
Long­time battler Christchurch Democrat Stan Fitchett has letters in his possession
from two former ministers of finance – Ruth Richardson and Bill Birch – saying that if the
government created the money supply there would be inflation. 49 The Hon. Dr Michael
Cullen emailed a member of the New Zealand Democrats in May 2003, in which he
stated: ‘In particular banks do not create credit like a Central Bank. When banks make
loans they are lending the money creditors have deposited with them.’ 50
Politicians can’t be much help to us if they are ignorant of the facts, nor if they
automatically repeat the arguments taught to them. But it wasn’t always that way. Money
creation has featured regularly in New Zealand politics since 1840; three times in our
history our government has created its own money. In the 1935 election, money creation
was a major election issue. Nationalisation of the Reserve Bank was the first action of the
first Labour government. Low­interest loans were issued from 1936 onwards to the Dairy
Board and to Fletchers for building state houses for the State Advances Corporation. The
Social Credit Political League gained 12 per cent of the vote in 1954 and 21 per cent in
1981. But for a decade, under the name of the Democrats, these politicians were part of the
Alliance, and struggled in vain to place the issue of money creation on the political
agenda.
In this chapter I have looked at the financial symptoms of our diseased system of money
creation: spiralling debt; the widening gap between rich and poor, both individually and
as whole countries; and increased instability. But this is by no means the end of the story.
The creation of money as interest­bearing debt by private banks sets in place a most
extraordinarily destructive chain of events, described fully in Michael Rowbotham’s The
Grip of Death. 51