Berrnard Hickey - Tell Me More

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Articles by Bernard Hickey
Bernard is a leading financial journalist and editor with over 23 years’ experience including roles with Reuters, the Financial Times Group and Fairfax Media in Wellington, Canberra, Sydney, London and Singapore. He is a senior contributing editor for and  Newsroom Pro, writes articles for the Herald, and is a regular commentator on financial, economic and investment issues, appearing regularly on radio and television.
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What if money really did fall from the sky?
Newsroom - August 26th 2019
It's long been a dirty word in economic circles, but people are starting to ask if "helicopter money" - printing large sums of money and distributing it to the public - might be our best option for stimulating the economy.
The Reserve Bank recently surprised everyone by dropping the Official Cash Rate (OCR) to an all time low.
It is currently sitting at 1 percent and the drop was about twice as much as most people expected. Governor Adrian Orr hopes that the low interest rate will get people spending.
But there could be another way...
The father of monetarist economics, Milton Friedman, used it to explain a simple but powerful idea. That central banks can create money out of nowhere. And that if real people were given it out of nowhere, they would spend it and stimulate the economy.
“Being able to do the helicopter kind of money concept would be around being able to inject cash into the system. That sounds quite exciting...........

What if money really did fall from the sky?
Radio New Zealand - Podcast
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Banks invent money out of nothing whenever they lend
Interview with Mark Sainsbury on Radio Live  June 20th, 2018
HICKEY - It's about close to ten trillion dollars worth of money created in China in the last decade, close to four trillion printed by the European Central Bank and the United States Federal Reserve in the last decade, and in Japan a couple of trillion dollars.
SAINSBURY - Hey Bernard, when you say like the European Central Bank they just print money?
SAINSBURY - What do you mean? They can just do this? Like sort of social credit?
HICKEY - Absolutely, It's what they call quantitative easing. So if you're a central bank and you've already cut interest rates to zero and you want to increase economic activity, you just plug into the spreadsheet 2 trillion dollars and then you use that to buy government bonds off banks and pension funds.
SAINSBURY - But what's it backed by?
HICKEY - Nothing! That's the beauty of fractional reserve system we have for banking and central banking. Actually, at the moment, it is private banks that print money.
They invent money out of nothing whenever they lend.
So that's the dirty little secret of international finance......
Every New Zealander would receive a gift of $1,000 a month

Bernard Hickey on Radio NZ National
5th July, 2019
I have been thinking about receiving every month from the Reserve Bank of New Zealand a $1,000 gift, and that everyone else in New Zealand  who is a permanent resident would also receive a gift of $1,000 a  month. Because that is probably the best way to do quantitative easing  or money printing once you get down to 0% with your official cash rate.

Every New Zealander would receive a gift of $1,000 a month
Listen to 2 minute interview ....................
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Power of Printing Money
February 26th, 2012
I am about to commit economic heresy, but at least I'm in auspicious company and it's something our own Reserve Bank and government has done before.
It's time the Reserve Bank of New Zealand started printing money and lending to our government to build houses and infrastructure, particularly in Christchurch.
Even a couple of years ago, this would have been unthinkable to say, even treasonous.
I'm sure many readers will still believe such money-printing is dangerous madness guaranteed to debase the currency, create hyper-inflation and empower politicians to go on an even bigger spending spree. But we've been here before and right now our major trading partners are doing exactly this. We should at least be talking about it.
Back in the very early days of the Reserve Bank, shortly after the first Labour Government was elected in 1935, the bank lent money created out of thin air to the government and producer boards. It was used to build state houses and help fund exports of meat, wool and dairy products.
Isn't it better for our Government to be borrowing from its own central bank than from foreign banks and pension funds? Wouldn't it be better employing the unemployed to build new houses and repair Christchurch's infrastructure than to just sit back and let it happen? Wouldn't it be better to print the money to fund the deficit than choose to sell public assets to do it? It would devalue our currency, but is that such a bad thing when we need to boost our exports?....
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Money-printing will work if controlled
March 4th, 2012
I argued last week that New Zealand should again look at printing money to build houses and infrastructure in Auckland and Christchurch.
We did it in 1936 and we could again as long as it doesn't create inflation.
It sparked a firestorm of commentary and criticism. Money-printing, or quantitative easing, would have to occur with a range of responses.
First, there's a risk of generating inflation - but only if resources are fully employed. Building houses, bridges, motorways, broadband, water treatment and electricity networks takes all sorts of resources, some imported.
There is a risk that money-printing empowers politicians to go on a giant lolly scramble or, even worse, funnel money to "friends" in the large companies that dominate our construction and infrastructure industries. This would have to be addressed by an independent commission. It would mean any surge in spending with printed money was directed to useful infrastructure that generated economic returns in the long run.
We have a floating currency. Money-printing would drive the dollar lower, making imports more expensive and generating extra export revenues. Some say it would also drive up interest rates. That hasn't happened in America, Japan and Europe......
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How the foreign profit and interest drain has made us poorer
April 15th, 2011
Ever wondered why it seems New Zealanders can't ever seem to get ahead despite apparent growth in Gross Domestic Product?
The simple answer is that any growth we saw in the last six or seven years was being gobbled up by either population growth or the ever-growing drain on our economy from profits sent offshore to foreign owners of assets here or interest payments to foreign creditors.
An analysis of the national accounts since the early 1970s shows that the share of GDP accruing to foreigners has risen from around 1 per cent to as high as 7 per cent in 2008.
Here's 5 ways in which we could turn around that debt:
- We should also do everything we can to stop selling more assets.
- That could and I think should involve formal bans on large sales of assets to foreigners.
- We should be very careful during any part privatisation of state assets to ensure they are sold to New Zealanders.
- We should be obsessive about increasing our exports and reducing imports. In the long run this slow slide to penury is a result of consuming beyond our means in a national sense.
Now for something a little more controversial.
- One solution for getting rid of debts you can't afford to pay is printing money. This a last resort, but it is not unprecedented and it's something that the leader of the western world (America) is doing right now.
The Reserve Bank could buy these bonds currently being issued by the government and essentially inflate the debt away. That punishes both local savers and foreign creditors (who hold our debt in New Zealand dollars) but it does fix the problem of indebtedness.......
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