For some time I have been studying the New Zealand banking and financial system. Recently, I have been horrified to learn that New Zealand continues to be victim of a very subtle, destructive and damaging banking fraud that negatively affects most New Zealanders. The direct effects of this fraud form a divisive stratification of society in which the rich by virtue of high interest rates become richer, and the poor even more enslaved in debt slavery, and forced to pay exorbitantly high prices for all necessary consumer goods. This fraud also ensures a generally continuing inflation with all its accompanying ills, and also sets the necessary framework in place for deep and prolonged recession and depression at the whim of those persons controlling the world financial system; a depression like the one we are even now beginning to experience.

This fraud, although initiated outside the bounds of New Zealand, continues only with the willful help and assistance of the various arms of the New Zealand government; particularly the Treasury Department in its abstinence to take control of the nation’s money supply, and the Inland Revenue Department in its aggressive prosecution and enforcement of income taxes.

I believe the offices of government are largely, if not totally, ignorant of this widespread and ongoing fraud and how it affects New Zealanders. Otherwise, I am certain that it would have been brought to an end once revealed and known. I therefore write with a confidence that well-intentioned heads in government will begin the process of ending this fraud once they become aware of it; so that we all can begin to enjoy our rightful inheritance as citizens and residents of New Zealand.

My investigations have revealed the already questionable nature of income taxes, the fact that they seem to be “voluntary” in word if not in fact, and the fact that “independent” New Zealand has no originating document separating this country from mother England. Thus, it can be said that none of the present structure of New Zealand government emits from legal right under international law, but rather from a widely held type of convention that continues to allow it to function in a de-facto type of independence in all matters other than those concerning the country’s important finances and money supply.

I rely upon such arguments not as the driving force to this issue, but rather as a convenient remedy to a situation badly in need of rectification; not necessarily because it is illegal, but because it is horribly destructive to our freedoms, the quality of our lives, our futures, and our children’s futures.

Where Does Our Money Come From?

Don Brash, former Governor of the Reserve Bank and former leader of the Opposition in Parliament, revealed to me several years ago that all New Zealand money originates through the banking system, glibly informing me that “we” create it ourselves by borrowing from our banks. This seems to be the common currency of thought within the circle of government economists; thought that fails to penetrate to the heart of the matter.

I have some knowledge and understanding of the Fractional Reserve Banking System whereby the “banks” somehow are able to “create” new money based upon loaning out a goodly portion of deposits; loans that invariably return as new deposits (and further loans) simply because, in the direct sense, people generally borrow to purchase something- and the seller generally proceeds to bank the proceeds of the sale. Thus a new loan proceeds through the system based upon recycling the spent proceeds of the last.

Indeed, I recently read an article published by the Reserve Bank of New Zealand that described this process very carefully. Simply stated, “We” supposedly create all new money simply by borrowing from our bank. Apparently, the same system works throughout the whole world; and a similar superficial mind-set prevails.

I have found this explanation sadly lacking in substance and detail, because no one seems to know from “where” this new money actually comes from. This continues to be one of the great unsolved financial mysteries of our age; and a mystery that no one seems to care about. I believe it is of the utmost importance that the New Zealand government address this question immediately. Our future as an independent nation depends upon it.

Fractional Reserve Banking in New Zealand

A short time ago I wrote to the Reserve Bank of New Zealand in an attempt to gain further understanding of this matter. I asked a number of questions: “Where does the money comes from?” “By how much does the money supply grow each year?” “By how much annually do our local banks borrow from foreign sources?”

Mr. Justin Matz was kind enough to provide me with his answers to those questions, informing me that “most of the nation’s money supply is created by the banks.”

He also relayed figures from the most recent period between Jan. 2005 and Nov. 2008, showing that M3 (total money supply) has grown at a rate of around 10% per year, from NZ$ 117.51 Billion in January 2005 to NZ$ 173.901 Billion in November 2008.

In the same period local bank indebtedness to foreigners has increased from NZ$ 78.791 Billion to NZ$ 127.738 Billion, while local claims on foreigners fell from NZ$ 27.379 Billion to NZ$ 19.977 Billion. Astoundingly the net indebtedness of local banks and financial institutions to foreign entities has grown by almost exactly the same amount during the same period. The money supply (M3) grew by NZ$ 56.391 Billion, and net local bank indebtedness to foreigners grew by NZ$ 56.349 Billion. These figures are just too similar to be mere co-incidences.

Surely, all of our money has been created by foreigners. Neither our government, our banks, or we ourselves create our own money supply. Every single dollar of New Zealand money has been borrowed from foreigners at interest- at least during the last 4 year period. One can only assume that this has been occurring since the beginning of settlement by Europeans; first by importing British Pounds as a means of exchange with the original inhabitants, and then by converting foreign currency loans into New Zealand currency in a vain pretense at being an independent country.

The Fractional Reserve Banking System provides a modern platform for this debt expansion to occur, but our local banks are merely tools through which some persons, bankers, or institutions outside of New Zealand actually create all new New Zealand money. This has diabolical ramifications.

How Local Banks Acquire Foreign Finance

Our local banks are able to borrow that kind of money (approx. $18 B per year) from offshore because we give them the necessary security with which to do so. When Kiwis surrender the titles to our homes or properties to “our” banks in return for mortgage finance, we no longer “own” them. For all practical purposes, they are now owned by the banks. Our banks then combine our mortgages with others to create a mortgage bond or a similar financial instrument, which is then given to some foreign financier as security for the reciprocal borrowed funds. Our banks pay interest to foreigners on the same money that they loan on to us at higher interest. This means that we New Zealanders are forced to give up roughly NZ$ 18 Billion dollars in ownership rights annually in exchange for the money required to “float” the local economy, and for us to maintain our present lifestyles.

No one seems to know how this money originally comes into being, or who is responsible. It magically materializes out of thin air at little or no cost, benefitting some anonymous offshore person or group of persons with enormous wealth and power. And once repaid (with interest) this money is effectively “laundered” removing it from further discerning scrutiny. Now legitimate, some of the proceeds trickle down through the international financial system until it finally re-enters New Zealand as foreign investment, competing with local dollars for ownership and control of our remaining assets. This contributes to a further understanding of why so much of New Zealand is now owned by foreign interests. By letting others create our money supply, we are giving away New Zealand to the tune of $18 Billion per year or more!

As of Nov. 2008 New Zealand private banking institutions owed a net NZ$ 120.336 Billion to offshore interests. This means that as of Nov. 2008 foreigners “owned” $120.336 Billion worth of our homes, businesses, and farms- simply for providing our means of exchange- by virtue of mortgage document, debenture, personal guarantee, or other security.

By subtracting this amount from the total “borrowed-into-existence” money supply of $173.901 Billion, we easily deduce that foreigners have purchased and directly control an additional $56.565 Billion worth of our assets; thus reducing net indebtednesss, but at the cost of total alienation of our inheritances.

We don’t need to know who is responsible for this fraud, or how exactly this money is created out of thin air. All we need to know is that this is happening outside of New Zealand, and that we are continuing to pay the price for it. Once we stop borrowing from the banks at high interest, the fraud can no longer control and “own” us.

The present world economic melt-down adds another worrying aspect to the problem. Falling real estate values will most certainly restrain and limit any further growth in the money supply. And unless the New Zealand government takes on some role in the creation of new interest-free money, our economy will most certainly crash and burn, along with the many other countries reliant on the bankers’ high interest debt.

Why We Continue to Borrow from the Banks

Simple common sense reveals that we borrow because we do not have enough money to continue our lifestyle and/or further our dreams. We borrow because we are in “want”. Either we failed to borrow enough in the first place, or some event has occurred to create our shortage. Setting aside the prospect of borrowing for a moment- which always leads to a form of debt slavery- there is one recurring event in our collective lives that leads to a shortage of money. That is the ongoing collection of taxes through various means that continually suck liquidity out of the private sector. The whole New Zealand tax take is in the vicinity of around $50+ Billion. This meshes neatly with the total mortgage “top-up” borrowing by the private sector, of which roughly one third originates offshore.

If all taxes were eliminated and $50 Billion worth of new interest-free money were created by government, our ever-growing foreign indebtedness could be brought to an end, and a huge new low-interest source of private local money could be brought to bear on investment and wealth creation rather than on serving tax debt. This assumes that a whole population might change its consumption-based belief systems and spending culture overnight. That is at least a little over-optimistic. Perhaps we should learn to walk before we try to run.

The two major taxes are taxes on personal and business incomes- amounting to somewhere around NZ $20+ Billion, and Goods and Services Taxes (GST) which amount to somewhere near NZ $18 Billion. The exact figures are unimportant, as there is no direct relationship between taxation and sustainable funding of government services.

Simple mathematics suggest that if either one of these sources were abolished, and government took on the responsibility and opportunity of creating a similar amount of new interest-free money with which to meet its commitments, the private sector would be roughly NZ $20 Billion better off, and may not need to borrow from overseas banking interests at all.

Before we can achieve any significant degree of national independence and ongoing prosperity, our government must begin to issue its own interest-free money rather than borrowing from offshore or forcing private New Zealanders to borrow from offshore through our local banks in order to pay our taxes.

Thus, some form of tax minimization must accompany the issue of new interest-free money, preferably one that encourages savings and investments rather than consumption.

The Best Way Forward

It seems clear when observing present spending habits that if GST were removed and income taxes retained, the present trend towards consumption would be accelerated, and much of the “saved” private funding would find its way into consumer spending. Arguably, some amount might be used to pay off mortgage debt, reduce further borrowing, and/or could be put into investment or savings; but because this would simply reduce the costs of individual consumer goods, the most likely effect would be an across the board increase in consumption spending. There is no reason to expect that this would result in lower interest rates, lower debt, lower inflation, and an increase in local ownership. To the contrary, the most likely expectation would be the need for government to raise income taxes substantially in order meet cash shortfalls, print yet more money, or increase borrowing; leading to higher inflation, higher interest rates, and increased private or government debt. Indeed, a great deal of study has been undertaken under just such a scenario; study encapsulated in what is known as the “Oliviera-Tanzi effect”, whereby “monetizing” debt (printing money to service debt) in an inflationary economy based upon income taxation simply leads to higher inflation, higher costs, and greater debt (or the need for grossly increased income taxes). This ultimately leads to hyper-inflation and total bankruptcy for a national economy. This route should be avoided at all costs.

On the other hand, removing all income taxes, and maintaining the present GST at its current rate would without doubt have an opposite effect. As investment and savings would no longer attract punitive tax rates, a great deal of the “saved” tax money would be apportioned towards those enterprises. The present GST would continue to put a brake on rampant consumer spending, and any increase in spending would increase GST revenue as well as stimulate the economy. But the greatest benefit would be in the increased savings and investment that would occur. Besides creating new jobs, better products, and lower costs, increased investments significantly change the important relationship between money supply and wealth.

If unchecked by the issue of new money, the resulting deflation would stifle business by continually devaluing stocks. And thus government would have the opportunity and responsibility not only to replace the former income tax revenue with the interest-free issue of new money, but to issue, distribute, and/or spend sums far in excess of the amount previously taken in income taxes, as a way of balancing the new wealth created by increased investment and savings.

Another beneficial side effect would be the new positive sentiment that would be harboured in the new system whereby most folks would tend to invest and spend more aggressively, effectively increasing the velocity (and availability) of money, and allowing more persons to profit from its presence.

Importantly, such a revised system would insulate all New Zealanders from the negative ripples of the coming world-wide depression, allowing our producers to reduce costs substantially and compete favourably on world markets regardless of the offshore business climate.

In such circumstances, the political questions of the future would focus not on how to find the resources to adequately fund government in the midst of scarcity, but on how to distribute surplus resources in the midst of plenty.

Fantastic new opportunities would naturally arise, allowing government to provide more and better services and/or fund a universal individual benefit to every New Zealand resident. The sheer necessity to work, or welfare degradation, would no longer be the prices of survival. Creative work would become an individual matter of choice, willful service, and/or the means to fulfill the wildest dreams.

My 2005 book, “The Zen of No Tax” includes an in depth examination of how income taxes create a destructive and counter-productive effect on government funding and society as a whole. Taxes do not and cannot work to provide sustainable government funding. “The Zen of No Tax” also offers a snapshot of what the future may look like without income taxes. Those early insights revealed in “The Zen of No Tax” dovetail nicely with those recently gained in conversation with the Reserve Bank of New Zealand, and underline the only sustainable path ahead: That is, eliminating income taxes, and empowering our government with the issue of interest-free money.

For more on the banking conspiracy to steal, destroy and control, go to http://www.truthaboutax.com .