Banks planning a ‘haircut’ for customers when in trouble, says Ōtaki spokeswomanBy Alan Tristram
And Spokesperson Deirdre Kent, of Ōtaki, warns that the Reserve Bank is working secretly on a plan to give bank customers ‘a haircut’ to pay for the banks’ problems when things go wrong.
Ms Kent says the Party wants Parliament to include examination of a new report from two IMF economists revisiting an idea which followed the 1930’s Depression.
The Chicago Plan
At the height of the Great Depression a number of leading U.S. economists advanced a proposal for monetary reform that became known as the Chicago Plan. It envisaged the separation of the monetary and credit functions of the banking system, by requiring 100% reserve backing for deposits.
Now ‘The Chicago Plan Revisited’ describes a process by which the money supply is changed from an unhealthy one to a healthy one (see full explanation at bottom of story).
Reserve Bank working ‘behind scenes’ with banks
She says: “The Government hasn’t yet publicised that the Reserve Bank of New Zealand is working behind the scenes with the registered banks to set in place a system where customers will bailout a failing bank out, instead of taxpayers.
“Their accounts will be frozen overnight and the bank will take a haircut from the top. A customer will wake up in the morning with less in the bank.
“But that is unfair. No one should have to bail out a bank. Banks should be stable in the first place and there are ways to make them stable,” she says.
Simultaneous action needed
“We have requested a Parliamentary Enquiry because we know that a better system has to be brought in simultaneously in all countries.
“A small country like us can work on it and take initiative. We have the skills here to work out a better banking system so we are not vulnerable to financial contagion,” she says.
“When I took this petition briefly to our local Otaki market, one man stalked off declaring ‘they won’t get away with this.’ There was no antagonism to the petition, just amazement that such a proposal was on the books and they hadn’t heard about it.”
She says the organisers have a Facebook page for the petition and have just started an online petition as well.
The petition has the support of Positive Money NZ, the Living Economies Educational Trust, The Awareness Party, and the Democrats for Social Credit.
“We are expecting more support from political parties and organisations,” Ms Kent says. “Nearly everyone has a bank account so we are all vulnerable.”
Deidre Kent on the Revisited Chicago Plan
At the height of the Depression a number of leading U.S. economists advanced a proposal for monetary reform, which envisaged the separation of the monetary and credit functions of the banking system, by requiring 100% reserve backing for deposits.
Under the Chicago Plan Revisited, banks will no longer be able to create the bulk of the country’s money and control the size of the total money supply.
Instead, the Government will replace all this by positive money which bears no debt – like the coins we use. Banks won’t be able to use fractional reserve banking any more but will become true intermediaries between lender and borrower as in a savings and loans bank.
This will result in the complete elimination of bank runs and a dramatic reduction of public and private debt. Banks will become more stable and government will have control over the total money supply rather than relying on the Reserve Bank of New Zealand to alter interest rates.