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July 2021

Money creation

Reserve bank should curb money creation by commercial banks

Social Credit described the action of the Reserve Bank to curb its purchases of government bonds from private banks as a sensible and responsible decision.

At the same time, it must now curb the avalanche of money creation that has hit the commercial banks.

Failure to do so will allow inflationary pressures in the economy to continue to rise.

These commercial banks create an average of $ 20 billion in new money each year, and that amount has almost doubled in the past two years.

The ASB’s move to raise mortgage rates is just a cynical scam, preying on customers who have borrowed at the record-breaking interest rates offered by banks and will affect not only homeowners, but consumers. businesses, the very sector of the economy. which must retain staff and increase the production of goods and services to meet the demand of the economy.

ASB’s decision will be quickly followed by the other banks, all of which will be keen to increase their profits as well and will attempt to intimidate the Reserve Bank into raising the official exchange rate.

Any increase in Reserve Bank in OCR will simply drive up interest rates even further, add to already record profits for commercial banks, and worsen the effect on borrowers.

The Reserve Bank must determine who is in charge of the country’s financial system, itself or the commercial banks.

It should encourage banks to channel a greater proportion of their loans to the corporate sector, thus providing working capital for businesses to grow, invest in new technologies to overcome the labor shortage and increase the production.

Falling into the trap of rising interest rates will make the problem worse, leading to higher costs, reduced production, and hardship for businesses and homeowners.

© Scoop Media


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