Inflation in New Zealand: Don't Be Fooled!
Resigned Central Bank Governor Adrian Orr said "we print money, and people believe it, touch wood." They think we're stupid. Like the politicians.
Prologue
24 April 2025: numbers need updating.
Before reading on, be clear in your own mind. When you see the word ‘debt’ think currency. When you see the word ‘currency’ think debt. Circulating cash (notes and coins) is a fraction of currency. A bank balance is currency. A credit card limit is currency. A mortgage is currency…
All debt is currency and all currency is debt.
Debt comes first.
No debt = no currency1
The destination of expenditure of the debt—that is the sector where the debt is spent—dictates what happens to prices in that sector. In New Zealand we have a perfect example of this phenomenon.
Housing.
Everyone knows what has happened to house prices in New Zealand for 50+ years.
Up and up and up and…2
Anyone who thinks house prices have inflated for over 50 years because the existing housing stock/land has magically become more and more valuable is deluded. House price inflation has occurred because the thing used to buy the house, the measure of its ‘value,’ the New Zealand dollar (NZD), has become less valuable, so more of it is required to buy the same thing. It has become less valuable because as RBNZ Governor Orr said “we print money, and people believe it, touch wood.”3
The RBNZ Bank Dashboard clearly shows the sector most bank debt is used for.
Housing. Which is why house prices have inflated so much in the past.
Because the NZD, the RBNZ’s only product, is ‘printed’ continuously and created faster than it is destroyed the total quantity continuously grows. Consequently the NZD’s value in real goods declines. We are trained to call this inflation, and have been brainwashed to believe this is natural and unavoidable. Not true.4
Key Point One - The Lie
When the word “inflation” or an inflation number is quoted by politicians, the lying MSM, or bankers — including the RBNZ and the Treasury — unless clearly stated otherwise
—they always mean consumer price inflation, and5
—the number is core inflation — which excludes food and energy.6
For example margins for oil companies on their petrol and diesel products are increasing, effecting prices at the pump. But according to the core inflation measure this is not inflationary. Utter nonsense.
So the inflation number used is always low compared to people’s experience, more so when food and energy are undergoing significant $ price increases.
The three entities in the top image are trying to create an illusion. An illusion that the rampant consumer price inflation ripping through New Zealand is your fault. The media are spreading this lie.7
For example, RBNZ Chief Economist Paul Conway gave a speech in mid-June where he said8
that the labour market played a key role in New Zealand’s inflation experience
So if you dare to claim a pay rise because of the increased living costs you are experiencing…the increased living costs are your fault and will result in increased living costs…
Can you see the circuit they’re trying to sell?
Living costs ↑. Pay ↑…living costs ↑. Pay ↑…
Living costs ↑…
Your fault. This is the lie.
Key Point Two - The True Cause of Consumer Price Inflation9
In February 2020 the Reserve Bank began to create an enormous amount of currency. It ‘printed’ it out of thin air, and much of this newly created currency was used to buy central or local government debt (bonds). The governments then used this currency to pay its bills…wages and salaries, contractors (lots of wages), suppliers (lots of wages), lockdown dole and other covAIDS subsidies…10
In January 2020 the RBNZ balance sheet was ~ NZ$25 billion. By February 2023 it was ~NZ$104 billion. The RBNZ had created about NZ$80 billion in two years and multiplied its balance sheet by ~4X in the process.
The point is most of this new currency did not flow into the housing circuit11
↑↑↑↑ we saw above what happens to house prices when that occurs ↑↑↑↑
Instead most of this new currency was used to pay incomes so most of it flowed into the consumer goods consumption circuit. The very moment the RBNZ and Ardern’s Labour-led Coalition Government did this the rampant consumer price inflation being experienced was a certainty. Baked in.
↑↑↑↑ CONSUMER PRICE INFLATION WAS GUARANTEED. ↑↑↑↑
The politicians ALL need roasting and toasting for this. Obviously the RBNZ and the Treasury do also, though they require different strategies. But the bankers’ local patsies, the politicians, they’re easy (and much dimmer).12
Don’t overcomplicate this.
It’s very simple.
1..Government prints ‘money‘
2..Consumer prices increase
3..You lose
This is not a revolutionary idea. In his Foreword to Yale University’s Professor Emeritus of Economics Irving Fisher’s 1936 book 100% Money, Robert H. Hemphill, former Credit Manager of the Federal Reserve Bank of Atlanta said:
To the "man in the street," or to one whose wages, salary or income is paid in currency or coin, banking appears to be a remote subject, in which he can have little direct interest. To such a man it may be a great surprise to read that the amount of his wages, salary or income depends on the total of loans outstanding by the commercial banks of the of the nation. And yet such is the case…If all bank loans were paid, no one would have a bank deposit, and there would not be a dollar of currency or coin in circulation
Fisher, I., 100% Money, 2nd Ed., Adelphi Company, New York (1936)…Foreword by a Banker p xix-xxii.
Fisher, considered by many the greatest neoclassical economist of his age, wrote a book on this subject in 1928, The Money Illusion. He found out a year later how big an illusion this was. Fisher was eventually beggared as a consequence of the New York stock market collapse that began in late 1929.
Though I disagree with Fisher’s very premise and definition of ‘money,’ and therefore his analysis, some of his insights into the minds of people in the 1920s are interesting. For example
Almost every one is subject to the “Money Illusion” in respect to his own country’s currency…Fisher (1928) p3.
There has been no change in the subsequent century. This must be intentional.
Fisher, I., The Money Illusion, Adelphi Company, New York (1928).
Years earlier New York banker J.P. Morgan, giving testimony to the U.S. Congress, was more succinct.
“Money is gold. Nothing else”…
Bank and Currency Committee of the House of Representatives investigating an alleged money trust in "Wall street.", 18 and 19 December 1912. Source.
On top of peoples own experience there is plenty of data showing this. The RBNZ House Price Index is an example.
Housing (M10) - https://www.rbnz.govt.nz/statistics/series/economic-indicators/housing
“became more valuable is deluded“
The definition of “valuable” is subjective and what the measure is. In this case the measure is the New Zealand dollar. A house deteriorates over time, and requires maintenance (= expenditure of wealth and/or energy) to maintain its “value.” If left to time alone a house will eventually turn to dust. House values are a long nuanced discussion but in general the assumption here is, with all things being equal and absent a severe supply shortage, which New Zealand has not had in modern times, housing value for a maintained house should be reasonably stable over a lifetime (say 70 years). The problem is the measure (the New Zealand dollar).
“printed continuously“
Two points to be totally clear. No entity in New Zealand actually prints physical legal-tender currency.
1…Most NZ$’s are created electronically by private banks using debt. Banks do not ‘print’ any physical currency; they buy it from the RBNZ.
2…The RBNZ do not actually ‘print’ anything either. The banknotes it circulates are actually printed by another entity.(1) The word “print” in this context is a metaphor for the various activities which the RBNZ do which leads to currency creation.
Generally, private banks create most of the currency and the RBNZ makes the rules.
(1)—I haven’t looked but I assume an offshore banknote manufacturer is used. The technology required to produce modern banknotes is specialised and probably not available in New Zealand. No coins are minted here.
Aside from banknotes, the RBNZ ‘prints’ directly via various interventions (e.g. Repos, LSAP, OCR) or indirectly via banking regulation, standards etc.
This is what was meant in this NZ Herald propaganda piece that ([ ] added)
Orr explained how it [the RBNZ] printed money over that period - it was done digitally and through its bond-buying programme where Treasury issued Government bonds, for financial institutions to buy, which the RBNZ later purchased on the secondary market; a means of flushing banks with cash and keeping pressure on real interest rates
Orr was being honest when he said this
“I said people believe it because it is a fiat currency, it is backed by current and all future taxpayers of New Zealand with a Crown balance sheet.
Are you a taxpayer with a Crown balance sheet?
The words “backed by” and “future” tell us the currency is debt.
“created faster than it is destroyed“
Which it must be otherwise the Ponzi fraud collapses— debt must be repaid at a slower rate than new debt is created. This is a built-in ‘feature’ of all debt based currencies and must happen or the currency withers on the vine. All debt based currencies die eventually — they normally last a few generations (30-50 years) if well managed — but when this happens the currency can’t be parasitically extracted from any more, and a new currency must be established. Like a Central Bank Digital Currency (CBDC).
“quantity grows“
One way of seeing this is by the M3 money supply measure.
“natural and unavoidable. Not true“
But it is unavoidable in a debt based currency system like we have today in New Zealand.
This definition of inflation — i.e. consumer price rises — is in my (and many others) opinion a fraud. The true inflation is the inflation of the so-called money supply. Adrian Orr’s "we print money.” Consumer price inflation is a consequence of the money supply inflation.
There are plenty of other problems with this ‘measure’ of ‘inflation’ which are beyond the scope of this wee missive.
“rampant inflation“
The premise behind this is, in a debt based currency system like New Zealand’s, there will always be both money supply inflation and therefore its consequence, consumer price inflation. But the central bankers try to keep the latter low (until recently a maximum of 2% was the target) because if their fake currencies were to lose purchasing power too quickly the peasants would revolt.
I am only examining the New Zealand currency creation element of the recent rampant consumer price inflation. The are other inputs including international events. But what is being described here is the most consequential input to domestic inflation that should have been avoided. Though only a close investigation in the future will show the true contribution of this currency creation to the consumer price inflation, I have no problem predicating events described here will be the primary input to New Zealand’s experience. As far as I’m concerned this is a ‘no-brainer.’
“dole”
Government benefit payment of any sort.
Some probably ended up paying mortgage debt and some may have ended up in deposits for new homes.
“The politicians ALL“
Though the most culpable ones, Ardern and Grant Robertson, have been early rats off the ship.
Without Googling, I believe there have been all too rare periods in history of honest (precious metals backed) money, particularly in England and the United States, 18th, 19th centuries comes to mind, with stable prices for extraordinary long periods when compared to most of history. Which provides stability, sureity, trust, reliability, long term planning, creation of high-trust societies, and communities. With associated old fashioned values of hard work, thrift, saving for a rainy day. Ha, ha seems quaint, right?
Instead of financialization, inflation, fraud, speculation, gambling and associated errosive financial activities. Housing is a classic. I have actually said to people that is not an investment, but it appears to be an investment because of the financial system we live under. And in fact, housing investment, runaway prices and the awful rapacious real estate and "rental industry" are a destructive social I'll.
And people think I am barking mad.
They can't see the woods for the trees.
The hell that money creates - in ANY form. Good look at the mess!!!