A New Zealand Central Bank: Interlude

A very short Q&A. And D.

Image from Inside the Portuguese Central Bank's Gold Vault. © BullionStar

As to thy friends, for when did friendship take
A breed for barren metal of his friend?

Act 1 Scene 3, The Merchant of Venice, William Shakesphere

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Home: New Zealand’s Financial Resets

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QUESTION

What would you NEED to ENSURE a value for your product?

ANSWER

A GUARANTEED BUYER

And a short…

DISCUSSION

By 1930 two important revenue streams for bankers in New Zealand were banknotes—i.e. still theoretically receipts for gold sovereigns—and credit—i.e. debt issuance aka currency creation. Neither business was possible without backing from an asset and gold was traditionally the main asset by value, though government securities (i.e. taxpayer debt) were growing in significance. Gold didn’t directly earn an income stream because when in your own possession, as per the image above, gold has no counterparty risk.¹

It’s a true asset, real wealth, not dependent on another outside entity (counterparty).

1 Sovereign - George V. Weight gold ~7.3g: Value: £1 sterling. Source.

It could be said with gold as the asset backing the notes and credit business, banks profit streams looked something like this (very crude) graphic.

Figure 1: Representation of banking sources of profit using gold as security.

But what if you could go from the above situation, to this.

Figure 2: Representation of banking sources of profit using SOMETHING with an income stream as security.

There are no prizes for guessing which the bankers preferred. They knew what they wanted to switch gold out for; what ‘SOMETHING’ was going to be. But to go from figure 1 to figure 2, the bankers first had to bait, switch and distract. And get rid of the gold.

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The bait, switch and distraction next.

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Next: Treasury Beguiles and A Prussian's Wiles: An Orchestrated Litany of Lies - #3 & #4
Home: New Zealand’s Financial Resets

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1. “no counterparty risk“
This is not the same as no risk; there is always risk. It means the property cannot be lost possession of because of the failure of a counterparty to perform.

See: https://www.investopedia.com/terms/c/counterpartyrisk.asp