 will override the democratic decisions of member countries.
Even with a small country like New Zealand centralisation of decision making has to ignore the fact that different parts of the country require different solutions. When Auckland house prices rose rapidly during 1992-1997, the Governor of the Reserve Bank stepped in and raised interest rates, infuriating people in Southland. But a one-size-fits all approach is never found in natural systems. Centralisation like this didn’t work for communism and it won't work for Europe, the interdependence which stabilises a system. So it isn’t an either/or decision. It is both, and that requires a new mindset.
Let’s look to see what happened with the Euro. Eurosceptics have argued that the economy required for Spain is quite different to that needed in Germany and one central bank can’t be all things to all countries. Take the case of Ireland, for instance. When Ireland adopted the Euro its economy was experiencing high inflation and stronger growth than most of the other ten countries. But did the central bank raise interest rates and dampen down the economy? No, the interest rate in June 2000 was a low 4.25 percent, and Ireland experienced double doses of a consumer boom. Its house prices rose and unemployment dropped, bringing inflation to 20 percent.
Before I discuss the proposal to adopt the US dollar, let's look at the Federal Reserve Bank. The US FED is 20% owned by the US Government and 80% owned by the Regional FED banks which are in turn privately owned by their member banks. The only physical money ever put up for the FED was the Government's 20%. The FED then promptly created loans to finance the 80% private banks' shares. A bank can loan money into existence, and the Fed did it for its own shareholders.
So if New Zealand adopted the US dollar, we would be giving away our sovereignty to the Federal Reserve of US which is 80% privately owned. That means our money supply could be contracted and expanded by the decisions of private international bankers. The so-called business cycle, the inevitable result of debt-based financial system, can then be used to the financier's advantage.
The power to decide on the size of the money supply is an awesome power. Of the Federal Reserve system, economist Milton Friedman once said: 'Any system which gives so much power, so much discretion to so few men such that mistakes, excusable or not, have such far-reaching effects, is a bad system. It is a bad system to believers in freedom just because it gives so few men such power without any effective check by the body politic.'
The case of Argentina provides a salutary warning for those who favour New Zealand adopting the greenback. Argentina pegged their peso to the US dollar and when the American dollar appreciated, Argentina’s exports were priced off the world market, forcing the state and the private sector to borrow more and more US currency from international financial institutions. Unemployment soared, pensions were cut, spending on health, education and welfare was slashed as Argentina struggled to service its US$132 billion debt. When President Fernando de la Rua forbade citizens to withdraw more than US$250 from the banks, Argentines poured on to the streets in open revolt and the government changed yet again.
The two options currently debated are the ANZAC currency or New Zealand dollar. But there is a third option, that we need both a NZ dollar and an ANZAC dollar. These could all co-exist.
What is known is that traders are more likely to trade in their currency zone than their geographical zone. Thus each currency has its role, and each economy should have its centre of control. Local currencies encourage local trade, national currencies encourage national trade and supranational currencies encourage trading within that supranational zone.
Retaining a NZ currency would enable New Zealanders to trade with each other without using valuable Anzac or US currency. It would help us keep our integrity as an economy and the Government wouldn't lose the $150 million a year gained