Eco-Economy: Common Currency – The ANZAC Dollar?
---> FOR FREE DAILY SCOOPS BY EMAIL - CLICK HERE
--> TO CHANGE NEWSAGENT OPTIONS - CLICK HERE
Common Currency – The ANZAC Dollar?
By Deidre Kent
During the late nineties, there began a debate in New Zealand about the merits of adopting an ANZAC currency. In April 2000 neoliberal economists Arthur Grimes, Frank Holmes and Roger Bowden provided fresh impetus when they published a book entitled ‘An Anzac Dollar’ in which they argued that a common currency would reduce costs for businesses who traded with Australia and be the next logical step in Closer Economic Relations with Australia (CER). It would lift export performance and everyone would benefit. Their survey showed that 58% of businesses were strongly in favour of a common currency, which eliminates uncertainty created by volatile exchange rates. New Zealand, they said, is the smallest industrialised country in the world to run an independent monetary policy.
By September the Prime Minister Helen Clark seemed not averse to the discussion, saying the New Zealand economy was ‘too small to register on the radar screens of financial markets and investors’. The Dominion editorial favoured dumping our dollar and a One News Colmar Brunton poll in September 2000 found that 51 percent of people were in favour of a common trans-Tasman dollar. Meanwhile the ACT Party was proposing the adoption of the US dollar instead.
Since such a step would be hard to reverse, it is important to think it out properly.
The main arguments against the common
A distant Melbourne central bank would make decisions for our country and monetary (and therefore economic) sovereignty would be surrendered. New Zealand would effectively give over control of its inflation rate and its interest rates to foreign bankers. If inflated house prices in Sydney caused the new Australasian central bank to increase interest rates that could make things worse for New Zealand if it were in a recession. It would mean greater centralisation where unelected bankers 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 