The land dollar : a national land backed currency
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The Land Dollar: Introducing a land backed
national currency
The Land Dollar: Introducing a land backed
national currency
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New Economics Party proposal
Deirdre Kent, author of Healthy Money Healthy Planet – Developing Sustainability through New Money Systems
Contact: [email protected] or on twitter @deirdrekent
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The order of this slideshow
International background
Four international problems
Paradigm shifts needed
What to use
What to do
Expected results
Has it been done before in history?
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New Zealand
Only two layers of government
Local taxes are called Rates
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Auckland is the biggest city with a third of the population
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Major problems
Climate change
Inequality
Economic instability
Energy cliff
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One global system = connectedness
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Financial contagion
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Ultimate needs
Food, clothing, affordable housing
Habitat restoration
Jobs/basic income for all
Create a thriving economy without growth imperative
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Three major changes we want
Publicly created currencies spent into existence – not lent into existence at interest
Change the tax system Tax the use of the commons – not labour, sales or enterprise
Welfare Reform to introduce Citizens Dividend.
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All three changes would shock the economy!
• Impossible both politically and practically to do public money creation suddenly.
• Enormous change to tax system, as 80% of NZ central govt revenue comes from income tax, GST, company tax - can’t be done rapidly, nor on its own
• Universal Basic Income is massively expensive and involves an inflation risk
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“Derivatives are financial weapons of mass destruction”
Warren Buffett
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Banks now bigger than before Global Financial
CrisisThe gigantic and growing shadow economy is very weakly regulated, even after the Global Financial Crisis. Derivatives were at the heart of the GFC. Banks are now both too big to fail and too big to jail. The wealthiest top 0.1% can now easily influence Governments.
We propose side-stepping the present (monetary, tax and welfare) system altogether and starting afresh, with one holistic solution, rather than fighting to change a very dysfunctional system
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Poverty in New Zealand
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The widening gap between rich and the rest hurts all.
(Inequality A New Zealand Crisis ed Max Rashbrooke)
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Global economy in crisis – bubbles everywhere
Nomi Prims, ex Managing Director of Goldman Sachs says “The global economy has to crash. We are in a precarious place” (Interview with Thom Hartmann)
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Banks create money
Michael Kumhof, economist IMF
January 2013
The key function of
banks is money
creation not intermediatio
n.
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Banks and land-ownership
When banks create money as interest bearing debt, they get the best security – land
With rising land prices they benefit from their rising loan portfolio
We need to weaken the link between banks and land and strengthen the link between Government and land.
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Each site is given value by...
Site
Government
Local Businesses
Local Government Social
Organisations
Nature
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The tax system should incentivise what we want to
encourage
Labour - but when you work, you pay
Sales - but when you buy, you pay
Enterprise - but when you run a business, you pay
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Hard to reform the tax system
Since people are already paying twice on their land – their mortgage and their rates – it is politically suicidal to propose a third tax, a land tax.
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The tax system benefits banks. Banks want
Rising house (land) prices
which means rising debt
which means rising revenue for banks
The last thing banks want is for government to benefit from rising land prices. Banks want that privilege. 24
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What happen whenbanks create money?
Banks create money as interest bearing debt
Prices rise
Growing debt
Wealth concentration
Instability
Habitat destruction
Growth imperative
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A welfare mess
Means tested benefits lead to a benefit trap
Complicated, intrusive, expensive, leads to
housing duplication, encourages dishonesty.
Doesn’t value caring for dependents or
developing useful skills or inventing
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Why not a Universal Basic Income?
Universal Basic Income is a full Citizens Dividend. If suddenly introduced, it would shock the economy.
Our three reforms of tax, currency and welfare would all shock the economy – if done separately!
But done together, introduced gradually as a small but growing Citizens Dividend, the transition will be smooth!
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Time to think differently?
“We can’t solve our problems with the same level of thinking we used when we created them.” Albert Einstein
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Central government
Should set the policies that can provide the right conditions for strong, vibrant local economies and then get out of the way
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Politicians decide tax, money and welfare
systems
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“To change something, build a
new model that makes the existing model obsolete.”
(Buckminster Fuller)
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• The crash will happen at some point.• Issue a new currency that can survive
it.• Spend it into existence to buy land.• Make it obey different tax and welfare
laws.
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A Living System
Complex
Whole
Feedback loops
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Different interventions, different leverage
A system has patterns which mustn’t be broken
Choose where to intervene to get the most leverage
Treating one thing in isolation won’t work
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Possible interventionsin a living system
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Interventions for most leverage
Change major paradigms, common assumptions and beliefs, about the currency system and the basis of taxation
Change the goals: aim of a vibrant economy is not growth, but maximum happiness for the most people
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1. Lending into existence vs.
spending into existence
New paradigm:Instead of money being created as interest bearing debt by private banks, money is spent into existence by government
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2. Parallel currencies
Change of paradigm: instead of one national currency, two national currencies acceptable for taxes
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3. People have ability to issue money
New paradigm: It is a country’s sovereign right to issue their own currency.
Any group of human beings is free and able to design and start their own currency
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4. Tax from monopoly use of natural resources
New paradigm: the monopoly use of the world’s natural resources should, and can, be taxed
Result: instead of government revenue coming from income tax, GST and company tax, it will come from the use of land and other natural resources
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Change the goal of an economy
The present goal of the economy is simply to grow so that the interest could be paid
The new goal of the economy is to bring the greatest happiness to the greatest number of people
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The power of currency design
A well designed currency system is a powerful agent for change. You can:-
Can build in incentives for import substitution
Designers can alter velocity of circulation
Currencies can shape behaviour towards co-operation and generosity
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A good currency flows like blood
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The Plan
Create a new parallel national currency
Link it to a very different tax and welfare system
Grow the amount of this currency slowly to avoid inflation
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Treasury issues a new currency for buying land.
This currency can be spent by citizens on taxes, land rent and student loan
repayments.
It is redeemable for taxes, so can be used for anything.
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Who will issue it?
Not the Reserve Bank, which is too close to the private banks, even in New Zealand
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Overview of the process1. Local land committees establish Land Rental
Index and recommend which land should be bought first in the area
2. A central land committee determines suitable order and intervals of land purchase, to avoid inflation
3. Treasury buys land, paying with land dollars and keeps the land as the crown’s security
4. The lessee pay rent to the Treasury but no longer pays any rates
5. The seller then spends the land dollars 47
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GovernmentTreasury
Citizens
Resource rental revenue shared three
way
Local government
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Treasury
Local monetaryauthorities
Monetary authorities, acting
together, make sure there is no
inflation
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Central Land Committee
Local land committee
Land committees, working together,
decide on a programme to buy
up land. Budget set by Monetary
Authority
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1. Land Committees set up
Committee in each local board area that has good Maori representation from local hapu.
Establish a local Land Rental Index and come up with a list of land recommended for sale.
Central Land Committee buys up land gradually.
Power to the local boards
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Whose land will Treasury
buy first?
Land which is not under
dispute from a Maori iwi
(tribe) or hapu subtribe)!
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The Waitangi Tribunal meets to hear Treaty claims
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2. The land committees might choose any combination of:
Land owned by land trusts who want to take land out of the marketplace
Land just outside built up areas, for food production
Land owned by a business person
Foreign owned land
Valuable land: central city land, especially vacant sections
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3. Treasury buys land
•Assess rentals on bare land by auction in order to find true value, and set up the Local Land Rental Index
•Land becomes Crown Leasehold Land
•Full land rental payable by lessee
Land rental adjusted annually according to
Land Rental IndexCrown pays rates
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What is a just lease?
Never in perpetuity
Possible to pass to a relative
Security of tenure
Rent adjusted yearly
Protected from political interference
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Crown Leasehold land exists
Many high country stations,Reclaimed land e.g. Napier
port, Auckland portLand Information NZ deals with
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3. When the Crown owns my land
We only have to pay for our house
Crown pays our rates
Because we only have to pay land rents, we have incentives to improve our house.
We can pay our builder partly in Land Dollars
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4. Use of Land Dollars
•A long term investment?
•Pay taxes in advance?
•Lend them to their children to pay off student loans?
•Put them in NZ owned bank to be lent out to businesses?
•Pay off mortgage59
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Can I sell Land Dollars for NZ dollars?
The Land Dollar is issued at par and redeemed at par by Treasury
In between let the currency float.
It could even go out of the country for a while but it must be back in Treasury before it expires, just like a Flybuy point or a store voucher.
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Resource tax on use of the commons
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Of course there will be ‘sin’ taxes
Tobacco, gambling and alcohol will continue to have taxes, once called Excise Taxes.
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Treasury receives land dollars
Refresh and re-date the Land Dollars they receive
• From taxes or student loan repayments
• Issue all men, women and children with a Citizens Dividend in Land Dollars.
• Digital only, on a dual currency debit card like Kiwibank’s Loaded card.
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The First Citizens Dividend
Paid to all who have lived in NZ for a year, including children.
Will be spent by most people on essentials like food.
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The farmer uses the money
• Choice of inputs directed towards local and non-fossil fuel
• Labour has no income tax so farmer employs more labour
• Encourages more manual and sustainable practices
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Results –Affordability improves
No tax burden so prices drop
No interest built into the price of goods so prices drop
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Thriving building industry
No GST on materials
No income taxeson wages
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Thriving post fossil fuel economy!•As people spend their Land Dollars on
labour intensive industries within the country, production will rise. The arts will flourish.
•Organic farming, smaller farms, improvement of land will result from more labour input and less fossil fuel input.
•Businesses with a low carbon footprint will thrive because of this new capital injection.
•And the price of houses on Crown land will halve.
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Has it been done before?Wōrgl 1932
1923 German hyperinflation
Age of cathedrals 10th to 13th centuries
BUT A CURRENCY HAS NEVER BEFORE BEEN DESIGNED TO LINK TO A NEW TAX AND WELFARE SYSTEM 69
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Alternative: Create national currency at local
level
Why not give money creation power to community boards?
And give them land purchasing powers. Community land trusts
That would give them revenue raising powers (but make them share)
Power to local people, with safeguards.
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Why a locally created national currency?
Wairoa, part of Hawkes Bay, part of NZ
Power to local #relocalisation
Care needed if rogue council. Commissioner 74
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Three levels all coordinated
All equally important and have
their integrity
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Summary
Money should be created by the people for the people. More than one model.
It should be backed by land.
It should be gradually spent into existence to buy land, monitoring inflation all the time.
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That’s preposterous!All new paradigms appear preposterous
for a start79
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A glimpse of hope
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`
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