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: deirdre.kent@gmail.com 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

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

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

leases57

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

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

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

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

A glimpse of hope

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