Duncan Garner nails the symptoms

But completely misses the cause and only solution.

Paying Tribute in the South Pacific

How New Zealand's Private Bank-Centric Money System Enforces Financial Subjugation

(Updated and expanded)

Author: Iain Parker
Uniting People’s Credit Movement NZ

Introduction: Tribute by Another Name

Duncan Garner’s recent podcast is one of the best I have seen at laying out the cost of living crisis symptoms, our nation is enduring:

It pulled no punches, and rightly so. Kiwis are hurting. The economy is limping. Businesses are folding. Families are raiding their KiwiSavers just to get by. And the excuses coming from Minister Nicola Willis, Trump, timing, tourism, are as hollow as a pokie machine promise. But here's the problem, Garner nailed the symptoms, yet missed the cause, thus does not know the only solution.

This isn’t just bad policy or bad luck. It's a structural trap, engineered through our entirely compounding interest-bearing, private bank loaned money system, we presently endure.

This paper, Paying Tribute in the South Pacific, responds directly to that deafening silence from the political class and mainstream media alike. It argues that the payments made by the New Zealand public through taxation and interest, both private and state, constitute a form of financial tribute, a structural ransom to access the basic circulatory flow of currency. This extraction is legally enabled by New Zealand’s post-1989 Public Finance framework and ideologically justified by neoliberal orthodoxy.

Unlike Modern Monetary Theory (MMT), which sometimes drifts into abstraction or unrestrained fiscal excess, this paper grounds its critique in legal, infrastructural, and prudential frameworks articulated by Professor Robert C. Hockett and Lord Adair Turner. These thinkers, along with perhaps the worlds biggest economic brain, Michael Hudson, offer a rigorous foundation for understanding how sovereign monetary issuance can serve public welfare without fuelling the very inflationary spiral the banking elite so cynically warn against.

Indeed, it is the private banks themselves—through uncontrolled credit expansion and speculative lending—that are the primary cause of the inflation they so loudly blame on government spending.

I. The Architecture of Financial Subjugation

As Professor Robert Hockett makes clear in The Finance Franchise, modern money is not a private creation. Rather, it is a franchise of sovereign authority, a legal construct whereby private banks are permitted to issue credit as compounding interest bearing loans in the state’s name, under the implicit backing of public institutions. In New Zealand, this franchise has been outsourced so completely that the government itself borrows from these private intermediaries, paying interest for the use of what should be its own sovereign credit.

The Reserve Bank of New Zealand confirmed in its 2023 publication Money Creation in New Zealand that "most of the money in the New Zealand economy is created by private banks when they make loans." These ledger-entry credits are not drawn from prior savings but are created ex nihilo, backed only by the borrower’s obligation to repay with interest. This system necessitates continual credit expansion to avoid systemic collapse—an unsustainable treadmill of debt that primarily serves the interests of offshore bank shareholders and bondholders.

As Adair Turner warns, private credit creation is not inherently productive. Much of it fuels asset price inflation, exacerbating wealth inequality while generating paper profits for financial intermediaries. Meanwhile, the public sector, constrained by artificial debt ceilings and balanced budget dogma, must beg these same institutions for access to credit, paying a premium to fund infrastructure, housing, and healthcare. This is not a neutral system; it is structured subjugation.

Its a systemic trap.

II. The Mathematics of the Tribute Economy: Why 1 + 1 ≠ 3

This system rests on a basic arithmetic impossibility: entirely loaned based money creation with compounding interest on all of it, demands more money in repayment than was originally issued. As the Reserve Bank explains, commercial banks create new deposits (i.e., money) when issuing loans. But the borrower must repay not only the principal but also interest, which is never created as part of the original loan.

For example: a $100,000 mortgage at 5% creates $100,000 in new money, but $105,000 in debt. That $5,000 shortfall must be found elsewhere in the system—either through new borrowing or bankruptcy receivership. This builds a systemic demand for perpetual debt expansion while continuously falling behind.

This concept is central to Adair Turner’s Between Debt and the Devil, where he identifies “credit-intensive growth” as the lifeblood of our current financial system, growth that relies not on productivity, but on ever-larger volumes of private lending. Robert Hockett, in The Finance Franchise, calls this a rigged franchise model that socialises risk while privatising reward. The end result? A mathematical certainty that aggregate debt must grow faster than the money supply, dooming any vision of sustainable economic growth under the current rules.

New Zealand offers a stark case study:

• ~97% of its money supply is created by private banks (RBNZ, 2023)

• Most of this is mortgage lending (~60% of total bank credit)

• Private debt-to-GDP has ballooned from ~100% in 1990 to over 170% in 2023

This isn’t just unsustainable. It’s designed to be unsustainable, guaranteeing ongoing tribute payments in the form of interest, default, and austerity.

As sale of assets are repeatedly forced under bankruptcy receivership, more often than not purchased by corporations that share the same shareholding majority few that also own the private banks.

III. How CPI Exclusion of Land Fuels Housing Inflation and Bank Profits

Another key structural flaw in the system is the exclusion of land prices from the Consumer Price Index (CPI). While housing construction costs are included, the price of land, which often constitutes the majority of property value in urban areas, is not. This omission creates a blind spot in inflation targeting, allowing massive increases in land prices to go unacknowledged by the Reserve Bank’s official inflation metrics.

This flaw enables private banks to lend aggressively into the housing market, inflating land prices and boosting their own balance sheets. Because land appears to be rising in value, thanks to speculative lending, the banks can justify issuing even larger mortgages. The result is a self-reinforcing feedback loop:

• Land prices rise due to credit-fuelled demand

• Higher land values justify larger loans

• Larger loans increase bank profits via interest payments

• None of this triggers a CPI response from the Reserve Bank

Meanwhile, the productive economy suffers. Businesses in manufacturing, technology, and export sectors cannot afford to compete with the returns banks earn on mortgage lending. As Michael Hudson notes, when credit creation is skewed toward unproductive assets like urban land, it diverts capital away from sectors that generate real economic growth.

This distortion amplifies the already fatal flaw of the entirely private bank loaned, with compounding interest attached, money system. Not only must debt grow faster than production to cover interest payments, but the credit itself is being misallocated, flowing disproportionately into land speculation rather than productive enterprise. The result is a housing affordability crisis, a stagnating real economy, and ballooning wealth inequality. In short, the exclusion of land from CPI is not a technical oversight, it is a design feature that serves the banking sector at the expense of the nation.

IV. Farmland as Collateral: When the Productive Sector Becomes Speculative

The distortion is not confined to urban land. New Zealand’s rural economy, long the backbone of real, productive output, is now caught in the same speculative spiral. Farmland prices have soared to such heights that income from farming operations alone can no longer support the purchase price. In other words, farms no longer make economic sense as farms, they make sense only as speculative assets.

The root cause is the same: banks issuing excessive credit against rising land values. Just as with residential housing, this inflates rural land prices far beyond their productive capacity. Younger generations of farmers are increasingly shut out, unable to afford to buy the family farm even with decades of future labour. Intergenerational farming is collapsing, and more and more farmland is being snapped up by corporate entities, often backed by the same international capital pools that own major stakes in the banks themselves.

This is not creative investment, it is extractive finance. The land remains, but its role in the national economy shifts from productive engine to speculative collateral. The profits go offshore; the costs remain local. Rural communities are hollowed out, family farms disappear, and what’s left is a façade of agricultural continuity masking a new form of absentee ownership.

Even Fonterra, the mothership, has outside investor shareholders, that demand appeasement above all other shareholders, without concern for the cost to the average Kiwi customer.

In this way, even the most grounded sectors of New Zealand’s economy, those tied to food, land, and physical output, have been hijacked by the same mathematical flaw. When land is priced according to its speculative, debt-fuelled value rather than its productive yield, it becomes impossible for genuine productivity to compete. The economic system eats itself.

V. From Sovereignty to Servitude: A Historical Arc

New Zealand’s original monetary architecture was not always so subservient. The Reserve Bank was established in 1934 with a mandate to support national development, and for a time, sovereign credit issuance was used to fund state housing, infrastructure, and wartime mobilisation. But beginning with the 1989 Public Finance Act, New Zealand underwent a radical transformation under neoliberal influence. Treasury operations were decoupled from monetary issuance, and the state’s capacity to create money for public purpose was abandoned in favour of market-based interest bearing loans.

The Local Government Funding Agency (LGFA), introduced in 2011, became a key vehicle for channelling local government borrowing into the hands of private and institutional investors, including foreign bondholders. Councils now borrow from a syndicated debt pool, underwritten by public revenue streams like rates, which are effectively tribute payments passed on to bondholders in the form of interest.

VI. The Ransom Model of Taxation and Public Spending

Contrary to popular belief, taxation in New Zealand does not directly fund government spending. Rather, it is used to repay interest-bearing debt issued by the Crown to private markets. As Hockett notes, "taxes are not the source of spending but the tool by which we prevent inflation after money has been issued." In New Zealand, however, taxation plays a more sinister role: it functions as the enforcement mechanism for tribute payments.

The Inland Revenue Department (IRD) becomes the strong arm of the financial system, chasing arrears not to reclaim stolen public funds but to service debts incurred to private creditors. Meanwhile, essential services are underfunded, not because of a lack of real resources, but because of an arbitrary refusal to use sovereign credit for productive investment. This is the equivalent of a nation paying ransom to use its own currency.

VII. Case Study: Kāinga Ora and the Housing Racket

Kāinga Ora, the state housing agency, provides a vivid case of how this tribute economy operates. Originally tasked with alleviating the housing crisis, it has increasingly become a borrower in international debt markets. In 2021, Kāinga Ora issued $1 billion in bonds, not to build homes outright, but to finance projects through private credit channels.

When Kāinga Ora sells land or delays projects—as it recently did in Wellington, slashing plans from 320 homes to just 42—it is not acting as a public builder but as a constrained corporate borrower. Its decisions are shaped not by social need but by debt servicing requirements. The net effect is that public housing is sacrificed to ensure timely interest payments to private creditors, another form of tribute.

In November 2022, the Treasury announced that Kāinga Ora’s future financing requirements would be met by loans from New Zealand Debt Management (NZDM) rather than direct bond issuance. However, this restructuring did not sever ties with the private banking system. The borrowed funds still originate from private investors, with NZDM acting as intermediary through the Crown’s borrowing programme. The underlying tribute dynamic remains unchanged—only now the payment pass-through is less visible to the public.

Importantly, this was not always the model. In 1936, under the First Labour Government, New Zealand used Reserve Bank credit directly to fund a massive public housing programme. The government created the credit, issued it through the state, and built homes—thousands of them—without borrowing from private markets. This sovereign credit issuance not only alleviated the housing crisis of the Depression era, it stimulated employment, stabilised communities, and built durable housing stock that endures to this day. The precedent is clear: sovereign credit issuance has been done before, and it worked.

VIII. The Sell-Off of the Commons: From Sovereign Assets to Corporate Control

New Zealand’s systemic dependence on private debt has not only distorted prices and driven inequality—it has also forced successive governments to offload state-owned assets and utilities in the name of fiscal prudence. This transfer of public wealth into private hands has been a slow-motion heist, cloaked in the language of economic reform, competitiveness, and efficiency. But the end result is clear: critical infrastructure, once owned by all New Zealanders, is now controlled by foreign corporations or private monopolies.

The logic is circular. The government is told it cannot afford to borrow directly from its own central bank or issue sovereign credit without triggering inflation. Instead, it borrows from private bond markets, incurring interest obligations. To service that interest and maintain credit ratings, it is then advised to reduce its balance sheet, by selling off revenue-generating assets. It is a tragic cycle of self-imposed scarcity in a country rich in natural resources and human potential.

Electricity networks, airports, ports, rail lines, telecommunications, forests, water rights, roads and the list goes on, have been partially or fully privatised under this regime. The public pays higher user fees, receives fewer services, and loses all say over strategic assets, while the profits go offshore. And too often, this process has been facilitated not by foreign agents, but by well-placed New Zealanders willing to betray their own people in exchange for personal enrichment.

Former ministers, officials, and business leaders who championed these privatisations frequently turned up later on the boards or payrolls of the very corporations that acquired the assets. This revolving door of influence has gutted democratic accountability and transformed what should be a sovereign nation into a tributary province of global finance.

The promise that competition among private owners will be the common peoples protection from price gouging has been a false doctrine. Due to the level of shared ownership of most joint stock owned, or private equity funds, by the same few majority private owners.

The result is not just economic loss, it is political disempowerment. A people who no longer own their infrastructure are a people who no longer control their future. In such a system, voting becomes a ritual without substance, as the true levers of power reside in opaque corporate boardrooms, not Parliament.

It is not too late to reverse course, but first, we must confront the scale of what has been taken from us, and the rigged monetary framework that enabled it.

IX. Reframing the Narrative: From Complicity to Resistance

To challenge this regime, we must reframe the national narrative. New Zealanders are not just taxpayers or citizens, we are tribute payers, coerced by a financial priesthood that has monopolised access to credit. But history shows us that alternatives exist. During the Great Depression and World War II, the state used sovereign credit issuance to fund massive public works and mobilisation, without triggering hyperinflation or fiscal collapse.

Hockett and Turner both advocate for prudential public credit issuance, tied to productive capacity, legal infrastructure, and democratic accountability. Sovereign credit should be directed toward housing, clean energy, transport, and technology—real assets with long-term public returns. This is not utopia; it is a restoration of sovereignty.

Conclusion: Ending the Tribute Economy

New Zealand's money system has become a machinery of wealth extraction, where the people pay tribute to access their own resources. The remedy is not endless borrowing or reckless printing, but sovereign monetary reform grounded in legality, prudence, and purpose. Public credit must serve the people, not the global financial empire.

So yes, Duncan, you're absolutely right: New Zealand urgently needs life support. But the real question is: will we keep begging the same bankers who broke our legs so we had to rent wheelchairs from them—while they tell us it’s a sustainable economic model—or will we reclaim our own ability to walk again?

Until this structural dependency is reversed, every tax paid, every mortgage signed, and every rate increase is another ounce of tribute to a banking cartel that has made serfs of citizens. It is time we recognised this system for what it is, and reclaimed our national credit card, preloaded with the credit reserve of our natural wealth, from that cartel.

The New Zealand Economic Stabilisation and Public Wealth Restoration Bill advocated for by the Uniting Peoples Credit Movement NZ, does exactly that. Check it out here:
https://www.facebook.com/groups/peoplescredit.nz and here:

Uniting Peoples Credit Movement NZ Advancing our proposed New Zealand Economic Stabilisation And Public Wealth Restoration Bill

By NZ Global Economics Context

Bibliography

• Hockett, Robert C. The Finance Franchise: Why the Fed is a Bank and Not a "Printing Press". Cornell Legal Studies Research Paper No. 18-25, 2018. https://ssrn.com/abstract=3192140

• Hockett, Robert. The Finance Franchise: Why Banks Should Be Public Utilities. Oxford University Press, 2020.

• Reserve Bank of New Zealand. Money Creation in New Zealand. 2023. https://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Explainers/Money-Creation-in-New-Zealand.pdf

• Turner, Adair. Between Debt and the Devil: Money, Credit, and Fixing Global Finance. Princeton University Press, 2015.

• Turner, Adair. Reflections on Monetary Finance. Institute for New Economic Thinking, 2020. https://www.ineteconomics.org/research/research-papers/reflections-on-monetary-finance

• Kāinga Ora. Debt Programme Updates. https://kaingaora.govt.nz/about-us/debt-programme/

• The Post. “Kāinga Ora Backs Out of Plans for 320 Homes, Now Only 42 to Be Built.” July 2025. https://substack.com/redirect

• New Zealand Debt Management. “NZDM to Undertake Financing of Kāinga Ora.” Media Release, 11 November 2022. https://debtmanagement.treasury.govt.nz/investor-resources/new-zealand-debt-management-undertake-financing-kainga-ora