NGO Another Way (Stichting Bakens Verzet), 1018
SELF-FINANCING, ECOLOGICAL, SUSTAINABLE, LOCAL INTEGRATED DEVELOPMENT PROJECTS FOR THE WORLD’S POOR.
Edition 01 : 13 September, 2012.
Edition 05 : 30 January, 2012.
Summaries of monetary reform papers by L.F. Manning published at http://www.integrateddevelopment.org
The referenced papers :
General summary of all papers published.(Revised edition).
THE MANNING PLAN FOR PERMANENT DEBT REDUCTION IN THE NATIONAL ECONOMY
T +64 4 2986890
24 January, 2014. Final version 10 for publication.
All Rights Reserved.
THE MANNING PLAN FOR PERMANENT DEBT REDUCTION IN THE NATIONAL ECONOMY
EXECUTIVE SUMMARY FOR INTERNATIONAL APPLICATION.
A low risk
politically acceptable and practical way to resolve the world debt crisis
without sudden or radical change to the world’s financial system is presented.
It is worked out for conditions in
Three administrative institutions are introduced:
A national debt management authority (NDMA),
A national public development fund (NPDF)
A national public investment trust account (NPITA).
The plan is based on specific forms of UBI and DJI structured to avoid inflation. Parameters can easily be adjusted so that incomes match the physical and human resources available to the economy. The plan provides for control of secondary on-lending to avoid any risk of inflation exceeding 1.3%.
All legal residents receive a weekly basic income payment of about € 63 ( US$ 84). This goes into a special personal UBI account. For businesses a weekly payment of € 63 (US$ 84) goes into a DJI account for each Full Time Equivalent (FTE) employee registered under a PAYE (Pay as You Earn) or equivalent tax system.
Parameters suitable for each country will vary. As a very rough guide, the total annual amounts involved could be to the order of € 5 billion (US$ 6.65 billion) for each million people, of which about € 3.75 billion ( US$ 5 billion) for Universal Basic Income (UBI) and € 1.25 billion (US$ 1.65 billion) for Business Debt Jubilee Income (DJI). The money to make the payments will be created debt-free and interest-free by a publicly-owned Central (or Reserve) Bank and administered by the NDMA
The payments made to indebted persons and businesses will be used to retire their bank debt. The payments made to non-indebted persons and businesses will be invested in a National Public Development Fund (NPDF) that will pay tax-free interest on the deposits at around 2.3%/year, a figure comparable to the existing average deposit interest rate after taking reduced inflation and taxation into account. The NDPF money will be used to fund new productive development both public and private. NPDF acts as a publicly owned Savings and Loan institution for the purposes of new productive investment.
Existing government debt will be replaced as it matures by debt-free interest-free credit created by the Central Bank for the NDMA. This does not increase banking system deposits so the process cannot be inflationary. Money to fund new government investment will initially be sourced from the NPDF using deposits from non-debtor UBI and DJI accounts.
National public investment trust account (NPITA).
Bank deposit holders will be able to invest in a National Public Investment Trust Account (NPITA) that will act as a publicly-owned Savings and Loan institution to manage the on-lending of deposits to fund the exchange of existing assets and to provide personal loans (including student loans and credit cards).
Bank balance sheets.
Under the plan, bank balance sheets will still grow, but over time there will be little bank debt remaining. Instead, secondary lending will be 100% backed by monetary deposits. Banks will be paid a spread of around 1.7%/year for their services, comparable to what they get now after taking into account that their lending under the new system is practically risk free as normal debt repayment is guaranteed through the Universal Basic Income (UBI) and Debt Jubilee Income (DJI) accounts.
Interest on NDPF and NPITA investments.
New money for interest paid on UBI/DJI balances invested with NPDF and to depositors on-lending their deposits through NPITA will be supplied debt-free and interest-free by the central bank.
EXECUTIVE SUMMARY FOR
1. This plan offers a very low risk way to resolve the world debt crisis without sudden or radical change to the world financial system. It brings together a number of ideas such as Universal Basic Income (UBI), Debt Jubilee Income (DJI), and Quantitative Easing (Monetary Dialysis) that are already receiving some attention but cause concern to some policy makers when they are considered in isolation. The plan can be implemented quickly and unilaterally.
2. The plan is based on specific forms of UBI and DJI structured to avoid inflation. The plan avoids most inflation because it can easily be adjusted so that incomes match the physical and human resources available to the economy.
3. The Manning Plan
sets out implementation details for
4. The total Universal Basic Income payments are initially about NZ $23 billion/year and the total Debt Jubilee Income payments are initially about NZ$7 billion/year. The money to make the payments will be created debt-free and interest-free by the Reserve Bank and administered by a New Zealand Debt Management Authority (NZDMA).
5. The payments made to indebted persons and businesses will be used to retire their bank debt. The payments made to non-indebted persons and businesses will be invested in a New Zealand Public Development Fund (NZPDF) that will pay tax-free interest on the deposits at around 2.3%/year, a figure comparable to the existing average deposit interest rate after taking into account reduced inflation and taxation. The NZDPF money will be used to fund new productive development both public and private. NZPDF acts as a publicly owned Savings and Loan institution for the purposes of new productive investment.
6. About NZ$ 15 billion of bank debt will be retired during the first year, leaving new deposits of about NZ$15 billion, roughly similar to the present financial system.
7. Bank deposit holders will be able to invest in a Public Investment Trust Account (PITA) that will act as a publicly-owned Savings and Loan institution to manage the on-lending of deposits to fund the exchange of existing assets and to provide personal loans (including student loans and credit cards).
8. Bank balance sheets will still grow, but there will be little bank debt. Instead, secondary lending will be 100% backed by monetary deposits. Banks will be paid a spread of around 1.7%/year for their services, comparable to what they get now after taking into account that their lending becomes largely risk free. Normal debt repayment is guaranteed through the Universal Basic Income and Debt Jubilee Income accounts.
THE MANNING PLAN FOR DEBT REDUCTION
1. Establish a private Universal Basic Income (UBI) Account for every legal resident. The UBI is described in paragraph 2. The UBI provision will apply only to individual people. The account will record the outstanding household and consumer debt of each individual. Jointly held debt will be shared among those adults in the household who are jointly and severally liable for that debt. Individual debt, such as student and credit card debt will be assigned to the individual who holds it. The debt accounts will be dynamic: new debt incurred and debt repayments made will be automatically registered on the private Universal Basic Income account.
2. Pay every legal resident a weekly debt-free, interest-free Universal Basic Income funded from the central bank. The amount of the UBI will be variable so that it matches the ability of the economy to absorb the debt-free, interest-free cash injection. The UBI will be managed by a New Zealand Debt Management Authority (NZDMA) set up for the purpose of administering the Manning Plan . A Universal Basic Income of NZ$100/week will amount to about NZ$23 billion/year.
3. The UBI will be funded by means of debt-free, interest-free credit created by the central bank and deposited in the UBI accounts managed by the NZDMA. The credit could be called sovereign or treasury credit created by the central bank on behalf of the government, and it mirrors the way government funding is created at present except that it will be done internally without the need to issue interest-bearing bonds to private banks and financial institutions.
4. The UBI will be used to automatically and directly reduce the debt of individuals carrying debt. Existing household bank debt will progressively be set off against the UBI cash injection (paragraph 2) used to repay it. About 36% of the NZ$23 billion annual UBI payments (paragraph 2) or more than NZ$ 8 billion will be used to extinguish bank debt until nearly all bank debt has been repaid . NZ$ 14.7 billion of the new debt-free, interest-free, UBI payments will be paid out to non-debtors compared with an average of NZ$16.4 billion of new bank debt issued annually in New Zealand during the period from the end of March 2002 to the end of March 2012 . Deposit growth under the Manning Plan will therefore be less than it has been in the past while existing household bank debt will fall quickly as it is repaid.
5. All Universal Basic Income payments made to those people (initially about 64% of the population in New Zealand, including children) who are not in debt  will be loaned by the New Zealand Debt Management Authority on their behalf to a New Zealand Public Development Fund (NZPDF) to be established by the NZDMA at an interest rate to be set by the NZDMA from time to time. The interest rate will reflect inflation of, say, 1.3 % plus a margin of, say, 1% to reflect the average interest rate on all deposits. The interest payments payable by the NZPDF on the on-loaned UBI deposits would be tax-free. On the above figures, the net real interest rate payable by the NZPDF would be about 2.3% compared with the comparable average existing net real deposit interest rate in New Zealand of about 2.4% .
The NZPDF does not have to on-lend all of the deposits it receives from the UBI accounts. The NZPDF could keep some of the residual NZ$14.7 billion (paragraph 2) to enable the government to reduce taxation or repay government debt, or it could decide to hold substantial balances in its accounts should that be required for system stability. The direct cost of any of the three options is the interest that the NZPDF pays into the citizens’ individual UBI accounts on those amounts it does not lend for productive investment.
A basic flow diagram for the Manning Plan is provided as APPENDIX A.
6. Establish a Debt Jubilee Income (DJI)
account with the NZDMA for every
The DJI is described in Paragraph 7. The account will record the outstanding debt of each individual business. The debt accounts will be dynamic: new debt incurred and debt repayments made will be automatically registered on the Debt Jubilee Income account.
7. Pay every qualifying company a monthly debt-free, interest-free Debt Jubilee Income (DJI) funded from the central bank. The amount of the DJI will be variable so that it matches the ability of the economy to absorb the debt-free, interest-free cash injection. The New Zealand Debt Management Authority (NZDMA) will manage the DJI. A Debt Jubilee Income of NZ$100/paid Full Time Equivalent (FTE) employee/38.45 hour week will amount to about NZ$7 billion/year .
8. The DJI will be funded by means of debt-free, interest-free credit created by the central bank and deposited in the DJI accounts managed by the NZDMA. It could be called sovereign or treasury credit created by the central bank on behalf of the government, and it mirrors the way government funding is created at present except that it will be done internally without the need to issue interest-bearing bonds to private banks and financial institutions.
9. The banks will use the DJI (paragraph 8) distributed through NZMDA to automatically and directly reduce the (non-transaction account) bank debts of businesses carrying non-transaction account bank debt. Existing business bank debt other than transaction account debt will be set off against the DJI cash injection used to repay it. Since most businesses carry some bank debt, most of the NZ$7 billion annual DJI payments  will be used to extinguish bank debt. Net business deposit growth from new investment supplied from the NZPDF will therefore initially be similar to what it has been in the past while business bank debt will fall quickly as it is repaid from the businesses’ DJI accounts.
10. Debt Jubilee Income payments made to DJI account holders that are not in debt will be loaned to the NZPDF at an interest rate to be set by the NZDMA from time to time. The interest rate will reflect inflation of, say, 1.3 % plus a margin of, say, 1% to reflect the average interest rate on all deposits. The interest payments on the DJI deposits loaned to NZPDA would be tax-free and paid from new central bank money created debt-free and interest free. The interest funding will be supplied to NZDMA by the central bank and passed to NZPDF for distribution. On the above figures, the net real interest rate would be about 2.3% compared with the comparable average existing net real deposit interest rate in New Zealand of about 2.4% .
The NZPDF does not have to on-lend all of the deposits it receives from the DJI accounts. The NZPDF could keep some of the residual it receives to enable the government to reduce taxation or repay government debt, or it could decide to hold substantial balances in its accounts should that be required for system stability. The direct cost of any of the three options is the interest that the NZPDF pays into the businesses’ individual DJI accounts on those amounts it does not lend for productive investment.
The basic flow diagram for DJI is shown in APPENDIX A.
12. A unit in the Audit Office will monitor the Debt Jubilee Income working alongside the Department of Inland Revenue .
13. Existing government debt will be replaced as it matures by debt-free interest-free credit created by the Central Bank for the NZDMA. New money to fund government and local government investment will be sourced (at least initially) from the New Zealand Public Development Fund (NZPDF) that receives deposits from the non-debtor UBI and DJI accounts.
Once most existing bank debt has been repaid and the need to sterilise the Universal Basic Income and Debt Jubilee Income payments made to non-debtors is reduced, the Central Bank may begin issuing some debt-free-interest-free credit directly to the NZDMA for public development instead of using investment funding from the Universal Basic Income and Debt Jubilee Income accounts. Replacing maturing government debt with Central Bank credit paid through NZDMA does not increase banking system deposits so the process cannot be inflationary. On the other hand, new public debt-free interest-free money issued by the central bank through the NZDMA and passed directly to the treasury for productive development would increase deposits in the banking system as it is spent into circulation and could therefore be slightly inflationary.
14. The NZDMA will manage the Universal Basic Income level (paragraph 2) and the business Debt Jubilee level (paragraph 7) to ensure the issue of new credit matches the needs of the economy as a whole so as to keep inflation at or below about 1.3%. The new credit injection includes a sum equal to the deposit and risk premium interest paid by borrowers to PITA as set out in paragraph 24. NZPDF will invest the new credit injection in new productive development as shown in Appendices A and B.
15. The Manning Plan could be designed for zero deposit interest and zero inflation, but many individuals and institutions presently depend on unearned income (deposit interest). The Plan is designed to accommodate a real interest rate at about the same level as in the present financial system to avoid overly distorting existing net real average deposit incomes, especially for the elderly and for pension funds. It will also prevent existing deposits leaking into consumption where they would create demand-pull inflation in the productive economy, a problem inherent in the large existing deposit base that other public credit proposals have failed to take into account.
16. The deposits on-loaned by those receiving a Universal Basic Income (paragraph 2) or Debt Jubilee Income (paragraph 7) represent secondary debt the treasury borrows from the public through the NZPDF (paragraph 5) to fund the creation of new productive assets, both public and private, (and which could also include government investments in education and health care, especially primary health care). The UBI/DJI accounts held by residents and businesses will separately record the interest balance. The interest paid by the NZPDF to non-debtor adult UBI account holders (those aged 18 years and older) and non-debtor DJI businesses will be available to them on demand. Adult account holders and businesses will be issued a NZPDF debit card so they can draw down their available interest balance and check their debt or investment balances. The interest balances of those UBI account holders under 18 years of age would accrue to provide them with a fund for personal use (such as education or a home deposit) once they turn 18.
17. As soon as the Manning Plan becomes
operative the banks would immediately cease to create new private
interest-bearing debt and its corresponding deposits for the purpose of funding
the purchase of new or existing capital assets, though they will continue to
fund day to day productive transaction accounts. The New Zealand Debt
Management Authority will regulate the interest rates charged on transaction
account debt when required, and set supplementary capital reserve requirements
to ensure there is a full 100% reserve backing for all financial system
deposits once bank debt (excluding that supporting the productive transaction
accounts) has been repaid. The 100% reserve backing will also extend to the
productive transaction accounts that, in
18. The debt repayments made through the UBI/DJI accounts will be in addition to the normal contractual debt repayments made by individual and business debtors to private commercial banks under their existing loan agreements with their customers. The enabling legislation will ensure that normal banking practice is continued until all existing bank debt except that supporting productive transaction accounts has been fully repaid but with:
(a) the repayment periods adjusted to take account of the accelerated principal repayments made from the Universal Basic Income and Debt Jubilee Income accounts and
(b) the interest rates on the debt adjusted downward as set out in paragraph 19.
19. The NZPDF may license private commercial banks to act as intermediaries in the production and exchange of new capital assets. The NZPDF will lend to the licensed banks at the same interest rate it pays on what it borrows from the Universal Basic Income and Debt Jubilee Income accounts held by individuals and businesses. That interest shall be included in the bank-intermediated loan interest rates. The commercial banks’ interest rate on intermediated lending will then be made up of:
(a) The NZDPF funding rate that the banks will pay to NZPDF plus
(b) A bank spread up to a maximum (probably less than 1.7%) set by NZDMA from time to time to reflect the zero risk of lending in a system where repayment is guaranteed through the UBI and DJI accounts. In practice this will provide funding for the production and exchange of new capital assets at less than 4% interest per annum.
20. The private commercial banks will be required to follow strict investment guidelines set by the NZDMA and administered by NZPDF. Rather than competing on the basis of cost the banks will need to focus on better service to their customers.
21. Most existing banking system deposits have been alienated from the original debt from which they were created. In aggregate, borrowers hold the debt while non-borrowers hold the corresponding deposits. The original household and business bank debt is progressively repaid through the UBI/DJI accounts using new interest-free and debt-free money, (as well as through orthodox debt repayment referred to in paragraph 18). The new deposits accruing to non-debtors in the UBI/DJI accounts are invested with the NZPDF. The existing bank generated individual and business debt remaining in the banking system declines as it is repaid.
22. To avoid unrestrained increases in total deposit
interest (and hence inflation) that would result from increasing the speed of
circulation of the deposit base by multiple on-lending of deposits, the Manning
Plan will manage the increase in secondary debt arising from on-loaned banking
system deposits. Currently in
23. The NZ Debt Management Authority will establish a Public Investment Trust Account (PITA) to manage the supply and price of secondary debt and will supply debt-free and interest-free money to fund the interest banks pay on deposits (b), (c), (d) and (e) set out in paragraph 27 that are not on-loaned to PITA by depositors. The deposit interest paid on bank deposits to non investors will be set by the NZDMA at a level up to about 1.3%.and to PITA investors will together produce systemic inflation that will be held at or below about 1.3% as in paragraph 5.
24. The Public Investment Trust Account (paragraph 23) will accept term investments from deposit holders and establish several risk categories for deposit holders who seek a higher interest rate than what is needed to cover inflation (below 1.3% per annum). Among the highest risk categories will be special categories for unsecured personal loans. The supplementary interest rate applying to each risk category will be managed so as to adequately allocate secondary lending for the purposes of exchanging existing capital assets and funding personal loans. No secondary debt funding will be made available for commodity speculation or the purchase of derivatives. The deposit interest including the risk premium paid by borrowers to investors through PITA will be injected into the financial system by the NZDMA through the operations of the NZPDF referred to in paragraph 14.
25. PITA may license private banks and non-bank institutions to act as intermediaries in the exchange of capital assets and to provide personal loans. It will lend the deposits invested with it by individuals and businesses to the licensed banks and non-bank institutions at the same interest rate paid by NZDMA on bankings system deposits that are not invested with PITA (paragraph 14) plus the interest rate surcharge applicable to the PITA risk category. That interest shall be included in the intermediated loan interest rates and paid to PITA by the borrowers or to intermediating banks and non-bank institutions as the case may be. The banks’ and non-bank institutions’ interest rate on intermediated lending will then be made up of:
(a) The PITA funding rate passed to PITA investors (those bank deposit holders who have chosen to invest with PITA) plus
(b) A bank spread up to a maximum (probably less than 1.7%) set by NZDMA from time to time to reflect the low risk of lending in a system where non-business repayments are guaranteed through the Basic Income accounts.
A flow chart for PITA is shown in APPENDIX B.
The licensed banks and non-bank institutions will regularly report on their allocation of loan funding sourced from PITA according to the different risk categories, ensuring that both the total secondary debt and the distribution of that secondary debt among the different risk categories are known at all times.
For purposes of illustration only, the risk margin on secured residential assets might be 1% bringing New Zealand home loan rates down to about 4%/year (1.3% inflation + 1.7% bank spread + 1% risk margin), while the risk margin on secured business assets might be 2%, bringing interest for them down to about 5%/annum. The risk categories for partially secured or unsecured loans would be considerably higher. The weighted average interest paid on all deposits would be set to about 2.3% as in paragraph 5.
26. The licensed banks and non-bank lending institutions on the one hand and PITA investors (those bank deposit holders who have chosen to invest with PITA) on the other hand will equally bear the cost of defaults on loans originating with licensed banks and non-bank lending institutions . Since any bank and non-bank institution losses are likely to be funded from the applicable bank spread the banks and non-bank institutions are likely to adopt a cautionary approach to risky lending. The PITA investors’ share of loan default losses will be periodically calculated for each risk category and deducted by PITA from the funding rate PITA investors are paid under paragraph 25(a).
27. At any time under the Manning Plan the banking system deposits are made up of:
(a) The new debt-free money invested by UBI/DJI non-debtor account holders in NZPDF in so far as that money has been on-loaned by the NZPDF either directly or through licensed banks for productive capital investment (paragraph 5), initially about NZ$14.7 billion/year (paragraph 4).
(b) New deposits arising from new direct government spending that is not funded from the Universal Basic Income or Debt Jubilee Income accounts. This would probably be quite small to begin with but could eventually total several NZ$ billion/year. The new debt-free interest-free money backing the deposits would be issued by the central bank through the NZDMA to the treasury at the request of the government.
(c) Existing household and business non-transaction account deposits held by debtors outside of the UBI/DJI accounts. .
(d) Existing household and business non-transaction account deposits held by non-debtors outside of the UBI/DJI accounts. .
(e) Deposits arising from the payment of interest on bank deposits by NZPDF, by NZDMA to banks on deposits not invested with PITA and the sum equal to the deposit interest including the risk premium paid by borrowers to investors through PITA (paragraph 24).
(f) Transaction account deposits.
The average annual increase
in deposits in
28. Government, business, individual residents and banks would all benefit from the Manning Plan. The government would benefit because it would have an ongoing domestic non-bank, non debt-based development fund available at low cost for public investment, and the ability to easily raise or retire government debt. The main benefits for business are the on-going debt jubilee, cheaper loans and the absence of boom-bust business cycles. Business would also benefit from the increased demand for public infrastructure work, from new consumption generated through any tax reduction and through the expenditure of interest received on the UBI/DJI accounts. Existing individual debtors would benefit from rapid reduction in their debt, and those who are not debtors would benefit from increased spending power as well as from cheaper loans and a stable, growing economy . Young people will benefit from having a “savings” fund available to them when they turn, say, 18 years of age. Banks will benefit from very low default rates, and a steady, almost risk-free increase in income from their balance sheet expansion.
29. The Universal Basic Income paid to individual debtors and the Debt Jubilee Income paid to indebted businesses will decrease deposits (bank liabilities) and loans (bank assets) by the same amount so that the banks’ net worth will not be affected. The on-lending by NZDPA for new capital assets and PITA for existing capital assets and personal loans will also create equal increases in the banks’ assets and liabilities so they will not affect the banks’ net worth either. The banks’ assets will also increase by the e-note cash they receive from the new money injected through the NZDMA into the banking system for direct investment and interest payments, and their customer deposit liabilities will again increase by the same amount. Overall, the banks’ balance sheets will continue to expand, even through the initial period of debt repayment, though possibly at a slower overall rate than at present. The main change in banking practice will be that all deposits will eventually be 100% backed by money (including the productive transaction accounts backed by bank capital) and there will be no interest-bearing bank debt in the financial system except that supporting the productive transaction accounts.
30. The NZDMA accounts will be held
in trust for all legal residents. Its balance sheet would grow quickly but it
will not normally hold large monetary balances. A large portion (about 36%) of
the debt-free interest-free e-notes it issues to individuals’ UBI accounts
during the initial period and most of the debt-free interest-free e-notes it
issues to businesses’ DJI accounts during the initial period will be promptly
cancelled through compulsory residents’ and businesses’ debt repayments. All
remaining debt-free interest-free credit except interest payments deposited in
the UBI and DJI accounts or paid as deposit interest to licensed commercial
banks and non-bank institutions will be initially be represented by loans from
the UBI and DJI account holders to NZPDF. The proportion of new credit invested
with NZDPF will increase as existing bank debt is retired. A substantial
proportion of other (that is, existing) deposits will be invested with PITA.
The PITA assets will be the (secondary debt) loans it (or licensed banks and
non-bank institutions acting on PITA’s behalf) makes to those needing funding
to exchange existing assets and for personal loans. The PITA liabilities will
be the deposits it has borrowed from those deposit holders who choose to lend
to it as shown in Appendix B. The banking
system deposits available for on lending by deposit holders to PITA will
increase at about the average deposit rate (about 2.3%/year in the illustrative
31. The Manning Plan remains fully flexible at all times. Its primary elements, namely the Universal Basic Income rate, the Debt Jubilee Income rate, the interest rates paid on NZPDF and PITA investments, the level and nature of NZPDF and PITA investments, and any tax reductions, can all be varied easily. Since the Manning Plan is entirely domestic, it cannot be directly affected by current account considerations, although it would best be implemented together with the Foreign Transactions Surcharge proposed in the working paper attached below as APPENDIX C.
Individuals and businesses will quickly see the benefits of the Manning Plan but there will be few visible changes in banking services. Individuals and businesses will still have debts and deposits. Debtors will still pay interest on and repay their debt. Deposit holders will still receive interest on their deposits (other than productive transaction accounts) except there will be no tax deducted from that interest. The main changes will be in the pathways for investing deposits and applying for loans insofar as investing and lending will be managed on a Savings and Loan basis by two public institutions. The New Zealand Public Development Fund (NZPDF) will manage lending for new productive investments while the Public Investment Trust Account (PITA) will manage the on-lending of existing deposits for the exchange of existing assets and for making personal loans. Since NZPDF is likely to license commercial banks as intermediaries and PITA is likely to license both commercial banks and non-bank institutions as intermediaries, the administration of loans may not appear very different to bank customers.
 Statistics New Zealand data suggest that
about 82% of two-adult households in New Zealand and more than 50% of one-adult
households are in debt. Single person and single parent households make up
about 50% of all households, and there are about 1.4 million households in
 As of July 2012 the banks’ average
“funding” rate (the average interest the banks pay on deposits) was 3.67%
(according to Reserve Bank of New Zealand data series C10 – the average
interest rate on loans was 5.79% and the bank spread or gross margin was
5.79-3.67 or 2.12%). Allowing for an
average tax rate on interest of 20%, the present tax-paid return to depositors
is about 2.9%. Systemic inflation in
 According to Reserve Bank of New Zealand
statistics Table C3 Monetary Aggregates (historical) the monetary base
(M3-repos) increased from NZ$127.1 billion in July 2002 to NZ$ 244.7 billion in
July 2012, giving an average increase of about NZ$11.8 billion/year over the
past decade. Since the
 The relevant data for
 The mandatory penalty for fraudulent reporting
of employees and/or worked hours might be the permanent exclusion of that
business from the business Debt Jubilee as well the permanent exclusion of any
other businesses subsequently established or purchased by any of that company’s
directors. However, the likelihood of
abuse is modest because, in the majority of cases, the income tax rates applied
to incomes in
 Similarly, if PITA lends directly to individuals and businesses for non productive investment or partly secured or unsecured personal loans, PITA will bear half of any default loss and the PITA investor the other half. The difference between such direct PITA loans and licensed bank and non-bank lending is that PITA may choose to include only some or none of the lending spread in the interest rates it charges. In practice it is likely PITA would restrict any direct lending to low risk investments.
 Not all of the deposits used to fund items
that make up a current account deficit are returned to the domestic economy. In
That means NZ$55 billion of the deposits created by the
 The Manning Plan is designed to protect pensioners and pension funds. Pensioners will receive much the same net return on bank deposits as they do under the existing banking system. There will still be an active investment sector that will enable pension funds to invest and grow.
 Informal lending among individuals, families, and firms may also occur just as it does under the existing debt-based financial system. Such lending represents unrecorded secondary debt, but its volume would be minimal in the context of the total secondary debt. Any interest paid on informal secondary debt is also unrecorded but small. Only banks and non-bank institutions licensed by PITA will be legally permitted to create secondary debt for the exchange of existing assets and for personal loans. Likewise, only banks licensed by NZPDF will be legally permitted to create secondary debt for the production and exchange of new productive assets. Informal lending for profit would become an offence.
THE REFERENCED PAPERS
The referenced papers :