• Is Donald Trump Real?

    Many Trump supporters are no doubt bemused at reports that, as evidenced by opinion polls across the globe, the USA’s standing in the eyes of the world has fallen sharply under a Trump Presidency.  They will be further perplexed by the mixed receptions for the President delivered in countries usually friendly to the USA, and promised in those he is yet to visit.

    And, they will ask, was the President deliberately snubbed by the wife of the Polish president?  And why was he isolated by other world leaders at the G20 summit in Hamburg?

    They do not perhaps understand that these responses to Donald Trump reflect the widely held view that he is not even a halfway decent President – and, rather more importantly, the even more widely held view that he is even less a halfway decent human being.

    It is no exaggeration to say that America’s friends around the world are aghast at the fact that American voters apparently believe that such a person is fit to govern and represent them, let alone to lead the “free world”.

    Such views have been cumulatively confirmed as we learn more – from the President’s own actions and more particularly words (courtesy of Twitter) – as to exactly what kind of person he is.

    It was hoped that the Donald Trump we saw on the campaign trail was a fabrication designed to capture headlines and attention, but one that would be put to one side in the unlikely (so it seemed) event that he would take up the reins of office.

    Sadly, the man we saw during the campaign, having installed himself in the White House, has revealed himself to be the real Donald Trump, so far as there is one.

    We now know beyond peradventure that the man who is President has the mind of an overgrown and spoilt schoolboy – a self-obsessed schoolyard bully, a bigot, a braggart, vindictive, ignorant, living in a comic-strip world, and with a prurient interest in, but limited understanding of, the opposite sex.

    The juvenile behaviour, the “yah boo sucks” language, the trivial vendettas – most importantly, the inability to grasp what his role really entails, and the limitations which the constitution imposes on his powers – are all signs of arrested development, wrapped up in what passes for, just about, the body of an overweight male adult.

    These flaws make it difficult to take him seriously.  He was probably wise not to echo JFK’s famous salute to the people of Berlin – “Ich bin ein Berliner” – when he, Trump, arrived in Hamburg.

    But the problem is that American voters have entrusted him with serious powers – powers to decide between war and peace, powers to risk the future of the planet in respect of climate change, powers to deny 23 million Americans a semblance of effective health care for the sake of putting in place hundreds of billions of tax cuts for his rich friends.

    And he is intent on further using those powers to divide races and religions against other, to portray his opponents as enemies, to promote – using his powers as President – his family’s and his own business interests, and to issue threats to a free press and an independent judiciary.

    With each new self-inflicted wound, each new glimpse into a Presidential mind like a sewer, there is a sense of revulsion and disbelief.  America’s friends are unfamiliar with the intricacies of the American constitution, but they are increasingly desperate that “something should be done”.

    If the President’s state of mind gives cause for concern, as it does – if he often seems lost and confused – what remedies are available?  If he loses touch with reality – and seems often to be acting out the role of an imagined Donald Trump as though it was just a televisual image in a fantasy world – what can be done to restore a sense of reality before irreparable damage is done?

    The leaders of the Republican party bear a heavy responsibility.  Republican votes will be needed if effective action is to be taken.  They alone have the power to deliver those votes.  The question is – what takes priority, the interests of the party or the country – or, for that matter, the world?

    Bryan Gould

    7 July 2017



  • Abdicating Responsibility

    America versus the world!  For Donald Trump, it seems, the battle against global warming is a conspiracy against the US concocted by those who wish to do them down.  “I am the President for Pittsburgh,” he declares, “not Paris”.

    It does not seem to occur to him that the US – and Pittsburgh – are part of the world, and that if the battle to restrain global warming is lost, there will be no “get out of jail” card which will exempt the US from the consequences which the rest of us will also suffer.

    By pulling out of the Paris accord, the country which has emitted more greenhouse gases than any other is saying that it accepts no responsibility, and will pursue what it mistakenly sees as its own interests, irrespective of the damage done to others.

    As many of Trump’s critics, including Arnold Schwarzenegger – a fellow Republican and the former Governor of California – have pointed out, reducing greenhouse emissions is not a barrier to economic growth and employment, but is actually helpful to it.

    Trump’s decision, in other words, not only looks like a denial of the available scientific evidence about the causes and seriousness of the issue but is also a miscalculation of what is really in American interests.

    A United States that – joined only by Syria and Nicaragua – refuses to take action on climate change will not only be reviled around the world for its selfishness but will also be doing itself considerable economic damage.  Countries that apply themselves to finding alternative ways of going about their business without polluting the atmosphere will secure a long-term advantage over those that do not.

    So why has the American President arrived at what looks like an extremely short-sighted decision?  The most likely answer is also a very depressing one.

    Donald Trump secured his unexpected election victory by making a series of improbable promises to the American electorate.  The underlying theme of those promises was that they would supposedly “make America great again” by putting American interests first and hopefully, as a consequence, producing a growth in the number of American jobs.

    The uncertain and faltering start Trump has made to his Presidency, and the controversies that continue to swirl around the Russian involvement in his election, have made it all the more important, from his viewpoint, that he should be seen to be taking decisive action to fulfil his promises – and one of them, of course, was that he would pull the plug on the Paris accord, which he insisted was costing American jobs, particularly in the fossil fuel industries.

    Reneging on the climate change deal, unlike for example building the wall or the attempted ban on mainly Muslim arrivals, can be achieved by Trump simply deciding that it should be so.  Whatever the downsides, in other words, it has the great advantage that Trump cannot be deterred – and he can then proclaim that he has achieved one of his promises.

    We are forced to the unpalatable conclusion therefore that the new American President cares more about fulfilling campaign promises, however ill-advised, and in due course being re-elected, than he does about securing the best interests of the country he was elected to serve – to say nothing about the damage his decision will inflict on the rest of the world for generations to come.

    The focus of the Trump Presidency is, so it seems, to put Donald Trump and his own personal interests – both commercial and political – first, second and third, front and back, and anything else nowhere.  Whatever pleas might be made by those who know what is at stake, the new President is not for turning.  It is his own survival that matters to him, not what serves the interests of those who elected him – to say nothing of those who will find themselves paying the price around the globe.

    New Zealand’s interests will count for little, but that should not deter us and our government from expressing our concern at the first opportunity.  That opportunity is likely to occur when the new US Secretary of State, Rex Tillerson, visits us in the coming week.  He, and Donald Trump, should be left in no doubt as to where we stand on the issue.

    Bryan Gould

    3 June 2017






  • What I would Have Said in the Herald

    I have received in the last couple of days a number of inquiries as to whether, when and how I will respond to Don Brash’s latest exposition in the Herald of his understanding (or lack of it) of the banks’ role in money creation.

    The answer is that the Herald – perhaps understandably – do not want to continue what they see as a “tit for tat” exchange.  The consequence is that Don Brash is left with the last word, and no further comment from me on this subject will appear in that paper.

    If I had been able to publish a response in the Herald, I would have, first, queried why they thought it was wise or helpful to publish Brash again, since he said nothing new and simply repeated his earlier errors.  It certainly did him no favours – he succeeded only in further damaging his own reputation and in compromising the Herald by ensuring that their readers were left at best confused and with the erroneous impression that the matter is not settled but is still one of contention.

    I would then have gone on to specify the precise errors and misapprehensions under which Brash seems to labour.

    First, he chooses to assert that the banks (or rather, he says, “the banking system”) does no more than operate in effect a Keynesian multiplier, with which all economically literate people are quite familiar, and that it is only in that sense that it “creates” money.  No one disputes that money in circulation will enable a large number of successive transactions as it passes from one hand (or deposit account) to another.  But that has nothing to do with the matter at issue, which is – how is money in circulation created in the first place, and what role do individual banks play in that process?

    On that subject, Don Brash has nothing to say, other than to deny (without any evidence or countervailing argument) what is now almost universally accepted – that the act of creating credit by an individual bank through placing a credit entry in a borrower’s account creates new money.

    His second error is to ask, if it is the case that banks create money, why would they bother to do anything other than write cheques to themselves?

    This simply betrays a failure to understand the process of money creation described authoritatively in the Bank of England paper.  As that paper says, “Commercial banks create money, in the form of bank deposits, by making new loans. When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created.”

    “For this reason”, says the Bank of England, “some economists have referred to bank deposits as ‘fountain pen money’, created at the stroke of bankers’ pens when they approve loans.”

    Commercial banks create money, in other words, by placing loans (or credits) into the bank accounts of borrowers.  They cannot of course write cheques to themselves (the money they create is by advancing credit to borrowers) and, in asking why they don’t do so if it is the case that they can create money, Brash is merely putting up a straw man so that he can apparently knock it down.

    The banks do of course need to have capital reserves of real money for prudential purposes in case of a run on the banks. They have no capacity to create money for this purpose, but, as the Bank of England explains, “The amount of bank deposits in turn influences how much central bank money banks want to hold in reserve (to meet withdrawals by the public, make payments to other banks, or meet regulatory liquidity requirements), which is then, in normal times, supplied on demand by the [central] Bank.”

    Brash’s third and most important error is to dismiss the increasingly weighty opinion of most of those – like the Bank of England – who have studied the role of the banks in money creation.

    In its 2014 paper, for example, the Bank of England says that “in reality in the modern economy, commercial banks are the creators of deposit money…Rather than banks lending out deposits that are placed with them, the act of lending creates deposits — the reverse of the sequence typically described in textbooks.

    Bank deposits make up the vast majority – 97% of the amount [of money] currently in circulation.  And in the modern economy, those bank deposits are mostly created by commercial banks themselves.”

    The paper’s conclusions are  accepted by almost all leading economists, including Lord Adair Turner (former Chair of the Financial Services Authority in London­­­) and Professor Richard Werner of Southampton University, and were foreshadowed (in a 2008 paper) by the Reserve Bank of New Zealand itself.

    Brash, however, seems unable to understand the process described by the Bank of England.  I had earlier thought that his denial that commercial banks were responsible for creating most of the money in circulation had to be either a deliberate attempt to mislead or the consequence of simple ignorance.  But, since he states that he “is aware” of the Bank of England paper (and has therefore presumably read it), I can only assume that his continued denial of what that paper tells us is the consequence of intellectual limitations.

    It is very frustrating that what is now a virtually undisputed truth has been continually confused by palpable errors in Brash’s contributions and that they have been lent some unjustified credibility by their publication in the Herald.

    I should be grateful if this posting could be given the widest possible circulation.

    Bryan Gould

    8 May 2017


  • The Fallout from Brash’s Downfall

    Don Brash’s attempt in the Herald a week or two ago to deny the accuracy of my account – also published in the Herald – of how the banks are not merely intermediaries but create out of nothing most of the money in circulation can be explained in two ways, but neither does much good for his reputation.

    On the one hand, he might have known perfectly well that my account was accurate but nevertheless tried deliberately to mislead the Herald’s readers.  Or, and perhaps more probably, he might genuinely have been ignorant of the true state of affairs.

    In either case, my rebuttal – again in the Herald – of his assertion that I was “peddling nonsense” has a number of ramifications that are worth pursuing.  For a start, here was one of our most high-profile public figures revealing that he was woefully ill-informed on a subject on which he was widely regarded as expert.

    He had, after all, been the country’s top banker, and that is to say nothing of his eventual emergence as a “hard right” politician – leading first the National party and then Act, and only narrowly failing to become our Prime Minister in 2005.

    As Governor of the Reserve Bank, he had been the principal champion and practitioner of the neo-liberal economic policies which became known as “Rogernomics”.  Are we happy that our economic fortunes were entrusted to a single individual who understood so little of his subject, and that ministers applauded themselves for their disclaimer of any responsibility for the decisions he made?

    His woeful attempt to deny what is now accepted must cast huge doubt on the continuing legacy of “Rogernomics” in our economic policies.  The whole myth of prudent economic management under neo-liberal policies must be reconsidered in the light of what we now know is the banks’ self-interested creation (or “printing”) of billions of new money.

    The frequent condemnations of any suggestion that governments might “print money” (unless it is “quantitative easing”, with the purpose of  bailing out the banks) must now be viewed against the relaxed attitude towards the banks doing precisely that – day in, day out, and on a massive scale – for their own profit-making purposes.

    An acknowledgment of the true role of the banks should lead us to reconsider many of the hitherto accepted nostrums in tackling economic problems.  Inflation?  No, not created by greedy workers claiming higher wages but by banks printing more and more money to boost their profits.

    Housing unaffordability?  No, not attributable exclusively to a shortage of supply but fuelled by the bellows applied to inflating house prices by billions of new money being created out of nothing by the banks to spend on house purchase.  Those many well-intentioned people attempting to explain why house prices go on rising need look no further.

    And what of the constant drag on our balance of payments as a result of the transfer every year back to Australia of the billions of dollars in profits made in New Zealand by our Australian-owned banks – profits made from the interest we pay on money created out of nothing by those banks?  How did we allow this situation to develop?  And should we let it continue?

    Perhaps the most fundamental questions arise in respect of how long it has taken to bring the true state of affairs to public attention.  Why have the media not blown the whistle long before now?  Why is the revelation of the truth even now largely ignored, and even denied, by media outlets?

    And what of our politicians?  It is perhaps to be expected that politicians on the right might see it as in their interests to conceal and obfuscate.

    But what of the left?  Are they too timid or lacking in confidence or too imbued with neo-liberal convictions themselves to challenge an orthodoxy they profess to criticise and oppose?  Are they really so frightened of losing the argument that they dare not take it on?

    And are they so focused on winning approval from the guardians of neo-liberal orthodoxy that they are prepared, for the sake of staying in the good books of bankers and their ilk, to ignore the truth, and to fail thereby those who have no one else to defend their interests?

    Bryan Gould

    29 April 2017



  • What Lies Behind the Missile Attack in Syria?

    Donald Trump would not be the first leader to try to revive his flagging fortunes by embarking on a foreign adventure.  The missile attack he authorised on a Syrian airfield comes after his Presidency has suffered a decidedly shaky opening few weeks.

    His term so far has seen one failure piled on another.  He has not been able to break free from the constant suspicion that Vladimir Putin had a hand in his election; and, on that account, he has lost some of his most senior appointments and has soured his relations with his intelligence services.  That issue is now under investigation by a Congressional committee.

    Then he failed both to put in place a legally effective travel ban on visitors from mainly Muslim countries, and to get the support of his Republican majority in Congress for the replacement of Obamacare by his own healthcare legislation – both suggesting strongly that he does not know how Washington works and that the “deal-maker” cannot even persuade his own side.

    Add to that some unlikely appointments made in critical areas like education and the environment, and his inability to separate business affairs from Presidential responsibilities, capped off by his delegation of many of those responsibilities to his son-in-law, Jared Kushner – someone entirely untried, unqualified, and unelected.

    Little wonder, then, that his eyes lit up when he saw the coverage of the chemical weapons attack on civilians, including children, by forces loyal to President Assad in Syria.  There is no reason, of course, to suppose that he was not genuinely moved by the graphic pictures of dying children.

    But he would also have seen the possibilities of immediate redemption in the eyes of US voters.  Here was a chance to make common emotional ground with millions of Americans, and to do something dramatic of which they would approve.  He could show how decisive he is (hoping, on this issue, to point up a contrast with his predecessor), he could show himself ready to confront the Russians – whatever the doubts about his links to them – and he could impress the world (and not least President Xi of China whom he was hosting at Mar-a-Lago at the time) with his unpredictability.

    Since most of us would want to see President Assad and his Russian supporters held to account for a heinous war crime, why would we not join in the applause for the missile attack?  Is this not the kind of leadership that the “free world” has been waiting for?

    There are, though, several good reasons for restraining our enthusiasm.  Let us recall, first, that the most recent exercise in using Western military force against a Middle Eastern dictator – the invasion of Iraq – proved to be disastrous and is almost certainly the genesis of most of the problems we have faced in the region since.

    Like the Iraq war, the missile strike in Syria paid scant regard to international law and was totally lacking in United Nations endorsement.  It was instead a unilateral decision taken at short notice by a bombastic populist seeking to shore up his support at home.

    It represented an almost complete volte face on the part of a President who had, up till that point, been more inclined to support Assad than to condemn him.  And it was taken in response, not to careful and mature consideration, but to television pictures watched – one imagines – late at night and in lonely isolation.  Is that how we want momentous decisions that might threaten world peace to be taken?

    Such a “shoot from the hip” approach has something of the Wild West about it.  We cannot afford a US President who sees himself as the Sheriff, ready to act as the world’s law enforcement officer and to blunder into complex international situations, fists (or missiles) swinging.  What thought was given to the possibility of military conflict with the Russian forces already in Syria, to the impact on relations with regional powers like Iraq and Iran, or to the boost to the recruiting efforts of Isis?

    And isn’t world peace and order better preserved by considered international action rather than by the idiosyncratic overnight impulse of a maverick, however many missiles he has at his disposal?

    Launching a military adventure is not enough to make good a loss of confidence in the decision-maker.  It is the confidence that has to come first; the action can come once the confidence is established.

    Bryan Gould

    9 April 2017.