@ f25afb62:8d50c6e7
2025-03-09 01:34:10
The recent economic turmoil in New Zealand has reignited debates over the role of the Reserve Bank of New Zealand (RBNZ) in "engineering a recession." Many believe that the RBNZ’s decision to raise the Official Cash Rate (OCR) was the root cause of the downturn, but this narrative oversimplifies the reality.
### Who Really Engineered the Recession?
Blaming the RBNZ for the recession ignores a fundamental truth: **market interest rates were rising long before the OCR was adjusted.** Bond yields, swap rates, and borrowing costs surged as the RBNZ stepped back from being the primary buyer of government bonds. When the RBNZ stopped paying artificially high prices (low yields) for bonds, the private sector had to price them instead, leading to yields rising back to real market interest rates. Meanwhile, the government continued to refinance its rolling debt at these higher rates, further driving up borrowing costs. The RBNZ, in hiking the OCR, was following the market interest rate, attempting to maintain credibility rather than dictating outcomes.
The real policy missteps were made much earlier:
1. **Artificially Suppressing Interest Rates Through Money Printing**\
The RBNZ engaged in Large-Scale Asset Purchases (LSAP), creating money out of thin air to buy government bonds. This artificially lowered yields, making it cheaper for the government to borrow and spend beyond its means. The result? Inflation surged as the economy was flooded with cheap money.
2. **Funding for Lending Programme (FLP): Free Money for Banks**\
The RBNZ offered near 0% loans to banks, allowing them to borrow at artificially low rates while lending at much higher rates. This wasn’t just monetary easing—it was a blatant distortion of the free market, reinforcing the **Cantillon Effect**, where those closest to the money printer benefit first.
3. **Holding Rates Too Low for Too Long**\
A 0% OCR in itself doesn’t cause inflation—what does is creating excess liquidity while artificially suppressing borrowing costs. Banks, instead of competing for deposits and lending productively, were incentivized to park money in assets like housing, fueling unsustainable bubbles.
When inflation inevitably took hold, the RBNZ had no choice but to raise rates aggressively. This wasn’t an effort to “engineer” a recession—it was damage control after prior policy failures. The claim that the RBNZ alone caused the recession is a convenient distraction from the real culprits: **government overspending and central bank interventionism.**
### The Cycle of Blame: Central Bank Governors as Fall Guys
This cycle isn’t new. Central banks are officially independent, but in reality, they almost always align with the government of the day. The **Large-Scale Asset Purchase (LSAP) program** was effectively a way to finance government spending through money printing—something politicians would never admit outright. When the government needed funding for pandemic-era stimulus, the RBNZ obliged, creating \$50 billion out of thin air to buy government bonds and lower borrowing costs, making it easier for the Labour government to spend big.
Now, with a new government in power, they get to bring in their own person—likely someone who will align with their fiscal policies, just as Orr aligned with Labour's. This cycle plays out over and over again:
1. **Print money to fund government priorities.**
2. **Blame the central bank for inflation or economic consequences.**
3. **Replace the central bank governor with someone more aligned with the new government’s agenda.**
4. **Repeat.**
The “independent central bank” narrative is a useful tool for politicians to deflect blame. Labour can say, *“Inflation wasn’t our fault, it was the RBNZ’s monetary policy!”* Meanwhile, National can now install someone who will adjust policy to suit their needs while still claiming, *“We respect the independence of the Reserve Bank!”* This allows both parties to escape accountability, despite the fact that **excessive government spending and central bank money printing go hand in hand.**
This isn’t just a New Zealand issue—**most central banks operate the same way.** They provide the liquidity needed to keep government spending rolling, and when inflation or other economic problems arise, the governor becomes the convenient fall guy.
### The Role of Bitcoin: An Exit From the Broken System
This cycle of money printing, asset bubbles, inflation, and central bank tightening isn’t unique to New Zealand—it’s the natural consequence of a system where central banks and governments have **unchecked control over money.** Bitcoin was created as a direct response to this very problem.
#### Bitcoin Fixes the Cantillon Effect
- Unlike fiat money, which is distributed to banks and institutions first, **Bitcoin’s issuance is predictable and transparent.** There are no backroom deals, no preferential access, no bailouts.
- Bitcoin doesn’t change its supply to accommodate political agendas. There is only one Bitcoin—just like there is only one Earth, and its land area cannot be expanded. It can be divided into **21 million equal-sized pieces called BTC or 2,100 trillion equal-sized pieces called sats.**
- **Bitcoin doesn’t grant special privileges.** You either earn it, mine it, or buy it. No one gets first access at a discount.
#### Bitcoin Removes the Central Bank Middleman
- The RBNZ and other central banks manipulate money supply and interest rates to serve political and economic interests. Bitcoin’s monetary policy is fixed and free from human interference.
- No government can arbitrarily print Bitcoin to fund its spending or suppress its value.
- Bitcoin allows people to store their wealth without the risk of inflationary dilution or government confiscation.
#### Bitcoin Protects You from the Next Bailout
- Every time the financial system faces a crisis, governments and central banks shift the cost onto the public—through inflation, taxation, or outright financial repression.
- Bitcoin lets you **opt out** of this cycle. By holding Bitcoin, your savings remain secure, beyond the reach of reckless monetary policy.
- When the next crisis hits—and it will—Bitcoin holders won’t be left wondering how much purchasing power they’ve lost overnight.
### A Strategic Shift: The U.S. Embraces Bitcoin
Recent developments in the U.S. signal a major turning point in how governments view Bitcoin. President Trump recently signed an Executive Order establishing a **Strategic Bitcoin Reserve**, marking the first time a nation has officially designated Bitcoin as a strategic asset. This reserve will be **exclusively Bitcoin**, initially seeded with Bitcoin seized through civil and criminal forfeitures, but with a commitment to acquiring more through budget-neutral strategies at no additional cost to taxpayers. This means that if the government can save money elsewhere, those funds can be redirected toward buying and holding Bitcoin as a permanent reserve asset.
The implications of this decision are profound:
- The U.S. **acknowledges Bitcoin as fundamentally different from “crypto.”** Altcoins and centralized tokens are being liquidated, while Bitcoin is being held as a permanent reserve.
- The government is shifting from selling confiscated Bitcoin to **strategically accumulating it**, positioning the U.S. as a key player in a Bitcoin-based financial future.
- Bitcoin mining is being embraced as a domestic industry, stabilizing power grids and reinforcing the U.S. as a leader in proof-of-work security.
This policy shift highlights what Bitcoiners have long understood: **Bitcoin is digital gold, and fiat systems will eventually recognize its superiority.** While central banks continue their cycle of money printing and blame-shifting, the adoption of Bitcoin as a strategic reserve asset may mark the beginning of a global financial transformation.
### The Bigger Picture: Free Markets vs. Centralized Control
The idea that the RBNZ acted independently in creating these economic conditions is a myth. Central banks do not exist in isolation; they facilitate government spending and economic policies, whether through bond purchases, artificially low interest rates, or direct lending programs. The economic pain we’re seeing now is not an accident—it’s a consequence of a system designed to redistribute wealth to those closest to the money printer.
Bitcoin represents an alternative: a free-market monetary system where no central entity controls issuance, no insiders get preferential treatment, and no government can erode its value through reckless policies.
The sooner people recognize the flaws in the current system, the sooner they’ll understand why Bitcoin exists—not just as an investment, but as a **monetary revolution.**
originally posted at https://stacker.news/items/907966