be squeezed out of an ever more oppressed productive sector.

Inflation is "wrung" out of the economy by killing the patient to cure the cold, using the price mechanism to decrease the demand for new money essential to maintain, let alone increase economic activity. Ordinary people are forced into an ever worsening standard of living and quality of life, reducing the ability of government to provide infrastructure, reducing any chance of significant real wage increases, reducing employment and income opportunities for the nation as a whole (the national economic benefit).

Meanwhile, the "free trade" agenda encourages cheap imports to mask the inflationary pressure, initiating balance of payments problems, which are partly offset by seeking foreign direct investment (mainly through the sale of New Zealand's land, assets and citizenship).

Natural resources are "used up", leaving future generations with environmental social and infrastructure deficits they may never be able to repay or put right.

Some of our productive companies have moved offshore. We are suffering a chronic "brain drain" as qualified people leave for greener pastures abroad.

The masking of inflation by such means results from institutional denial, the failure to acknowledge that the financial system is itself fatally flawed.

New Zealand's unsustainable current account deficit is the direct outcome of the measures used to mask the true underlying inflationary effects arising from the monetary system itself. Some of these measures are the sale of the nation's assets into overseas ownership, the repatriation of medium term foreign direct investment, and the unilateral reduction of trade barriers. The chickens are coming home to roost from the failed policies of the past 15 years or more.

Most of the country's public companies and all but one of its major banks are foreign owned or controlled. Recent financial outflows have been large, one reason why New Zealand's share market has been one of the worst performing markets in the world.

As a nation, we have long since "used up" any stopgap current account benefits arising from such policies and are now in a strong deficit situation. Under current monetary policy, the likely course of action is to join the well documented Third World "export" trade treadmill whereby an ever increasing proportion of our total production is sent offshore in an impossible effort to "pay our way" in the world, while the quality of life of our citizens steadily declines.

Trade is a zero-sum game. The more we are forced into supplying overseas markets for the sole purpose of closing our trade gap, the more we are forced into ever increasing competition with other countries, with a consequent reduction in our terms of trade (unless we start specialising in short run, high quality, high value goods and services that offer choice on world markets. I believe such a transition will take much longer than we have available).

International treaties (WTO, IMF, WB) allow countries to protect their balance of payment/current account. I have seen precious little effort to do so.

Perhaps the greatest single instability factor on the value of New Zealand's currency is currency speculation, the dissociation of financial transactions from the real economy. In New Zealand something in the order of 99% of all financial transactions are speculative.

While it may be argued that hedging foreign transactions in goods and services is a necessary precaution under present financial policy, the question is "why is such hedging needed in the first place?"

The "market" is dominated by speculation because there are very few if any controls on the quantity or flow of money. Many individual players in the speculation game have vast financial resources. While speculation itself may appear to be a zero-sum game, the effects of speculation fall directly on the people in the form of currency depreciation and currency instability.

My main point is that speculation cannot succeed without currency instability. Instability is the lifeblood of speculation. If you create stability you regain control of the currency.

I propose six new primary instruments of monetary policy:

(a) The phasing in of a debt-free money supply through the Reserve Bank coupled with progressive restraints on money creation through the private banking system (such as by the re-introduction of reserve ratios)

(b) The introduction of interest-free loans through the Reserve Bank to fund voter approved government and local government capital works

(c) A substantial surcharge on all financial transactions involving the purchase or exchange of foreign currency, sufficient to stop financial speculation, correct the current account deficit and, and, over time, repay government foreign debt.

(d) The introduction of a valid, reliable and objective measure of inflation

(e) The introduction of valid, reliable and objective measures of national economic benefit, individual well-being and real productive growth.

(f) Government intervention to ensure all New Zealanders share fairly in the additional wealth created.

The accountancy relating to these proposals does not need to be as "creative" as the process by which money is created and accounted now.

The use of debt-free money has been a defining debate through the centuries.

Elections in the US have been fought, won and lost on it. The issue has now reached critical mass again in substantial measure because automation and computerisation have enabled the financial paper economy to become dissociated from the real economy to an extent not previously contemplated.

This introduction of debt-free money is anti-inflationary. In its most basic form, it simply seeks to substitute new and existing debt with debt-free instruments that remove the interest component from the money supply itself. One example is the issue of debt-free notes to repay government bonds as they mature. The direct outcome is that LESS new money needs to be created than is the case under the present system. Subject to capacity limits, this then allows monetary targets to be set to enable sustainable increased production to take place throughout the economy.

The proposal requires only minor amendment to the Reserve Bank Act.

The use of interest-free loans for voter approved public capital works simply means the public can get much more infrastruc