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Author Topic: Mounting a legal challenge against the central bank  (Read 315 times)
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August 23, 2017, 10:44:40 PM

I want to mount a legal challenge against the Reserve Bank of New Zealand against their "loan to value"(LVR) rules. At a very cursory level the LVR rules require bank lenders to loan no more than 80% of the value of home mortgage for owner occupiers i.e. borrowers need a 20% to obtain mortgage funding. For "property investors" a 40% deposit is required.

Why do i want to do this?
- NZ is experiencing a severe shortage of homes across the country but particularly in Auckland the largest city
- The shortage is driven primarily by excessively restrictive land use rules by local councils and govt regulation. It is exacerbated by monopoly suppliers supported by local councils and nonsensical house building standards
- There is no shortage of land in NZ, demand is intense, we have record low interest rates, strong migration and consumer confidence. Imo it is a disgrace and scandal that we are in this situation
- The RBNZ has piled on top of council and govt and has restricted the flow of capital to the housing market and indirectly trying to suppress prices i.e. imo the LVR rules are a form of price controls although not as a blunt instrument as a price ceiling
- NZ led the world down a monetarist approach to monetary policy in the early '80s by having a sole function of price stability and nothing else. This has now changed for the worse.
- The LVR rules have been implemented under the so called "macro prudential policies" which came into effect during the GFC. Many other countries would have experienced the same policies implemented if they were not already.
- Macro prudential policies imo is the wrong path to take. Rather than stabilising the financial system they merely make too big to fail financial giants even bigger and more entrenched. These policies intensify rather than mitigate risks to the system. Macro prudential policies are the modern day keynesian approach of attempting to fine tune and economy. Central banks should stick to their knitting which is monetary policy.

Why bitcoin?
- Bitcoin is near perfection of monetary policy - no capital controls, no fixed rate of exchange and most importantly a predictable certain monetary policy that cannot change.
- Bitcoin has bypassed the central banks and imo time will prove it to be an inherently more stable reliable currency/medium of exchange
- Many of those involved in bitcoin will have similar views and background to me; in a nutshell i'm a libertarian monetarist who dislikes and excessive regulation that has very bad consequences and has an interest in social justice.

What do i need?
- Initially a modest amount of funding to obtain legal council
- Expert testimony from economists to support the legal challenge

Im in two minds whether this is the right place to start this. If anyone has any interest or suggestions please do post your ideas or message me. Obviously there are a lot of details to the above which will be explained pending interest.
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August 25, 2017, 09:21:00 AM

Sorry, I couldn’t read your whole speech, but the main point I understand is, you are looking for funds to fight the Government in a court of law.

But buddy, what's the benefit of the ones who will be funding you? It appears what you are looking for is political charity, or perhaps you are asking for some donations, disguised as for a cause, which is north worth it in the first place.
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August 25, 2017, 08:43:44 PM

The loan to value law is debatable and there are pros and cons of the same, but it is your country's internal matter and does not affect everyone in your country either. I bet there will be many in your country itself who supports this and I won't be surprised if majority of New Zealanders are happy with it.

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August 25, 2017, 11:27:37 PM

Thanks for the replies. Ill try to address them as best I can.

Im not attempting to gain personally from this in any monetary way. Mounting a legal challenge would not require much capital a few thousand at the most I guess which I can fund myself. What would potentially require funds is obtaining expert testimony but I would really hope that interested free market economists would contribute their time pro bono or a reimbursement to cover their out of pocket expenses.

There would be no direct monetary benefit that I can see for those contributing. This would be a project community funded by likeminded individuals similar to kickstarter. Ive reached out to the bitcoin community as I believe a large number of users/followers have similar views to mine. If the challenge is successful it would have potentially far reaching consequences like for Australia for instance. The Reserve Bank of Australia (RBA) is similar to the RBNZ in that it has very autocratic views, distrust of free markets, does not believe in freedom and believes people need to be "protected" from themselves.

Not that it really matters but the LVR rules are extremely unpopular and have effectively shut out low income first home buyers from the entire housing market. The fundamental problem is that that RBNZ does not believe there are not enough houses; they think there are too many people and therefore instead of policies to support capital flow to the housing market they prefer to try to suppress demand by trying to increase prices of homes and price people out of the market.

My guess is that no one supports the LVR rules especially including first home buyers and investors who have been priced out of the market and sellers who have less buyers competing.

The more important point is that the RBNZ has entirely misdiagnosed the problem and come up with a remedy that has made things worse. Nowadays you would be very hard pressed to find any economists who think price controls work. Unless you spoke to those at the RBNZ. The broader issue or protecting the financial system itself is also very wrong imo. The only thing that can protect the system is competition not complex rules and regulations.

My preference is that the entire macro prudential rules are repealed entirely and the RBNZ goes back to simply being responsible for stable prices. This policy has worked very well for decades and insulated NZ to a great extent from the GFC. However that is not going to happen so the next best thing would be to challenge their basis on intervening in the market in the first place.

This is a very serious problem in this country. For those not aware we have the highest rate of homelessness in the developed world. For a country with a landmass similar to Japan and the UK but with a population of only 4m no less. Auckland is the world's fourth least affordable city in the world, now tailing only Hong Kong, Sydney and Vancouver as the least accessible housing market.
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