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PROFESSOR WADAN NARSEY: "When Central Banks 'steal' from YOU"

28/3/2016

23 Comments

 

"And to be fair to my friends at the RBF, we all know who the real thief is, don’t we, the one annually receiving a nice fat cheque from the RBF"

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The Minister for Finance, Aiyaz Sayed-Khaiyum (right) receives a cheque of $35.198 million from Reserve Bank of Fiji Governor, Barry Whiteside
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The Reserve Bank of Fiji is one of the most efficient statutory bodies in Fiji, doing its work quietly, circulating money, the lifeblood of the economy, and transparently turning out its statistics in a timely manner, with no hint of dishonesty among its employees.

You would not think that it would “steal” money from the public.

But it does, in a petty way (this article) and in a big way (another article).

To be really accurate and fair, in both, it is merely an accessory to a crime, not the real thief.

The petty crime

Not too long ago, one of the senior managers of the Reserve Bank of Fiji, an economist by training, “reassured” the Fiji public that they could bring their old Fiji coins to the RBF Head building in Suva, and receive new coins in return.

There were no public comments from anyone, although sensible market vendors stopped accepting the old currency for their piles of beans or baigan, to the irritation of many shoppers holding the old coins.
How fair and sensible was the RBF announcement, which drew no comments from the Commerce Commission or the Consumer Council of Fiji?

Why should the holder of old Fiji currency pay for the cost of transport and waste his or her valuable time to get back the same face value of the currency?

If I publicly threatened and extorted 50 cents from you, I would be promptly and rightly prosecuted, fined some moderate amount, and if the magistrate wanted to make an example of me, I would be jailed for a few months,  to discourage others from committing the same crime.

But apparently, Reserve Banks can “steal” a portion of your wealth in clear public view, with no public comment whatsoever, no policeman prosecuting them, as they have done previously also with old Fiji notes.

Even more ridiculous was a recent case of the Central Bank of Samoa,  refusing to redeem  in Samoa, old Samoan bank notes.

What is money?

The senior bank manager who made the announcement is an economics graduate who ought to understand the fundamentals origins of “money” and the sacred “contract” it embodies.

There are many fascinating historical origins of money the world over- as salt, cowries, tobacco, pieces of iron, copper, silver, gold, and in the Pacific, shells, stone wheels, and whales’ teeth (tabua).

Historians and anthropologists argue that these monies were used not as a means of exchange, but as tribute or offerings to rulers, priests and anyone to whom people had social obligations such as during births, marriages, funerals, and even to atone for crimes committed thereby discouraging “payback crimes” (as in PNG).

For economics textbooks, however, money is explained as a mechanism to facilitate exchange in the economy, as a universally accepted means of payment, for goods or services, replacing the inefficient barter in primitive times.

Today, modern money is “fiat” money guaranteed by the state, the government, the central bank or reserve bank.

Behind every unit of money, note or coin or electronic record, is a sacred contract, which the RBF should think about.

Every single unit of money represents real goods or services already produced to the face value of that money, and the holder of that money is entitled to receive exactly the same value in return.

That money (note or coin) issued by the RBF must, by law, be universally accepted in payment for exactly that face value, not a cent less.

To then tell the holder of that old currency, say in Savusavu, that you cannot use it any more in Savusavu, but you must now take that old currency to the RBF office in Suva, and obtain exactly the same amount in new currency, is ridiculous.

The RBF is forcing the holder of the old currency, to lose the original value, by the cost of transport, and the value of his time wasted in exchanging the new currency.

Some holders will reluctantly do so if they have large amounts of old currency, and just put up with the costs.
But many simply could not be bothered and the old coins and notes, lie in their possession unused and unusable, having totally lost value, with their holders, in effect, swindled by decree, out of whatever value they gave originally, for that money.

But the RBF is not being prosecuted by any DPP or policeman, and the Central Police Station is just across the road from the RBF building.

No magistrate is fining them or sending them to jail for this daylight robbery.

Where you may ask, is the otherwise ever present and ever pugnacious Consumer Council of Fiji or the Commerce Commission CEO (rather reticent now their Executive Chairman has moved on to greener pastures)?

But another Central Bank in the Pacific really takes the cake.

Robbery by Central Bank of Samoa

Not too long ago, a Confucius Institute group from USP in Fiji went to Samoa, and some sensibly (or so they thought) bought Samoan currency notes from one of the expatriate banks in Fiji.

But they had “not banked” (ha ha)  on shops in Samoa not accepting the old Samoan notes: old was not gold.
Then to their amazement, even the commercial banks in Samoa would not accept the old Samoan currency notes.

And then to their utter shock and disbelief, even the Central Bank of Samoa in Apia, refused to redeem the old Samoan notes.

I suspect that had the holders of that old Samoan currency burnt one of the notes in the presence of the Governor of the Central Bank of Samoa, they would have been charged, fined and jailed, under some obscure Samoan law, for “defacing and destroying Samoan Government property” which they now did not want to admit ownership of.

The Fiji group was cynically told to take the old notes back to whoever had sold them in Fiji.

Which they meekly and mildly did, being peaceful law-abiding citizens, although they might easily have berated this bank for giving them the old Samoan notes in the first place.

You can bet your bottom dollar (not Samoan obviously) that the giant multinational Australian bank in Fiji would have had no trouble getting their Samoan currency redeemed by the Central Bank of Samoa (albeit with more expense along the way).

Where is the RBF common sense?

Common sense suggests that the RBF should not set any time limits to the acceptance of any currency they issue.

All traders must be required to accept all Fiji currency, which most would eventually deposit with the banks, who could, in the normal course of their business, eventually exchange them at the RBF for new currency.

Why did the RBF ever allow commercial banks to refuse to accept old coins and notes?

Commercial banks in Fiji make massive profits from the hundreds of millions of savings deposits which annually lose a large part of their value to inflation.

Was it too much for them to provide this basic service to the holders of old currency, not as a favor, but a legal liability?

Some might ask me, why make such a big thing out of a few coins or notes, worth a few dollars?

Steal a dollar today, a million tomorrow

I suggest that if the RBF ignores basic principles over a few dollars, it will also ignore them for a few million dollars.

The bigger crime, involving an open annual robbery of tens of millions, where the victim never complains to the police, is the subject of the next article.

And to be fair to my friends at the RBF, we all know who the real thief is, don’t we, the one annually receiving a nice fat cheque from the RBF.

The next article explains why lots of robberies, amounting to millions, are taking place, with nobody being charged.


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23 Comments
Samjha
28/3/2016 10:59:43 pm

Stealing from the public is the new norm in political governance in rogue regimes. Wadan's friends in RBF are regime good boys because they know that's the only way to keep their bread buttered thick.

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jack
28/3/2016 11:04:04 pm

Like I have said in the past, this so called Professor needs a real job, not sitting behind a desk, using all the monies that his family stole from the poor and writing on how others are stealing. Get real, Professor or whatever you are.

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Dekho
28/3/2016 11:37:27 pm

JErky boy you are in urgent need of a mental check up. Professor Wadan Narsey does not need a real job . He has over several decades of doing real job as an honest academic made more than enough to retire to a quiet tranquil, hassle free life. But he chooses to instead remain engaged in the political life of the country as a conscientious citizen. It's a good thing he is doing that. Democracy needs such citizens and their critical thinking on things that matter. But who the phucked are you Jack?

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Real Man
29/3/2016 12:59:01 am

Professor Wadan has always championed poor people. By saying that his family stole money doesnt make this so. Its so easy in FIji to make such allegations. This is typical of the Aiyas Kaiyum brand of a***lickers like JAck. Throw a lot of mud, and hope some sticks. Then use that to tarnish the person. But we dont forget - Jack has the right first 2 letters to his name - JA. This country is run by Asses. There is no shortage of masi polos. People like Professor Wadan will go in history books as making concrete contributions to Fiji. Those like JAck and Aiyas Kaiyum will also go in history books, as those who tried to destroy Fiji. Chee, how would it read, their kids and grandkids, reading this assessment of their fathers and grandfathers, JAck and Aiyas? Sad. Sad.

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Banks are Sharks
28/3/2016 11:12:44 pm

If RBF is loaning to Banks at 0.5%, then the rate they charge to cyclone victims should be price controlled at 2.5% as maximum above that of RBF loaned rate. i.e. customers should get this at 3%p.a.

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Enquirer
29/3/2016 02:07:07 am

Why was Sada Reddy sacked? Is it true that the RBF Board found nothing wrong with Sada's performance or conduct? Is it true that a report stating this was given to Bai? Is it true that Bai put the report aside and said: that is ok, but Kai wants Sada to go, so he will go? If so, they can Kai be asked the reason for him wanting Sada Reddy to be fired?

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tuks
29/3/2016 08:55:53 am

Great article by Wadan.

However, there is a major flaw in his analysis.

Wadan assumes like an economist that RBF is a thief based on half truths. Didn't he hear, read, see various adverts over an year to return or exchange the old currency.

It would do a he'll lot of good if Wadan did a bit more research on the practice across other central banks.

Oh, I forgot, he himself has first hand experience of the case of Samoa.

Now, I wonder if the issue is of theif or just seeking publicity for self.

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tuks
29/3/2016 08:57:49 am

Hi Victor

I remember you had an article the appeared in coup 4.5 about Sada. Can you pls reproduce to refresh some minds here.

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RBF
29/3/2016 09:05:47 am

Friday, November 12, 2010
Bank governor Sada Reddy is no longer at his post
Reddy allegedly secretly transferred thousands into his NZ bank account

BY VICTOR LAL

Sada Reddy, the Governor of the Reserve Bank of Fiji, is no longer at his post as the custodian of the country’s financial system.

Inia Naiyaga is expected to be brought in as the Acting Governor. Coupfourpointfive understands the illegal regime is to make an official announcement in due course.

According to highly reliable sources inside the Reserve Bank of Fiji, Reddy had allegedly transferred thousands of dollars to his private bank account in New Zealand last year, shortly before he devalued the valueless Fijian dollar.

On 9 April 2009, the Fiji dollar lost its value by 20 per cent. So while the poor feared more hunger and loss of employment, the man who devalued the Fiji dollar had the previous day allegedly secretly funnelled his own money, to the tune of $850,000 into his New Zealand private bank account, where his family reside, and he holds permanent residency.

The RBF’s Financial Intelligence Unit, tasked with the job of monitor money-laundering, according to the reliable bank sources, turned a blind eye to the alleged money transfer.

More information as we get it.

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Distorted
29/3/2016 11:10:40 am

AG and PM had allegedly ordered S Reddy to transfer $10-$15m to road contract deposit they were signing a contract off shore.

Was this ready the proper payment? It appears that is why SR was moved aside as 8 years later no one will remember to investigate.

Enquirer
29/3/2016 07:23:49 pm

The investigation report by RBF Board cleared Sada Reddy. Allegations like the one on Sada Reddy transferring money before devaluation were the mud thrown by Kai on Sada intending that the mud will stick. Victor Lal bit the first bait and got hooked. That was the purpose of the mud slinging by Kai and his henchmen. That practice continues - trow mud at any person not liked by Kai; social media bites it, and the man is destroyed in a public court. If there as any truth to Sada Reddy transferring money before devaluation, that would be regarded as a major fraud, and Sada Reddy charged. But nothing like this happened. So Kai henchmen: we still want answers - why did kai want Sada Reddy sacked? Why did Bai say there is no truth in any allegation against Sada but he still has to go because Kai wants him fired?

Yen-Can-Cook
29/3/2016 12:17:29 pm

This is a normal practise by Central banks around the world whenever new designed coins/notes are introduced and old ones withdrawn.
I wonder why only the RBF is being taken to task by this article?

As much as i appreciate insights provided in his various other articles, this one here seems vindicative and personal, targeted at demonising an institution whose credibility/integrity is probably unmatched compared to other machineries of govt in Fiji.

http://newsmobile.abs-cbn.com/business/12/29/14/still-hanging-your-old-peso-bills-read/

Pg 12 - http://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Factsheets%20and%20Guides/factsheet-explaining-currency.pdf

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jack
29/3/2016 11:45:15 pm

To the two "mental" cases, Dekho and Real Man, if this so called Professor is so good at what he does, then ask him to become " the face of the change in Fiji" and not just write. Anyone can write, but to actually deliver it is another question. That is my point.

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Dekho
30/3/2016 08:05:08 am

You have no point Jerk! Anyone can write. Well, it's clear from your writing that you can't write. Makes me doubt if you can read intelligently as well!
Jack what have you "delivered " ?

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Pita
30/3/2016 03:41:56 am

If only Khaiyum learns from history. This same Reserve Bank failed miserably in its bank supervisory role when in mid 1995 the National Bank collapsed leaving a debt of $220 million or 8 per cent of GDP. The SVT Govt of Sitiveni Rabuka and Kubuabola ignored calls for a Commission of Inquiry and gutted the FNPF of workers' funds to pay back the debt. Cronyism resulting from govt's control of appointments to top jobs was the root cause of the bank' failure to discharge its fiduciary duty. The Reserve Bank has now become filled with Khaiyum lap dogs that ensure they toe the party line at all times. No institution in Fiji should be above criticism for it keeps them alert and accountable

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tataleve
30/3/2016 08:03:53 am

Pita

Guess who was the head of supervision responsible for looking after NBF.

Anyone???

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Pita
30/3/2016 09:43:44 am

Tatalevu pls do not keep us in suspense. I have no idea

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tatalevu
30/3/2016 10:38:08 am

The man Distorted and Enquirer above are supporting

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Pita
31/3/2016 12:28:12 am

Sooooooo . . . Sada Reddy is the one directly responsible for sleeping on the job. As the then head of Bank Supervision at the RBF he was directly accountable for the RBF's failure to pick up the precarious state of the Nationsl Bank if Fiji prior to its collapse with a $F220 million loss. The question is why did'nt he do his job and act? Was it incompetence? Was it a blind eye? Perhaps Distorted and Enquirer above could elaborate?

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Ajen
31/3/2016 03:03:36 am

I agree with Enquirier - why was Sada Reddy sacked? Jone Kubuabola was RBF Governor when NFP collapsed. Ben Vunibobo was Finance Minister. That is water under the bridge now. But why can no one explain the reason for Sada Reddy being sacked by Aiyaz Khaiyum's toolboy Frank Bainimarama?

Reply
tatalevu link
31/3/2016 07:32:37 am

If the NBF is water under the bridge, why is the sacking 7 years ago relevant now.

Shouldn't it be water under the bridge?

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Pita
31/3/2016 10:06:04 am

Agen, wrong again. Paul Manueli and not Vuninobo was Finance Minister. Of course Kubuabola was Governor but he relied for advice on senior officers below him like Reddy who failed in his fiduciary duty. Question is was his silence on purpose? After all his brother Jai Ram was Opposition Leader who would profit the most by Govt's embarrassment

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tuks
31/3/2016 10:36:37 am

So if a university prof who gets paid to tech students but spends office time writing blogs, newspaper articles, sends personal emails, spends heaps if time talking to friends about drinking etc is also a thief. He or she is stealing from the university and his or her student.

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