The Dim-Post

October 11, 2012

Generation gap

Filed under: economics — danylmc @ 9:42 am

David Mayes has a substantive critique of the Green’s quantitative easing policy. You should read the whole thing – but I do wonder if there’s a generational divide when it comes to fear of inflation. If you’re young, anticipating many decades of paid employment and have a student loan and large mortgage then moderate inflation isn’t particularly terrifying – it could work out in your favor. But if you’re about to retire, own your home freehold and contemplating several decades of living off your savings then the idea of the government inflating away the value of your nest-egg away is an unthinkable disaster.

About these ads

56 Comments »

  1. If you’re about to retire and contemplating several decades of living, then either you have very high expectations of your lifespan, or are choosing to retire at a very young age.

    Comment by richdrich — October 11, 2012 @ 9:55 am

  2. You think?

    Comment by Mark — October 11, 2012 @ 9:56 am

  3. Young people on fixed low incomes would be hit hard by inflation.

    Inflation will hit various sectors of the community unevenly. The Greens (and Labour) aren’t being upfront about who will pay the price for the prophesised export-led recovery.

    At least National tell us – lately unskilled youth.

    Comment by NeilM — October 11, 2012 @ 9:57 am

  4. Also, I’m well past first youth, and I’d rather have a secure job with a decent wage. A few years of unemployment in middle age is a lot worse than a reduced income in later life.

    Comment by richdrich — October 11, 2012 @ 9:58 am

  5. Of course, QE in the form proposed wouldn’t be inflationary.

    Comment by Deano — October 11, 2012 @ 10:07 am

  6. in the form proposed it wasn’t QE

    Comment by NeilM — October 11, 2012 @ 10:28 am

  7. It’d also be that when older people think of inflation they think of the insane levels of the 1970s and 1980s, whereas younger people don’t see it as an issue because they’ve never known it to be above about 3% or so.

    Comment by helenalex — October 11, 2012 @ 11:23 am

  8. “Of course, QE in the form proposed wouldn’t be inflationary.”
    As Neil said, it wasn’t really QE. But even forgetting that, the form that IS proposed would directly increase the money supply so has to be considered inflationary – certainly the real world inflation we’d experience is up for debate but you can’t deny that monetizing debt for the ChCh rebuild would have an inflationary bias…

    Comment by garethw — October 11, 2012 @ 11:59 am

  9. It’d also be that when older people think of inflation they think of the insane levels of the 1970s and 1980s

    Indeed. It’s also partly to do with a bunch of egregious misinformation that pitches the result of inflation over 3% = Wiemar republic.

    Comment by Gregor W — October 11, 2012 @ 12:03 pm

  10. If you’re about to retire and contemplating several decades of living, then either you have very high expectations of your lifespan, or are choosing to retire at a very young age.

    No, you’re actually quite reasonable. If you’re a woman retiring at 65, you can expect to live another 21 years, on current figures. (2005, figures actually. That number will have inflated somewhat, particularly as Maori life-expectancy rises).

    Comment by George D — October 11, 2012 @ 12:04 pm

  11. Over the last 4 years the Opposition has been demanding the Govt borrow more because of the very low inflation and consequent low interest rates. Print money and the costs of borrowing go up plus paying back the debt gets more expensive. That means a long term direct impact on the young and middle class.. just another of those unintended consequences.

    JC

    Comment by JC — October 11, 2012 @ 12:05 pm

  12. In Mayes’ piece: “It is a mug’s game trying to compete with low labour and low energy-cost countries.”

    Does that sound like familiar policy to anyone else?

    Comment by Gregor W — October 11, 2012 @ 12:09 pm

  13. If you are young and can see that you are going to have to pay for the destruction of the older generations nest egg, as well as your own, QE is a disaster.

    If you are young and think you won’t be paying for the lingering effects of QE, you are mistaken

    Comment by George — October 11, 2012 @ 12:14 pm

  14. “If you’re young, anticipating many decades of paid employment and have a student loan and large mortgage then moderate inflation isn’t particularly terrifying – it could work out in your favor.”

    There is a questions of morality here. The state has made a deal with the users of its currency – that its value will only erode at a low, stable rate (except in exceptional circumstances). To suddenly do otherwise breaks that contract. It also kills the credibility of an independent central bank.

    But this policy is in line with general Green policy – i.e. visible benefits, opaque costs.

    Comment by swan — October 11, 2012 @ 12:21 pm

  15. I am a Gen Xer with a young family and a big mortgage. I am quite happy for there to be a bit of inflation – to inflate away all my debt. Most Gen Xers and Gen Yers will be in the same boat; Inflation only hurts if your wages remain static. If your wages are tied to inflation then you don’t particularly care. It is the ratio of income to debt that is important – the less debt I have relative to my income then the more spending power I have and that then creates growth as I spend it on goods and services. The part of the equation that has been left out of this argument is the income part for workers. If inflation went to 8% and I had an 8% pay rise then sweet! I have suddenly a lot less debt.
    If you have your wealth – like many Boomers have – tied up in capital assets. Then you see your wealth slip away… For a generation who have systematically screwed over their children and grandchildren with huge amounts of debt well I say what goes around comes around!
    And something I don’t understand is that somehow a export-led recovery is a BAD thing? WTF? How does that hurt people? Oh? Because your flat-screen tv and petrol cost a bit more? Well it is better for you to have a job and be able to afford a home to live in and put food on the table and clothes on your children’s backs and have a nice warm, dry house well then I think that is a fair trade.

    Comment by Shane — October 11, 2012 @ 12:30 pm

  16. If you have a big mortgage you might not like what happens to your cost of borrowing if inflation heats up.

    Ask you Mum and Dad how much interest they were paying on their mortgage in the 70′s and 80′s. From memory I think the old man told me his got up to something like 21%.

    So ask yourself Shane, do you have enough extra salary to cope with a tripling of you mortgage payments every month.

    Comment by King Kong — October 11, 2012 @ 12:37 pm

  17. @ swan – I’m not sure that deal has actually existed since the the adoption of fiat currency and the removal of the words “promise to pay”.

    Comment by Gregor W — October 11, 2012 @ 12:46 pm

  18. “large mortgage then moderate inflation isn’t particularly terrifying ”
    Sorry but are you serious?

    I may not be the “older generation” but I remember Muldoonism (just), when it was actually cheaper to put your house on your credit card, than use a bank mortgage.

    Comment by gn35 — October 11, 2012 @ 12:59 pm

  19. The thing about this whole QE debate is several on the right hvce engaged with meaningful critiques and several on the left have argued their corner. The government and its cheerleaders however have simply responded with insults and hubris. it indicates the dangerously narrow mental orthodoxy of the Bill English (perhaps great at keeping the books at, say, a small to medium engineering business, no so much the country) and lazy, intellectually free zone that is Joyce and Key’s thinking.

    Comment by Sanctuary — October 11, 2012 @ 1:07 pm

  20. 50 years ago my sister built her house using the State (Advances?) provided mortgage, at about 3%. By the time she reached the final payment about 10 years ago it worked out to be about $4.50 per week. So low interest. Long time. Inflation. (They still have their 4 bedroom house which by the way was the first concrete floored house to be approved by State Advances in Christchurch.)

    Comment by xianmac — October 11, 2012 @ 1:11 pm

  21. @gn35 – yeah this is where usury laws – which I am very puzzled that a lot of people in NZ are not familiar with – come into play. You can simply legislate for a maximum interest rate – or if you don’t like that you put KiwiBank into play with low interest rates on mortgages – or you can set up loans from the state for home purchases at a fixed interest rate. Should the mortgagee default the ownership goes to the state and suddenly you have a state house thus increasing the state asset base. I think many have been locked into neo-liberal economic thinking that anything outside of it is tantamount to heresy. But neo-liberalism has failed spectacularly. More of the same is not really an option.

    Rampant inflation is bad – yes – but that is not what is being proposed here. Practically everyone is substituting the complex argument about the Green’s proposal with the simple one of “Inflation is Bad!” It is only 2 billion dollars used to buy bonds and overseas assets. This is hardly inflationary. No-one is talking about the other bits of the proposal which is to reduce the OCR and introduce a captial gains tax.

    And the other argument that QE would make us look bad in the eyes of the world – well Switzerland has said it will QE to keep the franc pegged with the Euro and no-one batted an eyelid. They are MUCH more wealthy than we are and have much more influence on the world. We are smaller than most big ciites in Europe – we are not that important. :-)

    Comment by Shane — October 11, 2012 @ 1:43 pm

  22. Danyl is on to something here. High inflation transfers wealth from the lender to the mortgagee.

    The irony is that many boomers benefitted from this as they saw their mortgages shrink during the high inflation of the 80s. And this was at the expense of the WWII generation who saw the value of the investments they had squirreled away all their lives shrink in real terms.

    The boomers were happy to take a windfall at the expense of their parents (who had no such windfall themselves), but don’t want it done to them.

    Comment by Will Truth — October 11, 2012 @ 1:54 pm

  23. Gregor W @10
    After 4 years of inflation at 3.5%, things cost nearly 15% more. If you are retired with fixed term deposits earning 6%, then you’ll suffer a real decrease in living standards. Any idea how much faster local body rates increase than the general CPI?

    Danyl:
    “If you’re young, anticipating many decades of paid employment and have a student loan and large mortgage then moderate inflation isn’t particularly terrifying”
    Well there you go: part of the reason we are in the current pickle is those large mortgages taken with the expectation of inflation. All of us look with envy at those who bought houses for $14,000 in nineteen seventy something that are now worth $650,000 or more. We all want a piece of that action.
    Funny how folk like the greens bemoan the effect of consumerism on society yet want to boost consumer spending with silly money. Do we really want to take them seriously? Nearly every green initiative to save the planet is set to put downward pressure on GDP growth through restrictions of this and that. Ever pushed a car when the hand brake is still on? Well, that is what life in NZ under the greens would be like.

    Shane @16: what if your 8% pay rise puts you into a higher tax bracket? Inflation is not a friend of the worker.

    Xianmac, with a half-decent deposit and a reasonable credit record, you can get a mortgage for less than 6% and no implied taxpayer guarantee required.

    Comment by Clunking Fist — October 11, 2012 @ 2:00 pm

  24. “You can simply legislate for a maximum interest rate ” Shane @22
    Seriously? Mate, I think you had better have a chat with folk who were grown-ups during that era. As a gen X myself and thus a child at the time, I was only vaguely aware of second and third mortgages and solicitors nominee companies.

    Comment by Clunking Fist — October 11, 2012 @ 2:03 pm

  25. Shane – I’ll happily vote for you. But then not for the reasons you would like me to, but because your suggesting putting a whole lot of cash on the table to be taken advantage of. So long as you don’t introduce currency controls, i’ll be happily extracting cash from the government during your time in office and shifting it offshore whilst leaving you with a lot of empty housing.

    The RBNZ publishes interest rate and inflation data for the last 40 or so years – the quick takeout, inflation and interest rates can blow out very very fast and wages/income not stay in line with the rate of changes (hence high returns on capital – see Stock exchange/property growth but low returns to labour), so really QE would be a free handout to the very wealthy and generally sod all of everyone else baby boomers and gen-xers.

    Comment by WH — October 11, 2012 @ 2:09 pm

  26. From that Slate article “But the stimulus that is needed—on both sides of the Atlantic—is a fiscal stimulus.”
    Um, the massive fiscal deficits that nearly every western country are running ARE fucking fiscal stimulus.
    And those who advocate for stimulus and argue for higher taxes (on the income of the rich, on the expenditure of the poor) are ANTI-stimulus: if you cut the deficit, you cut the stimulus.
    And all these folk ingore the studies that indicate that the multiplier effect of additional government spending could be 1, a little more, a little less.

    Comment by Clunking Fist — October 11, 2012 @ 2:11 pm

  27. Advocating QE’s secondary or side effect of higher inflation – at whatever level – doesn’t make a lot of sense if the primary reason to adopt the policy – generating demand to boost growth – is not indicated in NZ. As many have noted, NZ growth and employment do not currently suggest further stimulus is required. If it is then more orthodox approaches – such as the cash rate – are available before needing to think about QE. And we have been running a stimulatory fiscal policy for quite a few years. Many other countries don’t currently have these options.If boosting inflation to assuage intergenerational inequity is the primary goal then there are probably better ways of doing so.

    Comment by Roger — October 11, 2012 @ 2:22 pm

  28. 1. If you already have a large mortgage you should be begging for moderate inflation to cut into your real interest rate.

    2. It’s hard to imagine a centre-left value system in which a point of growth accompanied by a point of inflation isn’t an improvement.

    Comment by bradluen — October 11, 2012 @ 2:25 pm

  29. “As many have noted, NZ growth and employment do not currently suggest further stimulus is required.”

    peak unemployment (Q4 2009): 7.0%
    current unemployment: 6.8%

    sure, we’ve totally fixed everything!

    Comment by bradluen — October 11, 2012 @ 2:31 pm

  30. If the the Greens continue to push out messages like this, and the Labour party tags along all wide eyed, it gives National the perfect platform for the next election. The proposals will be found to be flawed on analysis, and have a higher level of risk than present policy.
    Not to mention failing a first principle, Russel Norman should not give an appearance of wanting to dictate actions to the reserve bank- they are independent. He has had an out of characteristically naive week, maybe he took a couple of John Keys stupid pills?

    Comment by gn35 — October 11, 2012 @ 2:35 pm

  31. bradluen, IMF (yeah, yeah) expect grwoth of 3.1% in NZ next year. It’s not fixed, but we may be moving toward it. Let’s see idf the antibiotics continue to work before we go ahead and chop the limb off, eh?

    Comment by Clunking Fist — October 11, 2012 @ 2:41 pm

  32. Norman’s prime objective was to steal Labour’s thunder, or in this case vague mumblings.

    David Parker has been making noises about allowing inflation to rise in order to bring down the exchange rate. But has yet to come up with any policy.

    Now the Greens have it, albeit in a less subtle form. Parker might be left advocating something similar but with more qualifications ie a more complex and less sellable version.

    Comment by NeilM — October 11, 2012 @ 3:12 pm

  33. After 4 years of inflation at 3.5%, things cost nearly 15% more. If you are retired with fixed term deposits earning 6%, then you’ll suffer a real decrease in living standards. Any idea how much faster local body rates increase than the general CPI?

    @CF – sure – but 15% over 4 years is not the hyperinflation boogeyman painted by drones like Slater.
    While wages often do not match inflation (I know mine has gone up about 6% in 4 years), retirees also get a pay-rise by virtue of CPI adjusted Govt. Super.

    So in comparison to my nominal wage increase over the last 4 years, this from MSD:

    “Since October 2008, the married rate of NZ Super has increased from $439.80 per person a fortnight to $522.96 – an increase of $83.16 or 18.9 per cent.”

    Comment by Gregor W — October 11, 2012 @ 4:01 pm

  34. Of course there’s a correlation between wanting or not wanting Quantitive Easing policy and age. The young people in their twenties want it because it seems like a white light that will magically solve their burdens of credit card debt and the older people don’t want it because it will erode their savings. There’s also the fact that the category of “rich and old” is being eroded pretty fast already without any such economic methods. The older generation at any given time always wants matters like this to pass to the next generation down, but the next generation down, given today’s methods continued into the future, will, by comparison, be poorer than the previous generation was at the time of retirement, so it’s time now to stop the stalling and get on with it.

    Hypothetically speaking, my “grandfather” retired five years ago with a freehold house worth $230,000, $30,000 cash in the bank and a $200,000 investment portfolio. That totals $460,000.
    My “mother” will retire in 15 years with a freehold house worth $320,000, $20,000 cash in the bank and a $50,000 inherited investment portfolio. That totals $390,000.
    My “brother” has a job with a good income, is 35 years old, and despite his good income has no house and little assets. If the country continues with no measures of inflation being taken, he will retire in 30 years with an estimated $130,000 inheritance from his mother and $100,000 inheritance from his father. That totals $260,000.

    Comment by Dan — October 11, 2012 @ 5:23 pm

  35. Cheers Gregor. But does a pensioner’s basket of goods match the basket of goods included in the CPI? I think not, just look at council rates, a much bigger item in their basket than the average wage earner. CPI includes housing costs like mortgage interest, a fall in rates will lower the CPI measure, but pensioners never welcome a cut in interest rates.

    Few pensioners live a fun life on just the state pension. They rely on their savings. That is why 15% increase in costs is substantial for them: if the pension is only 60% of your income, even if that pension were to increase by 15%, if the other 40% of your income is unchanged or even falling…

    “but 15% over 4 years is not the hyperinflation boogeyman “ So it isn’t, but it is still a club to the side of the head for those on fixed incomes, such as the retired.

    Comment by Clunking Fist — October 11, 2012 @ 5:46 pm

  36. They rely on the INTEREST derived from their savings. Can’t have them at age 65 with a net worth of $500,000, having to solely rely on that CAPITAL for the next 25 years ($20,000 per annum). That just wouldn’t do, it wouldn’t be Kiwi.

    Comment by Dan — October 11, 2012 @ 5:52 pm

  37. Dan, your “brother” needs to get his hypothetical shit together. I’d had a personal super plan for 14 years at age 35. And was on to my second property.
    May I ask what he does with his good income and why he hasn’t joined kiwisaver?

    Comment by Clunking Fist — October 11, 2012 @ 5:54 pm

  38. 37 WTF are you on about? was that a sarc?

    All the govt employed lefties on this blog are quietly thinking “thank christ/gaia/humanity for the public sector pension plans”.

    Comment by Clunking Fist — October 11, 2012 @ 5:56 pm

  39. Higher inflation punishes savers but the political consensus had been that we need to encourage saving.

    What strikes me about this debate is that what a government can do to boost the export sector comes at a cost.

    With National that comes in the form if subsidies to primary industry via how the ETS had been set up. That cost is born by all of us and any unfairness is a result of the tax system rather than the subsidy per se.

    Comment by NeilM — October 11, 2012 @ 5:58 pm

  40. He may have had to get a student loan, which takes a certain amount of his pay. He may live in Christchurch, so is subject to increased rent. The high price of fuel and groceries may have taken their toll. Same with child support. Credit card repayments and high purchase payments for his car. The fact that, even with a good income these days, housing is still largely unaffordable unless you have a massive mortgage.

    Comment by Dan — October 11, 2012 @ 8:09 pm

  41. The meandering maundering above absolutely exhibits that bloggers on this site are stupid enough to trust economists.

    A plague on all of your heads!

    good governments care about their voters.

    All that matters to Key now is Wall Street ethics. HA!

    The inflation fears of NZ were born in very different times. Does anyone remember Muldoon, Rowling, Richardson?

    Actually this Key government reminds me of Muldoon’s taunt against Labour about “borrow and hope”.

    Is not that exactly what English and and Key are doing? Reduce the tax for wealthy. Screw the poor and borrow and hope that “the market”” will raise wages/salaries to match Australia and stop the exodus of kiwis to oz..

    Key is a prisoner of Wall Street.

    English is a prisoner of Treasury.

    Neither bodes well for this country.

    Rampant inflation was once a very serious problem, so are road works. One tolerates and manages.

    Comment by peterlepaysan — October 11, 2012 @ 9:17 pm

  42. Exactly.

    Comment by Dan — October 11, 2012 @ 9:26 pm

  43. Can we cut this sort of zombie stereotying shit out, for chrissakes? “The boomers were happy to take a windfall at the expense of their parents” that from some little eyass who wasn’t even alive at the time. Pathetic stereotyping and the sort of jerk-off tripe that Sanc @ 20 objected to. As PeterLeP suggests it’s time to look beyond the economy stupids and break the orthodoxies that blinker them.

    Comment by paritutu — October 11, 2012 @ 10:17 pm

  44. “The boomers were happy to take a windfall at the expense of their parents”
    I seriously doubt that, because I recall an elderly uncle whose mother took a fair slice of his wages in board and keep when he got his job at fifteen. And the job lasted 50 years, not because his parents were denied anything, but because employment was more stable then and so, quite the reverse actually, everyone benefited.

    Comment by Dan — October 12, 2012 @ 12:26 am

  45. Now that I think of it, he wasn’t actually a boomer. But the premise still stands.

    Comment by Dan — October 12, 2012 @ 1:58 am

  46. The danger of inflation is the big red herring around all the money-printing schemes. Technically, they all have to admit it is possible to inflate in that way. Which takes the focus off the fact that inflation driven by ever cheaper debt is far more rampant than any other cause. A movement of one basis point in interest rates sounds small, compared to injecting billions directly into the economy. But as rates approach zero, the proportional move becomes much greater. If, for example, it’s only 2 basis points above zero, then a one basis point drop halves the cost of debt, which drives up the most expensive part of our lives, the cost of property, very rapidly. Speculators could double their debt for the same cost. The idea that keeping interest rates low keeps inflation low is exactly wrong. Putting up interest rates takes the steam out of the economy. So if interest rates are your only lever, then the only direction they can go is down, in the absence of any other force driving the economy. Which means that eventually practically all money will be debt.

    This is madness, and it has to change, and it will change by itself if nothing is done. To be even thinking of QE is thinking in the right vague direction, but I don’t think it actually works, because it doesn’t really increase the money supply. It might have a short term inflationary effect, which would be good because interest rates could be given a little breathing room. But in the long run it doesn’t change anything. It’s a form of money-printing thought up by people who don’t inherently want it to happen.

    The other red herring in this debate is the intergenerational aspect. It’s convenient way of setting natural allies (families) against each other to avoid addressing the fact that a fucked economy is bad for everyone, and that debt choking workers, in favour of the retired, isn’t good for either group. Quite aside from the fact that the asset/liability divide is by no means uniformly weighted to baby boomers. Some of them have absolutely nothing, and some young people have a lot of money. It’s framing the debate around an irrelevance (the person’s age) to avoid the relevant (relative debt levels). It’s like making poverty about race rather than money. Actually, what makes people poor is having no money, not being Maori, or young.

    Comment by Ben Wilson — October 12, 2012 @ 10:27 am

  47. If the government was to say tomorrow – “here is $20 billion we just created out of nowhere by way of a cash issue, every New Zealander will wake up tomorrow with $5000 in there cheque account” does anyone seriously believe that in the current environment that would a) reduce confidence in the currency or b) be in any way inflationary? Some people will go and have a holiday, others would buy stuff, a large number would pay off the credit card. Isn’t that a far, fart better way of dealing with things than throwing money at banks? I mean, currency speculators create money all the time – if I make $10,000,000 on a currency trade with a fractional differential in the computerised trade of NZ dollars vs. the Euro where did that 10 mill come from? it came from thin air, and yet noone calls that “inflationary” they call great business and elect the guy to be PM of an under performing member of the OECD.

    Comment by Sanctuary — October 12, 2012 @ 10:45 am

  48. Sanctuary, I think that would be inflationary, a little bit. It’s small potatoes compared to the cash injection I negotiated just a few months ago, when the bank offered me $50,000 against the house, just because rates had dropped heaps, and inflation has given me a large capital gain on the property. It’s one paycheck for most families. It means the average income in one year would have increased by 1/12. If all of that turned into inflation, it would at most mean 8.3% added inflation that year. However, if all of it was spent paying down debt, the way most people are doing at the moment, it would have no effect whatsoever, other than to reduce the income of the bank a little, and increase the income of the population. If it were legislated that that actually *had* to happen, then the government could be accused of actually managing the economy to help with the recession. The fact that they could do it just to see, starting with only, say, 400,000, ie $100 per person, means that the question could be approached scientifically, rather than ideologically. But I think the reason that won’t happen is because ideology is the enemy of science, and neoclassical economists are like the people who refused to look through telescopes at the moon, so that they wouldn’t have to see that it’s actually got mountains, and isn’t a perfect sphere after all.

    Comment by Ben Wilson — October 12, 2012 @ 11:38 am

  49. if I make $10,000,000 on a currency trade with a fractional differential in the computerised trade of NZ dollars vs. the Euro where did that 10 mill come from? it came from thin air

    Actually, no. If someone makes money on a trade then, somewhere in the market, someone lost money (or perhaps didn’t do as well as they could have).

    There is a limited supply of each currency and they can’t all depreciate against each other. If you buy a million USD at NZD .80 and the exchange rate drops to .75 then you have made money, but the person you purchased off earlier lost out. Unless Governments pursue expansionary monetary policy, money doesn’t just *appear* out of nowhere.

    Comment by Vanilla Eis — October 12, 2012 @ 11:38 am

  50. Dan @ 41
    “He may have had to get a student loan” don’t be a snob, get a job at maccas like I did. Loads of cash, plenty of time: party time student lifestyle, would love it back again (well, apart from the study and exams bit).
    “Same with child support.” This hypothetical makes poor life choices! Still CS tends to be less than, say, half the ACTUALLY COSTS OF RAISING YOUR KIDS. I should know: I have two.
    “Credit card repayments” stop buying so much shit and eating out so mucjh. Make do with a few new pieces of furniture and a few pieces hand me down. Still, he’s on a good income: folk on good incomes these days are laughing all the way to Harvey Norman etal and the $999 50inch full HD plasmas. Woohoo!
    “and high purchase payments for his car.” Shoulda spent less on a car, then. We paid $12,ooo for a car in 2004 and its still going strong. Of course, not being a car snob helps.

    And finally:

    “so is subject to increased rent”

    That, my fine friend is FUCKING INFLATION, which you want more of. Do you see now?

    And increased HP and Credit card purchases is what the fucking Greens want. (loose money means credit, and if there’s one thing that the GFC shoulda taught us is that consumer credit [has the potential to be] BAD.

    Comment by Clunking Fist — October 12, 2012 @ 2:30 pm

  51. Sanc @ 48 “every New Zealander will wake up tomorrow with $5000 in there cheque account” does anyone seriously believe that in the current environment that would a) reduce confidence in the currency or b) be in any way inflationary?”

    Most economists believe it is inflationary, whether they are Keynesians or Austrian.
    Why? Because no more STUFF (goods) have been produced, but there is now a bigger pool of money chasing that fixed quantity of good: the prices are bid up “all other things being equal”.

    Most economists believe it would affect the currency. Why? Because most of the cool toys are imported and we would need to exchange our NZ dollars for US dollars/Yen whartever those cool toys are priced in. Without an increase in demand for the NZ dollar, the price of the NZ dollar would drop to “clear the market” in NZ dollars. A falling dollar also makes all imports more expensive, which is… INFLATION!

    Comment by Clunking Fist — October 12, 2012 @ 2:39 pm

  52. And increased HP and Credit card purchases is what the fucking Greens want.

    Really?

    Maybe what you meant to say was “If people’s attitudes to easy credit and unnecessary consumption don’t change, then loosening monetary controls could lead to unintended consequences” – basically what you were saying before you went feral and transformed the GP party and supporters into a branch of the NZBA.

    Comment by Gregor W — October 12, 2012 @ 2:43 pm

  53. Um, Gregor, how do you (and the greens) think QE or lowering OCR has an effect on activity in the economy? How does all that loose money flow through the economy?

    Comment by Clunking Fist — October 12, 2012 @ 2:47 pm

  54. Unlike you CF, I couldn’t possible comment with any degree of certainty what the GP ‘thinks’ other than what has been released publicly by their MPs.
    I certainly haven’t read anything that supports your histrionic comment about increasing consumer debt.

    You know the answer to the OCR question. Reducing it lowers the relative value of currency (making exports more attractive) and interest rates and (encouraging debt accumulation for purchasing asset classes and retail consumption).
    But given that lowering OCR is the current policy of economic stimulation, it’s hardly a GP issue.

    The whole QE thing is a sideshow. Personally, I think the GP got this one wrong especially when there is still wiggle room in the OCR. I suspect what they are really talking about (certainly what has been discussed elsewhere) is effectively a bond issue between the Govt and RBNZ.

    Comment by Gregor W — October 12, 2012 @ 3:39 pm

  55. Clunking Fist

    His rent increase may be due to demand and supply instead of inflation. Earthquakes happen in an area, many houses are severely damaged and rendered inhabitable, so rents increase. Sound like demand and supply, or inflation? Think about it.

    His “bad lifestyle choice” may be one child that takes up a lot of income but he is on a good income and the mother of the child wants this and that over and above the child support payments. Also, there’s a lot of people out there with good incomes and heaps of debt and “bad lifestyle choices”. This is because we have had two decades of low inflation. Time to have more inflation.

    “A falling dollar makes all imports more expensive”
    That it does, however we are an EXPORTING nation. Also, one of the main points of this thread existing in the first place is to discuss the issue of other countries inflating their currencies, which kind of renders your point moot.

    Back to the hypothetical, he may have had a job at maccas while he was a student but still had to take out a student loan never-the-less.

    Comment by Dan — October 13, 2012 @ 9:50 pm


RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

The Rubric Theme Blog at WordPress.com.

Follow

Get every new post delivered to your Inbox.

Join 336 other followers

%d bloggers like this: