The Dim-Post

October 8, 2012

There Is No Alternative

Filed under: economics — danylmc @ 7:27 am

Matt Nolan critiques the Green’s ‘quantitative easing’ policy on the grounds that it is actually a ‘stealth tax’ (via the resulting inflation) to pay for the Christchurch rebuild, and that our high exchange rate is a signal pointing to deeper problems in the economy, so policies fixating on the exchange rate are missing the point.

I don’t have the energy to read the Wikipedia article on Quantitative Easing so I can pretend to be an expert on it. I’m just glad Matt’s points are more substantive than the ‘OMG printing money = funny-money’ arguments I expected on this issue. (Our money is already almost all ‘funny-money’.)

I suspect the Green’s reply to Matt’s second point would be that the ‘signal’ that the exchange rate is sending us is that most of our trading partners are devaluing their currencies and using that cash to speculate on (amongst other things) the New Zealand dollar, and that this is driving it up and killing our export industry. To paraphrase Trotsky, New Zealand might not be interested in a currency war, but a currency war is interested in us.

National has ruled out such a policy – you wonder if English even got to offer his opinion before Joyce vetoed it – so we’re at least two years away from this policy being relevant. It’ll be interesting to see if other countries implementing quantitative easing have suffered the dreaded, much prophesised hyper-inflation by then.

63 Comments »

  1. The issue isn’t whether other countries will face hyper-inflation, the issue is whether we would. Given (a) our economic position vis a vis those countries (ie we are actually growing, 2.0% in the year to June) and (b) the sheer scale of the money NZ would need to print to make a difference, I’d say there’s a fair risk we would.

    Comment by Rob — October 8, 2012 @ 7:38 am

  2. What is in it for the Greens other than sticking it to the Government
    Since when have they been keen to put extra dollars in the dairy farmers pockets, who stand most as indviduals to gain
    And the rest of us are going to have to pay with increased prices on fuel and all other imports
    Peak fuel prices that will enable them to say that they were right all along

    Comment by Raymond Francis — October 8, 2012 @ 7:41 am

  3. QE in a New Zealand economic context is stunningly naive.
    If they ever had influence in government they probably wouldn’t actually have to do it to bring the currency down, as the sheer economic stupidity of the idea would cause such an international loss of confidence in New Zealands economic management, that it would go through the floor in any case.

    Comment by gn35 — October 8, 2012 @ 7:50 am

  4. “…And the rest of us are going to have to pay with increased prices on fuel and all other imports…”

    So you propose we sit supinely by while our exports collapse, and Bill English borrows billions and sells off the the family silver in a desperate attempt to cover the gap in our income? That is just another deluded right wing Ponzi scheme! What happens when the cheap Chinese money runs out and the Clyde Dam collapses because Fay-Richwhite energy has asset stripped the business and deferred maintainance to build a new super-yacht for the next Mediterranean cruising season? I thought Russel Normans argument on telly yesterday about this was persuasive. At some stage we have to feel the pain of weaning ourselves off our addiction to easy, unskilled low wages service sector jobs buttressed with cheap imports and switch to policies that encourage exports and import substitution.

    As Danyl says, we dont really have a choice anyway – everyone else is printing money, so we will have to as well. Even Fran O’Sullivan could only come up with the hair shirt economic purity defence when she tried to argue against printing money (BTW she has been destroyed by Andrew Geddis over at pundit – a great read).

    Comment by Sanctuary — October 8, 2012 @ 7:54 am

  5. our trading partners are devaluing their currencies…

    our biggest trading partner is Australia and they’re not devaluing.

    In a currency war between China and New Zealand, since it’s really China’s low renminbi that’s the biggest problem, I think NZ will lose. The solution lies with the international community putting pressure on China.

    Comment by NeilM — October 8, 2012 @ 8:08 am

  6. most of our trading partners are devaluing their currencies and using that cash to speculate on (amongst other things) the New Zealand dollar

    Using cash to buy NZD? Yes
    Using cash to speculate on the NZD? No

    What most international investors are doing is simply finding somewhere to park the excess cash being funnelled into the financial system by the Fed and ECB. That New Zealand is seen as a safe place to invest a very small portion of that cash is, in my view, actually a pretty good thing.

    Comment by Phil — October 8, 2012 @ 8:22 am

  7. Matt’s point about inflation is that the countries that are doing QE would be “suffering” from deflation without it, so it really is causing inflation. If you did enough of it, it would probably cause hyper-inflation, but I’m not sure who’s predicting that.

    Comment by Dave — October 8, 2012 @ 8:40 am

  8. No policy is costless. the cost of the current policy is 40,000 manufacturing jobs lost.

    Comment by Deano — October 8, 2012 @ 9:03 am

  9. I may have misheard on RNZ this morning but I’m pretty sure that during Joyce’s slag-off session, he conflated CGT with QE as Green economic quackery.
    I may have misinterpreted due to the presence of a noisy toddler.

    Comment by Gregor W — October 8, 2012 @ 9:20 am

  10. The question has never been about if we will print money. It’s been about when. Do we really have to wait until we have absolutely no room to move on interest rates, no growth at all, and no more assets to sell, before this patently obvious solution is even tried in the small experimental fashion that it can be? You have to be very well trained to NOT be able to see this.

    Not that I think QE is the way to inject cash, not the way the Americans are doing it. Giving more free money to the banks is just fuel to the fire. It changes nothing in a system that is fundamentally broken, and bails out the very people who have caused the mess. The money should be directly injected into the bank accounts of citizens of this country, with the strong proviso that it pays down debt first. Which could even be deflationary, but the only people losing money would be banks and they wouldn’t be losing capital, they’d be getting it back, and losing income. People with more money/less debt, would most likely be able to spend more, and that includes businesses looking to hire people.

    QE may be a stop gap, the last long hurrah of a system tightly cycling around the attractor before crashing out. I’m sure it will eventually be tried.

    Comment by Ben Wilson — October 8, 2012 @ 10:26 am

  11. Gregor W at 9.20am
    It would be quite reasonable for Joyce to discuss the two policies together. If we go with the Greens insane QE policy the result will be inflation. The greater the amount of money they print the greater the inflation.
    That means that the value of any real asset you own will go up by the amount of the inflation that occurs in nominal if not real terms. The Green CGT policy will then say you have made a capital gain and they will then tax you on this paper result. The Green party are like any other group of charlatan politicians. They love inflation.
    Russel Norman has demonstrated the truth of Abraham Lincloln’s old saw
    “It is better to remain silent and be thought a fool than to speak out and remove all doubt” Russel has spoken out.

    Comment by Alwyn — October 8, 2012 @ 10:50 am

  12. Norman is no fool. He has achieved exactly what he wanted.

    He has been doing the media rounds, as leader of the opposition, while Whatsisname is nowhere to be seen. You only have to hear Key and Joyce respond to observe how effective Norman has been. He irritates them enormously, and when you poke and prod and get a reaction, you win twice over.

    Whereas Shearer doesn’t irritate anybody in the government, only Labour supporters.

    Economists are now seriously arguing the pro’s and con’s of a Green Party “policy” (which won’t be implemented). Big win.

    Comment by sammy 2.0 — October 8, 2012 @ 11:22 am

  13. But the problems the banks and the corporates and the super rich are the only ones sitting on piles of cash. For the rest of us the problem is to much debt. If your debt is in form of a mortgage or some other asetyou are inflation proof; if your debt is in the form of, say, credit card debt then inflation will reduce that debt. Benefits are or should be inflation indexed, so the very poor and elderly are safe, whilst regular adjustments of the minimum wage will protect the low paid. I am not saying inflation is good, or even that it isn’t bad – but I think that positing it isn’t as bad as the current endless austerity death spiral.

    Comment by Sanctuary — October 8, 2012 @ 11:33 am

  14. “…And the rest of us are going to have to pay with increased prices on fuel and all other imports…”

    Good, then we might start to sort our shit out before its gets sorted out for us.

    Comment by Adrian — October 8, 2012 @ 11:39 am

  15. Heads up Danyl, daylight saving started over a week ago. (Or maybe you aspire to be no more organised than Jetstar)

    Comment by Adrian — October 8, 2012 @ 11:53 am

  16. Ah, I think the point of QE as deployed by others is that it is tactic to use when all else appears to have failed. That doesn’t appear to be the case in NZ. Full marks to the Greens for generating some media space though.

    Comment by Roger — October 8, 2012 @ 11:59 am

  17. NeilM wrote: In a currency war between China and New Zealand, since it’s really China’s low renminbi that’s the biggest problem, I think NZ will lose.

    good point. It hadn’t occurred to me that China would respond to this with a currency war. I had assumed that China set its monetary policy based on relativity with its larger export markets such as the Eurozone, US, UK, Japan, Russia, India, Brazil etc. How could I overlook the inescapable fact that they actually ignore all them and react largely to what New Zealand does? Silly me!

    Comment by kahikatea — October 8, 2012 @ 1:06 pm

  18. I ain’t no any-sized-city economist, but what the Greens are proposing isn’t really quantitative easing as I understood it – I’m not sure you can QE with an OCR of 2.5%? It looks like simple monetizing of debt, i.e. printing money to pay off the debts incurred through the ChCh rebuild and Disaster Fund recovery.

    Comment by garethw — October 8, 2012 @ 1:32 pm

  19. Sorry, just read the link you based this post on and see that point was made directly there. This isn’t QE.

    Comment by garethw — October 8, 2012 @ 1:34 pm

  20. Economists are now seriously arguing the pro’s and con’s of a Green Party “policy” (which won’t be implemented). Big win.
    They’re also completely NOT discussing the other two planks of that policy which are a little less contraversial and possibly more valuable – expanding the mandate of the Rserve Bank in OCR targeting and a CGT. I guess you could you say everyone already knows those are Green policy but I’d rather we increased the chances of those being implemented than ignoring them for the debt monetization fight…

    Comment by garethw — October 8, 2012 @ 2:00 pm

  21. Those are Labour policies, so expect to hear about them as soon as the party’s Instant Communications Sub-Committee has met (7 days’ notice required before the agenda is printed and posted to members).

    Comment by sammy 2.0 — October 8, 2012 @ 2:13 pm

  22. I support inflation at this point in time because Kiwis generally have low savings and high debt and I think it would be good to print money to cause inflation to curb that. I would aim to have 5% inflation every year for four years, then stop the printing of money and regroup about what to do next.

    Like the Christchurch Earthquakes, there will be some winners and some losers. Some people of modest means will find themselves set on a path to being moderately well off, while some people with substantial assets will see the value of those assets eroded. But that’s what happens when change is implemented. And most people’s lives and futures, at the end of it, remain about the same, except for some of the changes in the variables in the inflation period, such as increasing fuel along with an increased pay packet, as opposed to cheaper (but still expensive) fuel and relatively stagnant pay.

    Comment by Dan — October 8, 2012 @ 2:18 pm

  23. support inflation at this point in time because Kiwis generally have low savings and high debt and I think it would be good to print money to cause inflation to curb that.

    Inflation makes debt more attractive, because the value of saving is eroded as prices rise. Your proposal makes the situation worse.

    If New Zealand is serious about improving its savings rate, we need a stronger commitment to less inflation.

    Comment by Phil — October 8, 2012 @ 2:47 pm

  24. What about the scores of students and young people in their twenties who have high credit card debt and take any odd job in order to pay it off, but it seems like it doesn’t put much of a dent in the debt? True that it would encourage debt for the next generation, but it would help those already in debt to get higher pay and thus pay their debt off faster. And as for the generation that would be attracted to debt, there could be increased banking regulations to ensure that they avoid it for the most part.

    Comment by Dan — October 8, 2012 @ 2:51 pm

  25. Some people of modest means will find themselves set on a path to being moderately well off, while some people with substantial assets will see the value of those assets eroded.

    What Phil said. Plus, those with non-cash assets are probably the least affected by inflation.
    Also, I think you are making a pretty broad assumption that wages will rise at or above the level of inflation – as any wage earner in NZ will tell you, this is patently not the case.

    Comment by Gregor W — October 8, 2012 @ 3:53 pm

  26. >Like the Christchurch Earthquakes, there will be some winners and some losers. Some people of modest means will find themselves set on a path to being moderately well off, while some people with substantial assets will see the value of those assets eroded.

    That would be one way of doing it, that would play almost entirely into the hands of people who hate the idea, who would point out that such a policy rewards indolence and punishes forward thinking, and investing. I don’t think we should do that, personally, and I’m not saying that because I’ve got sacks of assets. I don’t. I’m saying it because such unfair redistribution is entirely unnecessary if the purpose is to reduce debt levels and to stimulate demand, and encourage investment. A money printout should go to everyone equally, and should be provisoed on the pay-down of debt (and stricter controls would need to be brought in at the same time). No one should lose out at all, other than the debt industry, which would have its assets back, but rules saying they can’t put out so much debt. Essentially, it would have to shrink as an industry. Since it is mostly unproductive, people taking profit by spinning inflationary money, this would actually benefit the overall economy a great deal. Rents would come down, ownership levels would go up, and people would have more money to keep out of their pay packets simply because the first 20 hours of every week wouldn’t be going to the bank. It may not even be inflationary, nor progressive – people who had no debt would receive money to do as they please with. What it would do is correct something extremely unbalanced in our capitalist system that is stopping it working and bringing it into ill-repute. This has happened many times in history, too, and debt jubilees have many times rejuvenated stagnant economies. But in the modern world we can do it without pogroms, indeed without any kind of violence whatsoever, if we have a will to do it.

    Comment by Ben Wilson — October 8, 2012 @ 4:55 pm

  27. Ben
    That’s a good way of doing it. However, issues arise as to the stability of our dollar and those who own our debt may have legitimate reason to increase it relative to inflation (Crown Debt, not individual debt). I don’t know if there are provisions in our debt agreements for this to occur, but there probably is. it would be good for paying off debt, though, but your idea (whilst good in terms of paying off debt) perpetuates the wealthy being wealthy and studies have shown a growing gap between the rich and the poor.

    Gregor W
    It is true that it would affect those with plenty of cash in the bank, but guess who those people are? The elderly. And guess who National have continued to provide superannuation for, without any regard to its unaffordability?

    Comment by Dan — October 8, 2012 @ 5:04 pm

  28. I’m not sure I understand Dan. You’re saying it’s OK to inflate savings away because the government (i.e. the taxpayer) will reimburse the elderly through CPI adjustment to government super? That doesn’t seem like a particularly sensible plan.

    Comment by Gregor W — October 8, 2012 @ 5:34 pm

  29. How could I overlook the inescapable fact that they actually ignore all them and react largely to what New Zealand does?

    I think we’re saying the same thing but I’m going with less sarcasm.

    As long as China wants to keep its currency artificially low nothing we NZ do will make any difference. We might be able to devalue relative to China and the US for a short period and have the less well off pay the price of inflation but that will do nothing to address why The US and China keep there currencies low.

    And they have more resources to do that than we do.

    It’s humorous in a dark way, the Greens are promoting an export (foreign consumption and consumerisim) based recovery to be paid for by those with few assets and little income and maintain that’s not economic orthodoxy.

    Comment by NeilM — October 8, 2012 @ 5:38 pm

  30. You’re saying it’s OK to inflate savings away because the government (i.e. the taxpayer) will reimburse the elderly through CPI adjustment to government super? That doesn’t seem like a particularly sensible plan.

    Especially with Labour planning to cut super.
    That’ll be a double blow the elderly have to to suffer.

    Comment by NeilM — October 8, 2012 @ 5:42 pm

  31. It’s not sensible that the elderly have got money in the bank, a freehold house, and $230 per week coming to them from the government. Inflation will erode their savings, which is good for the younger generations. It has to happen at some stage, to what extent and to what purpose is still unknown but a lot of superannuitants receive money currently under the phrase of “they paid for it in taxes while they were working; now they deserve it back in their retirement”, and I think that’s a fallacy. If they have enough assets to get by without the government, then so be it. And let us not forget that, while their cash savings will be eroded by this proposed inflation, their property values will increase and some of them may use the increased equity to fund the erosion of their cash savings. That’s okay. That’s the small sacrifice that needs to be made for the future of this country.

    And, as for retirees with little or no assets, there will be continued provision for them and there always will be. That’s the way it’s meant to be as well. One could argue, if it is in fact a viable measure for the government to print money and use some of that to pay down Crown debt, that there will be more funds available for health and housing for the elderly of limited means.

    Comment by Dan — October 8, 2012 @ 6:09 pm

  32. >but your idea (whilst good in terms of paying off debt) perpetuates the wealthy being wealthy and studies have shown a growing gap between the rich and the poor.

    Sure, but I don’t see the need to sell fixing the economy and strong progressive reform in the same package. If they have to go together, neither will happen. I think that a fair debt jubilee couldn’t help but be progressive, though. But that needn’t be its entire point, and the stumbling block that prevent its uptake by half of the nation. End of the day, right or left wing, the government needs to have more tools in its economic armory, or it’s like we’re swimming with one arm, just one slip away from going to the bottom.

    Comment by Ben Wilson — October 8, 2012 @ 7:32 pm

  33. I would be less concerned with the possibility of inflation in goods, and more with the very high likelihood of inflation in house prices. I get the sense that there’s actually a strong constituency against inflation in this country; it doesn’t take much to convince people that the government is trying to steal their wealth and that they need to park their money in inflation-proof assets like property. We’ve already seen the result of one decade of too-loose monetary policy, do we really have to repeat the lesson?

    Comment by Miguel Sanchez — October 8, 2012 @ 8:25 pm

  34. >I get the sense that there’s actually a strong constituency against inflation in this country

    So do I, but I don’t think there’s widespread understanding of the main driver of house price inflation being mortgage debt that is almost free, which of course means that only those already in property are protected from the inflation caused by it. They aren’t protected from a massive property value slump, though, nor could they handle a rise in interest rates. That being so, the interest rates control handle is virtually useless, leaving the Reserve Bank powerless unless they try other means.

    Comment by Ben Wilson — October 8, 2012 @ 8:43 pm

  35. Just by the way for anyone interested, the BBC world service recently had a two part podcast on inflation that looks at both sides of this debate.

    http://www.bbc.co.uk/programmes/p00w6btp

    Comment by Sanctuary — October 8, 2012 @ 9:11 pm

  36. P.S. the most interesting thing about the BBC documentaries is the way in Europe they don’t seem to be prisoners to the narrow intellectual straight jacket of neo-liberla orthodoxy like here. The idea of inflating your way out of trouble is discussed sensibly, and the pros and cons weighed by learned people. When I listen to the discussion in Europe in this podcast, and then I hear Key airly dismissing the whole idea as whacky, confident in that dull ordinary way of his, I sigh at his parochial stupidity and dispair at the miserably ignorant provincialism and anti-intellectualism that flavours the remarks of the local defenders of neo-liberal orthodoxy like Key. Joyce, the manufacturers, Dacid Farrar, etc.

    Comment by Sanctuary — October 8, 2012 @ 9:22 pm

  37. This is a very hypocritical government.

    Our exporters are are being slammed.

    Our importers/ retailers cannot sell much because our consumers lack of cash.

    Banks are wallowing in cash, that no one wants to borrow except aucklanders needing a mortgage.

    This government is borrowing money faster than it can repay it.

    This government says we have to repay debt before it can do anything apart from bennie bashing and kissing hollywood arse.

    There is no alternative?

    DOH!

    Comment by peterlepaysan — October 8, 2012 @ 9:42 pm

  38. @ Sanctuary – When your economy is absolutely rooted and you have no choice but to print money to pay your debt over a period of decades to avoid bankruptcy then you have to “look at both sides of this debate” however for the rest of the world who are not so unfortunate then QE is a pretty stupid thing to do because of the inflationary side effects.

    Comment by Bob — October 9, 2012 @ 2:05 am

  39. eh, i am pro-mild inflation but this isn’t the best way to go about it when the bond market is already giving us a super-cheap lunch. give the RBNZ a dual mandate already.

    as for “waah our poor seniors”, it’s perverse to argue that inflation redistributes wealth upwards. if you have enough net assets that an extra 1% of inflation makes a genuine dent in your income, you’re not poor.

    Comment by bradluen — October 9, 2012 @ 4:04 am

  40. It’s not sensible that the elderly have got money in the bank, a freehold house, and $230 per week coming to them from the government.

    I agree Dan. But the solution to this issue is not forced inflation. As you later point out, It’s means testing.

    Inflation will erode their savings, which is good for the younger generations.

    This is completely illogical. How will eroding older citizens wealth help younger generations? Guess who has to pay for supporting all the oldies if they have no income sources to support themselves. You and me, pal.

    And let us not forget that, while their cash savings will be eroded by this proposed inflation, their property values will increase and some of them may use the increased equity to fund the erosion of their cash savings. That’s okay. That’s the small sacrifice that needs to be made for the future of this country.

    A price increase does not necessarily mean a value increase, particularly in time of inflation. The value of an asset is what a counter-party is prepared to pay on any given day for it. In times of inflation, everyone else but the already secure is worrying about putting food on the table.
    Also, how precisely are people supposed to release equity in their property if they live in it? Encourage shady reverse mortgaging? Great for shark finance institutions, not so much for anyone else.

    I have to be honest Dan, when I see statements like “That’s the small sacrifice that needs to be made for the future of this country.” I can only assume the commentator is (a) gauche youth (b) already loaded via the labours of others or (c) a dangerous ideologue. Which are you?

    Comment by Gregor W — October 9, 2012 @ 9:53 am

  41. i think there’s a case for looking at QE although it seems that we’re not quite at that point of complete economic melt down where it would make sense.

    What I find irritating about Norman’s proposal is his glib comparison of NZ with the US when the two countries aren’t really in the same boat and there are things the US can get away with doing because no one wants to see that economy go belly up. There’s far less internatinal concern about NZ i would guess.

    And his even glibber dismsal of any down side. His policy will make life more difficult for the less well off and maybe that is the price “we” have to pay for some long term economic progress but I think we should be upfront about what those costs will be and who exactly will be paying it. Just like people have been demanding that National be upfront with the down side of partial asset sales.

    I also don’t see how this policy fits with core Green values.

    Comment by NeilM — October 9, 2012 @ 10:23 am

  42. @Gregor W – We currently live in a country with just about the lowest level of poverty amongst the elderly in the OCED. We also have a quarter of a million or so children living in poverty. Now, I am proud that we’ve largely banished the fear of poverty for the old. But i think it is also a stark commentary on skewed priorities when the future is being neglected and the past is receiving more than its fair share. When Dan says the elderly should possible be asked to make a greater sacrifice, I suspect that is where he is coming from.

    Comment by Sanctuary — October 9, 2012 @ 11:07 am

  43. Don’t panic folks – the glorious National party has saved our economy again! They have just announced they are re-introducing, and expanding, youth minimum wages. Woohooo! That’ll save the economy.

    $10.80 for 16-19 yr olds, and expansion over the old youth minimum wage that only applied to 16 and 17 yr olds. Stunning visionary leadership. I just hope all those sallow youth remember to work 20% less than their adult coworkers.

    Comment by bob — October 9, 2012 @ 12:38 pm

  44. but I don’t think there’s widespread understanding of the main driver of house price inflation being mortgage debt that is almost free,

    A driver? Sure.
    Main Driver? Probably not.

    How about lack of land supply and poor urban planning?
    How about high building costs?
    How about lack of financial education (meaning people don’t pursue alternative forms of wealth management and investment)?

    Comment by Phil — October 9, 2012 @ 1:04 pm

  45. That may be Sanc, but how about framing it in terms of ‘people who can afford to sacrifice more should be prepared to do so without whinging’.
    Target wealth, not income and do it across the board.

    Sticking it to the crusties – especially if workers are going to have to foot the bill anyway – is counterproductive (particularly given that the old bastards all vote and children don’t).

    Using inflation as a sledgehammer to fix an issue that could be adequately resolved by sensible legislation is just dumb. That is my issue with Dan’s prescription.

    Comment by Gregor W — October 9, 2012 @ 1:17 pm

  46. @Phil

    Poor urban planning? In the last decade, house prices rose fastest in the smaller towns, not in the main cities. Maybe you have more experience of it than I do, but I have a hard time believing that urban planning in Greymouth is worse than it is in Auckland.

    High building costs? House prices have risen much more than building costs. Section prices have risen more, but the value of land reflects the value of the right to build on it, so it’s completely circular.

    Lack of financial education? I think people are already well-educated on the fact that property is tax-favoured and inflation-proofed.

    Comment by Miguel Sanchez — October 9, 2012 @ 2:58 pm

  47. There’s also the point to be made that inflation will probably have the lowest impact among the elderly, ie, they are the ones on average that use the least amount of petrol and buy the least amount of groceries, the ones most likely to have a small vege garden, and the ones most likely to be cheap staples such as flour and sugar in bulk quantities and use their assets such as spare time and decades of knowledge to transform those ingredients, via the process of alchemy, into delicious homemade cakes and biscuits, preserves, etc.

    Comment by Dan — October 9, 2012 @ 3:49 pm

  48. “BUY cheap staples such as flour and sugar …”

    Comment by Dan — October 9, 2012 @ 3:51 pm

  49. Honestly now Dan, I can’t tell if you’re joking or not.
    Well played, Sir!

    Comment by Gregor W — October 9, 2012 @ 4:14 pm

  50. No, I’m not joking.

    And in answer to your question, I would probably fit most comfortably into category A, as I am 25 so still relatively young.

    Category B is a distant possibility for the future but not a current reality.

    Category C represents what I used to be but try not to be now. I think we are moving past traditional economic yardsticks (the wealth of our nation being measured by the wealth of our oldest citizens) and I wouldn’t class my views on where we should be going as idealist, but rather reactionary to the last decade of economic uncertainty.

    Comment by Dan — October 9, 2012 @ 4:36 pm

  51. “…particularly given that the old bastards all vote and children don’t)…”

    Nothing like $10.80 an hour to get an 18 year and 19 year old to the polling booth.

    Comment by Sanctuary — October 9, 2012 @ 5:53 pm

  52. … inflation will probably have the lowest impact among the elderly…

    Lowest total impact, probably. But lowest relative impact? Probably not. As you pointed out in your following comment, they still have to buy all these meagre supplies, you’re making the huge assumption that they are all rationing geniuses, and they often have the least flexibility in increasing their available resources.

    True, a single person stuck in a low paying job in a crappy house would have a lot of the same problems, but at least they hold out the hope of getting a better job one day. An old person is going to become increasingly less able to work, which is the entire point of a pension.

    Comment by Flynn — October 9, 2012 @ 9:39 pm

  53. Nothing wrong with a pension, but something’s not quite right when we have a record high youth unemployment rate and pensions going to elderly, some of whom can get by easily without it.

    Comment by Dan — October 9, 2012 @ 11:06 pm

  54. Sanc @ 4 says: “At some stage we have to feel the pain of weaning ourselves off our addiction to easy, unskilled low wages service sector jobs buttressed with cheap imports and switch to policies that encourage exports and import substitution’
    Don’t you mean:
    “At some stage we have to feel the pain of weaning ourselves off our addiction to easy money buttressed with poor savings and switch to policies that encourage savings and thus investment/kiwi ownership of the economy.”

    Comment by Clunking Fist — October 10, 2012 @ 5:54 pm

  55. Ben @ 10 “The money should be directly injected into the bank accounts of citizens of this country, with the strong proviso that it pays down debt first.”
    Australia tried that, TV retailers and the NZ tourism industry said “thank you”. How the hell do you provide that debt be paid down first? Would every recipient (i.e. most adults in NZ) be given a case worker to ensure compliance? Actually that could help with unemployment, but not the govt’s budget worries!

    Comment by Clunking Fist — October 10, 2012 @ 5:59 pm

  56. CF

    Savings does not necessarily go hand in hand with investing in kiwi enterprises. It’s going to take a damned long time of saving for that to happen to the average person. Inflation will speed up that process.

    You can give the money directly to each person’s bank to be held in trust temporarily until the staff at the bank figure out what debt is owed and pay it back first, each person’s account then being credited with the residue if there is any residual cash left.

    In the case of there not being any cash left, you can give those people 10% of their money and use the other 90% to pay off their debts.

    Comment by Dan — October 10, 2012 @ 6:04 pm

  57. Sorry Dan:
    Please direct me to credible research that concludes that inflation speeds up savings? It certainly can speed up asset value inflation, which is the appearance of savings, as some measures of household wealth look at Total Asset Values minus Total Debt. And we know what happens after that: folk feel “richer” so save less, consume more. I know a family that used to draw down the increase in value every couple of years to update their car and take a holiday. That caught up with them eventually, as the mortgage repayments increased faster than their real income.
    Give the money to the bank to do all the work? What if I have a cheque account with one bank, but credit cards & mortgage with other banks or finance companies? What a shedload of work. My little brain says, too much work.

    Comment by Clunking Fist — October 10, 2012 @ 6:23 pm

  58. Sanc @ 36 “P.S. the most interesting thing about the BBC documentaries is the way in Europe they don’t seem to be prisoners to the narrow intellectual straight jacket of neo-liberla orthodoxy like here.”

    How’s that non-orthodoxy working out for them?

    Comment by Clunking Fist — October 10, 2012 @ 6:43 pm

  59. Quite well if you like inflation and recession.

    Comment by Bob — October 10, 2012 @ 6:59 pm

  60. How is orthodoxy going in Greece?

    Comment by Sanctuary — October 10, 2012 @ 8:28 pm

  61. The Greek orthodoxy of not paying taxes, graft and corruption? Not so well.

    Comment by Bob — October 10, 2012 @ 8:32 pm

  62. Greece and it’s Orthodoxy? It has its own religion, why not its own “orthodox” economics, eh?
    http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010

    Just before the GFC, a recently returned tourtist to Greece asked me “What do the Greeks do?” What do you mean? “What do they do for a living? I never saw anyone working. All the men seemed to sit in cafes drinking coffee and talking.” Hmmm, I replied, I don’t actually know what Greece does to earn its keep.

    I guess now we know.

    Sanc, do you really believe that Greece was practicing orthodox economics? I don’think you do, I think you’re just being a dick (I won’t say idiot, because many of your posts prove that you are not). How can running deficits during a boom, receiving redistributive cash from the EU, using a fixed exchange rate (in effect that is what the euro is as between the Euro countries) and not having control of your monetary policy be considered orthodox economics?

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

  63. Not sure if this take on history is accurate, but here goes:
    http://www.periscopepost.com/2010/09/beware-of-greeks-bearing-bonds-an-apology/

    Comment by Clunking Fist — October 11, 2012 @ 1:11 pm


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