John Walley says "vision and leadership come first"

Unfortunately I don't think we will see much of this from either of NZ's monetary and fiscal policy makers.

Is Singapore's success due to their sound monetary policy or due to the subject about "freedom" as you stated? Perhaps, you could share with us here.

Firestone closing in ChCH..... guess we can import the same brand from Singapore.

Stamford is one of the major tire companies in Singapore , Wally . Bridgestone is the parent company of Firestone . The majority owner of Bridgestone is in Japan .

To others, freedom of press might not be what we wish it to be in Singapore, but you shouldn't paint it as an absence of freedom.

To John: Singapore is a one party state, effectively. To do what Singapore does requires a commitment we just don't have in NZ. Our two main parties are vote buyers, which will in the end wreck the country, as every socialist system has done, so although your suggestions are good one, they will never work here.

Just the same as the banks 'owning' all the property really. Profits go offshore. Sad about the workers and their families and deep crap for those who borrowed a heap from a thieving bank to splurge on price bloated property.

Walter : Our tire plant is to be re-tired . 275 jobs lost in Papanui , total closure of Firestone factory . And Bridgestone ( Aust Pty Ltd : 70 % owned by Bridgestone , Japan Ltd . ) cite overseas factors . Economies of scale . Cheaper labour in the sweat-shops of China , Thailand and Vietnam . So pray tell me , how can we compete in manufacturing ? How can we stop the flow of businesses to offshore domiciles........ Ooh , lest I forget , lower tax rates in those locales too ......... Now there is one clue !

Berend de Boer - you are right that Singapore has been effectively a one-party state since the 60s. This, I believe, has benefited policy-making - as it provides stability and the opportunity for its leaders to take a long-term focus. It, like us, has a unicameral Parliament.

But, I am unsure whether the difference in economic success has anything to do with ideologies of socialism as you have implied. In fact, much of Singapore's infrastructure (education, media/broadcasting, housing etc) is socialist in the sense of built/owned/operated by the state, and industries such as transport are heavily regulated, with for example, import quota restrictions on private passenger vehicles. It has compulsory national service (2 years) as well. And most of the citizens (80-90%) live in low-cost housing, provided by the state.

Perhaps the problem you allude to is rather a problem of capitalism as it operates within most Western representative democracies at present.

@Kate,

Are those factors you quoted make Singapore successful?

Why are you bothered by the fact about jury system? Why are you concerned about National Service? You do know alot about their system, infrastructure and education etc...?

You might want to fly to Singapore and have a feel if what you said ".... most of the citizens 80-90% live in low-cost housing, provided by the state..." is the case? and how you defined it as "low-cost housing." Go and see if you could spot much of the houses/apts are built of wood or concrete/bricks etc..... check it out if they are really low-cost housing as you defined?

Are you not able to appreciate any policy that could be implemented here? or are you taking just those you have trouble with?

Trudy, I'm not critical of their system of government or the level of state involvement in the lives/well being of their citizens - far from it. I'm not saying National Service is a bad thing at all - but it does restrict freedom of choice - whilst bringing the benefit of social equality. And the state-built housing to my knowledge is not low-cost in the sense of low quality. It is low cost in the sense that the state built it without the requisite need for interest bearing loans and profit taking, as is required by private sector built infrastructure, including housing.

And yes, I believe these factors and many other initiatives relating to their government's intervention in markets, have made Singapore more economically successful.

Whether Westerners, or the Western system of capitalism would be prepared to accept such government intervention in the lives of its citizens is another matter.

Walter, to reduce our import of goods from low wage economies, would I imagine require the re-introduction of import tariffs - is that what you are promoting?

For a nation as dependent on the private vehicle for transport as we are, combined with our geographic isolation - to have no local manufacture of tyres does seem a bit of a recipe for disaster.

New Zealand is a small open economy, with its population highly individualistic. Singapore is also a small economy, but government controlled entities with complex cross share holding structures dominate it, providing policy makers with significant levers of power and control. Exchange rate management in such an environment is a task on a different scale of difficulty than that which would confront New Zealand authorities. As such, Mr Walley's comparative is both simplistic and misleading.

Kate what is your opinion ?

Megan - "package', no, why? Social direction, no, why? See my 5.24pm, why not?

@Kate -
Are you saying close our door, no FTA, trade ourselves and so on?

With huge international borrowings, how to repay debts, yet still got to continue to borrow huge to substantiate the property mkt (home loans etc), govt also got to borrow, how not to depend on foreign capital? Otherwise, we got to start printing money, is that happening? If not, then what economic sovereignty?

Until we can produce our own trucks, cars, LCD TVs, rig sufficient oil and refine our own petrol from raw, produce all the foods to cater for everybody, manufacture clothings for all seasons for the entire population and the likes....we can't close our door and reduce imports.

Grandy, how not to depend on foreign capital? Nationalise money, not banks -

http://sustento.org.nz/nationalise-money-not-banks/

Simple concept really.

Why do we have to produce trucks and cars and LCD TVs? The average NZer will be unable to afford imported oil in times of scarcity anyway. We have to lower our dependence on imported energy by lowering our dependence on the private motor vehicle. Look at Singapore, it has strict import quotas on motor vehicles. This serves to 'drive' (excuse the pun) the population toward public transport. Is that a bad thing? Not for Singapore - it's been a very effective policy - and in addition they have significant congestion taxes for private vehicles wishing to access the CBD.

Effectively, we could with a bit of forward planning, stop all imports to NZ tomorrow and still feed and house our entire population.

Kate - it seems that your experience with Singapore wasn't quite great. Walley's article shares about the strength of the monetary policy yet you have lots of views on how the transport, vehicle quota and CBD work in Singapore (you did not mention - given their restricted land?). I do respect your knowledge of Singapore and welcome you to this opened-economy country NZ. A country that would not likely use horses and horse carts as main transportation in future.

@Kate

No Foreign Capital = First place no foreign Banks, No Telecom, No Contact Energy, etc. In order to buy these assets back from their owners where do we get the money?

Nationalisation of these assets would simply mean NZ becoming like Fiji overnight. So in fact to buy these assets back NZers need to generate sufficient wealth in order to pay off these assets owners and buy our stuff back.

In fact to free ourselves of foreign capital and given the bad choices of the past, we need more foreign capital. But this foreign capital invested in more productive aspects of the economy.

Rather than playing some sort of Ponzi scheme amongst ourselves with property, we need to invest in R&D. Generate unique ideas, and get people to buy these ideas.

It easy to look at a symptom, jump up and down and why not fix it. Finding causes and acting clearly on them, even if this means fundamental chances to our way of thinking and lifestyle choices is much harder.

Consider this article: [1]

"Interest rates in the US, Japan and the UK were either zero or low, so when investors were offered a triple A-rated New Zealand Government bond at 5.5 percent interest, it was attractive to them compared with the alternative.

New Zealand was now attracting interest from people who were wanting to diversify away from US dollars to buy New Zealand debt or the New Zealand dollar, he said."

Imagine an investor, who bought AAA sovereign bonds at 5.5% when the dollar was at .55c. They are laughly right now. Turn this around and the reason why these bonds exist is because we spend more for our lifestyle collectively than we can afford from our own pockets.

[1] http://www.stuff.co.nz/business/market-data/2996279/English-relaxed-over...

Mark - perfect example of globalist hegemony making a link between self-sufficiency and communism. Yes, children, "be afraid", growing your own vegetables and walking to work can be hazardous to your personal freedom!

:-)

From:

http://www.stuff.co.nz/the-press/business/2996279/English-relaxed-over-h...

"If there was a silver bullet to do with the dollar then we would fire it, but there is not one."

However if we modified monetary policy, with ideas you and your parlimentary peers before you continually rejected, we'd not be needing one:

'English defies the evidence on monetary policy', 20 Feb 2009, here:

http://www.mea.org.nz/media/pressreleases.aspx

For those not in favour of a carbon copy of the Singaporean monetary policy approach, how about my Reserve Capital Rate (RCR) idea, here, 'Number 6':

http://www.interest.co.nz/ratesblog/index.php/2009/04/15/opinion-how-tou...

Or, how about develop another idea, which is a simplification of 'Number 6' - that is, a Principal Repayment Rate (PRR). Along side the OCR, RBNZ could use PRR to increase or reduce the amount of principal paid in loan repayments. This would yield the much required immediacy effect that is neutered by fixed rate loans. Plus it's not another nasty old TAX, and it only affects those who are consuming credit - who are the ones at the root of credit demand! As for interest only loans, tough, when the PRR kicks in you'd be paying some principal back, like it of not - and if you don't like that - save. Plus, the policy would be that funds going back to lenders in relation to the PRR would be held on reserve, BUT, not form part of reserve liquidity ratio computations. (Sorry banks.)

So how might using something like this PRR tool have affected:- the credit splurge that fuelled the property boom; the track of the OCR; carry trade appetite; the rate and volatility of NZD and those 275 Firestone workers in Christchurch?

Nicholas - R&D, yes, see Number 1 in the above link. Plus we need to incentivise the other 'winning behaviours'.

Walter - something just for you:

http://www.youtube.com/watch?v=qDNFnO11dEg&feature=related

Enjoy, cheers, Les.

Exporters always want their currency to be as low as possible so that they can make as much money as possible. It saves them from needing to raise productivity, the bedrock of national wealth. Notice how the trade-weighted kiwi is still below its average value on chart 1?

Anyone interested in the question of whether a managed exchange rate would be preferable to a floating one for a small, open, commodity-based economy like NZ's as opposed to a small,open one based on manufacturing?

The point of chart one is that fluctuation can be managed if the will exists. The point of chart three is that change it is a matter of vision not resources. Chart 2 shows the out-turn of better policies for the export sector and consequently for the economy.

Comments from Wellington are increasingly desperate "if we had a magic bullet we would fire it" "the high dollar is a vote of confidence in the New Zealand economy" "the answer is productivity" continually replays the out of touch, closed minded, limited thinking that will not change the decades long economic decline of New Zealand.

Many exporters are close to the end of the road, for decades they have struggled with stupid monetary policy driving high exchange rates (our housing bubble fueled by global interest rate arbitrage), they have worked on productivity, they have also increasingly avoided investment in the face of falling or uncertain returns. The last point will bring the second wave that will accelerate the decline in the real economy cutting the legs of the table that supports the non-traded sector.

Ask not for whom the bell tolls"¦

John, agree - except I wouldn't call those comments from Wellington desperate - instead I would say they are contemptible. Given this type of abject dismissal, one has to ask what is behind this Government's continual debasing of their policy and other citizen-composed advisory group's advice?

What would be the downside of pegging the nz$ to the A$ (or sg$ if you like)?

Kate - "....one has to ask what is behind this Government's continual debasing of their policy and other citizen-composed advisory group's advice?"

Vested and conflicted interests - plain and simple. They get away with it because few of the electorate understand enough to ask the reasonable questions and even fewer are involved in remedying that particular aspect. (Good on Int.co for doing their bit.)

http://www.interest.co.nz/ratesblog/index.php/2009/08/05/have-your-say-h...

And then there are those who's business is credit.

Go figure.

Les,
Nothing surprises my anymore.
"¦and again they are just riding old donkeys with calculators in their hands looking for economic direction in this country "“ no vision.
Hopefully I don't have to put YOU and your BUDDIES into that category.

Here a link, which makes more sense (then yours) and provides some new ideas for New Zealand's manufacturers and government to reduce our massive current account deficit. Or should NZ import "Green industry products" from other countries, because they have again an edge on us.
Does the NZmea have a policy on that ? Did members of the MEA or the government visited the conference ?

http://www.youtube.com/watch?v=31NDaGgK584&feature=channel

Cheers Walter

We need an exchange rate where both exporters and importers have a show of making a living, given a choice we need to bias towards exports, remember they are the legs of the table that holds up the non-traded economy.

Why - exporters must invest in the development of local intellectual and human capital, importers buy stuff by the container load and if it fails special it out for what they can get.

We have to place our bets on local human capital leveraging local resources - what else is there that we can sell?

Ask not...

S Gibson says: "Notice how the trade-weighted kiwi is still below its average value on chart 1?"

Actually the chart stops at about Q1 2009. The TWI is now close to 68, about 10% below its all time peak and well above the historical average.

http://www.nbnz.co.nz/economics/exchange/nzdtwi.aspx

Let's forget the emotions and seriously review the numbers. How can you ignore the fact that Singapore is actaully a much more exposed economy than New Zealand, recognized it and put in place policies to protect itself from the extremes of the "Free Market" and has done well ever since.

A Free Market that ironically has made a slave of us all in New Zealand.

Grandy wade through the PEC slide deck on http://www.interest.co.nz/ratesblog/index.php/2009/10/23/top-10-at-10 point 3 as the data is mind boggling.

Matthew "“ "If individuals want to consume unsustainably, and others want to lend to them, who should stand in their way?"

Matthew do you really think its okay or are you winding the conversation up a notch. I hope its the latter.

Im thinking of sailing, i remember always being told never step down onto a life raft only up, ie, don't get off the boat too soon.
Im thinking that this boat is awfully low in the water,the high salaries paid to civil servants was the last straw. As soon as I think the $ has peaked Im out of here. Why bother this is too hard, take your talents and strike out for clearer waters. I may continue living here but my investments will be offshore and like many Kiwis I have dual nationality.
I listened to Bill English tell us that we can live with a high dollar, he is right many can but exporters cannot. Ive given up thinking this is going to change,lets face facts this is whats happening and stop kidding ourselves, it isn't going to change.

Even Brazils move appears to have failed.

http://ftalphaville.ft.com/blog/2009/10/20/78696/an-own-goal-in-brazils-...

Andrew you can't give up! Everyone that does changes the balance in favor of the idiots that believe this stupidity is sustainable. I keep thinking of Winston Churchill between the wars and what a lonely place it must have been to see a future no one wanted to see. This stupidity cant last"¦..it's a physical impossibility.

Everything that needs to be changed is already policy and in place in Australia or Singapore and we need to keep pushing that fact into the public domain. The numbers are there for anyone to see.

Its no surprise that up until we floated the dollar in 1984 we where leading Singapore in GDP and then it all changed and has stayed that way ever since. Andrew don't give up!

Selwyn
I think the only hope of change is if we experience a melt down, some kind of economic 'China syndrome'. The will may be there in some politicians but it sure as hell hasn't got a majority of support in the electorate. We are up against a powerful change that Helen/Cullen piloted in, through the education system, the treaty victims culture , the welfare system and WFF.
We live with an MMP electoral system that is designed to stymie the very kind of change you are talking about by forcing a conciliatory approach to legislation. Id love to hang around and see how it turns out but Ive got family to consider and I have not got all day to wait around while we try and see if we can invent some new kind of maths that lets as eat our cake and keep it too.
Besides Im cashed up and bored.

Selwyn,
You wrote:
But can I say in defense of John and Les that people not listening to the right thing doesn't mean you change the drum beat. You shout louder! Winston wasn't wrong between the wars but no one listened. As time goes by the right solutions will be adopted as there will be no alternatives left.

I think they already shout louder, but unfortunately in the wrong direction. Why not make that entire fiasco public through the media. What I can't understand is why do we not have public discussions on TV on prime time ? The private sector has to stand up and force politicians to front up. This works in many other countries.
Just another proposal.
Please Les and John, can you respond to my 3:13pm questions and my 7:01 comments.
Cheers Walter

@Kate

My point was: you can't expect the foreign capital or foreign owners of our assets to leave the country tomorrow without some payment. Thus we need to increase OUR wealth in order to BUY out their ownership. Saying that we wish that there was less foreign capital and more NZ ownership is like saying we wish we could win lotto.

My comment about more foreign capital was a little light hearted, but does have some interesting basis. I'll find a link later to an interesting post that comments about that situation.

However, what methods can NZ as a country/organisation/unit increase ITS wealth? To pay back our mortgage/loan we need to generate income.

There are two ways to do this: one build NZ companies or income generating units that foreign companies wish to buy from. Air NZ's new economy lie flat seat is an example of this. A new idea which will generate a lot of potential income for Air NZ and it's owners. Setting up a new Telecoms company is an example of a bad idea - already an existing company, massive investment and you are unlikely to make much margin. Probably not even enough to paid for the interest on the capital you borrowed to set it up. Thus NZ needs more R&D to generate ideas that can be sold in the global marketplace to generate income for us to pay off the debts we current have for the lifestyle we have lived to date and planned for the future.

Of course the other method to increase the wealth of the nation quickly is immigration. Imagine if the foreign capital owners become NZers? Started paying taxes here. If we added a million new people and kept the same or maybe greater per capita income, we could add 25% to the nations wealth overnight.

You might think these options are extreme, and maybe not workable. But it is important to think clearly about these issues.

Lets consider this NZ as like a single household. It owns a house with some land. They borrowed money from the guy across the stream to buy their house. Unfortunately they income is not enough to pay of the loan or cover their lifestyle (regular movie outings, etc). Luckily their lender is willing to put them on interest only, but wants a roadmap back to P/I. So consider the options: i) they reduce their lifestyle costs, start growing veges in their garden - their costs go down; ii) they get a boarder and get some rent from the guy or iii) their smart child comes up with a clever product that might make them enough money to pay off their loan completely. Each option requires change and a clear grasp of situation. Option i) - how can they do without n upgraded TV every couple years? Option ii) means their two childs are unhappy as they now need to share a room. To get option iii) to work they might need to "borrow" some more money from the guy across the stream in order to have enough capital to generate the production in order to create this new wealth.

Interesting link, AndrewJ - particularly this comment by the IMF guy;

"With today's financial engineering, it's not very difficult to disguise pure financial flows as trade flows or even foreign direct investment. In fact, the experience in a number of countries is that, over time, the system becomes rather porous."

Basically what he is saying is;

With today's standard practice of financial maniplation by the powerful international market players, it's not very difficult for them to commit fraud by disguising pure financial flows as trade flows or even foreign direct investment. In fact, the experience in a number of other countries is that their governments were unable to successfully police and prosecute such fraud and hence the system is rendered useless and the nation fails to regain any sovereignty back from the forces of the corrupt market practitioners.

Note he uses terms instead like "financial engineering" and "disguise" - whereas they should be "financial manipulation" and "fraud". So the IMF opinion is basically, don't try and regain any economic sovereignty - we and our mates will own you forever, no matter what your local laws are.

Neil C, thanks for the link to the up-to-date twi figures. I guess it would have been surprising if this article had appeared in Feb or March of this year. The fact is that when a representative of an association of exporters writes that he wants a managed exchange rate he's not suggesting a higher exchange rate. That's ok, it's his job.

I largely agree with Kiwi Trader. NZ's main exports and its real competitive advantage lie in soft commoditiies and the country has a well developed and positive image abroad which should allow it to charge a premium for its products. This pricing power applies to soft commodities like dairy and wool but probably not to whitegoods.

A floating exchange rate is not perfect but the kiwi does generally appreciate when NZ's exports receive a high price and depreciates when the reverse is true. The floating dollar tends to smooth out changes in the terms of trade and leads to a more stable domestic economy. We are not subject to regular bursts of inflation and periods of savage recession - the kiwi does the adjustment for us much less painfully. This flexibility is important because commodities are priced in USD and these prices are very volatile compared to the prices of manufactured goods.

Apropos the effects of flexibility, watch the speed with which Iceland returns to durable growth (kroner floating) versus Ireland (part of the eurozone).

At the moment the world has been flooded with cheap money and it's flowing to high yield securities such as NZ deposits. This has driven up the kiwi and, unfortunately, reflects the poor relative prospects of the rest of the world.

NZ's exporters will do what they've always done - hedge.

The Govt gets ready for a Land tax or GGT thank god someones doing so well in this country.

AndrewJ - So true how the producer gets screwed by the corporate owners of the distribution system.

In my opinion, the producers of the West are only now coming to experience what the cocoa and coffee producers of the third world have been living with for years.

And the NZ Government has been complicit in this by permitting the mergers and acquisitions which in this country inflicted on us a duopoly in the grocery trade. They were only obeying the country's 'real owners' instructions - those owners being the multi-national commercial conglomerates.

Hence, if the systemic shock to capitalism comes (which I think it will, I'm just unsure what will replace it) my plan is to be debt free and self-sufficient in some relatively "benign environment", as Helen would say!

AndrewJ --- agree. One of the best non NZ examples of your argument is the dairy farmers in the UK and what they are beingpaid for their milk. As you say its the margins in the distribution system that kills it.
So maybe with your "cashed up " position you could look at this. I've read where small bacon manufacturers in the UK sell on the internet to expat UK people all over the world directly. If the big guys can transport chilled lamb successfully to the UK now why can't a "small" guy do it directly to Mrs UK housewife ( may need a friendly pom on the other end to end ensure the "last mile" is done correctly in a chilled condition )

Selwyn and Les, with the greatest of due respect, can I caution what you are wishing for re adopting Singapore Monetary and/or Fiscal policy.
Just as a wee divergence, Monetary policy refers to that influenced by external international influences, Fiscal policy refers to internal policy of nations. Macroeconomics refers to taking into account both Monetary(external influences) and Fiscal(internal influences.
This insightful article from PIMCO, a major bond trader who Alan Greenspan now works for, is a great admission from the horses mouths that Monetary policy now dominates Fiscal:
"Conventional wisdom holds that while fiscal policy should be made directly by democratically-elected legislators, monetary policy should be made by technocrats nominated by the democratically-elected president, and confirmed by democratically-elected legislators. The rationale for this conventional wisdom is that democratically-elected leaders inherently are given to inflation proclivities, giving to the citizenry more than it is willing to tax the citizenry and running perpetual budget deficits that would be monetised, if such leaders kept monetary policy decisions to themselves. Thus, it is argued, democratically-elected leaders are doing the citizenry a huge benefit by bestowing operational political independence to the Federal Reserve, essentially protecting themselves "“ and, thus, the citizenry "“ from their inflationary selves."
http://singapore.pimco.com/LeftNav/Featured+Market+Commentary/FF/2008/Gl...

If you study the Macroeconomic situation in Singapore, you will find:
" Unique Characteristics
Due to Singapore's ideal location as a seaport, a large portion of the country's export sector is made up of re-exported goods. The major goods that move across Singapore's boarders are: rubber, petroleum, textiles, timber, and tin. Because of this, commerce has historically been the source of income for many of Singapore's people. The country is not a center for natural resources and imports, the majority of its food products.
Key Economic Factors
The economy of Singapore is highly dependent on international trade. For example, in 2002 the total value of trade in goods (imports plus exports) was 273% of the country's GDP. The majority of the industrial sector in Singapore is made of foreign multinationals and large domestic corporations. Medium and small sized companies play a miniscule role"
http://www.gocurrency.com/countries/singapore.htm

"Singapore - International Financial Centre
Over the last forty years, Singapore has established a thriving financial centre of international repute, serving not only its domestic economy, but also the wider Asia Pacific region and the world. More than 600 financial institutions, ranging from the world's largest players to boutique firms, operate here. Together, they provide a wide range of financial products and services in the areas of consumer banking, corporate and investment banking, fund management, insurance and treasury activities"
http://financeconnectsingapore.com/financesector.php

"Money supply and interest rates have a relatively modest impact on inflation and the level of economic activity in Singapore, given the greater contribution of external demand to growth than that of domestic demand. Unlike the larger economies where interest rates have a significant impact on investment, Singapore's economy is dominated by foreign multinational companies with foreign sources of funds, thus
limiting the importance of the domestic cost of borrowing."
http://www.bis.org/publ/plcy05k.pdf

This is a bril little slide show:
http://www.slideshare.net/apurva.chiranewala/macroeconomics-of-singapore...

Thus I would caution that much of the policy handed down by the Singapore Monetary Authority(equiv of central bank) is in turn handed down by external interests, and very much appears to be designed to create a haven for the Macroeconomic Corptocracy, such as an exchange rate with a set band, which makes it all but fixed. Rather than protect any homegrown export or manufacture, it appears to be another low cost corporate haven.

If we were to become that, John Key, the central bankers favourite son, would be stoked:
"Why not have an offshore banking industry based here?" he asks.

"In the right conditions you could attract 200 banks to register here - each with a CEO and staff. You could attract insurance companies. Bring back lots of Kiwi accountants and lawyers. Single out clusters - such as high-class yachts - or other special sectors as the Irish did."
http://www.nzherald.co.nz/company-taxation/news/article.cfm?c_id=691&obj...

and Lew Burton, ex Chicago Hedge fund trader, now head of derivatives at Goldman Sachs JBWere in New Zealand
"In New York, where I grew up, it is common to give companies tax breaks for remaining in the city. In other places the local government will give away land or natural resources.
New Zealand is a great place to live. It should take a small economic nudge to get companies interested in moving headquarters here. Tax breaks work, and it costs nothing if the companies demand little in the way of unique infrastructure.
If they employ and spend we get growth for free. Remember we get to pick and choose what types of companies are "invited"."
http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=105...

What have you been drinking Roger?

AndrewJ -- forgot about the quota , but for someone who wanted to do things on a "small" scale there are alot of expats , of all varieties around the world.The internet breaks all sorts of barriers.

Iain -- thanks for the links. Now I understand Lew's response to my comments about the bank shareholders vs staff rewards on another thread.

Iain et al - Lew Burton timeline at:

http://www.linkedin.com/pub/lew-burton/14/141/833

I would like to thank you - and all the informed contributors to this site, on behalf of the legions of financially illiterate followers of your unfolding debates, for helping to get this formerly esoteric information into mainstream awareness. (Educated sheeple are much more likely to head in the right direction!)

The 1956 financial system review was a long awaited summary, cheers.

http://publiccreditorbust.blog.com/2009/10/23/1956-report-of-1955-new-ze...

Lets face it Trading currencies is a zero sum game. It produces nothing. So how come it is such a popular pass time? It's popular because the speculative traders are on average doing better than those who must exchange dollars for goods i.e. exporters or importers, our true trading sector that produces things, employs people and when profitable increases the overall wealth of the country in a sustainable way.

The important bit here is that the speculators are doing better than those who's speciality is something else, something productive. This is an important point. The tables need to be turned back in favor of the producers.

There have got to be ways to reduce the volatility in the $NZ. What seems to be needed is a way to reduce the popularity of the $NZ as a speculative commodity currency. How about limiting the volume of transactions that can occur in the Kiwi? This would not alter is nature as a floating currency because price is independent of volume. But it would make it less attractive as a destination for large speculative interests because it would become a less liquid market.

A key driver for our currency is interest rates. New Zealand is a highly indebted nation. We consistently run large deficits. Our high dollar is not a reflection of a strong economy it is a reflection of our high relative interest rates. Bollard is worried that if he lowers interest rates further a renewal of the house price spiral will occur. I think that is unlikely but it is possible given the high multiplier that exists in the construction industry. This could be ameliorated by taxing speculative gains on housing and by regulating mandatory borrowing and loan serviceability ratios on all home loans. Measures like this would allow interest rates to be lower without risking a larger house price bubble. This would cause the kiwi dollar to drop and stimulate investment in productive enterprises.

This cannot work, that cannot work, the outcome is are we better.....? Is it the case that Nobody knows better than us? Oh good, better, best, are we best best and best? Why do we have to imported so many durable goods, cars, tyres, LCD TVs, computers, etc.... isn't producing ourselves as "a package" better/best? and close our doors, is that the case? This can't work, that can't work, so........... what's up?

Just another example: When I like to upgrade my computer for better performance, I would add memory or hard disk or something with better performance perhaps at different time (try it out at different stage). But, very unlikely that I would buy a new one unless I have the money. Isn't this a classice case of "selective improvement" rather than "total package"?

Iain, can you provide more detail relating to your description of the ASX's markets as a rigged commercial pyramid scam? An example you be useful too. Thanks.

Casino capitalism? Insider trading in Australia
http://www.aic.gov.au/publications/previous%20series/lcj/1-20/casino.aspx

I was in Australia watching the Christopher Skase Spanish extradition debacle unfold:

"Skase was actually something of a small fry"”although a brash, upstart one"”compared to the heavyweights of Australian business who crashed in the late 1980s and 1990s, most leaving far greater debts behind. To scroll through their names is to list many of the most prominent figures of the corporate establishment............
Skase's methods were far from unique. Like others, he exploited the depressed state of the stockmarket in the mid-1970s, when inflation kept share prices down in the wake of the 1973-74 world recession. As long as share and other asset values rose, borrowers could repay their loans by selling acquired businesses at higher prices. Skase and other takeover merchants thrived, using small amounts of capital to gain control of vast assets.
Most initially survived the October 1987 share crash because American and other central banks flooded liquidity into global markets to artificially boost growth. But the cracks began to appear within two years, as interest rates reached 18 percent in Australia and property prices fell."
http://www.wsws.org/articles/2001/aug2001/skas-a13.shtml

News.com Feb 2008
"INSIDER trading is so rife in the Australian stock market it may be weakening the reputation of the local bourse, forcing the companies' watchdog to bulk up its resources in the wake of a poor track record in cracking down on the practice.
Senior markets executives, including the chiefs at two investment banks, said insider trading had become "part of the system'' in the Australian bourse, with regular lifts in the share prices of takeover targets in the days before any official announcement of a deal."
http://www.news.com.au/business/money/story/0,25479,23245125-5013953,00....

"SYDNEY, Sept 12 Asia Pulse - Simon Hannes, once a highly skilled merchant banker, is now a convicted criminal after being found guilty, for the second time, of Australia's largest insider trading case.
A jury found on Wednesday the 42-year-old former Macquarie Bank (ASX:MBL) senior director guilty of insider trading and two charges of breaching the Financial Transactions Reports Act.
The charges related to the purchase of share options in September 1996 in transport company TNT, prior to the announcement of a takeover bid by another company which yielded him a profit of A$2 million (US$1.096 million).
The jury deliberated for about three days following a three-month trial in the NSW Supreme Court.
He now faces a maximum five years in jail... "
http://findarticles.com/p/articles/mi_go1523/is_200209/ai_n7226419/

It is classic insider behavour to pump the market up on creative accountancy, then ditch their stocks to the pension funds of the world, if you have got a bit of time on rainy day, toggle down to "silly money" at below link, is a comic piss take of the global credit crisis, based on facts but presented in an hilarious way.
http://www.thedossier.ukonline.co.uk/video_drugsmoney.htm

Iain
You are driving a truck??? I like Lee Yuan Yeu where he points out that in Chinese culture the best and brightest go into leadership then science,farming and production. Merchants and bankers bottom of list as they produce nothing just recycle others wealth.
You need to get a job where you can use your skills. How about a private watchdog. Ill pay for you to advise me what not to invest in and why. At present I wont touch the licensed Casino we call the stock market. Kathmandu anyone. Seriously your research has a value to many. Investing today is full of pitfalls that are 'barely legal',yet many of our elderly unable to continue working really on the advice of investment advisers and brokers who lead them down the garden path to ruin and heartbreak in old age, after a lifetime of hard work and saving. As Bill Bonner said,My stockbroker is the one person whom I know is unfaithful to me 24hours a day. Find it hard to believe that some old soldier hasn't dug up the old 303 and dealt to a few.
If the Govt wants more investment in the stock exchange then getting rid of the Parasitoids that hang around the market would be a good start.

Andrew, I think the truck Iain refers to is the one bringing in the next load of books and reports to paw over.
Iain your dedication to your mission is admirable. However those of us who had way too good a time in the '60's need one of your fans who is a master paraphraser to follow most of your posts with "In a nutshell, what Iain is saying here......"
Anyway, I stand in awe of your scholarship.

Sandwiches for lunch , and hardback chairs to sit in , that's a disgrace ! We do spoil these elderly geezers .

especially if I learn to spell "offer" correctly, instead of "over", got a little excited on the home straight.

And the nails keep getting hammered into the coffin,

http://www.stuff.co.nz/business/industries/2999041/High-cost-of-NZ-manuf...

In announcing the closure of the Christchurch plant and one in Adelaide, Australia, Bridgestone's owners in Japan blamed intensifying cost competition globally. In Adelaide, 600 jobs will go.

Bridgestone is Japan's biggest maker of tyres and in the half year to June made a loss of 38.3 billion, hit by the economic downturn in Japan, the United States and Europe.

"Despite continued efforts to improve cost competitiveness at both plants, international competitive forces have been making tyre manufacturing in Australia and New Zealand increasingly difficult to the point where the operations in both countries are no longer viable," the company said.

Offset cheaper imports due to our high dollar , by raising GST ?

more than likely we will be forced to lift interest rates to keep up with our over confident neighbor. Any drop in rates here would lead to an exodus of capital to Australia where the rates are set for a .5 raise in November

http://www.businessspectator.com.au/bs.nsf/Article/WEEKEND-ECONOMIST-Inf...

http://www.theage.com.au/national/rate-rise-tipped-after-hot-auctions-20...

....and corrupt and greedy Swiss banks, which over decades profited from the richness of the solid and proud manufacturing culture of Switzerland are now slowly destroying the image of Switzerland and the middle- class working within the manufacturing sector. "Money transfer" from the real economy to the banks with a blind eye from the government because politicians/ servants switched too. In stead of being shareholders of manufacturing companies they are now shareholders of banks "“ crazy !
Walter

Leaves me out , of the solution . Cool !

Who watched the "Tudors" on TV One last night? The peasants marching towards London with pitchforks and axes because they were being overtaxed and couldn't make a living, in order that the king and his court could continue on their merry binging way. Andrewj was right. It will take a depression level crisis, but when it comes guess whose heads they'll be looking for John and Bill. And don't count on your banker mates. They'll be be long gone.

What we are seeing is a complete global break down of faith in central governments. Everywhere the greed and corruption of politicians, senior bureaucrats and financial elites has created a tinderbox that only requires the match of widespread financial hardship to spark a broad based middle class revolt. I for one expect martial law in the US, China and the UK within the next 5-10 years. Here, who knows. Hopefully something better and more balanced and sustainable will arise.

Walter, heres just another example of the self regulating, self accounting, self auditing, financial sector not wanting anyone intruding on the lovely little class system they have all but perfected down under in NZ:
"Law firm Chapman Tripp is giving a thumbs down to a proposal to make all big companies file financial statements publicly."
http://www.nbr.co.nz/article/chapman-tripp-warns-against-making-accounts...

Many of the massive private equity companies are owned by those that were "insiders" that plundered the savings invested by the common folks into the public listed exchange for companies, then reached a point that they had sufficient enough cash that they need no longer bother with raiding capital from Ma and Pa investor, they could simply start buying outright that that they desired.

Walter in the video above, take into account that most of those businesses had to borrow from the banking system to set up, and then price the cost of debt servicing into their goods or services forsale, the compounding effect of debt down the food chain with the created credit money base entering circulation with interest bearing debt already attached, is enslaving.

That in mind, check this out:
http://www.youtube.com/watch?v=7tr5BbH6X8s

We need to take back oversight of our money system from NZDMO, return it to RBNZ. Take government banking off Westpac, give to Kiwibank. Issue our own created credit money base, interest free, spend it into circulation by the building of our public infrastructure, energy projects, roading etc. When our Kiwi issued dollars enter circulation, inevitably much will be used to pay off foreign originated created credit, cancelling that debt. Then fund Kiwibank with Kiwi dollars to offer 1% homeloans to first home buyers, and cheaper credit than foreign lending institutions, enticing Kiwi's to pay off foreign debt and exchange for domestic borrowing at fairer rates.
Take away the ability of commercial banks to create money, only RBNZ allowed that power. Commercial banks become what commercial banks were intended to be, safe storages for deposits and run an efficient bank to bank money transfer system for which they can charge a fair and reasonable fee.
By removing the inflation causing way that the created credit base currently enters circulation, you will return to the purer market force of price movement related to supply and demand, away from the current system that is inflationary by design, and removes the cost of living out of reach of low income earners.

Its been done with success more times than the current money masters ever want to many to know.

Heres a good Kiwi mucking in to do his bit:
http://www.youtube.com/watch?v=W5usYrTxb9A

They said on page 105 of the 1956 report of 1955 royal commission, that it can be done and I dont think the reasons they gave as to why it shouldn't be done any longer stand up given what has followed:
Page 105-6
"438. There is, of course the possibility of bringing about necessary expansion of the money supply entirely by financing government expenditure from Reserve Bank credit, and by at the same time preventing trading banks from expanding their lending through a rigid application of the reserve ratio. We consider that the needs of industry and commerce for additional credit can be more conveniently and efficiently met by expansions of trading bank credit than by expansions of Reserve Bank credit. The trading banks in close touch with the multitude of industrial, commercial, farming, and other businesses and they are in a position to give attention to the needs of individual businesses."
http://publiccreditorbust.blog.com/2009/10/23/1956-report-of-1955-new-ze...

Forgot to include, so much to remember, in the scenario at bottom of October 26th, 2009 at 9:28 pm , that Kiwibank funded with Kiwi dollars, remembering that if we can issue Kiwibonds we can issue Kiwi Dollars made good for the same reasons, would also supply 1% interest loans for worthy local government infrastructure.

The Bond v dollar thing made clear in this vid
http://www.youtube.com/watch?v=7tr5BbH6X8s

If you were a speculator, where would you chase the higher return?

A country that considers and supports its tradeable sector or one that demonstrates time after time an absent policy framework to deal with inflation in its non-tradeable sector, one that demonstrates time after time its lack of will to do anything about those policy setting.

Then, just in case nobody notices, the leaders of that country are off telling the world about it.

Walter - you've asked me to respond to many questions and comments you've made in various threads in recent days. Unfortunately I don't now have the time to answer each one specifically and in as much detail as I would have liked, so will offer some general answers instead, especially as we have covered much of the ground in the past on other threads.

Regarding your, "Why don't we manufacture it in NZ?" type questions - heaps of reasons, but we are where we are. If we want to change that and engage in more productive enterprise then we need to implement the kinds of monetary and tax policies NZMEA and PEC advocate. (We've been through the logic before elsewhere.) This would mean expanding our existing 'niche' manufacturing, and if there's a 'market pulled' quid in it, your favoured new "Green Light Industry" segments could emerge. So echoing what Selwyn has said in John's and my defence, "...that people not listening to the right thing doesn't mean you change the drum beat. You shout louder! Winston wasn't wrong between the wars but no one listened." And see here,again:

http://www.interest.co.nz/ratesblog/index.php/2009/10/19/have-your-say-b...

You asked if we had other ideas, questioned direction and have commented that we could all do with more public discussions to make the "entire fiasco public through the media". As I said before Walter, you are beginning to sound a little like a typical NZ politican. Responding to a Singaporean inspired "new idea", that is, a complement to the OCR in the form of a 'Principal Repayment Rate' (PRR), that I presented here:

http://www.interest.co.nz/ratesblog/index.php/2009/10/23/opinion-why-new...

You made the comment,"..and again they are just riding old donkeys with calculators in their hands looking for economic direction.." Unfortunatley commercial reality requires that some have "caluculators in their hands" to compute margin, profit and return on investment. I'm saying this because I do not understand why myself presenting a new idea here and John submitting this article to Interest .co and initiating this debate, is at all in the "wrong direction" for making this "..entire fiasco public through the media.."? Maybe like many politicians from both 'Lazy Labour' and 'Nanny National' you are tempted to simply ignore reality to suit your own agenda and so will continue to ignore good policy suggestions until some ineffective pacifier can be 'cherry picked' that does not disturb the status quo. (I don't really think that is you Walter - but it's certainly a majority of NZ politcians, hence the comparison - no offence meant - I don't doubt your direction and desire for positive change, good on you.)

As for Iain P's, Megan's and others' concern about us turning too Singaporean - noted, from a certain point of view, concerns appreciated. However, why can't we look at the 'useful to NZ' certain aspects, of anyone's policy? We don't have to be just like them to make them work, IMO, if we fit them to our needs well. Sure, it'd be great if we could take the kind of quantum leaps some advocate, ie. do a JFK, Iain? However, some smaller incremental steps in the right direction within the system we have must be better than maintaining the status quo because the big leaps are so easily rejected? Unless of course you have vested interests in the status quo, eg. unbridled credit/debt and inflation of assets, and a volatile currency more related to fx trade flows that real goods and service flows? (Who can that be?)

Finally do you think something like the PRR thing I have described would have reduced or increased the following in the last 10 years?:

apparent NZD value
NZD volatility
property prices
national debt

I can understand why many would like to maintain the status quo with the first three, but why would we not ALL want to reduce national debt? Who benefits from keeping that where it is, or increasing?

Cheers, Les.

Roger - point is, they are interchangeable, from the point of view of effective change - neither are capable IMO.

Firestone and niche, who knows, it's hard to comment on performance of specific firms, BUT, suppose they and many others had had the kind of tax/investment/monetary policy environment we advocate - even some of the potential positive outcomes of my new pet idea above - how might things have been different for them and other productive enterprises who've chucked it in? And indeed those who didn't even bother starting?

Iain

Monetary reform referendum?