Roger dear Roger you expect too much! Trim that list down to say one item and then maybe just maybe you might see some more spin.

I think Roger, you are expecting too much from Bollard and the Goverment.
They cannot or will not do anything ....

Your suggestions has not much hope of seeing the light of day expect in this post.
Overall, interest rates the world over is going up and there is nothing much any central bankers anywhere can do about it...especially ours.

Excluding or including this or that statistics in our measure of inflations is just gimmick...if you cannot win the game just change the rules ??

Accepting our status of "poor" is the first step in our cure..(much like an alcoholic admitting such in his AA meeting)....

then we should cut our public spending (inspite of all those whinging from the left)...
Which incidently would also cut out a lot of red tape and thereby make the economy freer.

then slowly depreciate our currency (everybody else is doing it but pretending not to) to increase our exports and reduce our imports..

then and only then we MIGHT have a chance of a better future for our children.

The causes of exchange rate movements and volatility seem obscure. There is an assumption that interest rates are key. But are they? There is an alternative explanation that it is fund management allocation policies.

Do you have evidence that you understand what drives exchange rate movements? Have you a record of making money from them?

Chalk and cheese william ........ Really, really smelly cheese!

Roger, your ideas would simply dig a bigger hole than the one we're already in. Stripping out figures to further distort the inflation figures is crazy. The Americans have done this well (i.e. increasing the money supply and seeing "inflation" numbers that don't correspond to this at all). Money creation is the big problem, and padding down the inflation numbers is like opposing mark-to-market accounting rules. In other words, it's the avoidance of reality (which we are very much avoiding at the moment).
And releasing more land for development?! Even previous sceptics of peak oil realise that our days of cheap oil will be numbered soon. Where do you think that'll leave the whole western urban sprawl model? In the toilet. We cannot even maintain infrastructure in the current urban limits. Urban expansion will just lead to bankrupting us earlier. The councils are in fantasy land. The coming flood of empty commercial space will make new developments look like absolute lunacy.
Agree with you on the competition issue...athough, don't hold your breath on that.

Roger said :... "The types of questions Mr Bollard should asking the others is how to bring about other economic policy changes to control inflation apart from ramping interest rates up and down and killing the export/productive sector in the process. "

Yes... that makes sense...

BUT.... what is inflation....?????
What causes it...????
Is there a relationship between Current account deficits and Inflation..???
Should money supply be allowed to grow at double digit rates.???
What impact on the economy does large increases of money supply have..???
Are growth rates in money supply more important than changes in the CPI...???

Roger... do u respond to responses.. Can answer these questions..????

Going back to first principles is the only way NZ can make policy decisions that DO NOT have distortionary effects...

Excluding certain nontradables from the inflation range (CPI) that the Reserve Bank deals with ... would be an Incredibly DISHONEST , Manipulative and Contrived solution which is not even a solution but a delusional Claytons response to a problem that they can't even define properly.

What about printing money, made the US dollar drop in value..
May do that here as well

Bollard can do something right now:

Domesticate the external debt by selling NZ$. They had the chance at 0.80 and didn't take it.

They are getting another chance now to deal to a hopelessly inflated currency and transfer our debt to local currency thus making it easier to manage and reducing reliance on overseas funding.

But ultimately why would we expect those who got us into this mess to get us out of it?

Roelef,

We have huge outstanding overseas debt. That will have to be paid in overseas currency at some point. We are exposed heavily on this credit risk as we have seen over the last few years and with the intervention of the Fed to provide currency swap lines to us.

We also have a severely overvalued exchange rate.

This gives us the option to "print" NZ$ (this costs us nothing) and then sell those to buy overseas currency. We then redeem overseas loans with this. The process would be money supply neutral but would lessen (there will always be some overseas balances) our reliance on external debt funding.

We would still have the same debt but denominated in local currency and therefore under our own control. Interest costs would be much lower as a result.

It's a possibility only when your currency is sky high like the NZ$ is once again.

There is no excuse for the RBNZ not be selling NZ$ at the moment and building overseas reserves.

Raf - good idea. Personally I can't see anything wrong with printing $, its our currency and we can devalue it if we want to.

Go Raf. Don't disagree with any of it except to wonder whether the sovereignty you allude to is an ideal shared by those with the power to exercise it on behalf of the nation.

Please explain Raf how your idea helps a retired person living off their lifetime savings.
If interest rates are kept low but prices are increasing, where are these people going to find the money to live, pay rates, buy their food etc.

When I read the post and all the comments all I am hearing is the continuous whine of a bunch of people who refuse to pay the piper. Every solution either moves the problem into the future or pretends the problem doesn't exist.

Chairman................whew!! excellent post and yes read all the link .

Raf...................A real injection for thought.......I like it!!

Roger Witherspoon said.." Personally I can't see anything wrong with printing $, its our currency and we can devalue it if we want to."......(it's our currency ?).............Not anymore matey....not any more.

Its not the printing of money, the money creation mechanism, that is of concern, it is how the created money is entered into circulation and the conditions surrounding it, such as adhereing to obvious boundries of natural resource sustainability that determine if that money serves society or puts society into servitude. We can not just print as much money as wished and drop it from a helicopter, it must enter circulation in productive means that there are the sustainable human and physical resources to support, thus we can afford all that is desired, but only if there are the sustainable human and physical resources for it.

Thanks again Iain for a very interesting, informative comment/ link.
New Zealand - a cork in the ocean I read here a few months ago - sad really !

Time for changes !

Why don't we just get rid of the RBNZ, which will in time eliminate a lot of our problems?

The idea that a central bank can manipulate and price fix the interest rate or cost to borrow is absurd. If you believe that then you must also believe that price controls in an economy work, however they don't. Just as price controls for gas or milk wont work neither will price controls via centrally planned interest rate fixing.

The idea that all we need to do to re-spike the punch bowl is get interest rates down is absurd, we have a debt problem, the world has a debt problem, we have all taken on TOO much debt, the only way to stop this from happening in the future is too allow the free market to work. No country in the world has a free market as long as it has a central bank manipulating and controlling its economy via interest rate price fixing the cost to borrow.

If savings increase in a society then there is more money to loan and thanks to supply and demand the price to loan (the interest rate) should decline.

If savings decline in a society then there is less money to loan and again thanks to supply and demand the price to loan should rise.

When the natural process above is stopped from happening usually via a central bank manipulating the interest rates for political reasons then what usually results is a debt bubble as we have all seen.

Note with regard to the current debt crises in the world nothing has changed judgment day has not been avoided it is just been pushed forward. The reality with a debt bubble is that judgment day CAN'T be avoided you can kick the can down the road but believe me it will eventually happen. If you kick your problem down the road eventually someone will have to deal with it. One only needs to think of all the problems that the looser boomers have kicked down the road.

Ponder this:

The problem with the current system is that every dollar created is a debt-based dollar; hence you've just created inflation before you even begin.

Capital expansion needs to be balanced and run parallel with productive growth. As soon as the equilibrium is broken the fiscal problems begin. (Prudence is needed to ensure expansion runs parallel with productive growth and costs only transpire if the equilibrium is broken)

Interest rates add to inflation, therefore it's an inefficient tool. The more it costs the productive sector to borrow the more the burden will be incorporated into the end consumer cost.

Credit needs to be controlled at the source of dispatch to be effective, especially when capital expansion is aided by offshore funding (if we printed our own debt free capital offshore funding wouldn't be required).

Borrowed offshore funds can only be sustained if the nation is generating a relative offshore return (exporting, offshore investment, tourism).

Failing to do so leaves the nation with no means (no new capital generated) to repay the interest incurred, leaving the nation worse off than when it initially obtained the loan.

Foreign investment, which the some believe is a solution, is a short-term fix that in the long-term will see far more capital head offshore.

Capital is a means to a productive need and should enter the market debt free. That doesn't mean interest isn't charged out on loans, it simply means the capital is created debt free before it's lent out.

Chairman ...
"Capital expansion needs to be balanced and run parallel with productive growth. As soon as the equilibrium is broken the fiscal problems begin. (Prudence is needed to ensure expansion runs parallel with productive growth and costs only transpire if the equilibrium is broken)"

I don't understand what u are saying... Can u explain....

Also, how do interst rates add to inflation.....????

thks Roelof

Roelof - If capital is expanded faster than the overall performance of the economy it distorts the equilibrium and becomes inflationary.

The bubble in the housing sector is an example of the principle. The money supply (which was poured into housing) expanded faster than the rest of the economy was able to keep up. This unsustainably distorted the price of housing thus causing them to inflate.

It wasn't the investment in housing that was the fundamental problem, it was the unsustainable increase in the money supply and the easy credit that allowed the over investment to take place. If balanced, property investment isn't such a bad thing.

Our current system has distorted economic fundamentals.

Consumer spending was once one of the bastions of economic stimulus. However, due to our over reliance on imported goods and capital, it has now become a sin.

Neil "“ indeed, it's a problem that will need to be overcome.

We entrust our government with sweeping powers except for the most viable of them all, the power to create money.

To be in control of ones destiny, one needs to be in control of ones capital.

There needs to be a public will to encourage a political will and to give the issue a platform to build off. This is where the media also has a large role to play.

Wally "“ indeed, bulk water exports has huge potential and is a viable way forward.

Roelof - The use of interest rates to control inflation is flawed.

First off, the use of offshore capital totally weakens its effectiveness. Remember how not so long ago the OCR was increasing to combat inflation yet the banks were still able to lend at lower rates? And now, we have the opposite taking place, the OCR has dropped to help stimulate the economy but is having little effect on overall bank rates.

Secondly, the higher the cost of interest the more the inflationary flow on effect. The more the capital costs the banks to initially obtain the more they pass on to the end consumer. The higher the interest rates are for a prospective borrower the more they will need to recoup, thus increasing inflationary pressures.

As previously explained, overall economic fundamentals have been distorted, therefore the counter-effect of inflation that one would normally expect through market competition is largely weakened by the over indulgence of private debt (which comes back to the loosely controlled capital expansion).

Stringent credit control is a far more cost effective way to organise credit demand.

Wally - indeed, bulk water exports is exactly the type of viable export venture the government should be looking at as a means to become self-funding. Giving mum and dad investors somewhere to turn while sustainably reducing our overall tax burden and helping to correct our balance of payments.

Ian Parker..........Enjoyed the post...once more enlightened ...once more dumbfounded in the murky permutations.

Wally.......... A simple ..neat..idea..,would it float.? Probably I think and right when you thought it was gonna fly... every tree hugger..intellectual property right owner...and corporate asshole with an eye for a buck would dam it to a trickle untill thier grubby littlle agendas were being soothed by the sounds of liquid gold.

Chairman said....."There needs to be a public will to encourage a political will and to give the issue a platform to build off. This is where the media also has a large role to play."

Absolutley right ,but they,(the incumbent) know always that the interested are fragmented, joe public is distracted by his mortage, joe shmo is propping for the loophole in the dole....and so it goes.
That does not mean I have a defeatist attitude, I just think many likeminded people first have to put some thought into how to get the attention of (...?..) rather than problem solving/debunking and repeatedly tossing worthwhile ideas into the.." pitt of despair"

Would you feel more involved if this site were to say...take 5 or 10 blogs of the month wheedle them down to three cross interest points ...then put them to (....?...) and seek a response or clarification of those points as a potential lobby group.

Call me cynical but it would be like King Solomon asking Don King what he could do to discourage corruption in the boxing fraternity.

The truth is in order to change "the way it is" you first must become involved and emersed,...then after time you reflect on your sacrifice ....then after time you justify your remuneration proportionatley to your sacrifice.............. and then congradulations you have become "the way it is".

Happy day to all..............no really!

"Which begs the question, why is the govt not flogging the water which would be 100% gain to the public purse? They obviously haven't thought of all the new MP perks it would pay for."

Wally are you truly suprised at that considering that the much maligned national bicycle lane was the best that the Job Summit could come up with to address the economic crisis (which is by no means over regardless of what the economists would have you believe).

As for the scheme itself, its actuallly been discussed periodicallly in of all places the Green Party blog so perhaps it wouldn't face such opposition from that quarter as you'd presume.
http://blog.greens.org.nz/2007/05/12/charlie-pederson-in-the-dompost/

As for the economic viability of the scheme, thats more problematic, especially since agriculture is one of the most intensive industrial uses of water and the Saudis have abandoned their goal for food self-sufficiency and have embarked on a programme of leasing huge tracts of land from their neighbours to produce food.

Saudis to buy vast tracts of land in Ethiopia, Sudan to produce food
http://www.clickafrique.com/Magazine/ST010/CP0000003412.aspx

Perhaps it would be more viable to engage in joint ventures with Saudis to produce food and base industrial processes here that are heavy consumers of water and energy such as oil refining, semiconductor production, server farm hosting, and car manufacturing where if New Zealand were to plan it right, we'd have significant surpluses of both, particularly on the West Coast.

http://tinyurl.com/m5xl3o

http://pubs.acs.org/doi/abs/10.1021/es025643o

http://www.ecogeek.org/component/content/article/1140

Chairman and Iain gave a link to an article by Geoff Bertman.

Here is a document that somewhat balances the views in Geoff Bertmans' article.

It is the Financial Stability report for may 2009, from the reserve Bank.

http://www.rbnz.govt.nz/finstab/fsreport/3631105.pdf

See page 31.... graph shows that the banks have greatly reduced their funding thru the off shore CP market.

Banks have also made use of the Reserve banks Term Auction Facility ( TAF).

The Bertram article was a good read... and I learnt something from it..

This Reserve Bank report is full of really good information... It is worth reading thru.

This is what Alan Bollard says about his time at Jackson Hole

"We were all surprised by the vulnerability of key financial institutions. It is chaos when a country's banking system does not remain stable, as in Iceland and Ireland. Ours proved stable."

Mmmmm........how can anyone with a good understanding of the banking system be surprised about its vulnerability?

Nothing on the expansion of the money supply and the more important point of how it gets expanded so quickly. His full statement is here.....does not inspire much confidence.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1059...