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Opinion: Why huge budget deficits are inter-generational theft
By Neville Bennett The cash carpet-bombing is gathering pace, amidst cries of "There Is No Alternative", without concern of accumulating debt. The alternatives are to spend less now, raise taxes now, or change entitlements to health, welfare and retirement. Realistically, can governments spend less when unemployment is burgeoning? Realistically, can governments be expected to increase taxes, cut services and defer retirement benefits? Easier to pile up debt! The result could be called inter-generational theft. It is also future-eating. We are eating our descendents future by leaving massive debt. We are future-eating too in environmental matters; by allowing our rivers and air to be polluted; by being apathetic about bio-diversity and agnostic about global warming. Leaving aside my environmental concerns, and local New Zealand issues, this ariticle examines the international economic consequences of cash carpet-bombing.
British Debt The UK's national debt has risen to a massive ₤2.2 trillion, largely because it has taken responsibility for Lloyds Bank and Royal Bank of Scotland. The debt from just these two banks is eqivalent to 150% of British GDP; the highest level in that country since the 1950's when the UK still had war debts. Debt is also growing because the recession has cut tax receipts. Government expenditure this year alone may require borrowing of ₤150 billion. The Bank of England, the world's most active central bank, has unleashed a breathtaking plan to buy one-third of all long-dated gilts (fixed interest government securities) in order to increase liquidity in the economy and also lower interest rates right across the interest rate curve. This is innovative as most central bank interest rate setting applies only to short-term paper: the market sets the price of bonds. The bill for the BOE's experiment is the equivalent of another 5% of their GDP. I was reading D.E. Moggridge's incisive biography of Keynes this weekend, when I heard of the BOE plans. He would have approved. Faced with the need to keep Britain's recovery going in the later 1930's Keynes insisted that the authorities should avoid high interest rates as they would be hell-fire: "the long-term rate of interest must be kept continuously as near as possible "¦ to the long-term optimum. It is not suitable to be used as a short-term weapon" he said (Moggridge p.118). Stimulus packages An IMF study estimates that the fiscal balance of advanced economies will advance by 6% of GDP in 2008-9, and Government debt will increase even faster; by 14% of GDP , the largest ever increase in peacetime. The US package will spend $719 billion with an impact over 2009-11. All major countries have packages which usually combine tax cuts (about one third) and new expenditure. All boost infrastructural spending, and most increase spending on vulnerable groups. Tax relief goes mostly to individuals, but the US, Japan and Canada give relief to corporates too. The size of stimulus packages varies considerably. The UK was only 1.5% of GDP when the report was compiled. The largest is the USA at 4.8% GDP, followed by China at 4.4% and Germany at 3.4%. The average is 3.4%. The US and Canada need larger packages as they have smaller social benefits (for unemployment, insurance, training) in comparison to Europe. The US, UK, Canada, China, France, and Germany had fiscal space to expand spending when the crisis began because of relatively low public debt, deficits and interest rates. Japan, India and Italy had high debt and Italy and India had high interest rates. It follows that Italian and Indian stimulus packages are very small (0.3-0.5 % of GDP). The size of distressed financial institutions is decisive: gross debt has risen through support to banks by an average of 4% of GDP, but it is 6% for the US, 9% for Canada and 20% for the martyred British. But these stimulus measures will not have a large effect. Preliminary calculations are that although growth increased by 2% in 2008 and 2009, it could only rise by 25-50 points in 2010. Nevertheless overall G7 output is expected to fall by -2% in 2009. More stimuli will surely be demanded. Debt Repayment The IMF's "The State of Public Finances" observes that in the advanced G20 counties, public debt will increase by 25% by 2014. Moreover, there are substantial downside risks, including more finance bail-outs, and increased revenue losses as the recession deepens. In some countries, saddled with an ageing population, a demographic shock may cloud prospects. I believe it will be hard to fund these debts at low interest rates, and there is a possibility that rising rates will further destabilize banks and increase the cost of debt funding. In a prolonged slowdown, the IMF calculates a mammoth debt ratio of 130% of GDP for the rich countries. The IMF offers a four pillar strategy for fiscal solvency: 1. The packages should be temporary, not permanent measures. 2. Once economic conditions improve, fiscal adjustments should occur. It suggests reducing political interference by setting up fiscal rules, fiscal responsibility laws and independent fiscal councils. 3. There should be growth-orientated structural reforms to reduce debt ratios, including tax reforms improving incentives to work and invest; and removing tax distortions that may have added to excessive leverage in the past. 4. A clear commitment to lower fiscal pressures by reforming health and pension entitlement systems. Many countries have tried to anticipate the demographic problem of an ageing population by increasing age-related spending. The IMF calls for reforms that do "not set back efforts to stimulate the economy in the near term". Good economics but unrealistic politics The IMF clearly believes that the crisis is so serious that Governments have to do all in their power to stimulate the economy. It realistically assumes that a large debt will be incurred. It suggests that governments should stay focused on growth in the medium"“to-long-term to pay off that debt, even at the cost of welfare, and especially entitlements to health and retirement benefits. This is good economic counsel, but is politically utopian. No elected government would find it easy to slash health, welfare, and retirement benefits when debt can be increased. New Zealand will find that discretionary income in its export markets has shrunk for years. http://www.imf.org/external/pubs/ft/survey/so/2009/RES030609A.htm ------------- *Neville Bennett was a long-time Senior Lecturer in History at the University of Canterbury, where he taught since 1971. His focus is economic history and markets. He is also a columnist for the NBR where a version of this item first appeared.
1 Comments
Conversely, governments are buying banking
Conversely, governments are buying banking assets (and the real assets mortgages are secured against) at fire sale prices. When the cycle turns up, a good chunk of debt may be offset by increases in the values of these assets.
The government is thus the classic counter-cyclical investor.
Who says governments must increase
Who says governments must increase debt?
Why not simply create new debt free money ( e-notes) and spend them directly into circulation.
Result:
- Boost to core services and infrastructure.
- Replaces contracting money supply.
- No future burden on the taxpayer.
- Interest free money circulating in the economy.
Yes, agree Raf .. I
Yes, agree Raf .. I have suggested several times previously create the NZT ( Tasman $)
Good idea...print money. That will
Good idea...print money. That will work.
We are exploiting the worlds
We are exploiting the worlds resources at twice the sustainable rate now in an attempt to pay off the already existing debt money supply. The IMF are basically saying to get out of this we must borrow even further ahead against the already depleteing world resources and exponentially expanding population. When are they going to face the fact that perpetual growth is a myth. I suspect it will be at about the same time that their central banking network own the entire worlds means of production.
http://www.optimumpopulation.org/opt.earth.html
http://www.millenniumassessment.org/en/index.aspx
http://www.stwr.org/
My suggested solutions for New
My suggested solutions for New Zealand's current account crisis.
I have spent over a decade studying 5000 years of international currency and banking. Completed a level 3 certificate (New Zealand) of Public Sector Knowledge. I have read New Zealand's entire debt management history from the Biographies of Finance Ministers, Economic Historians, 1934 Government monetary inquiries, 1956 Report Of The Royal Commission On Monetary, Banking And Credit Systems. 2007 Select Committee Inquiry Into Future Monetary Policy.
I believe we need to nationalise the credit creation mechanism, not nationalise the internal deposit taking institutes.
I believe a form of Debt Realignment is needed, where by the compounding interest component of all existing loans be removed from the loan and replaced by simple interest at the same rate. The removed compounding interest amount then credited back to the lending institutes from which it came, to then be able to be loaned out again under new bolstered prudent regulations.
We then spend our monetary base into circulation debt free, loaned from no one, owed to no one, paying for what ever is desired, provided there are the sustainable physical and human resources to do so. Just as we did under Fitzroy in 1834 to address a shortage of money and build infrastructure and Labour in 1936 to build our state housing project.
Remove from internal deposit taking institutes the right to create credit, insisting 100% reserves, 50% of deposits loaned - 50% held as reserve, to be kept with reserve bank. By removing the inflationary impact caused by most of the money supply currently entering the system as interest bearing debt, citizens would only need to find safe storage for their savings, not invest in dodgy investments to keep up with inflation, as under a debt free BASED monetary, with the right regulations, the purchasing power of your earned dollars would reduce much,much slower than it does today. Thus it would be fair to regulate the internal deposit taking institutes to charge only a fair and reasonable admin/safe storage fee and regulate interest rates to be far less usurious due to decreased risk.
Reduce the impact of speculative investments upon our real economy by implementing capital flow controls, as implemented by Malaysia in 90's Asian Crisis, insisting that any external money entering the country must remain for a minimum period of time.
As our own money enters circulation, backed by our own resources, we then pay down our foreign debts. As our foreign debts are paid down, we can reduce taxes by the proportion of our taxes that ware going to service those loans, eventually doing away with income taxes.
Of course there must then be a means of removing money from circulation should inflation occur or increasing it should recession occur. This can be achieved in the none debt reliant sector by retaining a variable GST minuscule to what it is now.
In the debt reliant sector by increasing/decreasing the repayment time of loans in a simple interest system, thus increasing/ decreasing the repayment but not the principle paid.
Fiscal Stimulus by way of debt free BASED government spending on sustainable infrastructure or, should the national infrastructure be in tip-top condition and companies have become sufficiently automated due to being able to reinvest profits instead of borrowed credit, a national dividend could be issued to make up the gap between purchasing power and available production.
I believe many nations examining the failings of current international monetary policy would join in and hopefully wish to form a new "fair trade" clearing house, instead of the current fraudulent so-called "free trade" that stands for the stealing of the efforts and resources of the basically decent majority of the world for "free".
It seems simple, but simple is what is required, as corruption hides within complexity.
In addition, the lack of integrity in the central banker dominated equities markets caused by rigged corporate voting structures, insider trading, lack of independent auditing. non policing of disclosure laws, short selling, mark to market accounting, Security Commission exemptions etc, need to be addressed.
Supporting research here;
http://socialcreditorbust.blog.co.nz/
The reason the indecent enslavement tool of compounding interest must go;
http://www.mortgagesexposed.com/
<i>We are exploiting the worlds
We are exploiting the worlds resources at twice the sustainable rate ...
Nonsense. Prove it?
Iain Parker - you want
Iain Parker - you want to stop banks creating credit? And you want to abolish compound interest? But if somebody doesn't pay their simple interest bill on time, it means the banks are creating the credit to fund the delay in payment. So your objectives are contradictory.
And personally, I would never pay my simple interest bill on time. Why would I, when I can deposit the money due elsewhere, and earn interest on it? Abolishing compound interest simply means forcing the banks to offer free credit to slow payers. That will just end in bankruptcy, as happens to all businesses who offer too much credit and don't collect the bill.
vibenna - dont meet your
vibenna - dont meet your repayments and just as happens now, you will have your assets repossed to pay your debt.
Mark Hubbard- Its family day today, will be back tommorrow to produce the evidence that excess liquidity of created credit has led to over population and exploitation of the earths resources. In the meantime did you bother to read these links;
http://www.optimumpopulation.org/opt.earth.html
http://www.millenniumassessment.org/en/index.aspx
http://www.stwr.org/
Tonz...........yes well noted. That is
Tonz...........yes well noted. That is also a possibility.
sj........pay more attention to the actual proposal.
Vibenna - where is it written that interest is a requirement of sound money? The current issuance of government debt is not the problem, in terms of a contracting money supply, but the interest on that debt most certainly is.
We have to really shake ourselves out of our current beliefs about money and its construct and actually start to look at how it could work best for society as a whole.
Make it evidence that is
Make it evidence that is robust and peer reviewed, not the rantings of a few extremists
The IMF solution sounds a
The IMF solution sounds a bit like maintain the neoliberal agenda status quo - individual responsibility and all that jazz. In other words, there seems to be no redistributive aims/actions in it?
Raf says: "Who says governments
Raf says:
"Who says governments must increase debt?"
I would guess if the government issued free money that belongs to no person in a recession then when the recession is over the government has no way of removing the excess money unless it gets hold of the surplus money and stores it some place not to be used in the economy. How would it do that? would taxes be paid just to destroy money?
The current method of removing excess money from the economy is to issue government debt which is bought from traders using currency so that currency flows to the government. If there is insufficient money then government debt is bought from traders by releasing currency.
So in this kind of scenario freely issued money released today would become government debt with **no spending** tomorrow. Which is i believe essentially the keynsian methodogy - Low taxes and high government spending in the depressed times and high taxes and low government spending in the boom.
Maybe i am naive but essentially i think today we have debt free money being issued by the central banks/governements which when better times return will be removed and destroyed by taxes as the economy improves to support that.
On the other hand if you believe in debt free money i would guess you think you can spend today and have no taxes to destroy or store money so that you have no taxes to do nothing tomorrow to get rid of the surplus money.
How would it work?
Essentially todays methods are i believe really are ways of spending today by borrowing from the future.
On the other hand if we all believed that was possible for ever today it would not be borrowed but rather indefinately created and never returned to the past
dare I say it, once
dare I say it, once again the boomer era shags those who come after.
sj and all others who
sj and all others who do not appear to have read about other ways that the money system can work, I strongly suggest you read about it, as it appears to me that your views are constrained by the assumption that money has to work the way the current money system works.
That is a mistake.
See:
http://www.neuralnetwriter.cylo42.com/node/66
also:
http://www.neuralnetwriter.cylo42.com/node/71
Best of all, get "The Future of Money" by Bernard Lietaer from the local library. You'll be amazed.
Steve N Lietaers executive summary
Steve N
Lietaers executive summary is not a good start
"The on-going financial crisis results not from a cyclical or managerial failure, but from a
structural one."
The current crisis arose from too easy money created by poor regulation surely?
Too many people able to chase dreams they were unable to afford?
Or are we to believe that people really can have today and not spend a few weeks or months or years saving for it or earning for it or paying it off?
Steve N "A good candidate
Steve N
"A good candidate for consideration would be a professionally run business-
to-business (B2B) complementary currency based on the model of the WIR system. "
Again the emphasis of WIR on client client trade rather than bank profit is a regulation problem before it is a structural one. essentially all banks exist as WIR one way or another.
Ian - the time between
Ian - the time between the debt falling due, and the repossession of the asset, represents credit. Without compound interest, it is free credit.
Imagine that I borrow $1m at 12% interest, and always pay two months late. That is, not late enough to affect my credit rating, but late enough to give me use of the money. Each month $10,000 is due. I have the use of that money for 2 months. If I can keep that $10,000 on call, at a different institution, for 9%, then I get $150 for doing nothing but paying that bills late. Over a year I do this 12 times, and get $1,800, scott free. Meanwhile, the bank has to find the money to cover my debt, which will cost them $1,800 to pay their depositors 9%.
So getting rid of compound interest is a fantasy. It will simply create an ongoing transfer of wealth from bank stockholders to late payers. That is not sustainable.
Vibenna If i allow you
Vibenna
If i allow you to buy my goods which i sell for a profit and i am debt free and there is almost no inflation and i do this free service upon the condition you repay me the purchase price over time then you get free credit and i get my purchase price and a profit providing i know absolutely you will repay me.
Similarly if my brother charges me 12% interest for the credit services he provides for me and he takes the risk you will not pay me then i can provide his services to you for free.
Similarly i can say i have a brother who provides credit services and say this is a cost i must pay if you want to have my free services to enable you to make your no money purchase with me as long as i know absolutely you will repay me in one year and only one other of my 8 one year credit customers rips me off.
And if i want i can be a government and i can provide myself with credit services to enable me to pay for work to be done and i can tax the people to get my money back with interest to cover for inflation and be gauranteed no losses because of failure to pay me.
Similarly if i am the government and some organisation is accumulating money that is being stored in a mattress as a result of receiving all of the interest in the universe rather than being spent back into the economy i can just print as much money as is necessary to maintain the money supply and pay my workers at no cost to me until the interest accumulating mattress stuffers begin spending the already created money at which time i just collect taxes and burn all of the money to maintain the money supply at the correct level.
Thats how i see it anyway!
Andrew - your description of
Andrew - your description of private credit there being zero credit risk (a permanently fixed amount of default is a zero risk). Your description of the public money supply assumes that the economy, velocity of money and taxation are all independent of each other.
I just can't accept either assumption.
Which generation is stealing from
Which generation is stealing from who? Babyboomers have spent the last 7 years on a debt fueled house buying binge driving prices up beyond the reach of generation X&Y and forcing them into renting instead of home ownership.
This is where the generational theft occured not the stimulus packages now needed. If it means reduced retirement payments in the future then tough bickies- its called consequences, you can't have your cake and eat it too.
Don't blame "boomers" blame these
Don't blame "boomers" blame these people and their values
http://www.richmastery.com/default.aspx
"We are exploiting the worlds
"We are exploiting the worlds resources at twice the sustainable rate "¦
Nonsense. Prove it?"
--------
"My point is that output is declining at a great rate, and the world will struggle to make up steep declines in existing fields. Output decline is exacerbated by falling investment as finance dries up because of the credit crunch and lower prices. In consequence, high oil prices will remain."
Neville Bennett
http://www.interest.co.nz/ratesblog/index.php/2008/11/07/opinion-oil-pri...
Vibenna I was unjustifiably assuming
Vibenna
I was unjustifiably assuming stuff? Moi?
P1 "providing i know absolutely you will repay me"
P2 "and he takes the risk you will not pay me "
p3 "as long as i know absolutely you will repay "
p4 " i can tax the people to get my money back with interest"
p5 "i just collect taxes and burn all of the money"
:-)
vibenna Says: "Imagine that I
vibenna Says:
"Imagine that I borrow $1m at 12% interest, and always pay two months late. That is, not late enough to affect my credit rating"
Hmmm my old accountant used to tell me to do that...or at least to pay end of the month rather than 20th instead cash up from...yeah as a bean counters looks good on paper..
"Over a year I do this 12 times, and get $1,800, SCOTT FREE."
But in reality pay cash or even have a reputation of on time and the 'trade' discounts as a genuinely valued customer, and that special delivery for a urgent part makes far more money than any bean counter can contrive
Also customers who "late pay" are the ones who tend to pay that little more for services/goods
Scott free is BS
Sorry, unscrupulous people who run businesses like that cost this country a lot of money and production.
Kieran Says:
"Which generation is stealing from who? Babyboomers have spent the last 7 years on a debt fueled house buying binge driving prices up beyond the reach of generation X&Y and forcing them into renting instead of home ownership."
That is simply and excuse for not getting off ones butt and getting on with life in a positive manner....I would like to see that stats as to who was actually the main contenders in the property boom..I know more people behind the baby boomers wheeling and dealing than those of my generation..
That is the same attitude and splurge I heard 2 days ago, by a 16 yr old kid who has just dropped out of school and blaming everyone and everything else for is own lack of motivation and commitment.
The Bob Jones, Brieleys, harts, keys didnt get where they are with a constant tirade of unfounded excuses.
"The Bob Jones, Brieleys, harts,
"The Bob Jones, Brieleys, harts, keys didnt get where they are with a constant tirade of unfounded excuses."
If people want to be greedy they can do that. Is Brieley the asset stripper and profiter to be held up as an example of what is good in our world?
Does Bob Jones really need so much?? Is he more good than the whinging 16 year old?
The children have points of view which are not entirely wrong.
On the other hand wolves and bears eat sheep and that is not wrong either. Men eat sheep and will eat sheep like men and we cannot say that is wrong either.
Life is what it is. It cannot be fixed to be utopian which is where the young are wrong but they are not absolutely wrong either.
History tells us it will never be right either.
"That is simply and excuse for not getting off ones butt and getting on with life in a positive manner"
I sort of agree!
Life is complex.........or simple. We whinge or we celibrate
I do blame babyboomers They
I do blame babyboomers They are the ones who followed the richmastery values and started the housing bubble when they suddenly realised they better start planning for retirement and invest in property because they were put off shares forever in 1987 (another bubble caused by babyboomers) They are the ones who had existing equity in the family home and were at the peak of their earning potential with two incomes and no children at home to enable them to drive prices out of reach of gen X&Y who didn't have these things. Why do you think home ownership rates have dropped dramatically in this age group in the last 5-8 years, they aren't the ones who did the all buying, they couldn't afford to.
The IMF make some good suggestions except for number 2.
Cutting future spending on superanuation etc.. is not politically utopian its political reality once we are out of this global recession governments will not be able to keep increasing debt they will have to start paying it off and something will have to give.
I can't understand why National
I can't understand why National don't means test super. It's means tested in Australia - it seems such a simple task and what wealthy superannuitant is going to moan about it in public?
For goodness sake, we pay it to Sir Bob Jones - and I'm sure he'd cope quite well without it.
Yes I agree Kate. However
Yes I agree Kate. However any solution to the near term problem of funding the elderly has come too late. Fact is with rapidly declining birth rates all over the world, government sponsored pension schemes were unsustainable anyway - we just chose to conveniently ignore the fact. Now that many pension funds have collapsed, with little hope of any meaningful recovery in the next ten years, the effects of our future demographic winter have been propelled into the present. I suspect this is why most governments are prepared to throw the kitchen sink at the current economic crisis. If the elderly are living longer & the young can't afford to reproduce at 2.1 per couple - it presents an unpalatable (not to mention ethical) dilemma for government. Pension funding relies on sustaining both economic growth & population replacement and we aint got much of either these days - something has to give, and very soon.
Raise the working age to
Raise the working age to 90. That should solve all our problems.
I have little time to
I have little time to answer all queries, off to work, back tonight. Would like to chuck this in for thought in an attempt to avoid the deviding blame game. Much of the debt accumulated prior to 1980s was public debt taken on without the knowledge of the populous. Remembering the electorate had no Official Information Act with which to question governments until 1982.
After we were bankrupted as a nation by public debt, 1890, 1910, 1939, 1961, 1984, 2008. In 1984, in order to be refinanced we succumbed to imposed structural adjustments that allowed direct access to our foriegn lenders. From that point on our private debt has gone through the roof. The fraudulent system is to blame, not the various generations.
"dare I say it, once
"dare I say it, once again the boomer era shags those who come after."
It's hard to disagree based on the evidence at hand both locally and internationally.
It seems the hospital pass was a beauty!
Thanks for building a 'better tomorrow'.
Regards
X&Y
It seems it's easy to
It seems it's easy to be a critic. What happened to looking at both sides of the story.
The government is taking the chance to build much needed infrastructure like roading etc whilst they should be able to get a better price from contractors who are quiet. Rather than intergenerational theft this is building the very things the future generations need to remain competitive in the world. The economic payback from some wise infrastructure investments could far out weigh the cost of a short term increase in debt.
I'm not saying that I agree with increasing government debt. But shouldn't we have a bit more balance?
Blaming the previous generations for
Blaming the previous generations for all the worlds whoos...
If one is to blame the last generqation one is way short sighted, the 'systems ' have been around for generations before them, and the reality is they will continue to be so.
How many remenber "up the establishment" ? A genertion that activily went out to change things... A generation who have the gumption to stand up, activly protest..
And generation who just didnt sit behind a keyboard a bitch.
A generation of boy racers who didnt ask for somewhere to race.. a hand out but got off their butts and built a race strip.
Yeah in some counties they did change the systems....Lennin for one... and we all know the road that went down.
Sry I do not have much time for "blamers" behind keyboards.
"If you want something , you will get it, but dont waste yours and other time just talking about it"... my grandmother late 1960s.
Steptoe I am assuming you
Steptoe
I am assuming you are a babyboomer. Was 1 in 3 of your generation born out of wedlock and broken marriages? did your parents wrap you in cotton wool because of "stranger danger" did they teach you to travel and experience life before settling down? did you have student loans? did your first home cost 6X your income because your parents were investing in property?
I don't have much time for short sighted "braggers" behind keyboards who go on about how great their generation is. Why don't you look at the legacy your generation has left behind and the great "systems" you talk about before you start bragging.
To quote Homer.... "this is
To quote Homer.... "this is everyone else's fault"
and you won't find that in The Iliad
"Blaming the previous generations for
"Blaming the previous generations for all the worlds whoos"¦"
Nope, not all the worlds woes, just a hell of a lot of them - babyboomers, maybe you should take some responsibility for your actions.
"How many remenber "up the establishment" ? A genertion that activily went out to change things"¦ A generation who have the gumption to stand up, activly protest.."
Again, thanks for the change, you've screwed the planet, and are trying to do the same to us financially...
It is still your fault, regardless of us sitting behind our keyboards;)
Nothing you can say will change that fact.
personally I don't think it
personally I don't think it is constructive to engage in bitch slapping about who is to blame - the problem is here NOW and collectively we have to take responsibility for it. It's more the case of how do we deal with this, than who is to blame (if anything blame would be popularist government policy). Any ideas?
Sharonv Governments are allready doing
Sharonv
Governments are allready doing the solutions of short term deficit spending on:
-increased capital investment and local government projects
-tax cuts
-assistance for large employers in trouble
-financial relief for unemployed
These things need to be done to keep the economy going. Trying to use the excuse of inter-generational theft and implying we shouldn't be 'cash carpet-bombing' with debt spending because it might mean reduced pension and health care payments for the poor old babyboomers really peeves me off. As you and PJ say start taking responsibilty for your actions and stop whingeing about the solutions to your own mess and get behind it instead.
"I am assuming you are
"I am assuming you are a baby boomer. Was 1 in 3 of your generation born out of wedlock and broken marriages? did your parents wrap you in cotton wool because of "stranger danger" did they teach you to travel and experience life before settling down? did you have student loans? did your first home cost 6X your income because your parents were investing in property? "
Yes Im a babyboomer, ex boy racer, surfer, and anti Viet Nam protester..."up the establishment"
And no parents grand parents, or family to LEAN on or bail me out, they where dead, no inhertance...I worked hard full time job with over time and studied full time... by 22 I had purchased my 1st home with 20% desposit..and dont forget the part about not having anyone help out... by 26 I was running my own manufacturing company
The 68 to 72 recession was not an easy time to do it in...
I dont have a single regret except my children never got to meet their grand parents.
"I don't have much time for short sighted "braggers" behind keyboards who go on about how great their generation is. "
I fail to read anywhere that a baby boomer has said how good our generation is....
"Why don't you look at the legacy your generation has left behind and the great "systems" you talk about before you start bragging."
I dont both to look (judge) for the same reason I didnt with the generation previous to me...It was about dealing with what IS and getting on with life, rather getting bogged down in coffee shops about what should be..."bragging" I fail to see that either, if anything it is just what is.
But lets take a bit of time to "Bragg" the world in the 50s and 60s was a very different place, not all rosey as many like to think...the unemployment benefit couldnt cover basics...no solo parent benefit except for widows, who where expected to work to make ends meet...and pubs closed at 6pm, and no licenced restaurants, overdrafts and lay-by was about all that was around... and as far as even considering a week or couple days in Aussie..forget it.
Now if someone was to ask "has our generation left behind a world of far more plenty?, do our children and grandchildren have better access to tertiary education and still able to party?.....Even thu hospital are under pressure is the heath system better? the answer is an unequally YES
The legacy we have left behind is a generation of 'MEs' 'you made ME you should provide for ME' rather than a generation who by 18 are training to be responsible for their actions and future, and by 21 are.
Damn ! I sound just like my old man!
You is what I am saying above...doent matter whos fault it is, or at what point in history, there are those who live life and those who are bogged in excuses why they cant blaming other right or wrongly.
In simple terms, and take time to think about the real meaning of the statement "get a life" we did.
OECD definition of Sustainable Development
OECD definition of Sustainable Development
"Development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs."
Government in New Zealand has rarely set the trend for productivity growth.
“Development that meets the needs
"Development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs."
Exactly..."the ability of future generations to MEET their OWN needs."
No generation has the same needs, other than food water, a good meal and a education to gain those needs.
"MEET their OWN needs" doesnt mean the previous generation has to PROVIDE them on a silver plater, rather the next generation must do what each generation has done before...devalope and work for them...other wise we would still be winding a handle dialing '242s' on a party line rather than walk around with a cell phone pressing buttons.
sj Says:
To quote Homer"¦. "this is everyone else's fault"
and you won't find that in The Iliad
LMAO sry the penny just dropped thats funny.
Steptoe you might want to
Steptoe
you might want to look at this it's quite relevant:
http://www.interest.co.nz/ratesblog/index.php/2009/03/11/bill-english-sa...
refeering to this link from Stephen:
http://www.spectator.co.uk/the-magazine/features/3430816/julie-and-jonat...
alastair thompson Says:
March 16th, 2009 at 10:42 pm
I wondered what Stephen was referring to above but then I found on the final page of the Spectator piece on the Meyerson's this wonderful piece of viturperative prose.
"I blame society "” no, really, I do. It is the hallmark of the Myersons' incalculably selfish and feckless generation, perhaps the worst generation we have ever witnessed in this country. Both Julie and Jonathan were born in 1960 (as was I, incidentally). This is the generation which has managed to spend the hard-earned cash built up over years by its parents and also has busied itself spending any possible inheritance to its children. A generation which takes but will not give. The money spent uselessly on divorces, or serial monogamy, or holidays, or consumer durables. A generation deprived of genuine hardship and poverty and cosseted by a liberal theology which insisted, at every turn "” no, go on, do your own thing, whatever that is, and let there be no recriminations. A generation for whom notions such as discipline, obedience and conformity were not merely antithetical but actually risible. A generation which inherited the highest standard of living this country has ever enjoyed and thus saw no great problem in simply spending until all the money was gone. A generation which believes in self-expression and emotional incontinence, which believes it owes nothing to anyone. And nor is it to blame for anything, even when its kids turn out to be real trouble."
Those who dont want to
Those who dont want to blame and who want more balanced discussion need to consider the government today has since december begun a borrowing procedure to get 40 billion dollars to survive this crisis
Meanwhile the government did sweet FA to stop the banks from lending all of the money that created the excesses we are now feeling we have to spend like no tomorrow to prevent some kind of disaster happening. Admittedly the seeds of this crisis were not really inside NZ and NZ went with the flow of excess created from perhaps the more important Anglosaxon countries.
Now for reasons that nobody outside of banking and government can fathom the banks and government are saying the disaster could not be forseen and they need more regulation.
If there was justice people would be punished for what happened.
But as people are saying we deal with 'what is'. There is no justice. It is 'what is'.
Even so if we want balance at least let us see 'what is' for what it is.
Kieran you miss my point
Kieran you miss my point - the pension system was unstustainable before the economic crash. The babyboomers represents a demographic bubble that is about to burst unless the working age population is able to not only reproduce itself but grow significantly (that isn't going to happen). Along with that growth we also need stable economies with no boom and bust cycles (like Gordon Brown promised - yeah right) - this isn't going to happen either. The current crisis has just moved the date that the demographic bubble was going to burst closer to the present. It is a pension crisis. Governements had to throw the kitchen sink and carpet bomb the economy, I agree, as there was nothing else to be done. They have to try to fix this - yes, but it still doesn't mean it is going to work and plenty of people are predicting an L shaped recession. Even IF it does work we have to face facts - the age demographic is going to flip into an inverted triangle very soon. There will be more elderly in the top part of the pyramid than there are people at the bottom supporting them. What do we do?
Sharonv, You are correct about
Sharonv,
You are correct about the bitch slapping not being constructive.
It certainly does not solve the problem.
-but that does not mitigate the consequences of baby boomer actions (and policies). Those actions as you've mentioned above are likely to mean x&Y are not able to support the boomers in retirement.
The whole point of the debate is not to sling mud, but to say - hey, you're accountable and unfortunately thats going to come back and bite you.
Personally, I'm more of a socialist and certainly don't believe the retiring generation should be thrown in the corner as we tend to do in the west.
Every generation before baby boomers
Every generation before baby boomers has every 70 yo 80 yrs created a major international economic crisis, then the generations in between these has sent their 16 yo 24 yr olds of to a messy war, like the Somme.
Baby boomers stopped national service, stopped sending our kids to die and be maimed horribly en mass on the battle feilds...but we failed in teaching our children how to grow a veggie garden when economics get tuff.
I now know why previous generation did send their spoilt brats off to a hail of machine gun fire... We have made a huge historical mistake... created a generation with no back bone when things get tuff, and i shudder to think what there legacy will be as it seems to be one with no direction.
hmm, not sure if sending
hmm, not sure if sending us spolit brats off to war will solve our problems.
Regards,
Lazy slug behind keyboard with silver spoon in mouth
Sharonv it doesen't matter wether
Sharonv it doesen't matter wether the recession is L or U shaped as long as it doesen't go pear shaped. Yes we are facing a major demographic problem, we will not be able to afford current levels of pension payments in the future. Government will have no other choice but to raise the retirement age to 70 or 75 and means test to reduce the burden. Either way taxes will have to be increased in the future and with a shrinking workforce we have to focus on increased productivity and capital investment and stop trying to build wealth through buying and selling houses. I agree pj we need to look after our elders but they need to start supporting the solutions because we won't be able to if the economy is in depression for the next 10 years.
and how do we introduce
and how do we introduce policy that makes the boomers acknowlegde/shoulder some of the responsibilty for their retirement care/funding - when they represent such a huge voting block. NZ has one of the most generous pension entitlements in the Western World and it cannot afford it. Steps this is an economic crisis and a demographic crisis all rolled up together. The world has never been here before so the past is no guide to the future. Interesting times.
Andrew Perhaps if banks were
Andrew
Perhaps if banks were treated like any other business that might have helped?
Some would have gone under and depositors would have lost their money. Lesson: know who you are depositing your money with.
Instead the bailout approach sees us in a no man's land of wishy washy policy.
Is a bank a public good? If so why does it have monopoly profits accruing privately?
At some point we have to make the decision:
is money creation to be a private or public process? (clearly I am for the latter and i know you are for the former).
guaranteeing deposits in private institutions just does not add up.
Regulation is a red herring.
Either the bank is well run or it isn't. Like any business if it overleverages it can go broke.
If Northern Rock had been allowed to fail (and a few others around the world), we might be sitting in a very different place now.
As i wrote back in Sep 2007
http://sustento.org.nz/astonishing-news-bank-of-england-changes-the-rules/
Sharon Maybe the "greedy greys"
Sharon
Maybe the "greedy greys" will have to see their children and grandchildren suffer first, and who is to say their won't be any direct support? is it necesary for all assistance to funneled via the statet, this of course fails the redistribution test, ie if you are feckless and raise feckless children then someone has to look after you, could always alter the estate tax percentage (currently 0% in NZ)
Neven
Raf you make a good
Raf you make a good point regulation is probably not enough it would be better to just go the full hog and nationalise all the major banks so we have more direct control of the money supply for the public good.
Kieran Says: "Yes we are
Kieran Says:
"Yes we are facing a major demographic problem, we will not be able to afford current levels of pension payments in the future. Government will have no other choice but to raise the retirement age to 70 or 75 "
I agree maybe it will come to that..it has before..and many do so by choice.
And this will result in baby boomers, well the younger ones of the generation, having even more influence on the future.
And most properly increase the ave life expectancy to.
Retirement is doing what one chooses...those who give up work, fix the garden, paint the house get bored and die..those who continue to 'work' part time what ever, or even start a new career live a hell of a lot longer.
sharonv Says:
"The world has never been here before so the past is no guide to the future. Interesting times"
Yes it has , the only difference is they are now dead...this is the reason why history has repeated its self in the 1873 and 1930s.
We have those who caused and the next generation that experienced depression, then their are the children of those..baby boomers...who have or near retirement, and the next generation of bankers etc who who have created the current situation.
So really where does the responsibly really lay? and who should really pay? the current 35 to 50 generation? the same generation who got on the band waggon real estate boom.
Therefore it is both the "greedy greys" and Kierans generation who 'suffer'...
It is the greedy greys who have seen their retirement nest eggs disappear in finance companies, bank savings whittled away with low interest returns.
"When throwing stones, make sure you hit the right window"
Kieran - "Raf you make
Kieran - "Raf you make a good point regulation is probably not enough it would be better to just go the full hog and nationalise all the major banks so we have more direct control of the money supply for the public good."
Because governments are so good at running banks?
That said, governments may not be as bad as the current/recent owners of banks.
I thought our current government
I thought our current government leant more towards privatisation.
-Can't see them nationalising banks.
Oh yes, I can really
Oh yes, I can really see the government running banking in a way that doesn't result in crisis, given the track record (Post Office, Min. Of Works, ACC, DFC, BNZ, Fractional Reserve Banking, Fannie Mae and Freddie Mac, airlines, health systems, etc, etc).
Yes, I put fractional reserve banking in there deliberately. Does anyone honestly still believe that the wild swings in base interest rates over the years, involve the central bankers "smoothing out" the booms and busts that a free market would give us? Hahahaha.
Someone I read just recently pointed out that the biggest regulations of all are "caveat emptor" and the need to make a profit. It is DEREGULATION of these factors that does the most damage and is still doing so.
I would defy anyone to read these 3 essays by Gary North, the first one in March 2002 and the following 2 in August 2003; and still conclude that the crash was not made by government rather than the vagaries of the free market, and that we were not warned:
http://www.lewrockwell.com/north/north96.html
http://www.lewrockwell.com/north/north200.html
http://www.lewrockwell.com/north/north202.html
No-one writing SINCE the crash has explained so succinctly to my mind, "how it happened", and this guy and the others he draws on, were writing years before it happened. What is also clear to me is that all the reasons "how it happened" are now being maximised by the involvement of government in providing "solutions"; like guarantees of financial institutions..........well, DUH.
Raf If you have a
Raf
If you have a venu we can talk about this then how about we do that?
Private commercial banks create private bank money. Where is the monopoly?
A bar creates private bartab money
A corner shop creates private corner shop credit money.
There is not much difference i can see.
The issue is one of regulation.
Who will regulate the government controlled by the people if it is the credit provider?
What actually do you understand by credit and money creation??
I think that must be the issue that we dont agree on so far?
Andrew, If the shop owner
Andrew,
If the shop owner lends forward more credit to his customers than he has stock on the shelves, or even what he could access from the warehouse, what would happen?
Iain If a shop keeper
Iain
If a shop keeper gives a customer a one million line of credit and the customer can pay then the shop does ok. If his shelves are emptied and his warehouse is emptied he can get more stuff from some place. If there is nothing else available in the universe then the customer cannot uses the available credit. However since such a demand for products would ensure others meet the demand it is likely that if the customer can pay then the goods can be provided. If a shop with one dollar of goods offers a one million line of credit only one dollar of the credit can be used.
A bank is the same situation. If the shops have the goods and the customer can afford to pay then he spends and the banks are paid back. If the shops are empty then the customer cannot access the credit facility/credit limit the banks are enabling.
The issue is then surely if it is prudent to allow people to borrow when their ability to repay is based on a continuing amount of credit in the economy that provides jobs etc etc etc.
I see the issue as being one of regulation and the presence of moral hazard when a continually expanding money supply removes risk for banks that the credit they are enabling will result in a monetary contraction and pain and grief for banks as buyers with credit are no longer able to pay to the banks what the banks owe to, or have paid to, the shop keepers
Vibena - you are so
Vibena - you are so right about different rates of interest encouraging hedging and other detrimental game playing to occur, thus I have added this to my solution;
All registered deposit taking institutions would be regulated to be unable to charge administration fees and interest exceeding 1% Any entity proven to be issuing loans regularly enough to be deemed commercial and in excess of 1% will be charged with loan sharking. Which would attract penalties in line with tax evation.
Full version here;
http://socialcreditorbust.blog.co.nz/credit%20reform/
Andrew - if the shop keeper loans out more credit at compounding interest than he knows the borrowers are going to be able to get goods from him or there are insufficient resources to ever convert to saleable goods to cover his lending , he is ripping them off and gaining the interest on even unspent credit for nothing. You appear not to grasp the fact that the planets resources are finite.
For all of you who blame government deregulation for the credit crisis and not the fact that masters of money have infiltrated and now subversively run most governments, with their locally recruited co-operatives, from behind the diplomatic curtain, I give you the last three articles here to provoke some thought;
http://socialcreditorbust.blog.co.nz/
Jill Wellington - if you are still out there, in the above mentioned articles there are a number of names you might be interested in learning some more about.
And this that reminds us that the Privatisation Blitzkreig we are about to have rammed up us by the Bankers favourite son Johny Key, has Douglas's strategies written all over it. Douglas and Keys good cop bad cop routine doesn't fool me, they are working toward the same end, for the same people ;
http://www.reason.com/news/show/30260.html
excerpt from above website-
But New Zealand's transformation cannot be properly understood without understanding the people who made it happen. Perhaps no two people were more instrumental than Roger Douglas, the Labour government's finance minister (from whom "Rogernomics" was to take its name), and Ruth Richardson, the finance minister when the National Party took back power in 1991. Their vision, persistence, stubbornness, and drive were indispensable in bringing about reform.
In the late 1970s and early '80s, while most of New Zealand's Labour Party was preoccupied with left-wing social and cultural issues (remember their anti-nuke policy?), Douglas, a businessman from a political family, was left alone to fashion much of Labour's economic policies. When Labour took office in 1984, he had brought a number of key party leaders around to his market-oriented views.
At the time, New Zealand looked remarkably similar to the interest-group-dominated state described by Mancur Olson. "New Zealand had been the acme of a lobbying, rent-seeking society," remembers Roger Kerr, the director of the New Zealand Business Roundtable. "If you look in Olson's book, you see two or three pages on New Zealand. The country conformed precisely with his hypothesis."
While recognizing the power of interest groups to block reform, Douglas didn't believe their existence necessitated compromise or retreat. Instead he designed strategies to buy out or overwhelm interest group opposition. One tactic was to apply the reforms on a broad front in order to spread the burden and enhance the legitimacy of the program.
Iain "Andrew - if the
Iain
"Andrew - if the shop keeper loans out more credit at compounding interest than he knows the borrowers are going to be able to get goods from him or there are insufficient resources to ever convert to saleable goods to cover his lending , he is ripping them off and gaining the interest on even unspent credit for nothing. You appear not to grasp the fact that the planets resources are finite."
You are not understanding what i am saying about credit.
The basic idea of credit of say a credit card is that there is only a charge when you *use* it. So you get a 5000 limit with more or less no charge. Right?
*Then* if you *buy* goods your limit gets consumed and you have less credit available to spend. Right?
The shop keeper does not 'lend out credit'. He gives you a monetary limit so you can spend the credit on goods you desire. He then assumes that most customers are going to repay him and it is worthwhile doing this.
But not all shop keepers want to take this risk.
So the bank takes the risk
It gives you a monetary limit. As you buy stuff the banks either owe or pay the sellers. You then owe the bank.
As a general concept in credit if you dont buy stuff you are not obliged to pay interest.
I agree there are exceptions to that. But for example:
1. a credit card with a 5000 limit and zero purchases accumulates no interest
2. A flexi homeloan with available credit limit of 250,000 with zero balance owing accumulates no interest.
An exception is for example an agreed overdraft where once the money is moved from the loan account to the current account to bring the current account into credit then interest is charged. But you dont do that unless you expect to spend the credit limit given to you or at least it makes no sense to do that unless you have some kind of requirement for 'available funds' you would not otherwise have. The bank meanwhile has 'unavailable funds' of that amount or at least as to be aware that there is a liability sitting in that current account.
Please dont keep assuming i dont grasp what you can grasp.
Thanks 4 The Good Read!!
Thanks 4 The Good Read!! I have found Absolutely Free Credit Report is definitely a quality site to get my credit and get my score 4 nothing. Has anbody else used them?