Here's my Top 10 links from around the Internet in association with NZ Mint.
I'll pop the extras into the comment stream. See all previous Top 10s here.
I welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.
This is a special issue from the Treasury's Macro Forum held in Wellington over the last couple of days. I've been focused on this so please accept my apologies for not doing Top 10s on Thursday and Friday. I've linked to all the papers.
1. New Zealanders' Woody Allen syndrome - New Zealanders are a bunch of negative whingers who don't know how lucky we are.
That was the opening gambit of UCLA Professor Sebastian Edwards in this paper he delivered to Treasury's Macroceconomic Imbalances - causes and remedies conference in Wellington Thursday and Friday.
I've been attending the conference and that's why I've been offline for a couple of days.
Edwards started the conference with this entertaining view of our economy and concluded quite sensibly with a caution that New Zealand probably needed to take out some insurance just in case the global economy and financial markets exposed some of our external vulnerabilities, in particular our high net foreign short term debt.
As Woody, many New Zealanders worry a lot. They worry about the economy and about the country’s position in the world. They are convinced that things are going downhill, and believe that the future looks rather bleak. And yet, by almost every possible metric New Zealand is a success
The similarity between New Zealand and Woody Allen goes beyond having a somewhat pessimistic outlook on life. As Woody’s movies progress, the viewers realize that, although he is sweet and lovable, he has certain traits that could be improved on. In fact, if he worked hard on them, he would end up being a much happier and successful fellow.
Similarly, and in spite of New Zealand’s wonderful showing in ranking after ranking, there are a number of areas where reforms would make the country’s position in the world even better.
Edwards did a nice job of summarising New Zealand's catch 22 situation where our reliance on commodity exports makes our currency volatile and our foreign creditors demand a high interest rate to compensate for the volatility, which in turn means our currency remains high and makes us more dependent on commodity exports, which makes our currency more volatile, rinse and repeat.
The chart below of our real trade weighted exchange rate since 1976 shows the end result: a volatile and rising currency.
The “Unofficial-Official” story has four fundamental elements:
(a) at some point the policy mixed became “somewhat loose fiscal-tight money”.
(b) This resulted in high domestic interest rates that attracted considerable capital inflows.
(c) This, in turn, generated a real estate boom, a strengthening of the currency (with the resulting loss in competitiveness), very low national savings, a very large current account deficit, and a highly negative NIIP (Net International Investment Position).
(d) As a consequence of the above there has been a decline in tradables output (both in absolute terms and relative to nontradables), and an increased degree of vulnerability to external shocks.
2. Theme of the conference - This rise in our exchange rate and the way fiscal and monetary policy worked together to increase interest rates, lift the currency and reinforce the commodity exports bias was the theme of the conference, I reckon.
3. Craig Burnside from Duke University made the point that our low growth and investment may not be linked to these high interest rates and high exchange rates. Australia seemed to have a similar problem with high exchange rates and interest rates. It seemed New Zealand had a lower savings rate and investment rate than Australia.
He said our high external debt was New Zealand's main source of vulnerability and he suggested changing the tax incentives for saving in financial assets relative to housing. Essentially he was saying we needed tax breaks for investing in stocks and the removal of tax breaks for investing in housing.
The chart below show NZ's growth rate has been the slowest in the OECD since 1960.
Here's Burnside.
The good news comes in two parts. In my introduction I stated that New Zealand had experienced the slowest growth in a group of OECD countries, and had slipped 18 places in ranking by per capita income within that group between 1960 and 2009. What I did not mention was that the most of the damage, if you like, occurred prior to 1990. New Zealand’s ranking by income has actually increased by one place since 1990, and its growth (ranked 9th out of 25) has been above average for the OECD.
Comparisons with Australia are perhaps inevitable, but it should be kept in mind that Australia has been one of the top performers. Second, New Zealand is in the fortunate position that a very substantial portion of its external debt is denominated in domestic currency. This means that the country is naturally hedged against the risk that I have argued is the source of its large risk premium.
The bad news, in the end, lies in the sheer size of the external position, and, perhaps, in the speed of New Zealand’s growth, given its location in the pacific rim.
It simply isn’t sustainable for a country with a large net debt position to continue to run large current account deficits and see its debt stock relative to GDP grow by 8% per decade.
I conclude that the central issue facing New Zealand is its substantial negative external position. Even if this position is largely naturally hedged through its cur- 21 rency denomination, it does not seem consistent with long run sustainability.
I argue, therefore, in favor of a balanced approach in which the New Zealand government continues policies aimed at increasing domestic saving, while moving away from policies that favor residential over other forms of investment.
4. The Irish guy - Trinity College Dublin Professor Philip Lane seemed a suitably chastened fellow, having witnessed first hand the implosion in Ireland. He was suitably cautious about New Zealand's own imbalances and made the good point that Ireland was a bit like New Zealand in that its government had also had relatively low public debt before the crisis.
That's before the Irish government bailed out its banks and was unable to rely on a floating exchange rate to help it cope with the shock of the Global Financial Crisis.
Here's his warning to New Zealand:
New Zealand’s external balance sheet still poses several macroeconomic problems. In particular, there are two primary reasons to be concerned about excessively-large external imbalances in net capital flows and accumulated net foreign liabilities. First, large imbalances may distort the overall structure of the economy, with a possible negative impact on long-term growth prospects. Second, large deficits and high external debt levels leave a country exposed to the risk of a sudden stop in capital flows, which in turn may generate a generalised macroeconomic crisis.
He also points out the risks in our banking system:
If the parent banks suffered losses in their home markets or elsewhere and/or experienced tighter conditions in funding markets, these negative shocks might impel the parent banks to withdraw capital from overseas operations and limit their capacity to provide funding to New Zealand affiliates. This is of particular concern in view of the common risks facing the Australian and New Zealand economies, such that any financial shocks in Australia might occur at the same time as similar shocks in New Zealand.
Finally, much of the external debt is intermediated through the banking system. These liabilities fund domestic loans. Accordingly, a possible trigger for an external funding crisis would be the emergence of significant loan losses and/or a decline in the quality of the collateral backing these loans. In terms of domestic risk factors facing the banking system, the elevated level of property prices (housing and farms) is a particular concern.
Lane pointed out how Eastern Europe suffered in the 2008/09 crisis when foreign owned banks restricted lending and that New Zealand had yet to see a real housing slump.
Property prices have declined considerably over 2008- 2010 in many countries that ran large current account deficits during the pre-crisis period, even if the adjustment in New Zealand has been very limited so far.
He looked at the options for macro-prudential controls to stop the banks from borrowing offshore, including such things as the Core Funding Ratio and any blocks on foreign borrowing. He points out companies and individuals could just borrow overseas themselves in foreign currencies if these controls were introduced or toughened.
Financial regulation on its own is not sufficient to tackle external imbalances, since corporations, the government and households may also accrue external liabilities directly. Indeed, over-regulation of the domestic financial sector increases the incentives to directly tap sources of foreign capital, via overseas banks, the international bond market and the issue of equity-type liabilities to foreign investors.
Lane also liked the idea of encouraging private savings and reducing the budget deficit to improve national savings.
Interestingly, he pointed to one idea the Irish government introduced in 2002 to take some of the heat out of the economy. It introduced a one for one incentivised savings scheme where savers locked up their money and the government put some of its surplus away for five years, hoping this would mature when the economy was in trouble.
Unfortunately the Irish economy was still booming in 2007 when the funds matured, adding extra fuel to the fire.
This chart of New Zealand's net foreign debt and interest rates showed just how high our interest rates are and how indebted we are. We're in the PIGS part of the chart but with higher long term interest rates.
5. The government's fault - Treasury Principal Advisor Anne-Marie Brook was disarmingly frank in her paper on how the Reserve Bank and Government had combined over the years to jack up interest rates, given the government had run a structural deficit ran expansionary fiscal policy after 2003 which the Reserve Bank had to lean against with high interest rates. It crossed into structural deficit position from 2008, as the chart below shows.
Her suggestions to solve this included a look at a Chilean style stabilisation fund and an Independent Fiscal Commission to advise government on not running structural deficits.
With the benefit of hindsight, it is widely argued that fiscal policy was insufficiently supportive of low interest rates and tradable sector activity over the 2005-2008 period. Because monetary policy was the primary tool for cooling the booming economy, higher interest rates ensued and the exchange rate was pushed up to unsustainably high levels, adversely affecting the tradable sector and exacerbating external vulnerabilities.
This chart shows just how connected the differentials between NZ and US interest rates and the currency are.
Brook also pointed out how much of a structural deficit the government is now running. It's at about 5% of GDP. My view is the Working for Families, Interest free student loans and the other bits of middle class welfare introduced in the last 7 years is responsible for most of that.
Brook is a bit more specific:
While increases in government spending did contribute to our structural deficits, I point out (page 25) that our large structural deficits today are due to a combination of the spending increases, the 2008 tax cuts and the downward revisions to estimates of structural revenues
6. Higher bank capital - Auckland University Economics Professor Prasanna Gai spoke about macroprudential policies and the need to look at toughening capital and funding requirements.
He particularly pointed out the need for systemically important banks to be targeted. He mentioned the need for banks to hold more capital and how the risks to society of bank blowups are not reflected in the banks' costs.
New Zealand’s large net foreign liabilities expose it to a possible rise in long‐term interest rates as a result of high funding requirements of banks and sovereigns in advanced economies.
The authorities should continue to strengthen their stress testing of banks and consider the merits of gradually raising bank capital to levels well above the Basel III requirements.
Staff recommended explicitly including funding risk in future scenarios, encompassing a disruption to bank funding and a large increase in longer‐term interest rates. The latter could come from a rise in global rates and an increase in New Zealand banks’ risk premium.
7. It's housing's fault - OECD economist Peter Jarrett talked about New Zealand's housing boom and its role in our macroeconomic imbalances.
It turns out our housing boom was bigger than in most other OECD countries.
And our household debt is now bigger than in other OECD countries.
'
He also pointed out New Zealand had relatively high population growth over the last 10 years and a lack of new supply of housing saw that population growth push up house prices.
8. The Arbee's strange rituals - The funniest presentation was from Motu's Arthur Grimes who looked at the Reserve Bank's activities and the New Zealand economy from an anthropological point of view. He detailed how the Arbee sub-tribe of the Aotearoan society influenced the overall society.
He paid particular tribute to the role of the Arbee's high priest in conducting the OC (Official Cash Rate) ritual and responding to the demands of the Big Fella man or Big Fella woman.
Grimes told the conference that our own Alex Tarrant assisted him with field research.
Note to self: muct check on moonlighting employees and their dabblings in anthropology.
9. My overall frustration - I enjoyed the conference and meeting many of the attendees. Fortunately (and unfortunately) it was like being back at university and listening to a bunch of fascinating lectures. It was fun watching New Zealand's best macro-economists doing their intellectual gymnastic routines, but I got the feeling the powers-that-be at Treasury and the Reserve Bank either didn't think there were that many serious problems or did not believe they could do much about the problems.
There was a lot of talk about unintended consequences and finger pointing at politicians and voters. There seemed to be an awful lot of shoulder shrugging and a disturbing acceptance of our lot in life. New Zealand seemed stuck in a rut as a commodity exporter with a high currency, high debt and a reliance on foreign creditors.
Everyone seemed to agree we needed to lift our national savings rate and reduce our vulnerability to hot international money markets.
But there were few big ideas to solve the problems. A few tweaks and fiddles were suggested, but on the whole most believed the status quo was the least worst option. The unsustainability of a current account deficit running at more than 5% of GDP, a net foreign liability of nearly 90% of GDP and a foreign debt rollover problem of 50% of GDP stared everyone in the face from almost every slide, but there seemed little that could be done.
There was no discussion about high youth unemployment rates, migration rates and falling Gross National Income per capita, which are the ultimate results of our macroeconomic failures. The looming surge of spending on health and pensions for baby boomers was only briefly addressed.
My frustration culminated in the final session where two very senior figures in New Zealand's business and economic community questioned this status quo. They pointed out that our reliance on a floating exchange rate and an inflation-targeting central bank had led to high interest rates, low investment rates and higher foreign debts. They were essentially saying the orthodoxy adopted since the mid 1980s was not working.
Their points weren't even addressed by policy makers with their hands on the levers of monetary and fiscal policy.
The whole conference reeked of complacency, a lack of urgency and a sense of impotence.
Why it really matters
Perhaps I need to lighten up and 'get a life', as the Prime Minister told me via Radio Live a couple of weeks ago. Perhaps I need a transplant of my Woody Allen approach to life with a John Key type enthusiasm for the good things in the world and assumption that everything will work out in the end if we just accept the status quo.
My problem is I've worked overseas for a decade and can see how we are failing to really compete and prosper in this world of ours, despite our obvious gifts and resources.
The end result is most of my immediate family has left the country I returned to because they see better opportunities in Australia. We are losing our best and brighest, leaving behind a shell of beneficiaries and pensioners. This is unsustainable as we approach the retirement of the baby boomers. Those actually still working here and paying taxes will just revolt with their feet and those left behind will have to accept the fallout from a national bankruptcy.
I'll finish this with an anecdote.
On the plane to the conference a 17 year old Maori girl sat next to me and started telling me her life story. She was traveling back to Wellington from Christchurch where she had just attended the Limited Service Volunteer (LSV) 'boot camp' course at Burnham, which is run by the Ministry of Social Development and the NZ Defence Force.
She was fizzing. She just wanted to tell someone how great she felt about the course and the friends she made on the course and what she had achieved. She showed me all the pictures on her well-thumbed mobile phone. She was so proud of her mates and what they had done. She boasted of her early morning starts, the ironing of the uniforms and about all the physical exercise.
She was a real bright spark and I found her enthusiasm infectious so I started asking a few questions. It turned out she had decided to leave the six-week course a week early after a fight with a couple of other course attendees. She explained how she realised she needed to control her issues with anger and wanted to work to fix these issues when she got back to Wellington. The language she used to describe how she never backed down was colourful to say the least. She said she could go toe to toe with any of the boys and wouldn't put up with any 'sh-t' as she described. It was the main word in her vocabulary, along with the F word.
She told me about her childhood and how she had ended up at the course after years of involvement with CYFS and then WINZ. She told me about the drugs, the alcohol and the violence that surrounded her as she grew up. She explained how her life had gone off the rails a bit after the death of her grandparents a couple of years ago. She was no fan of her father and explained how her street-kid mother hadn't been around much to help. She was going to stay with an aunty in Wellington after she landed.
I asked her what she wanted to do with her life. She enthused about how she now wanted to join the army or the airforce. She wasn't quite sure what she could do in the armed forces, but believed she had the qualifications. Maybe she could work as a gunner, she said. She boasted how she was just as strong as the boys.
She said she was sure she would be allowed to do the course again after she had sorted her 'sh-t' out. She had a vague idea she could join the armed services after that. It wasn't clear to her what exactly she needed to do or who to approach, but she was confident.
She explained how she didn't want to end up like her parents and many of her friends. She had already spent some time in jail and didn't want to end up like that.
I admired her spirit. It turned out she loved Kapa Haka and touch rugby and was an excellent musician.
I asked her if she had travelled overseas and wanted to do an OE. She said she hadn't, but wanted to go to America to be a musician. She explained she could dance hip hop and was an excellent singer. She couldn't afford to go at the moment and it was clear to me she would find it much harder than most to migrate because she didn't have the marketable skills and resources.
She swigged from a 1.5l bottle of Coke throughout the flight and took a heaping handful of the boiled sweets from the Air NZ hostie as we descended into Wellington. She also had a full packet of smokes (and a lighter!) she had just bought at the airport for NZ$27 because she said she was feeling a bit down and wanted some ready-mades rather than roll your owns.
I explained to her that my parents had also smoked like trains, but I didn't and had a 17 year old daughter who didn't. She told me she had 16 brothers and sisters, many of whom smoked as much as she did. Her mother had three kids, including her, while her father had 13 kids with a variety of mothers.
I really felt for her. She'd had a tough start in life and now faced a struggle to find her way. Maori youth unemployment was 28.8% in the March quarter, the Department of Labour says.
She had such enthusiasm and hope. I wished her the best as the plane taxied into the gate at Wellington Airport. I only hope we can generate the jobs and wealth to help improve the social problems underpinning her story.
But if we can't this teenager and her 16 brothers and sisters will be among those left in New Zealand.
I thought about the futures of my 17 year old daughter and this 17 year old I had just spent 40 minutes with hearing her life story.
My daughter has already said she wants to move to Britain. She is young and has a British passport and I'm sure it's something she should do to experience life on the other side of the planet.
But will she come back? Is there a well paid and interesting job for her to come back to. What tax rates will she be paying by 2020 or 2030 when John Key and myself are retiring? Will the country be solvent and owned by its population then? Will my grand kids grow up here? Will I stay if they don't?
I hope we can hand over a better economy to these 17 year old girls in the next decade or so than the one we have now. After this conference I'm not so sure our current crop of leaders are either aware of the scale of the problem or have the will to solve it if they do. I hope they realise this soon and take some action.
I watched this 17 year old girl step out of the door of the Air NZ 737 ahead of me and stride up the air bridge with a real spring in her step. My last view of her was the cheap, bright yellow t-shirt she was wearing over the top of her jacket. It had the signatures and tags of her mates from the LSV course all over it in black marker pen. She was texting her mates as she walked.
Good luck to you, I thought.
And then it was back to work for me writing about real exchange rates and property taxation and net foreign debt...
10. Totally irrelevant Clarke and Dawe video - The voter is beaten up. Fair enough.
(Updated after emailed comments from Brook)
145 Comments
Totally Woody Allen / Bernard video....
9) Only revolutionary events lead to positive changes – the sooner the better – before it is too late and it gets ugly.
We are entering a worldwide, fast approaching “Broom Economy”. Under the influence of climate change, natural disasters, an economically, financially and politically mismanagement scenario, we have to spend too much time, efforts and money for the “clean up” - resulting costs are simply prohibitively expensive for societies. The list of severe events on many fronts is frightening increasing.
The fact is, many (more) countries will enter into a new, more severe recession soon.
It appears that the structural frame-work of Bernard's happiness index is still stuck in the red-zone . ..
.... I suggest that we tear it down completely , here at interest.co.nz , and let him re-build it somewhere safer ......
Such as , with Elmo www.youtube.com/watch?v=K-ob8sr9ZX0
Gummy
Ha. That's a good one, though I'm more of an Oscar the Grouch fan. http://www.youtube.com/watch?v=Rdu3dA2RdTA&feature=related
cheers
Bernard
And then there's Kermit singing It's not easy being Green http://www.youtube.com/watch?v=hpiIWMWWVco&NR=1
;)
Bernard
I'll say something for our Beaker ...... ahhh , sorry , for our Bernard :
Hickey has a hide as thick as a rhinoceros
....... and a hair-cut to match !
[ and just for you Bernard , and that special someone whom you love , or if she's not around the wife will do , a romantic little song ....... trim the lights , snuggle up close , and enjoy : ... www.youtube.com/watch?v=0yvHWyvexZA&feature=related ]
But Gummy, you aren’t saying the lively female drummer in the back is Bernard’s wife - no wonder why he's o ccupied 24/7 with he’s job.
----
Strange drum pattern development: http://www.geonet.org.nz/earthquake/drums/
Yes Bernard we do have it good in this country. I have a few Iraqui friends who love to tell me their life stories too. Stories of people shot on their doorsteps and left to die in their doorways, they cannot open their doors to help these people because they were often planted with bombs that would go off if you moved them. The Iraqui people were not looked after by the Government like our Cantabrians are ... many of them lost everything they owned and a few family members too and if they could, travelled to a new country to start again from scratch.
I am glad we took these brave people into the country they have good attitudes and I am glad that we are looking after the Cantabrians. Even though the increased population and the cost of the quake might be keeping us in economic trouble.
But these acts should not be making economic trouble for us should they? Surely we can run an economy so that progress, exports and earnings balance what we spend to improve the lives of our citizens?
Oh silly me! it is that culture of over-spending and wanting too much that has got us here. I was pleased to see some thoughts about savings incentives, and I love that interest rate differential graph ... if you take that to its logical conclusion it is more evidence that the NZD has got to drop.
But what are we doing to encourage people who expect to put in a fair days work for a fair day's pay? and what are we doing to encourage innovation and creativity here?
I relate to your sentiments about whether to stay in this country. I also spent a decade overseas and came to the same conclusions as you.
More culture problems here like those you have outlined is a legacy I would not like to see materialise. I would like to find a job where I can help people like that, but CYFS etc won't employ people with my attitudes!
Keep up the crusade Bernard :)
Also ... how can a mere mortal like me get invited to conferences like these? I have much learning to do.
I couldn't edit my post (after a more careful read of No 9) so will post again.
Bernard,
Doesn't sound like your two days provided you with any great economic insights, but plenty of political ones. Perhaps the "Ministry of Happy Thoughts" carefully selected speakers that would not ruffle any feathers.
It sounds though that you still have doubts about Big Brother.
Seriously Bernard, Were you really surprised by the lack of vision or real willingness to get NZ out there to the world without some corporate kickback paid for by the NZ taxpayer?
The "usual suspects" (formally known as 'experts') in our global economic world are hardly going to get a clue now are they?
We are seriously looking at a lost generation or two i would say because of the events of the past decade and some might even say the last 30-50 years.
Your about my age (40+/-) and you will remember leaving school at the end of the 80's (post 87 crash) straight into the economic disaster which became the 90's.
Seeing no real reason to stay in NZ you left for the UK filled with hopes and dreams and fulfilled most of those I'm sure, OUTSIDE NZ, then decided to come home to good old NZ and finish building that family unit with the wife only to find that ......NZ (post 9/11) had gone crazy on debt just like the rest of the world, building and swapping Mini Mc Mansions with one another, watching show after show on tv about buying and selling property, buying all manner of new consumer good and the latest SUV etc,etc. You probably thought the same as me "this is crazy and will end in tears". And here we are.............although your still in NZ and I'm watching California continue to crumble
Justice,
I'm 44 and graduated when unemployment was 10.9%. in 1991. After 6 months of unemployment I got a job with Reuters. I then travelled with Reuters from 1994 to 2004 through Canberra, Sydney, London and Singapore.
I came home in 2004 in part because from a distance it looked like New Zealand's economy was on a much firmer footing. Little did I know it was all about to go pear-shaped as Labour loosened the purse strings and the property boom got going in a big way.
The rest can be seen in the charts above.
cheers
Bernard
Justice,
I'm always hopeful. The economists and policy advisers at Treasury, the Reserve Bank, the universities and in the Beehive are, I'm sure, all keen to do good things.
They are very bright and well resourced, but seem reluctant to shed the blinkers of the last 25 years. It's as if they haven't learnt the lessons of the last three years.
This conference was designed as a refresher for policy makers and I was hoping for a bit more of a challenge to the status quo. Brian Easton was the only one who suggested there were some things that were fundamentally wrong.
But I'm always hopeful.
There are some things that could be done within the existing framework. The government could genuinely try to run budget surpluses. It could also further reduce tax incentives for property. The Reserve Bank could introduce macro-prudential controls to discourage further offshore borrowing by our banks.
We'll see.
cheers
Bernard
Many NZ Economists are stuck within their discipline and social constructs. It is not new that the most progressive research in economics often occurs before the age of thirty. If you are employed within the economic profession how many job opportunities are there to buck the conventional wisdom of the day :-) Thats right not many. I know a few brilliant kiwis, economics trained, all usually have at least one other discipline to their name, hard sciences, mathematics, operations research or engineering all working overseas...
Our best an't here. I find it interesting the best an't into self promotion, possibly they have nothing to prove or too busy doing.
Hugh,
I wouldn't be so sure of that. Keynes was a successful market speculator. I'm sure many of those at the conference have been successful in picking markets.
The Reserve Bank itself made hundreds of millions 'speculating' on the currency through 2007.
And I'm no rich man myself...
cheers
Bernard
Bernard, that's EXACTLY why the RBNZ can't be trusted. They are playing the market while allegedly fiddling the fundamentals. Ask the exporters what they think of the RBNZ's playing in the currency at their expense. Does the RBNZ also profit from fiddling the CPI figures? YOU bet!
Learn, academics, I would say you are mostly in-correct...who made the first atom bomb? who wrote up the theory? certainly generally I would suggest you are far from correct...however, yes I agree there is a great deal of learning in the school of hard knocks...you get no quals, but its very well learnt....
There is a saying I like, actually two....Theory is great until it meets practice....and academics are philistines in any other area of expertese than their own.......
And philistine as possibly its originally meaning....'Philistine' must have originally meant, in the mind of those who invented the nickname, a strong, dogged, unenlightened opponent of the children of the light."
I think with just a small amount of googling we can name quite a few who are well off...but Im sure you can do that yourself....
Also, no not market experts....economic experts is usually a field of the very broad subject....So ppl actually make a lot of money via the share market directly? if you look at Warren Buffet, he hasnt, he seems to have a very broad portfolio...and yes he isnt an economist....
Interesting point Paul Krugman commented that those that followed the advice of the WSJ during the GFC probably lost quite a lot of money.......so unenlightened /incorrect comment can be just as damaging / useless.
I could also add that for many ppl money isnt the focus of their lives....personally I would say they are "richer" for that....but that's my personal view.....ie I consider myself rich because of my family, my children, my good job I greatly enjoy etc....So when the kids bounce in on a morning for hugs I couldnt wish for more....I would swap that for a million $.
regards
Actually I think you are mostly wrong to blame the economics profession.
Looking at Keynes, I think unfortunately post-war the UK Labour party pounced on his ideas and subverted them to their own political ideals, they simply didnt have any workable economic theories of their own and it and they failed.....Keynes in its more un-perverted form is probably workable....
After that failure, the swing to the right saw Thatcher and Reagan come to the fore....they in turn took Friedman's work and again perverted it to suit their political goals....and right now we see the greatest failure possible, we are probably on the verge of the Second Long Depression. In fact, like Keynes I think generally Friedman's work is probably quite workable.
The key to both for me is to use them as guidence not rigourously...even Hayak and Mises should be well understood....certainly then we have the three main schools and understanding their weaknesses as well as their strengths. I suppose that comes down to not having Political parties in Govn, cant quite see how you get democracy and non-politics at the same time though.
"In no small measure, the economics profession, due to its poor quality training these past two generations, has had a huge role in allowing these housing bubbles to form and create the destruction they have.
Increasing numbers within the economics profession recognise this - and thankfully, constructive changes are belately starting to happen."
It is?
From what I can read the fresh water school of economics have dominated the last 30 years...and I see little sign of change....it is after all a political change that needs to happen and not an economics one.
regards
She told me she had 16 brothers and sisters, many of whom smoked as much as she did. Her mother had three kids, including her, while her father had 13 kids with a variety of mothers.
Her father must be well off to be able to afford to pay child support and alimony for 16 children and their mothers !!
Although one must cast nasturtiums over said young lass's ambitions for hip-hop, music and the Yarts.
What we actually want are scientists, engineers, builders, civil construction workers and other horny-handed sons and daughters of toil.
Not more buskers. Especially now we have Paul the Henery back on deck.
We also won't get them by heavy handed urban planning.
One of the worst stupidities of urban planning, is this "one boundary" stuff and this "single centre city" stuff that leaves only one activity, farming, the most land-intensive, with the only truthfully-priced land.
There is also a whole lot of economic activities BETWEEN farming and "international finance" on the "land requirement" scale.
The McKinsey Institute told the British Government 20 years ago, that Britain would never have anything like Silicon Valley, thanks to their urban land prices and their planning system. The Poms have been unable to break the stranglehold of vested interests since, so their economy continues its long relative stagnation. Meanwhile, economic Darwinism seems to be a popular and spreading phenomenon.
Check out the work of Nicole Garnett (Notre Dame Uni) too, on agglomeration efficiencies and how high land costs work AGAINST these.
Bernard, you owe it to yourself and to NZ, to get a handle on this stuff and provide some helpful direction.
And while I am a bit of a specialist in the land economics side of it, Sir Paul Callaghan says a LOT of important stuff here:
I expect you are already familiar with this and have posted it already.
Here is a high-tech entrepreneur from Silicon Valley venting his spleen at the local council; this is highly relevant:
http://www.fcpp.org/images/publications/Cyprus%20letter.pdf
There won't BE another Silicon Valley in California either. I love the businessmen's popular acronyoms - "ABC" means "Anywhere But California", and "GTT" means "Gone To Texas".
He ends his letter to the council:
"..........We have invested nothing more in our San Jose fab and will soon sell it, to complete the move of the very last of our manufacturing facilities out of the state of California. With only a few exceptions, the silicon has indeed been forced out of Silicon Valley......."
Bernard, I taught the likes of the girl on the plane at a certain Manawatu secondary school for 31 years. Well, I tried to teach these kids is a better way to describe it. Multiply her x 32 and you can guess what classromm teaching was like. Most of the kids were Maori and I got on well with them as indivduals but collectively they were a nightmare. The background of the girl you met is not at all unusual, nor the ambition. Most think life is like instant coffee, add water and mix, and hey presto you're a brain surgeon. Frankly the prospects for the country are poor while the talented up stakes and leave. Most middle class NZers are unaware of the underclass waiting in the wings with their hands out. They have their political advocates, no need to tell you who they are.
Here in HK, as I eke out a retirement of sorts, I am coaching kids from poor homes. They are a delight and give me great satisfaction, so different to those 31 years where most days I went home only fit for TV.
Thank you for doing your bit to alert NZers to the very real problems the country faces, a country at the very end of the oil pipeline.
OMG
Hugh Pavletich is far too modest. He should have told us about this himself.
That will be a bit of a blow to Hugh's pathological opponents on here:
http://www.interest.co.nz/opinion/53947/opinion-hugh-pavletich-accuses-…-
Ah, even the ChCh Press is waking up too now:
http://www.stuff.co.nz/the-press/news/christchurch-earthquake-2011/5192…
Hopefully this is "1989" for Urban Growth Restraint - "people power" stirring into action against the totalitarians. Pity it takes a natural disaster to expose the incompetence and the failure of public duty, and "make it happen".
Bernard
You talk of your 17 year old daughter possibly going to the UK.
Yet their prospects aren't great either are they?
You would be right to say, though, that despite their rather grim prospects there is still more range of opportunity there than here, by virtue of being a bigger country etc.
There is a "glass ceiling" that every economy hits, when its urban growth is captured by rent-seeking interests, and rises in income transmit straight through to rising house prices and rents.
If you want to understand why the Pommie economy is the way it is, read the McKinsey Institute's Report on Productivity in the British Economy (from 1992); read Alan W. Evans' "Economics and Land Use Planning" from 2004; read the papers co-authored by Paul Cheshire and Steven Sheppard of the LSE over the last 10 years, and read the "Barker Review".
We don't HAVE to make the same mistakes. We don't have to be paranoid, like the Poms, about the ability to feed our population in wartime (hence "preserving farmland").
Our economy will tank much quicker than theirs because like Matt said, they do have a bit more economies of scale. NZ is NOT going to get "3%" growth back until we get sensible urban land prices back. It is nonsense to expect our entrepreneurs and labour forces to pay Tokyo, Hamburg, and New York prices for land rent.
Matt in Auck
You're quite right about Britain. It's much more of a basket case than us. It has bailed out its biggest banks and its financial sector is mired in debt.
I'm pretty confident she'd come back from Britain.
My main fear is she'll then bounce on to Australia where many of her mates will go. I'm doing my best to downplay the Aussie option.
I tell her at every turn about the high house prices. Australia has problems too with a high currency and Dutch Disease. The big difference is the much stronger investment record and the boost that has given to high skilled and high paid jobs.
cheers
Bernard
Here we go
http://en.wikipedia.org/wiki/Dutch_disease
In economics, the Dutch disease is a concept that purportedly explains the apparent relationship between the increase in exploitation of natural resources and a decline in the manufacturing sector. The claimed mechanism is that an increase in revenues from natural resources (or inflows of foreign aid) will make a given nation's currency stronger compared to that of other nations (manifest in anexchange rate), resulting in the nation's other exports becoming more expensive for other countries to buy, making the manufacturing sector less competitive. While it most often refers to natural resource discovery, it can also refer to "any development that results in a large inflow of foreign currency, including a sharp surge in natural resource prices, foreign assistance, and foreign direct investment".[1]
The term was coined in 1977 by The Economist to describe the decline of the manufacturing sector in the Netherlands after the discovery of a large natural gas field in 1959.[2
Oh a bite!!! Been a bit too busy to read today. I'm economics trained, I know all about it...the smile is that I'm teasing you.
I always chuckle to myself when people bring it up as they usually assume the same is there today, economist like to coin a phrase for observations, history and events and it catches.
In this case the real story was lost in the aggregated statistics, a relative decline at best from an impressive base.
However it seems to me stale and you would get a dressing down if you mentioned it at a similar conferenece in Northern Europe. Guess why europe and english speakers don't really see eye to eye.
The reality is you will find the opposite in the Netherland today. Their middle market is on a scale you will not find in Australia or New Zealand in manufacturing . Even private held business in environmental engineering and manufacturing which I have some involvement with are on a scale that will make your mouth water, quite impressive mutinationals, the commercial parks are no differnt than thirty years ago, the core never went away.
I always tease on this subject as the people who always mention it assume the same today.
The Nertheland is a small country with a population also of modest proportions but their zeal for enterprise makes up for it, why not here?
Hi Bernard, what are your daughters interests? I have five of the little devils and the trouble is getting something to turn them on that isnt heavily pieced, tatooed, on the dole and wants to move in.
Ive a daughter that loved music, she lives in London as an audio engineer, its been a sucess for her, she has worked at the London Opera house and such, at present writting music for a film company, not something she could do here. She travels all over Europe and has made great contacts. She did say her British passport opened doors that would have been closed to a Kiwi. My eldest lives in the States very happy but not got such great direction, trying writting at the moment, couldn't afford a car so rides a motorbike.( i read that up to 80% of organ donors in the USA are youg motorcycle riders) My 3rd was studying in ChCh, engineering papers but has moved home, is going to get her teachers cert in Music shes grade 8 and work with a friend who scuptures in steel( she learnt to weld on the farm and loves it) and start Uni again next year, my next is 16yrs, breeds chickens (go figure) wants to be a vet. My 5th, well I just drove to wellington to pick a horse up for, took me all day and over a tank of diesel, shes number 5 and just a great mate. Im going to pick a Cello up today as my 16 year old has always wanted to have a go and found a teacher.
Compare us, middle class whitees to the Maori girls family and there is a chasm wider than the grand canyon and the oportunities Im giving my children will be with them for life. Try figuring how to close that gap without lowering all our expectations and you are onto a winner.
Yeah!
We could go back to borrowing as much as anyone will lend, and living on credit as if we'll never have to repay our debt!
We can use that credit and debt to buy houses from each other and then sell them back again at ever increasing prices, while telling everyone how rich we are and how much richer we're going to become!
Hey, how about finance companies? We can find some guys with gelled hairdos and ask them to set up companies in which we can invest the borrowings we haven't yet spent and they will promise us amazing rates of return!
How can we lose?
Yes, those gloomster have gotta go. They're ruining everything.
Yes i guess you are right...there is only a certain percentage of the populous that would have the nous to benefit from having a positive disposition...so yeah, you may as well carry on with your whining.....At least that way you'll be safe.. sorry, i now see the point.
It's the certain percentage of the populous that still believe having a positive disposition can have any effect whatsoever on an economy who are largely to blame for the world's struggling economies.
Hype and thinking happy thoughts can't and won't conquer the fundamentals, something you and your fellow "positive thinkers" have yet to understand.
But being negative has never cured an ill and one simple can't find solutions using pessimism...the 'happy thoughts' tag is a red herring, I've been in many a tight situation over the years and one mantra i have learnt that works is 'turn your negatives into positives' meaning what has happened has happened, accept it, learn from it, look to what can be recovered as only then you can move on....but by all means sulk away if that makes you.. arrhh.. happy
I must say i have been quite impressed with the optimism and excitment coming out of chch for the rebuild of their broken city, the chance to create sometime new, fresh and world class will go a long way to repearing a shattered soul...thats the spirit!!
And it was greed not 'happy thinking' that got the world in the stook!
Spinners and spruikers claim that non-spinners and non-spruikers are "negative".
The people you like to think of as negative are cautious, careful types, who do not embark on credit orgies, who avoid living life on the edge of the debt abyss.
In short, the people you say are negative are, in fact, the exact opposite of the slobbering financial imbeciles with no economic road sense (known in your world as "positive thinkers").
LOL, Negative? See that's the problem with folks like you. You don't even realize there's a another term called being a "realist".
Realist's deal with the facts, the reality of situations. We don't gloss over issues with religious dogma based on being "positive" or having "faith".
We could think positive and believe for example that 2+2=5! The reality is that it does not.
NeilD : It's time that you understood , that many of the team here , even if they had the incredible good luck to win the Lotto first-division , would still find a reason to whinge ,
" .... ah geeez , do I have to go across town to pick up the cheque .... bugger ! .."
And "being positive" is based on what facts to believe such outcomes?
See, you are fooled by your OWN logic. Same with the "glass half empty or glass half full debate" which is not even a logical question to ask someone. Why? Well they FIRST need to know whether the GLASS WAS EMPTY OR FULL IN THE FIRST PLACE TO ANSWER CORRECTLY.
Now try again, tell us ALL what is "being positive" based on in REALITY?
I'd suggest he just doesn't understand how f$$$ed we really are
We often see these "experts" come to NZ and tell us this and that without them really having any depth of understanding about this country
my latest pet hate is all the British urban planners working for or visiting the Auckland Council telling us all that we are living in suburban sin....they know everything about neo-victoriana, but bugger all about new world cities, their economies and cultures
I suggest you read his paper.
He puts a very positive gloss around some sound observations. Note his acknowledment to those helped him "better understand the New Zealand economy" to see why (can anyone advise on those who are from the tradeables sector?):
I am indebted to a number of colleagues for helping me better understand the New Zealand economy. In particular, I thank Mark Blackmore, Anne-Marie Brook, Jean-Pierre Andre, Grant Scobie, Tim Hampton, John Janssen, Paul Dyer, Stephen Toplis, Arthur Grimes, Murray Sherwin, Kerry McDonald, Geoff Bertram, Bill Hampton, John Morris, Matthew Haigh, Colin Lynch, Bill Rosenberg, Anella Munro, Christie Smith, Shamubeel Eaqub, Kirdan Lees, Daan Steenkamp, Phil Briggs, Viv Hall, Bob Buckle, David Hargreaves, Bernard Hodgetts, Norman Gemmell, Simon McLoughlin, Brian Easton, Bill Moran, Dennis Rose, Gary Blick, John McDermott, and Michael Reddell. I am grateful to Peter Bushnell, who first introduced me to New Zealand’s economic
challenges, many years ago.
This extract from his conclusion is though right on the money (RER: Real Exchange Rate):
An illustrative exercise, based on labor productivity levels suggests that, inefficiencies in the non tradable (including government services) sector have reduced New Zealand’s exports’ competitiveness by 15%. The analysis suggests that reducing services’ inefficiencies is a more effective way of improving competitiveness than engineering (or hoping for) a RER depreciation.
Matt, I don't think your prior comment about Sebastian Edwards 'not understanding' was completely wide of the mark. My reply was to Muzza who I suggested should read the report - or at least its concluding remarks.
Sebastian Edwards has done research on NZ in a couple of areas in particular (Real Exchange Rates and tradeable/non tradeable interactions). His results in those areas should be noted. Beyond that I would urge more caution - his understanding of NZ appears to have been heavily influenced by a range of economists including from TSY and banks and is therefore in my opinion biased. That shows in his statement regards reports by the OECD and IMF:
Interestingly, the “Woody Allen” syndrome tends to be reinforced by reports from some of the international institutions. See, for example, OECD (2011) and the Concluding Statement from the IMF’s 2011 Article IV consultation. One could argue that, to some extent, these institutions role is, indeed, to point out weaknesses rather than praise countries for their good policies. If this is the case, it is reasonable to discount these analyses’
conclusions.
I could argue some of Sebastian Edwards' conclusions should similarly be discounted on the grounds he has likely been engaged because he "praises".
.... she had decided to leave the six-week course a week early after a fight with a couple of other course attendees. She explained how she realised she needed to control her issues with anger and wanted to work to fix these issues when she got back to Wellington.
Put simply, she failed. She couldn't accept/handle the discipline. They have very clearly stated, strictly adhered to rules. Agression towards other attendees being the number 1 can't do. She didn't likely "choose" to leave a week early - they sent her packing. Another lesson she obviously failed to learn; or another case of her failing to admit the reality of her failure. She'll be the last person our Armed Forces consider for future employment. The exuberance was a natural "high" which results from the sustained increase in oxygen which pumped through her veins as a result of the strenous physical programme. What was her plan of action to "fix" these anger issues? She's just lucky she didn't sit next to me on the plane!
Kate
I wouldn't (and didn't) jump to judgement too quickly. There's 17 years of 'issues' behind her issues.
It's hard to blame a 17 year for not doing the right thing. There's generations of social problems surfacing here.
The question is what we can do about it.
The best thing I reckon would be a job, hopefully an interesting and well paid one. I want that for both these 17 year olds.
My 17 year old just managed to get a part time job at a library last month, which she'll work at as she moves on to university. But she had to compete with 150 others to get that job.
cheers
Bernard
The question is what we can do about it.
The answer is : break the welfare cycle. And by doing so give all NZers a real sense of tino rangitiratanga/self-determination over their own lives.
The reality is in this day and age of shrinking employment opportunities many 17yo girls from this child's type of background will see children and the DPB the likely best lifestyle option going forward. The means for independence from the dysfunctional parents and wider whanau that (it sounds like) she comes from. But the sad fact is that the DPB route more often than not creates another dysfunctional generation.
The best proposal I have seen to break that cycle is to introduce a GMI as an alternate. No more means testing type benefits. All young people can accept part time work or devise a means of self employment (TradeMe sales, performing arts, casual labouring etc.) without needing to calculate the penalty to their mainstay income (which at the present is some form of means tested benefit).
Young couples with young children who are working families on a single lower income won't need all the Accomodation Supplements, WFF and other manners of social assistance - as they will have the two lots of GMI - one for the working parent, one for the non-working parent.
This GMI will of course cost those NZers with capital stores a tax on those capital stores (a comprehensive capital tax or a land tax) and other mechanisms (such as a Tobin Tax) would also need to be introduced to fund the GMI.
"The best thing I reckon would be a job...."
The best thing I reckon would be to get them a basic education (read and write) and some attitude like "what can I give, to improve my status" instead of expecting handouts or somebody take me by my hands and provide me a job on a plate.
There are no jobs where hip hop etc. is a qualification.
Could you employ a young person like her?
Don't get me wrong, I hope this girl with her positive attitude can make it somehow.
I am also still waiting that the elders and educated from her tribe make it clear to the youngsters the most important thing is to learn, learn, learn.
We are are relatively well off here but we're in no position to be complacent about our situation and let it deteriorate further down the slippery slope that we are on but seems that we are. Governments and their fee farming 'advisors' haven't exactly been setting a good precident around the world for getting this kind of thing right lately have they?
We're burning through $300-380 (?) million or so a week on a system that is out of balance and out of control. It's out of control because there is and has been little resolution to change our course for an alternative solution.
Cut the overheads, cut the middle class welfare and rorts, cut the bloated bureaucracy. Reorient our economy towards saving, investment (without digging the place up) and in leveraging our opportunities for our smart, innovative and resourceful people. Once you get the mix right people will feel engaged and energised and get on with it. However this is not happening and don't see anyway it can happen.
Chch has become a good example of our economic distortions. It's become painful obvious that even with a relatively generous offer for buyout of the red zone that most of these people won't be able to afford new sections let alone to build (I'm not enamoured by the sense of entitlement btw). -Imagine what's like for younger people starting out. Inflated property prices has become the major overhead for everything we do as well as directing investment and people away from businesses and innovation that creates the high incomes and jobs in the first place. A self reinforcing feedback loop to nowhere....or at least to Aussie.
Having a decent future for our kids and our grand kids of which the young Maori girl is one (and yes she has lots of potential) is not just a nice to have. We're going to continue to have compounding social and economic problems through not addressing the fundimental economic distortions inherent in the economy. We have/had the smart people, necessity is at our door...........but the lack of vision in this country by our 'leaders' astounds me. -They're more like middle mangers really and feels like The Office meets Alice in Wonderland.
So yes thank you for the story. Hopefully your work today won't go to waste....
Yes, because the status quo actually serves to keep the playing field unlevel.
Hone Harawira stated in his recent campaign that he supports a work for the dole program in the Far North. He proposes that we increase the dole to the minimum wage and if people don't go out and earn it, then they don't get it. There is much to be done in the far north - plenty of work for all - insulating houses, eradicating possums, riperian planting of streams and estuaries, clearing gorse and resowing pasture, improving fencing, upgrading the communications network, upgrading the rail network, removing noxious weeds ... the list is endless. Most of the REAL work that needs to be done in NZ does not require a degree - it requires youth and fitness.
But the status quo instead supports ongoing poverty ahead of employment. If there was a will by our politicians that 17yo girl could be in employment tomorrow. It's what she wants - why not give it to her?
This is good so long as some interesting and stimulating jobs come along eventually for those who have the brains and talent to do them. I agree that many jobs do not need degrees, even amongst those jobs that say that they need degrees!
I would like to see a $ incentive given to employers to take on youth or other long term (greater than six months) unemployed people. It is very hard competing for a job when you are a). currently unemployed and add to that b). young and inexperienced.
The introduction of the ability to voluntarily impose a 3 month trial period for new recruits was supposed to help ... it should work in practice, is there any evidence that it has worked?
These two measures decrease the risk that employers might see in taking on these people. Although god knows why they see them as a risk these days, there is too much talent out there now which is not being swept up by employers!
Part of the problem is insecure managers in this country. At the moment they should be hiring for ability and attitude because good people, and bright young things, will fit into anything and perform well. Instead employers are going for the tick box approach, stipulating many different attributes and experiences that they want their candidates to have - because they can. They do not realise that this is not the way to get the best staff.
The current unemployment situation is such a golden opportunity for employers (and NZ in general) at the moment, but they are just not 'getting' it. An incentive or a metaphorical kick up the backside might help them to see this?
and further to the above, with respect to Bernard's 17 yo airplane companion ... I would agree that she has a somewhat tangled mess of issues to deal with and the solution you / Hone propose would be interesting ... if she could stick at the work?
Also, in passing, I must note that those same social issues exist in the UK ..
"Professor Edwards says "NZ'ers are a bunch of negative whingers who don't know how lucky we are" He's obviously been reading this blog site. But there are a few who are not gloomsters!"
Muzza - on this site, if you started counting them, you won't need to get to the second hand, and you'd still have fingers left on the first. Unfortunately so many here seem to think that no one else realises that there are issues and problems, and that the only way to discuss them is to be negative about solutions and people - I agree about the Woody Allen comment because I suspect most Kiwis are typical of the bloggers here - Gold help us !
this is NOT, repeat me NOT, a no-solutions website!
yes we whinge alot, about totally whingeable problems, but most of us have been outlining solution after solution for quite some time. And the solutions are far from rocket science.
Yet the govt just rolls out working group after group with zero sense of urgnecy
Well Murray is getting on with it! There is always positive news if you look hard enough!
23 June 2011 MEDIA STATEMENT
Minister continues to fund mates
Government Minister Murray McCully continues to give un-tendered contracts to his mates, says Labour’s Foreign Affairs Spokesperson, Maryan Street.
“Under questioning in front of the Foreign Affairs, Defence and Trade select committee this morning, the Minister tried to defend paying his good friend, Charles Finny, $54,135 for two months’ work between 1 November 2010 and 24 December 2010,” Maryan Street said.
“The money came from the Seriously Asia Programme and was not available to tender.
“At a rate of $27,000 per month, I would expect that contract to be put out for tender. This is another in a lengthening line of ‘gifts’ to friends which the Minister needs to explain,” Mary Street said.
“He has already given former National Party MP, Mark Blumsky, a contract worth $75,000 for a development project in Niue, made Allan Peachey a Special Envoy to the Pacific on education matters, and recently appointed John Hayes, another National Party MP, to chair a committee which disburses funds to non-governmental organisations working in aid programmes.
“MFAT appropriations are not the Minister’s personal piggybank from which he can distribute largesse to his mates,” said Maryan Street.
Piggies, troughs ...it just gets worse and worse
Did anyone hear Kim Hill this morning with the guy who has written a book "Treasure Island".about tax havens?
Really interesting. This is what John Key wants for NZ. Of course he calls it a "financial hub".
Maybe the earthquake has slowed down the clever plans and secret tricks. Is it still going ahead?
On the one hand I reckon Key should be applauded for suggesting something besides houses and farming. On the other I don't know if we should be bringing our children up to believe that it's proper for us to be helping rich foreigners evade their tax obligations.
Key is from the group that believe only poor people should pay tax. Or maybe he and his friends just think only he and his friends shouldn't have to pay. I'm not certain which.
Still the people of this country need to leave behind the immature fixation with property investment and dairy farms. Maybe this is one way to kick start that? If only it didn't seem so 'dirty' somehow. Why not make New Zealand a 'haven' for overseas tech companies instead of tax dodgers?
NZ has strengths:
It is seen as stable and safe, honest and not corrupt, clean and green, modern and developed, progressive etc.
NZ has weaknesses:
Low average educational attainment, relatively high cost of tertiary education (grads pissing off OS to earn enough to repay student loans etc.)
Some strengths to some are weaknesses to others, such as our very low pay (great if you're an employer, bad if you're not).
Any worthy scheme to attract OS business will depend on NZ having a big pool of high skilled people. Right now in NZ you are considered educated if you can correctly remember and name all of Holden's models.
We can't get a high skilled and educated workforce if we make education too expensive to get. When NZ pay is as low as it is across the board there is no reason for an educated and skilled person to stay here especially if there are no jobs for them even at the low pay rates and if they have a huge student debt to service.
Any of these schemes --- including John Key's financial hub --- is pie in the sky without an educated work force, unless he plans to import 1,000s of Pakistanis with bought on the internet degrees, who will work for peanuts.
There are 95 million seconds in every 3 year electoral term ( allowing 0.75 days for leap years ) , and in 2008 , a tick under 2.4 million folk voted . That gives each and every one of us a full 40 seconds as Prime Minister , should we elect to share the job equally .
....... 40 seconds as PM ...... what are you going to do with your term ..... very quickly ?
And a " thumbsy-up " to my good friend Walter , and one to Beaker ....... oooops , sorry , I mean one thumbs-up for Bernard .........
........Kunzie : You get 40 seconds as PM , every three years , what're you gonna do in those precious 40 seconds ?
[ ... for what it's worth , Gummy would lock himself into the PM's office with Paula Bennett , and re-enact some scenes from the Bill Clinton Presidential handbook ... ]
oooooooops , silly Gummy , I should've mentioned that the first smart-aleck that tries that one on gets locked in a mountain cabin with Sue Bradford , Hone Harawira & steven , for a month.......
....... hope you like a robust debate , being called a white-honky , and lentils ..... Walter !
Gummie's 40 Seconds in the Hot-Seat !
Institute a policy to copy exactly Austalia's compulsory superannuation scheme , so as to strengthen Kiwi-saver , & to surplant the Cullen Fund .
.......... that should leave me a spare 30 seconds in which to find the cigars , and to chase Miss Bennett's ample hot seat around the PM's office ........ ..... yippppppeeeeeeeeeeeee !
3 Years Later : Gummie's Second 40 Second Term :
....... if Miss Bennett hadn't broken all my fingers ..... PM Gummster would bring in a flat tax , set at 18 % initially , across GST , personal income , company profits , trusts , trusses , the lot ........
Fuel excise would be eliminated , as would WFF , no exemptions , no charites ... 18 % flat , everyone pays .
...... send gift basket of Gummy-Bears to Paula's office , with invitation to an exclusive party ......
.....Break out the Remy Martin cognac , and find me collection of Mantovani albums !
That's the spot....
Twas the strains of Charmaine.... DROP school leaving age to 13 - conditionally, for those pursuing 'apprenticeships' - insist upon related ongoing education, whilst still at home....encourage and support. To leave at this age becomes a privilege... Also acknowledge that school is often extended 'child care'. Trade degrees ONLY to be obtained 'on the job' (Law, accountancy, architecture etc) start em early... Restrict 'burger flipping' jobs and retail to those over 16 (maybe over 65) Admiral Nelson had his 'own command' at the age of 20! This is fun....In New Zealand we tax "doing stuff" and we do "not tax Not doing stuff". We do know this and yet we keep on asking ourselves why we do not do enough.
We have the tax system we have because a lot of people like it this way. It is great for inherited wealth, It is great for rent seeking and toll booth operating. So this is the system we have.
Taxation and how it is done is completely artificial. We could tax windows- its been done before.
The government of the National Party of Socialists is very very poor. Many on this sight complain biterly of the things that Labour did. Yet looking back they did do some thing, things that they wanted to do.
eg.
Relationship Property Act
Prostitution reform
Civil Unions
etc
Now I would say that they did not understand that the debt that was flooding NZ via loans on property was causing massive inflation. Why they did not understand this is obvious, the people working for them in the Reserve bank and Treasury, the same people that are there now did not and still do not either understand this or refuse to admit it.
WFF was not really the best way to achieve the goals they had for a more eqitable society.
The problem I have is with the National Party of Socialists. What will they be remembered for, Bringing back Knighthoods.
Regarding Knighthoods, please take the following test.
Say the following Names
Sir Michael Fay
Sir Roger Douglas
Sir Geoffory Palmer
Now try and say a good word about Knighthoods.
Did Bernard bother to ask Treasury how much they had spent on this "conference" ?
Are we going to be told by Treasury what they gained from spending the taxpayer loot on the conference.?
Why was it necessary to bring speakers to the conference, when 21C tech allows, indeed encourages the use of remote video presentation.?
Am I correct in concluding that nothing new...not one bloody thing...emerged from the conference that was not already known, discussed and shelved by Treasury's pointy heads.?
Is it true that Treasury want to spend even more on a repeat "conference" next year and every sodding year afterward....because they can?
What other wonderful ways to spend taxpayer money have Treasury pointy heads come up with...that we don't know about?
Treasury goes through nearly $5000oooooo every bloody year.....five billion!
A year ago I started working overseas, a demotion of about 3 levels, but a pay rise of around 80 % (with the high NZ dollar included). My family are still in NZ, and that is the only place we all want to be, but it is the only way we can seriously look to the future, my job has been generous with leave to accommodate seeing my family.
I move in my work and have recently been in florida and the mid west, yes there are lots of sad stories of people underwater in their houses, but as for looking forward, in both States, you can buy a good house for 100k, and many people earn good money. Not to mention the cost of clothing, food, and electrical appliances and such are incredibly cheap. Medical and education are the only balancing factors, but for how long will they be so cheap back home?
I can only sit on the sidelines and see if houses drop in value in NZ (which I am not so convinced they will). As after hearing the stories here, it seems a risky move buying at the current high level back home.
NZ is incredibly expensive for houses, living costs, and the wages are very low, working overseas and moving forward, or staying home and treading water are the choices.
Kiwis may worry, but only because many are a months lost salary away from a hard situation
From the land where lying is an artform....
"Arianna Huffington's Third World America: How Our Politicians are Abandoning the Middle Class and Betraying the American Dream explains that the $787 billion American Recovery and Reinvestment Act, the bank bailout package also known as TARP, allotted only $72 billion to infrastructure projects. Another feature of the bill was to have banks agree to lend money to medium and small sized businesses to stimulate the economy. That didn't happen and official unemployment numbers remain above 9%, while unofficial figures for underemployed Americans soar above 20%."
Inadeqate Eden Park - this article is well worth a read, and strongly illustrates this country's deep rooted problems - poor vision, poor execution, short termism etc
the Park - in all its wet and leaky glory - could be a brilliant symbol for NZ construction!!!:
http://www.nzherald.co.nz/sport/news/article.cfm?c_id=4&objectid=10734566
They should have build my floating stadium Matt. We don't need a 100,000 seat stadium, so if we had built the floating model I proposed the minister at the time, we could have sold it afterwards. Would have anchored nicely down between the wharves. Could even have been build in China and towed here if we didn't have the resources.
I put a similar proposal in for the Queens Wharf competition, just downscaled for the 20,000 they wanted there.
I find that a rather shallow and meaningless statement. The same could be said of the USA. Of course there are still opportunities and possibilities (there always will be in even the deepest recession), the issues I am talking about are systemic ones. Unless there are systemic changes there will be limited ability for people "to make a go of things, work hard and show a bit of enterprise ""
will" will be limited.
In my humble opinion, NZ is the greatest country on earth, by a decent margin, except for earnings, and cost of living that is.
To be enterprising takes cash or leverage, and unless you have no dependents, leverage is often not worth the risk.
In a year overseas, I saved more than 4 years in NZ, and I am now thinking of ways to invest and be enterprising back home. As it is cash, risk to reward becomes an easier decision.
Driving trough the states, the trailer park towns were a shock, and as they are unable to get a good education and even have convinced themselves it is not a possibility, heath care even worse. I am sure that demographic, along with the ghettos in the cities make up a very large proportion of the bad statistics, the forgotten ones, while we may not be able to afford it, I am still proud we have not yet chosen to let people rot.
America makes NZ look like paradise, we are poor savers, and not good entrepreneurs, how much is to do with cost of living and poor wages?
In my humble opinion, NZ is the greatest country on earth, by a decent margin, except for earnings, and cost of living that is.
To be enterprising takes cash or leverage, and unless you have no dependents, leverage is often not worth the risk.
In a year overseas, I saved more than 4 years in NZ, and I am now thinking of ways to invest and be enterprising back home. As it is cash, risk to reward becomes an easier decision.
Driving trough the states, the trailer park towns were a shock, and as they are unable to get a good education and even have convinced themselves it is not a possibility, heath care even worse. I am sure that demographic, along with the ghettos in the cities make up a very large proportion of the bad statistics, the forgotten ones, while we may not be able to afford it, I am still proud we have not yet chosen to let people rot.
America makes NZ look like paradise, we are poor savers, and not good entrepreneurs, how much is to do with cost of living and poor wages?
Joe,
When life in NZ is so budgetly tight, then any savings people have will go into what they consider the lower risk option with real government incentives and that is NOT new business start ups.
This is why most kiwis are lock into being 'employees' and having 'mortgages', because that suits the government, the banks and the employers. People in debt are the easiest to control, particularly when the election lolly scramble comes around!
Total credibility in regards to what Grant? Give me your evidence to the contrary? I can show you examples of where banks for example have been bailout to save shareholders at the expense of the general taxpayer, I can show you where governments encourage people to take out debts with banks via controlling the OCR or investment tax incentives like having NO Capital Gains tax for example. But where's the incentive to save and not spend? I guess Withholding Tax on peoples savings is considered an"incentive"? I can show you example after example where corporations now have more influence over state governments legislation than ANY public protest.
It's not conspiracy theory Grant, It's the reality we live in and that reality is a world controlled by banks & corporations which many governments must now bow down too. What's a tax haven for example? please explain why governments allow these? Please explain why Google pays F all tax anywhere in the world on their profits?
Let's start with that and then i will find other examples for you to explain
Good luck Bernard, people in this country just want to live in fairly land, like ostriches, Key is one of the worst for it.
They will never accept all this housing debt is the biggest problem.
For all they hype about changes to property taxes last year, they actually changed very little, it was all a charade to make it look like they were doing something, while not doing much all.
What limited changes they did make have been cancelled out by the extended period of very low interest rates, pumping up borrowing even more.
Let's have some fun:
http://www.youtube.com/watch?v=W9t5ZqeHcYk&feature=related
So:
Woody - Take you pick, Bernard, Selwyn Pellet, John Walley, Bryan Gould, Gareth Morgan, BERL - "This is ludicrous!" Yep, it surely is - it's called maintaining the 'status quo' no matter what.
The Claw - Min of Fin., NZ Government.
Buzz - eminent non-Kiwi economist. Take your pick, lots to choose from it appears.
Sid - struggling on that one, GUMMY, need your help.
Chosen aliens - hmm, those favoured by Sid I guess, eh GUMMY.
The Aliens - c'mon, you can guess. Surely the expressions of awe give it away. (It was the similarity that inspired me to make this comparison.) Ooooh, aaahh, another Neo.Con con, bring it on, we only got three eyes. If people at 1&2 The Terrace had thirty three eyes it'd make no difference, hence Bernard's comments:
"There was a lot of talk about unintended consequences and finger pointing at politicians and voters. There seemed to be an awful lot of shoulder shrugging and a disturbing acceptance of our lot in life. New Zealand seemed stuck in a rut as a commodity exporter with a high currency, high debt and a reliance on foreign creditors.
But there were few big ideas to solve the problems. A few tweaks and fiddles were suggested, but on the whole most believed the status quo was the least worst option.
My frustration culminated in the final session where two very senior figures in New Zealand's business and economic community questioned this status quo. They pointed out that our reliance on a floating exchange rate and an inflation-targeting central bank had led to high interest rates, low investment rates and higher foreign debts. They were essentially saying the orthodoxy adopted since the mid 1980s was not working.
Their points weren't even addressed by policy makers with their hands on the levers of monetary and fiscal policy.
The whole conference reeked of complacency, a lack of urgency and a sense of impotence." [Try negligence instead of complacency, much more accurate, imo.]
Good article Bernard, I shudder to think what you'd have written if it had not been a Chatham Rules event?
Cheers, Les.
PS - seems last week was quite a bad week for NZ leadership and supposed leading institutions. This forum, the amazing EMA/TV3 fiasco and of course, Christchurch. Wonderful, not.
I had better just make it very plain and clarify, the business association I support is New Zealand Manfacturers and Exporters Association (NZMEA) with website addresses www.nzmea.org.nz and www.mea.org.nz NZMEA is in no way associated with the Employers and Manufacturers Association (EMA), to whom you are referring Gummy. In fact unlike all other similar associations and Chambers of Commerce, NZMEA is also not part of, or associated with Business New Zealand.
C'mon, get your humour-head on and think who Sid could be?
Cheers, Les.
Geez , Les ..... we all know you're NZMEA , and that Alasdair Thompson is EMA ...... !
.... we're not a bunch of slobbering thickos here @ interest.co.nz .......
[... where's me Gummy Bears ..... yummy , snork , gobble .......]
... .... Helen Clark is " Sid " ? ....
Sure Roger, I know you know and others who engage here will know NZMEA, which is oft referred to as MEA, is not EMA, but given the similarity in acronymns I thought it worth making the point for more casual readers of Interest, especially after what has happened this last week with EMA. Am still amazed.
Anyway, how can SId be Helen Clark if 'The Claw' is NZ Goverment?
C'mon, you can do better than that.
Hint: what interests benefit from the policy advice that the Neo.Con brainwashed three-eyed Aliens yield to 'The Claw'?
C'mon, suck a gummy and have another shot.
Cheers, Les.
Ivan - I think we have to remember that it is WE who elect these Govts, it is WE that kick them out if we don't like some measure they implement - basically WE get what we deserve. The only solution is greater education of the public, particularly around financial matters, a massive job that I wouldn't even know where to start
El-Erian ( Pimco)
“A basic rule as an investor is don’t buy something unless you know who else is going to be buying,” he said. “So when we look at Treasuries, we see the big buyer stepping away from the market, for certain. And we ask the question, who else is going to be buying at these levels, and we can’t identify another buyer of the size of the Fed.”
Meanwhile the shite is splattering the euro walls as the piigs fiasco unwinds and the losers stand naked watching the tide go out.....haha.
Scuttlebutt has it that a simple act of congress could force US pension funds to own a greater % of treasuries , for their own security of course , saving themselves from error ...... to protect them from the vagarities of the equities markets , treasuries being so safe & secure ...... ahem , cough , splutter !
Weekend funnies...get your laughs here...they're free freeeeee!
“We’re going to see improvement in the second half of the year, but I would not expect it to be stellar,” Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, said before the report. “We still have a bunch of headwinds for growth.”
I'd like to ask Hugh, Phil, GBH, and all mantra-types up-thread, a simple question:
Why did the IEA move to release 60 million barrels of the Strategic Reserve?
http://www.theoildrum.com/node/8069#comments_top
Was it because energy is not required for anything economic, perchance? Because they read Gummy's 6.whatever trillion barrel comment and decided to unload? Or?
http://ourfiniteworld.com/2011/06/23/release-of-oil-from-the-spr-desper…
Yet for whales they had been all but fished to extinction in all but the north west of the pacific....that was about 120 years ago....so there was evidence this was possible, then repeatable in the North Sea with the Herring industry.....so many examples, so much ignored.
Oh and the dodo....I can but assume like today, ignorance and no caring...
regards
Is Iain not onto something?
If I understand correctly what he is saying; That given the way our monetary system currently works (all NZ$'s are borrowed into existence where not just the principle, but also the extra interest must be paid back), this causes a mathematical impossibility, and an inevitable collapse.
Why can we not just create our own sovereign currency? And with it create a sustainable system, a zero sum game. The way currently do things, the house (banks, corporates) always win.
Isn't this just plain old common sense?
No Iain is not onto something..he is playing games with gullible people who are sucked into his Socialism like bees to nectar.
He has consistently failed to explain how he can avoid political corruption of political control over money creation...and reverts to posting endless lists of links that also fail to answer the question.
Yes the current system is full of faults, fraud, corruption, thieving, stupidity and a fair measure of political idiocy.....but it is a better system than handing the keys to the cash to the stupid corrupt and endlessly idiotic self serving lying and inept bloody politicians.
That won't stop Iain from pushing his idea up the mountain because he has let it dominate that part of his brain which humans normally allocate to mad beliefs, cults and religion.
Steady on Wolly,
Putting socialist ideals aside for a second, increasing money supply (to the same extent we do currently) by way of non interest payable debt has got to be better than what we currently do.
By sapping the holders of dollars of their value, and transferring it to private bankers only leads to social inequity. Debt formed in this way collectively can not be paid off, resulting in an eventual loss by the weakest in society. Like a game of musical chairs.
I would rather see a commodity backed currency myself, but either honest monetary systems can only be better than what we have now.
Whats your solution Wolly? Just wait for the inevitable result of the compounding interest on our sovereign debt to swallow us?
Human behaiour has shown that we won't change until we are forced to. Thus we will ride this system until we face catastrophe, and then most of the people will ask "how did that happen? No realising of course that their inaction was tacit approval for the status quo.
But at least a fair few on these forums, including yourself, will go "ah huh" though so, but at least you have a plan B right?
People won't give up power willingly Iain, and a complete overhaul is what is required. Changing from one flavour to the other of our current corrupt system isn't going to achieve anything.
So while some might call me a gloomster, I am actually the opposite. I see good things ahead for those that are prepared. As for others, well I have warned them but they don't want to know. I won't have too much pity for them.
Nice piece Bernard. I was supposed to be there myself but my flight got cancelled :(
But sent a back up anyway who reported much the same to me. However, there is now a strong group of committed people looking at solutions.
It's very clear what the symptoms of our problem are: hollowed out productive economy, overvalued property, humungous accumulated deficit and overseas debt.
Sadly there is still an unwillingness to acknowledge the main cause: expansionary bank credit as well as poor monetary and fiscal policy settings.
The solutions are there if we bother to explore them in detail.
As it happens I had a chat with John Whitehead last week as he was at his old school to give a talk. Actually he's a lovely chap with strong Christian values. I asked him how he managed to marry those values to the place he worked :-) The question took him by surprise by he acknowledged there were some issues there.
My son asked him a good question on his new job at the World Bank: he asked him how the World Bank actually went about alleviating poverty (its core goal). He answered that making loans was their many activity! I hope it works out for him.
Talking about the Treasury to him, it seemed to me that there is actually a range of diverse interests in there but little room for wider expression. I suggested more forms of engagement with alternative voices and analysts which he thought was a good idea.
That's a start.
FYI from an emailer
This cartoon by Robert Crumb has always stuck in my mind. It sums up my fears and dreams for NZ. http://tinyurl.com/3z24tkl
I have 20 and 16 year old sons.
cheers
Marc
FYI from a reader via email:
Bernard,
Great story about the kid on the plane. We could hear what she was doing
wrong, but she couldn't.
But then you said about your kid going overseas and I could hear what YOU
were doing wrong!
I've told my kids from scratch not to leave the country, that family and
people are way more important than travel. They're acting on it, staying
here, and are happy to do so. They're smart successful kids, just what NZ
needs, by the way. They'll have hugely successful lives here accordingly
because of the shortage of talent here. Surrounded by their supportive
family.
I have no idea why everybody tells their kids, "of course you must go
overseas". I told them not to because I could already see all around me
the endless wreckage of NZ families whose kids had gone overseas and
stayed there. Neither the overseas kids nor the parents were happy
afterwards, so I could see it was just a really dumb idea. I don't know
why nobody else can see this obvious point.
We all complain that everyone is going overseas and then everyone (except
me!) encourages their kids to go. Go figure!
Thanks for all your work, Alan
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