By Bernard Hickey
The Occupy Wall Street movement has gone global in the last month and has even spread as far as New Zealand, albeit in a toned down and diffused way.
Many of the complaints of the movement are valid, although the situation is different here.
The way Wall Street investment bankers took control of economic policy in America and Europe over the last 20 years was shocking and disastrous. The populace are only now waking up to the fact that all (yes 100%) of the economic growth created in the last 2 decades went to the wealthiest 1%, most of whom were bankers or hedge fund managers, because regulations were eased to allow banks to grow massively.
The real outrage happened 3 years ago when the banks blew up and were rescued by US and British taxpayers, yet the bankers responsible for the explosion of unsustainable debt kept on paying themselves egregious bonuses and salaries and gambling with the backing of their government guarantees.
Now those who have either seen their real incomes fall or have lost their jobs are rightly calling for massive reform of taxation and regulation to shackle the investment bankers. Even some of the richest bankers, bureaucrats and thinkers agree.
We haven't had the excesses of the investment bankers here. Our banks are relatively simple, albeit equally large, concentrated and profitable. There was some awful behaviour in the finance company sector which forced several very large taxpayer bailouts that had much of the whiff of the bailouts on Wall Street. We were lucky most collapsed before our deposit guarantee was introduced.
New Zealand also hasn't seen the complete transfer of income growth from the 99% to the 1% over the last 20 years, but there has still been a widening of the gap between the richest and the poorest. Last year's tax cuts accelerated that movement and the property boom from 2002 to 2008 created a two class society of rich property owners and tenants.
The scale of the outrages and the damage was proportionately lower here, but there's still plenty for Occupy New Zealand protesters to campaign for:
1. A land tax to rectify the massive transfer of wealth to the landed generation and make our budget more sustainable.
2. Reverse the tax cuts for the highest income earners, which are not working to boost economic growth and are being paid for by foreign borrowing.
3. We should join the European push for a global Financial Transactions Tax to forcibly reverse the financialisation of the economy.
4. We must avoid taxpayer bailouts of our biggest banks. The Reserve Bank's Open Bank Resolution proposal is heading in the right direction.
5. The retirement age needs to be extended to 67 over time, as recommended by the Retirement Commissioner.
6. Our banks must further reduce their reliance on flighty foreign bank funding that can freeze in a crisis.
7. We must pull out of Free Trade agreement talks with America, which is an enemy of free trade and bankrupt both politically and financially.
8. We must balance our budget as quickly as possible to reduce the burden of debt on future generations.
9. That means reducing consumption of imports, saving more, producing more and exporting more.
163 Comments
Libertarianism is just as much a ponzi scheme when you come down to it, if not more so....if you cant act/live sustainably then its a losing game inter-generationally.
I dont peddle "free markets work" or "or markets are rational" or "de-regulation", or "self-regulation" "Govn's never get it right" rubbush this is clearly as we can see before us 30 years of an attempt at this which has failed. If this was ta workable solution then we would have seen that such a system would have worked "naturally" as regs etc were removed and relaxed. Since it would have done so well we could have aimed for even less regulated or interferred with, it hasnt worked we we have done is allowed the sharks to pillage. We can clearly see the mess such a policy has taken us to....this is voodoo economics.....and fortunately for us (I'll exclude you) I think rational most ppl can see this and will vote for a course change back to more regulation....
This isnt a black or/is white issue, its about choices we as a society make....and since libertarians make up 1000 souls , well that isnt a choice likely to be made.
regards
I'm more and more convinced the Left believe they're living in a cartoon. Their posts certainly take on that aspect. I guess it's an attempt to try and avoid the brutality of what they actually believe:
The inability and unwillingness for the left to argue critically for its agenda is a recurring theme that I have blogged about for years. Clearly, a sheer unanimity of angst exists among them related to perceived societal injustices, yet the vaguest sense of cause and effect, context, or solutions does not. The corollary is that they rarely understand or even acknowledge the implications of their own positions. For example, socialism necessitates the initiation of force against innocent people - that is the point of the redistribution of wealth and the abrogation of property rights. However, most will become angry, switch topics or even deny the reality of that logic to the point of denying the facts of history.
"Join" yeah right...Im watching the sincerity drip off your tongue....
eg "unemployable" so lets jump to a conclusion and dis them eh?
Or made un-employed by the present situation, or feel so strongly that they are taking un-paid or annual leave to protest.
regards
"15 per cent - of Sydney's 15,134 first home buyers were at risk of poverty but not as high as in Hobart or Melbourne..'
It's not only the young and 'poor' Bernard, but the cost of housing in Aussie and NZ is going to ruin many people's lives; those that can't afford the current costs and those that are relying on the benefits of past purchases to sustain them in later life.
"If the protestors understand so well about the system and it's failures, why don't they make some money and take control of it."
Well, thats just not an option, considering the barriers to getting a hearing in the halls of power. We're a nation-state with a mature economy and social superstructure, its far harder to make enough money to descively influence political decisionmaking, here it has a momentum of its own, whilst in the emerging economies of China, India, and Russia, the aspiring wealthy and powerful have abit more latitude, because they're are also in the midst of constructing their own socio-political architecture. I read a book called the Super-Rich will Inherit the Earth (admittadly an emotive title), but it was interesting to read the profile's of the superwealthy and discover how with few exceptions those who gained the most out of the past 20 years or so did so through leveraging connections in the halls of power in their respective countries.
In each country it was the same story: an entrepreneurial group of insiders lobbied and bribed officials for government contracts, tax exemptions, subsidies and protection from foreign competitors to become very rich, very quickly.
Read more: http://www.dailymail.co.uk/debate/article-1269041/Age-plutocrat-How-Britain-thrall-billionaires-pernicious-influence-public-life.html#ixzz1bEjdjodBIn each country it was the same story: an entrepreneurial group of insiders lobbied and bribed officials for government contracts, tax exemptions, subsidies and protection from foreign competitors to become very rich, very quickly.
The Global Economic Crisis conclusively demonstrated that there is only so much room at the top. Through the Great Moderation, many of middle class became convinced that their aspiration of upward mobility and entry into the top echelon of the social class structure was inevitable, are now faced with the fact that their hopes have been dashed, for some by catastrophic downfall, because their affluence had only an emphemeral foundation.
It's been called so many things: "luxury for the masses," "trading up," "the new luxury," "the mainstreaming of affluence," "the democratization of luxury." The bottom line is, we're a rich country and getting richer, and more of us are indulging in the finer things—even those who could hardly be described as "wealthy."
http://www.adweek.com/news/advertising/mass-market-74632
In the meantime, upscale emulation had become well-established. Researchers Susan Fournier and Michael Guiry found that 35 percent of their sample aspired to reach the top 6 percent of the income distribution, and another 49 percent aspired to the next 12 percent. Only 15 percent reported that they would be satisfied with "living a comfortable life"-that is, being middle class. But 85 percent of the population cannot earn the six-figure incomes necessary to support upper-middle-class lifestyles.
http://bostonreview.net/BR24.3/schor.html"
#9 is trying to tell other people how to live their lives. WTHell do they get the Right? If such a Right existed then the rich could buy it and tell the protestors to all F-O."
Mist, the wealthy and powerful do think they have a "Right". Why do you think the world's political system is in its current state? Modern day capitalism has its basis in historical and continuing appropriations of the former commonwealth (land, resource rights, water rights fishing quotas, electormagnetic spectrum, public rights-of-ways, control of the national currency, control of the political system). How many people do not have to a significant proportion of the fruits of their labour to others, merely because the State has conferred upon them the exclusive title to often vast expanses of lands to a select few and protect the claim of ownership through the threat of eviction by the courts and enforced by the police? I would say very few.
John Bates Clarke, the founder of American neoclassical economics referred to wealth creation as, “the mere appropriation of limited natural gifts ..” and that repelling intruders “is almost the only form of labor which exists in the most primitive social state” (p.10). Those who appropriate them create wealth by so doing.
The essential attribute of wealth is “appropriability,” to create which “the
rights of property must be recognized and enforced Whoever makes, interprets, or enforces law produces wealth” J.B. Clarke, 1886 The Philosophy of Wealth
http://www.masongaffney.org/publications/K1Neo-classical_Stratagem.CV.pdf
"In the long run the earnings of each agent (of production) are, as a rule, sufficient only to recompense the sum total of the efforts and sacrifices required to produce them . . . with a partial exception in the case of land . . . especially much land in old countries, if we could trace its record back to their earliest origins. But the attempt would raise controversial questions in history and ethics as well as in economics; and the aims of our present inquiry are prospective rather than retrospective." [Principles of Economics, p. 832]
"Find their problem and fix it. Others are doing so, ignorance is not a valid position to protest from."
Who are fixing problems? Its patently obvious that those in positions of power are not at all inclined to repair the fundamental structural problems of our socio-political infrastructure. At best they are introducing pallative band aid solutions, to convince people that they have things undercontrol, though many of the purported solutions such as economic austerity and bank bailouts, are self-destructive and will lead inevitably to economic and social disaster. At the moment they're kicking the can down the road, but it can't continue indefinately.
BTW You can't accuse me of ignorance. I'm not arrogant in professing to know more about political-economy than most policymakers. It takes an obsessive compulsion to acquire the level of knowledge that I have.
Anarkist you are correct. I was going to put a new entry in but this thread explians how most the folk on these boards have no idea what they are talking about because they are theorising about a system which is broken, and can't be fixed by conventional thinking using failed pseudo science of the past. They do not understand and simply cant understand the lies happening in front of their eyes and because they cant get it through their heads, they propose soulutions which cant exist and can never work under in the systems we operate currenly, and they expect the architects of the sytems causing the problems to fix the problems.
The more I read on these blogs the more I realise the extent of the problem is simply that people are too scared, and too blind and too ready to ignore the possibilty that there is evil at work, and this is what we are seeing in the global events via war, finance and all the weapons being used to crush nations slowly, now quickening up fast. Folk want to believe that it is all coincidence and circumstance that creates the global problems, and hence can be fixed using simple 2 dimensional, black and white thinking, because this is what these sort of people have been condtioned to be trapped inside of, so they ridcule and label those who threaten this child like thinking!
They like to assign simplistic labels like conspiracey while, they genuinely believe or want to believe that their ideas can fix the systemic problems, this is just utter ignorant crap! They need to grow up, becasuse until they do, they are complicit to the problems, and they need to just get out the way and stop talking because they are wasting time and energy getting in the way those who actually are working to provide soltutions to what the real problems are. They like to use blogs etc to feel like they are contibuting to the solutions, personally feel they should just stop, because its actually too serious for time wasters. At least Morgan has actually done something to try help, whether people agree or not, jellously come into it also!
Like you my beligerant need to understand and cover all possible scenarios is too pedantic and my mind too open to be fooled into simple gullible understandings....
This thread illustrates well the level of time wasting some people here go to...my reply has wasted some of my time, but it needed to be said!
- stop govmnt subsidising borrowing
- counter currency manipulations to prevent current account deficits, so we don't sooner or later have to sell national assets to foreign banks.
- separate FIRE from our government. So more former FX traders as head of the country.
- actual 0 (ZERO) inflation policy. This means when inflation was positive for a period, inflation has to be negative to compensate. BTW this means govrnment still can expand money supply in step with actual ecomomic growth. Brings me to
- make policies zero growth, or even negative growth, proof. We can't grow for ever, a couple of generations and we hit the wall(s).
ohwell.
Steven, can I ask you what your opinion is on the reduced outputs of the oil nations which have come under Pentagon control in the past decade or more? production seems to have mysteriously declined, not to mention those fields which have been capped, under military control, while for example opium supply from afganastahn has exponentially exploded to the world.
To me there seems to be major effort to manipulate the prices up. I am not debating peak oil, I am questioning the motives of manipulation, which in my opinion is simply a workstream of the portfolio including the financial crises created by the same interests.
I prefer occams razor....
For Iraq for instance? lots of different nations oil companies have won contracts in fact the USA have won few and the US oil giants have bitched and plenty.....so you are going along the lines of a conspiracy involving many ppl....I just dont see it......
Also the USA imports 2/3rds or there abouts of its oil needs, when oil gets to 5~6% of the US's GDP the US goes into recession......
I think there are bigger profits to be made elsewhere by having cheap oil at about $50 a barrel than trying to get as high a price as possible..... Consider the world's economy is $56TrillionUSD, oil is the cheap lubricant you make way more by having it and keeping it cheap....the big banks in the US for instance want a slice (and the major one) of the growing Indian and other developing world's middle class thirst for consumption and credit......expensive oil ruins that plan.......so any forced wanting to push the oil up I think are more than counterweighted by those who dont want it.
I dont know about declined, Iraq I think is slowly ramping up (need to check), much slower than promised by the Govn....mainly because I suspect the entire infrastructure is decrepid and old in design.....ao 12mbpd, no I dont think so, 4 or 5 maybe 6....
Now in terms of conspiracy I think there is deffinately one in terms of locking off the oil fields as a long term objective of the West and the US in particular to secure their "future"......Dick Cheney had an oil task force committee the output from that was never released no matter what have a dig on what little was released its an eye popper IMHO......and I think he also said the American way of life is not open for negoitiation.....I think the US wont negoitiate, it will take under force of arms more and more nations with oil.....
Peak oil is a fact IMHO, its just a Q of when we are on a finite planet.....I think the likes oil Dick Cheney and other oil men know that its about here and now +/- 5 years.....we wont really know for sure if its 2006 until we drop off this plateau.....we could be on it for 2 or 5 years yet.....suspect not more than 2.....and the initial drop will be nasty IMHO.....easily 10% per annum for 2 or 3 years.
regards
..and Bernard where are the important points ?
http://www.youtube.com/watch?v=EQqDS9wGsxQ
Based on ethical and moral standards. A 100% NZpure green and green future for the next generation with massive economic & financial potential and for a happy society.
Considering what’s happening in this world - you guys from the “Hickey team” are still living in Disney land - just following capitalistic forms and norms.
We have to demand from our government/ policymakers and us as a nation - radical changes.
With the current and upcoming worldwide scenario’s on many fronts, I cannot believe how so called financial and economic experts quite often continue with a habit of mind in support of current political and economic fundamental structures. How much longer do these people waddle with the masses into the shit until they realize – men - gumboots do not help – we are going to drown in the dirt ?
Get rid of the growth based economic model, growth is over, or will be before I retire. Get rid of fractional reserve banking, get rid of ursury. End the system that punishes a conservative approach to prosperity by debasing the currency, forcing people to make risky investment descisions. Get rid of the system that rewards borrower, and the banking sector. Money without inflation. If you look at the lowest common denomintor in the ongoing GFC you will see interest bearing debt, and debased currency.
The whole system is doomed to repeat itself, time after time. You can't fix the problems with regulation, you need to change the system. Otherwise we will continue further and further into debt, and closer and closer to bankruptcy.
This needs a total delete and new sustainable system, that encourages production, and eliminates speculation.
"And when they start leaving? What then?"
Well the Irish managed when their banks periodically went on strike between 1966 and 1976.
"The Irish experience in 1970 (studied by the Irish economist Antoin Murphy) provides an interesting counterexample. In that year, a major strike closed all Irish banks for a period of six and a half months. All the indications from the start, moreover, were that this would be a long closure. As a consequence of the strike, the public lost direct access to about 85 percent of the money supply (M2)...Somewhat remarkably, checks on the closed banks continued to be the main medium of exchange during the dispute. Despite the increased risk of default, individuals continued to be willing to accept personal and other checks. Murphy summarizes the situation as follows: “a highly personalized credit system without any definite time horizon for the eventual clearance of debits and credits substituted for the existing institutionalized banking system...Presumably as a result of this spontaneous alternative banking system, economic activity in Ireland was not substantially affected by the banking strike. Detrended retail sales did not differ much on a month-by-month basis from average levels in the absence of banking disputes, and a central bank survey concluded that the Irish economy continued to grow over the period (although the growth rate fell)."
"The only thing holding Green Dollars (etc) back is the lack of people willing to accept them for serious payments. (eg business premises or equipment rental). "
Well, BarterCard's Barterdollars can also be considered to be an alternative currency. And they made $160 million dollars (cash) last year from their fees. I think the answer to the dilemma of the fragmentation of the alternative currency world, is to develop a clearinghouse that would allow alternative exchange participants to trade their balances with each other, like with the banks' Euroclear system or the Foreign Exchange systems. I'm committed with other stuff for now, but the idea is definately on the drawing board.
Ahhhhhhhhhhh, Gasp, Ahhhhhhhhh, Gasp, Ahhhhhhhhhh. Panic, Panic, Panic. NO BANKS. Ahhhhhhhhhhh, Gasp, Ahhhhhhhhh, Gasp, Ahhhhhhhhhh. What will happen. NO BANKS. Panic, Panic, Panic, Panic, do whatever they want, quick, quick, panic, panic. Is that the reaction you were looking for Tribeless?
If they threaten to leave again, I suggest showing them the door. It's an empty threat, NZ should be so lucky that they actually do leave.
If you had sound money, you could save to buy a house. Think about the fact that you pay in interest 2-3x the value of the mortgage. The banks tell you what a house is worth, then charge you future labour to own it now, then charge interest on money that they created out of thin air. If you borrow, you are punished by the interest, if you save you are punished by inflation.
This is total BS. A debasing fiat currency, forces speculation, forces risk taking, punishes anything that would be logical, safe, and sustainable. Encouraging risk is criminal if I did it to my children, yet that is exactly what the Fed and central banks all over the world are doing to us the people.
Gold is a common example of sound money, its value hasn't changed in thousands of years. There have been over 3,800 examples of fiat money, and they have all reverted to zero, destroying the wealth, and prosperity, of communties, and nations every time.
This comming financial collapse is an opportunity to start on a more sustainable path, to prosperity.
"Gold is a common example of sound money, its value hasn't changed in thousands of years. There have been over 3,800 examples of fiat money, and they have all reverted to zero, destroying the wealth, and prosperity, of communties, and nations every time."
skiduv, theres no such thing as "sound money". Gold Bugs would lead you to believe it was more efficacious, than it actually was historically. They may even believe in their deluded blather, but many are motivated by their desire to hoodwink another mug to accept their otherwise worthless commodity in exchange for the generally accepted medium of exchange (money). Its ironic how quickly Gold Bugs are to accept the supposedly worthless fiat money in exchange for their oh so precious Gold. Massive monetary inflation predated fiat money by a wide margin.
"Alongside growth however came a problem not seen since the time of Alexander the Great. From 1520 to 1640 a great inflation swept the continent, the result of population change, money supply and war – three forces that would drive waves of price fluctuations over the next 500 years.Somewhat confusingly, historical accounts suggest a constant shortage of money, prompting ‘long and persistent complaints’ from the population. The stock of money in England between 1526 and 1561 was reportedly unchanged at around £1.45m, and rising prices were probably caused by increase in ‘velocity’, or turnover, which spiked in the years following 1520."
http://www.bgtrustonline.com/articles/history/the-story-of-inflation.aspx
Yes to (4), except the Reserve Bank should be done away with in a move to laissez faire.
Yes to (5), except it doesn't go far enough. If we left people with their money, rather than tax them into poverty, they could provide for their own retirement.
Yes to (8), except that goes nowhere near far enough. We need to move to limited government, and out of the police state sized public sector we have now.
All your other points simply create a very highly taxed and enslaved fortress New Zealand: Muldoon tried that and came the closest of anyone to bankrupting the country. Your policy platform would be a disaster (economically and philosophically).
And regarding the ludicrous Occupy movement itself, Professor George Reisman sums it up best in an article well worth reading:
Quote:
Thus, however ironic it may be, it turns out that virtually all of the problems the Occupy Wall Street protesters complain about are the result of the enactment of policies that they support and in which they fervently believe. It is their mentality, the Marxism that permeates it, and the government policies that are the result, that are responsible for what they complain about. The protesters are, in effect, in the position of being unwitting flagellants. They are beating themselves left and right and as balm for their wounds they demand more whips and chains. They do not see this, because they have not learned to make the connection that in violating the freedom of businessmen and capitalists and seizing and consuming their wealth, i.e., using weapons of pain and suffering against this small hated group, they are destroying the basis of their own well being.
However much the protesters might deserve to suffer as the result of the injury caused by the enactment of their very own ideas, it would be far better, if they woke up to the modern world and came to understand the actual nature of capitalism, and then directed their ire at the targets that deserve it. In that case, they might make some real contribution to economic well being, including their own.
Here ya go.
http://theweek.com/article/index/218393/libertarian-island-a-billionaires-utopia
Watch out for Somali pirates, m'kay?
Welcome to the lightweight brigade Kakapo.
Who compared Somalia to a minarchy? Not me. That's just you being triggered into auto-rant by a key-word.
But they do have plenty of extremely accomplished pirates who'd be well tempted by an oil platform full of billionaires just sitting there in international waters. Better hire LOTS of heavily-armed bodyguards, and hope nobody slips them a few extra bucks in the event of an internal disagreement.
I wouldn't be calling Kakapo a light weight from the high end of the see saw myself. Still this does seem to be your most successful strategy, playing the man rather than the ball. I see you are taking advice from 'the stupidest man on the internet' and now think that free-banking is a good idea. Good luck with that, we call it idealogical bias when an idea sounds like a good one because it fits into your ideology.
Still I have seen worse. Max Kaiser was interviewing this guy on 'on the edge' the other day (it wasn't Peter Schiff, but it might as well have been, he said he was an Austrian school guy) and in the middle Max makes this analogy like, so the referee isn't enforcing the rules and there is all this fraud going on, but just removing the referee that doesn't sound like a strategy. Any the guy is like, actually Max I think it is a strategy, less regulation will fix all this fraud. Hilarious, but maybe only funny to people without a sense of humour, well it made me laugh.
Unfortunately, I think some of these guys are smart enough to know what they are doing and that is criminal.
It doesn't prevent all fraud, but Bernie Maddoff could have been put away 10 years ago if US regulatiors had looked at his business at the time, which several members of the public asked them to do. Many, many US laws have been violated to setup MERS, others were violated during the savings and loan crisis. Obviously they do prevent fraud when followed, what doesn't prevent fraud is letting certain businesses violate the law with impunity, having a regulator who doesn't prosecute, or removing all the fraud prevention laws from the books.
So yes, its 100% better to do something rather than nothing to fight fraud.
The United States will likely suffer the loss of its triple-A credit rating from another major rating agency by the end of this year due to concerns over the deficit, Bank of America Merrill Lynch forecasts
http://www.reuters.com/article/2011/10/23/us-usa-rating-merrill-idUSTRE79M2J120111023
So, what would implementation of the Big Kahuna mean for these objectives;
1. A land tax to rectify the massive transfer of wealth to the landed generation and make our budget more sustainable.
Land would be tax treated no different to any other capital investment.
2. Reverse the tax cuts for the highest income earners, which are not working to boost economic growth and are being paid for by foreign borrowing.
Like capital, all income would be taxed equally (a flat income tax).
3. We should join the European push for a global Financial Transactions Tax to forcibly reverse the financialisation of the economy.
Big Kahuna silent as an FTTis a trans-national, as opposed to national, policy prescription.
4. We must avoid taxpayer bailouts of our biggest banks. The Reserve Bank's Open Bank Resolution proposal is heading in the right direction.
Big Kahuna silent. But it seems to me, the OBR simply transfers the payment responsibility for a "bailout" from taxpayers (as per overseas models) to shareholders and other unsecured creditors - including depositors! It's a "bailout" with another name. It would be better to introduce a proceeds of crime penalty along with a mandatory custodial sentence for the Board and executive of any regulatory certfied banking institution which fails to price risk appropriately and hence finds itself bankrupt, having bet with and lost other peoples money.
5. The retirement age needs to be extended to 67 over time, as recommended by the Retirement Commissioner.
Doesn't matter under the Big Kahuna - as there is no need for such a definition (for transfer payment purposes) as a retirement age.
6. Our banks must further reduce their reliance on flighty foreign bank funding that can freeze in a crisis.
The Big Kahuna silent - but as per 4. above, problem is there is no personal accountability for acting irresponsibly with other people's money.
7. We must pull out of Free Trade agreement talks with America, which is an enemy of free trade and bankrupt both politically and financially.
How true - but as per 3. above - this is an issue of globalisation - and the Big Kahuna is a domestic policy prescription. NZ has indeed batted above its weight in promoting the ideological prescription that has become globalisation.
8. We must balance our budget as quickly as possible to reduce the burden of debt on future generations.
Only way to balance the government budget is to increase its income while reducing its expenditure. The Big Kahuna does both - increases income by way of incentivising the productive allocation of capital and decreases expenditure by way of massively simplifying domestic tax and transfer regimes.
9. That means reducing consumption of imports, saving more, producing more and exporting more.
Can't really see that any of the above are the responsibility of government. Reduce government influence (by way of 'the myriad of tax and transfer rules') on personal decision-making and (I would hope) personal accountability and professional innovation would follow.
He won't believe they did anything other than wonderful things DB....and he's off to hear a sermon on the evils of capitalism...yes there will be a collection plate passed among the faithful...a paper plate with a picture of goofy in the centre. The faithful are expected to contribute more than a Little!
So, #1-#2-#3 = yet more taxes. You might as well ask people to give 100% of their earnings to the govt (who, seeing by the mess we're in clearly knows better how to spend it...not), less loopholes that way!
#9, although the things you list are sensible, is telling people what they can and can not do. I didn't realise NZ was headed for a dictatorship.
I agree with the other points though.
I don't.....most of them invite more govt more state control...when all the evidence points to govts being next to useless...indeed in most cases they are counter productive. But socialists just love control...they positively fizz with excitement at being able to dictate the lives of others.
Elley, you are completely right. People shouldn’t be allowed to keep their own money; it’s preposterous that they can! I mean the mere thought of it is absurd. It’s unethical, and it’s unfair on those who don’t have any money. No no, all money should all be paid to the govt. where it rightfully belongs. After all the government knows far better than mere mortals what the money should be spent on. It’s the government who can best asses the needs of the people, who has the time and the resources to fully consider the pros and cons of expenditure, that can take into account all views from all sides. And when, after the fullness of time, proposals have been thoroughly considered the government can make decisions that are in the best interest of the whole community and not those selfish little piggy individuals. Happy communities mean happy people! Now I ask you, how on earth can an ordinary people be expected to achieve any of that?
That’s right, Elley, what we need are the big ideas to really get this country going.
I read somewhere we had the second lowest rate of taxation (second to Mexico) in the OECD.
Would probably be a fine thing if we didn't have the level of government subsidy of education, health and retirement (universal pensions) that we do. But, if we intend to keep those very generous social benefits - then more tax really is the only way.
That's the fundamental problem with JK - he wants his cake and to eat it too. I think it's a problem with any centrist political position.
"I read somewhere we had the second lowest rate of taxation (second to Mexico) in the OECD." - That's not surprising seeing the number of people in NZ who don't pay any income tax at all.
I wouldn't have quite so much of a problem with increasing taxes if it wasn't only and specifically targeting the small % of people who already pay most of the tax take. I do have a problem with the "rich" or "high income earner" tag that is applied to anyone earning 70K or more. It's plain ridiculous. 70K is not a high income at all. In fact, it is rather pathetic in comparison with the cost of living in NZ.
Yet in #2, "highest income earners" means people on 70K+, ie it encompasses everybody from people on 70K to millionaires! And while millionaires may be able to fork out more taxes to subsidise people on low incomes, a guy on 70K who is supporting a family on his income alone probably hasn't got any extra left to give to the govt (who'd probably mis-use it anyway).
So if you are right and "more tax really is the only way", fine...but please do it for everybody (starting by asking those who don't pay any to start contributing a little)!!! Thanks!
I have read on this site many times that a great deal of people on lower & middle incomes end up not paying any income tax at all thanks to schemes such as WFF (or even getting back more tax than they initially paid). I haven't checked this claim but that's what I was referring to. I think even the PM said this once (that a family on average income with 2 kids effectively doesn't pay any tax).
Exactly - then you'd be in favour of the Big Kahuna - a flat tax on both income and capital - everyone who has income and/or capital pays - it involves none of the income-tested transfers - such as WFF, and none of the private sector market subsidies, such as Accomodation Supplement - and none of the clever ways to "lose" money to take advantage of income and/or capital tax credits.
AND, it makes for smaller government!
But Kate, as Treasury calculations have shown, the numbers don't add up. The flat tax proposed by Morgan and Guthrie would not raise enough to fund a living income for those who don't have any other income. So you'd either have to tax more, or introduce some form of top-ups to the benefit in certain cases. Which is it to be?
http://offsettingbehaviour.blogspot.com/2011/10/impossible-trifecta.html
The Treasury looked at a GMI paid for through income tax only - and as the author of that blog post points out the Big Kahuna also proposes a comprehensive capital tax (CCT). That is not (as the author of the blog post seems to confuse) a capital gains tax. Big difference - all capital is taxed - whether it is productively used (i.e. either making gains by way of being an appreciating asset, or by way of a profit earning asset) or not. And that is the whole point of a comprehensive capital tax - it forces holders of capital to deploy or redeploy the use of that capital into uses which provide a minimum ROI.
So the "trifecta" study analysis by Treasury doesn't factor in new revenue generated by the CCT - in other words, it's conclusions are valid, but irrelevent in terms of the Kahuna proposal.
On the issue of a GMI set at $11K pa being below the poverty line for say a single income GMI-only person living alone - yes, there is no disputing that is likely the case. But why don't these seniors (and other beneficiaries not working) presently pool their living arrangements? For example, sell up existing homes/assets and live communally? Alot has to do with the way super is structured - i.e. the perverse incentive associated with taking home less super if you're "shacking up" with someone :-) - same goes for the DPB recipients.
That's part of the beauty of the GMI/Big Kahuna - transfer payments don't have any government "rules" around them. Sure, some people will struggle - so they have to employ self-help strategies - and the government could part fund an organisation in civil society, like Greypower, to help these people on their own self-help themselves by introducing them to others in the same situation.
On the issue of "top ups" - when there is no more money, there is no more money. I know human nature (i.e. political pork barrelling) will be challenged but at some stage we have to own up to the fact that as a society we cannot continue to increase borrowings to pay for a lifestyle we cannot afford. The Kahuna policy would have to be implemented via legislation and it could be written such that the threshold in terms of enacting amendment to that legislation is much higher and more participatory (i.e. perhaps requiring referendum etc) than is the case with other legislation which simply requires a majority in the house.
If we don't set these difficult decisions in motion, our creditors will do it for us.
.
Why would you force holders of physical or monetary capital to deploy or redeploy the use of that capital into uses which provide a minimum ROI, but not apply the same reasoning to the owners of human capital?
Why should they not be forced to deploy or redeploy their time and intelligence into uses which provide a minimum ROI?
... but not apply the same reasoning to the owners of human capital?
Why should they not be forced to deploy or redeploy their time and intelligence into uses which provide a minimum ROI?
Ah, but that's exactly the beauty of the Big Kahuna - it promotes individual accountability, or "self-help" as the book describes it.
Every adult has to decide how to either a) 'exist' below the poverty line on the $11K GMI, or b) do something (be it share resources, sell assets and/or seek additional income) in order to live more comfortably above the poverty line.
So, yes, the incentives are definitely there for widespread improvement in the deployment/redeployment of human/social capital.
Kate
Here is a Big Kahuna "real world" hypothetical for you. A guy runs a small business (manufacturing "widgets") that has been in the family for several generations, he took it over when his father retired. It employs 5 people in addition to himself. In a good year he earns $100,000 in a bad year he earns $10,000, but over the past 10 years has averaged $60,000, enough to live on. He has no tertiary education, is 50 year old. No other specialist skills. The assets of the business comprise a small factory of Land, Buildings, Plant. Because the business has been in the family for many years there is no debt. He figures there is about another 10 years of life in the plant and equipment before it needs to be replaced.
Capital Assets of the Business
Land at original cost $200,000 current GV $2,000,000
Buidlings at original cost $100,000 current GV $750,000
Plant at original cost $250,000 fully depreciated to $0
Plant and Equipment current valuation $50,000
Plant and Equipment replacement cost $800,000
He pays income tax on his annual income.
What will he do under the Big Kahuna.
Calculators here;
http://www.gmi.co.nz/bigkahuna/
From above scenario, a few more assumptions needed. For example, I assume the owner pays himself a wage from the business (you need that) and the earnings of the business (after deduction of his wage) need to be EBIT data. You then use two calculators to get the position.
Also, does the owner have a partner and/or any dependent children - and does the owner own his/her own home (and value).
The business is not a Limited Liability Co, it is operated as a "sole trader", the net income, is his income ie $60,000. If Original Cost of assets is used he wont pay any more tax, if current valuation is used he will have to pay more than $50,000 in CCT. He will have to shut the business down, sell the assets, and put 5 employees and himself out of work.
Utter nonsense!!!!!
For starters - why would the entity not be a ltd company? The business owner needs a lesson in good business practice in terms of structuring his assets/liabilities - and properly accounting and running the business for profitability.
But that aside - if he sells the business - why would the employees be out of work? If it's a viable business - someone will purchase it to run it and likely develop it further!!!
If it's not a viable business... why would the owner retain it? - it's a poor use of capital. Think what a person could do by re-investing the $2million+ held in his non-performing current assets into something more productive!!!!
Why be fixated by hanging onto non-performing assets?
Are you suggesting we encourage unprofitable businesses for the "sake" of employment? That's where this country was when the government owned most of the economy. This is certainly not a sustainable economic model for NZ going forward. Let's instead get people employed in viable businesses - and let's pass business ownership to those willing to work toward growing profit.
So the Big KaTaker involves Kate having to run my business to avoid all the pitfalls? And I still have to pay tax on everything, regardless: that's the point of it. I'm worse off than now.
KaTaker, Kate, bureaucrats, online calculators, valuers ... goodness. Give me freedom from all bullies and wise-ones thanks: I'll run my own life if you don't mind.
Oh, so I just have to run profitability. I'll have to get you to give your wisdom to about one third of my clientbase at the moment who are in desperate trouble: including tradesmen (one who has asked me does he take on an additional business loan to page wages over next six months), retailers, every group, in fact, but domestic rental. I don't do hardly any of those.
What do you do Kate? (A teacher?)
The Big KaTaker is a complete disaster. All forms of theft are always a disaster for producers.
Wish we weren't running out of space - as there is such alot of good points/counterpoints in what you've said. Take retail, for example, I think NZ is over-serviced by that sector. Alot of potential for capital to be lost in that sector from what you imply, and no economy wants an over-reliance on the retail/services sector in terms of future sustainability.
As for the tradesman - one would only take out a loan to pay wages if forward projections justify it. I've been an employer (owned one of my own businesses between 1986 - 1991) - they were difficult times - hard as it is one has to make decisions for profitability, or everyone ends up out of a job going forward. But, I'm not saying anything you don't agree with, I'm sure. Almost everyone is struggling, Mark - in my opinion, only radical reform will lift us out of the present rut.
How does a tradesman do 'forward' projections when for the first time in twenty years he's got no work on his books coming up?
You tell him, what sales is he going to have over the next twelve months: because he wouldn't have a clue. I certainly wouldn't. His bank manager doesn't. That is, in fact, precisely his problem.
You live in fantasy land Kate.
"For starters - why would the entity not be a ltd company? The business owner needs a lesson in good business practice in terms of structuring his assets/liabilities - and properly accounting and running the business for profitability." - There are reasons why structures other than ltd companies are available to business people and I'm sure most would know which one is most suitable for them depending on their circumstances. For you to judge them for their choice is a bit rich. My husband and I did set up a ltd company, mostly to keep our business separate from our private affairs, but we know people who are sole traders or have a partnership structure and it works well for them.
That wasn't the point anyway I think. The point was that the business in the example was/is profitable but under the BK, the new taxes (on capital assets I believe) mean that it is not anymore.
As for your comment above saying that "then you'd be in favour of the Big Kahuna", errr, let's not get too excited there :) While your enthusiasm for the BK is obvious, and while I would be happy enough with a single flat income tax rate, I do not agree at all with taxing capital (ie, income that has already been taxed once). Personally, I'd rather see taxes on capital removed entirely (especially on savings!).
Elley, you want an end to low and middle income welfare transfer payments - the Kahuna delivers it - but you're still not happy. You want your higher income taxed in an equitable manner - the Kahuna delivers it - but you're still not happy? You want those contributing nothing by manipulating the tax and welfare system to pay a fair share - the Kahuna delivers it - but you're still not happy?
Why are you not happy? Because you are looking at this from a WIIFM perspective, rather than a WIIFNZ perspective. If we fail to tax capital (and particularly income from capital which is presently not taxed) - then the only alternates are to increase taxes on consumption, income and/or profit from productive business. If we continue to incentivise investment in unproductive capital - we will go down the debt tube.
So, okay, you don't want to pay tax on saved money, or on earned money invested in capital assets - then you'll end up paying more on consumption, excise and income tax. It's not a matter of personal preferences on what an individual would like or not like to pay tax on - it's a matter what is most equitable for the whole of NZ society if we want the nature of it (our society) not to change radically going forward.
OK I'll take the bait. What is a "WIIFM"? I'm lost.
"then the only alternates are to increase taxes on consumption, income and/or profit" / "then you'll end up paying more on consumption, excise and income tax" Why??? Who says so? Why always talk about increasing taxes rather than decreasing expenses (if the goal is to balance the accounts)?
As for not being happy, you've got that wrong. I am perfectly happy. In fact I am pleased to report that I couldn't be happier. What I said is that I did not agree with taxing capital. Thank goodness whether capital is taxed or not doesn't affect my happiness level! I just don't understand why the govt, after already taking its share of one's income through income tax, should be entitled to take another share again on what's left (capital/savings).
:-) Elley - you're a resourceful person - google it! The Big Kahuna does decrease expenses - massively!!! No WINZ, smaller IRD, less paid out in super, no more student loans, WFF, accomodation supplement ... need I go on??? And, unless we both reduce expenditure (public and private) and raise taxes - we will never get out of the debt spiral that we as a nation are fast being swallowed up by.
One last point regarding the "end to low and middle income welfare transfer payments" and my "higher income" - I think there is a fundamental problem which is the discrepancy between the cost of living & the average income in NZ. While I don't think WFF is the solution, I don't resent a bit paying taxes out of my higher income used to make sure some kid is fed and clothed (as opposed to being used to bail out failed finance companies and the likes). What I was saying at the top is that I am sick of comments saying that people on 70K+ are rich and not paying enough when they already contribute the most. Not to mention the hints that everybody with a bit of money tries to dodge paying their taxes and doesn't give a damn about others.
Speaking for myself I do care about others and have been giving to various charities for years. Until a year or so ago, mostly to organisations working in third-world countries because it seemed like it was where there was the most need, but seeing how so many Kiwis seem to struggle to make ends meet I am now only involved with NZ-based charities. So despite earning a higher income, some people do pay all the taxes they should and then give away a little more. Thankfully for me, money is not my main source of happiness.
Plenty of business have no or very limited commercial risk and therefore it may not be ideal to have a company structure, other structures do have clear advantage in certain circumstances.
Can't get over all the text book...no practical view when it comes to real business, in particular policy makers and economist, institutional thinking at best.
Many people through circumstance end up self employed and it comes around to maximising their opportunities to make a living not necessarily being able to enter/exit investments as their skills are not trasferable to alternatives. It is often a case of buy a job not a business on a scale where you can work on it rather than in it. We have a certain skills and life experience and that is what we have to offer...
This group have enough compliance cost and you drive them further under water with a capital tax. Currently the property related businesses and land holders get a free ride currently unless they are traders. These people will not suddenly reinvest their capital to productive enterprises. They don't havea the skills, tolerence to risk and have lived passively and will die passively.
On the other end of the continuim I really felt screwed over as an enterprising person who as part of the small minority in this country who actually brought foreign exchange earnings, employed people and have paid very high income tax. I look at the income tables and think the above situation mentioned is the majority... but also believe declared income is understated.
Many groups do not effectively pay tax, take the public sector with their generous government super schemes, what has their effective income tax amount to over a working life? They represent a substantial part of the so called higher income tax braket. Dairy farmers making tax free capital gain, WFF..the list goes on.
Personally not so concerned with contributing with tax however it became clear most people don't contribute or want to contribute in this country so why should I contribute the most precious thing I have and that is my time to continue to carry people. If this is not a collective community it isn't a real community. Saw the light after the Feb Earth quake, life is way too short.
So after the EQ funded a MBO and the HO moved from Christchurch to Australia. End result payroll tax and my individual tax all up is approx 2.5 million less to the crown. People with serious businesses have options, F them off and they take them.
This country is so screwed up the socialist are psydo socialists as they want to spend other peoples money, never create it, while the true capialist actually are the real socialist as they carry the rest.
But the owners of assets are to be taxed as if they had decided to deploy their assets in order to deliver a 6% return, whether they have or not; whereas the owners of human capital are not to be taxed as if they had put their time and skills to use in order to earn a minimum income, whether they have or not. This undermines the incentive to turn human capital into capital assets.
Ellery, 44% of families in New Zealand take more from the tax system than what they put into it.
Over 2010 a quarter of all babies born were in families reliant totally on a State benefit by the end of their first year.
And people say my Libertarian ideals are unrealistic.
[Signed: one of those forced to pay for my own prision)]
Wow. That's exactly why I have a problem with people calling to "reverse the tax cuts for the highest income earners", especially when rich may mean 70Kpa. Comments that make it sound like people on higher incomes don't contribute when they are the ones contributing the most do make me mad.
We have 5 children (age 2 months to 7 yrs who I could easily use as an excuse not to work), don't take a cent from the govt to raise them, both work hard and earn very good incomes by NZ standards, and feel like we pay our fair share of taxes compared to most (no accountant for us you see, I do the accounting and happen to be honest so no cheating for us).
Don't get me wrong, I am happy to contribute but in my opinion, those who say that people on higher incomes don't contribute near enough or that their only goal in life is to dodge tax are very misguided.
That's exactly why I have a problem with people calling to "reverse the tax cuts for the highest income earners" .
And if $70K is the threshold for the highest break in our progressive tax system then that's just testament to the low wage economy that we are. That needs to change.
I agree - just tax all income, no matter what the amount, at a flat rate. And bring income taxes down by offsetting them with resource user/polluter charges. Call it, Kahuna Stage II.
Andrew R, the 44% figure from Bill English himself, also, 10% of house holds paying 70% of total tax take. Read it and weep - and so many thieving swine here want more 'redistribution':
Michael Woodhouse: Which groups now pay most of the tax collected by the Government?
Hon BILL ENGLISH: Our tax and transfer system is highly redistributive, and the number of people paying income tax is surprisingly small. The lowest-income 43 percent of households currently receive more in income support than they pay in income tax. The 1.3 million households with incomes under $110,000 a year collectively pay no net tax—that is, their total income support payments match their combined income tax. The top 10 percent of households contribute over 70 percent of income tax, net of transfers—over 70 percent of income tax, net of transfers. This system is highly redistributive and we believe it is fair.
That's neoclassicial economics for you, ignoring the hidden tax of fractional reserve banking with interest-bearing debt, which is a component - direct or passed on, of every business cost, and every customer purchase. This tax, on average, takes almost half of net borrower incomes, tranferring it to net lenders. It is constantly increasing income inequality, and almost all of it disappears out of NZ, of course. Bill wouldn't mention that. It's taboo.
Have a look
Here's a website for you too, Andrew. it's quite detailed on the merits of green politics and social- and kahuna-ism.
http://www.disney.com.au/disneyjunior/mickey-mouse-clubhouse/
That's a dumb video - it implies that a democracy doesn't have any laws or defined rights - it implies that the only rule of law in a democracy is the will of the majority. Utter nonsense.
Basically in terms of the US Constitution - it set up a liberal, representative democratic model of government with a number of checks and balances to limit the power of the elected representatives (i.e. the executive) ... irregardless of how the minarchists of today would like to redefine its intent.
The US is a democratic (i.e. representatives elected by popular vote) republic (i.e. who are constrained by the rule of law).
Good on Steve Keen for standing up in Martin Place and telling it how he sees it.
#6, #8, and #9 don't really work. They just state the results you'd like to see, not policies for how to achieve them. You need to state what you would do to achieve those results.
Also, and I think someone has already mentioned this, how about sound money? ie, 0% inflation targeting?
And how about removing tax deductability of interest on investment properties? That particular tax break does nothing but increase the price of houses, giving a competitive advantage to investors over homeowners. While we're at it, how about getting rid of tax deductibility of interest payments everywhere. The net effect is to distort investment decisions, and help fuel boom and bust cycles.
0% inflation targetting has four bad consquenses (apparantly). I wondered the same thing and did some reading....here is the synopsis of what Ive read,
1) Anything significantly less than 3% and you risk increasing un-employment....so 3% or 2% min and 4% max core inflation is apparantly about where you want to be......Which raises another aspect how do you measure inflation.....for a long term stability which I assume is your goal you have to use the core number....not CPI which is volitile....also sometimes the CPI or core you get for say September in early October is provisional I believe, so the actual September number is some months later....hence you need a working band....
2) 0% overall means some ppl get pay rises say its 5%, but the other half have to take pay cuts of 5% to balance out.
Beyond that how do you do it? Lets say you get 18months of +2%, do for the next 18months you should aim for -2%...but really there is no way to do that with any accuracy....so its quite possible in aiming for -2% you throw the economy into a recession....
3) Then what do you measure as the basket of goods? fuel is volitile now and rising in price....cant have that in the numbers as a rise in price of petrol is deflationary, ie it dampens economic activity so if you squeeze on taht you will get a double whammy....
4) Then there is the Q of stability for businesses....they need to Govn / RB to "interfer" (I will use that tword under ease) as little as possible trying to keep at 0% is a) hard b) uncertain.....its bad news for business planning.
#6, #8, and #9.....policy can be an end goal, "I want 3% inflation is a policy" how you get tehre is a plan or a [de-]regulation (maybe)....I have not read them yet so I might get back to you.
regards
Bernard, apart from what would be the consequences of your shocking continual lurch to an envy ridden, theft justifying socialism, you are simply wrong on what should be the strength of this site: economics.
Your central premise (for much of what you write lately) is given in your third paragraph:
The way Wall Street investment bankers took control of economic policy in America and Europe over the last 20 years was shocking and disastrous.
And so you continue your line on how corporate greed and deregulation led to the GFC. I can do no better than citing the facts as given by US economist Steve Howwitz in the below letter toa local newspaper. It's longish, but it's a stunning refutation of the premise behind this entire piece of yours, so worthwhile copying, and reading.
Above all else, I would be interested in your reaction to it.
To the Editor,
In his letter of October 23 criticizing George Will’s column on Elizabeth Warren, Mark MacWilliams of Canton repeats a number of fallacies about the recession and financial crisis that should not go unchallenged.
MacWilliams refers to Congress deregulating the financial industries but offers no specifics. In fact, since 1980, Congress has passed four new sets of regulations for every one deregulatory act, and between 2001 and 2008, there were nine new sets of regulation and not one bit of deregulation. Those recent regulations included the Basel capital requirements, which created powerful incentives for banks to sell off the mortgages they originated and buy them back as mortgage backed securities, which they otherwise would not have done.
Contrary to MacWilliams, our current mess was not the result of “predatory capitalism,” but the predictable consequence of government intervention and crony corporatism. Nowhere does he mention the Federal Reserve’s role in pushing interest rates so low that banks were being paid to borrow, nor does he have a word to say about Fannie Mae and Freddie Mac having privileged access to the Treasury to buy up all of the questionable mortgages that banks originated. He also ignores two decades of Congress’s role in mandating that banks lend to marginal borrowers.
MacWilliams needs to ask himself why, if this was really capitalism, banks would make loans to people they thought could not pay them back. If corporations are greedy profit-seekers, why would they risk customers not being able to pay unless they believed that those mortgages could be sold off to government-sponsored enterprises like Fannie and Freddie who would, as they did, get bailed out by the government?
If all the traffic lights in Watertown were stuck on green, we’d hardly blame the drivers for the ensuing accidents. When government distorts the signals and incentives facing producers and consumers, the blame for the resulting disaster should fall on government not the private sector. The crisis and recession are what happens when you put “people before profits.”
Finally, MacWilliams should learn who does assure that his toaster doesn’t explode by actually looking at it. He’ll find the stamp of not a government agency, but Underwriters Laboratory, a private firm that provides quality assurance for appliance makers and consumers. Unlike the government cartel of financial rating agencies that failed miserably last decade, the privately operated UL has decades of success behind it.
I'd say the writer and Bernard are coming from exactly the same page - as the writer points out, the cause of the crisis is:
government intervention and crony corporatism
Which is only another way of saying what Bernard did, that;
The way Wall Street investment bankers took control of economic policy
It's got nothing to do with either de- or re-regulation - it's about the cronies (i.e. the banks and that includes the Fed - as they're a private bank... another crony) taking control - or "capturing" government decision-making.
Given the history and the lack of success over the last 30 years of de-regualtion its pretty clear that some serious Qs have to be asked about its detrimental effects...
So while I can see that from your fundimenatist perspective thats "impossible" those without blinkers are seeing and questioning.
If at the end of the day ppl with intelligence and (normal) morals conclude de-regulation was a bad thing and they should be restored then that is a thought out decision that society makes....
regards
Yes I read your post....and as per normal....its the strange Libertarian view point......the facts are your version of reality, not mine. In any event all I have to do is step back and look at the huge mess we are in now and conclude there are some serious Qs around de-regulation that have caused what will be the greatest Depression ever (so far) I suspect....
So as per usual the 1000 libertarian votes go nowhere....welcome to democracy.
regards
Two posts for steven, one for Iain, and neither of you have even mentioned the point of my post, being Horwitz's proof that deregulation had nothing to do with the GFC.
Are you having fun playing with yourselves?
Have a look to his actual point, facts from the real world, respond to them, or don't waste our time. Don't worry about Ayn Rand, my post was never about her, and as far as I know, Horwitz is not an Objectivist.
Yet I see other economists post that there is quite a lot of evidence to the fact taht de-regulation actually did allow wonky and dis-honest behavior, P Krugman and Black for just 2.....think Steve Keen commented on it as well.
His claims are just that, claims countered by others....stunning refutal it isnt, its just a poor prop to hold up your political view point.....
regards
Dereg was a worldwide Reagan/Thatcher thing....at most you are being NZ centric in claimig it was "Labour"....I see very little Labour viewpoint from Roger Douglas at the time....whomever must have voted for him it wasnt the policies they were expecting....they wanted left of centre and got ACT....and it doesnt look like it achieved much....except disaster.
regards
Well this excerpt from a thesis about the Global Financial Crisis, published by an Oxford University scholar, vindicates your claims. One can hardly accuse them of being rabid Misoids. No offence, Tribeless, but the likes of Reisman that comment on the von Mises Institute site, make me cringe. "In the wake of the worst economic crisis of recent times, there have been widespread calls for better regulation and supervision of the international financial system. If more stringent regulatory regimes had been in place, one often hears, much of the reckless behavior leading to the crisis would never have occurred... ‘If we would have implemented Basel II’, the current chairman of the Committee boldly claims, ‘the world would have been different’. Unfortunately, this is far from the truth. Basel II is not the solution to the current turmoil, but rather an underlying cause of it. " http://www.globaleconomicgovernance.org/wp-content/uploads/GEG-Working-paper-Ranjit-Lall.pdf
Sorry Tribeless,
I replied directly to your comment so I didn't think I had to specify whose argument I was addressing. Yes I agree. He did indeed address all those points, but its easier for someone like Steven to dismiss the arguments of those affiliated with the von Mises Institute, but harder to do so to those of an Oxford scholar, with no apparent ideological axe to grind. Its hard for Misoids to profess objectivity in terms of economic arguments.
Basel II is an entirely different set of regulations to those which Alan Greenspan abolished. The problem is capital flight/free capital flow, which is economically very destructive. Basel II has next to nothing to do with this, the Glass-Stegall act (which was among those repealed) does. There were others repealed to do with allowing derivatives and securitization of mortgages as well.
Framing the discussion around Basel II and then claiming that regulation is bad because Basel II is bad, is rather stupid. Are you really surprised that a committee of bankers create policy which lets them make as much money as possible in the least regulated manner possible? Obviously removing the banking rules set by national democratic institutions and instead relying on the rules setup by special interest groups is not a good idea.
That would be the same theory which believed that the Banking system would never defraud their deposit holders? Isn't that the theory that Alan Greenspan said he was wrong about?
I guess this theory is right in theory because fraud does not exist in theory, but in practise this is a fantasy, people do carry out fraud.
The Basel II is certainly worse than the regulations created after the great depression specifically to limit capital flow, the more democratic ones, the ones not created mostly by special interest groups in the banking sector, the ones which worked reasonably well up until Reganomics kicked off the de-regulation era.
The way that the banking system took/takes control of the economy is by de-regulation. This allows the banking system to set their own rules in private rather than in the democratic system. This is exactly how the whole MERS fraud was setup. The savings and loan crisis (which was also a fraud) was followed by de-regulation to legalise the very practises used during the savings and loan crisis in the US.
Removing the referee is not a strategy, it's one of the main causes of the problem, the referee has not been enforcing the rules with an even hand. The solution to fraud is not legalised fraud.
BH,
"The retirement age" the problem I have with this is when you look at the socio-economic break down of groups (think thats the word) that are in the retirement age braket its not an even distribution. The lowest has hardly changed in decades, I think they have gone from 67 to 68....so in effect you are saying to the poor work til you die, sorry but I dont consider this fair.
regards
......don't think so..the poor will go on sickness or unemployment benefit..they pay about the same.
I suspect that as long as we have a beenfit sytem, the alleged savings from raising the age or super will not be as great as some believe....the alternative benrfits will be drawn down instead.
Hi,
I did say,
"the poor work til you die"
So what we are doing here by suggesting this is punishing un-skilled/semi-skilled workers...ppl who pay taxes even if it isnt a huge amount. As an example my maternal grandfather drove buses for a living, he retired at 65 and was dead before 68.....he worked all his life from about 14~15....what this says is some months retirement is all you get for 50+ years work.....sorry but I dont see that as reasonable. Conclusion if we need the money then the upper tax rate should be adjusted instead.
In terms of PDB benefits, yes all that happens is they stay on the DPB 2 years more....they still get paid so Icant see the financial advantage.....different argument/comment IMHO to what I was trying to get across.
regards
yeah I understand your rationale and don't disagree with your point - though the same rationale can be applied to some minority groups (and professions) who die at a younger age.
My main point is that there is more than one way to skin a cat...if Nat Sup is raised it will really only affect those that get super and keep earning (as super is not income tested). If you really have had a gutsfull of going to work, the benefit system steps in - though of course with an income test (which won't affect the 'poor').
#1, #2 and #3 agree.
#4 I really like.....but while its good for keeping eftpos going so we can buy food I dont know its solving anything else. By this I mean that if NZers "discover" that say ANZ is insolvent and about to go bankrupt and withdraw their money this becomes self-fulling.....so while i totally agree with the living wills Im not so sure how effective it will be....BUT its a damn good idea to have options....
Second just how the ratings agencies will see this as an impact on the banks I dont know, it might encourage a downgrade a bit sooner....
regards
#6....Im not so sure how thats achieved, I think unwinding this is a long process over probably a decade if you dont want to pop the property bubble in a horrendious way.
The tool I would use for that is do like Texas and have a LVR of 80%....but right now banks are lending at 90%+ so you cant just say 80% over-night without I suspect seriously collapsing the property markey which as you point out IS the NZ economy. So I'd hand the RB this as another tool with the long term aim of 80% to get to but also allow them to vary it to help with boom/bust control......
#7 Totally agree....America is terminally corrupt and inept but can cause a lot of pain. Really , its a loony christian banana republic and about as stable IMHO. What really worries me is that the present negoitations are now secret....I think they should be in the open and the public should be allowed to comment.
#8, well #9 is how you get to #8....just how you do that, well the points above are in the right direction IMHO, otherwise I think its hard to do directly, but Im all ears on how.
regards
Over the years one thing that strickes me about protests is that usually at the time I did not get it.
Protesters are usually young, students, unemployed etc. Why are they protesting? Because they can. For the rst of us protesting is too risky on many levels. If we are protesting we are not earning money (most of us) we risk jobs, income, ability to service debt, risk etting hurt, risk being looked on as strange or different. But mainly I think we risk putting into question our assumptions about how the world works.
Today with the occupy movement etc when you get right down to it we do not want to know how bad it really is, how the societies we are part of and help sustain are being preyed on by individuals who are not part of those societies and who look upon us as prey.
We think these things are only happening in other countries. But they are happening here. The finance Company owners knew what they were doing, booking and taking profits when they made the loan and depending on new deposists alone to prop up the businesses.
Individuals prepared to say anything to get their hands on the South Islands Hydro Dams.
Dairy Conglomerates twisting the logic of our monoply dairy industry , legislated into being and turning it into a debt fueled disaster both economically and environmentally
These people do not care if New Zealand can pay its way in the world, The only way to view them is as car thieves stealing car stereos, they do not care how much damage they cause or how much it costs to repair as long as they make $20.00 down the pub.
Our country is in the hands of such people.
Look out for the vilification of the protestors, The very foolish Deborah Hill Cone in the Herald.
http://www.nzherald.co.nz/deborah-hill-cone/news/article.cfm?a_id=368&o…
The 1% either provide a useful function or the can get lost, go somewhere else, The current thinking is that we need the 1%, off course this is not true at all, they need us. The 1% can be relaced very quicky, plenty of people have ideas, and can create businesses. The main job of the 1% is to stop them. To gain advantages that keep them apart from the rest of us. Inherited wealth is a brilliant way of doing this. When combined with debt for the rest of us it creates a separation that can almost never be overcome.
Kate: - I have restarted the discussion here to give you more room.
The essence of my hypothetical was draw a distinction between "capital intensive" businesses and "labour intensive" businesses. In capital intensive businesses which comprise a large component of land and buildings the valuation of those assets increases (can decrease) due to circumstances outside the owners control. Under the Big Kahuna, if those asset prices were increasing at 5% pa due to inflation, then the business owner would be forced to review prices upward in order to cover the anticpated BK tax bill. The problem arises if the business is stuck in a 3 year or 5 year production contract. Similarly in the example I set out to begin with, if it was a small cottage type industry that was reliant on the loyalty of long time customers, and was forced to revise his prices annually even if he didn't want to, he would eventually be faced with the choice of closing his manufacturing facility, outsourcing the manufacture to china, terminate the services of 5 long time loyal employees, sell the land and buildings, and invest in a non-business investment.
On the issue of capital versus labour intensity, government policy over several decades has been to encourage a transition from labour to capital.
As MdM points out an un-intended consequence of BK is to discourage capital and encourage labour.
Hi iconoclast. Yes, in particular, there is the case of farming - a typically capital intensive business. But, farming under the current model (with land values as they are) isn't economically sustainable anyway. I suggested elsewhere that this should be considered if the Big Kahuna were to get the political will to be implemented. Perhaps Fed Famrers could work with government valuers to revalue all agricultural land to reflect land (capital) values based on realistic turnover. In other words, a mass revaluation of all of NZs agricultural land (but there would need to be cooperation by the banks, as many holdings would technically end up 'underwater' following revaluation - might be a case for a new bank/finance entity to transfer these loans to). Couple that with a charge for resource use and factor that charge in to the revaluation methodology - and we then kill two birds with one stone.
FF already argues this income/productive capacity method in terms of calculating/setting rates for rural land.
Other capital intensive businesses (i.e. traditional high cost capital plant) always has the depreciation aspect of its accounting and hence I'm not so certain it becomes as much of a problem as a high capital intensive land-based business.
If by small cottage type industries, you mean those based on small rural residential land holdings? Yes, they'll get whacked - as they aren't usually zoned rural (usually rural residential) - meaning lifestyle blocks (close to a commercial centre) with folks doing some cottagey thing in order to be able to claim GST - so that the toys needed to upgrade the property (and hence realise a tax free capital gain) come at a GST free price. Can also write off the losses on the cottage industry against other income (which most lifestylers have).
If a small manufacturer, as opposed to a "cottage" industry - well many have sourced their manufacturing to China anyway - not sure at all why the Kahuna would make a difference. But even if this business did everything you say... why would the proceeds be invested in a "non-business" investment? I don't know what a "non-business" investment is? Do you mean gold? Problem there is it doesn't earn interest or dividends - and its (in my opinion) vulnerable to wider/bigger forces.
We want to encourage low capital/ high labour intensive business (e.g. TradeMe, Weta) - so again, unsure what your meaning is there.
Kate: my use of the term "cottage industry" was a poor choice of words. I really meant small manufacturing industries. As speckles described above, many of them simply represent the buying of a job that earns them a living wage rather than what you would call a major excursion into big time manufacturing. The ability to earn that income is dependent on a low cost of capital, ie. as in my hypothetical where the assets are valuable but have a "low entry cost" because the assets have been in the family for a long time. Entry in to the business at current costs would be both prohibitive and unprofitable. Who would buy the assets of that hypothectical business of $3,000,000 to earn $60,000. They wouldn't. But he's happy.
A non-business investment could be typified by placing the proceeds of the sale of the assets with a fund manager (ie one of the big wealth funds, which is code for the big AU banks) and they in turn simply invest the money offshore, as they do.
I went down to see the dirty hippies this morning in Wellington.
A lot of them are talking about new monetary systems, unpayable interest and fractional reserve banking and such like. I really see this as an awakening of sorts. You wouldn't of seen this stuff talked about a year ago, its a pity Berno is so slow in catching on.
I gave them a whole pile of food to snack on.
I will have to be there for the march to RBNZ on guy faulks day, its great to see. I completly disagree with most of their views of where they want nz going, most of them seem deluded in left wing marxisum but its good to see the issues going mainstream.
There have been two dudes who are running for office down here with a platform of a new monetary system
http://www.positivemoney.org.nz/
I was there watching them organizing themselves and getting a concensus of what to do for the afternoon, one person speaks and everyone else repeats, it was a bit time consuming but it kept everyones voice brief and everyone heard every speakers point.
I even participated in giving upsparkles.
That website is great. Very attractive, simple to navigate and effective.
Really like the What You Can Do page - highly constructive with lots of options.
Also - good on them for running in Dunne's electorate and Wgtn central - smart moves.
I signed up for email updates.
Gonna go back and Like it on Facebook.
Well done positivemoney.org.nz!!!!!!!!
I look at it this way with Central banks
A commune, of ten families, starts up it's own monatary system. To get the ball rolling $100,000 is printed but commune members must borrow this money at 5% interest. So even though $100K has been printed it is expected that borrowers will re-pay this plus the $5k in interest a total of $105k to be paid from $100k. Is'nt this exactly what Central banks do when they print money and lend it at interest? Ask to be repaid more money than exists.
To me, this illustrates how Central banks create inflation. The GDP of this community is $100k and for this trade to take place $100k is printed. But this printed money is lent at 5% interest so the community, in attempting to repay the principal plus interest, is forced into selling this $100k GDP for $105k and so 5% inflation. Of course the powers that be may well kid us that it is 5% growth.
So ignore all the bullshit about the CPI and rising prices causing inflation, the Central bank is the cause. Also forget all the bullshit about the Central bank having to raise the OCR to control inflation when they are the culprit.
Remember, inflation is a degrading of the money. As the money degrades the seller demands more before he will acept the exchange.
Well, that is how i see it.
Assuming the above to be true, the next question must be, why do Central banks create inflation then pretent to be trying to stop it?
AND i look at Banks this way.
A commune, of ten families, starts up it's own monatary system. To get the ball rolling $100,000 is printed and each family is freely given $10,000 each.
Later, one family sets up a bank, and lends their $10K at 10% interest. This money is spent, re-banked and re-lent so now the banker has lent the same $10k at 10% twice. By lending the same $10k twice the banker has increased the total purchasing power of the community to $110k while the cash in the system remains at the original $100k and re-lending a third time increases GDP to $120k and so on.So what is being achieved? Well, it can be argued that the banker has achieved growth and full employment in the community, but on the negative side it has all been achieved with debt. Also if the banker re-loans the $10k ten times then he has doubled GDP to $200k and has total debtors of 50% of GDP totaling $100k while the actual cash in the system remains at $100k
To me then, this illustrates how banks use Fractional Reserve banking, to speed up the transfer of wealth from the poor borrowers to the wealthy lenders.
And, that is how is see banks, if you disagree that's fine with me. I welcome your opinion, so long as you have a good explanation as to why you disagree.
No silly knitpickers please.
Thank you Iain for your contribution. I gues what i am really exploring is the actual workings of banks. I attempted to put my case in as simple form as possible in the hope that if i am wrong then i can be enlightened by an alternative explanation. So it is the consept i am looking at.
Recently i read an article, and its anoying me that i cannot remember the name of the author, which is well worth a read (get it later and pass it on). The article explains how goods should come down in price, not up, and not a recession. Just like computer and electronic prices come down so should everything else. When a new product comes onto the market it is initially expensive, but as sales increase, and production picks up, then prices should fall, but they do not. All to do with the manipulation of the money supply.
Bernard,
It's obvious you have a lot of well thought out ideas about what should be done. However, I'm starting to get a clear sense that this site is no longer presenting an objective viewpoint. I find that the more you press your view, the less credible your site becomes. I think you need to decide if you want to be an economic journalist or a politician. Personally, I would prefer if you facilitated the debate rather than jumping in with your own views as I no longer bother to read them
Regards
The perfect crime is one that is unknown to the victim. Most people don't know how the Wall Street 'money trust' operates. They don't even know that the US Fed is privately owned and run, like all central banks, under the "trust" and the BIS. This is how it happened: In 1913, a group of financial elite known as the Wall Street ‘money trust’, with some allied Congressmen, established the private US Federal Reserve (misleadingly named to appear part of the US Government). In 1944, the Bretton Woods agreement made the US dollar the world’s reserve currency under the gold standard, linking all major currencies in the global central banking system. In 1971, Nixon de-linked the US dollar from gold, setting the stage for the expansion of fiat (token) money, and eventually the global financial crisis. All central banks, and the commercial banks they oversee, are tied to this system. They all create money as debt and lend it at interest, even to their national governments, who borrow more and also tax the public to keep up payments. All business has a debt component, direct or passed on. Almost half your income is lost in hidden interest and government debt taxes. Wealth is systematically transferred from the net borrowers to the net lenders. This crime is made possible by Fractional Reserve Banking, a debt-based system which is unfair, unstable, and ecologically unsustainable. The opposite is a positive money system known as Full Reserve Banking, for which there are now proposals in the US, UK, and NZ. There is banking reform legislation in the UK in it's third draft, but the AMI (American Money Institute) has the most advanced legislation: HR 2990 NEED Act, introduced into the House (US) on September 21, 2011. When the debt pyramid collapses into crippling debt-deflation (after QE3 fails, of course), we will also need Full Reserve in NZ. Full Reserve would end the banking monopoly, restoring ownership of money to governments, but publicly regulated. It would retire debt, and allow a reduction in income tax of as much as 30%. The Government would stop borrowing of it's own currency, and infractructure would cost about 60% less because debt plus interest would be avoided over the 30 year-or-so repayment period. By the way, it's true about the 1% - the accrued debt of the world is held in their pockets, as IOU's, that YOU are paying. The majority of the Occupy Wall Street protestors don't know any of this, but they instinctively know that they are the victims - they are realizing that they are the "sheeple". However, the majority of the "sheeple" are at home, supporting the system that steals from them.
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