By Bernard Hickey
Our economic engine is misfiring badly and our ship is drifting.
The world’s ability to invent and develop new tools and techniques to increase productivity has atrophied over the last 30 years. The internal combustion engine is still our dominant means of transport. Burning coal and oil is still our main way to generate the energy we need for our modern way of life. Passenger jet speeds haven’t increased for 50 years. The burst of amazing innovation during the 1940s and 1950s that gave us nuclear energy, supersonic jets, radar, transistorized computing and penicillin hasn’t been repeated during the 1990s and 2000s.
Instead, the energy of the world’s best and brightest over the past two decades has gone into globalising and financing the global economy. This has reversed decades of rising incomes and wealth for the middle classes in the developed world. The fruits of any productivity growth was flooded upwards to shareholders, managers and bankers, as banks took a greater share of profits and the globalisation of supply chains helped shift income from workers to owners.
To maintain real living standards and incomes, these middle classes were encouraged to borrow to fill the holes in their hollowed out incomes. High paid factory workers were laid off and became real estate agents and bank tellers. Rocket scientists got jobs at investment banks and hedge funds.
A generation or two pulled forward resources from the future and over consumed through the 2000s. By the end of the decade household debt built up in the developed world became unsustainable, unleashing an almighty fight over who would pay the price.
Rising debt is sustainable when it grows slower than incomes, but when it becomes clear that incomes will grow much slower than debt, this usually triggers a revaluation and restructuring of this debt. Those at the bleeding edges of that debt are usually wiped out first.
Usually, that is bank shareholders, bank bond holders and then bank depositors, in that order. In 2008 this didn’t happen. Governments chose to take over the bad debts to protect bank bondholders and managers. This shifted bad debts from one group of private lenders to taxpayers in general.
All over the world this has broken economic growth and the result is that economies are drifting. Aging populations are going to retire and get sick over the next 20-30 years, leaving a smaller group of passengers working and paying taxes for health care costs and pensions. This isn’t the time to be up on deck sunning ourselves. We need all hands below deck to rebuild and restart the engine while we still have time.
I will be exploring these issues and more at the Voyage of a Lifetime event held at the Q Theatre in Auckland on Sunday the 10th of June.
This post is also over at Public Address here.
The passage is already fully booked, but those keen can go onto the waiting list by registering at www.thevoyage.co.nz and watch it live streamed on http://www.ustream.tv/channel/voyage-of-a-lifetime Follow @voyagenz on Twitter to keep updated.
92 Comments
Interesting and true. Should we begin by dealing to corporate welfare or individual welfare? I think it would be pretty easy to see where the most significant impact could be made. I googled "record profit" - lots of good news of that type around - I wonder whether those entities similarly paid record tax?
Actually, looking at some of the comments, and considering that a lot of people at the economics department here at Auckland uni still believe the global depression is caused by some mix of minimum wages/skills mismatch/ZIRP/business confidence/cheap Chinese labor/people withholding spending due to taxes, I'm quite happy to see Bernard outlining the problem again.
I feel the same way, Zolt. Can I call you Zolt? Anyway, Bernard is right that many developed, Western nations including New Zealand are in a period of stagnation. I disagree with some, but not all, of the reasons he has given for this.
In a sense he is right that we "pulled resources forward from the future" during the 2000s and "over-consumed". What he doesn't state is the real reason for this: Reserve Bank-sponsored inflation of the money supply almost throughout the world during this period, particularly in the early 2000s by Greenspan.
Where Bernard goes wrong is his implication that fast jets, medicine etc caused or at least drove economic growth through the 20th century. What really drove the growth was the capital investment that enabled these inventions to be successfully produced and sold to the masses.
Contrary to what many readers of this site seem to think, economic growth doesn't necessarily mean bigger, faster or even more. Economic growth is about satisfying human wants, and these shift like sand over time.
For instance, the growing use of telecommuting means in future people will probably require fewer cars and less petrol. Will this be an economic disaster? No, because the money saved on these goods will be spent on other goods (some of which probably haven't been invented yet).
What the aforementioned inflation of the money supply does is distort the structure of production, by providing misleading "price signals" through artificially low interest rates. This means scarce capital is plunged into producing goods that aren't actually profitable (just look at the empty housing estates in Ireland, Spain, USA etc).
Unfortunately, the process of reallocating this capital and liquidating the bad investments has been slowed and in some cases halted because, as Zolt mentioned, politicians have refused to let large insolvent companies go bust.
Excellent question. This is often brought up as an objection to Austrian Business Cycle Theory.
The first point to make in response is that it's hard to know which projects are economically sound and which ones just look that way because of the misleading "signal" sent by the interest rates. For instance, not every housing project in Ireland, Spain etc during the bubble went bust, but many of them did.
A second point is that, no matter how smart the entrepreur, there is no way to really know what level interest rates should be, or would be, were they actually set (as they're meant to be) by the rate of saving in the economy rather than by the whims of central planning Reserve Bankers. Besides, most entrepreneurs probably aren't schooled in Austrian theory anyway.
And a final point I'd like to make is that, while nature abhors a vacuum, the market is much the same in that profit opportunities tend to be snapped up quickly. If one business decides not to take advantage of the low interest rates they will be at a competitive disadvantage to the businesses that do. Sitting on the sidelines can be difficult, particularly because the bubble can last for several years. On the other hand, some people know a bubble is forming and try to take advantage of it while they can.
To be fair, here in NZ we've done pretty well with regards to finance company failures. We could have done something much worse and bailed out Bridgecorp, SCF, and so on. Of course, the depositors in the later got bailed out due to the Crown Deposit Scheme, but that's not nearly as bad as bailing out shareholders/executives. The best solution would be smarter regulation though...
Gosh Bernard...you say "Governments chose to take over the bad debts to protect bank bondholders and managers.".....yet you also say "We need all hands below deck to rebuild and restart the engine while we still have time".
So while the fatcat bondholders and salary bloated bosses who have received the political handouts remain up on the topdeck Gin and Tonic enjoying the fruits of the great theft and sunning themselves, with the thieving pollies...you expect the peasants below deck to bust a gut for more speed....
I think you will find those in third class down below have had an utter guts full of the thieving lying scumbag politicians and bankers et al...we are busy cutting a hole in the hull on both sides and we will sit on our tiny liferafts watching with joy as the shipload of garbage sinks.
Wolly, while we remain with the marine theme, I quite like this one:
The stern of the ship rose above the ocean? Well the ES is simulating just that today. After the spike, then comes the drop, and it won't matter how high the stern got before it went under. All that people will remember from this is that it was total carnage for those on board and not in a life boat.
Yup...seen so many do just that...up she goes...down she slides....and decades later we get the study to discover why it sank with so many lives...
I'm on a small elevated island watching the disaster unfold and expecting to sort plenty of goodies swept up on the beach..tins of caviar and bottle of plonk by the container load...
I am in agreement there, to the unindentured go the spoils. My favorite story on that theme is the fallout from the Depression on Martha's Vineyard Island, off the coast of Massachusetts. In the Golden Era it was the exclusive playground of the well-heeled. But the properties went for pennies after the crash as the wealthy had to sell off their vacation homes. Due to the fact that African Americans were not allowed to hold accounts in the banking system at the time, they found themselves cashed up at the right time, and whole neighborhoods on the exclusive island changed hands. Spending a summer working there, I used to bike through such neighborhoods and enjoyed speaking with the residents, families who had inherited the bonanza, and wisely kept the properties to hand down. I just love such unintended consequences of racism. Now the lines are not drawn in such ways, it is just down to people who did not get on the debt bandwagon, and the rest- who are riding high at the moment. It takes a lot of self discipline not to take advantage of credit expansion, even when one knows that contraction is inevitable. The media feeds off people's desire to reassure themselves that their boat can stay afloat forever, no matter how many holes are punched in the side.
Bernard, you said:
"Rising debt is sustainable when it grows slower than incomes"
Prove it. You have to mathematically prove this or change the basis of your worldview.
Why does every currency fail? Why is the average lifetime of a currency 40 years?
Is it some mismanagement? No.
Is it because the very money system we use is flawed? Yes.
Bernard Lietaer was so far ahead of thinking like this that it is frightening.
Based on this article I think it inevitable that the world is in for really bad times, because those capable of steering us in a good direction have no clue.
If you are using your position to steer others, I think you are taking them in the wrong direction.
You said:
"All over the world this has broken economic growth"
Please ask yourself the most basic of questions.
Why do economies need growth?
If you cannot answer that basic question, then you will realise that you are missing some basic insight. It is that insight you NEED to understand why currencies fail, and what the BASIC problem is.
..... welcome back Steve ! ....
Good question : Why do we put up with the government & their incompetent advisors the treasury endlessly whittering on about growth , and how growth will lead us out ? .....
..... as a country , NZ Inc. earns more now than it ever did previously ...... so why is the economy so skewered now , particularly towards the housing market and toward government welfare handouts ? ..... we had less exports and a lower GDP in the past , but did we have such an unbalanced economy back then ...
We're earning plenty . Enough $ per capita to be the envy of the majority of the world's inhabitants ......
ctnz - totally agree. However do you really think that the "political and banking power elite" are going to give us an alternative choice. I think it will be up to the masses themselves to change the system and that's why I have invested in precious metals. I saw an interesting TV programme on TVNZ 7 last night, Dateline, where it showed an alternative money system that is being used in a small town in Greece. Apparently there are 26 of these systems now operating in Greece.
Ctnz, You may have missed this from earlier in the week
http://www.interest.co.nz/opinion/59625/monetary-dialysis-has-proven-be…-
I think this website has seen some very open and robust debate over a few years now and we should be thankful for that. The wheels are turning slowly, although it seems we are not going anywhere :-)
Why do economies need growth?
Because while in primative sicieties people shared and were small enough that people knew each other (and their contributions, characters, circumstances) in large industrial societies people accumulate wealth but have no reason to help their fellows unless they have something to trade. That's why a poor woman i n Tijuanna sells crape paper flowers?
Bernard, it's also entirely possible that what you are pointing to (torpor, lack of innovation/productivity growth etc) is a consequence of the end of an S-curve.
To wit, most everything that Can be monetised, Has been.
Economic historians tend to be a bit more alert to the effect of monetising parts of economies that were non-cash-based before: payments in kind from mediaeval tenants to lords of manors, barter based transactions leaping the fence into the cash economy, black to white economy shifts etc.
There's only limited scope for much more of this: there aren't vast swathes of activity that are not now part of the formal, counted economies of the world.
This neatly explains two features of the current landscape:
- the switching of financing from support for the industrial complex and related activity, to the invention of ever more arcane instruments - the former was self-financing, so where else to clip a ticket?
- the switch from total physical consumption (the necessities of life, etc) to a mix of experiences plus a rump of the physical. There's only so much physical stuff to consume in the four main area of life: shelter, food, transport, security....
Fin de siecle - end of an era, in short.
When Governments made the decision to bailout banks using taxpayers money they changed the natural selection cycle of business. This appears to have stalled the economy as potential investors have no certainty about any future direction.
This is one of the reasons cash-rich coporates aren't investing (other than in Govt bonds) as you can't use the same old strategies that caused the economic crisis to solve the crisis. A direction change is necessary. It is called evolution and human nature being what it is HATES CHANGE and so insanity prevails as people keep doing the same old thing expecting a different result.
If the Government encouraged new technologies as opposed to mainstream concepts the market would invest in those directions. NZ has been a nation of inventors who have had to struggle against the odds to get their products into the market place. Most inventions end up lying at the back of a garage and never really see the light of day.
When NZ does do something really well we end up exporting the knowledge/technology offshore to another country and lose NZ loses much of its national benefit. E.g. Live export of dairy heifers to China, Dairy farming systems to South America, Kiwifruit varieties to Europe, people drain to Australia, even our rugby knowledge is exported.
Anything that is any good will soon be permanently exported out of the country with no financial reward to the country.
I read a book a few years ago called "Suppressed Inventions" average NZers were inventing some amazing stuff that has barely ever seen the light of day.
Governments do not want people inventing for example free-power as they have invested heavily in power sources. Would the oil industry want cars that ran on water - not likey, not when they are selling oil.
Restarting the engine is not complex its just a matter of ensuring that Govt and its agencies do not compete with private enterprise ever. Until the role of Government changes from one of interferring to one that is in the back-seat we will endure much of the same. Government needs to be downsized to the bare minimum and be there soley for the people of the country. Chuck out most of the legislation and write some decent short pieces. Legislation should be about: Do what you like as long as your not hurting/damaging someone else, or their property.
We don't need Government Ministries for Women, Children, Ethnic origins etc we just need one piece of legislation that treats all fairly and equally.
Magna Carta limited the powers of the King and offerred protection of the privileges of the people. While we don't have a King or Queen with excessive powers that are limiting on the people we have always had Government with excessive powers that are limiting on and to the people. In other words the power changed from King/Queen to Governments.
This situation is here to stay. As Richard Heinberg and Jeff Rubin have both pronounced what we are seeing is the end of growth. Oil is too expensive for the global economy to function on and so we are seeing the beginning of another global recession indicated by plummeting oil prices.
As an aside, given that oil prices are the main driver of inflation, what is the point of inflation adjusted oil prices? It seems like an ridiculously circular system. http://www.investopedia.com/ask/answers/06/oilpricesinflation.asp#axzz1x28reIzL Shouldn't we just leave oil prices separate from other commodities and present them as nominal only, rather than adjusting them for inflation which is measured by the consumer price index which is heavily influenced by the price of oil? It seems to me that oil is so important to the modern economy that is should be treated as an entity to itself. I'm not an economist so I'm wondering if a few of the more financial types could spread some light on this for me. Thanks.
"beginning of another global recession indicated by plummeting oil prices." I suspect so....if this,
is any indication then the drop and speed of drop looks significant...
"light on this" most economists dont understand oil....or the term EROEI....as far as I can tell many seem to not think on oil and the few that do consider it as not a problem if they do, its a simple thing of paying more and more will become available....
On the other hand a very few like Jeff Rubin do.
Monetary policy has been about controling inflation, if as you are saying oil now becomes a significant driver of inflation then yes you have to take it out because otherwise you get the double whammy of the RB raising rates and the rising price of oil...what that means to me is monetary policy is toast....but we face deflation anyway so its not much of an issue....
regards
On page 1 of one of AJP Taylor's great works on the history of Britain (I'm doing this from (a failing) memory) he says that untill the outbreak of WW 1, the average englishman barely knew a government existed. That is the way back to the future. However, I suspect things are going to get an awful lot worse before they get better.
Ergophobia
If a society has no purpose, no vision, no reason, apart from just buying and selling, then it's economy becomes an obsesion. In an obsesed economy nothing matters more than being able to buy things, getting the money to do so and ones status in society. A phony society.
Furthur, If that societies economy is soley about sellers and buyers, then what is bought and sold is unimportant. As, has been proven, you do not need farms for growing food and factories producing goods to have an economy. An economy can be made up of nothing more than a service sector pampering to the superficial needs of the masses and, a fiat money system that can grow to any proportion to prop it all up. Of course, this also needs a massive propaganda (advertizing) campane, to keep the masses convinced, that they cannot live without those pampering services. An economy then does not need to produce the necessities of life only the means to obtain those things from another societies economy. After all "who cares so long as i have the things i want"
What sort of a society do we want? A sustainable one or not. What about the Trans Pacific Partnership should we care or not.? What is societies position on these things? Should we have an economic bill of rights, as President Roosevelt proposed and so on. Or do we just leave it all to the poletitions and hope for the best.
I believe we need to know where we are headed. We can still be individuals but know the boundaries.
Bernard is getting there.
The air is a dense as it was when Wilbur and Orville lifted off. The resistance as you speed into it, increases in cube-law fashion. You cherry-pick the best efficiencies first, then it's a matter of diminishing returns. Same in every activity involving motion, work, energy use. The Concordes are parked up for good reason.
So we have flattened off. How predictable.
Meanwhile trading in invisibles ran far in excess of the real stuff, but expected the real stuff to be available whenever we cashed-in the invisibles. Condo's in Hawaii via currency-creaming being a prime example.
The underwrite isn';t there by several orders of magnitude, nor will be.
Steve Keen's sort of on the case, but the underlying problem is that there are perhaps 3x too many people on the planet. Ultimately, if we don't address that, the rest is pointless.
Maybe because of the side effects of its intrinsic cyclical nature, its inability to guanrantee full employment (of people and capital) and the way it distributes wealth and income.
John Maynard Keynes:
The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes. (from his General Theory)
..... same for the introduction of the Euro ..... which was meant to harmonise European nations and to facilitate trade ......
Bringing on WW III , the way things are going ...... but it's a nice turn of the worm , that the other nations are ready to attack Germany first , this time around ... ...
Sort of. Faux Keynesians like Paul Krugman (who supports all of his arguments with the IS/LM model, a neoclassical model not a Keynesian one) advocate the use of monetary/fiscal policy to fight recessions but they ignore the build up of private debt. Their solutions all involve encouraging even more lending (negative interest rates, anyone?) so they can reflate the bubble and keep the economy going. This is obviously unsustainable, as we are seeing in China right now.
Also Andrew was was not talking about policy. He was talking about the Keynesian theory of business cycles. The key point is Keynes recognized that business cycles are due to changes in the rate of investment, because that component of aggregate demand depends on current expectations of the uncertain future. Furthermore the rate of investment is pro-cyclical, because investment is based on expectations of profits which are estimated by projecting current profits.
This view of capitalism is very different from the standard "free markets will always reach equilibrium" view. When modelled as a system of ODE's, it can be shown that such a system is inherently cyclical and prone to collapse: http://www.debtdeflation.com/blogs/2011/05/16/a-dynamic-monetary-multi-sectoral-model-of-production/
Actually the likes of Iphones Ipad, TV are making us go backwards. Smartphones have not made smartpeople. They have made a lot people focus on updating their Facebook status or play the likes of Angrybirds.
And lets not forget how TV media has become more and more dumber with those stupid reality shows...
You're both right it would seem. Drag is proportional to the square of the velocity. Power required is proportional to the cube of the velocity.
http://en.wikipedia.org/wiki/Drag_%28physics%29
... which kind of poo poos the quote by that famous Italian car maker that "aerodrynamics are for people who cannot build decent engines".
Bernard says:
the burst of amazing innovation during the 1940s and 1950s that gave us nuclear energy, supersonic jets, radar, transistorized computing and penicillin hasn’t been repeated during the 1990s and 2000s.
I say:
Bollocks.
If you were trying to segue into financialization, I would give you a failing grade. I'm pretty sure any half-decent high school debating team would tear you to bits with that assertion.
If you are going to base another article on this meme, then please update it.
How much is Facebook allegedly worth?
And what is it they make(produce) and sell that we all need apparently?
That's right, NOTHING! So why the alleged value?
From what I can see Facebook produces one thing more than anything else: narcissists
Until we start dealing with the worped concepts that are a direct product of a ridiculous monetary system that is destined to fail then the total destructive collapse into oblivion is on the cards without doubt.
We would of had this mess somewhat sorted by now but the US Fed decided "banks and AIG are too big to fail" , setting in motion a 'can't lose ever' attitude on Wall St which will send us all over a cliff
Reading Bernards article and comments that follow, I am some what hartened by the number of comments about getting rid of big government. I couldn't agree more, I would love to see solutions proposed that do not start with "The government needs to.....". The only thing we need government to do or rather polticians is to p... off.
We only need a government to ensure people and markets behave fairly. Currently we have a crony capitalist system, driven by lobbiest who influence politicians to provide for the lobbiest particulary sector.
Consider the current situation where in the face of the largest need for borrowing the world has ever seen, we have the lowest price of money the world has ever seen. If that is not a sure sign that the writing is on the wall, I don't know what is. Even printing money as a solution, has gone main stream. You can already see how well that works, politicians come up with the same old crap and do nothing, central bankers are currently resisting more QE, while politicians know if they wait and do nothing long enough the cental bankers will have to print more to stop the whole system collapsing and the central bank getting the blame. Looks like a system designed for bankers to me.
Not sure about these:
http://peswiki.com/energy/Congress:Top_100_Technologies_--_RD
Bernard, aren't we forgetting that the last few decades have resulted in BILLIONS of people in the rest of the world being lifted out of poverty and having a greatly increased standard of living? Surely thats worth something, even to the biggest grinches in our midst?
Can you stop saying things like that ....
. .. .. around here we don't want the truth ; we want a bloody good knee trembling horror story of financial armageddon , world with end , woe , alas , oh the pain .... the pain of it all .....Grexit , PIIGS , Bankia , Eurozone , Sir Michael Cullen . ... .terrible , doom , all is doom .......
Go away and be happy somewhere else , sport .
happyfunball has raised a good point , that the majority of the world's inhabitants are far better off than they were at any time in the past ......
....... Bernard's raison d'etre is to spread doom , gloom & woe ....... and as human nature predisposes us to focusing on the negative ( the old flight or fight response is more deeply ingrained than the " smile & be happy " muscles are ) , we overlook the amazing quantity of wonderfully good stuff occurrring .....
As I have pointed out recently , medical science has made great advances towards overcoming blindness , curing spinal cord damage , and remedying breast cancer ......
.... 3 monster leaps towards a better life for mega-millions of fellow citizens of planet earth .. ..
He could have been cleverer in his spin.
There are more folk 'well off' than there have ever been. He could have stated that, in truth.
There are also more folk 'worse off' than there have ever been.
That happens when we only had gotten to 2 billion people by 1930, 3 billion in the 'Fifties, and 7 billion now.
The 'majority', though? Moot point, and not for long at any rate.
...... perhaps I should have been clearer , by using " % " ...... fewer people as a % of the world's population live in poverty now ( June 2012 ) than at any previous time ......
As a % , fewer people go hungry , lack drinking quality water , lack shelter ...now , than any other era . Unlike Bernie , I reckon that mankind has continued to make extraordinary progress ...
.... and in the last month alone there have been three separate blockbuster medical advancements ( or at least , the reporting of research & experimental findings ) ....
Life is remarkably good ...... and getting gooder by the day ......
If we take your billions at face value, How was that achieved? (on the back of?) and in those decades how many more billions were added to the popualtion of the world? (on the back of?)
Yes if it was planned it was noble....however its more circumstantial....and in some ways expoitative....so claiming credit for something we didnt do on purpose is what?
To answer my Q, it was done on the back of cheap fossil energy, which has now (more or less) peaked in output and set to decline....Given that irrefutable fact where do you think those billions are headed?
Who is the biggest user of energy? and how much do they give out in noble works? That answer is America and they give virtually nothing....what does come out is mostly to prop up right wing dictators in or near important spots and especially if they are a petro-country....so the anser is conceited.
regards
Well the US has been "at war" pretty much continuously for the later half of the 20th century
Korea 50's
Vietnam 60's / 70's
Cold War 60's / 60's
Cold War by Proxy (Afghanistan) 80's
Kuwait (early 90s)
Afghanistan (2001 to date)
Iraq (2002/2003 to date)
Then there was the project to land on the moon. Numerous advances from that project.
I'm just a'saying that Bernard is about 50 years out of date. Wonder if he has a smart phone. If he does, I wonder whether he knows that there is this thing called a silicon chip in it?
Numerous medical advances. The 50's/60's look like the dark ages almost in comparison
Disney are conducting a war on childhood obesity , banning junk food advertising from their Disney TV channel during kiddies' shows ...... if your breakfast cereal contains greater than 10 grams sugar per 100 g , nick off !
.... viva la fat war ! ...." telly tubbies " are on the march ...... slowly .....
Yes, the Paper Boys will be so proud to have lifted the pay scales of the Politicians and Bankers, the civil servants and the property developers and the real estate agents, land bankers and other wastrels.
Over leveraged, over paid and over done....and I do not mean the Paper Boys, but the Old Boys...network.
May I doff my cap to the new knights.....some will have sleepless nights (NOT), waiting for the paper boys just and true rewards.
Some eminent HYPOCRITICAL financial wizzards will hopefully spend a few sleepless nights tossing and turning.
Some in jail... some at home...some pension...some perks of the job are just too small to mention..
Some day the just rewards will come...
Some Hopes.
Arise Sir Knight....ye have performed a miracle, the paper boys will be so proud.
Powerdownkiwi - No debt =no advancement, poor stay poor, middleclass probably move to the poor class and the wealthy become extremely wealthy, poor health, no education and that is only the tip of the iceberg. The're pretty much all the reasons why the early settlers came to NZ in the first place - to have opportunity no matter what you were born into.
Government shouldn't have the ability to have debt and then we would have a steady sustainable economy. People would then know it is up to themselves to make a go of things.
Ok so you get it, congrats. Except the wealthy bit, they did that historically because the poor had no say and often used force of arms....that is now not the case.
Earlier settlers came here and exploited the un-used resources that are now gone, they didnt replant totara trees for instance....guess what there is no where left to go to.
regards
When I was in my twenties in the uk in the late 60's & early 70's we were told that technology would take all our jobs and that we would all be retiring in our 40's. Why did that not happen. I worked in the car industry and at that time it took us 5 years to design, develop and get ready for production, this has now been reduced to 18 months due to computer design & testing and when it gets to production the car is mostly put together by robots. I worked through this time as an engineer and was part of the team involved in speeding all this up. Luckily I managed to retire to NZ at 49 and will draw a NZ pension in 2 years after paying lots of tax.
I paid tax in the UK until I was 38 so kiwi's who retire there can enjoy my taxes. I then paid taxes in Japan for 11years, so now the retired there can enjoy my taxes. I also pay taxes in NZ on my investments and GST. That is the kind of world we live in now my friend.
As I left my initial post open...sounds like you are partially retired? Most likely next we will find out your a property investor or just spending money!!! lol
You left yourself open in your orginal post...many here will not be soo kind. Look at it from a cost benefit, tax paid here vs the earnings stream of your retirement here in NZ.
If he's like my parents their NZ tax bill is in excess of a NZ couples pension, so they are supporting at least one other pair of NZers who are retired. Then they spend the money that comes in from abroad into NZ, they also pay for their own medical needs....a net good.
Consider another point, look at the exodus of kiwi's, they will go and work in OZ for possibly decades and then come back? expecting a NZ pension? Or if OZ goes toes up (actually when) they will come back expecting dole money?.....having paid no NZ tax in the meantime?
ho hum.
regards
Good try Steven give your vested interest. Great to hear your parents Steven making a contribution however the IRD stats make it clearly they are in the minority.
The loose criteria which requires you to be only a collective ten years as an adult resident in NZ to gain national super will be tightened well before many other changes. Well aware of the aussie situation. Rules changes or not it will not be ho hum... :-)
Its also swings and roundabouts....ppl move, we are a global society....So a govn has some losses and some gains...
"The loose criteria" very probably...but that should also apply to NZers who choose to live and work abroad for a substantial part of their lives and not contribute via taxation yet return to NZ to retire and expect free healthcare and OAP.....
regards
When I start to get my NZ pension the NZ government will claim back from the UK what my pension would have been when I left the UK, so us NZ taxpayers will pay the rest. Also my wife is in the process of claiming her UK pension that she is due at the age of 61 I/4 , she will pay tax on it in NZ and will also be spending it in NZ.
Yes I did retire to NZ at 49 and yes I do help provide a roof over other less well off people's heads. I am also invested in NZ companies and we also spend a lot of time working in the community like a lot of retired people, and that means all of our taxes are lower than they would be without the retired army of volunteers.
Spot on BH.
Interesting that I hear from the rabid right how bad it is that younger ppl with brains are going into govn rather than setting up businesses.
http://www.youtube.com/watch?feature=player_embedded&v=_r-AKruzmkk
I would suggest the best and most capable to set up their own businesses are in fact going into finance....JK for instance is a classic example.
In the mean time I agree with PK, I think the right at least in the UK if the above is anything to go by are using this as an opportunity to drive political agendas and are not working for the good of the UK.....pretty clear this is the case in the USA as well, the result will be a depression like the 1930s,
http://krugman.blogs.nytimes.com/2012/06/06/doing-their-best-to-destroy…
sadly those causing this like the bozos above will suffer the least.
regards
Here go..this will make you spew ...the fatcats parade
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10811482
And look at this AJ..."Elderly people and beneficiaries would be hit hardest by a predicted winter power bill increase of $90 for Christchurch homes.." press................so these elderly Kiwi will be the ones paying the fatcat power company bosses their bloated salary
Happy with this situation are you Mr English?...how about you John Key?.....elderly Kiwi freeze while fatcat power company bosses wallow in bloated salaries....
Power bills have increased at a scary rate in the almost 10 years we've been in NZ...but I have to say that after having our power cut for 1 1/2 day (24 hours of which were apparently the coldest in 130 years), I don't think I will resent my power bill so much anymore. Playing the "little house on the prairie" is only fun up to a certain point!
The trouble is Elley, your average Kiwi bolthole has 20mm of wood on the outside, or shite cement board..10mm of gib inside and no insulation between...aluminium crap joinery and single glazed...no underfloor insulation...next to none in the roofspace..and warped entrance doors.....
We lead the world in poor quality housing.
Thanks for the link, Wolly. The fat cats remuneration has declined by a whopping 0.4%, how the hell are they supposed to live! We need a WFFC (Working For Fat Cats) program ASAP.
No mention in the Herald article of the thumping great rise in take home pay they got from the Governments tax changes. The guy on $5,000,000 would have got a $300,000 (6%) raise thanks to that. The country's paper boys and girls are picking up the tab for the shortfall.
Q. How many kids paying $10/week tax would it take to make up for the tax discount for the $1m + boys?
"If we decide that further action is required, then of course we have to decide what action is appropriate or what communications are appropriate,” Bernanke said to the Joint Economic Committee today. “We do have options that we can consider.”
http://www.bloomberg.com/news/2012-06-07/bernanke-sees-easing-options-while-not-specifying-them.html
The market has decided that action is required...not Bernanke et al
Fed action to date has been most inappropriate and an utter failure..so expect more of the same
Along with bluff and bluster about a slow recovery blah blah blah...
He has no options to consider...he can do nothing other than 'print'..the Greenback will follow the Euro.....
There she blows Capin Berny on the poop deck… from over yonder horizon what I can perceive through the fog are productivity gains being distributed in way of free time and old man Capital who invented the 40hour working week being taken to one side and beaten with a stick. A new man is arising from the ashes… called the 20 hour working week and less unnecessary shiny crap.
Usually, that is bank shareholders, bank bond holders and then bank depositors, in that order. In 2008 this didn’t happen. Governments chose to take over the bad debts to protect bank bondholders and managers.
Is it fair to say that bank bondholders by and large are pension funds? So that the decision to protect bondholders by nationalising the debt was a decision to keep pension funds intact?
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