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Gareth Morgan accuses the RBNZ of being an 'intellectual sloth' and says the 'last two Governors and RB Boards should have been sacked for incompetence'. Your view?

Posted in Opinion
You get the politicians, the policies and the outcomes you want. Don’t blame anyone but yourself.

By Gareth Morgan*

Personally I wouldn’t blame the exchange rate, the government, or any lack of entrepreneurship.

The world is really struggling if you hadn’t noticed and the ability of our firms that export or compete with imports, to maintain sales, is being whacked.

From that much flows – reduction of investment spending by these firms, a drop in orders for raw materials and commodities, and sackings of personnel.

And then we see all the knock-on effects through the towns in which these outfits are sited.

That’s then the reality we face – and with Greece, Spain, Portugal all still basket cases for the Germans to spend their money on; and with the US having to “DO SOMETHING” before the automatic tax increases and spending cuts of the legislated “fiscal cliff” take effect and impose austerity on that economy, plus China still in search of an end to its growth slowdown – you could be forgiven for thinking that New Zealand faces a far more hostile global environment yet before we can be confident our economy has stopped softening.

But hey, Auckland properties are on a tear so we’ll all be in clover soon.

If you believe that your myopia really is fatal.

What the RBNZ can do

What can the authorities do? Yes the global slowdown is not their fault but does this mean they’re helpless?

Let’s start with the Reserve Bank which, faced with one of the lowest inflation rates in the developed world is maintaining one of the highest interest rates.

What sort of time warp are these folk in?

Their monetary policy settings have no justification whatever.

It persists due to intellectual sloth.

Then consider their prudential policy that they have just arrogantly conceded might have played a role in the housing market distortion and the grotesque misallocation of investment monies over the last twenty years.

Better late than never I guess but that’s as close as we’re going to get an acknowledgement from the RBNZ that their last two Governors and RB Boards should have been sacked for incompetence over the conduct of prudential policy.

The Bank goes on and on about stress tests and purports that unless the favouritism they extend to mortgage lending is going to lead to a banking collapse then it must be right.

No matter it’s been responsible for steering scarce capital into the business of multiple housing ownership and starved the finance to manufacturing and  service industries.

With a Reserve Bank like that who needs politicians to deny economic and employment growth?

The issue with setting prudential limits on the various types of bank loans shouldn’t be narrowly focused on avoiding bank collapses. Setting these limits should take account of the impact they have on the year-to-year functioning of the whole economy, how they are influencing the allocation of investment monies across industries and households.

The Reserve Bank’s influence on our economy via its prudential policy for the lending shops out there is massive.

When you have a situation where a mortgage loan can be 3 or more times as attractive to a bank as making a loan to a business, it is just nonsense to argue the Reserve Bank isn’t determining the shape of our economy.

We are over-invested in housing and under-invested in business sectors, everyone who’s not into property speculation agrees.

We have high unemployment because investing this way produces lower incomes and fewer jobs.

The Reserve Bank’s directives to banks on where and how much they should give preference to the various types of loans, sits right at the heart of that distortion. It is responsible for paradox of a jobless property price bubble we are now experiencing – totally responsible.

What the tax system can do

Now let’s turn to the tax regime.

We know that the biggest mugs here are PAYE tax payers.

If we look across our society at the ratio of tax paid to wealth, the tax burden falls markedly as wealth rises.

If we look at the ratio of tax paid to the increment to wealth enjoyed each year (so taxed income plus capital gain) we see the tax burden plunges the more people make. It is pretty clear our tax regime is broke.

Then consider that families on $100,000 taxable income can qualify for a benefit from Working for Families – and you see just how broke it is.

The timidity of politicians to shirk the responsibility of leadership in favour of personal tenure is what leads to this ingrained inertia on policy improvements. For example, we hear over and over the concession that taxing capital is preferable to taxing one form of the increment to capital (declared income) is preferable, but nobody has the fortitude to bring in a capital tax to close the loopholes.

You get the politicians, the policies and the outcomes you want.

Don’t blame anyone but yourself.

---------------------------------------------------------------------------------

Gareth Morgan is a businessman, economist, investment manager, motor cycle adventurer, public commentator and philanthropist. This opinion piece was first published on his new blog garethsworld.com and is reprinted here with permission.

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53 Comments

I have come to the conclusion

I have come to the conclusion that our last Reserve Bank governors (& the new one) are economic dries who can't abide the idea of any intervention to save the economy, no matter what the cost in terms of productivity and wealth.
Sort of Kate Wilkinson on steroids.  The NZ economy is Pike River Mines writ large. 
 

Unless you're Mediaworks or a

Unless you're Mediaworks or a bank. Survival of the fittest and creative destruction don't apply to everyone.

You certainly right re Pike

You certainly right re Pike river and the standard of Governance in NZ.  The prevailing goverment and government culture gave rise to the total failure to manage mine safety.  You can bet your bottom dollar that this culture will cause every other aspect of governace to be weak minded and innecfective.  It has been my expeience that when you dig into an organisation that has failled in one important aspect, then you will find that the infection has spread to most other aspects.  In the the case of Pike river the consequences are rather hard to hide under the carpet and spin your way out of, unlike the rest of all the crap that comes out of Wellington.

oh lord please forgive this

oh lord please forgive this man as he speakath the truth.

What crisis - there is no

What crisis - there is no crisis.
www.johnwalley.co.nz
 

Strong words ... but Gareth

Strong words ... but Gareth is calling it as he sees it , and he is right  . Methinks maybe John Key has no plan and has become reactive to Labour's sniping in his second term
 We need a comprehensive economic reform policy which is clearly documented , gives plenty of warning to everyone , so that we can address these issues
 

And given the poor first

And given the poor first performance of this one at SC the other day, 2014 can't come quick enough.
 
http://www.legislation.govt.nz/act/public/1989/0157/latest/DLM200045.html

One thing which should be

One thing which should be discussed is the growing elite of core public servants, politicians, district health board employees, regional and city council staff, transport agenices, et al, who make and feel entitled to $100,000 plus salaries.
It starts with the head of the Reserve Bank making well more than twice what Ben Bernanke makes in the USA.   But working on down through the thousands of such employees all of whom now make more than their counterparts in most of the world.   NZ is not a low wage economy for these public servants.  They do quite well - monetarily and on various sorts of leave they are entitled to.
I'm in favour of a larger public service - with salaries more evenly shared than what has evolved in New Zealand in the last twenty years.    That could take 40,000 off the roles of the unemployed.

Great point. In return for

Great point. In return for the relative security of NZ public sector jobs, the tradeoff should be a lower salary.
Lets face in NZ govts of all persuasions would not take the axe to the public service because they are too timid and is thus deemed politically impossible. OK fair enough, but you can at least ensure remuneration is in line with the broader economy and it is not crowding out the private sector.
I get the feeling too many of NZ tertiary graduates aspire to a cushy highly paid govt job, but I seriously wonder about our ability to afford it, both in terms of fiscal impact and in the lost opportunity of having these people work in more innovative/dynamic parts of the economy (harder to measure).

You hit it on the head,

You hit it on the head, billsay. It is not only expensive labor, but worse yet, useless! Unproductive ocupation of space at its' very best, that's all they are, and we pay for the lot!
HGW

Unemployment is high because

Unemployment is high because the biggest corporate businesses in New Zealand 95% of them are run by muppets/tool heads. This is predominantly why skilled and unskilled workers have moved to Australia. Some 40,000 + in recent years. Bad Business decisions from the top equal high unemployment from below the top. Muppets.

Too bad NZ does not have a

Too bad NZ does not have a mechanism for impeaching, sacking this incompetent government.

Maybe that would be a good

Maybe that would be a good reason to campaign for binding referenda...?

Gareth, As with your last

Gareth,
As with your last note on the subject, I agree with nearly everything bar the specific medicine. Certainly massive amounts of foreign money brought in by the banks; and then mulitplied around the merry go round several times, almost exclusively for house and farm price appreciation, is not only distorting all investment, and establishing a new almost certainly very damaging bubble in housing. It is keeping the exchange rate way above any sense of fair value, destroying many manufacturing and trading businesses, with the resulting unemployment we see again this week. On all of this I'm pretty sure we agree.
I also agree that I'm sure the RB can pressure, or direct, or put controls in place to reduce this housing/farm lending by the commercial banks. In fact I thought a commentary from Westpac this week almost welcomed such a move; but it doesn't want to be the only bank left on the sidelines if there is no such directive.
The only difference in our views, is that the current policy settings do not allow the banks to profitably loan to businesses, especially in the export or import sustitution area; nor are  there likely to be businesses that can cobble together a half persuasive business case for them to want to borrow and invest.
The simple reason is that virtually all of their costs in NZ are structurally 20% more than they should be for them to be competitive, due to the exchange rate. That just isn't wages. It include rates, rent, service costs, and a whole bunch of other traded costs that have never come down with a high exchange rate. In many of these cases, a drop in the exchange rate will cause relatively little pain.
The only simple way to drop the exchange rate is to stop capital flows coming in; and so to then not gut the money supply, to replace at least enough of those funds with printed money. Or to buy back some of our government foreign debt with printed money. Apply some pressure on housing loans by all means; but a drop in the exchange rate will allow good business cases to be built on business investment.
The Aussies have apparently started. (see separate article today). We are now the last suckers in the world.

I have been wondering and

I have been wondering and wondering why it is that the more we pay our PTB, the MORE incompetent they become. I am thinking of the Pike River Massacre, the CCT building, the Earthquake response, some of our members of parliment, the heads of TVNZ, ACC, RR and so on. What I noticed from my intimate experience of a big institution (a NZ University), is that the BEST people are good, honest, well meaning cowards who keep their heads down, their mouths shut and wont  ever stick out their necks for fear of losing their decent wage packet.. (Any that have, have already gotten the chop, I mean, been downsized). The worst people are sociopaths and psychopaths who are thriving and getting pay rise after pay rise as they rise higher and higher. The problem is that the high wages of TPTB give them too much to lose. In the old days, people didn't worry so much about losing their moderately paying jobs. It was easier to be true to yourself, to do the right thing, to take a stand, to stand up. It was worth it to sleep well at night. Now the PTB just self medicate and carry on.
 
If we cut the wages of the people running things to "moderate" (instead of obscene), we would encourage enthusiasts and community minded people to run the country again. Good honest people, the sort who have perfect ratings on TradeMe. We need to be run by folks who are not doing it "for the money", but because of love, or interest, or conviction or joy or belief or vision or duty.......
 
There was a wealthy tycoon who was visiting Mother Teresa in Calcutta. She was on his "bucket list" of people to meet before he died. He saw her embrace a leper. The tycoon said, "Mother Teresa, I wouldn't do what you are doing for all the money on Earth!" And she replied, "I wouldn't either."
 
The problem, in a nutshell, is that "THE WEASELS HAVE TAKEN OVER TOAD HALL (New Zealand)"!!!!!!!

'If we cut the wages of the

'If we cut the wages of the people running things to "moderate" (instead of obscene), we would encourage enthusiasts and community minded people to run the country again'
Well one quick way to do that would be to up the marginal tax rate to 50% on anything over $100k. Quick but imagine the squeals!

much better piece Gareth,

much better piece Gareth, sticking with what you know well :)

No matter it’s been

No matter it’s been responsible for steering scarce capital into the business of multiple housing ownership and starved the finance to manufacturing and  service industries.
 
Scarce capital, I think not - the world is awash in cheap capital - the problem is finding solvent individuals and entities to service and honour borrowing commitments.
 
What is in short supply is a link to the active RBNZ Capital Adequacy Framework PDF.
 
Pages 21 to 23 inclusive are probably relevant to most readers.

cheap debt - for sure - but

cheap debt - for sure - but is it capital?

Not generated wealth for

Not generated wealth for sure.

I cannot sit here any longer

I cannot sit here any longer watching a bunch of idiots at the helm of what is fast becoming the titanic!

Does anyone there have any practical experience running a business?

It is quite apparent that some boffins high up were instrumental in wiping out the finance sector. Congratulations on a job well done.  What was ignored was that SME environment had become reliant  on the finance sector to lubricate the economy. That's gone now and the wheels are certainly falling off.

the RBNZ regulations are all wrong. Regulation should have been prescriptive from the bottom up. As opposed to the top down. Apart from a few dozen cases before the courts and a bunch of old men in prison cells nothing has changed.   The high compliance costs lumped  on those few remaining finance companies has lead to them privatizing. Those entities are now all under the radar. What a ludicrous outcome.

For gods sake lift the risk weightings on property - and reduce them for SMEs. The banks must be forced to hold more capital for property. They have become lazy and bloated.

The effect of the rbnz policies  is that it is sucking the life blood out of the economy, whilst creating/ contributing to a property bubble, and moving capital into non productive areas. All this whilst investors (mostly the elderly) earn bugger all, and profits move offshore. It's all very well creating a stable monetary policy but if it's at the expense of the "economy" then what's the point?

Banks must be forced to invest in productive areas of the economy and take some prudent risks. That is what banks do.

Please wake up. Or even better just do something, anything!!!

Banks must be forced to

Banks must be forced to invest in productive areas of the economy and take some prudent risks. That is what banks do.
 
As has become apparent banks will and have lent against any collateral.
 
While I believe bank employees and their owners are avaricious in their efforts to secure a segment of our wealth, it's the citizens that ceaselessly enable them to do so at the ballot  box that are the real culprits.
 
Innocence and ignorance are not excuses. The prospect of securing a portion of that wealth mutes rational collective activism.

Brilliant article, 100% spot

Brilliant article, 100% spot on, good someone is actually telling it how it is.
nz decline started with rogernomics and prob is majority don't care about nothing but the AB's winning their test matches and getting away in their annual camping trip down to coranandel.
Intelligent, smart kiwis are leaving or have already left. Why should we be paying through our PAYE for free student loans, an excessive working for families scheme that needs some serious hair cutting and the 12% of the bludgers on benefits ???
 

The time is way past, when

The time is way past, when the average NZ'er gave a crap about how well the AllBlacks do.
If you met an AllBlack in the street these days, chances are, he would be trying to sell you a bottle of flavoured water, or perhaps a nice suit.
Kiwis have wised up.
 
 

Perhaps - but we have still

Perhaps - but we have still got a bunch of weak and useless politicians in both te national and labour parties !!!

Ive been in NZ for a week but

Ive been in NZ for a week but its great to be back home in North California. I really notice the lack of young around us in rural NZ, at 50 Im still the youngest farmer on the road. At Napier airport I met an old friend loading 2 children on a plane to Perth looking for work and a better life,both well educated youth.  Its just so much more fun around young, we have 5 children in the house at the moment, the sun is out snow on the Sierras, fish in the river and everyone is soo much better off than in NZ..
 I got an upgrade at San Fran to a convertable V8 mustang, I have been cruising town with 4 children jammed in the back wifey in the front, little cold in the frost this morning taking the girls to school but they still loved it.  May have to take it back to san fran as apparently the deal was meant to be a return to airport one, so Its Walnut Grove tonight and  weekend in San Fran for Mum and Dad. No capes
http://www.youtube.com/watch?v=M68ndaZSKa8
 
 I would have commented from NZ but the internet was soo bad I may as well not had it,  The flight back was fun as the plane was half empty, i counted 58 empty seats in the back section alone. I hope Air NZ can keep the flights to San Fran going.  Oh an whats with paying the head of AKL airpot 1.7 mill a year its full of overpriced shops and Mac Donalds, KFC and Burger King are not the places I prefer to eat.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1084...
 
 The regional council wants me to read my vineyard bore log daily,bit hard from here so a 2k telephony thing has fixed the problem with a $200 yearly charge to read it, on top of all the other charges NZ has no hope, just hope its a controlled collapse and not to chaotic for you all.  My local towns were dead and the retailers told me its the worst they have  known in 40 years. 

Andrewj I follow your posts

Andrewj
I follow your posts for two reasons. Firstly you display very wide experience and balanced solid knowledge. Secondly - you care about others.
 
Like yourself I have been perplexed at the way NZ has become regulated into a one-way box-canyon - from which there is little hope of common sense reversal.
 
Any common sense re-set that I can envisage - will be a sad and messy event
 
Those 'officials' who are charged with the legal destruction of the New Zealand economy need to be asked "Please tell me about your University Degree?" The enquirer may be astounded with the answer. "Art History" - to administer worker safety!
 
For the past 45 years New Zealand has been churning out huge volumes of graduates with some very impractical job prospects. 
Who would employ such dormatory-party-animals?  They find secure-for-life overpaid employment working for your local Council - or Central Government Department. 
 
Anywhere that gives them a Dot GOVT email address. Or better still Dot DHB!
 
Once they are installed in their work-station they spend their days

  • Having meetings to make sure (whatever) "It will never happen again"
  • Filling in idea forms relating to next years new title (with salary increase)
  • Surfing the Internet - STUFF - Trademe and personal purchases
  • Complaining about the "underpowered" work car fleet
  • More meetings to close any loopholes missed in the earlier meetings
  • More meetings to ensure their clients never see them as their 'Servant' 
  • More meetings to boost the 'Muppet-desk' staff in the use of the word "NO"

 
I could go on for hours. When John Cleese did his one-man show to NZ about 8 years ago he did a great skit on the topic "Six reasons there is no hope".  This was a very serious Cleese!
 
About 33% of NZ GDP comes from the land. The boss of Lincoln Uni states that  only 2% of graduates nationally study agriculture. And a similar low percentage study the sciences - all of them.
 
But we churn out useless Art History - US film making and BA graduates by the - million.
 
Midway through a recent house construction I paid extra for a second Council "Water tightness" inspection.  Neither inspector knew anything about building - but a lot about BA. For $1000 I next employed a 75 year old X builder who found THREE MASSIVE WATER ENTRY points in our new home - within 15 minutes. 
 
John Cleese was 100% correct. We are administered by clueless and unemployable (in the private sector) graduates. Fifty years ago they would have been 'Builders Labourers' - pushing a wheel barrow full of concrete.
 
We now have an X woodwork teacher in charge of the rebuilding of Christchurch. In his private time he was a director of a scam company that intended to buy out Sky Casino. And as Transport Minister he raises petrol tax stating that the revenue is dropping "Because motorists have bought fuel efficient cars".  
 
If that X-woodwork teacher drove SH1 instead of flying he would know that the roads are simply empty - because the average middle class victim has no disposalble income left after paying housing, food, taxes, user charges, levies, ACC and insurance. No money left for open-road petrol.
 
As an old old friend recently told me "Petrol has not gone up at all - I still buy $20 worth on each trip to the service station" But his tank gets smaller!
 
For 51 years the middle class were my customers. I always cared about my customers. I still care about them. Without a vibrant middle class - we are stuffed.
 
Is there anybody out there????
 
 
 

Its sad Rudderless, I have a

Its sad Rudderless, I have a child working in London and another one joining her soon, two in California and one studying in Canterbury telling me she's going to transfer the the UK after the next year, she's doing well in science and even on the student army committe. 
  We just need to dump the cost structure and then we can get back to doing what we do best. Lots of frost damage in HB, lots and lots, very sad for many.  Hopefully the Nats can sort it,  the tax take looks to be on a downward trend and exports are going to be way down.  Cutting Gov spending is going to be painfull and its always the wrong people anyway. Aj
 
  

Hows this for shocking stats,

Hows this for shocking stats, HB Regional hospital has 3 out of 4 children born to 'at risk parents' , %80 of the mothers are under 24 and 1/2 are Maori. from a good reliable source.

Since there are not many

Since there are not many Maori, birth rates must be collapsing.

I think they are the growth

I think they are the growth area.
regards

It has been for a long time

It has been for a long time Steven. I recall a conversation with a colleague around 2000 in which I quoted to him statistics from a Bob Jones book I had just read. 90% of Maori children are born into a family without a father. My colleague is married to a lovely Maori lass, and has perhaps 1/16th himself, said to me that he didn't believe it. So I went hunting and found the numbers easily, at 80% Bob Jones wasn't far off.
     Of course if you have followed my posts on Maori I don't necessarily hold them to blame, I mean if you offer someone underprivileged a free lunch they would be stupid to turn it down right?

I have a son in Christchurch

I have a son in Christchurch who in some ways leads the world in his graduate science - and another science - in which he is 100% self taught. A blend of both. Unique worldwide.
 
At times - without the mentoring (and funding) of his parents - he would simply give up. 
 
Imagine how hard it is to launch a world-beating scientific product - after 7 years of creation - into the current NZ business environment.
 
As long as his parents are still 'above-ground' - our son will keep on pushing - and he will prevail.
 
I have decided!

Agree with you on AJ's posts,

Agree with you on AJ's posts, good to read from someone that walks around with their eyes open.
 
Good luck on getting that product moving, makes the two years I have been at my invention seem better. I have something in the pipeline that will hopefully give me some traction in February. But one thing to consider is that intellectual property is just as likely to collapse with everything else. I take the view that any protection is solely to prevent someone else ripping off the idea at my expense, rather that getting rich from it. Christchurch is certainly one place that could use my invention, but with ECAN is operation in the least likely place to receive it.

In 1972 Bill Wilson, the

In 1972 Bill Wilson, the inventor of the amazing TumbleFlow marine heat exchanger passed onto myself some fantastic advise. As a serial inventor I have used Bill's tactic ever since.
 
It works!
 
Always have your Mk2 version ready to go when you launch your Mk1 version. NEVER over-perfect your Mk1 version before it is launched.
 
When the free-riding copy-cats launch their Mk1 copies your Mk2 makes their efforts look inferior. They offen give up because you strip away their cashflow.
 
Apple must have employed Bill Wilson - because they cerainly use his proven tactics.
 
Patents are only of use if you have the capital to defend them - as Apple does - with hit and miss results. If you dont have the defence capital just rip into it and go for it - with your Mk2 version all ready to go to market.
 
Good luck with ECAN. NZ needs heaps of innovation now - like never before. NEVER give up.

Son just moved from Taiwan to

Son just moved from Taiwan to Switzerland - doubt he'll ever come back, excellent job prospects and accepted for a PhD at the European Graduate School. Not even sure if the wife and I will ever come back either, apart from an occasional holiday. I like it here in HK.
 
What's the Kiwi diaspora at now? About twelve percent of living NZ passport holders?

Fatal, well consider how

Fatal, well consider how fatal lack of energy is going to be.  How we have moved from production to services because thats less energy intensive.....we cant go back there...
Totally agree in context.....except for one minor point, well 2, I think we can blame the last 3 Governors, but personally I think we can blame the pollies more in this Gareth.  Who after all owns lots of property? generations of pollies. Who benefits most from generations of voters feeling wealthy? Pollies.  What other asset allows voters to easily draw down their "wealth" to spend which makes pollies lives easier (bigger tax take)  Then there is the intelectual aspect.  To grow our economy in a balanced way would take Pollie effort not least would be artifial restrictions on some sectors.  That then opens up a can of worms....slower GDP growth...more state housing maybe.......and of course we have a very hands off approach by them.
Fatal, well yes, but just one lesser fatal really....
Greater Depression anyone?
PAYE are mugs? yes.....trouble is there is no one else to vote for.....bill or ben the flower pot men, take your choice...get the same thing.  Where is the debate in Parliment? none....channel 22 looks like a bunch of clowns.....expensively paid clowns.
regards

Thanks Steven I wander thru

Thanks Steven
I wander thru any supermarket and I just see - diesel. Because without diesel - none of that stuff would be on the shelf.
 
The top-selling Coke is trucked from Auckland to Invercargill. The second top selling potatoe chips are the same! And the Vegemite and Kelloggs shipped from Australia. Everything is diesel and bunker fuel. HMMMMM. How long can it last?
 
And to add to your list. The channel 22 clowns keep telling us about the huge private dept - most of which was spent on housing - McMansions with pillars - subdivisions - furnishings - fencing - driveways - appliances - landscaping and everything else down to the letterbox.
 
All of which returned 12.5% TAX REVENUE to the 9 year Clarke government. That chunk of borrowed funding was really government borrowing dressed in drag.
 
If we add that huge historic tax revenue to the current government debt - we have a huge government debt problem.
 
Is there anyone still out there?

Deisel indeed....its not so

Deisel indeed....its not so much how long it can last as how long will be be able to afford it.   Which is the point of OPEC, Exxon and cos and the rest of the oil industry denying it I think.  The longer they and we deny its increasing price and scarcity the less time there is to move / powerdown, in the mean time we'll be paying them a shedload.
IMHO now its all about getting your hands on the biggest slice of the shrinking pie while you can....greed has much to play....the "arab spring" much else.  The latter makes me think it isnt going to end well....
There is a game minecraft, that is an excellent example of the economics of oil/energy/resources.  You start with your bare hands and build. So one of the things you can mine for is crude oil, then you convert it to petrol and use it, all good so far.  The problem is the geysers are spread out and few and like a well empty. So then you can try biofuel production....which only works really with fertilizer....the raw materials for the input you mine for......which you have to go further and deeper to get over time (sound familiar?) you end up chasing your tail.
Its a very good demonstartion of an economics model....and for me shows that the developed world is going to decline as the cost of getting what it needs in everything gets more and more expensive. The developing world meantime uses up its resources to follow us....or sell them to us for a one time "profit"....fools all....
Meanwhile the loopies want to sell off NZ resources to keep them in power and us playing the debt game in housing...
sure this can go on for ever............sure.
regards
 
 
 
 
 

Steven you are 110% correct -

Steven you are 110% correct - and your 'game' sounds amazing.
 
I used to play the game Monopoly and Utility ownership was always a path to constant cash flow from the peasants - whoops - water and electric customers.
 
Not many years ago we would have laughed at the concept of having to buy water. And electricity was supplied by State Hydro at prices that reflected that the customer was a partial  owner of the grid and dams.
As Bob Dylan said 50 years ago - "The times they are achangin".
 
If I was a multi millioneer and had the power (not the energy type) - I would engineer a situation where I (and my rich mates) could assume ownership of a share of such a Monopoly game Utility - in real life.
 
Cash flow galore. Let the might Waikato flow>>>>>>>>>>>>>>>>>Ho Ho>>>>>>.
 
My god how the money rolls in >>>>>>>>>>>>>>>>>>>>>>>>>>.
 
Disclaimer: - I own 1/32 of, and  controlling interest of, my own water supply. I generate 90% of our electricity requirements - and moving towards 95%. Not at all Rudderless.

I think the real danger is

I think the real danger is indeed that the essentials which hold monopoly pricing will be taken over that though I think is short term.  Ultimately we the voter hold the top card, we vote in whomever agrees to nationalise them back for $1.  Simple just vote for me at the right time.
;]
Right now removing such foreign ownership would not be very practical, they would sue is in a New York court, easy peasy take our overseas assets. In the future though that wont matter as deisel or bunkerfuel shortage/price will be the end of globalisation and global finance IMHO.  We with our resources  will trade with whom we want and not via the USA either....that I think is headed for a dark ages.
regards
 

Nice to see some contented

Nice to see some contented souls right here.
;o)

Hi Basel   Since about 1980

Hi Basel
 
Since about 1980 (when real wages stopped rising) I have lived a happy life as a optomistic pessimist - or at other times - a pessimistic optomist.
 
I am fine about whatever is ahead. Prepared and very very contented..
 
But whatever happened to my customers? They seem quite unprepared. I speak on their behalf.
 
Not at all Rudderless

Well, you certainly seem

Well, you certainly seem rudderless not! Prepared and content, is the secret indeed.
HGW

Iven its classic keynesian

Iven its classic keynesian and when you say it has not worked, well the Q is where would we be if they had not? ie you have nothing to compare to say it hasnt worked.
The countries who have tried austerity and hugher OCR have seen first hand teh neg effect on employment, income etc...
regards
 

Lowering the rate helps our

Lowering the rate helps our busineses survive and its SURVIVAL now IMHO, inflation is 0.9% a bad sign, couple that with rising un-employment and a silly exchange rate and we are looking at another recession.  What Gareth is saying is slow down the ponzi housing market some how else....and thats with LVR, CGT, land tax and other capital limits tools.
regards

Lowering the rate helps our

Lowering the rate helps our busineses survive...
 
Steven, are you a derivative market maker or salesman that stands make a massive bonus if interest rate swap positions eat the fixed payer customers alive?
 
It's the only logic that makes sense because every business with lease/rental agreements looks to get slaughtered with a higher cost structure than the new bloke across the road. As do the taxpayers with all that not so old government debt to service at the wrong interest rate structure. I'm sure I would look to squeeze your busineses with reduced  price offerings after I cleaned up on my fixed income investments along with Johnny Foreigner.

bugger lost what i wrote,

bugger lost what i wrote, hate this keyboard...
:/
Logitec are just crap.
Anyway its way more complex....and yes I dont understand it..no one does I think...
regards

The reserve bank is mandated

The reserve bank is mandated to keep inflation in check. It can't just do whatever it feels like. 
Doing anything other than keeping inflation in check would be risky in the long term. Unlike a lot of countries, our economy is not (yet) bad enough to take long term risks - we are not even in recession. 

I caught the tail end of a

I caught the tail end of a chap on the telly talking about unemployment so I dont know who he was  but I thought what he said was very instructive.
 
He said " Most of our factories are living museums" meaning we are uncompetitive in many respects regardless of the exchange rate. If we engineer the exchange rate down somehow or come up with subsidies in order to protect inefficient industries and thereby jobs we are on a short road to oblivion.
 
I think that is what Gareth is talking about when he discusses the misuse of capital. However, I am not all that sure that making housing lending less attractive to banks will encourage them to lend to manufacturers. I guesss what it might do is moderate the housing market and make individuals more inclined to invest in equities than property but that could be long process.