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Thursday's Top 10 with NZ Mint: The FT's Martin Wolf makes the case for 'Helicopter money'; Independent Liquor's very sour deal; Water is the new oil; Currency Wars rage; Dilbert

Posted in Opinion

Here's my Top 10 links from around the Internet at midday in association with NZ Mint.

As always, we welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.

See all previous Top 10s here.

My must read today is #1 from Martin Wolf. Adair Turner's speech has shaken the landscape of monetary and fiscal policy oop north.

1. Now the FT's Martin Wolf is talking about money printing - The discussion about monetising government debt via central banks printing money is getting a roll on.

Currently Quantitative Easing is done by central banks who print money and buy bonds off banks. Eventually, the plan is to sell the bonds back to investors and banks.

Another option is for the central banks to print the money and buy the bonds directly off the government, before eventually cancelling the bonds.

Essentially, it is money created out of thin air to fund government spending.

It's not a new idea, but it's gaining traction in Japan and the UK in particular, and to a lesser extent in America, where the idea is politically explosive.

It all depends on being able to do it without creating inflation. Japan has managed it.

Here's the FT's premier commentator Martin Wolf also talking openly about monetising government debt.

His piece is called 'The case for helicopter money'. Remember, this is the strategy proposed by the Greens and mocked openly by the Government. Again, Wolf's piece follows the epic Adair Turner speech I referred to earlier in the week.

Those convinced hyperinflation is around the corner believe that banks expand their lending in direct response to their holdings of reserves at the central bank. Under a gold standard, reserves are indeed limited. Banks need to look at them rather carefully. Under fiat (that is, government-made) money, however, the supply of reserves is potentially infinite. True, central banks can pretend reserves are limited. In practice, however, central banks will advance reserves without limit to any solvent bank (and, as we have seen, to insolvent ones).

With central banks able to supply reserves at will, the constraints on lending are solvency and profitability. Expanding banking reserves is an ineffective way to increase lending, not a dangerous one.

First, it is impossible to justify the conventional view that fiat money should operate almost exclusively via today’s system of private borrowing and lending. Why should state-created currency be predominantly employed to back the money created by banks as a byproduct of often irresponsible lending? Why is it good to support the leveraging of private property, but not the supply of public infrastructure? I fail to see any moral force to the idea that fiat money should only promote private, not public, spending.

Second, in the present exceptional circumstances, when expanding private credit and spending is so hard, if not downright dangerous, the case for using the state’s power to create credit and money in support of public spending is strong. The quantity of extra central bank money required would surely be smaller than under today’s scattergun quantitative easing. Why not employ monetary financing to recapitalise commercial banks, build infrastructure or cut taxes? The case for letting fiscal deficits facilitate private deleveraging, without undue expansion in overt public debt, is surely also strong.

2. Water is the new oil - Jo-shing Yang writes at MarketOracle about the push to control fresh water globally. HT Steven in yesterday's Top 10.

A disturbing trend in the water sector is accelerating worldwide. The new “water barons” --- the Wall Street banks and elitist multibillionaires --- are buying up water all over the world at unprecedented pace. Familiar mega-banks and investing powerhouses such as Goldman Sachs, JP Morgan Chase, Citigroup, UBS, Deutsche Bank, Credit Suisse, Macquarie Bank, Barclays Bank, the Blackstone Group, Allianz, and HSBC Bank, among others, are consolidating their control over water.

Wealthy tycoons such as T. Boone Pickens, former President George H.W. Bush and his family, Hong Kong’s Li Ka-shing, Philippines’ Manuel V. Pangilinan and other Filipino billionaires, and others are also buying thousands of acres of land with aquifers, lakes, water rights, water utilities, and shares in water engineering and technology companies all over the world.

3. American free trade deal with Europe? - Bloomberg reports Barack Obama has pledged to try to get a 'free' trade deal with Europe. Some Americans are very excited at the prospect of selling into an open European market, but they never talk about opening up their own markets.

Free trade for America is always a one way street. You have to wonder though how much they will achieve with the Trans Pacific Partnership deal if they're trying to do a European deal at the same time.

“Negotiations will not be easy, but they have enormous potential to open new opportunities for us to sell our goods and services in the EU,” House Ways and Means Committee Chairman Dave Camp, a Michigan Republican, said in a statement.

Congressional support for an EU deal depends on issues including better market access for U.S. agricultural goods, strong intellectual property protections and a means to settle disputes, leaders of the Senate Finance Committee said yesterday in a letter to Kirk.

A free-trade agreement between the U.S. and EU is an “enticing opportunity,” the senators, Max Baucus, a Montana Democrat, and Orrin Hatch, a Utah Republican, wrote.

4. Currency Wars -  Der Spiegel has done a nice summary of the current thinking in Europe and elsewhere on currency wars. Ze Germans are not zo keen. Le French are tres, tres keen. Soros is a fan of competitive devaluations. Oh, the irony from the man who forced Britain out of the European Exchange Rate Mechanism. Although, now, there's plenty of Brits who would love to give him a knighthood for that.

Billionaire investor George Soros and French President François Hollande, a Socialist, are in agreement: The world is on the verge of a currency war, and it threatens to destroy Europe.

The Europeans should finally enter the fray and do battle with all their might, says Soros, who made some of his fortune by betting against the British pound. "Europe is an outsider," the 82-year-old recently said at the Davos World Economic Forum. He blamed the European Central Bank (ECB), which he called the last representative of an outdated central bank policy.

Hollande doesn't put it as clearly, but he means the same thing. "A currency zone must have an exchange rate policy, or it will end up with an exchange rate that doesn't correspond to the actual state of its economy," the Socialist told the European Parliament in Strasbourg last week.

5. Yet another private equity deal goes sour - NBR's Nevil Gibson reports Japan's Asahi is suing PEP and Unitas over its purchase of Independent Liquor, alleging misleading accounts.

This is what happens when your main method of making money is gearing an asset up to the gills and then flicking it on for a profit. Financial engineering is a disreputable profession.

The companies are seeking damages over claims that PEP and Unitas provided false accounts during the sale process, causing the buyers to overvalue Independent Liquor.

"This is not a case of poor due diligence but, rather, misleading and deceptive conduct," the source said.

6. The problem of corporates hoarding cash - Izabella Kaminska at FTAlpaville has a look at the debates over corporate cash hoarding and whether it matters.

As Albert Edwards of SocGen recently noted, corporates may be levering up, but they’re also buying back their own equity with the proceeds at the same time. This has the effect of boosting RoE, whilst preserving cashpiles and pumping up corporate stock prices.

To some extent it’s a Jedi mind trick designed to disguise the ultimate point that Cowen was making in the first place: there is currently no useful deployment for corporate cash. All investment leads to too much capacity, output or inventory, which only floods the market collapsing prices, compromising returns and profits further.

Corporate profits, if achievable, are thus now dependent on contracting capacity and cutting costs. Or in the case of Apple stimulating fresh demand with new product versions that hardly differentiate themselves from the old ones

7. The Robot employment threat - FTAlpaville have done an excellent video on the rise of the robots and corporate profits while manufacturing jobs and middle class wages fall.

This chart showing the divergence between wages and profits in the video is a cracker.

8. Some excellent long term Australian house price charts - Courtesy of Leith at Macrobusiness

Another popular method of determining property valuation is comparing housing prices to rents. In a fairly efficient market, the costs of buying and renting should closely match each other, though due to factors such as taxes, risks, and interest rates, it is unlikely that costs will equal. Since the post-WW2 boom, the ratio has unevenly decreased. Upswings in the ratio suggest the presence of a bubble: the mid-70s, early 80s, late 80s, and today.

9. Another excellent piece on the currency wars - Slate talks here about the massive debates going on elsewhere in the world about currency wars. Yet New Zealand is just sitting in the middle of no-man's land, expressing mild surprise, shrugging its shoulders and adopting a profoundly fatalistic attitude to the un-ending rise in our currency.

We say: 'Oh well, there's nothing much we can do'. No one else (bar Australia) is doing that. They are running for the shell holes, putting on armour, firing back and generally doing something. As opposed to niothing Kiwi style.

Matt Yglesias at Slate actually thinks the currency wars are a good thing because they will float everyone's boats higher at the same time. That applies when everyone does it. If you're the one who doesn't, you end up like the last man standing in a game of musical chairs.

Two years ago, Brazilian Finance Minister Guido Mantega delighted headline writers around the world by warning that quantitative easing and other stimulative monetary policy measures risked unleashing “currency wars” upon the world. Shinzo Abe’s election in Japan and François Hollande’s worries about the risks of an overvalued euro to the French economy have restarted the drumbeats of currency war. Mantega himself is issuing more dire warnings; Societe Generale foreign exchange strategists are warning that “it’s hard to see what concrete steps can be taken” to halt them; and in the Weekly Standard Irwin Stelzer warns that “Lenin would be cheering the currency wars” as a step on the road to destroying capitalism.

In fact, there’s absolutely nothing to worry about here. At the very worst, the so-called wars that Stelzer and others find so troubling will do nothing at all. At best, globally coordinated, expansionary monetary policy could do a great deal to reduce unemployment in the West and speed industrialization in poor countries.

10. Totally Jon Stewart on North Korea's 'Nukes of Hazard'

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment in the box on the right or click on the "'Register" link at the bottom of the comments.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current Comment policy is here.

105 Comments

#1. Essentially, it is money

#1. Essentially, it is money created out of thin air to fund government spending.
 
You mean like the banks do already? I don't see that much difference, other than who is creating it.

Re (1) why don't we just fill

Re (1) why don't we just fill the ATM's with an infinite supply of notes, and all citizens can just go and pull out whatever they want? Need a house, just pull out th money and go buy it. No need to work.
 
... Doesn't solve the issues and problems the market mechanism is so essential for, does it?   Production, including what to produce, and scarcity. Why would anyone bother building the house, if they can supply all their needs via the ATM, and then even if the house were to appear - perhaps someone built it for a hobby - say it's the only house, then what use pulling out $1.1 million from the ATM if the guy behind me can do the same, plus $1. Or a trillion dollars for that matter, as money is just confetti. The whole pricing mechanism is now broken, there is no allocation system to determine the use (and who uses) resources ... it's got to end badly, surely, as I suspect the one who gets the house will ultimately be the one who can weld the most force to secure, then defend it. Money, that has value, is at the centre of civilised, peaceful society.
 
Well how do consequences change between private sector doing this, and the public sector?
 

Of course, we are going to be

Of course, we are going to be fighting over an ever smaller cake, that we fight is, it seems our choice.
The "long emergency" in NZ context means the civil defence act can and will be used I expect to secure the "house" for the good of the "nation"
There are some good vids on youtube on Cuba that should give you and your fellow libertarians nightmares for months, enjoy,
http://www.youtube.com/watch?v=CAxt4zURigk
http://www.youtube.com/watch?v=yjCDjmIpGoU
regards

You completely missed the

You completely missed the point of my post, steven.

He must have missed this back

Forget economics, I wasnt

Forget economics, I wasnt commenting on that as such.  What I was commenting on is how cuba coped with its energy crisis when the Soviet Union collapsed and the oil shipments ceased.  It was highly authoritarian/totalitarian sure, and the Civil Emergency legislation we have is actually similar in outcome.
btw oil is now thought to be off the florida/cuban coast in enough quantity to reverse the cuban "problem" at least for a while.
You can also consider how Russia is doingnow it free to extract oil at the rate it wants to...not much of a democracy there is there.
and of course looking at how so called market economy's have badly failed globally its dubious to say they have or are working now energy cost and scarcity is impacting them.
but dont let facts get in your way eh....
regards
 
 

Not really.....you completely

Not really.....you completely miss or really refuse to see that whether we have your minarchy system or a socialist one or something inbetween the "confetti" or the gold is a proxy for energy, which means neither system can re-pay the debt already in existance.
regards
 

I'm with you tribeless,

I'm with you tribeless, couldn't agree more

It's interesting these ideas

It's interesting these ideas are coming from intelligent people like Martin Wolf because what you say is quite true.
 
If we think of wealth as tangible assets then creating money out of thin air just dilutes the nominal value of money.
 
The only counter weight I can think of at short notice is the velocity of money.  Essentially the argument that money (in the form of debt) has been destroyed on such a large scale that an equally large creation will bring back equilibrium of 'pressure' to the system.

I think you may have

I think you may have forgotten to insert the word 'supposidly' between the words 'from' and 'intelligent'.
The fact that the meme of unrestricted money printing and disbursement is being given an airing suggests to me a) how desperate the monetary authorities are becoming in the UK in particular and b) that the ground is being prepared for such intervention.
You only need to see the rapid descent in the pound to see the effect this is having. At this rate its buying power will be reduced to that of toilet paper.
 

...suggests to me andyh they

...suggests to me andyh they are broke, can't pay their debts...so just print money....don't want to own up and face the truth, so create a facade with printed money

If anyone out there is

If anyone out there is interested Japan just confirmed it has had a second consecutive quarter of contraction, confirming another recession. Japan has now achieved the near mythical 'triple dip recession'  (three recessions in 5 years).
http://www.forexfactory.com/news.php?do=news&id=410171
 
If only they had tried huge doses of QE and money printing none of this would have happened!!!
Oh wait.........
 

...if Japan had of faced the

...if Japan had of faced the hard turths in the 1990s after their bubble burst and restructured their economy I think they would have recovered instead of the 20 years + downturn they've had. They never did that, they tried to prop up their banks etc...with QE, and all the tricks we are seeing now. I can't beleive the West is repeating this game...it ends in tears...as Tribeless alludes to above

rp - It seems to me that the

rp - It seems to me that the banks must be running/controlling the Governments, as the only action taken by every Gov't having a financial crisis is to save/bailout the banks.  

pretty much andyh. The one

pretty much andyh. The one exception is Iceland. They let their banks go down, their currency fall, and their economy re-structure e.g. gone back to more fish exporting etc...And surprise surprise, they're bounced back better than anyone else. Those with banks cornering governments and and getting printed money to rescue them etc. are mired in perma-slump

Tribeless - correct again.

Tribeless - correct again. Private enterprise is seen as the ATM and until that mentality is changed we are pretty much screwed.
 
 

Incorrect, all you argue over

Incorrect, all you argue over is who does the pillaging.  Private or public entities see the planet as an infinite ATM to be emptied as quickly as possible thus creating "wealth" for one or two generations and the expense of hundreds of generations.
Screwed, yes.
regards

Steven -

Steven - http://www.tradingeconomics.com/new-zealand/government-spending
 
If there is anything that is unsustainable then it's the type of spending in the link above.
 
Private enterprise business is far more conservative as it has an efficiency mechanism built in. I would rather use resources as efficiently as possible wouldn't you?
 
What would you suggest to solve your issue of the planet being emptied as you put it?
 
 
 

To start with if you ignore

To start with if you ignore its all un-sustainable as there isnt the energy to pay it, yes the present debt is fine considering the situation.
Private enterprise is frankly in my experience poorly managed with little appreciation of risk, and you confuse efficiency with resiliance...HUGE difference, HUGE.  Dont worry I fully expect that the Civil Defence Act will be used fully and long term...
Solve the plant being emptied [of resources], I expect inside the next 20 years the nature will solve that for the good of the planet. Humans numbers on the other hand I suspect probably wont exceed 1 billion by 2030~2050.
Thats another thing you just dont get, the scale of the problem.  It isnt whether one way is 5% more efficient than another or not...its 1 or 2 in 7 or 70% to 85% less has to be used..ie about the 1920s - 1930s population. Or if its 1 billiion about 1840.
As PDK says, you are justa another deckchair wannbe superintendant on the stern of the titanic, lots of those about.
regards
 
 
 

Steven - you don't know what

Steven - you don't know what I ignore......you make assumptions based upon your narrow understanding of where you think others are based upon your own limitations and world view.
I am realistic enough to know that we can only solve so many problems within any given timeframe. The fact is the worlds population is 7b and that cannot change. So either we all get off our proverbials and create ways to provide for that population. Some like yourself would rather persistently whinge about shortage and over-population and peak oil but contribute nothing to solving the problems. This lazy sitting on your rear end, entitlement, expectation attitude is the problem
 
You fail to understand how market mechanisms influence change. If the price of oil were to escalate because of shortages then you can bet that solutions will be found. You have little faith in the peformance and abilities of humans to solve problems.
 
I would suggest you have very limited knowledge and experience on Private enterprise by the contents of many of your postings. You have no idea what risks they are managing and believe me there are many risks which all have to be calculated and planned for.
You sit in the comfort of a job getting everything done for you, not contributing in anyway to any of the compliance issues that are mounted upon private business, your PAYE is paid by your employer, along with your kiwisaver and any other costs associated, you have poor understanding of the mechanisms of GST compliance issues, you make unsubstantiated statements about business.
You have no idea what efficiency is as you don't have to account for that component in your life. Only resilient people will be in business and stay in business. But you would prefer that the State keeps spending as you want to knock the resilience out of those who dare raise their head above the parapet and create and contribute in a positive way to society.  The only wannbe deckchair mover is you. I bet you were please when you heard the phrase peak-oil......you found another deckchair to move around, a way of creating fear and obtaining control over others. And then you added to your repertoire the handy tool of carbon emmissions....oh another deckchair.
 

and thus you have blind

and thus you have blind faith, ne fanaticism that money will solve everything....even bypass maths and physics.
infinite does not fit into finite.
Never mind you like I get to watch...we'll see whos right....in terms of private enterprise just look at solid energy....ever believeing in rising prices only to be crippled by debt and collapsing prices....rinse and repeat. What is happening now with the primary producers will flow into the next tiers....we are caught between a rock and a hard place...the rock is rising costs of extraction v our (end user) ability to pay.  So at some point private enterprise will quit.
regards

Steven - you really need to

Steven - you really need to inform yourself. This clip might just help you understand the leverage in pricing that is obtained by taxes.
 
http://www.youtube.com/embed/WGHY8XpM6oI?hd=1
 
The failure of Solid Energy is a damn good reminder of why NZ shouldn't have state owned assets.
 

Wow, that 20 something actor

Wow, that 20 something actor seems really smart, and successful and self confident. Probably should just accept every single unsubstantiated assertion he makes about everything, shouldn't we.
Is that the sort of reaction you were looking for when you said Stephen should inform himself?
 

Nic -  you would be the last

Nic -  you would be the last person on here that would how the tax system affects price on all goods and services.  Before you go rubbishing the fella at least do a little bit of a background check. 
 
Obviously you think that it is acceptable to tax people of which business wears the costs of that tax gathering. You also find it acceptable that large Government depts at great cost administer the system that then ends up giving people a fair chunk of the earnings back.
I would not expect you to understrand how this puts the prices of all goods and servces up as you find Socialism completely acceptable and don't care about who the pawns will be in your game.
 

I was just pointing out that

I was just pointing out that if I believed 20 something fact totums for all they were worth I would be drinking an awful lot of beer, but I can't immagine it would be nearly as much fun as it appears to be on the adds.
If he, or you, or somebody else wants to substantiate this assertion then go ahead, but I am not going to go rooting around for an argument for you.

Yes, notaneconomist was

Yes, notaneconomist was ensuring that without a shadow of a doubt that I should consider her a nincompoop, she needed have bothered, Ive long held that view on her.
regards

The fanatical dogma of the

The fanatical dogma of the deluded. Look its quite simple I consider you a clueless person witha liberatrian blinkered view of the world, hence I dont really take much notice of the rubbish you spout except to counter it so anyone else reading it knows there is an alternative.
The problem with an SOE, private enterprise or then a bank is the Govn feels obliged to step and keep it going where the situation warrents it. At least with a SOE the Govn has a betetr idea how good or bad the company is run. On top of that the directors should have been running it as a commercial concern...they have failed.
regards

Steven - is that all you can

Steven - is that all you can provide.
 

You are convinced that your

You are convinced that your libertarian/austrian way is the answer, what could I say to someone who has such an unshakable faith. 
Personally the more I find the more I realise just how difficult things really are and to determine, on many levels. Two things that seems to be holding true are, the more extreme the point of view and the more ignoring of science, engineering and math the less likely it is to be well grounded and offer a workable solution.
regards

It's a damned good reason why

It's a damned good reason why we should have the debate about energy underwriting wealth, and that we should be valuing things in a different manner. Your Ideology gets in the way of any objectivity you might have otherwise had.

I would suggest that if the

I would suggest that if the last 3 years is anything to go by most ppl dont yet see that energy is significant, yet. or in some strange way wont look at it, fright maybe?
One thing I have learned inside the economic model that is minecraft is without energy nothing happens.  Run out of oil, coal and it all stops, this is born out again and again throughout history.
regards

That was an interesting

That was an interesting description of 'Notaneconomist'.
 
Wonder if we're dealing with an ex-pollie? I know of one who would fit the bill.

damn it, posted a reply and

damn it, posted a reply and this site swallowed it and lost it....No I dont believe she's an ex-pollie....a farmer of some sort.
regards

Since Mr Tribeless asked for

Since Mr Tribeless asked for a reply, I deemed to write one. Since I posted a comment on his home page a week ago, and it didn't pass censorship, I guess he only asks rhetorical questions however.
http://wwaet.blogspot.co.uk/2013/02/free-from-ideology-or-free-form-ideo...
 

Dont be silly, cant have any

Dont be silly, cant have any sign of discent...like the christian fundie squads they freely insist they post their rubbish all over the place, but censor what  is on their sites. Just look at conservapedia  for the depth and beadth of rubbish they believe is real.
Fortunately in turn most ppl wont bother reading the sites of these nut jobs, so they have to come to neutral ground to try and get any air time, cant censor away rational discourse then....
Im sure Mark will be back spouting un-defendable twaddle that only his fellow fundies will believe..
regards
 
 
 
 

I am still amazed at the

I am still amazed at the contrast in the values Mark aspires to believe in and the censorship he implements on his own blog. In this situation, a bit like climate denial sites, you have to ponder if the author actually believes in their position.

There is no tolerance and

There is no tolerance and humanity in extreamism. No difference between he and the christian fundies...or any fundies....
Oh I believe 100% he is convinced of his position, nothing else but a fundimentalist can ignore reality.
regards

http://www.telegraph.co.uk/fi

http://www.telegraph.co.uk/finance/economics/9867111/Mervyn-King-warns-G...
 
 

drjonathanwilson
5 hours ago

 

For many on this blog, Sir Mervyn King is the devil incarnate. Their charge sheet against him is based on the view that Sir Mervyn has deliberately transferred wealth from the poor and middle class to a small band of bankers. 
This view is simply wrong. The only way bankers have gained personally over the last few years is as a direct consequence of the follies of the politicians and their electorates.
Consider the size of the annual deficits and the mountainous pile of sovereign debt that has been accumulated by both Labour and Conservatives. What drives such a mad accumulation of debt?
To find the cause of such a monstrous pile of debt we need to look at what was purchased with that debt.
We need to look no further than the national budget to find the answers. The deficits and consequent debt has been driven by expenditures on the welfare state.
Consider the proportion of state spending on "Education", "Health" "Social Security" (in excess of 75% of government spending, and as a total is now more than 50% of GDP). Now these expenditures could be considered "investments" if the market value of their outputs, even over the long term, is greater than the cost of their expenditures.
But is there anyone out there who believes that the market value of the output of the NHS or the Department of Education, both state producer monopolies, is greater than their cost? Is the UK's monopoly producer in education giving rise to students, in sufficient numbers, that can compete globally? How many hands up for that proposition?
The clear conclusion is that huge transfers of wealth from both current and future taxpayers, plus huge transfers from prudent savers to pay for the welfare state has not been matched by an output from the welfare state that can repay what has been spent.
And this huge gap in the value of outputs to the cost of production is exactly what Sir Mervyn King has had to finance through QE, which has had the side effect of enriching bankers through their bonuses.
But let us be clear - without the need to fund massive fiscal deficits year after year, bankers would be a lot poorer than they are today.
And so Sir Mervyn King is absolutely right to point the spotlight back onto the nefarious cause of meltdown of the financial system - the abject failure of the welfare state - the Bank of England has done all it can - it is now over to the politicians and their electorates.
My advice to prudent British patriots - vote UKIP at every available opportunity - they are the only choice with the potential for real change to this madness.
Jonathan

 

Andrew, the link you give

Andrew, the link you give doesn't go to the quoted article: do you have the correct link?

Hes in the comments, he's

Hes in the comments, he's page 2 in best rated.
 
http://www.telegraph.co.uk/finance/economics/9867111/Mervyn-King-warns-G...

Oh, sorry I just read the

Oh, sorry I just read the article. Cheers for that.

Personally I like Mervyn

Personally I like Mervyn King. George Soros said he was the only central banker who actually understood what he was doing, or words to that effect.
 
I can't say the same for Martin Woolff, he seems to be somehow a bit of a plonker, albeit one who appears to be very bright and is certainly able to parrot the mindless fashionable ideas of the day. What would his predecessor say about what's going on, William Rees-Mogg, the man who predicted the fall of the USSR?

I harbour similar sentiment

I harbour similar sentiment in respect of FT jounalism.
 
Hence I find myself in total agreement with the blunt words of John Ward:. 
 
The Financial Times remains a very pale shadow of the oracular organ it once was. Being a pink organ, it is perhaps not surprising that increasing numbers of people I respect think it is written largely by dicks. Its daily output of Business as Usual nonsense does I’m afraid add weight to this impression. The only truly grounded and original thinker in the place is Gillian Tett, and so of course she’s been shipped off to run the American operation. What a waste.

It seems William Rees-Mogg

It seems William Rees-Mogg was in fact editor of The Times in pre-Murdoch nonsense rag days, not the FT as I thought.
I find John Ward's writing style just wonderful, his ability to express his scorn of fools is a delight.

  all excellent stuff: The

 
all excellent stuff:
The clear conclusion is that huge transfers of wealth from both current and future taxpayers, plus huge transfers from prudent savers to pay for the welfare state has not been matched by an output from the welfare state that can repay what has been spent.
Tax in the UK is the thing that little people pay to pay for other little people- either ones just like them ( eg when it comes to state schools in the right area, and or the good public hospitals- again in the right area) or ones that are much poor than them, eg those up north.
Actual rich people, don't pay much of anything in so far as tax is concerned.
There is litle tax at all except on consumption and working. ie taxing little people.
 

#3....and we are busy burying

#3....and we are busy burying our own local businesses with our own "free trade" agreement with the US...
Great, just great.

not sure if interest.co.nz

not sure if interest.co.nz has covered this, but Venuzuela has fired a nuke in the currency wars, devalutation of 46%
http://peakoil.com/publicpolicy/venezuela-launches-first-nuke-in-currency-wars-devalues-currency-by-46
 

the lesson is dont mess with

the lesson is dont mess with uncle Sam and the OIl boys, or you get cancer and your currency gets destroyed.

they devalued it themselves

they devalued it themselves Andrewj...i.e. double their export revenues so they can spend more at home. But obviously halved their purchasing power if they buy any imports.

Interesting, Ive talked to

Interesting, Ive talked to two banker friends over the last few days, both think our currency is going to parity against the US, and bloody near to the Pound.

I'd agree with them. Every

I'd agree with them. Every Obama policy increases debt, hence need for QE, hence he's collapsing their currency, and the debt is so huge no short term fix possible (or medium term, or long term).
 
The price for helicopter money is when debt gets to a certain height, the economy's head will get chopped off by the rotors.

Tribeless, Only winners get

Tribeless,
Only winners get to rewrite history and you are not one. The US military industrial empire has been heading to this place way before your hated 'liberal' president entered the fray which i doubt he did only to reinforce your inane tunnel visioned view of the world

Of course I don't just blame

Of course I don't just blame only Obama. I wouldn't vote in US because neither Republicans or Democrats represent my beliefs. They're all statists, and statists are the enemy of free men. Obama's huge spend and brand of socialism is getting them to the cliff much quicker though. Goggle a map on US government debt since 1970.
 
Perhaps trying thinking about what I've written rather than making up a whole bunch of assumptions just so you can attack what I am.

Government debt since 1970,

Government debt since 1970, interesting approximately when the US ceased to be the worlds largest oil producer (The Steven/PDK Position), But yes I have read a few of your Randist rants and they all disolve in the same way, Your anti-statist position relies on so many instruments of the state, legal, police etc that is rapidly becomes clear you are not anti-state you are simply anti the parts of state that you disagree with, you may wrap this in a thin veneer of jingoistic ideology with primal appeal but in reality  you don't want freedom, you just want more than everyone else

I am for a minarchy. State to

I am for a minarchy. State to provide the rule of law - ie, police non-initiation of force principle, criminal and civil justice system, that's it.
 
Because the alternative is as I've blogged today: Dunne's Multinational Tax Crackdown: The Assault on Privacy and Prosperity.
 
Read the paragraph before the film clip.
 
Keep up neven.

Oh, and I 'don't want more

Oh, and I 'don't want more than everyone else', because I'm not really into money. To quote myself:
 
Unfortunately my advocacy of laissez-faire capitalism - noting the crony capitalism we have is to capitalism what sea horses are to horses - has never been about money; it's only ever been about that wonderful, evolutionary thing that capitalism, and only capitalism, is based on - the voluntary transaction. I'm a freedom freak: peace baby, the true sixties legacy, not those suited communists in the Greens Party whose every policy is the advocacy of force. Only on the voluntary transaction can there be a voluntary, free society. I said unfortunately because this has meant that while I'm comfortable, I'm not rich enough to build a space station. That's what I would do if I had money in real quantity. I'd build a space station and remove myself from the ugly, brute society we've created for ourselves, yet again. As generation text say, 'I'd be outa here'.
 
But thanks for the jingolistic compliment: I am a try hard with the language. I mean I do try hard. Most of my posts are written in iambic pentameter. Did you know that?

Shall i compare thee to a

Shall i compare thee to a summers day...not likely

If it were a nice summers

If it were a nice summers day.
 
It's been a while since I slummed it in here with the lads. What a blast. What you got for lunch nev?

Please don't let us detain

Please don't let us detain you any further.

Mist - good post. My answer

Mist - good post. My answer is simple and certainly not directed at you, as I know you already  understand this well.
The differentiation in simplistic terms for the illiteratii is......Freedom or Control.
Those people who advocate everything must be controlled have serious psychological issues. Masters of control have a constant need and desire to manipulate all and sundry.....they need victims to prey upon.....dominating control freaks feed off other people.
 
 

Voluntary transactions? Is

Voluntary transactions? Is that why you objected so strongly to Bernards suggestion of a voluntary boycott of Starbucks and other multinational corporates?
A space station, what a wonderful example that would be of a libertarian utopia, of course like all libertarian utopia its totally dependent on external supplies (like oxygen, food, water, garbage disposal in this case).
 

Pretty much nailed it there

Pretty much nailed it there Nev, chuckle.

Thanks Andy, I just can't

Thanks Andy, I just can't help myself sometimes...I see an intellectual puppy soiling the carpet and i have to roll up the paper and smack it on the nose

Oh you big bully you.

Oh you big bully you. Shucks.
 
Have you noticed though, every reply you've made to a substantive post I've made above, you've simply resnorted with ad hominem?

et tu "It's been a while

et tu "It's been a while since I slummed it in here with the lads"

I came upon this the other

I came upon this the other day. Seemed relevant to your discussion somehow.
http://orwell.ru/library/articles/ABomb/english/e_abomb
 

You boys are pretty funny,

You boys are pretty funny, but I can't remember what you were talking about.  Something to do with the political economy perhaps?

Actually you have never made

Actually you have never made a substantive post let alone backed by any deep and verifiable facts.
regards

Except if you look at the

Except if you look at the GOP, everything they have done has driven up the debt.
regards

Tribless simply not true, not

Tribless simply not true, not say v the GOP / Bush spending.
http://krugman.blogs.nytimes.com/2013/02/12/hearsay-economics/
http://krugman.blogs.nytimes.com/2013/02/11/more-about-us-austerity/
The graphs are of course quite striking.
The QE mess was inherited from Bush and isnt Obama's (directly) fault.
Or the fact that the GOP wanted to give the US military 2billion more than it wanted, needed or asked for....some policy that one.
regards

Paul Krugman?   C'mon!     I

Paul Krugman?   C'mon!     I think Tribless has it pretty close.   Let's see, the USA has $16T in debt.   Let's pretend that Iraq and Afghanistan, which cost about $1T each didn't happen. That leaves $14T.  Hmmm...  Still a whopping big number!   Obama says in 2008 that GWB's debt of $10T was unpatriotic.  Don't forget that includes those two wars!    So, in 4 years, he adds $6T all by himself while old George was taking it easy in Crawford. He's used quite a few drones, but I don't think it was $6T worth.  
The Senate, under the leadership of his pals has not passed a budget in 3 years.   The Republican house passes budgets and actually, you know, votes on stuff, but the Senate ignores them.  Do you also remember that Obama's last budget did not get even a single vote from his own party?    So the Feds have run $1T per year in deficits for the last 4 years and will continue to do so... Well, forever.   So, by the time Barry is done, the debt will be $20T.  
Meanwhile, the only states in the USA that are actually balancing budgets and creating jobs are being run by Republicans (Jindal, Christie, McDonnnel, Perry, Walker,Daniels, etc. etc.).   The real basket case states are all run by Democrats (Brown, Cuomo, that dork in Illinois).  
Last I checked, George was still in safely in Crawford, waterboarding horses for all I know.  
And Obama's answer to all this is... um... what?   Raise taxes on wealthy, which if it actually worked, would fund the government for about a week.   Genius.   
Well, something that can't go on forever won't go on forever and this certainly will not.   Cheer up lads, the USA is becoming a giant version of Greece with no sugar daddy to bail her out.   But that guy at the top sure can deliver a speech!   Too bad he's entirely content-free. 
Yeah, I voted Republican last time, and every time since 1980.   Not that hard to figure out why, really.  

Paul Krugman points out that

Paul Krugman points out that a lot of right wing economics propaganda is heresay based, and you respond with a lot of heresay and eventually admit you voted Republican last election. Hilarious.
 

Well, I just think he's

Well, I just think he's wrong.   So did Milton Friedman, another Nobel prize winner.   Can you actually define "right wing economics propaganda"?   Would that include the Chicago School (http://en.wikipedia.org/wiki/Chicago_school_of_economics)?   What a bunch of sleazy hacks!
I wish you were right about $16T in debt being "hearsay".  Wouldn't that be a nice fantasy?   But I think you and I both know that $16T is all to real and growing by $1T every year until... it won't because nobody will buy the debt.    Then what?   
So you've got one party saying we need to actually fix it and other saying "Don't worry, be happy. Those party poopers are just a bunch of racist hicks."  The other guys like the Libertarians don't matter because they won't win any elections.   So, pick your poision, mate.   It's either one or the other and it doesn't take a genius to figure out which party is screaming us down the path to Greece.  
In the meantime, I'd like some of that stuff you are smoking because you seem to think is all so hilarious.   

Yes, you will find that your

Yes, you will find that your total ignorance is hilarous to me, but I don't need any drugs to come to that conclusion.
You will also find that most Republicans are not racist, but they only get elected by pandering to hateful wings of their voting blocks. That's why they are holding post election, how to talk about rape discussions, to try to work out the most appropriate way to use conversations about rape and the pregnancies which result in the most expedient way politically. Thats why few latino, or african americans will vote Republican despite the fig leaves of candidates they hold up.
Probably the most stinging critique of Friedmans economics was the one he delivered himself, in a 1993 interview he stated that the concept of Monetarism was flawed, and he would not push it so hard if he had his time over. In other words the Monetarist experiments carried out in the UK, and to some extent NZ were just that, nation wide social experiments though of course the economic consequences for many people in these countries were real.
Anyway, I don't have voting rights in the US, so who the US elects as leader of the world is not in any way my perogative.
 
 

It would be interesting to

It would be interesting to know how many Republicans you have actually met, since you seem to be be able to read our collective minds and ascribe so many motives to people you don't know.  When you say that "most Republicans are not racist", what do you mean by "most"?  What's the number, mate?   49%?  Are you feeling generous today?  How about 34%?  I would love to see your list of racist Republicans.  Where is it? 
Arguing with you is like shooting fish in a barrel. So far, you have only spoken in cliches from what you've heard in the more fashionable corners of the Internet that echo your biases. Snark is not a substitute for knowledge. 
How pleasant for you!  If you just whip out a few bad names to call those you disagree with, you don't actually have to make an argument.  Your grasp of US politics is shallow.  You don't know the issues; you don't know the numbers, you don't know the players, and you don't know the policies. What do you know, really
By those standards, you are perfectly qualified to be opining on this site.   Good luck with that, friend.   

Actually like 99% of

Actually like 99% of republican voters are not racist would be my guess. And I differentiate between a political party and its voting base, the poorer voters for the Republican party are not best served by them, as has been obvious for years.
But you can't bring the Republican party line as an argument, its obviously propaganda, and therefore unreliable (the Democratic party line is also propaganda, by definition). In this case we know very clearly that its mostly scare mongering, first of all Republicans are desperate to cut social security, but as Ronald Regan said, 'Social Security has nothing to do with the deficit'. So this has nothing to do with the deficit. Also the Republicans were so desperately concerned with the size of the deficit that they came up with a plan, and the plan was, bud bud a ba, to ask the Democrats to suggest some budget cuts. Well anybody who knows anything about real politics knows this is so that they can use this when running for office next, with the message, and that Democrat, he cut your .... Hmmm, seems the deficit is in reality not such a concern.
 

mist, As it happens I agree

mist,
As it happens I agree with many of your sentiments, although wonder when push comes to shove what government expenditure you would really cut. Nearly a third of it is in pensions and welfare; and most of that in pensions. Add in education and health, (where I'm not sure the private sector world wide does have a more efficient record, but that is an aside) and you have the vast majority of spend. Where would the substantial cuts really come? The 65+ crowd are heavy voters.
That is aside from the main point I think.
If the government is determined to spend x, whether that spending is well based or not, and the economy's circumstances are that it can or will only collect considerably less than x in taxes, then I believe this man argues that printing money for the difference is not materially different to the commercial banks printing it for private debt. 

DID EVERYONE MISS

DID EVERYONE MISS IT?
http://www.interest.co.nz/opinion/62906/opinion-anz-nzs-economics-team-look-key-themes-2013-heres-theme-five-asia-taking-story
Opinion: ANZ NZ's economics team look at key themes for 2013
Part 5
"We're already seeing evidence of the benefits with exports to China compounding at 18 percent per year since 2000. Great stuff, until you learn China's agriculture imports have been growing in excess of 20 percent
This suggests we are undershooting the mark in an area of supposed strength, especially as we’ve also had the benefit of being the only country with a freetrade agreement with China (in place since 2008)."
 
Well, so much for "Free Trade Agreements"
We did worse than everyone else and they didn't have a FTA
Ha, Ha, Ha, what a bunch of tossers we have for government
 
 
 
 
 
 
 
 

When people talk about money

When people talk about money expansion and inflation can they please show in relation to the suply side so we can follow your logic. Thank you

...bit of a scary one

...bit of a scary one Andrewj....see a grain of truth in it though

Bernard, the Xmas break was

Bernard, the Xmas break was clearly good for you because you have come back flying.
I like what Matt N is saying but at this point i am on your side.

#2 - Lake Taupo iwi wants

Shamefully the burden of the

Shamefully the burden of the lake clean up costs are levied against ordinary ratepayers. Correct me if I am wrong. 

http://www.stuff.co.nz/waikat

http://www.stuff.co.nz/waikato-times/news/7693007/Govt-asked-to-boost-Taupo-cleanup-funds
 
They pay the majority - central government contribution 45% of the overall cost, balance to the ratepayers.
 

How does 45% taxpayer funds +

How does 45% taxpayer funds + a balance,which you don't quantify   = a minority?
It doesn't, and can't,  until you give a figure for non Iwi ratepayers.
 
 

It matters not. Those

It matters not. Those exercising their property rights while others remain financially responsible for the property's upkeep is a recipe for a ghost town.

  Mist, Good effort, and

 
Mist,
Good effort, and again, I agree with most of your sentiments. Am also not sure how to address the bureaucracy, litigation, middle class entitlement, government reliance, or noses in the trough culture that does seem to now prevail. Even if you credit the Nats with any genuine attempt to try (and I truly don't know whether they have or not) special interest groups and the media jump on any attempt to change the culture in any specific way, and the Nats falter pretty quickly. I accept that the opposition parties are unlikely to meaningfully change the culture either.
A spreadsheet on here:
http://www.treasury.govt.nz/government/data
shows government core expenditure in the following years, and then turned into USD at the prevailing rates for the year. Starts with Labour's last year. In Billions of respective dollars.
2008 NZ$57.0  US$40.7 
2009 NZ$64.0  US$40.6
2010 NZ$64.0  US$46.1
2011 NZ$70.4  US$55.7
2012 NZ$69.1  US$56.0
Yes there's been a GFC and the earthquakes (though am uncertain whether they are reflected in here); so maybe most of the increase in expenditure was necessary. It's a 22% increase over the 5 years in NZD terms, and a 37% increase in USD terms. As we know the extra expenditure has been borrowed; not taxed yet. And most of the borrowing was from offshore, so pumping up the exchange rate, causing the USD amount to climb by 38% in 5 years, and likely by 50% at this years rate.
Add in local government, and I agree the amounts are even worse.
So it seems to me we need to keep addressing the micro issues you talk of, have a sensible dialogue about some culture change. A quick win though would be to address the exchange rate, which would instantly make trading industry more competitive, and give a tail wind to the culture change you suggest, away from the government, and property, dependency.

Can you justify why you have

Can you justify why you have the US$ floating here? As far as I can see the NZ$ percentage increase should match the US$ percentage increase in any sensible analysis, e.g there is only one percentage increase.
 

Nic, It may not be intuitive,

Nic,
It may not be intuitive, but in my view in the end government mostly has to be paid for by trading industries and their employees; industries either exporting, or competing with imports, or tourism. To a large extent the USD is a proxy for our TWI trade weighted exchange rate, given much trade occurs priced in it. 
So I've taken the NZD costs of government in the last 5 years, and turned them into USD at the prevailing exchange rate for each year to come up with a USD cost of government that has increased by 40%, which is a cost increase to those traders, whose income has probably not gone up 40% in the same time.
Right now, the USD NZD cross is a further 5% higher. The fact that this tax has not actually yet been charged, (given the now huge fiscal deficits) is just storing it up for future generations. In the meantime through a very uncompetitive exchange rate, and complete indifference from the government, we are having a nice enough old time, but giving away our wealth and industry.
Despite English's claims of only having a peashooter, only he in the world has access to the print button on NZ dollars, and he refuses to use it. Without that our trading industries are roadkill in the currency wars that are raging.

I don't think that makes

I don't think that makes sense still. The government has not been increasing the business tax rate, so businesses are not paying the costs now. They may need to pay them in the future when the rate increases, however this will be paid at the current US$ exchange rate then, not in the years that the government debt was incurred, if we assume your argument is correct.
The main reason for NZ business struggling at present is hardly the cost of government, but simply due to a huge appreciation in the foreign exchange rate. Probably has a lot to do with lower turn over in some sectors as well. Since they didn't grow up in this environment they are struggling to cope with the appreciation.

when you deal in

when you deal in international trade the payments and contracts are normally done in the International Currency as proxy, this is currently the US$.
Agree.
As far as my research can tell, Government spending IS NOT paid for by taxation within NZ, but is actually paid for by foreign bonds/borrowing.
You mean the NZ government deficit, because that is almost entirely NZ$ denominated of course, which is best for NZers. There would be a real problem if we borrowed US$ to fund our deficit. But where we differ is here, its not the NZ governments responsibility if other businesses and individuals buy this debt and choose to fund the NZ government. The NZ government should not decide what spending to choose based on if this is good for foreign (or even if they were largely NZ housed) business profits. BTW, thats not a technical question, but a moral/politial one of NZ government policy. Obviously the NZ government should follow a spending policy based on as much democracy as possible, they don't, they should do this more. BTW, the standard assumption would be that if businesses and individuals are buying NZ government bonds then this is profitable for them at the risk rate, or they believe it will be. Again that's not the NZ governments problem, its not their to make its investors profitable, especially not any of its foreign investors. They invest at their own risk.
If you mix your ideology into the argument, of course you will end up with a non-sense. Stephen was arguing originally that there was a cost to be paid by businesses, and there might be, but that cost will be paid at (by proxy) the US$ exchange rate at this time and when the NZ government changes the business tax rate. Anything else is pure nonsense, and probably ideologically based non-sense.
Essentially I am just pointing out that far from every business in NZ elects to fund the government deficit and many overseas businesses do. Ergo your argument that this is a tax makes no logical sense, business tax's are paid by every NZ housed business (and most foreign owned subsidaries), electing to fund the NZ government deficit not so much.
 

NZ businesses don't "elect"

NZ businesses don't "elect" to fund the deficit
So you are going to explain to me how the NZ government forces anybody to buy its debt? Businesses have to pay the tax rate, but no more than that, and the tax rate has been going down if anything over time, especially recently.
NZ businesses are fined (taxed) for operating in this country by the government.
Yes, and this funds the non elective component of government spending, the elective component is called the government deficit. They don't have to fund that if they don't want to.
Frankly one would think that if you are correct and the NZ government is borrowing lots of money from overseas, and this is a form of tax in NZ dollars, then this would be a drain on overseas business profitibility, not NZ business profitibility. I mean what a bunch of idiots these foreign guys must be to be paying what you call a "tax" in NZ by lending the NZ government money. No, in fact the NZ government sells debt and this is at a profit to the buyers, its nothing like a "tax", and you are only making that analogy because of ideology.
Tax is tax, debt is debt and they are quite different. An argument that the US exchange rate is making the government debt more of a burden over time is plain nonsense.
 

So you are going to explain

So you are going to explain to me how the NZ government forces anybody to buy its debt?
What part of voluntary do you not understand about the NZ government deficit funding?
If the government pays its interest bill right now, they can get 84.5- 85.5 UScents for each NZD they owe.
What on earth are you talking about, NZ government debt is almost exclusively NZ$ denominated. If the lenders want to exchange for US$ that is their problem.
As I noted earlier, the government debt is a drain on business, when and only when the corporate tax rate is actually changed. Until then its probably a boost for any business which is interested in buying that debt.
If you are hinting that the government deficit is the primary driver of the exchange rate, that is incorrect.
 
 

*grabs popcorn*

*grabs popcorn*