Post RSS Feed 
Podcast Feed
Guest opinion: Why Labour took the historic decision to challenge monetary policy orthodoxy
November 19th, 2009
By David Cunliffe
I believe Phil Goff’s announcement today of the end of the major party consensus on monetary policy is historic. It will help shape New Zealand’s economic future and the opportunities available to young Kiwis and our kids.
The status quo was part of a global consensus that no longer exists. The global financial crisis has helped to wash it away. The change started much earlier. Some people still don’t get it.
The Official Cash Rate (OCR) was designed to fight inflation, as readers will know, by raising interest rates to cool off the economy (or the reverse as required recently). Over the years it did a pretty good job on that front, but it has been eroded by the growing lags invoved in fixed mortgages, and the failure of banks to pass through changes in full to retail interest rates (see www.bankinquiry.org.nz for more on that).
More importantly, acting alone it has not achieved inflation control alongside reasonable stability of exchange rates and money supply. Combined with an imbalanced tax structure, high real interest rates helped suck in hot money that drove the housing bubble.
As interest.co.nz has noted, that was great for banks and baby boomers who already owned houses, but bad for productivity, the foreign debt and younger Kiwis trying to realise their dream of home ownership.
The writing is now on the wall: New Zealand has to earn more, export more, save more and be more resilient: combining a sustainable environment and a decent society with a real plan for growth and high skill, high value jobs.
Kiwis can’t just keep borrowing ever greater amounts of foreign capital, then periodically electing National to flog off what’s left of the family silver to cover the debt.
Government debt is not the principal problem (although the Nats are planning to massively increase it through pollution subsidies to big emitters). Private debt is. And the way out of that quicksand is more savings combined with monetary policy that achieves a better balance between inflation control, growth and external stability.
These are tough problems, and more work is being done to learn from overeas experience and to refine solutions.
It is important to note that Labour will continue to support an independant, full service central bank. We will continue to fight inflation and guard against inflationary expectations. There will continue to be an important role for the OCR.
But as the recent Banking Inquiry rightly pointed out, the OCR should not bear the whole weight of adjustment on its own, nor can one instrument be addressed at several objectives. Complementary tools are required.
We can’t expect exporters to thrive with exchange rates swinging from below 50c US to 76c US in less than a year.
We can’t grow without serious investment in smarts and technology that give us in-country commercialisation and manufacturing capability.
And we can’t deepen domestic capital markets through an effective tax subsidy to real estate speculation, or a banking system that is 97% owned offshore!
Younger New Zealanders now have been whacked with bearing higher superannuation funding costs, massive ETS pollution subsidies and ongoing exclusion from the property market.
Labour is on the move to solve these hard problems. Good on you Phil – great speech!
____________
* David Cunliffe is the Labour Party Finance Spokesman
Tags: David Cunliffe, ETS, Labour, monetary policy, National
You may also like to read:
Loading ...
November 19th, 2009 at 2:59 pm
“Combined with an imbalanced tax structure, high real interest rates helped suck in hot money that drove the housing bubble.”
Imbalanced tax structure – yes.
High interest rates – no.
An imbalanced tax structure with a lower OCR would have lead to a larger housing bubble. We are a small open economy, the supply of credit is infinite – the housing bubble stems from credit demand, which is declining in the OCR.
November 19th, 2009 at 3:22 pm
These guys are something else. They say something that they know will appeal to all the idiots out there and boost their poll ratings, even if it means wrecking the economy.
This is wrong on so many levels, but to pick a couple:
Who cares if the exchange rate is volatile, it reacts to changes in commodity prices and so makes returns to exporters less volatile.
Most of the blame for the housing bubble and other economic imbalances can be laid squarely at the feet of the complicated tax system left by the last labour government. It is true the Reserve Bank is powerless to act, because it’s not their Job. The government needs to clean up the tax system.
November 19th, 2009 at 3:28 pm
That housing for average kiwi families is seriously unaffordable is a Labour achievement…well done that man. What a legacy. A stupendous own goal.
November 19th, 2009 at 3:36 pm
Matt can you explain your last sentence in plain english ?
” We are a small open economy,the supply of credit is infinite – the housing bubble stems from credit demand , which is declining in the OCR ” ????
SV — if you think the fluctuations in the exchange rate are just a reflection of commodity price changes — check out the figures because that is just nonsense. Why is the NZ$ one of most heavily traded currencies in the world if that is the case? All commodity price don’t move in the same direction .
November 19th, 2009 at 3:43 pm
I wonder how many exporters Swing Votor has spoken to recently….exchange rate volatility is a curse for business planning, and many smaller companies cannot afford to currency hedge.
Matt’s post is appreciated, but contains the false assumption that a reformed monetary policy is the same as a lower OCR – but even if it were, there is little doubt that high real interest rates attract speculative capital flows on average.
The underlying issue is to get below the headline to consider the nature of different types of inbound capital flows – short vs long term, speculative vs eg greenfield investment.
I welcome the debate. We do not claim to have been perfect, nor to have a monopoly on wisdom, but we do care very deeply about the future our of country and we look forward to working with others to consider how monetary policy can best play its part in building a more resilient and productive future for New Zealand.
November 19th, 2009 at 3:50 pm
Hi Ross,
We are a small open economy, the supply of credit on the market at the world interest rate is larger then we can grab. As a result, changing the domestic interest doesn’t actually change how much we can get our hands on (as if we are below the world interest rate we get nothing, if we are above it we can “bid it down” to the world interest rate). This implies that what matters domestically is demand for credit.
“SV — if you think the fluctuations in the exchange rate are just a reflection of commodity price changes — check out the figures because that is just nonsense. Why is the NZ$ one of most heavily traded currencies in the world if that is the case? All commodity price don’t move in the same direction .”
SV is right. It doesn’t matter that the $NZ is highly traded – that just means there is lots of people on both sides selling each other stuff. If you look at the figures, the exchange rate has moved to smoothed out movements in commodity prices over the last 20 years. If it wasn’t for the moving dollar the returns to exporters would have been even more volatile.
November 19th, 2009 at 3:51 pm
I would have hoped that the Finance Spokesman might fill in some of the detail left out of his leaders speech – disappointed that all we got was a slap on the back for Phil and his “great speech”. We need more than cheerleading – we actually need some thoughts on how this might be achieved.
November 19th, 2009 at 4:19 pm
Its historic iinsofar it demonstrates how stupid the current labour lot are.
November 19th, 2009 at 4:25 pm
Hi David,
“but contains the false assumption that a reformed monetary policy is the same as a lower OCR”
The tone of the reform is that monetary policy needs to focus on growth and the exchange rate as well as inflation. In a situation where the dollar is strong, that by definition implies a lower value for the OCR than in the case when inflation is the sole target.
“there is little doubt that high real interest rates attract speculative capital flows on average”
There is doubt.
The main issue isn’t that the interest rate attracts capital – it is the demand for capital. Just because people are willing to lend to NZ at a higher interest rate doesn’t mean people will necessarily just start borrowing.
The increase in capital flows was not the result of a rising OCR. It was the result of rising demand for capital. We should be asking why this increase in demand occurred – and I agree that a imbalanced tax system over most of the decade was one of the culprits.
November 19th, 2009 at 4:30 pm
Mr. David Cunliffe
Let’s hope that this is a good start and a re-invention of your party’s approach. Give us the real hope expeditiously. Action is the way to go.
Stabilising the currency at this level is cold comfort as the Kiwi dollar has already escalated so much. Hence, bring it down to sustainable level ie. about 0.55-0.60 should be the goal. There’s no shortage of ideas and solutions in this website.
Using OCR to control the currency is not going to achieve much as it might cause the house prices to move further. Hence, there must be policies that could bring down the Kiwi dollar (ie. discourage speculators) and to discourage/shift housing investments and encourage tradeable sector investments. Ideas are floating everywhere in this website, so hope that you are able to digest and bring forward workable ideas in perspective.
Regards
November 19th, 2009 at 4:30 pm
Dear Mr Cunliffe,
“The writing is now on the wall: New Zealand has to earn more, export more, save more and be more resilient: combining a sustainable environment and a decent society with a real plan for growth and high skill, high value jobs.”
So, what you are saying then is… you didn’t have a ‘real plan’ for 9 years…? Or, hang on, yes you did have a plan, higher top tax rates, more happy poor people finally getting rich quickly through property speculation (oops, investment!), and WFF!
One ad of a dog in the mud comes to my mind, bugger…
November 19th, 2009 at 4:38 pm
Mr. David Cunliffe
Huge borrowings from overseas is also one of the factors that could push up the Kiwi dollar. Hence, this is an area that you could address in order to stabilise and bring down the Kiwi dollar that would help the economy.
Regards
November 19th, 2009 at 4:55 pm
David – good article – even better language. You, Phil G and Bill E should form another party – ‘The Challenge the Status Quo Party’, see #4 here:
http://www.interest.co.nz/ratesblog/index.php/2009/11/19/top-10-at-10-black-swans-treasurys-prescription-bad-bet-in-las-vegas-beijing-bubble-grows-dilbert/comment-page-1/#comment-48090
What you are saying must be good for the productive sector because Business New Zealand seem dead agin it:
‘Reneging on Reserve Bank Act raises concern’
http://www.scoop.co.nz/stories/PO0911/S00210.htm
“raises concern”? Yep, for those relying on unwarranted inflation of passive assets and NZD to make a living – sadly, a large proportion of their membership:
http://www.interest.co.nz/ratesblog/index.php/2009/09/24/exchange-rate-reduces-price-volatility-for-nz-commodity-exporters-westpac-says/#comment-40828
It’d be great if you guys also opened up discussion on you re-modelling Kiwibank on the North Dakota, Guernsey approach:
http://www.pec.org.nz/2009/11/goff-says-rb-policy-targets-dont-work/comment-page-1/#comment-875
Trudy – the latter, using the ‘public credit’ approach, also starts to deal to with the debt problem, drill the links.
November 19th, 2009 at 4:56 pm
David Cunliffe : Splendid of you to begin to grace this website with some interviews and an article or two . But this site pre-dates the last election . Why were you not sharing your pearls of wisdom with the team WHEN you were in government . Got too much spare time on your hand’s now ? Or chastened by the arse-kicking that the electorate gave you ? Had that been a FPP election , you would’ve been annihilated . MMP masks the drubbing you received !
November 19th, 2009 at 5:06 pm
Roger – what have I said about ‘positive appreciation’ before? If Labour, or Nat’s, start inching in the ‘common sense’ direction, let’s encourage it. I imagine some in Nat’s are not too happy with their performance to date either and might welcome opening this debate, now at last, see #4 on ‘Top Ten at 10′.You never know Nats might see the light too and with cross-party cooperation we won’t have to risk sliding yet further down the gurgler before we all get out of the trenches.
It’s late, have a gummy.
Cheers, Les.
November 19th, 2009 at 5:15 pm
Les : Great to welcome Mr. Cunliffe onto the site . But before the hugs and adoration , let the guy know how incredibly hacked off we are , at what happened 1999-2008 , particularly the last 3 years . It was then that their spendfest went into turbo-drive . And credit where it is due , the Nat’s are making an utter balls up of governing too . $ 110 billion for the ETS !
Shag the flaming gummy bears , got the Chivas Regal awaiting me . Cheers , man .
November 19th, 2009 at 5:29 pm
Roger – sure, if David, Phil G, Bill E and John K – haven’t clocked the disgruntlement, they ain’t just thick skinned, they much be deaf and blind – and I believe they are none of those things and have as much right as anyone to change and adapt – because after all, like you and I, they are part of this ‘complex adaptive system’ we call New Zealand. Am jealous about the Chivas. Cheers, Les.
November 19th, 2009 at 5:48 pm
Matt — do you really think all the trading in the NZ$ is ” lots of people on both sides selling each other stuff” ?? Rubbish. What about the much talked about carry trade etc etc The majority of the trading in the NZ$ is speculative trading –we all know that.
November 19th, 2009 at 6:02 pm
Am I the only one who gets bored of all the “why didn’t you do this when you were last in Govt” every time Labour has an idea?
New ideas should be welcomed.
Does anyone really disagree with the problem analysis? Solving the problem is hard but surely liooking at it is better than doing nothing.
November 19th, 2009 at 6:03 pm
What about Key’s response “NZ has the best monetary policy in the world”.
Rodney Hide’s right – this guy does nothing.
November 19th, 2009 at 6:13 pm
I can’t believe it someone from labour making alot of sense, If only they weren’t full of anti family social engineer’s they would get my vote.
November 19th, 2009 at 6:24 pm
Thanks Matt for your last post. If people want Labour to move forward rather than be stuck in the past, then hopefully they will welcome the exploration of fresh thinking.
This change of direction is genuine and reflects a lot of work behind the scenes. We are keen to continue the debate with you all and we WILL be bringing forward more policy detail in due course.
November 19th, 2009 at 6:44 pm
David says:
If people want Labour to move forward rather than be stuck in the past, then hopefully they will welcome the exploration of fresh thinking.
This change of direction is genuine and reflects a lot of work behind the scenes.
-
Considering many aspects of our struggling, unbalanced economy, but especially our massive account deficit, our foreign financial and infrastructural dependency I’m coming to the conclusion major changes in New Zealand have to be made soon.
It is not all about exports, but less imports means savings also. It is not about OECD ranking but sustainability. It is not for the BB only, but our children – it is for all of us – to make us in many senses wealthier as a nation.
Reading through this week articles I’m under the impression the situation isn’t understood, because the government and the private sector still take “the luxury” to argue in stead of seeking urgently united strategy plans.
Introduction of new segments in our economy “Green manufacturing”
As more of a focus is being placed upon the necessity for greater environmental responsibility, citizens who implement a greener lifestyle are also demanding a greater level of environmental stewardship from companies. In addition, they are rewarding companies who implement green business solutions, such as green manufacturing, with their dollars.
Fortunately, many enterprising organizations are discovering that, through better planning and more efficient processes, corporate strategies with an eye toward environmental stewardship can often be more profitable. By combining best practices across enterprise asset management, product lifecycle management, and manufacturing planning, green manufacturing has become not only a more responsible way for many organizations to do business, but a more profitable way as well.
Website: http://www.nwma-wa.com/greenmanufacturing/
For the current situation this are ideal activities and we could enter a completely new area in our economy, providing full employment including research etc. and most importantly highly skilled jobs.
Walter
-
David, can you please comment on that.
November 19th, 2009 at 6:56 pm
David, this blog is full of interesting comments/ articles about our economy, often written by very knowledgeable people. Regular participation from politicians would be very helpful to build some bridges.
Walter
November 19th, 2009 at 7:27 pm
David I must admit I’m not really a believer that you have actually got it, and that’s a sad reflection on someone who has met many politicians, seen their behaviour when they’ve just lost – or just won, and they really are all the same under the skin. They love the power and the glory and whoever gets in does whatever they think will win votes to stay there.
Cynical yes, but how else do you explain 50 years of all government of every colour refusing to face up to the fact that they have set economic policy and created an economic environment (and thus a social environment) that has systematically rewarded investment in non wealth creating assets at the expense of productive performance, and steadily eroded any community of spirit and effort for us all to strive for the common good. It’s the job of politicians to foster a society’s aspirations and it’s been woeful in this country for half a century.
Now to business. David there will be no apprenticeships while we fear there will be no job for them at the end. Train at the polytechs all you like but it will create more disillusioned youths when that effort is then met with no opportunity.
The first thing is own up – you have been part of the cock up – big time. Or no -one will take you seriously.
Second thing is show you understand that the economy is a complex adaptive system. See Les Rudd’s constant refence to this. There is no place for doctrinaire approaches to running systems that are constantly changing and adapting to the incentives before them. Change when it’s needed not just when it will win votes. Change when it’s needed even when it will lose votes.
Third thing is show us your real agenda. Should we believe that Labour suddenly doesn’t think taxation is to be used for wealth redistribution, rather than to pay for the essential things the people think governments be involved in? Should we believe Labour now thinks that we really don’t need all that growth in bureaucratic jobs it created over their last 9 years in power?
You have done much wrong and I hope you can see what it was but I suspect you see this as a route to engage people who genuinely care about the country’s future so they consider voting for you rather than you have suddenly had an epiphany.
I sincerely hope I’m wrong. Your oratory and presentation looks like you’ll make a good politician but do you have what it takes to be part of a team that can be a good manager of the country. Please understand I’m not a supporter of National either. The criticsim of them would be just as harsh but over different emphasis in their history of mismanagement.
You sound as if you’re listening. I hope you know how to act. We’re all watching and we’ll judge you by what you do, not what you say.
November 19th, 2009 at 7:29 pm
The question is would New Zealand really be willing to go through the excruciating hardships associated with attempting to break free from the bankers and their ‘debt money’? Look at Ireland recently – the now defunct Celtic Tiger. It dared to vote against the Lisbon Treaty and the ‘banksters’ vision for Europe. So it was made to vote again and, like those frightened souls who used to ‘vote’ in the Soviet Union, this time it did what it was told. One cannot imagine what would have been done to that country’s economy if it had dared to defy Europe’s illumanists again.
Many, many years ago Lord Acton warned us that the issue we would ultimately have to face is “the people versus the banks”. I mentioned Sir Oswald Mosely in another thread and he attempted to wrest Britain from control by the bankers in the 1930s, firstly via the Labour Party and then with the British Union of Fascists. Mosely was hugely controversial but that wonderful old-school socialist, former Labour Party Leader Michael Foot said of him:
“No rising star in the political firmament ever shone more brightly than Sir Oswald Mosley. Since by general assent he could have become the leader of either the Labour or the Conservative Party. What Mosley so valiantly stood for could have saved this country from the Hungry Thirties and the Second World War”. – Michael Foot, M.P.”
Mr Foot’s words are a powerful reminder of what the ‘banksters’ have led us into in the past. Mosely, however controversial, is also a reminder of what happens when you attempt to take them on – amongst other things internment without trial. If – and it is a huge if – David and his colleagues are genuine in their determination to take on the banks then I wish them well. History though is powerfully against them succeeding
November 19th, 2009 at 7:59 pm
Well I’m all for politicians opening up dialogue with the electorate on neutral ground. I never frequent the party-sponsored website/blogs. The more non-partisan and willing to debate every aspect of an agenda set by the public – the better.
That said I would really like to hear your views David on proposals put forward here by contributors Raf and Iain Parker (slightly different proposals but the same aim/objective) – that being a sovereign money supply.
I note above you state, It is important to note that Labour will continue to support an independant, full service central bank.
I take this to mean that the Labour Party reaffirms its commitment to the global model of privatisation of the money creation/distribution mechanism?
As you mention the opposition parties banking inquiry (and well done for creating that forum of inquiry) – are you able to give us your thoughts on Iain Parker’s submission to that inquiry?
Thanks and regards.
November 19th, 2009 at 8:12 pm
David – following on from Kate’s comment,
http://www.interest.co.nz/ratesblog/index.php/2009/11/19/guest-opinion-why-labour-took-the-historic-decision-to-challenge-monetary-policy-orthodoxy/comment-page-1/#comment-48101
last part:
It’d be great if you guys also opened up discussion on you re-modelling Kiwibank on the North Dakota, Guernsey approach:
http://www.pec.org.nz/2009/11/goff-says-rb-policy-targets-dont-work/comment-page-1/#comment-875
Some advice – do it, or we are f*ck*d.
(Apologies for the bad language Kate and other ladies.)
November 19th, 2009 at 8:48 pm
People I have just read some of the negative comments above and I am shocked that we are still backward looking. Let’s get real this is the biggest and most significant shift in policy from either major party in two decades and signals for exporters… hope!
I have said before if I had only one thing I could change it would be monetary policy so this is fantastic news for me as was Bollards announcement last week.
I know many are very angry with Labour for what it didn’t do, when it frankly should have but neither Goff or Cunliffe where in a position to say much about it and we all know that.
The changing of the guard has happened, they have done their year of penance and this (I sincerely hope) is the beginning of a new Labour Party that is committed to doing what’s required to solve the problems we face instead of what’s required to stay in power. Early days but I am hopeful and even optimistic.
November 19th, 2009 at 9:14 pm
Totally agree with Selwin.
November 19th, 2009 at 9:19 pm
The comment I made here:
http://www.interest.co.nz/ratesblog/index.php/2009/11/19/have-your-say-labours-goff-abandons-consensus-on-rbnz-monetary-policy-tools/comment-page-2/#comment-48140
Applies to this thread also.
Build some bridges, swallow some pride and focus on where we are going and not where we have been.
November 19th, 2009 at 9:25 pm
Selwyn – I assume what you want is for Kiwis to be made poorer – in real terms via the debasement of their currency – so exporters can become richer – IN NOMINAL TERMS – via the accumulation of more weakened Kiwi dollars per unit of export.
As I have said before, I suspect the real reason for this type of idea is because New Zealand is ultimately planning to default on its obligations and it will do so ‘dishonestly’ via currency debasement. Weimar New Zealand here we come!
November 19th, 2009 at 10:33 pm
David C.,
Glad to see your public engagement on this most crucial of all issues. We need more open debate with our representatives. The days of the electorate being sidelined are long gone. The web has allowed many to express opinions and provide knowledge and research for free.
We are moving to a more open form of government where scrutiny is greater than ever before. It’s hard to imagine a country where politicians are more accessible than NZ so that’s something to be proud of. But engagement is now required. Long held truths must be challenged not by those who peddle (often innocently) them but by the harsh disinfectant of sunlight. We should not be afraid of change or realising that we have been doing things the wrong way.
So in matters of money we should start at the beginning and work from there. Starting from where we are now is not much help.
I look forward to hearing more from you and your colleagues. A good place to start would be to examine our money supply within the context of understanding what money is and how we create it. From there it should all be pretty straightforward.
November 19th, 2009 at 10:41 pm
Matt N.,
“the supply of credit is infinite”
that’s like saying the supply of sweets is infinite…..and all the kids want them. which of course is our problem……no limits. we always want more than we can or should have.
the private banking system is there to make profits for its shareholders. fair enough. but in that process it tends to create as many new loans as possible. it is not the banks job to control credit but simply to issue as much as it feels the borrowers can bear in terms of the ability to repay.
so the authorities attempt to control this via a mechanism that doesn’t work. in fact it is a mechanism that actually creates the inflation it is designed to prevent. do interest rates determine the supply of credit? nope. they determine the cost of credit and so higher rates suck out capital from the economy and give it to the banks. over time enough businesses go bust and sack employees which then lowers the demand for credit as unemployed people can’t access it.
so it seems that the OCR is used as a tool to increase unemployment and thereby cause the demand for credit to fall.
which begs the question: how can we really control the supply of money?
November 19th, 2009 at 10:53 pm
raf – excruciating comment man, awesome. If we control supply/issuance of money/credit we more effectively control:
national debt
inflation
NZD, val and vol
Who doesn’t want this?
How?
November 19th, 2009 at 11:12 pm
raf: We can control the supply of money via the gold standard. Trouble is this would require our esteemed leaders to live within the nation’s means and, ultimately, it would remove their monopoly over legal tender.
Money is merely a medium that communicates value. Within this gold has historically been useful because of certain physical properties, and because its supply is independent of politicians and bankers – put simply they cannot will extra ‘gold money’ into existence as they can with paper. That is why, groveling at the footstool of Keynes and the crackpot economics he bestowed on us, they dismiss gold as a ‘barbarous relic’.
What I find astonishing is the readiness of some commentators here to take the Labour Party seriously. Isn’t it now showing contrition only because it lost? Moreover, I thought Ms Clarke was infallible in all things – but are we now being told that policy mistakes might have been made under her tenure?
Certainly we have been doing things the wrong way. We have been allowing the socialist to steal our money, via inflation, for decades. John Maynard Keynes put it perfectly:
“Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some. – As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.
“Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
As Keynes observed, “not one man in a million is able to diagnose” – the way he is being fleeced by the likes of The New Zealand Labour Party, and their ideological bedfellows, The New Zealand National Party.
November 19th, 2009 at 11:43 pm
For David:
Further to raf’s point, it is not the banks job to control credit but simply to issue as much as it feels the borrowers can bear in terms of the ability to repay.
What I interpret as having happened recently is a global corporate banking sector expanding credit well beyond the borrowers ability to repay – and subsequently those same private sector institutions, who failed in their duty to properly manage this system, are subsequently accumulating greater and greater wealth, concentrated more and more in the hands of a few, through the dispossession of those assets which they imprudently created money-as-debt on.
I am curious as to whether your interpretation concurs with mine.
November 19th, 2009 at 11:59 pm
David,
I’m unsure exactly where you’re headed with this, but congratulations for opening up the debate at least.
Only the blindest Kiwi would not see that our economic policies since the 80’s have not delivered what we all hoped for back then, so it is refreshing to see new thinking being applied to our problems.
Can I please suggest the following remedies to our savings and investment poor/property speculation rich economy.
- A land tax (against commensurate tax cuts on income)
- Stamp duty on property transactions
- Interest to be taxed or deductible for the after-inflation portion only
- Compulsory KiwiSaver
- Give the RBNZ the ability to adjust KiwiSaver contribution rates
- Broaden the RBNZ mandate to include the control of credit creation
- Raise GST (whilst compensating low income earners)
- An immigration policy that focuses on attracting talent and not wealth and avoiding exacerbating the boom/bust cycle
- A national currency policy that uses the resources of the RBNZ, DMO, SuperFund and other state funds to smooth the excessive swing of the NZD
Please for the sake of our nation, act now. I’m no political expert, but Labour participation in bipartisan solutions will only increase the mana of your party.
November 19th, 2009 at 11:59 pm
@Raf – Hear, hear.
David – I hope you and your researchers will hang around on this site long enough to get more of a flavour for some of the solutions suggested by posters. The level of debate here is actually very well informed To assist you in settling in I’m going to attempt something very dangerous and try to summarise the various viewpoints held here. The following groups (my labels) post regularly (in no particular order):
- Social credit proponents. Viewpoint:- Basically ditch the present fractional reserve capital requirements and give government power to create money through paying for public works – Iain Parker and co. (Iain will slate this oversimplification but promoting discourse is really the point of this post.)
- Laissez faire proponents. Viewpoint:- All unfettered markets are perfectly efficient, regulation is bad, tax is evil (think Ayn Rand) – Mark Hubbard, Roger Thompson and co.
- The pragmatists (a very broad church). Viewpoint:- The OCR policy alonedoesn’t work – trade deficits, private housing debt and exchange rate volatility are killing us. Lets give RBNZ some different complementary levers to pull, and please, please,please get fiscal policy aligned with RBNZ goals. – Les Rudd, Kate (I think?), Bernard + most of the guest bloggers
- The peak oil brigade. Viewpoint: – Economies are actually all about energy especially transport fuel (oil). EROEI on oil is falling rapidly. Once it hits 1:1 we’re stuffed anyway so sustainability trumps all. Powerdownkiwi, Steve etc.
- The cynics and commodity bugs:- We’re stuffed. Its irredeemable and politicians have no desire to fix it. Lets get all our cash into hard assets (gold/copper etc.) and hunker down till the dust settles. Wally, Steve Netwriter etc.
- The property obsessives.:- Only post on housing matters. Debate centres on affordability of housing its causes and desirability. Can get petty…..
I’ve missed out loads of regular posters (some don’t fit these labels so well!) and grossly summarised the viewpoints, so my challenge to everyone is : You’ve got someone listening who might one day actually be able to do something. Make your constructive pitch on what needs to be done to fix the economy and maybe it might get incorporated into political policy.
This is your chance. Ready, steady, GO!
November 20th, 2009 at 12:26 am
David Cunliffe
“Government debt is not the principal problem (although the Nats are planning to massively increase it through pollution subsidies to big emitters). Private debt is.”
To me, that statement alone tells me that you fall into the “still don’t get it” category of people. And worse, you are suddenly trying to spin to people on this blog, some of whom have issued dire warnings well before your term in government ended, about the manifold problems of high debt (public AND private), trade deficits, productivity reducing instead of increasing in relative terms, monetary policy not having ANY desired effect, etc etc etc.
Reading the above bit of lightweight fluffy spin just confirms my suspicion that any really meaningful change in NZ’s political landscape is unlikely to come from Labour having learned what went wrong the last decade or three. Learning from mistakes means you truly understand what those mistakes were, and then you still have to own up to it and better come up with some details of your said “real plan”. But such details better be well thought through, truly revolutionary, and not based on ‘other people’s money’ schemes. Because, if we wanted any more of Labour Lite, we might as well keep National, as they seem no more prepared to tackle issues head on or be honest with the people of NZ.
November 20th, 2009 at 12:43 am
well said ctnz. As you say, if we want ‘Labour Lite’ there’s no need to change government – because we’ve already got it.
November 20th, 2009 at 1:09 am
Chris B : Thankyou for the honour of placing me with deep thinkers , true heavyweights such as Ayn Rand and Mark Hubbard . I am all of a glow . Undeserved of course . Not least because I am merely a bantam-weight whinger . As Bernard opined once , true free markets lead to massive distortions and monopolies , too . It is not just governments , massive ” too big to fail ” corporations are a hazard to our financial well-being too . Laissez faire is not fair . The capitalist system needs regulation , checks and balances . The current global financial crisis is testament to lobbyists succeeding in Washington D.C. , having those regulations altered or expunged , to suit their vested interests . Incompetence on a grand scale , from both the regulated , and the regulators . ( and the ripping sound you hear is the Libertarianz shredding my application form . Sorry team . Can’t quite embrace the totally unfettered market thing , just yet . )
November 20th, 2009 at 1:28 am
Oh , and credit where its due , the Fed : Messers Greenspan and Bernanke had a vital part to play in the unfolding shamozzle that is the world’s financial markets . Remiss of me not to let those two gentlemen enjoy the opprobrium of every human being who lives and breathes on this planet .
November 20th, 2009 at 1:52 am
Hi Roger, sorry for any misrepresentation, I was pretty certain that post would upset somebody – I suspect you won’t be the only one…
And yes the NZ economy is very vulnerable to the decision of policymakers and individuals overseas over whom we have no influence. Recognising that we are a very small fish in a very big pond is step one. Step two is understanding that we can’t expect to play by their rules and win – we will just get stomped all over, again and again….
November 20th, 2009 at 2:23 am
Hardly upset , Chris . But wayyyyyyyy out of my league with Ayn and Mark . Have a gummy bear , you are too kind to me !
I agree with your point . And I believe that is what Iain Parker drives at , that we have lost control of our destiny , to foreign bankers . Our credit supply is offshore , out of our hands . And that is where I get teed off by Labour ( and now , National ) , ‘cos they are not creating policy to strengthen us fiscally . We owe a massive debt of gratitude to Paul Keating , of Australia , who set up the ” 4 pillars ” banking policy . Were it not for the prudence of them , our credit lines would’ve stopped , and the property bubble burst , rather than deflate slowly .
November 20th, 2009 at 6:53 am
“Younger New Zealanders now have been whacked with bearing higher superannuation funding costs, massive ETS pollution subsidies and ongoing exclusion from the property market.”
You missed some key points that will noticably effect younger generations,
1) higher structural un-employment.
2) higher structural energy costs.
3) Higher health funding costs.
4) Weaker political landscape (inter-generational battle).
November 20th, 2009 at 6:56 am
Welcome David… and lovely to read everyone in such fine form. We are probably looking at a two-term ride from National, so you’ve got some time to read the tea-leaves and position yourselves.
- My leaves tell me we are looking at a global currency collapse; led by the Yen, Pound, Euro and US dollar. Economies will be realigned/reset around a new global currency. OCR discussion will become a thing of the past, perhaps sooner than we think.
- America is following in Japan’s footsteps. Jobs will continue to be lost in the face of continued deflation. I see the US becoming very protectionist, especially concerning agriculture and dairy imports.
- The prospects for New Zealand are good – provided we reduce our private and government debt levels and reduce government spending…. by 25%, at the very least.
We will never be able to compete with Indonesia, Vietnam, and China in manufacturing and exporting so why waste resources trying to. Rather, we could focus on becoming Education providers, producers of Super-foods, and bankers of information, rather than money. I also see NZ as a retirement village to the world, providing a moderate, safe place to wait out death. Just a couple of thoughts.
November 20th, 2009 at 7:00 am
@Swing voter:
“Who cares if the exchange rate is volatile”
Everyone….most ordainary ppl want it far less volitile, the balance who are $ traders and financiers etc want it more volitile…banks also make money on hedging which is another expense of exporters.
“it reacts to changes in commodity prices and so makes returns to exporters less volatile.”
No, it reacts mostly to currency speculators who move money in and out, or buy upfront in anticipation of rises to make $ at the expense of exporters or anyone else doing real business.
November 20th, 2009 at 7:03 am
@Matt N: “SV is right. It doesn’t matter that the $NZ is highly traded – that just means there is lots of people on both sides selling each other stuff.”
No he’s wrong as are you, check the stats…it isnt businesses buying and selling its significantly speculations…
November 20th, 2009 at 7:15 am
@Trudy: “Hence, there must be policies that could bring down the Kiwi dollar (ie. discourage speculators)” I dont agree on two fronts, speculators want volitility and not a value…they make money on the changes or hedging against the changes…
I certainly dont want the kiwi dollar brought down if that debases its value…right now other countries seem to be in a race for the bottom in de-valuing…we cant win that race without joing in the MAD….ie its relative and it does damage longer term.
Also there are few ideas out there or on this site that achieve what you want…there are ideas on decreasing volitility…
I would suggest exporters want long term exchnage stability…they can then plan and calculate if what the want to manufacture can make money or not.
Also Jerry brownlee etc is trying to sell the idea of substantial oil around NZ’s shores if that eventuates then the Kiwi will go far higher (1.2:1 is possible) destroying exporters and making us dependant on oil revenue…just about every case I read on that shows a petro-nation is handicapped by oil rather than released…..they become oil revenue junkies….
Im really quite amazed by how many ppl dont understand or want to influence policy in order to get what they want and to line their own pockets instead of thinking what’s best for NZ.
regards
November 20th, 2009 at 7:47 am
It’s 2005 and Cullen is deep in thought. “Do we stop the flood of cheap money coming in or not????….might be good for growth with the election this year…create lots of work and give me a heap of cash to throw around…..pretty well lock in another three years of power….love that word….or should I use the power I have today to give the RBNZ some extra tools and extend their mandate beyond inflation control to preventing a property bubble….that could mean a target average property price of say 3.5 times the average wage….well geee what a decision…I could do it…easy as to be honest…but will I….bank would have to set requirements for a much larger % of capital to be sourced from deposits here in NZ…yes that would work…and if need be they could bring back the reserve requirements and even drop the credit creation rights of the banks…we’d have to close the immigration gate…fewer future Labour voters coming in!!!!….don’t know about this….tough decision….go for sound financial management and secure future real growth based on exports and permanent employment..or..the easy option of porking a bubble for short term jobs and have plenty of happy voters in Novemeber???? …wonder what those tits Goff and Cunliffe would want…oh yeah I know…”HEY HELLLLLEN…we’re going with the bubble”….
November 20th, 2009 at 7:54 am
Hi David and welcome!
A couple of questions.
1) Will Labour stop foreigners speculating in our housing market? I do not understand why people who do not live here are able to buy houses here. It drives up prices, and these people then take the rent money (which is a good proportion of their tenants wages) out of our economy. If the NZ dollar is going to be kept low, then we are at even more risk as our houses are going to seem a bargain.
2) Before using immigration to drive growth, will Labour have a serious debate about how many people NZ can support and what the long term consequences of immigration will be? The world has plenty of people but we are running out of resources. Electricity is going to have to largely take the place of oil in a few years time- the more people we have here the more electricity we will need to generate. I would say we will struggle to produce enough electricity from renewables sources for the people already here. And then there is water- already shortages are becoming an issue in some parts of NZ.
What we desperately need in NZ is long term planning for the difficult future ahead of us. Thank-you for coming here to engage with us and listen to peoples ideas and concerns.
November 20th, 2009 at 8:08 am
Chris B – “pragmatists”, agreed, but may I request a sub-division within said box please? That being, ‘complex adaptive systempragmatist’ or CASP for short. So I’d be a CASPer. Roger T also deserves his own special category, something like ‘complex Roger adaptive pragmatist’ not because he talks crap or anything, but it’d clearly be good to have him in a special category, as I’m sure you now realise! (Morning Roger.)
Also, would like to put my hand up for ‘public credit’. I’ve come to the conclusion it’d be better to have a hand up for what the rude, the ill-informed and inflation lovers call ‘funny money’, rather than having to be on hands and knees begging for their ‘kin hilarious insane money – especially as there is nowt hilarious about NOT getting a grip of credit issuance – because that is a major root cause of our problems. Go Iain. Go Raf. Go NZMEA:
http://www.interest.co.nz/ratesblog/index.php/2009/11/18/opinion-how-the-rbnzs-new-bank-funding-policy-will-stabilise-interest-rates-currency-swings/comment-page-1/#comment-47854
November 20th, 2009 at 8:20 am
Morning Les : Not because I talk crap .!!!……….. Can you send a copy of that to my Mum and to Mr Beardsley , my woodwork teacher . They will be very surprised . But you are on the money with ” adaptive ” . Therein lies our problem . Our pollies keep up with changing world events , 2 or 3 election cycles too late . For instance , Alan Bollard’s tool-kit has one shiny little lever . 10 -15 years ago the call went out for a looser inflation band , and a wider mandate for monetry control , during Don Brash’s reign . We may get there yet . ( C.R.A.P. for parliament …………….. Shit , I think it’s already in there ! )
November 20th, 2009 at 8:35 am
Roger – in the end there are only two categories, ‘Stonecutters’ smacked-up and sedated on ‘Blue Pills’:
http://www.youtube.com/watch?v=eQ-KZyniB4c&feature=related
or ‘CASPers’ waking up after swallowing ‘Red Pills’
http://www.youtube.com/watch?v=q5YYbsoiNGI
Red pill, blue pill Roger?
Am glad to see Labour waking up, and I think Bill’s been popping some red ones too, hopefully he’ll slip a few in JK’s Sav?
November 20th, 2009 at 8:37 am
@RT: “how incredibly hacked off we are” since you appear to be a Libertarian “we” is nominally 1000 votes. From my perspective Labour had some good points and some bad ones….National has different good ones and some pretty bad different ones….I certainly think WFF and Labour’s (some of its) social engineering is storing up a disaster. eg WFF is building over-population into the system which then would take decades to remove. When we look at how to reduce familiy size education of women seems to play an important role, instead we have WFF which to my mind encourages the lower socio-economic (and hence usually more poorly educated) to have more children that is an issue NZ (and indeed globally) will pay for in the longer run.
Is National any better? no…..neither is looking beyond the immediate horizon at the Global over-population or exhausting of resources issue, instead they blithely talk about,
“New Zealand has to earn more, export more, save more and be more resilient: combining a sustainable environment and a decent society with a real plan for growth and high skill, high value jobs.”
“The writing is now on the wall” indeed it is…but you are not reading whats wrote in geology…without cheap and plentiful energy, growth goes south. The ability of an advanced society to allow specialist high skills declines if access to excess energy goes away…which within a decade it will be….at which point Labour is quite likely to be in power…At which point the mess you handed National in 2008 will look like a walk in the park.
So right now hell would freeze over before I’d vote Labour…
regards
November 20th, 2009 at 8:42 am
It seems to have gone unnoticed in mainstream media , Les , that Labour has snuck over the line , and is now less red than National . Crikey Dick , Batman , how will we cope ! ( not that I’m complaining , mind , keep it going lads . Soon you’ll be only pink……………..Ahhhhhhh , you left that phase after 2008 . Hmmmm . )
November 20th, 2009 at 8:52 am
Read em’ and weep:
‘Business unhappy as Goff abandons policy on bank’
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10610434
Hilarious!
Unbiased media?
Yeah right!
http://www.interest.co.nz/ratesblog/index.php/2009/11/19/have-your-say-labours-goff-abandons-consensus-on-rbnz-monetary-policy-tools/#comment-48027
November 20th, 2009 at 8:53 am
steven : I agree with pretty much all that you just wrote . So either you are a libertarian too . Or neither of us is . I suspect that the libertarians would gleefully tar-and-feather me . Because I do believe in some governmental services , and some regulations . But alot less of both . And a higher quality of each of them too .
November 20th, 2009 at 9:00 am
I just received this…. FUNNY, WACKY item below… in the mail….seems that there are more SORE-LOSERS out there than I first thought.
Funny…and off the WALL…WALLY/LES/DAVID/ROGER/KATE…etc…….but will it ACTUALLY WORK.
(Comments please on a 100$ note and sent to me care of PO BOX….)
I am up for the early retirement donation….cos we are not the DO-NATION. We just employ more idiots to do………… NOTHING, except SPEND..
End of RANT…
So here is the humour…Sent by a young lady who has just had a baby born in to this weird world of make believe.
Dear Mr. English
Please find below my suggestion for fixing NZ’s economy.
Instead of giving billions of dollars to banks that will squander the Money on lavish parties and unearned bonuses, use the following plan.
You can call it the Patriotic Retirement Plan:
There are about 1 million people over 50 in the work force.
Pay them $1 million each severance for early retirement with the Following stipulations:
1) They MUST retire. one million job openings – Unemployment fixed
2) They MUST buy a new car. one million cars ordered – Car Industry fixed
3) They MUST either buy a house or pay off their mortgage – Housing Crisis fixed
4) They MUST send their kids to school/ PolyTech /university – Crime rate fixed
5) They MUST buy $100 WORTH of alcohol/tobacco a week …..and there’s your Money back in duty/tax etc
It can’t get any easier than that!
P.S If more money is needed, have all members of parliament pay back their falsely claimed expenses and second home (living away from home) allowances.
If you think this would work, please forward to everyone you know. If not, please disregard.
Yours sincerely,
The Whole Country
November 20th, 2009 at 9:02 am
Labour only presided over the greed – I don’t think it created it.
But it’s good we have the debate. I’d like to ask David Cunliffe a head-on question:
He mentions – as do most – growth.
Is he of the opinion that growth can be had with, or without, physical resource extraction?
If he thinls we can have it without extraction, great. The lignite can stay in the ground and we can all get richer.
If he thinks we can’t – if he thinks that we need to extract to grow – can he explain what happens when we run up against peak extraction rates, and ultimate depletions?
And a follow-up to that would be does he take cognisance of ‘doubling times’.
Good to see someone bothering to join the debate, I just prefer good governance, and get heartily sick of partisan rhetoric. Open batting-around of ideas is the only way to go.
November 20th, 2009 at 9:08 am
I like the ” Do-Nation ” , gotta ring about it . Your new political party , Sore-Loser . But $ 100 / week for alcohol ………How’re I’m gonna stay pickled 24 / 7 on that ?
November 20th, 2009 at 9:18 am
“24 hrs is a long time in politics” or something like that. Goff blew all his good work of yesterday in a few comments this morning –when asked when the detail would come out he said that most political parties announce policies at a particular time (ie just before elections ). So we won’t hear anything few just under two years !!!!!
Reverting to type is what I think this is called.
Mr Goff —- as well as looking at changes to monetary policy why don’t you have the b….ls to look at how politicians operate and break the mould. The world is changing and with the internet everything is more open and transparent.Forget about hiding behind 3 yr cycles if you truly want NZ to move forward.
So folks I think we’ve had our 24 hrs of excitement — its back to the usual political cr..p.
November 20th, 2009 at 9:24 am
Observer – you are very observant on the need for debate over immigration and the house price insanity. So mad are we that we now repose our entire economic policy on inflating house prices and, if that requires a massive influx of replacement population, then so be it. I believe, that with effect from November 30th, yet another mass ’sale’ of passports scheme (or is that scam) comes into effect.
Within this I invite David to condemn, what his British Labour Party colleagues have done in Britain, where Blair and Brown have literally overwhelmed the nation with population that cannot be supported. The utter and reprehensible contempt with which the British Labour Party has treated that nation’s working class is becoming the stuff of legend. Still, what did they expect! Many of them would not know a Pinot noir from a sauvignon blanc! Even many established New Commonwealth immigrants, who came in the 1960s/70s etc, have had enough. I attach two links to remind readers of what the New Zealand Labour Party’s ‘ideological engine room’ in London has done to ordinary Poms.
http://www.guardian.co.uk/society/2009/oct/27/housing-labour-brown-cruddas-heseltine
http://www.telegraph.co.uk/news/newstopics/religion/6590411/Christians-would-rather-vote-BNP-than-Labour-pastor-claims.html
Immigration has to be debated. National will simply flog residence off to whoever chances by with a pile of cash in their pocket and they will not rest until New Zealand is covered in concrete tenements – all ‘hyper-geared’ to the benefit of the bankers that command them. I voted for them – knowing they would be scoundrels – but having to listen to Ms Clarke every night was putting me off my dinner!
Herein lays the challenge for New Zealanders. Are you going to go on being turned into a replication of urban Britain, or do you want better? Are you going to go on believing the demonstrably false claim that mass immigration delivers economic prosperity – when all rationale analysis exposes such claims as nonsense. The great skill of those, whom Benjamin Disraeli reminded us really run the show, is their absolute success in shutting down all debate on this issue via the cry of ‘racist’. In this Ms Clarke, along with Blair and Brown, were performers par excellence and it would take an extraordinary metamorphosis within the New Zealand Labour Party for them to go back to representing ordinary ‘Joe Public’.
November 20th, 2009 at 9:37 am
Malcolm – I’ve been disappointed with what I’ve interpreted as racist remarks and comments on this site at times. However, I for one DO NOT think the information you deliver and the debate your are suggesting should be opened, is racist. It seems to me it’s more about sensibly matching resouces to population, it’s growth and the needs of said population in a sustainable way. I’ve not commented on your stuff much, if ever I think(?), however I use this site to learn so do read your stuff and look forward to reading more from you. Cheers, Les.
November 20th, 2009 at 9:38 am
Great stuff all.
On the currency issue:
Just to get the obvious out of the way. Currency hedging is always a part of doing business overseas. We saw yesterday that F+P Healthcare covered themselves quite well when the NZ$ fell last year. The same with Rakon and many others. So it can be managed though is a bit of a pain for sure.
But looking forward:
- A Financial Transactions Tax will eliminate most of the speculative activity.
- The current account deficit causes the currency to be in play as part of the external debt requirement.
- IF we have a stable domestic money supply then the currency will settle of its own accord at a place where trade is balanced (assuming the external debt is paid off).
As to Malcolm’s suggestion of a gold backed currency:
- It’s a possibility for that to happen. We would have to buy $300bln worth of gold which might be interesting. If properly managed it could work i.e. actually having the full amount of gold sitting in a vault somewhere. History has shown that authorities, from the BoE to the Fed, have often leveraged paper money off the back of a small gold reserve. However, in theory it could work.
- Given NZ’s resource make up a general commodity backed currency may be better. A mixture of energy/metals/agriculture in a basket might help steady the ship.
Again I think creating stability is the key. A Fiat system can work if people believe that the paper is being managed appropriately i.e. $300bln is the supply of money and there are $300bln of notes in the system whether in a vault or in circulation.
It will be tough to wean ourselves off the credit drip and there are very strong and embedded interests which will oppose it all the way. There is a whole generation of academics, politicians, bureaucrats and population that have been brought up not really understanding money and the monetary system in its entirety.
Inflation and interest rates have become words of both fear and admiration. Basically we are monetarily illiterate.
So opening this debate more fully will be difficult but ultimately rewarding.
November 20th, 2009 at 9:45 am
Well the reactions from “business” have been predictable. The mainstream media see all “business” as the same. So the happy recipients (businesses in the non traded economy) of wealth transfers via an overvalued exchange rates from the tradeable sector remain wedded to the policy framework that has served them so well for 20 years.
Not everyone agrees, the tradeable sector support the need for change.
Goff is right to say so. Good on him.
November 20th, 2009 at 9:50 am
Roger – home brew?
November 20th, 2009 at 9:56 am
Simple advice…for free….
RODGER….BREW YOUR OWN….the only way forward is self-sustainability..
You can make a lot of BOOZE for very little….NO TAXES TO PAY…if you brew your own…….. WHY SUPPORT the idiots in POWER on their junkets…etc.
Also 90 booze barns in PAPAKURA would be out of business overnight, if we as a NATION had any SENSE, but the strange thing is we SUPPORT the habits…but do not CHANGE em.
Must be POLICY somewhere, me-THINKS.
The problems need fixing, but that is the ONLY self-sustaining thing these idiots can do, sustain the PROBLEMS.
Simple fixes….from a simple guy.
PS…This lot in POWER….only know how to BUY….not SUSTAIN
HO HUM.
November 20th, 2009 at 10:04 am
A good home brew was set to become a great little business…and then along came the bloody beaurocrats with their red tape and laws and taxes and fees and regulations and so ended the chances for Home Brew inc… back to selling the spuds with a free bottle of BH…oooops I mean HB.
November 20th, 2009 at 10:05 am
Has anyone though about backing other than gold ?
I know it’s a little harder to store/quantify, but I suspect energy will be the greatest coming scarcity.
Just thinking outside the battery
November 20th, 2009 at 10:05 am
Some fellow on CNBC reckoned that if the world were to adopt a gold standard , the price of gold would have to rise to at least $US 4000 / oz . Possibly up to $US 11 000 / oz . Ahhh , won’t that in itself bankrupt us all ?
November 20th, 2009 at 10:19 am
Les Rudd – Many thanks for your generous comments!
One of the most humbling things for me, as a Pom, was to see those five guys from Vanuatu despairing of Britain during their recent visit ‘to meet the natives’. If you have not seen this programme it will restore your faith in humanity!
http://www.channel4.com/programmes/meet-the-natives
As to the monetary role for gold I suggest those with an embryonic interest in the possibility of restoring – indeed instigating a 100% gold standard – visit the following:
http://www.goldstandardinstitute.com/
In respect of the above Professor Fekete is regarded as perhaps the foremost authority on money in the world today and his writings are certainly worth inspection. Within this we need to understand something. Gold will be re-monetized either sooner or later – “alea iacta est” – “the die is cast” (Julius Caesar, when he crossed the Rubicon to confront General Pompeii)
ps: Roger – no it wont bankrupt us for it is the quality, not the quantity of money that matters. There is sufficient gold for us to do what is necessary and to free ourselves from the ‘banksters’.
November 20th, 2009 at 10:26 am
Malcolm – interesting thought. If we all didn’t have to pay them for interest charged on smoke-and-mirror money, then gold would indeed underpin a lot.
Maybe a finite Standard is what’s needed to curtail exponential growth.
I’ll think on it
November 20th, 2009 at 10:26 am
POTCHEEN and wine…..can be made from just about any VEGETABLES, GRAIN & FRUIT….
We have the means….and the technology.
We could also run vehicles etc… on it….NOT THAT I WOULD ADVOCATE A SENSIBLE USE FOR THE MIND NUMBING STUFF….what would be the point.
I just do not have the inclination to drink, except when I THINK, what a mess THESE IDIOTS created….and perpetuate….so am an ALCOHOLIC now….(Yeah Right).
Seems we have more of the same drivel…so expect more DRINKERS to DROWN their sorrows…A bit like that poor guy in the KAYAK and our PAPAKURA examples.
HOPE is what we need in NZ…….not SOME HOPES…like from this MISS-LEADING lot.
I digress…coffee time…and I do not mean a GAELIC one.
RANT over.
November 20th, 2009 at 10:28 am
PS…we have other sustainable energy sources….but the idiots would never have the brains for that either.
Simple minds.
November 20th, 2009 at 10:33 am
Sore Loser – what’s the ratio for gin-to-oil in a two-stroke? Gotta do some weedeating…
November 20th, 2009 at 10:49 am
I fermented some pumpkin wine , once ( and only once ) . The lawnmower took it neat . I sure as heck didn’t …………. the memory still lingers . Ye-uckkkkkk !
November 20th, 2009 at 11:12 am
I hope the minister and/or his people took note of yesterday’s thread about what to do with hydrocarbon revenues and the popularity of the Norge /StatOil solution. That was some impressively open and smart discussion.
I can’t help but think that having a successful system like that would be electoral gold, not to mention just plain common sense. If it helps powerdownkiwi keep his weeds under control without wasting good gin i’m all for it.
November 20th, 2009 at 11:18 am
I would have to well lubricated to get me to attempt weed eating…I prefer to smoke mine…
AND that is a JOKE…if the THOUGHT POLICE are watching.
As are most of my comments.
When anyone really wants to get serious…Just let me know.
Till then I will just WHINE…and not PUMPKIN….Roger…there are limits.
I am a wine BUFF, I can POLISH off a cask in a couple minutes. Luckily they have 20 litre ones in France.
Gotta go to the BANK…
See ya..
November 20th, 2009 at 11:54 am
New Zealand belongs to whoever conquers or buys it. The Maoris owned NZ until they “sold” most of it for worthless crap and promises from the English. Now the same thing is happening again. Infinite credit will be created, and this country will be sold for worthless crap and promises. We need a government that protect us- not to sells us out.
The World is a tough place. It hasn’t changed much over the thousands of years.
November 20th, 2009 at 12:10 pm
David,
“Kiwis can’t just keep borrowing ever greater amounts of foreign capital, then periodically electing National to flog off what’s left of the family silver to cover the debt.
”
The greatest explosion in debt in history occurred ON YOUR WATCH so dont bring National into it. they seem to be the first ones in a while to publicly acknowledge the damage our housing bubble is doing and hopefully Biil english’s comments mean there are some tax changes afoot. Phil Goff had 9 years in power, only when in opposition did he bring up the CGT as a serious issue.
You guys are responsible for a lot of the mess. The housing bubble drove consumption and mad you guys look good and consumers feel good. Until reality arrived. Not that i think National would have acted differently. Short termism dominates all politics. The same problems arose under Labour govts (UK and NZ) as well as conservative ones (US and Aus). Now most countries have thrown out their govt the other side is continuing the problem. Especially in Europe / US via loose monetary policy,and Aus/NZ via stupid housing incentives and immigration driven asset inflation policies.
we need a govt that acknoiwledges that house price falls are GOOD and NECESSARY, and is prepared to DO SOMETHING ABOUT IT.
November 20th, 2009 at 12:33 pm
The Chinese have a currency that is pegged to the US dollar. They are not doing too badly economically. Maybe we would benefit by doing what the successful countries are doing? For instance, it would not be a good idea for us to follow the Icelandic example.
What would happen if we pegged the NZ dollar to the Chinese Yuan?? Maybe some stability at last. Running our country (NZ), like a casino is disgusting. We need some grown ups in charge.
November 20th, 2009 at 12:49 pm
Why just peg it to yuan? Why not to several? Put ‘em in a basket –
oh, already been done
November 20th, 2009 at 12:49 pm
LearnTo : what if we peg to the Yuan , and then the chinese begin loosening the peg . Estimates are that the Yuan is 30 % out of sync to the $US . They revalue , and we do too . Do we want any more of the control of our economy to reside off-shore ?
November 20th, 2009 at 12:59 pm
Why peg to Yuan instead of the US dollar?
November 20th, 2009 at 12:59 pm
A thought from the past that is so relevant to today:
“In the midst of prosperity the mind is elated, and in prosperity a man forgets himself; in hardship he is forced to reflect on himself, even though he be unwilling. In prosperity a man often destroys the good he has done; amidst difficulties he often repairs what he long since did in the way of wickedness”. (King Alfred the Great 849-899AD)
November 20th, 2009 at 1:08 pm
Too many immigrants, too few houses. House prices up.
More money borrowed to pay for it. A never ending circle of real wealth destruction in NZ.
NZ productivity is what needs to shift, we need to produce more per person as a country, not increase GDP by bringing more people in. We become poorer and poorer as a whole sharing the national income pie between more and more people.
People need incentives to produce more through real work not buying and selling the same houses for ever more borrowed money. Tax changes are essential to acheive this. Tax that which doesn’t move. It’ll bring all of those overseas people who own NZ houses into the tax net as well.
November 20th, 2009 at 1:11 pm
We don’t hear about it much in our media, but has anyone heard of ‘quantitative easing’. Even the Bank of England are doing it, despite centuries of orthodox interest rate setting to maintain the the confidence of the City. If the RBNZ did it here, the media probably wouldn’t notice. I’m sure Mr Cunliffe won’t acknowledge the need to boost liquidity in this way. It would also mean that the government would not have to borrow $250 million a week, assuming that is accurate anyway. The OCR regime has been a mechanism to ensure an inverted yield curve: even when the previous government did not need to borrow short term the Treasury bill rate was needlessly high. Until Labour start talking about the specifics of this, they are wasting their time. As an historical point, they were elected in 1935 on a policy of quantatitive easing.
November 20th, 2009 at 1:18 pm
Simon Boyce – I suggest you read this article:
http://www.marketoracle.co.uk/Article15131.html
November 20th, 2009 at 1:20 pm
Oh come on Andy M, fair suck of the sav mate, property speculation is the only game in town and you want to stop the party…look at all the players…we have the banks and the pollies, the peasants immigrants and the media, the RE liars and even the highly educated property valuers…all playing this game…and you want to end the party…what the hell else is there to hold up the rotting economy…lamb wool??? haaaarhaahaaahaaa. Go back to sheep.
November 20th, 2009 at 1:35 pm
Simon Boyce –this is what QE ( printing money ) leads to
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/6608234/OECD-warns-Britain-risks-debt-spiral.html
November 20th, 2009 at 2:14 pm
Hello Mr Cunliffe,
Thank you for frequenting this space lately. I am not a Labour supporter, but I do know you are educated and will listen to what it is you come up with.
I believe in markets, but I believe in some control too. Imagine going on for years longer with rogue real estate agents. Regulation helps with the rogues and the laggers, but will it help with the NZD? Is it rogue at all? It is high because the USD is low. Yes, it crashed out and has made this big rally upward again. If something needs to be done, will it only be a short term measure to compress the dynamics of the peak and trough in choppy times? Are we being fair to the global community? The USD should be low, and right now they’re suffering more than we are.
Yesterday, I felt that perhaps it does need stability, but today I’m wondering whether it doesn’t. If you wipe out the dynamics of the swings you will take it off the speculators. They get a bad name, but they’ve got a job too. And they help business with their problems too.
November 20th, 2009 at 2:34 pm
@Roger: yeah, it’s an identity issue. We could be taiwan, instead of tasmania (joke). The peg is under great criticism as we read from that Harvard Prof the other day on Bernards link to the Chimerica. Of course, no complaining when the goods are cheap.. just when the distortion is not working out for us. Looks like cry baby, but it’s probably true pressure and when China do appreciate it for need of imported goods (iron ore, environmental tech, food, etc), they will. Of course it makes the EU and US look like ‘I told you so’, and ‘we have the power’. The reality is, the Ball is in China’s court. Will they ease, and give the US a break out of goodwill. Or will the US get their just desserts? It would probably go a long way towards relations if they do it in the next 6-12 months.
@Immigrationers: If you want to look at it, then do – but I’m steering clear of public debate about it, because it’s divisive and brings out the worst in all of us.
November 20th, 2009 at 2:52 pm
America thought they where really clever outsourcing everything to Asia / China. However this is what happen’s when real economy stuff drifts away. So does the real money.
Perhaps a lesson for us?
November 20th, 2009 at 3:01 pm
Simon Boyce
Quantitative easing is fine in my opinion if it is used purely to increase our productive economy. 10% increase in money supply and a 10% increase in productivity is no problem. A 10% increase of money supply into housing is a major problem.
Oh isn’t that called our current monetary policy. Inflation up, OCR up, money floods in inflation up again and so on and so on. So easing is an option if we want to really focus on productivity we could recapitalize Kiwi Bank to act as a modern version of the DFC.
November 20th, 2009 at 3:09 pm
@Selwyn,
We import almost everything and export our most important capital – the young and smart generation. Yes- real money again on all fronts drifting away.
What an economy ?
November 20th, 2009 at 3:17 pm
Selwyn – the DFC, yep, essentially ‘public credit’.
Why not?
Because it’d have a reducing effect on inflation and take market share from those now issuing interest bearing debt.
Who wouldn’t want that?
No wonder TINA is so popular!
November 20th, 2009 at 3:44 pm
Selwyn – I think outsourcing has been going on for a while – many of the Gladiators were Nubian.
Seriously, the grapes dropped andt the orgys orged and the fiddles fiddled – and Rome fell.
It mak be that societies go through stages. China certainly looks like early-Victorian England to me.
Malcolm will remember!
November 20th, 2009 at 10:45 pm
David C. says:
1) I welcome the debate.
2) We do not claim to have been perfect,
..nor to have a monopoly on wisdom, but we do care very deeply about the future our of country and we look forward to working with others to consider how monetary policy can best play its part in building a more resilient and productive future for New Zealand.
–
More then 30 hours since your first and last comment, and no signs of a debate (1).
2) is more relevant or can we expect some comments over the weekend ???
Walter
November 21st, 2009 at 4:21 am
http://www.interest.co.nz/ratesblog/index.php/2009/11/20/special-report-why-nz-needs-a-bipartisan-grand-coalition-for-economic-reform-not-tweaks-to-the-rbnz-act/#comment-48393
November 21st, 2009 at 2:52 pm
Iain Parker,
Interesting point. I have 2 questions;
(1) is US actually printing money or issuing govt bonds in this crisis ?
(2) is issuing govt bond similar to printing money ?
November 22nd, 2009 at 7:41 am
I’m just waiting for Mr Cunliffe to answer my question re GROWTH, back up the blog.
Until he – or somebody – does that, this is all deckchairs on a tilting deck.
Went to an interesting debate last night – at Hampden. Debating Growth – Rod Oram, Te Radar and Susan Krumdiek for the negative, Gerry Eckoff, a Fed Farmers ring-in and a School of Business ring-in for the positive.
No Govt invitees accepted – including the local Member Jacqui Deans – nor did any Labour reps…… too obviously a losing argument? Shame on you folk – call yourselves leaders?
Good night, but.
November 22nd, 2009 at 8:49 am
Pull up a chair , powerdown , and I’ll tell you the truth . Yeah , one of those deck-chairs will do . David Cunliffe is using ” interest.co.nz ” to gain exposure within this community . But he is not listening to us . Just telling us what is on his mind . Kind of a Richard Prebble ” I’ve Been Thinking ” sort of thing . Sit quietly in your chair , and the great one will inform you . No questions from you . You are not qualified . OK ?
November 22nd, 2009 at 9:29 am
For pete’s sake Roger…you just ruined my bloody breakfast with an image of Cunliffe exposing himself…have a heart mate…
November 22nd, 2009 at 9:51 am
Hey Wally : How about we challenge David Cunliffe to a meeting of the minds ? We pick a few bloggers , and he has to face their questions . Off the top of my head : Mark H , Iain P , Kate , Selwyn , Roger Witherspoon , Les Rudd , you Wally ( if you promise not to regurgitate your weeties over the fellow ) , Steven ……….Hmmmmm , could be gnarly for Cunnie !
November 22nd, 2009 at 6:40 pm
Reverend Roj -
I figured that, nonetheless these folk (while they won’t expose themselves to all-in debate) usually have a morbid personal thing, which makes them sweat their way through every comment. It goes with the territory.
So I thought it no harm if Mr Cunliffe did some Sunday thinking.
He should have been at that Hampden debate – would have been great exposure, but all he really needs to do is put out an iconic Kiwi book – how about:
“Skimpy on a Soapbox – the phenomenon New Zealand politics is waiting for”.
Or, “read his new best seller, Grandchildren of the Poor”
Or – (back to the deckchairs) – “I’ve been Sinking”.
Or – “There had to be a better Way – That just Wasn’t It”.
But you’re right. He’ll be on a tight leash. When one of them Goffs, they all start Goffing – it happens when you’re out in the cold.
It’s just a pity – I suspect a man with a conscience and a brain, and he could be doing so much.