John Mauldin of Mauldin Economics sees a Japanese style deflationary economic cycle with no growth for the United States

John Mauldin of Mauldin Economics sees a Japanese style deflationary economic cycle with no growth for the United States

By John Mauldin*

In baseball, there is a situation where a base runner is sprinting to home plate and can’t see what is happening behind him. Totally focused on scoring, he doesn’t know if the outfielder is throwing a ball that will reach home plate first. That’s where we get the phrase “out of left field.” (If the ball were coming from right field, the runner could actually see it.)

COVID-19 was the ultimate ball out of left field. Yes, we knew viruses spread and pandemics were possible. Most of us have lived through them before. We didn’t foresee this particular one appearing when and where it did. But it quickly changed the course of history.

Or did it? In the grand scheme of things, maybe not. World-changing trends were already in motion and are continuing. The pandemic may delay or more likely hasten events, but not stop them. For instance, I think The Great Reset is still coming. I previously expected we would get through to at least the late 2020s before hitting the debt wall. Now, I’m not so sure. This pandemic and recession may push us there faster because they are making the debt grow faster.

Today I’m going to blend a few thoughts about The Great Reset with some other historical analysis I recently discovered. It adds up to a disturbing outlook, even if (as seems likely, given the latest vaccine news) we’re past the pandemic by late next year. We’ll find different challenges on the other side.

'Revamp' capitalism

Whenever I mention The Great Reset (most recently here), people ask me to explain exactly what it will look like. I can’t answer because I don’t know in terms that can be labeled “exact.” The Great Reset is simply my term for climactic events that resolve our global debt overload while at the same time dealing with slow economic growth, high unemployment, and social unrest. It could happen many different ways, some better than others. But I firmly believe we will see some kind of resolution. The present course is unsustainable.

Another source of confusion is that I’m not the only one to use this term. Others have used it for their own purposes.

You probably know of the World Economic Forum, whose annual soiree in Davos, Switzerland gathers the world’s wealthy and powerful to discuss/solve our common problems. That’s what they say, at least. Somehow the problems they discuss never seem to get solved, so it’s fair to wonder what they do there. It is, however, a great way to meet fellow elites. (Somehow, my invitation keeps getting lost in the mail.)

Now, in the spirit of “never let a good crisis go to waste,” the WEF sees the coronavirus pandemic as an opportunity to reset capitalism. Really. Founder Klaus Schwab says it quite openly.

COVID-19 lockdowns may be gradually easing, but anxiety about the world’s social and economic prospects is only intensifying. There is good reason to worry: a sharp economic downturn has already begun, and we could be facing the worst depression since the 1930s. But, while this outcome is likely, it is not unavoidable.

To achieve a better outcome, the world must act jointly and swiftly to revamp all aspects of our societies and economies, from education to social contracts and working conditions. Every country, from the United States to China, must participate, and every industry, from oil and gas to tech, must be transformed. In short, we need a “Great Reset” of capitalism.

WEF calls this effort its “Great Reset Initiative.” For the record, it has nothing to do with my conception of The Great Reset. In fact, I think much of what they propose will make the version that I see even worse. I agree capitalism has gone off track and needs some adjustments, and not just minor ones. The current morass of crony capitalism and lobbying for special government favors is abhorrent. But “revamp all aspects of our societies and economies” sounds ominous. Especially coming from the people already nominally running the global economy.

Furthermore, what they really propose is that we change our lives while Davos Man continues undisturbed, maybe paying a few more taxes but with the brunt of the change affecting those further down the food chain. And, of course, they are not long on specifics.

When you start talking about resetting the educational and social contracts and working conditions, you are talking a radical social agenda. I believe we are going to have to have considerable change in the social structure of this country. That is what the current partisan politics is telling us. Too many people on both sides feel the current “social contract,” whatever you might think it is, is not working for them. Income and wealth inequality are very real. I am not convinced a WEF-style “Great Reset” is the answer.

Fortunately, I don’t think WEF will get very far. More likely, this is another example of wealthy, powerful elites salving their consciences with faux efforts to help the masses, and in the process make themselves even wealthier and more powerful.

The real problem may be simpler: We have too many “elites.” History shows this rarely ends well.

Excess elites

The December issue of The Atlantic magazine has a fascinating interview with Peter Turchin, a University of Connecticut professor with some unique ideas about human history.

Turchin is actually a zoologist. He spent his early career analyzing population dynamics. Why does a particular species of beetle inhabit a certain forest, or why does it disappear from that same forest? He developed some general principles for such things, and wondered if they apply to humans, too. Answering that requires data, so he went from studying beetle history to human history.

One recurring pattern, Turchin noticed, is something he calls “elite overproduction.” This happens when a society’s ruling class grows faster than the number of rulers it needs. (For Turchin, “elite” seems to mean not just political leaders but all those managing companies, universities, and other large social institutions as well as those at the top of the economic food chain.) As The Atlantic describes it:

One way for a ruling class to grow is biologically—think of Saudi Arabia, where princes and princesses are born faster than royal roles can be created for them. In the United States, elites overproduce themselves through economic and educational upward mobility: More and more people get rich, and more and more get educated. Neither of these sounds bad on its own. Don’t we want everyone to be rich and educated? The problems begin when money and Harvard degrees become like royal titles in Saudi Arabia. If lots of people have them, but only some have real power, the ones who don’t have power eventually turn on the ones who do…

Elite jobs do not multiply as fast as elites do. There are still only 100 Senate seats, but more people than ever have enough money or degrees to think they should be running the country.

“You have a situation now where there are many more elites fighting for the same position, and some portion of them will convert to counter-elites,” Turchin said.

The excess elites become counter-elites, who then try to make alliances with the lower classes which usually don’t work out. But my eyebrows went up when I saw how Turchin describes the endgame.

The final trigger of impending collapse, Turchin says, tends to be state insolvency. At some point rising insecurity becomes expensive. The elites have to pacify unhappy citizens with handouts and freebies—and when these run out, they have to police dissent and oppress people. Eventually the state exhausts all short-term solutions, and what was heretofore a coherent civilization disintegrates.

Terrifying? Yes. It sounds amazingly like what the WEF proposes. I am sure Klaus Schwab and the others there recognize the frustration that many people have. They are proposing programs to alleviate that frustration—expensive, society-altering programs. But they would still let the game at the top continue.

But it gets worse.

Instability spikes

In 2010, the scientific journal Nature published a collection of opinions looking ahead 10 years, i.e., where we are right now. Nature then published a short response from Turchin in its February 2010 issue.

Quantitative historical analysis reveals that complex human societies are affected by recurrent—and predictable—waves of political instability (P. Turchin and S.A. Nefedov, Secular Cycles, Princeton Univ. Press; 2009). In the United States, we have stagnating or declining real wages, a growing gap between rich and poor, overproduction of young graduates with advanced degrees, and exploding public debt. These seemingly disparate social indicators are actually related to each other dynamically. They all experienced turning points during the 1970s. Historically, such developments have served as leading indicators of looming political instability.

Very long 'secular cycles' interact with shorter-term processes. In the United States, 50-year instability spikes occurred around 1870, 1920, and 1970, so another could be due around 2020. We are also entering a dip in the so-called Kondratiev wave, which traces 40-60-year economic growth cycles. This could mean that future recessions will be severe. In addition, the next decade will see a rapid growth in the number of people in their twenties, like the youth bulge that accompanied the turbulence of the 1960s and 1970s. All these cycles look set to peak in the years around 2020.

Again, that was from 2010. Right on schedule, we are experiencing the “instability spike” Turchin says tends to come along every 50 years.

Why 50 years? It relates to the human lifespan. Consider who was “in charge” during the period around 1970. We Baby Boomers were all 25 or younger at the time. Managing the chaos fell on older generations, who remembered it well and spent the rest of their lives trying to prevent more of it. But after 50 years or so, they are mostly gone. We who remain must learn the lesson again.

I’ve talked before about Neil Howe’s “Fourth Turning” idea, and George Friedman’s geopolitical cycles, both of which are peaking in this decade. Interestingly, Friedman also sees a different geopolitical 50-year cycle playing out in the mid- to late ‘20s. Which overlaps with his 80-year geopolitical cycle for the first time. The mid- to late ‘20s should see the climax of Neil Howe’s Fourth Turning. Now we see Peter Turchin postulating a similar time frame for different reasons. None of them, to my knowledge, expected the pandemic we are now experiencing. What is its effect?

Well, we know the pandemic triggered a recession that may, before it’s over, rival the Great Depression. For millions of Americans, it is not just something they read about. They feel it.

You’ve probably seen this famous 1931 photo of Al Capone’s Chicago soup kitchen.

Source: Wikimedia.

The 2020 equivalent is this from my former hometown Dallas last week. That was very emotional for me and brought a tear to my eye.

Source: CBSDFW via Twitter.

We do see progress in these images. The people obviously have cars and fuel. Those were elite luxuries in 1931. Some of these people may be educated and intelligent, but they’re not elites. Actual elites don’t have to wait in line for food. They call Whole Foods or DoorDash and have it delivered.

The problem, borrowing Turchin’s framework, is that some thought they were elites, or if not exactly thinking of themselves as elite, did enjoy the benefits of good jobs, at least until recently. This year took away that illusion, and they’re naturally disappointed. They may join the “counter-elites” and seek more power.

This is where we are. The hard times we’ve long anticipated are here. That 1931 soup kitchen photo was just the beginning of a long, dark period. It got a lot worse.

Will our situation similarly worsen? That remains to be seen. As I’ve said, good things keep happening even in the darkness. The mRNA technology behind the new coronavirus vaccines may lead to breakthrough treatments for other conditions. mRNA technology allows the delivery of specific proteins to the human body. If you have a disease, and there are many of them that simply come along as part of the process of aging, it may soon be possible to deliver specific proteins that cure or at least mitigate your condition.

I want to further explore Peter Turchin’s ideas, but in fairness to him, I want to read more of his work first. He has a number of books and articles. I will even try to reach out for discussion. What I see so far is worth deeper study.

But the more important part is that I especially pay attention when I see multiple smart people reaching similar conclusions for different reasons. We are now at what Turchin calls the final stage, when elites try to pacify the masses with bread and circuses. Doing so racks up the debt and suppresses economic growth. Debt is accumulating faster than I expected, so The Great Reset may happen sooner than I expected.

Whenever it comes, we should welcome it. The alternatives may be even worse.

What do we do with all that debt?

But that still doesn’t answer the question that is on our minds: What happens when we come to the place where we have to deal with all that debt? Fortunately, my favorite central banker, Canadian Bill White who was the BIS chief economist, did a brilliant interview with my friend Mark Dittli in Switzerland this week which gives us some answers.

Today, the Canadian criticizes the central banks: “They have pursued the wrong policies over the past three decades, which have caused ever-higher debt and ever greater instability in the financial system.” He suggests that the current crisis should be used to rethink in order to build a more stable economic system, one in which fiscal policy plays a greater role and that relies more on productive investment. In this in-depth conversation, White says what should be done—and he demands more humility from decision-makers: “We know much less about the economy than we think we do.”

But Bill is not calling for austerity at this time. He recognizes we are in a recession/potential depression. But he wants more emphasis on the fiscal policy and not central banks.

We’re on a slope where monetary policy has become increasingly ineffective in promoting real economic growth. Every crisis was met with monetary easing that caused debt and other imbalances to accumulate over time, and that caused the next crisis to be bigger than the previous one. The next crisis then needed more punch from central banks. But since interest rates were never raised as much in upturns as they were lowered in downturns, the capacity to deliver that punch was decreasing.

[The recent March, 2020] episode perfectly encapsulates my view of what’s wrong with our monetary policy of the past decades. True, the Fed had no choice but to step in to prevent a financial meltdown. But this meltdown only happened because of the monetary policy followed over previous years.

… my point is: Central banks create the instabilities, then they have to save the system during the crisis, and by that they create even more instabilities. They keep shooting themselves in the foot.

William Dudley and other central bankers are beginning to admit that they have come to the end of their effective ability to manage their respective economies. Governments have to step in with fiscal policy that is actually targeted and productive.

Then Bill lists four ways that we can deal with the debt, not all of them palatable:

There is no return back to any form of normalcy without dealing with the debt overhang. This is the elephant in the room. If we agree that the policy of the past thirty years has created an ever-growing mountain of debt and ever-rising instabilities in the system, then we need to deal with that.

In theory, there are four ways to get rid of an overhang of bad debt. One: Households, corporations and governments try to save more to repay their debt. But we know that this gets you into the Keynesian Paradox of Thrift, where the economy collapses. So this way leads to disaster. Two: You can try to grow your way out of a debt overhang, through stronger real economic growth. But we know that a debt overhang impedes real economic growth. Of course, we should try to increase potential growth through structural reforms, but this is unlikely to be the silver bullet that saves us. This leaves the two remaining ways: Higher nominal growth—i.e., higher inflation—or try to get rid of the bad debt by restructuring and writing it off.

When later asked about write-offs he said this:

That’s the one I would strongly advise. Approach the problem, try to identify the bad debts, and restructure them in as orderly a fashion that you can. But we know how extremely difficult it is to get creditors and debtors together to sort this out cooperatively. Our current procedures are completely inadequate.

I expect that we will be coming back to this interview again. (Over My Shoulder members can read my marked copy here.)

How long can this go on? Longer than you might think. From Rosie (David Rosenberg) Friday morning:

We had core CPI data out of Japan and the YoY trend went further into deflation to -0.7% in October from -0.3% in September. The is the sharpest move into deflation terrain since March 2011. A country with a 700% total debt-to-GDP ratio, two decades of zero interest rates, and a central bank balance sheet that is 130% of GDP. Nice to see how all the credit creation has managed to spur on a reflationary backdrop. Shades of what’s to come in the US.

I agree. The US could turn Japanese. While I think we could see inflation in the short term (2 to 3 years) the debt overhang and growth of central bank reserves will lead us directly into the same problem Japan is facing: a deflationary economic cycle with no growth. All while new technology (especially biotechnology) makes our lives better. It will be a strange new world that will have no resemblance to the last decade’s “normal.”

We will stumble through and some of us will do extraordinarily well, because we position ourselves to take advantage of this cycle. Stay tuned…


*This is an article from Mauldin Economics' Thoughts from the Frontline, John Mauldin's free weekly investment and economic newsletter. This article first appeared here and is used by interest.co.nz with permission.

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54 Comments

More forecasting (inherently crystal ball gazing) from a so called expert. We hear this constantly and invariably they're wrong or not quite correct or somewhere in between. Fundamentally they are using past experience (now out of date) to attempt to make a call on future direction. The day you take their advice is the day you begin to lose. Nothing in human endeavors follows a constant and predictable path (except housing in NZ)

the US would join the Belt and Road Initiative to prevent such things from happening.

Then, the US would realize that building the world rather bombing it would be more profitable for them as well as making everyone happy.

Haha.. good luck with that xing, the US is only interested in it's own advancement.

ditto with China too my guess, wherever they venture out is just hugging the power elite for destination countries, but when you open the venture abroad, usually will be manning by the exported workers from China.. have a look their company venture in Africa, even the security guard is imported.

All big imperialist powers have always has their inherent nastiness, it's necessary to maintain their power.

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Building the world, one Uighur at a time

Certainly the trillions spent on wars in the last few decades could have been better spent at home or building constructive relationships with other countries.

The world is already "built". What you mean, is turning the world into a more profitable industrial zone. You fantasise that's what's required for "happiness"?

Good one Xing. The only reason CCP spends money anywhere is to gain influence and power. for example, Aussie iron ore purchases are to be linked to Aussie behaving itself with regard to Chinese expansion and butchery of it's citizens.

We have already "built" the world beyond what is sustainable. We have already overpopulated it, and to its credit, China was one of the first countries to recognise this, although the solution was not always humane.
The realisation that we have to take less from the planet than we have been means we need to go in the other direction, so China's expansionist goals are very unhelpful.

"Fundamentally they are using past experience (now out of date) to attempt to make a call on future direction."

Yes. It's like trying to drive a car forward along a country road while only looking in the rearview mirror.

More forecasting (inherently crystal ball gazing) from a so called expert. The day you take their advice is the day you begin to lose. Nothing in human endeavors follows a constant and predictable path (except housing in NZ)

An expert who is contrarian by nature and is largely ignored by the financial and mainstream media but has a tremendous reputation and following among finance professionals who don't meekly follow the status quo. The general populace in NZ are more familiar with and put more faith in the extrapolations of Ashley Church and Granny Herald than John Mauldin.

He's an ex - pert. How many times have we seen so called experts get it completely wrong lately?

Good logic there. Experts were 'completely wrong' lately, therefore all experts are 'completely wrong'. Similar to all swans are white because you've never seen a black swan.

I never said experts are completely wrong, as I also said experts aren't completely right. As for swans - I've probably seen more black ones than you give me credit for. All I said was that experts are inherently prone to inaccuracy based on the fact they tend to view future events through a "this is what happened last time" lens. If everything experts based their assumptions on was constant we wouldn't be in the crap we are now, so clearly they can't be relied on

What did Mark Twain say about predictions. ..
Really they are a bit of a folly. Better to look at scenarios.

Hook, all you did was attack John Mauldin as a person. You never rebutted one word of what he said. There is an obvious reason for that.

It is a constant source of amazement to me how somebody like you can take a statement - "how many experts got it completely wrong" and twist that into "all experts are completely wrong". Did you learn that at uni or on the 'net?

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If you're going to toss doubt onto the experts, it's best to challenge the idea. When you bandy around comments like "the day you take their advice is the day you begin to lose," you should at least back it up with a constructive rebuttal of what what Mauldin is saying. As I said, the general populace have no time for perspectives from people like John Mauldin (most would be unlikely to know who he is). And as I pointed out, they are more familiar with and attached to the opinions (and forecasts) of people like Church, the Hosk, and media organizations like Granny Herald.

J.C. I don't really need to challenge their ideas personally. There is plenty of evidence to support the idea that experts aren't as expert as they'd have you believe. The banks with their prediction of falling prices, RBNZ with its attempts to lift inflation and Fund managers trying to tell you they can beat the market - need I say more??

Well in the case of Japan, debt has stifled economic growth. Is there any argument as to why excessive debt will not stifle growth and exacerbate deflation in the U.S.? I think it's a reasonable argument Mauldin is making. Whether he is wrong or right is kind of beside the point.

If his argument is neither wrong nor right doesn't that make it kind of specious. Goes back to my assumption that you believe so called experts at your peril, however validity is in the eye of the beholder.

OK. To 'believe so-called experts at your peril' is not particularly useful to understanding Mauldin's ideas or opinions.

Does this opinion broaden your thinking in any way?

No. He's an old guy using out of date thinking trying to rationalise a new and changing world with little or no anchored reference points. Listening to cloistered academics has never been my strong point. If they actually knew what they were talking about they would have made a killing on the stock market and we wouldn't hear from them imo. That they rely on speaking slots tells me how pertinent their advice is

Listening to cloistered academics has never been my strong point.

Mauldin is not an academic.

Perhaps it's time to re-read 'Voltaire's Bastards' - John Ralston Saul. The core of his doorstopper book is that Reason has to be combined with Morality (derived from the surrounding civilisation) and common sense, if Reason is not to be used as a club with which to pummel us into submission at the hands of the Reasoners.

Maudlin is, as Saul is, a Doubter, and exhibits both Morality (what Should be done, not what Can be done - the latter is the province of siloed Experts, the former is the concern of us all), and Common Sense.

Err, just like the RBNZ & Banks economist here in NZ? - If they got it wrong (whichever side you've preferred).. then the label is biased accordingly. Off course your context is in the economy, but honestly. Try the view on those so called Healthcare expert, it can be tweaked as how they got it right or wrong but in general for most of terminal prediction is almost as good as gravity law, albeit in the end it's still patient rights to deny the verdict.

It seems that you have no faith in mainstream economics but when somebody mentions MMT as an alternative way of thinking then you just get angry.

Fully agreed, history never repeated if human do something about it to deny the possibilities. Not just housing in NZ, I believe in certain stage of terminal illness this is also the same.. try to discount several expert opinion, keep looking until find alternative expert opinion which aligned to us.

"are actually related to each other dynamically. They all experienced turning points during the 1970s. "

This is where he diverges. He gets that economics and banking, as practised, are out of ideas and out of tools. That part is fine. He also - shrewdly - nails the turning-point.

But that turning-point was energy and resource-related; per-head energy peaked about 1980
https://ourworldindata.org/energy

Thus he is wrong about (linear) cycles, whatever the length. Ultimate depletion is the real killer. Too many people and not enough planet left.

Which renders Hook, above, irrelevant too. But we knew that......

Haha.. I normally don't like sharing my space PdK but I guess I'll have to make room for you - there's a nice corner of the floor you're welcome to, next to the drain. BTW can I interest your estate in the 15K I offered for your demise? as you proffered yesterday?

Yes
As Bali are finding out, if we aren't burning something, there ain't no jobs.
Reset all you like, it doesnt solve this resource overshoot issue which reared its head in the 70s... 50 years later and we are in deep s#@t

When this all settles down is anybody's guess...

Read Article: Ahead of G20, U.N. chief warns 'developing world on precipice of financial ruin'
https://www.reuters.com/article/us-g20-un-guterres-idUSKBN2802DS

I'm no futurist but one thing we'll need for the great reset, is some new way of organising currency, and a replacement for the USD as a hedge...

Ahem there's something called "bitcoin" in the news, gaining some fans

A currency for what exactly?
If supply chains break there won't be much Trading surplus

If supply chains break it won't be for long. After that the ONLY thing that matters between traders is that the piece of paper in their wallet that says $100 can be transacted for $100 worth of goods and services.

Currencies are 100% about confidence in value. QE is a large scale global assault on this principle. The only solution will be a decentralised system with fixed rules. Govt banks are proving they aren't qualified to manage the fundamentals of reserve currencies.

I think you underestimate what it takes to be a reserve currency...
Control over resources
ie A military

Mauldin has been so wrong for so long now that it amazes me that he keeps going on about this...it's just sad.

He is akin to an employee at a Titanic casino table.

He can see the table is too tilted to continue placing bets and spinning wheels. But in the past, that meant the ship would roll the other way after an interval. This time it isn't going to roll back. This time the tilt is permanent. He sees the First-Class passengers moving in the direction of the lifeboats, knows that the masses are going to be locked down.

But his expertise is only about accepting bets, and spinning the wheel. He knows there is a sinking potential, but has no understanding of dosplacement, freeboard or soundings. The joke is that the knocking commentator up-thread isn't even that far down the track, cognitively.

Upthread commentator is asleep in the toilet

Surely the easiest and cleanest way to create inflation will just be for the reseve bank to transfer money directly to the bank accounts of citizens. This will firstly create controlled inflation which in turn that will increase retail interest rates which will encourage people to repay debt with the money they have available so reversing the cycle we have seen to date.

I don't know about our govt but wont they have to change some laws to do that? It's a quick fix and I'm all for helping people pay rent and eat. But I'm 1000% sure there will be downstream effects that are hard to handle. I'm not sure if it can really be fixed at this stage. On that point i think the article is correct.

a free lunch economy to get us out of our debt burdens?
Too easy
why not go the whole hog and make everything free?

We arent short of money to divvy up
We are short of surplus to divvy up

Thought provoking article. I rarely see humans acknowledged as a type of animal and subject to the same conditions thereof, so this was refreshing. I'm struck by the converging tendencies of Freidman and Marxist analysis in relation to how debt operates.

I'd like to disagree with Cassandra's voice, but fear I can't.

Unfortunately I think what he is saying has at least some merit but am certainly hoping he is wrong.
Feel it is a little unfair to say he is simply using the past to predict the future, when, as I understand it, the main premise of his article is that our current global debt has got so high that it is unsustainable for much longer and something has to give.
We have no past experience of anything like this amount of debt, making it impossible to (incorrectly try to) use the past to predict the future anyway. Parts of "The Mandibles" by Lionel Shriver may not be as far-fetched as it appears. It's worth a read.

What are any of us doing but using the past to predict the future. Bit ridiculous to criticise a guy for not having a crystal ball

I think you are right Karl, the future is something more unpredictable than it has ever been. To look at past cycles when the human race was in expansion mode and compare to nearing full capacity now is probably not going to give any sort of reliable prediction.

Trump spent $US 1 trillion dollars on a tax cut in 2017 mostly for the elites of America. What lower income earners did spend buoyed the US economy until Covid. Then Trump spent a large amount of money on the biggest US businesses while many small businesses missed out.

The result is a small fiscal stimulus, inadequate to keep small business and low income earners afloat at the time of lockdown coupled with the tightening of bank lending to businesses with a credit risk. There is all that tax cut money sitting in the bank accounts of large businesses and wealthy individuals not being spent in the real economy during Covid and now being spend on speculative assets like shares, real estate and crypto currencies.

Then there is the US$ trillion bond issuance that is driving down the value of the $US and making life difficult for all the other nations.

If the US Federal Reserve was able to bypass Congress and the Presidency and send cheques to people in need, extend loans to small businesses and send money to state govts, then many of these problems would cease. If in addition it was to forgive a percentage of user pays loans for low and middle income earners then those people would have more purchasing power and demand would return to the economy.

The release of lower income people from user pays debt burdens like student loans, loan shark interest rates, local rates/tax bills, extortionate health care and dental costs and the like never seem to be mentioned. Yet these solutions are the obvious ones.

Substitute New Zealand for the US and the issues are not too different.

It doesn't take increasing numbers of new taxes on any slow moving taxpayer to achieve the return of demand to the real economy and the easing of housing and infrastructure pressures either. It just takes the govt to spend money on essential items like housing and infrastructure, health care and education.

At some point surely New Zealanders might ask themselves why can't the RBNZ spend $128 Billion on new housing, low interest loans to small business and helicopter payments to those finding it difficult to pay their bills right now, rather than an attempt to plead with Australian banks to lower interest rates for people (small businesses) that the banks aren't going to lend to anyhow.

I get annoyed when people go on about wealth taxes when I know that those taxes aren't going to be spent on actual new housing stock because no-one in the govt has the practical skills to ensure that houses get built. The money is there now (the RBNZ issues the money) to build new housing stock. You just have to spend the money, purchase the land and build the houses. That is what has to happen to relieve the pressure, or start sending people to Australia again.

As Covid has shown, fiscal spending by the govt has positive results. NZ Govt debt to GDP is one of the lowest ratios in the world. The govt could take $10 Billion and spend it on housing, housing infrastructure and council costs now if they wanted. The Victorian State Govt in Australia is doing exactly that.

Do you want the govt to save up the wealth tax money for the next 10 years before they have enough to spend on new state housing/new housing? Only to have National come along in 3 or 6 years and give in away in income tax cuts like they did before?

All this attacking different age groups and suggesting ways to strip them of their assets or telling them to save more won't get more houses built, it just makes people nastier and roadblocks more difficult to get around.

The amount of houses that need to be built and the areas they need to be built in have to be identified and then the land needs to be purchased and the houses built. If the govt doesn't build houses for low income earners in low decile areas then I doubt the pressure on our society will be released.

Interest-ing article on Aljazera this morning pin-pointing New Zealands Poor people and asking Jacinda what she is gonna do about it.

Seems strange that she invests in bumping up her Million Dollar Houses, then is expected to help the poor with overpriced accomodation, food, etc that NZ has pumped up to pay for their own.....Million Dollar Houses......paid for with DEBT.

I would not swap a Million Dollars for a crap New Zealand House...but that seems the only game in Town.

Bitcoin fixes this

Sounds brilliant
Can you eat a bitcoin?

Of course. Follow the logic of an economist;

They are mined, therefore they are a resource.

All things are substitutable

Therefore you can eat bitcoins.

The same way you can stuff dollar notes in your petrol tank.

Oh.......

JRSNZ.. don't you mean blockchain together with a crypto currency like method of exchange fixes this?