By Bernard Hickey
Let's take matters into our own hands
It's now clear our government and our banks are not doing anything substantial to reduce our vulnerability to another Lehman-style Global Financial Crisis or to improve our national savings rate.
We have short term net foreign debt of around 50% of GDP or around NZ$90 billion. Every 90 days much of that has to be refinanced by our banks in the 'hot' international money markets that froze during the Lehman crisis of late 2008.
Our Reserve Bank had to tide over these banks in late 2008 and would have to again if the markets froze because not enough has been done to reduce that exposure.
European authorities and the Greek parliament managed to avoid a default and another financial meltdown by the skin of their teeth last week, but there remains a significant risk of more turmoil in the weeks and months ahead. America faces default by August 2 unless its politicians can agree to lift its debt ceiling and China is struggling to slow down its over-heated economy.
Our Reserve Bank has introduced the Core Funding Ratio to try to reduce our banks' reliance on these short term money markets, but as the IMF pointed out in March the exposure is still too large.
Essentially our policymakers have decided to cross their fingers and hope nothing goes horribly wrong. They're also taking a punt that China will succeed in its Goldilocks plan of slowing down its economy so it's not too hot and not too cold. They are betting this will keep commodity prices high and rising, which will in turn drive a farming-led transformation of the economy from being all about borrowing and spending to being all about saving and producing.
But even their own forecasts show this punt and hope strategy won't work. Treasury is forecasting our net foreign liabilities will rise to 85.3% of GDP by 2015 from 78.6% now as we continue to rack up current account deficits of more than 5% of GDP. New Zealand is getting more indebted and selling more assets to continue spending more than it earns.
Last month's Macro Forum conference also made clear that New Zealand's low savings rate means we have to offer relatively high interest rates to keep servicing our growing foreign debt, which in turn keeps our exchange rate higher than it should be and stops us from diversifying out of low added-value commodity exports into higher value, higher wage manufacturing and services exports.
New Treasury Secretary Gabriel Makhlouf seemed relaxed about this outlook in his initial interviews this week and has already said we should continue to sell assets to foreigners. The Reserve Bank remains wedded to a free floating currency, no capital controls and its inflation targeting mandate. And John Key's government ran a deficit last year of 8.4% of GDP, most of which will be paid for by foreign borrowing.
So if our policy makers won't do anything, what can New Zealanders do individually to reduce our short term foreign debt and improve national savings.
Here's a few ideas:
- Stop spending on imported goods and services or switch to locally made items. That keeps the funds circulating within New Zealand and reduces the need to borrow to fund a current account deficit.
- Use those savings to repay bank debt if you have it. This will help reduce the banks' need to borrow offshore to fund that debt.
- Use locally owned businesses where you can because that reduces the profits exported to foreign owners, again reducing our current account deficit.
- If you have repaid debt then the easiest way to ensure it helps repay foreign debt is to save with a bank. That allows the bank to reduce foreign borrowing.
- If you have to borrow, use a bank that funds its lending with local term deposit funds. That excludes the big four Australian banks and Kiwibank, who are continuing to borrow in hot international money markets to fund lending here. The leaves the likes of TSB, SBS Bank, Heartland Building Society, PSIS and the credit unions.
- If you're investing in a business, choose one that either exports or competes with imports, and one that employs locals on high wages. This wil reduce our current account deficit and improve savings.
In essence, save like the wind New Zealand because unless we do it ourselves it will never happen.
103 Comments
You obviously dont understand Keynes.........
So my head for sure isnt exploding, not that Im fanatical about Keynes anyway, its a tool for insight, not governance. Its a bit rich blaming pseudo keynesian actions that have been trying to prevent a huge mess considering the moneterists have brought us to the edge of the second Long Depression (or as I perefer theGreat Austerity) and are hell bent on putting us into it due to "CPI" inflation knee jerk reactions I think I can sit back and not worry real / modern keynesian economics will be damaged....
regards
steven.... do u understand monetarism..???
The boundaries between all these ....isms are so blurred that they become meaningless.
My own view is that Economics has been hijacked by special interest groups...
This includes big business, the financial sector and politicians.
Read a little about the Keynes vs Hayek debate and u see that Marco economics that deals in "aggregates", and is devoid of any awareness of the microeconomic effects, is a really flawed and dangerous philosophy... Sounds good on paper ... but in reality it leads to all sorts of distortions.
From everything that I have read about economics over the years... I have come to the conclusion that recessions are a natural part of the Capitalist economic system...
Sounds ironic..... BUT sometimes going on a diet is the best thing one can do to regain health.... ( rather than a shot in the arm that makes one feel better. )
Monetarism, not as much as I'd like.....
Blurred boundaries, totally agree....
Special interest groups, totally agree.....
Diet, I think Keynes general theory is holding up very well to to what we have just faced and what we face soon(ish). In fact the risk of a diet right now is a clear fall into a terrible depression that will make the Great Depression a walk in the park......Hayek was quite influential in making teh Great Depression worse....cant see too much in the austrian model that works....
Im afraid diet v shot in the arm are not alike.....there is a difference betwen being starved and eating the right things in moderation as a help to recovery.....sorry I know which I'd follow.
The outcome of actions or non-actions up against the zero bound is pretty clear.....
Boom and busts, yes I can accept that these cannot be avoided, but I think with positive action the excesses, (like high inflation or unemployment) can reduce the impacts of both.
regards
Errr, I think you are twisting history a bit there steven,
This link may clear things up for you.
http://www.youtube.com/watch?v=6XbG6aIUlog
-b
Bernard, the difference between any of the political parties stance on this is what? You couldnt slide a sheet of rice paper between the differences....
"Essentially our policymakers have decided to cross their fingers and hope nothing goes horribly wrong." Yep, and they are all the same. When it blows, the Govn of the day will re-act....as its an "emergency" and depending on which party it is we will se a swing to the left or right. as which ever party it is tries to protect the size of the pie slice its voting block has...I dont ythink its going to be peaceful...
Meanwhile they will try and convince us that GDP isnt the best measure of our well being, but a new metric they will "invent" will be.....some formula that they can tweak at will is on the cards.
Yep...
regards
@steven
Modern Keynesian economics is an oxymoron. It’s like saying Post-Modern Ancient Rome. It’s a failed Dogma. And nobody understands Keynes. Even Keynes didn’t understand Keynes. That’s what makes it sound so brilliant. It’s pseudo-scientific economic mumbo jumbo wrapped in logical fallacies. Keynes it the string theory of economics and it’s not even wrong! Money follows Newton’s third law of conservation of motion: Every action has an equal and opposite reaction.
Its not failed by a long way...what has certainly failed is the left's corruption of Keynes's work....
http://www.econ.cam.ac.uk/keynes-conf-2011/krugman.html
Like I said earlier, its a guide on what is happening....its holes and there are a few are no worse and in fact better than many...
Certainly to say Keynes advocated wild spending is simply untrue, if you think that then you dont understand Keynes at all.
Never mind we are both in the test tube, we get to watch at point blank range.
regards
The entire Keynesian philosophy is based on the government becoming the spender of last resort. The government should throw money on a crisis like a firefighter throwing water on a fire. The entire idea behind his philosophy is short circuit a recession, stopping it in its tracks, cause a soft landing, and therefore spurring growth. Am I missing anything here?
The fundamental flaw is the idea that you can “short circuit” an economic cycle. The cycle takes time to weed itself out. You can’t immediately re-tool 20% of your population overnight and find them new jobs. You have to let the inefficiencies work them out naturally. It takes time for people to sort out their lives, reeducate themselves, and then find more meaningful work. That is like taking an entitled Ivy League lawyer, throwing him on the street and expecting him to be a productive farmer in less the 9 months.
And by the way that little “test tube” has taken place many times all over the world with disastrous results. So the idea that you can cheat time by switch people on and off or someone can take out a loan, build a new factory, and re-staff it within three quarters is ludicrous. Never mind the fact that humans are natural hoarders and if you throw monies and the elite they will only stash it away to survive the next crisis.
Just how long so you think it’s going to take for America to switch from an information and service economy to a manufacturing economy? It’s going to take decades! Nope sorry but by any reliable metric Keynes is fail.
Well I can assure you success will not be throwing debt at “make work” projects. The only thing that will fix is letting people sus out the issues and finding solutions at the natural rate of problem solving and production. There is no substitute for time. I would postulate that the only actual success that brought the world out of the Great Depression was in fact: “time”. (Reality 1, Keynes 0)
If you want to move into the modern era fine, Japan has thrown more and more debt at its problems for decades and stubbornly refused to allow time to heal its economy. The result has been that Japan has been in the debt trap ever since. (Reality 2, Keynes 0)
You’re still not convinced? Fine the US has thrown an unprecedented amount of debt ($8 trillion and counting) at this problem with very very very little, if any, evidence to show that it is working. Also the US is currently involved in 2.5 wars and those don’t seem to be doing anything other than keeping unemployment a little lower. So the debt trap isn’t working and neither is the war effort(s) that so many Keynesians love to cite as a shining example of lifting a nation out of a Depression. (Reality 3, Keynes 0)
If you want a modern economy that seems to be doing ok, then we need to look to China. They both make stuff and have a severely high saving rate…hum wonder if there is anything we can learn there? (Reality 4, Keynes 0)
With so much fail, success is simply doing the opposite. It’s time to make money worth something by severely raising interest rates and taxes. Let practical deflation take root for a couple years and allow the world economy to hit the collective reset button. The only way to change the collective behavior of the human species is to show that money has value. Consistently destroying the value of money will only cause hyperinflationary “trust” issues. If the lack of trust in money hits a critical mass then it’s game over. The first step is to get people to trust the system.
The only way NZ will success is to refuse to play the rest of the world’s failed reindeer games.
As for more data…most people believe it was WWII that brought the US which is a logical fallacy. In fact, unemployment and GDP were still depressed for the first couple years after the war there were a lot of solders looking for work. What really helped was the US not being attacked and having the time to develop the infrastructure to develop a leading economy.
Japan is living a dream. The only thing keeping Japan’s shirt on it bake is that large investors can go there without disrupting the local economy. You take that way and Japan rots on the vine.
As for the US the only two things saving the US from Argentina style hyperinflation and subsequent IMF intervention is 1) The USD reserve currency status and 2) The USD is backed by oil.
The dirty little secret is that equities and commodities do not drive the economy. Those markets are but pimples on the ass of the fixed income market. Savings is what untimely drives economies. It is absolutely important to loan money to help generate wealth. I’ve worked in may start ups in the US so I know the value of Angel investing, seed money, and bridge loans. I understand that I’m currently 10X my personal GDP by owning a home. So I can see the debt argument. However, where do you think the most cost-effective loans come from? It’s not from banks! It’s from the fixed income market. Anytime you see an extremely profitable company (i.e. Google, Apple, etc) ask yourself where do you think they got their monies. Angel investors whose clients’ are a venerable “who’s who” list of large institutions have a mandate to place their money somewhere, anywhere, and find an ROI. Also if you’re a large corporation and need short term financing for payroll…you’re going to the commercial paper market. And the commercial payer maker it funded by fixed income. So this idea that savings is evil and has no value in modern finance is the silliest thing I have ever heard. Savings makes the world go round! The global pool of money is $60 trillion and needs to find a home somewhere.
I don’t believe in debate via Google. So I’m really not a fan of links. But since you asked, the best place to start is wikipedia
Hum…good question. Not sure if you’re going to find an exact paper on structured finance that specifically talks about the $60 trillion in fixed-income securities. It’s one of those metrics that are just a known value…like the US GDP being $14 Trillion. That isn’t really written, per se, but it is a known metric. The market size from largest to smallest usually goes from: Derivatives $120 trillion, Fixed income $90 Trillion, and the equities and commodities are just few trillion each.)
You might want to start reading Satyajit Das’s blog (his books are good too)
http://www.wilmott.com/blogs/satyajitdas/index.cfm/2011/4/30/Sovereign-CDS--The-Case-for-Control
Maybe if you contact Ceyla Pazarbasioglu at the World Bank she maybe able to better help you.
http://info.worldbank.org/etools/docs/library/155468/finsecissues2003/pazarbasioglu.html
It’s never explicit but implicit. You talk to a disciples of the Church of Paul Krugmen and his ilk and they will tell you that savings is the kryptonite of a functional economy. They believe that one man’s savings in another man’s income so it’s best to spend and have zero savings to keep the economy robust. It is remarkably flawed logic since savings is always the seed of future investment. Why shouldn’t; I be able to save and find a worthwhile investment later on that might increase my wealth? Why should I live paycheck-to-paycheck? I don’t consider that an increased standard of living, I consider that indentured servitude in a comfortable room.
LOL, talk about covering all your bases, cant be wrong, can you?
Net deflation, pure and simple. You cant get expotential deflation in assets for long anyway, they simply reach zero value..and most things will have / retain value....now things like SUVs and other 4 or 5 litre cars will probably drop to scrap value....MiEV's almost worth their weight in gold....Land, I expect will drop in value, but its an energy producer, so it will drop in value because the present production on it cant be sustained without large energy inputs....so its going to be essentially organic....but ppl will need to eat...
regards
Steve,
I’m not covering my bases I’m simply illustrating the natural cycle of economic collapse. Feel free to talk to an Irishman, an Argentina, or even a Brazilian what hyper asset deflation looks like. During each of their extreme economic vicissitudes you could buy property for a single unit of currency or even trade it for food. Never disregard the levels of panic and a human’s innate talent to buy at the highs and sell at the lows.
Any economic collapse will be followed by a brief and rapid economic diversification followed by an extra-long recovery. Keynes attempted to short circuit that recovery. I claim that it is impossible because human nature and millions of years of evolution will trump monetary and fiscal policy every time. Panic sets in and some violence may erupt but it is usually quelled once people decide to cooperate once again and get on with living. Once you lose the public trust and break the social contract it takes an extremely long time to (typically more than a generation) to recover said trust. Once the economy breaks down the long economic recovery starts. Secondary and tertiary markets will spring up and the economy will continue. The local currency will experience “trust shocks” causing hyperinflation. People will panic and buy stuff they need as soon as they get paid, unemployment will rise, and people will sell everything they own to move to greener pastures. That means houses and property that cannot be transported will be selling for very very little. Mostly likely a desperate person will trade their now worthless property for transportation (i.e. car, horse, boat ticket, or skateboard) anything to get the hell out of dodge. People will be engaging in such behavior en mass, so any asset that isn’t easily converted to cash or a tradable commodity will suffer from the spiral of hyper-deflation. BTW gold doesn’t work at this point ether, nobody can eat gold. So you can buy gold for little or no issue. Anyone that keeps a level head and starts buying assets at this time will emerge from the recovery a very wealthy individual. The trick is to have enough tradable assets to buy all the depreciated assets you can get ahold of. In 10-20 years trust will be restored, the country will emerge from bankruptcy, and you can reintroduce a fiat currency.
Troy, you are in most excellent form today, I love it.
Bernard, I'd suggest pay off debt then buy gold is a good idea. Starve the banking industry beast until it ceases to parasitic. But then, what do I know. Oh, hang about a bit didn't someone or other say something like:
"Neither a borrower or a lender be."
Yes, someone or other did say that. But so what? Shakespeare put those words into the mouth of a pusillanimous, querulous old bore so it's not at all clear that they reflect his own view - and even if they do, how much weight should we put on the opinions of a sixteenth-century playwright, in debating personal financial management?
The good Lord Himself said not to worry about working for a living or saving up for tomorrow - that's what "Consider the lilies of the field" and "Sufficient unto the day is the evil thereof" are (respectively) about. But then, He was a rubbish economist, as the parable of the vineyard workers shows.
Gold is a bubble....the Q is what you see and how severe you see the future....gold is only going to be of value in fairly extreme fairly short term (say 5~10 year) events...if you see a second Great Depression like I do but Govn's stay solvent, its cash.....unless they decide to re-issue new money, then of course gold and silver bypass that scam...
regards
Iain,
I appreciate the history lesson, but I very familiar with the difference between Keynes that man vs. Keynes the economic philosophy. The idea that humans hijack and cherry pick a philosophy and usurped it for their own political and financial gain. I’m sure that are many historical religious figures that would be shaking their heads in disgust to see how their philosophy has been persevered. So please don’t confuse me taking umbrage with Keynesian economic philosophy with an ad hominem attack on Keynes himself. Besides Keynes isn’t the first or the last person that will make the World Bank/Clearing Union argument. With the current system that is exactly the next stem the US would have to take.
The entire Keynesian philosophy is based on the government becoming the spender of last resort....
I understand that Keynes' big insight is that there is uncertainty about the future and that that means that markets can fail to shift to "equiibrium". So it is possible to get stuck in a demand deficit economy. This leads to the policy approach where the government can compensate for the lack of private demand (not the entire Keyenesian philosphy).
We haven't seen much of Bernard on TV, since the 'get a life' retort from John Key. Coincidence? Or has Mr. Hickey been nobbled? "Get out there sir!" Someone has to put a realistic opinion forward to the masses that counters the 'don't panic the horses' view that Michael Wilson spews forth on a daily basis.
"Essentially our policymakers have decided to cross their fingers and hope nothing goes horribly wrong."
Talking about going horribly wrong.
What happens when the inevitable real big earthquake hits Wellington? At a cost possibly 10 or 20 times that of the Christchurch mess.
Soon our best and brightest will be migrating to Botswana and Kazakhstan, both of which are forecast to overtake us economically by 2025. By that time another 400,000+ Kiwis will have buggered off to Australia.
By then maybe we won't actually need Wellington.
Successive waves of incompetent political management have destroyed this country. In 1900 we were per capita the richest nation on the planet. The party political system doesn't work any more.
Time for a revolution.
Im back, took the wife to Wanaka for a week, stayed in a posh lodge that a friend had a time share in and gave us a free week. There were over 100 rooms and only 3 cars in the car park, it was quiet and a great way to spend our 25 wedding anniversary. You could have fired a gun down the street of Wanaka and not hit anyone, Q-town had its winter festival, we went out to dinner their, we were the only dinners and they shut the door at 9.
Colin I think we may allready be saving either that or the lack of snow is keeping the masses away.
I took the time to read 'All the Shahs men' and would recommend it anyone interested in the politics of the middle east.
I see the heats on the Greeks, I for one disagree with Greek defaulting being a bad thing, I see it as the start of a Greek recovery.
http://www.telegraph.co.uk/finance/financialcrisis/8614438/Greece-must-…
Bernard whilst promoting savings is sound economics the idea of stopping purchasing imported products or items is Green Party nonsense as is many of the of the other ideas you have promoted lately. What would you think if China or Japan said lets stop importing milk products from NZ. History clearly shows that trade creates prosperity not fortress policies. As several others have commented here your economics are all over the place!
Colin
I'm very happy to sell exports to the Chinese and Japanese. I'm just encouraging people to avoid buying imports whereever they can to ensure we run a current account surplus.
China and Japan routinely control their imports and currencies to ensure they run supluses. Why don't we?
Why do remain so naively open?
The rest of the world is much more pragmatic (and selfish) than we are.
cheers
Bernard
The trouble is, people are probably more concerned about running a surplus on their own bank account than about the status of NZ current account... With NZ-made products often a lot more expensive than similar foreign-made products (and not necessarily better quality), well, not everybody can afford to be patriotic...
Bernard
this is a massive about turn. your philosophy appears to be "seat of the pants stuff". firstly you, along with a number of others advocated the mass collapse of the nbdt sector. this resulted in over a short duration the mass exodus of investors to the banks, or as you called it "flight to safety". many good operators in the finance sector were subsequently decimated. the "banks" closed up shop. now you are advocating the reverse yet one of your key points was that nbdt don't have investment grade ratings. Heartland bank, and others, including most CU have below par credit ratings, and yet you propose NZ inc. enmass collectively move all depsosit funds there. Is this not a flip-flop od epic proportions?
signed perplexed
Vote Labour back into government , and they will create a NZ Department of Mercantilism ..... Bernard & Winston Peters would happily join them ......
..... re-introduce subsidies for farmers
...... bring in punitive tarrifs on imported goods
...... ban " foreign " ownership of any utilities or anything deemed to be a means of production
Study how Robert Muldoon ran NZ Inc. when he was P.M. ........ not so long ago !
....... allow only NZ registered ships to enter our ports
....... quadruple landing fees on foreign airlines craft , to protect & subsidise Air NZ
This is the world as Bernard wants it ..... ultimately an end to free trade , a world with trade " protection " , tariffs , and random barriers galore ..... Siege mentality .....
...... he wants a new Great Depression , and Mercantilism will bring it on .......
Bernard is patriotic to his country . Sir Rob Muldoon was too , he absolutely loved NZ ..... but his policies to advance our cause in world trade , back-fired badly .......
..... when the Chinese eventually abandon mercantilism , and un-peg their currency from the $US , and their citizens feel confident enough to spend more & to save less .... only then will world trade re-balance . .... another 10 years or so , or 20 ......
No financial system is perfect , but the free market enterprise , AKA capitalism , allows more people to lead lives of freedom & abundance than any other system , by a light-year . Hickey & Parker can belly-ache all they like , but their recipes for a better way are a slippery slope to disaster ..
...And as per another thread , we are not the morality police of the world . The best way that we can assist poverty and child-labour , is to trade with countries ...... The American example of isolating Cuba and North Korea has led to what ? Incredible poverty in both countries , and we wonder why they hate westerners ......
.... the Chinese are a prime example of trading with a state who have an appalling human rights history , and what is our trade , and the internet doing ? .... making them richer & more informed .....
Change must come from within .
Wether our economy swings to either end of the economic spectrum, Iain's socialist utopia, or Barry Goldwaters libertarian ideal. It can only be better than the debt backed system we have today.
The idea that we can borrow money into existence from private institutions and and be expected to pay it back with compounding interest (that doesn't exist to begin with) is so stupid. I find it bizarre that more people are not talking about a honest monetary system.
The system we have at the moment is a ponzi scheme, it is close to the end of its life cycle. All debt backed monetary systems will collapse by mathematical certainty.
Can you not see we are approaching this point?
We have a system that requires exponential growth, the economy just needs to stop growing and the people on the bottom rungs of the ladder loose out.
Default is built into the system.
Problem is there is more debt in existence than money, said another way if every dollar that is owed to someone is paid off there would be still more debt out there!
Everything is fine when the economy is expanding, but that cant go on forever!
We had an economic hiccup in 2008, but the banking wizards managed to kick that can one more time down the road!
Bernard's running off the mouth again , some ra ra that he has repeated from yesterday's Herald ( we're only second hand articles here , @ interest.co.nz ) ....
.... the guys want some guidance from someone who actually knows economics ......
===================================================================
... and steven's off into a little corner of his own , attempting a jolly hard " think " ......
If that is a serious question then may I suggest you consult a registered and reputable financial adviser or two, first checking their credentials and any disclosures about who apart from you is paying them, rather than taking advice from some bloke off the internet who knows nothing of your personal financial circumstances
martyh - almost no media commentators in NZ 'get it'.
The vast majority do variations on 'growth' 'the economy' and all the trot-out phrases.
Actually, Steven's right: think it through for yourself. Start by asking what money is - and what it isn't.
I suggest it's a proxy, and isn't an end in itself (y'can't eat it).
Then ask what it's a proxy for.
I suggest it's the supplying and/or the purchasing off goods and/or services.
Ask yourself what they require, every one of them, to exist. I'll give you the clue......it ain't money.
I suggest (but work it out for yourself - check out the blogosphere on the IEA's recent moves) that it''s the expending of energy. Think it through, see if you can disprove it.
Peak the energy flow, peak the wealth (efficiencies aside).
Almost everything that the media does, thinks and questions, misses the point. We are talking mass-delusion as to what is the driver. Money is all we discuss.
Kim Hill gets close, but skitters away when she gets (I think) scared of what the result might be. She's the most intelligent of the kiwi media, though. Laidlaw runs her a second. He isn't scared to think it through (which is more important that IQ, at the end of the day). There aren't many (any?) others. I figured BH was the likliest to 'get it', which is why I joined here, but he's still got a ways to go.
My post wasnt aimed at you, but the extremist brigade who seem to think anyone who doesnt expound failed right wing voodoo economics or libertarianism is a failure....While actually in the real world BH is pretty much on the ball IMHO.
Im sure the previous poster or any fundie libertarian lurker can recommend uh good sites to read up on....quite why they bother coming here if BH is so cr*p is mind boggling.
regards
Did I not say look after yourself because no NZ govt will risk voter hatred especially in an election year...!!!
That is why the borrow and splurge game continues today. It can be said the govts we get are gutless and stupid in the extreme...and that's when they are being productive...but it is the greedy memememe attitude cemented into the mob over decades that decides which idiots control the pig trough.
The $1.1billion wasted every year on rent subsidies is a classic piece of govt pork for votes scam which has become foundation policy of both parties.
So...Bernard is right...nothing will change until the roof caves in.
I disagree with BH on the saving with a bank idea...doing so makes you a victim of RBNZ near zirp policies on top of the debasement theft.
If more of us moved our capital out of NZ..it would speed up the collapse of the roof!
Dear BH
My grand mother believes in helping local companies and invested her life time saving into Hanover.
But picture this, if most of us filled our cars at Z Energy.. that will leave the other four out in the cold, in turn they will shut shops and we ended up with a monopoly situation! aka Air NZ in the olden days. Telecom is another shining example, as well as Watercare in Auckland.. I'm sure deep down you wouldn't want to see it..
Very noble idea.. but it's something that one can only suggest if he/she had too much to drink!
Hey martyb, seriously, if you want to invest a little bit of time into you and your families future, understanding how money is created may be the most valuable distinction you can gain.
I encourage you to do this little bit of homework;
-be able to understand and explain clearly how money is created to a layman in two minutes or less
let me help you
http://www.youtube.com/watch?v=EewGMBOB4Gg (this one gets a bit green party at the end)
http://www.youtube.com/watch?v=JXt1cayx0hs (a marathon doco!)
http://www.youtube.com/watch?v=Dc3sKwwAaCU&feature=related (animated)
If this simple concept is understood a lot of things suddenly make a lot of sense, like why;
we don't drive electric cars, you don't learn this in school, iraq and afghanistan were invaded, most households have two income earners, a chinese or african person earns a fraction of what we do, gold and silver has gone up in price many time over in the last few years, america is great friends of israel, 9/11 happened, bank bailouts happen, there is little difference between main political party's, you cant find out who the federal reserve shareholders are, .........
thanks
"If you have to borrow, use a bank that funds its lending with local term deposit funds. That excludes the big four Australian banks and Kiwibank, who are continuing to borrow in hot international money markets to fund lending here"
Bernard, frankly seems seems rather niave to me. I thoroughly agree that NZers as a whole need to reduce borrowings, but are you suggesting that our banks force us to borrow ? If we start depriving the trading banks of retail funds as you mention, you can guarantee that there will be another monster term deposit war - why do you think you're having to put Kiwibank into the heavy offshore borrower category, because there was a shamble for TDs and suddenly they couldn't fund themselves onshore. Create another war and guess who's going to be doing the same (SBS, TSB, PSIS) and thats providing they can, otherwise you destroy their businesses
As the trading banks already have higher credit ratings than the locals, what chance retail depositors will not support them when you have recreate a TD war that forces them to pay even higher rates ? And worthy NZ borrowers will pay higher ad well as a consequence at a time when growth is badly needed - remind me who's winning ?
Laissez-faire didn't work and I can't say I am a fan of neomercantilsm....like most Kiwis I am into pragmatism. I undertand the point Bernie is making, you can debate theory until the cows are milked, the fact is, like everything else - its cyclic, we are up to our necks in debt, we need practical ideas to turn the tide quickly, the government won't do it for us and neither should they be expected to - it is our responsibility, maybe it's protectionisms turn? you may not agree with the suggestion, but at least it is a start.
I have three kids under three and hope there is some type of economic renaissance soon. I have no doubt there will be more global economics shocks, but I am certain a push for greater equality here in NZ is the tonic for us - so yes Bernie I think you are right - lets start giving each other a hand and working together and stop being so idealist...otherwise we will continue to get pushed around.
Speaking of Keynes is seems Simon Black at the Sovereign Man is talking about him today and how central bankers are following his inept philosophy to their determent.
Troy - welcome to a finite planet, and the inevitable clash with an exponential expansion.
You can't keep moving to the frontiers when you run out of frontiers, and that 'economic freedom' actually translates to ' untapped-as-yet resources.
You just described the physical limits to growth. :)
I think you misunderstood. I do not conflate “greener pastures with virgin untouched “frontiers". A frontier can be anywhere there is more economic and personal freedom then were you are now. Right now the US is suffering from market saturation so there is very little economic or personal freedom. That may change in 20 years and the US may emerge as a more advantageous place to go then NZ. Then again, maybe not only time will tell. But it behooves us to always know what we are worth, what are skill sets are, and where those skill set are best value for money. I’m always on the lookout for a better ROI on my skills. Right now NZ ticks all the boxes I need. In 10 years maybe NZ might become too suffocating to stay here and I’ll dust off my Spanish book and move on to South America. I have many friends who have already uprooted and did that.
"and I’ll dust off my Spanish book and move on to South America. I have many friends who have already uprooted and did that."
and
"I do not conflate “greener pastures with virgin untouched “frontiers".
are the ultimate expression of the oxymoron.
All economics are/is about resources, availability of, and none of them is available without energy to extract, process, produce, transport, comsume. Pay for.
The USA will never 'tick the boxes' again. Imports most of her energy, consumes 25% of the planet's energy, and has an infrastructure (totally dependent on it), which is aging. There's only one way that goes - triage.
I suspect joining the dots is better than ticking the boxes :)
First off the US doesn’t import most of its energy. That is an urban myth. In fact the US will be a net export of energy this year. However, let say for argument sake the US does import all it energy. You shouldn’t confuse the terms “import” with “dependence”. For example, Japan imports 100% of its oil and it its dependent on those imports. The US might import oil but it is not dependent on those imports. There is a huge difference. When the US is importing oil it’s importing cheaper oil from overseas then what is currently found domestically. That’s all.
"When the US is importing oil it’s importing cheaper oil from overseas then what is currently found domestically. That’s all."
Wrong, or mis-informed, the US is one of the most drilled nations on this earth, despite trying it has been unable to reverse the decline in oil output since 1970. Its dependant on crude and it has set itself up on the basis of ever increasing oil consumption at a very low price. So even if your comment on the US choosing to import oil and not use its own was true (which it is not) then even the cost of imported oil is too expensive for the US economy to sustain and function.
So I really dont follow what you mean..........URLs? though I think we have had this wierd conversation before....and it went no where.
regards
I was only trying to make the distinction that just because a country decided to import a product or commodity doesn’t necessarily correlate with dependence. Sure the US has a lot of “active” drills and pumps but there are just as many, if not more, dormant wells in the US. The US has plenty of forest but buying a bookshelf made in the US is still more expensive than buying one form Ikea. So the fact that crude imported from South America, Canada, or Mexico is cheaper then dealing with a domestic supplier does not mean the US is running out of it. It just means its cheaper elsewhere. So Importation does not necessarily correlate with Dependence
In this case it does however.....It didnt decide to, the US is clearly running out, any data trail you care to look at shows how far advanced the US is to total depletion and they have no way to pay for their continued high consumption in the future. The USA is finished as a world power and finsihed as a great economy...its a dead man walking.
Mexico is interesting, due to the collapse of their oil output within a very short time frame they will no longer be exporting oil to the US....
regards
"very little economic or personal freedom".....both are words clearly expounding exploitation of more/new resources....so its the same argument that applies.....sooner or later you wont have the freedom to exploit available non-renewable resources (econmic) at your will....(freedom)...
Im afraid personal freedom's at least to the extent a Libertarian wants is more and more a thing of the past, if it ever was....this will happen globally as more and more developing nations realise they face a similar future to the developed nations once their resources to are exhausted. Sure practice spanish, all you are looking to do really is find a big enough crack somewhere to hide in.....sooner or later though all the cracks will get filled...and there you are sitting outside the last one to be filed with no where to go....
regards
Isn't it interesting, you do denial with the same emotive stuff as GBH.
This isn't about the doomsday/armageddon line.
Peak everything, yes.
Addressing same, and how society will have to adapt, yes.
That it will mean the end of fiat extension. yes.
That we will have to decide population numbers (or have it decided for us) yes.
That we will have to triage our existing infrastructure, yes.
That it's the end on ECONOMIC growth, yes.
So? Is that a downer?
Not to me. It's just a rality to adapt to, intelligently. I find it fun, but then, I feel no need to be 'wealthy'.....
I'm not sure it's 'frugally', that I live. We live 'well'. Own food (good stuff, and we know what went into it), really warm house (2deg frost last night, no artificial heat tonight, 24 deg inside @ 8pm), no power bill, time to tramp, sail, visit, travel sometimes. Some of it is displacement, for instance I've just spent a week building a 20 sq/m glasshouse, out old ones and bits of scrap. I could have 'earned and bought' and achieved the same result in the same time perhaps (but it wouldn't have been half the fun :)
I think the 'will' isn't the choice of budget-level, so much as the personal confidence to travel to the beat of your own drum. Once you have that, you don't have peer pressure - and boy that can cost, there's always a Jones up ahead if you're insecure.
Who said crowding? the problem is energy (which from your post, you are correct, you dont understand it) for our over-populated planet. Over-popualtion is not the same as crowding btw.
The glass is half full/empty is a great analogy when you consider the expotential function of growth and that glass. Consider the time period you now have left before that galss is empty.
regards.
Interesting that you fail to practice what you preach...if you believe Keynes is the way out then you should be heavily in debt. I’m only in debt because I’m betting that I will be repaying my loan in much much much cheaper NZD. The fact that you’re not taking advantage of all of the cheap NZD washing around is amazing!!!
Economic philosophy aside...money is at an all-time low. Banks are literally giving away cash. Why wouldn’t; you take advantage of this? Again it seems you’re buying into the human condition of buy at the highs and selling at the lows. Money is low so you should be buying it and using it for ROI. And with all the economic uncertainty there is plenty of ROI!
I think "level playing field" is the key there troy.... the manufacturing base of many western companies has been gutted because china allows near-slave labour and loves pollution, which gives them the competitive advantage they need, along with their currency manipulation.
personally i don't see anything wrong with a bit of govt intervention but the devil is totally in the detail . It's a fine line for sure. that said, some corporations bully countries and have no real accountability so if i'm gonna get screwed i'd at least like to get screwed by a fellow countryman i can vote against next election.
Agreed. I might be a Libertarian but i understand the value of a solid rule book and unbiased referees. In the late 80’s I was very pro deregulation now I have seen what a farce deregulation has become. I was once saying regulation is prone to capture (i.e. political corruption), it still is. But it seems the pendulum has swung too far the other way and the lack of even regulation has allowed the private sector to become more corrupt. This is causing market distortions unparalleled in human history.
yep i'd like to think businesses can be regulated like the way I parent - give them parameters which they can play around in as much as they want, but if they cross those parameters then theye are definite unavoidable disincentives in place.
unfortunately it seems to be that people can be bought off relatively cheaply (corporate box tickets enyone?) to enable companies to profit by much more.
like you troy i like the idea of low regulation, but things are currently out of whack and i suspect the broom is coming. unfortunately the world is largely run by people who think that buying and selling money and shares is actually contributing to society so they won't usher in change themselves - they will be swept aside once the big broom arrives.
Central bankers following Keynes? that's laugahble....then in the next sentence they want to put up interest rates! that isnt Keynes....its voodoo economics made up on the fly because moneterist neo-classical economics has let them down.
and the guy contradicts himself in two sentances,
"........And yet even fewer realize that Keynes was a major advocate of Soviet-style central planning.
Among the many fascist viewpoints.............."
So he was a communist AND a fascist.....yet actually a more moderate and balanced view of keynes shows (so some ppl consider) a bit of a right wing just off centre lean....
You are most welcome to your opinion but I think unjustified and unsubstantiated attacks on valid alternative economics thought doesnt add to the scene.
regards
Troy, .....they are doing their (The Fed and US administration) own thing, its Keynes only in that its a sort of in the same general direction. Its simple, it isnt Keynes that got us to this mess and unless the stimulus is a of a size appropriate to the problem's scale Keynes wont work to get s out...what they have managed to do is keep a depression at bay....just....its a drip feed they now want to stop....
Now however its lets do the pseudo austrian model type thing ie austerity to grow, this is sort of similar to Hayak's argument in the 1930s and the recovery that had started was undone.....then, this will have the same effect today, but worse, a depression and deflation.
regards
Isn’t that oful Gummy – these mega reaching capitalistic testicles ?
The mega billionaires of the mega corporations directly influence and control the mega public servants – think from presidents down to presidents’ appointees.
Great suggestions, but too late, We missed our chance to be the Switzerland of the Southern hemisphere. Instead we sold out to the globalist elite with Bilderberg very much in the driving seat, hell bent on bringing in a one world governement, . by having nations in a state of debt they can never get out of. Carbon tax is another tool being used to bring this in. The madness is only going to get worse over the next few years in my opinion, Best thing we can do is say no to the IMF and the globalist banksters, stop our land and assetts being sold off to foreign entities (only leases should be allowed) and develop our natural resources to try and become self sufficient.. The great south basin is potentailly one of the biggest gas fields in the world for a starter.
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