Bernard Hickey says the government will change the rules and give subsidies to those sectors and companies it likes the look of and he wants manufacturing exporters included

Bernard Hickey says the government will change the rules and give subsidies to those sectors and companies it likes the look of and he wants manufacturing exporters included
Bernard Hickey wants the right types of people to start asking for a tilting of the playing field.

By Bernard Hickey

This week voters and people in business started to get a more granular idea of how this government does business behind the scenes.

Details from emails released under the Official Information Act show how the government dealt with Warner Brothers over the various threats to the green light decision needed to start filming The Hobbit.

There wasn't much negotiation.

Warner Brothers asked for a law change to specify all film workers were contractors rather than employees and the Government changed the law under urgency in a day.

It also kicked in US$25 million in extra tax rebates and marketing costs to keep Warner Brothers sweet.

It was classic John Key dealmaking: do whatever it takes to make the deal happen.

The Auditor General's report into the negotiations around the Sky City convention centre show how the government gave Sky City special treatment after a series of dinners in which John Key's office suggested 'regulatory relief' to get the deal done.

There is a pattern developing here.

The government will change the rules and give subsidies to those sectors and companies it likes the look of. Another set of examples crop up around farming.

The government has set aside NZ$80 million in this year's budget to invest in irrigation schemes to help farmers convert sheep farms into dairy farms and intensify production.

Also this week the government declared a drought in Northland, which meant government grants were available to Rural Support Trusts and special Rural Assistance Payments to farmers.

Yet regularly, the government claims allegiance to the principles of 'level playing fields' and 'laissez faire' policy when it suits. The government's refusal to intervene in the currency markets or to consider helping manufacturing exporters is an example where it chooses to say there is nothing it can or should do.

It also refused to invest in a second Internet cable, claiming the market was working to solve the problem.

How is a weather event, a supposed act of god, different from the 'economic headwinds' of a painfully high currency?

How is a faster and cheaper broadband connection to help export services different from subsidies for dairy farmers?

The difference is in who is doing the asking for a tilting of the playing field.

Manufacturing exporters such as Hamilton Jet have pointed out they cannot profitably invest in new production and productivity-enhancing equipment with a currency at such high levels. Hundreds of exporting jobs are being lost every month as the government sits on its hands in the no-mans land of a currency war and twiddles its thumbs.

Unfortunately for those exporters and their workers there are more votes in cheap petrol prices and discounted flat screen televisions than there are in a fairly valued exchange rate.

What is desperately needed is for the right types of people to start asking for a tilting of the playing field.

Warner Brothers consistently complained about the high New Zealand dollar in asking for more subsidies. There is no way the Lord of the Rings movies would have been green-lighted in the late 1990s with a currency over 80 USc. It averaged 54 USc during the lead-up and making of the first Tolkien trilogy.

One of the government's biggest supporters, Federated Farmers, has until now also been remarkably quiet about the currency.

Its comments this week about the drought highlighting the currency's unjustifiably high level were the first signs of a cracking of that resolve.

This only serves to highlight the government's lack of consistency and adherence to a coherent strategy and its penchant for doing deals with mates.


This article was first published in the Herald on Sunday. It is used here with permission.

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

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Bernard, have you ever set out what you think the Government should actually do about the exchange rate?  Could you humour me and provide a link, or maybe set it out again?

What are the good things and bad things if the OCR drops 1%?
That would drop the exchange rate I believe.

Steve - NZ's interest rate differentials have been dropping significantly over the past year and its hasn't made one iota of difference. Australian has actually been cutting their OCR and its hasnt made one iota of difference to their over valued currency either. Interest rates aren't whats holding the NZD over valued - if you want a low currency, grossly mis-manage your economy - you have a prime chance to create that from next election.

And the ensuing negative real rates (as if they aren't already) will create further assett bubbles in NZ's favourite investment class. 

hmm high paid movie effects jobs...wonder which way they would tend to vote or will now vote in 2014.
If you look to America, the states seem to be in a bidding war to attract corporations who then pay virtually no tax.  Look at the stink in the UK with corporations paying little tax, or Ireland with corporations paying 14%? tax.
The Q is if they pay little tax or get handouts are they really worth having in terms of our economy.
Wonder where the money comes from to fund election parties, actually no I do not.

Flat screen TVs, maybe it could be argued that the Govn wants to support the retail sector which is suffering from poor sales hence cheap imports is helping that sector. Lots of ppl in that sector are the poorly paid shop assistants or equiv...easily put out on WINZ, neg impact to Govn coffers..and of course lost PAYE and GST, dropiing GDP thrown in.
Also whats the net effect of more expensive fuel?  Us voters are paying $2.20 for petrol, knock the ER to 0.75 and the price goes up to $2.40? lots of complaints and it becomes and election issue.
Of course its easy to say that National is vote buying, all the other parties are teh same, or worse.....seems to be pick your poison.

Why doesn't the Govt do away with all incentives and subsidies and see who's left standing.
Then they can reassess who needs them.
If a company can only survive because of subsidies and tax relief then maybe they shouldn't exist

Everyone in NZ expects ahandout, and even Warner Bros got in on the act, Who's money are they spending is is it all borrowed?
 We have working for families to subsidise workers, we have solo mother subsidies, we have generous unfunded pensions for civil servants, where in hell does all this money come from?
Farmers have actually had a pretty good run, but now the cost structure is too high for low cost producers and intensive production, so something needs to change. The government could have taken money of farmers in the good times and be giving it back now, but no one would have keen on the idea at the time. Fed farmers are a lobby group representing their clients can we really trust them,or will they just take, take, take? Will farms get fat and inefficient?
How do we know which company can compete with Sth Korea, Thailand or China? Can our government really choose a winner and we really want to borrow the money to find out? Would you invest you own money Bernard?
Can we compete in the technology sector or with the low wage economies of Asia or for that matter any other sector?  Last time i looked they were not interested in a living wage,  a free hospital system,  welfare or health and safety.
 Is Hamilton jet  falling behind other makers is it overpaying its workers and ceo? I dont know and i dont care its a private company but should we help it out when for all we know there could be a lot of other factors, like the recession in the States and high fuel prices
 I would tink the best course would be to shrink govermnet spending back to the same level as when Helen Clarke got into power. The reduction in spending would result in lower taxes and lower costs for businesses.
 Thats the best way to help.

I would tink the best course would be to shrink govermnet spending back to the same level as when Helen Clarke got into power. The reduction in spending would result in lower taxes and lower costs for businesses. Thats the best way to help.
I wonder if you share the commonly held perception that Labour are the big spenders, and the Nats are somehow more conservative with your tax dollars.
A link here:
shows that General government total expenditure in 1999 (when Clarke came in), was 31.5% of GDP.
Over her 9 years, it dipped down to 29% in 2005 before coming back up to 31% in 2008. Since then spending has grown to 35% of GDP.  Might be best to get Labour back in to achieve your aims of getting expenditure under control.
Yes there's been a GFC, and an earthquake(although am pretty certain equake expenses are separate from this number); but overall the numbers suggest the Nats are rather stuck in the headlights, and have no idea how to get out, other than supporting their mates when they ask for favours.

Yes Stephen, so you for one won't be complaining about the Nats trying to get back into surplus by 2014/15 and doing other things to cap spending that many are complaining about - I think they know exactly what they need to do but are being fought every step of the way by the left.....good to see you're not one of them

Growing the economy, first in nominal terms, but also in real terms, would be a priority, (so getting the denominator up, and not necessarily the numerator down) and the only likely answer to get NZ off welfare and other dependency. In the end  sound growth in the economy will need to be based on trading success, and not just selling houses and lattes to each other. 
Nevertheless I actually do agree that spending per GDP is an important variable, and should be targetted and controlled. The Nats do more talking than walking in this regard, it seems to me, and Labour's record was better than I think many imagine.
As a country building houses and infrastructure actually is important (and some of it is happening, that being the only real growth in the economy), although there is little evidence that the Nats are any better at this than anyone else.  
Otherwise it comes down to supporting trading industries to at least the point of low unemployment. There is micro stuff like education, trade agreements, innovation type support and other things that no doubt all is very important (and again, it's not obvious much of this has changed under the Nats).
Then there's monetary and exchange rate management. There are many papers that describe the fiscal multiplier effect in different countries. See an example here:
They show that the benefits of a fiscal deficit to a country with a non fixed exchange rate and open capital, is zero. That excess government expenditure is funded from offshore, causing a lift in the exchange rate, causing local businesses to make lower profits, and hire less people, causing welfare and other government expenditure to climb, in a vicious cycle. The deficit is a free gift to foreigners, under our current settings. NZ under the Nats is very much in that cycle; at some stage the music will stop, and it would likely be messy if not managed in advance.
So we could choke all the xpenditure, although that would be very difficult politically (and the Nats haven't really even tried if you are honest). Or we can do something about the exchange rate, monetary management.

StephenL -
"Growing the economy, first in nominal terms, but also in real terms, would be a priority",,
I have given you a lot of info hereabouts, pointing out that that goal is (a) unobtainable in the medium term, and (b) undesirable given the consequences.
Your continued parroting of that phrase and approach, mirrors Labour's stupidity.
They're a wasted space until they learn, perhaps that has to come from someone within, and perhaps that's why some of us make the effort to teach.
Stony ground, obviously.....

I have not read all of your contributions, so may have missed the compelling arguments as to why even nominal economic growth, let alone real economic growth, is impossible for NZ.  My understanding of what I have read from you, is that the planet is running out of resources, especially fossil fuels, and that because all economic activity in your view is dependent on this energy (in a linear correlation, apparently, without material efficiency gains) then growth is impossible globally.
The global piece makes some sense to me; although finding that the world has 112 years of coal reserves suggests to me that we may not globally run low in our lifetimes. Global warming and other pollution is another problem, I accept, but does not state that growth is unobtainable as you have said. That will be a choice for governments and peoples to make, and I suspect they will burn it while they can.
Nominal economic growth is of course a measure of activity in a defined currency. If that currency devalues by say 10%, and real economic activity remains the same, then nominal activity has grown by 10%. You say that is unobtainable; I'm not sure why? The new governor of the Bank of England has suggested he should have a nominal GDP growth rate as a target, so it is not crazy talk. Simplistically printing an extra few billion achieves it. (I note that doing this is a transfer of wealth generally from savers to debtors; but that is an aside).
Even if the world is constrained in real growth terms (and the coal position suggests to me it's not yet); then New Zealand could possibly try and increase its market share (and if it doesn't try to, and others are, then NZ will surely lose share). From what I have read of your pieces, I haven't seen any reason why NZ should not try and grow its share (and so at least not go backwards).
I do actually see population and demographics being a constraint to growth more than energy restrictions, for NZ and other places. Maybe that is your underlying point. So activity per capita would be a fair measure to aspire to. I don't believe that is your point though.

"Simplistically printing an extra few billion achieves it. (I note that doing this is a transfer of wealth generally from savers to debtors; but that is an aside)."
But that is only 1st order effect, savers won't just sit there, they will be forced to speculate on assets. What are consequences of the 2nd and 3rd order effects?

Stephen we might have 112 years of coal but that is at current rates of consumption. Two scenarios that come immediately to mind throw that figure out the window.
If you keep growing then eventually you have a doubling of consumption.
If oil runs out or is uneconomic the next kid on the block for transport fuel is coal. The EROEI is terrible, perhaps 2:1, so it won't take long to eat your 112 years worth. South Africa already converts coal and the Nazi's invented the process to supply their war effort. Australia has already bought the technology and will be producing inside of 5 years. I suspect the Aussie effort may make a play on our South Island fields.

There is a solo mum in the Herald this morning complaining she can't get a job.
She is given $530 a week in the hand by the govt  for being a solo mum with one child.
Aquick calculation tells me that a person on $13.75 an hour would gross $550 per week and still pay tax.
Why should someone not working get more.
Thats why this country is stuffed.

Bernard is copping his regular weekly sado-masochistic lashing from the commenters over at the NZ Herald today
If I understand it correctly, your main point is, the Government can and will act in a single day and change the law where it suits, for the benefit of the few, while dragging the chain in matters affecting the many.

One of the government's biggest supporters, Federated Farmers, has until now also been remarkably quiet about the currency.
Its comments this week about the drought highlighting the currency's unjustifiably high level were the first signs of a cracking of that resolve.
Didn't Casual Observer post this Fonterra PDF and point us to page 3 suggesting the dairy boys are hedged up and a fall in the value of the NZD/USD pair might do more damage than good?

Wheels within Wheels ..
Follow AndrewJ over on Dan Bell's Article discussing the $80 million kicked in on the Hawkes Bay Regional Council Ruataniwha Dam irrigation scheme and how "They are going to change the RMA" .. The CEO knows what's going on, he spends a lot of time in Wellington, but he's not telling us.
Yes they can act when they want to - Follow the money .. who stands to benefit
In one post AndrewJ says "The rest of us will be collateral damage"
In the next he says .. I have a lot to gain from the dam .. it will increase the value of my farm

Even though Im in the scheme and get a subsidy from other rate payers, I still will fight it ,as I think its a bad idea. I  choose to stuggle on as I am I like my farm the way it is.
 Also as a rate payer I lose a port and a lot of other assets which the Regional council will sell and will end up with higher rates.
 Like my nieghbor Colin Riden spoke to, its  a case of looking for the best option for my family, which is harder for him as his farm has been in the family for ever, and if the costs associated with the scheme could actually have a negative impact of the value of his farm not a positive one.
 I think I put my case poorly, I dont support the dam although with enough rate payer subsidy I would be financialy better of with it.

Yes. Subsidies. Good word.
Do you remember a while back, just before Lange and Douglas, when people were paying high prices for farms, where the profit of the farms was equal to the amount of subsidies being received. People were effectively buying the subsidies. When Douglas canned the subsidies, farm prices fell by 50%. Or, should I say farm valuations fell by 50%.
It seems that subsidies are back in vogue, just in a different guise, but we can deduce that they influence valuations.

Aj - irrigation schemes causing some concern in Central Otago -

and here:
A Hurunui irrigation scheme is a step closer to reality but the project's manager still holds concerns about its cost.
The Waitohi Irrigation and Hydro Scheme was notified for resource consent on Saturday.
The public has until November 5 to submit to Environment Canterbury on the project, which involves several dams and electricity hydro- generation on the Waitohi River in north Canterbury.
Four dams would be built in two stages to irrigate close to 60,000 hectares of Hurunui farmland at a cost of more than $400 million.
The extra expense meant it was unlikely all investors would subscribe straight away, she said.
"Most are a bit unhappy about the cost. It is a stretch for them. It has all sorts of implications for the scheme."
The cost estimate of $7000 to $7500 a hectare was unlikely to come down, Loeffen said, but farmers would not have to pay it all at once.
and check them all out
don't forget the fight between Synlait and Dairy Holding re Te Parita CPW
Debt-laden dairy company Synlait has transferred its proposed consented Rakaia irrigation proposal to irrigation company Central Plains Water.
The scheme taking water from the Rakaia is called the Te Pirita irrigation scheme and likely to be part of the bigger $200 million CPW irrigation proposal which received resource consent three weeks ago with the appeal period soon to expire.
In an agreement announced yesterday the two companies buried their differences over priority to take water from the Rakaia River. They agreed Synlait would transfer its resource consents to take water from the Rakaia River to CPW and it would increase its stake in CPW to be one of the larger shareholders.
CPW would drive the Te Pirita irrigation proposal rather than Synlait which has struggled with debt and posted a $42m loss for the 14 months to July 31 last year.

And all this development depends on an optimist outcome for dairy exports, look at US production increases.

Cooperatives Working Together has received a package of 12 bids from Dairy Farmers of America, Foremost Farms, United Dairymen of Arizona, the Michigan Milk Producers Association, and the Maryland and Virginia Milk Producers Cooperative.

The bids were for financial assistance on the export of 1.122 million pounds of Cheddar and Monterey Jack cheese, 908,305 pounds of butter, and 44,092 pounds of whole milk powder to countries in Asia, North Africa, and the Middle East.
does this mean domestic America processors subsidise exports in order to keep domestic prices and supply high?

Bernard - can I endorse Ms De Meanor's request for well researched suggestions on what to do about the exchange rate, otherwise your calls are just hot air...and lets not hear lambrain blogger type comments such as "Singapore do it" etc where all countries situations are different.....tell us what NZ specifically, with its size of currency market, economy, RBNZ balance sheet etc  can specidically do....looking forward to hearing them but doubt it 

Grant, Bernard's point seems to be that if the Nats' view of life is that "nothing can be done", they seem to apply that approach or not at their, and their mates', convenience.
Nevertheless, while I'm not sure Bernard would endorse any or all of these, there are plenty of options that are used by many different countries in the world.
As categories they seem to fall into:
1) Lowering interest rates to lower than otherwise necessary, possibly including capital controls. Most of Asia.
2) Printing money for direct purchases of foreign assets, to directly lower the currency. Switzerland, Japan, and many others.
3) Printing money ostensibly to increase local demand, but certainly to keep the currency down, and to fund government deficits (which otherwise would have to be funded by foreign borrowing). USA, UK among others.
4) Capital and banking controls of many types: Canada, and others.
In NZ's case, my understanding is that the RBNZ already has some discretion in 1,2, and 4. It has recently explained why the OCR on its own is not a great choice right now (and I agree with them on this, as it happens). It dabbles in 2, and maybe has some effect, although with a $9 billion allocation, could easily be bolder. Under 4, there are many options, including in my view leaning on the main commercial banks in terms of their source of funds, mixed with some of 3, if need be. 
It is option 3 that does not seem to have been seriously considered; and in my view would be a good place to start.
The government, since the Nats came in, is the worst offender by far, borrowing billions a year offshore, keeping the currency overalued in the process, while hocking off the country to do so. 
Printing some to fund part or all of the fiscal deficit, at least until the currency was fairly valued at say approximately 75c US, or until unemployment reached say the NAIRU level, seems a good idea, and I have not heard a sound argument against it.

Stephen L
Well quoted here today already but
1. NZ's interest differentials with the world have fallen substantially and indeed in the case of Australia's have been cut in the past 12 mnths, yet no impact on the currency - they both stay high and over valued. It is yesterday's driver of currencies, not today's
2. The Swiss have had to bloat their central bank balance sheet out to 100% of GDP to maintain their euro peg to date. It may even take more for NZ considering our relatively small size of our economy compared to the size of our FX markets - do you consider the risks associated with the RBNZ having to blow out its balance sheet to the likes $180bn appropriate to try to defend the currency, and with no certainty having done it, that it will actually have had the desired effect - then try unwinding it over the years -  a few hedge funds could take them on alone.
3. If printing money was without substantial risks, which history has proved continually, there would be no poverty in the world right ? Printing money has huge downside risks because once you start its damn hard to stop - just watch how the US, UK and others suffer the consequences over the next 5-10 years (not without impact on us though) - and you want us to join them and "out-print" them ?
4. Capital controls haven't been a huge success for NZ in the past, especially for a country that can't fund its own housing, infrasture, dairy factories, etc. I'd like to see more research on what's changed.
"Borrowing billions of dollars" overseas ? add to that the banks' to fund housing and other activities that NZers do not save and invest for, and yet when we look to provide them with some investment opportunities such as relatively safe power/energy companies partially privatised, they don't want them. The Govt, with a GFC and Chch distaster to cover, is forced to borrow offshore currently, and thanks to the high NZD (lower inflation and therefore lower interest rates) it's (also know as "we")  paying very little for it compared to what they otherwise would.  
To your last comment I'll reiterate, "if money printing was without substantial risks, which history has proved continuously, there would be no poverty in the world" - think about it. There has been a massive build up of risk from money printing over the past 2-3 decades, and now without end and reaching a tipping point as each one has less effect - you will see the risks over the rest of the decade...I wouldn't be voting for that.
If you've not heard a sound argument against it, you're reading only Bernard Hickey blogs. Start researching further afield on the web with an open mind, and look to those that forecast the GFC, the same people who will enlighten you on the ultimate likely outcome of QE.  

So all the other countries are wrong, and we are just incredibly lucky to have one of only two smart central bankers in the world, appointed and cheered on by a great Finance Minister?
On 1, we are agreed. No point reducing interest rates further; in fact doing so would have other bad consequences.
On 2, The Swiss have a current account surplus of 11% of GDP; we have a deficit of 4-5% of GDP and growing. They are fighting a surplus, we would be riding the otherwise natural effects of a deficit. Very few hedge funds in the world would fight a semi determined central bank of a government with a massive current account deficit trying to get its currency down. (Google that and find the nswers).
3, Printing money is certainly not an answer to poverty, although in certain specific circumstances it can help, if managed correctly. It has been generally a sensible response from the major central banks to avoid a likely depression, asset value slumps and mass bank failures. Our money supply has in fact increased by $32 billion since the Nats came to power; (see ) but all sourced offshore plus a multiplier. There is I think a perception among printing avoiders that this figure is somehow stable. So, a free gift to our main commercial banks, and their funders. If the rest of the world is doing it, should we sit by and sell or mortgage all our assets? I personally strongly think not.  
I agree that unlimited commercial bank printing was a key cause of the GFC; although I actually share Evans Pritchard's view that the real underlying cause was international trade and current account imbalances. So all that surplus money had to go somewhere, be it Greece, or subprime in the US, or asset bubbles everywhere. Government money printing was not a cause.
In any case we are in a competitive world, and should act as though we are. I see no real vision from the Nats on what they would like NZ to be; and how they would have us get there.
In the meantime it is tempting therefore to think they just might be running it for them and their mates' benefit.

Stephen - I don't know about smart or lucky, but we can name a multitude of other  countries other than NZ, Australia, Canada , most of the commodity countries, plus others, who didn't revert  to money printing or negative real interest rates. Unfortunately, many people, seemingly yourself, seem to think that because several of the biggest economies, who are all in deep dodos, did so, is evidence that all the rest are wrong, and that these guys are gurus ? ....interesting thinking.
Point 2 - what you are saying, as I say to others, is that NZ is a different country with different economics and not comparable easily to others, that's my point.

Point 3.  I agree that the money prining has to date avoided what would most likely have been a depression. Two questions, who do you think took those countries to the brink in the first place (well you did answer that), and what confidence do have have that all they've done is delayed it for an even bigger one ? I know the answer to the first one, and hope its not the case about the second one, but that's the risk, and risk are what we're talking about here.
A NZ is small fry, and easy for any group of hedge funds to able take on a central bank that only owns a pea-shooter, unless again, you want the NZ central bank balance as large, or larger, than 100% of GDP - do you ?


I don't beleive the "looking after their friends" type comments any more than I believed that Labour only ever looks after the unions. Its always used by the other side as a way to get a back slap from their supporters, but makes no difference to anyone else or makes any contribution to debate..

A fair debate on first principles at least; and that is not always possible it seems.
Bernanke, King, the Swiss and others are no fools was my point; and our circumstances are closer to the UK in particular than many others. Much debate in NZ seems to recoil from printing in principle, without any reasoned debate.
NZ is different; but would likely need a much smaller balance sheet than the Swiss, purely because they have to fight against $80 billion of surplus per annum trying to force up their currency. We actually have $10 billion a year deficit that should be encouraging ours down, all else being equal. We just need to give it a good nudge, assuming we are sincere in wanting it down. Key gives the strong impression he doesn't really.
The rest of the world has not fixed its underlying imbalances; and the currency wars are about those in my view. China, Germany, the Swiss, Japan are addicted to surpluses. They will spend less than they earn as peoples; their surpluses have to go somewhere, and sometimes they are taken advantage of (sub prime etc) and sometimes they do the taking advantage of, including with NZ assets and debt with a bonus of a perpetually increasing exchange rate thrown in. If the anglo saxon world decides to at least not dissave, and even start saving, then either the surplus countries will have to start consuming more, or we will head into a significant recession/depression globally.
In the meantime what should NZ do? Not be taken advantage of would be my vote.  I strongly recommend keeping competitive with the exchange rate, and so, keeping our current account somewhere closer to balance.
On the cheap shot re the Nats looking after their mates, I actually accept the point that I don't think they are corrupt; nor even overly cynically political. There were some valid reasons for helping the Hobbit, and a convention centre for example; while irrigation makes some good sense. A lack of transparency in the process was not good though. But I really don't see a vision for where NZ inc should be headed; and so I don't really think they have a plan to get us there. (If you don't know where you are going, it's hard to get there, is the old saying.) In the meantime its just a bunch of tinkering, missing the big picture, and responding to what they think might get them through the next election. (which is responding to their mates in a political sense)

Enjoying this discussion!
What do you both think about NZ trying a policy of slight domestic deflation?
For a start I never understand why 3% inflation is great while 0.2% deflation is Armageddon. There seems to be something wrong with that assymetry.
Seems to me delaftion would make our domestic cost base more competitive over time, ie companies would not need to increase pay as in real terms consumers would be better off over time, and yet Interest rates would be low because say with 1% deflation if rates are at 2%. That is still 3% yield.
Seems to me despite the high currency, costs in NZ have become astronomical, look at the cost of goods compared to say in the USA. (Let alone housing).
Having money 'increase' in value over time would also ease the speculation into the housing market/general asset prices as well.

Printing only works to get you out of the zero bound trap.  Otherwise yes it tends to be inflationary, Ive pointed out this differentiation for 4 years...others have said here comes hyper-inflation, well where the F*** is it after 4 years and not even looking like its going to happen in 2013?  Like how much evidence is needed that while in the poo like we are there will be no significant inflation?  Now once out, sure...but at the rate we are going it could e like Japan 2 decades worth.

Is there a difference between putting all your financial eggs in one basket and a financial buuble?

Thanks Stephen, I enjoyed the debate.
I guess by way of final comment, I hear what you say about the Bernake, King & Swiss etc not being fools, they most certainly aren't, but what they are is human. The people who created the mess, and there are a mirad of them across politicans, bankers, central bankers, regulators, rating agencies etc, are all subject to the same human weaknesses as the rest of us, most notably fear and greed.....despite their otherwise good intentions, sometimes we give them too much credit for not having the same faults

I'm sorry but Bernanke is a fool. These videos prove it.
All he knows to do is "print money". Just the shakiness in the way he speaks these days is evidence he doesn't believe half the sh*t he says.
We should pay attention to when he exits stage left, cue the shit hitting the fan ~1 year later.

No he isnt...when in a zero bound trap under Keynesian economics the Govn prints/spends to get you out. Otherwise we'd be in a second Great Depression already.  As when in such a situation there is actually no other course of action that has had success, hence yeah sure thats all he says...thats because its all you can do.
Zerohedge are a bunch of nut jobs...
sh*t? I assume you been hyper-inflation?  because uh no, Depression, yes once he leaves and they stop even doing the little he's done its inevitable. 1year later could hardly be attributed to him bearing in mind just how destructive the pollies aim to be. 

The 'playing field' has always been warped to score political goals...haha

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