Auckland is falling behind the rest of NZ in home building and home ownership rates, but increasing its share of overcrowded housing stock

It is reasonable, its simply a question of scale.

If Port Villa is where planes land and banking is done, then yes that would also be a reasonable comparison, at the very lower end of the scale.

"Haven't you wondered why in a system where massive injections of money have been introduced (QE) the inflation remain so low while stock markets were crazy-happy? That's the key question."



No point wondering.



The money is created to loans given to people with income and collateral.

who has these things? investors, companies.

what happens when a company invests loans into new assets or stocks or projects? It's stock price lifts.



Government makes injections of credit, I expect it to end up in the stock market almost immediately, lifting returns there (creating "velocity of stock market" increases).



For B2B companies this is a great thing they do entremely well at such times.  The grocery and hardware seller always do well in gold booms.



But the miners and  the consumers, not so much. (money trickles up, not down).  Expected inflation and resulting higher interest rates are counter by those in wage-setter (the internal versio of price setters vs price followers) will demand a bigger part of the pie, and they get more attention and more consumption (thus are courted by more media and businesses and politicians).  

 The lower socio-economic will just need their existing plight to be subsidised at a slightly higher rate.  And those inthe middle will bear the brunt. again.



- -

Interest side note:

Today I dropped my son of a his mothers daycare employer.  Interesting looking around the place by my son's guided tour and comparing to my upbringing.   I can see why we are creating so many socialist and community thinkers.

 When I grew up I was often on a farm, or occasionally at a Playcenter with my mother.  On the farm we only had the equipment and objects which my family or myself created (I'm the eldest), my school always struggled for funds and equipment (which was in the 70's and State money was tight).

 At my sons daycare, they have a massive sandpit (filled with beach sand to keep cats from toiletting in it) it would be 20m x 15m. They have volley ball net, tennis court converted into a slalom course for scooters uses old tyres, plastic forts and other modern playground equipment, real tills and doll houses, computers, huge supplies of paper paints, music of many kinds.  and occasionally the supervisors will help organise large games and supervise the more aggressive individuals.  Each year they add on to this asset list.  They have a dozen or 30 other children to play with, and space to read or sit quietly if they like.      With such communal wealth just laid at their feet for no effort, no wonder they have no concept of striking out on their own, or see any advantage in independence.  Why try to build your own sand pit from four old tyres and loose dirt, when 30 adults provide the best solution for free.   Why struggle to play cooperative games and have to answer your own questions, when all you've known is a constant hive of 30 or more other available playmates - a wealth of companionship that simply wasn't available to my family or parents.

 No wonder the importance of persnal ownership and inhertance are lost on such children, who have always had the State Authority provide much bigger and more impressive Works for free.      Why work to buy your own music collection, when the 30 parents will donate 10 years work-equivalent to the collective?

No to finitude, ie desiring a resource doesnt cause inflation, and no I have not wondered why because its been explained to me, why, here,

"like Evans-Pritchard and many others now — believed that the Bank of Japan could surely end deflation if it really tried. IS-LM said not, but I was sure that if you really worked it through carefully you could show that, say, doubling the monetary base will always raise prices, even if you’re at the zero lower bound. So I set out to show the point with a minimalist New Keynesian model; link to the little paper I wrote here. (By the way, I screwed up the aside on fiscal policy. In that model, the multiplier is one.) To my own surprise, what the model actually said was that when you’re at the zero lower bound, the size of the current money supply does not matter at all. You might think that it’s a fundamental insight that doubling the money supply will eventually double the price level, but what the models actually say is that doubling the current money supply and all future money supplies will double prices. "

http://krugman.blogs.nytimes.com/2014/12/16/the-limits-of-purely-moneta…

The thing is QE isnt money printing as the last line says "all future money supplies will double prices" but QEing doesnt do that, unlike printing the money gets removed later.

So QE was an experiemnt to do "money printing" without teh rosk of runaway inflation later, except it has really worked very well....maybe its kept us out of a depression event at best.

QE is of course debt, but no one in main street is taking on more as the consumer is tapped out. Ergo its beginning to look like QE is actually worse than straight money printing.

"inflation becomes systemic as long as everything else remains the same" no I dont believe that is correct.

anyway ... why I reply.



The most important cause for inflation is not extra money, nor that the resources are desired.



If you people gave it even the most basic of independent thought you would realise thise.

(1) In third world Africa and refugee camps around the world... food and water are in great demand...do they have inflation problems?  No.



(2) hyperinflation around the world.  massive amounts of increased money (currency).  has the introduction of money caused these problems...well yes..but was it the actual introduction that caused it?  At what point did they start pouring in ridiculous amound of cash?  In Zimbabwe, according to a accountant and investment advisor who was working there at the time, it was that someone had spent all the government money, and all the pensions and other reserve funds (to pay the military).  So was it the in pouring that caused the hyperinflation...or that the government thought that it could create new money and that the government thought it wasn't like a home/business cheque book and that spending the money would create an economy.



The one most important fundamental factor you have skipped...is simply the inelasticity of supply.  inelasticy of scarce resource (money) in many places, and inelasticity of ability to provide.

 If a business fids itself swamped with orders it must increase it's supply by spending more, or use some mechanism to reduce customers.  In the latter controlling credit is the first obvious step, inflating prices to ease demand is the other.   In the former that's more staff, more labour hours which can increase price per hour, or increasing plant; all these things require funding.  that is why it is the primary driver of inflation - inelasticity of supply.



Problem is doing this syphons off the available spending, and spending tends to be in bursts, often influenced by sudden availability of credit.  So the investment must be low enough that the profit from the demand period will cover the life of the asset.  This is one problem with NZ farming, MPI demanding equipment which isn't required, not caring about how long its cost will take to recover.  It's not like a government funded hospital where more money will be provided if you spend all of it this year.  Or a business, where it's comes out of the invisible mans pockets so who cares.

 This means that the cost recovery to resolve the inelasticity must be higher than the cost to supply.  Which is why increasing minimum wage CANNOT work as an economy driver/crutch for low incomes.   The expense of wage costs more at point of sale, meaning that there is a net loss.



Problem with that net loss, and rising inflation through inelascity of supply is that to the idjits in comfortable offices is that according to the education they've been sold and the information-free brochures they read, inflation is the sign of growning economy.  They ASSUME that prices are up because demand is higher and/or disposable income is resulting in lifting of prices - just like the two of you have.



But what do you think happens to the business owner who has 10 widgets for sale at $1000 breakeven.  Ideal margin produces a price of $1500/widgit.   But what happens if knowning the state of peoples available cash (because they're paying so moch in rates, interest, rent and taxes) the excellent business owner realises they can only sell 7 of those items at full price.   What do you think happens to the sale price hmmm?

 It creates inflation, because the money supply is inequally, and inelasticity of _demand_ means that the cany owner must target a higher price for the same item.



 Notice how petrol, communications and electricity, absolute staples of life (communications, transportation and food) don't follow the same curve?  they have elasticity because they're life esssentials - petrol is dropping. Are other prices marking the fall?  no.  This is because of the inelasticy in the groups involved.



Yet many items ARE rising in cost. food, luxury foods.

It's not because more people are demanding them, its because less people are demanding them, and the margins have to be shifted to those who can afford to pay.  Then the last of the line will probably be sold at discount, once the batch cost is covered.  However these are the ones to watch - the few wealthy that were always going to buy, and do not have to care about cost, have done their purchase.   Where the discount point is for the less wealthy to buy the same item, shows you where you income inequality inelasticity comes into play.   If the owner plays their cards right, it looks like an expanding economy and that GDP would rise, but in reality the wealthy are just subsidising the discount required to make the minimum profit.    So the higher the price... the higher the inflation...the _worse_ the economy is actually performing.