Answer – move to a more productive, frugal country where you can earn loads more and keep it and not subsidise academics who specialise in political science who accuse you of being miserly or greedy when in fact they are the ones who are better off at your expense.

This is not inflation with reagrd to the value of the dollar, but only a rise in price for the good in question which is entirely different.
Like Owen implied if there is greater demand for a good, there must be either a reallocation of preference toward it or some other external means of funding this new preference. The value of money hasn’t decreased in aggregate rather the price of this one good has increased. Paradigm is ignoring the other micro-markets that fall out of preference in order to fund an increase in demand for his rising good.
None of this explains why in aggregate the dollar is worth more or less.

I don’t like Brash’s idea. Why tamper with “legitimate” demand for a good or service because it is in the basket of goods used to measure inflation? (it’s in this basket for good reason though i.e oil has low elasticity of demand and is cruicial for our economic health but even so this basket is only a proxy for inflation). All this does is hide true inflation which I agree comes about entirely because of the amount of $ chasing the amount of goods. Inflation has only been good for Cullen.

Also Paradigm, please back up your assertion that restricting the printing of money will be economic suicide. The answer to the current credit crunch is not to print more money so banks have more to lend. The answer is to properly identify risk and lend accordingly. Highly risky lending is not necessarily good lending just because it has a high yield when it doesn’t default.

Respectfully, I must disagree. You cant disagree with the definition of inflation, thats simply what it is.

The flaw in your logic is that you are taking a microeconomic concept and agregating it to take a view on the entire economy, it simply doesnt work that way. Most macroeconomics is junk for this very reason.

how much do they print per year? do they explain why they are printing said amount?”

The Reserve Bank.

You can only control one of two things at once, the money supply or the price of money (interest rate). The RB sets the price of money (just like a Monopolist does) and then prints as much money as is demanded at that price.

Remove immediately all fuel taxes across all fuel types: excise, RUC, whatever.

Simultaneously commit to funding ALL existant and on-going transport programs from remaining govt revenue.

At one stroke you’ve slashed both govt spending and a significant driver of the CPI.

Take a look at some of the finance company ads – one on TV now doing the rounds says ‘Live the way you want to’. New Zealanders are financially inept and finance companies prey on the weak and ignorant, with promises of instant satisfaction. It amazes me that a leftist government has let this market go largely unregulated with it’s predatory advertisements.

Respectfully, I must disagree: As I suggested earlier, increase in price from high demand will inevitably cause labour to demand higher wages. We can then describe the situation as follows: Workers are now paid more for the same production output AND it now costs more for to purchase the same goods, services. In short the value of money has decreased.

You are actually correct in that if one was to restrict the money supply, the scarcity of money should counteract inflationary pressures; however to do so would be economic suicide. If money becase scarce businesses and people seeking loans would often be outright turned down. New busnesses would then become difficult to start and current businesses could not finance capital aquisitions. Economic activity would grind to a halt. Currently we tollerate a degree of inflation as it allows the economy to operate efficiently. Draconian control of the money supply could prevent inflation but at the cost of shutting the modern economy down. One would also suffer a problem of knowing exactly how much to restrict the supply of money…

It appears the Mystery man in Winston Peters life has been exposed !

“Print one thing wrong, sunshine, and I will sue you,” Mr Peters said before hanging up.” http://stuff.co.nz/4608002a19715.html

vintage Peters stuff -excellent

It seems determined to commit economic sabotage. That’s impressive given all the damage it has already achieved over the last nine years. New Zealand just keeps on sliding down the OECD ladder. Don’t people see the falling living standard in New Zealand or are high fuel costs preventing Kiwi’s from travelling overseas and seeing for themselves?

Labour party MP’s should be prosecuted for treason for what they have done to the New Zealand economy.

I take strong exception to the reasoning found in the not pc article:
“If the price of oil goes up, and if people continue to use the same amount of oil as before, people will be forced to allocate more money to oil. If people’s money stock remains unchanged, less money is available for other goods and services, all other things being equal. This of course implies that the average price of other goods and services must come down.”

This is rubbish as it assumes we spend our entire income on consumption and do not save any. What will actually happen (especially to those in the middle class and above) is that the amount of money saved will decrease, the amount spent on consumption will increase. Also in the longer term higher prices tend to increase pressure for wage increases. When wages increase without a corresponding increase in production, more money is given for the same amount of worker output, ie the price of labour increases. This is in its self inflationary, however we should also consider that in order to pay for the wage increase, the employers are forced to increase their prices. Once again inflation happens.

What I think we do need to differentiate between is supply driven inflation, which is caused by increasing scarcity of resources such as oil and demand driven inflation, often caused by cyclic booms in various sectors of the economy and/or the imperfect knowledge of consumers and producers. The latter should be smoothed by the monetary policy, however it may be more efficient to leave the former the way it is.

A large part of the problems we and other western nations are in is due (I think) to the ability of the governments to dip into the workers pocket virtually sight unseen and then spend.

This creates a situation where people don’t see a connect between their actions and costs which encourage the government to keep on spending. This isn’t just things like working for family welfare but also business’s who quietly line up to receive our cash. If you look around a lot of business groups are starting to put their caps out so the tax payer can subsidize them.

Where this burble is going is that if the tax system offers little benefit for gains such as claiming tax and projects that need doing are funded by actual charges then money would generally go to where the profit is with out tax distortion, project spending would be constained by the actual return, houses included. The money just would not be there for the government to give away.

Another factor that no one seems to mention is the extra things that the gov has handed out. Now as a worker I like flexi-time, four weeks leave, increases in minimum wage and removal of youth rates as well as maternity pay, OSH regulations and equal opportunities but (always a but) I would guess some one has to pay for these things, I can only guess how many percent this all adds to our costs.

When the Official interest rate / OCR was first instituted, most mortgages were variable and changed with Reserve Bank pronouncements. So at the moment the effects of OCR changes take much longer as people take fixed term rates and could be 2-3 years before the rise hits in the pocket.