Spend baby spend says CTU
The Government has just announced a $10 billion deficit, and the need to borrow $250 million a week. So what does the CTU recommend to make things better:
Council of Trade Unions economist Bill Rosenberg says rather than pull back spending, New Zealand needs to borrow more to keep the economy ticking over.
“Making sure that all of us have enough money to spend to keep the economy going, to keep jobs going and make sure the economy doesn’t go into a downward spiral.”
I think someone needs to explain to the CTU that when you borrow money, you have to pay interest on it, and have to pay it back one day. And the more interest you have to pay on debt, the less money there is for hospitals and schools etc.
I look forward to hearing whether Labour endorse the CTU’s call for bigger deficits and more borrowing. So far they have voted for or indicated support for an extra $6 billion a year of borrowing, so I guess they do.
October 15th, 2009 at 4:14 pm
Yep, Labour prefer the borrow wildly stimulus plan also: http://blog.labour.org.nz/index.php/2009/10/07/now-thats-a-stimulus-plan/
Basically they wish we’d copied the Obama strategy of burdening future generations with interest repayments exceeding GDP.
“This is the kind of long term thinking that has been missing from NZ’s response to the recession. Of course we don’t have $21 billion to do this, but our government has set on the sidelines, and worse still pulled back from research funding. If we want to improve productivity and develop a new economy, we need large scale investment. On this issue, the Obama administration is showing the way.”
Now I’m happy to donate a few hundred dollars to any Labour MP who wishes to emigrate to the US to be closer to Obama. The proviso is one-way ticket only and take as many of your cohorts as will go.
October 15th, 2009 at 4:26 pm
“I think someone needs to explain to the CTU that when you borrow money, you have to pay interest on it, and have to pay it back one day. And the more interest you have to pay on debt, the less money there is for hospitals and schools etc.”
That line is wearing a bit thin DPF, perhaps you should direct your comments at English and Key who seem to be of the same mind as the CTU given that they are happy to borrow 1 billion a month.
Not that I am accusing you of being a cheer leader or anything…..
October 15th, 2009 at 4:41 pm
I remember Jim Bolger boasting of nil deficit with sale of forestry.
Its all politicians fault we’re this far in debt
At least they being made accountable for expenses now.
Less govt, less MPs!
October 15th, 2009 at 4:44 pm
Here’s another present Labour left the country.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10603391
What absolute scum they are. Overpriced trainsets, ACC blowouts, massive pay rises for state servants, 10 yrs of large deficits and the bloody CTU want us to borrow to pay for all of it when the World is shitting itself for…..excessive borrowing.
They should be lined up and shot.
October 15th, 2009 at 4:50 pm
If their households were deeply in debt, would they keep spending?
October 15th, 2009 at 4:51 pm
Gooner
You are dead right, Labour should be taken out and shot.
BUT, unless Neville Key takes this golden chance to make REAL change then Key should be taken out and shot along with those from Labour.
October 15th, 2009 at 5:01 pm
At least the Herald shows a sense of humour by putting that story under “business” Gooner.
Political stories go between the Weather and Crime on their website.
Working for the State is the new business.
October 15th, 2009 at 5:08 pm
A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship. The average age of the world’s greatest civilizations from the beginning of history has been about 200 years. During those 200 years, these nations always progressed through the following sequence:
* From bondage to spiritual faith;
* From spiritual faith to great courage;
* From courage to liberty;
* From liberty to abundance;
* From abundance to complacency;
* From complacency to apathy;
* From apathy to dependence;
* From dependence back into bondage. (Alexander Tyler 1790)
Now where would God’s Own be on this progression?
October 15th, 2009 at 5:10 pm
At the last full stop.
October 15th, 2009 at 5:11 pm
I completely agree David, and indeed believe we should extend this analysis to the private sector.
No companies should ever borrow money, regardless if they believe they can generate a return in excess of the cost of capital, because they will have to pay it back one day and the interest payments mean they can’t spend money on production, employees etc.
I therefore hope you’ll join me in advocating for the dissolution of the banking sector.
[DPF: When you are already borrowing $10b a year, and the recession is actually over, you have to be daft to say spend and borrow more. If the call was for spending on infrastructure that will result in economic growth, that is fine, but this was a call to borrow money just to handout to people]
October 15th, 2009 at 5:34 pm
That $250 million is $60 for each person in the country each week. In a household of five that is about the week’s rent.
What on earth is going on?
October 15th, 2009 at 5:38 pm
Ha ha ha, I take it Bill Rosenberg is the jolly joker. Since when has a socialist/commie union git ever worried about paying the money back, they only know how to take, repay is not a word they would be familiar with.
October 15th, 2009 at 7:13 pm
The CTU economist Bill Rosenberg must have gone to the same school as that well known financial brain Dr Cullen… Train sets anyone?
October 15th, 2009 at 7:16 pm
The CTU are to economic matters what Chris Kahui and Macsyna King are to parenting.
October 15th, 2009 at 7:49 pm
The CTU economist is as dumb as all the other economists. Look seriously, it’s about time we started printing our own money. If the Federal Reserve can do it then so can we. Who gave them the licence to print the stuff? It should be in the hands of the Government to print money on behalf of the people. Take your wholesale banks and stick them somewhere dark and smelly – thieving, ponzi scheming bastards.
Apparently we borrowed $9 billion from the good old IOUSA last year? If we print our own we can pay it off real quick as we almost have parity with the US dollar! OK we will lose a substantial forest or two in the process but hey, at least we can actually grow more trees.
October 15th, 2009 at 7:52 pm
Re backster @ 5.08:
I believe we are at the apathy to dependence stage and not too far away from dependence back into bondage. That bondage shit comes in many forms and financial is one of the biggest.
October 15th, 2009 at 7:55 pm
“That $250 million is $60 for each person in the country each week. In a household of five that is about the week’s rent.
What on earth is going on?”
Good take on it Ben, isn’t it astounding? When the average punter out there has time go tough for him, gets hours cut, loses his job etc, he adjusts accordingly by hoarding cash, being careful with spending etc. WTF makes govt any different?
Oh, silly me, votes of beneficiaries, WFF recipients, and a trillion other groups need to be paid off with my taxpayer dollars. Did I really need to ask..
October 15th, 2009 at 8:06 pm
nickb – don’t forget that our own Government are an Obama mini me, using our money for bailouts.
http://tinyurl.com/yko6jgz
That’s right, they expect to pay out $816 million in the next 12 months! Makes you almost want to apologise to the Maoris for complaining about the $3 million spent by TPK on TV rights!
They already paid out $34 million to a couple of finance companies. South Canterbury are in deep shit at the moment. I am really angry about this situation, these are private companies that should be allowed to fail.
I wrote to Treasury about this and was told we had provide “confidence” to the market. The day a market is dependent on confidence is the day it takes on religious traits, time to run. Anyway, I would like them to be confident with their own money, not mine.
October 15th, 2009 at 8:13 pm
Absolutely kaya, haven’t followed the markets yet but SCF is looking rather sickly, there is quite a large moral hazard implicit in guarantees of this sort. Banks can’t even pay their taxes, yet taxpayers are going to socialise any losses. What a sad situation.
It is sad that some investors, especially the elderly, have lost money in finance companies, but it is maddening that some now expect those with less to pick up the tab.
October 15th, 2009 at 8:37 pm
I think I would refer David to Paul Krugman, Nobel Prize winner for ecconomics recently, for the rebuttle of his position. Basically the point is that with a good ecconomy the government receives more tax and so it is easier for them to pay off the loan. Better than struggling along with [hopefully] a slowly improving ecconomy with the drag of unemployment benefits etc. Krugman points to the American situation of the 1930’s when Rosevelt unfortunately heeded the calls similar to Davids and reined in government spending in the latter half of the ’30s, his second term I think, with the result that until WWII came along America dropped back into a recession climate. Today Governments need to bite the bullet and borrow and keep up feeding the stimulous into the ecconomy and only back off when the ecconomy is truely up and running again not at the first faint sign of a turnaround which can easilly be the centre of the ‘W’. A problem with both the States and here is that the governments appear not to have the guts to do the job properly and have applied pretty pathetic not even half measures but considerably less to date.
October 15th, 2009 at 8:45 pm
Austrian > Keynesian
October 15th, 2009 at 8:46 pm
What really needs to be done is for the government to take clear decisive action like lowering domestic costs, allowing banks and finance companies to fail, massively reducing government spending, and reducing barriers to entry for all industrial sectors, particularly high tech. We need to sell more than we consume, it is really simple. Borrowing money is fine if you have a plan in front of you of what you are doing with it. Spending it for the sake of keeping the economy going is insane.
Get the fundamentals right, the banking system, infrastructure, taxation. No fucking around trying to artificially maintain some impossible status quo (a la IOUSA). Then make it as easy as possible for people with the capital and the ideas to come here and set up shop.
October 15th, 2009 at 8:49 pm
kaya and nickb, the government guarantee was classic Clark government.
They announced a policy to be seen to be doing something. Then they expected it to be enacted by lunchtime. If you two really want to scare yourselves, try and rustle up the original application form for the guarantee. It was one page and I shit you not, it was a joke. IIRC it may have asked for each Directors star sign!
October 15th, 2009 at 9:02 pm
Kimble – I heard the first version was a shambles which has been tightened up in version 2 but I still fail to see why there is a government guarantee at all! Private companies shouldn’t be bailed out.
October 15th, 2009 at 9:08 pm
Get the fundamentals right, the banking system, infrastructure, taxation. No fucking around trying to artificially maintain some impossible status quo (a la IOUSA). Then make it as easy as possible for people with the capital and the ideas to come here and set up shop.
Absolutely kaya.
One thing I do note with huge irony is the left’s attacking of greedy banking practises and excess, and trying to smear it as the fault of “right wingers” and “unrestrained capitalism”. Yet at the same time you have the left bailing out these “greedy monsters”, and you have those on the right like Ron Paul urging Congress to let bad businesses fail and sticking up for the taxpayer.
BTW Kaya, if it is of interest, I am currently reading “Pillars of Prosperity” by Ron Paul that I downloaded from the Mises Institute, a good read.
October 15th, 2009 at 9:11 pm
This is one thing the Nat’s got right – not going down the road of a “government will do all to boost the economy by borrowing and spending in some futile stimulus” effort . . . which never works.
“you cannot carry on for ever squeezing the productive bit of the economy in order to fund an unprecedented engorgement of the unproductive bit. You cannot spend your way out of recession or borrow your way out of debt” – Daniel Hannan.
October 15th, 2009 at 9:12 pm
“This is one thing the Nat’s got right – not going down the road of a “government will do all to boost the economy by borrowing and spending in some futile stimulus” effort . . . which never works.”
Sure they are not pumping the economy full of cash to the extent of Australia or the US, but keeping the status quo in itself is shameful IMO Angus.
October 15th, 2009 at 10:38 pm
I think the CTU have already got what they want. This government is so keen to chuck money around, TVNZ and MTS bids for the world cup, the ETS, bank deposit guarantee scheme, ACC , WFF, benefits, perks, … Pity it’s our money they are spending.
October 15th, 2009 at 11:04 pm
The government guarantees came in when there was a real risk of all banks experiencing a run world-wide, when that happens you can kiss goodbye to any orderly recovery, the panic is just too widespread.
But it wasnt just about flighty depositers, there was a real risk of banks going bankrupt because they couldnt borrow internationally (which was their bread and butter). The Australian guarantee was put in place expressly to allow their (and our) banks to borrow on the global markets. The NZ guarantee covered deposits as well, because that’s what HC announced. The silly cow probably didnt know what she was talking about, and because she was desperate for a sound bite to show New Zealand that she was DOING SOMETHING TOO you now have to worry about South Canterbury Finance.
October 15th, 2009 at 11:10 pm
“VNZ and MTS bids for the world cup” – gots to spend money to makes money
“the ETS” – the ETS doesnt mean the government is spending money, in fact it is sending private wealth overseas
“bank deposit guarantee scheme” – brought in by HC, and while the execution was bad, and the spillover was worse, you shouldnt think that the government guaranteeing banks wasnt in some way helpfull
“ACC” – again National is cleaning up after the last lot, cutting spending in the area is tricky, and political suicide
“WFF” – you gonna complain when they keep an election promise? It might not have been a promise to you, but it was to someone, and that person was one Key faux pas away from voting Labour
“benefits” – yes, they should all be costs
“perk” – otherwise known as non-financial remuneration, you will need to be specific here
October 16th, 2009 at 8:58 am
Nickb – I like a lot of what I hear from Ron Paul, I will grab a copy of the book cheers.
Re left v right and “he said she said” politics, I am rapidly coming to the conclusion it is irrelevant which “side” is in power. Tell me what are the differences between the Key administration and Clarke’s?
It looks like the whole political system is nothing more than posturing to give the plebs some shred of hope that pollies will look after their interests first, as they are supposed to do. It seems that the powers that be only wish to maintain their positions of power and privilege in society and take turns in being in charge, paying lip service to the real issues at hand.
Ask yourself why the top ranks of the public service get substantial pay rises but nobody at the bottom? Didn’t National come to power on a promise of dealing to waste in the public service? They have done squat except put a cap on increases, the place was overblown by about 15000 staff and the best National could do was cap the numbers? WTF?
Tony Ryall’s weasel words on Newstalkzb this morning re the top dog pay rises made my skin crawl, “not our fault, was nasty Labour, nothing we could do about it”, he even said “we the taxpayers”! What utter shite, more looking after each other.
ACC needs an overhaul so targets the end users, the soft targets, not a whisper about any changes amongst the powers that be who are ultimately responsible for the present situation! I’m not saying the changes aren’t needed, far from it, I’m just pointing out a recurring theme. The power brokers never get touched, even though they are supposed to be where “the buck stops”? If the system is flawed then so are the people responsible for it. I haven’t seen any sackings in the upper echelons.
There is a structure of government and hangers on that are dependent on the taxpayer to maintain them. The problem is they always look after themselves first. Hence ever increasing taxes in their many forms. Vehicle registration, ACC, GST, income tax, levies for Africa on just about everything and others under different guises.
The reason there is more noise is because the tax base that they feed on is shrinking and people actually doing the paying are starting to squeal. The sad part is it won’t stop them, it never has in the history of mankind. Things just keep going until the system implodes. Read what backster wrote @ 5.08, a very astute piece.
To sort out our debt problems and systemic failures in our administration needs drastic measures. Nobody will do it, they want to stay in power so will do whatever it takes to maintain the status quo.
October 16th, 2009 at 9:14 am
Kimble – “The government guarantees came in when there was a real risk of all banks experiencing a run world-wide, when that happens you can kiss goodbye to any orderly recovery, the panic is just too widespread.”
I understand and I say bring it on. They are private businesses and have obviously screwed up, they should be allowed to fail.
Please explain to me why it would be so catastrophic if they did? Other than supplying a means of exchange (at a huge profit) they provide nothing of value. They don’t produce any of the actual essentials of life like food, building materials or fuel. The real economy would quickly find another method of facilitating exchange, we always have done before, why is now so exceptionally different?
Financial markets are now full of gamblers that feed on the real contributors in society. Financial markets make up Disney style financial products to trade as though they were real products, what a load of old bollocks! I have no objection to gambling, I like the odd flutter myself but not at the expense of the rest of society.
As for banks, get rid of them. Abraham Lincoln famously stated on money creation…
“The Government should create, issue, and circulate all the currency and credit needed to satisfy the spending power of the Government and the buying power of consumers. The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government’s greatest creative opportunity. By the adoption of these principles . taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.”
The changes are coming, it is only a matter of time. The “recovery” being witnessed currently is bullshit. It is an illusion maintained with trillions of fake dollars being pumped into a corrupt system. More people are becoming aware of this every day. The system runs completely on faith, no better than any cult or religion, when enough people lose faith the whole ponzi scheme will collapse on itself.
October 16th, 2009 at 11:03 am
“They are private businesses and have obviously screwed up, they should be allowed to fail.”
Ok, this shows you dont know what you are talking about.
There were banks that were going to fail even though their own loan book was clean and they followed prudent banking standards. They would have failed because no-one was lending to them; everyone was panicking. The risk premium had spiked through the roof and the global credit markets had effectively shut down. No one was lending to anyone because everyones risk aversion had increased to ridiculous levels. The government guarantee allowed people to calm down and to start lending again.
I dont think the recent “recovery” is anywhere near as good as some people think, but I still think it would have been much much worse had the Australian and New Zealand governments not shored up confidence in the local banks.
As for the “Disney style financial products”, you obviously dont understand them either. They were real products. They actually existed. Even if it was just one “bettor” against another, they were still as real as any mortgage or credit card contract, and in some ways much more real than equities. Even sub-prime mortgage CDO’s were real products. It is just the pricing of them that was wrong, for however many and varied reasons you can think of.
Are you really saying that you think the government should monopolise banking and credit creation on the basis of what a long-dead American President said? WTF did Lincoln know about modern banking? LOLZ, get out.
October 16th, 2009 at 1:45 pm
“Spend Baby Spend”. The underlying tenent and first principal of ObamaRuddGoof-onomics.
October 16th, 2009 at 8:27 pm
tenet and principle Alistair.
Sort of weakens your argument a bit doesn’t it…
October 17th, 2009 at 10:18 am
kimble – You obviously work in the industry or your income depends on it, you refuse to see the truth staring at you. Emperors new clothes comes to mind.
The reason these places were going to fail was because they didn’t actually have any money, the whole system runs on faith like a bad religion. It is a lie, a crock of shit, made up Disneyland bollocks. If it all fell over tomorrow the world would carry on very quickly as if nothing had happened. Those markets consist of nothing but bullshit.
What I am saying is that the current fractional reserve system of banking is a ponzi scheme. The system is a mathematical impossibility. The ability to create money out of thin air, multiply it tenfold with a keystroke then lend it out at interest for the benefit of a few is nothing but theft. People throughout history have been put up against a wall for less. It should be in the control of the people, not a private industry.
Re the financial markets, most of the people who worked on Wall Street didn’t know what the fuck they were selling, all they knew was that they got paid commission for selling the shit.
“WTF did Lincoln know about modern banking?”
Obviously he knew the threat which is why he said what he did, a wise man who foresaw the shite we are in today because of thieving and greed by bankers. It will resolve itself, and not before time.
October 17th, 2009 at 10:22 am
Kimble – you also failed to explain in detail the catastrophic events that would befall the world if finacial markets collapsed? Keen to hear your thoughts?
The real world carries on without that shit.
October 18th, 2009 at 10:04 pm
Kimble – the more I read what you wrote the more I realise you don’t actually reside on planet earth, nano nano.