Why we should not amend the Reserve Bank Act
December 29th, 2011 at 9:00 am by David Farrar
Now that Labour have abandoned 25 years of bipartisan commitment to sane monetary policy, we may need to get used to bank notes like this if they win in future (unless they quietly drop their policy to have more inflation).
One NZ$ is worth around 4,000 Zambian kwacha, so that note is worth around NZ$1.25. Note that in 1968 the kwacha was worth more than the US dollar.
Their largest note is for 50,000 which is NZ$12.50.
Yes that is a 100 trillion dollar note. Dr Evil, take that!
We shouldn’t have to worry about this scenario unless it is a four-way coalition of Labour, Greens, NZ First and Mana 
In fact the note is “worth” more than 100 trillion as there were three redenominations. The first was a 1,000:1 redenomination, the second was a 10 billion:1 and the third a 1 trillion:1 redenomination.
So in terms of the original Zimbabwean dollar, that note is worth 1×10^39 or 1,000,000,000,000,000,000,000,000,000,000,000,000,000, which could be called a duodecillion dollars.
This note was worth US30 when printed in 2009 but is worthless today. Their inflation rate in 2008 was 231,000,000%. It was only 28 years ago in 1983 that their dollar purchased US1.
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December 29th, 2011 at 9:09 am
They may as well start using scientific notation
Vote:December 29th, 2011 at 9:10 am
This post is hyperbolic idiocy of the highest order. That is all.
Vote:December 29th, 2011 at 9:24 am
That’s modern day Africa for you: the lost continent.
Vote:December 29th, 2011 at 10:17 am
Did you use them as toilet paper?
Vote:December 29th, 2011 at 10:18 am
Actually Rob I have seen many people on the left of the political spectrum argue that we should print money to support our productive sectors. This is the very reason that led to Zimbabwe’s astonomical inflation rate.
Vote:December 29th, 2011 at 10:35 am
What I love is that Zanu-PF is big on rallying against neo-colonialism but the solution they were forced to implement to resolve the hyperinflationary situation their left wing policies caused was to legalise the use of foreign currency within their country. Essentially they gave up having an independent monetary policy.
Vote:December 29th, 2011 at 10:51 am
To quote Danny Archer:
T.I.A.
Vote:(This Is Africa.)
December 29th, 2011 at 10:55 am
Reserve Bank Act was a Roger Douglas initiative, it is a tremendous legacy to him which along with ACT’s spending cap bill makes you wonder what on earth a National Govt has ever done which has contributed as much as the ACT philosophy. With David Farrar so keen on what are ACT initiatives I have to wonder why on earth he supports this do nothing National Govt we have had for the last 3 years. Time to get on board with ACT everyone. John Key is a handbrake this nation does not need.
Vote:December 29th, 2011 at 11:19 am
rg, ACT doesnt exist anymore. It is John Banks’ party. Now is definitely not the time to “get on board” with ACT.
Vote:December 29th, 2011 at 11:32 am
I love how everyone laughs at Zimbabwe for printing money and crashing their currency. What do you think the US, UK and EU have been in the process of doing for the past few years?
http://en.wikipedia.org/wiki/Quantitative_easing
Vote:December 29th, 2011 at 11:58 am
Rob Salmond:
Sadly it isn’t. We had 15% inflation in the 80s and we have the likes of Don Brash and Roger Douglas to thank for getting it under control. Now 15% isn’t 231,000,000%, but fundamentally there is no difference. (Hyper)inflation is the result of loose monetary policy and printing too much money. Thankfully NZ fixed its monetary policy before it got out of hand.
During the election Labour was advocating a change to current policies. They were very vague, but it could only be interpreted as a desire for printing money and higher inflation. I’d provide a link to their policy, but thankfully they seem to have taken it down.
Vote:December 29th, 2011 at 12:29 pm
David – dont forget to have a look back and see how this wretched country performed when the colonial powers were in charge.
In case you dont have the time -ill tell you – the place was doing very nicely thanks very much.
Independance isnt all that its cracked up to be. Well theyre not independant really – they are toadies to the UN and the IMF and that lot of wasters.
Vote:December 29th, 2011 at 12:50 pm
Iirc, Labour’s policy was to change the inflation target from “0 to 3 percent” to “1 to 3 percent” and add full employment as one of the goals of monetary policy to be pursued by RBNZ. This would bring New Zealand more in line with Australia (though the inflation target there is apparently 2 to 3 percent, as of 2009 at least). So why not make a post saying “if Labour’s policy were implemented, New Zealand could be as bad off as Australia, monetarily speaking”?
Vote:December 29th, 2011 at 2:58 pm
Must get to a stage when printing the notes costs more then their value, madness.
Vote:December 29th, 2011 at 3:02 pm
we need a stable $NZ dollar, so that the Nation can recover without being manipulated by speculation and foreign gamers.
Vote:December 29th, 2011 at 3:08 pm
Yes SSB, in Oz it currently costs treasury 4 cents to mint a 5 cent coin, yet the idiots have decided to persist with the 5 cent coin…. Nobody ever said they were bright.
Vote:December 29th, 2011 at 3:16 pm
It’s a bit unreasonable to blame the monetary policy of the Zimbabwean government- the currency failure was simply the natural result of the economic policies of the terrorist since he was put in power in 1980. Following his wrecking of the Rhodesian economy, he was left with the choice of trying to inflate his way out or reverse his attacks. Obviously one of these options was more palatable.
Vote:December 29th, 2011 at 3:28 pm
Sadly it isn’t. We had 15% inflation in the 80s and we have the likes of Don Brash and Roger Douglas to thank for getting it under control. Now 15% isn’t 231,000,000%, but fundamentally there is no difference.
Vote:…….
It is about time National took house prices seriously. Having rejected most of the advice of the Tax Working Group and Savings Working Group the only answer they like is “increase land supply”.
December 29th, 2011 at 3:33 pm
A 100 trillion dollar note – that is so awesome! In a couple of years time Zimbabwe will have a 1 google note (10^100).
Vote:That would be one to get framed.
December 29th, 2011 at 4:06 pm
Iirc, Labour’s policy was to change the inflation target from “0 to 3 percent” to “1 to 3 percent” and add full employment as one of the goals of monetary policy to be pursued by RBNZ. This would bring New Zealand more in line with Australia (though the inflation target there is apparently 2 to 3 percent, as of 2009 at least). So why not make a post saying “if Labour’s policy were implemented, New Zealand could be as bad off as Australia, monetarily speaking”?
Or he could do a pro mining post and title it: If the limp dicked eco-nazis would STFU about mining, we could be as bad off as Australia, monetarily speaking of course.
Vote:December 29th, 2011 at 4:08 pm
This post is hyperbolic idiocy of the highest order. That is all.
Your statement is redundant Rob, we recognize the fast approach of a moronic post when we see your name.
Vote:December 29th, 2011 at 4:16 pm
simonway: So this would be no doubt be accompanied by changes to welfare policy to make an approach to as close as just 1-2% shy of full employment possible?
Vote:December 29th, 2011 at 6:48 pm
“Now that Labour have abandoned 25 years of bipartisan commitment to sane monetary policy, we may need to get used to bank notes like this if they win in future (unless they quietly drop their policy to have more inflation).”
Is there a reference for this claim David? I have not seen Labour advocate changing the function of the Reserve Bank such that its primary role would not be to keep inflation low.
Labour would not change the bank’s 1 to 3 percent annual inflation target, saying “the importance of controlling inflation is a lesson of history well understood.”
http://www.interest.co.nz/currencies/56793/businessdesk-labour-wants-aggressive-reserve-bank-action-snare-currency-speculators
Vote:December 29th, 2011 at 7:34 pm
Do you realise this reads, I have not seen X advocate changing Y, except when they advocated change Z.
So they are advocating change, you just need to show that it isnt insane.
Diverting the Banks attention from only inflation to “punishing speculators”, managing the currency, and eventually boosting employment (not sure if they have advocated this in policy or if it was just one of their supporters here) and not expecting it to weaken the Banks control on inflation isnt technically insane, but it is stupid enough to strip Labour of the benefit of the doubt.
http://www.merriam-webster.com/dictionary/lip%20service
Vote:December 29th, 2011 at 10:00 pm
You should tell John Key, because the National government had Parliament amend the Reserve Bank Act in 2009.
And National voted for another amendment in 2008. And one in 2007. And one in 2006.
[I stopped looking at that point]
We’re all doomed.
Vote:December 30th, 2011 at 1:39 am
If Labour enters the 2014 election with this kind of interventionist mentality and wins then we will indeed have the govt we deserve.
Vote:December 30th, 2011 at 9:08 am
Graeme: wasn’t the inflation target ceiling raised from 2 percent to 3 percent in 1997?
Vote: