Pagani v Dim on economic growth

January 13th, 2012 at 2:30 pm by David Farrar

(Labour candidate for Rangitikei) has an op ed in the Herald where she says:

We were seen as looking backwards, not forwards. We didn’t sound aspirational, we sounded miserable. We were turning up on people’s doorsteps telling them their lives were gloomy. And anyone who has ever been poor knows the last thing you want is someone telling you your life is crap.

The hardest week to door-knock was when we were telling people – who had just come home from a day’s work earning the minimum wage – that it was a great idea to extend their Working for Families tax credit to beneficiaries. “So what’s the point of working my guts out all week while someone sitting at home on the dole gets the same tax credit as me?”

Indeed. Their worst policy of 2011.

There’s a reason we’re called “Labour”: We have always represented people who work. If you work hard you should earn enough to pay the bills, save a bit and enjoy the holidays with your family. If you have a great idea to build a business and work really hard, a Labour government will back you to be world class. It’s not just about dividing the economic pie fairly, it’s about increasing the size of the pie so everyone can get their piece.

Pretty sensible stuff. But Danyl at Dim Post says:

Growing the pie. David Shearer used the same cliche in his first speech to Parliament. Here’s my question: why are Labour still using ACT Party rhetoric about the panacea of economic growth, when all our economic statistics, social indicators and lived experience over the past thirty years tell us that the benefits of ‘growing the pie’ now aggregate to a  small number of high-net worth individuals? The rest of us stay where we are, or go backwards. …

For a few years during the mid 2000s it felt like we were going forwards – but that was just a bubble fueled by overseas debt. During this time Helen Clark constantly resorted to the tired old Kennedy/Sorenson trope that ‘a rising tide lifts all boats’. But this just isn’t an accurate way to think about economic growth. It may, eventually lift general living standards over a long period of time, but it always involves an element of ‘creative destruction’.

Danyl joins the ranks of left wing bloggers giving David Shearer appalling advice.

We had a party in New Zealand that used to say what Danyl said. They said economic growth is not as good as people make it out to be. They said we should not grow the pie as this exploits limited resources. They were the Green Party and tended to get 5% to 6% of the vote.

Then in 2011 they dropped the socialist dogma, and started talking about green growth, and how a vote for the Greens is a vote to get richer (implying more growth). And they broke through 10% for the first time.

Danyl thinks arguing in favour of economic growth is National/ACT dogma. It also happens to be the dogma of basically every major centre-left party in the developed world, plus pretty much all of Asia except North Korea and maybe Burma.

So my advice to David Shearer is not to start campaigning against economic growth. Well not unless he wants to beat Phil Goff’s 85 year low in the vote for Labour.

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105 Responses to “Pagani v Dim on economic growth”

  1. reid (16,509 comments) says:

    Lefties don’t understand how an economy works because they know nothing about monetary policy and they think the tried and failed Keynesian model is the way to run it.

    They overlook the stagflation of the late 70’s and early 80’s that bought the Keynesian-based world economy to a halt before Reagan, Thatcher and Douglas here, applied the Hayeckian policies which have since been applied worldwide and now dominate most but not all economies: e.g. China has a way to go.

    Lefties think that Hayeck is all about selling collective wealth to a handful of rich people and they don’t understand/refuse to discuss the argument that state ownership distorts the operating model because state demands result ultimately in tremendous distortion and the whole world saw the result of what massive state ownership and price control does to an economy when the USSR ground to a halt in the 1980’s with low productivity, alcoholism, no goods on shelves, low queues etc. Remember all those issues the USSR used to have. They don’t have them now, do they.

    Lefties also think that this same “free market philosophy” is why the GFC has happened for they believe markets are selfish, hurtful and brutal things that must be tamed lest naked greed be allowed to run rampant over the poor and helpless. This idiotic anthropomorphism means they fail to see that in fact, a truly free market is in fact neutral, it’s up the regulatory authority to let it run as it wants, but in an open and transparent way.

    This is why the GFC happened, that The City and Wall Street managed to pay enough to get politicians re-elected that the politicians were only too happy to repeal inconvenient things like Glass-Steagal so the poor old banks could just run out and go nuts. Which they did, all through the 90’s and noughties. On top of that the EU made the market for some reason think that every tinpot Euro country was just as good a credit risk as Germany was so bond rates allowed interest rates to remain low which allowed all the tinpot politicians to go simply nuts with all sorts of things, lest the voters didn’t re-elect them.

    You see the GFC has nothing whatsoever to do with Keynes vs Hayeck it is rather a system issue spanning the financial market regulations, the political structure where lobbyists can achieve this kind of influence and where politicians are so lacking in ethics they will cooperate with such and the monetary policy area where there is no global gold-backed reserve currency. But lefties either don’t understand or refuse to see this, and insist on proclaiming it’s the selfish market forces led by dark “banksters” who stole your assets during the “failed policies of the 90’s.” (Hulun didn’t want to mention the failed policies of the 80’s for some reason – wasn’t that odd, as she worked to setup this meme during her term which is still in vigorous use.) This is what disgusts me about lefties. Those of them in the know actually do know all of this but they run this meme because that’s how their base has been setup to believe. The fact it’s lousy for the country in that you get this constant spend-conserve-spend stop-start dynamic in the economy which prevents us from achieving consistent growth, is apparently neither here nor there, to these people. I truly do think this is reprehensible of them.

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  2. La Grand Fromage (145 comments) says:

    If you scratch below the surface of Danyls referencing of obscure quotes from Sci Fi books and his “too cool for school” snideness, you will find that he is actually a bit of a political moron.

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  3. willtruth (243 comments) says:

    How about you meet the lefties half way?

    They are acknowledging that economic growth is incredibly important (and of course it is, did any lefty with a brain ever really deny this?). They just think that it would be better if everyone got to share in that economic growth.

    Why don’t you righties respond to the assertion that most of the economic growth is going to the already rich. Is it an incorrect assertion? But most the stats I have seen seem to agree with it. Or do you think that the only way to get economic growth is to pursue policies where only the top 10% get any richer?

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  4. Wetfootmammal (32 comments) says:

    Economic growth, over the last 100 years, has been almost perfectly correlated with growth in the use of hydrocarbons. Time to face facts, the growth paradigm is over. We need new thinking, not 19th century economic liberalism.

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  5. ISeeRed (236 comments) says:

    No no no! I encourage Labour to continue with their eat the rich, rich prick, bludge-it, your life sux because of da man rhetoric for an assured victory in 2015!

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  6. Kimble (4,440 comments) says:

    Why don’t you righties respond to the assertion that most of the economic growth is going to the already rich.

    We do. Almost everyday. It isnt true. I dont think you actually have looked at stats. And if you have, you havent understood them but merely accepted what someone else told you about them.

    All of the gains going to the top 10% over the last 30 years? Pics or it didnt happen.

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  7. hj (7,033 comments) says:

    Sunday Star Times | Sunday, 20 April 2008

    “Another 38,000 people could lose their jobs in the next couple of years as the economy slows, and people working in real estate, housing construction, retailing, manufacturing and business services are most at risk.
    ANZ National Bank chief economist Cameron Bagrie said these sectors had grown off the property-market boom and accounted for 60% of new jobs over the past five years.”

    http://www.stuff.co.nz/sunday-star-times/latest-edition/376946/Downturn-puts-38-000-jobs-at-risk

    Apart from encouraging immigration where does the national govt expect the jobs to come from?

    Since housing is unaffordable for many people what will National do to free up income?

    “PM says ‘no’
    Prime Minister John Key reiterated later a land tax and broader capital gains tax were still off the cards. Asked whether the implementation of one or the other could allow government to reduce income taxes to give people more income to spend, he replied:
    “At the risk of repeating myself from last year, we looked at a land tax, and land taxes, one, reduce the value of land in New Zealand, by definition, and it has an impact on every single homeowner in New Zealand.”
    http://www.interest.co.nz/news/52737/imf-recommends-govt-broaden-capital-gains-tax-base-and-introduce-land-tax-your-view

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  8. side show bob (3,660 comments) says:

    So are we to assume that only 10% benefit with greater wealth in their hands, what utter lefty horseshit. Like to see you tell the untold millions in India and China raised up out of poverty in the last decade that only 10% are getting richer.

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  9. Kimble (4,440 comments) says:

    But ssb, Will knows loads of people whose situation hasnt changed for decades. Despite the great growth we have experienced in this country in that time, their benefit hasnt grown by as much as the earnings of rich people!

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  10. hj (7,033 comments) says:

    Righties don’t understand that the worlds economy is a subset of the worlds eco system and that capitalism will probably be better at unlocking the energy source that flows through the ecosystem, thereby causing the wheels to fall off faster.

    To put it another way many righties believe there is no such thing as natural resources, people make the resource and when one resource becomes scarce a substitue will be found when the price rises. Making the earth sick as by AGW doesn’t fit so musn’t be happening.

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  11. willtruth (243 comments) says:

    “It isnt true. I dont think you actually have looked at stats.”

    I have seen stats over the period 1982 – 1996. They are a bit old but they confirm the idea that all the gains are going to the top 10%. Maybe median incomes improved after that. I hope so. I’d love to see some good news statistics. There’s a challenge for you.

    Mean income for a NZ household of 2 people

    1982 = $29,200
    1996 = $29,420

    Source
    http://www.eastonbh.ac.nz/?p=333

    Over the same period the household incomes of the top 10% increased from $50,000 to $87,000

    Source
    http://keithrankin.com/chart/1999521aHeraldIncomeDist.gif

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  12. Kimble (4,440 comments) says:

    Actually capitalism increases resources. Competition forces the more efficient use of resources. As the price of a resource rises, this competition ensures that the resource is only used for the best purpose. It also ensures that if there is a substitute (and can you think of anything that doesnt have one?), that substitute would become a resource.

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  13. willtruth (243 comments) says:

    And actually it’s even worse if you look at median income. It actually fell from $22402 in 1982 to $19680 in 1996.

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  14. Kimble (4,440 comments) says:

    willtruthm, why arent you looking at after tax income?

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  15. willtruth (243 comments) says:

    That was all I could find Kimble. Please show me what you have found about after tax income. Is it dramatically different?

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  16. Kimble (4,440 comments) says:

    I know tax rates in 1996 were quite different to those in 1982.

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  17. willtruth (243 comments) says:

    Yes they were differen, tax rates for the rich were a lot lower in 1996. Can you show me some figures please?

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  18. Kimble (4,440 comments) says:

    Actually if those figures are already after tax, that might explain the entire difference. Top tax rate fell from 60% down to 33%.

    The figures might be after inflation too, which would introduce all sorts of problems with the measurement of CPI.

    The period that you are looking at didnt have great economic growth either.

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  19. willtruth (243 comments) says:

    Actually Kimble, I had a look at the article, I think that those stats ARE after tax.

    Anyway, I’m quite willing to change my mind, but at the moment all the stats seem to support the thesis that the gains of economic growth have mostly been going to the rich. I’d love to see some stats Kimble.

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  20. PaulL (5,987 comments) says:

    willtruth: are those inflation adjusted? Assuming they are, since most industries (and the minimum wage) have definitely gone up in headline terms. Perhaps yet more evidence that inflation is bad for people.

    How much of that “going backwards” occurred in the late eighties? A time when we were unwinding the fact that Muldoon had bankrupted the country by paying people more than they were worth – i.e. we were about like Greece is now.

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  21. reid (16,509 comments) says:

    Why don’t you righties respond to the assertion that most of the economic growth is going to the already rich.

    It always has, will. That’s how capitalism works. It works under communism too. It’s just in communism the wealthy people aren’t the professional classes but the politicians and the party apparatchiks. Under capitalism at least you aren’t required to join a party and do stuff they want whether or not you want to, in order to become wealthy.

    The big mistake that lefties make in this area is firstly their ill to non existent definition of who precisely they mean. Is it the 1% for example or is it everyone who lives in Remuera or whichever the best suburbs of any NZ town are, because the latter is a hell of a lot more than 1% and that’s who you seem to be talking about, not the 1% but say the 10% who live in the best areas. Which is it?

    Secondly lefties think that rich people get that way by taking money away from other people which is not how it works at all. Life is a value equation and unless you take something by force the only way to accumulate money is by giving other people something of value. The more value you give them in your product or service, the more they will pay. Doctors for example give something of the highest possible value: health, and this is why they get paid heaps as a profession. Does this fact of life make doctors “rich pricks?” Most lefties seem to think it does. I don’t know why they think that, they just do.

    The same applies to every walk of life. Whatever value one is capable of giving to another is how one gets rewarded. This is what lefties call ruthless since one’s reward is adjusted without taking into account anything other than one’s ability to do the job. It doesn’t for example take into account the fact if someone has a low IQ they’re not going to get rewarded over a lifetime as much as someone brighter. Lefties don’t seem to think this is fair. I can’t imagine why they think this but they seem to.

    I could go on will but hopefully you get the idea. Lefties don’t understand either the economy nor do they understand life.

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  22. willtruth (243 comments) says:

    Kimble, obviously the figures are inflation adjusted. Good God if they were not inflation adjusted then that would mean that real average incomes had actually dropped hugely.

    Again, I’d love to see some counter stats please.

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  23. willtruth (243 comments) says:

    So Reid, you agree that the gains go to the rich, but you think it is inevitable. But in the post war years the benefits of (unprecedented) economic growth were actually shared more evenly. So it is not inevitable.

    Meanwhile Kimble is still disputing that most of the gains go to the rich, but he has yet to come up with any stats. I would really like to see some stats Kimble.

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  24. Kimble (4,440 comments) says:

    Kimble is still disputing that most of the gains go to the rich.

    Actually I am disputing that ALL the gains go to the rich. A look at the income figures from statsNZ show that median income has increased since 1998. I would also point to the reduction in unemployment during periods of economic growth in NZ. Surely these people are sharing in the benefits of economic growth.

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  25. Camryn (543 comments) says:

    Dim urgently needs to read “The Rational Optimist” (as does everyone else). Even the first 50 pages are enough to thoroughly convince anyone of the benefits of economic development to everyone.

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  26. Kimble (4,440 comments) says:

    How much of that “going backwards” occurred in the late eighties?

    The big drop occurs in the mid 1980’s, with another drop around 90-93.

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  27. Michael (910 comments) says:

    Labour needs to find a cut-through issue – like Brash did spectacularly with his Orewa address. The one Goff focussed his efforts on (the cost of living) didn’t resonate because it was not something a Government can credibly control.

    If I was going to pick an issue for Labour I’d steal the one John Key spoke about in the Burnside address – the uneducated/unemployable underclass that lives in South Auckland, Eastern Porirua, and a lot of rural areas. Shearer could clobber Key on what hasn’t been delivered, it’s National’s soft belly.

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  28. gump (1,650 comments) says:

    Reid said:

    Doctors for example give something of the highest possible value: health, and this is why they get paid heaps as a profession. Does this fact of life make doctors “rich pricks?” Most lefties seem to think it does. I don’t know why they think that, they just do.

    ————————

    Not a good example.

    A doctor’s services are expensive for a number of reasons unrelated to the quality of service provided. For example there are heavy restrictions that limit the ability of foreign trained medical professionals to practice in NZ. This has the effect of reducing competition in the marketplace.

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  29. hj (7,033 comments) says:

    Reid says:
    “Secondly lefties think that rich people get that way by taking money away from other people which is not how it works at all. Life is a value equation and unless you take something by force the only way to accumulate money is by giving other people something of value. The more value you give them in your product or service, the more they will pay. ”
    ……..
    All those who benefited from the property boom are sitting on unearned wealth for which someone will have to either pay higher rents or higher purchase prices to live or operate a business.

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  30. thedavincimode (6,800 comments) says:

    Actually gump, you can’t equate costs and earnings. There would be many doctors who would struggle to earn the same sized crust as an Auckland wharfie. The hours aren’t quite as good either.

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  31. Manolo (13,837 comments) says:

    DPF is being faithful to his motto of creating mischief. But, who cares about what the tripe the hack Pagani writes?

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  32. hj (7,033 comments) says:

    Kimble says:
    Actually capitalism increases resources. Competition forces the more efficient use of resources. As the price of a resource rises, this competition ensures that the resource is only used for the best purpose. It also ensures that if there is a substitute (and can you think of anything that doesnt have one?), that substitute would become a resource.
    ………….

    High oil prices trigger a recession not alternatives. There are alternatives but they aren’t alternative and equal.

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  33. Kimble (4,440 comments) says:

    High oil prices trigger a recession not alternatives.

    Stop fixating on the short term. It is beyond question that the increase in oil price a few years ago made previously uneconomic oil projects profitable. New resources were created. Those projects take some time to get going though, as would any shift to alternatives.

    There are alternatives but they aren’t alternative and equal.

    Of course the alternative isnt equal. If it was then we would be using it as much as the original. There is a reason it is an “alternative” and not the “equal first choice”.

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  34. hj (7,033 comments) says:

    Kimble says:
    Of course the alternative isnt equal. If it was then we would be using it as much as the original. There is a reason it is an “alternative” and not the “equal first choice”.
    ……….
    the alternatives are so unequal they can’t really be called alternatives.

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  35. expat (4,050 comments) says:

    I agree DPF. Danyl is being a pretentious lefty by proclaiming from the halls of Beltway academia that the plebs shouldn’t have growth because they will only squander it it or worse be exploited by the rich pricks. Perhaps Danyl needs to spend some time outside of Wellingtons economic sweet spot, a sweet spot artificially sweetened by the concentration of Govt. departments and head offices lobbying Govt in Wellington, so that he may understand the economic reality for the majority of New Zealanders i.e. economic growth is essential for raising incomes and living standards for the uneducated proles outside of the beltway i.e. 99% of the country.

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  36. Danyl Mclauchlan (1,070 comments) says:

    Dim urgently needs to read “The Rational Optimist” (as does everyone else). Even the first 50 pages are enough to thoroughly convince anyone of the benefits of economic development to everyone.

    Does Ridley explain how his mastery of free market capitalism cost the British taxpayers sixty billion dollars when they bailed out his failed bank, or is that in the later chapters?

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  37. hj (7,033 comments) says:

    “Creating wealth, security and financial freedom is often an investor’s ultimate goal. 90% of millionaires get there by investing in real-estate”

    New Zealand has strong population growth due to its progressive immigration policy and birth rates. Many parts of the country are experiencing housing shortages translating into strong tenant demand and price growth. This trend is expected to continue with recent population projections by the New Zealand Department of Statistics forecasting up to 64% growth over the next 17 years. Auckland city is predicted to almost double its population in the next 40 years. For property investors, this represents outstanding potential growth in demand and return on investment. New Zealand’s property prices are also relatively undervalued compared to its closest neighbour Australia.
    http://www.nzps.com/

    Asset inflation isn’t wealth creation it simply creates a charge elsewhere in the economy.
    …….
    and what does national do? Very much what those who stand to benefit would want.

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  38. Pete George (23,591 comments) says:

    There’s too much attention given to “growing the pie” and “sharing the pie”.

    We’d all be better off concentrating more on improving the meat and veg, and making do with less pastry and gravy.

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  39. Pete George (23,591 comments) says:

    That’s food for thought, at least it should be.

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  40. Kimble (4,440 comments) says:

    the alternatives are so unequal they can’t really be called alternatives.

    The alternatives to everything were once “so unequal”. Some were so unequal they didnt even exist.

    Asset inflation isn’t wealth creation it simply creates a charge elsewhere in the economy.

    Gosh, if only someone could capitalise on the high demand and the rising prices and build new houses! Alas, capitalism is to blame for that not happening.

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  41. bhudson (4,740 comments) says:

    @La Grand Fromage,

    DM at 6:45pm:

    Does Ridley explain how his mastery of free market capitalism cost the British taxpayers sixty billion dollars when they bailed out his failed bank, or is that in the later chapters?

    What was that again about “too cool for school” snideness?

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  42. willtruth (243 comments) says:

    “A look at the income figures from statsNZ show that median income has increased since 1998.”

    Kimble, I think you might be right about that but I have been unable to find any stats to back it up. Was the increase very large? Could you provide a link please? It would be nice if we could all stop arguing in ideological terms and look at the facts as to whether dimpost’s assertion that the gains mostly go to the rich is true. So far it seems that it is, but no-one has presented any data post 1996.

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  43. reid (16,509 comments) says:

    Pete, I agree. Good point.

    So Reid, you agree that the gains go to the rich, but you think it is inevitable.

    will, this is life. Without choice one is born rich and one is poor. One is born brainy and another thick. One is born crippled and another bursting with health. The thing you lefties don’t get, is that while it is society’s job as a compassionate society to make sure that people with less opportunity are not impeded and are supported sufficiently, it is not society’s job to ensure that every single person has equal outcomes for we are not equal will and nor should we be. All humans are powerful individuals in control of their own destiny and while they may not always know that such as when we are children or haven’t been given the right education, we should always be treated as such as part of simple human dignity.

    Correcting the imbalance in order to give the poorest children chances that Remuera have, is not impossible, if the family is paying attention to what it should, which is not what a lot of poor families pay attention to, will. But lefties seem to be very keen for the state to become deeply involved in this without holding families to account which is, quite frankly, very creepy and very fruitless, for the people you most need to help are the people who don’t give a fuck about helping themselves will indeed they will tell the social workers who are there to help them to fuck off. And this happens because of easily understandable lefty tolerance policies over the decades will but even though this is the obvious case, lefties still seem to think operating against human nature is practical and refuse to challenge those who hold these attitudes amongst their base instead they actively nurture them. And lefties further seem to think that people who don’t agree with their vision disagree for the sole reason they are hate-filled, selfish people who want to hurt others. This is how lefties appear to think.

    Unfortunately for lefties will, the conservatives have already thought this through and have concluded that while this is worthy it has to be done in the real world and not in the utopian world which is all you lefties seem to talk about as if we’ve already arrived there. I mean if the world could wave a magic wand will and fix all the wars and all the starvation and all the rest of it, don’t you think it would? It’s not that it doesn’t occur to conservatives that your lefty utopia would indeed be pleasant, it’s just that you lefties never paint the picture of how to get there, from where we are now.

    The fact is will, your lefty utopian world will never be achieved by what lefties proclaim, for what lefties proclaim is that collectively we should all support each other which means the capable pay for the crippled to have the same as they have which means in your utopia will, taxes for say, over 60k go to say, 60%. This is your utopia will in order that poor people get the income they need to have the same lifestyle as the rest of us has. So the working people have to pay way more than half, to the crippled people. When I say crippled will obviously I mean everyone who gets any benefit whatsoever.

    I suspect will that the working people would have to pay even more than 60% to enable all the crippled people to achieve rough parity. Don’t you? But this is what you ask society to do, with your emotive, plaintive pleas that the crippled people are all victims.

    The thing is will, by doing this to the crippled people you lock them into dependency which crushes human spirit which is borne from test, trial and success and there is no other formula to get this and unless you have those under your belt sufficiently at any given stage in life, you will fall behind. This then becomes a feeding ground for failure to get those three elements over time the more and more time that passes results in the sort of society we have here today.

    This is because will, lefties have ignored this dynamic of humanity but have instead encouraged people to think that unless we embrace all the cripples and coat them with marshmellow and cottonwool then we’re all just great big meanies who should be ashamed of ourselves. This is you lefties, will. This is your essential message to the voters.

    Now isn’t this nuts, given this fact of human nature. Furthermore, it’s cruel really will, for instead of developing the human spirit of your base instead your very philosophy crushes it, for its own convenience.

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  44. nasska (11,580 comments) says:

    You’re hitting form tonight reid.

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  45. willtruth (243 comments) says:

    Thanks for all that ideology Reid. But to go back to the world of facts, we can see that it is not inevitable that all the gains of economic growth go to the rich. The western world had massive economic growth from the 50s till
    the eighties, and redistributive policies which managed to share the wealth in a way which did not retard economic growth and (many would argue) actually promoted it.

    So Reid, why do you think it is inevitable that the gains of economic
    growth go to the rich when we have an example from such recent history that shows it is not?

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  46. Kimble (4,440 comments) says:

    Was the increase very large?

    Not very large, but I cant recall exactly as my calcs were;

    1. back of the envelope
    2. included inflation
    3. tried to account for differing household composition
    4. several months ago.

    As for Dims post,
    1. ACT and the Nats do not say (did not say in ACTs case, as it no longer exists) economic growth is a panacea for all that ills. But economic stagnation is certainly not better. What if the economy didnt grow, while inequality increased?
    2. ACT and National have a whole bunch of other ideas for what will help improve peoples live.
    3. Complaining about “creative destruction” is to complain about progress. The right doesnt want people unemployed. Maybe you have missed that message when they complain about any increase in the number of people relying on a benefit.

    The Right usually investigates inequality in response to assertions by the Left that it is the cause of all sorts of problems. (This isnt an exaggeration either. The Spirit Level essentially blames inequality for every bad thing in modern life.) The Left offers proposals simply to reduce inequality. We say that inequality is not necessarily bad, and efforts to reduce it wont necessarily help.

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  47. PaulL (5,987 comments) says:

    So, I went to stats NZ: http://www.stats.govt.nz/tools_and_services/tools/TableBuilder/income-tables.aspx

    I selected the “Income by age, sex, and labour force status”.

    I used the table builder to select only those employed. The result is:
    Year, Average weekly income, median weekly income, number of people (000)
    1998 592 520 1730.7
    1999 616 529 1750.1
    2000 623 540 1774.7
    2001 653 566 1830.9
    2002 698 595 1894.1
    2003 744 612 1934.4
    2004 754 630 1996.1
    2005 787 659 2062.1
    2006 809 690 2132.8
    2007 882 741 2166.2
    2008 909 767 2184.3
    2009 917 778 2166.1
    2010 939 797 2165.6
    2011 954 809 2208.3

    In short, median income for those in employment has increased substantially. It lets you download as a csv so you can do stuff with it. I did so, and calculated the yearly increase for both average and median.

    The yearly increase for the average is 3.8%, the yearly increase for the median is 3.5%.

    This implies that more of the gain has accrued to the top (the average is going up more than the median is, so therefore people above the median are getting more of the gain than people below the median).

    I believe the inflation rate (CPI) in this same period is less than 3.5% per annum, I think it is around 1.6% or thereabouts. I might check later. So the median employed person in NZ has accrued 1-2% increase per annum in real gross income over the period 1998-2011.

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  48. slijmbal (1,236 comments) says:

    @willtruth – so of course everybody on an average wage drives the same car, has the same TV, computer etc they did in the 80s

    Has the same disposable income value? They’ve gone nowhere since the 80s?

    Common sense says that you’re using a single stat to make a rather broad case.

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  49. PaulL (5,987 comments) says:

    Reflecting on reid’s viewpoint, I’d add some points.

    Everybody receives from life a package of benefits. People make tradeoffs between those benefits so as to optimise their own happiness. So, one person studies computer science at university, works 80 hours a week so as to earn lots of money, and climbs the corporate tree. Another person works 40 hours a week and spends quality time with their family – they have less money, but arguably a better life. Another person chooses to study English Literature at university because that is their passion, and spends their life analysing the classics – they are doing what they love, but it isn’t well paid.

    Now along we come and say “hang on a minute, one of those people is earning more than the others, we better take some of it and redistribute.” But in this particular group of people, they have each chosen to do what they are doing – and you’re redistributing only one part of that person’s tradeoff. If we also could transfer the middle person’s family time to the person who has no family time, and the third person’s happiness to the first person’s workoholic career driven life, then maybe that would be fair. But then I’d question why government has decided that these people haven’t made the right choices, and redistributed their life to make them all clones. We’re not all clones, and we don’t all make the same choices – this is what the market is good at and government is bad at.

    Take another example. I’m 18 years old and working in a supermarket whilst at university. My income is low. I’m 25 years old and working in my first job, my income is moderate. I’m 40 years old, supporting a family and a mortgage, and working in middle management, earning good money. I’m 55 years old, looking towards retirement, and I have a lot of assets – I’m “rich”. Does it make sense to redistribute money between these people? Or is it just life stages?

    There are a lot of reasons that people have different incomes. Some of them I think are worthy of some level of redistribution. Others of them aren’t, they’re choices and they’re life, and there’s no good reason for the government to get involved.

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  50. willtruth (243 comments) says:

    Paul. Good work. Some stats at last. They ate not inflation adjusted but you have mentioned that, and I see that the period from 1998 on is not quite so bad. Some benefit has gone to average people.

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  51. Viking2 (11,488 comments) says:

    PaulL (4,356) Says:
    January 13th, 2012 at 8:42 pm

    I believe the inflation rate (CPI) in this same period is less than 3.5% per annum, I think it is around 1.6% or thereabouts. I might check later. So the median employed person in NZ has accrued 1-2% increase per annum in real gross income over the period 1998-2011.

    Some weeks ago the figure was posted for the last 80 years and I recall that inflation averaged 4%.

    So that makes a big dent in the wages increase per annum.

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  52. PaulL (5,987 comments) says:

    Back to CPI and wages. From this site: http://www.stats.govt.nz/infoshare/ you can get the yearly CPI, under economic indicators. The index is a value, with 2006Q2 set as 1000, and every other period as an index of that period.

    I can combine that with the table I had before to give a CPI adjusted income, in constant 2006Q2 dollars. I’ve used Q3 as the index for the whole year – so 2011Q3 is assumed to be the index for 2011 (you could make a different choice if you wished).

    That updates the table I gave before as follows:
    Year Real Average Real Median %Increase Avg %Increase Median
    1998 705.1559602 619.3937488
    1999 737.4820721 633.3247015 5% 2%
    2000 724.2224372 627.736944 -2% -1%
    2001 741.1765817 642.4287063 2% 2%
    2002 771.8454463 657.9484822 4% 2%
    2003 810.7778787 666.9301905 5% 1%
    2004 801.3333336 669.5490719 -1% 0%
    2005 809.2164244 677.6030796 1% 1%
    2006 803.3763654 685.203575 -1% 1%
    2007 860.4878049 722.9268293 7% 6%
    2008 844.0111421 712.1634169 -2% -1%
    2009 837.4429224 710.5022831 -1% 0%
    2010 845.1845185 717.3717372 1% 1%
    2011 820.9982788 696.2134251 -3% -3%

    Over the entire period in question we get 16% increase in the average income for those in employment, and 12% increase in the median wage for those in employment. We also see the biggest portion of that increase coming in 2007 (6%) – arguably a high point in the bubble where, if will’s theory were correct, surely most of the gains would be going to the 1%. In the last few years things have been static, except for a 3% decrease in both the average and the median in 2011 – presumably the earthquake had an impact, and impacted both rich and poor. Or it could be the double dip recession.

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  53. Other_Andy (2,676 comments) says:

    Excellent piece (at 8.49) PaulL
    I copy that, if you don’t mind, for future references.

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  54. Pete George (23,591 comments) says:

    PaulL – very well put. How do you measure overall equality? Impossible.

    Another comparative example:
    – a 25 year old mother of two on the DPB, rents a modest house, budgets carefully, buys mostly basic but good quality food, supplements that by growing some herbs, fruit, berries and vegetables
    – another 25 year old mother of two on the same DPB, state house, smokes, drinks, can’t budget, rotating boyfriends, fast food fanatic

    Are they equal?

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  55. PaulL (5,987 comments) says:

    You’re more than welcome Other_Andy. The site itself is very easy to drive – NZ Stats provide great information, and it’s all free. There are an amazing range of statistics there, and different ways to manipulate them to get exactly the answer you want (lies, damned lies and all that).

    Edit: Ah, the other piece. You’re welcome to that one too!! I didn’t put in the lines that Eric at offsettingbehaviour sometimes does about other distributions – distribution of attractiveness for example – do beautiful people have a better life, and if so, how should the government redistribute beauty? Seemed a bit grad school, but I think the point is made either way.

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  56. Kimble (4,440 comments) says:

    Thanks Paul, around 1.9%pa is a little higher than I recall, but same ballpark.

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  57. Kimble (4,440 comments) says:

    Some weeks ago the figure was posted for the last 80 years and I recall that inflation averaged 4%.

    1970’s had inflation in excess of 15%, so that skews things quite a bit.

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  58. reid (16,509 comments) says:

    The western world had massive economic growth from the 50s till the eighties, and redistributive policies which managed to share the wealth in a way which did not retard economic growth and (many would argue) actually promoted it.

    The western world had massive growth from the 50s to the 60s will but by the 70s it was sputtering out due to the massive overhead of bureaucratic overhead in every single pigeon hole the folly of which was finally exposed by the first oil shock followed closely by the second which collapsed confidence in Kenesianism will, which is what you lefties want to return to.

    …which managed to share the wealth in a way which did not retard economic growth and (many would argue) actually promoted it

    What do you mean will?

    why do you think it is inevitable that the gains of economic growth go to the rich when we have an example from such recent history that shows it is not?

    I don’t see that not showing at the mo will, in fact I see it showing in spades. Why I was reading >this only last night.

    The answer to why the 1% are the 1% is the fact they control both the market and the politicians, in both NY and London. The % of global GDP financial services comprise is incredible, something like 70% – can’t be bothered looking it up.

    But in an economy, financial services should only provide foreign exchange trading necessary for trade, unless the currency means something and unless it’s backed by something valuable it doesn’t. And this is what has happened, deliberately and by design. By the poor innocent people who own and run these banks and the poor innocent politicians who never knew what could possibly happen.

    Criminal action against those bankers in particular, should result. But how come Obama being a Dem, isn’t pushing stuff through accordingly?

    If you want to sniff the festering filth in politics as history reveals it will, this is one good place to look.

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  59. thor42 (971 comments) says:

    There is one sure way to ensure that our economic growth can improve – leave the Kyoto agreement FRAUD immediately.
    (Apologies for going off-topic a bit here…..)
    I say this because I’ve just seen the video on this page – “The great global warming swindle” –
    http://www.solopassion.com/node/2291

    I am now convinced that so-called “man-made global warming” is a complete fraud. The above video shows why, and it gives proof that the climate is not only changing **all the time** (naturally), but that CO2 levels go up and down naturally as a *result* of climate change, not the cause of it.
    Watch the video. You will not regret it.

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  60. PaulL (5,987 comments) says:

    thor42: apologies for going further off topic, but I’m a bit dodgy on looking at a video from a web site entitled “solopassion”. Are you sure it’s not going to be porn of some 40 year old guy doing the business at home alone? Just saying. :-)

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  61. Kimble (4,440 comments) says:

    But in an economy, financial services should only provide foreign exchange trading necessary for trade

    So people with money to invest will have to become experts in their own field as well as investment? They will also have to take care of their own insurance. Hang on, sorry, there is no insurance. There are no accountancy firms, nor firms to help people do their taxes. There would be no way for businesses to raise new capital. There would be no facility for anyone to borrow to buy a large item, and they cant save either. Etc, etc, etc.

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  62. reid (16,509 comments) says:

    Kimble the general point I’m making and it’s a strategic not a tactical point is that the only economic benefit from financial instrument trading period, is to the extent and only that extent required to faciliate forex payments in return for commodities trades. [I may be wrong, there maybe other appropriate instruments in addition.]

    There is no financial benefit apart from to the players, in things like CDOs or other leveraged financial instruments. In an ideal world therefore, these would not be allowed.

    In this world, they are allowed, because the generate simply trillions p.a. for those who promote and trade them, so there’s lots of research on precisely why they are so fantastic if one cares to google.

    This doesn’t mean they are fantastic and it doesn’t mean they are necessary.

    “There is nothing so vigorously defended as a vested interest disguised as an intellectual conviction.”

    I have observed more instances of that truism over time than any other I know and it’s happening in spades as the GFC fallout progresses.

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  63. Wetfootmammal (32 comments) says:

    Apparently people who aren’t working aren’t people, but are irreverent. According to the right they should be deleted from homicide and rape victim statistics as well. Actually, gas all the fuckers.

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  64. gump (1,650 comments) says:

    PaulL said:

    That updates the table I gave before as follows:
    Year Real Average Real Median %Increase Avg %Increase Median
    1998 705.1559602 619.3937488
    1999 737.4820721 633.3247015 5% 2%
    2000 724.2224372 627.736944 -2% -1%
    2001 741.1765817 642.4287063 2% 2%
    2002 771.8454463 657.9484822 4% 2%
    2003 810.7778787 666.9301905 5% 1%
    2004 801.3333336 669.5490719 -1% 0%
    2005 809.2164244 677.6030796 1% 1%
    2006 803.3763654 685.203575 -1% 1%
    2007 860.4878049 722.9268293 7% 6%
    2008 844.0111421 712.1634169 -2% -1%
    2009 837.4429224 710.5022831 -1% 0%
    2010 845.1845185 717.3717372 1% 1%
    2011 820.9982788 696.2134251 -3% -3%

    —————————-

    Thanks for posting that.

    What surprises me – and I post this as a National/Act supporter – is that the real average and real median incomes rose over the period that Labour was in power (1999-2008) and have dropped while National have been in power (2008-2011).

    Yes. I am aware that this is what happens when you look at data over a small time period, but it still surprises me.

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  65. Kimble (4,440 comments) says:

    There is no financial benefit apart from to the players, in things like CDOs or other leveraged financial instruments. In an ideal world therefore, these would not be allowed.

    Why not? There is no benefit apart from to the players, in things like pepper steak pies. Should they be banned?

    There is nothing inherently wrong with a CDO. Nor is there anything inherently wrong with leverage.

    In a CDO the originating lender gets cash in exchange for a bunch of loans they have. Should selling loans be banned?
    The benefit to the lender is that it gives them more cash to go out and make more loans. The buyer recognises that the loans he bought has cashflows that are supposed to occur at different times, so he sells a security for the cashflows in each time period.

    So wheres the problem?

    Well, the people buying the securities paid too much for them. Who’s problem is that? It should be theirs. But it ended up being someone elses. Thats the problem.

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  66. PaulL (5,987 comments) says:

    Myself too gump. But I think underlying economic conditions explain a lot of that. Labour largely inherited economic conditions created by preceding governments (micro and macro-economic reform of the Lange and Bolger/Shipley governments), National inherited economic conditions driven by the GFC and socialist policies in Europe. But I guess as a right wing supporter I would say that…..

    I think it does stand that the characteristics of those governments probably weren’t the drivers of the overall wealth. What might be more interesting is whether the Labour years resulted in a greater share of median to average (i.e. the poor got a greater share) than the National years. Problem is there are too many confounding factors, and I suspect you’d really want to look at after-tax income if you were going to try that – tax policies are probably one key area of difference between the parties.

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  67. Kimble (4,440 comments) says:

    Yes. I am aware that this is what happens when you look at data over a small time period, but it still surprises me.

    Why should it surprise? During Labours reign of error, all world markets were pumping thanks to a debt feast. That ended in 2008. Labour squandered the good times, spending on pointless things solely with the goal of getting re-elected, in what will eventually come to be known as the greatest missed opportunity in New Zealands economic history.

    Governments dont “run” the economy. As far as NZ is concerned, our trading partners determine our fate. Labour had next to nothing to do with NZ’s propserity, so ignore what their acolytes tell you.

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  68. reid (16,509 comments) says:

    So wheres the problem [in say a CDO]?

    Suggest you research cause of the GFC if you don’t understand that yet.

    National inherited economic conditions driven by the GFC and socialist policies in Europe. But I guess as a right wing supporter I would say that

    It’s a factual question Paul so I’m not sure why you think it’s an opinion. I agree with the conclusion, BTW, it’s quite obvious.

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  69. bhudson (4,740 comments) says:

    reid,

    There is no financial benefit apart from to the players, in things like CDOs or other leveraged financial instruments. In an ideal world therefore, these would not be allowed.

    In a very real sense – when you are looking at the tipping points that set the GFC in motion – they were not allowed. Some/many CDOs were loaded up with far more risky or toxic debt than they were supposed to be. Traders/houses hid the fact that what they were selling was not necessarily ‘balanced’ in the ratio that investors and the markets thought they were (and that the regulations, such as they were, said they were supposed to be.)

    I believe, when you strip it down, the essence of it was not the fault of the markets, nor the governments, nor their regulators. It wasn’t even in the organisations necessarily; the trading houses or the banks themselves. They might have been guilty of demanding continued for success and growth, but the root was greed of individuals, cliques, groups. No one was going to put them under the microscope when they were being successful – as they were for a good long time. It was borne of their greed – or if you really need to try and put something of a positive spin on it – desperation borne of a perceived need to be successful; to be great.

    They allowed themselves to be blinded by the successes of their past and their [assured] future glories – they lost sight of the fact that their manipulations of the funds/packages could no longer sustain the values and deals of the past.

    And all it really took was a question of confidence to bring it all down. While I don’t think it captures the entire story by any means, House of Cards by William Cohen is a worthwhile read [a story on the Bear Sterns collapse.]

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  70. annie (539 comments) says:

    hj (1,892) Says:
    January 13th, 2012 at 4:39 pm

    Righties don’t understand that the worlds economy is a subset of the worlds eco system and that capitalism will probably be better at unlocking the energy source that flows through the ecosystem, thereby causing the wheels to fall off faster.

    To put it another way many righties believe there is no such thing as natural resources, people make the resource and when one resource becomes scarce a substitue will be found when the price rises. Making the earth sick as by AGW doesn’t fit so musn’t be happening.

    Love the ecosystem subset model. Thanks for that HJ, I needed cheering up.

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  71. Other_Andy (2,676 comments) says:

    “Making the earth sick as by AGW doesn’t fit so musn’t be happening.”

    Correction.
    The data says it isn’t happening.
    But then, that isn’t nearly as important as all those computer models.
    As for trying to create theories to fit a worldview, ah well….

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  72. Kimble (4,440 comments) says:

    Suggest you research cause of the GFC if you don’t understand that yet.

    You think CDO’s caused the GFC? Wrong. That’s like blaming the canary for a mine explosion.

    Your problem is with research, with pricing, with market inter-relationships, with complexity, with agents, with perverse incentives, with selective bail outs, and with moral hazard. It is not with the CDO’s.

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  73. Yoza (1,879 comments) says:

    You guys are wrong. The disastrous consequences of allowing a corporate agenda to corrupt the decision making process will become more dire as those decisions more readily reflect the self-interest of the few at the expense of everyone else. The economic disaster, which has been inexorably unfolding since the introduction of Rogernomics (neo-liberalism, Thatcherism, Reaganomics, call it what you will) has culminated in the global financial crisis. It is a crisis that will not end until we find a way to eliminate those concentrations of capital that, through disproportionate influence in ‘democratically’ elected governments, dictate economic policy.

    The policies of the last thirty years promoted unsustainable levels of personal debt which led to illusory amounts of credit which culminated in an unrealistic financial system. The reason the level of private debt exploded was a direct consequence of the eviscerating of the working class as vast swathes of production were shifted to poorer countries and people in the formerly economically healthy west compensated for the drop in wealth with the growth in the easy debt industry. The growth of unsustainable derivatives like collateralised debt obligations and credit default swaps were the enevitable consequence of the kind of policies the right are prone to champion. It does not matter that the economic model is necessarily flawed, all that matters is the illusion of growth the model allows.

    There were a great many on the left ( I would not call Helen Clark left) who warned the global financial crisis was going to happen (to be fair the were many of the right who were betting, through the credit default swap insurance scam, that there was going to be a massive financial collapse). The real left also understand that the ‘risk taking’ the right laud as a virtuous endeavour is little more than a euphemism for confidence tricks that the public and ordinary people will pay for when things go bad. The massive bail outs of banks in Britain, the US and finance companies here are a tribute to the power of the wealthy few to have their personal circumstances attended to by ‘public’ policy.

    The trouble with the economic model being adopted by the western establishment is the detrimental consequence will not be felt by the privileged few in the ownership and coordinator classes until it is too late, they are afforded the luxury of being able to ignore economic and social deprivation as those conditions do not exist in the gated communities, leafy suburbs and exclusive apartment complexes they inhabit. As long as there is scope to maintain the illusion that everything is OK nothing will change. I have no doubt the likes of Marie Antoinette and the Romanovs shared the enthusiasm, expressed on this site, in their time for the economic direction of the status quo. The illusion of perpetual growth, however, has a history of foundering on the reality of finite resources and the ability of those at the bottom to tolerate abuse. These are one of those interesting times of which the Chinese curse warns.

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  74. The Scorned (719 comments) says:

    Yoza…..complete and utter shit.

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  75. Elaycee (4,393 comments) says:

    Doza – Jesus wept! Did you read that crap before you hit the ‘Submit Content’ button?

    Either your nurses have buggered up your dosage, or you were Aesop in a former life.

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  76. Pete George (23,591 comments) says:

    The policies of the last thirty years promoted unsustainable levels of personal deb

    People choose to take on debt. There seems to be too much expectation that governments should ‘fix’ things like debt by cajoling, manipulating, incentivising, forcing or whatever.

    People can collectively make a lot more difference to their own lives if they take responsibility for their spending and borrowing themselves. One of the best things most people could do is have a good look at their quality of spending, their need to spend on things they don’t really need, and their addiction to borrowing money to buy them.

    One of the most effective things we could get going is a lot more self education alongside self responsibility.

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  77. Scott Chris (6,150 comments) says:

    Elaycee says:- “Doza – Jesus wept! Did you read that crap before you hit the ‘Submit Content’ button?”

    LMAO – That’s rich. If you disagree with something, why not critique it objectively?

    Why do you find it necessary to be so consistently abusive?

    Says a lot more about you than is says about those with whom you disagree.

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  78. ross (1,437 comments) says:

    David

    You’ve completely missed Danyl’s point, which is that “growing the pie” will benefit workers little (if at all). The Ports of Auckland is a classic example. Workers there have, according to the company, suppled significant productivity increases during the last 5 years. Their reward? An attack on their working conditions. The company wants to cut real wages by up to 25%. So much for growing the pie and sharing the benefits. Another myth of the Right.

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  79. ross (1,437 comments) says:

    NZ has one of the highest rates of income inequality in the developed world. I note that David doesn’t attempt to explain how to reduce such inequality. He seems to think that growth will do that by some magical process. That’s wishful thinking at best and wilful ignorance at worst.

    http://ips.ac.nz/publications/files/d3ffbb25bdb.pdf

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  80. kiwi in america (2,454 comments) says:

    Yoza

    Did you lift your screed from FireDogLake or Talking Points Memo or was it your notes from your Capitalism Sucks 101 class? So much to unpack from such a dense Marxist worldview but it’s a quieter Friday for me here so someone has to deal to this. Please excuse the length of this post.

    Here’s why we had the global financial meltdown – and I write as someone with 20 years lending/finance/capital raising experience. Back in the late 1970’s the Carter Administration felt that minorities were being discriminated against by banks so they passed the Community Reinvestment Act pressuring banks into granting loans to people who normally won’t qualify. Back then the impact was minimal as it was barely enforced so the numbers of these forced loans were modest. Clinton decided to use the CRA to more aggressively expand home ownership in the US via its anti discrimination clauses. What was once lightly enforced by the late 1990s became a key indicator that banks and home lenders were measured on. The Administration used its enforcement and regulatory approval powers to force all home lenders to make more marginal loans. Home mortgages in the US are administered very differently compared to NZ. In NZ most home loans are written by banks and each bank keeps its loan portfolio and administers the mortgage. In the US almost no home loan lender (bank or non-bank) keeps their paper. They aggregate their home loans into investment packages and sell the package of loans on wholesale markets usually in parcels on $100 million or more. These parcels are packaged according to risk – so called “Conforming” or “Non-Conforming” (Conforming meeting a conservative loan to value ratio and that the borrowers income is fully verified and stable and has good credit and Non-Conforming being less safe on all 3 criteria). These packages of home loans are called Mortgage Backed Securities (or MBS). For a long time they were a very very attractive investment option for large institutional investor groups (such as the huge union pension funds, 401k superannuation funds for employees etc).

    In the late 60’s and again in the late 70’s the Federal Government formed 2 agencies called Fannie Mae and Freddie Mac (acronyms) whose purpose was to facilitate home ownership by acting as an aggregator or end buyer of mortgage packages or MBSs. Sometimes they acted as the middle man simply buying from lenders and selling to institutional investors but as the Clinton Administration acted to rigorously enforce the CRA, Fannie and Freddie became more and more aggressive purchasers of MBS. Lenders soon realized how to make money from this government sponsored market distortion – that of them being forced by fiat to lend to people with low incomes and bad credit. They began to offer an increasing array of subprime loans – over time and by the height of the market in 2006, you could get 100% loans on an investment property with bad credit and no evidence of your income (so-called stated income or no docs’ loans). People with higher credit scores could borrow 125% against their home with super low introductory fixed rates of 2% (that would flip to a market floating rate in 2 years) with interest only and even deferred interest options (ie the value of the loan would actually increase over time). Lenders realized that making these poor loans not only made them instantly CRA compliant but they didn’t have to worry about the risk of them going sour because the Federal Government’s own agency was aggressively buying the subprime MBSs. Freddie and Fannie fanned the flames by offering their executives and staff massive bonuses based on the volume of the loans they wrote. They sent a signal to the marketplace – we will take all your paper including the subprime stuff!

    Enter the Wall Street giant brokerage houses that were also in the business of brokering the sale of MBSs but for many years they only sold the Conforming loan packages. Their huge clients always put a portion of their investment portfolios into mortgages because for decades they offered almost zero bad debts and a higher rate than Treasury or Municipal/Utility bonds. Suddenly they had a whole new product to sell – subprime MBSs and with the implicit guarantee of the government’s own agencies, they were an easy sale. The loss ratios of these subprime MBSs were higher than the Conforming loan MBS but not that much in the early years (less than 1% versus 3%) but they were offering a rate of return almost double that of the conforming loan MBSs. Very quickly the subprime MBSs became flavour of the month and all the big broker houses were pushing them and their clients were buying them. With so much new money in this category sloshing around and with Fannie/Freddie saying hey we will buy all your subprime paper, banks and particularly non-bank lender went on a lending frenzy tripping over each other to get more money out the door with ever more attractive and easy lending policies and criteria.

    So what happens to property markets when you have the 10-15% of people whose bad credit or poor income means that in a normal market would be renting – suddenly the prices are bid up by the subprime buyers being able to buy a property when normally they’d only be renting. This led to a boom in prices and in building fueling further lending and leading to a classic bubble which of course collapsed as they all do.

    When the property market began to tank in 2007, bad loss ratios of the subprime mortgages spiked, and by mid 2008 the markets panicked and suddenly the value of subprime MBSs in the portfolios of the giant Wall Street traders were wiped out – primarily by the imposition of the mark to market rule which states that you must mark down the value of an asset to its fire sale price not its likely long term asset value. Even with the spike in bad loans, the average subprime MBS would probably have been able to recover over the term of the mortgages at least 85% of the loans outstanding so that would mean a 15% reduction on the value of the package. The trouble was that when a bubble bursts, reality flies out the window and so the subprime MBSs (that were still worth something because the vast majority of the loans in the package would still be repaid) were valued at zero and then in August of 2008 a large Conforming loan MBS package was sold for a 30% discount and that sent shockwaves through the market. Not only were subprime MBSs now worth zero, the conforming MBSs were worth 30% less (when in reality these packages were still only suffering less than 3% loan defaults). Bear Sterns had the largest expose to this market and their bankers made a margin call after the forced valuation write downs and they couldn’t make good on the call and collapsed and the rest is history.

    Read this history carefully and see where it all started. Not evil capitalism, greedy Wall Street Bankers (although they did fuel the fire TOWARDS THE END) or the derivative markets to protect futures contracts – it was caused by government intervention in the lending market forcing lenders to make loans to people who traditionally couldn’t repay them. The government exacerbated the distortion by allowing its own aggregator to send a market signal to all purchasers of MBSs that the subprime MBSs were safe and desirable. If not there would have been only a small market for these loans and the retail lenders would not have had the extra funds to loan to this market from the constant sale of their dodgy mortgage packages. Without the 12% of people with bad credit bidding up the real estate prices, the housing boom would not have become a bubble that burst.

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  81. berend (1,711 comments) says:

    Let me just quote Victor Davis Hanson:

    Sometimes the class blending is more mundane. I went into the Selma Wal-Mart at 7AM and by noon, and after a long drive, walked through Neiman Marcus in the Stanford Shopping Center, 180 miles and a planet away. I was investigating, you see. Was the casual ensemble of pants and shirt at Wal-Mart priced at $25 all that much different from the counterpart priced at over $500 at Neiman Marcus? I saw also children’s outfits that went for $10 in Selma, and not much different ones for $180 in Stanford. Ah, but you connoisseurs object — “Victor, Victor, there are questions here of brand, subtle qualities unnoticed by your bumpkin eye, matters of signature.” Yes, of course. But as far as day-to-day durability and the casual look, I don’t think there is over a $170 difference.

    My point for the nth time? In today’s globalized world of cheap Chinese imports, money buys you a constructed status tag, but not commensurate value beyond what the lower classes can ever hope to attain.

    I.e. globalisation and growth has given us all access to privileges that were for the 1%. One more quote:

    I drove down to Los Angeles in my Accord again not long ago. And once more I was amazed at what people pay for comparable rides in imported luxury cars. For some reason, I got stuck on the 99 behind a new BMW for 50 miles. My car is probably now worth $20,000, the other driver’s probably $75,000. We went the same speed. I had heating; so apparently did he. My windshield wipers worked as well. My exhaust was as clean as his.

    When I flew last month in the economy, middle seat across country on a 757, on landing I saw lots of “corporate jet owners” taxiing into LAX. Their ride was far superior to mine — but was it $20 million cleaner, safer, and faster? Were their pilots $20 million better than mine?

    The 1%, Danyl and Josie Pagani, simply don’t recognise this.

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  82. wat dabney (3,775 comments) says:

    Danyl,

    Does Ridley explain how his mastery of free market capitalism cost the British taxpayers sixty billion dollars when they bailed out his failed bank, or is that in the later chapters?

    Er, if a business was bailed out then by definition it wasn’t free market capitalism, was it.

    And then you might perhaps consider how the business, and all those dealing with it, changed their behaviour because they knew that it would be bailed out.

    Then finally you might start to wonder whether it wasn’t the absence free market discipline which was at the root of the meltdown.

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  83. Elaycee (4,393 comments) says:

    @Kiwi in america: Its always helpful to read comments by someone who knows what they are talking about.

    For me, the key: “People with higher credit scores could borrow 125% against their home with super low introductory fixed rates of 2% (that would flip to a market floating rate in 2 years) with interest only and even deferred interest options (ie the value of the loan would actually increase over time).”

    This was the catalyst for financial disaster. And sure enough, that’s exactly what happened.

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  84. niggly (830 comments) says:

    Cheers KIA for putting reality back into the discussions!

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  85. wat dabney (3,775 comments) says:

    Ross,

    You’ve completely missed Danyl’s point, which is that “growing the pie” will benefit workers little (if at all).

    How could that possibly be correct? In a competitive free market employers are forced to compete for resources, including workers. So “growing the pie” doesn’t change the proportions. The relative sizes of the employers and employees piecies don’t change. But in absolute terms all are better off because the pie is that much bigger.

    The Ports of Auckland is a classic example. Workers there have, according to the company, suppled significant productivity increases during the last 5 years. Their reward? An attack on their working conditions. The company wants to cut real wages by up to 25%. So much for growing the pie and sharing the benefits. Another myth of the Right.

    And suppose the workers at the buggy-whip company had significantly increased productivity over the last five years yet the company still wanted to cut wages by 25%. What would that tell you? Well, it could basically mean one of two things:

    1) The market rate for the work has simply fallen (in this case probably due to reduced demand for buggy-whips, but possibly due to increased supply, perhaps after a free trade agreement was introduced or some other artifical restriction was abolished.)
    2) The company has somehow managed to aquire some price setting power so it can set workers’ wages artificially low.

    The point being that the supposed productivity increase in your “classic example” is completely meaningless in isolation.

    And note that option 2 implies the very opposite of what you seem to be complaining about; it shows you that it’s the absence of a free market which is the problem.

    All you or anyone else can ask for in fairness is that workers get paid the going free market rate.

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  86. PaulL (5,987 comments) says:

    KIA – very good piece.

    I’d add to that the default provisions. The poor people who couldn’t pay for their 100% or 125% loan, in many American states, had the option of just mailing their keys back to the bank. The bank had no right to pursue them for the difference – so this was a one way ride. If the house price goes up, you make money. If it goes down, you mail the keys back, no risk to you. Who wouldn’t take that deal?

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  87. Kimble (4,440 comments) says:

    KIA, I think you missed some elements, such as the poor pricing of risk brought about from poor (tainted) research into the products. There is also the desire to “keep the party going” at the end with ever increasing complexity. And the credit insurance angle, the previous 100 cents in the dollar bail outs which made the expectation of such happening again more rational, and very importantly the role that remuneration was structured in the large market players.

    Of course, we stopped hearing about CDO’s and sub-prime mortgages quite a while ago. Now we are worried about sovereign debt default in places like Greece, Italy, Spain, Ireland, and Portugal. Its pretty hard to blame Greece’s debt problem (due to government over-spending) on capitalism. But I am sure the 1% will try.

    Edit: PaulL, I dont think that had as much to do with it as it would seem. I recall seeing something a while ago about default rates in non-recourse states being pretty much the same as default rates anywhere else. Econlog probably, though it could have been Barry Ritholz’s site.

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  88. PaulL (5,987 comments) says:

    Maybe Kimble, maybe not, it’s hard to say. I think the mark to market rules played a huge part, along with the sudden freezing of markets. So we had companies that had an asset that would pay off probably 90% or more of it’s value, and that didn’t have a need for the capital back any time soon. They were forced to value the asset at the price it would achieve on the open market. The problem is that once the run started, this rule exacerbated things. The MDS was marked down from 100% to 95%. That meant everyone else had to mark down to 95% for similar assets, which meant they’d all lost some money, so they stopped buying MDSs. Which meant if anyone had to sell, they could only get 90%. Which then made everyone else mark down as well, and took even more money out of the system. And so on and so forth. Mark to market makes sense in some cases, but it also directly exacerbates any swings (it does the same on the way up – it let’s you revalue assets upwards because someone paid over the odds).

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  89. kiwi in america (2,454 comments) says:

    PaulL
    The non recourse nature of mortgages here has been the case here for so long that I don’t think it added to the problem. The credit cycle dictates mortgage availability and the easing of credit enabled penetration deep into renters market. Right now the pendulum has swung way back the other way (as it has in NZ as well) with mortgages much more difficult to come by despite lowest rates in 40+ years. This will of course enable banks to shore up their balance sheets and in 10 years time we may be back in a cycle of easier credit. I totally agree re th mark to market rules.

    There is another part of Yoza’s piffle that I need to address and that is the usual canard of the left (and MSM) of course brought front and centre by the Occupy Wall Street mobs and that is about the bailout of ‘fat cat’ Wall St bankers. If you look at the latest SIGTARP report (the agency tasked by Congress to oversee the bailout http://www.sigtarp.gov), you will see that only 25 % of the TARP fund (the $780 billion bailout funded by the Treasury usually by swapping T-Bills for stock in the bank) was extended to the largest 30 banks, the so-called Wall St banks. The rest went to smaller regional and community banks and other entities such as Fannie, Freddie and General Motors.The “Wall Street banks” weren’t “bailed out.” Depositors, lenders and the entire financial system–one could say, the 99%–were bailed out. This includes, of course, those 99%-ers who successfully flipped houses with sub-prime financing and those 99%-ers who sold at the top of the bubble at inflated prices and had enormous windfalls of capital gains. So in what sense were “banks” “bailed out?” They weren’t “given” anything–and certainly not by the 47% of the US population that pays no income taxes! Large banks were forced to take liquidity loans by the lender of last resort to prevent a bank run, protecting the 99%…while their equity holders got mercilessly hammered in the market, essentially wiped out. Most “bankers” had huge amounts of their bonuses and net worth in options or in equity in the bank, respectively, which also became nearly worthless. Hundreds of thousands of “bankers” lost their jobs and will never work in finance again, most likely. This is a “bailout?” Look closely at who REALLY got bailed out, defined as having government grants or equity infusions or long term unremitted TARP or government guarantees funded, together with anticipated permanent losses.

    So what has happened since the bailout. ALL of the large Wall St banks have paid back their TARP money WITH INTEREST!! The US taxpayers made the profit on the deal! Its the smaller community banks still dragging the chain…THEY made the bulk of the bad loans. But they only owe $45 billion so who owes the rest? You guessed it – Fannie and Freddie ($184b), AIG ($50b) and GM ($50b) – all highly controversial bailouts that many conservatives bitterly opposed. I didn’t see the Occupy people marching on Fannie and Freddie’s offices in DC or on GM’s Detroit HQ and yet they still are on tax payer welfare whilst the evil Wall St banks paid back the lot …in record time….with interest!

    You never hear the MSM or the left mention the role friend of Bill Clinton and former head of Fannie Mae Clinton Raines who promoted and presided over the culture of excess and mass acquisition of the damaging subprime loans and when Congress started to look at Fannie, he lept with a $25 million parachute. By the time the Bush Administration started to act to reign in Fannie and Freddie, the Democrats had control of Congress. Legislation sponsored by Sen McCain to ramp up the oversight over these agencies to try to dampen down their role in fueling the sub prime market was never allowed to leave the respective Banking Committees in the House and the Senate – blocked in the House by Rep Barney Frank who assured voters that Fannie and Freddie were sound as late as 2007 and by Sen Dodd (D – CT) who not only received a series of sweetheart low interest large loans from Countrywide (the largest non bank lender in the US at the time) but received $100,000’s in campaign donations from said sub prime lender.

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  90. Yoza (1,879 comments) says:

    “…the usual canard of the left (and MSM) of course brought front and centre by the Occupy Wall Street mobs and that is about the bailout of ‘fat cat’ Wall St bankers. If you look at the latest SIGTARP report (the agency tasked by Congress to oversee the bailout http://www.sigtarp.gov), you will see that only 25 % of the TARP fund (the $780 billion bailout funded by the Treasury usually by swapping T-Bills for stock in the bank) …”

    According to Bloomberg the bailout figure in the US was closer to $7.7 Trillion, I think you may need to adjust your propaganda source.

    “The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.
    “TARP at least had some strings attached,” says Brad Miller, a North Carolina Democrat on the House Financial Services Committee, referring to the program’s executive-pay ceiling. “With the Fed programs, there was nothing.”
    Bankers didn’t disclose the extent of their borrowing. On Nov. 26, 2008, then-Bank of America (BAC) Corp. Chief Executive Officer Kenneth D. Lewis wrote to shareholders that he headed “one of the strongest and most stable major banks in the world.” He didn’t say that his Charlotte, North Carolina-based firm owed the central bank $86 billion that day.”

    http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html

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  91. PaulL (5,987 comments) says:

    Yoza, there’s a bit of a difference between loans (TARP) and guarantees. The NZ govt, for example, guaranteed all deposits in banks in order to (supposedly) stabilise the system. That money was never called upon, and never removed from taxpayers, albeit that it might have been called upon. Would you include that as “bail out”? Many of those banks never needed the guarantee – they were very safe, but they also didn’t refuse it.

    Of course, personally I don’t think I would have done many of the things that were done in the bailouts – and many on the right were pretty clear that they thought the right answer was to let the companies themselves go bankrupt, and then deal with any people who unfairly lost money (we’re now talking about depositors, not shareholders). The left were very prominent in pushing the bailouts.

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  92. kiwi in america (2,454 comments) says:

    yozza
    Your one attempt at a rebuttal..and it was wrong. Its what happens when facts meet rhetoric. The ‘propoganda’ source was Obama’s own appointed TARP oversight agency.

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  93. Luc Hansen (4,573 comments) says:

    niggly (511) Says:
    January 14th, 2012 at 10:06 am
    Cheers KIA for putting reality back into the discussions!

    Ha ha. Silly niggly. KIA is to reality what his friend Mark Regev is to facts.

    KIA’s “reality”:

    The Administration used its enforcement and regulatory approval powers to force all home lenders to make more marginal loans.

    And

    It was caused by government intervention in the lending market forcing lenders to make loans to people who traditionally couldn’t repay them

    If you read KIA’s post carefully it, in reality went like this:

    The government set up incentives for home lenders to make high risk loans, and since we couldn’t lose, it would have been immoral of us not to lend, and create the CDO’s to multiply our returns for our acts of moral courage in making, nay, enticing so many mugs financially unsophisticated people get sucked in take out loans we knew they couldn’t service

    KIA, you are so right, I weep in sympathy for those unjustly vilified billionaires.

    Yes indeed.

    KIA, you should start a movement. I’ve got a name for it: Pity the Billionaire

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  94. Luc Hansen (4,573 comments) says:

    And then there was this, from my old sparring buddy, KIA:

    Hundreds of thousands of “bankers” lost their job…

    That’s sad, but so is the fact that in the US there have been 4,000,000 foreclosures in the last four years.

    That’s families, in general, so, say, 20,000,000 adults and kids thrown out of homes the lenders knew they couldn’t afford, especially when the enticing entry-level interest rate was hiked up to the market rate within the first year.

    But, hey, we all read every word in our mortgage contracts, don’t we?

    And we all understand that even if the government creates the opportunity to rip people off for short term advantage, our moral principles, as God fearing folks, proscribes us from not taking advantage of that situation.

    Time for a Tui.

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  95. Yoza (1,879 comments) says:

    “The ‘propoganda’ source was Obama’s own appointed TARP oversight agency.”

    And how is it that Obama’s propaganda outlet, on which you seem to base a disproportionate amount of credibility, clings to the ‘paltry’ sum of $780 billion when the Bloomberg article points out that, “The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy…”

    Obama and his cronies are as much functionaries of the ruling elite as Bush and his band of thugs were. Mindlessly regurgitating US establishment dogma hardly defines reality, more than anything your spiel demonstrates the fantasy the wealthy few require the population to believe.

    Yes, pity the billionaires indeed.

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  96. Kimble (4,440 comments) says:

    The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day.

    That wasnt TARP money. You do know that, right?

    Hundreds of thousands of “bankers” lost their job…

    That’s sad, but so is the fact that in the US there have been 4,000,000 foreclosures in the last four years.

    “Bankers” includes cleaners, secretaries, help desks, as well as a dozen dozen different types of clerical worker who never originated a single loan and didnt share in any bonus. Dont be hating on everyone in financial services. They arent all Gordon Gecko.

    The originators of the loans were completely different people than those working in the big banks.

    Normally there is a mechanism that stops people from lending money to people they know cant pay it back. What happened to that?

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  97. Kimble (4,440 comments) says:

    Actually thats something that hasnt been mentioned yet. The originators did a lot of shady things. Outright fraud in many cases.

    The other thing is that many of those 4m foreclosures would have been from people who simply stopped paying their mortgages when the market bottomed out leaving them well under water, as well as mortgages over houses that were built for the “huge demand” evidenced by the ever increasing house price index.

    But I suppose it suits your desired narrative that every “banker” is a millionaire, and every foreclosure sends tiny Tim to the work house.

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  98. Yoza (1,879 comments) says:

    You lot should watch ‘Inside Job’, that offers a much clearer version of those events leading up to the collapse.

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  99. Kimble (4,440 comments) says:

    You lot should watch ‘Inside Job’, that offers a much clearer version of those events leading up to the collapse.

    All that means is that it agreed with what you already “knew” must have happened. Evil greedy rich white people did it to oppress the masses, right? Lots of Moore-esque misrepresentations and ambushes? Lots of black hats being scolded by the white hats?

    http://blogs.ft.com/economistsforum/2010/10/the-economists-reply-to-the-inside-job/#axzz1jQvePTuA

    Seems like.

    They had their story written before they even began filming, and knew their audience would lap it up. Suckers like you Yoza.

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  100. kiwi in america (2,454 comments) says:

    Weak response Luc but then slogans and rhetoric is all the left have left when their demagogery is laid bare and found wanting.

    The moral of the story is this – if you want to help the poor get into housing don’t incentivize bad lending practices. There are far less distortionary ways to subsidize housing for the poor. In pandering to its Democrat base, the Clinton administration’s enforcement of the CRA gave an easy pathway to lenders to compliance – make loans to people who nornally would be declined a loan. Raines’ tenure at Fannie Mae is one of the crucial root causes of the crisis that the left doesn’t want to investigate. Absent the directives and remuneration incentives that incentivised Fannie and Freddie, the green light to buy subprime MBSs would not have been the trigger to the lending frenzy to this market. Markets move to fill niches and voids – yes to make money. But these were niches that government action created and absent the CRA and Fannie/Freddie’s blatant and I believe politically motivated interventions (house the poor), home lenders would have had no choice but to continue with safe lending practices. MBSs would’ve remained rock solid very low risk investments because the loans inside them would have only been advanced to borrowers with the credit and income to reliably service the debt. A housing bubble would have been more muted and far less economically damaging when it came time for the inevitable correction.

    Yoza still can’t figure out the difference between a loan and a guarantee. “Inside Job” is a predictable Michael Moore type leftist spin on the collapse. If you are going to comment on finance industry matters it pays to be informed rather than rely on slogans and ideologically infused analyses.

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  101. Kimble (4,440 comments) says:

    In pandering to its Democrat base…

    I dont think it was just the Dems. The benefits of home ownership were acknowledged by Republicans for years as well. I reckon it might be something to do with home ownership favouring the incumbent.

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  102. Yoza (1,879 comments) says:

    Kimble, did you read any of the responses in the comments underneath Mishkin’s feeble attempt at self justification, there weren’t many compliments. I would urge anyone to read the link Kimble posted if they want a bit of a laugh. Here’s one of my favourites so far:

    “As a colleague of Mishkin’s, I cringed when I read his rebuttal, above, just as I cringed when I first saw the film. It is shameless in every sense of that word. And, sadly, it is wrong: Based on his appearance in Inside Job, Mishkin does have a future on the silver screen in typecast roles of men who are crooks or fools; foolish crooks or crooked fools.

    Many of his colleagues feel as I do. We all feel disgraced by him and wish he’d do the honorable thing: resign.”

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  103. Kimble (4,440 comments) says:

    Yoza, you are a paedophile and a serial arsonist. I can say that because I am a colleague of yours.

    I assume you will be turning yourself in to the police at the earliest opportunity because an anonymous person on the internet made some unfounded assertions about you. Thats the rule, isnt it?

    What was the name of that “colleague” of Mishkins? Mad Colleague? Yeah, thats legit.

    Anyone who goes and reads the comments will see it is the same rabble of fanboy cheerleaders that jump in to defend Michael Moore’s craptastic fuckyoumentaries as depicting an “underlying truth”. Looks like the article was linked to somewhere else, sending a steady stream of know-it-all, econ-rage-tards to leave comments.

    I am not surprised you liked the comments, Yoza. Almost every comment is along the lines of, “I watched the move and based on that information along with my opinion that economists caused the GFC, I think they were right about you.” They were formulaic, all demanding a resignation for being an “obvious” corrupt fraud.

    See this mea culpa?

    We might have also discussed why the financial crisis occurred, and why policymakers and the economics profession (myself included) did not fully recognize the inadequacies of prudential regulation and supervision of the financial system in advanced economies.

    Did you believe the fact Mishkin was paid to write it was uncovered by documentary makers?

    Instead, the filmmaker made insinuations that I didn’t disclose that I was compensated for the study – even though he learned the precise amount of the fee in a 2006 from a public disclosure that I made.

    You guys think it enough to just say “he got paid” and leave it at that.

    Have you read the paper on Iceland, Yoza? Is your entire knowledge of the paper what you got spoon fed in the movie?

    http://www.vi.is/files/555877819Financial%20Stability%20in%20Iceland%20Screen%20Version.pdf

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  104. Yoza (1,879 comments) says:

    Mishkin’s paper is just another example of the field of research into economics being used to reinforce the kind of policy doctrine which is designed line the pockets of the wealthy at the expense of everyone else. Mishkin is more of a mercenary than a Professor of Economics and Finance. He has, essentially, been paid to write a report that parrots the policy direction the Iceland Chamber of Commerce champions. The whole point, it seems, of Mishkin’s involvement was to allay fears (justifiable fears it turns out) that the Icelandic banks were in big trouble. Mishkin, motivated by personal gain, contributed to the Icelandic ponzi scam being able to continue to disastrous proportions.

    Page 53 is pretty unequivocal: “Although we believe that the banks’ reliance on external financing poses the biggest risk to the system at the moment, we firmly believe that Iceland will not be the next credit event.”

    Have you read the paper Kimble? Because just skimming through, I haven’t read it closely, offers some pretty damning insights of the rigid framework from which Mishkin and his (IMF and World Bank) co-conspirator, Herbertsson, had predetermined they would not stray.

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  105. Kimble (4,440 comments) says:

    Mishkin’s paper is just another example of the field of research into economics being used to reinforce the kind of policy doctrine which is designed line the pockets of the wealthy at the expense of everyone else.

    Evil greedy rich white people did it to oppress the masses, right? Check.

    Because just skimming through, I haven’t read it closely, offers some pretty damning insights of the rigid framework from which Mishkin and his (IMF and World Bank) co-conspirator, Herbertsson, had predetermined they would not stray.

    So thats the first time you have looked at it, huh? You said he was corrupt before you even read what he had written. Who is the one with the predetermined conclusions again?

    Present one single piece of evidence that his conclusions were pre-determined. The fact he was paid is not that evidence. People get paid to do research all the time. If he got paid to do the research and said “holy shit! everything is going to blow up!” you wouldnt have a problem. So it is only his conclusions that make you think he wrote it corruptly.

    What you need to do is show how he could not have simply erred in his analysis. Could someone have come to those conclusions honestly? You will instinctively say no, but your opinion is worthless due to your demonstrated ignorance and bias evidenced by your eager willingness to draw conclusions in spite of your ignorance.

    Of course all of this is not something the movie makers wanted you to think about, so they made it look as if he hid the fact he got paid, and that he made changes to the title to present that case. And you uncritically lapped it up.

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