Fed Farmers say no to printing money

October 10th, 2012 at 7:00 am by David Farrar

The claim their printing money proposal (which Labour supports, so long as the RB decides to do it, not the Govt) is to benefit exporters.

Well the group that represents more exporters in NZ than any other, , have said they think the proposal is lunacy.

3 News reports:

The country’s biggest export sector is strongly opposed to the Green Party’s suggestion that the Government should print money to bring down the value of the dollar.

The agricultural sector sells most of its products overseas and Federated Farmers says printing money, known as quantitative easing, would be “incredibly bad” for New Zealand. …

The Government has rejected the idea and Federated Farmers president Bruce Wills says it would “set off an inflationary bomb that risks returning New Zealand to the dark days of double-digit interest rates”.

Mr Wills says quantitative easing should be a “break glass in case of fire” policy option.

“New Zealand is nowhere near such desperate measures because our official cash rate is 2.5 percent versus 0.5 percent in the United Kingdom, 0.25 percent in the United States and 0.10 percent in Japan.”

This is what is so bizarre about the Greens policy. Those countries which are doing QE are not doing it because they want to. They are doing it as a last resort as they can not lower their cash rate any lower.

The Greens would have New Zealand as pretty much the only developed country in the world to print money and cause , as a preference rather than a last resort.

Tags: , , ,

35 Responses to “Fed Farmers say no to printing money”

  1. Bogusnews (414 comments) says:

    This is an extremely valid point which was made by Ralph Norris on Leighton Smith’s show. The Greens often talk about the “crisis” we are in, but we are no where near the point where we have to rely on such measures.

    The points I remember particularly from Ralph Norris include the fact that this is a very blunt instrument whose effects and almost impossible to calculate. Further, it is easy to overestimate how much you need to do because the changes it sets in motion you will not be aware of until they are well and truly underway.

    I knew the Greens were cavemen economically, but this stupidity surprised even me.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  2. Pete George (23,833 comments) says:

    Greens may just be testing for responses with this proposal. They will have to print a lot more than $2b to be able to fund all their policies.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  3. Komata (1,220 comments) says:

    But Pete, money DOES grow on twees and that’s where it is to remain – ON the twee; anything to placate the great earth mother.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  4. wreck1080 (4,001 comments) says:

    Most people agree that QE is last chance saloon type economics.

    Perhaps the main point is that the government is doing nothing at all. The NZD is high because other countries are printing money but it is not necessary to be as high as it is.

    Our love with housing and wasteful government spending are major contributors to economic indicators that lead to a higher exchange rate.

    The govt has done very little to address the issue with the nations ridiculous property prices . We are one of the most expensive countries in the world to buy property as a percentage of annual income.

    National rejected Capital gains tax, saying it was too expensive to operate. But lack of CGT costs in other ways, such as distorting otherwise rational investment decisions away from the productive sector to non-productive sectors . So , instead of investing in a business which produces tax revenue people invest in housing which produces no tax revenue. Some argue that CGT did not moderate Aussie house prices — but, if Aussie did not have a CGT then I bet their housing would be even more costly.

    John Key supports helen clarks interest free student loans and working for families. This smacks of Greece, people wanting money for nothing and financed by other countries.

    There are lots of things the govt can do to address the exchange rate, but, they simply have their heads in the sand, greek style.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  5. Pete George (23,833 comments) says:

    Russelstiltskin

    Today propose, tomorrow print

    When I get the Finance stint

    Spinning gold my budget game

    Russelstiltskin is my name!

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  6. Kleva Kiwi (291 comments) says:

    I like that our government is doing little to lower the NZ dollar. I am happy where it is. I think I am not the only one. I believe that there are a majority of NZers who are happy with the value of the NZ dollar.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  7. Bob (445 comments) says:

    When people talk about increasing the money supply they forget money is not wealth. It is a medium of exchange. It only needs to be increased when there is not enough in circulation to perform it’s function. There might be a case for increasing the money supply temporarily for a particular outcome but eventually all prices will rise to equal the money supply. The more stable we are the more overseas investment we will attract.

    One of the disadvantages of a democracy is that the government has to be responsive to the voters. That means it won’t always do what it knows is needed. Labour handed out largess to stay in power. Now National can’t backtrack without becoming very unpopular. Labour would then promise to restore handouts to buy themselves back into power.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  8. tom hunter (5,134 comments) says:

    An interesting result when one considers that fifty to seventy years ago it was the rural community who were the strongest supporters of Social Credit ideas, and not just in NZ either. The whole “price support” scheme set up by FDR in the 1930’s involved similar thinking, even if not explicitly the SoCred proposal for the government to just print money to support it.

    Clearly, a couple of decades of high inflation, high interest rates, ever-reducing exchange rates, and economic stagnation, have left their educational mark on farmers, probably more so than any formal economics education!

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  9. Scott Chris (6,178 comments) says:

    The Greens would have New Zealand as pretty much the only developed country in the world to print money and cause inflation, as a preference rather than a last resort.

    Has printing money in the States, or Japan or Britain caused inflation?

    Sure, it sounds dangerous but if nothing else is going to bring down the overinflated dollar then perhaps a limited trial is worth a crack. Print a short run and see what happens. Might scare off the speculators.

    Fact is, none of the well known economists in this country are in agreement on this issue but many seem irrationally gun-shy, harking back to bygone eras (such as Weimar Germany) which bear little relevance to our peculiar modern economic context.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  10. somewhatthoughtful (472 comments) says:

    Sounds like Fed farmers are really protesting the prospect of having to pay for all the over-leveraging of their members.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  11. greenjacket (486 comments) says:

    Is the NZ dollar is ‘high’? The NZD is higher than the historical average against the USD and EURO – this is because those economies are in deep shit. But most of our exports go to China and Australia. And our currency is stable vs. the Yuan (with seasonal fluctuations) and considerably lower against the Aussie.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  12. wreck1080 (4,001 comments) says:

    Actually, Scott, inflation has been falling in the UK, despite money printing.

    I think economists generally agree that printing money is a last resort option though.

    It appears the majority of NZ’ers are quite happy with the level of the dollar though — it will come back to bite in future though but most people only think of today.

    @greenjacket — the dollar is ‘artificially’ high on a relative basis to our main trading partners. Look at the trade weighted index. it is high. It is also increasing against the aussie as the mining takes a dive.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  13. OTGO (579 comments) says:

    Printing money will hurt the poorest people the most because they will need to pay more to buy that shitty jap import and the fuel to go in it or that new flat screen telly or those Nike sports shoes or imported food etc etc. The Green policy is a product of one too many tokes on the happy backy methinks.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  14. thedavincimode (6,890 comments) says:

    Scott

    … and exactly how big is your proposed limited test edition print going to be? Why did Germans wander down the road with a wheel barrow full of money to buy a loaf of bread during the depression? Where is the tipping point at which the NZ economy is perceived to be sufficiently more fucked than the last ditch effort economies who have been to the printer that QE will actually have an effect on our exchange rate – that people will actually stop over-valuing us relative to the greenback. I would sugqest that in theory at least, it will be at the point when we are in fact more fucked. What is your grand plan after the exchange rate has reduced and you want to get inflation down? Put interest rates up and make our currency more attractive? What are your mitigation strategies for the disruption to NZ business and cost by way of destruction of economic value that these policy swings cause? Who pays for that? Understand this: since the NZD was floated it has always been overvalued due to a number of factors that include high interest rates, repatriations of export earnings (supply and demand) and now, perceived relative weaknesses in other economies that are no reflection on the strength of our own other than the fact that so far at least, we haven’t been as stupid as others.

    I have no desire to be fucked in the arse by the lunatic melon and I can’t understand why you would want to be either. We are simply not big enough to influence the markets that over-value our currency and this has always been the case. Our only sensible course of action is what we do internally to ensure that our domestic economy is as strong as possible and that is where the debate lies and that is why infrastructural reform, including gummint spending, is so critical. That reform is a juggling act between competing objectives and priorities. The arguments on this blog about the level of gummint spending reflect that.

    In summary, all you’re saying is: “everyone else is fucked, I want to be fucked too”.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  15. Auberon (779 comments) says:

    The Greens AND esteemed econimist Ganesh ‘Complete’ Nana. Don’t forget dear old Ganesh.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  16. Mark (1,502 comments) says:

    The IMF has predicted economic growth in NZ at 3%+ for next year. The balance of payments position is still ugly but QE will not resolve that in any significant way. The Greens and Labour seem to be banking on some from of import substitution and the lower $ making our manufacturing sector all of a sudden competitive with the likes of China, Japan and South East Asia.

    That is unlikely and the down side of QE is too great a risk to even contemplate such a move.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  17. davidp (3,585 comments) says:

    Is it true that Russel Norman recently claimed that banks get their money from the Prime Minister, the Prime Minister gets it from the Queen, and the Queens gets her money from banks?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  18. Mark (1,502 comments) says:

    wreck1080 (2,432) Says:
    October 10th, 2012 at 8:49 am
    Actually, Scott, inflation has been falling in the UK, despite money printing.

    The inflation numbers are helped of course by the significant cuts in Government spending in the UK. Not something our Government is prepared to attack with the same vigour.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  19. Rich Prick (1,750 comments) says:

    Good Lord. The problem is not with the New Zealand dollar, it lies with the US dollar, British pound and to a lesser extent the euro. Why do these morons want us to join that club?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  20. wreck1080 (4,001 comments) says:

    @richprick — There is no one-off cause for our high dollar. A combination of factors contribute to the high dollar.

    High interest rates encourage the carry trade which pushes the kiwi even higher than it would otherwise be. Record busting house prices are also problematic.

    US/British money printing has also contributed but it is not the sole cause. We can do nothing about foreign jurisdictions printing money, but, we can address the other factors.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  21. tvb (4,560 comments) says:

    Your response to a serious policy issue continues to be childish I thought you were more intelligent but I was mistaken. The fact you keep raising it suggests there is something worth talking about but you simply refuse to deal with it with any intelligence.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  22. ross69 (3,652 comments) says:

    > Has printing money in the States, or Japan or Britain caused inflation?

    Or in Switzerland, for that matter? Not sure that printing money is a last resort there because they’re not in crisis.

    It reminds me of the debate about poverty. The Right say – in somewhat disappointed tones – that there aren’t people starving in the street. In other words, we should wait til there are people starving in the street before we discuss the issue. We should, apparently, wait til our economy worsens further before we discuss solutions. Has the Right ever been more bereft of ideas?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  23. ross69 (3,652 comments) says:

    > Printing money will hurt the poorest people the most because they will need to pay more to buy that shitty jap import

    Really? How are they going to afford that shitty Jap import while on the dole?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  24. alloytoo (582 comments) says:

    @thedavincimode
    *In summary, all you’re saying is: “everyone else is fucked, I want to be fucked too”.*

    Well put.

    The essence of liberal economics is to claim that the free market is broken, institute dubious “corrective” measures which inevitably result in a harsh market correction.

    They then point at the correction as proof that the market is broken and bugger off to let someone else pickup the pieces.

    Rinse and repeat.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  25. Bevan (3,232 comments) says:

    Really? How are they going to afford that shitty Jap import while on the dole?

    Well, they could get a job….

    Auckland jobs listed in the last 7 days:

    94 Trades & Services:
    http://www.seek.co.nz/JobSearch?DateRange=7&SearchFrom=quickupper&SearchType=search+again&Keywords=&location=1018&industry=1225&salary=-60000

    98 Manufacturing, Transport & Logistics:
    http://www.seek.co.nz/JobSearch?DateRange=7&SearchFrom=quickupper&SearchType=search+again&Keywords=&location=1018&industry=6092&salary=-60000

    110 hospitality & Tourism:
    http://www.seek.co.nz/JobSearch?DateRange=7&SearchFrom=quickupper&SearchType=search+again&Keywords=&location=1018&industry=1212&salary=-60000

    2 Roles for Weed Eater operators here:
    http://www.seek.co.nz/JobSearch?DateRange=7&SearchFrom=quickupper&SearchType=search+again&Keywords=&location=1018&industry=6205&salary=-60000

    117 Call Centre & Customer Service roles:
    http://www.seek.co.nz/JobSearch?DateRange=7&SearchFrom=quickupper&SearchType=search+again&Keywords=&location=1018&industry=1204&salary=-60000

    Maybe if they attempted to help themselves instead of waiting for someone else to do all the work for them, you know the concept… I know it can be foreign to some, but hey – they can’t expect us to carry on wiping their arses for them their whole lives now can they.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  26. Elaycee (4,425 comments) says:

    For anyone still believing the fairy tale that printing more money won’t affect inflation, think: Zimbabwe.

    And if that scenario doesn’t ring any alarm bells for you, then nothing will….

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  27. wreck1080 (4,001 comments) says:

    elaycee — you are cherry picking .

    You select countries where money printing caused inflation and ignore those where it hasn’t.

    It is overly simplistic to focus on one feature of an economy and project an outcome without considering the entire economy.

    But, I suppose taking a simplistic approach suits you fine.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  28. b1gdaddynz (279 comments) says:

    The problem with QE is that once you start doing it you have no idea what the results will be. The economy is actually recovering so why take the risk now?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  29. b1gdaddynz (279 comments) says:

    Can someone enlighten me how the tiny NZ economy could ever win at QE against Europe, The UK, Japan and the USA? I’m not an economist and would really like someone who knows what they are talking about to explain it to me?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  30. Paulus (2,712 comments) says:

    The Greenpeace New Zealand Branch are just chanceing their PR arm (like fracking) because the media are fully in support of them attacking the Government in anything.
    The media are continuing in their Ambose Utu phase of Hate John Key (he took action against a possible lying newspaper person – who wrote an apology to Key – which was accepted – but being one of the precious ones – as all the media are) they will continue to support any of the many opposition parties positions irrespctive of the truth.
    Look at the NEW Herald – only change cheaper paper from Malaysia, but same old same old crap inside.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  31. questlove (242 comments) says:

    The Greens AND esteemed econimist Ganesh ‘Complete’ Nana. Don’t forget dear old Ganesh.

    Exactly. I’d take the judgment of a renowned economist over Steven Joyce any day.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  32. Monique Watson (1,062 comments) says:

    @wreck1080. In California if you want to rent a house in the middle of a connected city equivalent to Auckland Wellington or Chch, it will cost you 4000 to 6000 US dollars per month for something reasonably skody. That’s gotta be more unaffordable than NZ. And @Scott Chris, the gummit has effectively follwed the QE path in buying up the loan books of SCF and other failed loan companies over th last 6 years. Where do you draw the line?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  33. SPC (5,678 comments) says:

    And the average house in the USA is now under $180,000, despite their average wage being higher than ours. The high value markets that exist, reflect the huge disparity of wealth and income in that society.

    One can draw the line at emergency bailouts and call the GFC, finance company collapse – need to secure the financial sector for confidence in the economy as qualifying. One can call rising public debt from a one off event like a city rebuild another. And a quicker return to sufficiency to an earthquake reserve fund another as well. This was as large an impact here as some banking problems offshore.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  34. ross69 (3,652 comments) says:

    > Well, they could get a job….

    Obviously you’ve been living under a rock the last few days. We’ve been discussing the loss of thousands of manufacturing jobs. If everyone could get a job, we wouldn’t have 6.8% unemployment.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  35. SPC (5,678 comments) says:

    “The Greens would have New Zealand as pretty much the only developed country in the world to print money and cause inflation, as a preference rather than a last resort.”

    Except Japan and Switzerland have already done it, and to manage the currency downward.

    Bollard once bought up foreign currency when he thought the dollar was at the peak of the cycle – he made a bit of money doing so. Issuing free credit to finance a build up of the Earthquake Reserve Fund (buying up offshore assets) is similar. Is it really inflationary to hold assets offshore and use them to finance the cost of any future earthquake? Any more inflationary than borrowing the money from offshore to do so and rolling over the debt?

    Can no one on the right in this country actually think?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote