Meet your future Green currency

October 8th, 2012 at 3:00 pm by David Farrar

Also a great comment by Alex Tarrant on Twitter:

BREAKING: Fuji Xerox approaches Green Party in early bid for printer procurement contract…

Heh. Also Victoria tweeted:

Brb, just getting a wheelbarrow to carry my notes to buy a loaf of bread!

Matt Nolan at TVHE blogs a very useful analysis of what the have proposed (and Labour are semi-supporting):

 Russel Norman is completely misrepresenting QE by saying that the recent crisis is “evidence it isn’t inflationary”.  QE was put in place to fight the fact that policy was too tight overseas, and they were trying to fight deflation – in essence the fact that stayed near the “target band” in these countries is evidence that QE is indeed inflationary as you would expect … just in the way they were intending.

Exactly. QE can be considered if you face deflation, and your official cash rate is as low as it can go. We are within our target band at 1% (which is what I think we should be aiming for) and the cash rate is 2.5%.

Remember how often Greens and Labour complain about increased costs such as electricity and food? Well this is a policy to increase their costs even more for families finding it hards to make ends meet.

Now you may believe we should fund the rebuild with a one-off tax – that’s fine, in that case get the government to put a tax in place directly (or to directly cut spending from other place).  However, taxation by stealth of this sort is likely to be worse in multiple ways:

  1. We have betrayed RBNZ independence for virtually no reason … understandably a sneak tax by the RBNZ would make people less likely to believe them in the future about holding to their inflation mandate.  As a result, we run into the time-consistency issue in monetary policy again, and it will become more painful for economy when the RBNZ tries to commit to its inflation mandate again.
  2. We have a relatively rough redistribution of resources due to this.  By putting in our sneak tax through QE, we transfer resources to those with assets, those doing the rebuild, and those who can easily adjust prices/wages – while hurting those on fixed income, and those who have saved.  It is an inflation tax – pure and simple – and as a result, it will initially transfer resources from those who can’t protect themselves (generally the poor) to those who can (generally the rich).  If we introduce the tax through fiscal policy instead we can sort out these distributional issues a little better.
  3. A country that is willing to introduce QE as a clear fiscal transfer – when there is no reason – will destroy its credibility with international lenders.  People will scoff at this, but such a policy will increase the level of “inflation insurance” lenders ask for – increasing the cost of credit in New Zealand.

That is a very good way to put it – the Greens have proposed an inflation tax – one that will hit fixed income households the hardest!

The Greens, and Ganesh Nana, are wrong in stating that the RBNZ has failed.  Distinctly and totally wrong.  Things like this:

”No system of monetary policy is perfect and New Zealand cannot remain the last devotee to a failed monetary theory while the rest of the world moves on,” Norman said.

Paint a complete and utter misrepresentation about the lessons from the Global Financial Crisis.  Our flexible inflation targeting framework saved us from a massive crisis at home – while the rest of the world fell apart.

Matt’s conclusions:

  1. We don’t need QE in NZ, as we have enough monetary stimulus (and if not we can cut interest rates further).
  2. What is being suggested isn’t even QE – its the monetization of government debt, effectively a inflation tax to pay for the rebuild in Canterbury.
  3. It is unlikely that such a tax is the “best” way of raising the revenue to rebuild Christchurch – which should be the primary question.

Say no to the Green’s inflation tax.

Oh you must watch the video also, H/T Whale.

John Clarke as hilarious as always. He is also factually correct in this case.

Tags: , ,

125 Responses to “Meet your future Green currency”

  1. scrubone (3,105 comments) says:

    One hundred trillion dollars!!!

    (Does best Dr Evil presentation but sounds more like a Green Party co-leader)

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  2. willtruth (243 comments) says:

    But we have to do something about the exchange rate, even if QE is not the answer. The NZ dollar is currently at 2 dollars for a pound sterling. Normally its 3 dollars for a pound. The dollar has been too high for too long and its hurting our exporters. I don’t see how our economy can recover unless our exports recover.

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  3. Jimbob (641 comments) says:

    Priceless from John Clarke. The Japanese and the Americans have done the lion’s share of global money printing. It is going to be interesting to watch their currencies over the next ten years.

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  4. DJP6-25 (1,389 comments) says:

    Fred Dagg aka John Clarke has hit the nail on the head as usual.

    cheers

    David Prosser

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  5. anonymouse (722 comments) says:

    The scary thing about this is not the printing of Money ( which is, by the way totally barking), but the biggest rubicon we are crossing here is letting the Minister of Finance meddle in the operations of the central bank.

    Rusty’s Ideas about Monetary reform are all well and good, but let politicians into the Hen house of the Reserve bank and you will never get them out again,

    All around the the World the banks that have embarked on QE have done so because their economies are in the crapper, and the central bank cannot push on string.

    The Greens want to make NZ a semi command economy again, letting the Beehive direct the Reserve bank would get them most of the way there…

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  6. metcalph (1,434 comments) says:

    All this talk of wheelbarrows of banknotes is simply wrong. We live in an electronic currency society. Therefore hyperinflation would mean that our internet gets used for nothoing other than transmitting the long stream of zeroes to and from the EFTPOS terminals.

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  7. Bevan (3,924 comments) says:

    But we have to do something about the exchange rate, even if QE is not the answer. The NZ dollar is currently at 2 dollars for a pound sterling. Normally its 3 dollars for a pound. The dollar has been too high for too long and its hurting our exporters. I don’t see how our economy can recover unless our exports recover.

    You want our dollar weaker? So, how much are you prepared to pay for Petrol, Milk & Bread?

    I can’t believe there are still people in this world that want to join the US/Europe & Japan in a race to the bottom!

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  8. Gosman (324 comments) says:

    Agreed Bevan. What some people seem to ignore is that a major contributing factor in exacerbating the impacts of the Great Depression was trade and exchange rate policies of various nations who attempted to devalue their currencies below those of their trading partners. Of course with everyone doing that it became impossible to maintain and then people started resorting to trade sanctions to try and counter the negative impacts. Thyis led to a contraction of trade and less wealth.

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  9. Pete George (23,685 comments) says:

    David Parker is trying to jump on the Green printwagon:

    “Labour has a plan to get the dollar down. We need to end National’s policy of primacy of inflation. The Bank needs to consider other critical aspects of the economy such as exchange rate and employment.”

    http://www.labour.org.nz/news/joyce%E2%80%99s-stubborn-refusal-to-accept-high-dollar-costs-jobs

    However he doesn’t explain how you can set the Reserve Bank targets on all of inflation, exchange rate and unemployment. And if you could how would the Reserve Bank be able to meet all three targets?

    Inflation
    Target: 0-2%
    Tool: adjust interest rates

    Exchange rate
    Target: maximum 0.70 against the $US
    Tool: buy and sell currency
    Budget: ????
    And if that doesn’t work??

    Unemployment
    Target: maximum 7% as per labour survey
    Tool: create government jobs
    Budget:???

    That’s simplistic, but how the hell can you set targets on all three with realistic tools to keep to the targets?

    And what targets take priority if there’s a conflict?

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  10. ross69 (3,652 comments) says:

    According to our illustrious leader, our dollar is overvalued. His solution? Do nothing and hope the market self-corrects. What an economic genius.

    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10799479

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  11. dime (10,109 comments) says:

    “What an economic genius.” – hence hes worth 50 mill… what are you worth ross? im guessing about 120 grand if you sold everything.

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  12. Gosman (324 comments) says:

    metcalf,

    You would be surprised how much of transactions in the NZ economy is still performed via cash. Regardless if we ever hit the levels of inflation that would require wheelbarrows of cash it is likely that the electronic transaction system would have trouble coping. Certainly that was the experience in Zimbabwe where Banking applications cannot manage more than a certain number of zeros easily. Many systems simply failed.

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  13. Gosman (324 comments) says:

    Arguing the NZ dollar is overvalued is idiotic. It is at a level that the market is comfortable with. Just because some politician or exporter might not be happy does not make it wrong.

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  14. ross69 (3,652 comments) says:

    > hence hes worth 50 million

    The guy that won Powerball recently must have $20 million in the bank. Let’s make him PM.

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  15. Gosman (324 comments) says:

    Are you implying that John Key essentially achieved his wealth via luck Ross?

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  16. Auberon (873 comments) says:

    According to Ganesh “complete” Nana from BERL we are facing deflation. I see that for his next trick he’s going to sell the Napier to Gisborne rail line. Good luck with that mate!!

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  17. wtfunz (133 comments) says:

    Ross69,
    what you fail to comprehend is that NZ is a poxy little country at the arse end of the world. If you can google – try typing in George Soros. The man owns a business, one of many, which manages $34 billion in assets. NZ’s entire GDP in 2011 was $143 billion. One man manages nearly 1/4 of this. We can influence nothing for more than a blink of an eye in financial terms. You are being feed pipe dreams and lapping them up.

    Please read and digest, the other posts that have been left for you on the Printing Money post. At least try to educate yourself FFS.

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  18. scrubone (3,105 comments) says:

    wtfunz, I think he’s trying to implyl that he mugged 10 powerball winners then blew a lot of money making losing bets on the stock market.

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  19. Pete George (23,685 comments) says:

    @AnthonyByrt
    As long as we put @RusselNorman on our $1,000,000,000 note, I’m cool.

    I wonder if he’ll volunteer for that.

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  20. dime (10,109 comments) says:

    lmao i love how the left think.

    Person A) made 50 million dollars
    Person B) WON 20 million

    they are the same.

    it all comes back to this – lefties think they are the smartest people in the room, they just cant make money. they should be able to because they are smarter than everyone else but they just cant .. therefor people with money must have done something illegal to get it.

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  21. ross69 (3,652 comments) says:

    > they are the same.

    Glad to see you admit that one’s personal wealth is a bad measure of success.

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  22. ross69 (3,652 comments) says:

    > Are you implying that John Key essentially achieved his wealth via luck Ross?

    You’d have to ask him that question. But given that he lost money on the sale of TranzRail shares – despite trying to talk up their value via his position – you’d have to question his financial nous.

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  23. willtruth (243 comments) says:

    Bevan. Yes of course I WANT our dollar weaker. I AM prepared to pay more for imports such as petrol and bread if it means that the economy has an export led recovery, and there are more jobs and higher wages.

    Whether there is anything the govt or reserve bank can usefully do to make our dollar weaker without having other adverse conseuqneces is a different question. Maybe there isn’t.

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  24. The Scorned (719 comments) says:

    But it is a valid one in the main….

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  25. Gosman (324 comments) says:

    Nice to see that you are wanting a weaker dollar and are willing to pay more for imports willtruth. It is when you attempt to try and force others to do the same using the powers of the State that causes problems for me.

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  26. willtruth (243 comments) says:

    dime. Plenty of lefties are able to make heaps of money. Ever heard of Warren Buffet?

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  27. The Scorned (719 comments) says:

    Paying more for a good than you need to is no way to help your country’s economy or its people…..in fact its destructive to those ends.

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  28. Gosman (324 comments) says:

    Let’s see if I have this straight Ross. Someone who loses out on a single investment must be by definition bad at making investment decisions even though he may have made significantly more money from other investment decisions. Is that your position? If so I suggest you don’t understand how investments work at all.

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  29. ross69 (3,652 comments) says:

    Apparently our PM lost $5 million last year. Still, personal wealth is a poor measure of success, eh…

    http://www.stuff.co.nz/business/money/7374961/PM-laughs-off-Rich-List-loss

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  30. davidp (3,588 comments) says:

    I can recommend “When Money Dies – The Nightmare Of The Weimar Hyper-Inflation” by Adam Fergusson. I read it last hols. At one stage, the biggest limit to German quantitative expansion is that their printing presses and paper mills were maxed out. Even then with hyper-inflation and a collapsing economy, German central bankers were arguing that the problem was that they didn’t have enough money, not that they had too much.

    Greens: Too stupid to learn from history.

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  31. Gosman (324 comments) says:

    I agree willtruth. Hence why instead of whining about how the nasty rich are screwing the poor over the intelligent lefties should use their ideas to make a shed load of money and then voluntarily use the profits to benefit the less advantaged. Instead they seem to simply want to take from those that have and give to those that don’t.

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  32. ross69 (3,652 comments) says:

    > Ever heard of Warren Buffet?

    Isn’t he the guy who said the wealthiest Americans don’t pay enough tax because investment profits are taxed at a lower rate than wages? Sounds like a decent guy.

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  33. Gosman (324 comments) says:

    I’m getting sick of Berl’s Chief economist Ganesh Nana. He seems to be popping up more and more banging on about various leftist ideas recently without being directly challenged on how wrongheaded they are. I am reminded of one of his predecessor in the role Kel Sanderson who was arguing against the Reserve Bank act in the lat 1980’s on the basis that NZ had an imported base rate of inflation of around 4% hence setting a target at 2% was reducing the size of the economy. Even though I was at High School I could see he was speaking bollocks and told him. History proved which one of us was right.

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  34. willtruth (243 comments) says:

    Gosman. I find it hard to credit that there are people who would rather see the country gradually eroded by a balance of payments deficit than have to pay a bit more for bread and petrol. We would all benefit from a lower dollar. The poorest people would pay a bit more more a loaf, but their higher wages would more than compensate for this. And the exporters – who are the engines of our economy – would benefit.

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  35. Gosman (324 comments) says:

    What is enough tax ross?

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  36. Gosman (324 comments) says:

    Funnily enough Willtruth the more successful exporting economies over the past 60 odd years (e.g. Germany and Japan) tended to do so with appreciating currencies. Even China is having to adjust now to a slowly appreciating currency despite efforts to keep it artifically low. The countries that relied on depreciating currencies for their wealth tended to be places like Greece and Italy. You can see where that eventually led them.

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  37. davidp (3,588 comments) says:

    > Ever heard of Warren Buffet?

    He’s the wealthy American who said that wealthy Americans don’t pay enough tax. He’s also the wealthy American disputing around $1billion worth of taxes his company owes, and who once spent 14 years in a legal battle about a tax deduction. He’s a big hypocrite.

    http://www.newsmax.com/Headline/buffett-irs-back-taxes/2011/09/01/id/409520

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  38. Changeiscoming (199 comments) says:

    I have always dreamed of being a Trillionaire.

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  39. RightNow (6,995 comments) says:

    So decent is Warren Buffet that his company Berkshire Hathaway owes taxes going back To 2002.
    He’s a lefty alright, spelled H Y P O C R I T E

    edit: snap davidp

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  40. willtruth (243 comments) says:

    ross69. Yes that’s him.

    I just brought Buffet up to refute Dime who said that lefties can’t make money. He is unquestionably left by most definitions. And unquestionably rich by any standards.

    Not all lefties advocate wealth redistribution out of self interest. Some do of course. But others (like Buffet) advocate for policies that are detrimental to their own narrow financial interests, but he still would like to see them implemented for the good of his country.

    I know that is hard for some of you to get your heads around, but there you have it.

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  41. lastmanstanding (1,302 comments) says:

    Question. Ever seen a country with a strong economy and a weak currency

    Answer NO.

    The Greens proposal will punish the poor as prices of all imports will rise. Think petrol for one. How about a litre for $3. Thats gonna help the poor aint it Wussell.

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  42. willtruth (243 comments) says:

    I don’t think that this makes Buffet a hypocrite. He is advocating for higher tax rates overall. He is still entitled to make sure the IRS does not overcharge his companies. In fact, he must do this out of duty to his shareholders. If he didn’t he would be at a competitive disadvantage and he would go out of business.

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  43. willtruth (243 comments) says:

    Question. Ever seen a country with a strong economy and a weak currency

    Yes. Most of the asian Tigers made their massive gains during periods when their currency was weak. That was partly why they had such strong exports.

    And there are plenty of other examples.

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  44. willtruth (243 comments) says:

    The poor would rather pay more for petrol if it meant they had a job for an export company

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  45. RightNow (6,995 comments) says:

    Ah willtruth, you have enlightened me. You should be forced to give 90% of all your income and assets to the poor.

    I am a saint for advocating that you do.

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  46. davidp (3,588 comments) says:

    willtruth>I don’t think that this makes Buffet a hypocrite. He is advocating for higher tax rates overall. He is still entitled to make sure the IRS does not overcharge his companies.

    That’s like portraying yourself as an environmentalist on one hand, but spending ten years fighting the government to allow you to dump toxic waste in the sea on the other. You could argue that you’re entitled to maximise your dumping rights. But it would be a very weak argument.

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  47. nasska (11,808 comments) says:

    RightNow

    …”You should be forced to give 90% of all your income and assets to the poor.”….

    Gimme that ol time compulsion. You’ll end up press ganged into taking over the Green leadership yet! :)

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  48. hj (7,066 comments) says:

    John Key:

    http://www.safehaven.com/article/6790/the-highway-men

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  49. greenjacket (486 comments) says:

    So the Greens-Labour want to print money. Printing money is inflationary – evidently Greens-Labour think that inflation is a good thing (in spite of the lessons of history). So anyone who has retirement savings (especially fixed savings like Kiwisaver) will find the value of their savings eroded, while anyone with a fixed asset (like a house) will be sitting pretty (watch the house market skyrocket when these clowns take power).

    Either Russel Norman is a fool or else he is dangerously cynical.

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  50. kowtow (8,776 comments) says:

    This is what the republican,throw off the shackles of Mother England we are grown up now ,mob would bring us to.
    From Zim to aotearoa in how many easy steps.

    And we could even have President for Life Auntie Helen on the 5 trillion dollar note.

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  51. willtruth (243 comments) says:

    RightNow,

    No, you would be a fool (not a saint) for advocating that anybody should be forced to give 90% of all their income AND all their assets to the poor.

    The so called Buffett rule is a minimum tax rate of 30 percent on individuals making more than a million dollars a year. Hardly extreme.

    And yes he is a saint (of sorts) for suggesting it because it will benefit 97.7% of Americans but will be detrimental to him personally.

    Stop criticising the man for being both more successful and more compassionate than you. Yes he shows you up. Get over it.

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  52. swan (665 comments) says:

    Willtruth:

    “The poorest people would pay a bit more more a loaf, but their higher wages would more than compensate for this”

    This shows you have no idea what you are talking about. The reason a lower dollar helps exporters is because domestic input costs are lowered in price relative to world prices. The most important of which is labour. It’s about lower real wages not higher wages.

    I don’t know why Norman doesn’t call for a lowering of the minimum wage. That would be a better way of achieving lower wages and higher employment

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  53. Bevan (3,924 comments) says:

    Bevan. Yes of course I WANT our dollar weaker. I AM prepared to pay more for imports such as petrol and bread if it means that the economy has an export led recovery, and there are more jobs and higher wages.

    1st, what makes you think that a lower exchange rate will equal higher wages? The only jobs that will increase will be exporting jobs – what about those who work in other industries? Those employers will see their costs go up, and most likely their income go down when their clients start having trouble making ends meet and start cutting their own costs. Then that employer will most likely have their employees coming to them saying their household costs have gone up therefore need a pay rise… You get where this cycle is heading?

    Whether there is anything the govt or reserve bank can usefully do to make our dollar weaker without having other adverse conseuqneces is a different question. Maybe there isn’t.

    Not to that magic fairy land pixie dust scenario you want where all the roads are paved with gold and things just happen cause we want them too.

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  54. Ross12 (1,454 comments) says:

    Has anyone asked Norman the obvious basic questions about his policy idea ? What level does he see as realistic for the US/NZ dollar exchange rate and how much money needs to be printed to achieve that level ? ( My guess he would not have answers for either question )

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  55. Komata (1,202 comments) says:

    swan
    re: ‘I don’t know why Norman doesn’t call for a lowering of the minimum wage’

    Couldn’t do that old chap. By making the school-leaver minimum wage one of their platforms, the gweens have so psyched-up NZ teens to EXPECT a minimum wage on parity with their elders, that to ‘back-pedal’ and bring it down would be unthinkable (and tewibly embawassing). They will never, ever do it voluntarily.

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  56. Bevan (3,924 comments) says:

    Question. Ever seen a country with a strong economy and a weak currency

    Yes. Most of the asian Tigers made their massive gains during periods when their currency was weak. That was partly why they had such strong exports.

    And there are plenty of other examples.

    The key error in your argument here is that the original four asian tigers were considered developing countries at the time (1960 – 1990) whereas we are considered a developed country. HINT: Our wages are starting from a much higher level than theirs did.

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  57. mavxp (492 comments) says:

    If they want to lower the dollar, why not just reduce the OCR to near zero in line with the US, Japan and UK. The overseas folk who have parked money in NZ to earn our higher interest rates will retract it and put it somewhere else, causing our dollar to drop.

    Simple as.

    ;)

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  58. big bruv (14,156 comments) says:

    Many have mentioned that the price of fuel would rise should we ever be dumb enough to allow the Greens to implement this policy. Norman has so far avoided answering this question.

    Of course the reality is that Norman and the stinking Greens would love to see the cost of fuel rise, the idea of petrol costing another 25% more is the thing of Green wet dreams.
    I suspect that the desire to see the NZ dollar devalued has nothing to do with jobs, the Greens really do not care about jobs, what they care about is forcing us all onto public transport. Norman and the Greens know full well that the only way they can ram through their unpopular transport polices is to make petrol so expensive that very few can afford to drive their cars.

    Remember, when it comes to the Greens the only what to approach anything they say or do is to treat it as a blatant lie.

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  59. ross69 (3,652 comments) says:

    > Many have mentioned that the price of fuel would rise

    The price of fuel has been rising and will continue to rise…and you can’t blame the Greens for that. Bugger.

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  60. Pete George (23,685 comments) says:

    David Shearer just said on 3News there is no difference between tax avoidance and tax evasion. Maybe Labour does need Russel Norman for finance minister.

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  61. Manolo (14,065 comments) says:

    Norman and the Luddite’s credibility has taken a massive blow after the big brain fart on the comrade’s part.

    If only the left-leaning lenient MSM would do its job by asking a few direct questions of the economic illiterate from the Green Party.

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  62. Pete George (23,685 comments) says:

    Has anyone asked Norman the obvious basic questions about his policy idea ? What level does he see as realistic for the US/NZ dollar exchange rate and how much money needs to be printed to achieve that level?

    I think he also hasn’t been asked how much the Reserve Bank employment targets will costs.

    And especially he hasn’t answered how a combined inflation/unemployment/exchange rate set of targets would cost to juggle and manipulate. Neither have Labour answered that.

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  63. ross69 (3,652 comments) says:

    > Printing money is inflationary

    Wrong. It can be inflationary but isn’t necessarily so. But I doubt that the unemployed are patting each other on the back saying “Hey, isn’t it great that inflation is in single figures?”

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  64. big bruv (14,156 comments) says:

    Ross69

    So what happens to the so called poor when everything costs at least 25% more?

    Will the call then be to raise the minimum wage to $25 an hour?, what about the thousands who will give up work to go on the dole given that the Greens want to raise benefit payments so the bludgers and parasites have more money?

    What happens when there are not enough people working to pay for all the parasites and bludgers, do we print more money?

    Nah, the truth Ross is that the Greens do not want growth, they do not want people to travel and they do not want wealth. They want everybody to be dependant on the government for their survival.

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  65. Reid (16,634 comments) says:

    Either Russel Norman is a fool or else he is dangerously cynical.

    Wussel sees himself like this.

    We see him like this.

    Dangerous? You bet. Cynical? Nah. Just weally, weally mental.

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  66. Spam (588 comments) says:

    I think that the reality is that Russel won’t have to do this. First sign of him getting his hands anywhere near the finance minister portfolio and there will be so much capital flight from NZ that the dollar will fall like a brick anyway.

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  67. wat dabney (3,809 comments) says:

    willtruth,

    We would all benefit from a lower dollar…And the exporters – who are the engines of our economy – would benefit

    So who is it that benefits from printing more money? Is it “all” of us or “exporters”? Clearly they are anything but synonymous, yet you casually use them interchangeably in your wild claims.

    And how are exporters the “engines of our economy” and why should everyone else be forced to subsidise them and watch their own employment shrink?

    The poorest people would pay a bit more more a loaf, but their higher wages would more than compensate for this.

    What “higher wages”? You are making stuff up out of whole cloth. The fact is that the poorest are the very last people able to protect themselves from theft via inflation. Russel’s great plan to print our way to riches will hit the poorest hardest.

    And what of the higher interest rate which will inevitably follow? How does that help the economy? What of all the people who lose their jobs because of it? Don’t they count?

    Most of the asian Tigers made their massive gains during periods when their currency was weak. That was partly why they had such strong exports.

    And what was their average standard of living at the time? Because that’s the whole point of all economic activity; not the pointless exporting of as much as possible, but to raise living standards. Remember, the only point of exports is so that we can enjoy imports.

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  68. Anthony (798 comments) says:

    It’s not much good having a really strong currency if it is being propped by increasing inflows of foreign money. There certainly could be some rebalancing of monetary policy by lowering the cash rate and getting rid of tax breaks for foreign depositors as I (and others such as Hugh Fletcher) have suggested. We do have to pay our way as a country – sometime!

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  69. wat dabney (3,809 comments) says:

    The price of fuel has been rising and will continue to rise…and you can’t blame the Greens for that. Bugger.

    Where have you been for the last 5 years of plummeting natural gas prices?

    Prices paid in May ($2.94 per 1,000 cubic feet) were less than half the natural gas prices of two years ago in March 2010 ($6.31), and about one-quarter of the $13.62 price four years ago in July 2008.
    http://seekingalpha.com/article/768421-natural-gas-prices-america-s-energy-jackpot

    Of course, that’s only where the Green zealots have been unable to block the exploitation of shale gas.

    Imagine the least well-off New Zealanders seeing their monthly gas bill drop by 10% or more.

    Still, the Greens here will do their best to ensure that nothing like that can ever happen.

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  70. Colville (2,300 comments) says:

    I am horribly confused by this.
    The Dr is proposing to print money.
    This policy makes poor people poorer because everything costs more in real terms and rich people get richer because they benefit from price rises on property etc.
    Why didn’t ACT propose this?

    (Answer is coz they didn’t want to get laughed at)

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  71. Griff (8,194 comments) says:

    more like this reid
    http://theweek.com/section/cartoon/82/219679/world-economy

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  72. Colville (2,300 comments) says:

    wat dabney, a 10% drop in cost of gas makes SFA difference when half of your gas bill is made up of supply charge.

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  73. Reid (16,634 comments) says:

    how are exporters the “engines of our economy”

    It’s called globalisation wat. Heard of it? Apparently it works quite well: e.g. Dutch in the 1600-1700’s, British in the 1700-1800’s, US in the 1900’s, Japan 1950-present, China in the 2000’s and for the rest of this century. We used to do quite well ourselves, still do. We were at the top of the OECD in the 50’s courtesy of the Korean War and the consequent demand for wool and continuing through the 60’s. Then we kinda lost focus till the 80’s. But the same global forces that made all those nations rich moves on, and on and on.

    Globalisation gives you growth without inflation, because you are growing the economy on OPM. However the downside is, the nation gives up some of its sovereignty – look at the EU, NAFTA, BRIC and our soon to be launched TPP will do the same. It’s a trade-off, just like life is.

    In an ideal world we wouldn’t compete, we would all cooperate. There would be no starving, no privately owned IP, no wealth, no nationalism, no currency. Everyone would get what they needed to succeed and bring their own unique talents to the party. But we’re a long way from that model. Humanity just isn’t mature enough to accept it let alone embrace it. Someday we will, but while people still hanker after idiotic things like this and worse yet admire people who own them, we’re lost. But that’s where we are. So we might as well deal with it. This is, our reality. For better or worse. So little ole us may as well play the game wat. And if you or I ever become “successful” enough to afford a toy like that idiotic boat, let’s hope both of us have the wisdom to spend it on starving people, instead.

    Griff thanks. That’s very good.

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  74. SPC (5,775 comments) says:

    The most QE so far has come from Switzerland and the UK, followed by the USA, then Europe and the least (recently) by Japan (who began to do it 20 years ago, with little inflation to show for it).

    The case for QE, to devalue the currency to manage an economy out of recession, is classical economics (but then those who are unrelated to the productive sector, and thus do not bear the brunt of the over valued currency recession, are more concerned about their net wealth/income as measured in foreign currency).

    The most recent example is that of the Swiss National Bank doing so to counter-act the impact of an increase in value of the franc against the Euro – because of harm to Swiss exporters.

    http://globaleconomicanalysis.blogspot.co.nz/2011/08/quantitative-easing-begins-in.html

    You don’t think the Swiss understand money and related economics? Norman is advocating we follow their example.

    Some think we are too good and pure for a capital gains tax, too good for a GST that has differing rates for necessities, too good and pure for QE – unlike the British, Europeans and Americans. And what do we have to show for it, our inequality, our child poverty, our economic underperformance in wages and productivity?

    You think and the Bank of England, the ECB, the Fed Reserve. And you say he does not understand money and those who say we should not do? Another case of those who

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  75. wat dabney (3,809 comments) says:

    Colville,

    You’ll have seen the quotation I included above about the plummeting gas prices where shale has been exploited. Ten percent should be the minimum we could expect. And remember that the alternative is not just static prices, it is significantly higher prices as the Greens impose renewables.

    So that’s a minimum of a ten percent reduction as opposed to a minimum of a ten percent increase.

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  76. Griff (8,194 comments) says:

    Warming aside wat this is our future energy in New Zealand
    http://www.stuff.co.nz/business/industries/7777042/Coal-cheerleader-laying-groundwork

    Within a few days of being at Solid Energy, Elder was persuaded by a handful of executives that New Zealand was sitting on a huge and valuable lignite resource.

    Since then he has cheerled the highly ambitious and contentious concept of turning Southland’s vast resources of lignite – a poor quality coal – into fertiliser and diesel as the answer to New Zealand’s future energy needs.

    The size of the two projects – lignite to urea for fertiliser and lignite to diesel – involve a scale of coalmining New Zealand has not had before and will cost multi-billions of dollars.

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  77. Reid (16,634 comments) says:

    It’s not much good having a really strong currency if it is being propped by increasing inflows of foreign money.

    Anthony I’ve never read a really astute analysis of why our currency is played with like a killer whale does with a baby seal. Which is what happens. As I understand, it’s something like the fifth most traded currency in the world. Why? That’s what I’ve never read. Why the interest in us and why has it been this way for so long?

    I hallucinate it’s because we’re so tiny, you can get big movements with relatively small capital and since we’re part of the tight five, we’re considered a safe bet, not like the banana republics many of whom are similar size to us.

    However I recognise that’s an extremely superficial and naive perspective on why, why, why, we keep getting artificially inflated, beyond all reasonable fundamentals, for decade after decade. The cynic in me wonders if this isn’t continuing punishment for our anti-nuke mentalism temerity. And even if not organised, I wonder how much US patriotic sentiment amongst the intelligentsia on Wall Street and they are all intelligent on that street, plays a part.

    Of course the lefties would scweam foul at such a suggestion. [How dare they, etcetewa.] Me? I’m a pragmatic realist. I wouldn’t put it past the realms of possibility. And that would explain why it’s been happening since we floated.

    But of course that’s just a hallucination. So has anyone out there read a real good rationale that explains the phenomena we all observe? Would appreciate a link if so.

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  78. SPC (5,775 comments) says:

    People should reconsider the idea of a direct link between inflationary stimulous and inflationary outcome. Japan has practiced QE with little inflation to show for it for 20 years.

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  79. Pete George (23,685 comments) says:

    The Swiss example:

    The important thing to note here is that this is yet another example of central bank quantitative easing gone wrong. As the Financial Times notes, when the SNB buys euros, it is essentially undertaking a QE program — that is, it creates francs and swaps them for euros. The end result is balance sheet expansion.

    But inadvertently, the SNB has put pressure on the very assets it is purchasing (euros) by using them to purchase core debt. By exacerbating the divide between the eurozone core and the periphery, the SNB made it appear as though periphery bonds were performing worse than they would otherwise have performed, thus signaling funding stress that otherwise would not have existed. This in turn, put pressure on the euro and, concurrently, on the foreign currency reserves (euros) held by the SNB.

    From a theoretical and prescriptive perspective, this is further evidence that central banks should avoid intervening in markets via balance sheet expansion as the unintended consequences can outweigh the benefits or, in the SNB’s case, be self-defeating.

    http://seekingalpha.com/article/889921-qe-goes-wrong-again-the-franc-euro-and-an-s-p-allegation

    And how much have the Swiss put into this?

    These currency market interventions have resulted in a dramatic increase in the SNB’s foreign currency holdings — foreign currency reserves now amount to 73% of Switzerland’s GDP with euros accounting for 60% of the total. To put this in perspective, as of the end of August, foreign currency reserves had increased 64% over the course of a year.

    Of course the problem with this policy is that it forces the SNB to hold ever increasing amounts of a rather risky asset: euros.

    So the Swiss are buying more and more of a currency that their actions are making more risky.

    Swiss roulette.

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  80. double d (225 comments) says:

    SPC – surely you are not using Japan as an example of QE working?

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  81. SPC (5,775 comments) says:

    reid, we borrow offshore to fund our home and farm mortgages, the rising level of debt (and roll over of the foreign funding) means a rising level of foreign inflow (buying of local dollars) unrelated to the trading economy. If we reduced home values, then this inflow would not rise and thus the dollar would ease as the economy grew relative to this offshore finance.

    The rise of the Oz dollar since they moved their OCR higher than ours shows this is also a factor – and suggests there is nothing personal about it, its about money not politics.

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  82. SPC (5,775 comments) says:

    double d, it’s an example where inflationary stimulous does not cause inflation outcomes.

    People have to relate policy to context. Japan has falling propulation and thus property deflation – QE counter-acts that.

    At the moment banks are storing capital to meet new Basel capital standands – QE is occuring in this context, counter-acting bank activity decline (there is recession in Europe and the USA as well) – thus inflation concerns are overstated.

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  83. SPC (5,775 comments) says:

    Pete, but Norman is not proposing we buy foreign currency with the printed dollars – but that we spend the money locally (the Christchurch rebuild) rather than borrow money offshore. I will note however that Bollard did make some money when he bought up foreign currency when the dollar was at a peak some years back – this time this is not an option now as QE will continue offshore a while yet.

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  84. wat dabney (3,809 comments) says:

    Reid,

    Participating in a broader market is obviously a good thing, I am simply making the point that you must remember why you are exporting. It’s not the exports per se which increase your standard of living (that would be crazy.)

    Globalisation gives you growth without inflation

    There is no reason to suppose that growth leads to inflation. In fact, since you are increasing the amount of services and goods, it makes more sense to expect the reverse:

    http://www.cato.org/pubs/policy_report/v21n6/cpr-21n6.html

    The benefits of globalisation are the opportunity to extend the market; to increase still further the benefits of specialisation combined with free trade.

    However the downside is, the nation gives up some of its sovereignty – look at the EU, NAFTA, BRIC and our soon to be launched TPP will do the same.

    Participating in international agreements doesn’t reduce sovereignty, since the country can pull out of the agreements if it wishes.

    if you or I ever become “successful” enough to afford a toy like that idiotic [gold yacht], let’s hope both of us have the wisdom to spend it on starving people, instead.

    In terms of resources consumed in construction there is nothing excessive about this gold boat compared to a similar-size vessel. The owner has just chosen very expensive material is all, but starving people can’t eat gold any more than they can eat steel or fibreglass or whatever boats are normally made of.

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  85. Anthony (798 comments) says:

    I think your are largely correct SPC about the reasons for our currency being in demand, we have had one of the highest real interest rates in the Western world for a long time so overseas depositors, like the cliched Belgian dentists and Tokyo housewives, love sending their money here. Of course there has to be a demand for it and overpriced housing and farms are certainly a strong drivers.

    There is, therefore, some logic in the Greens call for proper taxation of capital gains. Farm owners and rental property owners shouldn’t be relying on tax free capital gains to make their purchases economic. The price needs to fall to where the investment is returning a reasonable yield from ongoing income.

    I would also push for a land tax that can be credited towards income tax so productive land doesn’t attract extra taxation – but the land of those who hold it mostly for their own enjoyment or who manage to avoid tax on the income from it do pay tax.

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  86. Peter (1,723 comments) says:

    The price needs to fall to where the investment is returning a reasonable yield from ongoing income.

    A building has a cost per sq m to build, maintain, and administrate. If there’s not a tax free capital gain to make it worthwhile, then rents must rise.

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  87. tom hunter (5,086 comments) says:

    we have had one of the highest real interest rates in the Western world for a long time

    That introduces a point that has not been considered thus far in the debate about currency printing and inflation. Those incredibly low interest rates in the USA that are the by-product of QE, the rates that are supposed to kick-start the economy? Well, they’re killing savings in the USA and that especially effects retired people.

    For years, millions of them put savings aside to supplement their Social Security, except now the interest rates are so low that their interest incomes have been slashed to the bone. There are indications that these millions of retirees are steadily liquidating their savings to compensate.

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  88. Viking2 (11,569 comments) says:

    Gosman (321) Says:
    October 8th, 2012 at 4:41 pm

    I’m getting sick of Berl’s Chief economist Ganesh Nana. He seems to be popping up more and more banging on about various leftist ideas recently without being directly challenged on how wrongheaded they are. I am reminded of one of his predecessor in the role Kel Sanderson who was arguing against the Reserve Bank act in the lat 1980′s on the basis that NZ had an imported base rate of inflation of around 4% hence setting a target at 2% was reducing the size of the economy. Even though I was at High School I could see he was speaking bollocks and told him. History proved which one of us was right.
    ———

    So gos you think our economy is better than it was in the 80’s? Certainly it has undergone some massive destruction and incurred a shit load of debt whilst moving people to other countries having spent zillions on thier education, leaving those producers and the rest here combating poverty.

    Quite a recipe for sucess indeed.

    Trouble with many people like you is that actually you haven’t lost your lifes savings or work efforts like thousands of other Kiwi’s have. The latest being those in the Kiwifuit where intransience is preventing the use of sprays that will stop the PSA.
    Still we survive despite your levels of ignorance and incompetence of your peers.

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  89. hj (7,066 comments) says:

    The big adverse gap in productivity between New Zealand and other countries opened up from the 1970s to the early 1990s. The policy choice that increased immigration – given the number of employers increasingly unable to pay First-World wages to the existing population and all the capital requirements that increasing populations involve – looks likely to have worked almost directly against the adjustment New Zealand needed to make and it might have been better off with a lower rate of net immigration. This adjustment would have involved a lower real interest rate (and cost of capital) and a lower real exchange rate, meaning a more favourable environment for raising the low level of productive capital per worker and labour productivity. The low level of capital per worker is a striking symptom of New Zealand’s economic challenge.
    http://www.treasury.govt.nz/publications/reviews-consultation/savingsworkinggroup/pdfs/swg-report-jan11.pdf

    Forecasts released by Statistics New Zealand today indicate within the next 20 years, Auckland’s population will have grown by a third from the current 1.5 million to around two million.
    http://business.scoop.co.nz/2012/10/08/population-projections-back-need-for-investment-in-auckland/

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  90. cha (4,081 comments) says:

    There are indications that these millions of retirees are steadily liquidating their savings to compensate.

    Plan B, sharpen tools, buy a new drop-saw, put my pinny on and start on a couple of rentals.

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  91. Anthony (798 comments) says:

    Peter, a lot of rental properties are old and dilapidated and shouldn’t cost anywhere near the cost of building new. Furthermore, what about the land value – that can quite easily fall!

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  92. hj (7,066 comments) says:

    Anti-immigration feeling has no place in the Green party Immigration and Population policies released today, Green MP Keith Locke says.

    http://www.greens.org.nz/press-releases/greens-counter-peters-welcoming-immigration-policy

    so that rules that out.

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  93. hj (7,066 comments) says:

    Interesting to compare this:

    John Carran, 2 April 1996

    “Vehement opposition to immigration, particularly from Asian countries, in New Zealand from an ill-informed and xenophobic rabble persists despite overwhelming evidence that immigration will improve our long term economic prospects.

    In 1988 The Institute of Policy Studies published detailed research by Jacques Poot, Ganesh Nana and Bryan Philpott on the effects of migration on the New Zealand economy. The research, which abstracted from the social and environmental impact of immigration, concluded that “…a significant migration inflow can be beneficial to the performance of the New Zealand economy and subsequent consumption and income levels.” The authors point out that this is in general agreement with Australian research on the economic consequences of immigration.”
    http://www.gmi.co.nz/news/1021/opposition-to-immigration-why-let-the-arguments-get-in-the-way.aspx

    With this:
    Savings Working Group
    January 2011

    “The big adverse gap in productivity between New Zealand and other countries opened up from the 1970s to the early 1990s. The policy choice that increased immigration – given the number of employers increasingly unable to pay First-World wages to the existing population and all the capital requirements that increasing populations involve – looks likely to have worked almost directly against the adjustment New Zealand needed to make and it might have been better off with a lower rate of net immigration. This adjustment would have involved a lower real interest rate (and cost of capital) and a lower real exchange rate, meaning a more favourable environment for raising the low level of productive capital per worker and labour productivity. The low level of capital per worker is a striking symptom of New Zealand’s economic challenge.”
    http://www.treasury.govt.nz/publications/reviews-consultation/savingsworkinggroup/pdfs/swg-report-jan11.pdf
    with this

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  94. ross69 (3,652 comments) says:

    > So what happens to the so called poor when everything costs at least 25% more?

    Why would everything cost 25% more? Have prices skyrocketed in countries where money has been printed? No, they haven’t. The commenters here criticise Norman but their illogical rantings are beginning to make him look like a Rhodes scholar.

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  95. hj (7,066 comments) says:

    Have prices skyrocketed in countries where money has been printed?
    FFS… Wiemar republic: Sixth form history.

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  96. ross69 (3,652 comments) says:

    In the UK, there has been a lot of QE and its effects have been “economically significant.” Seems that Norman might be on the right track. It’s curious that DPF and commenters here haven’t poured scorn on David Cameron.

    http://www.bbc.co.uk/news/business-15198789

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  97. wat dabney (3,809 comments) says:

    ross69,

    Because, like Key said, countries like the UK are in crisis.

    It makes all the difference in the world.

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  98. ross69 (3,652 comments) says:

    > FFS… Wiemar republic

    FFS if you’d gone back 1000 years, you might have been able to find an older example.

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  99. Anthony (798 comments) says:

    I think QE is a bit like drinking, in moderation it can be good for you – you don’t say all drinking is bad because drinking to excess is bad!

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  100. Bogusnews (477 comments) says:

    I always knew the Greens and Labour were economically illiterate, but I have to say this surprises even me. But how great this is, for the first time we are seeing some of the policies that the greens want to implement. Scarey that Labour think they are a good idea too.

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  101. ross69 (3,652 comments) says:

    > It makes all the difference in the world.

    So QE isn’t wacky at all?

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  102. wat dabney (3,809 comments) says:

    Here you are, hj, another immigration reference for you:

    In recent years there has been a lot of research on the economic impacts of immigration, both in New Zealand and abroad. In many areas a consensus has been reached on what the impacts are, although in some other areas there remains uncertainty. This report reviews 2005-2010 research on the economic impacts of immigration. The report concludes that immigration has made a positive contribution to economic outcomes in New Zealand and that fears for negative economic impacts such as net fiscal costs, house price inflation, lower wages, and increasing unemployment find very little support in the available empirical evidence. Moreover, the economic integration of immigrants is broadly successful. Migration increases trade and tourism, both inbound and outbound. The net fiscal impact of immigration is positive. The links between immigration and technological change are complex. Additional immigration raises gross domestic product (GDP) per capita, albeit only modestly. Without net immigration, GDP per capita would be less. Changes in immigration policy and in the New Zealand economy over the last quarter century now yield greater economic benefits from immigration than in the past.
    http://www.dol.govt.nz/publication-view.asp?ID=362

    Now, what are the chances we ever see you post this again along with the well-worn stuff you repeatedly repost?

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  103. ross69 (3,652 comments) says:

    Switzerland isn’t in crisis, yet it is printing a lot of money, ironically with the support of the IMF. And, wouldn’t you know it, no surge in inflation.

    http://www.thejakartapost.com/news/2012/10/01/currency-war-vs-economic-stability.html

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  104. Keeping Stock (10,433 comments) says:

    willtruth said

    The poor would rather pay more for petrol if it meant they had a job for an export company

    There’s just one problem willtruth; by the time that the exporter has paid the increased costs of imported machinery, domestic price increases and the increased costs of getting his goods to the market when fuel prices go up by 15%, he’ll have no money left to pay wage increases for his existing staff, let alone create new jobs. But Russel hasn’t worked that bit out yet.

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  105. wat dabney (3,809 comments) says:

    So QE isn’t wacky at all?

    In crisis countries it is primarily intended to prevent a collapse in the money supply and a credit crunch.
    Imagine if you – an excellent credit risk – received a letter from your bank saying your floating mortgage was being cancelled because they didn’t have the money to lend. Or if your employer couldn’t roll-over its loan and had to close down for the same reason, despite having full order books.

    Bernanke is well known as a student of the Great Depression, which we now know was primarily caused by the Fed’s gross mishandling whereby they actually tightened the money supply and turned a recession into a depression.

    Keeping the money supply stable and preventing disastrous deflation is clearly not the same thing as printing money under normal circumstances.

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  106. hj (7,066 comments) says:

    The Savings Working Group acknowledged that study and threw it out (like your climate crank court case) Watt

    Hodgson, Rob and Jacques Poot (2010) “New Zealand reserach on the economic impacts of immigration 2005-2010 – Synthesis and research agenda.” Wellington, Department of Labour,
    http://www.treasury.govt.nz/publications/reviews-consultation/savingsworkinggroup/pdfs/swg-report-jan11.pdf

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  107. hj (7,066 comments) says:

    watt has a crack at:
    “Keeping the money supply stable and preventing disastrous deflation is clearly not the same thing as printing money under normal circumstances.”
    ………
    unfortunately if the rate of energy production falls off we have the underlying reason for deflation and is isn’t something monetary policy can fix.

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  108. tvb (4,512 comments) says:

    The Key Government is dead when they respond to this debate with the hysteria they have. Good riddance to them.

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  109. wat dabney (3,809 comments) says:

    The Savings Working Group acknowledged that study and threw it out (like your climate crank court case) Watt

    Where does it say they “threw it out”?

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  110. hj (7,066 comments) says:

    Well they considered it and posted their conclusions as above.
    http://www.treasury.govt.nz/publications/reviews-consultation/savingsworkinggroup/pdfs/swg-report-jan11.pdf

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  111. wat dabney (3,809 comments) says:

    hj,

    So when you said “the Savings Working Group acknowledged that study and threw it out (like your climate crank court case) Watt”, that was just some complete shit you made up.

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  112. tom hunter (5,086 comments) says:

    but Norman is not proposing we buy foreign currency with the printed dollars – but that we spend the money locally (the Christchurch rebuild) rather than borrow money offshore.

    Ha SPC! Given the discussion you and I had about this on the 47% thread here and here, I did wonder why you weren’t in the thick of it on the related Green money printing thread. As I noted on the 47% thread with your reference to the 1st Labour government:

    So I was right, you are a Douglas Creditor.

    But I will not repeat my arguments against the idea of government printing to buy or invest, save to say that you simply refuse to accept the point that you can’t get something for nothing.

    People should reconsider the idea of a direct link between inflationary stimulous and inflationary outcome. Japan has practiced QE with little inflation to show for it for 20 years.

    it’s an example where inflationary stimulous does not cause inflation outcomes. People have to relate policy to context. Japan has falling propulation and thus property deflation – QE counter-acts that.

    I’ll accept your point about QE not necessarily leading to inflation, with Japan as the example (and the US so far). But you seem to miss the point that QE (and this Green money printing idea) is supposedly the way to get economic growth going. Japan is a great example of how wrong that is. Twenty years of QE by the BOJ has produced nothing but anemic economic growth of, at best, a couple of percent per year, mixed with recessions. They may have had little inflation to show for it, but they’ve also had bugger all economic growth, which has led to the situation described here by the NYT:

    Like many members of Japan’s middle class, Masato Y. enjoyed a level of affluence two decades ago that was the envy of the world. Masato, a small-business owner, bought a $500,000 condominium, vacationed in Hawaii and drove a late-model Mercedes.

    But his living standards slowly crumbled along with Japan’s overall economy. First, he was forced to reduce trips abroad and then eliminate them. Then he traded the Mercedes for a cheaper domestic model. Last year, he sold his condo — for a third of what he paid for it, and for less than what he still owed on the mortgage he took out 17 years ago.

    Moreover, you also miss the point that if the population is falling then house prices should be falling.

    That last was one of the major fallacies of all of the American QE’s – that they were trying put a floor under house prices, because house values had made people feel wealthy and caused them to spend, spend spend – which is all any bloody Keynesian ever thinks about. But the thing is that the house prices should never have risen to those heights that quickly in the first place. Thank you Paul “we-need-a-housing-bubble-to-replace-the dotcom-bubble” Krugman and Greenspan. The whole thing was an absolutely wrong way to get people spending! It was fake wealth – and yet Bernanke and company are trying to hold on to what’s left, even as the huge backlog of unsold properties tells us that house prices need to fall further. It’s just nuts.

    Finally in the case of Japan, the inflation claim and their QE in general, needs to acknowledge the fact that all that created money has been soaked up internally by pension funds and the like for two decades. That’s why Japan has so little foreign debt; it’s all internal. But that cannot last much longer as their population ages rapidly. Those funds are going to have start being liquidated soon (god knows one can’t survive on the interest rates) and there have already been indications of pension funds refusing to buy any more Japanese treasury bonds. When that happens, things are going to get even uglier for Japan – and no amount of QE will even hold the floor up this time.

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  113. wat dabney (3,809 comments) says:

    I don’t think anyone believes there is a direct link between inflationary stimulous and inflationary outcome. When you’re pushing on a string you won’t get inflation. When demand for the currency is increasing you won’t get inflation.

    Russel’s problem is that he just blurts out his shit without showing any sign of understanding that there are other variables. Every time he comments about economics he commits a howler. He’s worse than Hickey in this regard. The problem is, he favours state coercion to impose his half-baked opinions on everyone.

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  114. hj (7,066 comments) says:

    I’m not Saying the Savings Working Group threw your climate case out Watt (but they would have); I’m saying they considered that study and it didn’t pass the smell test.

    However: “In a statement to the Sunday Star-Times, Coleman said: “Department of Labour research shows there is no strong link between immigration and house prices”
    http://www.stuff.co.nz/business/money/4622459/Government-policies-blamed-for-house-prices

    Once Redcliffs was an unprepossessing fishing village, distinguished by a collection of modest fishermen’s cottages. Most have now dissapeared, replaced by more luxurious residences, and property values have escalated.

    “It’s a standing joke that we’re being taken over by the Americans and British, who have taken advantage of the stronger property markets in their own countires and favourable exchange rates”

    “I know an English couple who have summer here and go back to England in the winter”

    “What other parts of the city have such nice walks?…..
    From Community Paper…. Minister Coleman would say “correlation isn’t causality”

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  115. unaha-closp (1,180 comments) says:

    Quantitative easing is not printing money. Quantitative easing is giving truckloads of money to bankers.

    Quantitative easing is where the government purchases toxic assets at inflated prices to prop up the financial institutions. Russell Norman is asking for us to give money to bankers.

    What they do in America and Japan and Europe – they give money to bankers.

    What a man, what a plan. Give money to bankers. Everybodyelse is doing it.

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  116. unaha-closp (1,180 comments) says:

    The problem for the foreign banks is that their own taxpayers can’t bail them out because the bankers are that completely incompetent. Now we have this Australian politician over here asking for us to give money to Australian banks, yay.

    Clarke and Dawe have another brilliant video on the issue: Clarke and Dawe – Understanding the GFC

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

    Paul “we-need-a-housing-bubble-to-replace-the dotcom-bubble” Krugman

    Very Romneyesque of you, Tom.

    In making that sarcastic comment, rather than advocating for a housing bubble, Krugman was being critical of Greenspan’s policies.

    In his view, the only thing that could possibly have saved the US from impending recession was another bubble, like a housing bubble, because under Greenspan’s settings that was the only path available. And of course, Krugman was correct that that is exactly what occurred.

    This implication that Krugman thought that was desirable is simply false.

    Roll on DPF’s dream of a replica factcheck.org.

    But the main point about Norman’s initiative is that as the major economies engage in QE programs, their currencies will devalue thus forcing ours upwards. To protect what competitiveness we still have, we need to follow their lead.

    Otherwise, we sacrifice success as a society to success of economic purity.

    Great if we could afford it.

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

    I should add that Norman’s plan is not QE as I understand it, and as Matt Nolan points out.

    QE simply changes the nature of the financial assets of the bank by converting it to cash – which does not involve printing banknotes – and it is reversed at a later date. If the banks fail to actually lend the more liquid form then QE will fail. Japan is often mentioned but Japan has some unique constraints, especially a falling population and a deply ingrained savings philosophy.

    Matt argues against Norman’s plan but offers no alternative. In these days of unconventional behavior by central banks, Norman’s recipe of unconventionality is focussed on our unique problem, a devastating earthquake or two. By proposing an amount of 1% of GDP, the risks are small and the gains would be incremental at best, but it would not lead to wheelbarrows of money to buy a loaf of bread.

    At least he has got the country thinking – except for our resident ideologues, the ‘The Gambler’ PM and Double Dipton.

    Oh, and their reliable resident echo chamber.

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  119. SPC (5,775 comments) says:

    unaha-closp

    QE is printing money. The Swiss National Bank uses it to buy Euro’s, to lower the franc, these become assets on its books. The Federal Reserve uses it to buy assets held by banks.

    Norman is proposing that we use the money to afford some of the rebuild cost, as an alternative to things like borrowing from offshore banks (places further upward pressure on the dollar) and or selling power companies.

    After all, I am sure that the Bank of England and the Federal Reserve did not want their QE assistance to local banks to result in them lending money on the other side of the world to fund an earthquake rebuild.

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  120. tvb (4,512 comments) says:

    Banks create money but where there is a collapse in bank credit there may fe justification in the central bank creating money instead through a policy of QE. that is the conclusion the economist reached. I have yet to hear anyone from the Government cinsider this issue with any thought. If they continue ignoring it I for one will withdraw my support and will gore labour or Green who are prepared to consider it instead of following a policy 24 years old.

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  121. hj (7,066 comments) says:

    Watt Dabney:

    “Globalisation gives you growth without inflation”

    There is no reason to suppose that growth leads to inflation. In fact, since you are increasing the amount of services and goods, it makes more sense to expect the reverse:

    http://www.cato.org/pubs/policy_report/v21n6/cpr-21n6.html
    …………………………………
    What about the Auckland property market?
    ans: that’s the fault of greenies holding up developers and council over charging.
    Q. so who pays for the new infrastructure and who makes the profits?

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  122. tom hunter (5,086 comments) says:

    In making that sarcastic comment, rather than advocating for a housing bubble, Krugman was being critical of Greenspan’s policies.

    In his view, the only thing that could possibly have saved the US from impending recession was another bubble, like a housing bubble, because under Greenspan’s settings that was the only path available. And of course, Krugman was correct that that is exactly what occurred.

    This implication that Krugman thought that was desirable is simply false.

    Roll on DPF’s dream of a replica factcheck.org.

    It’s good to see that Luc Hansen retains his sense of humour, adding that last sentence to one of the most pathetic pieces of apologia for one of his intellectual heroes that I’ve ever seen on this blog. Still, given the partisan track record of the “fact-checkers” in this year’s US election, the suggestion of a DPF replica factcheck.org might not be a bad idea.

    Since semantics may be the order of the day, here’s Krugman’s 2002 quote in full:

    The basic point is that the recession of 2001 wasn’t a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

    It should first be noted that as a proud Keynesian it would be entirely in keeping for Krugman to advocate a housing bubble to replace the dot-com bubble, since doing so would dovetail perfectly with basic Keynesian doctrine, in which it does not matter where in the economy all the created money is spent, any hole will do. As a Keynesian, Krugman should have wanted lower interest rates, as Keynes himself did in his famous General Theory:

    Thus the remedy for the boom is not a higher rate of interest but a lower rate of interest! For that may enable the so-called boom to last. The right remedy for the trade cycle is not to be found in abolishing booms and thus keeping us permanently in a semi-slump; but in abolishing slumps and thus keeping us permanently in a quasi-boom.

    And Krugman did want lower interest rates, and he wanted them to feed spending, as another quote shows from an interview with Lou Dobbs (also in 2002) showed:

    Low interest rates, which promote spending on housing and other durable goods, are the main answer.

    and from another Lou Dobbs interview in 2001:

    In time this overhang will be worked off. Meanwhile, economic policy should encourage other spending to offset the temporary slump in business investment. Low interest rates, which promote spending on housing and other durable goods, are the main answer.”

    That is entirely descriptive. It is not normative. It is clearly advocacy for a housing boom brought about by artificially lowering interest rates. How can anyone spin that as a purely academic musing, and not a policy recommendation for artificially inducing housing spending? It would be very slippery to argue that extremely low interest rates will not lead to a bubble somewhere in the economy, but to a Keynesian that’s not as much of a concern as getting the money out there.

    But even if one did want to argue that Krugman was not advocating for a bubble, yet another quote (from one of Krugman’s own readers) goes straight to the point:

    Mr. Krugman,

    I don’t know if you were on the grassy knoll, too, but you certainly were in Spain in March, chatting with that most fervent of your admirers, Prime Minister Mr. Zapatero, and interviewed in the Spanish public TV channel.

    Since these days a video is worth a thousand words, allow me to quote you and say: “guys, watch it for yourselves”. The program is about other things, innovation, and in Spanish (sorry), so go straight to the 35 seconds in the interview after minute 2:50. Under the Spanish translation I’m sure you’ll be able to hear the English original. Quite enlightening:

    To be honest, a new bubble now would help us out a lot even if we paid for it later. This is a really good time for a bubble…

    There was a headline in a satirical newspaper in the US last summer that said: “The nation demands a new bubble to invest in” And that’s pretty much right.
    http://www.rtve.es/mediateca/videos/20090502/innovar-para-salir-crisis-informe-semanal/495712.shtml

    Mmmm, mmmmm. Bubblelicious. Krugman thought it was cute that even a satirical newspaper could stumble upon the truth.

    As far as his other evasion (and that of his followers) is concerned – where Krugman is supposedly merely observing that Greenspan’s setting must lead to a housing bubble, which is a bad thing for Krugman v.2006 – another quote from his own 2002 column gives the lie to that:

    Judging by Mr. Greenspan’s remarkably cheerful recent testimony, he still thinks he can pull that off. But the Fed chairman’s crystal ball has been cloudy lately; remember how he urged Congress to cut taxes to head off the risk of excessive budget surpluses? And a sober look at recent data is not encouraging.

    In this paragraph, Krugman opines that Greenspan is too optimistic about the economy and by implication won’t take the needed measures to turn things around. So the contrast Krugman is making is not that Greenspan and the Fed were limited in what they could do by their “settings” of the moment, but rather that they were unwilling to do what was needed because they didn’t understand how bad the economy was.

    The 2006 clarification is a classic case of CYA. Even more obvious when you combine it at two other quotes from the 2002 article:

    Despite the bad news, most commentators, like Mr. Greenspan, remain optimistic.

    and

    But wishful thinking aside, I just don’t understand the grounds for optimism. Who, exactly, is about to start spending a lot more?

    He is clearly characterizing a housing bubble as an object of optimism, whether or not he thought it was possible. In other words, at best, Krugman could be interpreted as saying that it would be great if Greenspan could pull off a housing bubble, but that he, Krugman, doubts whether he’ll be able to accomplish such a worthy feat.

    So it should be clear that the Fed causing a housing bubble in order to bring about “soaring household spending” was Krugman’s optimal situation, whether or not he thought it was doable at the time.

    I’ll finish up with two quotes from other writers as to the meaning of all this. First, in this article from the Mises Insititute:

    And what about his strawman protests that he didn’t cause the housing bubble, much less the Enron scandal or Kennedy’s assassination? The man is willfully missing the point. What is damning about these quotes is not that he necessarily caused anything. What is devastating about them is that they expose the intellectual bankruptcy of his economic principles. Those who look up to him like the second coming of Adam Smith should realize that the neo-Keynesian principles that lead him to advocate aggressive interest-rate cuts and mammoth public spending now, are the very same principles that led him to advocate inducing a housing bubble then. He would himself affirm that his economic principles haven’t fundamentally changed since then. So the conclusions and policy prescriptions he infers from them are just as wildly wrong now as they were then.

    What was the stimulus he wanted in 2009 – $2 Trillion was it not? FFS.

    But the second quote goes to the bankruptcy of him personally:

    “Op-Ed columnist Paul Krugman has the disturbing habit of shaping, slicing and selectively citing numbers in a fashion that pleases his acolytes but leaves him open to substantive assaults.”

    That was from the editor of the paper Krugman writes for, the New York Times.

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  123. kevin_mcm (152 comments) says:

    The reason that there has been no impact on inflation in the USA has been that money supply increase has been offset by a reduction in monetary velocity.

    see http://en.wikipedia.org/wiki/Quantity_theory_of_money

    US corporations have been deleveraging plus substantially increasing the amount of funds they are holding and have been doing this as fast as QE puts money into the system.

    In NZ, QE would flow straight through to inflation.

    What we need is fiscal policy, but unlikely to see that given the government’s aversion to financial control.

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  124. unaha-closp (1,180 comments) says:

    QE is printing money. The Swiss National Bank uses it to buy Euro’s, to lower the franc, these become assets on its books. The Federal Reserve uses it to buy assets held by banks.

    Exactly the state purchases financial garbage at inflated prices to prop up failing banks.

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  125. SPC (5,775 comments) says:

    The Federal Reserve of the USA is not owned by the state.

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