More analysis of Greens print money plan

October 15th, 2012 at 10:00 am by David Farrar

of Krieger Capital blogs:

In any event, quantitative easing ultimately benefits the rich. For example, the Bank of England commissioned a study in which it said that 40% of the gains of its quantitative easing programme went to the top 5% of British households. The reason is simple. The rich own shares, property, and precious metals, whose values rise or remain constant when the central banks flood the world with money conjured out of thin air. Conversely, working people and savers rarely own financial assets whilst simultaneously having their real wages drop during an inflationary period. Dr Norman’s tacit support of even lower interest rates penalises retirees who depend on interest income to live. In essence, Dr Norman wants the Reserve Bank to continue the very imbalances that helped produce the Global Financial Crisis by punishing those prudent enough to save and rewarding the spendthrifts.

So this is what the pro- policies of the left will bring – gains for the top 5% and losses for poorer working people. Are these not the same people who go on about income inequality?

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29 Responses to “More analysis of Greens print money plan”

  1. Mark (496 comments) says:

    The Greens and Labour want to make people poor (the poorer the better) so they will vote for their tax and spend policies.

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  2. Manolo (13,837 comments) says:

    Krieger is wrong, because the Luddites are always right. The ginga knows everything and his knowledge of the economy is as profound as Shearer’s honesty.

    In summary: Krieger must be on the the payroll of big business. Norman is infallible.

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  3. seanmaitland (501 comments) says:

    Even if it didn’t go to the rich through their investments, its obvious that the inflation would also hurt the poor horrendously.

    I tried posting on the Greens Facebook page asking them how many of them would be happy with $3-$4 a litre petrol and paying way more for all their food, clothes and other items – all I got was a lot of people calling me a greedy right-wing troll and one of John Key’s banker mates.

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  4. flipper (4,083 comments) says:

    “Dr” Norman ?

    He is not a registered medical practitioner, nor even a graduate, un-registered doctor in either New Zealand or Australia.
    He is not a Phud in economics (of whatever esoteric branch).
    Hang on. Russel[sic] Norman, Ph.D did his dissertation on some crazy, esoteric, pol sci matter, did he not?

    I for one refuse to address him as Dr. Norman. To do so is to insult to every real doctor. That he refers to himself thus in the House of Representatives is simply self-aggradisement.

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  5. Luke H (73 comments) says:

    Speaking of crazy economic policy, did anyone catch the Democrats for Social Credit piece on Stuff?

    http://www.stuff.co.nz/stuff-nation/7803282/Can-you-fix-it-We-need-to-understand-money

    The scary thing is how sensible it must sound to anyone unfamiliar with their reputation as the ‘funny money’ party. The virtue of reducing overall debt, the fact that overpriced housing doesn’t represent real value, all money is debt … all perfectly true.

    Of course the opinion piece stops before going into detail on the craziness behind their policies.

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  6. seanmaitland (501 comments) says:

    @flipper – his thesis was written on Jim Anderton’s Alliance Party apparently, which he got to study by hanging out with The Alliance for a while.

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  7. tom hunter (4,890 comments) says:

    In addition to screwing the very people they claim to care about it’s also instructive that the Greens are making such a base, populist appeal. As seanmaitland points out, he noted that petrol would be at $3-$4 a litre – which in any other context would have the Left/Greens screaming about greedy oil companies – and got called out as a greedy right-winger.

    That’s a clear indication that not only do these people not think, they don’t want to think. They’ve got a cheap, easy “solution” that could also be ridden to political power, so who cares about anything else.

    It’s also yet another indication that the Left are simply intellectually exhausted and bankrupt. They know that all the rest of their standard economic solutions have been tried and found wanting. In the face of a National government borrowing hundreds of millions per month what extra spending and borrowing can be argued to have any effect. What tax increases are going to make a dent in the higher deficits caused by such spending; there aren’t enough rich pricks left in NZ. What public-private initiatives could spur industry better? Bullshit-fests like the Knowledge Wave?

    No. All they have left now are the seemingly cheap and easy solutions: print money and devalue the currency. Repeat what Mickey Savage and FDR did – or more pointedly, what people think they did.

    To that end, everybody should read this article: Great Myths of the Great Depression. It catalogs the four huge government interventions that created the Great Depression and maintained it for ten years – as well as the wonderful propaganda that was brought off in hindsight, in which everything was blamed on “the free market”. This is the antidote to the crap that I and every other kid in NZ – and probably most of the US population as well – was fed through popular culture for decades.

    Until ordinary people understand how government intervention (“doing something”) can make things so fucking awful economically, the sort of bullshit from the Greens will always find a toehold, though I am heartened by the public response to date, even though that probably stems from our experiences in the 1970’s and 1980’s than from the Slump.

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  8. YesWeDid (1,048 comments) says:

    Who the hell is Marc Krieger?

    DPF do you just trawl around the net looking for people who have the same views as you?

    According to his website he has ‘fled the tyranny of the US government’ and sells an audio book that ‘explains why you should leave the United States before the empire collapses’, with a picture of the US flag with the stars replaced by a hammer and sickle and the word ‘socialism’.

    I don’t agree with the Green’s economic policy but if I was going to critique it, I’d look for someone more credible that this guy.

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  9. frankflintstone (68 comments) says:

    so 40% of gains go to the rich and 60% of the gains go to the rest..everyone still gains so what is the problem?

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  10. flipper (4,083 comments) says:

    @seanmaitland.
    Thanks for that. You jogged my memory of seeing that somewhere.
    F

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  11. seanmaitland (501 comments) says:

    Oh yeah, I get sick of people on the Green Party blog, who continually point to “It worked a treat in the 1930s for Labour” as a reason for QEing.

    Are people really that simple that they believe that you could use the same approach to managing an economy in the 1930s and the 2010s???? The world has changed so significantly since then that its not even worth trying to think about how one could be applied to the other.

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  12. dime (9,980 comments) says:

    40% go to the top 5%? maybe Dime is on board :D

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  13. Longknives (4,764 comments) says:

    “Krieger must be on the the payroll of big business. Norman is infallible.”

    According to the adoring New Zealand media he is…

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  14. Brian Smaller (4,023 comments) says:

    Green MPs are in the top 5% of income earners here. Sounds like they want to increase their personal wealth at the expense of workers.

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  15. Longknives (4,764 comments) says:

    Good point Brian.
    Are there actually any examples of Green MPs practicing what they preach and ‘redistributing’ all their own personal wealth??

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  16. simpleton1 (230 comments) says:

    I am surprised that the sting in the tail is also not talked about.

    As a Capital Gains Tax would be bought in also, whether as a form that you pay as an ongoing rate on supposed estimated gains, or on sale of capital.

    I am sure the rich would find those quantitive easing gains nicely redistributed to the ones that supposedly miss out

    Initially the capital gain tax would be at low rate but once set could be adjusted by an Order In Council to a rate that democratic people would feel to be really fair ! ! .

    I am sure another department to administrate this will be welcome to soak up all those people with degrees

    Of course if you have a very good yearly ongoing income, and a super gold-plated pension you will not have to worry about capital or saving.

    That way quantitive easing would be fair to all of society…

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  17. burt (8,275 comments) says:

    Labour policies always benefit the wealthy…. The low-middle earners shouldered most of the burden of Clark & Cullen’s policies of envy … but hey… The left is all about getting more votes – not better outcomes.

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  18. bhudson (4,740 comments) says:

    simpleton1,

    That way quantitive easing would be fair to all of society…

    The Greens aren’t talking about quantitative easing; they’re talking about printing money and spending it.

    QE is a last ditch effort to stimulate an economy where interest rates are basically zero and banks are not lending money. The govt will print money and use that new money to buy assets from the banks; giving the banks the cash to lend to stimulate business. A QE programme will have a plan for govt to sell down those assets in the future and remove that additional money from supply (i.e. undo the money injection.)

    Our Reserve Bank rate is not zero. And our banks are not refusing to lend. (Lending criteria has been tightened somewhat from the property ‘boom’ period, but the banks are captialised and will lend.)

    There are no grounds for QE in NZ – it is a (last ditch) solution looking for a problem.

    Of course, what the Greens are proposing is simply printing money and injecting into the economy through spending (govt works). An incredibly inflationary action which will erode the value of incomes and savings.

    Given our high private debt levels are what drove the agencies to lower our credit rating last time, the Greens policy would not only lower incomes and savings, it lead to a further credit downgrade, increasing the cost of borrowing capital; it would constrain economic growth, leaving us all worse off and with reduced means to climb out of the hole they had created. (No doubt their solution would be to dig our ourselves out of the hole.)

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  19. burt (8,275 comments) says:

    bhudson

    Perfect loopy-lefty policy then… make us all the same – poor and dependent on welfare voting for more loop-lefty policies.

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  20. simpleton1 (230 comments) says:

    …….they’re talking about printing money and spending it………
    …….An incredibly inflationary action which will erode the value of incomes and savings…

    Thanks for informing me of the difference between QE and printing…

    If the greens gain an influential aspect in government, whether easing or spilling over to printing. I do take your point under QE that the assets so acquired by govt and may be at a later date be sold to soak up surplus money. What if they do not want the assets to be sold later? or will they be turned over to another group?

    I still believe as with you that inflation would be only half a step behind. They are wanting this blurring of QE and printing to be discussed and making this sound like a benign possible step in helping NZers.

    The next step is to install capital gains, to attempt to pre-empt inflation, and there seems to be a backing in many political circles for this. Then the circle will be complete as the government can tax inflation wealth that goes to the rich and so to then redistribute to the more needy voting people in society. They and others clip the ticket for their salaries and govt guaranteed gold plated superannuation. That way we will have an egalitarian dependent society. So why work hard?? Why save??

    I just had to find and put this quote in from “Hitch hikers Guide to the Galaxy”. I think it has been quoted not long a go on Kiwiblog.

    FORD:
    How can you have money if none of you actually produce anything? It doesn’t grow on trees you know!

    MANAGEMENT CONSULTANT:
    You know If you would allow me to continue!

    CAPTAIN:
    Yes let him to continue.

    MANAGEMENT CONSULTANT:
    Since we decided a few weeks ago to adopt leaves as legal tender, we have, of course all become immensely rich.

    FORD:
    No really? Really?

    CROWD MEMBERS:
    Yes, very good move…

    MANAGEMENT CONSULTANT:
    But, we have also run into a small inflation problem on account of the high level of leaf availability. Which means that I gather the current going rate has something like three major deciduous forests buying one ship’s peanut. So, um, in order to obviate this problem and effectively revalue the leaf, we are about to embark on an extensive defoliation campaign, and um, burn down all the forests. I think that’s a sensible move don’t you?

    MARKETING GIRL:
    That makes economic sense.

    [Murmurs of agreement from crowd]

    It is a laugh, if it was not seriously being thought about by the “crowd”.

    Inflation robs all savers affects insurances pensions and superannuation and for old people is a real villain. And the ones who think they will gain will be capital taxed gained.

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  21. Fentex (986 comments) says:

    Hang on, while I concur that the Greens are being silly on this matter, it seems a little odd to say…

    The rich own shares, property, and precious metals, whose values rise or remain constant…

    …and…

    …punishing those prudent enough to save and rewarding the spendthrifts…

    People who save generally have their money in some asset somewhere – that’s how we save.

    If people who have assets are protected from inflation caused by increased money supply, then how are the spendthrifts protected but the prudent savers hurt? That’s contradictory.

    The waged, who have a hard time keeping ahead of expenses, are the people who generally don’t amass assets and are those most hurt by inflation eating into their earnings.

    The invested, which means those who have saved, which generally includes the wealthy, are those best able to weather inflation by the concordant rise in the value of their investments.

    So who are these spendthrifts that suddenly appear in the quoted story? And how are they protected? Surely a spendthrift has neither investments nor surplus income to protect at all and ought suffer the most.

    And how are those who save, building up assets, punished by policies that help the invested rather than the struggling worker?

    That quotes conclusion is incoherent.

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  22. Tom Jackson (2,553 comments) says:

    To that end, everybody should read this article: Great Myths of the Great Depression. It catalogs the four huge government interventions that created the Great Depression and maintained it for ten years – as well as the wonderful propaganda that was brought off in hindsight, in which everything was blamed on “the free market”. This is the antidote to the crap that I and every other kid in NZ – and probably most of the US population as well – was fed through popular culture for decades.

    That’s some weapons grade derp there.

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  23. Tom Jackson (2,553 comments) says:

    According to his website he has ‘fled the tyranny of the US government’ and sells an audio book that ‘explains why you should leave the United States before the empire collapses’, with a picture of the US flag with the stars replaced by a hammer and sickle and the word ‘socialism.

    He’s perfect fit for this place. I want to know what happened to the sensible old time conservatives. The Bircher loons seem to have taken over.

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  24. bhudson (4,740 comments) says:

    simpleton1,

    A CGT would simply exacerbate the problem that inflation from printing & spending would create for business investment. Inflation would see income and savings levels reduce in real terms, yielding less capital available for business investment and growth. The credit downgrade that would follow would make it more expensive to raise capital and reduce returns. Taxing the returns of that business further through CGT would simply undermine the value of the investment and have people look for alternatives.

    For instance, under Labour’s half-baked CGT plan, doing the family home up and selling every few years could represent a better return than investing in a business. Not only would that constrain growth and reduce CGT take, it would also serve to help to keep the (non-productive) property market buoyant, with high prices driving higher debt – adding more fuel to the fire.

    I like the quote from Hitch Hikers Guide. The Greens are the Agent Orange to our economy!

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  25. simpleton1 (230 comments) says:

    The discussion that is softening up the ground seems to be that a little bit of inflation, that is targeted by the Reserve Bank, is not so much of a problem. This printing-QE-spending would then allow the dollar to go lower. The job market, namely in the manufacturing industries, will be saved from going under, and so maintaining employment, and possibly gaining employment as also the tourism industry would hope. The farming industry would also be more of a winner and then will be able to pay in full the ets taxes and comply with all the environment things that they should be doing so the government would be off the hook for the carbon tax.

    At about the same time the 2nd prong of capital gains tax would be brought in, and it would be so easy as it just about talked into political place now with closing of trust, company loopholes etc. That money will go to gifted organizers of well staffed (all those degrees must be employed) departments to help the more vulnerable in society in welfare, housing, health, education, etc.

    A real super money go round so they and others clip the ticket for their life time inflation proofed salaries and govt guaranteed gold-plated superannuation schemes. Do you not wish for all these things ? ?

    MARKETING GIRL:
    That makes economic sense.

    [Murmurs of agreement from crowd]

    The real point is, that when power is gained, that it will be happening one step at a time, print, spend, then capital gains tax as we are being softened up to accept all this. Unfortunately I hear these maddening siren sounds and the murmurs of the crowd all around me, as they want the syrupy kool-aid and as;- burt (5,720) Says: October 15th, 2012 at 4:20 pm “…….” will then complete the “loop” so that all of NZers will be looked after in their book.

    Is there any thing else out there that is convincing ? ? more so than lotto or “NZ has got talent”.

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  26. burt (8,275 comments) says:

    The real point is; The loopy-left gain popularity based on the policies of envy… how can anything they do possibly be considered to be fiscally prudent when they are marketing themselves to appeal to sense of injustice held by the lower socioeconomic sector of society.

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  27. Tom Jackson (2,553 comments) says:

    The real point is; The loopy-left gain popularity based on the policies of envy.

    How big a hammer do we need to pound into your thick skull that this policy has little to do with envy, equality or socialism? The connection of egalitarian goals to QE is peripheral, at best.

    Why is it that every time some policy is promoted by someone you have a political disagreement with, you must immediately interpret that policy in light of a laundry list of grievances that often have little or nothing to do with the policy? That’s the mentality of a complete cretin.

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  28. burt (8,275 comments) says:

    Tom the mentality of a complete cretin is pretending socialist policies of popularity work… Sure they are popular – we all want free money … but they always fail….

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  29. tom hunter (4,890 comments) says:

    That’s some weapons grade derp there.

    He’s perfect fit for this place. I want to know what happened to the sensible old time conservatives. The Bircher loons seem to have taken over.

    That’s the mentality of a complete cretin.

    Looks like Tom Jackson is slowly progressing, as that last assertion at least came at the end of a piece of slight reasoning, compared to the first two which had nothing behind them at all.

    Still, it’s good to see the Left in such complete denial that they don’t even condescend to make general rebuttal arguments, let alone point-by-point ones. It means that they’ll never address the problems with all the government institutions they’ve set up, that are now slowly collapsing around the world. How very reactionary?

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