….A dynamic, growing economy can expect to run consistent trade deficits, resulting in not one dollar of debt.

Where is the evidence, Watt Dabney?

Booming China with consistent trade deficits. Of course not? Resurgent, growing Germany and Japan from the 1950s with consistent trade deficits?No. Taiwan?No. Singapore?No. Malaysia?No. South Korea?No. Brazil?No. Indonesia?No. Australia?No. Russia? No. All booming and with trade surpluses, rather than deficits.

The United States has been running a deficit since 1975, which more or less parallels its relative decline as dominant economic power in the world. It’s debt has been rising. The Congressional Debt Office reported today (NZ time) that it will take another $2 trillion in belt-tightening over the next decade to begin to reduce the federal debt closer to historic levels.

India, one of the economic leaders grouped as BRIC (Brazil,Russia, India, China) is growing roughly between 6% and 7% a year in GDP, but has had a series of deficits. It also has public debt at 70 per cent of GDP. So India doesn’t support Watt Dabney’s assertion.

And, generally NZ seems to run negative trade balances of which the export/import differential is a major contributor (not all as you say). This will be a constant drag on economic growth.

The exchange rate will eventually balance things out but why does it have to be a boom/bust scenario? If the government could set monetary policy to try and smooth such spikes then things would be much easier for everyone.

“While exports<imports there will always be net borrowing. Otherwise you cannot pay for those imports.”

You are still putting the cart before the horse. In such a scenario net imports don’t drive people to borrow; it’s the borrowing which drives the imports. The solution is to just stop borrowing. If you can’t afford something then you can’t buy it. Then net importing would decline to a prudent level. Sure, if you export more then you can import correspondingly more. But that is a different argument. Increasing NZ exports will simply allow us to import correspondingly more. That’s the benefit. But there is absolutely no reason to imagine that it would lead to less borrowing.

Secondly, it is entirely false to claim that ‘while exports<imports there will always be net borrowing.' You are only looking at half the picture and ignoring the capital account which makes up the other side of the balance of trade. Net foreign investment will contribute to a trade deficit, yet clearly that is a good thing and no debt is created. A dynamic, growing economy can expect to run consistent trade deficits, resulting in not one dollar of debt.
I'm not saying that that's what's happening here, I'm just saying that your statement is incorrect: a trade deficit doesn't automatically imply debt.

While exports<imports there will always be net borrowing. Otherwise you cannot pay for those imports.

Why do you you think borrowing and the trade imbalance are mutually exclusive?

…And guess what! Fascism is the solution. …

Watt Dobney, are you saying that countries that aren’t as laissez faire in currency management are fascist?
Switzerland, for goodness sake, Singapore, Hong Kong, Japan.

dog-eat-dog says:

Lowering the dollar, if that’s even possible to do, would effectively be a poll tax for every New Zealander for the sake of (some) manufacturers…

How often does it have to be repeated, farmers, the tourism industry, the fishing industry, forestry – everyone who exports – is affected by our high currency, not just manufacturers.

The present high dollar must lead to a blow-out in a few years, with a currency collapse as the balance of payments deficits continue to grow. What will the price of petrol be then?

A moderate dollar now is best medium and long term for all consumers.

Entire industries are expected to migrate back to the US simmply because of this fact.

The Green Fascist Party’s crocodile tears over NZ manufacturing jobs are all the more sickening since they are largely responsible for preventing similar opportunities here.

Fracking = Manufacturing Jobs. Everything else is self-serving politics.

“We as a country spend more than we earn…The way to address this imbalance is to increase exports or decrease imports.”

No it isn’t.

The way to address it is to stop borrowing.

It’s that simple.

You’re effectively arguing that ‘if my salary went up then I would borrow less.’ Well, maybe. But if you borrowed recklessly at one wage level then the chances are that you would use an increased salary to borrow even more.

No because we import more as the kiwi dollar strengthens.

We as a country spend more than we earn. The consequences are in the future so most people simply don’t care.

The way to address this imbalance is to increase exports or decrease imports.

As it is, many jobs are being lost in the export manufacturing sector and it is easy to see why.

In future the US/Europe economies will recover and they will regain their currency strength. The NZD will likely over correct to the negative and our exporting sector will have been hollowed out. Imported product prices wills sky rocket but our exports will be slow to recover due to the time it takes to replace plant.

It will be a nasty time.

Have you also seen it reported that there is a shortage of manufactured goods in New Zealand?

No, neither have I.

You can trust toad and the Greens to totally misunderstand any economic issue; just as you can also trust them to use state coercion to enforce disastrous “solutions.”

According to toad, NZ agriculture must be in the worst shape its ever been, since the proportion of the population employed in it has been declining for the last 100 years.

Yes, that really is their argument.

And guess what! Fascism is the solution.

Thanks, Greens.

Read AG @ 8:03 pm and SPC @ 1:53 am

Yet, you are saying there is no problem?

“The number of filled jobs rose 0.4% while full-time jobs rose 0.7% in the last three months of 2012, Statistics New Zealand’s quarterly employment survey shows.

The main increases in jobs are in construction, up 6.8%, wholesale trade, up 8.3%, and healthcare and social assistance, up 4.3%”

So I’m not sure how clear it is that lots of low wage jobs are going. Can’t be if the overall number is up.

It is notable that retail wages had a solid increase – arising from the cheaper cost of imports or the shedding of lower waged staff because of consumer spending restraint?

Those exporting to Oz are getting good returns finally. Others are not and some are closing production.

Generally only those exporting to Oz or those who set prices, rather than take them, are doing OK.

Instead NZ manufacturers are slammed with a cascade of new taxes, regulations (taxes) and compliance costs (taxes). Not to mention ACC (taxes) and a plethora of other BS (taxes).

Then some shitheads moan when you move production off shore. They’ll never buy your stuff again because you are a traitor blaa, blaa

I think I know who is running the asylum

I guess it’s a refusal to look at any other way of controlling inflation than the present narrow tools targeting short-term inflation rates. It’s a high currency policy by default. “We don’t see how anything can be done about the high kiwi, so live with it.”

It’s a strategy that facilitates the continuing national borrowing abroad (in capital and interest), and makes politicians and bureaucrats look less incompetent than they are.

It’s an intellectual arrogance that we have the world’s best economic brains and a disdain to look at the success the Swiss are having with their cap, and how Singapore and Hong Kong, both bustling, thriving economies leaving us in the dust, perform well with their pegged currencies.

It’s a smug belief that somehow new age technology industries will spring up and make us as comparatively rich as we were in the late 40s and early 50s. Yet our tech start-ups repeatedly wither. Most, as soon as they are looking internationally promising, are flogged off to overseas firms. Those that survive squirm under the high kiwi along with other exporters.

IMHO, National’s high kiwi dollar strategy comes down to a believe that there is no other way, that nothing can be done, that the market will sort it all out, that any national collapse from debt and piling current-account balance deficits will come long after all the current MP mob have gone out to grass with a decent super and air travel concessions.