Trotter on Greens

June 22nd, 2013 at 12:00 pm by David Farrar

writes:

“Why has abandoned the attempt to legitimate QE as a sensible means of stimulating the New Zealand economy?”  

With this thoroughly retrograde decision, Russel has brought to a needless and sudden halt his near faultless eighteen month performance as the Opposition’s most astute economic critic of the National Government.  

By abandoning QE, Russel has also deprived himself, the Greens, and any sort of useful ‘Centre-Left’ coalition government, of one of the very few means of mobilising the indigenous capital resources necessary to fund the job-rich, socially-just and “green” economic development New Zealand needs.  

Both the Greens’ and Labour’s promises: to put New Zealanders back to work; on a living wage; in clean, green and innovative export industries; while guaranteeing them and their families an affordable home; effective health services; and a progressive, child-centred education system; can only be achieved at the cost of billions of NZ dollars-worth of new state spending.  

What Chris Trotter is saying is that the policies of Labour and Greens are unaffordable, unless you printed more money to pay for them.

Russel’s QE proposal: Requiring the Reserve Bank to purchase government issued Earthquake Recovery Bonds to a sum equivalent to 1 percent of GDP (approximately $NZ2 billion) to both assist the Canterbury rebuild and bring down the value of the punishingly over-valued NZ Dollar; was one of the very few practical and non-inflationary funding options available to an incoming progressive government. By taking it off the table, what Russel is really telling us is that the Greens’ and Labour’s promises can no longer be paid for.   -

Trotter is right that their promises can no longer be paid for. What he is absolutely wrong on is saying QE is non-inflationary.

The Greens have always made it a point of political honour to be absolutely straight with the New Zealand electorate. If they intend to keep faith with that tradition, then their co-leader and chief economic policy spokesperson needs to step forward now and admit that, with QE off the agenda, the Greens’ promise to give New Zealand a clean, green and innovative economy can no longer by paid for and, therefore, will no longer be included in the Greens’ 2014 Manifesto. And, while he’s at it, Russel should also foreswear any ambition to be Minister of Finance in a Labour-Green government.  

I doubt they will do either. They’ll just hope the public don’t care of promises are affordable or not.

 

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52 Responses to “Trotter on Greens”

  1. JeffW (324 comments) says:

    What does Trotter smoke?

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  2. thaksinsproposal (40 comments) says:

    “Why has Russel Norman abandoned the Greens attempt to legitimate QE as a sensible means of stimulating the New Zealand economy?”

    With this thoroughly retrograde decision, Russel has brought to a needless and sudden halt his near faultless eighteen month performance as the Opposition’s most astute economic critic of the National Government.

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  3. NK (1,138 comments) says:

    Of course it can be paid for. The money has to be earned, borrowed or printed.

    It’ll never be earned with the Greens in government. So it has to be either borrowed or printed. Printed is now off the table. Guess what’s remaining?

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  4. Samuel Smith (276 comments) says:

    I am no supporter of the current Government, Bill English or austerity, but I would have to say I think many New Zealanders identify with the fiscal strategy of returning to surplus as soon as possible.

    If you are one of the ‘winners’ under post 1984 neo-liberalism in New Zealand, the strategy of returning to surplus in 2014 probably seems quite palatable. You remember the 2000s when economic times were good and some self-guilt could be shed as the Government of the day helped those less fortunate through working for families and interest free student loans. And while New Zealand is not as wealthy as many other OCED nations, we have not experienced the same level of damage the GFC had on the U.S and many European countries.

    But there is still a major problem that society faces. How long can you sustain socio-economic policies that allow the wealth of the rich to grow faster than the incomes of the poor?

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  5. thaksinsproposal (40 comments) says:

    I am sorry for uncompleted post above. I meant to say that Trotter seems crazy.
    Russel Norman compared John Key to Muldoon in part of his ‘faultless performsnce’
    Printing money is crazy, it is linked to Ruseell Norman and he certainly scared the horses.
    Although religion is personal, I see Trotters belief system as absurd.
    Trotter censors comments all the time on his post

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  6. Sir Cullen's Sidekick (839 comments) says:

    Let is forget for one moment that Trotter is on some sort of weed. The sheep of NZ, i.e. the left wing nutters who follow Greens and Labour don’t care about whether a policy is affordable or not. They are happy to hear meaningless commitments. For them, money comes from taxing the rich pricks. The 2 billion that is being discussed here can easily be achieved by slapping a rich prick tax of 42% on anybody earning more than 80K and 39% on anybody earning 60K. SIMPLE.

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  7. NK (1,138 comments) says:

    Samuel – your last sentence is silly because the “rich” could have $10million earning just 1% net per annum and that’s $100,000 per annum. That’s always going to be more than the incomes of the poor. Despite the 2000s, with huge wealth distribution, interest free student loans, and all that went with this, the “poor” in this country are no better off. What does that tell you about trying to make the rich poor by making the poor rich?

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  8. Paulus (2,565 comments) says:

    It is now interesting that the way the Greens have come from an effective well supported conservation lobby, in which they were shown well active, to now a left wing party despised by many, who previously supported the virtue of the underlying Greenpeace philosophy.

    The political wing now shows all the traits of frustrated middle class, well educated, white, chardonnay drinking disparate group, who have such bitterness that their zealotry shows in everything they do.

    Is this the model Green party, or has Norman subverted their real philosophy to his former Marxist self, with Cannabis Turei from the McGillicuddy party following behind ?

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  9. expat (4,048 comments) says:

    That and the fact the KIWI has fallen 10% against the USD recently so Normans half arsed policies now have less than half an arse of bringing down the dollar any appreciable amount.

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  10. hj (6,747 comments) says:

    Greens are crazy they believe economic growth can’t continue indefinitely (whereas the smart people know it can*).

    * deny climate change
    claim regulation is the issue
    shrink the issue (NZ is only .07% urbanised
    blame beaurocratic inefficiency.

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  11. Reid (16,111 comments) says:

    The money the Fed printed over the last 12-18 months hasn’t yet hit the US economy and the markets. When it does inflation will go to at least 10% and will probably approach 20%. Inflation at 10% wipes out half the value of a 10-year T-bond, at 20% the whole value is gone. (Which is why Obama is doing it, because of the 1.5 trillion the Chinese hold in T-bills.)

    However when this QE-generated inflation hits, interest rates are going sky-high and this is going to wipe out the real-estate market and the stock market.

    As we speak, the smart money is selling down consumer-driven US stocks across the board. They know this is in the wings.

    And this is precisely what Wussel was advocating and what Trotter reckons he should have continued advocating.

    WTF do you say in the face of such complete and total ignorance except thank fuck such idiots will never ever get their hands on the levers of power.

    Phew Timmy, that was a close one wasn’t it?

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  12. James Stephenson (2,096 comments) says:

    @Reid – don’t worry about the stock market (at least not in that way), we can see from the US and UK experience that the only thing QE really guarantees is the false glow of a stock market bubble.

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  13. expat (4,048 comments) says:

    “Which is why Obama is doing it, because of the 1.5 trillion the Chinese hold in T-bills”

    That and the fact the US had no money to back the interest on the loans and buy stuff from the Chinese or anyone else or provide liquidity.

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  14. NK (1,138 comments) says:

    expat, you could have stopped at “the US had no money”.

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  15. expat (4,048 comments) says:

    true!

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  16. dime (9,668 comments) says:

    “You remember the 2000s when economic times were good and some self-guilt could be shed as the Government of the day helped those less fortunate through working for families and interest free student loans”

    What the fuck?

    Self-guilt for achieving? Nup! None! This is New Zealand, almost anyone can fight their way to greatness.

    Do I have some empathy for had working people on average wages? A little. Depends if those people are still trying to better themselves or not.

    Do I have guilt over some lazy sack of shit living as a poor person? No sir I do not.

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  17. adze (2,005 comments) says:

    NK you forgot “Taxed or levied”.

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  18. Fentex (909 comments) says:

    What he is absolutely wrong on is saying QE is non-inflationary.

    Lots of people say this, ECON 101 insists that it is true, the logic behind it seems sound – more money among the same quantity of goods and services suggests inflation in prices (though of course quantity of goods and services is always in flux and reactive to conditions).

    Yet in five years of stagnant economies and increasing monies it hasn’t been observed to happen. It either isn’t or it is hidden in other figures or is being held back by something absorbing it, possibly to release it later.

    Whether it is a threat is the crux of Keynsian vs Opponents arguments – is the theory of the liquidity trap accurate? If it is, and it has accurately predicted events these last five years where it’s opponents theories have not, then increasing monies through public borrowing is not a horrid threat.

    That said Norman was wrong to posit ‘QE’ as useful for New Zealand, we do not have a problem it could be, by anyones theory, a useful tool to resolve. And he didn’t do himself any favours in his ill mannered effort to lie away his promotion of the idea.

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  19. OneTrack (2,823 comments) says:

    “It’ll never be earned with the Greens in government. So it has to be either borrowed or printed. Printed is now off the table. Guess what’s remaining?

    Ah I think you missed plan A, which comes before printing. Tax the shit out of “rich pricks”. Because that would be “fair”. Note most of the complaints are around “inequality”. Usually they don’t say the poor person doesnt have enough money, just that the problem is inequality – in other words, the politics of envy – somebody has more than me and I Want It too.

    The only problen with the tax the rich prick plan, is that the left defines anybody on $50k up as a rich prick. Do you work hard and earn more than a beneficiary then you should be taxed more and the money given to someone on the dole. You do believe in equality don’t you?

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  20. burt (8,035 comments) says:

    Trotter confirms what we pretty much know about lefties. They are smart enough to convince their simple minds that their ideology is sound. Once they have done that they are too stupid to notice their entire ideology becomes no more than denying that their ideology is a compete failure.

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  21. hmmokrightitis (1,572 comments) says:

    Fentex, it isnt inflationary IF the banks hold on to it, as noted in my post yesterday. The issue is, IF the banks hold on to it, you’ve achieved what? Nothing. The secondary issue is, like all crass interventions, it comes down to artificial levers being pulled. Its inflationary if the banks act as mere conduits. In the US at the moment, they are rebuilding capital with Barry’s printed notes.

    As noted, its the bubbles you are creating that will bite, and bite hard. Barry is creating some really nasty surprises for the next White House incumbent, just as Clinton did all those years ago.

    As a keen, amateur student of history and a macro economist and sad bastard sovereign debt follower, I wish I could be looking back on all this from the year 2150. The advance of China, the fall of the US and potentially Japan, the spread of non-christian religion through Europe, and the rise and rise of NZ & Australia as safe haven economies would be fascinating to study.

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  22. thaksinsproposal (40 comments) says:

    I have always found Trotter interesting. He writes stories, and he gets paid for these stories because we read them in the newspaper. But unlike other people Trotter believes his own stories.. Trotter gave no evidence in favour of Quantitative easing, , just his normal rhetoric .I am always wanting to learn more about this Quantitative easing thing. How can you introduce new money into a society without a creating inflation, and devaluation of existing values. I think I even saw Eric Crampton suggesting that QE was a possible idea. What is happening, I have struggled for years to understand this thing, and it eludes me like a magic puff of wind. Why do we have this insatiable desire to lower the value of our currency

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  23. wat dabney (3,724 comments) says:

    Trotter’s teenage scribblings and Norman’s laughable economic ignorance are on a par with Miss Utah’s recent pronouncements

    https://www.youtube.com/watch?v=a7WBGaShRgY

    At least the pretty Miss Utah has the saving grace of not seriously pretending to be a policy wonk. When the juvenile Totter and Norman pout and spout their stupidities they actually think they’re speaking like grown-ups.

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  24. hmmokrightitis (1,572 comments) says:

    Agree totally wat. I know Trotter through mutual friends; dont have any time for him because of what you allude to, his intellectual dishonesty. He has a very good mind, yet sadly thinks he can distort the truth to gain his moral high ground, which is a shame, yet he cannot see the fault with that.

    But then if you understand the mess of his personal life, you start to see where that position comes from. Its a pity, because he has a very sharp satiric wit – he would have made a good comedic writer. Well TBH, he does, but in ironic form only. A champagne socialist of the worst kind.

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  25. Ross12 (1,279 comments) says:

    I think hmmokrightitis is onto it in his first couple of sentences. Those like Norman and Trotter who think QE is a good thing assume that the extra money is going to somehow spread out relatively evenly through out the economy ( even if it is over some time). But it doesn’t happen like that –the money ends up with a select few or selected areas. Hmmokrightitis saying if the banks hold on to it is not inflationary is quite correct and wasn’t that part of the reason for the Feds activities,at least originally, to shore up the banks.
    The question becaomes will the flood of money eventually spread out through more of the economy and cause serious economic issues ?

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  26. hmmokrightitis (1,572 comments) says:

    Indeed Ross, and thats when you get bubbles – as they buy up “stuff” – assets – you get artificial markets and demand growth. And once that peaks and the money / demand stops….

    Hang on for the ride down :)

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  27. Tom Jackson (2,529 comments) says:

    Whether it is a threat is the crux of Keynsian vs Opponents arguments – is the theory of the liquidity trap accurate? If it is, and it has accurately predicted events these last five years where it’s opponents theories have not, then increasing monies through public borrowing is not a horrid threat.

    Can’t recommend this post enough.

    Problem is that too many right wingers have been brainwashed into thinking that Keynes was a communist.

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  28. Tom Jackson (2,529 comments) says:

    Self-guilt for achieving? Nup! None! This is New Zealand, almost anyone can fight their way to greatness

    Why don’t you fight your way to becoming competent with basic English prose?

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  29. Yoza (1,678 comments) says:

    I can’t say I’m a huge fan of Trotter, but in this instance he is right on the money – the Greens need to demonstrate they are an alternative to the National/Labour coalition and they caved in. Russel Norman should have spent more time reading the feral gibbering that accompanied every post concerning the Greens on this blog to understand how well they were doing.

    hmmokrightitis (1,324) Says: ‘ In the US at the moment, they are rebuilding capital with Barry’s printed notes.

    As noted, its the bubbles you are creating that will bite, and bite hard. Barry is creating some really nasty surprises for the next White House incumbent, just as Clinton did all those years ago.’

    There is no difference between how the Democrats manage the economy and how the Republicans did – the Democrats left the same banksters in charge of the Federal Reserve that the Republicans had there.

    Seriously Hmokrighty, what is the difference between Fed policy under the Dems and the Repubs?

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  30. SPC (5,473 comments) says:

    A lot of the money has gone to the banks to keep them solvent. This being done via QE has hidden the amount of money transferred to the banks after the GFC.

    As banks have higher capital requirements under new Basel criteria do not expect that all of the money will later be released back into the economy and this will not be as inflationary as some here suppose.

    That said the stock market value has been boosted by the comparative advantage of dividends being higher than cash returns and this will end once the QE era is over.

    The economic question that then remains is who buys the stocks and at what value – and then where do people place their money – could it be another asset value bubble – in housing? Well the rich will bid more for desired property and the banks will be flush with money for lending for those who can afford the interest payments.

    However the presumption that QE is inflationary is only true if there is increased demand and lack of supply, so how the housing market responds to the increased demand will be a factor.

    As to Normans idea being QE or inflationary. No. It was to print money and spend it on

    1. building up the EQC fund (investing offshore not locally)
    2. the Christchurch rebuild – that we are affording by debt build up instead.

    The high debt/budget deficit route of National is no less inflationary a stimulus.

    However the low amounts proposed meant that there would have been little impact on the dollar value. Thus it was not the Swiss or Japanese option.

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  31. Yoza (1,678 comments) says:

    “Why don’t you fight your way to becoming competent with basic English prose?”

    Yoza thinks you should give Dim a break TJ, at least he didn’t once refer to himself in the third person during his latest attempt at communicating in a coherent fashion

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  32. SPC (5,473 comments) says:

    There is a strategy to reform global and national finance in accord with Norman’s thinking.

    It comes from IMF economists.

    “IMF’s epic plan to conjure away debt and dethrone bankers.

    So there is a magic wand after all. A revolutionary paper by the International Monetary Fund claims that one could eliminate the net public debt of the US at a stroke, and by implication do the same for Britain, Germany, Italy, or Japan.”

    http://www.telegraph.co.uk/finance/comment/9623863/IMFs-epic-plan-to-conjure-away-debt-and-dethrone-bankers.html

    http://en.wikipedia.org/wiki/The_Chicago_Plan_Revisited

    http://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf

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  33. SPC (5,473 comments) says:

    Facts unpleasant?

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  34. wat dabney (3,724 comments) says:

    SPC,

    Norman was talking here about printing money, whilst you have provide links to the problems of fractional-reserve banking.

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  35. thaksinsproposal (40 comments) says:

    SPC and others above .
    About quantitave easing, thanks to posts above
    It appears that if the banks could not create loans without 100% backing we would have the opposite of printing money.
    I can not imagine that you could just introduce this overnight, but fake money is a curse on all those who have saved real money
    That is if you do not create money the balance will return to natural
    I used to think I could vote NZ First in next election, just for fun I thought ,
    I wonder now what was I thinking. I hate the idea of money prnting,
    and in the end I will just be a litle man ticking the NZ Nat box

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  36. seanmaitland (472 comments) says:

    If QEing worked, why aren’t any of the countries that have tried it booming? Why doesn’t every country in the world do it and then everyone will have massive economic growth?

    Fucking idiot Greens and Trotter – I think I learnt about such silver bullets when I was in 4th form economics.

    For their next trick, they will come up with perpetual motion machines.

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  37. SPC (5,473 comments) says:

    wat dabney, no you misunderstand the IMF economist proposal.

    It is not just a retreat from fiat finance but also a retreat from private sector monopoly on the issue of money – one they see as a response to heavily indebted government.

    The concept of printing the money to finance the rebuilding of the EQC fund and as an alternative to financing the public sector share of the Christchurch rebuild is in accord with the latter part of the rationale of the 2 IMF economists.

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  38. Yoza (1,678 comments) says:

    SPC (3,100) Says: 7:58 pm

    “Facts unpleasant?”

    First off it is an affront to God and as such invites God’s wrath!

    Secondly, it is in defiance of the laws of physics and would, in all probability, knock the Earth out of orbit – sending it flying off into oblivion and dooming us all!

    END OF!

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  39. UpandComer (525 comments) says:

    Pj O Rourke has the correct answer for hj.

    Hey hj, you do realise that just because some people eat some slices of pizza, everyone else doesn’t have to eat the pizza box?

    Everything is running out until it isn’t. We’d still be eating mammoth burgers and complaining about the finite supplies of rock, seriously, if we adopted your world view and mentality.

    The Greens have a role to play, but it doesn’t involve serious governance.

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  40. UpandComer (525 comments) says:

    Samuel Smith, the fact is, wealth grows. Incomes don’t necessarily, because income is a cost to wealth. So move away from income and get wealth. don’t have kids, do what you fucking have to do. Like the wealthy people.

    @ Tom Jackson, the problem with too many left wingers is that they think Keynes was one of them, and that his solutions aren’t temporary. I mean, if spending is a proxy for growth, why would you stop? That, seriously, is what the arguments of Labour and the Greens boil down to.

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  41. UpandComer (525 comments) says:

    SPC, you say a lot of words.

    Money borrowed in deficit spending is not the same as printing money. It sounds so easy doesn’t it. It’s all increasing the money supply, so herp derp why not just print it instead of borrowing it? Like most things that sound like can’t fail easy finance wins, it’s bollocks. I can’t be bothered explaining to a Russell Normanite, but printed money is not exactly the same as borrowed money.

    Has it ever occurred to you that Bill English ‘would’ have printed money if it was that easy?! The Greens are the ultimate snake oil salesmen, ‘oh yes, we can spend oodles of money, and devalue and deactivate productive cash producing parts of the economy, oh yes and also have zero debt!’ It’s just crap SPC, just like Jacinda Arderns Bill about more and stupider measurements of ‘poverty’ and Parkers even stupider ideas about devaluing the dollar to destroy New Zealander’s standard of living in order to help a few manufacturers.

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  42. SPC (5,473 comments) says:

    UpandComer, so you think that our standard of living rises if the dollar does and it falls when the dollar does?

    It actually makes little or no difference to those who do not consume imports or consume rarely. Those whose spending is on housing, food and power and who shop for clothes in second hand shops. For them a surplus of wages (boosted if the employer makes a profit exporting) over costs allows planning for buying a home and raising a family in it. This is an increasing proportion of voters. But I guess you don’t see the connection between whom a party represents and their economic policy.

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  43. SPC (5,473 comments) says:

    And it is very easy to print money rather than borrow – that is the whole point of the IMF economist proposal. It is a choice whether to do so or not.

    The constraint on borrowing is the debt cost – so governments try and borrow only when necessary and pay down debt when the economy is growing. The constraint on printing money is crowding out other would be users of money – printing money could be inflationary unless their was compensating tightening of overall monetary policy (the Chicago system is the extreme form of this).

    As for Bill English – he would not even delay the top rate tax cut to reduce borrowing, dismisses a surcharge on mortgages and opposes a CGT on rental property investment. This naturally leads to those on the top tax rate being encouraged to leverage their savings, higher net income and capital gain on existing investments to speculate further in the property market.

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  44. expat (4,048 comments) says:

    wat dabney (2,769) Says:
    June 22nd, 2013 at 8:28 pm
    SPC,

    Norman was talking here about printing money, whilst you have provide links to the problems of fractional-reserve banking

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  45. SPC (5,473 comments) says:

    expat, first the IMF economists made a proposal to change the way we issue money, it is not just a criticism of fractional reserve. It is identifying an alternative to replace it – and one that includes not just about the end of fiat but moving to government issue of money. That they suggest it is a way for highly indebted governments to cope is clue enough that it is about much more than just fractional reserve banking being superseded.

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  46. expat (4,048 comments) says:

    I await wusel and the gweens finance policy.

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  47. SPC (5,473 comments) says:

    expat, I await critics of the Green Party who don’t think it is clever to use a w instead of an r.

    But you are right in that, in the end it is the totality of party’s programme that has to be viable.

    The governments credibility is in that they have able to get the economy through a recession and get the budget back towards balance. There were better and fairer ways of doing it, but that is another issue.

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  48. seanmaitland (472 comments) says:

    @SPC – living in NZ, everything you eat or buy is impacted by the currency – if our currency goes down significantly EVERYTHING will go up in price, unless you grow all your own food, are completely off the grid and don’t use any fuel or electricity and don’t buy anything.

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  49. Yoza (1,678 comments) says:

    All the IMF paper is saying is the creation of money should be a function of public institutions rather than private institutions.

    If, as so many argue here, New Zealand cannot have any significant impact on the relative value of our own currency through buying or selling it on international exchanges. It then follows that Russel Norman’s/the IMF working paper suggestion that allowing an institution, fully under government control, to create money to fund the development of national projects will have minimal impact on the value of that currency – the value of the money created would be supported by the value of the infrastructure it was used to build.

    Not only would this be a far cheaper option for the government it would be far less risky than borrowing that same amount from foreign private financial corporations.

    That IMF paper was a great find SPC. I am guessing its authours now face the prospect of being burned at the stake for heresy as reward for their efforts.

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  50. UpandComer (525 comments) says:

    SPC have a look at the situation right now in Brazil. An avowedly socialist govt has done every protectionist and re distributionist thing possible to protect it’s exporters and it’s dollars and it’s particular voters.

    It now faces outright insurrection from the same voters fed up from everything being so expensive, so unavailable, so slow, so corrupt. That’s the Green party future for New Zealand.

    What you are saying isn’t true, because the gains to ‘some’ exporters from the dollar being at 60cents against the Greenback is absolutely outweighed by the devastating rise in the costs of imports and goods for everyone else in the country. If the Greens and the Manufacturers got their way, yes, standards of living would absolutely plummet.

    Further, please don’t buy into the Greens/Labour class reductionist bullshit. ‘Everybody’ spends money on food, and housing, and stuff. Not just some mythical non-existent Labour constituency, who will suffer the most from the Green’s economic policies.

    As for basically ‘ending the fed’ like most things it is superficially attractive. But the downside is that you then have the moral hazard of Russell Norman in charge of the printing press. Do you really, as an intelligent individual, believe that Labour/Greens would not engage in political economic cycles after the electoral finance act?

    Our system with the reserve bank is very good, because it is largely independent, and presently, govts have to actually face the consequences of their spending decisions. Taking that away is a very dangerous and stupid idea.

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  51. SPC (5,473 comments) says:

    seanmaitland, I completely disagree with you when you say that everything you eat or buy is impacted by the currency. Most of our food is local. Many spend little apart from on local food, rent or mortgage and power – all unaffected by the currency value. And many buy their clothes from second hand shops.

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  52. SPC (5,473 comments) says:

    UpandComer, yes look at Brazil, a government that favours the underclass favours a lower currency value as this assists local production and growth based on exports – such job led growth is sustainable. Most of the poor there, like in any country, spend little on imports but mostly on necessities that are provided locally – discretionary spending on imports is a middle class past-time. Thus it is no wonder that a Labour led government here would have a similar focus.

    After all the poor don’t buy new cars they buy used cars, their major import spending is probably on petrol.

    Brazil is not facing an insurrection by “voters”, but protest by the middle class. The issue of the protest is not the currency value, but the poor standard of the health and education systems (an increasingly wealthy middle class seeking first world standards) while spending on hosting international events. Also paradoxically high ticket prices for the sports events and public transport (presumably upgraded for them). This political divide also exists in Venezuela and it does not mean the middle class is a majority.

    No I don’t see a connection between political manipulation of economic cycles and the electoral finance act (personally I support the American system of matching contributions up to a cap rather than full taxpayer funding or spending controls). National’s tax cut offers are just as onerous a burden to the fiscal regime as campaign promises financed by spending on a credit card. And just as likely to require balance from a RB Governor’s monetary policy.

    The current RB system is not good enough, the RB is unable to compensate for the lack of a CGT or the inflow of foreign saving that results in landlords leveraging historic CG to buy further properties at 90% loan to value. Simply using the OCR to constrain consumption led growth that comes from a property owner’ sense of wealth does immense harm to the productive sector. Without profits there is no investment in R and D and wages remain low. Continuing as we are will result in high foreign debt and lead to ultimate dependence on last resort QE and or high public debt. Both roads lead to the proposal of the IMF economists – and their idea of a constraint on the amount of money is the Chicago Plan.

    In that world the debate is how much of the restricted (total amount) money goes to government and how much goes to the private sector – in the current world, it is how large is the government share of the economy and how this is funded by taxation/revenues and or debt.

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