By Bernard Hickey
The grand plan is in shreds
Prime Minister John Key, Finance Minister Bill English and Reserve Bank Governor Alan Bollard have been beating the drum for more than two years that New Zealand's economy needs to rebalance towards exporting and investing and away from consuming and borrowing.
The widely-embraced theory is that New Zealand will reduce its current account deficit by exporting more and borrowing less. The long term decline in exporting jobs will be reversed and the economy will naturally rebalance to a more productive and sustainable state where businesses invest to create higher wage jobs. This will improve real wages and help narrow the gap with Australia.
The Reserve Bank and Government even indicated earlier this year that the strategy was working. They pointed, rightly, to an improving current account deficit and the end of a flood of foreign borrowing to buy rental properties.
They also pointed to a surge in export returns as commodity prices rose and a slowdown in imports as households pulled in their heads and stopped spending like drunken sailors. Both the government and the central bank have acted to help the rebalancing process along.
The Reserve Bank introduced a secondary monetary policy tool called the Core Funding Ratio that forced the Australian-owned banks to rely more on local term deposits and long term bonds to fund their lending. This helped reduce our short term foreign borrowing and staunched the surge of cash into the housing market.
The government increased the GST rate and tweaked the property taxation process to encourage more saving and to discourage the 'wrong' type of property investing fueled by foreign borrowing. It seemed to be working, but it's now clear the grand plan has been shredded by a combination of factors that are apparently beyond the control of the government. The first shredder is the US Federal Reserve's policy of Quantitative Easing or money printing to weaken the US dollar and try to kick-start the world's largest economy.
This pre-emptive strike has destablised a currency system that was created in 1944 with the US dollar as the reserve currency. Competitive devaluations have unleashed an every-man-for-himself approach that could see trade barriers and capital controls erected to protect national interests.
The New Zealand dollar has sprinted up to nearly 80 USc and in recent weeks the Trade Weighted Index has surged too, threatening the export recovery, particularly of those non-commodity exporters trying to sell to America and Asia. The second shredder is the surprising reluctance of New Zealand businesses and their banks to lend, borrow and invest.
The Reserve Bank's Financial Stability report out this week shows that bank lending to businesses continues to fall, despite better business confidence and the beginning of a recovery from the 2008 recession. Bank lending figures show that business lending has fallen NZ$9.3 billion since November 2008 to NZ$71.5 billion, while farm lending has risen NZ$4.9 billion to NZ$48.3 billion and housing lending is up NZ$8.8 billion to NZ$170.8 billion.
That means New Zealanders and the banks have actually increased their exposure to property by NZ$13.7 billion since the crisis while business borrowing has fallen by almost as much. That's not much of a rebalancing. Banks are even more reluctant to lend to businesses and are falling back on the tried and tested method of lending against land.
How can New Zealand possibly rebalance our economy when our high value export sector is being demolished and businesses are not borrowing and investing? The grand plan is shredded.
We need a new one.
78 Comments
1. SME's borrow through their properties from the banks. Because banks prefer hard assets and do not wish to lend direct to small businesses.. Hence "home lending" is up and "business lending" is down. Talk to the banks, they will confirm this is happening..
2. USA exports are 11% of total NZ exports. The USA is in recession, therefore growth in exports to the US will be minimal, if not falling. Exports to Asia have the benefit of stronger commodity prices sheilding the stronger currency effect. And anyway 30% of our exports go to Australia. You don't hear the AUD exporters complaining.
3. Ever heard of hedging?
Bernard, this is such a non story!
KiwiTrader
Have a look at page 26 in the RBNZ's FSR http://rbnz.govt.nz/finstab/fsreport/fsr_nov2010.pdf showing a tightening of lending standards to business and weak business lending growth, particularly to SMEs.
I take your point on Small business lending being buried in household lending, but the RBNZ keep a close eye on this too and they're noting tighter standards and weak borrowing demand.
Will hedging save our manufacuturing exporters in the long term?
Or should we just resign ourselves to being raw commodity exporters?
cheers
Bernard
Our manufactuered exports to Australia, a growing economy, are doing very well thanks.
If we make a good product and we brand it properly and the exchange rate goes up,
PUT THE PRICE UP.
It's what BMW or Mercedes would do.
A floating exchange rate is the answer. Sure it is hard when it swings against us. But the USD weakness is coming from the US, and all countries will suffer from a weaker USD.
We must learn to live with it.
Going back to a fixed exchange rate regime did not work last time, does not work now either so let's move on!
1. Im sure the banks prefer to lend via a nice asset, maybe the SME's are given no option? ........however many small businesses are bigger than borrowing through one house...indeed I'd like to see the figures because the suggestion is all lending is way down.
2. I agree and not only is the export market in the US going to decline from lack of demand, I would bet on the US bringing in protectionalism as well....we are looking for a FT with Russia, and Asia is growing, so its likely the relative rates wont change and they want to do business with us, so why even give the US the time of day?
3. Hedging is as always a 2 sided bet, we have one side (say) who thinks it might be lower or not rise much and the other side who thinks the opposite....given the drop in the USD is a an almost certainty it would be a brave person to bet against it....and then there are the chanrges the banks take.....hedging is a significant overhead (apparantly) that a business can ill-afford.
"kiwi-trader" as in you make money on it? bet its a non-event....eh?
yeah right........
regards
Punting is a 2 way street, agreed.
But hedging a known cost rate is only protecting margins.
Spot NZD/USD is 0.7750
6 months out it is 0.7650
12 months out it is 0.7520
Exporters get a BETTER rate in the future, so hedging is a benefit.
Most companies hedge. Those that do not are the ones on the front page compaining.
Managing the risk, it's not punting at all!
Bernard, the whole cause of this crisis is the same everywhere, and it involves the banks "falling back on lending against land". This has resulted in BUBBLES and it is NOT the "safe option".
The only tool in the policy kit that stops this, is the one we won't use - throw land supply open. Take the council urban planners powers off them.
The other thing we desperately need to do, is actually make it worthwhile for investors in real productive business. Taxes, red tape, employment law. As long as the voting public regards moves in this direction as "lining the pockets of your fat cat mates", this nation is destined to become the Cuba of the South Pacific.
This is a result of asset bubbles everywhere in everything, and not restrictions on land....ie low interest rates for long periods encouraging speculation....de-regualtion aka Greenspan and his stupid policies...
NZ is consistantly [one of] the easiest places to do business...sure from a Libertarian point of view Im sure getting rid of "all this" would be great, but that's 1000 ppl in NZ....Thats not the voting public, ie meanwhile for the other 99.999% of the voters its not even on the radar as significant.....there is such a thing as quality of life and not turning our country into a cesspit for the benefit of a few ppl.
regards
Steven,
You perpetually "stalk" me with your ignorant B.S.
Turning NZ into a cess pit? What do you think our policy status quo on land use has long since done to it?
Typical NZ "backbone of country" business:
Farm: thousands of hectares, sheep or cows crapping all over it, profits for farmer $100,000 per annum, jobs provided, 6 jobs at $30,000 per year. Export income, $2,000,000 per year.
Typical German "backbone of country" business:
High tech manufacturing business: one acre; profits, $2,000,000 per year; jobs provided, 20 at an average wage of $80,000 per year; pollution of environment, negligible; export income, $20,000,000 per year.
Spot the reason that one country is rich and getting richer, and the other WAS rich once. Also spot the reason why you can swim in the Ruhr River and not get poisoned, and you can't do this in the Manawatu River. Now explain to me why someone who might start the latter business in NZ today should have to pay $2,000,000 for his one acre of land, and the farmer can get thousands of hectares for less. THIS the result of nothing more than council urban planning policy.
By the way, one really good article once claimed that Bill Gates would never have got started if he had had to pay "post urban planning" California land prices for his first premises, rather than the "pre urban planning" prices he and other Silicon Valley entrepreneurs DID pay in their day. Now does the thought not scare you, about how many Microsofts (or even Gallaghers or Rakons) NZ might be missing out on? (California is losing Silicon Valley businesses hand over fist right now, to less stifled, less anti-business States and countries).
One Economic Darwin award, coming up.
Phil : steven and powerdownkiwi stalk a few of us with such ignorant B.S. and occassionally with some personal abuse .
On another thread today , steven hoes into Don Brash , again . If you're right wing in your thinking , you must be a " denier " , and a sub-human , according to him & PDK .
Oddly enuff , Don Brash is a very gentle and caring man . But the loonies from the left refuse to see that .
Being right of centre doesn't preclude deeply caring for one's fellows , nor for the planet .
All historical/hysterical, PB.
Manufacturing isn't enough definition, anymore. Manufacturing something that addresses sustainability - now that's different.
It won't be on a BAU payments set-up, though - who will be earning the dosh to buy?
Try this: the red deck-chair is sliding faster than the others. You have come to the conclusion that red is a bad colour for deckchairs. Some have even worked out that red paint has a greated coefficient of friction. Folk like Steven understand that the ship is sinking.
It's hard to get folk like him, to seriously believe that red deck-chairs are the problem.
Here some ideas, which could work for New Zealand in difficult times ahead. Of course these ideas need to be tailor- made for NZ :
Most modern economies can be characterized as dirigiste to some degree – for instance, state economic action may be exercised through subsidizing research and developing new technologies, or through government procurement.
http://en.wikipedia.org/wiki/Procurement
It is within this framework that the state increases or reduces taxation, eases or restricts credit, regulates customs duties; that it develops the national infrastructure — roads, railways, waterways, harbors, airports, communications, new cities, housing, etc.; harnesses the sources of energy — electricity, gas, coal, oil, atomic power; initiates research in the public sector and fosters it in the private; that it encourages the rational distribution of economic activity over the whole country; and by means of social security, education, and vocational training, facilitates the changes of employment forced upon many Frenchmen by modernization. In order that our country’s structures should be remolded and its appearance rejuvenated, my government, fortified by the newfound stability of the state, was to engage in manifold and vigorous interventions.” 1
Please read this : http://tarpley.net/2010/07/14/de-gaulle-as-economic-dirigist/
Because of worldwide, financial, political and other difficulties, the success of exporting becomes increasingly more uncertain. Now is the perfect time to revitalise the economy internally. Next to many more advantages, this would almost guarantee full employment and the reduction of our account deficit.
Please, read and understand this article in correlation to my many other comments.
Great article on De Gaulle Walter. PDK's ODT article is also a good one.
What a lot of people don't get, and a lot of the weekend warrior contributors are high on the list, is that this isn't about tweaking around the edges in an effort to bring things back the way they have been for the last 20 or 30 years.
It is a bit the same about the day a few weeks back where I made the comments about high density urban design being a solution to better living standards. Those who chose to focus on the failures of current planning in that department have missed the point. Just as architecture/urban planning and design isn't about comparing to other modern methods, which is just comparing one failure to another, it is about a complete overhaul of the system.
What is required is a whole new way of doing things. To a degree this is going to be forced upon us as oil and other commodities run out and we face a paradigm shift.
Most people can see that something is critically wrong, but for some reason just stick their head in the sand pretend it is all going to get better.
I think the pending resource wars will wake some up, after all resources are why Japan declared war on the US, and why they continue to whale in Antarctica. It is also why Germany was never going to win WWII because they never secured an oil field. That is why Fisher Tropsch was invented.
Interesting PDK that you have the same figure as I have been given for a non-oil world population cap. Mine came compliments of an ex CFO from a fertiliser company. But the resource wars will cull it back a bit.
Just finished my book on the 1930's depression, and I can't say that it panned out all that differently to now. Unemployment in NZ hit 30%!
Absolutely brilliant - a real success story - nearly 80 per cent of the manufacturing was done here, he said, and 14 local companies were involved in the process.
full story:
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10687606
Yes Walter agreed, potentially a nice success story. All instigated and acheived under current regulatory and policy settings. No mention of govt subsidy or preferential treatment of any kind. An opportunity to fill a niche spotted and actioned no centeral planning required. Simply the free market in action.
Sheep Shagger this is among a few others only an isolated success story - we need more - many more. In the current difficult environment striving for sustainable production in this country needs to become a culture and can only be achieved, by the government setting a solid framework - e.g. as I mentioned above 11:22am.
Production (manufacturing) in NZ is in many sectors still in it’s infancy and not properly developed. The free market alone doesn’t produce enough success stories.
Great article Bernard
John key has been very active with trade deals following on from labour's trade deal with China. We have had trade deals with Vitnam and even the Pacificv Islands and now Russia.
My question is how much growth has occurred with exports under these agreements and how much additional value will be created in the future. John fronts well at big international events like APEC and is a master for good photo shots with teh right people - even though the big guys like Obama look like they have just been hijacked for a photo.
What happens when we have a trade agreement with every country?
Doesn't life just revert to a normal market - whcih we are actually in now - in reality - ie anyone can sell great product at great prices to great countries. You don't need trade agreements to succeed. You need great products and great efficient technology.
And with great products teh currency is not as relevant because you have great margins to work with because your product has a point of difference.
"And with great products the currency is not as relevant because you have great margins to work with because your product has a point of difference."
Exactly so. We are exporting into Asia and Australia and they want our products.
The US does not, and anyway they can't afford them.
The NZD/USD exchange rate is the wrong focus and is becoming increasingly irrelevant..
The NZD/AUD is the one to watch!
Bernard,
Germany, Japan, China, Brazil; are not having any problem exporting lots more than they import, regardless of what the US have done with their QE so far. That's why the Yanks keep doing more QE.
I frankly do not believe that the US Fed can control inflation/deflation further down the track, after having done so much QE that has merely been sat on by the banks in the form of de-leveraging. A lot now depends on the US's banks self-regulating; if they find new bubbles to leverage into, the Fed will have no hope of controlling the inflation/deflation rate. Expect volatility like we've never seen before.
I also think the world is now forced to find something other than "the paper money of the world's most powerful nation" to use as "reserve currency". This always was going to lead to tears. I am inclined to trust the good judgement of those nations that have NOT indulged in QE, to hammer something out in this regard.
But you are right that NZ is really just a tiddler being swept along in currents far too strong for it. But what did John Key tell the WSJ in that interview? NZ needs policy setting that will enable us to hit the ground running when things stabilise, something like that? I sure hope he DOES have a "secret agenda", because I am not impressed with his public one. What we need are bold and courageous policy changes of the sort advocated by Roger Douglas and Don Brash, not all this tinkering around the edges.
But we are a democracy, and Lord Wodehouselee predicted in the early 1800's how democracies would end. NZ is just one of the first. Voters ignorance and envy kills the goose that lays the golden eggs. The Russkies used to say that Communism was merely the longest route to Capitalism. I am inclined to say that Communism is the thing constantly trended towards, and that "mixed economy" democracy is just the longest route to it.
I don't think we need a new plan , National just needs the balls to implement its original plans taking into account the constantly changing external environment .
My view is that John Key's hands -off wishy washy approach to real reform is the problem
Bernard used the word " tweak" in his article regards tax changes , well its simple If you want less of something , Tax it . Tweaking is not enough.
Kiwi's need to understand they cant all be a nation of passive investors as property owners living off rental income , someone actually has to do some work .
I would also like to own four or five investment properties and not have to be at work every day at 8:30 . I would fish , play golf and go skiing . I could manipulate my taxable income too.
To wean New Zealanders away from property investment and into more productive investment , introduce Capital Gains tax AND ring-fence the losses on negatively geared properties. It will be like rats off a sinking ship , and property yields will come back to reality
Unfortunately, after the tax changes around depreciation , there is still a perverse incentive to invest in property , gains are still tax free and interest rates are still too low to not take advantage of it and borrow instead of saving.
The securities regulations have not been tweaked since 1987 . Remember the sharemarket crash ? A generation of Kiwis do not trust companies and their directors . And given the shennanigans of a few choice rogues , Mr Eric Watson immediately springs to mind , can you blame them . The only alternatives are to place munny into the low-life pond-dwelling scum sucking Aussie banks , who dominate 80 % of NZ's financial market ............ Or to buy a rental ......... Kind of an easy choice , when you see it 'like that !
Problem is to steer the economy gently in the the right direction.....otherwise you are in danger of doing great damage to a very weak economy....so you cant do too much at once.....given the signs of an at best flat housing market the changes so far seem about as agressive as we'd want to go in one step....sure go farther.....but not so fast it crashes...
If you want to legislate well look at making the finance industry transparent and open. In the 1980s mom and pops got burned and afterward the industry successfully lobbied to kill proposals to fix it....so some carrot and stick.....
regards
http://www.odt.co.nz/opinion/opinion/34180/hard-times-here-stay
I wrote that in November 2008. Note the call for a new Bretton Woods.
But of course, the whole problem is a lack of cheap land??????
- something about forests and trees comes to mind.
I think the banks have forfieted their right to be the main conduit into the economy, of QE. The government as a conduit is not much better. The very best conduit, I think, would be to use "company taxes owing" as the conduit - simply peg the penalty interest rate for company taxes due, to the OCR. The Reserve Bank then simply "buys" the taxes due, with newly created money. The tax money is then owed to the Reserve Bank.
This ensures that the increased money supply lands FIRST in the hands of businesses that are making a profit, ensuring the "most productive use" of the money. Non-profitable businesses (or ones that fiddle the figures to minimise their tax bill) will not access this low interest finance. Businesses will generally retain this money as the OCR rises again, at a greater rate than what banks will.
The company tax rate could also then be fine tuned to achieve an optimum mix of monetary policy outcomes.
Berend de Boer : Absolutely nailed it , buddy ! Bernard wants a new plan . More clever pointy heads in Wellington to direct the economy , rather than the ebb and flow of zillions of transactions in the world's marketplaces to pull the economy . Clever dicks in Wellington to push the bastard thing forward , as Muldoon tried , and failed . Because those clever clogs know better than you or I , what it is that you or I want and need !
Grand Plan ?? Is there one in the first place ??
Or is it just "let's hope the glue sticks and the wings don't fall off " plan ??
The last 12 to 18 months of good statistics is just the result of QE1 boost of trillion of dollars slooshing all around the world and the inventory rebuilding after the crash....if they had really hoped that it was a sustainable recovery and that "alls well that ends well" then they are just as delusional as every Goverment head and Fed CBs in the world.
To say that "every crisis should not be wasted" is a farce...this crisis was wasted by navel gazing and so will the next crisis and the next after that.
New Zealand solution to our long term economic situation is simple and straight forward :
1. Restructure our bloated public sector and transfer payment system so that the goverment don't need to tax everything that moves.
2. lower our exchange rate by intervention so that we can export more and import less and cut our standard of living (yes STANDARD in case you misread) inorder to repay our external debt and reduce capital outflows. We have been spending more than we can afford for long enough....stop being Grasshoppers and start learning a little ant virtue.
Bernard... one of the problems here is that you focus exclusively on the USD. As other commentators above note there is quite a lot of trade done in other currencies such as AUD and Euro.
If I am exporting from NZ to Asia doing the trade in USD doesn't really affect either of us because both our currencies have appreciated against the USD. So the net difference is really the difference between the NZD and the currency of the country I am selling into - now that country may have its currency linked to the USD, but the pressure will be on them to cut away simply because depreciating your currency is simply a race to the bottom - it is a cut in living standards.
No one likes what the US is doing; flooding the world with useless crap (its currency) that no one wants - traders and exporters will switch to different currencies and trade through them where there is less risk of being tripped up by what is in effect US domestic politics.
It is a continual adjustment process... if you think that it is all just about the USD then you have been living down a hole for too long. Just think of the exporters that import in USD and sell in AUD to Australia, our largest export market - they will be grinning from ear to ear...
Horace,
Good point on the TWI. The trouble is it has take off in the last couple of weeks. The euro, the pound and the yen will no doubt weaken vs the NZ dollar too as their economies engage in their own money printing exercises to match the Fed.
It's a matter of time.
Then the only currency where we won't jump is the Australian dollar. That really does force us into being a suburb of Australia. Is that what we want?
cheers
Bernard
Your number one Kin...that's a starting point for Key and Co...will it happen before the crisis arrives and the IMF turn up to stuff little Kiwi...probably not...the Sir Humphreys have control in wgtn and the higher salaries commission are permamnent members of the old boy's club. That mob have their very own WFF rort going.....it's called MFM..."More for Me".
The National Government, Reserve Bank and the "Big 4" banks are scared sh*tless of this property bubble bursting and believe me, in many areas, prices haven't dropped to reflect their "true worth", not a property spruikers value on such a property.
John Key does NOT want to upset the big banks and will do anything and everything to protect them.... he did not go far enough with his reforms for property investors ... to the point we now have property investors from Australia saying that it is better value in NZ than Aussie. And do they have a "BUBBLE' ready to burst !
We are STILL the only country in the OECD without a capital gains tax .... this backs up the above.
"The first shredder is the US Federal Reserve's policy of Quantitative Easing or money printing to weaken the US dollar and try to kick-start the world's largest economy."
As you know but chose not to mention, the stated purpose of QE is explicitly not to weaken the inherent value of the dollar, but to lower medium term interest rates and reduce the likelihood of deflation.
Could this go wrong? Absolutely. But whether it does or not will depend on what action the Fed does or doesn't take in the future once money begins to flow again into the real economy. For now, the impact on exchange rates is driven primarily by interest rate differentials. If the Fed does the responsible thing in the future, those differentials will ultimately close and exchange rates will adjust accordingly.
In the meantime, continuing to deleverage, save and invest is the right strategy for individuals and the country. Strengthening export markets to whatever extent is possible remains a good thing, but naturally there are limits for now simply due to the weakness of overseas economies - exchange rates are merely a symptom.
Increased exposure to residential property and falling business investment are indeed problems and could yet end in tears.
Your data shows that the 'grand plan' is in fact not being followed, not that there is something wrong with the plan itself.
Define "invest"
The fed is effectively taking savings and bonds to zero interest, so the only way a retiree/saver/investor has to not lose money is to go out into the share market and gamble....This might be thought of as sensible in terms of being in the "National Good" but for the individual they risk huge losses.....for me I think the markets in everything is severly over-valued ie a bubble and therefore will burst....
Then there are smoke and mirrors....what the Fed is doing is saying its being a good boy while its actions speak louder than words....if you want to consider the "side effect" of what they are doing is dropping the value of the dollar and exporting un-employment well OK....this doesnt make such side effects trivial...but then the US does not care about anyone else but itself....its looking for an easy way out of the mess its got itself into.....there isnt one it has to take the medeicine itself....at some stage...
So to me right now "invest" means putting your $'s somewhere safe....
regards
Define "invest"
The fed is effectively taking savings and bonds to zero interest, so the only way a retiree/saver/investor has to not lose money is to go out into the share market and gamble....This might be thought of as sensible in terms of being in the "National Good" but for the individual they risk huge losses.....for me I think the markets in everything is severly over-valued ie a bubble and therefore will burst....
Then there are smoke and mirrors....what the Fed is doing is saying its being a good boy while its actions speak louder than words....if you want to consider the "side effect" of what they are doing is dropping the value of the dollar and exporting un-employment well OK....this doesnt make such side effects trivial...but then the US does not care about anyone else but itself....its looking for an easy way out of the mess its got itself into.....there isnt one it has to take the medeicine itself....at some stage...
So to me right now "invest" means putting your $'s somewhere safe....
http://www.cnbc.com/id/15840232/?video=1640401359&play=1
regards
By public I take it you mean the out there right wingers....Brash almost won based on his bribes and nothing else, Cullen managed to outbribe him at the post......thank good for that as he is obviously an ACT stooge.
"we" how about sticking to just you....you do not speak for me, therefore "we" is not justified.
Key is treading a very fine line IMHO. So far he's pushed as much change given the precarious state of the NZ and indeed the world's economy as I think is sensible....part of a Govn's job is to steer but also not kill off NZ's economy...So a valid issue is to make sure he doe not kill the housing market, just deflate it slowly and point investment to where it makes sense for NZ.
Local Govn is the least of our worries...peak oil is our biggest....and most severe test ever.
I hope indeed they do ask such Qs at the next election, bearing in mind 97% of NZ isnt of a libertarian extremist nature...Take Wellington's new major, a greenie, a huge contrast to the previous one, an excellent result.
regards
Good points Hugh. Unfortunately for anybody living in the ChCh region things will not get better for at least another 3 years. John Key came down to ChCh in July this year to endorse Bob Parker's Mayoralty campaign. BP was the Chairman of the Greater ChCh housing strategy committee that widened the policy of "smart growth" to the adjacent Selwyn and Waimakariri Council areas, thereby severely limiting land development outside the current metropolitan areas. So we have JK endorsing BP whose main policy is "smart growth". We are stuffed.
Hugh : There is nothing wrong with being " right wing " ! Don Brash would've been an excellent PM , and would've got cracking on NZ's unbalanced economy . Unlike Key , who constantly reacts to the polls and to smarmie know-it-all actresses .
Right-wing means letting people have more control over their lives . Expecting them to accept the consequences of their actions . Personal responsibility ............ What do the " lefties " see as evil & nasty in that ?
Powerdownkiwi,
YOU are the one with the cranial inability, mate.
The envirofascists desperately want to regulate and "plan" our economies to death BEFORE the free market solves the problems they have fabricated like all good fascists.
"Big oil" etc is quite happy to go along for the profit-gouging ride.
I am wasting my time posting links to sensible articles about the amount of resources left in the world and the rate of economic substitution. You've got your narrative, and you're sticking to it. Also, you are totally incoherent and hypocritical about urban planning that assumes endless bureaucratic jobs in the CBD are the mainstay of the economy and we just need to live in apartments and catch trains and all will be well. Yet you, a resource doomsayer, are quite happy to just go along with this. Credibility, nil, mate.
envirofacists.
resource doomsayer.
see what I mean?
And I don't say anything is "the mainstay of the economy", never have, never will.
'The economy' is a temorary construct, and I haven't ever thought of 'it' as anything else. You have too much 'taint' in your grap of things, typecast too much.
Read Roger Kerr in the ODT, a couple of Fridays back, about Ireland. He used to write with arrogance/confidence - this time he was trying to say Ireland wasn't a failure of 'the market, or free markets, or whatever the holy grail is called. He sounded to me, like a slightly bewildered schoolboy, trying to work out why he'd been given an 'F'. Quite unconvincing.
I found that telling.
Having now read Roger Kerr's column on Ireland, I am more sure than ever that you simply lack the intelligence to understand economics. It was a good article, hardly even fair to describe as an opinion piece, it was so factual and dispassionate.
"Imbalances", of which the Kerr article identifies many, are the result of the free market NOT being able to work. Monetary Union is one source of many economic problems in Europe today, and that certainly is not "the free market". It always was going to involve the stronger economies bleeding money to the weaker ones.
Furthermore, Ireland is another poster child for what urban land rationing by council planners does to an economy. And they certainly have not "got it"; this will continue to damage the Irish economy.
The fact that they had low tax rates and low company tax rates, always was an advantage to them, not the cause of their crisis. Fiscal austerity and reducing the bloated size of the State sector now, will help them, not hinder them. Do you really not understand that a nation with a State share of the economy of 45% plus, can not be described as a poster child for "the failure of the free market"?
Take a look at THIS:
http://texanomics.blogspot.com/
That is probably the most truly "free market" spot in the USA, if not the planet. Can't you follow evidence?
Even resource runout will be coped with the most effectively by the freest markets in the world. I hope to be able to continue to point to the evidence for years to come, Powerdownkiwi. Planning and regulating utopia has never had anything but the opposite effect to that promised by the charlatans and rabble-rousers of the Left.
the 'free market'. is just the sum total of a lot of knee-jerk lemmings.
It is also short-window.
Addressing ultimate scarcities requires long-term planning - but there, people who worship at the Ayn Rand shrine presumably don't think there are ultimate scarcities.
The Greenland Norse died out with coin in pocket, gnawing on the raw hoof-bones of next-years herd. Free market but no planning = fatal.
I've read Kerr for years, but the nuance of this one is bewilderment. His castles are crumbling around him, and his 'learning' hasn't equipped him to understand what is happening.
I'll try again, simply: Money is an entirely artificial, man-made construct. The planet, the laws of physics, and the realities of chemistry, take no notice of same, and outspan it in both time directions.
What seems 'important' (where have I heard that word before) to some, temporarily, now, is of no real consequence whatever.
Why do so many worship the regime? Same reason folk worship anything - insecurity.
When I read the Kerr piece, I read insecurity.
the 'free market'. is just the sum total of a lot of knee-jerk lemmings.
It is also short-window.
Addressing ultimate scarcities requires long-term planning - but there, people who worship at the Ayn Rand shrine presumably don't think there are ultimate scarcities.
The Greenland Norse died out with coin in pocket, gnawing on the raw hoof-bones of next-years herd. Free market but no planning = fatal.
I've read Kerr for years, but the nuance of this one is bewilderment. His castles are crumbling around him, and his 'learning' hasn't equipped him to understand what is happening.
I'll try again, simply: Money is an entirely artificial, man-made construct. The planet, the laws of physics, and the realities of chemistry, take no notice of same, and outspan it in both time directions.
What seems 'important' (where have I heard that word before) to some, temporarily, now, is of no real consequence whatever.
Why do so many worship the regime? Same reason folk worship anything - insecurity.
When I read the Kerr piece, I read insecurity.
GbH: "Right-wing means letting people have more control over their lives . Expecting them to accept the consequences of their actions . Personal responsibility ............"
Hanover, Bridgecorp, SthCantyfinance, RBS, Wall St, rodney hide and his girlfriend, etc ad infinitum, are all good solid right wingers who absolutely did not "accept the consequences of their actions" and who were not held to account. This ayn randish rightwing freemarket ideology works in theory but history suggests that once put into practice, it gets messy.
Personally i'm a centrist because i understand that left to their own device people are greedy, selfish and (worst of all ) myopic
All you prove by quoting Ayn Rand is that you have never actually read her. Ayn Rand would have expected all the examples you give above to suffer the consequences of their actions. That is what real free markets are all about. Bailouts are NOT "free market", or Randian.
The less free market we have, the more moral hazard there is, and the more failures there are, whereapon the call always is for "LESS free markets", not more. If you didn't like Wall Street's actions this time around, you wait till next time. Thanks to bailouts, the next one is going to actually finish the US economy.
I have no doubt at all that if the founding fathers of the USA had been in government today, they'd have sat Wall Street's bosses down and given them a stiff lecture, and made them come up with their OWN rescue plan, involving mergers and takeovers and actually identifying their mistakes. I have no doubt that Wall Street could have survived without bailouts, they just always will "try their luck" with conceited "saviour of the world" politicians.
FYI from a reader via email.
Bernard as an employer of several young guys in the construction industry who all have rather large mortgages (by my standards) why cant we have a kiwi saver style saving scheme where instead of putting money every week into a share based or similar scheme , we have a mortgage based one where the employee and employee could pay into just like the others where they pay off their mortgage. This would of course be over and above what they would normally pay . This way we would also be paying back overseas debt....sure there would have to be rules in place so mortgages couldn’t be increased etc... This way the employee would also be getting a guaranteed return instead of not knowing what their nest egg would be in the future with the other saving schemes... Just a thought. Regards PeterPeter, no need for a government scheme costing taxpayer's money.
Your suggestion can be done by the employee setting up an extra automatic payment from his wage account into his mortgage account.
No need for government involvement in such a private and individual responsilbility.
FYI from a reader via email
Does a section of your readers always find exasperating your exhortations for the people to save more. What people and save what? Following the financially catastrophic Muldoon years and the even worse Rogernomics years, the assets of this country were sold to foreign buyers. Prebble smirking on TV: "I have 22 state assets to sell as soon as possible...ha, ha, ha!" Roger Douglas earnestly on TV: "The new owners will have the capital to invest in these assets. The taxpayer will see a very satisfying improvement of these assets." There were other proposterous statements of the value of foreign ownership of this country's assets. Even the dumbest of people could see that foreign owners bought those assets for one reason and that was for them to make as much money as could be made as quickly as possible. Roger Douglas: "Foreign owners will buy those assets to improve the quality of life of New Zealanders." Where are you Roger??? Let us hear you say those words again and then give us examples of such improvements. What followed was the disastrous rundown of those assets and then the buy back of vital assets to protect our lifestyle. You say "How can New Zealand rebalance its economy when our high value export sector is being demolished? We need a new plan." The new plan would be to nationalize those foreign owned assets. Remember when the banks were nationalized? Don't say it can't be done we have done it before. Then instead of $3 billion going to its Australian owners that profit would remain where it belongs and that is in this country. With your superior access to financial data why don't publish a list of foreign owned assets and how much profit each owner makes? Perhaps we will see in action the National Party's motto "Private profit, taxpayer debt." Banks and investment houses take the private profit and when things go wrong Key simply makes their mistakes a taxpayer debt. Meanwhile is there anybody out there who is willing to form a political party to nationalize those foreign owned assets.??? HaroldI am glad Harold is writing emails instead of running the country. You left wing loonies are very good at idealology and but cr@p at understand economics 101.
One quick way to bankruptcy as a country is to nationalise foreign owned assets, running it to ground because of lack of expertise and investment. An asset is only an asset if its run and invested properly, otherwise its a liability.
Take the telecommunication sector for example, a very capital investment heavy sector. Foreign companies like Vodafone and BT invested heavily in NZ after deregulation and still do. We have world class mobile networks from 3 different providers, two of them all created from foreign money. How can this have happened if it wasn't for deregulation of the telco sector?
Yes Harold, there are already political parties that will nationalise some of these assets, the Green Party and the Jim Anderton party.
um - wait till the drugs have worn off.
NZ rail was a result of private, overseas expertise and investment?
Spare me - and I'm not a left-winger
And what did we own as an asset with Telecom? Who do we pay the profits to collectively?
They weren't 'created from foreign money' for touchy-feely reasons, they were set up to make a profit from............us.
Let me guess 'Hard Worker' - you also thing Climate Change is a hoax (it would impact your hip-pocket, therefore it can't be), don't accept Peak Oil, and think any Limits to Growth are nonsense.
So according to your thinking, Venezuela should be an economic powerhouse today?
Iran should not be importing its own petrol?
Kicking out foreign investors and stealing the private sector's assets does have consequences. Hard worker is right about you lefties being crap at Econ 101.
you have trouble listening, don't you.
I didn't say anything about 'economic powerhouses', and I never have.
and I DON'T TYPECAST AS A LEFTIE.
Understand?
I'm a phsics studier who realised, as did Hubbert a long generation before, that the game was unsustainable.
It doesn't alter the fact, that rail (one of the things that we need to address the future) was let to run down in private foreign ownership. It may well be let to run down in the tenure of the curent govt too.
And you don't understand that Rail in NZ never is going to break even regardless of who owns it, unless we get many millions more people, or scale the whole system back to 2 essential lines?
Do you not see that something that needs a billion dollars a year in subsidies is not "sustainable"? Even environmentally, it is not as sustainable as a system that does not need subsidies.
Everything you are saying on here, typecasts to me as a typical leftwing Greenie who does not understand econ101 (none of them do). And I am discovering that that goes for a lot of scientists too.
Even when I am trying to give you the benefit of the doubt and recast you as a log cabin libertarian, you disappoint me. If you can't see that rails CAN be worse for resources and the environment than roads, and that profits, break even, and the need for subsidies are actually prima facie measures of RESOURCE efficiency, then you are indeed just another ideologically driven ignorant leftwing Green.
Kunst, read Alain Bertaud's "The Costs of Utopia", and William Wheaton's "Commuting, Ricardian Rents, and Housing Appreciation in Cities With Dispersed Jobs and Mixed Land Use".
But hey, if you understand this stuff, you are ahead even of many economists. The econ profession has failed us dismally on the subject of land use and transport today. Nobody bothers to study the world's few real experts like the 2 above, and Peter Gordon, and Randall Crane, and John Quigley, and Ed Glaeser and several more I could name.
The bottom line: 500,000 people within an average 15 minutes away from employment "cores" by car, is more efficient than 500,000 people within an average 60 minutes (door to door) of a single urban core by train.
The former USSR tried the latter model. If you think "auto dependency" was bad for the environment, read Bertaud on the results of the USSR's urban planning experiment.
The most efficient form of transport system in the world, is a completely free market one - jitneys, dollar vans, owner drivers, ride sharing, car pooling. The efficiency losses involved in public monopolies is so staggering as to completely undermine their case in terms of "sustainability".
The most efficient urban form is one with the most mixed uses of land and the best inter-connectivity between nodes. "Zoning" is the main cause of auto-dependence and long commutes. There was a strong social consensus in favour of strong zoning 50 years ago. Now the planning profession wants to put the genie back into the bottle.
Resource doomsayers need to be consistent about the viability of ALL aspects of the status quo. If we really are going to run out of resources, or at least of cheap energy, it is ridiculous to assume that the urban core's existing jobs structure is going to be viable, and that anyone at all will still need or want to travel there daily. I think it quite likely that a future generation of urban planners is going to curse the current one for their misguidedness (except they, too, will try to blame "the free market"). I see the most viable future IF we cannot handle oil price rises with technology and substitutes, as a LOW density one.
Roads are made from oil. What part of peak oil don't you understand?
Econ 101 says that at a certain price, a substitute is found.
It fails to ascertain that energy is different - in that all things need it.
And it fails to understand that without energy, nothing happens.
nothing.
whatever.
zilch. nada,
f-all.
So Econ 101 was like there being a heaven above the bright blue sky - a flawed hypothesis put to rest by reality. Sadly - and contrary to you comment - the business news reporters are all products of the same school.
(I almost added 'of thought'. silly me)
Do rails and high rise buildings not need energy? Do thousands of bureaucratic jobs not need thousands of energy-using get-hands-dirty jobs to create the wealth necessary to pay the wages?
Here is where I think you fail to grasp how Econ 101 has worked in practice.
Malthus said that population growth is exponential but food production is linear. You are saying something similar, only regarding oil and its substitutes.
The USE of energy and its substitution, Powerdownkiwi, has involved and continues to involve, exponential gains in efficiency. This is NOT a "linear" question at all. I find Reisman's thesis that we will never run out of resources at all, quite convincing. I am aware that most people probably don't, but "most people" are shallow thinkers. Leftwingers and Greens are just deficient in some areas of their faculties, full stop.
The questions you are touching on are really moral-religious ones. I think I get the point now, that you are not talking about "economic powerhouses" at all. You actually APPROVE of people like Castro and Chavez because of the "great leap backwards" they have imposed on their people completely unintentionally. Communism always promised MATERIAL PLENTY for all, which turned out to be a lie. Now, the Commies fall-back position is that "our ideas have ultimately proved better for the environment".
This is actually nonsense in terms of "environmental impact per unit of GDP". Communism's environmental impact, IF IT IS LOWER, is only because production is so low that people are starving to death, or nearly.
Here is where the moral-religious question comes to a head. It seems to me that there is a class of people who wishes to impose the suffering and death on humanity NOW "just in case" our descendants were going to have to suffer and die because we'd used all the resources. In the face of this, I pose the question: is it right to torture a terrorist to save a city?
Reisman is very strong about this. He says, and I agree with him, that it is MORAL to just continue to allow the free market to provide more and more efficient ways to use resources, and more and better substitutes; and one day, if people suffer and die due to resource depletion, this is no less an "act of nature" than a Tsunami or a volcanic eruption. "Pre-emptive" imposition of suffering and death is IMMORAL, and those imposing it would be tyrants.
Theodore Dalrymple said something like this. When he was young, he found "the free market" way of rationing scarce resources distasteful; until he had travelled widely and seen every ALTERNATIVE way of rationing resources. He said nothing demeans humanity so much as having to grovel to local Kommisars for your ration, wheras if you can work and earn and trade and buy, you at least have the dignity of knowing you did your best to keep yourself alive.
You're a mile away. With luck you're on a different planet.
I had the balls to apologise to my kids, for being part of a generation that took more than it's share - and that doubled it's numbers in my lifetime (the first time that had happened in a human lifetime - think about it). I now make sure I spend a part of each day making things better - physically and/or socially.
If you don't feel responsible for your impact on others, or on the planet, that of course is a matter for you and your conscience.
From where I sit, you're duck-shoving your responsibility, and that has to be one of the saddest epitaphs I can imagine.
Ultimately, reduction of the human population will happen, bigtime. You seriously think 'letting it happen' is better than attempting a soft landing?
The only way to weasel out of that one would be to pretend there were no limits. Why don't you test that one. Start walking in a straight line.
There are no limits ! I have the book " Unlimited Power " by an electrical expert in the USA , Anthony Anthony . Bucket loads of the stuff to go around , unlimited .
Now as for walking in a straight line ............. Is that betore or after we snort the white-powder that we bribed the Pulis to share with us ?
Can't quite remember how this one ends...
The 2 options are: let it happen
OR, YOU pull the trigger - bang - you just killed someone, his blood is all over you - "to save others". Millions of people, rivers of blood. To save "future millions".
I'll run with "letting it happen". More than that, I'll run with "humanity doing its best with its brains" to make it better. This is an extension of Dr Dalrymple's argument: there is more dignity in doing your best to provide for yourself, even if you fail, than there is in prostrating yourself before the boots of some Kommissar and ending up being starved to death anyway BECAUSE OF INHERENT FLAWS IN THE IDEOLOGY THAT DROVE THE KOMMISSAR SYSTEM.
And as Gummy points out too (thanks Gummy), there IS a rational, scientific, intellectual case to be made that there ARE no limits. I will run with that gamble, rather than advocate mass murder, or the prostration of my descendants to mad scientists and Kommisars "just in case". I'll run with the chances of free humanity and their brain power to "make it better"; ANY DAY. "Planned economies" ALWAYS bring on and maximise the very disaster they were alleged to prevent.
We have the example of Communism, that claimed it would bring "material plenty for all" and delivered the opposite. I predict that a "planned economy" with the aim of "saving the environment", will DESTROY the environment. Humanity's capacity for delusion (again) really is that serious. Do you know what the "land area footprint per person' of a hunter gatherer society is? Did free market capitalism "desertify" Australia centuries ago?
Interesting economics study , Venezuela . Prior to Hugo Chavez nationalizing all assets , and biffing the foreign infidels out with just pennies for their businesses , the country was a net exporter of cement . Holcim earnt alot of export revenue for Venezuela . Just 3 years later , under state control , the industry has collapsed , and Venezuela is now a net importer of cement . ................ Just 3 eensy teensy years for the state central planners to bugger up what was a profitable industry , that they had stolen .
So if you want to reduce borrowing for property, maybe it's about time they got serious about making new housing more affordable (and I don't mean those stupid cash handouts).
Rather than just more taxes on property, that will only have the effect of making even less houses get built.
Property investors have been very quiet for basically the whole year, so this years borrowing at least, must be due to mainly home buyers rather than investors.
Maybe it's about time every new subdivision didn't have all these rules around them that guarantee every house in them is going to be way above what is an affordable house.
Did most new houses 30 years ago have 2 bathrooms, a double garage, and four bedrooms? nothing like it I would think.
The pigs at the trough get more!
"An increase to MPs' salaries is almost inevitable if the Prime Minister's bid to get rid of their foreign-travel perks is successful." herald.
Why hasn't Key got the guts to chop the perks AND chop the bloody salaries as well. Plenty of money for the pigs and other members of the old boys club....snouts in the trough...
Come on Goofy....use your pudding....give the public a firm unconditional 'promise' that a new Labour govt will cut all the perks and cut all mps 'pay' by 10% as soon as it takes office and get rid of the higher salaries commission. Freeze the pay at that level and then index it to the average wage!..........show some guts Goofy........show us you are different.......chop the bloated civil service pay packs back to match the new mp pay and index them to remain there.
"Area school teachers across the country will begin a series of paid union meetings today to consider a worse offer than that presented to their primary and secondary colleagues." only by cutting the salaries of the lower ranks can the pigs at the trough ensure a fat pay rise for themselves.....
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