We need 2 debt-shy curmudgeons

Why John Key's relaxed approach to growing public debt is dangerous and why Bill English should help him embrace the curmudgeon within

17th Dec 10, 9:13pm by Bernard Hickey

<p> Statler and Waldorf from the Muppets were renowned curmudgeons.</p>

By Bernard Hickey

The young have a curiously relaxed attitude to debt.

Perhaps it's naivety or simple confidence.

Debt seems much less worrying when you believe you will be able to work forever and you can feel your wages rising almost daily. As the bank ads suggest, just imagine the 'futures to be created' and the 'places you'll go' It's easy to imagine that nothing can go wrong.

Getting sick is something old people do. Getting pregnant or made redundant is something happens to other people.

Everything is on the up and the prospect of ever actually having to repay the debt seems forever away, particular when price and wage inflation will mean it's not worth nearly as much in 20 or 25 years time.

Debt is a young person's game.

It's only as the intrusions of middle and later age set in do we realise the dangers of debt. Unplanned pregnancies are great disrupters of plans. Illness or the needs of aged parents complicate matters. Children always seem to cost more time and money than you'd imagine.

Restructurings and redundancies start to get a bit nerve-wracking once any borrower hits middle age. The scar tissue of life starts to build up, making any borrower more wary of yet more debt.

Borrowers become much more aware of the vulnerabilities of life and of the need to have cushions and backup plans as they hit middle age. They become aware that flexibility is crucial and high debt reduces flexibility.

It forces any borrower to make decisions based on the needs of the debt, rather than the person. The New Zealand government seems to be taking a young man's approach to debt at the moment and this is a dangerous thing to do as we age not-so-gracefully in an increasingly volatile economic world.

It's no coincidence that our Prime Minister is the youngest in our history.

He has had an unblemished track record of ever onwards and upwards through the ranks and pay scales.

John Key has an admirably sunny and forward looking outlook on life. It is the attitude of a young man. He inherited a low public debt and knows he can use that cushion in the short term to avoid some short term political and economic pain. It's worth contrasting Key's attitude with that of former Finance Minister Michael Cullen.

The Labour veteran's approach was forged through the crises of 1984 and 1990 when the New Zealand government had too much debt and had to make some ugly choices. Dr Cullen used most of his time in power from 1999 to 2008 to repay that debt.

He was overwhelmed in the last three years by his colleagues' desire to be re-elected, but oversaw a massive amount of debt repayment through the good times. At times he seemed irrationally opposed to spending some of the windfalls. That's because he was a middle-aged politician with a middle-aged approach to debt.

The worse than expected budget deficit revealed this week should have been a wake up call.

Buried within the mountain of paper was news of a NZ$10.5 billion increase in New Zealand's borrowing programme over the next three years.

We are now borrowing almost NZ$300 million a week.

We are increasing our net foreign debt at a time when countries with similar levels of debt to us are being punished.

So far we have avoided the bond market vigilantes because most of that debt is bank debt backed by Australian-guaranteed banks.

But these animal spirits of the markets are dangerous things. They can turn on the vulnerable in an instant.

And we have many of the vulnerabilities of the middle aged.

We are ageing quickly with all the sickness and pension costs that implies. We should actually be building our nest egg right now. Not running it down.

New Zealand's government needs to take a more middle aged approach to its finances. It needs to rediscover the curmudgeon within. Bill English has something of that curmudgeonly air about him. He's had a few setbacks and saw up close and personal the dangers of too much debt during the Richardson era.

Let's hope the finance minister can 'age' our prime minister before the May 2011 budget and the November 2011 election.

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62 Comments

by Kunst | 17th Dec 10, 10:24pm 1292577875

I see Bern-hard, I don’t mind, you calling me a “Curmudgeon”

Looking into New Zealand’s economic and financial landscape, I would have sacked the government by now – but at least and explained why a number of times - I would have sacked not performing - Brownlee and Joyce. More critics must be applied from the media and the public. We are politically far too friendly. Grow up New Zealand before it is too late. We need urgently culture changes.

Why is the government not pushing for replacement of e.g. stupid/ violent programs on national TV stations by political forums.

PM – why is your minister Coleman not organising once a month during prime time the broadcasting of a “National Forum” ? An interesting program from a studio (low cost/ high viewing figures) with politicians answering questions from the audience ? Why not have publicly a 2 hours debate with politicians/ ministers about an issue of national interest ? Now in difficult times and frustration growing, why are our politicians increasingly dissociate from the public in stead of seeking support/ ideas from our society ? Why does nothing change ?

by Kunst | 18th Dec 10, 11:40am 1292625608

...and living in a society struggling with too much consumerism, violence, crime, alcohol and people killed on the roads - why PM and Minister Coleman are you allowing TV programs involving, even supporting such negative elements mostly broadcasted on prime time ? Why not make changes for a better NZ, broadcasting positive entertaining and educational programmes ?

Although you are talking about changes in practice nothing has been done. This is just another fact of many where you and your team are underperforming.

by Ant Manelope | 17th Dec 10, 10:38pm 1292578681

I agree Bernard. The crown must recognize that as individuals falter in their ability to repay the banks, they will also falter in their ability to be taxed. As you and others have discussed, NZ is under a debt load as bad as the PIIGS. While that is at the moment on the shoulders of private persons severally, it doesn't bode well for tax revenue.

The budget defecit was shocking and actually made me a little sick.

by Kunst | 17th Dec 10, 10:41pm 1292578907

The system is rotten to the core we need a more philosophical approach to life and business - a restart.

Small countries have to think small, but with bigger ideas. Scale back NZ ! We need to think big : A tailor- made “100%NZpure Economy” the world leaders of sustainability - to make real and honest money for us and the next generation.

by Gummy Bear Hero | 17th Dec 10, 11:03pm 1292580229

Bah , hum-bug ! Uncle Gummy says that you've all been naughty boys and girls this year , again , havn't you . Greedy little gluttons , wasting your pocket munny on rental properties , dairy farms , flat screen TV's , SUV's .............

No Christovmas pressies for any of you this year . You must be sober, upright , and responsible . Tighten your belts . Pay off debts . Don't lie nor steal . Prudence and honesty , at all costs .

............. Not you 122 special elite kiddies in the Wellington Play Centre , of course . Carry on regardless . Rort , snort and rip . ............ You are entitled !

by steven | 18th Dec 10, 8:31am 1292614278

The MPs are not all like that, the Green's Ive come across seem considerably better....but it gets them no votes because most MPs are a mirror reflection of the voters....

What they have not seen yet, or if have are not saying is the cake is going to get smaller....so those who want to grow their share will have to make sure others get even smaller, the problem with that is its fewer v the many....and I think the many are waking up....

....this isnt a recipe for a quiet time in any land.

regards

by Mike B | 18th Dec 10, 3:40am 1292596848

Why we, along with most of Europe have so much debt and unable to get rid of it.

Supply - is the sum of all goods and services that have been made ready for exchanged to demand.

Demand - is the sum of all the money that is available for exchanged to supply.

Supply and Demand - is the relationship of how the two react with each other.

GDP (Gross Domestic Product) - is the total annual value (not volume) of supply which has been satisfied by demand.

Growth - is a measure of either value or volume and can be either posative or negative and can be further influenced by a change in the volume mix.

Shopper - is a person or identity that has a desire for demand.

Consumer - is a person or identity that has had a demand satisfied.

In order for an economy to be in equilibrium supply and demand must be in equilibrium. If demand is greater than supply then prices go up which is called inflation. If supply is greater than demand then prices go down which is called deflation.

For economic stability it is important to maintain equilibrium between supply and demand. Therefore pressures put on one without a counterbalance can upset this equilibrium. Governments are notorious at upsetting this balance by putting ever increasing pressures on supply without a counterbalance on demand. For example GST is, as it says, a goods and services or supply tax while no such taxes apply to demand. Likewise producers of supply are burdened with compliance costs, plus ACC levies, PAYE, company taxes and so on. All of these government actions mean that demand (money supply) must increase in order to cover those costs and maintain equilibrium. As we can see, increasing GST increases the total annual value of supply (GDP) and we say that the economy has grown when in fact we may have only increased the value of supply by the tax content. Such an increase in the supply side is an increase in cost without an increase in value and so has the same effect as inflation. Other forces on supply include shortages of oil and other resources.

When a country opens it's boarders to global trade, it has the same effect as opening up a massive new factory, the size of a country, (China) that produces ten times or more of everything that we already produce and all to compete with our own market. Suddenly the supply side is increased many thousands of times so the demand side (money supply) has to be increased many thousands of times and there is no inflation because demand has been brought into line with supply. As the people do not have the cash for all of this supply the banks dish out the loans.

If exports do not increase proportionately, then the outcome can only be massive debt and a trade deficit. As this all takes place the supply and demand relationship is immediately destroyed. Trying to maintain equilibrium by using the OCR (official cash rate) becomes futile. In fact any attempt at maintaining equilibrium using supply, when supply is so huge, is futile.

If demand for locally produced goods and services decreases, it causes normal reccesionary pressures locally. Whereas if demand for inported goods and services decreases, it causes recessionary pressure on some other country and to some extent on local importers and distributers.

As we can see, there needs to be a shift from controlling inflation, to controlling debt and trade deficits if we hope to continue trading with other countries. In the first instance, the government should inform the people as to what is the maximum total debt they are perepared to accept and the steps that will be taken to ensure that it is not exceeded.

Then a new aproach is needed

by The Real The Man | 18th Dec 10, 7:55am 1292612131

Thank goodnes you are here to explain it all to us! It's not as if we've all been saying the exact same stuff for years or anything.

by JB | 18th Dec 10, 5:33am 1292603619

BH, Brilliant as usual !

Debt is a four letter word and as such should be avoided at all costs.

Buffett has built his fortune without a single dollar of debt on Berkshire Hathaway's own balance sheet - so it's hard to argue it's a component of value creation.

The simple fact of the matter is we are living, and encouraged by all around us, to live beyond our means.

Now that Ireland's been wacked very hard by Moody's this am - we are next in the firing line and it is no coincidence that NZ's market debt has jumped by 0.3 % overnight.

This is all going to end in sadness.

It's all avoidable - but a solution does not involve borrowing another $ 15.6 B pa into the never never. It's the cash deficit that has to be refinanced.

Do we really believe we are going to surplus in 2016 ? Yeh Right ...

It will be a sad end to what was a wonderful little South Pacific nirvana but entirely self inflicted.

by steven | 18th Dec 10, 8:42am 1292614936

2016, no........pigs might fly.......

No one will be......economies have to grow to pay off the debt and with oil at $90US, economies wont....oil has to be <$50 thats never happening again, bar short term collapses.....JK cant see that.....the man in charge thinks we should be growing at 6%.....and is mystified we are not....

sadness......yes

Avoidable.....yes.....will we.....no........we have a yes culture.....those who say yes to the voters every whim and need get voted in......

I mean if you are a voter and I stood as a Pollie and I said are about to have a hard 30 years of grief and graft, vote for me and I'll do my best.....and the other Pollies said no its fine this is just a little glitch, he's negative all will be well. Vote for us and life will carry on and we'll grow and prosper and all will be happy, no one will starve, the developing world will live like us.......

So who would ppl vote for?

I reckon I'd do worse than the Libertarians....not even get their 1000 votes........I think my wife might vote for me...hmmm maybe.....so 2 votes......

regards

by Miggle | 18th Dec 10, 7:51am 1292611907

There is a saying that if you think about it sums up the situation an that is : "ah well"
It infers-
1) We should of done better.
2) We know we have/ are not doing what we should.
3) We most probably will not do anything about it.
4) We know there will be ramifications but we are willing not to think of them.

by The Real The Man | 18th Dec 10, 8:08am 1292612910

Bulls eye.

The only way NZ is going to survive economically is by drastically cutting spending and increasing taxes but noone wants to do this and no one will do this and there will be the worst election defeat in history for whatever govt which grows some balls and tries to do the necessary.

Gummy bear hero and Wolly will shriek like raped chimps about 'socialism' and having to pay their fair share for once instead of just taking all the time.

The PIs and other clueless dribbling idiots will weep about how people aren't promoting and supporting the property bubble the way it ought to be promoted and supported because the only thing they care about is the property bubble, because they don't understand anything else. Which is pretty funny when you think how PIs don't even understand the property market! ( If they did there would never have even been a property bubble in the first place. )

Obscene greed and selfishness characterise NZ's current dominant generation.

by steven | 18th Dec 10, 8:22am 1292613743

First para....you only have to look at europe to see this is the case (who are hopefully ahead of us in this mess so maybe our pollies can learn by observation)....no Pollie is taking tough mediecene...those that try even a bit are seeing riots....so its the kick the can down the road scenario....the problem wit that is it assumes the future will be better and can pay....it cant IMHO. Pollies react, they can only do this because if the voters (who are shallow beasts) cant see a benefit the Pollie is toast....so a Pollie who fixes a problem so it never happens gets no kuedos....I did a y2k project managers job....we fixed the problems so nothing happened....then I had morons saying oh look y2k was a non-event....On the other hand a pollie who fixes the crisis is a great man/woman.......

GBH I agree,.....Wolly not an anti-socialist, an anti-moron IMHO....

The BBs have only known ever better success and more...50+ years of better......now its 30 if not 50 years of less....

regards

by Lucky Basket | 18th Dec 10, 12:37pm 1292629077

"Wolly not an anti-socialist..."

Bloody hell!

Wally/Wolly has been on Bernard's site all day, every day, for years posting apopleptic tirades blaming socialists for absolutely everything bad , and absolutely everything bad on socialists!

Or are we talking about some other Wolly?

by KW John | 18th Dec 10, 12:43pm 1292629393

Your confusing Socialism with Apathy.

by Gummy Bear Hero | 18th Dec 10, 12:56pm 1292630210

Ultimately socialism and apathy become the same thing , as the former USSR discovered .

[ And for anyone who doesn't like Wolly's opinions , .....just don't read them ! Or go elsewhere ; it's a wonderfully big and amazing world .......... discover it , have some fun .......... ]

by Lucky Basket | 18th Dec 10, 1:26pm 1292631976

"Your confusing Socialism with apathy" what?

Wrong adjective? Can't punctuate?

However, if you bother to check Wolly's posting history here at interest.co.nz, you'll discover that he has devoted his (online) life to screaming hysterically about the Evil that is Socialism.

by Wolly | 18th Dec 10, 1:52pm 1292633540

Bollocks LB....I enjoy putting the boot into almost every govt and politician....read and learn from all my previous posts!....but I reserve a special kick in the bum for bank bosses, not the poor buggers working for them mind.

So off you go and correct your comment. I have not "devoted" myself to the evil that is socialism.

by puketepapa | 18th Dec 10, 1:05pm 1292630747

BH should give wolly his own "personal scribble page" so his many thoughts on everything are presented together in a meaningful collective

by steven | 18th Dec 10, 8:07am 1292612874

"[John Key] He has had an unblemished track record of ever onwards and upwards through the ranks and pay scales. John Key has an admirably sunny and forward looking outlook on life. It is the attitude of a young man. "

Maybe its certainly one of a yes man....(in part).

Many of my managers work/think the same way....the problem is as long as you move up the scale you have this can do anything attitude because whether luck and/or ability thats how its been....it also helps greatly to be a yes man....yes men get promoted.....those above assume when you say yes that it can be done because you know how to do it...not in actual fact your a good salesman and have no clue.

No, I agree it is an attitude of someone brought up with a totally postitive attitude and a career of success and as you said little "scar tissue of life" he has no concept getting wiped out, getting up and starting again...and again....

I have a negative attitude (personally I think Im a realist) probably because I have a lot of scar tissue....Ive been made redudundant 4 times, first at 21 after spending 4 years training for something I wanted to do since 14.....that is and was a huge shock....I then spend 4 years living on a weekly pay packet that had to do overtime just to pay the bills, easily the worst (except for those being un-employed) years of my life (I hope). Finally I moved to another job got 10 years of doing OK, then 8 years of poor money and getting made redundant 3 times....over 2 years un-employed...in that time....moving to different cities and even different countries to get work....so my attitude is one of caution....I know there are risks and I know the impacts....I know ppl will rip you off....so the answer is get educated in the "problem" so you know more than the next guy and you know who's giving a line of bullsh*t and who too trust........

Hence why I am so forthright here at times....lots of bull and rip off merchants out there in economicsa nd pollie land that has to be fixed (but it wont be).....its pretty obvious to me that Pollies are the ultimate in yes men and the ultimate in thick skins....JK is just one more....when it comes to the crunch Im not convinced he will hold up....I think he could fold....but I think BE is made of sterner stuff.......

regards

by The Real The Man | 18th Dec 10, 8:15am 1292613306

'Many of my managers work/think the same way....the problem is as long as you move up the scale you have this can do anything attitude because whether luck and/or ability thats how its been....it also helps greatly to be a yes man....yes men get promoted.....those above assume when you say yes that it can be done because you know how to do it...not in actual fact your a good salesman and have no clue.'

Yes, managers are people who have dedicated their work life to climbing the ladder and they don't understand why other people have no interest in doing the same. So they promote those who do try to climb it and punish those who don't, so it automatically becomes a self perpetuating attitude.

Look at how many managers and people in senior positions are very poor managers, and who were just as bad at the jobs they were promoted above. One of the first things done by a company which has self-created a disproportionately huge management structure is to reduce the number of people below them, the ones who do all the actual work. And the first of those people 'let go' are always the ones who are most skilled and best at the job, because they are better than the managers and that is unacceptable, so those workers live with a target on their back.

This is something we've all seen many times and a lot of people just assume it can't be fixed and so they say 'if you can't beat them, join them' and try to climb the ladder as well.

by Wolly | 18th Dec 10, 8:34am 1292614447

Sorry.... but the only event that will cause this govt to change direction is for the ratings agencies to put the boot in. The bond mob are our only hope. Funny isn't it!

by steven | 18th Dec 10, 8:55am 1292615747

But......you assume the new direction will be the right one......what will happen is as per Europe, Greece etc, huge sacrifices by the workers....no hair cuts by those who can most afford those haircuts.......at least for now......but I think it will change....

Why do you think JK wants a tax free zone for money managed here but not invested here?

and why is it urgent?

The first I can see as an idea....of some merit.....what raises the hairs on the back of my neck is the urgent bit......the advantage to NZ doing this is small IMHO, its not worth JK's time as PM....maybe a few hundred jobs, maybe say a few thousand, 10,000? no........it doesnt justify the "urgent" bit.... 100,000 jobs+ yes....that's something to run at....

What does justify the urgent bit is JK's financial bretheren looking for safe havens in desperation....because they see the probable outcome of this mess....Pollies saying haircuts will be taken......in europe....next stage windfall taxes, huge bonus taxes say 90%..accounts being frozen while witch hunts take place and then the money confiscated.....all by desperate Pollies because the tax payer will be broke....today and in the future....so JK is looking to to become a safe haven.....

By all means show me another scenario justifying this....I'm all ears...I cant see one.

regards

by Wolly | 18th Dec 10, 12:31pm 1292628666

Let me have a thunk steven....why would JK be so keen...maybe he really does just want to attract jobs for staff doing the fx deals and corporate rorts...I do not see NZ being allowed to operate as a tax and bonus haven given the amount of thieving that will be done by so many lying govts. They would soon crush NZ. Perhaps Key is just pissed off that the beaurocracy can make a simple task last a whole three years.

by KW John | 18th Dec 10, 12:39pm 1292629176

After all ... its just one idea - there must be many more - but why do we rely on government for them? 'Think Big' suits us in so many ways...

by Bernard Hickey | 19th Dec 10, 10:35am 1292708131

I'm thinking of writing a Christmas wish letter to Santa.

Please can we have a credit rating downgrade for Christmas?

I'm sort of not kidding.

cheers

Bernard

by Wolly | 19th Dec 10, 11:02am 1292709766

Simple quesion really.....Can this govt tweak and fiddle its way to rebalancing an economy dependent on property ponzi schemes in the rural and urban sectors....shifting it to an export driven nation of savers who act prudently and with thrift throughout their lives...leading to fiscal surpluses and lower taxes and seeing an end to the financial domination by the trading banks...with a smaller state machine sucking a decreasing amount of wealth from the new productive sectors.........................?

Not a chance in hell.......pigs will evolve wings and fly first.

by Gummy Bear Hero | 19th Dec 10, 11:34am 1292711641

Bernard : Do a midnight call to the ratings agencies . Tell them you live in Madoff County . And you've heard that a ponzi scheme involving 4 million people is being operated in the property market . Give them Auckland's longitude & latitude ............... They might discover us . Abel Tasman did , with less information to go on .

[ no article in the NZ Harold today , big guy ? ]

by Number 6 | 19th Dec 10, 11:43am 1292712196

You mean, you want the names of Julian Assange and Bernard Hickey to mentioned in the same breath?

by Gummy Bear Hero | 19th Dec 10, 11:57am 1292713072

Ha !........ In Bernard's dreams !!!

by Wolly | 18th Dec 10, 12:24pm 1292628259

" Ken Rogoff, who wrote the book This Time is Different. Here is a quote from Ken:

"I would say that virtually every country in the world is grappling right now with how fast we get out of our fiscal stimulus and how much do we worry about this longer term problem of debt. And I fear that all together too many countries will wait too long,"

That's us..... right Mr English?

http://www.marketoracle.co.uk/Article25042.html

by philthy | 18th Dec 10, 12:58pm 1292630311

Those tax cuts were a complete and utter joke, even though being in the top tax rate they benefit me, I'm still against borrowing to support them.
If they had done all the cutting first then found they had the money in the coffers to do them it would have been better, but they have done it the other way around, and without the cutting of expenditure.

by Gummy Bear Hero | 18th Dec 10, 1:22pm 1292631742

Yes , if they'd scrapped that idiotic WFF , then everyone could have had tax-cuts ............ or as I like to think of it , more of your own munny to keep ! ......... Who earnt it ?

by Wolly | 18th Dec 10, 1:28pm 1292632095

You just can't let the peasants have too much of their own money Gummy...not when there's a Kiwisaver empire to build....then along came the compulsion....it'll be gimme gimme gummy before very long.

by Wolly | 18th Dec 10, 1:24pm 1292631890

Cunliffe has slipped back under a rock to plan his run on the leadership of the Labour Caucus...this could be fun....Goofy will have to work hard to prove he hasn't been pocketing the allowances...so hard in fact he might fail to see the knife. Will he be gone in the new year?

by Gummy Bear Hero | 18th Dec 10, 1:33pm 1292632400

Julia Gillard proved that you can dump the ruddy useless leader , and still go on to win the next election , within a 6 month time frame ............... Go Cunny ! Would he keep Goofy's deputy , Corporal Klinger , or replace her with some other low flying worm burning scudder ..........Jacinda " Press Release " Ardern !

by Haggis Hague | 18th Dec 10, 11:46pm 1292669170

Bernard

This is half an article. Where are your red strokes through the balance sheet?

by Bernard Hickey | 19th Dec 10, 10:36am 1292708205

Good point. Hang in there.

I'm writing a '10 ways to reduce the deficit' story as we speak

cheers

Bernard

by Gummy Bear Hero | 19th Dec 10, 12:38am 1292672290

S&P has done Wild Bill ( and us ) a great favour ! The " down-grade " gives the Nats a mandate to make the changes necessary . The electorially unpalatable changes that JK is too gutless to stomach . They can go into the 2011 election on a platform of un-Cullenising the economy . And not before time , that we unravelled his seriously dopey vote bribing rubbish .

Patience . The pace of change is glacial . It won't happen over-night . But it will happen ............. if it helps , imagine Rachel Hunter ( naked ) advancing toward you with a tube of Pantene shampoo ........... ah Rachel , knife & fork material ............. hmmmmmmmmmmmmm !

by Gummy Bear Hero | 19th Dec 10, 1:03am 1292673793

Hello Gerald : I suspect that " power-brokers " within the National party , and a few outsiders ( Roger Kerr perhaps , as one example ) , will see to it that National go into the 2011 election on a reform or perish platform . No more pandering to the social welfarists .

JK has gotta get busy on altering the path of the NZ-Debtanic , or it will be " man overboard " . And that would be a pity . After the snarling bitchiness of Clark & Cullen , it is pleasant to have a P.M. of manners and decorum .

by Gummy Bear Hero | 19th Dec 10, 1:18am 1292674706

True , but that is still just a fraction of the debt owed to Aussie banks by Kiwi holders of residential house mortgages . And dairy farm debt is well over those projections of government in-debteness , too .

We have been silly girls and boys ! And Uncle Bolly didn't act quick enough to prick the housing bubble . And Uncle Cullen feigned sleep , to gloss over it all , and the finance company debacle . And Goofy sat in a corner muttering , " the flat , my precious , we loves my flat .......... oooooh yes , precious " . Plane Jane Diplock was flitting the globe , at our expense , blithely unawares of any problems at home , the Remy Martin goggles methinks !

So many to blame . So many " experts " ........ and all unaccountable , all sailing off to safe and secure sinecures in other jurisdictions ......... The U.N. ............ Kiwi-Bank/NZ Post ............

And one lone voice , one dissenter , screaming for all to hear , from 1999 to 2010 ........ But no one in the halls of power paying any attention ........... One man railing against it all , a guy with as big a kahunas as America has cars , Mr GM himself .

by steven | 19th Dec 10, 9:10am 1292703018

Interesting that Paul Krugman still thinks the bond vigilanties are invisible...in the case of the US, yes......In all the other countries where the "invisible" bond vigilantes have called its taken 1 to 2 months I think to turn that country into a basket case....So while PK might be right on the USA Im not confident that such applies to any other country......

Does this mean NZ's Public debt is terminal? no not today, next year, maybe if we really do get a double dip, in 2015/6 I suspect so. NZ's private debt on the other hand could be....the problem I see is while the private debt gets reduced there is far less churn in the economy so the Govn collects far less tax...so its debt climbs....the only way sensibly out of this is to raise taxes, I will assume that National has done its best to cut Public waste....

Whats left is cut WFF or an actual service or cut public wages....the problem with that is it would shatter public confidence and there would be even less money being spent......even assuming the Govn could do it....

Clearly taxes have to rise in 2011 ( or 2012, at some point etc) to meet the short fall.....clearly earlier Govn's should have put money away for a rainy day.....neither did....Labour spent it and National reduced taxes.....neither was sensible....

We are starting to do the sensible thing from a bad position.....maybe too bad.....while there isnt the will....this one we can lay at the last Labour govn's door I think.....but National would have been no better.....Im p*ssed that I have no one worth voting for....

regards

by Number 6 | 19th Dec 10, 9:30am 1292704215

Maybe you should run the country, Gerald? I wonder how you would look after two years in the job? Worse: I wonder how the country would look under your stewardship! Capital letters will go a long way towards helping you fix our fiscal problems.....

by Justice | 19th Dec 10, 12:13pm 1292713988

Your opinion is pure speculation and assumption. Fact is Key is not solving the problem of NZ's debt. Blaming it on "one offs" is just complete bollocks and a pure cop-out. John & Bill take no responsibility for educating the masses in what is now affordable and what is not because they know the Truth might just hurt their next election hopes. Either way they are clearly weak and gutless. We need a government that is fiscally responsible and neither Labour or National are. (p.s. that is not a vote for the Greens either)

by Lucky Basket | 19th Dec 10, 12:36pm 1292715398

Sometimes I wonder if conditions will reach a point where govt becomes largely irrelevant, because the rest of us will be completely ignoring it as we do what needs to be done to survive.

by Number 6 | 19th Dec 10, 10:59am 1292709553

Wrong tense, snippy: "..have dug...". The option of "stop digging" when in trouble has long since passed them both by! S&P will no doubt confirm that in the near future, thereby granting Bernard's Christmas Wish....

by Wolly | 19th Dec 10, 11:28am 1292711332

Time for a look into the crystal ball.....

The bank with the least exposure to the housing debt and bubble collapse....this bank stands to clean up in the market if only they can see the woods.

Buyers need and want the best of help to get the lowest price possible on a property. The first bank to step in to provide a first class service will win the market.

Buyers will opt to approach such a bank....they will pay for the service....a % based on the price savings below the cv. The fact that buyers are with one entity forces sellers to accept they have to deal with that buyer or maybe see their property go unsold.

The bank has the cost of providing the service which would be contracted out and fiscally neutral..but they would get the new mortgage trade....The other banks would be forced to follow suit but doing so invites an end to the property bubble and red ink in the balance sheet.

Imagine today if a new bank came into the market...determined to drive down the bubbles...they would own the market.

by Gummy Bear Hero | 19th Dec 10, 11:46am 1292712367

If you look into your crystal balls , the only bank to survive totally unscathed from the deflating of the property bubble in Oz & NZ , will be the Sperm Bank . ........... But they are responsible for creating a few " bubbles " too , you know !

We ought to support them in their effort to clean up the industry ; let us all pull together .

by KW John | 19th Dec 10, 1:44pm 1292719493

Wasn't it about this time last year that you suggested Kiwibank started it's own real estate agency Roger - doesn't time fly. Ties in with Wally's point now though...

by Gummy Bear Hero | 19th Dec 10, 2:13pm 1292721226

Well , I felt that as property is the only industry in NZ which grows , it is essential to our future . Kiwi Real Estate could offer a no fees service ( subsidised by the tax-payer , naturally ! ) . Bugger Harcourts , B & T , First National , and all those other racketeering sods . How dare they turn a profit out of our genetically encoded drive to trade rentals and dairy farms with one another .

Further , I mooted that bakeries such as Couplands , ought to be nationalized , to halt their profiteering at our knead for a daily loaf . A Kiwi Bakery in every suburb , making all the dough for the citizenry . A little folate could be dashed into every batch , to mass medicate the populence , as we require .

That builds a nice portfolio for the government , adding to their recently acquired petrol stations , train-set , air-line , and SCF .

by Lucky Basket | 19th Dec 10, 2:19pm 1292721568

An almost wholly unproductive industry and a drain on the economy in the long term. It only grows the same way govt depts did under Labour.

by Number 6 | 19th Dec 10, 11:37am 1292711862

You and me, snippy. After all, in all our wisdom, we put them there.......and guess what? We will put them there,again....

by Lucky Basket | 19th Dec 10, 12:46pm 1292716019

Maybe not.

Some of us voted for the Nats last time round because we believed we had little choice. It seemed as if they had to be better than Labour. But we were wrong. It turns out they're even worse.

National's starry-eyed fan club is no bigger than Labour's, so that means it was swing voters like me who handed them the election and as you can see many of the swing voters have already had enough of National.

Now I'm not suggesting I'm going to vote for Goff's mob next year, but I almost certainly won't be voting for National again, unless they are able to amaze everyone and pull their socks up in a mighty way between then and now.

Whatever happens, the next election will be yet another exercise in voting for the least worst option.

by Justice | 19th Dec 10, 12:05pm 1292713515

This kind of 'spin' does not help either. Anyone else read this load of crap?

http://www.stuff.co.nz/business/money/4469537/Debit-cards-don-t-deserve…

All they want is you to constantly use 'credit'

by lksteve | 19th Dec 10, 12:16pm 1292714193

I enjoyed this article, as I do all Bernard's writings.

This government is squandering New Zealand's fiscal reputation & borrowing on this scale will lead the country to ruin. As a stakeholder in New Zealand, a citizen & taxpayer, I decided some time ago that I was not getting a fair-go out of the tax system. I withdrew my support for this government in 2010 & jumped the ditch to Australia. We are law abiding people & we still have a not insignificant sum sitting on term deposit in a New Zealand bank. This sum was saved over a period of 7 years towards our first home. We did not want to borrow heavily & therefore were planning on at least a 50% or higher down payment. The high price of property relative to our earnings and in-fact, relative to average earnings meant that I was being very conservative when making offers on properties that were to be our first home. I simply did not want to overburden us both with debt. This is conservative thinking I know but that's the way I have always been. Even in my youth I did not borrow.

New Zealanders in general are not conservative like this. The property boom was & still is being driven by people happy to borrow to the hilt.

As I have personally seen, having relations & friends in both Ireland & the US, property markets do go down, sometimes dramatically.

This is a view which is highly unpopular in both New Zealand & here in Australia.

The clock is ticking for New Zealand, as it ticked loudly for both Ireland & the US. The Irish & the Americans buried their heads in the sand, as New Zealanders & to a certain extent Aussies are doing.

The New Zealand economy is now clearly hooked on foreign borrowings, whereas Australia has big holes in the ground where they get their money from. New Zealands financial position & the financial standing of its citizens who have borrowed to participate in the housing ponzi scheme is very serious. Prepare yourselves. An Irish Style austerity program is the only way to sort this out while there is still time, otherwise the country & its citizens will be declared bankrupt.

As for the government, they will have no choice. Foreign bond holders will be the ones making the decisions. Government's are merely puppet's of global financial markets.

by Justice | 19th Dec 10, 12:18pm 1292714281

If "recovery" ="just more debt" to our so-called political experts then we have a major problem WORLDWIDE!

There is NO recovery until the "debts" whether government or personal start going down.

by Justice | 19th Dec 10, 12:23pm 1292714602

In 2 years time NZ will be hearing the words "austerity" from our politicians

by Number 6 | 19th Dec 10, 1:18pm 1292717934

I doubt it will be as long as two years.

"Mum and dad" homeowners accounted for 24 percent of mortgagee sales in September, Mr Donald ( of Terralink ) said.... our data shows that it's increasingly ordinary Kiwi property owners losing their home. Sadly, this trend is likely to continue for as long as there is a sluggish economy."

by Lucky Basket | 19th Dec 10, 2:50pm 1292723403

That's what happens when you incur debt you cannot service.

by JimboJones | 20th Dec 10, 10:05am 1292792750

Bernard complimenting Cullen for getting our debt down - thought i'd never see the day!!

I personally think Cullen had it all right - pay off debt, save via the Cullen fund and Kiwisaver. National have undone all of his good work in just two years - built up public debt, stopped the Cullen fund, and dropped Kiwisaver from 4% to 2%. But at least we got some measly tax cuts!

by Gummy Bear Hero | 20th Dec 10, 11:23am 1292797425

Cullen also used the commodities boom as an opportunity to increase government expenditure by 50 % over his 9 years in power . We're stuck with the cost of that bloated state sector , and all the " packages " he developed to encourage swathes of the populence to vote for Labour . The GDP of the economy lagged the government's spendfest , by a wide margin . And still does .

by muzza | 20th Dec 10, 12:04pm 1292799878

The Key government seems to be very popular according to opinion polls. Would appear most think his cautious approach is the way to go. National are probably still smarting from the Ruth Richardson-Jennny Shipley times when their popularity (and effectiveness) declined markedly. And may be all those opinionated souls who are on national super should beware of any return to those times!