OnPoint: Everything has changed until 2014
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Just apropos of this, a good post by Johann Hari on why the UK (and by extension NZ) doesn’t really have a debt problem.
And references Paul Krugman who talks about 'The Confidence Fairy'.
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Thanks Rich of Observnz!
Have emailed this round several of the whanau - cheers -
nzlemming, in reply to
Great line in that, worth repeating:
It’s as if tomorrow you became so panicked about your mortgage that you decided to pay it all off in one year, by ceasing to buy food and water. You get sick, and your house gets repossessed.
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Craig Ranapia, in reply to
Just apropos of this, a good post by Johann Hari on why the UK (and by extension NZ) doesn’t really have a debt problem.
"By extension", Rich is bullshit. It's a very good polemic (and I haven't checked whether it actually stacks up), but I don't know whether it's a net contribution to worthwhile debate to take a specific response to events twelve thousand miles away and assume it says anything worthwhile about New Zealand.
Still, nice to know debt isn't a problem - or is it only a problem when Bill English does it?
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BTW, that's a serious question not trolling for a partisan shit-fight because does anyone else remember when Dick Cheney told the soon-to-be-fired Treasury Secretary Paul O'Neill that "deficits don't matter"? Funny how quickly that tune changed.
Now, if you want to say that "debt does matter, but priorities matter even more" I'm open to persuasion. I'm just getting a bad case of handwavium poisoning from the political-economist complex.
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nzlemming, in reply to
Still, nice to know debt isn’t a problem – or is it only a problem when Bill English does it?
Debt’s a problem only if you can’t repay it.
If you reduce your capacity to pay, then you’re making it a problem.
Your capacity to pay is reduced if you reduce your potential for income and increase your outgoings.
By cutting staff from the public services, English reduces the amount of tax they pay and increases the amount of welfare the government has to pay. More, by reducing government spending, he reduces the amount of money flowing through the economy, which has a flow on effect of reducing the amount of GST as well as income and company tax, companies go bankrupt, which increases the drain on welfare etc.It’s not just a problem when English does it, but he persists in doing it even when the likes of Stiglitz and Krugman point out that it’s going to have the opposite effect and when the “more with less” meme that National pushed under Richardson et al in the 90’s was such a singular failure. National did not leave office last time with a surplus, Labour did.
What Hari is pointing out is that Cameron is attempting to get an agenda for smaller government through under the lie of “debt is so bad we have to take extraordinary measures”. Hari points out that it’s no different from most of the last 250 years.
It’s already been pointed out that NZ public debt (i.e government debt) is actually quite low in comparison with other countries. It’s servicable. Where NZ’s debt problem lies is in private debt (i.e. citizen and corporate debt). Nothing English does to government spending is going to reduce that and might easily exacerbate that by removing a significant amount of economic activity that is enabling SME’s to service their debt.
It’s a splendid example of why “NZ Inc” is a myth – you can’t run a country the way you run a company. A company can cut staff to reduce its costs, but those costs move out of the isolated “local economy” of the company and into the wider economy as welfare payments. Companies can do that because the country can pick up the slack, if it has such a structure in place. Look at countries where they don’t have social welfare to see what happens when there is no-one to pick up that slack. A country has no-one else to pick up its internal slack, but that slack must be taken care of somehow. That becomes increased cost to the country.
Being debt free is better than having debt, if you’re happy to remain stable rather than grow (not advocating growth as a strategy, here, just saying). But having debt is not a bad thing in itself, or none of us would have mortgages. Having so much debt that you can’t even pay the interest on it is a bad thing. NZ is not there yet, and the public accounts are nowhere near that position, yet English is talking about the big, scary debt monster in order to achieve a bunch of things within the state sector that, ideologically, National always try to do, or say they want to do. Just like Cameron. Which is why it is not bullshit for Rich to say “by extension” – it doesn’t mean Camoron’s decisions extend to NZ, but his example does.
[ETA] That was a totally unintentional typo, but I think I'll leave it there. I can't believe I'm the first person to call him that.
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nzlemming, in reply to
Now, if you want to say that “debt does matter, but priorities matter even more” I’m open to persuasion.
It's not even about priorities vs debt - it's about doing all the wrong things to assist the economy because you're not looking at the examples and experts all around you.
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Andrew E, in reply to
Just apropos of this, a good post by Johann Hari on why the UK (and by extension NZ) doesn’t really have a debt problem.
Whatever he's done to configure his site, the browser I'm stuck with at work (IE8 on XP) treats every page on his site as a file to download, not read in a browser.
Grrrr... *grits teeth and makes a note to read article later*
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So Craig, the NZ economy obeys different, special rules to other nations?
I’d point out what I posted days ago – our government debt is the 7th lowest in the OECD. It’s lower than the US or UK – so, please explain how, if they don’t have a problem, why we do?
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Kumara Republic, in reply to
"New Zealand does not have a debt problem, we have a growth problem." - John Key, 2008.
And NZ does have a debt problem all right - credit cards, mortgages and what-have-you - largely private. But the only guaranteed solutions are either nanny statist or Icelandic/Irish in nature.
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Craig Ranapia, in reply to
So Craig, the NZ economy obeys different, special rules to other nations?
No, Rich – but it might be helpful to be a little cautious about making straight line extrapolations between New Zealand and other countries that exist in their own specific contexts. They do matter – unless you really think a large part of Australia’s economy isn’t a minerals sector New Zealand just can’t emulate no matter how much magical thinking goes on. (And anyone who thinks Oz is a low-tax paradise should share with the group how much stamp duty their paid on their house.)
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Sacha, in reply to
I haven't checked whether it actually stacks up
Yep
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Kumara Republic, in reply to
unless you really think a large part of Australia’s economy isn’t a minerals sector New Zealand just can’t emulate no matter how much magical thinking goes on. (And anyone who thinks Oz is a low-tax paradise should share with the group how much stamp duty their paid on their house.)
Not to mention the third layer of state-level government. And payroll tax on company profits. Even if said magical thinking somehow involved ACT and the Libertarianz mounting an armed coup, it still wouldn't solve much.
A big part of the problem is that NZ over-relied on the cargo cult of Mother England's food basket. When that turned out to be a mirage in 1973, all NZ did was swap the British cargo cult for an American one, and even that's on shaky ground.
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