Speaker: The Voyage: On Interpreting and Sending Messages From the Deck
73 Responses
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Angus Robertson, in reply to
Well to be fair there is in element of me that wants bankers to suffer.
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Angus Robertson, in reply to
I think its a very good idea. If stimulus has to occur it should be making things that are good and useful.
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DexterX, in reply to
Or just slap a land tax (rather than a CGT) on the whole economy to further disincentivise real estate speculation and suck the surplus cash back out of the economy.
I am interested into how you see it as beneficlal that Land Tax will suck surplus cash out of the economy - what surplus cash - where is all this surplus cash hiding? I feel you don't understand what money "is" and how things work or can work,
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DexterX, in reply to
If you can see a way forward that prevents suffering for everybody - please share.
The US is looking at QEIII, and will then look to QEIV, Then QEV etc etc – In my view they should have bitten the bullet when the shit hit the fan and bailed out individuals and not the financial institutions which are now less regulated than before – go figure.
It should be noted that when the value of financial instruments “falters” it is not as if assets that are there as security are damaged or fail to function – someone else gets to buy those assets and use them for their purpose.
There is something that had been ignored - In the same way that households have differed their expenditure since 2008/2009 so to have businesses/corporations.
Globally corporations/businesses (Non Banking and Non Financial Institutions) have not been embarking on capital spending (plant and equipment) or research and development – their concern is about survival in a contracting economic environment – an environment which first shrunk rapidly and then contraction further but at a slower rate.
There needs to be stimulus undertaken by Govts to moderate the contraction of economic activity by providing incentives for capital expenditure and research and development. With out this expenditure the economy becomes less efficient and it drags.
Eventually all the differed spending will circulate through the economies of the world as households will still need to have the work done on their homes and cars and spend on their children in the same way that business will need to replace plant and equipment and spend on research and development. It needs to be encouraged.
In NZ the Nats are waiting on the Chch rebuild to kick-start the recovery – that is all – they are doing waiting, waiting, waiting – they are effectively doing nothing – hence a zero budget.
If you consider the economy is like a hot air balloon – if it is left alone the air cools and it begins to sink – if you want to keep it buoyant you need to keep heating the air inside – provide a stimulus – IMHO that is what needs to happen – stimulus needs to be provided to the productive sectors and it needs to be more than just "hot air".
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Scott Chris, in reply to
I am interested into how you see it as beneficlal that Land Tax will suck surplus cash out of the economy – what surplus cash
I’m suggesting a constructive countermeasure to balance the possible inflationary pressure caused by an increase in the money supply. A land tax is desirable anyway imo.
I feel you don’t understand what money “is” and how things work or can work
Having read your latter post, I would say that the feeling is reciprocally mutual.
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BenWilson, in reply to
Well to be fair there is in element of me that wants bankers to suffer.
That's a widespread feeling. I want to make it clear I actually mostly like your commentary, and agree with a lot of it. But I think you equate all money printing ideas with "quantitative easing". It's not the same thing - to even think that it might be requires buying into theories that have been proved false by the very use of that idea on a massive scale without producing massive inflation. The US public very fairly wonders what the hell happened to the trillion odd dollars that were printed and gifted to banks, why that didn't cascade via the supposed money multiplier effect into many times those trillions in new loans to crank up the economy like the hot air DexterX is talking. It just didn't happen - the money was kept with a great big smiling "thank you for the bailout, now we can insist on tougher lending criteria without going broke". If they had printed that money and simply used it to pay government bills, it would certainly have contributed to the much needed money churn.
Why the hell they didn't insist on actually getting something for that money is beyond me. Instead of gifting money to near insolvent banks, they could have simply purchased controlling stakes, buying the debts up the way any other bailout would work. Then, at least, they'd be getting interest on that trillion dollars, and they'd be in a powerful position to reorganize the companies however they saw fit. But such was the hysteria that government has no place in business that government actually bailed out business without insisting on owning it in the bargain. Just incredible - it managed to actually anger both sides of the political spectrum, even the most right wing ideologue can see that this is not functional capitalism. Nor is it socialism. It's just corruption, driven by ideology and hiding behind the supposed expertise of the managerialism that had slowly taken control of all powerful economic institutions.
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DexterX, in reply to
I’m suggesting a constructive countermeasure to balance the possible inflationary pressure caused by an increase in the money supply. A land tax is desirable anyway imo.
This is odd - how and why would a land tax translate to countering increased liquidity, a land tax is not a tool to control liquidity/the money supply.
The assumption that the amounts of money supply/the liquidity are a primary cause of inflation is flawed – inflation results from the dynamics that are interacting in the economy.
The reserve bank seeks a low inflation target and a low level of unemployment.
The reserve bank influences the sale and purchase of goods and services through attempting to increase or decrease the money supply having regard to the the “deemed” inflation at the time against the “desired” inflation target. It does this using the Offical Cash Rate.
The OCR influences the cost of borrowing money which in turn affects the decision people and business make on the sale and purchase of goods.
As a control this approach or any other will only works so far, people in the end do what they want and can afford to do.
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Marcus Turner, in reply to
Now that's folk music! And I'm going to pass it on.
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Angus Robertson, in reply to
Globally corporations/businesses (Non Banking and Non Financial Institutions) have not been embarking on capital spending (plant and equipment) or research and development – their concern is about survival in a contracting economic environment – an environment which first shrunk rapidly and then contraction further but at a slower rate.
There needs to be stimulus undertaken by Govts to moderate the contraction of economic activity by providing incentives for capital expenditure and research and development. With out this expenditure the economy becomes less efficient and it drags.
The alternative explanation is that the economy contracted and then the governments intervened to slow the contraction and they have been totally successful. Its been so successful that we will be in a moderated decline until they stop, Japan managed to sustain a decline for 20+ years (I don't want that to happen here).
Until the bottom hits private business (especially banks) will soak the government for every cent it is willing to provide. The government doesn't want to trigger a collapse, so the way for private capital to make money is simple - be big enough to pull down a large swathe of the economy if you fold and then threaten to fold continuously. Moderating the contraction encourages risky banking practices that will either make or more likely lose a lot of money. Since the economy operates on the back of these poor private investment decisions everything continues to get worse and so on and so forth.
The private money is sitting on the sidelines, because the system hasn't hit bottom and isn't being allowed to. Investment will happen later when the economy bottoms.
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Scott Chris, in reply to
people in the end do what they want and can afford to do.
Yes, within the context of the economic environment peculiar to each country. If there is a tax on land, you have no choice but to pay it. If discretionary spending is a driver of inflation a land tax compensates for that without directly affecting those most in need – the landless.
In contrast to your hot air balloon analogy, consider a mad scientist’s lab with an elaborate construction of millions of glass tubes, bubbling beakers and valves, all interconnected. Turn up the heat here, adjust a regulator there, release a valve here, add some ingredients there. That’s how I see things.
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Angus Robertson, in reply to
...this is not functional capitalism. Nor is it socialism. It's just corruption, driven by ideology and hiding behind the supposed expertise of the managerialism that had slowly taken control of all powerful economic institutions.
I'd agree its corruption and managerial crap, I don't think its ideological - at least it isn't capitalism or socailism. I think it is the third way - middle of the road politics. And its driven by people like us.
Instead of gifting money to near insolvent banks, they could have simply purchased controlling stakes, buying the debts up the way any other bailout would work. Then, at least, they'd be getting interest on that trillion dollars, and they'd be in a powerful position to reorganize the companies however they saw fit.
That would work, it would work to provide a bottom to the system. Likewise unfettered capitalism where the economy deflates and banks go bust would work to bottom the system. Unfortunately each of the solutions will cause massive immediate pain for you or me (both of us represent large sections of Western society). And politically that would be death for whoever did it.
The problem with this 3rd way is the corruption. I suspect that if the 3rd way continues for long enough, there will have a moderate decline that (due to corruption) has the West decline gracefully past the original bottom. Until 10 years from now we are 3x worse off than if we had taken the hit now.
Anyway - happy thoughts...
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Eric Crampton, in reply to
I think I said rather that profits sent abroad are compensated for by that the owner sent money into the country in some prior period to pay for that current outflow.
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DexterX, in reply to
consider a mad scientist’s lab with an elaborate construction of millions of glass tubes, bubbling beakers and valves, all interconnected. Turn up the heat here, adjust a regulator there, release a valve here, add some ingredients there. That’s how I see things.
So you work for treasury making forecasts, No?
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DexterX, in reply to
I think you may be missing the point I am trying to make as regards stimulus - that it isn’t applied to the bankers but elsewhere.
Until the bottom hits private business (especially banks) will soak the government for every cent it is willing to provide.
Problems are created by seeing the banking sector as critical "business" and quite often it is the only banking that seems to matter in the management of the economy - the problems it creates take precedence over everything else..
The productive base of the economy needs to be treated differently - there needs to be a separation between how central governments treat financial intermediaries and “business” that actually makes things and "other enterprises" that actually do things.
Financial Intermediaries need to be kept on a tight leash.
NZ is presently shit out of luck as regards leadership with Key and English - this is becoming apparent in MFAT, Class Size, Handling of Pike River and the other fiascos, which are becoming indicative of the hallmark of their administrative incompetence – more on this elsewhere.
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Stephen Judd, in reply to
Thanks for clearing that up. My memory of the exchange is pretty dim.
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Kiwi Nomad, in reply to
Angus, you totally misrepresent my views. I'm not a socialist. I don't agree with the huge sums given to bail out banks, and I don't think Keynes would agree either. I think you confuse government stimulus spending with bailouts... I don't condone bailouts, and this is not what I mean by stimulus spending. Any government stimulus spending in terms of spending on government programmes (not bailouts to the finance sector) was too little anyway, and was withdrawn too early which is why we see the UK for example going back into recession.
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Ian Dalziel, in reply to
Selling us short...
NZ is presently shit out of luck as regards leadership with Key and English – this is becoming apparent in MFAT, Class Size, Handling of Pike River and the other fiascos, which are becoming indicative of the hallmark of their administrative incompetence...
... I suspect they may both be feeling a little worried now that they met, and riled, the real 'Mom and Pop' investors in our country's future - the rapid backdown on class sizes shows they have had to listen when voters' genuine outrage reaches critical mass and boils over.
Can we replicate this over asset sales, we may have to...
Which buttons to push though?
I'm hoping this genie doesn't get squeezed back into the lamp, and that the folk who reacted vociferously over education cuts have had the scales drop from their eyes, and will now see how ludicrously short-term the Government's actions and plans are...
But what else would one expect from a Trader like Key, he has no thought of long term investment or loyalty, the action's all in the quickfire sale and the margins, and that is where he will leave the country, marginalised! -
Sacha, in reply to
the owner sent money into the country in some prior period to pay for that current outflow
if only we had a better track record of selling things for something even approaching their future value. Telecon, anyone?
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Sacha, in reply to
But what else would one expect from a Trader like Key
True but we need to take into account Joyce, English and others really in charge (including outside govt).
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Rob Stowell, in reply to
the rapid backdown on class sizes shows they have had to listen when voters’ genuine outrage reaches critical mass and boils over.
Does anyone else get the feeling policy turns are dictated by the PR team?
C-T: John, we just can’t sell this class-size thing
JK: Ok, what about asset sales?
C-T: The focus groups are telling us you have 18 months-
J K: Ok, U-turn on A, full-speed ahead on B. Now what’s the current favourability of beneficiaries? -
Ian Dalziel, in reply to
policy turns are dictated by the PR team?
and
we need to take into account Joyce, English
and others really in chargeDamn, never play a player, huh?
Glum now.... -
DexterX, in reply to
The class size back downs came as a result of bad press, the organisation of the diverse strands of the education sector, and perhaps measures of public opinions and National's own polling - I cannot seem to see a major opposition presence/voice in this - correct me if I am wrong?
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Ian Dalziel, in reply to
I cannot seem to see a major opposition presence/voice in this
– correct me if I am wrong?Sorry, I wasn't saying there was any major opposition
(read Labour) voice , just that MPs heard from their electorates
- ie the masses. and it seems to have made National back off.
Though of course it may have just been a cunning way to
maintain the status quo...
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