Posts by Jim Cathcart
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The Home Truths series didn't address the following, which I think are crucial elements in the existence of property bubbles:
- How banks rely on wholesale funding to fund mortgages
- How banks are deposits are created from loans and the extent of leverage that entails
- Since 1984, how the money supply has exploded by 6,166% and how bank lending for property has increase 23,921% (refer to this excellent article by Brian Gaynor if that seems unbelievable (http://goo.gl/XWwrlR)
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Unfortunately the debt overhang from the pre-GFC period was never allowed to be resolved globally, particularly the purging of the financial sector. In the case of Australia and NZ, it seems as equally as bad as it ever was. The general understanding was that the Australian banks were prudent, yet most people are unaware that the banks in Australia were bailed out by the Federal Reserve.
http://www.moneymorning.com.au/20101203/nab-and-westpacs-secret-bailout-revealed.html
And no, this is not conspiracytheory.com If you download the spreadsheet from the Federal Reserve.
Also, most NZers are unaware that in the event of a financial collapse, deposit holders are the first to go under our law (there are no deposit guarantees). Savers foot the bill before shareholder. Wholesale funding has primed this bubble. Nobody in the mainstream media has addressed this.
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Watched it here in Vietnam when I heard Chris' story was going to be shown. Up this way, there are also generics crossing from India to Th Philippines because some of the obscene pricing issues they have.
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Disappointing time was when in Auckland 6-7 years ago and Mark Lyon and his entourage were feral marching down the road during the day. Tension was high.
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Place has special memories as I had a close work colleague from Henty Wines and Spirits living in the apartment at the rear of St Kevs Arcade. Still remember a great party at the apartment with Lee Ralph in full throttle when the "skins" turned up and expectations of strife bubbled. And it did. Quickly sorted courtesy of Lee.
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I wonder how well Labour understands how education is changing, particularly within the online space with platforms such as Couresa and Edx. Particularly for continuing education, these platforms are growing in scope, quality content, and endorsement. The idea of returning to university-based education when most people are scratching from month to month seems to be an antiquated idea.
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Hard News: The CRL and the nature of change, in reply to nzlemming,
Actually, it is policy-driven, more than economics. Because they were going to do this (and other cuts), they knew they could afford the tax cut vote winner promise.
Policy and economics are not mutually exclusive. Tax cuts are actually a way of shifting savings to the private sector and increasing public debt. I know that saying that it is strategic option to win votes rings true, but it is also good for the economy as a whole. The smaller the public debt means the larger the private sector debt. This is an inescapable reality.
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Hard News: The CRL and the nature of change, in reply to Bart Janssen,
NZ hasn’t had a great experience with public debt. It can be worthwhile but it can also be badly managed and end up being a dead weight on the economy.
It only really works if you can be sure the asset will generate enough value to pay off the debt and generate further gains beyond just debt servicing.
Bart, while I'm not saying you're wrong about debt management, this is kind of at odds with the shift in economic thought happening globally. All the pump priming in infrastructure that occurred in Japan to keep their economy afloat post the the 1990 crash has been unsustainable from a position of being able to manage the debt.
What I am suggesting is that NZ has limited options on how it can continue to drive the economy without spending on infrastructure, hence the similarities with Japan. How that spend is allocated nationally is important at the local level, but with so much effort and resources spent on CRL, I'm suggesting that this decision was quite an easy one to make, considering the political establishment is probably more concerned about the bigger picture.
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Hard News: The CRL and the nature of change, in reply to Russell Brown,
Interesting point. I think it is starting to dawn around here that there aren’t many levers left to pull.
I think that there is a strong element of opportunism at work here. I don't necessarily think that is a bad thing for the sake of the economy. NZ's public debt is relatively constrained so makes sense from a macro perspective.
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Just actually drawing from a wider lens here, the global economy is looking into an abyss (not immediately obvious to most NZers); national and global private debt is reaching its natural limits; and the world is looking to the public sector to print and spend on infrastructure to save us going off a cliff. Only days ago, Bill English suggested that NZ is not isolated in terms of the need for public debt and spending; in fact, NZ has been a target of this false, monetary-driven post GFC world. Therefore, this decision is not necessarily a victory for vision and good judgment. I would imagine part of it's driven by economic necessity.