Red Alert

A Zero Budget is a Consequence of Failure a.k.a. Its About the Economy Stupid

Posted by on May 4th, 2012

David Shearer’s speech today blunted National’s attacks on Labour, and takes the economic debate towards growth in the economy, especially exports. This undermines National’s attempt to narrow the focus.

National is trying to convince NZers that when the government deficit is overcome they should be seen as good managers of the economy, even if the economy is stagnant, exports drop and more private debt and asset sales increase New Zealand’s net international liabilities.

Today’s announcement was an important step in overcoming the National Party’s attack on Labour over government debt.

When in government, Labour ran very substantial budget surpluses and reduced gross government debt from 38% of GDP to 17% of GDP, and net debt to close to nil. This is one of the main reasons NZ survived the GFC better than most European countries. Despite the fact that National opposed those surpluses and called for unaffordable tax cuts, they convinced NZers at the last election that Labour would rack up lots of debt.

Since National was elected, gross government debt increased from $31 billion in June 2008 to $80 billion in the 2011 PreFU – an increase of $49 billion. Net core Crown debt excluding the NZ Superfund increased from $10 billion to $54 billion, an increase of $44 billion.

Government debt will continue to rise until after the government returns to surplus. The trend towards surplus is obvious:


2010/11                2011/12                2012/13                2013/14                2014/15

-18 billion             -12 to -13             -8 to -10               -4 to -5  nil or close to it

So by 2014/15 NZ will be back to surplus (and will still have low government debt by world standards).

This would have been the case under Labour too. Our confidence in this was one of the reasons we produced the most detailed ever opposition financial projections at the time of the last election – much more detailed than National ever produced in opposition.

Despite this, National managed to beat up Labour over government debt, in large part because we did not convince NZers it was wise to recommence contributions to the Cullen/ NZ Superannuation fund before a government surplus is achieved.

Contributions to the Cullen fund did not increase the government deficit. They are capital contributions not operating expenses. They do not increase net debt, because they are matched by an asset. But they did increase gross debt.

Over the medium term, Labour’s package at the last election  of increased savings and a capital gains tax resulted in less government debt (and less private debt).

But in the short term we did borrow a total of $14 billion more.

A whopping 70% of that was because of restarting contributions to the Cullen fund early.

12% was because we would not sell the SOEs. The public got that not selling the SOEs was wise for lots of reasons, including that the savings in interest are less than the profits foregone. As for the rest, most was due to the timing of CGT revenues cf the tax free zone.

Our largest spending commitment was expanding Kiwisaver to all workers.

We were not profligate, but still lost the argument about when to restart contributions to the Cullen fund. By the next election, we will also be three years closer to restarting those contributions even under the government’s plans, and so the substance of the difference lessens anyway.

David Shearer’s speech today takes from National this club with which they beat us, and turns the debate back to the economy, which clearly has not rebalanced.

National’s attempt to narrow the debate to the government deficit (and government rather than private debt), is undermined, especially as the trend towards surplus is clear (unless the economy tanks further from here).

John Key’s pre-budget speech this week titled ”Sticking to a plan that’s working” was so easy to pillory in Parliament this week.

National used to say their plan was to grow not shrink exports, to reduce our current account deficit not grow it, to reduce our net international liabilities not grow them, and to reduce the wage gap with Australia. Given they seem hell bent on continuing with what isn’t working, it seems their plan really is as inadequate as the forecasts show.

David Shearer’s announcement today clears the way for that debate.

57 Responses to “A Zero Budget is a Consequence of Failure a.k.a. Its About the Economy Stupid”

  1. indiana says:

    “they convinced NZers at the last election that Labour would rack up lots of debt.”

    The context of this sentance alone is a key difference between what David Shearer has said and what you and many in the Labour caucus belive. National hoodwinked the public and thats the only reason they won right?

  2. Matt says:

    Considering the Cullen Fund is a giant waste of time and a neo-liberal construct to boot, makes me wonder if Labour has learnt anything? A government surplus = a private sector deficit, hence the massive rise in private sector debt under Labour… That and refusing to use its fiscal tools (ie. tax) to suppress asset price inflation.

    Secondly, government debt on issue INCREASED under Labour’s last govt, why? Despite running surpluses and “saving” for the future, it continued to issue debt… Because governments don’t “pay down” debt, they retire it and issue it to the private sector to maintain the targeted interest rate. It is amazing that this Labour party never talks about the massive amount of corporate sector welfare that is issued on a risk-free basis via the DMO…

    This is more neo-liberal clap-trap from a party without a clue on economic policy…

  3. whodunnit says:

    Mr Parker, isn’t the speech Mr Cunliffe gave the sort of speech that Mr Shearer should be delivering? Why is Mr Cunliffe talking about whole of economy issues? Aren’t you the finance spokesman? When has an economic development spokesman ever gazumped the leader and finance spokesman by going out on a limb on these things before? Why is Mr Shearer in the shade and why are you endorsing Mr Cunliffe from taking his limelight?

  4. Matt says:

    Here we go…

    “One of the most critical issues National has also ignored is the future affordability of superannuation. Bold decisions are needed. I am the first to accept that last year we didn’t signal our intentions very well in this area, to raise the age to 67. The reality is that over the next 40 years the cost of Super will double. Any government has to come up with a credible way to pay the bill.” – Mr. D. Shearer

    Wrong. The government can always “pay the bill”. That “cost” is actually income to the private sector, which maintains at least some level of demand in the economy… For once I actually back Key on this, the affordability issue is nonsense…

    As an aside: this type of narrative and the type of policy measure enacted by Joyce (Tertiary Ed.) actually UNDERMINES the ability of future generations to provide the goods and services that an ageing population requires…

  5. al1ens says:

    @ David Parker

    They don’t like it up ’em Mr Mainwaring 😆

  6. SPC says:

    Matt, you refer to some theory that budget surplus means some deficit from the private sector and from this comes rising private debt.

    In the real world (1999-2008) private debt was expanding equally in countries where the government was in budget surplus and deficit. Your theory tool does not explain why, so it’s so blunt as to be the sort of nonsensical contribution only a partisan ideologist would take seriously.

  7. SPC says:

    Matt, how would the “private sector” afford the doubling of the cost of super if it occured next year – by returning to the tax rates of 10 years ago or cutting the rest of government spending via the German Greek example on IMF advice?

    The government budget will be under pressure from rising health budget demands that will compete for (eat up) the fruits of growth over the next 20 years.

  8. Matt says:

    No, government budgets are not financially constrained. The issue is the real resources within the economy that can produce the goods and services required by the population… The private sector ie. households, SME’s, and corporates don’t pay for super, the govt does. So your point is? No, the budget won’t be under pressure, the real resources will be… Ie. doctors, nurses, home-care etc…

    Each country is dependent on it’s sectoral outcomes, I was referring to NZ, not the entire world… Which were you referring to?

  9. SPC says:

    So economics can drive people mad … or at least enable them to contradict themselves over and over and evade accountability for what they say, so that it becomes little more than gibberish pronounced assertively.

    “The government can always pay the (doubling cost of super) bill”, to “the budget won’t be under pressure” only “the real resources (delivery of public services that it funds) will be … .

    “A government surplus = a private sector deficit, hence the massive rise in private sector debt under Labour”

    The rise was in farm and home debt financed from offshore borrowing by local banks, nothing to do with government fiscal policy.

  10. Matt says:

    You’re the only one talking gibberish… What drives people mad? You perhaps? What contradiction? THE FINANCIAL COST IS IRRELEVANT! Hence, the budget can always expand or contract depending on the state of the economy. I fail to see how I couldn’t make that clearer to you…

  11. Matt says:

    You added more…

    It does, by definition, as a matter of accounting… It did have everything to do with government fiscal policy (spending & TAXATION). The Labour party oversaw it and did nothing! So, if I understand you, governments cannot regulate banks or enforce taxation policy?

    And no, offshore borrowing had nothing to do with it. Banks will find the requisite capital where they need to, that is their risk-management decision, but the LOANS COME FIRST.

  12. SPC says:

    matt, re 6.27. Dogmatic statements do not provide clarity, they require acceptance or rejection. Your’s fly without reference or context and so end up meaning nothing.

  13. Matt says:

    And you misinterpret financial cost vs. real resources, the govt can always pay for new doctors and nurses, but only if they are actually there…

    Oh should I provide academic references for you? So you might actually learn something?

  14. SPC says:

    6.32pm Fiscal policy is not monetary policy controlled by the RB.

    Banks did not find capital offshore they found money to on-lend on a margin.

  15. SPC says:

    Matt 61.

    No I don’t “misinterpret financial cost vs. real resources, the govt can always pay for new doctors and nurses, but only if they are actually there” I was questioning your unwillingness to address the relationship between the two.

    “Oh should I provide academic references for you? So you might actually learn something?”

    So you do pretend competence in this matter.

  16. Jack Ramaka says:

    National are digging a deeper and deeper hole for most of us apart from the top 10% who are fillinf their boots.

    Lucky global dairy prices are where they are otherwise we would be in a severe BOP situation.

    Gross Government debt increasing from $31 Billion in June 2008 to $80 Billion in 2011 says it all, these guys know how to spend and waste money but wait we have the Wizard of Wall St who is going to start pulling rabbits out of the hat.

    It really is the Mad Hatters Tea Party.

  17. Matt says:

    I’m sorry, no. Banks didn’t require money offshore which they then created loans from at a profit margin. Demand drives loan creation, a bank’s willingless to gather a capital basis offshore is driven by their OWN decisions. Mostly profit-driven. Hence, high interest rates in NZ will always see banks seek offshore capital at lower interest rates…

    Secondly, and what would that relationship be? Or will you continue to give vague answers and reply with accusations of dogmatism, when you don’t give any explanation yourself?

    You said “it had nothing to do with fiscal policy”, so taxation and regulation isn’t fiscal policy? Then what is it? Monetary policy is irrevelent when discussing government intervention…

  18. SPC says:

    1. There is not enough savings in New Zealand, even with our higher interest rates, for our loan demand because of lack of saving (low incomes) and otherwise the diversion of saving into investment that does not attract CGT.

    2. Quantifying it is one of the hardest things to do in economics, but I’ll settle on some awareness that the rising budget cost of super in the future has impact on the rest of the economy, if it is not provided for by such as the Cullen Fund.

    3. Government fiscal policy has little to do with the 1984 chgange that allowed banks to borrow offshore to finance home purchases etc and related control of monetary policy of the RB. This is the cause of ballooning private debt not domestic fiscal policy.

  19. Matt says:

    1. This is adhering to the belief that savings drive investment, that is a fallacy. Primarily, either retained earning or debt drives investment. CG should be declared under a taxation system as income.

    2. No is isn’t, just look at the National Accounts, it’s all there… That’s their job. The “cost” of rising Super is nothing, merely more crediting of bank accounts. The Cullen Fund is a construct that drives asset price speculation in the markets… It is completely unneeded. The impact will be the shuffling of resources within the economy which will be directed towards providing the different types of resources required by the elderly. I’m of the opinion that this wouldn’t be too difficult as long as other countries continue to flush their economies down the toilet…

    3. The reason banks would borrow offshore is because they can gain more from it, interest rate arbitrage. Though that is countered by exchange rate risk. It is the banks decision, no one else. That isn’t causation, banks create loans firstly due to demand and then their risk-management position…

  20. Jack Ramaka says:

    Sounds like a lot of humbug to me the fact is this Government is borrowing up a storm to pay for tax cuts and misguided management of the economy ie propping up failed finance companies like SCF.

    If we still owned BNZ, ASB and the National Bank we might be in slightly better position.

    I can see us joining the PIGS and eating bananas in the BANANA REPUBLIC very soon, while John Key and Banksie will be sunning themselves at Waikiki.

    The key fact is Government debt has grown from $31 Billion to $80 Billion from 2008 June to 2011, this is horrific and I wonder else is hidden under the carpet.

    Here we have a Government who wants to try and reshape MFAT and make saving of $12.0 million, something is going haywire here.

    Unfortunately we have a financially illiterate press in this country who only promote the emotional nonsense and not the facts. They tend to focus on how successful John Key was as a Currency Trader at Merrill Lynch and how clever he is, rather than the raw hard data on the performance of the NZ Economy.

  21. Waterboy says:

    I thnk the problem isnt with John Key, its with the overall national team.

    The Nact team are loosing trust, theve lost alot of good team members through a varitey of reasons, and JK is probaly spending more time managing the fires than focusing on trying to get NZ in the black.

    David, you need to have a plan to implement as soon as you get into office in 2014, normal people in NZ are hurting. Its wrong that the price of a big screen tv is about the same as 3 weeks grocerys for the average family. Its wrong that if you have more than 1 child day care costs eat up most of your wage, its wrong that people in NZ cant afford meat(other than mince) and dairy products in a country that produces such large quatitiys of these, its wrong that the governement has to subsidise employers through WFF etc becuase the employers dont pay enough for the staff to live on.

  22. RegistryAdmin says:

    Jack Ramaka:

    Completely accurate statement Re: Press in NZ not reporting facts and being financially illiterate. However, your statements are not far off those made by the press.
    Your apparent ignorance as to how the banking sector operates, and always has operated is staggering. The banks you have mentioned are both Overseas Incorporated banks and Locally Incorporated banks (refer to their respective general disclosure statements as displayed on the home pages of their websites by law (refer to BS7A Section 14 of the Reserve Bank Orders In council [just to help you get a bit of knowledge surrounding banks in New Zealand]).
    South Canterbury Finance (a non-bank deposit taker) collapsed for a number of reasons. However, I refer you to a letter addressed to Liane Dalziel dated 23 August 2007 (those key words will return it on google). Situations such as the South Canterbury Finance collapse could have been prevented if the Minister of Commerce under the previous government had done their job and ensured that best practice auditing was being adopted earlier, rather than at the request of Industry leaders. The overriding fact however is that the Government had no choice but to make a pay out to SCF under the Retail Deposit Guarantee Scheme. Having not done so would be a breach of law and completely undermined the financial system in NZ.

    We are fortunate to have a government who has business acumen rather than trade unionist backgrounds. Better still, we are fortunate that the general public understands this and voted in a manner consistent with prudent and rational individuals.

  23. Jack Ramaka says:

    As far as I am concerned the Bank of New Zealand was a NZ Bank which went tits up while Sir Ron Brierley and Sir Michael Fay were Board Members, didn’t last particularly long in private ownership the Government had to bail it out for some reason after it was privatised and it was sunsequently sold to National Bank of Australis who picked it up for a song.

    The National Bank of New Zealand was at some stage taken over by LLoyds and has subsequently ended up in ANZ’s hands.

    The Auckland Savings Bank was taken over by the Commonwealth Bank of Australia.

    What it indicates to me is that the NZ Business Community does not have the ability to manage risk and has lost control of key strategic financial assets. We don’t seem to think long term like our forebears we have been in crisis mode for the last 30-40 years cashing up our Assets with no thought to the future.

    Correct me if I am wrong.

  24. Jack Ramaka says:

    Getting back into surplus doesn’t mean jack shi* if you are increasing debt substantially year by year.

    It’s like generating a profit in your company accounts for a year with a mountain of debt hanging over your head which has been built up over a number of years.

    I may be wrong with this assumption.

  25. Herodotus says:

    All Nationals and Labours focus on govt debt just displays to anyone with a basic understanding of financial insight that this insight is lacking either by Lab/Nat or the ability for the media to analysis and comment on.
    What is the point of accounting manipulation that occurs by govts transferring operation costs to balance sheet e.g. Student debt $11+b. Or the massive increase in the countries offshore debt- to becoming one of the worst in the world at 100% of GDP ?
    ALl that occurred in the 5th Lab govt was a transferral of debt from PAYE workers increasing to afford the lost dream off a family home with some govt surplus. The only winners that came out where those who were multi property owners that were untaxed on their windfalls at the expense of the worker.

  26. SPC says:

    Hickey looks at possible policy options for the RB

    One of the other options is to apply GST on borrowing for residential property mortgage finance and personal loan finance (cars etc), this allows a lower cash rate and possibly a lower currency value (and thus assists business borrowing and exporters).

    If the OCR was 2.5% and a mortgage was 5.5% – applying a 15% GST might result in the RB lowering the OCR to 2%. Then the mortgage cost might fall to 5.0% with the total cost being that plus .75% GST.

    The amount of money raised by the GST on this finance would be over a $1B pa. And there would be further tax benefits from lower business borrowing costs (consequent higher profits subject to tax) and greater export revenue with a lower dollar) (higher tax returns also).

    The only downside would be a slight increae in net pay spent on the mortgage cost (here 5.5 to 5.75%) – a slight tightening in consumer demand. This small impost on home owners pales in significance with measures in recent years under zero budget rounds.

  27. Matt says:

    That’s far wrong. The RB can set the overnight cash rate at whatever it chooses. It’s arbitrary. It can manipulate the yield curve to whatever it wants to. Mortgages just reflect banks making their margins on top of that.

  28. SPC says:

    Your’re not making any sense. Please consider explaining what you mean and try to relate it to what I wrote.

  29. Matt says:

    Passing GST onto mortgages will merely INCREASE the cost to consumers…

  30. Matt says:

    It doesn’t allow a lower cash rate, the cash rate is decided by the RBNZ.

  31. SPC says:

    Yes passing GST on mortgages is a cost met by those who use them to buy property. But it also raises tax revenue for government (if part of the cost of money is tax then government gains in revenue) and by much more than the cost to consumers.

    The RB determines the OCR based on conditions in the rest of the economy – the RB Governor Bollard called for a surcharge on mortgages (similar to GST on mortgages) to allow him to “lower the OCR” and thus “upward pressure on the dollar”. GST on mortgages would be an impost that enabled the RB to lower the OCR.

  32. Matt says:

    Why does the government need revenue? It doesn’t. If Labour wants to address taxes surrounding property or property investment there are other means… Ie. actually discourage it rather than encourage it.

    Frankly, Dr. Bollard determines the cash rate due to his inherent prejudices. So, charging more to home-owners that have already been duped into buying inflated property, should be taxed more? Considering their balance sheets are already excessive?

    It wouldn’t allow him to do anything, he could do that any-time if he chose to… The OCR is arbitrary.

  33. SPC says:

    The OCR is not arbitrary, the RB Governor operates to achieve inflation band targets.

    The objective of a lower currency (to enable a better trading position for local and export prodiction) is achieved by using an anti-inflation means that allows a lower OCR.

  34. Waterboy says:

    Do you realy beleive a country could function without any revenue for the governing body.

    Can you name a single time when this has occured, other than in theory.

    Communish works in theory very well also.

  35. Matt says:

    Oh so? – def. (of power or a ruling body) Unrestrained and autocratic in the use of authority. Why are rates so high, bar Mr. Bollard’s obsessive fear of inflation?

    WB: how does a fiat currency operator gather revenue? It doesn’t.

  36. SPC says:

    The RB Governor just does the job given, they do not determine the inflation band policy.

    The OCR rate is not high, just high relative to others and that (and the amount of offshore borrowing) causes a currency value impact. Thus the need to reduce reliance on the OCR as a tool and also the level (to GDP) of offshore borrowing.

  37. SPC says:

    Unemployment in most parts of the UK is likely to continue to rise over the next five years, according to an economic forecasting group.

    The Centre for Economics and Business Research (CEBR) says the overall jobless rate could hit 10.7% by 2016, the highest for more than a decade.

    The CEBR also believes unemployment could in time rise to levels not seen since the recession of the early 1990s.

    BBC business correspondent Ben Thompson says the CEBR warned that areas reliant on public sector jobs and government spending will be badly hit – especially Wales, Scotland and the North East of England.

    But in Northern Ireland, where almost one in three people now work in the public sector, the impact could be even worse, he said.

  38. Matt says:

    Yes his job is to set the short-term interest rate… The inflation band policy? You mean the one-page letter sent from the Minister of Finance to Bollard saying “oh yeah, 2-3% inflation please and price stability, thanks…”

    The OCR is high, just look at the lack of investment and growth in the economy. I don’t follow your point on offshore borrowing. Who cares where private firms get their money from…

    Yep, unemployment points to lack of government spending in the economy. What I’ve been saying all along.

  39. SPC says:

    It’s not high in historic terms and only high relative to the UK and USA – similar to Oz (after their .5% rate cut). The problem is the NZ dollar/US dollar price for exporters (and in the near future the decline in terms of trade with falling dairy prices).

    An increase in offshore borrowing places upward pressure on the currency as much as a higher OCR.

    The USA and UK have demonstrated how near zero OCR can co-exist with a lack of growth and investment. Their public debt levels constrain them from increasing government spending. That is why we need more revenue flow (via a GST on residential mortgage finance) to government in a way that allows a lower OCR. Both allow a stimulous to the economy.

  40. Matt says:

    And why would comparative interest rates mean anything? Why not add France, Germany, Canada, Japan…

    No it’s not, look at the composition of drivers of GDP growth, agriculture is less than 5%, manufacturing 25%, and the service industry 70%! How can any govt. suggest that a lower exchange rate is beneficial considering the drivers of economic growth? It’s odd, in terms of exporters, because their businesses drive up the exchange rate but they complain about a high exchange rate…

    How do public debt levels constrain any government? They don’t. Look at Japan. More “revenue flow” in your terms means cutting the ability of the private sector to spend. Which means lower incomes/revenues for the private sector and lower GDP growth…

    The idea that cutting spending is a means of stimulus is so laughable I’m beginning to worry you can’t even grasp simple economics…

  41. Sfeg Messmand says:

    Gawd where is the country heading, what’s a poor flea lawyer to do !

  42. SPC says:

    1. Comparative OCR/interest rates influence the movement of investment money – why else has the NZ dollar fallen relative to the Oz dollar (over 90 cents to under 80 cents) since their OCR went higher than ours?

    2. Given we import more than we export, claiming exporters drive up the value of the currency is a bit silly. Maybe it’s borrowing offshore to finance local consumption that is the really decisive factor, that and the relativity of the OCR.

    3. Name one economist at your university that agrees with you that “public debt does not constrain government spending”. Japan is a unique country – because the population are prepared to lend money/save at a near zero interest rate. But because of the aging of its population it faces a decline of workers able to save, so is increasing its consumption tax to afford refinancing its debt (as the aging call in their money in retirement). And Japan has had a very low growth rate for the past 20 years, something is constraining its ability to stimulate the domestic economy ….

    4. You still overlook the fact that placing GST on residential mortgages and other personal finance is an impost reducing discretionary incomes by a lesser amount than the gain in public finances. Thus the capacity is there for an immediate increase in total spending and or lower debt servicing cost (higher medium term total spending).
    This without factoring in the gain to business from lower borrowing cost (lower OCR) and to exporters from a lower dollar – and thus a further gain in government tax revenue.

  43. Matt says:

    1. Really? Private investment will flow where it gets the best returns, blaming capital flows for the shitness of the NZ economy is quite astounding…

    2. Um, who cares? Nations want to give us real goods and services in return for paper claims… Good on them. Let’s put it this way: NZ exports 95% of its dairy product, how does that improve the standard of living of NZ? AND B: bullshit! They do drive up the value of the $NZ simply by what they do…

    3. At my university? Are we going to compare dicks now? No it’s not. It’s like most countries, it issues debt because it chooses to. The interest rate falls to zero because the BoJ doesn’t pay a return on reserves ala the RBNZ. They operate different systems.

    The second part of that makes absolutely no sense…

    4. Oh other personal finance? What would that be?

    No I don’t, increasing the cost of financing loans will merely increase the cost to the private sector. There is no gain to the “public finances”, the government could choose to increase spending whenever it chose to… 4+4, is the same as 3+5 regardless of how you get there… And what happened to the Japan economy during the 1990’s? I’ll give you a hint – PRIVATE RESIDENTIAL DEBT.

    Yeah the private sector would gain from the ability to borrow at lower rates… Bollard might actually need to LOWER rates for that to happen…

  44. SPC says:

    4. I would have thought the issue in Japan in the 90’s was the fall in property values, private residential debt did not increase.

    Can you name one economist who believes that “public debt does not constrain government spending”? (I just wonder who you are going to cite or any published work to support any post graduate work conclusions you come to … especially if they are similar to your positions here.

    How does a government finance spending without a budget surplus or borrowing (with debt cost)?

  45. SPC says:

    PS As I have already noted the RB Governor Bollard has said that a mortgage surcharge (similar to GST on mortgage and other personal loan finance) would allow a lower OCR and borrowing rate for business and help exporters via a lower dollar value.

  46. SPC says:

    2. If you think bidding up the value of local property based on increasing indebtedness (as measured to GDP) to offshore savers is giving us “real goods and services for paper claims” – I’ll note we are paying one of the highest amounts off wages for our housing in the world, it has having an effect on the amount of money available for private consumption here. And we have no more houses or services to show for it, just the same housing stock.

  47. Matt says:

    4. Yes, driven by excessive price inflation via debt, subsequent prices fell 70-90%. So every single home-buyer paid the entire cost in cash? It was a debt-driven bubble…

    Secondly, you could cite many. The simple answer is look at the definition of fiat currency. Any heterodox economist? Any economist who understood what Keynes actually said? His influences, ala Marx. The Cambridge Tradition? Kalecki, Schumpeter. Joan Robinson and all who followed. Christ you can go and read the testimonies of Greenspan and Bernanke and it’s all there in plain English…

    Thirdly, because you’re a neo-liberal.

    Your second post: Bollard sets the rate to what is decided (by him), no more, no less… A GST charge makes no difference. Your obsession with exporters (like Labour, like National) is misplaced, as I said, they contribute less to GDP growth than the fascination implies…

  48. Matt says:

    You turn an export/import quote into a discussion on local savings and property? How does that work? Secondly, how does a local buyer “bid up” for offshore savers? You seem unable to grasp that where banks decide to get their capital is irreverent, if they go under – boohoo.

    Yes, banks will increase prices as long as there is enough income to fund it… Now, we’re at Land’s End.

  49. SPC says:

    So you think that acceptance that public debt constrains government spending is of neo-liberalism?

    I note that in this way you attack any Labour Party policy that shows a more constructive and yet responsible approach to economic management – claiming that they (and the Greens) do not understand it right.

    As for Keynes I would imagine that many economist would disagree with you on your claim otherwise for him, but of course you dismiss that as not understanding him correctly as you do. He was quite firm on managing the economic cycle and this implies surpluses to balance out deficit financing. This implies awareness of the relevance of tax revenue funding for spending etc and the conseuqnces of debt build up etc.

  50. SPC says:

    You claim that it makes no difference what Bollard says – that he could lower the OCR if there was a surcharge (same impact as GST on mortgages)

    “Bollard sets the rate to what is decided (by him), no more, no less… A GST charge makes no difference”

    Clearly Bollard has said that it would make a difference. Doh.