Thursday, October 16, 2008

National Socialism

John Key's 'Dancing Cossacks' plan for the 'Cullen Fund' to amend the law "so the Finance Minister can direct the allocation of the fund" and allow Bill English to start buying up New Zealand for the government has given everyone the chance to spot the economic illiterates around the traps -- most of them people paid to pretend they know what they're talking about.

The Herald's Paula Oliver, for instance, who blithely reports, "The policy would see a greater amount invested into New Zealand."  Well, as I explain below, not necessarily.  The policy would see a greater amount of the Retirement Fund invested into New Zealand ... but that's not the sme thing at all.

And the Herald's John Armstrong, for instance, for whom politics is just sport -- and economics is just something Finance Ministers do to each other -- who says on the Herald's front page that Key's plan may offend the "economic purists," i.e., those who know what they're talking about, "but his announcement cleverly outflanks Labour...  National's bolder move has given it back some of the initiative on economic policy..." 

What a twit.  National's move has shown that in a time of economic crisis John Key is just as ignorant about what to do as the other team.  If Armstrong was doing his job he could point that out.  Instead, he say, "It will be seen by most voters as the right call in worsening conditions."  If that's true, it's only because when voters read commentators like Armstrong they don't realise he's so bloody ignorant of the subject on which he's paid to comment -- in this case economic policy.

To call this "bold" or "brave" -- let alone to use adverbs like "cleverly" -- is to ignore completely the effects of such a policy, and to demonstrate the paucity of your grip on what your job should be. 

To ignore how enormously destructive it is to give politicians the keys to this particular candy box; how irrational it would be to crowd out foreign entrepreneurial investment in NZ, and to forego higher returns elsewhere; how bloody risky it is to put so many of NZ's future retirement eggs in the same bloody basket as where they were hatched; how ridiculous for the NZ taxpayer to be investing in taxpayer-backed bonds... 

Yes, yes, Oliver asks a few "experts" later in her piece, under the fold on page 3, two of whom (Weldon and Skilling) are in a froth about the prospects of getting their hands on the candy jar.  (It's Weldon who calls it "brave" -- and not as an ironic reference to Sir Humphrey's warning: "'controversial' can lose you votes; 'courageous' can lose you the election.")

Thank goodness then for Brian Gaynor (and I don't say that too often), the other expert interviewed by Oliver, who points out his concerns with "the principle" of the move -- and bravo for a man who knows that principles are guides to right action -- "Where does it stop?" asks Gaynor, "It leads to pork barrelling -- go and build an airport in Kaitaia, or something like that."  Drive around Europe and see all the pork barrelling projects scattered around Europe like EU confetti, super-highways to nowhere and bridges made just for bungy-cords, and you get an idea of what sort of "returns" politically-driven "investment" brings.

Thank goodness too for commentators like David Hargreaves who writes in BusinessDay,

    [Key] wants the fund to take money from higher returning assets overseas and pump it into lower performing New Zealand assets as a short run boost to the economy. It is an easy way of the government increasing spending, without increasing its budget deficits.
    What it means is the returns to the fund are likely to be less in future years than they would be if the fund was left alone. Therefore the fund's ultimate ability to service pension requirements in future will be reduced.
    And worse, once the fund has become a play thing and source of easy money for the government to invest in its pet projects, you will lose the very high calibre of people the fund currently has.

Bingo!  And then there's the 'Dancing Cossacks' problem,

    that the New Zealand economy runs the risk of being heavily skewed by the impact of the fund. The fund already at this early stage has to be careful that it does not cause distortions in the markets through its activities. This risk will grow as the fund grows.

Sure will.

    One of Key's long ago predecessors as National Party leader, Rob Muldoon, won an election by lambasting a superannuation scheme set up by Labour. The argument was that as the Labour super fund grew, then so it could be used as a political tool. National scrapped that scheme after it won in 1975 and delivered us on the route to the future pension problem we now have.
   
How ironic then that a National leader is now attempting to politicise a fund that has been set up for all of us.
   
New Zealanders should have absolutely no truck with this idea. Key wants to mess around with money that is set aside for your retirement. In doing so, large chunks of that money could be lost.

Exactly right.  Now, John Key says he's been thinking about this since 2004! -- Gawd help us! -- but it takes only a moment of thought to realise, as Matt Nolan explains so simply that what he's "thought" about is a way to make "more" local investment mean less:

If capital at home made the highest return, then we wouldn’t need to legislate a 40% investment - as the Cullen Fund would put all its dosh there anyway. As a result, by “forcing” the fund to keep 40% onshore, we are reducing the return on our investment plain and simple.

As Nolan concludes, this is a terrible idea. National=Labour Lite -- "but they seem to be bouncing worse and worse ideas off each other."

It's just utterly pig ignorant, and shows beyond doubt that the single biggest danger with Key is not just his craven need to appease, but the idea apparently so strong within him that his laudable success as a currency trader gives him the credentials as Prime Minister to tinker with the levers of a very fragile economy.

We had one hot shot already who thought he could do that job, and we all know where that left us in 1984, don't we.

When Cullen announced earlier in the week his own plans to dig into the Super Fund chocolate box, Adolf from the No Minister blog called it "a defining election issue." It still is. In a time of terrible financial crisis, we now know absolutely that Key has no more clue what to do than Cullen.

UPDATE 1: Elijah is right, "Those people who have gone down the "vote National to get rid of Labour" track should be ashamed of themselves... A vote for National is now, without doubt, a vote for left wing socialism and State ownership..."

UPDATE 2: Yes, I've changed the title of the post. The more I think about this, the angrier I get.

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12 Comments:

Blogger Elijah Lineberry said...

Disgraceful policy!

Those people who have gone down the "vote National to get rid of Labour" track should be ashamed of themselves...(although they won't be)

A vote for National is now, without doubt, a vote for left wing socialism and State ownership....even the Alliance was not this mindless.

And the ACT people will eagerly march into the division lobbies to support this...(how typical)...so they are even WORSE (if that is possible)

10/16/2008 11:49:00 am  
Anonymous Anonymous said...

"how ridiculous for the NZ taxpayer to be investing in taxpayer-backed bonds.."

Good point PC. I had a guy in the pub last night showing me his Kiwisaver statement invested in a "20% high risk fund" with some outfit I can't remember. He was chuffed with himself then..

gregster

10/16/2008 12:27:00 pm  
Anonymous matt b said...

Good post. I especially liek your point about crowding out. That is exactly what will happen, I believe the evidence strongly favours that.

It is *particularly* ironic that of all times to introduce political control to national savings, it would be in the middle of a crisis induced by the failure of two large state directed, state backed corporations (Fannie & Freddie) that failed precisely because of the direction and implicit backing Key now wants to introduce to the Cullen fund.

Key knows all of this. Which says something.

10/16/2008 01:14:00 pm  
Blogger PC said...

You're dead right, Matt.

He should know it ...

10/16/2008 01:26:00 pm  
Anonymous Anonymous said...

Do you think the Cullen superannuation fund should be directed to invest more in NZ?

Yes - it'll be good for the country (2321 votes, 71.8%)

No - it'll damage the fund's performance (913 votes, 28.2%)


Hopefully Key is expecting that publically announcing a policy like this will give him a bump in the polls from an ignorant public.

But if he actually gets into power, he might already be planning on breaking this promise and justifying breaking it by blaming it on (i) changing economic conditions or (ii) delegating creating a plan to Treasury who will duly report that it just isn't possible to do, and how terrible that is, poor Key getting foiled by those villians in Treasury who don't care about NZ, they only care about making themselves look good.

When it comes to re-election time in 3 years and he is asked about breaking the promise, he will point to the returns on the fund and say that based on the expert advice he received, they would be significantly lower if he had invested it in NZ.

10/16/2008 01:35:00 pm  
Anonymous Anonymous said...

Key should be promising whatever is required to get into government.

ANd when there, with the NZ economy imploding he will have all the leverage he needs to do what is required.

As for the fucking cullen superfund: he should just give the money back to the high-income taxpayers who paid for it

and close it down. by Christmas.


It was a white elephant when it started: Brash & Key were right to want it abolished then. They are even more right to want it abolished now - and frankly, on a fucking libertarian blog - I'm flabbergasted noone has pointed this out.

they would be better getting the whole fund in US $1 bills and burning the lot than doing any government investment with it!

10/16/2008 02:15:00 pm  
Blogger adamsmith1922 said...

This is not good policy for an economy such as ours

Please forgive the link, but I agree with you totally in respect of your clear and appropriate post

http://adamsmith.wordpress.com/2008/10/15/8337/

10/16/2008 03:16:00 pm  
Blogger Luke H said...

they would be better getting the whole fund in US $1 bills and burning the lot than doing any government investment with it!

I think you're overstating the case there, anon! Of course it would be much better if the money was back in the hands of those who earnt it, but a government fund generally produces SOME return, even if it is lower than in private hands.

Proposing that we destroy the money altogether, as if it is irrecovably tainted by its association with the government, seems disingenous.

10/16/2008 03:31:00 pm  
Blogger PC said...

" ... frankly, on a fucking libertarian blog - I'm flabbergasted noone has pointed this out"

Frankly, since you've been reading this fucking libertarian blog fro some time, I would have thought you'd seen that point made many times.

I'm flabbergasted you missed it.

10/16/2008 04:11:00 pm  
Anonymous LGM said...

Anonymous National Socialist has a core principle. It is this:
telling lies, cheating, stealing, deceptive behaviour and fraud is all OK, so long as you gain power over others. Once that is achieved it is OK to break your word and do whatever you like (and justify as "necessary").

He argues that the ends justify the means. Of course once in power his type change the ends arbitrarily. Fibs can be altered on a whim.

How can any sane person trust such a one as him? How can any sane person trust anyone who behaves as he promotes?

LGM

10/17/2008 07:11:00 am  
Anonymous Anonymous said...

I think you're overstating the case there, anon! Of course it would be much better if the money was back in the hands of those who earnt it, but a government fund generally produces SOME return, even if it is lower than in private hands.

the point is that any such sum kept in government hands is so bad that we would better burn it than leave it with them.


Proposing that we destroy the money altogether, as if it is irrecovably tainted by its association with the government, seems disingenous.

I'm not proposing we destory the money. But if we cannot give it back only to those most productive individuals and corporations who provided it, then we would certainly be better of burning it.



How can any sane person trust such a one as him? How can any sane person trust anyone who behaves as he promotes?


This is of course why democracy is inimical to liberty. But in a democracy - this is the only possible way for politicians and political parties to behave, especially those who wish to introduce more liberty.

Parasites will not vote for them otherwise: until they have not votes this is what we must do.

We all agree Douglas & Richardson did not go anywhere near far enough: we also agree that they were the best finance ministers NZ has ever had.

And both of them followed this practice. Get a grip. Grow up.

10/18/2008 06:03:00 am  
Anonymous LGM said...

Anonymous

According to you, being deceptive and dishonest and telling fibs "is the only possible way for politicians and political parties to behave". In that case none of your heros are fit to be trusted and none are fit to attain and exercise power over any other person or persons. None. Not even the ones you adore. Interesting how politicians and cronies who are caught out behaving as you promote are despised.

BTW since you are a promoter of dishonest and deceptive behaviours, it is certainly clear that you can't ever be trusted either. That of course means that your entire ideology is immediately suspect. Any person you attempt to persuade or deal with would certainly treat you and your ideas with suspicion and disdain once they realise what you are about. So they should. What you are promoting is contempible. Pathetic.

Liberty is not achieved by lying and cheating and stealing from other people. Deceiving others and demonstrating a total lack of integrity is the path to crime and collectivism, not to liberty. It's known as fraud. You may have heard of it.

Deception of the sort you promote runs counter to individual liberty. By engaging in deceptive action you are attempting control over another party's reason and action. In the end you'll be found out to be a low fibber and will be treated appropriately to that status.

LGM

10/18/2008 08:47:00 am  

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