Tuesday, 14 July 2009

Same country, different views [update 5]


    New Zealand is likely to begin recovering from the global financial crisis ahead of the pack , Reserve Bank Governor Alan Bollard said today. . . “The New Zealand economy has taken knocks, but some form of recovery is now on the horizon."


    Speaking at the Herald's Mood of the Boardroom breakfast, Bill English admitted that the current global recession made it difficult to take any long-term economic views with certainty.
    "It's getting a little easier to get a fix on what the picture will be like in a month's time", he said, "but forecasting a year or more out is not so easy.” . . .  English certainly was not about to promise any quick fixes. He described the ten years we face until we achieve fiscal surpluses again as a "demoralising trudge"

Well, they can’t both be right, can they. 

Meanwhile, NZ’s M2 money supply is increasing at a year-on-year rate (as of May) of 10.7%.  We still haven’t learned, have we

UPDATE 1:  Says Bernard to Alan Bollard: “Stop wagging your finger and start hiking”:

    Reserve Bank Governor Alan Bollard has developed a finely tuned style of finger wagging lately. He has wagged his fingers at so many people and in so many directions he risks looking like a man who just waves his hands around a lot and doesn't actually do much. . .
    So what is it Dr Bollard? Should we borrow less and spend less? Or should we borrow more and spend more? Or would you like us to save more and spend less? Or should we do everything at once? Why do you tell us to do one thing with your finger and then do another thing with your OCR?

Here’s what Alan should do.  He should stop wagging his finger around and just resign.  Shut down the Reserve Bank, and step down – and let interest rates be what they will on a genuine free market.  That, dear friends, is what genuine deregulation looks like.  Central Banks: Who Needs Them?

UPDATE 2: I love this comment from a National Business Review reader:

I was optimistic till I heard Mr B says we are out of trouble. This guy couldn't pick last weeks Lotto.

UPDATE 3: If Alan’s relying on the States to pull us out he’d better think again.  Morton Zuckerman at The Wall Street Journal says “The Economy Is Even Worse Than You Think.”  Read the 10 reasons the US is in even more trouble than the 9.5% unemployment rate indicates.

UPDATE 4: Eric Crampton notes a little . . . inconsistency from His Alan-ness:

A week ago the RBNZ berated banks for interest rates being too high; today, Bollard berates consumers for responding to interest rates being too low. Which is it?

Life’s always tough for an economic dictator. 

UPDATE 5: Matt Nolan comments at TVHE [hat tip Anti Dismal]:

When the hell did the Reserve Bank become a central planner? Their mandate is to control medium term inflation, not to decide how national income should be divided.

Give an economic dictator an inch, and he’ll try to take your smile.


  1. PC

    Printing more money are they? Well, didn't you know the rule? It is, if more is good, morer is betterer. Does that make sense?

    As FF used to say, "If not, why not?"


  2. And according to Bernard Hickey, New Zealanders are taking on more debt and it is going back into housing - low rates reinflating the bubble. If there's a credit crisis, interest rates should be going up, not down...

    I'm trying to convince my wife that housing is *not* a good place to have your money and this is not helping. Why do people think negative gearing and claiming losses against tax is good? You're still losing money. Under the best possible circumstances, break-even point on my house in NZ is over 43 years from the date of purchase. Why is this called an investment? It seems to me that the only way to make money in housing is to have sufficient cash to buy outright to start with.

    Sorry, frustration bringing out the rant...

  3. Heisenburg

    But isn't it good that the house prices are going up again? That way people can borrow more again and use the extra "value" in the houses as security for the new loans. And then they can spend the borrowed money to create more demand and that and then the economy will start up and the banks will unjam again. And if that happens fast then everyone will be more wealthier and that's betterer. Then everyone is happy again and we can all be happy and rich and that and stuff.

    Hell, even if you say it fast it sounds wrong. What's been missed?


  4. Heisenburg maybe you should consider commercial.

    Bayleys just ran an auction in Auckland of the sale of a whole lot of shops in the Lincoln Rd Shopping centre in Henderson, West Auckland. Demand was absolutely massive -- demand for decent commercial property in the under $3m bracket far outstrips supply in Auckland at the moment.

    Another thing worth mentioning is that debt is *not* a bogeyman. You will not meet any truly self-made wealthy people who have not gone into a serious amount of debt over the years to attain their goals.

  5. Yip, speaking to pals still the real estate sales business, got buyers coming out their ears looking to spend money. I've sucessfully disuaded my chick from seeking out a bigger house to buy, she's mortgage free, and recommended we can get a much bigger house by renting. The properties up for rent are bargins; as I said to her, if it doesn't work out and you hate renting, move back into this one. With the job risk factor, who wants a mortgage? Renting differential is only $150 bucks a week.

  6. What annoys me is the abject mediocrity that is New Zealand's economy. Ahh she be right. But she's not. Good grief, what incredible success could we have? What are we afraid of?

  7. I have heard very recently that two major banks have effectively stopped lending. Get the printing presses going.

    Also still plenty of people around with some money.

    John Key wants a second term. Needs to get housing moving.

  8. Ruth

    You wrote, "You will not meet any truly self-made wealthy people who have not gone into a serious amount of debt over the years to attain their goals."

    That's a false statement. I've met self-made wealthy people who have not gone into a serious amount of debt over the years to attain their goals. One of them, an Australian, used to rant about how evil debt was. Now that's not to say I agree with him, but given that he was taking $20,000,000 a year income into his company, and that the bulk of that ended up as retained earnings, it is clear that taking on large debts is not necessarily the way to make oneself wealthy or even necessarily the way to attain one's goals. There are alternatives.

    BTW the facts suggest that the taking on of debt is, for the vast majority of people, a loss making enterprise.


  9. Just an opportunity for some gratuitous self promotion, I have just started a new business assisting house sales with the provision of video instead of or supplementary to photographs. Still fledgling and developing as a company, we have service in Auckland City & Invercargill thus far. Normally $150 a pop - as an opening offer to signed up Libz I will offer a couple for free! www.seethruvideos.com. Anyone interested in growing the business beyond Auckland & the 'giggle please drop me a line.

    Sorry PC. Crapp-ed your thread. Or did I? Call it "Libertarianz member innovates out of economic crisis better than Johnkey can"

  10. Well done Shane Pleasance! It's great to see people finding opportunities in a downturn.

    LGM/Banker/Beehive or whoever you call yourself today, do you have any knowledge of profit-making activities or do you just pull stuff out of your keister.

    People who start off with nothing have to take huge risks. Take John Key, Eric Watson, Graeme Hart, every self-made man/woman on the rich list - all went into debt at an early age and some still carry considerable debt.

    I presume you are very risk averse, which is fine. Just don't bash those who are not.

  11. I too am very risk averse. Have studied hard to better me odds.

  12. Ruth

    You made a claim. It was,

    "You will not meet any truly self-made wealthy people who have not gone into a serious amount of debt over the years to attain their goals."

    Do you remember writing that?

    Now, I've pointed out to you that there are self-made people who have earned significant wealth without doing as you stated. They did not get into serious debt. One of them even decried debt as a bad thing. He could never bring himself to get into serious debt. Therefore your statement is false. Simple as that.

    I specifically did write to you that I did not necessarily agree with that individual's point of view (regarding the best way to achieve one's goals). Nevertheless he's achieved great wealth following his judgement. He took a non-debt path. Once again, that demonstrates your claim is false.

    Do you understand?



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