I’m not sure why it comes as a surprise that Treasury made an error in their figures. After all, they’ve made an error every year for the last nine when they projected how much tax the government would collect, giving Michael Cullen an excuse not to deliver the tax cuts that were then (and still) so desperately needed.
They’ve made an error every year when they’ve “predicted” the country’s growth. Or the effects of the Reserve Bank’s economic dictation.
So frankly, the very phrase “Treasury credibility” looks increasingly like an oxymoron -- their credibility is almost on a par with that of their colleagues in BERL who they were so recently beating up.
At least this time, for once, their error has caused some belt-tightening where it’s most needed.
UPDATE: The inimitable Jamie Whyte, the NZ philosopher whose best-selling book Bad Thoughts: A Guide to Clear Thinking is around here some place, writes in the London Times on the effects of central banks’ economic dictation.
Rather than giving the Bank of England more powers as Bank of England governor Mervyn King is calling for -- just as every other central bank and central banker around the world is calling for more powers for their bailiwick -- they should instead be given less power, says Whyte, who’s clearly been boning up on the Austrian Business Cycle Theory. Just like you should by reading his column: Strip the Bank of England of its power.
4 comments:
Great, connected, article here:
http://www.timesonline.co.uk/tol/comment/columnists/guest_contributors/article6619963.ece
Strip the Bank of England of its power.
And another great link, regarding that social democratic wet dream, Sweden:
http://globaleconomicanalysis.blogspot.com/2009/07/sweden-cuts-deposit-rate-to-negative-25.html
Quote:
"There has been a lot of ludicrous recommendations recently to combat deflation by making deposit rates negative. I did not think any central bank would be dumb enough to try it. I thought wrong.
Today, Riksbank, Sweeden's central bank cut the deposit rate to -0.25% effectively charging savers interest on deposited money.
...
The global economy is in a mess because of the lack of savings not because of an excess of it. People spent money they did not have, pushing asset prices to ridiculous levels. Banks, in belief that asset prices would keep rising exponentially, increased leverage. Now consumers everywhere are retrenching in the wake of the collapse, a much needed phenomenon.
In light of the above, punishing savers with negative deposit rates is the height of stupidity.
It would be fitting if there was an immediate run on deposits. And if that happens what will Sweden do? Halt deposits? Sweden risks (and deserves) a currency collapse and bank runs for this insane effort. Look for capital flight in Sweden.
We should all be rooting for the demise of Sweden lest Bernanke or some other Central Bank clowns try the same thing. The risk is that Sweden does not immediately suffer for this stupidity and that Bernanke tries to do the same thing."
Or is that article taking the mickey? Surely no central bank is actually going to adopt a negative rates????
Well spotted, Mark. That's great that Jamie Whyte has been studying Austrian Business Cycle Theory. Good man that.
"Or is that article taking the mickey? Surely no central bank is actually going to adopt a negative rates????"
Surely you jest?
How could there not be a run on the banks? Who in their right mind would leave their money in when taking it out and stuffing it in the mattress would give a better return. Who would lend to the government when they promise to give back less than you lent them?
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