John Key is still a fucking moron

Cartoon by Richard McGrail from The Free Radical

I've been reminded this morning about what a clueless fucking moron we had as a Prime Minister for two-and-a-half terms. Back a few years ago when we were "rock stars." Remember that?

Anyway, here's John Fucking Key last month giving his considered analysis of what's wrong with New Zealand's economy now:

"The guts of what’s wrong is that the housing market is going down, not up,' he said.
    “When house prices go up, everybody tells the pollsters, ‘Oh that’s terrible, my son or daughter can’t buy a house. I feel really bad.’ The technical term for that is ‘bullshit’.
    “What they really do, is they say to their wife – or the wife says to her husband – ‘God, we paid $1 million for this house and it’s worth $1.7 million now.’ Quietly they go, ‘Oh, we feel rich’.
    “And then they go and borrow a bit from the ANZ and they go on holiday and they upgrade their kitchen, they feel good about life. So when you have a negative wealth effect, they feel bad.”

And I bet the roomful of home owners and property "investors" and National Party political advisors — no to mention all his former colleagues on the ANZ board —had a smug little chuckle into their at their man's shrewd witticisms. It's hard to know where to begin at his economic acumen however, 'cos apparently it's never begun.

Let's make it simple, since that's the best description of Key's grasp of things. Trump's been called a fucking moron for not understanding the economic destruction of tariffs. And rightly so. But Trump doesn't pretend to be in any way clued up about economics. Key does. And yet the fucking moron apparently knows nothing about a simple enough concept: capital consumption. It's a process of converting someone else’s wealth into your income.

And this is his one simple trick to fix the fucking economy.

You wouldn't believe it.

Here's what the fucking moron either doesn't know, or doesn't care to know.

That fucking "wealth effect" the moron talks about is paid for by one thing: it's paid for by eating the fucking seed corn. The seed corn is the part of your harvest you put aside to plant again next year. Without that seed corn, you have nothing to plant, and nothing further to harvest. What Key wants to "fix" the economy, the simple guts of it, is for is to eat the fucking seed corn. That's his recipe for success. 

Any fucking moron could get a "wealth effect" (and a poll bump) by consuming the seed corn.  But ultimately the farmer will pay a price; he'll no longer have anything to farm.

Fellow on the right enjoys Key's "wealth effect." Not so much farmers on the left.

But the difference in what Key proposes is even worse: he wants home owners to consumer other people's seed corn. Hayek used to call this "forced saving." Savers have to save more, or else, because the "seed corn" being consumed is theirs. 

Here's the thing: When mum and dad borrow a bit from the ANZ and go on holiday and upgrade their kitchen and put in another fucking ensuite, that's paid for by what was, or would have been, accumulated capital. The accumulated capital of those other savers. It's called "forced saving" because what pays for John Key's fucking borrowing is new counterfeit capital: i.e., new money that's been borrowed into existence to pay for the holiday, the new kitchen, the fucking ensuite. That counterfeit capital means savers are forced to save more just to keep up.

That's because this new borrowing is new money "injected into the economic system at a specific point" that advantages those consuming the counterfeit capital while disadvantaging those trying to save.

If the money or credit were evenly distributed among all economic agents, no “expansionary” effect would appear, except the decrease in the purchasing power of the monetary unit in proportion to the rise in the quantity of money. 

However if the new money enters the market at certain specific points, as always occurs, then in reality a relatively small number of economic agents initially receive the new loans. Thus these economic agents temporarily enjoy greater purchasing power, given that they possess a larger number of monetary units with which to buy goods and services at market prices that still have not felt the full impact of the inflation and therefore have not yet risen.

The purchasing power of these home-owners is paid for by the losses of savers. 

Hence the process gives rise to a redistribution of income in favour of those who first receive the new injections or doses of monetary units, to the detriment of the rest of society, who find that with the same monetary income, the prices of goods and services begin to go up. “Forced saving” affects this second group of economic agents (the majority), since their monetary income grows at a slower rate than prices, and they are therefore obliged to reduce their consumption, other things being equal.

In a nutshell Key's quick-fix for poll-driven success, and economic growth, is to grant home-owners purchasing power by quietly, secretly and unobserved, stealing from savers. ("By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens." ~ John Maynard Keynes)

Recall that he said something similar when the problem erupted of paying to repair leaky homes. He said quite bluntly, not to worry,  inflation would fix that. Remember that when housing unaffordability was bad before he took office, and he promised to fix it. He didn't, of course. Instead, he did everything he could to put rocket fucking fuel under house prices. It would, he claimed, 'fix" the problem of paying for the problem. 

This prick has form.

He's either a calculating Machiavellian.

Or he's pig ignorant.

My money's on the latter.

RELATED:

• Key on housing affordability and elsewhere - NOT PC, 2007
• Counterfeit capital - NOT PC, 2008
• Mr Key’s dirty little secret - NOT PC, 2009
• We’re rock stars! - NOT PC, 2014
• How Do People Destroy Capital? - Keith Weiner, SNBCHF, 2015
• Housing bubble is consuming our capital - NOT PC, 2015
• The Reserve Bank’s war on capital - NOT PC, 2016
• Key admits to ‘crisis theatre’ and talks up house-price inflation - NOT PC, 2016
• John Key has had an unbelievable solution for affordable housing - NOT PC, 2017