PC crappaid for by us
Weldon summed it up in the herald this morning. Continuing the hawkish interest rate policy will sell NZ to foreigners as happened after the 1987 crash. Clearly since we stopped fixing the exchange rate, the RBNZ should at least set interest rates against international players - they have ceased to be a unique control of domestic activity or prices.
They are working on a dead paradigm. High interest rates contribute to domestic inflation. NZ's world beating interest rates rob kiwis to pay foreigners, and make kiwi companies uncompetitive because their cost of capital is prohibitive. Hence to survive they must go overseas and eventually the jobs go too. An efficient capital system is essential. The NZX is dying (actually a bit like the the US recession - already happened just not declared yet)
Control of the NZ economy has to be through balanced financial measures designed to maximise NZers Long term wealth (in the widest sense). Screwing up interest rates until the ship sinks is dumb. Jumping on band wagons like Kyoto without being able to negotiate terms appropriate to us is dumb - our delay costs us and the world nothing.
Items in finite supply will appreciate in value. Oil, water, food, useful energy, good land, nice places to live, etc. NZ has these in bucket loads but we continue to go backwards against others in the OECD. The trick to me seems to be to direct capital and other resources into productive activity. Interest rates can't do that on their own. Our whole society becomes more and more "short term focussed" the higher our interests rates go. You don't need economic consultants to improve the situation. A little applied common sense would go a long way.
(Cullen has killed the NZ economy. Sqeezed the life blood out of it. Perhaps his fund can now by NZ back although that would be contrary to declared intention and therefore not PC. One assumes that he will continue to send more of our devalued currency overseas to support their economies.
The economists will teach in a few years time that previous learned theories were BS and now we have new ones which must be right.
A monetarist will have worked out that the money supply has been increasing through these margin facilities, and dodgy credit schemes, Japan's zero interest rates and carry trades, every economy in the world printing cash, all contributing to asset inflation in those countries relying on state of the art economic theories and the dying concept where supply always increases to meet demand and lower prices.
On a similar vein...
I liked an article from a foreign academic (unfortunately I lost the reference and the full article is a bit big to post) "
Some Aspects of the Future Supply of Oil
Professor Ferdinand E. Banks
January 18, 2008
The University of Uppsala, Uppsala Sweden
The School of Engineering, Asian Institute of Technology, Bangkok Thailand "
"Saudi Arabia is still regarded as the primary exporter of oil to the main oil importing countries, and my contention both here and elsewhere is that a demonstrable willingness on their part to steadily increase output over the foreseeable future is perhaps the most bizarre fantasy ever put into circulation by the International Energy Agency (IEA)."
He contends that the Arabs are looking for long term wealth and will maximise their oil production to that extent.
Smacks of "a little bit of work life balance" economics to me. The more pay to the working wealthy implies the less work they need to do. The more money your house earns the less productive work you need to do...the higher the price people will pay for oil, the less you need to pump.
Anyway, one academic coming up with something worthwhile, more than we see from these guys for the RBNZ. What question were they asked to answer?