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Speaker: The Voyage: On Interpreting and Sending Messages From the Deck

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  • Bart Janssen,

    To return to the original point, why would anyone invest in improving NZ export industries? There simply are no compelling industries worth the investment. It's all very well to sound off about the overseas investors but they responding to the lack of genuine competitive advantage in our export industries.

    Without a real advantage there is always another country more convenient. We have cheap water and cheap energy (if we bothered to generate it) at the moment that is translated into milk and not much else.

    Creating an culture that allows people to innovate and develop novel industries in NZ and is also accepting of failure is the only way to create anything worth the investment. Until we commit to doing that we will remain small and indebted.

    As an aside I think one of the problems is that the NZ stock market is still untrusted and some would argue untrustworthy.

    Auckland • Since Nov 2006 • 3425 posts Report Reply

  • DeepRed, in reply to Joe Wylie,

    The arguments around the Crafar deal – we need them more than they need us, overriding the “xenophobia” of “misinformed” popular opinion

    And it only seems to be ‘xenophobia’ if big money is supposedly at stake. The same people who wield that word like a big stick wouldn’t hesitate to whinge about ‘PC gone mad’ if they’re shouted down as ‘rednecks’. It'd be hollow for them to feign surprise if the likes of the Mana Party pull off a Le Pen and grab double-digit support on the crest of an anti-Wall Street wave.

    The southernmost capital … • Since Nov 2006 • 4365 posts Report Reply

  • DeepRed, in reply to Bart Janssen,

    As an aside I think one of the problems is that the NZ stock market is still untrusted and some would argue untrustworthy.

    And the MOM will only further entrench it. As I've previously mentioned, the NZX is too heavily dominated by ex-state monopolies, whereas other sharemarkets have a much higher proportion of companies that started out with inventors in garages.

    The southernmost capital … • Since Nov 2006 • 4365 posts Report Reply

  • Scott Chris, in reply to Angus Robertson,

    the stimulus programs carried out so far have had direct inflationary effects on the price of land, of shares, of gold and of safehaven bonds.

    Perhaps they have been poorly directed. There is certainly an unevenness to pressures of supply and demand within our economy which aren’t being mitigated by market forces for one reason or another, so surely it makes sense to inject liquidity into these areas to address, for instance, the housing shortages in Christchurch and Auckland?

    Auckland • Since Feb 2012 • 167 posts Report Reply

  • Ian Dalziel, in reply to Scott Chris,

    So surely it makes sense to inject liquidity into these areas to address, for instance, the housing shortages in Christchurch and Auckland?

    It was the liquidity underlying the houses in Chchch that exacerbated the shortage during the big physical shake up...

    too soon?

    Christchurch • Since Dec 2006 • 5070 posts Report Reply

  • Angus Robertson, in reply to Scott Chris,

    The problem with injecting liquidity is that sooner or later it works really well. The added liquidity increases demand and drives up prices so demand is met and then exceeded. Then the price falls, by lots.

    An abundance of liquitiy in the American housing market caused the global recession...

    Auckland • Since May 2007 • 984 posts Report Reply

  • Marcus Turner, in reply to Angus Robertson,

    I as a "neo-liberal" think that banks that make bad loans should be allowed to fail and people who buy property at over inflated prices should suffer when the market falls.

    Why should people suffer?

    Since Nov 2006 • 202 posts Report Reply

  • Rich of Observationz,

    I as a "neo-liberal"

    No shit, Sherlock.

    Back in Wellington • Since Nov 2006 • 4467 posts Report Reply

  • Richard Llewellyn,

    I think part of the issue with the Crafar decision is that it sends uncertain signals to foreign investors.

    If we accept that NZ needs some *some* degree of foreign investment/capital (given we are small, a long way from most places, and have a small population base yet we still want as a nation first-world health, education, lifestyle etc), then a sensible policy needs to be formed around what type of foreign investment do we want/need, and what don't we want/need, how it can be consistently applied etc.

    At the moment I would suggest that the tos and fros of the Crafar decision (and the heat that it has generated) illustrates that we haven't yet got to that point. Most rational offshore investors (at least the ones I speak to), are comfortable playing by the given investment rules of any country, but they do want to be certain that the rules won't change at half-time, or be applied differently to different foreign investors.

    There is a strong perception off-shore - true or not - that where the foreign investor comes from is a factor in the decision as to if their capital is wanted.

    Mt Albert • Since Nov 2006 • 399 posts Report Reply

  • Angus Robertson, in reply to Marcus Turner,

    Why should people suffer?

    Rich people who purchased at inflated prices and the rich bankers who loaned them the money should suffer losses, because morally we shouldn't reward the greedy rich. Because the tools used to prevent the rich from suffering losses will cause greater suffering amoung poor people who haven't got equity that needs protecting, but will be hit by the inflation that results from the injection of liquidity.

    They should suffer, because they can best afford to. Injecting liquidity into the a failing market is a boon to the established rich at the expense of the poor.

    Auckland • Since May 2007 • 984 posts Report Reply

  • Angus Robertson, in reply to Rich of Observationz,

    No shit, Sherlock.

    I'm a pragmatist, not a neo-liberal.

    Auckland • Since May 2007 • 984 posts Report Reply

  • BenWilson, in reply to Angus Robertson,

    Angus, I struggle to agree with you when you think that a massive scale property collapse would be a good thing. It may be inevitable but it that doesn't make it good. And it's only inevitable if governments buy into the required level of complete apathy about their ability to do something about the problem.

    It's also a straw man to suggest that printing money goes hand in hand with bailing out the rich. That's only true if the way in which money enters circulation is not changed at all, in other words if you have failed entirely to grasp what KiwiNomad would seem to be suggesting. It is entirely possible in a sovereign nation NOT to create money by bailing out banks and hoping for them to buy into fractional reserves, rather than just keeping the money, as they have done. Which, ironically, counter to your argument, has not created much inflation at all in the USA where they did exactly that in response to the GFC, which just goes to show how much more the inflation problem is a function of debt availability rather than money supply.

    There are a thousand ways that the economy could be handled, Keynes was but one theorist, and by no means the only socialist one. But there does seem to be only one kind of monetarism, and it's had a damned good run at the helm. If economists have any understanding or appreciation of what science is at all, they would have to admit monetarism is one of the few theories that has been proved wrong conclusively, because it has actually been tried, in hundreds of experiments around the globe. It's time for new experiments.

    Auckland • Since Nov 2006 • 8598 posts Report Reply

  • Martin Lindberg, in reply to Angus Robertson,

    Rich people who purchased at inflated prices and the rich bankers who loaned them the money should suffer losses, because morally we shouldn't reward the greedy rich.

    And the definition of greedy rich is anyone who has bought property?

    Stockholm • Since Jul 2009 • 797 posts Report Reply

  • BenWilson, in reply to Angus Robertson,

    Rich people who purchased at inflated prices and the rich bankers who loaned them the money should suffer losses, because morally we shouldn't reward the greedy rich

    Dude, you're talking about me, who purchased a house in a low income area at a time when it simply made more economic sense than paying higher amounts of rent, someone who wanted continuity of their dwelling because they are raising a young family. You're talking about bankrupting me. You're talking about a million other people like me. Is it surprising that middle class turkeys aren't voting for a massive Thanksgiving in honor of your ideology?

    Auckland • Since Nov 2006 • 8598 posts Report Reply

  • Martin Lindberg, in reply to BenWilson,

    Dude, you're talking about me,

    He could be talking about me as well, but I think he's just talking about some straw men greedy rich and rich bankers. Easier that way, then he doesn't need to consider actual people.

    Stockholm • Since Jul 2009 • 797 posts Report Reply

  • Marcus Turner,

    I’m struggling with the concept that a person thinks other people should suffer. Why would you want that? Do you think other people want you to suffer?

    I like the idea of people learning from mistakes, but don’t wish other people harm.

    Surely, there are too many people suffering already.

    Since Nov 2006 • 202 posts Report Reply

  • BenWilson, in reply to Martin Lindberg,

    Hard to be sure, because the austerity distribution will most certainly be inversely proportional to wealth - the actually rich who own their homes outright will be unaffected, except in losing paper wealth. But those who are the most vulnerable, the ones who scraped a deposit together from years of saving and are riding right on the line of being able to pay the mortgage whilst also eating, they are the ones who would be foreclosed and bankrupted by the discrepancy. In that scenario, every poor family would lose their home, prices would stabilize downwards, and then have a guess who would be sitting around with sacks of cash to buy in again at rock bottom prices? Economic bust is not a progressive redistribution.

    Auckland • Since Nov 2006 • 8598 posts Report Reply

  • Angus Robertson, in reply to BenWilson,

    Dude, you're talking about me, who purchased a house in a low income area at a time when it simply made more economic sense than paying higher amounts of rent, someone who wanted continuity of their dwelling because they are raising a young family. You're talking about bankrupting me. You're talking about a million other people like me.

    Yeah, I'm talking about people like you. I think it would be better for people like you if you didn't have to pay so much money for a house.

    I am talking about the reality that NZers are over leveraged and there is a distinct possibility property prices will fall.

    Injecting liquidity by giving money to bankers so that they can write even more loans to more people so that those people buy more property propping up the demand side and keeping prices high is at best a temporary solution. Unfortunately either one of two things follow - even more people will be trapped in a miserable position when a bigger crash happens later or we will have a period of high inflation.

    Is it surprising that middle class turkeys aren't voting for a massive Thanksgiving in honor of your ideology?

    No, it'd be fair to say anybody suggesting that property prices should be allowed to fall isn't considered good company in middle class circles.

    Auckland • Since May 2007 • 984 posts Report Reply

  • Richard Aston, in reply to Islander,

    HOWEVER back here in ANZ buying a property(landed means something ENTIRELY DIFFERENT here) is a vastly different matter from buying a property in China – and comes with a whole set of prohibitions of use and commitments towards community than a possible Chinese owner (Corporation or set of individuals) might know about-

    Islander thanks for bringing up this side. I'd extend that to say land should not be seen as a purely trad-able commodity /asset, its way more than that. Its what we are made from , its our bones and the land offers to support us for nothing and as such deserves our gratitude and respect.
    Ownership is in the end , guardianship really and guardianship comes with responsibilities, sensibilities and sensitivities.
    If a foreign "buyer" can engage with that kind of relationship to land then maybe maybe - but I cannot see a large Chinese Corporate even understanding the above.

    Auckland • Since Nov 2006 • 503 posts Report Reply

  • Angus Robertson, in reply to Marcus Turner,

    I’m struggling with the concept that a person thinks other people should suffer. Why would you want that? Do you think other people want you to suffer?

    As I see it in the event of a property crash there is going to be some suffering:

    Scenario A - property prices are allowed to fall: loans are defaulted, banks are stressed and some people go bankrupt.

    Scenario B - liquidity is injected at low rates so more people are encouraged to invest in property, but this just delays the crash and the crash that occurs later involves more people.

    Scenario C - liquidity is injected in the form of created money so that prices are maintained at high levels forever, but this inflation effectively wipes out savings and this causes suffering in everybody who wants to retire or is retired.

    The number of people suffering increases A to B to C. I want to see the least number of people suffering, therefore I want to see A occur and those people to suffer a loss.

    If you can see a way forward that prevents suffering for everybody - please share.

    Auckland • Since May 2007 • 984 posts Report Reply

  • Rich of Observationz, in reply to BenWilson,

    Ben, how about if you got swapped into a secure lifetime tenancy with the right to make reasonable changes, etc and pay a fair rent?

    That would be my solution - nationalise the unpayable mortgages, let people stay in their houses and convert them to tenancies. A house becomes a place to live, not an investment vehicle.

    Back in Wellington • Since Nov 2006 • 4467 posts Report Reply

  • BenWilson, in reply to Angus Robertson,

    Yeah, I'm talking about people like you. I think it would be better for people like you if you didn't have to pay so much money for a house.

    OK, so how is my losing the house that I already partially own, and owing the bank the difference going to help out with that?

    Injecting liquidity by giving money to bankers so that they can write even more loans to more people so that those people buy more property propping up the demand side and keeping prices high is at best a temporary solution.

    Again, that's not what Kiwi Nomad said, so far as I can tell. Giving the money to the bankers is not the only way to inject money. It could be spent directly by the government as a far more direct way to inject money into the economy. That spending could be straight into debt paydown, so long as there was accompanying controls put in place so that it couldn't simply be replaced by more debt. Or it could be injected into any number of other things. Your argument against printing money seems to be entirely predicated around the idea that it will be given to the finance industry. This is not a given. I agree that doing that is not a very good idea, and could well perpetuate or exacerbate the problem.

    No, it'd be fair to say anybody suggesting that property prices should be allowed to fall isn't considered good company in middle class circles.

    I don't know about that. The middle class does include a lot of people who don't own property, but would like to. But I doubt that even those without think that an economic collapse on a scale that could dwarf anything from the 20th Century is going to be good for them either, since it would spill into the entire economy. Especially when it is actually avoidable, when the impossibility of the nation balancing its books is entirely predicated around limitations that are self-imposed, like the impossibility of raising tax or printing money. That these ideas can't be considered by either major party is a sign of just how badly they have bought into the economic idiocy of our times.

    Ben, how about if you got swapped into a secure lifetime tenancy with the right to make reasonable changes, etc and pay a fair rent?

    I'm not really sure what you're asking. If there was a tremendous collapse (property would have to fall 35% percent before I was bankrupted), I'd probably feel lucky to get such a lenient outcome. But for my mortgage to become unpayable, all that would have to happen would be my wife losing her job. Considering she works in a finance company, this could easily be an outcome of even a much lesser property collapse, indeed she was already made redundant by that same company back in 2008, pregnant with our second son.

    However, if someone in a sitting government seriously posed the solution to me that property could and should go belly up just to teach me a lesson, and that I would then be bailed out in the way you suggest, I'd sell tomorrow, since I've invested vast sums of money into this place, done without quite a lot of things for a long time, worked really hard for what I have here. I'd also probably leave the country, because I can only tolerate so much madness, and a government seriously entertaining complete economic collapse as a solution is a government I don't want to live under.

    Auckland • Since Nov 2006 • 8598 posts Report Reply

  • BenWilson, in reply to Angus Robertson,

    Scenario A - property prices are allowed to fall: loans are defaulted, banks are stressed and some people go bankrupt.

    By some people, you mean tens of thousands of families. Possibly hundreds of thousands, if any banks actually collapse, which they easily could.

    Scenario B - liquidity is injected at low rates so more people are encouraged to invest in property, but this just delays the crash and the crash that occurs later involves more people.

    It could be delayed indefinitely by this method. In fact, it has been.

    Scenario C - liquidity is injected in the form of created money so that prices are maintained at high levels forever, but this inflation effectively wipes out savings and this causes suffering in everybody who wants to retire or is retired.

    It might not wipe out savings, if they are given high returns. For the enormous number of NZers whose only retirement plan was the high prices of their property they've invested in for their whole lives, this will be business as usual. A crash would, on the other hand, finish them, and they would most likely go bankrupt and die as beneficiaries.

    Scenario D: Liquidity is injected simultaneously with stipulations that it is only to be used for debt paydown, and stricter controls over the amounts of equity are put in place

    Scenario E: The government buys up the banks, maintaining prices and gaining a very valuable asset.

    Scenario F: The government raises taxes, introduces compulsory savings, prints money and invests it directly into the economy, whilst tightening financial controls.

    Scenario G, H, I, J, K, L, M, N -> ZZZZZZZZZ....there's no limit to the possibilities. We're talking about the government here, the entity that makes the laws, runs the courts, the police, the military, takes the taxes, controls the bylaws, employs more people than any private enterprise. It has tremendous power to take active control of the economy, and pretending it can't requires an ideology I'm perhaps just not educated enough to buy.

    Auckland • Since Nov 2006 • 8598 posts Report Reply

  • Scott Chris, in reply to Angus Robertson,

    Injecting liquidity by giving money to bankers so that they can write even more loans to more people

    You're only considering conventional quantitative easing. If you simply 'print' electronic money rather than monetize bank assets then you bypass the banks. The government then uses that money to build houses which in theory would do at least four beneficial things.

    1) It would ease the housing shortage.
    2) It would undermine demand for real estate.
    3) It would undermine the value of a bloated kiwi dollar.
    4) It would provide jobs for the unemployed.

    Easy enough to try it on a small scale to see how much inflationary pressure is generated. Or just slap a land tax (rather than a CGT) on the whole economy to further disincentivise real estate speculation and suck the surplus cash back out of the economy.

    Auckland • Since Feb 2012 • 167 posts Report Reply

  • Marcus Turner, in reply to Angus Robertson,

    If you can see a way forward that prevents suffering for everybody – please share.

    I accept that as rhetorical, and understand that your point is to keep the numbers of disadvantaged to a minimum. I didn't get that from your earlier post.

    Since Nov 2006 • 202 posts Report Reply

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