Posts by Angus Robertson
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Farming in New Zealand has become more of a property development game; production is a secondary issue, there to service debt up to the point that the current owner cashes out to the next tax-free.
Since 2009 rural property values have fallen by 15 - 25%.
New Zealand’s macroeconomic settings support low revenue to asset ratios activities like those found in dairy farming,
Macroeconomic "support" to farming is such that farming asset values have fallen by 20% in 3 years.
What would we need to do to start transitioning to a more logical economic situation?
Acknowledge reality, perhaps. How do farmers farm for capital gain and make a "tax-free" profit when farm capital values decline by 20%?
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Speaker: The Voyage: On Interpreting and…, in reply to BenWilson,
...this is not functional capitalism. Nor is it socialism. It's just corruption, driven by ideology and hiding behind the supposed expertise of the managerialism that had slowly taken control of all powerful economic institutions.
I'd agree its corruption and managerial crap, I don't think its ideological - at least it isn't capitalism or socailism. I think it is the third way - middle of the road politics. And its driven by people like us.
Instead of gifting money to near insolvent banks, they could have simply purchased controlling stakes, buying the debts up the way any other bailout would work. Then, at least, they'd be getting interest on that trillion dollars, and they'd be in a powerful position to reorganize the companies however they saw fit.
That would work, it would work to provide a bottom to the system. Likewise unfettered capitalism where the economy deflates and banks go bust would work to bottom the system. Unfortunately each of the solutions will cause massive immediate pain for you or me (both of us represent large sections of Western society). And politically that would be death for whoever did it.
The problem with this 3rd way is the corruption. I suspect that if the 3rd way continues for long enough, there will have a moderate decline that (due to corruption) has the West decline gracefully past the original bottom. Until 10 years from now we are 3x worse off than if we had taken the hit now.
Anyway - happy thoughts...
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Speaker: The Voyage: On Interpreting and…, in reply to DexterX,
Globally corporations/businesses (Non Banking and Non Financial Institutions) have not been embarking on capital spending (plant and equipment) or research and development – their concern is about survival in a contracting economic environment – an environment which first shrunk rapidly and then contraction further but at a slower rate.
There needs to be stimulus undertaken by Govts to moderate the contraction of economic activity by providing incentives for capital expenditure and research and development. With out this expenditure the economy becomes less efficient and it drags.
The alternative explanation is that the economy contracted and then the governments intervened to slow the contraction and they have been totally successful. Its been so successful that we will be in a moderated decline until they stop, Japan managed to sustain a decline for 20+ years (I don't want that to happen here).
Until the bottom hits private business (especially banks) will soak the government for every cent it is willing to provide. The government doesn't want to trigger a collapse, so the way for private capital to make money is simple - be big enough to pull down a large swathe of the economy if you fold and then threaten to fold continuously. Moderating the contraction encourages risky banking practices that will either make or more likely lose a lot of money. Since the economy operates on the back of these poor private investment decisions everything continues to get worse and so on and so forth.
The private money is sitting on the sidelines, because the system hasn't hit bottom and isn't being allowed to. Investment will happen later when the economy bottoms.
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Speaker: The Voyage: On Interpreting and…, in reply to Scott Chris,
I think its a very good idea. If stimulus has to occur it should be making things that are good and useful.
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Speaker: The Voyage: On Interpreting and…, in reply to Marcus Turner,
Well to be fair there is in element of me that wants bankers to suffer.
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Speaker: The Voyage: On Interpreting and…, 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.
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Speaker: The Voyage: On Interpreting and…, 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.
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Speaker: The Voyage: On Interpreting and…, in reply to Rich of Observationz,
No shit, Sherlock.
I'm a pragmatist, not a neo-liberal.
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Speaker: The Voyage: On Interpreting and…, 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.
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Speaker: The Voyage: On Interpreting and…, 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...