This is a great read. I couldn't imagine a city more suited to cycling than Christchurch. Our new CERA boss is a mad keen cyclist so expect that to be at the top of the agenda. Also pretty cool that we had 4 different reps from Copenhagen around the TEDxEQChCh conference. They all stand at the ready to help us out. There is a lovely synergy and relationship between the 2 cities which we can expand upon.
I actually think we should be focusing on how to get cheaper electricity prices and not end up with another Contact.
Selling us back assets we already own is simply nonsensical. See my reasons here
And if we really need hard cash now we should liquidate the overseas piece of the Cullen Fund whilst stock prices are at elevated levels. There's almost $18bln sitting in that.
when oil gets to $500/barrel the global economy will be in collapse. NZ has hydro, wind, solar, huge forest area with capacity for more and oodles of coal.
So my point is that the rest of the world be be in dire straits well before NZ is.
Not necessarily. Remember the price of fuel already contains a large amount of tax. When i looked at this in the UK it turned out that VAT and other taxes actually came out about the same as pricing the cost of carbon in.
The oil market is also extremely inefficient basically run as club. NZ is far less exposed even considering trade distances. Shipping is a pretty cheap form of transport and our general costs are much lower.
NZ is well placed on all fronts to cope with any eventuality, dopey politicians notwithstanding. We have everything we need right here.
The answer Raymond is that environmental costs should be priced into the system. It's as simple as that. If you have an uninsulated house you will use more energy and pay more for that. If you fly around the world you will pay more.
As Stephen notes the end user (the consumer) will only change behaviour when the price signals are correct.
I'm not advocating a return to the gold standard. The gold standard didn't cause the great depression in the 1920s, it was caused by massive asset inflation (properties and stocks) caused by huge speculation on the back of bank credit.
I'm advocating that the power to create new money is taken back by the people and away from the banks.
This is a whole subject in itself so hard to fully dissect here but there have been booms and bust on an 18 year cycle for a long time. Always the same cause....expansion of the money supply for speculative endeavours.
When you read the history of this you would laugh at the same stuff happening time after time. Our current malaise is nothing new at all.
You'll have to read my blog if you want to learn more about this stuff :-)
To answer your question as foreigners take cash out of the economy and back overseas they sell NZD so someone has to buy it right? But its the nature of the flows.
The profits made by the Australian banks here in NZD are around $4bln....nice work if you can get it. Whose idea was it to sell National Bank to the Aussies?
That $4bln will come back as financing money so we can pay for our imports on credit.
Which is why we have a current account deficit of 9%. So its productive cash flows going out and non productive ones coming in.
I know Kiwibank is a bit behind in its services but really if you care about where your money goes you should bank there as at least the profits stay at home or any other local financial institution such at TSB.
When they improve their services i'll be happy to use them for everything.
We can solve this problem by issuing the money ourselves instead of borrowing from overseas. We can then control the amount of money issued and thus avoid asset price booms, exchange rate volatility etc.
Malaysia fixed its currency back in 1998 after the Asian currency crisis and slowly lifted various controls on it and now its floating again.
Just remember who is in charge of our money. Money is a sovereign right, a tool of Parliament. Only the Reserve Bank is authorised to create money....unfortunately 98% of the money supply is debt having been created by the private banking system as bookkeeping entries.
I am calling for a democratisation of the money supply putting it back into Parliament's hands for the benefit of all.
Removing the banking systems licence to print money is the only thing that will ever enable us to have a stable economy.
As Thomas Jefferson once said "banks are more dangerous than standing armies" .
And old Aristotle himself "money should be the servant of mankind not its master".
Thanks for the tip Michael. It should be an interesting night and probably a microcosm of water disputes taking place globally (think Darfur, M.East).
Lee, Although the USD is in a major downtrend the NZD has had major moves against the Yen especially. Australia, the US, Japan and China are our major trade partners. Kiwi/Yen is at crazy levels.
But looks rates go up and down over time so there is an argument not to be too concerned. It's when your currency becomes a toy for global markets that you have a problem of instability.
The reason floating rates were chosen at Bretton Woods was not because of the stability of the USD, it was simple grab for economic power by the US. If the Bancor as suggested by Keynes had been adopted the world would look very different.
Rich, yes house prices are the main problem but they always are. That's where the majority of people's disposable income goes. As for Nigel Lawson he was caught, like all Chancellors, with his pants down. They all believe they will be the ones to end the boom/bust cycle (witness Gordon Brown pontificate). The problem is that they cannot control it.......it's built in to the system. The banks dictate what happens not the finance minister.
The Fed's given up publishing money supply numbers!
Inflation targeting doesn't work....it's why Australia has outperformed NZ.
Rob, globalisation of money in terms of free flow of capital is a major destabilising force. One the great ironies was Alan Greenspan being awarded a knighthood for services to financial stability.
Well i was a trader for those years and it was probably the most unstable times the markets have ever known.
Yes as Rich says unemployment is low (even though some of those employment statistics measure employment as 1 hour or more a week) and inflation is now back in the 1-3% range. But interest rates are very high by global levels, mortgage affordability is at extreme levels and the exchange rate is at abnormal levels, driven not by trade flows or productive investment capital but by speculative capital.
That isn't healthy.
What it has done is expose the underbelly of monetary policy and that is a very good thing. Lets hope the Inquiry into Monetary Policy brings about some conversations in this area with a wider range of policy interests.
Has anyone considered that interest rate rises are actually inflationary as they increase prices across the economy as well as reducing profits or expenditure.
Like energy, interest costs are embedded in the price of everything we buy. As someone mentioned in a controlled money supply the increase in rates would lessen the demand for money.
However, we do not have a limited supply of money........it's unlimited. And who is in charge of it? Not the RBNZ but the private banking system.
Here are some numbers for Dec 1988-Dec 2006:
GDP +2.70% pa
CPI +3.02% pa
Money Supply (Broad Money) +18.1% pa
House Prices +22.1% pa.
Our underlying economy is sound but our speculation in land prices isn't and that is driven mostly by in expansion in the money supply which in essence is bank's creating accounting entries.
Inflation targeting is nothing more than a red herring, a wild goose chase and totally ineffective.
When the latest boom is over and interest charges overwhelm the ability to repay them (mathematically guaranteed to happen) and the banks stop expanding the money supply then we will have our bust.
According to Fred Harrison, author of "Boom Bust: House Prices, Banking and the Depression of 2010" this will end another cycle of 18years of boom and bust. His work, which i recommend, identifies an 18 year cycle going back to 1775 and in his view to 1600 when land first started to be sold by the Churches in England.
The money supply is the problem not inflation.
Hopefully one day we will address this but i fear it is too late for the current cycle which is already approaching its point of no return.