Hard News: Is that it?
327 Responses
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bmk, in reply to
Well the prostitute provided a service. So it's not like the debt magically disappeared.
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BenWilson, in reply to
I'd like to add to my previous post that this outlook is only predicated on countries failing to change they way they manage money. Any number of small tinkerings could make a substantial difference to overall competitiveness, general fairness, and economic growth. We could avoid the slide to third world status, simply by opting out of the way of managing finances that left it to markets and bankers to ruin.
This opting out can happen at a personal level, a social level and a national level.
We can opt out of running up personal debt. We can opt in to saving, and in a longer run, investing. We can help people we care about for free. We can change government policy.
I hate the sweeping rhetoric that suggests we're powerless before the forces of globalized capital. We're very far from powerless. Every person can talk to the people they know aiming to turn them from the disastrous path of trusting fatcats to work it all out for us.
I'm feeling particularly inspired today, the example of Libya has me feeling positive about world affairs for the first time in months.
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BenWilson, in reply to
Well the prostitute provided a service. So it's not like the debt magically disappeared.
In Rich's example, she already owed the hotel money, and the payment she got was money owed to her. So the point he's making, that the mere existence of the token that let money move around does indeed resolve, in the situation where there is a debt circle.
If only there was a mutual debt circle. It's usually more like there's a rich guy in town, who everyone owes money to.
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Rich Lock, in reply to
There's plenty wrong with the example, not least the crooked accounting practices - it all falls apart when they have to balance the books for the taxman. But it's a mildly amusing (albeit crude and flawed) illustration of modern economics.
Like, (I think) most people, I just don't 'get' how the fate of the global economy can be decided on an abstract perception that is far, far removed from the goods/services that the companies involved actually offer/sell. Or how immense fortunes can be made or lost trading on this perception, rather than something that someone, somewhere can hold, touch, taste, feel, etc.
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bmk, in reply to
Yeah I get the point and that the prostitute was already owed the money. But all the money being traded was for goods and services rendered. But yeah I get what the example is trying to show.
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bmk,
Related to this is how when one large business decides to start paying their monthly accounts one week later this has a huge flow on effect to the average invoice date-payment date cycle. As businesses are all dependant on being paid in order to make their own payments.
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DexterX, in reply to
Maybe.
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"chris", in reply to
Any number of small tinkerings could make a substantial difference to overall competitiveness, general fairness, and economic growth.
I'm not sure if people are still routinely paid fortnightly in NZ but it would seem that monthly payments dramatically enhance peoples' money management abilities.
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Steve Barnes, in reply to
However, the whole town is now out of debt and looks to the future with a lot more optimism.
You got my point then ;-)
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Then I went to sleep and had a dream....
Only to wake and find Gareth Morgan had written it down -
Steve Barnes, in reply to
If only there was a mutual debt circle. It’s usually more like there’s a rich guy in town, who everyone owes money to.
Ah, but then the rich guy went out and sold that debt...
Yeah, that works.
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BenWilson, in reply to
I'm not sure if people are still routinely paid fortnightly in NZ but it would seem that monthly payments dramatically enhance peoples' money management abilities.
It had that effect on me, but only via the school of hard knocks. That's not really the kind of thing I was meaning. People struggling to pay for things for a whole month to teach them discipline.
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People struggling to pay for things for a whole month to teach them discipline.
It’s a slightly different breed of struggle though. The guarantee at least once a month of seeing the kind of money you can shake a stick at, does encourage more ambitious use of one’s income: Not having to save up week to week or fortnightly to pay utility bills is a weight off minimum wage earners’ minds, being able to bulk buy at the supermarket and the money saved on transport is both economic and environmentally advantageous. It develops foresight, which is something the status quo is currently lacks the scope to.
I have no opposition to the compulsory savings scheme you mentioned Ben except for the fact that it would be compulsory, a feature which seems wholly at odds with the notion of encouraging personal responsibility, enabling our population to reach budgeting maturity, and most simply freedom. Crucially it ties up a large amount of capital, capital that in some cases could be put to better use keep the wheels of the economy rolling. Perhaps it’s the right thing for the region, I don’t know, I simply rail against the underlying implication that it would be justified because the population are incapable. but perhaps we just are.
One of the main things I learnt rather belatedly, and this ties back in with your scheme for issuing shares for the dams to New Zealander tax payers, is that money saved is money earned. My problem with that scheme is that surely it entails there a finite window for issuing, so New Zealanders who had been living offshore at the point of issuance, or future immigrants, will be profited off – for a basic human need. This would be exacerbated would only be heightened by as you say
since we have to buy the power from them, would demand efficiency from them too, as shareholders, with the actual power to hire and fire the management.
When it would seem, that deprivatizing these assets would be the single best road for maintaining the businesses at minimum profit, reducing the cost of living, enhancing the population’s spending power and paving the way for further economic growth.
On a previous page, I mentioned defloating the dollar, creating greater stability for exchange, amenable both to exporters and freelance consultants etc, Sacha you made a timely joke of it. But, why not? Why would anyone want to start a business in New Zealand when they could start it somewhere with a stable exchange rate? Why would consultants who can work anywhere want to have their foreign income paid into the New Zealand economy when the floating exchange rate begets uncertainty as to their monthly income? It’s simply not an attractive scenario, and so the money flows elsewhere. The government should peg that dollar and micromanage the economy, earning their keep so to speak.
Another issue I touched on on the CGT thread which again wasn’t run with is the introduction of a tax free threshold, again to tie up less money and encourage market liquidity. 12.5% 0-14,000. What is that? A child doing a paper run earning 40 dollars a week should be taxed? kids doing some odd jobs are tax evaders? Sure no one will be prosecuted. But what is the relevance of a 5 tier income tax system? China has 9 the US has 6. Surely all economic indications are that this is no longer relevant. Why is there no income tax exemption bracket? The UK has one up to £2440. To me it just seems laziness and a real lack of imagination.
The ilk of nouse and creativity of the competition is well illustrated in this example of China’s economic growth 2000-2010. The CCP, knowing that the local population are frugal savers encouraged the importation of millions of westerners (usually English teachers) on a gray visa system (allowing apparently laxly policed illegal temporary residence) under the assumption that westerners will spend! spend! spend! a foreign lubricant to help kick start the engine of the domestic economy. Not that anything of the sort would work in New Zealand, but, it's hard to dispute that it's canny….that’s the challenge.
Sorry for the rant.
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BenWilson, in reply to
Sorry for the rant.
Not at all. Good ideas in there.
Not having to save up week to week or fortnightly to pay utility bills is a weight off minimum wage earners’ minds
Not sure about that. They do have to save up for the entire month to have anything to spend at the end of the month. Most importantly, since few employers pay in advance, your first month at work is going to be really hard, if you're really at the bottom of the pile.
To take this to extremes that I've actually endured as a contractor, getting paid once every 4 months was really, really hard. You have to save a lot of money up or you will end up sucking up a lot of debt, or really tightening your belt at the end.
It develops foresight, which is something the status quo is currently lacks the scope to.
Perhaps it does (not really sure about that), but it does causes hardship. Foresight doesn't tell you when your car is going to die, or you are going to be hit with a huge dental bill.
enabling our population to reach budgeting maturity, and most simply freedom
They've had millenia to work this out, and just haven't. It's one of those compulsions I don't really feel bad about. Some freedoms just should not be allowed. The freedom to be enslaved, for instance. Which is not hugely different from the freedom to take on too much debt.
There are arguments of personal responsibility all around allowing people to enslave themselves. I think they all suck. Similarly, the freedom to ruin yourself economically is another of those freedoms that I think has simply had its day. You can blow everything up to a point, some base minimum, but there should always be something saved up for old age or destitution.
btw, I don't think this money should necessarily only be in cash. It could be that some proportion in higher risk, higher return asset classes is allowed.
For the rest:
-I don't think dams should be privatized, even if there was a share issue to the population. I just think that if they are to be privatized, then it should be via a share issue.
-Pegging the dollar makes a LOT of sense. It's worked for China.
-I totally agree with a tax free threshold.
-The Chinese government's ability to think long term is well worth thinking more about. -
Thanks for such a forthcoming response Ben. I'll be the first to admit I don't know much about this stuff so I was super pleased to read your critique. getting paid once every 4 months sounds like it would be nightmarish to adapt to, especially in an environment where that wasn't standard practice.
Foresight doesn’t tell you when your car is going to die, or you are going to be hit with a huge dental bill.
You're right, it won't tell you when, but these things do happen as a matter of course. Foresight is prudence, it's making provisions for potential calamities, being duly prepared.
They’ve had millenia to work this out, and just haven’t. It’s one of those compulsions I don’t really feel bad about.
And obviously not everyone but by and large. One of the things that irks me are the constant MSM reminders that NZers can't save, where I suspect that social and economic conditioning does play a large role. Why can Chinese save so well? Certainly decades of abject poverty aren't easily forgotten, but it would also seem that economic conditions are more conducive. Across the board monthly payments and lack of social welfare push people to develop the habit of saving. But there are other trends in conjunction with this such as quarterly or biannual rent payments which further enhance the scope for a longer term prescience, and free up a lot of capital for short term investment.
your first month at work is going to be really hard, if you’re really at the bottom of the pile.
That really is the crux of it. there would be a horrendous changeover period and knowing New Zealand's luck there would be a decades long hangover of some kind or other as we've seen since the end of the 6 o'clock swill. All things considered, I have to agree that you are right Ben, I'm used to the monthly payments now, but it took quite a number of years for that mindset shift. And I have kiwi friends who still haven't got to grips with it, the inevitability being that they end up borrowing more from mates, deepening their debt burden.
Similarly, the freedom to ruin yourself economically is another of those freedoms that I think has simply had its day.
In a nutshell. Thanks again for your reply Ben, I've been profoundly inspired by your posts of late. And yes, I'll shut up about the dam. More ideas!
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Paul Campbell, in reply to
Why is there no income tax exemption bracket? The UK has one up to £2440.
even the US has not one but two of these - a $5800 "standard deduction" ($11,600 if you file with your spouse) and a $3700 "personal exemption" (claimed once each for yourself, your spouse and your kids) - a single person would pay tax as if they earned $5800+$3700=$9500 less, married couple with 2 kids it would be as if they earned $11,600+4x$3700 or $26,400 less
(I say 'less' because the tax tables are written in the US as if someone starts being taxed at an income of $1 past the above values - they treat a real income of $26,401 for the above family as $1 and start taxing at the 10% rate from there which is confusing when trying to compare with other places)
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BenWilson, in reply to
I've been profoundly inspired by your posts of late.
Thanks! Nice to hear.
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Steve Barnes, in reply to
seems wholly at odds with the notion of encouraging personal responsibility, enabling our population to reach budgeting maturity,
Some people just can't or won't, Ben said "
Some freedoms just should not be allowed. The freedom to be enslaved, for instance.
I disagree, the freedom to be enslaved is still a choice, to some, slavery is freedom, freedom from unwanted free will, strange but true.
I mentioned defloating the dollar
But what could you tie it to? Gold? our Dollar would be worth so much in a short time it would either kill our exports or destabilise out internal economy, it would be chaos. (the converse of this would be if the US were to tie their Dollar to Gold then the price of gold, comparative to other currencies, would go through the roof so fast you'll wet yourself.
Just look at the US Debt Clock
Lookout for the shitstorm.One of the things that irks me are the constant MSM reminders that NZers can’t save, where I suspect that social and economic conditioning does play a large role.
One of the things that irks me are the constant MSM reminders that National will win the Election, where I suspect that social and economic conditioning does play a large role.
[adapted] -
But what could you tie it to?
Thanks Steve, obviously not my decision, there seems to be ample precedent for creativity here:
"Singapore moved towards pegging its currency against a fixed and undisclosed trade-weighted basket of currencies from 1973 to 1985."
leading to…
Some people just can’t or won’t, Ben said ”
The natural follow up being “why is it that the Chinese can?” sounds like a job for Woody and Wesley
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Rich of Observationz, in reply to
The Singaporeans also take 35% of everyone's income into a super fund. They can do this on account of not really being a democracy.
All issued Singapore dollar currency in circulation is fully backed by international assets to maintain public confidence
So (in theory) all the money is just tokens for an undisclosed collection of dollars, euros and yen sitting in the <strike>government's personal Swiss bank accounts</strike> sovereign wealth fund.
That's kinda similar to a simpler alternative (as used by Kosovo, Montenegro, etc) of just leeching off another currency. Kosovo doesn't print any money, and it isn't a member of the EU/Eurozone. It simply has the Euro as legal tender, and imports the physical currency it needs on an informal basis. Iceland considered doing the same, and it's also a possibility for countries like Greece.
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Steve Barnes, in reply to
The natural follow up being “why is it that the Chinese can?” sounds like a job for Woody and Wesley
White men can't save? The East Asian sector of the Human Race had Confucius for a founding thinker...
The philosophy of Confucius emphasized personal and governmental morality, correctness of social relationships, justice and sincerity.
Which would lead me to think that saving for a rainy day was a pre-requisite to being an upstanding citizen. And that was years before us Europeans invented Jesus, you know, the blue eyed fair-skinned guy.
There has been much discussion over the years about Race and IQ, there is a current Channel 4 Programme.
A controversial conversation if ever I saw one (note the very careful wording of the Daily Mail article).
If the measure of IQ means a measure of one's ability to succeed in a Western paradigm, then I can see a correlation. -
BenWilson, in reply to
But what could you tie it to? Gold?
Other currencies are usually favorite choices. Whoever you do the most trade with. In our case, probably the USD, which conveniently also pegs us to the RMB.
The Singaporeans also take 35% of everyone's income into a super fund. They can do this on account of not really being a democracy.
It is conceivable that a majority of people could agree with super schemes, particularly if they come with immense tax savings (as they do in Oz).
35% is a big slice of income. I suspect that the main reason they can do that is because they have very good incomes. When you're really rich, you can save way more money.
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they have very good incomes
Actually their household incomes are about 50% higher than NZers. When you adjust for living costs and the huge lump of super payment, they're probably worse off than we are.
(Obviously expat bankers and the like make huge dollars, which might explain why people think the Singaporeans are rich).
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Steve Barnes, in reply to
In our case, probably the USD,
Or maybe some other plummety thing... Like a big Gold brick in an Ocean of debt.
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I shall immediately go and discuss all this at the Kingsland Office over a jug or two of Hop Rocker. There may well be slurring.
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