Hard News: Theories, please ...
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I don't have anything like the discipline required to accumulate 5k in the bank. I'm impressed and a little frightened by people who can exercise such self-control - who knows what else they're capable of?
I thought that, then I tried it, and it's surprisingly easy. Set up an A/P to yourself. If your lack of discipline stems from the temptation to withdraw, get one of those accounts that only lets you put money in, and charges horribly for withdrawals. They tend to pay higher interest anyway.
Then you too can be capable of anything.
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The hard part is measuring people's intent. In houses, especially, the IRD hasn't really done much to enforce this rule.
Hmm. Not quite. One of the issues is where does the burden of proof lie in proving intent: the IRD or the taxpayer? The few cases are a bit sketchy on this.
Of course, if you are regularly buying and selling real estate every couple of years the IRD kind of feels its got you bang to rights.
The provision regarding intent to sell has been in the Act for a long time. Funnily enough - well, I think its funny - the then United Future MP Gordon Copeland wrote a letter to Cullen back in 2003 suggesting the IRD more actively enforce this part of the Act, so as to cool the housing market.
Tax officials supplied a long memo back on why this wasn't a good idea. Amongst other things, they said it would be tantamount to a "de facto capital gains tax".
(I've written about all this in NBR and Property Magazine)
A couple of years later they started doing just what Copeland suggested. Set up special teams in Auckland and Central Otago. Got quite a windfall; hence Cullen throwing them an extra $14 million in the last Budget to enforce it more rigorously across the country.
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Terence wrote:
Craig: It’s not argument from authority it’s just good evidence that he is a very good economist.
OK, Terence, Milton Friedman was awarded the 1961 The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. Sounds awfully impressive, but whether that's particularly sound evidence that he is "a very good economist" might be disputed by one or two people -- including Paul Kurgman himself.
As for your other comments, it would be more succinct if you’d just said that you personally don’t like him. You offer nothing of substance.
Oh, Mr. Wood, blow me. The op-ed page of The New York Times is not a peer-reviewed academic journal, and he's writing general commentary with a heavy political tinge. And "cranky" (as Russell puts it) is erring on the side of generosity. I'd also say tediously predictable, not particularly well-written or insightful exercises in preaching to the converted. Which fits the NYT op-ed page like a glove, but bores the shit out of me.
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Craig,
I don't dispute the fact that Friedman was a great technical economist; nor does Krugman.
Friedman's work on consumption behavior would, in itself, have made his academic reputation. An even bigger triumph, however, came from his application of Economic Man theorizing to inflation...By predicting the phenomenon of stagflation in advance, Friedman and Phelps achieved one of the great triumphs of postwar economics. This triumph, more than anything else, confirmed Milton Friedman's status as a great economist's economist, whatever one may think of his other roles.
As for the rest of your little rant, Krugman's strength as a writer is that he writes about complex economic issues gracefully. And he knows his stuff. Oh yeah, and he was right about Bush long, long, long before Andrew Sullivan or David Brooks or their ilk started lurching towards the life rafts. I'll keep reading him. You do what you want.
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Oh no. The last guy who made me that offer ended up standing over me in a car park wearing a zebra-skin hat screaming 'Don't make me go upside your head'.
Sounds like a story worth hearing. Last guy who made me that offer was from AMP. I gave them about $1500, then realized I actually wanted my money before I was 60. At which point it was made clear that the penalty clauses meant I would get about $400. Fortunately AMP demutualized a year later and I got $3000 worth of shares. A lucky escape.
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For what it's worth Krugman is a Bates prize winner and a highly acclaimed economist. He was also right about George Bush. Right from the start. And a long time before almost anyone else in the punditocracy.
Craig,
I agree with you. Paul Krugman has been confidently predicting an imminent reccession for the USA in every year of the Bush presidency since 2002 and so far has got it wrong every time.
Now he has gone and predicted an imminent reccession is upon us, and he might well be correct. But even a stuck clock...
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The NZ equity markets did not fall as significantly as overseas and Aussie equity markets is that NZ markets were not as overvalued as the offshore equity markets.
When the recovery happens NZ markets won't rise as much as the offshore markets.
NZ markets are not large enough and lack the diversity to get caught up with what just took place in the offshore equity markets.
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With regard to the talk about NZ being under inflationary pressure, the peril of interest rate differentials, the worst thing that could be done is to give NZers a tax cut.
The second worst thing would be to reduce interest rates.
The third worst thing that could happen would be NZers get wage increases to help them meet the exorbitant rise in basic living expenses.
The war against inflation falls heavily on the wage earners and no one else.
If the three things above happened the NZ economically would sink into the sea without trace.
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Terence:
OK, so you've shifted the goal posts to "a great technical economist" - grounds on which I've said twice I'm not really competent to pass judgment. Could you point me to any place where Krugman has been equally complimentary about Friedman's extensive writings on matter of public policy?
Sorry, I'm sure this is boring the crap out of everyone else -- but I guess we're going to have to agree to disagree on Krugman's worth as a writer. But please stop it with the rather fatuous appeals to authority. As long as he keeps publishing on the op-ed page of the New York Times, he's going to have to suck it up and accept that even highly sceptical plebs like myself are going to look at his oracular wisdom.
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Sue,
Russell my heart goes out to all of you.
is there any chance you can get an advocate to help you all out. Rather than you as parents having to fight against the system?
and dude, from everyone, if you need some hustling, you holler ok.
and holler loud -
is there any chance you can get an advocate to help you all out. Rather than you as parents having to fight against the system?
I think having to advocate for yourself is what a lot of people find when they have family members with various special needs in health or education.
While it would be great if we lived in a system where those things were available, NZ institutions just aren't funded well enough to have that sort of expertise generally available, for a lot of things.
My niece has Downs Syndrome, her parents have been finding that it's pointless just going to see 'any doctor', as they get so paranoid once they see Downs that a common cold turns into a two day hospital visit. Now they just fight their way through the first two layers until they can see the specialist who actually has the knowledge to deal with her special needs.
It's kinda crappy, and if you find a way around it and get hold of someone who works, hang onto them. Unfortunately it's not working for everyone.
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Surely NZ's reliance on overseas borrowings to create asset bubbles (particularly in property) will ultimately lead to its economic downfall, regardless of the relative prudence of the corporate sector.
Why should it? The people borrowing the money can afford to pay off their mortgages, car loans, credit cards, etc. (for the most part). So the lenders see a reasonable risk profile and keep lending. If NZ had a sustained collapse in the productive economy, then yes, default rates would increase, lenders would take a bath and money would become more expensive. Similarly, if the Kiwi dollar tanks, the perceived risk will go up and interest rates will follow.
Probably the main effect of a lack of savings is that people will need to work later and/or have less opulent retirements than they hoped for. Plus their kids won't inherit much and will need to work harder if they want to enjoy their parents lifestyle. None of which is the end of the world.
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Craig,
I agree - now would be a good time to agree to disagree seeing is everyone else on this thread is discussing weightier things than the merits of Paul Krugman.
I stand by my points of course: Krugman - great economist, good columnist.
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I get the feeling that Krugman's commentary at the moment is being skewed by his links with the Clintons. He seems unduly cranky.
You'd be cranky to if someone was saying you had non-existent children working for the Clinton campaign.
I think its more that Obama has been poking one of his pet issues - the "bankruptcy" of social security - and just won't accept that he's utterly, utterly wrong.
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I stand by my points of course: Krugman - great economist, good columnist.
Fair enough, Terrence. I stand by mine, that Krugman is a lousy columnist, and it's not particularly relevant how many prizes he has on his CV.
Anyway, what do folks think of Cullen's op-ed in today's Herald? On the political tip, I'd have to give him credit for striking just about the right tone. But substantively, a sounds assessment of the prospects for New Zealand, Pollyanna making a party political broadcast or a bit of both?
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And interestingly, while the US administration is throwing cash out like the Santa Parade, Mark Weldon (NZX boss) is telling all political parties to NOT offer any tax cut as election policy - given the inflationary pressures we are under and the interest rate differentials we have to the rest of the world, we can't possibly afford the extra pressure that a tax cut would provide.
Umm, he seems quite keen on tax cuts of various sorts actually:
TAXES
* Cut corporate rates to 25 per cent. This will increase our competitiveness and improve our ability to pay in line with Australia.
* Deal quickly with some of the competitive tax issues such as imputation credits and withholding tax.
* Tie some personal tax cuts to savings, potentially by putting the cash into KiwiSaver.
(This would be a good time, with markets relatively low, to put money in for the long term.)
* Make some modest changes in the personal tax rates, but only to non-inflationary levels.
There's a hefty tax cut in there (5%) for his corporate pals.
Also, as someone not generally economically minded, I'm unclear as to why personal tax cuts would be more inflationary than the alternative, which is (I assume?) greater government spending.
Presumably a decent proportion of tax cuts would be spent on things like debt repayment (credit cards, mortgages, student loans, etc.) and that's not inflationary?
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WH,
Krugman´s writing deserves greater respect than your lazy iconoclasm would give it, Craig.
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One further comment on Mr Weldon's effort.
IMMIGRATION
Virtually all employment sectors are feeling the squeeze. The medium-term viability of all our companies depends on a ready supply of skilled people.
My sense of it, and that of some others, is that many employers, in many sectors, care a lot less about "skill" than they do about "kiwi experience". As if, say, the experience of being a scientist in Japan or the United States is irrelevant to being a scientist in New Zealand.
As one commentator on the discussion board linked to above put it:
I have been forced to conclude that the primary reason for the ongoing shortage of skilled labor is precisely the unwillingness of NZ employers to employ immigrants.
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dc_red, quite right - I missed that little word "personal" in front of the "tax cuts".
And frankly I think he's just using the chance to drop in his usual "cut company tax" line - although there is an argument that company tax cuts would see greater investment in the productive economy (as you don't take the money out of the business when your personal tax rate is 39% but the company's only 25%). And a larger (if not 100) percentage of government spending is non-inflationary as it goes on infrastructure spending on the like.
While some personal tax cut would go on debt reduction etc, the profile of likely spending from personal tax cuts is more inflationary than that of most government spending/hoarding or lowering the corporate tax rate. None of those are ultimately one direction or the other, but the weighting is different on each... -
Anyway, what do folks think of Cullen's op-ed in today's Herald? On the political tip, I'd have to give him credit for striking just about the right tone. But substantively, a sounds assessment of the prospects for New Zealand, Pollyanna making a party political broadcast or a bit of both?
I would class it as a political "told-you-so", but the thing is - he's kinda right. "You all told me I was hoarding too much of the good times, but I told you there would be a cyclical down turn and we'd need to have the money to respond to it".
The question now is how does the Budget cushion us - tough ask to my (admittedly junior-economic) mind as the combined nasties of inflation and recession are tough for the Govt to respond to early on, yet they won't want to let the recession bite as a brake on inflation itself... -
Robert Reich has a thunderous column on Salon today. It concludes:
In reality, the crisis is both a credit crunch and the bursting of the housing bubble. Wall Street is in terrible shape and Main Street is about to be in terrible shape. And there's not a whole lot that can be done about either of these problems -- because they are the results of years of lax credit standards, get-rich-quick schemes, wild speculation on Wall Street and in the housing market, and gross irresponsibility by the Fed, the Treasury and the Comptroller of the Currency.
As a practical matter, our only real hope for avoiding a deep recession or worse depends on loans and investments from abroad -- some major U.S. financial firms have already gotten key cash infusions from foreign governments buying stakes in them -- combined with export earnings as the dollar continues to weaken. But this is something no politician wants to admit, especially in an election year. So we're going to go through weeks of posturing about stimulus packages of one sort or another, and then see enacted the big fat bonanza of a temporary tax break that will likely have little effect. That, perhaps along with a few more rate cuts by the Fed. The presidential candidates will be asked what should be done about the worsening economy, and they'll give vague answers. None will likely admit the truth: We're going to need the rest of the world to bail us out.
Ouch.
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Also, as someone not generally economically minded, I'm unclear as to why personal tax cuts would be more inflationary than the alternative, which is (I assume?) greater government spending.
Presumably a decent proportion of tax cuts would be spent on things like debt repayment (credit cards, mortgages, student loans, etc.) and that's not inflationary?
I'm no expert, so someone else might have a better answer.
But my guess would be the alternative to tax cuts isn't necessarily more spending, it might just be "more surplus" or "less deficit". Or more money into the super fund. None of which is inflationary. Particularly with recession coming up on the horizon.
I wouldn't think a small personal tax cut would lead to much personal debt reduction. Student loans are a fixed repayment at no interest, it doesn't make financial sense to pay down extra, you'd be smarter to invest the money. Mortgages you often have to refinance if you want to change the payments.
The amount of money most tax cuts would be talking about are in the pocket money range in terms of extra ability to spend. It'll just get sucked up in slightly more spending at the supermarket or another DVD or McDonalds or... etc
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Regarding "Kiwi Experience", it's true that NZ employers *are* probably a bit racist. I work for a company that employs numerous people born overseas (including me) and is always happy to employ more. However most applicants we get, although they might have impeccable technical qualifications, don't have sufficently good English to handle client facing work.
Exactly the same would apply if I tried to get a job in Switzerland - my French and German isn't up to scratch - not so much for the formal aspects of the job, but to interact with people and persuade them to do what the business wants. That's the essence of most NZ jobs (in bigger economies, they have more specialisation - a company like Novartis would probably be happy to harbour a monoglot Notes admin if they couldn't find a German speaking one).
I think potential migrants are often misadvised that they should do a 4 year Masters degree in their subject and a six month English course. They'd be better off with 4 years learning English and six months doing MCSE or similar.
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Gareth & Kyle - thanks for the thoughts on inflation, tax cuts, etc. Not something I'm accustomed to thinking about. I do wonder though: as long as the Reserve Bank believes personal tax cuts are inflationary, we can expect it to do its best to hoover the "extra money" out of the economy quick smart?
Rich said:
Regarding "Kiwi Experience", it's true that NZ employers *are* probably a bit racist. I work for a company that employs numerous people born overseas (including me) and is always happy to employ more. However most applicants we get, although they might have impeccable technical qualifications, don't have sufficently good English to handle client facing work.
Hmm - I would have thought much the same thing Rich: and English-language skills are often bona-fide job requirements, so it makes sense on the employer's part. But a mixture of first- and second-hand experience suggests plenty of migrants who speak English as a first language encounter significant discrimination too. e.g., highly-skilled, articulate Americans and Canadians who can write impeccable application letters.
I can almost envision Joe Q. Employer's HR person looking at these applicants' CVs - detecting "foreigner!" (by virtue of the location of previous work experience and/or qualifications) - and throwing it in the reject pile without another thought.
I do not detect any evidence of this in my own employment sector (which is very internationalized), but have good reason to believe it exists in plenty of others.
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Gareth & Kyle - thanks for the thoughts on inflation, tax cuts, etc. Not something I'm accustomed to thinking about. I do wonder though: as long as the Reserve Bank believes personal tax cuts are inflationary, we can expect it to do its best to hoover the "extra money" out of the economy quick smart?
That I don't know.
Personally I do get aggrieved at the way we're made to all feel personally responsible for inflation. Personally I couldn't care if prices are going up by 3 or 5 percent, I don't view that as justification for the government holding back money that it doesn't need.
I'm not in favour of tax cuts, just think that making us all personally responsible for a national economy which is to a reasonable extent at the whims of the international market, kinda unfair. If there's not tax cuts then it should be because the government needs the money for "good things".
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