Hard News by Russell Brown

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Hard News: Crash and Contempt

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  • Luke Williamson,

    It all seems so "over there in the US" until I talk to a friend at swimming who is in marketing for a company that sells saw blades around the world. Big orders into the US until people stop building new stuff and now they are looking at serious financial issues. It's interesting to view it from this side of the Pacific however, where our country still seems to be trading OK, has lots of cow money coming into the country and where, outside of banks and property, business still seems to be ticking along reasonably well. Maybe my glasses are rose tinted but it feels like hearing about people in Las Vegas who lost a bundle. It does scare me a little to hear John Key and Bill English still saying they are happy to borrow more to fund their tax cuts (I mean infrastructure). Wise in these times?

    Warkworth • Since Oct 2007 • 297 posts Report Reply

  • Craig Ranapia,

    I'm down the with Sullivan-Ranapia doctrine.

    Wheee! I have a hyphenated doctrine, now can I have a think-thank and a book deal for Christmas? :)

    But what's smacking my gob is that McCain (who should know better) and Palin (who I doubt knows anything that isn't written on a 5x7 file card for her) are running a campaign that is full of reflexive and habitual lies .

    You can make a serious fiscally conservative argument against Obama's economic policies. But what's happening is downright fibs being told about Obama's tax-plans. And what's McCain's alternative? Anyone?

    North Shore, Auckland • Since Nov 2006 • 12370 posts Report Reply

  • Russell Brown,

    Wheee! I have a hyphenated doctrine

    Well, I figured that if Fran O was going to go around conferring them, I'd dish out a few myself ...

    Auckland • Since Nov 2006 • 22849 posts Report Reply

  • Gareth Ward,

    Wise in these times?

    There is some argument that infrastructure investment in these times (even tax cut - broadly running a deficit) IS wise. Or at least that now is the best time to do it.
    The boost to the economy it provides is best done when that economy needs the boost. And governments have such a strong credit rating that we'll likely get very good subscription rates in such a risk-averse environment.

    I'm not necessarily advocating for it, but there is certainly a school of thought that the Govt can spend it's way through global recession...

    Auckland, NZ • Since Mar 2007 • 1727 posts Report Reply

  • Craig Ranapia,

    It does scare me a little to hear John Key and Bill English still saying they are happy to borrow more to fund their tax cuts (I mean infrastructure). Wise in these times?

    Well, Luke, fair questions but they should be put to Cullen as well. I don't think anyone had made a convincing argument that you can cut taxes and increase government spending, without something giving way somewhere. Perhaps the combat wing of flying pigs is passing as we speak, but I've my doubts.

    North Shore, Auckland • Since Nov 2006 • 12370 posts Report Reply

  • Russell Brown,

    I'm not necessarily advocating for it, but there is certainly a school of thought that the Govt can spend it's way through global recession...

    Quite. I'm surprised it's being touted as such an issue this morning. The money fleeing the markets is already going into government bonds, which bears out your argument about risk-averseness. You could also make the case that it's a course permitted by the strong state of the government's books now.

    Auckland • Since Nov 2006 • 22849 posts Report Reply

  • Jeremy Eade,

    "But what's smacking my gob is that McCain (who should know better) and Palin (who I doubt knows anything that isn't written on a 5x7 file card for her) are running a campaign that is full of reflexive and habitual lies .'

    Everything that's happening in america politically or economically
    had been predicted for ages. Right wing parties (lets not waste the word conservative on them) EVERYWHERE are a cringing joke surviving on the oxygen of a fear of real change. They are fear parties .

    auckland • Since Mar 2008 • 1112 posts Report Reply

  • Simon Grigg,

    Joe Klein in Time today:

    What we are seeing on Wall Street today is the result of an ideology gone amok. There was call to loosen and change the antiquated regulations governing investment back in 1980. But the Republican era has seen that loosening go to the point of near-cataclysm. Banks are failing, markets dropping. We are in the midst of a slow-motion economic crash. What happens next is an economic contraction: loans aren't available, so businesses can't expand. A crash comes at the beginning of a period of economic trouble.

    John McCain, after his political near-death experience, could have made the responsible regulation of markets one of his great causes. He didn't. And today he said, once again, "The fundamentals of our economy are strong." I hope he's right, but it's entirely possible that he knows as much about our economy as Sarah Palin knows about The Bush Doctrine.

    Just another klong... • Since Nov 2006 • 3283 posts Report Reply

  • Paul Litterick,

    next, Goldman Sachs and Morgan Stanley.

    Auckland • Since Nov 2006 • 1000 posts Report Reply

  • Gareth Ward,

    You could also make the case that it's a course permitted by the strong state of the government's books now.

    Exactly - and I think this is where the argument needs to lie. We need to maintain strong books, but this doesn't directly reflect surplus or deficit. More the strength and resilience of any spending and the productive use to which it is put.

    Auckland, NZ • Since Mar 2007 • 1727 posts Report Reply

  • Stephen Judd,

    So just to be clear Russell: is it ok to prejudice someone's right to a fair trial (eg all Lockett's co-defendants) as long as there is enough public interest? I fear you have left too much dangling here:

    the issue of the public's right to know is not inconsequential

    How far does "the public's right to know" go?

    For one thing, it is in the public interest to have fair trials.

    For another, suppose people who ought to have been convicted get off because they can no longer have a fair trial? How was the public interest served then?

    the defendants and their supporters were also making extraordinary claims on their own behalf.

    The one defendant I know personally was strongly advised by his/her/its lawyer to make no public claims, and did not. Nor did I see anything more extraordinary claimed with respect to that person than "X would never do such a thing, that is unlike the X I know."

    it would worry me if the court were to apply a very harsh penalty

    If a guilty person goes free because of this, or an innocent person has their reputation ruined, what sort of penalties do you consider appropriate? What kind of collateral damage to personal or public interests is acceptable when pursuing the public right to know?

    Wellington • Since Nov 2006 • 3122 posts Report Reply

  • Kyle Matthews,

    The state of the US financial markets and economy is a worry. I haven't followed it closely, but my impression is that they've bailed out a couple of major players, and now run out of their ability to bail out any more.

    Yet they don't seem to be addressing the underlying problems that are leading to these businesses falling over. So more will collapse as the country heads further into recession. They're heading for much bigger economic trouble, and that's going to be bad for them, and for us who will get dragged down with them.

    Since Nov 2006 • 6243 posts Report Reply

  • Luke Williamson,

    I see the logic of boosts to the economy etc. but I wonder if we are in the slightly protected position we are, as a country, because Mr Cullen has run a conservative approach to the economy over the last 9 years. Earned a bit and saved a bit. Would we be in a healthy state if we had borrowed more and spent more? Too macro-economic for my poor brain. I would also be interested to see what the total of the profits had been over the last 10 years for companies such as Bear Stearns, Lehmann Bros and other collapsing ones (excuse my spelling of their names - too lazy to check).

    Warkworth • Since Oct 2007 • 297 posts Report Reply

  • Blake Monkley,

    The USA has been borrowing to consume. Nobody has loaned the USA money to build factories, to build infrastructure. They have nothing to show for the trillions of dollars the world has loaned them except empty houses, plasma TVs, SUVS.They have blown the money on consumption and this is the problem. Ultimately the solution for the rest of the world is to stop lending them money, let the dollar collapse, let the US economy implode, and the rest of the world just try and go about its business.
    The USA has been living on IOUs.Part of the USA arrogance at the end of Second World War was to say we are the biggest, toughest, strongest country on the planet. You're going to use American dollars for international exchange.It's meant that when other countries ran out of American dollars when they are running a trade deficit, particularly back when exchange rates were fixed, they were forced to devalue. They had to do something serious. When America ran out of American dollars, it's just printed more.

    I just hope that governments whether they are right or left leaning take a good look at this and make good fiscal policy that benefits future generations rather than the crap we have seen by both sides for the last fifty years.

    Auckland • Since Jul 2008 • 215 posts Report Reply

  • FletcherB,

    If a guilty person goes free because of this, or an innocent person has their reputation ruined, what sort of penalties do you consider appropriate?

    Also, if your reputation IS affected by public release of legally (and properly) suppressed evidence.... do you have a civil case against the party that released it?

    West Auckland • Since Nov 2006 • 893 posts Report Reply

  • Gareth Ward,

    I wonder if we are in the slightly protected position we are, as a country, because Mr Cullen has run a conservative approach to the economy over the last 9 years

    Well yes, his handling of it broadly agrees with the counter-cyclical approach I mentioned. When the economy is chugging along well, take some of the heat out of it to rein in inflation and smooth it's progress. There's no need to spend up large (read: run a large deficit) because the economy is boosting itself.
    Then use those hoardings to inject back into the economy as it turns.

    Auckland, NZ • Since Mar 2007 • 1727 posts Report Reply

  • Steve Withers,

    Given the way things have gone for the past decade, it is almost certain that what needs to be done will be what is not done. Despite the Tech Crash in 2000, Bush went ahead with his tax cuts in 2001 even though they were based on the no-longer prosperous assumptions applying PRIOR to the Tech Crash.

    Similarly, National is promising tax cuts even though they are predicated on the formerly prosperous environment applying PRIOR to the implosion of the property bubble, the consequent finance company crashes and the recession now underway.

    Voters are just as much to blame as the vast majority know next to nothing about most of this and lack the education and skills to even understand the explanations without undertaking extended remedial tuition in how the world REALLY works. instead, they cling to the same preconceptions and misconceptions that underpin most of what now passes for right wing "thought".....a word I use reluctantly.

    As for NZ's indebtedness, our government books might look good but everything else is going to hell in a hand cart. Bernard Hickey recently highlighted NZ's debt (non-governmental) is now greater - per capita - than the United States and lenders elsewhere could begin to look at us as a poor credit risk.

    We are far from safe. Through our local banks we have collectively borrowed $138 billion for mortgages alone from the financial system that is now in disarray.....

    How interest rates on that money can avoid going up is unclear. Lendors have been walking naked in a blizzard of risk for too long already.

    Auckland • Since Mar 2008 • 312 posts Report Reply

  • giovanni tiso,

    The USA has been borrowing to consume.

    And to wage war, let's not forget that.

    Wellington • Since Jun 2007 • 7473 posts Report Reply

  • Russell Brown,

    __the defendants and their supporters were also making extraordinary claims on their own behalf.__

    The one defendant I know personally was strongly advised by his/her/its lawyer to make no public claims, and did not. Nor did I see anything more extraordinary claimed with respect to that person than "X would never do such a thing, that is unlike the X I know."

    There was far more expressed than that by some defendants and, more especially, surrogates such as John Minto. He certainly felt free to use his privileged access to evidence and presence in court to deliver his own spin on suppressed evidence.

    Remember the newspaper column he wrote declaring that the intercepts -- the same ones the Dom Post quoted -- picked up:

    nothing one wouldn't hear on a Saturday afternoon at any gun club around New Zealand – even before the beer comes out.

    It was all quite surreal. Those of us sitting in court were incredulous. The lack of substance to the evidence we heard was frankly embarrassing.

    Minto explicitly set himself up as an adviser and spokesman for the defendants, and he had no compunction about selectively quoting privileged evidence to influence public opinion about the case. And he wasn't the only one to do so.

    This article on CounterPunch by one of the accused, Valerie Morse, is a disgrace. It kind of makes my blood boil when she says:

    I was arrested, I believe, to provide a cloak for the racist nature of the operation.

    There's a good reply to that, but it involves currently suppressed evidence. Morse is simply using the vacuum to spin the story for public consumption.

    There there's this extensive account of the gathering of the intercept evidence on the website of Morse's publishing venture. As usual, the account is selective, and the reader is invited to see the police investigation as solely political in motivation.

    So, yeah, I had a problem with that.

    Auckland • Since Nov 2006 • 22849 posts Report Reply

  • Evan Yates,

    Also, if your reputation IS affected by public release of legally (and properly) suppressed evidence.... do you have a civil case against the party that released it?

    IANAL but my bet would be "Yes". However I expect you would have to get in line behind the crown's criminal case for contempt and then be able to prove actual harm to be awarded any damages. Not an easy thing to do in real life for Joe/Jane Q. Citizen...

    Hamiltron, Te Ika-a-Māui • Since Nov 2006 • 197 posts Report Reply

  • Gareth Ward,

    While the makeup of the Government's deficit has some effect, the general concept of spending your way through a recession is based on the size of that deficit.
    As such a low tax, low-ish (but bigger than tax take) spend is roughly equivalent to a higher tax, even higher spend. If the deficit from National or Labour is $x billion then at the broadest stroke I believe the expansionary effects are similar.

    I have no doubt there are dozens of highly trained economists spitting coffee over their keyboards as they read this but the nuances of the impacts from different deficit makeups are not something I've got a great handle on (deficit as % of tax take, nature of private vs public spending/saving etc)

    Auckland, NZ • Since Mar 2007 • 1727 posts Report Reply

  • Tom Semmens,

    Hmmm, for all this talk about borrowing for tax cuts and counter-cyclical stimulation, I now wonder who we are going to borrow this money from.

    The Reserve Bank factored in the high cost of credit when it cut the OCR by .5%,, but the collapse of Lehman has just made credit that much harder to get - and therefore more expensive - for our baking system.

    I now expect Dr. Bollard to cut another half a percent in his next OCR, just to get mortgage interest rates down even a little bit.

    We have a relatively robust banking sector, but we are also addicted to cheap foreign credit as much as the American - probably more so on a per capita basis. All that is standing between us and a financial meltdown of US proportions is the health of the government's balance sheet.

    Sevilla, Espana • Since Nov 2006 • 2217 posts Report Reply

  • Paul Rowe,

    the collapse of Lehman has just made credit that much harder to get - and therefore more expensive - for our baking system.

    So the price of bread goes up too? Will no-one think of the children?

    Lake Roxburgh, Central Ot… • Since Nov 2006 • 574 posts Report Reply

  • Andrew E,

    As a non-economist, I think there's still some problems with this, even if you accept that Cullen has done 'the right thing' by 'taking some heat out of it' when the economy is 'chugging along' and could now 'use those hoardings to inject back into the economy as it turns.'

    Yes he could, and that would be the sensible thing to do, it seems to me. The problem is, that rather than do that from the centre, where he can control where the fiscal expansion should go, to best boost the economy/avoid the downturn, he's given in to this ridiculous mantra about 'the government's running a surplus so we should get tax cuts'. Which means that he apparently wants consumer spending to boost the country out of a downturn/avoid it.

    The problem with this is that, in spite of relatively high interest rates NZ consumers have been on debt-fuelled consumer boom of their own over the last few years. So do we really want to add to that?

    Especially as we've got a Reserve Bank which is now lowering interest rates to ease the pain for mortgage-holders and ensure companies still consider borrowing to invest.

    So, tax cuts plus lower interest rates means consumers might spend more. But the lower interest rates also lowers the relative strength of the NZ dollar (artificially boosted by all those overseas investors who saw a much nicer rate of return on their savings if they were held in NZ dollars, rather than, say, yen), which means that exporters aren't getting as much for their products anymore and consumers can't actually spend our way out of the downturn because their dollars won't buy as many imported goods.

    Not to mention that our high interest rates and relative economic stability were also what fended the hard questions about the huge balance of trade deficit.

    Seems to me that reducing interest rates or cutting taxes might be sensible, but doing both simultaneously isn't a good way to go.

    Personally, I'd prefer the reduction of interest rates to the reduction of government tax income. The reduction of the strength of the NZ dollar may reduce the export earnings in one way, but if it makes NZ products cheaper, then hopefully they'll sell more. And I'd rather have an export led recovery (/downturn avoidance) than a consumer spending spree of tax cuts on more imported goods. I'd prefer to trust a finance minister to spend the money on things where the needs are identified (infrastructure/health/education).

    But then, as I said, I'm not an economist, so what do I know?

    174.77 x 41.28 • Since Sep 2008 • 200 posts Report Reply

  • Paul Litterick,

    the collapse of Lehman has just made credit that much harder to get - and therefore more expensive - for our baking system.

    So the price of bread goes up too? Will no-one think of the children?

    I am putting my money into scones.

    Auckland • Since Nov 2006 • 1000 posts Report Reply

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