Posts by Rich of Observationz
Last ←Newer Page 1 2 3 4 5 Older→ First
-
Raf: What I think you are suggesting (fixing the money supply) has also been tried. It's more or less what the "Gold Standard" did in the 1920's and before - all currency had to be backed by gold in central bank vaults. It led to the Great Depression.
-
Nat: when the company got sold overseas there was an inflow of cash to buy it. After that, there is an outflow of dividends, so it goes both ways. Plus, the dividends paid by a company are usually a fairly small proportion of turnover - all the expenses the company incurs in NZ stay here.
Barry: price inflation is worked out a statistically determined "basket" of goods and service. This represents an average persons spending mix. Yours might be widely different. For ijnstance, if you have a recent big mortgage, housing will be a large part of your living costs. If you rent a small apartment, it might not be.
With a "pegged" currency, the downsides are manifold. There will be inevitable pressure to break the peg (as happened in the ERM). This will be worsened by the fact that the peg is unilateral - the other nations are under no obligation to help keep our currency in line. So the parity will change, but it will do so in jumps - accompanied by much wailing, gnashing of teeth and adjustment of interest rates to extreme levels.
You may argue that all that is caused by currency speculation and we can stop that by exchange controls. If we do that, we are making life harder for everyone who has to transact overseas and effectively locking ourselves away from the world.
Once you put currency parities and interest rates under political control, you raise the question of what they should be. Borrowers will always want the lowest possible rates and exporters will always want an ever lower parity. Having such artificial economic conditions doesn't really help the economy. Inefficient producers would be cushioned - consumers incidentally, would pay more for many goods because imported items would be artificially dear.
This isn't surmise, BTW. It's more or less what happened in Britain from the end of WW2 until the 1980s.
-
current account deficit: 9% of gdp.
house prices: way out of reach of single-income families
most capital: foreign-owned with lots of dividends and interest whooshing off-shore
savings rate: negativeThree of those are just numbers. They are inputs but they don't have any practical effect on actual people. You aren't stopped from going on holiday because the current account deficit's excessive. Although people might be xenophobic about furriners, it doesn't actually have much practical impact that companies are foreign owned - why is it better to work for a a wealthy kiwi than a Japanese pension fund?
The only one that does affect people is house prices. They're high because the minority of the population who primarily live off assets have a disproportionate influence on political decisions. If the government took decisive action they could burst the housing bubble - as Nigel Lawson did in the UK (1988). They don't because a minority make money out of house price inflation and a majority are conned into thinking they will one day.
-
But then there are all those saying it is broke.
- they want to get elected
- they have some sort of economic ideology to push
- they are naturally grumpy
- they have a vested interest in some business activity (like low-added value manufacturing) which the current NZ economy isn't optimised for
-
The way people are talking you'd think we had some sort of actual crisis. Look at the figures
Inflation is 4%
Unemployment is 3.8%I'd call that pretty successful. We should be careful about trying some snake oil scheme (like cutting short term interest rates to drive the dollar down) that could wreck this. The concept of "it aint broke so don't fuck with it" possibly applies in economics as well as engineering?
-
I was. Didn't see you, but maybe you don't look like your byline photo!
Was that Chris Knox getting down at the front - or just someone who looks a bit like him?
-
On the Solow Residual thing, one thing that maybe an economist could explain to me is why they always look at productivity growth as:
Universal Widgets produced 100 trunnion brackets an hour at a value of $1000 using 10 workers. After installing an Acme 2000 flange twiddler at a cost of $1mln, the same number of werkers were able to produce 120 items an hour
rather than
Universal Widgets shut down due to foreign competition and their 10 workers lost their jobs. InfiniDim Software opened a development centre the same week and hired 10 IT geeks, who each produce $120 of software an hour
Both of these are productivity growth, but all the economics I've seen concentrates only on the first kind. Or is there something I'm missing?
-
I thought that James Duncan's solo set was a bit, shall we say, experimental? I suppose some people like that type of thing...
SJD was pretty good though.
-
Marcus:
Just got a quote on UK petrol (taxigas.co.uk) - 86.9p = NZD2.24
NZ caltex = NZD1.51So the Brits are paying 50% more for petrol. However, because this is mostly tax, when the price of crude oil goes up, we get hit correspondingly harder.
Petrol is a bit of a special case, because NZ governments are forced to undertax fuel because of our car compulsion. In general, most things with a high local labour content are cheap here whilst small easily transported things are a little bit more expensive than the global minimum (Canon EOS400=NZD1250here, USD834=NZD1055 there - tax removed for comparison).
-
Prices in NZ for most things are outrageous.
I guess it's always bad to generalise from your own experience, but when I lived in the UK my salary in pounds was exactly the same number that I now get in dollars. I think my standard of living is similar if not better here. I've got a house with a garden within a short drive of my office - in London you'd need to be a multi-millionaire to have that. There are some areas where I've downsized - my car is a lot older, I don't buy much Paul Smith - but then nobody else does.
Groceries are expensive and poor quality here - I think that's because Tesco and Sainsburys nail their suppliers to the wall on price and quality - bad for farmers, good for consumers. Maybe UK fsrmers don't get ten votes each like NZ ones do :-)