jamesz

Is marriage really the answer?

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Family First and Rochester divorce lawyers have just released a report on the costs of the breakdown of the family unit. I might not have given it a second glance save that it is written by Dr Patrick Nolan, the more qualified sibling of our Dear Leader.

The thrust of the document, as you might expect, is that costs of having fewer intact marriages are very high. The report points to a bunch of private and social costs, such as increased risks of poverty, mental illness and infant mortality, and tries to put a dollar value on them. It ends up suggesting that the fiscal cost of the reduction in the number of marriages is about $1 billion per year.

I don’t have a sociology background or the knowledge to challenge any of the assertions made by the report, and I trust that Dr Nolan has calculated his costs in as objective a fashion as possible. However, it’s what the report doesn’t monetarise that is most concerning. Read more

Matt Nolan

Should we be bullish about food prices?

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According to Tony Arthur at BNZ we should be.  This is an essential issue for NZ as it determines where our Terms of Trade stays elevated – or whether it falls.  In turn it determines our national income, given what we produce.

I agree with many of the factors he states (although he is a bit bullish on them) but I think he ignores factors around the long run elasticity of supply of food.  So I thought I’d try a poll (my first one 🙂 ), and do a post based on discussing the dominant view later:

jamesz

The Greens on economics

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There has been a lot of chatter about the Green’s understanding of economics lately, so I thought it might be apropos to have a look at their economic policy, just released. The key points appear to be:

  • Income taxes cut;
  • Taxes on waste, pollution, speculation and scarce resources;
  • Commitment to buying NZ made and Kiwisaver investment in NZ;
  • Only citizens and residents allowed to purchase land.

Let’s start with the good bits. Read more

Matt Nolan

Bank guarantee “here to stay”

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So says Dr Cullen, and I think his description of why is pretty spot on:

it will be difficult in two years to return to a situation where bank deposits were no longer insured by the government

When financial institution base there decision on the fact that this new framework exists, changing the framework would be problematic and painful – making it harder to remove it. Furthermore, as he says, when every other country has a scheme we sort of get stuck having to have one – or else we have to pay a higher premium on our credit (assuming of course that the private sector can’t provide insurance as efficiently – a debatable assumption).

Dr Cullen also points out a major concern that:

excessive amounts of money that could flow into finance companies to chase the guarantee for two years

In that case, why don’t they let the Reserve Bank adjust insurance premiums based on risk – the companies have to show a credit rating anyway, so the better the rating the lower the premiums. At the moment the larger organisations, which also have better credit ratings, are paying MORE for this insurance – it is ridiculous.

As Dr Cullen has identified the problem, why doesn’t he fix it?

Matt Nolan

Quote 3) Frederic Bastiat: Cause and effects

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Frederic Bastiat:

In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them

ht Kimble.

I have not read any Bastiat – so I have very little to say.

Matt Nolan

Baltic Dry Index collapses

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So the Baltic Dry Index (an index that implies what the cost of shipping for exporters will be – in as far as it represents the fees of the people running ships) has collapsed by about 79% so far this year.

As the supply of ships is incredibly inelastic in the short term, this is probably the result of collapsing world commodity demand (although it could be that a whole lot of new ships came online at the same time – unlikely though).

What does this imply for NZ?  Well the index mainly represents shipping of “hard commodities” – so it tells us that demand for those has invariably fallen.  This implies:

  1. Soft commodities may have fallen further,
  2. Growth in Australia will slow – harming our exports,
  3. Shipping costs (especially for our logs and aluminium) have fallen markedly.

The first two factors are a concern – but the third factor is a bonus.  One of the reasons forestry has struggled is that prices have been depressed (no construction in the US!) while shipping costs have been high/shipping has been impossible to get.  Now ships will come here – and cheaply, making it possible for forestry to get back on the game.

As log prices are not likely to fall further – forestry will benefit from this.  Other commodity sellers may have some trouble (depending on what happens to soft commodity prices).