Matt Nolan

Damned if you do, damned if you don’t

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The daily post for today has been delay to next week – as this issue needs to be covered now.

That’s what the RBNZ is likely hearing when columns like this appear.  This one is from Bernard Hickey, where he bemoans the Bank’s decision to signal an increase in interest rates (which will increase long rates, and so IS an increase in interest rates) which has lead to a slight tick up in the currency.

The logic of the article might seem seductive for those who feel we must “transform” the economy, and those who believe we can truly “command and control” an entire economy.  But it is false.  Let me explain.

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Matt Nolan

Core funding ratios, monetary policy, and trade-offs

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In a recent Herald article, Geoff Simmons discusses the core funding ratio.  I work near the GMI team, and I have a lot of time for their outside the box thinking on issues – however, this is one case where I will have to respectfully disagree with the conclusions.

What was the conclusion?  It was that the RBNZ should look at varying the Core Funding Ratio (CFR) at its next meeting in order to reduce inflationary pressures, instead of increasing interest rates.

Now it has been suggested that adjusted the CFR during the “extremes” of the cycle may carry weight – but here I want to share for the trading 212 review uk.

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Matt Nolan

A independent tax authority is not undemocratic – it is more democratic

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In an act of striking economic naivete and breathtaking historical revisionism, writer Joe Beagelhole marshals the European debt crisis as evidence that allowing political institutions to use a lack of transparency to rack up debt is sustainable, and that we don’t need an independent body making the full cost of fiscal decisions transparent to the public at large.

Well, at least if the author of this column can insult other people like a pretentious prat – then I figure I’m allowed to be equally pretentious (hell I even used his first sentence as the base of mine – in case it wasn’t obvious 😉 )

Let’s ignore his excessive claim that Greece didn’t have a debt problem prior to the crisis – when it did, and the problem was exacerbated by informational issues (something that is key to the article he is criticising).

To be honest, I’m in love with the idea of an independently set tax rate – something that is closely related to the idea that is being criticised.  And its not because I’m a dictator and want technocrats to rule my life.  The reason I love the idea is that the COST associated with the spending politicians promise is made TRANSPARENT.

By having such an authority, politicians can redistribute and spend – they just have to be elected.  By having an authority that states the costs associated with scheme (through the given tax rate), people in society can vote with full information.  This IMPROVES the democratic process.

Beaglehole shows himself incapable of thinking about transparency and information with regards to politicians, and accuses other people of being undemocratic for daring to give society more information about government spending.  If you ask me, his faith in government officials to just ‘do what is right’ without transparency is more akin to a belief in philosopher kings than anything Mr Worthington stated.

Matt Nolan

Keeping NZ inflation in perspective

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Holy shit.  Since I’ve started getting the chance to read opinion pieces again I’ve noticed one extreme theme running through them – a sharp and angry fear of inflationary pressures.

This in itself doesn’t bother me, but it has been combined with people saying that ALL of the following will happen:

  1. The economy will implode
  2. The currency is/will be too strong
  3. Borrowing will be/is too high.
  4. We will have out of control inflation.

And that ultimately this is the RBNZ’s fault.

Like some sort of arbitrary rant, a large number of commentators have gripped onto any negative element element they can about the domestic economy, laid it down as a failure of monetary policy, and then used it as an excuse to attack the Reserve Bank.  To be honest, I find it all patently ridiculous.  Let me explain why, saying all these things will happen at once is inconsistent.

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Matt Nolan

In defence of government funded tertiary education

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As a young child I was told repeatedly that education was a right, and that society should pay for it – not just at the primary level, not just at the secondary level, but at the tertiary level as well.  Being an argumentative child I disagreed repeatedly.  In I make a point of still disagreeing whenever I run into my mother.

If I was to boil down my argument I’d say “the individual benefits from their education with higher wages and the satisfaction involved”, I would then go on to say that “we should only fund the public benefit associated with education – which is shown to be lower than the current level of funding”.  This would lead to the reasonable conclusion that we should be cutting funding to tertiary education, not increasing it.

Now this was all well and good when I was a young impulsive lad, but as I’ve grown older I’ve become unhappy with the idea of reaching conclusions.  As a result, I find it a bit uncomfortable that I would find this solution “obvious” – and with a few seconds of thought I’ve realised why.

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Matt Nolan

GST up, income tax down: Both happened remember

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Blah blah blah government is to blame for increasing GST and hurting families struggling to put food on the table.  This is coming out constantly.  It is a load of crud.

GST went up, and income taxes were cut by an amount that implied that pretty much EVERYONE had greater real disposable income following both changes (benefits and super were adjusted as well remember).  So don’t pull this line.

And also, all this talk about prices rising rapidly … well the CPI rose 0.8% in the quarter, almost all the result of a spike in petrol prices (on unrest in the Middle East and North Africa) and a spike in food prices (on the back of droughts and floods overseas).  Prices across a whole range on retail products actually fell during the quarter – such as clothing and footwear.

Also, lets not forget that both parties arbitrarily want the exchange rate lower – remember that a lower exchange rate increases the price of imported goods.  This is something that will make it harder for families to put food on the table and make it more difficult for mum and dad to pay for a new school uniform for the kids.  The high exchange rate (due to high food prices, when we sell a lot of food overseas) helps to take some of the gains from high export prices and pass them on to other households in society – don’t forget this, as politicians and exporters seem determined to hide this fact from the public.

If we genuinely think incomes are too low for the poorest households, increase the benefit/minimum income provided by government as a transfer to these households.  Stop this political bullsh*t that misinforms people regarding the true impact of other, completely unrelated, policy changes.

Note:  My apologises for the lack of updates from us at the moment – things are extremely busy.  There are a few posts I HAVE to write – hopefully I can write them over Easter and get them up afterwards.