Sunday, October 21, 2012

Armstrong on "funny money"

John Armstrong's column in yesterday's Herald is a good read. Amongst other things, he reminds us that what Winston Peters promised in opposition was a far cry from what he did in 1996-98 when he became Treasurer.

But he saves his most trenchant criticism for last; here's how he closes:

The latter is the other prong in Labour's strategy to loosen voters' attachment to economic orthodoxy.
Rather than debate job cuts across the board, Labour is trying to focus the debate on job losses in manufacturing. It argues that a modern economy requires a manufacturing sector that is not solely consumed with just processing pastoral, fishing and forest products. It requires a skilled manufacturing sector that provides the jobs for those who would otherwise flee to Australia.
Labour knows that weaning voters off economic orthodoxy is not going to happen overnight. While it has big-ticket items in the policy mix - a capital gains tax, lifting the age of entitlement to national superannuation and rock-solid adherence to a workplace-based savings scheme in the form of KiwiSaver - it has yet to show how these fit together in a coherent, easily comprehended economic plan.
For now, the basic message is that the current orthodoxy is not working. However, voters must have confidence in whatever replaces it.
No surprises then that Labour eyes looked skywards when earlier this month the Greens' Russel Norman floated the idea of allowing the Reserve Bank to follow the American and British examples of "quantitative easing" to stimulate the economy.
This licence to print money was used by the central banks in those countries to signal that they would not allow their economies to slip into depression. Unlike those central banks, the Reserve Bank here still has some leeway for cutting interest rates, thereby stimulating activity and easing buying pressure on the dollar without jeopardising inflation targets.
The last thing Labour wanted was for the economic debate to get sidetracked by quantitative easing which opponents would decry as at best the resurrection of Social Credit and "funny money" and at worst raises the spectre of hyper-inflation and people being forced to carry their money around in wheel-barrows.
Economic orthodoxy will not go down without a fight. Labour, the Greens and NZ First may have capitalised on a wildly fluctuating exchange rate. But there is a long way to go before they can claim any kind of victory.

The mere mention of "funny money" and quantitative easing in the same sentence should ring alarm bells for Labour. What the Greens have proposed is not a long-term fix, but a short-term knee-jerk response which will harm our economy in the longer term.

8 comments:

The Editor said...

Really though, we are all aware that Armstrong is a shallow and inconsequential shill.
Why re-present his 'thoughts' here? You are wasting good bytes.

Keeping Stock said...

Nice to see you back Judge Holden, albeit under an assumed name. You're still unwelcome here however.

Brian Duffy said...

The downward spiral evident in the manufacturing industry is evidence of National's appalling handling of our economy. Clowns like Armstrong do all they can to cry down parties that are not paralized by their own ideology, and present suggestions and proposals to arrest and reverse that spiral, and 'amplifiers' like you Keeping Stock, aid and abet him in his mistaken support of Banks, Key and the rest of the market-blinded Nats.

Bunk said...

Printing money won't do anything except send us down the economic sewer. The downward spiral started under Cullen's watch, we were in recession before the GFC! Presenting ideas is one thing, presenting complete nonsense is what the left specialise in at the moment (when they aren't engaged in character assassination with no evidence to support it).

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