Posts Tagged ‘public money’

January 13th, 2014

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2014: Evolution not Revolution

I’ve been somewhat remiss in posting to this blog over the last half of 2013. Instead of talking  about politics and policy, I decided to jump in and be involved directly. To that end I stood for election in the October 2013 Christchurch City Council elections and was elected in my local ward. The last few months has been a blur of briefings, updated and meetings, with many crucial issues to be dealt with.

It’s a great opportunity to be involved at the micro level of local government and will certainly help shape some of my more macro level thinking. I will be posting about specific Christchurch issues on my public Facebook page but will still be posting here on broader policy questions.

I have been reading lots of posts about the “ten things” to watch for in 2014 and predictions galore, from the meltdown of the Chinese shadow banking system to the partial breakup of the Euro. I’ve given up trying to predict specific outcomes but we are, I believe, still in a long process of transformation, both at the global economic level and in the social sphere as well. That transformation is likely to keep throwing up small scale conflict, civil wars, major power Sabre rattling, financial crises and resource challenges. Realism is still the order of the day but the forces of change will continue to dilute the desires of the super egos in charge of many of our missile carrying nations. The collaborative movement, building on the back of Occupy, will continue to bring new ideas to the social enterprise and business spaces. Like the early days of social networking and dating sites, it’s unclear how this change will finally manifest, but I expect some major shifts in the way we work, the way we finance that work and how we engage, both at the social and political level.

The political space is one area where change is long overdue. There has been no new serious attempt to reframe the left-right tennis match and put it into concrete policy proposals. The 2014 NZ general election offers that’s opportunity. How the different parties shape their messages, vision and philosophy is going to be very interesting and I hope that we get something a little different from what has been delivered up in previous elections. With all the major global themes swirling around, it’s definitely time for some vision about where NZ is heading as a country and society, and how that vision can be achieved. I’ve read one article recently, which struck me as a good place to start this conversation. It’s fair to say that it came from the more liberal end of the political spectrum (on the left hand side). It generated plenty of interest and it’s fair to say I’m strongly supportive of the proposals in some form. What engaged me even more is that a response came from the conservative end of the spectrum, which explored the same issues from a different perspective, landing up with different proposals, but with enough similarity to allow for a decent conversation.

The five topics covered are:

- Unemployment.

- Universal basic income.

- Land Value Taxation.

- Ownership of productive assets.

- Public banking.

Read both articles and see which one resonates more. They are not that far apart in reality and my hope is that people will see that and start talking to each other rather than shouting at each other.

We certainly need that conversation more than ever. The question for us here in NZ is whether the major parties are up for it, or whether it will be left to the minor parties to do the job. It could also spark a new political movement. It feels like anything is possible.

March 17th, 2011

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Dinosaur Economics: Bill English loads up more debt

Bill English, the NZ Finance Minister, has predictably gone for the traditional response when considering how to pay for the rebuilding of post-quake Christchurch: he wants to borrow $10bln and add further to the mountain of debt New Zealand already struggles under.

At current government bond yields this is likely (presuming the issue is in longer term bonds) to cost over half a billions dollars a year. That’s right $500-550m a year in cost, just to access the money we need.

Bill English has our recent proposal to use new public money in front of him but so far we have heard nothing back on it. Other than an earthquake levy, which has been ruled out also, there are no other proposals on the table.

I look forward to hearing why the Finance Minister thinks paying $500m a year is a good idea for something we could do ourselves.

February 25th, 2011

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Christchurch Quake: Time for Public Money and a New Deal

I was at University when the quake struck, eating my lunch and reading a paper on “Native Rights”. I didn’t hang about and immediately dived under the table as I didn’t like the look of the walls and ceiling lights flailing about like paper decorations. When the first shake had finished I headed outside quickly and sat down whilst the two big after shocks rocked the surrounding buildings. The University seemed reasonably unscathed……nothing like the CBD which is 5 kms to the East.

The damage of the Feb 22nd 6.3 shake is way worse than the Sep 4th 7.1 quake. No doubt this is due to the depth and the proximity of the epicenter. But this post is not about the earthquake, it’s about the economic impact and the re-building to come.

The cost of this disaster is only guessable at the moment. Numbers from $10 to 16bln have been thrown out but it could be anything. There is no doubt that this is a complete rebuild of the city’s infrastructure and central business district. Added to that is the viability of the eastern suburbs. They were affected badly and there will be questions over ground issues when it comes to re-building.

I want to go back to 1936 and the First Labour government which introduced low interest loans as part of a system of public finance to rebuild the country’s post-war economy. Think of it as New Zealand’s New Deal. The Reserve Bank governor can direct this at any time. This is certainly one possibility.

What I would like to see is fresh new money being injected directly into the economy by the government. The Treasury can action this at any time. The New Zealand economy has been struggling for a few years now since the GFC hit and deleveraging started. Business is struggling and cash is constantly tight. This latest quake will have finished off many business hanging by a thread.

I am proposing the Treasury create $5bln of new interest free money and credit it to the Government Earthquake Department for use in the rebuilding of public infrastructure. This is real money (not debt) and it will flow through into the economy thus giving it a boost as well as providing liquidity to the economy.

The money supply will increase by $5bln but I don’t believe there will be any inflationary risk. We are currently in a period of deflation and deleveraging with falling house prices and economic stagnation. NZ needs all the help it can get and there has never been a greater need nor a better time for this proposal.

It’s time for a New Deal. Please pass this on if you can.

About

"I’m a Londoner who moved to Christchurch, New Zealand in 2002. After studying economics and finance at Manchester University and a couple of years of backpacking, I ended up working in the financial markets in London. I traded the global financial markets on behalf of investment banks for 11 years. Since moving to NZ, I have been an angel investor, budget advisor, director, trustee, mentor and business consultant. I'm currently a Councillor at Christchurch City Council and a Trustee of the Volunteer Army Foundation and the Christchurch Arts Festival Trust. I write about the intersection of economic, social and environmental issues."

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