Government still waiting for the collapse of Capitalism before borrowing big

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When this Government first formed, I argued that key members involved in the negotiation process believed an enormous crash was looming, and that once that economic crash occurred, we would see a genuinely transformative Government.

The only problem was that economic crash didn’t happen.

To breach the debt agreement Grant and James signed us up for to placate our Corporate Overlords, we needed an economic crisis. The crisis hasn’t occurred, so Grant hasn’t been able to breach it.

You see this reality being teased out now by journalists as they probe what is going on…

Patches of blue sky show now not right time to hit fiscal panic button

TDB Recommends NewzEngine.com

Finance Minister Grant Robertson has been steering a careful line by gently paving the political path for a possible “cave-in” on the Government’s debt reduction target while at the same time signalling he does not intend to jump the gun.

There have been growing calls for the Government to get out its cheque book since the Reserve Bank slashed the official cash rate to 1 per cent in August, drawing attention to the risk of a strong economic downturn and negative interest rates.

Robertson has responded by repeating the message that the Government’s promise to operate at a surplus and its goal of reducing core government debt to no more than 20 per cent of GDP during the 2021-22 financial year was always subject to a get-out clause.

That caveat includes there being no “major economic shock or crisis”.

…we need an enormous borrowing campaign to rebuild the infrastructure and fund social services properly but to trigger that borrowing campaign we need an actual crisis.

This is leading to political stagnation, the Government can’t be transformative if there isn’t a crisis to spark it off, so Grant might secretly wish there was one.

What should the Government do when the comic crisis hits? Once the crash is moving, Grant can dump his budget restraints nonsense and borrow to keep NZ afloat. Luckily for us we have one of the lowest public debts around and have room to move that other Governments won’t. With that extra money, I suggest creating two lists – those you save and those you allow to burn.

DAIRY FARMERS: They are up to their eyeballs in debt from Dairy Intensification.   To get them to agree to helping everyone else, you need to help them and this could be a once in a generation move to get then to change their allegiance to National. Underwrite all Dairy Farm debt on the agreement that they revert from Dairy to planting forests.

FIRST HOME BUYERS: You can’t leave them for the wolves of the market, under write their mortgages through Kiwibank.

MUM AND DAD’S INVESTMENT PROPERTY: You can’t wipe out an entire generations wealth base, again underwrite one property over the family house through Kiwibank.

CORPORATIONS: Fuck em, let them burn.

BANKS: Only save Kiwibank, the others can burn.

PROPERTY INVESTORS: Anyone with more than a family house plus one property investment can burn.

TAX AMNESTY FOR SMALL AND MEDIUM BUSINESS: They are the ones who will suffer the most, allow a tax amnesty with the usual penalties cancelled.

WELFARE: Everyone will be scrambling for some type of welfare, it will need to be increased, and the draconian punitive crap dumped.

IMMIGRATION FREEZE: We will need to freeze immigration at a time of economic crisis because everyone will be fleeing.

This next economic collapse will shape NZ for the remainder of this century, this is to be the chance for the Left to reshape the neoliberal economic agenda, the question is are they intellectually ready for that?

20 COMMENTS

  1. Yeah the real problem of course if this “is” a neo liberal pro capitalist, pro big business government just like those we have seen since the Lange led Labour government of the 1980’s. You can’t expect change from them as its asking them to go against 30+ years of a philosophy that’s failed again and again but they still won’t reject.

    The only option as this voter see’s it is to vote for new parties and in their absence to refuse to vote for more of the same. Indeed I think every ballot should include “no confidence” option (not that they would ever entertain that!).

    • @sean, where are these new parties to come from? To get into parliament a party, with few resources, must get 5% or more of the vote unless Labour and National change the base line to 3%, which they never will.
      I am not aware that any new party has ever passed 5% from a standing start, unless Social Credit did early on. Incidentally that party still exists and does have financial policies that work, which is more that can be said for Martyn’s absurd ‘solutions’.

      • Is there a point, if so what is it? You assume because something has not happened it can not happen? Indeed even if they don’t get in first time they might the second or third. To do nothing and accept the status quo to my mind is worse than trying.

  2. It’s not about the borrowing. It is the fact that we have NO OTHER PLAN, aside from keeping Christchurch afloat (like we have a choice).

    Just borrowing money isn’t the answer. People don’t borrow for something that might not happen in the future. Normal people have to plot, scheme and plan how they intend to spend the money before filling out the forms.

    Only reason to be concerned about economics is if the economy can not produce enough jobs and the suffering from lack of planning.

    John Key must feel better and better about his years in office, sure he had Christchurch, but Jacinda had 3/15…

    Now Jacinda is trying to take credit for Keys economic strategy.

    • @Sam. Borrowing money is the only way to keep the economy growing. At the moment the need for new cash in the system is being met by the banks lending to private borrowers. Most of it’s beng waste on real estate and as a result New Zealanders are up to their eyeballs in debt. The government isn’t heavily indebted and there is no problem with the government borrowing if the economy grows at the same time.

      Of course the government has a sovereign right to print it’s own money withour borrowing but that’s another story

      Double-of-course, if you want to talk about the problem of perpetual growth on a finite planet that’s another story again. To change that will require a crisis so massive I frankly don’t want to be around to witness it – although I think I probably will be.

      • Can I first admit to just schem reading your comment, Aaron.

        Growth post WW2 was driven by domestic demand, not foreign demand.

        Global trade was much smaller back then and the NZ economy was practically a closed loop.

        Second is no, nope. Growth = innovation plus investment.

        Infrastructure debt like how it is in Singapore is the government borrowing from itself.

        Our ACC and Kiwi Saver is more than enough to meet our own infrastructure deficit.

        The moral of the story here is that government can finance itself.

      • @ Aaron, ….”Of course the government has a sovereign right to print it’s own money withour borrowing but that’s another story”. Why is the creation of its money supply by the Reserve Bank “another story”? Its the only workable story.

  3. I find your longing for economic disaster both distasteful and ignorant.
    Firstly, it will be the very people you claim to care about that will suffer most and secondly those who you obviously despise who will largely come out unscathed.
    Whether you like it or not, it doesn’t matter what system is in place those people at the bottom will always remain there because they either lack the skills, motolivation, intelligence or all three to position themselves any better.
    Cause an economic collapse and life at the bottom just becomes a lot harder for the same people who are at the bottom now.
    You’re inability to understand this is just shocking.

  4. “CORPORATIONS: Fuck em, let them burn.
    BANKS: Only save Kiwibank, the others can burn.
    PROPERTY INVESTORS: Anyone with more than a family house plus one property investment can burn.”

    Yes Martyn I buy all that.

    Next we all need to highlight the scumbag insurance racketeers who feed of the grief of common kiwis in time of any insurance claim need, as we have had a guts full of the global corporate called IAG (Insurance Australia Group) the same ones that adorn our ‘All black’ Jerseys they are rouges
    as AMI was another wing of their empire who deliberately defaulted the Home owners in CHCH after the earthquake, and forced the NZ taxpayer to bale us all out so you are right we need a government agency to handle insurance as well as fuck these corporate’s as they need to be closed down because of their racketeering.

    https://www.stuff.co.nz/national/115559200/christchurch-couple-misled-by-southern-response-want-an-apology-and-inquiry
    worth a watch as it shows insurance companies are crooked
    A couple who defeated the government’s quake insurer in the High Court say its deceptive actions were nefarious and they want an apology and inquiry.

    • @ Cleangreen: I think your recollection of what happened to AMI is mistaken. As I recall, AMI was the only sizable NZ owned Insurance company. Its head office was Christchurch and the overwhelming bulk of its customers lived in that city. It hadn’t allowed for an earthquake and wasn’t cross insured for one, so when the earthquake happened it was technically bankrupt.
      The National government didn’t have to sell AMI. Before selling to IAG the government absorbed the debt so IAG got the company free of debt at a fire sale price. The government could have underwritten the loss if it chose and taken it on as a Kiwi owned asset. When you observe what IAG did to its new customers, it is clear that nationalising AMI would have been the better option

      • bonash

        Question;
        Was AMI always NZ owned before it was folded and Government baled it out before IAG took it over?

        AMI Insurance (AMI) is a business division of IAG New Zealand Limited 2018.

      • Yep I did get that wrong as it was a CHCH company firstly in 1926.

        https://en.wikipedia.org/wiki/AMI_Insurance

        ‘AMI Insurance began in Christchurch, New Zealand, in 1926 as the South Island Motor Union (SIMU), and grew to be the second biggest residential insurer in New Zealand.[1] It was, before the buy-out from IAG New Zealand Ltd, a Mutual insurance company, meaning it was owned by its policy holders.’

  5. “PROPERTY INVESTORS: Anyone with more than a family house plus one property investment can burn.” And therein lies your Right-wing thinking, Bomber… anyone with a single “investment” property should burn at the fucking stake… or just get strung up by a mob when civil order collapses… one is one too many…

    The Wage Slave Labour Party, ladies and gentlemen… as Right-wing as the Transnational Capital Party

    • it not case of burning its the moral hazard of bailing out speculators they took the risk that risk is not mine or the tax payer its the speculators risk and nobody else’s

  6. we have the money its kiwi saver its 30 year money it very very stable money its us investing in our own infrastructure the light rail in Auckland could be financed and owned by kiwi saver me personally i want my money invested in new Zealand infrastructure rather than buying a second home i am using kiwi saver instead iam a very happy simplicity member

  7. MUM AND DAD’S INVESTMENT PROPERTY: You can’t wipe out an entire generations wealth base, again underwrite one property over the family house through Kiwibank. no way they took the risk
    DAIRY FARMERS: They are up to their eyeballs in debt from Dairy Intensification. To get them to agree to helping everyone else, you need to help them and this could be a once in a generation move to get then to change their allegiance to National. Underwrite all Dairy Farm debt on the agreement that they revert from Dairy to planting forests. no way they’ve already had billions free water south Canterbury finance bailout they and the a lot of proceeds from the asset sale went on irrigation project they will never change from national na let them burn. and boomers let them burn to we need to support savers with normalized interest rates which may come since the banks have borrowed alot of the capital they lent into the housing market came from offshore so interest rates may have rise to support the dollar

  8. WHISPER.

    The worlds central banks are using cheap money (and a second bout of QE is necessary) to keep the economy afloat until the baby boomers retire and they receive their pension payout (they are the same age group). Until then the cheap money has savings keeping the stock market high (super funds).

    This may last to 2023.

    The government budget strategy – reassure the voters on debt 2020/2021 to mitigate the English Joyce governments portrayal as spendthrift, and then in office loosen for the 2023 period was/is politically prudent.

    But for mine there is a housing crisis causing poverty because of high rents and the governments Kiwi Build reset will not resolve this. Thus a political need for decisive action if the government is to keep its commitment to reduce poverty. 2000 state houses pa and a commitment to build 2000 Kiwi Build homes as rent to buy pa (and for mine allow those owning one bedroom flats and apartments to buy Kiwi Build family homes and those 55-70 downsizing from family homes to buy Kiwi Build).

    And in farming – cost free loans tho those investing to reach higher farm environment standards (interest accruing but neither this or principal repaid until the farm is sold so farm operating costs are unaffected).

  9. There are lots of policies that can be applied in an emergency. The idea that there is only a resort to government borrowing is itself a relic of the 20th C regime (that only dependent on those lenders need to buy into).

    End the payment of super to those still working ($3B pa rising to $5Bpa by the 2030).
    Re-introduce estate tax over a threshold – say $1M.
    Government QE in the credit to government form (no need for dependence on foreign borrowing and why not use this to take back control of local insurance – no more inflationary than foreign rebuild finance we now send money offshore to obtain cover – why fund disaster capitalism?) – given any crisis will reduce bank activity this government financing cannot be that inflationary.

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