The Paradox of Thrift
27 September 2007
The command economy is still well and truly with us.
Someone in Wellington has decided we have to save more and become less reliant on foreigners’ savings (and the same people have told dairy farmers how they should be spending their money — incredible).
The same thinking nearly destroyed the world economy in the 1930’s.
A free economy will always have sufficient savings to exactly match investment needs.
There are these things called the interest rate and bond yields and yields on assets which fluctuate to encourage exactly the right balance between savings and consumption.
There is no need to get racist about these things — and worry about foreign money lenders.
Global money markets got over that prejudice half a century ago.
The last person you need interfering in the market is a history teacher now one of the highest paid speech makers (and possibly comedians) in New Zealand — especially one adept at blowing public savings (tax income) on the modern socialists wildest dreams.
KiwiSaver is another tax and another signal to anyone still adding value in New Zealand (employing people) to get out now.
If you don’t believe how economically backward this stuff is think about this little lesson in monetary economics currently being exercised in Fiji (the global enemy of New Zealand’s socialist sisterhood, rating even higher on the hate list than Al Qaeda).
The Fiji government believes it needs Fiji money kept in Fiji.
So it tightly controls all overseas remittances for import of goods and services; i.e. it’s hard to get your money out of Fiji.
And it warns foreign owned investors that 50% of their borrowing in Fiji will have to be repaid within one year.
Unsurprisingly there is excess savings — with local deposit rates as low as 4% (where New Zealanders can get up to 8.7% for 90 days).
And the interest rate on commercial lending is about 10% (if you can find someone credit worthy enough).
In one hit Fiji has achieved the dreams of the New Zealand Kremlin — an excess of domestic savings; but now what; unless someone can convert them into improved economic value, interest rates will actually soften.
The best borrowers (foreigners who can kick start the economy) are shut out.
Incredibly the New Zealand government is being as stupid as Fiji.
STOP MEDDLING — MARKETS ARE VERY DETERMINED — let them run and if little fingers get burnt (people paid too much for their homes), so what.
Since when should a socialist government protect landlords from themselves — they didn’t care about leaky homes why worry about a housing boom which has put more smiles on New Zealanders’ faces than a win at the Coupe du Monde de Rugby or for that matter a win for the toy boys of Valencia.