Reserve Bank of New Zealand and NZ Treasury Dept

@jamesabbott Having a separate "domestic" currency is very much like @kennethkopelson plan for a central value currency, and a separate renminbi (can't help using the name someone else gave that literally means "the people's currency).

The RMB could be carbon, energy, or renewal based.
The Value currency could be crypto.

Most of the ideas thrown around are not mutually exclusive. They tend to be different implementations of externalities of each other, banking vs money, vs economy.

It'd be great if the Party @vikram were to commit to an economic policy (even if only prospective, not for public consumption), and get all these ideas put into a single economic policy and then run that past paid economists of the type who would be critiquing it on the news and see what they say, and get parts reviewed, eliminated, or expanded on depending on professional feedback.

Without the party's blessing, the discussion of all these good ideas in the forums will go nowhere.

Link the people's money to energy, the government money to value, the banking for government money is by coops and credit unions only, and the banking for the people's money is P2P, and both monies are crypto, with some printed/minted currency, and we'd have nearly everything together in a mashup. The dropping of the ticket-clipping by the banks, the drop in taxes for the value economy, and we'd see 50% more money in the hands of the people, that was otherwise lost to banks and government. A few taxes around to recycle money, and it sounds like something that could work, and would be better than anything anyone has ever tried before.

More take-home and keep-home pay, lower taxes, more services. Where's the problem? Oh yeah, it's too disruptive for the entrenched players to allow it.

@iankiddle "Inflation is always a result of government policy, not increasing wages or prices which are symptoms but the creation of excess money in relation to the underlying assets which is the cause."

I think that in part that is one of the issues, the other is the fixation of the Reserve Bank on inflation control above all else. This country does not really have an inflation issue at the current moment, what it does have is a high exchange rate which is affecting export industries with this countries current account being almost the highest in the developed world.

All of the Reserve Banks interventions are focussed on inflation minimalising which it has been rather successful at - and has been its very narrow scope, has resulted in an artificially inflated exchange rate and is to the utter detriment of the NZ export employment sectors - which has resulted in 50,000 or so manufacturing jobs in the last 7 years and many times that more since the Act was legislated in, which then is a big contributor to the many social ills that have become the mainstay since the Reserve Bank was retooled to be an inflation smasher.

@nobilangeloceramal That NZ First bill to amend the NZ Reserve Bank Act obviously got voted down, but it shows to me that there is extreme interest there with Labour, Greens and NZ First to overhaul the act should they become the ruling coalition.

It appears that their approach was to extend the powers of the act to allow the Reserve Bank to employ competitive devaluation and or a form of quantitative easing as a means of pushing the exchange rate of the NZ dollar down.

Peters main amendment
Section 8 "The primary function of the Bank is to formulate and implement monetary policy directed to the economic objective of maintaining stability in the general level of prices while maintaining an exchange rate that is conducive to real export growth and job creation.”

The idea I think is to match what the US, EU and Asian countries are doing. But to me it still appears to be a short term fix for a much more complex problem than simply opening up the boundaries of the Reserve Bank in that manner.

From a car mechanics perspective, its like a spray painter bogging up a hole in the engine block.

None of these issue exist in a vacuum of each other. We have proposals all through this incubator about social inequality. IMO, all of that is connected downstream from the source of the problem which are caused by the direct function of the settings of current monetary policy.

What I think is needed are real mechanics to take a look at the entire monetary system in this country and design one that benefits the majority of the country, not just a populist hatchet fix up that benefits only one sector.

@terangikaiwhiriake "Peters main amendment
Section 8 “The primary function of the Bank is to formulate and implement monetary policy directed to the economic objective of maintaining stability in the general level of prices while maintaining an exchange rate that is conducive to real export growth and job creation.”"

It looks to me that the " while maintaining an exchange rate that is conducive to real export growth and job creation" means the current system of setting monetary policy to maximize Fonterra profits would be maintained.

I'd like to see a monetary policy that was broader and more aimed for the "average" person than compromising all to maintain a strong Fonterra over all else.

Or maybe Fonterra is blamed for keeping the NZD weak to encourage tourism or other reasons

Possibly its just a lobby attempt for Fonterra that was behind NZ Firsts bill.

But if you consider the fact that this country has a rather high current account deficit considering the size of its export market, its more likely the entire manufacturing export sector more than just one specific exporter that is feeling the affects of the deficit.

And not just since the National Government either, the current account has been sharply in deficit for decades, sometimes being the worst in the developed world, going back to the inception of Rogernomics.

This policy of pushing the value of the NZ dollar to keep low inflation has endured through successive Governments mostly due to the Reserve Bank Act which sets inflation as the god they must serve above all, and also due to Treasury driving that ideology into the policies of all successive governments since Rogernomics.

This is another reason I think Winston Peters bill would have inevitably failed to address all the ills associated with decades of a high exchange rate. You can extend the rationale of the Reserve Bank to take into account overall stability, but that doesn't mean those that people the Reserve Bank would do so.

Most of the key players in both the Reserve Bank and Treasury are hard core Rogernomics ideologies and because they share that single ideology, I doubt the independence of the Reserve Bank from Treasury at all, and I doubt they would implement a wider monetary policy even if given the leeway to do so.

The NZ Initiative thinktank is still the high priest of sorts of that entire operation, and successive Governments are just too dumb to get it, which is why they all eventually get beguiled by that lot, election after election.

You can see a sort of trend that taking place here.
http://www.rbnz.govt.nz/statistics/key_graphs/current_account/

In those stats, one can almost see the election date, Governments with the best intentions of lowering the current account deficit, then eventually conceding to Treasury, NZ Initiative and the Reserve Bank as their term progresses.

@terangikaiwhiriake "But if you consider the fact that this country has a rather high current account deficit considering the size of its export market, its more likely the entire manufacturing export sector more than just one specific exporter that is feeling the affects of the deficit."

If the export market is so small, why are we trying to minimize our international buying power? It's obviously better for most people to have a 20% cut in prices through a stronger NZD than have more profits for the few exporters.

If we import lots and export none, then the NZD will fall, and we'll get back to an equilibrium determined by the global market for our products.

All the fussing with it is hurting both sides by artificially manipulating the market. It'd be cheaper, and easier to not try to manipulate the international value of the currency. There are other mechanisms in place to stabilize international currencies.

@marcwhinery "we’ll get back to an equilibrium determined by the global market for our products"

Many other countries are artificially deflating their dollar via competitive devaluation and quantitative easing in what some see as a currency war.

Between the Reserve Bank artificially maintaining a high exchange rate as a part of its rampant minimalising of inflation scope, and the interventionist methods used by the US, EU countries and Asia artificially devaluing their exchange rates, there is no equilibrium to be had just a slow death of this countries export industries, massive lay-offs etc via 25 years of continuously high current account deficits and exchange rates which even National knows should be in the high 70s not high 80s.

Meanwhile we get to deal with all the social ills that have formed downstream of this dilemma because none of this type of activity exists in a vacuum and governments are well aware of the social spin-offs of policies that push the exchange rate and put pressure on manufacturers to downsize and move offshore.

This is the bit that really bothers me, enacting monetary policy in a vacuum for which most politicians including ministers of finance, barely understood themselves ( part of that continuum of beguiling by those two organisations ), then scurrying around for the last 25 years trying to make up for all the social ills that came about because of this.

Agreed.

@terangikaiwhiriake "Many other countries are artificially deflating their dollar via competitive devaluation and quantitative easing in what some see as a currency war."

Yes. So?

We should devalue our currency because everyone else is doing it faster?

The US isn't doing it for a "currency war" but because the debt is unsustainable, and inflating the money the debt is denominated it reduces it.

As for the rest, you are asserting that a strong dollar will result in complete economic collapse. Then why are we trying to fix the economy? If we do that, we'll end up with a stronger dollar, and that will destroy the economy. We need to instead weaken the economy to strengthen it.

A stronger dollar won't break the economy. We'll be better off than those "easing" their economy.

@marcwhinery "We should devalue our currency because everyone else is doing it faster?"

No. We shouldn't do anything of the sort. My point there was that there is no such thing as equilibrium when many other countries are artificially playing around with their exchange rates, not that the Government should follow suit.

@marcwhinery "The US isn’t doing it for a “currency war” but because the debt is unsustainable, and inflating the money the debt is denominated it reduces it."

So they say. But they are just one of many countries using exactly the same technique to artificially reduce their current account deficit.

@marcwhinery "As for the rest, you are asserting that a strong dollar will result in complete economic collapse."

Again, no.

But 25 years of a high current account deficit is part of the reason the economy has never regained that social justice aspect after the social ravages of the 1980s, repeated again and again, the last being the 40,000 odd manufacturing export jobs lost in the first National Government term.

When the reforms of the 1980s were first postulated, Lange stated that he desired an, 'efficient economy that is socially just'. A few years of Treasury pissing in their ears, and Chicago Boys reforms, Geoffrey Palmer revised this to, 'you cannot have social justice unless you have an economy'.

He was right, and for the last 25 years there has never been social justice because of the broken economy that is headed by an monetary Act that serviced problems from yesteryear - i.e. high inflation caused by the mid 1980s boom that came about from unbridled deregulation of the economy by Roger Douglas.

@marcwhinery "A stronger dollar won’t break the economy. We’ll be better off than those “easing” their economy."

Artificially suppressing inflation in the form of inflation fixing ( which is essentially what the act inflicts ), has resulted in an artificially inflated exchange rate which has resulted in a continuous high current account deficit since the 1980s.

The social ills we see now, began then.

This to me is not an indicator of a strong economy, but in fact a false economy.

National and previous Governments going all the way back to the Lange Government of the 1980s have counter balanced this with overseas loans and selling off state assets.

The national shortfall from the high current rate deficit is about 10 billion dollars a year which has to be either loaned or raised by selling state assets.

By the end of Nationals term in parliament this year it will have loaned more than all previous Governments combined, something close to 200 Billion in order to service this massive deficit.

This is of course compounded with the profits from the state assets that are sold, going overseas, and of course we have to eventually pay interest on those loans.

This has been the method used by all previous Governments and will be no different if Labour takes power this election - for which Internet MANA may find itself in some form of agreement with.

However, Labour, the Greens, NZ First and Mana have strongly indicated they intend to amend the Reserve Bank Act with various hatchet fixups to address the restrictions of the Reserve Bank Act and the powers of the governor.

The Internet Party has its own view forming on a modern economy and needs to formulate its own position on a reform of the act of which it could either present as a bill, or negotiate in at the select committee level.

@terangikaiwhiriake "My point there was that there is no such thing as equilibrium when many other countries are artificially playing around with their exchange rates, not that the Government should follow suit."

I disagree.

Equilibrium is often mistakenly used to mean "stable equilibrium". That isn't a requirement of an equilibrium. L1, L2, and L3 are unstable equilibrium points of equal gravity between two bodies. L4 and L5 are stable equilibrium points (in some circumstances).

Hitting equilibrium means having zero velocity at L1, L2, or L3, and any perturbation will upset that (such as movement of the other planets) and eventually the body that was in "equilibrium" will be lost.

A pencil balanced on it's tip is in equilibrium, even if the next person to look at it will vibrate the floor or air enough to make it fall so it never stands up again.

A ping pong ball inside a bowl is in equilibrium. And it would be very difficult to disrupt it from its equilibrium. That's what most people think of.

But, more directly back to the point, L1 is an unstable equilibrium point that is always moving. But it is an equilibrium point. It's real. It's well documented. And we have artificial satellites in that area now. So the assertion that a moving target for an unstable equilibrium is unattainable is something I refuse to believe. Because I have proof otherwise.

As for the economic part, that's more in the realm of opinion. Who to blame, and how complex interactions can be traced to specific points, and how that affects people on an individual basis.

The amount of the debt is about 4x the amount removed by the banks from the economy. Remove the banks and put the fees/profit that would have gone to them to the debt for 5 years, and we'd be debt free and able to buy back every state asset sold (excluding real estate, which I haven't seen numbers on).

We don't have a lack of money or productivity, we are just losing it in all the wrong places. Spending so much to live, we don't have spare resources to innovate.

1) Should the Internet MANA Party look at overhauling Roger Douglas’s Reserve Bank of New Zealand Act?

Yes

2) What would it take to defeat the entrenched economic ideology in the Treasury?

The complete clear out of nonsense thinking and the formation of a currency capable of sustaining a healthy, educated, and thriving populous living in a clean, healthy and natural environment.

This currency / economic system also needs to have a responsive, future thinking and globally leading citizenry enabled through means of self determination in turn working to help other nations achieve the same.

The economic system will have to be based on industry that has merit purpose non discriminating and future focused etc ..... seems easy enough to me.

Great work Team IP Econ. I've been reading this with interest. Great discussion.

The move towards amending the Reserve Bank Act connects the IMP to the NZP who also has this intention to amend; increasing the ability of the IMP to attract voters on the centre Right that Winston and Dunne share almost exclusively. This is the macro. To introduce the micro to the voters calculations, a reduction of GST to 7% means things getting cheaper across the whole board and business will at least get a share. Compare this to the NZF no-GST and too many people from all sides lose out whereas with 7% everyone gets something of it. Basically, a win-win situation.

To counter arguments against this reduction, its crucial that whoever finalises the policy ensures that above-anything-else the flagship 'amendment of the RBA' is sufficiently explained to the voters in income terms i.e. more money flow, more credit, less taxes etc before explaining the details. This is pivotal. The voter needs to understand how more money will be available that counters as well as enhances the reduction of GST. This is how both the amendment and reduction needs to be presented for the voter to see how it will $$$$ them.

Last chance for people to vote on this before it expires and fails to reach the 7% mark.