Matthew Hooton examines the lunacy of Labour and the Greens:
Labour, the Greens and their cheerleaders are delirious about work by staffers at the International Monetary Fund.
Rethinking Macroeconomic Policy was written in 2010 by French and Italian nationals Olivier Blanchard, Giovanni De’Ariccia and Paolo Mauro. Professor Blanchard has followed it up with Monetary Policy in the Wake of the Crisis.
The work is being cited by Labour’s David Parker and the Green’s Russel Norman as justifying all sorts of nonsense, including Dr Norman’s loony idea of printing money despite the official cash rate being above zero.
Left-wing cheerleaders Selwyn Pallett [sic], John Walley and Rod Oram have picked up the theme at events like the EPMU’s “crisis” summit.
Profound changes, we’re told, are needed to New Zealand’s monetary and wider economic policy. Funnily enough, their proposals would transfer wealth to Mr Pallett [sic] and Mr Walley from savers, consumers, taxpayers and the EPMU’s lower-paid workers.
Selwyn Pellett just absolutely loves corporate welfare.
On the role of government, Professor Blanchard argues for much tighter fiscal policy in good times, saying that when economic growth returns, as it has in New Zealand, countries must reduce their debt-to-GDP ratios rather than increase spending or cut tax.
The left has been strangely silent about that.
He also thinks legislators should consider giving central banks additional monetary tools, a debate which is not new. Even Don Brash has floated ideas such as the Reserve Bank being able to impose a mortgage rate levy, or vary GST or petrol taxes at the margins.
Professor Blanchard is particularly keen to debate how monetary and regulatory policy could be better combined. In leading that debate, he acknowledges the risk that too many tools and too many interventions could be distortionary and harmful.
He worries that, if central banks started being in charge of too many instruments, they would then be responsible for picking favourites among different sectors of the economy (say, Mr Pallett [sic] and Mr Walley over savers and consumers).
That, in turn, would raise questions of whether or not they could or should continue to be independent from politicians.
Labour politicians are even signalling that they want control over even private companies like Fisher & Paykel and a say over their own affairs when seeking capital or even to sell.