Phil Goff and Labour like to use terms like Keynesian economics. It makes them sound smart and clever about how they are going to spend money we don’t have.
I will explain in simple terms for you what it all means. In terms that everyone can understand.
Keynesian economics works like this.
In Keynes’ theory, one person’s spendings goes towards anothers earnings, and when that person spends her earnings she is, in effect, supporting anothers earnings. This circle continues on and helps support a normal functioning economy. When the Great Depression hit, people’s natural reaction was to hoard their money. Under Keynes’ theory this stopped the circular flow of money, keeping the economy at a standstill.
Keynes’ solution to this poor economic state wasÂ to prime the pump. By prime the pump, Keynes argued that the government should step in to increase spending, either by increasing theÂ money supply or by actually buying things on the market itself.
Still confused? Of course you are. Even a simpleton can see that this circle jerk has to end somewhere.
Well let’s explain it in simple terms, ones you can understand.
You have aÂ mortgage, but things are a little tight, you are having trouble meeting your bills, including the bank’s mortgage interest rate. Then you lose your job. This is the “depression” that Keynes talks about. Following Keynes’ brilliant suggestions to keep the pump primed you go visit the bank manager and suggest he follows Keynes’ plan for paying your bills with other peoples money, even though you don’t have an income anymore. You tell the bank manager that in order to keep going with your current spending levels and in order to pay his mortgage interest you want to borrow even more money, but don’t worry Mr Bank Manager you get it straight back with your interest payments. Then when that money runs out because you are still spending like you have the income to support the borrowing you go back and ask for more from the bank manager. On and on it goes and its all good because some smart American economist said it would work.
Except it doesn’t. The bank manager knows this, that is why you would never have got the increased loan to pay your bills or your mortgage, in fact what would have happened is that the bank manager would have made demand on you to repay what you did owe, now.
The piper must be paid and no amount of wanky weasel words can get around the fact that borrowing to fund a lifestyle is doomed ultimately to failure. The sooner Labour realises this the sooner we can all stop being lied to by them.
In a country the size of New Zealand we are essentially a great big household. Keynesian economics doesn’t work at teh household level and it sure as hell won’t help New Zealand. We as a country must cut our clothe according to our income, and the sooner all politicians stop pretending we are a first world country with an income fromÂ theÂ first world we will all start getting better off. We can’t keep borrowing for our lifestyle, sooner or later teh bills must be paid.
This was Muldoon’s fundamental error and many governments before and since. The older generation of New Zealanders, the very same people who pine for Winston Peters to return are the ones who had the best of this country, but they borrowed to fund it, and they left the following generations with the bills to pay for their lifestyle. They also have the temerity to complain that they still don’t get enough.
The economic bullshit must end and Kiwis need to start getting real and honest about economics.