Gareth Morgan smacks out his pals

There isn’t much I agree with Gareth Morgan on. But the other day on his blog he smashed out his Green bedfellows on their loopy idea to print money:

So let’s come to a small and pretty irrelevant economy like ours. Say we unilaterally decide that economic growth just isn’t strong enough so we enter into the race to the bottom by printing NZD and lowering our exchange rate. Foreign creditors and potential investors look at our external debt ratios and simply see they’re of similar proportion to those of Spain, Ireland and Italy. Why would they line up for more? The only reason would be if they thought that by extending our debt we would enhance our ability to service it and pay it back.

Now look at what we did with the last dollop of external debt raising. Into property it went in the main, lifting NZ property prices to some of the highest in the world compared to income. And what are we all aware of again right now in our economy? Isn’t it that the property market is champing at that bit to get going again, the only thing holding it back is our banks can’t get access to easy offshore loans like they once could. Their masters require higher collateral on mortgages.

For us there is little to no credibility in a policy to achieve growth from printing money. It will simply lower our credit rating and raise our interest rates as creditors extract the required reward for largesse.

No, if we want more economic growth of a permanent kind we need to have products and services to sell that the world wants. Only that way will investment or loans from abroad be more forthcoming. Every time this comes back to policies (tax and financial) that don’t discriminate in favour of housing speculation, and that do encourage capital inflows because we have rising sales of products to the world. Remember the commodity boom we had recently?

After 30 years of economic growth fixes being gerrymandered by politicians ordering up the printing presses, global investors with governments around the world owing them trillions, now recognise a sham, a scam, and an also-ran. Economies with intelligent policy settings targeted to deliver better deals for the global customers of their firms will reap the most rewards over the next decade.


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  • Honcho

    I cant help but find myself agreeing Gareth Morgan.

    Printing money would be a race to the bottom, and one of our biggest issues with taking on debt is that its channeled into economically unproductive property speculation, generating the current intergenerational theft. Hit the mark, although its just a mindless observation, with no options considered to solve the issues our economy currently faces.

  • 2ndAmendment

    simply see they’re of similar proportion to those of Spain, Ireland and Italy

    And that’s the most important phrase in this rant. The Greens are crazy – yes of course. But given our debt and deficit, with Greens, Italy and Ireland dropping spending by 10-15% per annum for the last few years – while we just borrow and hope – National and Labour are just as crazy

    The #1 policy change should be removing the mortgage interest deduction to remove the bias towards property investment.

    The #2 policy change should be to move into a significant surplus immediately (should have been in 2008 but beggars can;’t be choosers and NZ is a land of beggars). Yes, that means the end of welfare, and co-payments or full-privatisation of health and education. It means the end of KiwiRail, KiwiBank, KiwiSaver and the rest.

    This is commonsense. Staying on current policies is just as mad as printing money

    • CJA

      I see your point regarding removing the mortgage interest to remove the bias towards property investment and to a certain extent the government has tried to do this with buildings now no longer being depreciated in most cases but you would have to rewrite our tax laws if you wanted to say mortgage interest was no longer deductible. It relates to the Nexus test which is a fundamental part of our tax laws.

    • Meg

      Following your ideas in #2 would be a disaster for NZ. You would tear the country apart, riots in the streets and that is not counting the actual cost to future generations of average kiwis.

      • 2ndAmendment

        Of course there can be no real reform without “riots on the streets”.
        Ruth had riots, so did Thatcher! Riots are one of the few signs that reforms are really biting – if there are no riots it is an absolutely sure sign there is no reform!

        • Meg

          Ruth and Thatcher caused massive harm and damage, not the examples I would use to convince people they should do as I say.

          • 2ndAmendment

            Ruth – in just one budget – did more good than any other budget, any other finance minister for the last 170 years!

            Unfortunately Labour reversed every single change Ruth made

            All NZ needs now is just one more Ruth budget – to do everything Ruth did over again – and to carry on and finish the job!

            If Key & English & Joyce think they are going to lose: perhaps they might actually do the right thing next year
            – end the benefits
            – end corporate taxes
            – end state & integrated education
            – end state hospitals & GP subsidies
            – sell everything, including school & hospital buildings & roads, not to mention every SOE, RNZ, TVNZ, KiwiBank Kiwi Rail KiwiSaver – the lot

  • cows4me

    Gareth Morgan, oh yeah, surely this isn’t the same clown that believes the world is over heating? Quite frankly I would be happy to print useless bits of paper to pay for the bullshit he expects NZ to pay to save the world. I bet “Mr Morgan” likes cold hard currency to pay for saving the world. Go take a running jump Mr Morgan.
    He might be right on money printing but whats the point if we have to piss it up against the wall, he can’t have it both ways.

    • Unitedtribes

      The only thing that Gareth is right about is that its fun to ride a motor bike. Well that silly BMW he rides dosnt quite make it!