|Posted on October 12, 2012 at 7:05 PM|
Green Party co-leader Dr Russell Norman wants the Reserve Bank of New Zealand to launch quantitative easing to lower the value of the New Zealand Dollar. Dr Norman writes “Since the Global Financial Crisis, our major trading partners have engaged in large scale measures that have devalued their currencies” and that “The UK, USA, Japan and the European Union have deserted traditional monetary policy tools in favour of successive rounds of quantitative easing.”
The maxim that imitation is suicide accurately describes Dr Norman’s cavalier attitude towards currency debasement for he openly advocates the implementation of the very policies that have proved so injurious to the aforementioned economies. If merely printing money was a panacea that could solve a country’s economic problems, then Zimbabwe or Argentina would stand on the pinnacle of economic greatness. Dr Norman wants New Zealand to end its relative prudent monetary policy that has made New Zealand and its currency a sanctuary from the vicissitudes and tumult offshore. His call to weaken the currency means New Zealanders will pay more for imports like petrol. The effects of this inflationary policy will reverberate throughout the economy and produce higher prices for Kiwi consumers and businesses, ultimately imperilling the economy.
Ultimately, Dr Norman ignores the undeniable reality that the New Zealand Dollar is a fiat currency that is losing its value, albeit at a much slower rate compared to the US Dollar, Euro, Yen, and Pound. Nonetheless, the New Zealand Dollar has lost about 6.3% this year relative to gold. For comparison purposes, the US Dollar has lost 13.5% of its value relative to gold, the Euro 14.4%, the British Pound 9.0%, and the Japanese Yen 14.7% during the same period.
Despite Dr Norman’s thoughtless and inaccurate comments, the New Zealand economy is amongst the least affected by the Global Financial Crisis and is performing comparatively better than its peers in the developed world. Admittedly, part of this is attributable to the strength of our two largest trading partners, Australia and China. However and notwithstanding its imperfections, the current government deserves some of the credit for prioritising a return to surplus and for adopting pro-business policies that embrace the free market.
In any event, quantitative easing ultimately benefits the rich. For example, the Bank of England commissioned a study in which it said that 40% of the gains of its quantitative easing programme went to the top 5% of British households. The reason is simple. The rich own shares, property, and precious metals, whose values rise or remain constant when the central banks flood the world with money conjured out of thin air. Conversely, working people and savers rarely own financial assets whilst simultaneously having their real wages drop during an inflationary period. Dr Norman’s tacit support of even lower interest rates penalises retirees who depend on interest income to live. In essence, Dr Norman wants the Reserve Bank to continue the very imbalances that helped produce the Global Financial Crisis by punishing those prudent enough to save and rewarding the spendthrifts.
Dr Norman and the Greens pretend to show solicitude for poor people, but their policies are disastrous to those on the lower rungs of the socioeconomic ladder. For example, the Greens have been the most vociferous supporters of “smart growth” policies that limit the amount of residential land available for development. The lamentable result is that house prices skyrocket thanks to the Greens’ advocacy of policies that artificially constrain the supply of land. Ultimately, Green policies are partially responsible for house prices remaining unaffordable for many New Zealanders, but this hypocrisy seems not to worry the Greens.
Ultimately, the Greens are simply rebranded Reds masquerading as friends of the environment. Unfortunately, their politics is nothing more than repackaged Bolshevism. In the spirit of the Marxist class struggle, they assail and vilify groups whom they dislike such as dairy farmers or small businesses merely out of envy. The regrettably reality is that most New Zealand dairy farmers and small businesses earn less than what parasitic parliamentarians like Dr Norman earns as an MP whilst actually working for a living. However, New Zealanders can choose not to buy dairy products or goods offered by the businesses Dr Norman reviles whereas taxpayers must pay the taxes that fund Dr Norman’s generous parliamentary salary.
Given that Dr Norman wants “to start a mature discussion”, I am challenging him to debate this issue in a public forum. Most likely, Dr Norman will decline my request because he is more interested in emitting CO2 emissions with the political hot air emanating from his mouth than he is debating topics upon which he knows nothing. Sadly, financial illiterates like Dr Norman prefer to engage in demagoguery and promise the impossible rather than to offer solutions based on reality.
Categories: New Zealand