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| Last Updated: Aug 15th, 2008 - 11:26:43 |
Newsletters
:
2005 Newsletters
:
5 August 2005
Thought for the Day
I am always doing things I can't do, that's how I get to do them.
Pablo Picasso
Aug 5, 2005, 11:46
Newsletters
:
2005 Newsletters
:
5 August 2005
What is the Current Account Deficit?
As Muldoon so famously said, "the man in the street wouldn't recognise a deficit if he fell over it".
Peter explains our Current Account Deficit.
Aug 5, 2005, 12:10
Newsletters
:
2005 Newsletters
:
5 August 2005
A Consuming Folly
It is interesting that all governments seem to run inflationary policies. Hopefully they think that a bit of inflation keeps everybody happy as they get more money in their pockets. And so Michael Cullen can see the workers getting pay rises and being grateful while their purchasing power diminishes through increased taxes and imposts as well as the more subtle effect of inflation.
I wonder what the true inflation rate is in New Zealand at the moment. Houses are not included in the CPI. This is because rents are said to be the equivalent and easier to measure and therefore can be used as a substitute. Have you noticed that rents have hardly changed over the past five years while house prices have nearly doubled? What does this say about true inflation?
Also the Department of Statistics is now moving into the subtle field of hedonics which adjusts the actual new price of a good by a smaller one which is supposed to account for the improved capabililty or quality of the newly produced widget.
This leads me to think that there may be more problems with the truth of our statistical calculation of inflation.
Perhaps the average Kiwi is not as stupid as Central Bankers and Ministers of Finance try to make out. With inflation and taxes increasing at unknown rates the only safe investment is Real Estate and the Real Estate that your average punter can afford is the house.
So the government tries to talk people out of protecting their wealth by not buying real estate and at the same time sets up the conditions which make buying real estate the only logical thing to do.
Now the government is proposing to attack property owners by setting up new rules and regulations over rental properties and issuing licences for fees and having lots of rules about how to rent apartments all at the cost of the owner. This will inevitably lead to some landlords selling off their apartments as individual units and a reduction in the number of rentals available. This will increase the rent for the remaining apartments and of course this will increase the capital value of the properties.
Your average punter is not stupid.
Michael Cullen says that giving tax payers' money back is inflationary because they might spend it but if the government takes more more tax that is not inflationary even though he is more likely to spend it. He states, "Tax cuts are inflationary and therefore they are a bad thing". does the corollary to this state that therefore taxes per se must be a good thing?
Here is an article about economic thinking which you may find interesting.
Aug 2, 2005, 10:06
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