NZ Greens call for Quantitative Easing

Nothing could illustrate the conundrum facing economists and policymakers in an era of a collapsing economy and the end of cheap resources.

Those in charge hold onto their right-wing policies and condemn many to poverty and unemployment as the country moves into a deflationary depression.

The critics are right in their condemnation of this but, being wedded to the concept of Infinite Growth, are putting forward solutions that would see New Zealand join the rest of the world in a race to devalue their currencies through Quantitative Easing – a kind of 'race to the bottom'.

Ganesh Nana is probably right that while the one policy will lead to inflation, the other will lead to deflation.

At the time of the elections I roundly critcized the Greens for their runnng their campaign based on 'for a richer New Zealand'.

For the record, at the time of the election. (November last year) the Greens were in denial about the state of the economy.

They have without a doubt provided a powerful political opposition to this quasi-fascist government. 

In this they have my support. 

It will be a popular stance that will probably translate into votes in the next election.

However, their adoption of a pro-growth, slightly-to-the-left-of Labout position is also deluded, and probably unprincipled.

-- Seemorerocks

Government dismisses proposal to print more money

Economic Development Minister Steven Joyce says the Green Party's proposals to drive down the New Zealand dollar are half-baked, and change isn't needed as the economy is stable.

Radio NZ,

8 October, 2012

The Council of Trade Unions, and some economists, back the party's proposal to tame the dollar and pay for the Christchurch rebuild by what is known as quantitative easing - printing more money.

The Greens want the Reserve Bank to consider the exchange rate as well as inflation, and to cut overseas debt by printing an extra $2 billion to buy the Government's earthquake bonds.

Mr Joyce says the Government is taking a sensible and conservative approach, and the Green's proposals would harm the country's reputation.

"What the Greens are proposing would literally cause the international community to doubt New Zealand's economic priorities quite significantly, and it literally would be a case of talking the economy down to other countries which are in much tougher situations than we are."

Many of New Zealand's key trading partners, including Britain, the European Union and the United States have carried out quantitative easing in the last couple of years, but Mr Joyce says the approach has only been embraced by countries in crippling debt and hasn't worked in Japan and Switzerland.

Mr Joyce told Radio New Zealand's Morning Report the dollar is high because the rest of the world sees the New Zealand economy as having better prospects than those of Britain or the US.

Greens' co-leader Russel Norman says the idea of using monetary policy to address the exchange rate level as well as inflation has become mainstream thinking, backed by such figures as the chief economist of the International Monetary Fund.

He told Morning Report research indicates countries that have printed more money have not at this stage experienced inflationary problems.

Listen to Russel Norman on Morning Report

Listen to Steven Joyce on Morning Report

Employer, union groups at odds

Employers and Manufacturers Association chief executive Kim Campbell says printing more money would make overseas banks reluctant to lend to New Zealand at a time when businesses are in desperate need of investment.

Mr Campbell says it's up to businesses to become more productive, and for the Government to encourage foreign investment and cut red tape.

The association points out that while the high exchange rate makes it tough for exporters, many businesses rely on imported goods, like petrol, so the high dollar isn't all bad.

Council of Trade Unions economist Bill Rosenberg says the high exchange rate is costing jobs, as exporters can't compete with the flood of cheap imports.
 

He says with unemployment heading towards the 7% peak of the 2008 global financial crisis, the Government should abandon its hands-off approach to monetary policy.

However Institute of Economic Research principal economist, Shamubeel Eaqub says bringing down the dollar wouldn't necessarily stop manufacturing jobs going off-shore and quantitative easing could turn New Zealand into the "Zimbabwe of the Pacific".

"In the short term you would get the benefit of essentially having free money, but over the longer term it would reduce the value of the New Zealand dollar and raise the cost of living for all New Zealanders."

Consultancy firm BERL says the manufacturing sector is being destroyed by the high exchange rate, which is out of kilter with the rest of the economy.

Chief economist Ganesh Nana supports the Green Party proposals, saying New Zealand needs an appropriate exchange rate in order to create a high-value manufacturing industry that can compete internationally.