Listener: 22 October, 2005.

Keywords: Macroeconomics & Money;

Monetary activity is dominated by capital flows. Its interaction with the trade of goods and services may seem marginal, but a financial crisis in the monetary system threatens the payments system, and could lead to a depression. This is especially true internationally because of the foreign exchange requirements of trade.

Listener: 8 October, 2005.

Keywords: Macroeconomics & Money;

In a few months, the 2005 election debate may be forgotten, as we focus on the real economic issues that were hardly addressed during it. The most salient include:

Listener: 13 August, 2005.

Keywords: Macroeconomics & Money;

When an Italian politician proposed that Italy should exit the euro area and return to the lira, specialists just laughed.

Transtasman banking regulation is a pressure point in our relations with Australia.

Listener: 18 June, 2005

Keywords: Macroeconomics & Money;

More than other overseas investors, banks can quickly withdraw their key assets. The foreign owner of a factory, farm, forest or beach-house can go off in a huff, but the physical entity remains. Financial assets are much more mobile.

Finance Minister Michael Cullen faces the political reality of election year

Listener: 23 April, 2005.

Keywords: Macroeconomics & Money;

How to slow an economy that is pressing on its capacity to produce? A couple of decades ago, the government might have imposed a credit squeeze, reducing private investment. Additionally, it would have tightened restrictions of consumer credit (especially hire-purchase), raised taxes to reduce household consumption (but not in election year), reduced government current spending and told government agencies to defer their investment plans. Today, it appears to rely only on the Reserve Bank to squeeze credit by raising interest rates.

Listener: 12 March, 2005.

Keywords: Macroeconomics & Money;

Underneath much of economics is the notion of “homeostasis”, the tendency to respond to an external shock by adjusting internally to maintain equilibrium. So a surge in demand for a product results in its price rising, reducing the amount demanded and increasing the amount supplied.

Imbalanced tax cutting is like pouring petrol on a blazing barbecue

Listener 6 November, 2004.

Keywords: Macroeconomics & Money;

With the general election just a year ahead, I have, as usual, reviewed my approach. My strategy is always to help readers try to understand economic issues, rather than tell them which way to vote. Next year I may have to modify it.

Trying to make sense of a rising exchange rate.
Listener: 3 April, 2004.

Keywords: Macroeconomics and Money.

The conventional wisdom, like generals, fights the last war. Its complaints about the high exchange rate are from the perspective of the late 1980s. You may recall a few intrepid souls then arguing that the hike in the real exchange rate undermined the profitability of the tradeable sector, which generates foreign exchange by exporting or conserves it by import substitution. The weakened sector would slow overall economic growth, as happened. Meanwhile, the generals, fighting the earlier Muldoon war, ignored the exchange rate, completely failing to predict the poor economic performance.

Listener: 21 February, 2004.

Keywords: Macroeconomics & Money;

Many New Zealanders assumed that when our economy stagnated in the late 1980s and early 1990s, the rest of the world stagnated, too. In fact, it boomed, and New Zealand’s per capita GDP fell from the OECD average to 15 percent below. Similarly, there has been a tendency to assume that there was no world recession in the first few years of the millennium, because New Zealand was hardly affected by it.

Listener: 13 December, 2003.

Keywords: Macroeconomics & Money;

The history of the modern Treasury –– described in Malcolm McKinnon’s landmark Treasury –– is one of fiscal stress, extreme fiscal stress or intolerable fiscal stress. You might think from the government accounts that is not currently true, for the Treasury reported a “surplus” of $5.6 billion for the year ending June 2003 and promises another comparable one this year. (This surplus’s exact name is “operating balance excluding revaluations and accounting changes” or OBERAC.) For a detailed description of the OBERAC.