Category Archives: Macroeconomics & Money

New World Disorder: Where Is the World Economy Going After Iraq?

This entry was posted in Globalisation & Trade, Macroeconomics & Money on by .

Listener: 19 April, 2003.

Keywords: Globalisation & Trade; Macroeconomics & Money;

We see only vaguely the world order which will follow the flames of Iraq. The whole episode has confirmed the American (Hard) Right’s suspicions of the old order, based on alliances and multilateral institutions, which Franklin Delano Roosevelt and Harry Truman (and, indeed Peter Fraser) contributed to creating after the Second World War. They argue the case for, what amounts to, an American imperium – a world empire over which it wields unqualified power. With President Bush they have an administration which could pursue such a unilateralist goal, with profound international political and military implications. But as this is only a short economics column, the focus is on the economic and financial ones.

Iraq, Oil and the US Dollar

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Note in response to questions arising from the ‘Disorder Afterwards’ Listener Column of 19 April, 2003

Keywords: Globalisation & Trade; Macroeconomics & Money;

In the past few weeks I have been asked by a number of people about published opinions that argue the US is invading Iraq in order to get access to its oil, and to strengthen the role of the US dollar, it being noted that a few years ago Iraq decided to settle its oil deals would be transacted in euros.

The Washington Consensus: When Facts Get in the Way Of Economic Orthodoxies

This entry was posted in Globalisation & Trade, Growth & Innovation, Listener, Macroeconomics & Money on by .

Listener 8 February, 2003.

Keywords: Globalisation & Trade; Growth & Innovation; Macroeconomics & Money;

Overseas economists visit New Zealand regularly, seeing politicians, officials, business people, and even independent commentators. One, late last year, began his session with me, by saying that New Zealand’s economic relativity in the OECD had deteriorated throughout the last half century. The government wanted to accelerate our economic growth, he said ,but since coming to office it had
– delayed unilateral tariff cuts;
– raised income tax rates;
– ruled out further privatisation;
– toughened regulation;
– introduced a more active industrial policy ;
– re-regulated the labour market.
He concluded that he did not see a single policy change which would contribute to increasing economic growth.

How Representative Of Inflation Are Changes in the CPI?

This entry was posted in Macroeconomics & Money, Statistics on by .

DRAFT: Comments welcome. (The origins of this paper are evident in the text, but its stimulus was a question arising from the interpretation of a standard textbook on international trade.)
The paper was revised in April 2003.

Keywords: Globalisation & Trade; Macroeconomics & Money;

Over a decade ago I investigated to what extent the CPI could be used to represent the prices of the economy of the whole (GDP), as a part of the study which led eventually to In Stormy Seas. In the process of reducing the vast quantity of material that was produced into the book for publication, the material was left out. (The first draft of the book was about twice as long.)

I must have thought the issue as a methodological curiosum at the time, but since the book’s publication on a number of occasion during public discussions I have wished the material had been publically available. As the next section explains, the section was an illustration of one of the general issues with which In Stormy Seas was concerned, and it is also – as a later section explains – crucial to the understanding how monetary policy works, and how the current management regime may inhibit economic growth.

Two Great Economists: Raymond Firth (1901-2002) & James Tobin (1918-2002)

This entry was posted in History of Ideas, Methodology, Philosophy, Listener, Macroeconomics & Money, Maori on by .

Listener 25 January, 2003.

Keywords:
History of Ideas, Methodology & Philosophy; Macroeconomics & Money; Maori;

I would start a beginning course in economics with Economics of the New Zealand Maori by Raymond Firth, who died last year. Not only is the book a part of our heritage but it confronts students with the classical Maori economy which answered the central economic problems of ‘what, how, for whom, where and when’ in quite different ways from today. Starting with an alternative to the narrow idealised version of the US economy which they are usually taught, would help students realise how special it is. It might even suggest that every economy is particular, and such general economic principles there are, need not result in the policies which slavishly follow from the idealised US one.

The Borrowers: Don’t Be Too Hasty Condemning So-called Loan Sharks.

This entry was posted in Business & Finance, Listener, Macroeconomics & Money, Regulation & Taxation on by .

Listener 16 November, 2002.

Keywords: Business & Finance; Macroeconomics & Money; Regulation & Taxation;

Tamaloa wants to go back to Samoa for an aiga maliu (family funeral). With no spare cash he needs to borrow. He has no record with any core financial institution, no assets to secure a loan, only the prospect of repaying out of future earnings, which sadly are not as secure as those of the Palangi. No bank will advance him a loan, so he goes to a fringe financial institution, and ends up paying a much higher interest rate.

Economic Reforms: Index

This entry was posted in Business & Finance, Distributional Economics, Globalisation & Trade, Governance, Growth & Innovation, History of Ideas, Methodology, Philosophy, Index, Labour Studies, Macroeconomics & Money, Political Economy & History, Regulation & Taxation, Social Policy on by .

History
Sequencing (December 1983)
Freeze and Thaw
 (July 1984)
Ssh …It’s the Big ‘‘D’’ (August 1984)
Confidentially Yours (August 1984)
Devaluation!: Five Turbulent Days in 1984 and Then … (July 1985)

Economic Liberalisation: Where Do People Fit In?
 (May 1987)

From Run to Float: the Making of the Rogernomics Exchange Rate Policy (September 1989)
Liberalization Sequencing: The New Zealand Case (December 1989)

Towards A Political Economy of New Zealand: the Tectonics of History (October 1994)
The Wild Bunch?: An Inquiry is Needed to Restore Treasury’s Integrity (August 1996)
The Great Diversification: Ch 9 of Globalization and a Welfare State (December 1997)
The State Steps In: Michael Bassett Makes A Case for Intervention. (August 1999)
Remaking New Zealand and Australian Economic Policy by Shaun Goldfinch (August 2001)
The Treasury and the Nationbuilding State (December 2001)

Evaluation
New Zealand’s Economic Performance This is an Index
Economic and Other Ideas Behind the New Zealand Reforms
 (October 1994)
For Whom the Deal Tolls (Of Dogma and Dealers) (August 1996)
The Economic Impact of the Employment Contracts Act (October 1997)
Microeconomic Reform: The New Zealand Experience (February 1998)
Some Macroeconomics of the Employment Contracts Act (November 1998)
View From Abroad: What Do We Know about Economic Growth? (May 1999)
The Model Economist: Bryan Philpott (1921-2000) (August 2000)
Comparison with Australia: New Zealand’s Post-war Economic Growth Performance (August 2002)

The Debate
Waist Deep in the Big Muddy? (February 1991)
Friends in High Places: Rogernomic Policies Have Powerful Allies in Australia (April 1994)
Systemic Failure (December 1995)
Ignoring the Critics (February 1997)
A Permanent Revolution? (March 1997)
In the Dark: The State of Research Into the Economy is An Embarrassment (June 1997)
The New Zealand Experiment: A Model for World Structural Adjustment? (Review) (July 1997)
Out of Tune: Even the Officials Admit the Health Reforms Were Fatally Flawed. (December 1997)
Money for Jams: the Government Response to Roading Reforms is Commercialisation. (January 1998)
Reforms, Risks, and Rogernomics (March 1999)
The London Economist and the New Zealand Economy (December 2000)
Locked Out: of Free Press and Free Economics (May 2001)
A Surplus of Imitation (June 2001)
Government Spending and Growth Rates: A Methodological Debate (January-May 2002)
From Pavlova Paradise Revisited by Austin Mitchell (July 2002)
Manure and the Modern Economy: Has Economic Policy Hardly Changed? (September 2002)
From is This As Good As it Gets? (December 2002)
1999 and All That (January 2004)

Books
The Commercialisation of New Zealand (1997)
In Stormy Seas: the Post-war New Zealand Economy (Chapters 15-16) (1997)
The Whimpering of the State: Policy After MMP (1999)

The Bubble Bursts

This entry was posted in Globalisation & Trade, Growth & Innovation, Macroeconomics & Money on by .

Will the Recession Be So Severe That it Will Count As the ‘Millennium Depression’?
Listener 2 November, 2002.

Keywords: Globalisation & Trade; Growth & Innovation; Macroeconomics & Money;

There was increasing pessimism about the state of the world economy among the international economic commentators I admire. Those who are paid to talk up the financial markets continue to predict optimistically – so far, four of the last zero economic upturns.

The Millennium Depression?

This entry was posted in Macroeconomics & Money on by .

A Listener Sequence

This note prepared in the first week of October 2002. Since then I have published the following columns on the state of the world economy:
The Bubble Bursts: A “Millennium Depression”? (2 November 2002)
Deflating News: Just How Sick is the World Economy? (28 June 2003)
Recovery and Deficit: Where is the US Economy Going? (February 2004)

Keywords: Macroeconomics & Money;

Towards the end of the 1990s I became increasingly concerned that the US boom was not only unsustainable, but the reversal would lead to a severe recession or even a depression. In the early 2000, I wrote in a column Self -interest Rates (27 May 2000) which said
“Any monetary authority in an economy which has its share values so dangerously out of line with reality as in the US, cannot be given a top grade. History will be less generous with Greenspan’s reputation, after the millennium depression.”
With hindsight it reads as a bon mot, but it was almost certainly a careful – if gloomy – judgement following a trip overseas. The following is a commentary on the Listener columns which addressed the world economy since then. It was written in preparation for my planned column of 2 November 2002, probably entitled Will There Be Another World Depression?.

Manure and the Modern Economy: Has Economic Policy Hardly Changed?

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Listener 7 September, 2002.

Keywords: Macroeconomics & Money;

Don Brash recently claimed that ‘almost none of the big changes of the late 1980s and early 1990s have been reversed’ and described those who denigrate the economic policies of the 1990s as talking ‘cattle manure’. This may be inappropriate language for the National Party’s front bench economic spokesperson, but the greater worry is that he seems to be keener to repeat the past, than to learn from its mistakes.

Imbalance Of Power:

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Are Double Dipping US Corporations Symptoms of a Double-dipper World Recession?

Listener 10 August, 2002.

Keywords: Business & Finance; Macroeconomics & Money

Almost all recent New Zealand forecasts have accepted the international conventional wisdom that the US economy was in recovery. However, some forecasters have private reservations that a ‘double-dipper may be on’.

Corporate Chaos: Is the Collapse Of Enron and Worldcom the Beginning Of an End?

This entry was posted in Business & Finance, Listener, Macroeconomics & Money on by .

Listener 27 July, 2002.

Keywords Business & Finance, Macroeconomics & Money

Because there is no coincidence of wants, money acts as an intermediatory in the conversion of something we have (including our labour) into something we want (perhaps the groceries). This role can be summarised as C→M→C* where a commodity (C) is converted (sold) into money (M), which is used to purchase a different commodity (C*). In this way money facilitates the specialisation of production upon which modern standards of living depend, because it enables each to concentrate on producing one thing well, and convert it into all the other things they want to consume.

Pay Later

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The Budget Deficit and Future Generations

Listener 1 June 2002.

Keywords Macroeconomics and Money

MMP has meant the better parliamentary representation. Those whose parties dont make the threshold (75,306 in 1999), who vote informally (19,887), whose votes are disallowed (41,382), who are enrolled but dont vote (382,602), or who are eligible to enroll but dont (who knows?) miss out. But the remaining voters (1,990,188) selected a parliament that better reflects them ethnically and genderwise while a quarter (560,0057) voted for minority parties which better represented their politics than the two main ones. The people’s representation is further enhanced by MMP tipping the balance against the autocracy of single party government.

Keep the Aussie Dollar at Bay

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New Zealand Herald 07.05.2002

Keywords: Globalisation & Trade; Macroeconomics & Money

Should New Zealand form a currency union with Australia, just as until recently Argentina did with the United States dollar? A fixed exchange rate between two markets is clearly advantageous to the exporter, whose one ambition is to sell to Australia. But more than 80 per cent of exporters and 90 per cent of the economy have other ambitions.

The Macroeconomics Of the Superannuation Fund

This entry was posted in Macroeconomics & Money, Social Policy on by .

This was a note I prepared: 24 February 2002.

Keywords: Macroeconomics & Money; Social Policy;

Unfortunately the debate on the superannuation fund established by the Labour-Alliance Government in 2001 has largely ignored its macroeconomic effects. This paper takes the orthodox position that a government has to manage its fiscal position, including its deficit or surplus. There is no necessary rule – such as that propounded by the US right – that sets an a priori level for the fiscal position – such as the government should be in exact balance.

Dont Cry for Us Argentina

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Listener 9 February 2002.

Keywords: Globalisation & Trade; Macroeconomics & Money

Street demonstrations and the fall of four presidents in a fortnight tell us something is desperately wrong with the Argentine economy (which, with 56 million people, is the world’s 17th largest economy on some measures). It is a century since the expression ‘as rich as an Argentinian’ was in vogue, and many things have gone wrong since. But the precipitant of the recent crisis was the ‘currency union’ with the United States. The Argentinians had abandoned an independent currency and locked their peso to the US dollar. This ‘dollarisation’ is much stronger than pegging the exchange rate, as occurred in New Zealand before 1984. In a currency union there is a common currency – in effect the US dollar was the Argentinian currency, although they used a ‘currency board’ so that while there was a local currency, the ‘peso’, all financial contracts were effectively written in US dollars. The arrangement has the advantage of price stability if prices in the primary currency (the US dollar) are stable.

Economic Directions: What Does the Government Think It’s Doing?

This entry was posted in Growth & Innovation, Listener, Macroeconomics & Money, Social Policy on by .

Listener 12 January, 2002.

Keywords Growth & Innovation; Macroeconomics & Money; Social Policy

A government needs a policy framework to coordinate its various decisions, and give it, its supporters and commentators a sense where it is going. The Labour-Alliance government has not announced one. If it did, what would it look like?