Not more of the same

Guest post
12 years ago
Categories: Economy

Some thoughts on how to get the economy moving again while also shifting us away from the failed banking system that we’ve been using for the last few centuries.

What could the government do for the economy if?

The government makes fractional reserve banking illegal preventing the private banks from creating money
The government prints money at 0% interest that it spends into the economy. It neither borrows money nor sells bonds

Ok, we all know that there’s a housing shortage and that the government needs to build more state housing. My suggestion has always been that the state builds this housing and rents it out at 25% of household income but, as the people aren’t actually buying the house, it really shouldn’t be that high. All we really need would be about 10% adjusted on if it’s an apartment for a single/couple or a three bedroom residence to cover maintenance (normal wear and tear, anything above that gets charged to the people living there at extortionate rates). Unfortunately such low rents are likely to encourage resentment from some people and bring about another round of beneficiary bashing neither of which we want.

We also have a problem of a high dollar which is being pushed up because seemingly we’re the only country in the world that isn’t engaging in Beggar Thy Neighbour quantitative easing (otherwise known as printing money). Don Brash, of course, thinks nothing can be done about this and that doing so “which of course really means cutting the real wages of New Zealand workers”. The point that Mr Brash seems to miss is the fact that we can’t actually afford such a high dollar as all our money goes outwards and, due to exports being constrained by the high dollar, very little is coming back in. This trade imbalance is also exacerbated by foreign ownership which channels profits offshore.

So the suggestion is that the government goes out and builds houses and apartment buildings with printed money and rents them out at low rates. On top of that it also offers to buy peoples houses and rent them back to the ex-owner for the same low rentals. I figure this will have numerous effects:

It’s going to cancel a huge amount of debt, especial foreign debt, without actually trashing the economy as it won’t be removing money from the system as paying down debt does with our present debt based money
It’s going to drive the exchange rate down as NZ will no longer be a high interest haven for foreign funds
With the exchange rate down there’s going to be a boost to exports – especially in the manufacturing sector. Agriculture is already at or, more likely, past maximum (See my definition of the Renewable Resource Base) although I’m sure the farmers will be looking to pollute our waterways even more
The boost in demand for exports will drive unemployment down
It will help prevent the resentment of beneficiaries and the low paid due to it being available to everyone

Further to that, once the government owns these houses it then behoves the government to get them up to standard so that means installation of insulation and, at a later date, solar panels (both electrical and water) as well. This will create more work and save the country in terms of power along with the house building that the government will be engaging in will give a huge boost to our construction industry – possibly to the point that proper fully automated factories will need to be built to support it which opens up more export potential.

This isn’t a full list of what the government could do if it was serious about creating jobs and eliminating poverty. There is a hell of a lot more it could, and should, do to boost NZ’s flagging economy and society. We know, after three decades of experimenting, that leaving it to a few rich people doesn’t bring about the dynamism that is needed to maintain a just and equitable society.

Draco T Bastard