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Labour, National Experts Agree on Failed Approach


Thursday, 9 November 2006

Labour and National Experts Agree on Failed Approach

If anyone believes the ‘experts’ on the construct of the NZ economy have an answer to what causes inflation they just need to take note of the latest admission of failure from three of them.

Under the heading “Inflation conundrum unites unlikely threesome” Michael Cullen (Finance Minister) Don Brash (Former Reserve Bank Governor) and John Key (National Spokesperson on Finance) have revealed today in the NZ herald that none of them have a solution to the inflation conundrum and that “a search party of officials” sent out to look for a solution “came back empty handed”.

Well that is not a surprise, given that the territory where they looked is as barren as the surface of the moon and any solution sought within the framework which led to the inflation issue, without changing that framework, simply can’t work.

Inflation is inherent in the mechanism used to create the interest bearing debt which forms the ‘monetary’ foundation on which all economic activity is built. Using that mechanism to provide virtually all the money in circulation inevitably means that more interest bearing debt must be created to accommodate the interest component. That results in added costs to the entire infrastructure around economic activity that can only be recovered in increased prices for goods and services. In other words inflation is built into the system by the mechanism. It is that mechanism which drives the problem.

What is needed to address the issue is to use a mechanism that injects ‘money’ into the system which does not have an orthodox debt component. Such a mechanism used to provide interest free capital for designated essential infrastructure would enable interest bearing debt to be backed out of the economy, thus reducing inflationary expectations and leading directly to reduced taxation and charges, without any loss of service quality or quantity in sectors such as education, health or disability support. Seems fairly simple to me!

As long as the incumbent ‘experts’ have their hands on the lever of economic power the best future generations can expect is more futile debate around how best to band aid the issue of inflation, when what is needed is a cure. The comment by Don Brash that “there is no simple solution” doesn’t mean that none exists. What Brash, Cullen and Key are really saying is there are no simple alternatives they will consider if they don’t fit in within the framework of the orthodox economic mythology they subscribe to and defend.

That is treating New Zealanders like mushrooms and Democrats believe we deserve better than that –much better.


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