Posted on 7-11-2003
Reserve
Bank Mania
by Maureen Coxhead
It is what the rules make profitable that survives and what
the rules make unprofitable that is eliminated. It follows the
survivors are the ones who manipulate the rules to suit themselves.
Europe and the USA have been doing it for years though they
have finally woken up that China has out manoeuvred both of
them. China has kept her currency at an export friendly level
vis-a-vis the $US, they didnt free the financial sector and
kept tariffs to protect their manufacturing sector. Result:
Real National income has tripled since 1984 and is set to pass
that of the USA in 2012.
N.Z. on the other hand floated the dollar, freed capital
markets and wiped most import duties without demanding reciprocity.
Result: a five fold increase in debt since 1984 . Lest you think
it was just N.Z. Russia followed the same policies as we did
with an enthusiasm that would have done Roger Douglas proud.
Result: twelve years after they threw out Communism their GDP
is still less than it was under Communism.
As Joseph Stiglitz (Nobel Prize economics 2001) points out,
it is easier to destroy firms than to recreate them and the
damage caused by high interest rates will not be reversed when
they are lowered. He also points out that it was the jobs created
by export expansion, not the job losses from increased imports,
that gave rise to growth.)Globalisation and its discontents).
Yet Governor Bollard insists on maintaining comparatively
high interest rates with threats of even higher rates resulting
in an overvalued dollar. This makes importing i.e. increasing
the nations debt more profitable than exporting i.e. increasing
the nations wealth. This is crazy. It is not a sustainable policy
and the longer we continue with it the more severe the crash
will be when, not if, it comes.
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