The PM has criticized teachers' pay demands with the jibe that the "Governments have to ultimately make the books balance, we don't have a great money tree in the backyard that means we can continue to indefinitely increase government spending, we have to pay for everything somehow". His line comes amidst strike action by the teachers' union that has led to school closures throughout the first half of this year.
If I was a teacher then this is how I would respond - the Kiwi government has actually formally stated that it does have a money tree. The Reserve Bank has given it a name, Tāne Mahuta, and identified the part of the tree with the money as being "Te Toto", or the sap. The RBNZ writes that "Te Toto represents money, cash and foreign reserves". I like this metaphor, by the way, even though the PM insists on denying the tree's existence and lampooning it.
The RBNZ shook the money tree so hard these past few years that its branches broke & over $50 billion of cash came pouring out. That $50 billion supported the government's $30 billion wage subsidy scheme by keeping interest rates low during 2020-21. Half of the wage subsidy was paid to medium and large corporations that never even needed the cash. That sum amounts to many multiples of what the teachers have been asking for.
When the Integrity Institute, which was founded by Grant and Marilyn Nelson in the South Island, tried to raise public awareness of the wage subsidy rort by placing an information ad in leading newspapers, the Ministry of Social Development (MSD) tried to silence them and threaten their right to free speech by making a complaint! The Department states on its website, "MSD has made a complaint about this misleading advertising campaign to the Advertising Standards Authority, which is investigating the matter".
Imagine that, a private citizen shining a light on one of the biggest wastes of public money ever and civil servants try to shut down the publicity. Why publish a defamatory allegation that the ads were "misleading" when that has not been established - the matter is under "investigation". What would the Advertising Standards Authority know anyhow about the economics of the wage subsidy scheme? I concur with the Nelsons that it was a rort. I wrote a paper a few years ago with a former Kiwi Finance Minister who also believed it was a rort. Are we not allowed to hold opinions any more? MSD should be writing cheques in the name of folks who are hard up, not in the names of the richest accounting & law firms and biggest firms in the country, which is what happened. It was a shake-down on a scale of the bailout of the banks in the US and UK during the global financial crisis.
So my advice to the teachers is to reply to the PM by saying that they do want higher wages financed by shaking the money tree planted at Number 2 The Terrace, which Hipkins can even see from his window. When he answers back by saying that printing money is no way to pay for their wages since it will be inflationary & the government has to "make the books balance", then the teachers should say, "well, running a huge deficit supported by money printing was exactly how you funded the wage payments of the employees of big business in 2020 and 2021".
The point I am making, of course, is that Chris Hipkins has no economic credibility, either with the right, who don't trust him, nor the left, who he has abandoned.
Sources:
https://www.1news.co.nz/2023/08/01/pm-responds-to-strikes-we-dont-have-a-money-tree/
https://theintegrityinstitute.org.nz/about/
https://www.rbnz.govt.nz/about-us/tane-mahuta-and-our-financial-system
https://www.msd.govt.nz/about-msd-and-our-work/newsroom/media-releases/2023/integrity-institutes-wage-subsidy-advertising-campaign.html
Professor Robert MacCulloch holds the Matthew S. Abel Chair of Macroeconomics at Auckland University. He has previously worked at the Reserve Bank, Oxford University, and the London School of Economics. He runs the blog Down to Earth Kiwi from where this article was sourced.
The RBNZ shook the money tree so hard these past few years that its branches broke & over $50 billion of cash came pouring out. That $50 billion supported the government's $30 billion wage subsidy scheme by keeping interest rates low during 2020-21. Half of the wage subsidy was paid to medium and large corporations that never even needed the cash. That sum amounts to many multiples of what the teachers have been asking for.
When the Integrity Institute, which was founded by Grant and Marilyn Nelson in the South Island, tried to raise public awareness of the wage subsidy rort by placing an information ad in leading newspapers, the Ministry of Social Development (MSD) tried to silence them and threaten their right to free speech by making a complaint! The Department states on its website, "MSD has made a complaint about this misleading advertising campaign to the Advertising Standards Authority, which is investigating the matter".
Imagine that, a private citizen shining a light on one of the biggest wastes of public money ever and civil servants try to shut down the publicity. Why publish a defamatory allegation that the ads were "misleading" when that has not been established - the matter is under "investigation". What would the Advertising Standards Authority know anyhow about the economics of the wage subsidy scheme? I concur with the Nelsons that it was a rort. I wrote a paper a few years ago with a former Kiwi Finance Minister who also believed it was a rort. Are we not allowed to hold opinions any more? MSD should be writing cheques in the name of folks who are hard up, not in the names of the richest accounting & law firms and biggest firms in the country, which is what happened. It was a shake-down on a scale of the bailout of the banks in the US and UK during the global financial crisis.
So my advice to the teachers is to reply to the PM by saying that they do want higher wages financed by shaking the money tree planted at Number 2 The Terrace, which Hipkins can even see from his window. When he answers back by saying that printing money is no way to pay for their wages since it will be inflationary & the government has to "make the books balance", then the teachers should say, "well, running a huge deficit supported by money printing was exactly how you funded the wage payments of the employees of big business in 2020 and 2021".
The point I am making, of course, is that Chris Hipkins has no economic credibility, either with the right, who don't trust him, nor the left, who he has abandoned.
Sources:
https://www.1news.co.nz/2023/08/01/pm-responds-to-strikes-we-dont-have-a-money-tree/
https://theintegrityinstitute.org.nz/about/
https://www.rbnz.govt.nz/about-us/tane-mahuta-and-our-financial-system
https://www.msd.govt.nz/about-msd-and-our-work/newsroom/media-releases/2023/integrity-institutes-wage-subsidy-advertising-campaign.html
Professor Robert MacCulloch holds the Matthew S. Abel Chair of Macroeconomics at Auckland University. He has previously worked at the Reserve Bank, Oxford University, and the London School of Economics. He runs the blog Down to Earth Kiwi from where this article was sourced.
2 comments:
Great article.
A wonder that woke Auckland University continues to employ this expert......
his solid expertise must be inconvenient.
Maybe woke academics will complain as they did with the scientists who challenged Maori science a few years ago.
If you were to look at every developed nation on Earth, each has a common factor- a central bank. Each of these central banks IS a sovereign entity. Being a sovereign entity, central banks have no higher authority. Former Federal Reserve chairman Alan Greenspan put it this way: “No Government Authority Can Over-Rule ANY Decision We Make.”
The “big secret” is this: Ever inflating debt is in fact the only way which the current system can function. The current central bank created debt-based system demands that ever-increasing amounts of debt must continually be borrowed into existence. More debt MUST be added every single second of every single day 365 days a year, decade after decade in perpetuity.
What is the downside to central banks colluding with so-called world leaders? Firstly, central banks are the real government, as it is they who control the entire financial system.
The major downside of this hideous collusion between world leaders and central bankers is currency de-valuation-a loss of purchasing power. Today this is made even worse as central banks are cutting off credit by raising rates, effectively crushing small businesses to fulfill the corporate agenda.
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