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Our government attempts to attain the “economic objective of achieving and maintaining stability in the general level of prices” via the Reserve Bank (does that remind you of Muldoon’s wage and price freeze?). Usually this is manifested in the Bank adjusting the Official Cash Rate to try and manipulate the rate of inflation. So why is this mechanism always beset with trouble?
In 2007 the government got a committee to look at the latest problems with the government’s monetary policy and Bruce Sheppard made a submission critical of the government. Part of his submission in regard to the causes of inflation was:
The Crowns activities in the property market through Housing New Zealand are also not helpful. The Crown is the largest holder of residential property in New Zealand, and to blame the baby boomers for the “scarcity” of homes is a little unfair. The Crowns holding is now valued at $13 billion.
Basically, houses are a popular investment in New Zealand, and because the government owns so many there are fewer available for purchase. High demand coupled with low supply drives prices and inflation up.
What is the common thread between the government’s manipulation of prices via the Reserve Bank and the government’s ownership of more houses than anyone else? Why are both policies causing economic harm? The common thread is this: both policies are directly from the Communist Manifesto.
The Communist Manifesto was written in 1848 by Marx and Engels, and listed ten stepping stones for the transition from a capitalist society to a communist one:
1. Abolition of property in land and application of all rents of land to public purposes. That’s government ownership of houses and administration of almost a third of New Zealand’s land area via the Department of Conservation.
5. Centralisation of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly. That’s the Reserve Bank.
It’s no wonder that these policies are a failure when they are based on communist economics. Such economics simply don’t work, as any Russian who queued for toilet paper between 1917 and 1991 will tell you.
There is a far simpler mechanism for “maintaining stability in the general level of prices”, and it doesn’t require hordes of expensive bureaucrats; it’s called the law of supply and demand. In other words, if the government stops interfering with supply and demand things will sort themselves out.
Attempting to fix a governmental monetary policy based upon the Communist Manifesto is akin to finding the skeleton of a horse and trying to get it to pull a cart.
What do you think about the points that I have made here?