Thursday, December 15, 2005

controling inflation

The government sems to focus only on controlling inflation and currency using interest rates and low government spending - why doesnt it use one of its other tools.

1) the cullen fund - aparently telecom has been threatening the government that it should be nice to them and not unbundel the local loop or it will cost the money in terms of the cullen fund. So why doesnt the NZ government take advantage of its ability to think long term and move money out of NZ.
this will achieve a number of things
A) lower the demand for NZ dollars pushing the value down and helping exporters
B) reduce the policy distorting effect of owning to many shares in telecom

Another interesting thing is property investment
they could buy property it doesnt take too much brainpower to do simple land investment and it will give some control over house prices and ability to lower inflation.

they could use these methods to draw money out of the economy as required.


Blogger sagenz said...

the inflationary effect of the government buying land over the next few years in sufficient amounts would do even more horrible things to the lack of non housing investment. not a prospect really worth considering

6:17 AM  
Blogger Genius said...

It would indeed - which is why this would be EXACTLY the time NOT to be making that investment - but if they had already made the investment they could sell it off (ie state houses or whatever).

Effectively using their long run perspective to flatten the flucuations in the market by selling high and buying low.

3:03 AM  

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