Thursday, September 04, 2014

Recipe for a Rock Star Economy.

Recipe for a Rock Star Economy.

In the private sector when you come in as a CEO there is a certain policy all good CEO's should follow. you find any reason you can to write off assets and blame the loss on others. Often this will take the form of realizing losses on an investment or a project that was started by your predecessor. But what if you could do even better - what if you could also borrow billions of dollars to spend on fixing all those problems and write that off too? What if you were also your own customer and you could make money off that extra activity and claim it as an increased profit?

So now we come to the NZ economy.
We write of billions of dollars of assets in an earthquake, and then write off billions of dollars in investment to repair that damage.
Now we pump that investment back into the economy as a stimulus.Under normal circumstances this would cause the economy to grow at quite a high rate (in fact overheat) in a particularly bad economy it might jsut stave off recession.

With this growth you get more taxes (all else being equal) and makes "surpluses" easier. But surplus needs to be put in quotation marks because it is a lie - in reality you are running massive deficits to prop up a stimulus program - it is just you are using an accounting trick to hide it.

I hate politicians trying to play me for a fool.


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