Interest.co.nz – a discussion on Monetary Policy

I’ve been joining in at Interest.co.nz  lately –  an interesting bunch of commenters. Yesterday, though, I found I differed with almost all of the comments, and got to thinking – always a good thing.

I’m sure I’m right – that paradigms have changed, and permanently.

These folk are all good kiwis, and are honest questioners (well apart from a Libertarian or one) but they were all addressing the ‘foreign exchange/monetary policy’  from a Business as Usual stance.

I guess that’s understandable (we’ve had no other scenario for longer than anyone has currently been alive) but it showed up – starkly – the problem I think we’re heading for.

If wealth is the ability – the promise – that you can exchange it for something, then the increasing of wealth must need a parallel increase in ‘stuff’.  We are at the limits of the planet’s ability to supply said ‘stuff’, and therefore at the limit of what ‘wealth’ can buy.

Apart from invisible services  (I give you a massage, you give me one, and we charge each other….) that only left one option – to over-value existing ‘stuff’.

Hence the exponential increase in ‘value’ of things like housing. The wealth didn’t exist, of course. Which is why folk can’t find their money anymore.

It can only happen again, and again, under a slowly sinking lid.

What that does to Monetary Policy, is that we have to have a re-look at what we’re actually trying to achieve.

‘Getting wealthier’ is clearly not going to addres the problem of supply, and impacts (like climate change or pollution of waterways) so we have to have another goal.

How about ‘wellbeing’, sustainable’, and ‘obligation’, as some key words.

We will continue to export food, but it should be only in a non-impactive, maintainable-for-ever manner. (otherwise, sooner or later, some generation ‘wears it’, which is unfair).

We should wean ourselves off importing energy – which will be the most contested commodity from here on. Pulling stored energy out of the ground – oil, gas, lignite – is a raiding of the ‘commons’, the finite larder owned by us all, including yet-to-be-born people. Not a sustainable option, and – the thing Brownlee doesn’t get – the ‘wealth’ gleaned, won’t buy energy when the dug-up supply is depleted. His whole approach can be summed up in one phrase – Buying Time.

We should also wean ourselves off importing things made in a manner which impact us – ie: we should not buy produce made in a coal-fired factory (which currently means almost anything Chinese) due to the impact it will have on our farming – East Coast droughts.

Once we have gotten to that point, maybe inflation and other subjects can be addressed, but I think they will have addressed themselves. Given a dwindling supply of physical materials, and a growing demand/growing competition, bidding will be keen.

Some – those at the bottom end – will be bidding with their lives. Expect them to push up the prices of energy and food – and don’t blame them too much, they have no choice. You will outbid them (you were born luckier) that’s just how it is – but that must have a major effect of resultant pricing.

In either scenario, inflation and deflation become interesting indeed – I expect stagflation, but I’m not an economist…..

And I don’t see where profit comes from in the future, unless it be to less and less folk, from more and more down-scalers.  In a less-than zero-sum game, it’s the only possibility outside of war.

Have a great Friday – don’t get leveraged, but…

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