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That said, Austro, how on earth does
'high inflation' reduce a country's debt?
Or make it difficult to reduce its debt?
Because, if high inflation does, in some
perverse way, help reduce a nation's
debt, does that not create a political
incentive for governments to foster
inflation, to the detriment of the gen-
eral populace?
If I can have a stab at it......
If you have debt inflation is your friend......inflation shrinks your debt.....the "numbers" stay the same but inflation erodes the "value" of those numbers
Its interesting to see how national has been criticised for increased debt while people forget that When times were good th left wing government spent up large and decreased NZs ability to deal with a crisis Heres an loose analogy:
It is also interesting how the same left wing government left the finances in a good shape allowing the right wing govenment that followed a lot of wiggle room in the debt they could amass.
In the final days of the left wing government the right wing opposition was calling on the government to get rid of the surplus - which they didn't do.
If you have debt inflation is your friend......inflation shrinks your debt.....the "numbers" stay the same but inflation erodes the "value" of those numbers
Cheers
Spaceman
And to put it even more simply--lets say you borrowed $20,000 to pay for part of your $50000 house in 1980.
Your house is now worth $1,000,000 ---How is that $20,000 debt looking now?
It is possible for inflation to only increase a bit (below target) and jobs and therefore tax to increase 9there are always exceptions.
Most of the greatest areas of inflation (aside from house prices in some areas) are unfortunatly those things that we are levied(like rates-council charges-etc.)
Can some erudite forumite please explain how high inflation is
necessary to achieve a current account surplus? Pretty please.
Well, I'm pretty far from erudite on this matter, but after hearing some of the other theories, I'm keen to have a crack at it.
I'm not sure what they mean by "account surplus"? What account?, that's going to be important to the answer.
I think I know what's getting drained out of the country.
Here's the running clock (below) that shows what the country owes right this second. (about 92 600 000 000. New Zealand dollars.)
So am I correct in thinking that a true "surplus" must be what we have left over after we pay that all back?
As I see it, blenglish is talking about what the gummint earns
in taxes and excise, etc., and what it spends on whatever. So
I see that as a very short cycle - one that is not materially
affected by inflation. I.e. I suspect that tax revenue is spent
as fast as it comes in, with borrowings making up any shortfall.
The more I think about it, the less I'm persuaded that inflation
is economic growth under another name. To me, inflation is
the erosion in purchasing power of a currency unit, rather
than some abstruse indicator of a country's prosperity.
Originally posted by skid
And to put it even more simply--lets say you borrowed $20,000
to pay for part of your $50000 house in 1980. Your house is now
worth $1,000,000 ---How is that $20,000 debt looking now?
But what's the difference in the borrower's wages and other
financial circumstances over those 34 years? That's in addition
to the likely collapse in the purchasing power of money, over
that time. According to the RBNZ inflation calculator, the
factor is 4.52. I.e. $4.52 needed to buy in 2014, what $1
bought in 1980. And interest rates back around those eighties?
Over 20%, as reported in another thread hereabouts.
I'm no closer to grasping why blenglish needs greater inflation
than the present figure, in order to balance his books.
Ah, O.K. So the word "surplus" is the first lie.
There is NO surplus, we're ninety million dollars in debt. (see post #3882)
We should look into their specific budget claim - with the firm idea that it's not a surplus, but really some sort of lessened debt.
First (consider the graph above), it might be nice to see how our "ACTUAL"debt changed over the recent past, and what National and the World were doing at that time.
I wonder if you are confusing internal debt with o'seas indebtedness?
And that's gov't internal versus external debt, excluding private debt.
Rest assured Perry, I will be looking at the small picture, as soon as the big picture is locked down.
I mean, what member of a family can be in surplus while the whole family is in debt.
As I see it, blenglish is talking about what the gummint earns
in taxes and excise, etc., and what it spends on whatever.
Right.! You're a good man Perry, and I can see we are both interested in the truth behind the picture Bilgy paints.
Just so that you aren't too harsh on him, we have to bear in mind that he's only studied a bit of Business and Writing at school.
looking at your summation ( in blue above) I couldn't make a good mental picture of some object like a government. (Gummint (ha very good)). So it had to be a cluster of (probably imaginary) objects. But what ??
After a bit of rummaging around I came up with the word "state".
A good starting point.
" for most of human history, people have lived in stateless societies, characterized by a lack of concentrated authority, and a lack of large inequalities in economic and political power." "For 98% of the time they lives in autonomous bands and villages.3000 years ago there were 600,000 of these free units". wiki. Ha!, really takes the edge off the word "Armageddon" when you think of it.
Good work on becoming cashflow positive - or at least very close to it.
Only after day to day bills are paid can the mortgage principle be addressed.
Shame about the the opportunities the NZ Super Fund missed out on due to contributions being stopped however.
Generally, well done to Mr English and his team.
Last edited by speights boy; 22-11-2014, 09:49 AM.
Good work on becoming cashflow positive - or at least very close to it.
Only after day to day bills are paid can the mortgage principle be addressed.
Shame about the the opportunities the NZ Super Fund missed out on due to contributions being stopped however.
Generally, well done to Mr English and his team.
Is Bill English making these claims as himself, or on behalf of his department, or as spokesperson for the Governments financial aspect?
How will we decide if a job has been well done without first understanding the mechanism of the task or the outcome preferred?
I'm no closer to grasping why blenglish needs greater inflation
than the present figure, in order to balance his books.
Come to think of it Perry, I'm going to loose everyone while I try and figure out the complexity of the interconnecting mechanisms of economy.
I'll also need to consider the physical properties they posses and the words that are best to convey them.
Then run all that against the spun words of ministers.
So how about a blunt idea instead.
Govt gets less tax if people spend less on things?
People spend less on things if those things are less expensive.
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