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  1. #1

    Default Knock on effects of benefit cuts

    Consider the scenario where about half the beneficiaries became ineligible...

    So you realise that's 200,000 squatters - right?
    200,000 overdue rents, every week ad infinitum (most beneficiaries don't have HNZ access)
    Landlords go under, banks have to recall mortgages for landlords at high risk
    An oversupply of properties, property prices plummet
    Banks have to raise rates to cover losses and cover higher wholesale rates
    OCR up due to increased risk premium
    Currency plummets, fuel increases -> inflation -> still higher interest rates -> more mortgage defaults -> government debt servicing becomes a BIG problem -> IMF bailout???

    Then there's the crime issue, higher home and contents insurance premiums etc

    As for taxpayers...having to compete with downward pressure on wages, desperate people don't work for minimum wage, they'd be happy at $8 an hour, under the table of course. IRD would be irrate at that. The question becomes, how long can you remain a tax payer (i.e. in employment)

    Personally I'd prefer the tax, rather than:

    Higher interest rates
    Higher insurance premiums
    Personal risk due to crime
    Energy/import price inflation
    Wages lowering and job insecurity
    Paying for supermax prisons ($91,000 each person you know)

    Put it this way, NZ wouldn't be a pretty place, you'd want plane ticket, not a job. Hmmm and as for the Tourist/Immigrant Student/Immigrant Retirement industry? Overseas retirees did wonders for Tauranga's real estate prices by the way - hint.

    Insurance is duplicious and doesn't work all too efficiently, Americans are learning this slowly with their health system. Besides, if you had to pay insurance to guard against unemployment - then even the 17.5% tax is a rip off. What with the increased mortgage on a depreciated property, the crime effect, the lower wages, the increased import prices etc...

    A good economy always has spare capacity in the workforce
    A good economy always has population growth

    Tax is the price you pay for job security, it keeps other bidders at bay. Children raised on DPB become tax payers too someday, assuming there are jobs...in other words, they're supposed to be an INVESTMENT - dur.

    Welfare is not a poverty trap, a poverty trap is when you are homeless and don't have the resources to present yourself for a job...I cannot believe we are taking advice from an American. In America, the good old USA, many people are so desperate that prison accomodation and food is a welcome gift if all else fails.

    Benefits keep you alive, they are not a life. Enjoy trying to hold down your job if these dreamers get their way.

  2. #2
    Join Date
    Oct 2008
    Location
    Auckland/Melbourne/ whereever the money is
    Posts
    1,400

    Default

    Oh SurRealist
    I think you need to get off whatever it is that you are taking and start taking your happy pills instead.
    I think maybe you have been spending too much time over at interest dot co

    Your points of issue are mostly valid, but your expected outcomes are mostly the opposit to real life experience.

    "Consider the scenario where about half the beneficiaries became ineligible..."

    "So you realise that's 200,000 squatters - right?"
    uhh not for long its not. 21 days in arrears & a couple of weeks later the tenancy tribunal will order their eviction. Time for new tenants. - even at lower rent, some tenants are better than squatting tenants.

    "200,000 overdue rents, every week ad infinitum " 4 - 6 weeks actually
    "(most beneficiaries don't have HNZ access)" not sure what basis you have for that statement, would be interested in your explanantion

    "Landlords go under" a few might- most wont

    " banks have to recall mortgages for landlords at high risk" a possibility, but since it didn't happen last year after a major financial meltdown, it is probably not that likely.
    Calling in mortgages is one of the last things banks want to do, it creates major problems for them- search this forum

    "An oversupply of properties, property prices plummet" we have an oversuppply of property right now & prices haven't plummetted, in fact today QV released last months house price report & they are still over 8% higher than last year and only about 4% down on the 2007 peak. the 30% doomsayers fail to account for human nature.

    "Banks have to raise rates to cover losses and cover higher wholesale rates"
    Theyve already done that, & will continue to do so slowly for the next year or so, but we are still over 2% below historical averages.

    "OCR up due to increased risk premium" raised .25% yesterday and will continue to slowly raise to historical average.

    "Currency plummets," uhh no it wont. It jumped UP by over a cent upon the OCR increase yesterday. each increase makes it more attractive for carry trades.- thats money coming INTO the country, until something spooks them.

    "fuel increases -> inflation -> still higher interest rates -> more mortgage defaults -> government debt servicing becomes a BIG problem -> " we already have all these right now and will continue to have them- life goes on.
    The beneficiary payments are a major reason the Govt has a servicing problem- not enough workers & FAR to many beneficiaries- including those with $100k incomes receiving WFF !!!

    "IMF bailout???"
    After half of Europe, the UK, the USA & various other countries. by that time there will be a lot more to think about than worrying about the consequences of cutting beneficiary payments.

    "Personally I'd prefer the tax, rather than:

    Higher interest rates
    Higher insurance premiums
    Personal risk due to crime
    Energy/import price inflation
    Wages lowering and job insecurity
    Paying for supermax prisons ($91,000 each person you know)"

    And thats exactly what the Govt wants you to think, because in the end they will achieve both- tax & your list.
    Last edited by Keithw; 11-06-2010 at 08:17 AM.

  3. #3

    Default

    Quote Originally Posted by Keithw
    "So you realise that's 200,000 squatters - right?"
    uhh not for long its not. 21 days in arrears & a couple of weeks later the tenancy tribunal will order their eviction. Time for new tenants. - even at lower rent, some tenants are better than squatting tenants.
    Where are the resources to evict 200,000 occupants in 21 days? Which countries army would you hire and at what cost?

    Quote Originally Posted by Keithw
    "200,000 overdue rents, every week ad infinitum " 4 - 6 weeks actually
    You cannot find an additional 200,000 Occupants who actually have the money and wherewithal to stay in houses with recurrent squatting problems in 4-6 weeks, more like 4-6 years.

    Quote Originally Posted by Keithw
    "Landlords go under" a few might- most wont
    More like a few thousand. Remember that the scenario is a shortfall of 200,000 occupants. That impacts landlord cashflow fatally with repercussions to be felt across the entire sector.

    Quote Originally Posted by Keithw
    " banks have to recall mortgages for landlords at high risk" a possibility, but since it didn't happen last year after a major financial meltdown, it is probably not that likely.
    Calling in mortgages is one of the last things banks want to do, it creates major problems for them- search this forum
    The global credit crunch has not directly impacted NZ to a great extent yet because our banks were not directly exposed to the collateralised debt obligations anyway.

    Landlords unable to pay the mortgage means banks sell the houses quickly. Of course they wouldn't want to, afterall the glut of property on the market would devalue the very asset base they would be trying to stabilise. They would have to do it in order to shore up their asset base, it would be catch 22. If they failed to get the balance right, which could be an impossible task, then they would require a government bail out.

    Quote Originally Posted by Keithw
    "An oversupply of properties, property prices plummet" we have an oversuppply of property right now & prices haven't plummetted, in fact today QV released last months house price report & they are still over 8% higher than last year and only about 4% down on the 2007 peak. the 30% doomsayers fail to account for human nature.
    Of course they haven't plummeted, the over suppply is nothing at this point in time. The oversupply resulting from the mortgagee sales (due to 200,000 less occupants) would be catastrophic however. Today's figures are irrelevant to the above scenario.

    Quote Originally Posted by Keithw
    "Banks have to raise rates to cover losses and cover higher wholesale rates"
    Theyve already done that, & will continue to do so slowly for the next year or so, but we are still over 2% below historical averages.
    Present day losses are nothing compared to what would happen as a result of 200,000 occupants failing to pay rent.

    Quote Originally Posted by Keithw
    "OCR up due to increased risk premium" raised .25% yesterday and will continue to slowly raise to historical average.
    The OCR didn't go up in relation to risk premium, it increased to circumvent the materialisation of future inflation, better to raise early and slow, rather than hard and late.

    Quote Originally Posted by Keithw
    "Currency plummets," uhh no it wont. It jumped UP by over a cent upon the OCR increase yesterday. each increase makes it more attractive for carry trades.- thats money coming INTO the country, until something spooks them.
    Yes exactly, until something "spooks" them, in other words until the perceived risk increases beyond the allocated risk premium. Of course the currency appreciates if the risk is the same and the rate increases! The OCR increase was nothing to do with risk, it was simply to curb future inflation.

    Quote Originally Posted by Keithw
    "fuel increases -> inflation -> still higher interest rates -> more mortgage defaults -> government debt servicing becomes a BIG problem -> " we already have all these right now and will continue to have them- life goes on.
    Wrong, the currency is stable, fuel imports and inflation is being kept in check. What I am talking about is a vicious cycle as a result of a massive shock to the real estate sector were Paula Bennett to get her way.

    Quote Originally Posted by Keithw
    The beneficiary payments are a major reason the Govt has a servicing problem- not enough workers & FAR to many beneficiaries- including those with $100k incomes receiving WFF !!!
    Right, however, paradoxically it gets worse when the benefit payments are stopped because as I mentioned, the interest rate increases while tax take goes down (due to downward wage pressure and less demand). The government might save a few billion on benefits but has to shell out on crime, plus remain liable for many more billions to prop up weakened banks.

    Quote Originally Posted by Keithw
    "IMF bailout???"
    After half of Europe, the UK, the USA & various other countries. by that time there will be a lot more to think about than worrying about the consequences of cutting beneficiary payments.
    UK and USA will be fine, worst case scenario, they can inflate out of debt. The problem with Europe is, there is too much disparity between the economies, so they have to resort to wealth redistribution among the member states in order to try to correct the imbalance before they can do that. The idea with inflating your way out of debt is that you're not supposed to implode your economy first, you keep the liquidity running.

    Quote Originally Posted by Keithw
    "Personally I'd prefer the tax, rather than:

    Higher interest rates
    Higher insurance premiums
    Personal risk due to crime
    Energy/import price inflation
    Wages lowering and job insecurity
    Paying for supermax prisons ($91,000 each person you know)"

    And thats exactly what the Govt wants you to think, because in the end they will achieve both- tax & your list.
    No, the government just wants power. In order to get power they offer more to voters than they can deliver sustainably. Labour uses debt, National uses money from state assets, each appeals to a different voter base, that is their existence. Everything else is a side effect.

  4. #4
    Join Date
    Jan 2005
    Posts
    1,129

    Default

    Quote Originally Posted by Realist View Post
    Consider the scenario where about half the beneficiaries became ineligible...
    Can you expand on how this would happen?
    Or is this a fictitious, dreamworld, 'what if' scenario?

    And what do you mean by ineligible? Ineligible for what?
    Are you thinking the govt would stop all benefits to 50% of their customers? Or just accomodation benefits?

    Or do you prefer to just say '200,000 squatters - what are you going to do?'

    My reply would be 'I'll tell you when I see 200,000 squatters'

  5. #5

    Default

    Quote Originally Posted by tricky View Post
    Can you expand on how this would happen?
    Or is this a fictitious, dreamworld, 'what if' scenario?
    My point exactly, it is a dreamworld scenario and is not feasible.

    Quote Originally Posted by tricky View Post
    And what do you mean by ineligible? Ineligible for what?
    Are you thinking the govt would stop all benefits to 50% of their customers? Or just accomodation benefits?
    Well according to Bennett, she wants a time limit on benefits. Even if she made it a 5 year limit (the study group is talking 3-5 years) then half the beneficiaries would receive nothing, (178,000 are 7+ year recipients - so go figure where the 200,000 figure comes from).

  6. #6
    Join Date
    Sep 2008
    Posts
    7,658

    Default

    unemployment's not working

    people get better

    quicker

    when they are working

    perpetual benefits

    benefit no one

    http://www.parliament.nz/en-NZ/PB/Bu...rm-Welfare.htm

    http://www.guardian.co.uk/politics/2...are-dependency
    Last edited by eri; 12-06-2010 at 02:30 AM.
    have you defeated them?
    your demons

  7. #7
    Join Date
    Nov 2006
    Location
    Cyberspace
    Posts
    5,896

    Default

    Realist.

    Your scenario requires all beneficiaries to be booted off their income source at one time. This is an unrealistic assumption. You also assume all beneficiaries will do nothing about it. Your post makes so many assumptions it is not really a valid discussion point. Try to get some more credibility by posting things which are worthwhile. You've also managed to master the "quote" function in two posts. Therefore you know about these forums. Are you someone else and using a second log in ID? If so, what's the point?

  8. #8
    Join Date
    Apr 2005
    Posts
    2,944

    Default

    Bravo!

    A very interesting concept.

    Perhaps you have overstated the case, but the basic idea is sound.

    Yes I agree, reducing the money supply to the lazy will reduce the money supply to rentals.

    Not saying that all people claiming assistance are lazy.

    But many abuse the system....it's human nature.

    good thinking, I have not heard this idea before.

  9. #9

    Default

    Quote Originally Posted by eri View Post
    unemployment's not working

    people get better

    quicker

    when they are working
    Not exactly, statistics are in the eye of the beholder, it's a self selecting sample actually. People who get better then get a job then get better still. Anyway, that's a blanket statement and depends on what the illness is, depression is a comorbidity of many illnesses so of course it helps that component -if the depression is not too severe. More money tends to improve overall health too incidentally. So, whose jobs will be given up in order to get these people off benefits? You need to create jobs in order to get people off benefits, unless you want the above scenario to play out that is.

    Quote Originally Posted by eri
    perpetual benefits

    benefit no one
    That begs the question, why are people on benefits then?

  10. #10

    Default

    Quote Originally Posted by Keys View Post
    Realist.
    Your scenario requires all beneficiaries to be booted off their income source at one time.
    No, only those who have been on the benefit for 5+ years - see above.

    Quote Originally Posted by Keys View Post
    You also assume all beneficiaries will do nothing about it.
    No, I said some will commit crimes, some will find jobs 'under the table' (thereby putting taxpayers onto the dole queue), I also said some will become homeless etc. Let me guess, in your view they are going to all get jobs and be good little automata? whose jobs?

    Quote Originally Posted by Keys
    Your post makes so many assumptions it is not really a valid discussion point. Try to get some more credibility by posting things which are worthwhile.
    Obviously an initial assumption needs to be made in order to consider the scenario in the first place (i.e. that Bennett gets her way), after that it's all logical deduction. I don't need credibility, just use your own mind and work the scenario through yourself - it's quite logical when you know how our economy works. Property is the cornerstone of liquidity, liquidity is king. Kill rents and you kill the liquidity machine.

    Quote Originally Posted by Keys
    You've also managed to master the "quote" function in two posts. Therefore you know about these forums. Are you someone else and using a second log in ID? If so, what's the point?
    Or I could have just mastered it on another forum


 

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