Utopia, you are standing in it!

A Financial Times leader delivers advice that Finance Minister Grant Robertson should (but probably won’t) consider.

Essentially, the advice is to resist the temptation to  involve the central bank in the challenge of slowing the rise in house prices.

Changing regulation and reforming planning law is a smarter way to go.

The FT observes that – to many – it may seem obvious that the central bank quantitative easing programmes launched after the 2008 financial crisis have led to inflation, as money printing inevitably does.

But the inflation has has shown up in booming stock markets, high prices for art and collectibles, and surging cryptocurrencies.  Rather than higher consumer prices, cheap money has led to asset price inflation.

In this reading, the FT says, central banks should reconsider their stimulus policies because they are only delaying and deepening the eventual bust.

Furthermore, according to the critics, stimulus is increasing…

German Autobahn
EU politicians seem determined to hobble their car industry regardless of economic consequences, to save a few molecules of a harmless trace gas that’s essential to plant and tree growth.
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The European Commission’s proposed Euro 7 emission rules on cars, vans, trucks and buses would amount to “a ban through the back door” of internal combustion engines as of 2025, if implemented in their current form, industry has said, calling the proposal premature and “completely out of the question”. Euractiv reporting.

The ‘Euro 7‘ rules aim to ensure vehicles are clean over their entire lifetime, helping Europe to meet its European Green Deal emissions targets.

The exact details of the measure are still under discussion, but they are already creating jitters at VDMA, a German trade association representing mechanical engineering companies.

The  reverential   aura enveloping  the  Ardern government   is beginning to fade and ministerial  fallibilities are  emerging. Just as  suddenly, the  media  are  offering  some  space  to  critics  of  the  government.

Richard  Prebble  is  calling for a  Royal Commission into   the  government’s  handling of the pandemic response.  ACT’s  David Seymour  sees  the  government’s rollout of the vaccination programme  as  an “insulting lottery”.

The Prime Minister’s   famed  kindness  and compassion  did not extend to “Case L”  in Papatoetoe who, she said,  ignored instruction in going to work at  a  local KFC.  But  the PM’s  anger  was  misplaced: “Case L”  had  been told  she was free to go to work.   “Case L” is  said  to have been distressed  by  the  vilification she suffered  in social  media.

And  now it  is  becoming apparent how  the pandemic and the government’s response to it are wreaking  havoc among  businesses.  News media have reported  this week how  …

On balance, I think Rishi Sunak got more things right than wrong in Wednesday’s Budget. Let’s start with a couple of positives.

First, he extended the most important support measures, including the uplift to Universal Credit and the furlough scheme, until the end of September. This is probably longer than strictly necessary because the remaining lockdown restrictions could all be lifted by 21^st June. But it does make sense to continue this support in the meantime and to minimise uncertainty for businesses and households.

There was also a good case for asking employers to contribute more to the furlough scheme from July, as the Chancellor has now done. Continuing the scheme on its current terms after restrictions have been lifted could lock people into jobs that are no longer viable and delay the adjustment to the ‘new normal’, whatever that may be.

Some will still say that Rishi Sunak…

Over the three and half years that Jacinda Ardern has been Prime Minister and Grant Robertson Minister of Finance it has become increasingly obvious that not only do they have no serious ideas for turning around decades of productivity growth underperformance, and no intention of doing much on that score, but they have no real interest either.

Appointments are among the things that help reveal priorities. A couple of years ago they had the opportunity to look for a new Secretary to the Treasury who might revitalise the agency and start generating serious credible advice on fixing that economic failure – with all its ramifications for opportunities in other areas of life. They chose to pass up that opportunity.

More recently – and the focus of this post – there has been the Productivity Commission, set up a decade ago with some vision that it might offer medium-term analysis, research…