It was March 2020. Something called coronavirus was sweeping the globe. Horror stories were coming out of China, Iran, Italy and a rapidly increasing number of other countries about how quickly the virus was spreading and how health systems were struggling to cope with it.
Share markets were plunging. The US Treasury market, something of a bank to the world, failed and needed rescuing by the Federal Reserve.
As Adam Tooze, author and professor of history at Columbia University, put it of March 2020: "The trillion‑dollar Treasury market, which is the foundation of all other financial trades, was lurching up and down in stomach‑churning spasms. On the terminal screens, prices danced erratically. Or, even worse, there were no prices at all. In the one market where you could always be sure to find a buyer, there were suddenly none."
Back here in New Zealand the Government shut the border, plunged the country into a lockdown, and instigated a national wage subsidy scheme, based on the post-earthquakes Christchurch one, in order to protect jobs, and ultimately the financial system.
These were unprecedented times. No one had a play book as to how to respond. The economic forecasts were dire. It felt like the world might be ending.
At 2 The Terrace in Wellington, Reserve Bank of New Zealand (RBNZ) headquarters, the boffins were busy. The Official Cash Rate (OCR) was slashed to a record low of just 0.25%. The RBNZ also embarked on quantitative easing (QE) for the first time, buying up government and local government bonds off banks in the secondary market with the aim of lowering borrowing costs to households and businesses by injecting money into the economy.
Banks, the RBNZ and government teamed up to launch a mortgage deferral scheme, and the RBNZ swept away all restrictions on high loan-to-value ratio (LVR) home lending.
In terms of the RBNZ's dual monetary policy remits as what became known as the Covid-19 pandemic gathered pace, it certainly seemed that maintaining maximum sustainable employment would be a much bigger challenge than maintaining price stability. Heck, during the post-Global Financial Crisis (GFC) decade leading up to the pandemic, a period known as the Great Moderation, Consumer Price Index Inflation had only briefly exceeded the 3% top of the RBNZ's target band in 2011, largely because the John Key-led government increased GST.
Once the middle of 2020 rolled around it was becoming apparent that the world wasn't ending. New Zealanders had successfully fought off the first wave of Covid-19. Lockdown ended and the housing market took off. Economic activity bounced back strongly in what was referred to as a v-shaped recovery.
However, epidemiologists had said from the start that the pandemic would run for years, not months. The picture in many other parts of the world was dire, notably in the world's biggest economy, the United States. Covid-19 was running amok, tensions were heightened during a divisive presidential election, and black lives matter protests swept the nation.
New Zealanders got a wake up call in August that Covid-19 was far from done with us, and Auckland was placed in a lockdown. As the year rolled on the RBNZ was talking about taking the OCR negative, and introducing something called a Funding for Lending Programme (FLP) through which banks could borrow billions priced at the record low OCR.
Globally there were supply chain snarl-ups caused by the pandemic as people staying at home bought more goods and less services. There were long queues of ships waiting to get into some of the world's major ports.
But as former RBNZ Deputy Governor and Acting Governor Grant Spencer noted in a recent episode of interest.co.nz's Of Interest podcast, sentiment was looking up. It was becoming obviously that the high unemployment and drastic economic downturn feared back in March wasn't materialising. Sentiment improved in bond markets.
Was this the point at which the RBNZ should've started to dial back its economic stimulus? I would say yes, certainly, especially with the benefit of hindsight. LVR restrictions could've been reintroduced. QE, through the Large Scale Asset Purchase Programme, could've been scaled back. And certainly the December 2020 launch of the FLP, by which point Real Estate Institute of New Zealand data had national median house prices up 18.5% year-on-year to a new record median high of $749,000, seemed to be throwing petrol on the fire.
As 2021 got underway inflation started to show its head. I remember in January 2021 the father of one of my son's friends, who has clients in the freight industry, asking me what the RBNZ was going to do about all the inflation he was seeing. The answer was nothing for some time to come.
There were certainly signs from the third quarter of 2020 that it was time to at least reduce the volume of liquid in the punch bowl. However, the RBNZ was far from alone in not doing so, and would've been swimming against the global central banking tide if it had done so. Central bank and government largesse continued in much of the world.
Much of the international discussion and debate in 2021 was whether the inflation emerging was merely transitory, caused by the extraordinary circumstances the world found itself in. New variants of Covid-19 were emerging, and in the second half of 2021 Auckland, and parts of Waikato, were back in lockdown due to the delta variant being in the community.
In July 2021 the RBNZ did bring its QE bond buying to an end. And then in October 2021 it started increasing the OCR. The timing of this OCR hike actually made the RBNZ one of the first central banks to start a tightening cycle. The Reserve Bank of Australia, for example, didn't begin until May this year and had its Cash Rate at just 0.10%. And the US Federal Reserve began lifting its Fed Funds Rate, from a range of 0% to 0.25%, in March this year.
In February this year Russian President Vladimir Putin launched an invasion of Ukraine, causing a sharp rise in oil and food prices.
And now in mid-2022 we find ourselves with CPI inflation of 7.3%, the highest it has been in 32-years. People are struggling with high prices, including of fuel and food, with borrowers also grappling with rising mortgage rates. New Zealanders are far from alone in facing high inflation. In the US it has hit 9.1%, the UK 9.4%, the Eurozone 8.5% and Australia 6.1%.
Against this backdrop we now have calls for an inquiry, or review, of the RBNZ's actions. And it has got political with National Party Leader Christopher Luxon calling for a review this week. Luxon, of course, wants to be prime minister next year and anything he and his party can use to aid this cause, and can use to attack the Government with, will be grasped with open arms.
Notably in Tuesday's press release Luxon grouped the RBNZ and government together saying; "The Reserve Bank and the Government took unprecedented steps in 2020 and 2021 to pump money into the financial system. The massive and ongoing monetary and fiscal response unleashed a tidal wave of cash into New Zealand’s economy."
Then there's the Government which wants to stay in power beyond next year's election. Finance Minister Grant Robertson was quick to reject Luxon's call for a review, labeling him Captain Hindsight. With inflation running high, Robertson and his colleagues know this is a major issue with voters and want to minimise the blame assigned to them for it. Any mud sticking to the RBNZ they will want to pin to its independence.
Then there's the RBNZ itself. With any organisation and individuals at the centre of any such inquiry there will be a strong element of 'we took the best option at the time based on the best information we had available.' There will be an element of butt covering among decision makers too of course. And there's the matter of Governor Adrian Orr being up for a second term next year, in election year, assuming he wants one.
In a statement the RBNZ and Orr acknowledged playing a role in the high inflation being experienced.
"I acknowledge that consumer price (CPI) inflation is at 7.3%, above the Remit target range of 1% to 3%. I also acknowledge that the [Reserve Bank's] Monetary Policy Committee’s decisions over recent years have influenced this outcome," Orr said.
But he also noted: "I regret that the Committee – and society at large – has been confronted with the COVID-19 pandemic, and other recent events that have caused food and energy price spikes."
A danger of a review/inquiry is that it merely prepares old generals for the next war by reliving the last one. There's been an element of that in the Covid-19 response with a view forming that governments didn't do enough with fiscal policy, IE didn't spend enough money, to help central banks get economies going after the GFC. Thus this time around that view, and the fact Covid-19 was a health crisis, saw governments splashing cash.
And that brings me to another point. The GFC was a banking crisis. The Covid-19 crisis was a health crisis. We don't know what the next one will be.
Could it be that in a couple of years time the prevailing view will be that central banks' steep interest rate hikes in 2022 were a mistake?
We also, of course, don't know what the counterfactual would've been if central banks and governments hadn't done what they did. And we never will.
It was screamingly obvious in March 2020, as the pandemic took a global grip, that for better or worse the RBNZ would go down the QE path, buying up billions of dollars worth of government bonds. That's because this had become the international central bank crisis response de rigueur during the GFC a decade earlier.
Would a National government, whether it had been led by Simon Bridges, Todd Muller, Judith Collins or Christopher Luxon have prevented the independent RBNZ from following international central banking norms?
Robertson is right in saying National, at times, wanted the government to provide more financial support to businesses. Heck, in March 2021 National was even on the same side as the E tū trade union, calling for the Government to cover 100% of a worker's wages or salary when they were forced to self-isolate. At the time these weren't unreasonable calls. Many small business owners and workers were experiencing tough times.
Nonetheless it would be good if the Opposition agreed that any probe of the Government and RBNZ's Covid-19 responses also includes what they were advocating along the way. This might prove interesting.
It appears that there will be an inquiry into the RBNZ monetary policy response to Covid-19, and probably the government's fiscal policy response, if there's a change of government at next year's election. If there isn't, there won't be.
If there is a probe it'll be politically charged, that seems unavoidable. And arguably not having an inquiry is political too.
But politics isn't the reason we should want an inquiry. Rather we should want one to explain to the public, properly, what happened and why. And take on board lessons as to how to improve our ability to respond to future crises as much as is possible given we don't know what will cause the next crisis.
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74 Comments
Yes House Mouse,
I agree. The article may become a historic document.
My personal prediction is that we will go into a deflationary financial crisis in NZ, due to the RBNZ currently being too hawkish. Then, later, there may be no other way but to do more QE. The endgame could be hyperinflation.
Not enough. The slow down currently seems to be housing and related activities. Most other sectors are still busy.
From what i hear inflation may have shown some signs of slowing for commodities but the food, clothing, building, services sectors etc still have price rises to come based on their costs having risen.
employment wise i think companies are still struggling to hire as the market is tight. so RBNZ will be keen to see that level and improve,
Energy wise i am wondering what the impact of russia constraining gas to europe will be, obviously lower output by european manufacturing sector will hurt inflation locally as energy prices soar, putting up product prices and reducing supply from there.
i suspect we have a long way to go yet.
Rental demand is slowing, I first know first hand of several tenants who have moved to Australia, prices falling as well. Everything will slow, construction has one of the longer lag's. Ask anyone in discretionary like restaurants and cafe's - they will be feeling it before most.
As part of the opening up from covid, we're actually seeing consumer spending moving away from physical good purchasing to services and experiences. So unless your eatery is in the Auckland CBD, you're probably not doing too badly.
So maybe better to ask someone working at Harvey Norman or Briscoes.
OldSkoolEonomics, you need to think ahead. The economy works in cascades, like domino pieces. One falls after another: First the equity markets, then certain sectors of the economy, then others. When you see the stock market collapse like 2008 or the property market like today, run for the hills. When you see credit defaults, it is too late. We are not far off.
Unemployment may rise last, as up to now we have been having staff shortages. But you can't say all is fine just because the avalanche has not arrived at where you are yet. If this current approach is not corrected, we may see mass insolvencies like 2008 and mass unemployment like 1930-32.
The UK wanna-be Prime ministers are making a lot of noise about decoupling from China as part of their election process, coupled with Nancys visit - its likely the BRIC vs WEST geopolitical breakdown will continue and will for sure affect supply chains and inflation etc.
China and Russia for sure want to respond to western pressures and sanctions - and damage western economies and governments by constraining supply of energy and products.
It's good to take a look at the public persona of Kaumatua Orr to understand how bad this is. When he first burst on the scene, he was bristling with colorful metaphors and almost an air of arrogance when speaking with the media or public. Compare that to now where he looks nervous, sheepish, defensive and flushed. You can tell he can't wait for any of his annoucements to be over and done with. The metaphors are mostly gone and all we have is some ramble about climate change and some tenuous links to Maori spirituality. He's spent.
On that note, Robbo is equally as bad. The exceptionalism benchmarks (NZ vs rest of world) have been sidelined. No direct frankness about realities are shared and all he has in him is barking towards anyone who tries to hold him to account. On anything.
I think it's clearly obvious that both of them are over it. Most mornings getting out of bed will be a challenge.
Balanced piece - thanks Gareth.
My two cents worth is that the RBNZ threw the kitchen sink at monetary policy as if consumer demand was going to go down the toilet. What RBNZ and many commentators didn't appreciate is:
- How stimulatory $50bn of Govt net spending into the economy would be (i mean real fiscal stimulus like wage subsidies, not placebo QE!!)
- What lower living costs and changed 'lockdown' consumption patterns would mean for consumer demand.
Now add in asset owners' confidence as they got rich on paper and it is unsurprising that everyone in the suburbs of Auckland near me spent late 2020 and 2021 trying to get home improvements done, buying Teslas, ordering new appliances etc. Just as many amassed cash, and paid down chunks of their mortgages at the end of 2021 as rates started to rise.
Our low unemployment rates are primarily the result of this fiscal stimulus - our housing boom is primarily the result of low interest rates (scaffolded by QE). The lesson for next time is just leave monetary policy alone..
I am all for criticising RBNZ - but my main critique is of monetary policy. It's a blunt tool ill-suited to supporting a modern economy, and it is particularly terrible at dealing with non-monetary problems (pandemics, wars, price gouging etc). That was true in March 2020 and it is true now.
OK, but the way you describe it, everything doesn't seem to be too bad. Nevertheless, do you think the the broader economy is more fragile in any way? My intuition tells me that it is more fragile, despite the joint actions of the govt-RBNZ. Problem is that is just my 'reckon' and I can't actually back it up with evidence. And I suspect your position will be that everything balances so no worries.
That's not my position at all - but I acknowledge that I didn't make that clear. I think the best test of economic fragility is the level and precarity of private debt, and given private debt is around 160% of GDP, and RBNZ have jacked up rates mercilessly, I think we are heading for a real mess. Consumer spending started to drop months ago, wages have flatlined since January (don't believe the hype), and unemployment has been rising for a few months now (see unemployment nowcast on covid19 data portal). My guess is that RBNZ will pull up from their doom spiral of rate hikes very shortly. But, we will still have high private debt levels, the wealth in the economy will still be being channeled efficiently into the pockets of the weathy (including me and my neighbours), and whilst house prices will have come down, the correction will still leave us with a chasm between asset owners and renters , which then widens further as renters' disposable income + govt top-ups flow to asset owners.
You let your DGM run a little wild there. I think we are on the same page when you say fragility comes from pvte debt, but I have less conviction on the triggers that expose the fragility. What concerns me is those who look at things from the aggregate level - - debt free boomer households with strong balance sheets will see us through. I don't buy into the narrative because you still require the younger generations to buy their assets at ever increasing prices as well as to spend like drunken sailors into the consumer economy and drive innovation in business.
My reading of what JFoe has said - excellent as always - is that QE and ultra low interest rates pumped the economy big time, and a lot of that is still working through the system and providing a degree of economic support, despite forward looking sentiment being really bad.
I don’t know what JFoe thinks, but I think it will won’t be until late 2022 that that stimulus really starts unwinding and we see more obvious signs of economic problems.
Thanks. Low interest rates (enabled by QE) pumped up the price of house prices because kiwis spend as much as they can afford to spend on their weatherboard castles. A $1m mortgage over 30 years with interest rates at 2% is the same cost per fortnight as a $650k mortgage when rates are at 5.5%. So, if I can afford $1,700 a fortnight and rates are at 2%, off I go in search of a $1m mortgage house! If rates are at 5.5%, off I go looking for a $650k mortgage house! The cumulative impact of lowered rates and people chasing their dreams is higher house prices. The reverse is also true, which is why a graph of *change* in mortgage rates vs *change* in house prices moves in beautiful opposition.
The other impact of lowering rates for people that are not trying to buy their dream home is reduced mortgage costs, increased disposable income, a feeling of wealthy confidence, and higher consumer spending. When coupled with wage subsidy and protected income (Govt fiscal stimulus) etc, this is what has driven our economic and employment boost. Sadly, the reverse is also true, we are now seeing higher interest rates, less disposable income, reduced consumer spending, and a Govt that has switched to taxing more than it spends in recent months (fiscal tightening). Crash coming - and it has started.
2nd para is bang on. Are you familar with nudge theory? If you aren't, it's basically about how to control behavior using incentives (+ or -). This is what property bubbles in particular are all about. Those pulling the strings are the triumvirate of the govt, central bank, and commercial banks.
Crises start slowly and then accelerate. So far we have the high debt and the high interest rates causing everyone to be cautious.
The USD is rising against all currencies causing a worldwide scramble to repay USD debt. Europe is bankrupt, they are in the dead man walking stage. Many countries are in chaos (Sri Lanka, Pakistan, Lebanon, as well as those destroyed by US proxy war policy, Afghanistan, Iraq, Yemen, Syria, Libya and now Ukraine.
These troubles will reach us on a lag. Talking of lags, unemployment always lags economic conditions, it is the last domino.
How many here were all for government approach… lockdown and print to support… eschewing the alternative path and ignoring the related affects and their costs.
‘Effectively we’ve shit canned our economy and burdened the next generation to struggle to save the old who many aren’t even aware of the sacrifice the young have made… others have even taken advantage to increase their wealth at expense of ‘their savours!
To answer the question in your first paragraph - I wasn’t. I always had significant reservations with the government’s approach. Those concerns were part fiscal and economic, and part social ( massive disruptions to school education)
I came partly around to the government’s approach, but only partly…
Could it be that in a couple of years time the prevailing view will be that central banks' steep interest rate hikes in 2022 were a mistake?
Where do you think the inflation target could be better positioned, if the current range of 1-3% may be seen as a mistake? 5-10%? 10-20%?
I know you think it's funny but 1 to 5% is in fact a good target range for inflation. The current target of 3% is just not realistic anymore after all the money printing. Any attempt to bring inflation back down to 3% will destroy our economy. It is already happening.
This should be coupled with including the house price index into the consumer price index basket. As a result,
1. we would not have seen the massive house price increases as interest rates would have been raised much earlier;
2. we would now see a truer picture of the inflation rate (as only consumer price inflation is high whilst house prices are rapidly deflating), so massive interest rate rises could not be justified and this would prevent economic collapse;
3. including the house price index into the consumer price index basket would - in summary - achieve greater economic and financial stability, avoiding massive boom and bust cycles.
The 2% target was fine (thought I personally favour 0%). It just needs to be measured properly.
As long as they don't measure pulling money from the future into the present via home loans, etc (reflected in higher property prices), we'll keep having these problems.
Ha, yes well. My view is that the US, EU and NZ all acted from the same playbook and got out the Biological Warfare Handbook. The only sane country was Sweden, who got out the Pandemic Handbook (since extensively rewritten by dodgy types).
Surely this was a concerted action to break taboos and enforce a Do What You Are Told, Or Else... culture upon an unsuspecting populace.
Taboo about direct monetary financing of government expenditure, broken.
Taboo about Human Genetic Engineering, broken.
Nuremburg Code, that experimental vaccines are only allowed when there are no alternatives and when people are clearly informed of the dangers, broken.
Free speech, suppressed.
Doctors who questioned government medical policy, suspended or dis-barred.
Treatments and preventatives such as Ivermectin, supressed.
Protesters subjected to psychological warfare and ignored by politicians.
All politicians doing what they were instructed without question.
This is part of a bigger picture that is only starting to emerge.
Exactly, except that as a dictator he started no wars. He was elected as he was not from the political elite class. The warmongers are now back, with a sad puppet who does what he is bidden.
The identification of an individual as an enemy of the tribe is used because it stimulates a strong neurochemical response. Is this why you hate Trump? We are in an age when we are all being manipulated all of the time. The method is to elicit a strong emotional response. The sad thing is that people of goodwill are being used by people who see them as disposable.
He is from the elite, if not the political class, and he was one of the same stories told elsewhere with Bolsonaro, Duterte etc. Just folk falling for that idea and rhetoric. He kept wars going just fine, even murdering a foreign general for political distraction - Soleimani.
Sorry if tribalism made you admire him. I always just wondered at folk hitching their identities to a serial conman (since the 1980s) who was so obviously lying to them.
The oddest and saddest thing is that some of the Kiwis who hitched their identity to Trump have come out all guns blazing against his successor, right-fighting other Kiwis on social media about them... seemingly not recognising that Kiwis haven't hitched their identity to Biden and really don't care. They end up shadow boxing.
Indeed. Hard to see a way forward though. None of the politicians seem to represent me. The bureaucracy seemed heavily biased towards protecting and enhancing their own interests by presenting the politicians with a carefully curated list of suggestions.
Maybe it is just the result of boom times from much government spending and price control of interest rates. Recessions usually bring on an outbreak of sanity, but they are sad times for many. The mood changes from "He's got more than me" to "There for the grace of God go I".
That is the core of this country's problems.
1 Productive work is discouraged on all fronts.
2 Consumption funded by borrowing is encouraged in all areas.
3 The fact that we are getting poorer as a nation has been hidden by rising house prices caused by price control of interest rates.
4 We have all become wards of the state, handing over our independence for reliance on state price control of interest rates.
An extremely balanced article. At the time it was all about saving what we could. No one was saying it was the wrong thing to do.
I find Nationals commentary and questioning amoral and unethical. They would have done the same.
We need to fight vigorously for Rbnz independence. We don’t need another national prime minister like Muldoon destroying our futures again.
Yes the technocrats may argue that they would have done it differently, but let’s remember economics is like religion. We act in a certain way based on our belief systems, and when it doesn’t turn out that way, it’s because we didn’t try hard enough, or the actions were tainted. It’s an art that pretends it’s a science. They did the best they could. Could it have been better. Yes. But no need to destroy independence just because you want to get into power.
Focus on solving the real issues that the pandemic has exposed.
The destruction of our civil society through nearly a generation of mindlessly following neoliberal trickledown claptrap. The markets will solve everything. No they don’t. The destroy the commonwealth for short term gains and mortgage our futures for the now.
Now is the time to rebuild our infrastructure, health system, education system, police force and tax base.
Destroy the cancer of neoliberalism and short termism and focus on growing the commonwealth in a sustainable manner.
National’s comments and the shouts of the neoliberal high priests merely diverts attention away from the real issue, that national has no plan to jump start our once awesome nation and ensure that it works for the benefit of all and not just the entitled few. It is a party of tired old white men, out of ideas and out of touch. That has lost the moral right to govern and now seeks to get in by fear rather than by hope.
Yet here we are basking in the glory of Muldoon's hydro schemes. I'm not quite clear on the timelines as I wasn't here then, but weren't we crucified for Lange's banning Nuclear warships in our waters, causing the US to show no mercy about our debts. There may be another story here.
It is a fact that Neo-liberalism is not what was promised to voters of the western countries. But dont forget the context in which people were too eager to believe lies of new-liberalism: total collapse of the protected local markets, government owned economies, captured markets of incapable third-world countries (just see where China and South Korea were in 70s and early 80s), hyper inflation, etc.
I do not think wise to repeat the same mistakes of our past and think that doing so will fix the mistakes of today.
I'm spending time in a part of the world where there was no stimulus, no helicopter money, and no cheap lending. The populations are financially battered and bruised, many businesses closed for good and jobs lost, and now having to weather the same or higher inflationary pressures in NZ.
It could definitely be significantly worse.
If you think inflation is here to stay - then you buy now as it will never be cheaper.
If you think it transitory - then you hold off, hoping the recent prices rises abate.
So how is Joe public going to act?
I say for housing, they will wait (and are).
Everything else....dunno?
I think most sit in the buy now camp. That's why the spending hasn't stopped.
Add the boat/car to the mortgage. HP or personal loan for the tv, phone is on a plan, car is financed through the dealer....
The question is not when they stop buying, but when do the defaults start happening because they can't cover the repayments.
The issue is not whether Orr got it wrong at the start of the pandemic- lowering interest rates was probably the right thing to do, its the fact he took so long to raise interest rates when it was apparent that
1. Unemployment was not increasing
2. the housing market was soaring to unsustainable levels
3. GDP was racing through the roof
4. inflation was starting to set-in
All of these issues were apparent by the end of 2020 and as such he should have stepped in- at the latest Feb 21 and restored interest rates to at least 1.00% - the same level pre-pandemic, instead they waited 9 months and by then all of the above issues became out of control.
They waited in case NZ had another lockdown - even though they had already clearly seen that lockdowns produced V shape recoveries and there was little reason to worry on that front.
'we took the best option at the time based on the best information we had available.'
If the "transitory inflation" saga had never happened that might have been more justifiable. However one suspects that had we started setting rates appropriately when inflation moved above the target band we would not be having this conversation because rater would be higher and inflation lower.
After Lehman Brothers went bust, Citigroup and Commerzbank and many other retail banks had to be bailed out. Merkel had to appear on TV to calm the German public, to prevent a bank run. What you call paranoia was in fact a collapse of the financial system, barely prevented.
Still waiting for a review of the government reponse to the Christchurch earthquake. I'm not counting the one where they threw the first responders under the bus. But where is the reponse covering:
Politcal meddling in the rebuild including promised anchor repairs that were never funded
The managed home repair scheme which has cost billions extra to fix and is still not finished.
The use of broad powers with little to no oversight
Creating and running the rebuild plan from Wellington
Ignoring and undermining any opportunity for a local-led rebuild, including ripping up the share an idea campaign.
The total inability of the government to complete any project as promised on time costing millions in cost blowouts.
It's not true that there are no counterfactuals, not all countries followed this path. Sweden for example didn't impose hard lockdowns and so I assume wouldn't have had to print so much money to pay people to stay at home. There are also other countries like Russia and parts of Africa that did nothing at all. It might be able to be argued that they paid a higher health price but from an economic perspective there are countries we can compare ourselves to.
The all cause mortality figures seem to suggest the path taken by Africa and Sweden was significantly better. It is suggested that the vaccine attacks all major organs and does so for many weeks, thus those with an existing weakness are less likely to survive. They just die suddenly from major organ failure in the following weeks.
Even if true, this is not to say the vaccine is necessarily bad, it may in fact actually be better than not taking it. There is an enormous controversy going on behind the scenes. The politicians are terrified of being labelled war criminals for violating the Nuremburg Code. It will be interesting to watch them all turn on each other as this progresses.
Always risky to assume...inflation running at 8.7%.
There are two customs of the Reserve Bank that I'd like to see questioned given what's happened.
-'Forward guidance'. The goal seems to be stability. OK. But it doesn't work. Instead of markets whipsawing when a change is made to rates, they whipsaw when a projection is made about a future change to rates. And then there's the possibility that the projection has to be revised up or down again anyway, which is disruptive because a false sense of security was created. It causes more instability, not less. The RBA with their criminally reckless 'no rate rises til 2024' is the worst example I can think of.
-Slow response times. There's a calendar, everything is supposed to move slowly. This creates, again, a false sense of security, and makes it harder to respond to data. The RBNZ should have been able to respond to rising house prices much faster, when it became clear that the market was exploding rather than limping. But there was a published schedule of cheap lending, bond purchases, etc., with months and months left to run! So how about: don't do that. Announcing rate changes when they are needed rather than according to an agonisingly drawn-out schedule will force banks to be more prudent. Allowing a situation where cheap mortgage funding is being thrown at an insanely escalating market is... insane. You shouldn't pretend you have no choice but to continue doing something destructive and stupid when they only thing making you do it is a piece of paper from your own office that isn't even a legally binding agreement.
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