All the issues have come about because people have taken too many risks. The principle of being conservative when it comes to money has been thrown out and the specter of big 'returns' has caused many people to be pretty headless. Take for example someone paying $500k for a house when the build new price is $250k. Absolutely nuts!
The only thing more stupid than the risk people have taken is the response to it. To me these can be classified into three categories... only one of which makes any sense.
The first is what most governments have chosen... prop up the idiots who have been taking the big risks. Specifically banks. Many times governments get criticized for "picking winners". In this case they have lost the plot and picked the losers. My absolute guarantee is that spending money to prop up banks and other idiots who have taken too many risks will only deepen and lengthen any 'crisis'. It will protect the idiots from learning a very valuable lesson, it will be inflationary (which always hurts the less well off) and it simply just delays the inevitable.
The second approach is the "head in the sand" approach. This has a lot more going for it than it may appear. If people don't panic then it probably will minimise the impact. However if people panic, the 'crisis' will turn into a MAC truck and sticking ones head in the sand will not protect ones butt from being run over. Unfortunately I suspect the panic has happened enough for the MAC truck to be approaching. Already in NZ we are seeing empty shops and people reducing their normal consumption. There is no need to reduce consumption. Just be wise in what is spent.
The third approach is where we probably have to go. Governments, because they have the power to mortgage our futures, should use the recession to change some of the economic and social paradigms. A recession presents a great opportunity for doing this as resources become under-utilised and hence more flexible and less expensive.
What this could look like is as follows:
- Infrastructure investment in energy efficiency. I'm talking upgrading homes so our average house temperatures come into the healthy zone. I'm talking at demand generation (ie solar). I'm talking better transmission.
- Infrastructure investment in telco. I'm talking 1Gbit/sec to every home minimum! 100Mbit/sec is not a paradigm shift. Just an incremental improvement.
- Reduction in the working week (when was the last time we reduced the number of hours people worked?). I'm not advocating forcing people to work less. Just that if they work more than say 30 hours, then employers should be paying through the nose! Likewise if shops want to be open at Christmas, then they should have to pay an overtime rate of five times!
- Government generating a market for a new fuel like hydrogen or electricity by upgrading public transport and government vehicle fleets
- Changing the tax system so your tax rate is based on your contribution into the community. I have no idea how this could work but such an approach has the potential to turn our social structures upsidedown.
- Encouraging community based education coops through provision of resources through the web. Long term schools are a goner as technology allows the very best teachers to teach not just 20 kids but thousands!
- Dump the NZ dollar and use Aussie money. It is going to happen one day so why not bite the bullet. Really... what are we afraid of?
This is our second opportunity to paradigm shift in the last decade. The first was the period of effectively zero unemployment. Surprisingly the Labour government missed this opportunity (Labour governments tend to be the reformers). Now is National's opportunity with an approaching recession. Hopefully they don't miss it.
No comments:
Post a Comment