Are You Lucky?

If you had been born on a farm in Africa, your economic situation
would not be good:  Possibly no hospital, no education, and a subsistence
way of living.

These guys may well have the last laugh though. Such a system is
quite robust.  As long as things like droughts and local
war lords do not cause problems, you will survive.

This is in contrast to a western style of living which depends
on employment, and economic health etc to keep up a reasonable
standard of living.

Which, at the time of writing is by no means rock solid. There seems
to be a lot of worry by most at the moment, because most of us
are dependent on our job continuing, so that we can pay the
mortgage, put food on the table and so on.

So, how can you possibly be thought of as lucky?

You are only lucky because you were born in a technologically advanced society.
As opposed to being born in a poor part of rural Africa.
The effect of technology seems to be entirely forgotten when
talking about the economy.

For instance, I once worked in a firm that had a large warehouse.
Apparently years ago they needed around 100 men to work all day in it
stacking bags of product. Now, there are 5 robots palletising all
the goods and 5 men riding on forklifts loading trucks.

The point is, as a society, we now, do not need 95 men doing menial work
anymore, so is there a mechanism for them to be paid?

The answer is, yes, and why not? The firm in question is overseas owned so
you can argue that the profits from their operations end up being
sent overseas, which is true.  They probably pay taxes on this.

They may minimize their company taxes, but there is one tax they cannot
avoid, and that is Goods and Services Tax though, which in New Zealand is 15%. 

So the Government gets richer, or should we say, more capable of handing
out money to people who may need it.

Most people baulk at the idea of getting a handout from the Government.
The argument above is surely sound enough to say that they can, and
that they should.

These are worrying times for pensioners in New Zealand, because of
a thing called term deposit interest rates.  These are options
offered by the banks for you to deposit reasonably large amounts, ie
larger than $5,000 with them, for a set period of time, usually months
or years. Most pensioners have these as they are regarded as a
relatively safe form of investment.

Three years ago, term deposit rates were around 3.6%, which although
not that high, were better than the ones available in Europe, which I
think were around 0%.  All my working life (I am retired now), I thought
that it would be a good idea to save money and put it in a term deposit,
as the Superannuation paid by the government was barely enough to
live on. 

This idea is now looking a bit rubbish as term deposit rates are now
about 1.4% for a year.

Conventional economic wisdom seems to be that the Reserve Bank should
cut it's rates, which has the effect of lowering the term deposit rates.
The writing is on the wall that this is going to happen.

Speaking as one about to get squashed under this economic truck, I do
question this wisdom.  After all, does is make sense to stop all these
old people buying cups of coffee and buying false teeth, just because?

I would like to conclude by a quotation from Dr Don Brash, who gave
a talk on this way back in 30 March 2001, but still relevant today:

"But in some respects, central banks are a little like the judiciary,
which most societies have also decided to make independent of
day-to-day political influence in the interests of achieving the
goals established by those societies in the best possible way.

While both the judiciary and central banks can make a very useful
contribution to the societies in which they operate, over the longer
term central banks can't make economies grow much more rapidly,
or materially reduce unemployment, or eliminate the business cycle,
or deal with the problems of particular industries or sectors -
any more than the members of the judiciary can make us all virtuous."