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  • Robert MacCulloch

TVNZ's Breakfast Show and the Politics of Envy

Our national broadcaster today has provided the public with an inaccurate characterization of quantitative easing. They report that "it's fresh cash being handed over to people who already have lots of money .. the money goes into financial markets for people who already have bonds, shares and assets .. those people who already have assets are rescued .. and get richer because all that money has to flow into the system".


Not so fast. To boost growth and help the unemployed, our central bank is able to cut short term interest rates, via its policy tool, known as the official cash rate (or "OCR"). In especially bad times, particularly when deflation is a risk, the central bank can also cut long term interest rates. It does so by purchasing long dated assets, typically government bonds, which pushes up their price and lowers their yield, a process known as quantitative easing (or QE). Cuts in the OCR and QE both make debt cheaper and stimulate investment, leading to job creation. Deflation, which QE seeks to avoid, hurts borrowers, which includes many of those on low incomes.


Arguing that QE is about rescuing the rich, whilst ignoring the poor, promotes the politics of envy. And if it really was about rescuing the wealthy, why would our central bank and Labour government be so keen to pursue this policy, whereas pro-business think tanks like the NZ Initiative are against it?


See the TVNZ website:

https://www.tvnz.co.nz/one-news/new-zealand/actually-means-government-starts-printing-free-money



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