The latest wave of financial markets’ volatility is caused by a combination of factors, including the world’s addiction to debt over the past 30 years and serious flaws in our political systems.

The debate over the United States Government’s debt ceiling and Standard & Poor’s downgrade of US Government debt from AAA to AA+ have brought these issues to a head.

The United States has a long history of spending far more than it earns. The Federal Government has run a budget deficit in 69 of the 81 years since 1930.

Read Brian’s full article here

The last fortnight’s dramas on financial markets is really just the sound of investors waking up to some fundamental problems in the global economy.

It is now dawning on the world’s biggest fund managers that there is too much debt weighing on households and governments in the developed world.

More importantly, they realise there will not be enough economic growth and income to repay those debts over the next 10-20 years.

Read Bernard’s full article here

Bernard Hickey highlights 10 options available to the Government and the Reserve Bank to lower the value of the Kiwi dollar. Hickey’s suggestions focus on reducing New Zealand foreign borrowing by: Cutting the government’s fiscal deficit, reviewing government procurement policies to encourage tendering of contracts to New Zealand firms, increasing the Core Funding Ratio for banks, and keeping New Zealand assets in New Zealand hands.
These policies will help the productive sector by lowering the crippling New Zealand dollar whilst also helping New Zealand develop the economic base and policy framework that ensure New Zealand realizes its economic potential.

For more information read here

Geoff Simmons suggests that the Reserve Bank look to increase the Core Funding Ratio for New Zealand banks. The move would protect against an influx of foreign money flooding in to New Zealand banks after the upcoming interest rate hike by forcing New Zealand banks to fund its lending through long-term deposits. This would reduce the impact of the rate rise on our dollar and the crippling effect that the high New Zealand dollar has on our exporters and manufacturers.

To see the full article click here

Capital gains  tax will be the defining issue of November’s election. Its advocates want to tackle our economic problems and fast-forward our opportunities; its opponents are in economic and political denial.

We, along with Turkey and Switzerland, are the only developed countries without the tax. Its absence causes economic distortions, weakens the tax system and undermines government finances. – Read Rod Oram’s full article here

Chalk this one up as something of a triumph for Phil Goff. So far, at least.

You can question the merits of a capital gains tax. You can question whether Labour’s promotion of such a tax will turn out to be the game-changer the party is so desperately praying it will be… read the full article here

“In the wake of the collapse of finance companies and the slide in bank deposit rates, investors are just as keen to put their money into housing in the hope of making tax-free capital gains.

House prices are rising again, particularly in Auckland. Since Key ruled out a capital gains tax or land tax in February, housing loans have risen by $3 billion to $172 billion.”

Read Bernard Hickey’s full article here

“Even the Tax Working Group has acknowledged the “major hole in the tax base concerning the taxation of capital, which is manifest in high investment and low returns for the property market”.

And the Government’s own Savings Working Group has also pointed out that 50 per cent of our housing bubble (larger than bubbles in the US, Australia and the UK) was due to the lack of a capital gains tax.”

Read Tapu Misa’s full article at the Herald Online

“The lack of such taxes (CGT) on property, the OECD said in a survey on New Zealand in April, was one of the reasons our house prices went so high. The Kiwi boom was one of the nuttiest in the world, with prices rising more steeply than nearly anywhere else.”

Read more of Anthony Hubbard’s article here

Over at The Dimpost, Danyl ponders the right wing’s emerging promotion of Singapore as a shining example of free market economics at work. His conclusion? That this love is “is strange, because Singapore is the world’s ultimate nanny-state”.

“My point is that the right – notoriously Don Brash – endlessly insist that we need to ‘be like Singapore’. But what they actually mean is that we need to be completely unlike Singapore in almost every way imaginable, with the exception of a tiny number of policy areas that massively benefit the rich and harm the poor. This is a zero-credibility argument.”

Read more here.