As established in the last Inflation, attempting to solve a nation’s economic woes through the printing (handing) out of money, does little but increase inflation.
Having just read through the first Inflation, I realise I could have basically condensed that 1000+ word article into just one line: ‘if you are receiving more for doing no more, you are doing nothing but contributing to inflation.’
The above line is why the New Zealand Government would do well to stop being so ecologically precious about ventures such as West Coast goldmining and start seeing an opportunity for what it is.
Any high-profit business in New Zealand, from our Socialist Government’s perspective, is effectively printing money; in a financial year, for example, if an electricity company takes $300 million revenue, then is taxed at 33%, the Government will effectively skim $100 mil – now we begin to see maybe why Government allows utilities to charge consumers increasingly high electricity prices.
Internationally, gold prices have reached a new peak; incidentally, international trade is the best way to increase a nation’s wealth without dramatically increasing inflation.
Known global tax havens – Switzerland, Luxembourg, Bermuda, etc – where income tax is extremely low, yet individual wealth is comparatively high, acquire that wealth primarily through foreign investment, enticed by their miniscule income tax rates (sometimes less than 10%), compared to NZ’s 33%.
Therefore, where Switzerland imposes around one third the taxation of New Zealand, that taxation is against perhaps 10 times the cashflow thus, in the previous scenario, the Swiss Government will still accumulate over three times the wealth of the New Zealand Government.
Of course, a wealthy Government does not necessarily equal a wealthy populous although, as the New Zealand populous has surely witnessed over past decades, if the incumbent Government is focused on short-term political popularity rather than long-term national prosperity, that wealthy Government might take the easy route to success and, instead of using its wealth to build a future financial stronghold for the people, that Government might simply pander to the people, essentially handing out money thus making the people also wealthy and temporarily, for a few months anyway, very happy, until inflation catches up; then the people are again struggling and Government coffers are again short.
Regarding those wealthier nations, then, Switzerland, Luxembourg, or Bermuda, how do they prevent inflation from rendering their currency worthless?
Aha, they have clever, forward-thinking Governments and, along with other tax-haven countries such as Andorra and Netherlands, they seemingly understand that a government’s foremost concern has not so much to do with people’s finances but rather ensuring the contentment of said populous.
If an affluent government uses its wealth to provide for its people by subsidising everyday commodities such as food, childcare, and electricity, rather than handing out cash, the result is a populous of financial contentment which does not need as much money; this is in comparison to an avarice-driven but cashed-up populous who watch the price of commodities being continually pushed up as inflation rises rapidly.
When commodities are affordable people do not need to be driven by avarice and subsequently, because people are not price-gouging one another across every available commercial avenue, the cost of living comes down thus poverty becomes non-existent; simple, right?
Government wealth and populous contentment notwithstanding, if a nation’s inflation is to remain low, there does need to be income inequality; as with every Socialist country, in New Zealand, tax from the higher income earners takes care of citizens of lesser fortune and if not for that higher income taxation, the country’s economy would cease to function – for instance, if every person was on a high income, first commodity prices would inflate accordingly then, if every person was making the same, how would one define a ‘high income’, anyway?
Pay attention.
Ultimately, one of the best ways for a country to get rich is through foreign investment (that or oil and, you know, eco-issues), and John Key knew that.
Unequivocally, the best way to abolish poverty is for a wealthy Government to subsidise the cost of everyday commodities – food, childcare, electricity; Key was working on that one, too.
Alternatively, if your wealthy Government has already given away all its money, essentially in cash form, while the cost of everyday commodities continues to rise and inflation is set to go out of control, if aspiring businesses must battle through barriers of bureaucracy and pointless eco-regulations only to find themselves still struggling then I don’t know, maybe you voted the wrong way in the last election.
Just saying.
Article by Tim Walker
Edited by John Keenew
Photography by Future National