NZ 1st homebuyers are ScReWeD...

[Logen Ninefingers]

The headline was different in the printed paper this morning I think it said there would be price rises due to the changes.

Reading the article, it was a bit vague as to why house prices would be rising but I think it was due to an easing of the LVR ratios and the length of time it would take debt to income limits to actually be implemented.

https://www.nzherald.co.nz/business/...BM7VYXQZP2SRQ/

Another example of bank economists and the real estate funded media getting wealthy boomers salivating at more gains and FOMO millennials taking out even bigger loans. Maybe it was to offset the inflation story from yesterday.

The following quote by the RBNZ deputy governor was laughable.

RBNZ deputy governor Christian Hawkesby said yesterday it was important to have policies in place to manage boom-bust credit cycles.

The article just explained how the RBNZ drives the property market with policy. The only limiting factor for house prices appears to be how much money is available and the interest rate.

Christian is maybe unaware that it was reckless RBNZ policy over the pandemic that created the current boom and these subsequent polices are to try and put a lid on it as it becomes obvious how wrong these polices are and that trickle down economics is BS.

I assume the people at the RBNZ are stupid but maybe after creating the wealth gap they are now ensuring there will be no social mobility between classes. That would assume they are evil, I prefer stupid as it fits better with the NZ as a caring society narrative I prefer.

At the end of the day the greedy boomers and overindebted millennials (risk takers) will be saved by RBNZ created inflation (cost of living crisis) while all those that missed the boat will find life harder and harder.

I am sounding very conspiratorial this morning.

I was reading your comments with interest and then - apropos to nothing - you came out with this:

and that trickle down economics is BS.

It's surely a truism that the more affluent the society is, the more it is able to support the less forunate members of that society.

Surely it is also a truism that the more successful a business is, the more it will need to hire more workers - creating opportunities for people to accept paid work.

Surely it is a truism that if many businesses in an economy are expanding at the same time, competition for the pool of available workers will increase and wages & salaries will go up.

Surely if everyone feels wealthy and has plenty of disposable cash, then an entrepreneur can capitalise by opening a coffee shop to sell coffees to those who like to buy them.

This is 'trickle down economics'. This is 'a rising tide floating all boats'.

Some out there seems to think that 'trickle down economics' means that if a country is doing well economically then everyone on an unemployment benefit should be rolling around in a vat of money like Scrooge McDuck, or that it means that the worker in the business will be making the same amount as the person who took the risk and started the business. But it doesn't.

[Aaron]

A good example of trickle down economics was when Adrian explained back in 2020 that low interest rates and easy money would create a "wealth effect". People who own assets would feel richer so they would keep spending i.e. the trickle down effect.

I have heard some people suggest things about trickle down on this thread.

According to the older generation who have reaped astronomical gains solely due to central bank policies since the GFC, all young people have to do is not spend so much on coffees and smashed avocado on toast and they will easily be able to buy a house.

The arrogance of the older generation in this regard is unbelievable. Yes, they did work hard. No, this does not mean that they should have been entitled by right to enormous windfall gains which have come about due to a bizarre historical event: the action of central bankers to deliberately inflate asset bubbles as a response to a global financial crisis. Then as a response to a pandemic, they have defended the bubbles they created with more of the extraordinary stimulus and interest rate suppression.
Logen Ninefingers 26/01/2022 post 2558

What we have seen to date from the government and central bank has been a passive bail-out of the housing market. Back in 2020 when house price falls were predicted they went into overdrive to support the market. Of course the measures were intended to prop it up (orbail it out in other words) rather than over-heat it. Of course your average Kiwi see's interest rates being slashed to the bone and doesn't think "hmmm...they are propping up the market", they think "corrrr....look at interest rates; I better get e another house!" or "I better get me a better house". So you got the unintended consequence: massive price rises.

You see a lot of comments on line about 'ha ha ha ha...the experts were predicting house price falls - instead they went up massively. Those idiots don't know what they are talking about".
These comments are dumb. Prices would probably have fallen without the heavy handed intervention of the government and the central bank.

Logen Ninefingers post 2567

I guess on the one hand many young people have been left holding the bag, but have a long life to look forward to.

And the boomers have cashed out their central bank given gains but are at the end of their lives and have the old folks home, dementia et al to look forward to.

Logen Ninefingers post 2574

Trickle down economics is about using monetary policy to prop up asset prices or "bubbles" as you have referred to them in your posts. The effect of constantly propping up asset prices has the side effect of reducing social mobility and appears to be concentrating wealth and income into fewer and fewer hands. I am calling BS on this, you seem to have changed your tune since 2022, perhaps you won lotto or received an inheritance since then.

To get the trickle down it appears you have to support the asset owners with monetary policy to get a trickle from their... hmm how did you say it "enormous windfall gains"

The other side effect of boosting asset prices is that you also boost the price of everything else it is called inflation (or in NZ a "cost of living crisis"). Inflation is OK if your assets are rising while your debt is diminishing but not so great if you have no assets.

[Ggcc]

A good example of trickle down economics was when Adrian explained back in 2020 that low interest rates and easy money would create a "wealth effect". People who own assets would feel richer so they would keep spending i.e. the trickle down effect.

I have heard some people suggest things about trickle down on this thread.

According to the older generation who have reaped astronomical gains solely due to central bank policies since the GFC, all young people have to do is not spend so much on coffees and smashed avocado on toast and they will easily be able to buy a house.

The arrogance of the older generation in this regard is unbelievable. Yes, they did work hard. No, this does not mean that they should have been entitled by right to enormous windfall gains which have come about due to a bizarre historical event: the action of central bankers to deliberately inflate asset bubbles as a response to a global financial crisis. Then as a response to a pandemic, they have defended the bubbles they created with more of the extraordinary stimulus and interest rate suppression. Logen Ninefingers 26/01/2022 post 2558

What we have seen to date from the government and central bank has been a passive bail-out of the housing market. Back in 2020 when house price falls were predicted they went into overdrive to support the market. Of course the measures were intended to prop it up (orbail it out in other words) rather than over-heat it. Of course your average Kiwi see's interest rates being slashed to the bone and doesn't think "hmmm...they are propping up the market", they think "corrrr....look at interest rates; I better get e another house!" or "I better get me a better house". So you got the unintended consequence: massive price rises.

You see a lot of comments on line about 'ha ha ha ha...the experts were predicting house price falls - instead they went up massively. Those idiots don't know what they are talking about".
These comments are dumb. Prices would probably have fallen without the heavy handed intervention of the government and the central bank. Logen Ninefingers post 2567

I guess on the one hand many young people have been left holding the bag, but have a long life to look forward to.

And the boomers have cashed out their central bank given gains but are at the end of their lives and have the old folks home, dementia et al to look forward to.Logen Ninefingers post 2574

I agree with your statement that the majority of older generations don't understand it and choose not to want to understand how this generation can't get a house. Although if you ask this generation, most don't want to own a house. I am trying to tell my parents to spend their money, but they struggle as they feel they are living comfortably. They have a different comfortable way of living than I do. I have aircon which I use regularly, they take off a shirt or put one on if it gets too cold. They have a different mentality, which isn't wrong it is just different.

Also I have the same feeling for the younger who can't learn to live without. If you save money from the time you start working things get easier. I had a nephew who bought a house at 18. He managed to save $50,000 by that age. He worked a job and side hustled selling pens he made out of wood. He did get a $20,000 injection from family which he paid off at 20. He lived without lots of stuff for ages. He had 2 flatmates that helped with the mortgage. He believes if he can do it anyone can you only need discipline.

An example is one who can't go without carpet in their house, when the older generation couldn't afford it yet and walked on cardboard for years until they got carpet. I have young ones I know, that don't buy a vacuum cleaner, they need a Dyson. They can't get a cheap phone they need a $2000 iPhone. I worked with 15 year olds with a brand new $1500 phone, they have afterpay and live with debt. They don't know how to say I can't afford it nor do they save. These are the types that get to 25 saying we can't buy a house.

What I am trying to get at is, where there is a will there is a way. Plus parental advice is required. Most who wanted a house and bought one know they must help children to get a house. That is how I got mine. Just plan that your children want a house and work hard at getting it sorted. Plus only let your children have a house if they can budget and if they can reach targets of saving money.

A bit all over the place sorry about that. Got called away about 3 times and lost where I was going lol

[Logen Ninefingers]

A good example of trickle down economics was when Adrian explained back in 2020 that low interest rates and easy money would create a "wealth effect". People who own assets would feel richer so they would keep spending i.e. the trickle down effect.

I have heard some people suggest things about trickle down on this thread.

According to the older generation who have reaped astronomical gains solely due to central bank policies since the GFC, all young people have to do is not spend so much on coffees and smashed avocado on toast and they will easily be able to buy a house.

The arrogance of the older generation in this regard is unbelievable. Yes, they did work hard. No, this does not mean that they should have been entitled by right to enormous windfall gains which have come about due to a bizarre historical event: the action of central bankers to deliberately inflate asset bubbles as a response to a global financial crisis. Then as a response to a pandemic, they have defended the bubbles they created with more of the extraordinary stimulus and interest rate suppression.
Logen Ninefingers 26/01/2022 post 2558

What we have seen to date from the government and central bank has been a passive bail-out of the housing market. Back in 2020 when house price falls were predicted they went into overdrive to support the market. Of course the measures were intended to prop it up (orbail it out in other words) rather than over-heat it. Of course your average Kiwi see's interest rates being slashed to the bone and doesn't think "hmmm...they are propping up the market", they think "corrrr....look at interest rates; I better get e another house!" or "I better get me a better house". So you got the unintended consequence: massive price rises.

You see a lot of comments on line about 'ha ha ha ha...the experts were predicting house price falls - instead they went up massively. Those idiots don't know what they are talking about".
These comments are dumb. Prices would probably have fallen without the heavy handed intervention of the government and the central bank.

Logen Ninefingers post 2567

I guess on the one hand many young people have been left holding the bag, but have a long life to look forward to.

And the boomers have cashed out their central bank given gains but are at the end of their lives and have the old folks home, dementia et al to look forward to.

Logen Ninefingers post 2574

Trickle down economics is about using monetary policy to prop up asset prices or "bubbles" as you have referred to them in your posts. The effect of constantly propping up asset prices has the side effect of reducing social mobility and appears to be concentrating wealth and income into fewer and fewer hands. I am calling BS on this, you seem to have changed your tune since 2022, perhaps you won lotto or received an inheritance since then.

To get the trickle down it appears you have to support the asset owners with monetary policy to get a trickle from their... hmm how did you say it "enormous windfall gains"

The other side effect of boosting asset prices is that you also boost the price of everything else it is called inflation (or in NZ a "cost of living crisis"). Inflation is OK if your assets are rising while your debt is diminishing but not so great if you have no assets.

You are simply conflating Central Banks inflating asset prices to induce the so-called ‘Wealth Effect’ with a different idea referred to as ‘Trickle Down Economics’. Just because you heard it referred to as that term doesn’t mean it is.

In New Zealand, the desire to boost asset prices have demonstrably stimulated consumer spending and propped up the economy for a long period of time. This is not Trickle Down Economics though, it is simply the main driver of economic activity in New Zealand. Building and selling houses is how we keep the wheels spinning. Anything that threatens the ‘housing ponzi’ - such as a pandemic - induces the kind of panicked over-reaction from the central bank & government that we saw in 2020.

Leftists are obsessed with’Trickle Down Economics’ just as they are with the term ‘Neoliberalism’. These bogey words are thrown about like hand grenades to the point where they lose all context and meaning.

It is helpful to strip these terms back to their meaning:

Neo-liberalism: Less regulation, less state intervention in economies, less state ownership of businesses.

Trickle Down Economics: ‘A rising tide floats all boats’, although it is unrealistic to think that the indolent or unskilled will benefit to the same degree as a business owner or qualified person.

[Aaron]

You are simply conflating Central Banks inflating asset prices to induce the so-called ‘Wealth Effect’ with a different idea referred to as ‘Trickle Down Economics’. Just because you heard it referred to as that term doesn’t mean it is.

In New Zealand, the desire to boost asset prices have demonstrably stimulated consumer spending and propped up the economy for a long period of time. This is not Trickle Down Economics though, it is simply the main driver of economic activity in New Zealand. Building and selling houses is how we keep the wheels spinning. Anything that threatens the ‘housing ponzi’ - such as a pandemic - induces the kind of panicked over-reaction from the central bank & government that we saw in 2020.

Leftists are obsessed with’Trickle Down Economics’ just as they are with the term ‘Neoliberalism’. These bogey words are thrown about like hand grenades to the point where they lose all context and meaning.

It is helpful to strip these terms back to their meaning:

Neo-liberalism: Less regulation, less state intervention in economies, less state ownership of businesses.

Trickle Down Economics: ‘A rising tide floats all boats’, although it is unrealistic to think that the indolent or unskilled will benefit to the same degree as a business owner or qualified person.

There is a difference between creating an asset and inflating an asset. I am not going to debate ideology with you, just commenting on what is actually happening in the real world. The rising tide of debt, low interest rates and inflation is certainly floating the asset owners boats.

[Aaron]

I agree with your statement that the majority of older generations don't understand it and choose not to want to understand how this generation can't get a house. Although if you ask this generation, most don't want to own a house. I am trying to tell my parents to spend their money, but they struggle as they feel they are living comfortably. They have a different comfortable way of living than I do. I have aircon which I use regularly, they take off a shirt or put one on if it gets too cold. They have a different mentality, which isn't wrong it is just different.

Your point I guess is that there is still a chance of social mobility if you make the effort, rather than just moaning about how unfair life is.

I agree.

Although I am suggesting for someone born to the wrong family social mobility is getting harder rather than easier. The main reason being monetary policy.

The example of your nephew includes the inevitable "helping hand" from family but by the sounds of it he would be doing well anyway maybe just not as well as quickly.

[Aaron]

Trickle Down Economics: ‘A rising tide floats all boats’, although it is unrealistic to think that the indolent or unskilled will benefit to the same degree as a business owner or qualified person.

Thought I had better check the definition of trickle down economics as I use it a lot and there are a lot of water metaphors in your definition.

What Is Trickle-Down Economics?
Trickle-down economics and its policies employ the theory that tax breaks and benefits for corporations and the wealthy will trickle down and eventually benefit everyone.

Tools like reduced income tax and capital gains tax breaks are offered to large businesses, investors, and entrepreneurs to stimulate economic growth.

Sorry not monetary policy as I have suggested. It is more to do with tax policy. Although inflation has been likened to a regressive tax and inflating assets and debt would provide the job creators and go-getters with more funds to trickle down and the "indolent" and "unskilled" (much better terms than the usual "lazy" and "stupid" are you sure you are not woke?) end up contributing more as they trade time for dollars.

Taxation is always tricky but following your ideology if it is correct the countries with the least taxes should be the wealthiest with all the boats at high tide.

https://en.wikipedia.org/wiki/List_o...s_by_tax_rates

I don't think you can rely on Wikipedia but it is the best attempt at what we are after. Confirmation of the success of trickle down economics.

Which countries do you consider successful? and which ones are unsuccessful? It would be interesting to look at their comparative tax rates.

I don't generally like to get into ideological arguments but sometimes ideas are soooo stupid and fly in the face of reality it is always good to check the ideas against actual results in the real world.

[FTG]

In New Zealand, the desire to boost asset prices have demonstrably stimulated consumer spending and propped up the economy for a long period of time. This is not Trickle Down Economics though, it is simply the main driver of economic activity in New Zealand. Building and selling houses is how we keep the wheels spinning. Anything that threatens the ‘housing ponzi’ - such as a pandemic - induces the kind of panicked over-reaction from the central bank & government that we saw in 2020.

You are right "on the money" L9F's.

Politicians & bureaucrats, in cahoots with the 'elites', continuing to inflate money supply, & hence debasing our currency, will only further inhibit 'Trickle Down Economics' in the productive economy having a good chance of taking hold.

The combination of cheap debt and inflation has exacerbated rising inequality between low-middle NZ and the large owners of capital. The top quartile (and second quartile to a lesser degree) have been able to profit from insidious inflation, using their balance sheets to borrow at cheap rates and buy real assets as a hedge against inflation. Meanwhile kiwis in the two lower quartiles — with weak balance sheets and little/no access to leverage — will continue to bear the brunt of rising prices.

[Aaron]

You are right "on the money" L9F's.

Politicians & bureaucrats, in cahoots with the 'elites', continuing to inflate money supply, & hence debasing our currency, will only further inhibit 'Trickle Down Economics' in the productive economy having a good chance of taking hold.

The combination of cheap debt and inflation has exacerbated rising inequality between low-middle NZ and the large owners of capital. The top quartile (and second quartile to a lesser degree) have been able to profit from insidious inflation, using their balance sheets to borrow at cheap rates and buy real assets as a hedge against inflation. Meanwhile kiwis in the two lower quartiles — with weak balance sheets and little/no access to leverage — will continue to bear the brunt of rising prices.

How is inflating assets and providing cheap capital different to tax cuts for wealthy people. They both provide them with more money/capital to work their magic.

I was waiting for Logen to respond because the tax cut idea does not seem to stack up when you look at the different tax rates of the different countries. Maybe it depends on your definition of success. There are always a group of people in most third world countries that do very well for themselves. Maybe that is what he is after with lower tax rates. That seems to stack up better to reality.

https://en.wikipedia.org/wiki/List_o...s_by_tax_rates

[Ggcc]

Your point I guess is that there is still a chance of social mobility if you make the effort, rather than just moaning about how unfair life is.

I agree.

Although I am suggesting for someone born to the wrong family social mobility is getting harder rather than easier. The main reason being monetary policy.

The example of your nephew includes the inevitable "helping hand" from family but by the sounds of it he would be doing well anyway maybe just not as well as quickly.

I am not 100% sure what you mean by social mobility. If it means both parties need to come to a common ground then yes.

I am nearing 50 and I "moan" a bit about the next generation and feel if they want to get ahead they need to look how their previous generation did things. I feel the kids of today don't need everything they feel they need. People don't need a $2000 cell phone. Kids of today have so much help from parents in way of daycare. Daycare never existed for my parents. Benefits were less. No working for families. One parent had to stay at home as their parents or family were unavailable. If they could not afford to live in the street they chose they moved to a street they could afford. Again different mentality.

Of course people don't need to go as rugged as our parents generation. Sometimes I feel my parents have some jealousy how the kids of today live. They feel many live and don't plan for tomorrow. I read an interesting article in the Herald, more a letter to the editor in the business section. I will write about it how I remembered it below.

My husband is 69 and has started having medical problems. He still works and I want him to finish up with work. He feels that if he did they would be homeless within a few years. Later you find he has a freehold house and 4 million dollars???? Always planning for the just in case. It is built into them.