Morgan Edwards

Regular reminder that money is created either by Govt spending or bank lending. The phrase 'public money' for the former seems entirely appropriate.
Indeed, bank lending is effectively state licenced.

they have no idea what they are doing, and neither do most of their advisors. Treasury don't understand the role of private debt in the economy - they think that causal mechanisms only flow one-way. It's all very embarassing.

We are so back. In other words, we have stopped falling. It is truly remarkable that NZ almost uniquely plunged its economy into a sustained recession in response to a global inflation shock that other countries just rode out. And, now we are celebrating ending our self-flaggelation. [1/2]

In fact, one of the biggest increases in bank deposits was the NZ Govt - a cool $5bn in just 3 months. This is Treasury magicing up dollars and adding them to Ministry bank accounts - presumably a sign that Govt is pushing accelerated delivery of capital projects into election year. [5/n]

2. Countries that run deficits with the world (like NZ for 50+ yrs) can only do so if Govt deficit spends and / or the private sector goes into more debt. The Clark years budget surpluses were ONLY possible because businesses and households were sending private debt levels to the moon. [10/n]

The NZ Govt spent $183bn into the economy in the year ending June 2025 and took back about $170bn in taxes, charges and dividends etc. This left the private sector $13bn better off. If more people understood this basic reality, we could have sensible Govt spending discussions.

O m f g
This guy is seriously a banana
And that’s offensive to bananas

Preach

I am admittedly rage-posting now, but come the fuck on! Can we have an actual conversation about what we are doing as a country?

Very true

Now, about the famed Clark budget surplus of 2007 (pink). How did we do that and run a chunky deficit as a country with the rest of the world (yellow)? Easy, the banks were pumping in billions of new $ as households (grey) & businesses (blue) piled into debt cos the good times would never end. [7/n]

'We need to ensure that we save for future crises, and limit the growth of debt so that our grandchildren don't bear the burden'

'Ok ghoul, but can you explain settlement cash?'

'Why are you asking about settlement cash, idiot, that's the Reserve Bank's domain'

Ghoul-ifed, no doubt

Absolutely agree. I described in my Master’s thesis (in 2022) that these long term fiscal strategy reports are vacuous and unintellectual. While being those things too of course, this report is just absolutely maddening - reflecting only ideology. Back to the 1980s for sure.

... fat cat rentiers will say they're the 'big contributors' to NZ life - they pay the most taxes and 'lend' the Govt money to buy nice things. That's *horseshit*. Govt spend the $, rentiers gather it up, and then play the fking hero when they give some back (or buy interest-earning bonds!) [5/n]

I love Musical Chairs

In reality the Govt votes on how much to spend, and then spends brand new $ into the economy - paying nurses, builders, teachers etc. As those $ get spent, and then spent again, taxes get paid on every transaction. Govt also sells bonds - draining the economy of any 'residual' Govt cash $. [2/n]

Hell yes!

I wonder how this ends…

Behold, the great moderation. We freed enterprise, deregulated, privatised, shrunk the cumbersome state and we got juicy growth! The genius move here was focusing the public on govt debt while we paid for growth on the private sector credit card (aided and abetted by the housing ponzi).

Now, let's look at retail sales vs jobs vs private debt growth. See how in 2010 we got job growth without going nuts for more debt? That was Govt fiscal and cheaper imports doing the heavy lifting - boosting domestic demand. Compare to the current *longer* slump... [4/n]

Quick 🤓 update on Govt/RBNZ money magic. Reminder first:
1. Govt spending adds brand new $ into the economy. Taxation destroys used $.
2. Govt debt goes up when Govt spends new $ into the economy. Govt debt goes down when Govt collects tax.
3. Bond sales destroy $. Govt debt does not change. [1/n]

Govt net spending picked up strongly at the end of the financial year. We won't get the annual accounts for a while, but it will be interesting to see what's going on here.

For the avoidance of doubt, any politician trying to answer the 'how much interest is govt paying on its debt' gotcha question should simply answer 'gross or net?' They should then ask who receives the interest Govt pays, and, for good measure, point to the real issue (blue and pink lines below).

Amen!

Our financial liabilities (debts, loans, bonds, shares etc) are perfectly balanced out by our financial assets (cash, bonds, shares, etc).
In fact, that's an accounting certainty.
Our financial wealth is the mirror of our financial debt. Let's have a look at some examples... [4/n]

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You'll love this Musical Chairs:
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