Tuesday, July 7, 2009

Three i's and a y

It is surely one of the wonders of the modern world that
three of the foremost economic commentators in New
Zealand are called Brian. I refer of course to Easton,
Fallow and Gaynor, whose surnames—and surely this is
significant as well—follow each other alphabetically.
Make of this suggestive nomenclature what you will, but
insofar as I understand anything at all about the New
Zealand economy, I understand it mostly thanks to the
three Brians and the one and only Rod Oram, whose
luminous dissertations on money, trade, national identity,
life, the universe and the medium-to-long-term are
tucked away disgracefully in the business section of the
Sunday Star-Times each week when they ought, frankly,
to be on the front page. But back to les trois Brians, as the
French so playfully call them, or would if they knew of
their existence: Gaynor in particular surpassed himself last
Saturday with a masterly column on the way in which the
Kiwi dollar has become a favourite of the global currency
speculators whose gambles shape our economic destiny.
Gaynor sums that up pretty well when he says that the
New Zealand dollar is

extremely difficult to forecast because
it is primarily driven by speculation—
rather than fundamentals—and many
of these speculators are relatively
uninformed about New Zealand.

You could say that, yes. Unfortunately, while declaring that

there should be far more high-level
discussion on the state of the NZ
dollar market and any measures we
can introduce to reduce its volatile
and speculative characteristics while
assisting our export sector

Gaynor goes on to assert that currency controls

are not an option for New Zealand
because it would be impossible for
our government to set the right
exchange-rate level and then
support this against potential attack
from US and European hedge funds.

Here I part company with Brian G. Nor would this view of
his be endorsed by another economic commentator whose
thinking I respect enormously; nor it will surprise readers
who have stuck so far with this dithyrambic blog to learn
that this individual’s name is also Bryan, only spelt with a y.
I refer of course to the Ohope oracle Bryan Gould, who in
his book The Democracy Sham cites the example of the
the Malaysian government, which in 1998, in defiance of
'free-market’ orthodoxy, imposed exchange controls on its
currency. Writes Gould:

To reclaim national control over one's
economy through the simple step of
re-imposing exchange controls—even
when done in isolation from anyone
else and in the teeth of fierce criticism
and dire warnings from the most
powerful economic forces in the world
—did not mean that the heavens fell in.

He's right. I checked back on the major news stories of 1998
and could find no record of the sky falling in. In fact, the
Malaysian economy continued to do rather well. And even if
it were to be concluded that powerless li'l ol' Enzed had no
alternative but to remain a counter on the global
checkerboard, the value of its currency subject at any
moment to anyone's whim, there's nothing to stop us
pushing, as Gould proposes, for internationally coordinated
action to control the movement of capital and regulate the
currency casino in which, as Gaynor says, New Zealand
might as well be the Las Vegas.

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