Vote over republic falls at first hurdle

NZH: A bill setting up a referendum on republicanism was defeated in Parliament last night at its first reading, 68 votes to 53.

The Head of State Referenda Bill in the name of Green MP Keith Locke provided for a referendum with three options on how New Zealand should select its head of state.

The three options were the status quo of the British monarch being the head of state, a New Zealand head of state determined by a 75 per cent majority in Parliament or a head of state directly elected by the people under a preferential system.

The bill allowed for a second referendum if none of the three options got 50 per cent of the vote.

The two top options would have had a run-off referendum.

Mr Locke said the debate was about national identity, not like or dislike of the Queen or the royal family.

"The present Queen has been competent in the performance of her duties and she turns 84 this very day. I wish her a happy birthday."

But he pointed to the inherent conflict of interest in the Queen being head of state of two independent countries which had different foreign policies.

"When Britain sent troops into Iraq, the Queen, as Queen of Great Britain, went down to the barracks in military dress to support the soldiers.

"That was in conflict with her role as Queen of New Zealand - a country which opposed that same war."

He said it was important to have a head of state who could operate with true independence under MMP.

National's Tauranga MP, Simon Bridges, said he had been "chuffed" to see Prince William have a barbecue and beer with the Prime Minister recently, but who was New Zealand's head of state was not an issue with which he concerned himself.

Labour supported the bill, MP Charles Chauvel saying New Zealand could be an independent country and stay in the Commonwealth.

VOTING

For
* Greens
* Labour
* Progressive
* United Future

Against
* National
* Maori
* Act
* Progressives

By Audrey Young | Email Audrey
http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=10640002&ref=rss

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MMP Bill passes first reading

Press Release: New Zealand Government
MMP bill passes first reading with unanimous support

Thursday, 22 April 2010, 5:00 pm


The Electoral Referendum Bill passed its first reading unanimously in Parliament today and has been referred to a special select committee.

The Electoral Legislation Committee has been established to consider the MMP bill and the upcoming electoral finance reform bill. All parliamentary parties are represented on the committee.

“I’m pleased all parties have agreed to the special select committee, and I look forward to seeing constructive work on this important democratic issue,” Justice Minister Simon Power said.

The bill empowers the referendum on MMP to be held in conjunction with the 2011 general election.

“The referendum fulfils one of the Government’s pre-election promises to reassess how MMP is working after five general elections under the voting system.”

The bill sets out the two questions to be asked of voters: first, whether they wish to retain the MMP voting system, and secondly, what alternative voting system they would prefer from four options, regardless of how they voted in the first question.

The Government is committed to holding a second binding referendum in conjunction with the 2014 general election if there is a vote for change. That referendum would be a run-off between MMP and the most preferred alternative.

The bill provides that if more than 50 per cent of voters opt to retain MMP, the new Electoral Commission will undertake a review to consider whether changes are necessary or desirable, and report back to the Minister of Justice by 31 October 2010.

The bill also sets out the conduct for the referendum, including rules around advertising.

Further information on the referendum, including previous announcements, can be found here.

Information on how to make a submission to the select committee can be found click here

ENDS

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Central bank ‘quantitative easing’ isn’t inflationary

An interesting article about inflation originally published in the Melbourne Age, April 21, 2010.

Central bank ‘quantitative easing’ isn’t inflationary

One of the sillier propositions which has been propagated on the internet and in a range of investment newsletters over the past couple of years is the idea that the ‘quantitative easing’ strategies pursued by central banks such as the US Federal Reserve or the Bank of England in response to the financial crisis amount to ‘printing money’ in order to finance mushrooming budget deficits, and must inevitably lead not merely to higher inflation at some point in the future, but (in the more extreme variants) to the sort of hyper-inflation experienced in Weimar Germany in 1923, or more recently in Robert Mugabe’s Zimbabwe.

It’s certainly true that central banks in most of the major advanced economies have pursued a variety of unorthodox strategies since the onset of the financial crisis in order to provide liquidity to the banking system, to support particular financial institutions or markets, and to get around the problem created by the inability to reduce interest rates below zero. These strategies have generally entailed central banks making loans or purchasing securities that they ordinarily would not, in much larger amounts than they ordinarily would, and for longer periods than they usually do.

Before the onset of the financial crisis, the US Federal Reserve’s balance sheet was of a size in the order of about US$900 billion, with the vast majority of its liabilities comprised of US dollar notes on issue, and most of its assets being holdings of US Treasury securities (that is, debt issued by the US Federal Government). After the collapse of Lehman Brothers in September 2008, however, the Fed’s balance sheet expanded rapidly, to around US$2¼ trillion (US$2,250 billion), by November 2008, and has remained at around that level ever since.

At no time since the collapse of Lehman Brothers has the Fed had more US Treasury securities on its balance sheet than the US$790 billion it had in mid-2007, when the financial crisis initially erupted. As of early this month, its holdings of US Government debt stood at just under US$777 billion. Thus, it is simply not true to say that the Fed has financed, or ‘monetized’, any part of the increase in the US Budget deficit since the onset of the financial crisis.

Rather, the money ‘created’ electronically by the Fed has gone largely to provide liquidity to parts of the US or global financial system that were critically short of it. For example, beginning shortly after the collapse of Lehman Brothers it provided as much as US$500billion worth of US dollars through swap facilities with foreign central banks (including the Reserve Bank of Australia). These facilities have now closed. The Fed provided liquidity to the US banking system and to various markets within the broader US financial system (such as that for commercial paper) in excess of US$1,000 billion on several occasions late in 2008. This support is now down to less than US$60 billion. It also provided over US$100 billion for the bail-outs of Bear Stearns and AIG; most of this is still outstanding.
Beginning early in 2009, and especially since the middle of last year, the money created by the Fed has been directed towards propping up the American mortgage market. As of early this month, the Fed holds over US$ 1 trillion of mortgage-backed securities, as well as almost US$170 billion of debt issued by Fannie Mae and Freddie Mac, the two giant US mortgage insurers now officially in what, in Australian parlance, would be called ‘administration’. Prior to the collapse of Lehman Brothers, it held not a dollar of either; they now account for almost half the assets on the Fed’s balance sheet.
Without this support, the mortgage market would have been in even more difficulty than it was, and American house prices would presumably have fallen by even more than the 30% which they did from their peak in mid-2006 to their trough in June last year.

The increase in the Fed’s holdings of mortgage-backed securities and debt issued by Fannie Mae and Freddie Mac is matched, almost exactly, by an increase in the cash held by the commercial banks in their accounts at the Fed, from typically less than US$10 billion prior to the collapse of Lehmans to over US$1 trillion since last October.

What happened, in other words, is that the Fed has injected over US$1 trillion into the market for mortgage-backed securities; the sellers of those securities deposited the proceeds, directly or indirectly, with their banks; and those banks have held the cash on deposit with the Federal Reserve (as opposed to lending it out again).

There’s simply no way that this can be inflationary. Inflation would only become a risk if the Fed failed to unwind the expansion in its balance sheet once the banks start to lend out the funds which they are currently holding as reserve balances with the Fed. But the Fed has made it very clear that they are aware of this risk, and have both the inclination and the means to deal with it when it arises.

Meanwhile, the burgeoning US budget deficit has been financed – rather smoothly, judging by the absence of sustained upward pressure on US government bond yields or downward pressure on the US dollar – by sales of Treasury notes and bonds to households, who have been saving more and borrowing less since the onset of the financial crisis (and whose direct holdings of US Treasury securities have risen by almost US$400 billion since the collapse of Lehmans); to American banks (whose holdings of Treasuries have risen by some US$300 billion since the collapse of Lehmans); and especially foreigners (whose holdings of US government securities have risen by more than $1,000 billions since the collapse of Lehmans).

The US Federal Reserve hasn’t been the only central bank pursuing these ‘unorthodox’ strategies. The Bank of England, in particular, has expanded its balance sheet by slightly more (relative to the size of the British economy), than the Federal Reserve. And the balance sheets of both the European Central Bank and the Bank of Japan are larger, relative to their respective economies, than those of either the Fed or the Bank of England.

Japan’s experience is particularly instructive in this regard. The Bank of Japan has been consciously trying to engineer a positive inflation rate for the best part of a decade: and yet in only one year of the past ten has Japan’s ‘core’ inflation rate not been negative.

The example of Japan shows that, in circumstances where supply exceeds demand by a wide margin – as is the case in most of the major advanced economies at this time – creating inflation is actually quite difficult.

This is the exact opposite of the examples commonly cited by those drawing analogies with Weimar Germany or Mugabe’s Zimbabwe. In those and other instances (including Nationalist China under Chiang Kai-Shek, Germany and Hungary immediately after World War II, many Latin American economies in the past five decades, and much of the former Soviet empire after 1989), the ‘supply side’ of the economy had collapsed as a result of enemy occupation, wartime destruction, institutional collapse or years of egregious economic mismanagement. And in those circumstances, copious money-printing by the central bank in an attempt to sustain demand inevitably led to massive inflation. But those circumstances are a world away from those confronting the world’s major advanced economies today. And the parallels which are sometimes drawn with them are utterly spurious.
(Saul Eslake is a Program Director at the Grattan Institute. The views expressed here are however his own). http://www.theage.com.au/business/hyperinflation-is-a-hollow-threat-20100420-srsy.html

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US Ambassador Anti Direct Democracy

I had the opportunity today to meet with and listen to an address by the US Ambassador to New Zealand, David Huebner, at Waikato University.

He gave an extremely honest, down to earth, and entertaining speech. I would highly recommend you taking the opportunity to do so yourselves if you ever get the chance.

I posed the question... "Given America's long history with the use of the Initiative and Referendum, and given that the USA is one of only three countries in the world who have never held a national referendum, do you see the possibility of using the the referendum on a national issue like the health insurance debate in America?".

Given he is from California, a state with the highest use of referendums, I was somewhat surprised to hear that he was extremely anti Direct Democracy and even commented that it has ruined the Californian economy. I imagine there is some personal bias here given the current debate in California over gay marriages, and given that David is openly gay.

I had the chance to discuss his comments briefly afterward, before he was whisked away, but I did mention a university study by Californian Professor, John Matsusaka, about the effects of referendums on the Californian economy which empirically argued otherwise. It is titled, Have Voter Initiatives Paralyzed the California Budget? Below is the studies abstract:

Many observers blame the California budget crisis on a series of voter initiatives that unrealistically appropriated spending while prohibiting tax increases. However, a review of all initiative measures approved by the voters since 1912 shows that no more than 32 percent of appropriations in the 2003-04 budget were locked in by initiatives. Virtually all of the earmarked spending was for education, and would have been appropriated by the legislature even without an initiative mandate. Initiatives placed only minimal constraints on the legislature’s ability to raise revenue. The facts suggest that voter initiatives are not a significant obstacle to balancing the budget in California.

If you would like to read the whole study you can do so by clicking here

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NZ: Monarchy or Republic?

What's your opinion? Is it time to remove links to England and the Queen? Is it still appropriate to have the Queen as Head of State?

Although it hasn't been in the headlines lately, debate over this issue raises it's head from time to time with many arguments for and against. If we create a Republic what format should it take? All comments welcome.
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Grey Power pushes Democracy

Residents to vote on Omana road closure Beachlands and Maraetai residents will get to vote on whether or not to close the road through Omana Esplanade.

In an unprecedented decision last Thursday, Manukau City Council agreed to a request by Pohutukawa Coast Grey Power for a referendum on the controversial decision by the Clevedon Community Board to close the roadway.

Grey Power had offered to foot the $10,000 bill for the postal poll but the councillors voted that the council should provide the funding.

It was a close vote: 9-8 in favour.

Voting in favour was Botany- Clevedon councillor Michael Williams along with Daniel Newman, Dick Quax, David Collings, Anne Candy, Jami-Lee Ross, Sylvia Taylor, Bob Wichman, and Sharon Stewart.

Against were Mayor Len Brown, Gary Troup, Alf Filipaina, Efu Koka, Arthur Anae, Colleen Brown, Hugh Graham, Sir John Walker.(SHAME ON YOU ALL)

Botany-Clevedon's other councillor, Maggie Burrill, declared an interest and didn't vote.

Grey Power president Bill Bateman also spoke at the meeting as did resident Paul Johnson representing the Save Omana residents’ group. Bill Bateman says he feared the worst going into the meeting but is now delighted and already looking to the next step. "We will be campaigning to keep the road open and we can do this with very little money. We have already formed a campaign committee," he says. "I am a cautious man and am confident but will be working my butt off to make sure it happens." He says feelings on the issue are high in Maraetai “less so in Beachlands“ and that referenda held by other councils show a higher turnout than with normal local body elections.

The Clevedon Community Board is less impressed and in a statement says the decision "is more about political grandstanding and less about common sense."
Says the statement from chairman Maurice Hinton: "Our decision (to close the road) came after several years of discussions including workshops, consultation with residents and reviewing expert advice“ something the majority of councillors who voted last night were not party to."

Maximising the recreational potential of the reserve and the safety of the users of the reserve, especially children was the Board’s main concern.
"Playgrounds, roads, plus children do not mix“ it is that simple. "We believe that in coming to their decision last night councillors who supported the motion to hold a referendum have undermined the local democratic process and let down future generations of Manukau residents."

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Harshan Kumarasingham from the Institute of Policy Studies was interviewed by Chris Laidlaw on Radio NZ. Very interesting discussion

on constitutional matters. The main theme being the lack of constitutional checks in the form of an upper house in New Zealand. He did make reference to citizens referendums and these being used in some countries after they have moved to a single chamber government.
http://static.radionz.net.nz/assets/audio_item/0011/2289908/ideas-20100509-1110-Ideas_for_9_May_2010-m048.asx

Many thanks to Bill Daly for pointing this out.

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