Loopy logic

New Zealand has a leaky house problem. Apparently some dodgy building around the nation has left homeowners with a dampened enthusiasm for their chosen place of abode. Not only that (though that is bad enough), it has left the authorities with a conundrum with respect to compensation: who foots the multi-million dollar repair bill? The Court of Appeal this week said it is the responsibility of local councils, since it is their job to ensure that buildings are up to scratch. It comes as no surprise to hear that local councillors are more than a little chagrined by this outcome – as will be the ratepayers, in due course.

Here is where it gets loopy.

The North Shore City Council have suggested the government should bail them out (pun intended), since they will be collecting some windfall GST and income tax revenue from all of the repair work that is going on! Apparently they think this whole messy situation is a boon to the economy. Brilliant, that. Let’s all do dodgy work that has to be re-done, and the economy will roar along. The gap in logic has been pointed out to these happy contributors to economic theory: a dollar spent somewhere, is a dollar not spent elsewhere. If people have to spend on unexpected repairs, they will reduce their spending on something else. Et voila, the windfall gain is washed down the stormwater drain.

So what makes economic stimulus any different?

Nothing. Not that you would think that, to listen to the self-congratulatory talk of the lever-pullers and button-pushers of our modern economies. According to them, their timely intervention in the financial markets has saved the world. They have spent, spent, spent, and isn’t it marvellous, we are all richer because of this brilliant work. But a dollar spent by government today is a dollar not spent by the private sector tomorrow. All that has happened is that more control has been ceded to government.

So for the next bit of loopy logic.

Paul Keating, former Prime Minister and arch lever-puller has warned that further global turmoil is on the way. He is late to the party on that one, but at least he sees it. Locally, he is concerned about what will happen when the government runs out of stimulants, and the public runs out of puff. Private spending won’t reappear, he fears. The reason it won’t reappear is that we will be too busy paying yesterday’s bills. All common sense. But Mr Keating’s remedy is choice: get Germany and China to help! They are in the terrible situation of being in good financial health. While the rest of the world has been on a spending bender, they have saved like there really is a tomorrow. So now they are sitting on massive surpluses: that is, the rest of the world owes them a heap of money. Mr Keating says they should stop being party-poopers, and spend it, now.

Is it any wonder the world is in the mess it is in?