Keith Rankin, 9 July 2026 – The authorities’ policy of economic cruelty continues, with yesterday’s rise in the Official Cash Rate in the middle of an ongoing (and possibly deepening) economic crisis. Refer OCR Increased To 2.50% To Return Inflation To 2%, Scoop, 8 July 2026.

The argument originally presented, a few months ago, for a rate hike in July was that the Israel-US-Iran war would lead to significant cost increases which would then unleash ‘inflationary expectations’ which would need to be quelled by higher interest rates (where higher interest rates would serve as a Pavlovian signal for employers and workers to expect lower inflation).

The story we got yesterday was that, while such war-based expectations had already been quelled, nevertheless interest rates would still need to go up to some ‘neutral’ level; the storytellers (including miscellaneous bank economists) asserted that the OCR of 2.25% was ‘stimulatory’. The argument was that the New Zealand economy is now in the initial phases of an economic growth boom, is presently overstimulated, and that the inflationary expectations arising from this projected boom would need to be pre-emptively quelled! As if taking steps to aggravate a cost-of-living crisis reduces, as a matter of course, inflationary expectations.

Most people, quite rightly, think that the imposition of higher costs means higher (than otherwise) price increases. Indeed, you would have to be living in a rabbit-hole or echo-chamber or faith-based community (or all three) to believe that additional higher costs lead to lower price increases.

Nobody can tell us what the ‘neutral rate of (OCR) interest’ is; though there is a clearly claimed claim that the neutral rate is above 2.5%. (We should note that there may not even be a neutral rate. Or there may be a floating neutral rate. It’s ungrounded woohoo economics.)

The Neutral Rate of Interest (OCR)

We only have to look at the Reserve Bank’s own chart, to see that the best estimate of a neutral rate is the 1.75% which prevailed from late 2016 to mid-2019. In those years – years of stable on-target economic growth – the inflation rate was stable between 1% and 2%.

If anything the 1.75% OCR was above the neutral rate, given that the annual inflation rate stayed stubbornly below the 2% target. Further, in May 2019 the OCR was decreased from 1.75%, as evidence accrued that the 1.75% level was mildly contractionary. The 2019 cycle of OCR reductions brought that rate down to 1% by September. Inflation indeed increased to 2.5% in February 2020, just before the Covid pandemic. The clear evidence here is that neutral, if it exists at all, is about 1.25%.

We also note from the Reserve Bank’s own chart that there were two mistaken attempts in the early 2010s to raise the OCR. Both attempts were explained, effectively, as ‘stimulus reducing’ rate hikes – likened to easing the accelerator rather than deploying the brakes; thus, in both those cases, the belief was that there was a neutral OCR interest rate around 3.5%. And in both cases reality required the Bank to reverse its stance. The evidence became clear (to those willing to see it) that the neutral interest rate was no higher (and probably lower) than the then prevailing 2.5%. Hence OCR rates were brought down to 1.75% in 2016. And that 1.75% proved to be the ‘sweet spot’, at least until 2019 when it appeared to be too high.

(We note that in those years from 2014 to 2019, interest rates in Europe and Japan were set at zero percent or lower, and that those settings proved stable until the Covid19 pandemic which started in 2020. Thus, for the best part of a decade, the neutral interest rate in Europe was zero. And the neutral rates in North America and the United Kingdom were below one percent.)

What actually happens to inflation with high and rising interest rates?

We can look at New Zealand in the late 2000s, and at our ‘Anglo-Saxon cousins’ in the years after the elimination of Covid’s delta strain, meaning the years when the ‘pandemic crisis’ – as distinct from the pandemic itself – were over.

In New Zealand in late 2003, the OCR was set at 5%. Since then there was a long tightening cycle taking the OCR to 8.25% in mid-2007, and keeping the OCR there until July 2008. Interestingly this – from 2004 to 2007 – was a period of significant increases in the exchange rate of the New Zealand dollar (NZD) meaning that, on that basis alone, inflation in New Zealand should have been very low. In fact, from 2004Q3 to 2008Q3, inflation averaged 3.4%; going up to 5.1% in the year to September 2008. (In late 2008 and early 2009, the OCR interest rate was slashed within a year from 8.25% to 2.5%; those high interest rates had been an important contributing cause of the 2008 Global Financial Crisis.)

Clearly, the rises in the OCR from 2003 to 2007 were aggravating inflation, not dampening it!

In the United States, interest rates stayed at 0.25% until March 2022. They then increased to 5.5% in 2023; and started falling late in 2024, tapering off at 3.75% at the end of 2025. Annual inflation peaked four months after the rise in interest rates, and then fell over the next year. Then from mid-2023 annual inflation in the United States stayed around 3%; until, that is, inflation went up this year to 4.2%. The United States was unusual compared to Europe in keeping its interest rates high; probably as a result of this, inflation stayed high in the USA compared to Europe. (Of late, France’s interest rates have been 2.15% and inflation around 2%; and this is normal for Europe.) The evidence here points to a direct causal relationship in the United States from higher interest rates to higher inflation rates.

In Canada, interest rates followed a similar cycle to that of the United States. But the peak was lower, and the climb-down from the peak went further. Most likely as a result, the inflation rate came down more in Canada than in the United States because the interest rates also came down by more.

In the United Kingdom the raising and lowering of interest rates followed a similar cycle. The OCR-equivalent interest rate went up to 5.25% and the rate has subsequently only come down to 3.75%. Inflation in the last two years, while not as high as in the United States, has been significantly higher than in New Zealand and Canada.

Australia only raised interest rates to 4.35%, and definitely had less accumulated inflation than New Zealand in the years from 2021 to 2023. But Australia only lowered to 3.6%, and this year has pushed its interest rates back up to 4.35%, the same as the post-Covid high. With very high and now rising interest rates in 2025 and 2026, Australia has had significantly higher inflation rates than New Zealand in the last twelve months; in Australia annual inflation rose to over 4% at the beginning of this year! While the UK has had high and falling interest rates in the last year, Australia has had high and rising interest rates. In the United Kingdom, measured inflation has come down; in Australia it has gone up.

If this was a court case being put to a jury, the evidence is ‘beyond reasonable doubt’ that higher interest rates aggravate rather than ameliorate inflation. The Reserve Bank, like a crooked prosecutor, gets away with its counter-evidential claims simply because the evidence is not put to a jury of common sense lay opinion. The evidence presented here, while conclusive beyond reasonable doubt, is not at all technical; certainly much less technical than much evidence routinely put before juries in New Zealand.

The New Zealand Reserve Bank thinks of itself as a science-based organisation. But it rarely addresses the quite available historical evidence which refutes the narrative that higher interest rates are required to lower inflation.

The state of the New Zealand economy

For more evidence, to understand the state of the New Zealand economy, we only have to look at my recent article NZ Economic Growth Over The Medium Term, where I published a chart showing that for the last 12 months, New Zealand’s GDP has been lower than GDP two years earlier. In common parlance, that level of low economic growth is called a recession. And all manner of social statistics support the evidence that the New Zealand economy is in a recessionary hole; and that the last thing it needs is a counter-stimulatory monetary policy.

Below I present a new version of that chart, this time showing per-capita GDP. This shows the growth or otherwise of output per person in the New Zealand economy. (This chart is really a measure of productivity, in that it only accounts for the working-age population; not the total population.)

This chart shows that the decline of the New Zealand economy began in 2023, an election-year which in the old-days would have featured a pre-election fiscal stimulus. But the Hipkins-led Labour government, favouring austerity-mode over election-mode, preferred to concede government than to follow a stimulatory policy. Labour walked haplessly into its biggest ever defeat, having three-years earlier secured its equal-biggest-ever victory.

Matters then got worse, with the present National-led government doubling down on fiscal austerity in the hope that the Reserve Bank would continue to provide reduced monetary austerity. Now the Reserve Bank has commenced a policy of escalating monetary austerity; a policy likely to dampen down any recovery which might have been underway in 2026.

Will the present recession be more like that of 2009 or that of the early 1990s? While the jury is out, the domestic situation New Zealand faces is more like that of 1990 than that of 2009. We note that, after 1990, New Zealand moved into a severe double-dip recession.

In the meantime, a growth of annualised productivity from about minus two percent to minus one percent is hardly an indication of boom times ahead.

Employing today’s teenagers tomorrow

I note that the Reserve Bank notes that there is “spare capacity” in the economy, and that the presence of spare capacity is a counter-inflationary influence. I will finish my argument against the present counter-stimulatory stance of the Reserve Bank, by noting a particular feature of coming ‘spare capacity’. That is our teenage population cohort.

My Growth of New Zealand’s Working Age Female Population (published 8 July 2026, and with an appendix for the male population) showed that the resident New Zealand population aged 15 to under 20 (taking this as New Zealand’s present teenage population) is substantially higher than in previous years.

The New Zealand population aged 15-19 in March 2026 was 13.3% higher than it was in March 2021. (In March 2026 there were 10.6% more employed teenagers, 58.1% more unemployed teenagers, and about 7.6% more teenagers aged 15-19 in education or training or neither.) Here we have a huge potential to contribute to the New Zealand economy in the next few years. But we will need to have a strong polytechnic system – focussed on educational outcomes rather than on business profitability – if we are to make sensible use of this ‘windfall’ human resource.

The signs are that our authorities will cast this birth-cohort into the labour-market underworld (or to Australia), as they did the previous two birth-cohorts (now aged 20 to under 30).

I note that, while employment of people aged 15 to under 20 increased 10.6% in the five years to March 2026, employment of people aged 20 to under 25 increased by minus 4.2% and employment of people aged 25 to under 30 increased by minus 8.4%. One important reason for this is the huge bleed of people in their twenties to Australia.

It is our most urgent priority, over the next five years, to render our present largesse of teenagers employable and employed. This means skills, and employment opportunities. The latest policy of the Reserve Bank – a kick in the guts to their putative employers – is a big ‘damn you’ to our present large cohort of teenagers.

Why do we tolerate a monetary policy which has a repeated tendency to ‘snatch defeat from the jaws of victory’ for countries’ economies? It’s because the priests (or hawks) of money spin an incomprehensible narrative that leaves most of the rest of us disengaged. The narrative renders good people helpless. Whenever the people complain about the high cost of living, the delegated academic spin doctors translate that into a wish for a brand of ‘anti-inflation policy’ which aggravates the high cost of living; and aggravates the human redundancy which is tearing apart our communities.

About the writer:

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

Keith Rankin, 8 July 2026 – Earlier I published two charts showing the demographic changes, from 1986 to 2026, in the female working-age population. See my Growth of New Zealand’s Working Age Female Population. These charts were organised around different birth cohorts; meaning people born in different half-decades from 1926-1930, through to 2006-2010.

Below are the equivalent charts for the male population; generally showing, compared to women, lower numbers of older men and more younger men.

About the writer:

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

Keith Rankin, 8 July 2026 – The charts below look at women born from the 1920s to the 2000s. The charts show the sizes of the different generations (strictly ‘birth cohorts’), and the impacts of international migration and mortality on those populations. The focus of the first chart is on older women. (I plan to do similar charts for men, as well.)

The data source is the Household Labour Force Survey (HLFS); the data run from early 1986 to early 2026. We can start by simply look at growing sizes of each birth cohort, with the 1931-1935 birth cohort (born during the Great Depression) being the smallest; it is this small birth-cohort (now in their early 90s) which is at present dying the most. Since the early 1930s, there has been a steady and significant increase in birth numbers, up to the 1961-1965 birth group.

In the chart above we see women of older working-age age groups. So, within each group, we see attrition through mortality. We note that death-attrition is more apparent for the 1926-1930 cohort than for subsequent cohorts (or at least up to birth cohort 1951-1955). For cohorts born before 1946, we note that death-attrition begins from about age 45.

With ‘boomers’ (born between 1946 and 1955), we see people in their 30s in the 1980s; and for the first time on this chart, a greater upwards impact from net immigration than the downwards impact of attrition. The number of people born in the early 1950s living in New Zealand has been boosted by net immigration, including New Zealand born people returning from overseas. Overall, the numbers of women living in New Zealand who were born in the early 1950s has barely changed since 1986.

Based on births in New Zealand – NZ-born people substantially dominated the population aged under 25 in the previous century – the early 1960s’ birth cohort was the most populous in New Zealand in, say, the year 2000. (Gen-J means ‘Generation Jones’, reflecting television culture; a popular American moniker for those born in the late 1950s and early 1960s.)

If we look at all those born after 1955, we see something of a ‘die-off’ – still small, but nevertheless significant – for the most recent data (data for the population in March 1986). This reflects the Covid and post-Covid years, and is alarming in the sense that in this chart it is for people aged under 70. We see a general pattern of population attrition after age 50, though for Gen-X that is outweighed by the impact of immigration in the 2010s.

For Gen-X we see what looks like a substantial OE (‘overseas experience’) population-hollowing effect for people aged 20 to 34. (In the HLFS dataset, we don’t have the data to show the extent of this for earlier generations.) Though, it seems likely that the high population born 1966-1970 has been boosted by substantial immigration this century of overseas-born people. Many New Zealand born Gen-Xers continue to live overseas.

The second chart shows the younger generations, starting with Gen-X.

In this chart, the birth cohorts are of broadly similar size – or at least were of similar size as children; look at the 15-19 age group, the purple column. The exception is the baby-bust (Gen-Y) generation, born 1976 to 1985. We might note that this initially-depleted generation had been relatively favoured compared to the generation before and the generation after. (This is in line with the Easterlin hypothesis: “the size of the cohort is a critical determinant of how easy it is to get a good job; a small cohort means less competition”.) Many of the familiar faces we see in the visual media, and in Parliament, are from this ‘Jacinda’ generation, essentially now in their forties. (Nicola Willis was born in 1981, eight months after Jacinda Ardern.) We see the young-adult hollowing impact of ‘OE’ becoming substantially less for people born after 1975; typically they were having shorter overseas experiences as young adults than previous generations, and had good employment options in New Zealand in the early 2000s.

Birth rates were back up after 1985 – the ‘baby blip’, so millennials (Gen-M) could easily have been called the ‘baby-blippers’ or just ‘blippers’. Then, teenage populations in New Zealand were very stable for generations born from 1986 to 2005.

The most dramatic feature we see for cohorts born after 1980 is the impact of immigration. In particular we see the huge increases, from immigration, in the numbers of women aged 30 to 44. We can be certain that there have also been similar increases in New Zealand of overseas-born women now in their twenties; but these increases have been offset by huge numbers of young New Zealand citizens departing, ‘permanently’ at least for now.

One final quite dramatic feature in this second chart is the huge increase in the size of New Zealand’s teenage population. While this is partly a result of more immigrants in 2022 to 2024 being whole families, it is also a reflection of higher birth rates in New Zealand for overseas-born women. Thus the change in the ‘look’ of New Zealand’s youth, especially pronounced in places like West Auckland, reflects a mix of both young immigrants and higher rates of New Zealand born children to people of Pacific and Asian ethnicities; to people whose parents and grandparents were, for the most part, new New Zealanders.

A ‘Westie’ myself, I welcome these ‘multicultural’ demographic changes, though I am aware that some people do not like this browning of New Zealand. However, I do find it regretful that the influx of new New Zealanders is matched by the size of the New Zealand diaspora. And I wonder if New Zealand will in a few years become a net recipient of international remittance funds, as individual New Zealand resident families increasingly look to their foreign-employed children for financial support.

New Zealand is renewing its working-age population, and it is renewing its maternal population; this represents a browning of both workers and mothers. This ensures that demographic decline will be less than in those countries our elites like to compare New Zealand with; and much less depleted than countries such as those in Eastern Europe whose younger people are being ‘hoovered up’ by those countries further west.

Finally

The statistics collected by governments reflect the social preoccupations of the upper middle-classes; the managerial elites. These people tend to see the world with an immediate rear-view perspective. Thus, today New Zealand arguably collects too much information about ethnicity and gender; and too little information about people’s ages, birth-years, and birth-places.

(Countries also need a stocktake of where their people were living at age ten. This is a boundary age for the formation of national identity. A twenty-year-old foreign-born New Zealand resident has a more developed sense of New Zealand nationality if they arrived at age four, than at age sixteen; or even at age eight compared to age twelve.)

About the writer:

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

Keith Rankin, 3 July 2026 – Last week I posted these two charts (Terms of Trade and Import Volumes) which presented, for New Zealand, a long-run view of two critically important (though under-reported) economic indicators. The terms of trade chart suggests that New Zealand has enjoyed unprecedented boom-times this century. The imports chart confirms this, revealing that – for more than three decades, starting in 1986 – import volumes increased by six percent per year; that is, import volumes have grown much faster than the New Zealand economy has grown.

(For New Zealand’s economic growth since 1990, see my NZ Economic Growth over the Medium Term Scoop 2 July 2026.)

In my text (see New Zealand Economy: Boom or Bust in Early 2026? Scoop 25 June 2026) I noted that, in 1985, a year before the dramatic change in New Zealand’s terms-of-trade fortune, New Zealand’s new political class launched a financial scheme – effectively creating an entity which might have been called New Zealand Financial Incorporated 1985 Ltd. The New Zealand economy then became – at least in significant part – a successful Ponzi scheme.

As we can tell from the case of the Icelandic national Ponzi scheme (associated with the regime of Prime Minister Geir Haarde) which began in the mid-2000s and ended late in 2008, the New Zealand scheme might have been equally short-lived. New Zealand’s scheme was rescued more by good luck (a terms-of-trade turnaround, starting with the substantial 1986 fall in global oil prices) and by a suite of foreign purchases of New Zealand assets accelerating in 1989. (New Zealand import volumes were 29% higher in the year-to-June 1990 than three years earlier; and, through the following deep recession, imports held up over the next three years.)

The principal feature of a Ponzi scheme is the promise, to investors, of high interest rates.

A Ponzi scheme is a consumption mechanism which masquerades as an investment portfolio. To fully understand what a Ponzi scheme is, it is necessary to know what isn’t a Ponzi scheme. A useful metaphor for consumption is ‘putting food on the table’.

Meeting the economic challenge: ways to put ‘food on the table’

There are a surprisingly large number of ways that economic entities – households, businesses, governments, whole nations – can ‘put food on the table’; meaning to provide for themselves.

The first way is subsistence. In a pure subsistence economy, there is no marketplace nor ‘legal tender’ money. Households hunt, fish, gather, garden, and/or corral animals; they may do this on a mix of private and common ‘land’ (considering the sea as a form of ‘common land’). A subsistence country, without imports and exports, is known as an autarky.

The second way is through transfers. I identify four basic types: gifts, theft, taxes, and inheritance. Gifts are not always altruistic; for example, slaves – human livestock – are provided for by gifts (as are other prisoners). Gifts and common theft are ‘current transfers’. Inheritances are ‘capital transfers’. Taxes are legally mandated transfers to sovereigns; they put ‘food’ on governments’ ‘tables’.

The third way is through ‘paid work’; receiving remuneration for work or the sale of goods or services produced. This kind of remuneration can be summarised as labour income; wages and salaries, including the implicit salaries paid to self-employed people. (Though most executive ‘salary packages’ are not labour-income in the usual sense; they represent portions of their employers’ profits.)

The fourth way is income derived from capital; contractual remuneration paid on account of the possession of many real and financial assets. Machinery and buildings – and canals and railways and airports – are real assets which may be leased or rented out. Bonds, bank deposits, and company shares are financial assets. Intellectual property is a bit of both. Privately-owned real estate is both. Categories of capital income include dividends (from profits), rents, royalties, and interest. Income accruing to assets is called ‘yield’. (Gold is also a financial asset, though is not income-bearing; as such, it has no associated yield. Money is a financial asset. Money – unless in an interest-bearing account – does not have yield; nor does crypto-currency, which can be thought of as ‘virtual gold’.)

The above four ways of putting ‘food-on-the-table’ are essentially current methods of provision for an economic entity such as a household. The exception mentioned so far is inheritance, which is a transfer of capital. If the economic entity is a nation state, the equivalent of income is export revenues.

There are also four capital methods to put ‘food on the table’.

The fifth way of putting food on the table is through the sale of assets. In principle, anything listed above as an asset can be sold; the potential cost is the loss of income deriving from such assets. A special example of an asset sale is the withdrawal of money from a bank deposit; that is, the drawdown of savings.

The sixth way is to borrow money and to use it to buy ‘food for the table’. That creates a debt; a liability which would normally be serviced from future current income such as wages. (Though a bridging loan would be serviced by a subsequent asset sale.) Compounding economic growth, in principle, facilitates wages rising more than enough to counter the compounding interest burden of debt; that allows the debt to be serviced and eventually repaid. Historically, much debt has been deflated by inflation (or, to a lesser extent, by bankruptcy); much historical debt has thereby been converted into transfers (the second way), enabling plenty of food to have been placed on the tables of many people born in the 1930s, 1940s and 1950s.

The seventh way is capital gain. If a recently acquired asset appreciates in market value, it can be sold, and the proceeds of that sale may be used to put food on the table. Alternatively, new loans can be taken out, allowing unsold assets to accrue capital gain (as collateral). The new loans put food on the table, in the full expectation that such new debts can be retired in the future through the sale of the collateral assets. (This can of course go awry if those capital gains prove to be ephemeral, meaning that the collateral becomes insufficient to repay the compounding debt.)

The eighth way is Ponzi finance. One version is to accrue unsecured debt (and to spend some or all of it on consumables such as food on the table), and to service that debt in the future by acquiring further unsecured debt. This becomes fraud – a form of theft – if the creditors are deceived with manipulative intent by the debtor entity. If the debtor entity has ready access to borrowed money, that access to future debt serves as an alternative to collateral. (Banks, necessarily, have privileged access to future debt; especially central banks such as the Reserve Bank. Nonbanks may have to secure future debt by offering to pay above-market interest rates.)

We note that, whenever a nonbank entity borrows money – eg from banks – then, from those lenders’ points of view, they have invested in the entity.

Thus, the more general way to think of Ponzi finance is through the concept of ‘investment’, in both the economic and speculative senses of that word. The economic meaning of investment is to purchase a new asset, to purchase on a primary market. The speculative meaning is to purchase an existing asset, to purchase on the secondary market; to purchase (say) a house or company shares or bonds on the resale market, either to gain a yield or in the hope of a capital gain. A new bank deposit is not in itself an economic investment – it’s saving, not investment – but it may facilitate a loan by the bank to another customer; such a loan would be an investment by the bank.

Many economic entities, probably most, finance current spending – put food on the table – through the use of more than one of these eight methods. For example, a superannuitant may receive a transfer payment, some wages, and some provision in the form of interest or rent or capital gain; or might have a reverse mortgage, whereby food on the table is funded by secured debt.

Ponzi Schematics

We note first that the word ‘scheme’ has pejorative undertones and overtones (like the words ‘regime’, ‘proxy’ and ‘propaganda’ for example); so, having a discussion about the possible benefits of Ponzi schemes runs counter to entrenched narratives, ie before any discussion has even started. (And of course the name Ponzi is also entrenched in our cultural ‘Book of Bad’.) Nevertheless, counternarrative discussions are what the world urgently needs; and on all manner of topics. Many things that are labelled as ‘bad’ are not entirely bad.

(A scheme is simply a proposal or a program. A regime is simply a government or an administration or a constitution. A proxy is an ally, a smaller participant in an alliance; the United States has numerous proxies. Propaganda is a narrative, drawing [as narratives typically do] more heavily on normative criteria – beliefs, and managed perceptions – than on verifiable evidence. To use the regime vis-a-vis government example: when we use this example of value-loaded language, regimes ‘scheme and propagandise’, whereas governments ‘administer and inform’.)

From here on, I may use the word ‘entity’ (‘Entity’ for a formal organisation) rather than ‘scheme’. A Ponzi entity would normally have the trappings of a business, though it could be that financial mechanism adapted by a country or a government.

Investors ‘invest’ in the Ponzi entity, essentially by lending it unspent money, and securing a contract to gain a yield; and having the invested money able to be withdrawn on relatively straightforward terms. (This contrasts with retirement-pension finance in which the yield or capital gain is compounded, and the ability to withdraw each ‘investment’ is strictly limited.)

The owners – or principals – of the Ponzi entity would themselves spend on themselves (rather than ‘invest’ in the economic sense) much of the money that’s paid to them; the rest of the money paid into the scheme would be held as a ‘liquid’ cash reserve. Thus, the Ponzi entity is essentially a consumer (like a household) rather than an intermediary (a bank or a vanilla finance company) or an ordinary business (which is a producer).

Investors in the Ponzi entity will be paid out – yield and repayments – from a cash reserve which is dependent on incoming funds from new investors (or additional ‘investments’ from existing ‘investors’). Thus, the Ponzi entity is commonly understood as a kind of financial perpetual-motion machine. It is like a time machine – not a time-travel machine – which works by continually borrowing energy from the future; and, as the future is infinite, there is no necessary endpoint when the machine stops working.

A Ponzi entity is able to continue to function so long as sufficient new investments are forthcoming. That ongoing functionality is facilitated by investors who infrequently withdraw their ‘savings’ and/or who are content to let their yields – their interest – compound; miserly investors, in other words, who deposit much and withdraw little.

The Ponzi entity fails when withdrawals exceed its ability to secure ongoing investments. Unusually large numbers of withdrawals can be called ‘capital flight’.

Harms and Benefits

In itself, a Ponzi Entity is an enterprise; a fraudulent enterprise if there is deceptive intent on the part of the principals. It transfers consumption from ‘investors’ to company ‘principals’. But these businesses can only thrive if there are investors who are simultaneously frugal and greedy; people who do not want to spend their money (or at least not for a while), but who also demand returns that are both high and liquid. (By liquid, we mean able to access their ‘money’ – interest or capital – on call and with minimal risk of capital erosion.) Such investors are frequently hoarders (maybe they are ‘insurance hoarders, saving for a rainy day’) – rather than people who save for particular short-term purposes – who expect to receive high amounts of interest in return for their hoarding; noting that hoarding is, in and of itself, a deadweight cost on the economy. (Hoarding – distinct from both economic investment and short-term saving – is a circulation blockage, much as fatbergs are blockages in the sewerage system.)

Under these conditions, the Ponzi entity is able to re-inject hoarded funds into the economy, negating the deadweight cost associated with miserly hoarding. Ponzi entities act to restore the circular flow of money in the economy; effectively removing or by-passing a circulation blockage (much as a stent might do with respect to a sclerotic patient with circulatory disease). Consumer spending – food on the table, to persevere with that metaphor – facilitated by Ponzi finance acts essentially as current transfers from miserly contributors to spendthrift principals. Ponzi principals compound debts which are neither serviced nor repaid; rather they are rolled over into either perpetuity or bankruptcy.

So, the harm is the spending of invested funds as if they were gifts; and the potential for the investors to lose their money. Ponzi finance is a victimless crime, so long as the investors (whose current needs are being satisfied by other means) continue to get what they want; which is an accumulating – that is, compounding – on-call savings balance. It’s victimless theft; that is, victimless until the scheme falls over and the investors lose their money.

It’s like much ‘benefit fraud’; a kind of fraud which helps to keep the economy ticking over and thereby generates about as much public revenue as it depletes. Indeed, maybe more revenue is generated than depleted. So the benefit of Ponzi spending is its inherent counter-recessionary nature; hence Ponzi schemes are most likely to thrive in circumstances of inequality, and may indeed stave off otherwise-immanent recessions.

When the Ponzi entity is a country; a nation-state

In this case, the investors are foreign entities: households, organisations, governments. The domestic economy is the Ponzi entity; resident households, organisations and governments are together the beneficiary principals. Though some beneficiaries may be more equal than others; New Zealand’s stunning growth of imports since 1985 has been distributed far from equitably.

In this nation-state case, it is extremely unlikely that the only way a country puts imports on its table is through the Ponzi scheme. Exports always continue to play some role in funding imports. Further, a Ponzi scheme is not the only way through which debt may be used for consumption and then subsequently not repaid. Inflation is another. (Those who have historically benefited from inflation are typically the parents of those who now rail against inflation. Indeed, there are stabilising benefits to inflation not unlike those circulatory benefits arising from Ponzi finance; that’s why inflation is regarded as compulsory, noting that New Zealand and many other countries have a policy requirement that annual inflation should be between one and three percent.)

Any country which has had continuous – or near-continuous – current account deficits for forty or more years can be said to be beneficiaries of a long-running Ponzi environment. New Zealand is very definitely one such country. Australia used to be such a beneficiary, too. The United Kingdom almost certainly is, though that country’s economy is obscured by the financial roles played by its many realm countries – including the likes of Jersey, Gibraltar, Bermuda, Virgin Islands, and Cayman Islands. Canada may be undergoing relatively recent ponzification.

A special case of a Ponzi country is the United States, to which the international community has granted specific stabilising privileges. The United States’ [Ponzi] economy is comparable to the giant black hole at the centre of the Milky Way. It separately involves both its longstanding current-account deficits (funded in perpetuity by foreign investors) and its longstanding federal fiscal-deficits (funded by both those self-same investors; and, critically, by the United States Federal Reserve Bank).

New Zealand

The last year in which New Zealand – very much one of the world’s consumer nations – did not enjoy a current account deficit was 1973. The circumstances from 1974 to 1984 were non-Ponzi; they reflected both an acute and a secular decline in New Zealand’s terms-of-trade through which New Zealand had no choice but to resort to overseas-sourced credit. There was no way during the decade from 1974 that any country facing such circumstances could export enough goods and services to pay for its imports.

Nevertheless, New Zealand’s policymakers did their very best to meet the challenge of ‘putting food on the New Zealand table’ through the diversification of income and the challenge of import-substitution. That is, until 1985, under the auspices of the ‘new-broom’ Lange-Douglas government.

Roger Douglas’s pre-election devaluation policy was most probably intended as a means to meet that challenge of more exports and fewer imports; this was a key feature of Douglas’s 1981 book There has got to be a better way. Douglas was not an innate Ponzi-schemer; he was largely played, a victim of the 1970s and 1980s global resurgence of financial liberalism. His tenure as Finance Minister thus came to be characterised as a period of over-valued rather than under-valued exchange rates, despite the principal talking-point of his book. Even more than a history of perpetual current account deficits – which is also a historical feature of developing economies – a multi-decade history of an appreciating exchange rate in a country with a floating currency is also a feature of international Ponzi finance.

In the first half of 1985, a very deliberate policy of financial deregulation was implemented; and so quickly that doubters had no time to mount a defence. The expectation at the time was that New Zealand’s traditional commodity-export-based economy was in terminal decline, and indeed suggested by the Terms of Trade chart. Little attention had been paid by the new elites to the substantial and mostly market-led restructuring of the tradable sector; restructuring that had already taken place, under duress, in the years from 1974 to 1984.

The initial flagship component of the new policy was the floating of the New Zealand dollar (NZD). The exchange value of the NZD would have to be defended by a monetary policy of unprecedented high interest rates. In other words, this was a Ponzi scheme; arguably a scheme with fraudulent intent. Those interest rates were nectar to foreign speculative investors; many of those investors actually being intermediaries such as pension funds and their likes, guardians of the captive funds of foreigners saving for their retirements. The overall intent – established through the revamped 1980s’ rhetoric of economic liberalism – was to treat the tradable sector (exports, and import substitution) with almost complete contempt.

And indeed there was a substantial disintegration of the tradable sector, which had been constructed for over a century, since the days of Sir Julius Vogel. Examples which some may remember were the near-collapse of sheep-farming, with some farmers diversifying into a short-lived goat bonanza. And there was the 1980s’ ocean-fishing expansion, including the rapid exploitation and depletion of the orange roughy fishery.

New Zealand’s increasingly competitive manufacturing sector went into steep decline before recovering at a permanently lower share of GDP. One example of this was the Whangarei Engineering Company which built excellent tugboats – and the Bounty replica – but which went under because New Zealand buyers were encouraged to favour imported tugboats subsidised by foreign governments (in this case, Australia). New Zealand became religiously opposed to any kinds of subsidy or assistance to the tradable sector; almost unique in the world.

(On this matter of nation-state Ponzi schemes with arguable fraudulent intent, the classic case is that of Iceland from 2006 to 2009. Other Nordic countries – Finland and Sweden – did something similar in the late 1980s and early 1990s; and, like Iceland in the 2000s, they got caught out. Also, and again like Iceland in the 2010s, they recovered relatively quickly; though they became Ponzi investors rather than Ponzi principals, contributing to the circulatory instability which has plagued the world since the 1980s. Sweden in particular continues to amass huge and ongoing current account surpluses, the exact opposite of New Zealand. Another country – like New Zealand – which continues to have Ponzi-structured finance as part of its ‘putting bread on the table’ mix is New Zealand’s south seas’ neighbour, the Kingdom of Tonga.)

In 1986, a year after the high-interest Ponzi scheme was established, something remarkable happened. The longstanding secular decline in New Zealand’s terms of trade reversed; a circumstance of fortune which eventually (ie in the 21st century) became equivalent to Norway’s 1970s’ discovery of huge oil and gas fields in the North Sea.

So New Zealand’s Ponzi economy, established in 1985, came to be blessed with an unanticipated windfall; a windfall large enough to facilitate the building of a new export-oriented tradable sector despite the high interest rates and overvalued exchange rate. (The overvalued exchange rate probably helped; many of the costs of this new sector were internationally priced, meaning that the high exchange rate became like a subsidy; especially as the expanding pool of rich foreign buyers were themselves relatively insensitive to the prices they were paying.)

Thanks to that change of fortune – which first began in 1986, and re-began around 2001 with the growth of the China market – New Zealand was able to fund an astonishing four-decade import spree, funded this century from a mix of bonanza-like export prices and Ponzi-style investments. These ‘investments’ were in large part financial inflows, drawn-in – more than anything else – by New Zealand’s attractive-to-investors monetary policy settings from 1985 to 2023; and supplemented by booming real estate markets in the 2000s and 2010s. Despite slow income growth, New Zealand consumers have had plenty of food on their tables; though more tables than ever also went without, due to increased inequality. New Zealand now imports most of its staple granular foods; in the language of the classical economists, New Zealand – a protein-food-exporter – has become a corn-importing country.

Government Ponzi finance

New Zealand as a Ponzi entity may be called New Zealand Financial Inc. The government is not a Ponzi principal – the New Zealand government has low debt by international standards – but does whatever it can to attract ‘private investment’ to support the national Ponzi scheme. And it prioritises monetary policy (while delegating it), which means that there is an understanding that interest rates will – whenever necessary – be raised to continue to be a drawcard to attract funds from the world’s less spendthrift countries.

A country very different to New Zealand is Japan. The world’s fourth largest nation-state economy, it has a long history of high personal savings and of current account surpluses. Its people don’t like paying taxes. Japan went through a shocking decadus horribilis in the 1990s, following a brief few years in the late 1980s of a financial bonanza underpinned by massive though illusory capital gains and an overvalued exchange rate.

As a result, Japan pretty-much invented a new macroeconomics, and it works. It is a macroeconomics, pioneered without acknowledgement or recommendation by the United States as a result of its post-WW2 status as the world’s financial centre of gravity (though most Americans fail to see how global prosperity – including their own prosperity – hinges on United States debt); a macroeconomics predicated on high levels of government debt and perpetual public-sector financial deficits. (Such deficits need not all be spent on infrastructure or bureaucracy or military capacity; also, they can be recycled back to people – in a way that poor people get the same dollar or yen amounts as rich people – as a contribution to some form of universal income, resulting in more private prosperity and less inequality.)

The Japanese government operates a virtuous domestic Ponzi scheme; the Government is the principal, and the citizen taxpayers are the investors. In essence, the people lend their money to the government at zero or near-zero interest rates, as an alternative to paying more taxes to the government. Indeed the Japanese get to ‘eat their cake and have it’. The government spends the citizens’ surplus cash, which still remains there for the citizens to spend as well and at will, should they need to or wish to spend it. Japanese householders will never all want to spend all their money invested with their government all at once.

(Modern fractional banking, likewise, is based on more than one party being able to spend the same pool of funds; this is reality, not magic.)

Finally

The beneficial reality of Ponzi finance is that, so long as there are many people with money they either don’t wish to spend or (as in KiwiSaver) are not allowed to spend or have so much money that they simply cannot spend it all, then there can also should be Ponzi schemes to accommodate them. In the case of Japanese savers, they much prefer – than the alternative, which is to be taxed more – to invest their money in a safe Ponzi scheme; that scheme is their own government.

Japan runs on government deficits and current account surpluses. Japanese citizens invest in both foreign and domestic Ponzi entities without coming a cropper. Others eat their cake, while they continue to have it. The Japanese government can remain a secure Ponzi principal because it has the sovereign privilege of being able to raise taxes; a sovereign right that it is unlikely to have to effect anytime soon because it has had a well-functioning economy of circulation, low non-stimulatory interest rates, and optimal inflation.

Will the New Zealand Ponzi scheme – established 1985 – ever fold? Maybe not. New Zealand is small and the world is large. Indeed those who have invested in New Zealand, a Ponzi entity for four decades, have generally done well for themselves. So far, the only significant casualties have been lower-income New Zealanders who have been priced out of the labour market and the housing market; not the scheme’s foreign investors.

But a trend-change in the terms-of-trade – meaning persistent falling terms of trade in future decades – could certainly trigger a demise of the scheme; so could an inability to continue to attract sufficient investors for any other reason. The challenge then would be to look to the many new New Zealanders – many who are internationally well-connected – to reestablish a balanced trading economy, and for New Zealand citizens and denizens to accept significantly reduced levels of imported goods and services. And to embrace a model of public finance which works for rather than against the people.

About the writer:

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

Keith Rankin, 2 July 2026 – Two weeks ago I published a chart showing New Zealand’s latest economic growth, showing the whole of the last two years compared to the whole of the previous two years. This gives a better picture than the usual charts which look at simple annual growth. If an economy is barely larger in the 24 months to March 2026 compared to the previous 24 months, then it’s too early to pronounce a return to ‘economic growth as usual’, let alone the success of a ‘growth strategy’. As it turns out, while 2025 GDP (gross domestic product) may have been bigger than 2024 GDP, it was hardly bigger at all than 2023 GDP.

My new chart uses the same data, but focusses more (and differently) on the latest 12-month period and placing that in a medium-term context.

Short-Medium and Long-Medium

These days ‘short-term’ change usually means very recent change (ie within the last 12-months), or – at most – comparing the most recent 12-months with the previous 12-months.

So I call the black plotted-line ‘short-medium’; looking back from 2025 or 2026 to 2023. The most recently-plotted point represents GDP for the year-to-March 2026 compared to GDP for the year-to-March 2024. (Points have been plotted every three months, so the previous point is the year-to-December 2025 compared to the year-to-December 2023.)

The black plotted-line shows that, from the year-to-June 2025, New Zealand’s total GDP (not GDP per person) has been lower than the whole year two years earlier. (Only slightly lower, and subject to revision; but lower nevertheless. GDP under National’s political watch has been lower than it was under Labour’s watch; despite National’s claim to giving priority to economic growth as a KPI [key performance indicator].)

We note that the three previous major downturns in the black plotted-line are clearly identifiable as the Asian Financial Crisis of the late-1990s, the Global Financial Crisis of the late 2000s, and the Covid19 Crisis of the very early 2020s. (None of these were attributable to wars.) On the other hand, the current recession and the early 1990s’ recession have been clearly connected to New Zealand’s macroeconomic-policy environment.

The early 1990s’ recession followed on from a recessionary period which began in 1986. This pattern of chronic recession is rare; it is more normal – in New Zealand and especially in other countries – for a recession to be immediately followed by a period of above average growth. (This is because post-recession growth is ‘low-hanging-fruit’, driven by reducing labour and capital surpluses, rather than being dependent on productivity growth.)

So, the very-early 1990s should have been a period of high growth. Eventually that very rapid post-recession growth did take place from 1993 to 1996, in the wake of a prolonged ‘double-dip’ recession.

The experience of the early 1990s gives context to the early 2010s; under a National-led government, as is the present non-growth experience. In the early 2010s, the recovery in New Zealand from the Global Financial Crisis was surprisingly slow; was significantly slower than it should have been.

These findings – relating to the early 1990s, the early 2010s, and now the mid-2020s – suggest that there is something fundamentally anti-growth in National governments’ policy-frameworks during the post-1984 neoliberal era. Growth-prioritisation rhetoric is not enough to actually achieve economic growth.

Labour-led governments – on the other hand, and without prioritising economic growth – have consistently achieved normal levels of growth (around three percent); indeed despite the Covid19 crisis and the Ukraine-Russia war which began early in 2022. The look of this chart is that, in practice if not in rhetoric, that National is anti-growth and Labour is not anti-growth. (My suspicion is that Labour, by running a larger governmental apparatus, inadvertently facilitated the circulation of money. While productivity did not grow remarkably under Labour; at least aggregate demand held up, enabling normal growth to take place.)

Smoothed Plots

The shortcoming of the black-line plot – and just about any other published growth plot, except in academic economic history – is that the earlier period being compared to the more recent period is itself only 12-months, and may in some cases lead to misleading results. Indeed we see this for the Covid19 period; with growth for 2022, in which 2022 is being compared to 2020, showing as artificially high.

The best way to address this is to compare a more recent period of one-year with earlier data that covers much more than one year.

So, consider the grey-plotted line. For this plotted line, annual data are compared to averaged five-yearly data. We see that the growth peaks and troughs are significantly less; that’s what smoothing does, to reveal the medium-term more and the short-term less.

The grey line confirms the same stories outlined above. But it shows the early-2010s’ malaise rather better than the black plot; the black plot overstating the recovery in 2011 and 2012. And it shows that the growth experience of the mid-2000s (under Labour) was more substantial than that of the mid-1990s (under National).

Now consider the blue-and-red plotted line; this represents the longer medium term. This compares the most recent year of data with five-years of data averaging eight years prior. (Eight years represents three inventory cycles of the New Zealand economy; inventory cycles are short-term growth spurts and pauses, which average at about 32 months.)

With the blue-and-red line, the shorter term growth fluctuations are ‘ironed-out’, and we see very clearly that economic growth operated at normal levels (three percent annually) while Labour-led governments were in power. And persistent below-normal growth ‘performances’ under National-led governments. (2016 medium term growth was, for example, surprisingly low, given the fact that the Global Financial Crisis was at the centre of the period being compared to 2016.)

Finally, we note just how little the Covid19 pandemic affected New Zealand’s economic growth. The present downturn, under National’s watch, looks like its heading for eight-year lows comparable to 2013 and 2014, or less.

Do we really care about the long term?

Many policy positions these days are claims that New Zealand must make policy for the long term rather than for short-term “sugar hits”. This item – Spend Today, Save Tomorrow: Budget 2026 Promises Restraint, Eventually – was almost certainly prepared by Ruth Richardson, who was Minister of Finance in the early 1990s (the Ruthanasiaperiod; see the chart above), and who is the current ‘brains’ behind the New Zealand Taxpayers’ Union.

Indeed, the National Party has a (KiwiSaver) savings’ policy whereby the government will put money in babies’ bank accounts at birth; money which they will only be able to access in or after 2093, and even that is contingent on the government not raising the ‘retirement age’. Long-termism gone mad!?

But our governments these days almost never look back; credible long-termism means looking back, critically appraising historical narratives and omissions. Last week I posted two charts which look back to 1957, and they tell a disturbing story about the real reasons for the prosperity of a significant minority of New Zealanders today. The Government has no idea about these facts; and I do not expect that anyone close to the government will have reflected upon my charts.

(Indeed the government has never informed New Zealand citizens the realised quantity and quality of the promised – eg $10 billion suggested in 2012, John Key reveals plan for asset sales, Stuff 6 Sep 2012 – gains to education, healthcare, and infrastructure spending arising from the ringfenced half-sales of our big electricity gentailers in 2013 and 2014. Stories about the gentailers include: Profit taking as thousands sell power shares RNZ 30 Nov 2015, and Four big gentailers face new competition rules in bid to level playing field RNZ 26 May 2026.)

Whereas the present government may be more interested in the 2090s than the 1990s, there is a movement on the political right to ‘reclaim’ history. See this item about David Seymour’s new friend (refer ACT’s David Seymour on latest weather events, climate change, RNZ 27 Jan 2026) Javier Milei: Javier Milei’s far-right rewrite of the past, The Listening Post, Al Jazeera, 30 June 2026.

The takeaway from the Listening Post report is: ‘whoever holds power in the present has the opportunity to distort the narrative of the past, and whoever controls the past (to a significant extent) determines the future’. (The exact quotation is: ‘George Orwell wrote in 1984 “Who controls the present controls the past, and who controls the past controls the future”‘.) We note that such distortions are most potently done by omission rather than by commission. Thus, it is up to people like me to post reminders about forgotten facets of the medium- and long-term past.

If we are going to play the long-term game – as John Key did, cynically, in 2012; and as politicians today do, when they repeat finance-industry talking points about retirement savings – then our powerbrokers should be urgently pressed into some reflective intercourse with the past, at least over a comparable timeframe. Thus, if we are to enact policies with the 2090s in mind, we should be looking back – critically – to at least as far as the 1950s. (It’s hard to do in New Zealand, though, because the 1950s to early 1980s are the least digitised part of New Zealand’s historical record; time-pressed academics often eschew such periods to study.)

About the writer:

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

Keith Rankin, 25 June 2026

The standard narrative about the New Zealand economy – the narrative pushed by the Luxon-led government – is that New Zealand’s gross domestic product is ever-so slowly climbing out of a hole; a growth hole made by a mixture of New Zealand Labour, and Vladimir Putin and Donald Trump creating a difficult trading environment.

Certainly, the growth hole is there – see my New Zealand Economic Growth Update, Scoop, 18 June 2026 – but is it because of factors beyond the present government’s making, as Mr Luxon would have us believe? Or is the Luxon/Willis government itself largely to blame?

The hole does not extend back to the previous Labour-led government; rather, this is a ‘sink-hole’ which has taken place under the watch of the present National-led government. In particular, under the watch of Minister of Finance Nicola Willis. This appears reminiscent of the growth hole in the early 1990s overseen by the then National Government, and most associated with Finance Minister Ruth Richardson. The factor in common with both regimes has been fiscal austerity; austerity which undermined aggregate demand and thereby undermined these governments’ own revenue bases. Government retrenchment may have generated the very fiscal crises which the two government Ministers claimed they were fixing.

But, other than that, and considering New Zealand’s trading economy, is New Zealand suffering a short-term economic bust? Or is New Zealand enjoying a cyclical boom which will not last? Is New Zealand currently at the top or the bottom of the metaphorical cliff?

Terms of Trade and Import Volumes

The most important measure of the international trading environment for a country – especially a country which relies on importing and exporting goods – is called the merchandise terms of trade. It is a measure of the prices of exported commodities relative to the prices of imported merchandise.

Big picture first. New Zealand’s terms of trade have almost doubled over the last 40 years. That means a given quantity of exports buys nearly twice as many imports in 2025 compared to 1985. That statistic represents an incredibly prolonged period of very good luck for New Zealand and New Zealanders; access to a windfall of imports enabling New Zealand to become a truly first world consumer society.

The terms of trade chart, above, reveals a ‘game of two centuries’. In the just-over 25 years so far of this century, New Zealand’s terms of trade has improved remorselessly by seventy percent – albeit punctuated with a few brief setbacks. That places New Zealand this quarter-century in a similar fortunate place as Norway was in the last quarter of last century; Norway then exported crude and refined oil, New Zealand this century has exported regenerating wealth in the form of green (grass-fed produce), white (wine, milk, and honey), and red (meat).

In the years from 1957 to 1986, New Zealand’s story was very very different, a decline in the terms of trade of 32 percent in less than thirty years. This was the kind of challenge that led to something very close to fascism in late 1970s’ southern South America; and coincided with an elected government in Australia being ousted by a political coup led by that country’s Governor General. Further, in New Zealand it was compounded by the substantial loss, for United Kingdom political reasons, of New Zealand’s principal market country. New Zealand was more reliant on the British market in the early 1970s than was any other country.

By 1984 it had faced up to this ‘perfect storm’ of challenges, and largely met them. New Zealand was exporting meat to Iran, dairy (and dairy machinery) to the Soviet Union, and wool to China. And New Zealand had embarked on a large-scale “growth strategy” (as the then-government preferred to call it) of energy import-substitution (and indeed energy export, through the production of aluminium from renewably-generated electricity).

The first important turning point in New Zealand’s terms of trade came, unexpectedly, a year later. It was the substantial real fall in oil prices from 1986. (Another big feature of the global economy at that time – in September 1985 – was the Plaza Accord, which reversed the trading balance between the economies of the biggest players, especially United States and Japan; the core effect was to devalue the US dollar and to substantially revalue the Japanese yen.) Later, in the 1990s, New Zealand appeared to be settling into a pattern of stable commodity prices, in that post Soviet Union time of European restoration.

The biggest driver of the bountiful pattern of the last 25 years – of this century – has been China. New Zealand has been a general beneficiary of high ‘income elasticity of demand’ in the ‘Global South’, meaning especially in East Asia. The rising export prices New Zealand enjoyed resulted from rapid economic growth in Asia. That export price stimulant may not be over yet. It all depends on the continued per capita growth of the Asian economies; growth continuing to favour higher protein diets in that very large continent.

In reflecting the global economic environment, in addition to the upwards trend New Zealand’s terms-of-trade seems to reflect a global trade cycle of about three years. Look for the black circles on the chart, especially for this century. The apparent regularity of the ‘three-year cycle’ may be misleading though, in that the brief but sharp downswings can be related to particular global events: the 911 attacks on New York and Washington, the global financial crisis, the Eurozone crisis, the Syrian refugee crisis, and the early stages of the Ukraine war.

What is most apparent is that, based on both the identified trend and the apparent cycle, New Zealand as a trading nation has never been in a more fortuitous situation. With all that demand for New Zealand produce, the New Zealand economy should today be in the best state that it’s ever been in (despite, that is, the Ukraine hiccough which adversely impacted global aggregate demand in 2022 and 2023).

Regime change in New Zealand

New Zealand’s political regime-change in 1984 (much more than a mere change of government) translated into an economic regime-change in 1985. As Geoff Bertram noted in the Oxford History of New Zealand, the change was from a political economic establishment dominated by tradable sector interests – think Federated Farmers, Chambers of Commerce, Manufacturers Association – to a political economic establishment dominated by the finance sector. The new broom – which liked to ridicule the Think Big growth policies (of the early 1980s) which focussed on rebalancing the tradable sector in an ambitious and financially sustainable way – came to be called neoliberalism. Neoliberalism remains New Zealand’s reigning paradigm to the present day, and the financial services lobby remains stronger than ever (noting the extraordinary hold that KiwiSaver seems to have over us).

The red circle in the chart marks the beginning of the new economic regime – the first half of 1985 – when the New Zealand dollar was floated, the financial sector was deregulated, and monetarist ‘high interest rate’ monetary policies were adopted. The ‘current account balance’ was abandoned as the number one target of macroeconomic policy – indeed it was largely abandoned as a target at all – and ‘inflation’ became public enemy number one in the new policy narrative. The more broadly accepted economic growth and employment targets came to be regarded as consequential to getting inflation to (and keeping it at) acceptable levels; at least that was the rhetoric of neoliberal macroeconomics.

The placement of the red circle suggests that, in 1985, it was widely believed that the terms of trade would continue their steady downward path, and that New Zealand would have to reinvent itself; perhaps as a financial services centre. Relatively more money would flow into the country as ‘investment’ – as defined by financial servants, not by Keynesian economists – and relatively few tears would be shed for demotion of the tradable sector.

In practice, in 1985, New Zealand (considered as a private-public financial partnership) launched the world’s most successful Ponzi Scheme. High interest rates (needed to prop up the newly floated New Zealand dollar), and liberalisations of the financial sector, would draw in investor funds – much of it ‘hot money’, otherwise known as the ‘carry trade’ – which would be serviced (and paid out when necessary) from subsequent inflows of financial capital. New Zealand – or at least New Zealand’s more financially wealthy segment – would be able to import, with minimal constraint, the best goods and services that the world had to offer, and without being constrained by stagnant or diminishing export receipts.

Of course, neither Finance Minister Roger Douglas nor his ‘new broom’ Treasury masters consciously thought of this policy as a Ponzi scheme. Nevertheless, that’s exactly what it was; a financial scheme to access global goods and services which were in abundance thanks to miserly savings rates in especially Europe and Japan. (We also note that this was never a secret Ponzi scheme; for those who can read the financial tea leaves, this was a cunning scheme hiding in plain sight.)

We note that the big global events that turned around New Zealand’s terms of trade happened independently, a full year after the regime change in New Zealand. Nevertheless, the reversal of the terms of trade decline reinforced the new import-facilitating financial regime. The New Zealand Ponzi Scheme which was inaugurated in the first half of 1985 would be helped by fortuitous decreases in import prices – especially oil – as well as increases in the prices of New Zealand’s traditional (and later non-traditional) exports.

Demand growth – rapid demand growth – was now coming from Japan and South Korea and from other East Asian capitalist economies. That process paused in the 1990s, with Japan in particular having to deal with the consequences of its financial collapse from 1991, and especially as a result of the Asian Financial Crisis of 1997 and 1998. The process of East Asian demand growth resumed from 2000; with the added bonuses of China joining the New Zealand party and California’s discovery of New Zealand (think Americas Cup and Lord of the Rings).

New Zealand has enjoyed an import bounty

My second chart, above, shows the growth of import volumes in the same period, from 1957 to the present. The dashed line shows a trend of six-percent annual growth of import quantities from 1985 to 2008, with the six-percent trend resuming for another decade after the 2008/09 Global Financial Crisis. (We note that after 1975 – during the ‘international stormy seas’ years from 1974 to 1984, when the National government came into power – import volumes dropped in the late 1970s, and then restored in the early 1980s as the import requirements of the new import substitution growth strategy – Think Big – took precedence.)

In the years before 1973, the growth trend of imports – significantly less than six-percent per year – roughly matched the growth of export volumes and the growth of GDP; that is, imports then were not outgrowing the rest of the economy. We also note that the blip in imports in 1974 and 1975 (and the crash in 1976) largely reflected the huge increase in New Zealand’s terms of trade then known as the ‘commodity boom’. New Zealand’s exportable product prices went up first, and oil prices – oil being New Zealand’s principal importable commodity – went up dramatically at the end of the commodity boom; the main trigger – but not the only cause – of the quadrupling or crude oil prices was the October 1973 Israel war against principally Egypt and Syria.

The six percent annual growth of import volumes (from 1985 to 2008) contrasts with less than three percent annual economic growth over that same period. That’s two decades in which exponential import growth was more than twice as fast as the growth of economic output. Further, if we look at 1987 to 2018, six percent annual growth of import quantities for three decades, the average annual economic growth rate was under 2.7 percent. That’s creaming it; literally in part (from dairy exports), and (in approximately equal part) as a result of the continuance of New Zealand’s successful Ponzi scheme. That scheme began in 1985 when expectations were that the traditional New Zealand economy was fizzing out.

What about now?

The chart of import volumes shows a remarkable decline in the rate of import growth in the 2020s. This may be in part due to the short-lived decline of New Zealand’s terms of trade in 2023. With terms-of-trade reaching a record high in December 2025, however, that import growth should recover. (We note that import growth did recover after the Richardson-inspired austerity recession of 1991 and 1992.) But import growth will probably never recover to the six-percent annual growth rate that a complacent New Zealand enjoyed for three decades.

Are we reaching the denouement of the Ponzi Scheme inaugurated by Roger Douglas early in 1985? The answer, of course, is ‘maybe’. I note that it was only the recent rises in New Zealand’s terms-of-trade that have kept the exchange rate of the New Zealand dollar ‘above water’; and then, only just. This month the dollar has been falling again. On a trade-weighted basis, the New Zealand dollar in May 2026 was priced exactly the same as it was in September 1985. (It maxed in July 2014, at a time when the central banks of Denmark, Sweden, Switzerland and Japan were establishing negative wholesale interest rates; meaning at a time that New Zealand was a particularly attractive target for the international carry trade.)

As time went on, New Zealand’s Ponzi-based economy became increasingly difficult to service. Hence New Zealand has not really been able to fully capitalise on the escalating fortune it has enjoyed as this century has progressed. The lower socio-economic groups, in particular, have been missing out.

New Zealand may now be at the peak of periods of both long-term and short-term good fortune. The summer of 2025/26 may be as good as it gets. Or the long run trend may extend for another three-year cycle.

Certainly, the pursuit of anti-growth fiscal policies – policies designed to suppress aggregate demand – make it much harder for New Zealanders to service their ever-increasing global liabilities; support by the New York credit rating agencies for the Luxon/Willis policies notwithstanding. This Ponzi Scheme’s continuance relies on the performative trick of persuading foreign ‘investors’ that they will continue to receive returns from New Zealand similar to those returns they have enjoyed since 1985. The scheme’s continuance will also be facilitated by one-percenter semi-immigrants buying real-estate in New Zealand, keeping the money churning.

Foreigner faith in New Zealand – indeed in New Zealand exceptionalism – has proved reliable for forty years. As long as they continue to bring the money to New Zealand that enables the outgoing interest to be paid, then the post-1985 New Zealand economy will continue on a ‘business-as-usual’ basis. New Zealand’s stunningly favourable terms of trade – increasingly favourable over 25 years – will continue to bolster foreign perceptions that their money is safe. And expected increases in interest rates in the second half of this year will favour the continuation of the carry-trade which brings short-term money into the country.

Will New Zealand’s terms-of-trade continue its seemingly remorseless improvement? Possibly yes. Especially if the world demand for animal protein continues to rise at rates in excess of global economic growth. But also, possibly no. The sense of crisis and vulnerability in the world is now very high. Importing ever-more protein may be, for much of the rest of the world, a ‘nice-to-have’ rather than an economic priority.

In the meantime, despite near-zero economic growth (in the two years to March 2026, compared to the two years to March 2024; see chart on Scoop), the New Zealand economy is enjoying boom trade conditions (indeed as was reflected in Fieldays this month). A boom squandered.

About the writer:

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

Keith Rankin, 19 June 2026 – I draw attention to the role of Jeffrey Sachs as an important global public intellectual, speaking out in these dangerous times in which too many Western elected leaders – and far too many bureaucrats – have withdrawn into intellectual blinkerdom, unwilling to think or engage outside of those partisan narratives.

I refer in particular to: Jeffrey Sachs: Germany Is Leading Europe Toward World War III – YouTube [31 May 2026]

And to his two open letters to Germany’s political leader (Friedrich Merz whose party, itself a coalition, got just 28% of the vote in last year’s election):

An Open Letter to Chancellor Friedrich Merz — Jeffrey D. Sachs

An Open Letter to Chancellor Friedrich Merz Security Is Indivisible — and History Matters — Jeffrey D. Sachs

Sachs has been a world-renowned development economist for around forty years; indeed, I have, since the late 1980s, known of his work. He’s nearly my age, so he’s old enough to speak out without too many repercussions; it is too late for his career to be blighted by political spite. He continues to hold a formal position as Director of the Center for Sustainable Development at New York’s Columbia University.

The Cassandra Problem

My main issue here is that public intellectuals like Sachs can see more clearly the risks that powerful ‘players’ are taking; in particular downside risks that, if or when they eventuate, may take all of us down, and not just those risk-takers who seem to take pleasure in their global-scale recklessness. But the telephone is ‘off the hook’; just as the original Cassandra could see how events in ancient Troy were slowly unfolding, but nobody with sufficient influence would take heed of her concerns.

As it is now with, since Sachs’ more recent open letter, severe attacks by Europe-backed Ukraine on Saint Petersburg and on Moscow – the Moscow attack was just last night (Moscow residents complain of black rain after largest Ukrainian attack hits oil refinery, BBC) – the points made by Jeffrey Sachs are chillingly more real than he imagined at the end of last month.

Aside

We note that by Europe blatantly attacking the two largest cities of a former superpower – still a significant nuclear power – Europe is risking, simultaneously, three forms of global catastrophe. Not only are these Europeans actively engaging in nuclear war brinkmanship, they are accelerating global environmental catastrophe, and they are doing as much as any other nations have to create a stagflationary pinch-point in the global economy by targeting the global oil market.

Further, we should note where Russia sits in the world economy. Its GDP (Gross Domestic Product) sits somewhere in between that of Italy and that of Spain; alternatively, a bit smaller than that of Canada (in Nato) and a bit larger than that of Australia. Russia, given its history and its size, is now a poor country with many resources that certain richer countries might like to have more control over.

Germany’s GDP is significantly more than double that of Russia, while the Euro Area has a GDP seven times larger than that of Russia. We should also note that Ukraine’s GDP is significantly smaller than New Zealand’s. New Zealand’s is the same as Greece’s, and one-seventh that of Australia.

Sachs’ main warnings, and those of his interviewer Glenn Diesen

I’ll quote from the 31 May 2026 interview.

“What has occurred in the last couple of weeks is a startling escalation of rhetoric and the Ukrainian attack on the girls’ school in Starobilsk, Luhansk.”

“These are alarming days and the response in Europe has been escalatory in rhetoric … rhetoric out of the Baltic states about perhaps attacking Kaliningrad [the Russian exclave which was once the heartland of Prussia].”

“Shocking, not the kind of behaviour that we need in a nuclear age, incredibly irresponsible, incredibly neglectful of your and my life.”

“I put the principal responsibility on Europe; it has shown no capacity to engage in any kind of diplomacy except to whine when the US and Russia speak [to each other].”

“This chest-thumping about how saintly Europe is and how evil Russia is, this unending one-sided narrative … is going to get us to complete disaster.” [Sachs of course is not saying that Russia is saintly and Europe is evil, though some people do imagine that being against war is tantamount to being in favour of ‘the enemy’.]

The most serious European duplicity came when a “commitment was made at the Bucharest Summit of 2008 … the decisive event … Nato’s commitment to expand into Ukraine and Georgia”. [Noting that kinetic warfare – which may become the 2026 ‘word of the year’ – is politics by other means’, or at least ‘geopolitics by other means’; Europe’s expansive agenda is a mix of geopolitics and geoeconomics with the provocation of warfare – kinetic politics – as a subsequent option.]

“Angela Merkel hopes that the war will end within the next ten years [!?]” Given that this is, mainly, a war of attrition on the Donbas front, a military stalemate not unlike the Western Front in World War One, how many more soldiers’ lives will be lost if it goes on for another ten years? Sachs gives Merkel credit for having formerly supported a non-expansionist solution, that Ukraine could be a non-aligned nation with an autonomous eastern region (comparable to the German-speaking autonomous region of northeast Italy).

“The core issue of this conflict is [and always has been] Ukraine’s neutrality [that is, not Ukraine’s existence].” Not too many years ago, that country was set for a prosperous future whereby it could deal constructively with not only the European Union, the United States, the United Kingdom, Russia, and Türkiye; but also with the likes of India, China, the African Union, Iran and even Israel.

“The immaturity and shallowness of the people who lead us is something to behold … they are playing games in Armenia and the South Caucasus, but I digress … is something so wrong in the European mentality that war is so normalised?”

“I don’t know if Merz knows any of this, if he’s done his homework, if he’s aware of history; but he’s the Chancellor [so he has certain responsibilities].”

Glenn Diesen: “I know for a fact that something has changed now … this incremental escalation of the last four years has now crossed the line … Europeans now speak openly about war with Russia, the goal of destroying it … we are now at war, we attacked Russia, this is not a proxy war any more … we don’t have the luxury any more of just putting the Ukrainians in front of us and letting them die for us … twelve years of this nonsense sabotaging every diplomatic path, it’s beyond insane.”

On the inability of critical intellectuals to be heard and engaged with

“While I can still publish an open letter … our governments are in a bunker … they don’t talk to the public, they don’t engage in any discussion … they won’t answer … Chancellor Merz is not going to answer me, that goes without saying, but in general they have hunkered down and operate without responsibility.”

Another name for an intellectual bunker is a ‘rabbit-hole’. Essentially, our political discourse today involves a significant minority of people in various rabbit-holes – one or two much larger than the rest – sniping at each other, and otherwise accusing others of nefarious motives. I would argue that there are three kinds of people who are not in rabbit-holes: some of those who are switched off by ‘the conflict of opinions’ (that is, the genuinely apolitical), the semi-political class who want to be able to trust politicians and technocrats but generally feel they cannot (but know they must vote in general elections), and intellectuals who can be quite polemical but who are characterised by their willingness to engage constructively and creatively with others.

“We have all the trappings of democracy, the trappings of accountability, but … there simply is no response; if I call a senior official in the European Commission I don’t get an answer, I don’t get a callback, they know who I am, I’ve been dealing with them for over forty years and I know a number of them on a personal level; they simply will not speak any more … they are hunkered down, they cannot defend their position … all they can do is propagandise in one direction … and use sanctions against certain people [no doubt including Yanis Varoufakis].”

“What we don’t have, even within our own countries right now, is open discussion, and this is an explanation of how we go day-by-day with falsehoods hanging in the air unresolved. They don’t try to resolve them, there’s no independent commissions or responses or answers … it’s a very dangerous situation because of the [absence of] normal processes of truth-telling or analysis or … understanding how the other side thinks … and if there’s something wrong with how the other side thinks, discussing it openly [so as to] clarify … none of these processes happen right now.”

“The publics are disgusted by this; Merz’s popularity is essentially in complete collapse [from a low base!], Macron and Starmer too, it’s not as if these people are expressing the will of their publics, absolutely the opposite … the behaviour is so bizarre that this point, so counterproductive, so dangerous.” (Re Starmer, and his survival beyond 2026, I note that his rival Andy Burnham has just won by a massive margin, the Makerfield by-election.)

“You [Merz] said you were going to talk, to find an intermediary … for the sake of 450 million people in the European Union, find someone and get started.” (A former Chancellor, Gerhard Schröder, is deemed too ‘pro-Putin‘ by many; but it would be a waste of time putting up someone like Kaja Kallas, who Sachs noted is too inflexibly anti-Putin.)

Glenn Diesen: “It’s incredible, diplomats who don’t believe in diplomacy, leaders who ignore their basic national interests and seemingly have contempt for their own public; journalists who see it’s their job to defend narratives. We risk a legitimacy crisis, [these people] are not actually doing their jobs.”

Conclusion

Jeffrey Sachs, and others less well known, may be political intellectuals with their own foibles and biases; but they are not living in bunkers, rabbit-holes or echo-chambers. They engage; and provoke through argument rather than through a mixture of rhetorical gaslighting and military violence.

My understanding of social science is that it is a truth-seeking enterprise, undertaken in the full knowledge that truth itself is an irascible concept. I can see Russia – economically smaller than Italy and whose resources are very stretched, yet who will never surrender to western pretensions of a unipolar world – being provoked into using nuclear weapons, as soon as this year. (I would rate this conflict going nuclear this year at about a 25% chance; I would never board a train if I believed that it had a 25% chance of crashing. The problem is that humanity and all other species are already on a ‘train’ from which no creature can alight.)

Jeffrey Sachs and other intelligent and courageous people are trying to warn us. We should listen, and respond with reason rather than quasi-religious rhetoric about Good and Evil.

The world becomes a rather confusing place when we see a self-ordained ‘Good’ doing many evil things, and ‘Evil’ doing some good things. The greater evil may be to label oneself – or at least one’s own side – as Good, thereby (through presumption) casting the other side(s) as Evil.

About the writer:

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

Keith Rankin, 18 June 2026 – The latest quarterly economic growth data were released by Statistics today. The following chart summarises eight-quarter (ie two yearly) economic growth rates from 1990. I have colour coded the data to match the political party leading the government for each period. (Shades are lighter where the data spans a change of government.)

In the charted data, it is clearly possible to see the effects of two international financial crises, one pandemic, and two domestic fiscal crises. While both of the two fiscal crises are/were associated with National governments, the first ‘Richardson crisis’ followed on from the Labour-associated economic crisis linked to Roger Douglas. (The data series available only allowed me to go back to 1990.)

An important point to note is that, historically, there has generally been a significant ‘bounce-back’ of economic growth following a period of economic slowth. (There was an exceptionally large bounce-back in New Zealand in the 1930s after the Great Depression.)

The two exceptions to this bounce-back generalisation are the two growth phases preceding the two National-led domestic fiscal crises. The Richardson recession followed a period of flat economic growth from 1986. And the Luxon/Willis recession seems to have flattened what should have been a post-Covid19 bounce-back.

Recession? Or just slow growth?

Although the chart above doesn’t show a technical recession in 2025 or 2026, there has certainly been a recession, according to the latest figures. Real production GDP was $73,625 million (expressed in 2009/10 prices) in the December 2025 quarter, whereas it was $73,752 million two years earlier.

It’s a similar story of decline for the June and September quarters of 2025 (when National was in charge), compared to the same quarters of 2023 (when Labour was in charge). It means that the total GDP for the year ended March 2026 was $282.97 billion compared to $283,180 billion for the year ended March 2024. This is despite significant population growth in New Zealand between 2023 and 2025. And this is despite a markedly improving terms-of-trade; meaning a highly favourable global economic environment for New Zealand.

GDP lower than it was two years earlier is a recession. This latest recession seems to have been particularly unnecessary, occurring in otherwise unusually favourable times. Why is there so little criticism? Where is Labour’s evidence-based critique of National?

About the writer:

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

Keith Rankin, 17 June 2026 – Yesterday morning I listened to John Cambell (RNZ) interviewing an Iranian-born New Zealander, who came to Australia as a refugee 42 years ago, and subsequently moved on to New Zealand. (Refer Iranian-born Kiwi hopeful following deal signing, RNZ 16 June 2026.)

Iran was in the news that day both because of the previous day’s US-Iran armistice ‘deal’ and because New Zealand was scheduled to play Iran in the FIFA Football World Cup in Los Angeles yesterday afternoon (NZ-time).

Campbell (asking about the deal): “I suspect you have thoroughly mixed feelings this morning, do you?”

Kiwi-Iranian (who I will not name here, because he is not a public person): “Yes we do, and hopeful that peace is finally there. Talking to my family they still can’t believe that peace will be achieved there because the third party in that war has not fully committed themselves to that peace, and that’s Israel.”

Campbell: “And of course, sorry to interrupt but … [as Cambell shuts off the Israel talk with a few platitudes]. Can you describe what your family in Iran have been living through during this period?”

Kiwi-Iranian: “Two of my cousins got injured but they couldn’t go to the hospital because of the fear of America brutally attacking Iran; the hospital, the university, the infrastructure, the ping-pong execution of the regime [ie the assassinations of some of Iran’s leaders] … imagine living in there and when the bomb comes and thinking the next one is for me. On top of that the regime has expanded their executions …”. The interviewee finally said something in relation to what Campbell was probing for, evidence of governmental violence notwithstanding the fact that the nation of Iran may have been experiencing attack in early March from within as well as from without; given that such attacks from within – immediately after the start of the war – were the full expectation of the “brutal” American and Israeli aggressors.

Campbell: [more pushing for statements about whether the regime is more or less evil than before]

Kiwi-Iranian after giving answers to these questions as quickly as he could, resumed his own voice [which Campbell had being trying to hijack]: “John, one thing we’ve got to realise as Kiwis is that this war break the international law, the Article 51 of the United Nations – they violated that law – and New Zealand said nothing. New Zealand Kiwis give a lot in World War One and World War Two; a lot of Kiwis die to create an international law to protect human beings. If we don’t respect that, if we don’t follow that, if we don’t honour those laws, what do we expect tomorrow if they attack New Zealand; if somebody attack New Zealand, which law will protect us? We have got to point out that the New Zealand government failed to acknowledge this.”

Campbell [ignoring everything unprompted that the interviewee had said, from his own voice]: “I want to ask you about the failure of the justification of the war … [not at all acknowledging that the interviewee had clearly said that there was no justification for the war, and that the interviewee was speaking on behalf of the attacked party], so the regime [a loaded word, Campbell could have said ‘government’] – and you are not alone in saying this [and the interviewee said this only after having been earlier prompted by Campbell] is now tougher more hardline and less sentimental than it was before [failing to acknowledge that there has been no ‘regime change’, and that no nation or government under attack can ever act in exactly the same manner while defending themselves from multiple strikes than they were before hostilities commenced] and further emboldened by their leverage over the Strait of Hormuz, right [interviewee tried to get a word in edgeways], so in real terms what has this conflict achieved? What has President Trump achieved?” [The interviewee has already answered that, ‘mass destruction of civilian infrastructure’ and ‘ping-pong executions’ of political and military leaders; but Campbell is trying to extract a political comment from this guy as if he is a technocrat who can answer for the party attacking his country.]

Interviewee: “They have achieved nothing. What they have achieved is they have strengthened the regime [yes, Iranians are patriotic too; it is normal to put domestic politics aside when your country is being attacked with missiles]; they have realised that like China that maybe they are not a military force against America, they don’t have a nuclear bomb, but that they can turn the war to the economy, which affects everyone including you and I, our standard of living. So, they kill thousands of Iranians, Iran got stronger, Iran’s going to support the forces against Israel, the Hezbollah and the terrorists, and they’re going to get their money. The conversation is that the Europeans are going to ease the sanctions on Iran. By the way the whole sanction business will always say that sanctions should be aimed at governments not at the ordinary people; why don’t they release food and medicine for Iran; at the moment thousands of people are out of work, Iran doesn’t have social benefits like we have got in New Zealand, so people are struggling, really struggling, the condition of living is really worse for them. The regime has got their own supporters in the street flag-waving and destroying any oppositions; they [ie the aggressors] have achieved nothing but make the conditions worse for Iranians”.

Campbell gets his way in the end, in that the interviewee, who has not been in Iran for over four decades, does kind-of condemn the Iranian government, following a series of leading questions. Good on the interviewee for making his principal points, despite not having been asked (except in a very general way) about the external aggression that Iran has faced, and despite Campbell’s manoeuvres to shift the discussion from the interviewee’s narrative towards a validation of the Campbell narrative. And despite Campbell’s clear desire to push the story away from Israel. Interviewers need to appreciate that listeners want to hear the voices of the interviewees, not the interruptions, quips, and steering by the interviewers.

Campbell didn’t even ask the interviewee who he was supporting in today’s World Cup match!

Campbell’s ‘summary’ of this interview came half an hour later, in another interview, BBC’s Frank Gardner with latest on US/Iran deal signing: “We had an Iranian New Zealander on about half an hour ago, and he said that we have a new regime that in some respects is more hardline and tougher and less sentimental [whatever ‘sentimental’ means here] in its response to opposition in Iran”. These are Campbell’s talking points, John Campbell’s voice; not the voice of his interviewee.

John Campbell wouldn’t think that his style of journalism is propaganda; and he’s probably not pushing his own personal agenda here. Nevertheless, his line of questioning prompts certain kinds of answers and moves away quickly when the answers don’t fit the intended line of response. The propaganda lies in the presumptive Eurocentric narrative(s) which Campbell and his colleagues have absorbed through repetitive exposure to these narratives; and limited exposure to narratives which run counter to these. This uncritical absorption of narratives, unprofessional for an enquiring journalist, is professional practice to social technocrats (people who apply narrative ‘knowledge’ to their daily work practice). Indeed, Campbell treated his guest as a social technocrat rather than as a family member of victims of lethal aggression from the west beyond Iran’s borders.

This kind of ‘journalism’ has of course become commonplace, not only at RNZ. Indeed, almost every time I hear about Israel’s blatant military expansion into Lebanon, the story – whether on TV3, TVNZ, or RNZ – presupposes that every act by the Israeli military in Lebanon is a ‘defensive’ response to some past, present or future act by Hezbollah (subtext, by some Iranian-backed ‘terrorist’).

(Hezbollah, we should note, was formed among the refugee Palestinians and resident [mostly Shia] Muslim Lebanese in 1982, as a resistance movement – not a terrorist movement – in response to the terror invasion of Lebanon by the Butcher of Beirut, Ariel Sharom. I have a book at home – still on my bookshelf unread – called Assassination of the Butcher of Prague – which is about the (often counterproductive) resistance to the Nazi terror occupation of Czechoslovakia in 1942. That Czech resistance movement is never referred to with the disparaging sense of ‘evil’ which our media perpetually apply to Hezbollah.)

Re Lebanon, the New Zealand media almost never reports the ‘double-hit’ tactics by the IDF, whereby – after an allegedly anti-Hezbollah ‘operation’ – there is often a second strike which targets local paramedics or journalists. Further, the New Zealand media – and I mean the likes of RNZ and TVNZ – do not report the ongoing Israel genocide in Gaza (where it is common for ten or so people to have been murdered in their tents or their rubble in a single day and where there is now virtually zero Hamas or other resistance, given that the ‘terrorists’ largely observe the negotiated Cease-Fire). And, even – before 2026 – when there was much Hamas resistance in Gaza, these New Zealand media outlets barely reported the ongoing Israeli military and settler atrocities in the ‘West Bank’, where there was no Hamas, mainly Ghandi-like peaceful resistance.

Another issue with the journalism is the repeated presumption that there has been ‘regime change’ in Iran. Well, no! The democratically-elected president’s the same, the foreign minister is the same, the murdered Supreme Leader has been replaced by his son, and the important Speaker of the Islamic Consultative Assembly (who will sign the deal) has been there since 2020. Not only is the Islamic Republic still the same, three of the four most important personnel are the same, and the fourth appears to be a younger carbon copy of his elderly now deceased father.

The Following Day

This morning’s coverage of the football match was somewhat disrespectful, in that after an excellent game of football with four excellent free-flowing goals scored, the coverage barely mentioned the Iranian players’ contribution to the game. (Refer All Whites draw with Iran at FIFA World Cup.)

While the New Zealand players and fans clearly appreciated Iran’s contribution to the game – as indeed did the many expatriate Iranian fans, some of whom were politically ambivalent – the New Zealand media only described New Zealand’s performance and the excellence of  New Zealand’s goals.

About the writer:

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

Keith Rankin, Thursday 11 June 2026 – On Monday night I watched the movie Truth (available on Netflix until 13 June), about the circumstance which ended the career with CBS of anchor Dan Rather and 60 Minutes investigative reporter Mary Mapes.

In September 2004, CBS ran a story about the probable facts that George W Bush, United States’ president: (1) avoided military service overseas in the late 1960s by using privileged connections to score a place in the National Guard as a trainee pilot, (2) had not graduated as a pilot, and (3) had been AWOL (absent without leave) for much of his time of service.

An important part of the backdrop to the story was that Bush’s opponent in the 2004 election – John Kerry – was being accused of falsifying aspects of his record of service in Vietnam. Kerry had become the victim of a dirty tricks campaign, commonly associated with Karl Rove. (See Why Bush’s man is fighting dirty, The Guardian, 5 Sep 2004; and Campaign ’04: Kerry in Combat: Setting the Record Straight, Time 30 Aug 2004. And note this 2008 movie, screened in the United Kingdom as Dirty Tricks: The Man Who Got the Bushes Elected, which outlines the backstory to the Bushes and the rise of ‘dirty trick’ politics.)

In the movie, Mary Mapes – under inquisition – was accused of conducting her research under a ‘liberal’ presumption that George Bush was guilty; whereas, under formal law, accused persons should enjoy the presumption of innocence until proven otherwise. Dan Rather was accused, implicitly, of lacking judgement by going along with this. The story itself is an example of conservative cancel culture in play (noting that cancel culture has, in recent times, been presented as a sin of the political Left).

The CBS story was somewhat rushed in being put together, due to scheduling constraints; and there were some editing constraints, to fit the story into the allotted time for the 60 Minutes format. Nevertheless, the story was made professionally. However, the movie Truth did suggest one issue about journalistic zeal which remains unresolved today; the idea that there are many secret truths out there – facts of public interest – for which journalists should have an investigative zeal to reveal.

That idea is that truth is a simple matter that is technically available, and for all to see once any ‘cover-up’ barriers are removed. It is arguably true that this CBS 60 Minutes story was such an example of ‘revelation journalism’. In reality, knowledge shortfalls are more complex than the ‘cover-up’ narrative would allow; indeed, facts really do vary with perspective. It is appropriate that truth should be contested, and to remain unresolved.

The accusation against CBS was that, on account of ‘liberal bias’, especially on the part of Mapes, there had been a lack of scepticism in the evaluation of one piece of evidence presented in the story. While it was technically difficult for anyone to prove that a relevant copied document might have been fraudulently created by a disaffected source, the 60 Minutes crew did indeed show that the document was credible by showing that some typewriters in 1968 could produce the relevant font and superscript.

Yet that document, which was most probably genuine, was only part of a web of evidence pointing to the veracity of the story. If this had been a jury trial, and based on the totality of the evidence presented, I am sure that George W Bush would have been ‘convicted’ of hiding the truth relating to his military service as a young man.

Truth and Proof are sticky concepts, both subtle and elastic

Real ‘practical world’ truth and proof are in fact statistical concepts; they have an attached probability. Almost nothing that is non-trivial can be known to be true with absolute 100% certainty; almost nothing – except abstract truths such as those of mathematics – can be known with zero doubt.

To establish truth in an inquiry (such as a Court of Law), the formal procedure is first to presume the innocence of the accused party; this presumption – that an accusation is false until proved – is known as a null hypothesis. In the trial itself, evidence is presented and interrogated by multiple parties. In the resulting evaluation, a jury or a judge effectively estimates the probability that the accused is innocent (as presumed); the name for this probability is doubt. In a criminal trial, to get a significant – ie guilty – result, the null hypothesis must be disproven beyond reasonable doubt. The null hypothesis is thus rejected. Social scientists typify reasonable doubt as five percent doubt, meaning that guilt is at least 95% certain.

If judges think that there is – based on the evidence presented to them – a five percent chance that an accused is innocent, then the judgement can be said to be on the cusp or balancing point of a guilty verdict. (A judge would resolve that balance one way or another, maybe with a coin toss; whereas a jury might be split and a retrial called for.)

For some purposes, for example in a capital trial where the accused is subject to the death penalty, reasonable doubt might be reclassified as one percent doubt rather than five percent doubt; that is, 99% certainty of guilt. (Indeed, one reason for scrapping the death penalty in many jurisdictions is that it makes it harder to get a conviction from a jury, given the greater burden of proof required.)

In the case presented in the movie Truth, my assessment of all the evidence presented against George Bush junior was a two-percent doubt of his innocence; meaning 98% certainty of his being guilty of using oligarch privilege to avoid military service in Vietnam. So, under the five-percent doubt rule, I would have found him guilty, regardless of a few technical misgivings relating to one item of evidence. But, if I was applying the one-percent doubt criterion, I would have been obliged to find him not-guilty. If one-percent had been the maximum doubt allowed and I had two-percent doubt, then I would have had too much doubt to establish the historical case against the then POTUS (President of the United States).

Had it been an accusation of treason rather than of privileged avoidance of military service, the president would have kept his head, on account of the high burden of truth faced by his accusers. And of course, based on the story as presented, Mapes and Rather should have kept their heads; metaphorical heads should never have rolled at CBS. There was massive doubt that they had been seriously unprofessional. They were doing their jobs, subject to the practical constraints that investigators face.

The process was, thanks to a low level of doubt, unable to disprove President Bush’s performance of obligation; and was also unable to prove the manifestly high (but not perfect) broadcasting standards of Rather and Mapes. Truth proved to be a capricious commodity. Thanks to about 2% doubt, Bush kept his reputation. Yet, despite perhaps 98% doubt, Mapes and Rather lost their broadcasting careers.

No ‘acceptable level of doubt’ was applied to Mapes and Rather. Instead, they were subjected to a reversal of the presumption of innocence, exactly what Mapes in particular had been accused of doing (towards George W Bush) by her interrogators.

Reversing the Presumption of Innocence

An important implication of the judicial process is that if a judge or jury believes that (based on the evidence) presented there is a 90% chance (or even a 94% chance) that an accusation is true, then that accusation should be evaluated as ‘not-true’ (the nuance being that ‘not-true’ is not the same as ‘false’). The more transparent language for such a finding is ‘not-proven’ rather than ‘not-guilty’. Further, in a court of law where only two verdicts are possible – guilty or not-guilty – then all ‘not-guilty’ verdicts are euphemisms for ‘not-proven’.

The only way that innocence can be ‘proven’ is to reverse the burden of proof. If you start from the premise that an accusation is true, then you can come up with verdicts of ‘innocent’, or ‘not-innocent’. If the criterion was ‘innocence beyond reasonable doubt’ – that is, a presumption of guilt – and evidence showed that there was ten-percent doubt of innocence, then the verdict would have to be ‘not-innocent’; someone would be deemed guilty (and punished) despite a 90% certainty that they were innocent! Even if the criterion was ‘balance of probability’ (where say 30% doubt is acceptable), if the evidence suggested a fifty-percent chance of guilt and a fifty-percent chance of innocence, the verdict would still have to be ‘not-innocent’. Having to establish innocence beyond reasonable doubt, having to face a presumption of guilt, would be a chilling legal requisite; the epitome of a police state.

So, there are various different standards of truth – indeed (literally) ‘extremely’ different standards of truth. That is not necessarily a bad thing, so long as context is taken into account; but it can be problematic, especially for accused parties who somehow find that their truths must bear the burden of proof whereas other dubious truths can hide behind a requirement of disproof.

University of Auckland case on RNZ on Tuesday 9 June

The introduction to this story played on RNZ goes like this: “Auckland University is facing criticism from its own staff over its handling of sexual assault, bullying and harassment allegations against a former [academic staff member who] left his role at the University of Auckland after an investigation late last year found that he had likely bullied and harassed a student. A legal academic at the university is now raising serious concerns about the investigation.” (Refer Sexual assault investigation at the University of Auckland, RNZ 9 June 2026.)

The word “likely” suggests that the case was conducted on the ‘balance of probability’ criterion, meaning that 30% doubt would have been acceptable to make a career-ending judgement. However, listening to the story itself, it is clear that the concern raised by academic critics is that the process is biassed in favour of the accused, and gives insufficient regard to the rights of the accuser(s).

While the investigation finding included the phrase “not enough concrete evidence” (meaning doubt in the 5% to 50% range; that is, certainty of guilt in the 50% to 95% range), the principal complainant had argued that there should have been a presumption of guilt – “she felt that the onus was on her [the accuser] to prove the allegations” – rather than a presumption of innocence towards the accused. Indeed, the accused was granted the appellation of “whistle-blower”. (If this was the Mapes versus Bush case, it would be like Bush having to prove his innocence rather than for Mapes – the whistle-blower – to establish his guilt. Indeed many ‘liberals’ would wish that were generally so; so long as the whistle-blower was neither the ‘state’ nor a litigious neighbour with a propensity to complain about anything.)

This University of Auckland case is a case in which some people (including at least one legal academic) believe that, for guilt to be established, the burden of proof – the presumption of innocence – should be reversed. (As indeed it was Mapes but not for Bush.) How then should a democratic society decide who should benefit from the presumption of innocence, and under what circumstances should a presumption of guilt apply instead? An important part of the context here is to ensure the ongoing safety of vulnerable potential victims; a consideration that was also applicable in the Mapes/Bush case, given the chilling effect that the case had on investigative journalism in the United States.

The issue really comes to a head when we consider binary cases. The classic binary case in New Zealand has been the 1994 Bain homicides.

The 1994 Bain homicides

This represents a binary situation whereby the innocence of one accused party necessarily means the guilt of the other.

Here we had a case of five violent deaths within a single family, where the only two possibilities considered were that the killer was either David Bain or Robin Bain. (A possibility not considered was that Robin killed four of the family, and then David killed Robin; a possibility of dual-guilt which I will ignore here.) Thus, if David was innocent then Robin was guilty, and vice versa.

David Bain was put on trial twice for murder, de jure. But, because there was a ‘binary’ truth to be established, Robin Bain was also on trial, de facto. A guilty verdict for David would have been a not-guilty verdict for Robin. And a not-guilty verdict for David would have been widely understood as the establishment of Robin’s guilt.

The criterion for guilt was ‘beyond reasonable doubt’, which we may quantify as five percent acceptable (ie ‘reasonable’) doubt. In the first trial David was found guilty. Let’s say that the jury had a 3% doubt re David’s guilt, which would have been beyond reasonable, then there would have been a 97% doubt about Robin’s guilt. With David formally – ie explicitly – on trial, he benefited from the burden of proof, otherwise understood as the advantage of doubt. Whereas Robin, implicitly on trial, suffered from the disadvantage of doubt re David. Robin was implicitly cleared in that first trial; 97% doubt of Robin’s guilt meant 3% doubt re Robin’s innocence.

In the second trial, I believed the evidence presented against David Bain to be similarly strong as the evidence in the first trial. (Though, not having attended either trial, my impressions from media reports may have been awry.) The jury reached a ‘not-guilty’ verdict, which could have meant that they were ninety percent sure of David’s guilt; that is, a 10% level of doubt. Ten percent doubt for David – requiring a ‘not-guilty’ verdict – translates to 90% doubt for Robin. Yet, at the end of the second trial, the effective judgement was that Robin Bain was guilty; that is, despite there always having been more doubt about Robin’s guilt than about David’s guilt.

Robin was presumed to be guilty; not because there was less doubt about his guilt, but because he was subject to a different criterion for the establishment of guilt.

In a sense David Bain is George Bush in the original example; and Robin Bain is Mary Mapes. David and George benefited from the presumption of their innocence. Robin (and Mary) suffered directly from the presumption of innocence granted to David (and George).

I am not arguing that the legal system should drop the presumption of innocence. This presumption is required because of the consequences that could be faced by a party formally judged to be guilty. But the formal result of a trial is not the same as ‘the truth’, especially when the verdict is not-guilty. The formalised non-guilt of David Bain became the guilt of Robin Bain. The exoneration of the youthful George Bush became, despite about 98% doubt, the guilt of Mary Mapes and Dan Rather.

In the University of Auckland Case, the accused person vacated his academic career without the statistical establishment of guilt. The truth in that case remains firmly ambiguous. We can say, though, that the accusers in this case clearly had a weaker case than Mary Mapes had on that 60 Minutes program.

What about cases of scientific truth? There can be many public victims when private mis-truths are presented as protected public truths.

One final case: Cholera in London in 1849 and 1854, and epidemiologist John Snow.

Here we have a case where an orthodox professional narrative enjoyed the presumption of ‘innocence’, with a heterodox scientific investigator being required to bear the burden of proof beyond reasonable doubt (eg 5% doubt), or even beyond unreasonable doubt (eg 1% doubt).

John Snow is now the de facto ‘patron saint’ of epidemiologists. (Refer Maps and Legends, Lee Jackson, The Lancet, 13 April 2013.) In those fatal cholera years nearly 200 years ago, Snow was a heterodox medical scientist who had already built something of a reputation in the field of anaesthesia. He was no crackpot or conspiracy theorist, as heterodox investigators risk being cast as.

In those days there was an established ‘scientific’ view that cholera was a lethal airborne disease. There was also an important heterodox view that it was a waterborne disease.

The established procedures for technocratic science – including social science – are that the heterodox community has to bear the burden of proof with respect to any disagreement over what is more likely to be true. That means, in practice, that the heterodox community has to deliver an evidence-based argument to the orthodox community or to the wider community (for example, to an imaginary jury) that would leave no more than five percent doubt.

Snow came to regard the waterborne explanation to be superior, and, during the 1849 epidemic, set out to investigate the matter. He investigated two nearby streets in Horsleydown (Southwark, London, south of the Thames close to the subsequent site of Tower Bridge) which consumed water from different sources; that is, water reticulated by different suppliers. In one street cholera was widespread. In the other cholera was practically absent. Further, for those streets with cholera, there were no discernible differences in air quality from those without cholera. (Refer On the Mode of Communication of Cholera, internet archive.)

My reading (from Steven Johnson’s The Ghost Map 2006) is that Snow’s 1849 research constituted proof, beyond reasonable doubt – ie with, at most, 5% doubt – that cholera was waterborne rather than airborne. The public health ‘establishment’ however rejected the finding on the basis that there was too much doubt, maybe 6% doubt. As a result of this rejection, and despite the balance of probability favouring the waterborne explanation, the authorities continued to ignore the requirement to replace wastewater facilities which would feed into someone else’s water supply.

The result of inaction was that, when the cholera returned in 1854, there were similar devastating consequences as in 1849. It was in 1854 that John Snow went on to create his famous map, which suggested a particular water-pump (Broad Street) in Soho (London’s West End, north of the Thames) was supplying cholera-contaminated water. The Broad Street pump was eventually closed.

The resulting aftermath, that the residents of Broad Street stopped getting cholera after the pump was closed down, is the more well-known ‘proof’ that cholera was waterborne.

In fact, the 1849 research was better proof (note Snow Mistake: Correcting Myths in the Mapping of Cholera Joshua Stevens 2025, and Our sense of Snow: the myth of John Snow in medical geography Kari McLeod 2000); there was evidence that the shutting-down of the pump made no difference because by time it was shut down its water was no longer contaminated. Further, abundant hydration has always been the primary cure for cholera, and the shutting down of a water source made that cure harder to attain.

Still, the further ‘proofs’ did not sway the established ‘scientific’ narrative. The final proof in London had to wait until 1866, after the new sewerage system (which down-rivered the city’s effluent) had been largely built. In 1866, the only significant outbreaks of cholera were in the East End districts which had not yet been connected to the new system. As stated in Cholera and the Thames: “The third outbreak of cholera hits the east end of London, an area of town which was not connected to Bazalgette’s system; the rest of the city is unaffected by the outbreak; Snow’s water-borne theory begins to become more widely acknowledged.”

Yet, even then, in many other countries and cities, establishment technocrats clung onto the airborne view (and imposed that view on their Ministries of Health and their Municipalities), resulting in lethal cholera epidemics in cities such as Hamburg and Naples decades after the matter was resolved in British public health policy.

This needless truth deficit, which condemned millions of people to ghastly and avoidable deaths, was that the established ‘scientific’ belief was shielded by the presumption of innocence; and that those who tried to meet an unnecessarily strict ‘burden of proof’ found that – as outsiders – the Inquiry system was biased against them. Just as the Inquiry system depicted in the film Truth was biased against the professional journalists (Mapes and Rather).

A public health system which was shown to be lethal ‘on the balance of probability’ was allowed to persevere for many decades in many places, thanks to a presumption of technocratic innocence that was quite inappropriate. Scientists with beliefs that were known to be most likely false – even 90% likely – were allowed to manage public health policy in many jurisdictions and to implement dangerous systems in light of those ‘scientific’ beliefs.

In the case of the technocratic establishment, the public requirement for the most accurate truth available outweighs the rights of these officials to the presumption of innocence. Wilful ignorance of probable or possible truths is not a defence. The choice – whether made consciously or not – to be ignorant of heterodox knowledge is not an excuse for public policy failure.

Finally

Mary Mapes in particular seems to have had one failing, which is common amongst investigative journalists. Such journalists tend to see truth as something that is known but all-too-often covered up on account of its inconvenience to some powerful party; and that their mission is to uncover these known truths. Reality is, however, that almost all important truths come with some degree of doubt; and that good science research increases or decreases those doubts, and good science practice acknowledges those doubts.

Journalists, scientists, and other professionals need to be humble in their relationship with truth. Few known knowns are free of doubt; and there are almost certainly many more known unknowns (knowledge subject to significant doubt) and unknown unknowns than most of us presume. Humans may be clever, though not as clever as is commonly supposed.

Truth-seeking is a worthwhile yet murky business. Truth is substantially unattainable, as is absolute proof. We need to build our lives around evidence, context, principles, enjoyment, compassion, respect, uncertainty, and openness to new information and ideas. Not around belief and opinion posing as faith or truth.

We have processes to make parties accountable for their alleged misdeeds. While we need such processes, we should also acknowledge their imperfections, their misuse, and indeed their contradictions. We should not go on believing improbable truths when more probable truths do not meet a sufficient threshold of certainty. To do so is a perversion of the scientific method.

About the writer:

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

Keith Rankin, 21 May 2026 – In 2026, a number of countries desperately need one or two circuit-breakers to trigger an increase in aggregate demand; an increase in spending which can induce both consumer spending and business confidence.

Keynesian economics tells us that the most reliable circuit-breakers are exports and government spending. New Zealand’s exports are booming, and have been for a while. But for New Zealand that’s still far from enough; New Zealand needs a government spending circuit breaker as well.

The United States last year sought to bully the world into buying more American goods. But that hasn’t been a circuit breaker for the United States (but it really boosted China’s trade with other countries), just as Roosevelt’s ‘New Deal’ of the mid-late-1930s was not enough. In that era, the final and successful circuit-breaker was American armament, in 1940 and 1941; armament in support of the United Kingdom in its war against Nazi Germany and also to prepare itself for a possible entry into war against Germany and/or Japan.

From 2023 to 2026, the United States economy is back into a growth phase, dramatically so this year; it’s Keynesian circuit-breaker has – once again – been armament for war. War production in support of others – including Ukraine and Israel – and war production in support of its own foreign adventures. Further, war has proved, literally, to be the killer application which makes AI (artificial intelligence) profitable.

The New Zealand Government this week, seemingly far from producing a circuit-breaking stimulus, has just announced a policy to retrench the public service. (Refer Scoop, Government plans to cut 8700 public service jobs over three years, 19 May 2026.) At first sight, it looks like Déjà vu, all over again; a quick exit to political ignominy for a failed government determined to not learn from the past.

Retrenchment in New Zealand’s past

What in the past was generally called ‘retrenchment’ is today, euphemistically, called ‘fiscal consolidation’. The worst two retrenching Ministers of Finance have been William Downie Stewart Jr., and Ruth Richardson. (Roger Douglas converted to that doctrine, but didn’t practice it to anything like the extent that Ruth Richardson did. Douglas and Richardson subsequently became principals of the ACT Party.)

During the second half of the twentieth century, it was well understood by most bureaucrats and relevant academics that the core political misdemeanour which converted the 1929 global financial crisis into a global Great Depression was government retrenchment.

Retrenchment was a ‘race-to-the-bottom’ policy whereby governments would undermine their own revenue bases in a misframed and impossible quest to ‘balance the Budget’. Undermining the revenue base through spending reductions at a time of already-low consumer and business confidence and already-growing unemployment could only be the height of fiscal folly. In the years from 1926 to 1933, New Zealand had a Minister of Finance who twice brought New Zealand to its economic knees through his ardent and ideological commitment to retrenchment; to a policy supposedly about reducing the size of government, but which actually achieved bigger size reductions to the private sector.

The global crisis around 1931 and 1932 was particularly bad, because the simultaneous retrenchment of almost all capitalist governments had the particularly discouraging effect of collapsing world trade. Government retrenchments and reduced spending on traded goods reinforced each other, creating a particularly problematic downward spiral.

William Downie Stewart Jr was Finance Minister from 24 May 1926 to 10 December 1928, and again from 22 September 1931 to 28 January 1933. During both of those comparatively short tenures, Stewart effectively waged fiscal war on the country. His first tenure as finance minister ended with an ignominious ousting of the Government which indulged his constipatory policies. The second stint ended with an internal putsch of sorts in January 1933 (a dispute around the issue of currency devaluation); a coup driven, ironically, by the man (Gordon Coates) who had been Prime Minister in the 1925 to 1928 government. (In both cases, the economy ‘turned the corner’ after the riddance of Stewart; though it took several years after 1933 to fully recover, meaning that the then proto-National government – led by the hapless George Forbes – was unceremoniously dumped in the 1935 election.)

In like vein, I think we can say that Ruth Richardson was the deserved victim of an internal putsch – a removal that was too slow, though, given that she was still able to do damage in 1994 – instigated by Bill Birch and Jim Bolger. In terms of the popular vote, in the 1993 election, the Left (deservedly trounced in 1990) thumped the Right. If that election had been held under MMP, the result would have been a landslide defeat for a one-term National Government.

Back to the Future

2026 is the future, as seen from 1933 and 1993. Indeed, the framed retrenchment undertaken this week by Willis and Luxon has optics similar to those of 1927, 1932, and 1991. But the then ‘future’ – ie today’s present – is different; subtly but importantly different.

Politically, Ms Willis and Mr Luxon are under pressure from the Treasury, from the New York credit-rating agencies, from David Seymour of the coalition’s Act Party, and from the whiney (but economically sub-literate) journalists whose first question is inevitably “where’s the money coming from?”.

Sending public servants down the road – and replacing them with bots – may be good optics for this kind of staunch masculine fiscal politics. But, to get re-elected, the government needs the circuit-breaker mentioned above. In economies, as in prostate science, flow works better than constriction.

So, what has the Government announced? Ahead of next week’s Budget, they have committed to more than a billion dollars of extra spending. That may be the circuit breaker. Here’s the crux of Nicola Willis’ announcement: “Over the next four years these initiatives will deliver savings of $2.4b which will be re-deployed“. Re-deployed when? In 2026, of course! (That is, predeployed rather than redeployed.)

Where will the money come from? From the public service retrenchment promised for 2027 to 2029. The promised retrenchment is in effect collateral for a loan to be drawn down this year, indeed this month. Based upon my reading, the announced public service disemployment probably won’t even happen; it’s like unmined gold used as collateral – alleged gold that will probably remain in the ground.

Labour, if returned to power in November, will almost certainly cancel National’s public servant retrenchment ‘plan’. And National, if returned to power, may simply move on to other policies and conjuring tricks; journalists are so easily distracted by political sleight-of-hand. Money, as always, is an illusion; a set of circulating promises.

Here’s hoping I’m correct; that this fiscal predeployment does represent a long-awaited expenditure stimulus.

About the writer:

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

Keith Rankin, 20 May 2026 – Recently, the New Zealand First Party released its KiwiSaver policy, promising to make this retirement savings scheme compulsory for New Zealand born citizens, and setting them up with a $1,000 startup deposit at birth. (See Winston Peters unveils KiwiSaver-from-birth NZ First policy, bank takeover plan, Scoop, 18 May 2016.)

The New Zealand First Party also promised that no government which they are a part of will be allowed to raise (from 65) the age of entitlement to New Zealand Superannuation, which is New Zealand’s universal pension. The National Party, on the other hand, plans to campaign on a promise to raise that age of entitlement. What National did not confirm or deny, is whether it will raise the age of entitlement for KiwiSaver.

I cannot imagine the age for KiwiSaver entitlement staying at 65 – what today is loosely called the ‘retirement age’ – while the age of pension entitlement is raised to 67 or higher. Requiring people to wait until they are 67 before they can access their retirement savings may prove to be even more unpopular than raising the pension-entitlement age.

But, back to Peters’ KiwiSaver startup plan.

In the last 24 hours I have heard references on RNZ (publicity excerpt from The Panel) and on Stuff News (TV3) to such start-up retirement savings. And how we can all become retirement millionaires on the basis of ‘the miracle of compound interest’.

The RNZ item considered a savings plan – at five percent interest – commencing at age 18, which would result in a lump-sum at 65 of well over a million dollars.

The TV3 item (This KiwiSaver change could give Kiwis a $53,000 retirement boost. It’s gaining high-profile support across the political divide, Damien Venuto, 19 May 2026) goes like this: “If $1000 was invested into an aggressive account for a New Zealander from birth that would compound to $53,000 by the age of 65 even if nothing else was invested. The one disclaimer here is that inflation will eat into that over time, making the buying power of that $53,000 far lower than what it would be in today’s terms.”

Two Examples of ‘Miracle’ KiwiSaver savings

In my first example, I start with $1,000, and put that aside in a ‘conservative account’ which we expect to yield five percent interest per annum. The result, after 65 years (daily compounding), is $20,081. That’s assuming tax-free interest. To get to $20,000 while paying withholding taxes, a gross interest rate – gross yield – of about seven percent would be required.

In the second example, I go for Damien Venuto’s target: $53,000. You would need a net annual yield of 6.62 percent. Venuto claims that this is possible in an “aggressive account”. We note Venuto’s inflation proviso, though clearly Venuto presumes that average inflation over the next 65 years will be well under 6.62 percent.

(Given that inflation compounds in the same way as savings’ deposits do, we can say that, if inflation averages five percent over those 65 years, our savers at birth would end up multiplying their birth ‘investments’ by a factor of 2.65; meaning that, after correcting for inflation, their $1,000 seed deposit becomes $2,650. However, if inflation averages 2.95 percent, the $1,000 starter rises to $9,000 after adjusting for inflation. My best guess is that inflation over the next 65 years will average over ten percent, given both the present state of the world and the demands on goods and services which will arise from baby boomers and Gen-Xers eventually cashing in their private pensions. At ten percent average inflation, the initial $1,000 would be worth just $132 in 65 years’ time.)

Risk and Uncertainty.

If you are looking for a risk-free Saver account, you should be expecting a gross interest rate of about the rate of inflation; that means a net interest rate below the rate of inflation. Otherwise, you have to accept risk (estimable) and uncertainty (unknown unknowns can be predicted, at best, with intelligent guesswork).

If you transport yourself back to 1961 (New Zealand’s year of maximum births, 65 years ago) and try to guess your way to the year 2026, what inflation, yields, and risks would you have predicted?

(Inflation has compounded since then at an annual average rate of 5.3%. $1000 saved in 1961 would have to have compounded to $29,400 in 2026 just to break even. Money passively – yet ‘aggressively’, in Damien Venuto’s sense – ‘invested’ in shares or property would have achieved an excellent long-run return, however. Money in a savings account would have fallen well short of break-even. It’s highly unlikely that the next 65 years will be as favourable as the last 65 years were. What actually happened in the last 65 years was not necessarily the best prediction; you might win a game of roulette, but the best prediction is that you will lose. In 1961, most people would have predicted some kind of nuclear war by 2026; indeed, with hindsight, the chances of such a war in 1962 may have been as high as 50:50.)

In an ‘aggressive account’, there are many associated risks. The essential difficulty relates to the fact that the returns are principally capital gains, which may or may not occur, and may or may not be taxed.

Capital gains are largely self-fulfilling in economies with a high degree of inequality, because those people with lots of money tend to use it to buy and sell financial assets from and to each other, boosting the prices of those assets in a financial merry-go-round. This situation can go on for a long time, though never forever. The break happens when more than a few people want to cash in their inflated financial assets at the same time; and such ‘corrections’ are almost certain to happen with rapidly aging (‘first world’) populations in the ‘global north’. After all, much of this money is in pension funds and sovereign wealth funds, which are both going to come under extreme pressure when those older persons seek to spend their savings (and require more services); savings which individual savers cannot take to the grave. And, while sovereign nations may not have an imminent grave, their Treasuries have certain expenditure obligations towards their aging populations, and towards the younger people struggling to support the older people.

While investment yields can be real, capital gains by their very nature are largely illusory, dependent on most of the ‘invested’ funds not being withdrawn. These financial assets will largely disappear in the event of another ‘levelling event’, such as the Great World War of 1914 to 1945; noting that that event included the Great Depression, part of the levelling process.

Who Pays the Interest?

Whenever we hear about the magic of compound interest, we hear very little about who pays that interest. Let’s start with a static, non-growing economy. This may be called the ‘zero-sum’ case.

In such an economy, interest (unless the interest rate is negative) represents an unrequited flow of money from debtors to creditors. In the twentieth century world, when it wasn’t at war, that largely meant from private businesses investing in growth to private savers ‘investing’ in financial assets. Governments tended towards balanced budgets from 1950 to 2000, so were more on the financial sidelines than they are today.

In the twenty-first century world, the debtors are mainly small businesses, relatively poor households, and governments. (In some but not all cases, the same governments which have trillion-dollar sovereign wealth funds.) There are other situations, especially around large leveraged ‘investments’, where interest is paid by the very rich to the very rich; these situations ‘net out’, so can be ignored when looking for the big picture around systemic interest flows.

Once netted out, the main flows of interest today are from small and medium size businesses and relatively poor households to the richest ten to fifteen percent of households. Interest flows from poorer households to richer households. And from younger households to older households. Further, dwelling rents constitute a form of interest; they represent a yield paid to landlords by tenants. The words ‘interest’ and ‘yield’ are close synonyms.

What this tells us is that it’s impossible for all of us to benefit from the ‘miracle of compound interest’. Every dollar of interest received must be paid by someone. It also tells us that one of the risks associated with the miracle is the possible default – or bankruptcy – of a smaller or larger proportion of interest payers.

An interesting finding in New Zealand in the late-2000s, when finance companies were going broke, was that there were actually two types of finance company. One was mainly financing property investments, and the interest payers were relatively affluent people. This type of finance company – eg Hanover – failed during or prior to the global financial crisis (GFC) of 2008 to 2009. The second type of finance company were funding distress loans to the poor; they continued to thrive through the GFC. The poor struggle on, conscientiously.

Looking at this second type of finance company, we can see the emergence of a new ‘lower working class’ – many of them denizens rather than citizens of the countries they live and work in – who may be considered to be ‘debt slaves’ or something close to it. In that sense, the lucky Kiwi Savers are enjoying their credit miracle (in the cases when that miracle is not a mirage) at the expense of a global proletariat of debt slaves.

Now consider economic growth, real and nominal. Real economic growth is the ‘positive-sum’ case.

The standard growth story about ‘who pays the interest’, is that the savings are’invested’ in businesses that are creating economic growth. In this story the creditor ‘passive investors’ – the Kiwi Savers – and the debtor ‘active investors’ (small, medium and large businesses) are both receiving the yields arising from the societal process of economic growth. The yields are the increased amounts of goods and services made available through the growth process.

That’s real growth; indeed, exponential real growth. However, high-paced real growth can never go on forever. Eventually – later or sooner – it must crush the planet through depletion, waste, and (probably) the ‘laying waste’ of warfare.

If we don’t have indefinite real growth, we return to the ‘zero-sum’ case discussed above.

Now consider the forms of the nominal economic growth case. This is when apparent economic growth turns out to be inflation. This is benign compared to the zero-sum case outlined above, because inflation erodes both debts and savings. So, it means that the flows of interest from the poorer debtor community to the richer creditor community become sustainable, because these flows are always being ameliorated by inflation.

In the extreme form, the nominal economic growth case is a zero-sum case, because there is no real economic growth. In a less extreme form, there is a mix of some real growth and some inflation. This is probably the optimum. Modest real economic growth is sustainable if it does not intensely use non-renewable resources. And some inflation addresses the debtor-creditor inequity that the miracle of compound interest is predicated on.

In this relatively optimal case, interest rates will on average be approximately equal to the inflation rate. So the miracle of compound interest disappears. If interest approximately equals inflation, then $1,000 today will buy approximately the same amount of stuff in 65 years’ time. And that’s what should happen; we should save when we have a relatively high income, and withdraw our savings when we have a relatively low income. No interest, on balance. We should not kid ourselves that simply sitting on a nest-egg of magic money is going to make us fabulously rich!

Finally

There is another case where the debtor-creditor relationship becomes too exploitative, and when that broken relationship induces socio-economic breakdown. The result is a negative-sum game, whereby everyone – or just about everyone – loses.

Anyone trying to play the compound interest miracle game should understand that they are trying to get something for nothing; that they are playing the role of ‘exploiter’. Capitalism as we know it is a game of exploitation; indeed, low levels of ongoing exploitation can be sustainable.

Under our present order, of liberal private capitalism, the best possible option is a mix of low inflation and low sustainable growth based on renewable resources and accumulation of benign knowledge. Keeping this balance is a bit of a tight-rope walk. Today too many of us have slipped on the rope, and are hanging by our fingers. The more people who slip, the more the tight-rope wobbles, leading ever more people to slip in their wake.

There is a better capitalist order; a more democratic more sustainable form of capitalism which fully incorporates public equity – public property rights alongside private property rights – with appropriate public equity dividends to stem the growth of income inequality. This is consistent with a balanced mix of sustainable growth and sustainable inflation. It is not consistent with interest-rate exploitation.

In the meantime, why do we look kindly upon compound interest alchemists while lampooning conspiracy theorists? The worst offenders in both groups are equally bogus.

About the writer:

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

Keith Rankin, 14 May 2026 – Since the latest Household Labour Force data was released on 6 May, there has been quite a lot of unfocussed chatter about NEETs; young people not in employment, education or training. The standard narrative about NEETs is that they are disengaged young people, especially teenagers, not sufficiently motivated to undertake tertiary education or vocational training in order to find a job.

The latest overall statistic is that 14.4% of New Zealand resident people aged 15-24 are NEETs. In addition, there is an even higher ‘underutilisation rate’. These data are published in an awkward way which makes it hard to mesh them together. And there is a further unmeshed measure; persons aged 15-24 – especially 20 to 24 – who have emigrated.

The real story this year is about young adults aged 20 to 24, not disengaged teenagers. “Women aged 20 to 24 continue to have the highest NEET rate, rising 1.9 percentage points to 20.3 percent in the March 2026 quarter”. This 20.3% is well above the overall rate of 14.4%. The female adult NEET rate has jumped significantly, whereas the male adult rate is lower and has not jumped much this year.

NEETs can be separated into four groups: teenage males and females, and young adult males and females (‘adult’ here being defined as aged over 20). Of these groups, we would expect adult females to be least disengaged. The story that appears to be true is that many if not most NEETS aged 20-24 are young adults who have completed their education or training; rather than being disengaged, these NEETs are educated, trained, often graduated, and raring to commence their careers.

The problem, then, is that we have created an economy which is barely interested in employing our educated youth. This is especially ironic when we keep hearing superannuation scare-stories about how this group of young people will be required to ‘support’ in retirement their huge parental (Gen-X) and grand-parental (Boomer) generations. The statistics clearly show that we are not nurturing this very special cohort, born in the early 2000s.

(Re the underutilisation rates, males aged 20-24 have gone from 11.6% in early 2023 to 18.7% in early 2024 to 19.0% in early 2025 to 21.8% in early 2026. Females aged 20-24 have gone from 17.0% in early 2023 to 23.0% in early 2024 to 22.2% in early 2025 to 25.0% in early 2026. These worsening statistics cannot be blamed on the Israel-USA-Iran war.)

Why Females?

The latest data suggests that tertiary-educated young women are having more difficulty gaining employment than their male peers. Employment outcomes for this age group are very much about employers’ hiring practices.

Economists understand that the perceived labour-cost associated with new hires is all important. This is an age group with minimal work experience, so it means that demographic and educational attributes will be particularly used when making hiring decisions. Statistical profiling – something all employers (including female employers) do, even if they do so with a degree of distaste – is particularly relevant to this age group.

Is the expected cost – a statistical concept meaning the average perceived cost – of hiring young females greater than the expected cost of hiring young males? Especially in the context of very tight business profit margins.

(Differences in expected cost played a huge role in hiring decisions during the Great Depression of the 1930s. Teenage females were cheapest, then teenage males, and then adult females. Adult male joblessness was particularly high in the early 1930s because adult males were the most costly demographic to hire.)

Reasons why young females might be perceived as more costly to employ

Such reasons arise from both statistics and politics.

Individual employers will have access to their own company data. If females in the past decade or so have had a record of leaving their jobs sooner than males, or if they have had a record of taking more sick leave than males, then those records would influence the perceived cost of employing any given female job applicant. Willingness to work overtime – including unpaid overtime – is also something that employers have records of; such willingness, on average, may be different for males than for females.

In the realm of politics, there may be areas of actual positive discrimination – for example, menstrual leave, which exists in a few countries. (See What working women really want: Paid menstrual leave? Stuff 15 August 2023. And of course there are definite examples around maternity leave.) Or perceived positive discrimination; perceived, for example, because pay equity is widely confused with equal pay.

In relation to options like maternity leave and menstrual leave, one way to politically manage these is to offer men similar discretionary leave provisions as those offered to women, to the point that employers perceive the likelihood that a man will take discretionary leave is the same as the likelihood that a woman will take such leave. This, I understand, is the Swedish way. In order to maximise employment of both sexes, the Swedish authorities offer discretionary leave provisions to females and males in equal measure.

Another issue is the sensitivity around the ‘gender pay gap’. (For society as a whole, the ‘pay equity’ argument is that gender-based pay inequity is between occupations, not within occupations or within workplaces.) Such sensitivity is heightened if employers are required to report to some government ministry their firms’ gender pay ratios.

There is one relatively quick way through which employers can make their gender pay ratios more equal. It is to hire fewer young females, giving preference to males. Given that new hires are towards the bottom of employers’ pay scales, having more junior males and fewer junior females will have a significant impact on a firm’s reported gender pay ratio.

Unintended Consequences

The hiring practices mentioned above can all have unintended consequences. Very few employers nowadays – whether male of female employers – believe that it is a good thing to have a gender pay gap. All employers practice ‘equal pay’, as they have been mandated to do since 1972. But employers – under the pressure of legal or moral compliance to achieve one or two key statistics – can end up achieving problematic outcomes for other important statistics.

Is it possible that an unintended consequence of moral compliance in relation to pay equity – of attempts to equalise pay by gender, within firms and other employing organisations – has been to create more young adult female NEETs? It’s a hypothesis that at least deserves to be investigated further.

Of course, there is a wider problem than this female-adverse NEET outcome. There are far too many adult NEETs of both sexes. Our recent governments, through stifling fiscal policies which undermine their own revenue base, have been playing an unnecessary and brutal game of musical chairs; a game in which the odds are stacked against New Zealand’s young adults.

About the writer:

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

Keith Rankin, 13 May 2026 – On 7 May, Al Jazeera ran this alarmist programme about the ‘national debt’ of the United States: US borrowing exceeds GDP: What does it mean for the economy? (And here on YouTube.)

A topic surrounded by so much confusion. (Sigh!) The first problem is that what is commonly called the ‘national debt’ is actually the ‘government debt’. Second, we have the issue of which debt measure to use. By one measure the United States government debt has become equal to the United States gross domestic product (GDP). By another measure, that milestone or millstone was achieved long ago, and is now 123% of GDP. The Al Jazeera programme uses both measures interchangeably.

The programme host – Cryil Vanier, who I usually respect as one of the best news anchors in the world’s television media – commenced his contribution with an easily verified untruth; that is, untrue if using the usual measure of debt as a percent of GDP. He said: “The United States is the most indebted country in the world. Almost every year the United States Government has chosen to spend more than it collects. … The national debt now stands at $39 trillion dollars, exceeding the United States economy … for the first time since World War Two.”

($39 trillion dollars is 123% of the United States’ GDP! That 123% of GDP measure is exceeded by Venezuela, Japan [237%], Sudan, Singapore, Eritrea, Bahrain, Greece [146%], Lebanon and Italy [137%]. Government debt is not an indicator of a government’s economic performance, let alone a cause of poor ‘performance’; noting that the concept ‘performance’ itself is about optics – about theatre – rather than substance.)

Debt is owed by debtors, and owned by creditors. The Al Jazeera programme noted that ‘Japan’ is one of the big three foreign owners of the United States [government] debt. But note, above, that Japan is – among first-world countries – listed as the (proportionately) biggest ‘ower’ of debt. Indeed, Japan sees neither its large ownership of debt nor its large owership of debt as being a major problem; the Japanese economy is a sea of tranquillity compared to many other countries’ economies.

There is a problem though; the one trillion dollar interest bill. That’s unnecessarily large; indeed, that’s a much bigger problem for the United States’ government than for Japan’s government, due to very different monetary policies in the two countries.

The key question to ask about the interest is: ‘Where does the money go?’. It goes from the owers to the owners, of course; but who are the debt-owners who receive most of that interest, and to what extent do they represent the real problem (assuming there is a real problem)? For the most part, the interest-recipient owners – not exactly clamouring for repayment – are more than happy to return the interest to the owers, just so long as it is accounted for as additional debt.

The Al Jazeera programme, using one of the more egregious chart graphics that I’ve seen, shows that “debt has ballooned since the eighties”. Correct, though the chart (commencing around 1800) – not using the correct (logarithmic scale) fails to show earlier balloonings. The chart shows a tenfold increase in the dollar-debt – not the percent of GDP – from 1976 to 1996, and a just a 6½-fold increase from 2002 to 2026; yet the latter smaller jump looks dramatic. At the end of the chart-viewing, we are told that there’s “no plan to actively pay it back”.

Putting aside the one-third foreign ownership of the United States government debt, we can think of the remaining two-thirds – the domestically-held debt – as being owned by the ‘US banking system’ (the banks being a short-cut for what is a rather complex financial system). So, the United States domestic government debt – a liability of the Government – is an asset of the United States’ banking system. As is normal for asset-holders, the banks would rather retain and expand their assets; they would rather not liquidate their assets.

On the other side of the banking systems’ ledger lies the liabilities of the United States’ banks. These are the deposits of American households and businesses. The domestic debt is owned by Americans and owed by the American Government. Bank deposits are assets to depositors, and liabilities (ie debt) to banks. Banks hardly see this debt as ‘bad’ in any sense.

People would rather lend their governments than pay taxes, though most citizens realise that a substantial part of government spending should be funded by taxes rather than debt. A mix of taxes and debt works; it always has. Households and businesses prefer to own some government debt than to fund their governments entirely from taxes. It’s not a problem. Debt’s a solution.

The people own the debt that the government owes (albeit through the intermediation of the baking system). The people do not want the government to repay that debt. They just want the government to pay the interest. The people – the creditors, the debt owners – like it just as it is. The government debt is not a problem for them; rather it’s an income for them, and insurance for them.

What would ‘paying it back mean’?

So, if the government repaid its debt to the banks, the banks would either have to force the people to accept back their deposits, or would have to find other borrowers. In the latter case, some parts of the private sector would have to become substitute debtors, thereby adding much to the financial risk of the citizenry. In the former case, the people would have to accept banknotes – paper money – from the drastically shrinking banks; banknotes that could stand to become worthless.

In other words, if governments tried to pay back their debt, there would be a financial collapse on a scale which would make the global financial crisis seem like a non-event. (There was such a collapse in Romania in the 1980s.)

Looking at it from the point of view of the people, the banks’ creditors – especially consider the Mum and Dad savers. They, and ordinary people like them, are the government’s creditors. The government’s debt is an important part of their savings; indeed, of their retirement savings. Who would like their bank coming to them, saying that the bank’s main debtor (the government, as the banks’ biggest debtor) wants to ‘repay the debt’? So, they would have to take back their deposits; they would have to withdraw their funds; say, half their savings. And, at the same time, each other bank would be saying the same thing to its customers.

There is no clamour from the owners of the United States government debt to have that debt repaid. If anything, there is a clamour from would-be owners of United States government debt for the Government to take on more debt; not less. (In Japan, owning government debt is understood as ‘financial security’.)

Global Financial Balances

We can understand the world’s financial balance sheet, showing the net financial relationship between the two big sectors; the private sector (households and businesses), and the public sector (central and local governments).

Throughout the history of the world, the private sector has been the net creditor, and the public sector the net debtor. A financial balance sheet must add to zero; the net debt owed must be exactly equal to the net debt owned. It is not conceivable that the global balance sheet would have the worlds’ governments – taken together – owning the world’s debt, with the global private sector owing it; except possibly under a global soviet-style communist state, where we could imagine most people being in debt to the government.

The global balance sheet has two (net) components. The first component is financial stocks: assets (owning) set against liabilities (owing); these liabilities represent the global public debt. The second component is about financial flows: surpluses (credits) set against deficits (debits). Both components are, by definition, zero-sum games. Total assets minus total liabilities must equal zero. Total surpluses plus total deficits also must equal zero.

For the world as a whole, the public sector (the fisc) runs the deficits, and the private sector runs the surpluses. It is almost inconceivable that, in any year, there could be a global fiscal surplus, meaning a global private deficit. (In most years there are some countries’ governments which run fiscal surpluses.) This state of affairs is driven by the fundamental drive of private citizens to save parts of their income; if successful on balance, by definition a private sector surplus means a public sector deficit. Basic human nature dictates that there will be a global fiscal deficit, every year.

Public Debt management, in practice

The size of the global public debt, measured (appropriately) as a percent of the size of the global economy, goes up and down over time. This is because there are a numerator (the global fiscal deficit) and a denominator (nominal gross world product, the measure of the size of the world economy, the sum of all countries’ GDPs).

We note that the denominator is a nominal measure, meaning that we are referring to the monetary measure of the size of the world economy, not the production measure. Nominal GWP (gross world product) increases either if world production – global output – increases or if world prices increase. A major reason – but not the only possible reason – for increasing world prices is world inflation.

World public debt increases next year if the world’s fiscal deficit is greater than the increase in gross world product (GWP). Essentially, there are three possible reasons for an increase in world public debt: a big global fiscal deficit, a small (or negative) increase in global output, or low (or negative) world inflation. Commonly, then, rising public debt – as appropriately measured – is a result of slow economic growth and/or low inflation.

Conversely, world public debt decreases next year if the world’s fiscal deficit is smaller than the increase in GWP. Essentially, there are three possible reasons for a decrease in global public debt (expressed as a percentage of GWP): a smallish global fiscal deficit, a largish increase in global output, or highish world inflation. Commonly, then, falling public debt is a result of economic growth and/or inflation.

The most painless route to ‘acceptable’ public debt – what is acceptable is in the eye of each beholder – is through inflation. Far from being ‘economic public enemy number one’, inflation is the market’s method – capitalism’s method – of maintaining healthy and sustainable financial relationships within society. The more that financial relationships are ‘out of whack’, the more inflation is needed to put things right.

(We note that policies to raise the inflation rate are not easy to achieve; in the two decades most famous for such policies – the 1930s and the 2010s – it actually proved extraordinarily difficult to use monetary or fiscal policy to bring about reflation. Cutting interest rates did not achieve the inflation sought. Wars, on the other hand, did achieve inflation in the 1940s and 2020s.)

Of course, an ‘out of whack’ financial community is one with relative losers and perceived winners. A healthy correction restores over-indebted losers to a degree of financial health, and reduces the winners’ excessive winnings. That’s why we are in a battle today between the elite classes (including left [Bidenite/Starmerite] elites and right [Luxonite] elites) and the working classes (including most small and medium businesses).

Class conflict is real. Our political elites – left and right – have a policy bias towards high interest rates and low inflation. Our elites favour an ever-expanding flow of financial incomes from the poorer people to themselves. As debt-owners, they do not want inflation to make prevailing debt relationships more sustainable. (Smart elites might have more foresight than regular elites. Though ‘smart elites’ may be an oxymoron.)

Fiscal probity, its obsession and its distraction

Public debt is presented as a monster; public debt is posed as a fundamental cause of inflation. And inflation is posited as the problem which must be fixed before other problems are addressed.

When in the throes of (usually ineffective) inflation-fighting in the name of fiscal probity, the only thing that the established authorities allow as a distraction is the call to war. For some reason deep in the elite human psyche, financial probity has generally taken second place to the excitement of wars in which the elites become the generals and planners, and the working-classes become the planned.

We can easily see that the United States ‘national’ debt is on an upwards, not a downwards, trajectory; the Department of War can loosen Treasury’s guard-rails more easily than the Department of Health. (This is true in Germany too, with last-year’s partial removal of that country’s debt-brake.)

Wars have always been drivers of public debt; they are inevitably financed by huge fiscal deficits. Intractable wars have also been levelling events, wealth-collapsing events – accompanied by inflation – eventuating in relatively good times for working class survivors.

Elites start wars. Wars finish or diminish elites. Elites are poor learners.

About the writer:

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

Keith Rankin, 12 May 2026 – The outbreak of (Andean) Hantavirus on board the Dutch eco-adventure ship Hondius clearly is a matter of concern; and is not being played well by the experts who tell us one rather soothing thing about it only being transmitted through intimate contact, but then show up in the highest grade of Hazmat suit when evacuating people from the ship.

See this story Where did the hantavirus outbreak start, and where has it spread? from Al Jazeera (11 May 2026) and this Inside Story episode: Should we be worried about the hantavirus outbreak? (Al Jazeera 9 May 2026, and here on YouTube).

We keep hearing about the established history of the virus in southern South America, whereas we need to get a handle on the possibly quite different future of the hantavirus. This zoonotic virus has probably already changed; or it may have found an environment in which it is possible (or even necessary) to behave differently from the way it behaves in its endemic South American setting.

Around 16 minutes into the program, interviewer James Bayes asks: “This particular ship … is not your typical cruise ship. They describe it as an ‘expedition ship, often with scientific, wildlife or geopolitics lecturers on board’. … I am told that the experience of previous passengers is that they have very strict safety protocols because of the places they visit, mainly for biodiversity reasons. Previous passengers have recalled sniffer dogs and having to wear sanitised boots. If it can happen on a ship like that, do you have concerns in general? … Are cruises incubators for disease? Would you go on a cruise holiday?”  (The subsequent answers, by experts, trivialised this important question.)

The Hondius was as sterile as any ship could possibly be. Could the human-human transmission on board that ship be because of that sterility, rather than despite the sterile shipboard environment? In a sterile environment, a virus which has already infected an embarking passenger has no soil or other muck that it can transmit to; rather, the least sterile life-forms available are the other people on board. Hence an unusually sterile environment may be the counterintuitive cause of human-human transmission of a virus which ‘prefers’ other options.

Evolutionary variation of any life-form can arise in three ways: because of selection in favour of one existing variant over another; because of a mutation creating a favourable new variant; or because of a hybridisation of two quite different variants creating a genuinely novel form. The first of these three mechanisms of variation may have been enough to create a humanly-transmissible form of the Andean hantavirus. (We note that Covid19 was significant because it was transmitted by a novel virus; transmission of coronaviruses has been widespread throughout our lifetimes.)

This would be a nightmare scenario. Such a new-variant virus – maybe a novel virus – would still be lethal, would still have a long incubation period, would have an unknown duration of infectiousness before symptoms emerge, and an unknown rate of transmission.

The Black Death in Europe: 1346 to 1353

This historically famous pandemic reduced the population of Europe by about forty percent. It is generally attributed to a disease called Plague (aka Yersinia pestis), which comes in several forms, the best known being bubonic plague. The Plague pathogen – Yersinia pestis bacteria – was identified by Alexandre Yersin and Kitasato Shibasaburō during a much more recent pandemic; a pandemic which impacted seaports all around the world in the decade after 1894 (including Sydney and Auckland in 1900).

This disease – linked to rats and fleas – looked like a good fit for the Black Death; the descriptions of the symptoms were a good match. So, the Black Death narrative came to incorporate Yersinia pestis as the culprit. This pathogen is endemic today in some parts of the world, including the southwest of the United States, but generally confines its lethal mayhem to rodents. People die of it most years. The good news for later twentieth century human populations was that bubonic plague is treatable with antibiotics.

However, especially around the early twenty-first century, the ‘Yersinia pestis as the culprit’ thesis was substantially questioned. (See A plague on all your houses, The Guardian, 14 Aug 2004; I have read Return of the Black Death: The World’s Greatest Serial Killer by Susan Scott and Christopher Duncan.) This questioning has subsided of late, because of the discovery of Yersinia pestis DNA in the bodies of known victims of the Black Death. James Belich, author in 2022 of The World the Plague Made: The Black Death and the Rise of Europe, argues that those sceptical narratives were an important part of the scientific process, but settles on Yersinia pestis, based on subsequent DNA evidence.

Nevertheless, I was persuaded by aspects of Susan Scott’s argument. She agrees that bubonic plague was significantly present in Europe – especially in Mediterranean ports – in the late 1340s. Essentially, her argument is that there was another disease present at that time in Europe, and that this other disease played a greater role than bubonic plague in the lived experience of pandemic plague in the period from the 1340s to the 1590s. Scott made her argument using village studies which suggested that the three main epidemic parameters – transmissibility (especially from humans to humans), incubation, and duration of infectiousness – were a poor fit for the known information about Yersinia pestis. (We may also note that there is a variation of bubonic plague known as pneumonic plague, which is human-human transmitted, looks a more plausible fit for the 1340s to the 1590s than rat-flea transmission. But the parameters of pneumonic plague don’t fit, either.)

In Scott’s thesis the principal agent of the Black Death was what she calls Haemorrhagic Plague. It is well known today that there is a family group of lethal zoonotic viruses which cause haemorrhagic fevers in humans; these include ebola and hantavirus. For the vast majority of human cases, they are transmitted to humans from animal incubators. Her argument is that the majority of Black Death deaths were caused by one of these viruses, not by Yersinia pestisbacteria. The parameters she calculated from the historical data match haemorrhagic fevers rather well.

The pneumonic symptoms of the two diseases could be similar (albeit more blue than black). Indeed the 1918 influenza pandemic was known, at least in New Zealand, as the Black Flu. Plague is bacterial, treatable by antibiotics. Haemorrhagic fever is not treatable, except at the margins; it’s a viral illness.

We may also note that it’s rare to have two simultaneous epidemics. One epidemic of a viral disease tends to pre-empt another viral pathogen. However, simultaneous epidemics – even pandemics – of bubonic plague and haemorrhagic fever seem entirely plausible. Because the pathogens are so different, even if the end states of both diseases are quite similar. And we note that the stresses arising from one lethal illness may create malnutrition and other states of being likely to make us more vulnerable to a second quite different pathogen doing the rounds.

We should also note that, after much trial and error, the Black Plague could be contained by quarantine; isolation for forty days. Quarantines are particularly effective for human-human transmissible diseases. Presumably less effective at containing burrowing rodents (or mosquito-borne diseases for that matter). Rats don’t carry passports.

Warning

Susan Scott was particularly concerned about modern complacency towards the Black Death. The widespread perception in modern infectious diseases studies is that bubonic plague is treatable, and that the rodent-flea transmission mechanism is less plausible in modern more-sterile environments, reflecting the perception that modern cleanliness and bubonic plage are incompatible. (And noting James Bayes’ presumption that if hantavirus can transmit human-to-human on a sterile ship, then it must be able to so transmit anywhere.)

There is no complacency towards haemorrhagic fevers such as ebola (hence the PPE); although it’s still widely understood to be – in a sense, dismissed as – a ‘third world’ disease. Susan Scott was concerned that complacent modern public health systems would leave us completely unprepared for a pandemic involving a haemorrhagic virus, such as hantavirus; indeed, I did not sense sufficient concern among the panel of interviewees on Inside Story.

Even if it can be proved that Scott’s thesis about the Black Death is completely wrong, then nevertheless her research still represented an important warning to the world about what the next really lethal pandemic might look like. At the very least, the present hantavirus scare should be understood as an important wake-up call.

If we had learned much more about the history of coronaviruses – viruses which were known to have been long-circulating as ‘common cold’ viruses – after the 2003 SARS1 panic, we might have been much more prepared for the SARS2 Covid19 pandemic in 2020. Scientists should not be too quick to dismiss Susan Scott’s hypothesis about the causes of the ‘great levelling’ event which came to be called the Black Death.

A lethal transmissible disease which is asymptomatic for six weeks, and which is infectious before symptoms occur, is one of our worst public health nightmares. The present scare should remind us of that.

How can we cooperate through pandemics when we are too busy waging hot and cold wars? The 1918 novel influenza virus was forged on the battlefields of France; a hybrid of influenza strains from Asia and America. In the end, it killed as least as many people as were killed on the 1918 battlefields.

We should learn to question prevailing narratives. Experts – whether epidemiologists, economists, or geopoliticians – don’t have all the answers; too often they pontificate from professional scripts while ignoring inconvenient evidence. People, especially those with a modicum of power, should exercise their influence with more humility and less sureness.

The world is becoming more vulnerable; too vulnerable for badheads and hotheads and sureheads (such as Christopher Luxon) and bombastic appeasers (such as Keir Starmer) who cannot broach alternative explanations or strategies. These people simply ‘double-down’ when the evidence is that what they are doing is harmful or counter to their stated objectives.

Pestilence follows deprivation, closed-mindedness, and stupidity. These qualities are not confined to the uncivilised. Our environments fight back, often in ways that we least expect, often in places where we do not look.

About the writer:

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.