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It appears that much of the media (some parts excluded) wants to make the discussion of monetary policy a titianic battle between opposing forces – rather than informing the public of the trade-offs that exist, and the issues that are currently being looked into. There are two issues currently being debated – only the first one that is due to the financial crisis:
  1. How should financial regulation, and the goal of financial stability, be put in place?
  2. Why is NZ’s real exchange rate persistently so high?
The “orthodoxy” in New Zealand has been discussing these issues and trying to improve policy the entire time, in fact there was nothing wrong with the instituional settings we had in place through the Reserve Bank (hence why the PTA was little changed) – many of the problems that have occurred are to do with other things … and many of the “issues” that are being raised are in fact fallacies that show a fundamental confusion about the issue in the New Zealand context (such as the constant confusion about the nominal and real exchange rates, or the view that QE creates a “prisoner’s dilemma” between central banks). If we had more articles like Brian Fallow’s, that aim to discuss the issues and ideas involved, instead of the aforementioned ideological drivel that often appears, we might be able to have an adult discussion on how to genuinely improve outcomes for New Zealanders.