Government Support

Governments and central banks think that the current economic problems can be resolved by making money available to businesses and people. Unfortunately, money is usually the symptom of a problem. not the underlying cause.

You cannot eat money.

Money is a means of exchange. It is useful, because it allows people to buy things that they need. But to get money, people have to sell things, or work in paid employment. Money only has value if there are things being produced that people want to buy.

Businesses and economists often assume that economic activity is demand-driven, so giving people extra money to spend will keep the economy going. Economies actually work the other way around. Supply creates demand. When people supply labour or produce something they can sell because they do not need it for themselves, they get income that enables them to buy things produced by others. If nothing is produced, people with money cannot buy anything, even if they have some spare money. Therefore, giving people extra money as a grant or loan does not help the economy, if nothing extra is produced.

When all businesses are expanding, it is easy for each business to expand. When many businesses are decline, most business will get caught in the downturn.

In the long term, a nation can keep only buying things, if it keeps on producing things that other people and nations want to buy.

New Zealand is a small nation that needs imports of good from overseas to support our daily lives. Although we are a food-producing nation, much of the processed food that we eat each day is imported.

This dependence on imports means that we need to be exporting goods and services overseas to pay for the imports. Fortunately, most of our export industries the export season is well through, so we will receive most of the overseas income for goods that were exported. For example, the dairy season is well through. This is important, because dairy products are a major part of our exports. Likewise, the tourism season was well through when the restrictions on travel were put in place. The concern is kiwifruit and other horticultural exports, for which the export season is only just beginning.

Governments will spend like crazy in a desperate attempt to keep their economy going, as if it had not stopped. They will keep some businesses from going under, but at a serious cost. Every dollar that the government spends on supporting business will have to be borrowed. Government debt, which is already high everywhere will blow out to unprecedented levels. Fortunately, the New Zealand government is not starting with high levels of debt, but if the crisis goes on too long, the build-up in debt could be massive.

Expanded Government debt will be a deadweight on economic recovery. This will make it much more difficult to deal with any economic crisis that occurs in the next few years.

Rather than focussing on when they will be able to restart their church services, pastors should be thinking about how they can organise their churches to support and care for people who fall through the cracks of government support. The government will not do it all.