An oddity in The Guardian

Land that debt forgot: tiny Pacific country of Niue has no interest in loans

Apparently Niue has no money any more. Because according to Ritchie if you pay off the national debt then there is no money.

One of the world’s smallest countries has declared itself debt-free and is spending the extra money on increasing pensions and offering incentives to lure expatriates home.

Well, look at that, if you’re not spending the money on interest payments then you can do better things with the cash.

Amusing that The G highlights this really.

18 thoughts on “An oddity in The Guardian”

  1. Sadly, one of the things your government can do with the money its not spending on debt service doesn’t seem to be ‘lower tax rates’ or ‘give it back to the taxpayers’.

    Instead they’re spending it on programs to ‘lure expatriates back home’. How ’bout you simply create the conditions where those expats can prosper as well as they do elsewhere?

  2. Remarkable financial prudence, how do they do it?

    “Although self-governing, it has a free association with New Zealand, which provides around $14m a year in aid and mostly handles foreign affairs and defence.”

    Oh.

  3. They use the New Zealand dollar though, so they couldn’t have done what Ritchie wants and just cranked up the printing presses.

  4. That is brilliant though, the folks that whinge and wail about austerity (yeah right) and cuts (as if) praising a place that hasn’t got a national debt so it can spend the money on better things.

    Nice catch.

    These folks, and we know Ritchie fits the description too, are actually immune to cognitive dissonance, aren’t they? Completely contradictory ideas just coexist in their heads without clashing (probably because someone else always picks up the tab).

  5. Niue runs a deficit of around £5k/head per year (nine or ten times the UK current deficit per head, I think) and it’s automatically bailed out by New Zealand’s subsidy every year. Amazing how little debt you can have if someone else picks up the tab

  6. Well if Niue is not in debt, then someone else is in debt to Niue. The someone else is probably the future taxpayers of NZ.

    If nobody is in debt to Niue and it has no debt, then it truly has no money.

  7. ‘Cos it’s sort-of-not-quite a New Zealand territory it’s like a UK town council paying off all its debts and working out it can run everything with a zero council tax and just use the government central grant – like Westminster City Council did in the 1990s.

  8. > Well if Niue is not in debt, then someone else is in debt to Niue.

    Why would that be so? If the Kingdom of Wessex has 500 gold coins and the Kingdom of Mercia has 1500 silver coins, neither has a debt to each other nor to anyone else. Those coins are not a claim on somebody else’s effort or property.

    The words “I promise to pay the bearer five pounds” have no legal meaning any more.

  9. @Niv

    Er……..

    Barter relies on coincedence of wants. Money (shells, beads, gold, silver, whatever) intermediates and strips that out?

  10. “Er…….. Barter relies on coincedence of wants.”

    You can’t have it both ways. Either you’re exchanging goods for the direct value of the inherently valuable lumps of metal you’re taking in exchange, in which case that’s barter and coincidence of wants (maybe the recipient is a numismatist or jeweler), or you’re accepting tokens of a medium of exchange in which case it’s based on the promise of what you can expect to get in exchange for it, and implicit promises are a form of debt. The value of the money is as secure as the credibility of the promise. If nobody is bound by any promises, then the value of the money is founded on spit and hope.

    Government normally guarantee the value of their currencies by promising to accept payment of taxes in them. it’s not the only basis possible, but not going to jail for not paying taxes is a near-universally valued commodity.

    Money lubricates trade by allowing the two components of a barter to be conducted at different times. The money is simply the means used to keep track of the as yet unresolved balance. If gold coins are used merely as a symbolic token of favours provided as yet unrepaid, then that’s debt. It is a measure of society’s debt to the individual, in return for what the individual has done for society. If they’re used as a valuable commodity in themselves, and each half of the trade is an exchange of intrinsic value for intrinsic value, then that’s barter.

  11. I’d suggest that gold gained value as jewellery because it had utility as money, not the other way round.

    The flaw in your argument (I think) is that you are overlooking gold’s ability to be of value to all people at all times – it was universally desired in order to be used as money (not just jewellery). As such, there was no problem with coincedence of wants – people wanted gold in exchange for anything, all the time.

    The reason for that of course, was its unique monetary characteristics – its usefulness as jewellery etc stemmed from these, not vice versa.

    I think this has been largely forgotten, aided by governments who refused to accept taxes in metal so that its monetary characteristics would be forgotten in order that the state be freed from its constraint.

    In short, the Curajus State told us gold was only good for jewellery, so it could print then currency and buy votes with it.

  12. “I’d suggest that gold gained value as jewellery because it had utility as money, not the other way round.”

    Gold has value as jewelry because it is durable, shiny, non-reactive so it does not tarnish, and also can be found as a metal in nature without the need for smelting.

    Flowers are also attractive, and a lot more common, but they lose their decorative value quickly. Gold doesn’t. If the value of a gift is made up of the pleasure it gives multiplied by the time over which it gives it, then gold lasts forever. In an era before metals or even glass were easily manufactured, gold and jewels (shiny semi-transparent rocks) were probably the only permanently shiny things people could find and pick up.

    “he flaw in your argument (I think) is that you are overlooking gold’s ability to be of value to all people at all times – it was universally desired in order to be used as money (not just jewellery).”

    No, this is central to the argument. The value of money is peculiarly abstract and self-referential – everybody wants it to trade with because they know everybody wants it and is willing to trade for it. It’s value arises from the social agreement, not from anything intrinsic to the material itself. And therefore this type of value can be attached to anything, so long as its supply is limited.

    If the only way for most people to get it is through trade, then possessing it is strong evidence of having provided value to the community in the past, a favour which is repaid when it is used to buy something else. The coins are not valued for themselves, (you can’t eat gold coins, or wear them, and they’re uncomfortable to sleep on…), only as token of the work you have done for others, that others have yet to repay.

    This is a representation of debt. Money – in this sense of a universally accepted token for trade – is a way of keeping track of what the community owes each of its members. It means that barter-style trades can be split across time and among many people. You give up the first half of the barter for money, and later exchange the money for the other half of the barter. The coins is not consumed, or used for any other purpose. They’re inert tokens used to record these ‘split barters’ while they’re in progress.

    It didn’t take humans long to realise they could perform the same function with easier-to-handle alternatives, like paper. Those alternatives are much more flexible and powerful, which is why we no longer use gold. They’re simply records of trades currently in progress – pure information.

    But for a lot of people, the mechanism by which this works is a bit of a mystery. Gold has value. (Why? Because it just does!) Money has to be backed up by actual gold (or something else of solid value) so that when you are given money for the fruit of your labours, you have hold of something of real intrinsic value right then, something not dependent on airy, abstract social conventions and expectations that could evaporate like mist. Money that people value simply because they know people value it sounds like magic; like castles built in the air. (The stones of the castle are held up there among the clouds by being firmly attached to all the rest of the castle’s stones. It’s scary seeing all that empty sky under you.) Gold bugs *hate* having to accept ‘fiat’ money. If you’re given gold, then even if the magic stops working, at least you’ve got some gold.

    That’s what Andrew M’s point was about. Money made of big lumps of Gold and Silver has intrinsic, non-magical value; not dependent on the immaterial world of debts and claims and obligations. In a sense, that’s true. Gold does have some intrinsic value – to jewelers, coin collectors, gold bugs, etc. – but in the sense that it does then buying things for gold is a barter system. You rely on everyone else wanting gold as well, not for trade but simply for itself. Not everyone does.

    You’re always standing on solid ground with a barter system. At every point in time, you have hold of things of immediate, solid value, not dependent on vaporous social conventions. But as soon as you add in that “Oh, and you can use it to trade with, too”, you’re back in that magical kingdom up in the clouds.

  13. “Gold does have some intrinsic value – to jewelers, coin collectors, gold bugs, etc. – but in the sense that it does then buying things for gold is a barter system. You rely on everyone else wanting gold as well, not for trade but simply for itself. Not everyone does.”

    Indeed, but nothing has intrinsic value – the value of everything is “peculiarly abstract and self-referential “, right?

    That’s why gold became so nearly universally valuable – it could be reliably exchanged for whatever you happened to value at any time, under any circumstances.

    A thought experiment can illustrate this – if we were playing snap and decided that the Deuce of Clubs was a wild card matching all other cards, would not the Deuce of Clubs become the most valuable card in the deck?

  14. “Indeed, but nothing has intrinsic value – the value of everything is “peculiarly abstract and self-referential “, right?”

    I’m making a different distinction. All value is subjective, because it is based on what people want, but sometimes people want a product for themselves, for its own sake, and sometimes they want it purely because they know other people want it.

    In the first case, the value is based on the product’s intrinsic properties, and how they enable some human need or desire to be met. Gold is desirable because it’s shiny and doesn’t corrode, and is therefore peculiarly well-suited to satisfying the human desire for decoration. But gold as money is valuable simply because we know that other people believe it to be valuable, which they do for exactly the same reason.

    “if we were playing snap and decided that the Deuce of Clubs was a wild card matching all other cards, would not the Deuce of Clubs become the most valuable card in the deck?”

    Yes, but that’s because of something useful you can *do* with it (win hands), not simply because other players consider it valuable too.

    Suppose you’re playing Happy Families. Each family is equally valuable – equally able to win. Then suppose you start a rumour among the players by secretly telling each player that all the *other* players are trying to collect the baker family. Suddenly, Mrs Bun the Baker’s Wife *genuinely* becomes an enormously valuable card to trade with, because even if a player is not collecting bakers, they know that they will be able to trade it to one of the other players for something they really do want.

    The rules of the game haven’t been changed, and Mrs Bun can’t do anything that Mrs Pots the Painter’s Wife can’t do. She’s not ‘wild’. The card’s higher value is based purely on the belief that the other players are collecting bakers, and all the other players *really are* now trying to collect bakers because of the belief. This is what I mean by “self-referential”.

    It becomes true and is true because we all believe it is true, and for no other reason. Belief shapes reality. That’s magic.

  15. I don’t ascribe any value to anything…………unless I believe it has value.

    I won’t pay for a tin of baked beans unless I believe they will be nutritious (or I think that others believe it and I can trade them for something else) – their actual nutritional value is immaterial?

  16. “I won’t pay for a tin of baked beans unless I believe they will be nutritious”

    Do you often find yourself buying packets of wood screws and plaster of Paris in the belief that they will be nutritious? Or are your beliefs based somehow on the actual properties of the material in question?

Leave a Reply

Your email address will not be published. Required fields are marked *