The short answer is that wealthy folks' savings have increased by tens of billions of dollars because pension funds etc are holding more super-safe Govt financial assets (Bonds). Offshore investors are also stockpiling wealth stored in Bonds. How did this happen? Let's unpick it. [2/n]
Govt spent big on wage subsidies and other C*vid programmes. This money was paid out to workers and businesses who settled their bills, paid rent, went shopping etc. Tens of thousands of jobs / lives were saved.
The $ spent moved through the economy into the bank accounts of wealthy people. [3/n]
What do wealthy folk do with surplus $ earning nothing? They buy and sell assets from each other, and put their savings into pension funds etc. What do pension funds do? Buy financial assets - including Govt bonds. Here's how it works.
Now, can you spot what Govt could have done differently? [4/n]
Yep, Govt were selling bonds to mop up the cash collected by rich folks - they could have used temporary tax increases to achieve the same goal. What about the wealth stack of bonds built up by offshore investors? That's a slightly different story... [5/n]
As the world opened up after lockdowns, import prices went up by around 24% year-on-year (mostly thanks to oil). We import about a third of what we consumer so unsurprisingly we saw inflation of nearly 8% (1/3 x 24%). [6/n]
Those higher import prices combined with kiwis having money to spend after lockdowns to send our deficit with the rest of the world shooting into the red. When we run a deficit, offshore investors end up with loads of NZ dollars to spend. What do they buy? Govt Bonds. [7/n]
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The $ spent moved through the economy into the bank accounts of wealthy people. [3/n]
Now, can you spot what Govt could have done differently? [4/n]