On the weekend at one of those gatherings of the National party faithful that seem to occur every other week – as a party the Nats sure do know how to party – Prime Minister John Key unmasked the arch fiend who threatens the New Zealand that we know and love: namely, Russel Norman, Co-Leader of the Greens by day, sleeper agent of the Soviet Internationale by night. Here’s Key’s version of the threat that Dr. Norman poses to the nation:

Normally elections are fought between the centre left and the centre right. That is not what's going to take place next year. David Shearer has cut his cloth and it is wrapped around Russel Norman. "But that now becomes an election between the centre right and the far left."

And the telling evidence that the far left has taken over the role of Her Majesty’s Opposition?

[Key] cited the Green Party's policy proposal to increase the money supply and the two parties' plan to regulate wholesale power prices as examples of their shared "far left" policies.

Wow. Increasing the money supply aka one form of quantitative easing policies (QE). In other words, the QE policies advocated by the International Monetary Fund in 2009 as a way of re-igniting demand in a stricken and stalled global economy, and pursued subsequently by US Federal Reserve chairman Ben Bernanke in two major installments. For the last two years there has been lively debate as to whether QE has, or hasn’t been responsible for the US economic recovery. Back in 2011, this guy thought that the second round of QE looked likely to be beneficial – and he happens to be a Harvard Professor of Economics and a former chairman of President Ronald Reagan’s Council of Economic Advisers:

At the annual Fed conference at Jackson Hole, Wyoming in August, Fed Chairman Ben Bernanke explained that he was considering a new round of quantitative easing (dubbed QE2), in which the Fed would buy a substantial volume of long-term Treasury bonds, thereby inducing bondholders to shift their wealth into equities. The resulting rise in equity prices would increase household wealth, providing a boost to consumer spending.

To be sure, there is no proof that QE2 led to the stock-market rise, or that the stock-market rise caused the increase in consumer spending. But the timing of the stock-market rise, and the lack of any other reason for a sharp rise in consumer spending, makes that chain of events look very plausible.

I’m not going to argue the pros and cons of quantitative easing in this column – that’s something for another day – beyond noting that it is hardly a “far left” proposition if Ben Bernanke and the IMF were all for it, and particularly so at the time when Norman first raised the issue for debate. QE is not to be regarded as a magic bullet – but the dogged pursuit of austerity and fiscal tightening (whatever the cost in jobs and public services) is arguably a bigger threat to society and to economic progress than the small increase in inflation that can be attributable to QE. In a recent interview, even a staunch neo-Keynesian like Paul Krugman says that QE cannot overcome a government that is hellbent for its own ideological reasons, upon policies of fiscal austerity. Krugman’s argument though is that a judicious amount of easing need not result in excessive inflation – not when there is plenty of slack in the labour market and when investment needs to increase. In which case, he believes, there is room to increase spending without increasing inflation unduly – and the payoff will be in increased economic activity and the growth in jobs.

"I wouldn't say that quantitative easing [QE] has been decisive [in the US reciovery.] It is a fragile and fairly weak tool, so to ask it to override fiscal austerity is asking too much." But he wants more QE and is relaxed about inflation at 4% or 5%.

Key, who spent an important part of his career prior to politics working in the Federal Reserve, knows this stuff. He knows QE is not communism, and his readiness to depict it as such is entirely strategic. In years past, the Greens could be written off as Morris dancing fruit cakes. Now, by demonizing Russel Norman as the scare figure of the 2014 election, Key is indulging in a practice that is politely called hippie punching. Hippie punching is the political equivalent of paintball, and here are a couple of useful definitions from the Urban Dictionary as amended for a New Zealand context:

Hippie punching: 1. the fantasy common among disaffected right-wingers of assaulting people they imagine as being the embodiment of treasonous forces afflicting the nation. Rarely if ever put into practice, since in the real world the hippies either went back to real life after 1980, or turned into Silicon Valley libertarians.

2. The practice common among Establishment centrists of ritualistically denigrating progressives in order to win over imaginary swing voters…. Sometimes misinterpreted as a boneheaded political mistake, it's actually a sign of deep and unselfish commitment to pleasing business owners and professionals even at the cost of losing elections. Some common useages of the term:

a. “After a pleasant afternoon of drinking antifreeze, Vaughan and Christian decided to go down to the Fair Trade shop for some hippie punching.”

b. “After a pleasant afternoon of tongue-kissing insurance lobbyists, John Key had a good night’s sleep, before going into Breakfast TV the next morning for a round of hippie punching.”

You get the picture. The scare tactics will go down a treat among the more credulous members of the National Party. (If you think you’re born to rule, any alternative will always look like treason.) Will it convince anyone else? Can red-fanged Russel Norman really be a bigger worry to most voters than a government busily flogging off shares in publicly-owned assets to the wealthy few?

In any rational world, Norman would seem an unlikely casting choice as a Hugo Chavez figure within the Opposition ranks. What Key is actually promoting is a simpler message from a simpler time – that if you’re not with him on asset sales and austerity for its own sake, you’re with the terrorists. That line of thinking got the US into all sorts of trouble, and it isn’t good for New Zealand, either.

ENDS

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