Why not wait a bit, raf, and get more Dollars per dollar and get best bang for our kiwi? Maybe it's all about timing.

And that is why now is the time. In fact we should have been doing it for the last month. The market wants to buy NZ$ and that is the best time to be selling.

We have a lot of debt to clear: $140bln at the last count.

This intervention can have several positive impacts:

- Reduce the level of the NZ$ and thus help to improve the terms of trade and therefore our current account deficit.

- We can use the $ we buy to start paying down overseas liabilities and domesticate that debt.

- We can take the NZ$ out of the speculators hands by discouraging hot money flows and getting back to the basics of trade flows at which point the NZ$ will find an appropriate level.

Can anyone tell me when the next rating reviews are. I know Moodys etc are useless but the currency markets still listen to them.

SimonD

That's exactly what I am suggesting. When you sell your own currency you simply print the money. The BOJ has done this for years and amassed a fair few $ in reserves.

In NZ's case the goal would be to use those newly purchased $ to pay down overseas debt and convert it into NZ$ debt thereby reducing the interest rate cost and remove credit risk.

The reason I am advocating this policy now is because the NZ$ is in such great demand. This is simply a repeat of 2007 when the NZ$ traded above 0.80. I hinted at this back then. There is never a better time to sell than when everyone else is buying.

Even buying $10bln would help but it's a great opportunity to take back some control over our debt position as well as, hopefully, reduce the NZ$ to a level where our terms of trade might improve (current numbers the worst since 1980).

Simon D....

There is a somewhat Pavlovian response to the mere mention of printing money leading to inflation. The Japanese have been printing money till kingdom come and they are still mired in deflation. Yesterday core machinery orders were down 34% YoY...worst on record.

That aside this proposal is not about increasing the money supply (which is still an issue in a contracting credit situation) but swapping our debt into local currency so that we can manage it ourselves, see it for what it really is, lower the interest burden on it and stop the constant leakage of our wealth overseas.

It's not an inflation issue.

And another.........

retail sales down 0.5% mom against expected +0.5%.

Just keep worrying about silly house prices and ignore the real information coming out about the economy.

groundhog day... again!!

And ponder how much interest we have paid away to overseas lenders in that time.

And we continue to need to fund that interest burden.

Isn't your suggestion a bit like a pub brewing it's own beer, raf? That's fine if all your patrons want to drink home brew, but I wouldn't want to go back to the breweries at some later stage to try and get a wider variety of produce. Surely the solution is to get the patrons to cut back on their binge drinking?

I'll have to think about it , raf, because I see enough example of your suggestion around the world to worry that politics run a muck would knacker the policy, and resultantly, the country.
If I owe money to someone, I have to pay it back ( or they will clobber me one way or another). If I make it up, and, as you say, have no limit to the amount of illusary money that I can create nobody will come and beat me for repayment; but they will stop trading with me. We are not selfsufficient enough, unlike maybe Australia, to have a go at something like this. And unlike South Africa, who I think gave somthing like this a go under the sanctions regime, we do not have a gold standard to back our paper.

Thank you Chair,

Harriet,

Absolutely we have to pay the money back and I believe we can.

In the short period of recent NZ$ weakness the trade balance came back into surplus. That will now return to deficit at current rates.

http://www.tradingeconomics.com/Economics/Balance-of-Trade.aspx?Symbol=NZD

This assures me that at 55-60 we can export more than we import and thus have cash left over to pay down debt. It's as simple as that.

So we can do it with an appropriate currency rate.

But as the Chairman points out that is only the trade balance. Our overall current account deficit is made up of years and years of accumulated trade deficits PLUS all the accumulated interest on the debt we have borrowed to pay for it.

We have paid premium rates of interest on that debt for many years. We can reduce that by charging ourselves domestic rates of interest.

Now if i can give you example:

- your son owes a lot of money overseas to many different lenders. he pays a higher interest rate on that money than others do overseas. every so often he has to renegotiate his terms and sometimes he wonders what will happen if they ask for him to pay it back. he can't and would go bankrupt.

- you decide to pay off all the overseas lenders yourself and lend him the money directly. the overseas lenders are happy to accept your money and they go away happy to be repaid.

- you then impose a strict repayment plan on your son - no more partying on the credit card...he must earn and pay back his debt with what he saves. he gets a lower rate of interest so can pay it back more quickly.

that's it in a nutshell. the only difference here is that the currency will fall which will actually be helpful in getting our trade balance back into surplus.

it may take years to pay down the debt but your son knows you are not going to pull the plug on him and he is keen to pay you back as quickly as possible.

as a volunteer budget service advisor i do this thing all the time. it's amazing how often it helps people to move forward. why? because they feel they have control over their situation.

we don't. but we can do.

it won't change that we have a lot of debt but it will change our appreciation of it.

NZ has a lot going for itself if it can get through debt rehab.

raf it is exactly because Bollard is acting like a toothless puppy that the kiwi$ is on steroids. If you were a currency speculator you would also search out the one country that meekly does what's expected of it and makes not the slightest effort to excercise economic sovereignty...

So which interests are stopping Bollard from acting? "Independent" is the RBNZ clearly not.