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Opinion: Why NZ can't step aside and wait to be slaughtered in the currency wars to come

Posted in Opinion
See video

By Bernard Hickey

Is New Zealand ready for the currency wars that are breaking out all over the globe?

New Zealanders and our policymakers seem remarkably relaxed about the implications of the turmoil that threatens to push our currency through 80 USc in the coming months and destroy any exporters that are not reliant on booming commodity prices.

Other countries are not so relaxed. In fact, they are positively panicking. Brazil described the situation unravelling across global foreign exchange markets as 'currency wars'.

This week Brazilian Finance Minister Guido Mantegna spoke for many when he talked about an international currency war.

The growing talk of a new programme of  US Federal Reserve money printing to push down long term interest rates and the US dollar is forcing others to think about similar devaluations. The Bank of Japan is intevening to push its currency down. China is refusing to let its currency rise much versus the US dollar.

This triggered moves in the US Congress this week to give President Barack Obama the power to impose tariffs on virtually all Chinese imports to America. The drums for trade wars are beating just as loud as the drums for competitive devaluations.

A race to the bottom in the world of currencies is akin to a game of musical chairs. Anyone who chooses to stay on the sideline risks left standing high and and dry when the music stops.

New Zealand seems set to stand aside and let its currency rise as others desperately act to hold their's down.

Along with Brazil, Mexico, Korea, Columbia, Taiwan, South Africa and Russia are all either already intervening in their markets to keep their currencies down or are considering some form of capital controls.

So what could New Zealand do?

Should we join the game and put up our shutters too?

The collective groan from our policymakers ingrained in 30 years of orthodoxy is already emerging from Wellington. Trade controls worsened the Depression, they say. New Zealand is now an open country and we can't be seen to be doing the 'wrong' thing, they say.

These arguments are naive at best in a world where there is no wrong or right. It is what it is. We cannot step aside and play the holier than thou card when our export sector is being smashed and we are again being swamped by cheap foreign capital that leaves us in a hollowed out wasteland of indebted consumers, beneficiaries and public servants.

There is precedent for intervention, even in New Zealand

The Reserve Bank, despite its history of arch-orthodoxy, has actually been the most pragmatic under current governor Alan Bollard.

It intervened in 2007 to push the New Zealand dollar back below 80 USc. It should consider it again if we head towards that mark again.

It introduced the Core Funding Ratio (CFR) last year, which in effect is a type of capital control. It makes it much harder for the banks to borrow heavily and cheaply overseas and then shovel it on through to the housing market.  It's no accident that the currency has been relatively stable between 65c and 75c over the last year since the CFR kicked in.

But it won't be enough once the Fed's printing presses start rolling later this year.

Other options for capital controls include limiting loan-to-value ratios for property lending, a mortgage interest levy, making the NZ Super fund invest in New Zealand assets, forcing KiwiSaver funds to keep their money at home and limiting foreign purchases of land.

We need to start thinking about these things. Standing aside and waiting for the music to stop is not an option.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment in the box on the right or click on the "'Register" link at the bottom of the comments.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current Comment policy is here.

73 Comments

Is New Zealand ready for the

Is New Zealand ready for the current wars that are breaking out all over the globe?

Good question Bernhard.

Too many are already underwater and with prices going up - I doubt -  the world changed forever and most people still don't realize the fact. Our unbalanced economy isn’t any help for improvement  either. Therefore New Zealand will increasingly become under the influence of these worldwide events.

Oddly enough Walter , there

Oddly enough Walter , there have always been wars of some degree or other breaking out all over the globe ............. A few peace treaties signed too . ............. Agreements to reduce stockpiles of weapons ............. We are not in ( nor likely to be entering ) the worst phases of armed conflict throughout mankind's history .

Globalisation assists the continuance of peaceful relations .

I know Roger – often

I know Roger – often I’m divided – but I can’t help my self and have to tell others reality – the world is full of lies anyway. We need a good balance of both – so people live in hope – like you do – great !  

 I’m strong enough to live with reality – making constantly lots of positive, visionary proposals - and I’m continue to tell the truth – but I know I’m the bad guy in Kaikoura and also here – always negative people say – even avoiding to talk to me - funny isn’t, but I’m use to - it is part of my adult life since about 20 years.

Globalisation assists the continuance of peaceful relations. Was it Bush/ Obama, who said that ?

Some people in Kaikoura may

Some people in Kaikoura may not talk to you 'cos you're a foreigner , and you're successful ................ Most folk are pretty darned decent .... But a minority are foolish and bigoted . Focus on the good , but be prepared  for the bad . I'm not a " Polyanna " Walter . There is some serious shit happening in the world . But it has always been so . There are also alot of amazingly wonderful people and innovations ............ I look for them , 'cos unlike Bernard , I'm not a journalist .

Yes Roger, I wouldn’t

Yes Roger, I wouldn’t be worried about some single events coming in periods – happened all the time – all soluble. The problem the world is facing today is the sheer number, severity and the most danger, accummulation of the worldwide problems.

"Polyanna" good to have google - still needed everytime I'm reading your comments Rogie.

Another war - this time about

Another war - this time about very important minerals is brewing. A demonstration of China’s often ruthless policy to achieve worldwide monopoly positions – a dangers scenario for Western economies.

 http://www.mysinchew.com/node/45865

 http://www.australianrareearths.com/

..and another reason, why NZ should "hang on" the Australia and some others, rather small well constructed countries.

and therefore within your

and therefore within your defination as globalisation dies we will have less peace.

and globalisation will die, at the core of its "efficiency" is the low cost of transport to go to remote places, use energy to extract raw materials, ship it somehere usin energy, process it at an energy cost, and ship it somewhere else at yet another energy cost and sell / consume it....

When oil was $20~40 a barrel ok at $80+ not OK.

regards

I think you're wrong, GBH, on

I think you're wrong, GBH, on this and other things. The scrap over energy will indeed be to-the-death.

Beyond peak energy, folk who think about it have opined that the village / small town is about the convenient size for social grouping - not globalisation. It makes some sense - getting bigger/fewer on the way up (like Auckland curently) then getting smaller and smaller on the way down.

Which means - not unreasonably - that the lower socio-economic suburbs will be the problems, first. Not simply geographically ring-fenced, and the least able part of an unsustainable paradigm.

Mind you, as every charity

Mind you, as every charity collector or fund raiser will tell you (heard the same recently from the Girl Guide Association regards cookie sales) - collections and fund raising is always highest in the lower socioeconomic neighbourhoods.

Giving/sharing comes more easily to those who have little/less - and there are likely more useful/practical skills relative to  a powered-down world in the lower socioeconomic groups as well.

Maybe, maybe not.....lower

Maybe, maybe not.....lower social-economic groups are generally, less educated and less capable intelectually....they are at best technicians and not inventors, but the key to success/survival is being able to think and adapt. Technicans can work at a known process very efficiently....the problem comes from putting them outside their sphere were the programming only say partially applies....

So sure you can in effect program them to do certian jobs well but they cant step outside of their programming.....

On the plus side the most efficient energy converter is man...

regards

You've got to be joking!  You

You've got to be joking!  You must have been educated, steven, by an impractical (and totally prejudicial) "elite". 

Sorry to put it to you so late in life but practical intelligence has little to do with levels of formal academic achievement! 

You are full of it. Im

You are full of it.

Im working class, sure I have a Hons degree, I got it part time while I worked to eat / pay rent etc......not joking at all....practical experience while working with ppl for over 30 years....

So in terms of "practical intelligence" I have jumped up the scale and Ive seen other working class ppl do the same and even better than I...its not impossible....at the same time ive seen many working class ppl stay "there" because they cant do any better beyond working hard... which is extremly sad because ive seen so called elites and their kids who quite frankly are a waste of oxygen.

Sure you will get natural inventors and tinkers with little more than basic education who if only put through higher education could have been anything from good to brilliant....sure, they display capability but often lack real understanding.  back in the industrial revolution such ppl were of enormus use. Today 200 years later the world is simply to specialsied for tinkerers to cope....any exceptions are few and far between, these are not most of the working class....

regards

If you're not working class

If you're not working class any longer, steven - what are you... aristocracy, a hunter/gatherer, landed gentry ..?

Thanks Kate. I'd never

Thanks Kate. I'd never thought about it, but Landed Gentry has a certain ring to it!

Come on Bernard - stop with

Come on Bernard - stop with the 'Sun' like headlines...  next thing you know this website will be no better than the Herald on Sunday...  panic and scaremongering where you look...

I suspect that the reliance global traders will place on the US$ will steadily decline and be replaced possibly by the Euro...

The 'wars' that you screech about are nothing more than a transition from one state (US$ dominant) to a new state, although we don't know what that new state is yet...  Its not the end of world as we know it...

Stop thinking in linear terms...  this is a dynamic and rapidly evolving situation - flexiblity is the key and that's what the RB has... 

Now start reading some books on economics!!!  Your ignorance is showing....

Well said Horace : Agree 100

Well said Horace : Agree 100 % .

Whilst Bernard and his gloomy band of doomsayers feel joyous at latching onto negativism , there is alot happening in the world which may lead us to greater productivity , innovation , and " sustainability " .

Guess I'm a half full Gummy-Bear bag sort of guy .

Productivity and

Productivity and sustainability are oxymoronic.

apart from efficiencies.

Those who think of them as compatible, may well suffer from a condition known as:

Cognitive Dissonance.

just a thought...

Yes, well said Horace.  

Yes, well said Horace.   "linear thinking" is where many predictions go horribly wrong....!

Maybe you should recommend

Maybe you should recommend some....because so far Ive seen BH's economic capability....ive seen zilch from you expect ignorance...or a huge set of blinkers....I dont know which yet....enlighten me.

regards

Horace, And I thought I was

Horace,

And I thought I was grumpy... ;)

I'm not the only one worried about these competitive devaluations.

Our RBNZ governor is a tad concerned too...

http://www.interest.co.nz/opinion/double-shot-interview-reserve-bank-gov...

And so he should be.

Happy to keep twiddling your thumbs when the NZ$ hits 80 cents?

And what happens when the Americans/Chinese/Japanese/Brits come a callin' offering their rapidly devaluing currency for our hard assets?

Do we just take their money and hope it'll work out?

cheers

Bernard

Re: USA/PRC/UK/Nippy   :  

Re: USA/PRC/UK/Nippy   :   More the fool them , Bernard , 'cos if our currency eventually corrects , those kiwi businesses will lose the foreign owners a bundle on the exchange conversion . And at these elevated levels , it empowers Mom & Pop savers in NZ to grab comparatively cheap investments offshore .

Horrace..... firstly from a

Horrace..... firstly from a business perspective I think he B.H. is getting "it" closer to  right everyday.....yes there is sensationalism ...but then these are sensational times outside our ordinary lives.......the headline may be overstated it may be misleading to get your interest but that my boy is what sells newspapers outside of nudity and sport.

So relax....reading the paper is not the end of the world either .....it's how we pretend to be involved.

In respect to your relaxed attitudes about a transfer of power occurring as if it was by natural selection....I believe you could not be more wrong.......The U.S. have got way more to lose here than mere currency dominance and I'm gobsmacked you cannot see the posturing of the Americans over the last wee while.

No matey ...They will not go quietly..............take THAT to the Bank.

For people not going to

For people not going to church tomorrow morning - with some fun too:

http://www.youtube.com/watch?v=UTrEC-zszpI&feature=player_embedded

more serious and more NZ from 13:00 min.

Let's get real here. ALL

Let's get real here. ALL tender is worthless no matter what currency! Gold? hmmm I don't want it cause you can't eat it. Water? oh yeah, NOW THAT IS TRUE currency. Without clean water you have very little 'health' or 'wealth' (health is true wealth after all), without water full stop? YOU ARE DEAD in days.

Forget currency wars, the future is WATER and even Maori know it

Thanks Justice - I didn't

Thanks Justice - I didn't know that I'm so important for some.

WALTER

Indeed, water and

Indeed, water and energy....you need both....

regards

The “Currency

The “Currency War” can only be solved with international unity - I know in the current worldwide economic environment – a dream.

http://www.financialnewsusa.com/finance/archives/18120-china-warns-us-currency-bill-might-harm-ties-and-spains-hurting-economy-hit-with-debt-downgrade

Cheers for this, I must get a

Cheers for this, I must get a hold of the book and have a read.

I remember when the Labour govt of the 80's opened up the floodgates to imports and my boss stated to me that this was not good for NZ as our wages will not be able to compete with an overseas worker who is paid less than a dollar a day...

Is it time to stop that disastorous experiment that Douglas started in the 80's that progressive govts have continued?

Bring back protectionism but in return get this country working together as we begin to support ourselves once again?

It would be a slow painful journey to start with as we rebuild industries that were smashed apart by the flood of cheap imports but it would start putting some pride and hope back into a generation that really don't have much going for them. 

How many towns around the country became desolute because their primary industry was closed due to it being uneconomical on the global market?

We don't need more police, we need to seriously look at why we need cheap TVs and cheap Japanese rejected cars.

Roger Douglas and the Business Roundtable's experiment with this country has been an utter failure.

Yeah, this country was sooo

Yeah, this country was sooo much better off with empty shelves and no foreign imports. Death to
the ipad I say!

Dunno which country you live

Dunno which country you live in but NZ? uh no.

regards

Nice piece Iain Parker, I

Nice piece Iain Parker,

I completely agree with the idea of our country creating our own money supply and becoming self sufficient in this regard. More factual information should be written about how a NZD comes into existence to open peoples eyes as to what currently happens.

The problem with socialist endeavors how-ever is that they almost always create the opposite of what they intend particularly when governments become involved as governments have a very short term view of life usually 3 years or from one election to the next with little regard for the negative consequences they create.

Take housing as an example - when you own a home you tend to look after it and make improvements to increase the value of the home over time / when you rent you don't really care about the carpet and the paint and you certainly don't spend your own money to improve the house so over time the house depreciates (debasing the value of your currency and also the value of the property).

A better example would be university loans with no interest charges coupled with a student allowance. As a country you give students the opportunity to better their life's, but the consequence is universities increase there charges causing inflation, where 20 years ago a student could go through study and graduate with no debt through living at home and a part time job now they graduate with $20 - $60,000 of debt; and to make matters worse the student is forced to leave this country to pay the debt so it's a negative sum game for tax payers.

Take Government bailing out failed financial companies. With a piece of paper or new legislation people who invested in these companies don't have to do there own due diligence on the investment  - if it does well they get rewarded, if the company collapses they get paid out. You can say the same about the leaky house syndrome - privatize the profit, socialize the responsibility and any loss.

Personally Labor would have to become allot more mature about the outcomes of their policy before I will take them seriously.

China warns America –

China warns America – America warns Europe – Europe warns Russia – China warns Japan etc.

 Free trade agreements – globalisation – free market economy – etc. – a real question mark !

 New Zealand economically hang on to Australia and orientate to a few other, rather smaller, well structured countries.

We would be far better off

We would be far better off balancing our economy internally and trading for our external needs as cream on the top. Under the current system we borrow our entire money supply under conditions that no matter how much we export we will never be able to repay by mathematical formula.

100% agree with that Iain.

The philosophy……was that as the money was created for productive purposes no loss could occur if it were not repaid from one department to another. Meanwhile, during construction, tradesmen had been paid wages which had been spent and absorbed into the economy. But it was solid money backed by the creation of assets. People had been kept fully employed while the government built homes for the people.
 

today:

…and I see a high number of young people walking the street doing nothing.

...and I see MP Steven Joyce saying: All imported, because it is cheaper.

...and I see more idiots saying the same.

...and I see more young people walking the streets doing nothing.

...and I see young people getting together forming gangs - not working gangs constructing our most needed infrastructures in factories - but destructing.

… and I see Steven Joice saying in parliament we do need more police.

…and I see the public saying - Yes we do need more police. HA great  !

The rising cost of shipping

The rising cost of shipping will make [mass] importing a thing of the past.....Look at the chinese sending steel to the US....the comment is that extra cost of shipping from oz and then to the US makes chinese steel no cheaper, so the US steel industry is actually finding more work.

So one thing we do have is labour....

regards

I suppose the thing is, what

I suppose the thing is, what can we do?

but do something I think we will have to........the trouble is becasue we are so small we are a non-event.....or worse easy to squash out like some bug If we attract attention...

For me one of the things we should be doing is "withdrawing" or insualting ourselves  from areas/countries where the politics are going to go against us and aim to grow or move into areas/countries where what we have is wanted and commands a premium.

For instance I'd forget the US....we trade there on their terms and look at the "complaints" the US dairy industry has over us, so there is a real risk we wont be able to trade there effectively/efficiently soon so why expand or try to, there?....EU, I suspect will go the same way.....

Lamb and dairy are well received in the Middle east it seems...and our stuff is high quality and in glbal terms our output is fairly small....

Apart from that I think we should also be looking to stabilise "things".  For instance a tobin tax on currency flows looks a goer....where it isnt a real product involved.

regards

Currency Wars Ha! - the best

Currency Wars Ha! - the best thing we could do is stop shooting our selves in the foot.

With the Govt borrowing 250 Millon a week offshore... the biggest real purchaser of NZ Dollars is the NZ Govt (AKA National/Act/ Maori Party) avoiding making the hard decisions...

That's right the Govt is materially interviening against Exporters to buy NZ Dollars, thereby diminishing Export returns and subsidise the Business of Importers.... absolutely the wrong thing to be doing.

All because they are yet to realize Borrow and Spend is no longer a strategy for return to the old Normal... 

Normal Transmission sadly, will never be resumed. 

At the last election , John

At the last election , John Key painted National into a corner , by agreeing to continue all of Michael Cullen's extravagent vote buying bribes , for the next 3 years . Hence there is no debate on WFF / interest-free-student-loans / etc . Current levels of funding to welfare are being at least maintained . Key shut down the debate on retirement age & superannuation entitlements , personally .................... Thus , the budget short-fall , and the $ 250 m. / wk. borrowing . Bernard equated that to the cost of constructing a large hospital , each week , to put the figure in perspective .

NZ is continuing to live beyond it's means . And entrapping a future generation of tax-payers with a gigantic welfare debt to pay . ................ Bugger !

The point is that money

The point is that money borrowed is operational money used to say run the hospitals we have...sure we could build a new one with that money, but it would have no staff and no medicines, no heating/cooling/lights, kind of pointless.

The budget shortfall isnt un-expected we have a recession.....what should have happened is in the good times the Govn should have been saving for a rainy day just like a responsible individual, instead they spent more and more (Labour) or gave it back (National)...in nether case was that competant....and of course we had anonther bunch of assh*les who thought they could avoid recessions for ever.......but then we voted for them so we only have ourselves to blame.

regards

Wow Chq this...>

Wow Chq this...> http://www.cnbc.com/id/39474119

"China to the Rescue! Wen Offers to Buy Greek Bonds"

I guess they percieve a better Risk/Return from Greek, viz a viz US Bonds.

They'd best be careful -

They'd best be careful - could come acropperliss.
 

Ha!. Made me

Ha!. Made me laugh.

cheers

Bernard

Justice,you are so right

Justice,you are so right about the importance of "WATER" for the ongoing future of NZ. As you quoted, "that even Maori know it". The following link is a must read for all thinking New Zealanders. Nationals foreshore and seabed bill, and see if you are at all comfortable with the directon JK is taking the NZ people, without a mandate ? 

Sorry the link is as follows

Sorry the link is as follows : www.nzcpr.com

Nailed it Iain ....... " I

Nailed it Iain ....... " I have been thinking ............. " . Yass , this ole bumper-sticker-boy is Richard Prebble in disguise . Shag ............ outed at last . Cannot return to interest.co.nz ever again . Oh the shame of it all ......... Alas and alack ......... Farewell cruel world . Adieu !

.......... take your pick , I

.......... take your pick , I am all of them , wrapped up into a nasty little Gummy Ball . A horrid little nerk who believes that individuals should have control and responsibility over their lives . Ghasty I am , truely ghasty . I earnestly believe that the government cannot offer goods and services as quickly / cheaply / & innovatively as the privates sector . Even to this day , I still believe in the capitalist system , the marketplace , the law of supply and demand .

You are right to depise me and my beliefs . Filth ! Pure unadulterated filth , all of it .

I must go , dear friend . Thankyou for " outing " me . It is in the best interest of all . Must find a passing jeepney ....... And throw my sad sorry carcase under it's wheels . Bless you Iain . God speed !

Iain, Of-course you will

Iain,

Of-course you will remember that Germany was a socialist country / similar to Labor are socialists in NZ, and that Hitler was of the Labor ilk (National Socialist German Workers Party), when he was voted in and as Germany even hosted the Olympic Games Hitler must have been very well accepted in world society at one stage.

It was largely due to the repatriation costs from world war one that drove the German economy broke and lead to the fascism of WW2, ironically WW1 officially ended on Sunday from a financial point of view with the final payment being made by Germany to the allies. 

So it's all a bit of an oxymoron for Mr Lee to say that he wanted to fight the economic conditions which would continue to sprout Hitlers - I mean given that they were both from socialist labor parties.

Interestingly, you may find it interesting to google Austrian School they offer an alternative to the sort of 'socialist/labor/state' intervention economics which NZ currently subscribe too and that generally lead to war.

The government most certainly

The government most certainly shouldn't be using taxpayers money to throw at our currency. Just abolish the central bankers, and our currency will take care of itself. The world is really not going to be pooring money into a country that is falling out of the OECD top 30.

At the rate things are going

At the rate things are going we could be the top one..........

regards

B de B Pooring - good pun or

B de B

Pooring - good pun or bad spelling?

That 'OECD' nonsense, along with the 'get level with Aussie' nonsense, and the GDP nonsense, is something you want to consider carefully.

They're all part of a historical phase, and folk like you remind me of those folk in the '20's, who tried to re-establish Edwardian top-hat-and-champers society post WW1.

Wasn't going to happen, and neither was growth, global average, beyond 2005.

So sad to see how long it takes for the penny to drop with some types.

I suspect you're the type who has dropped one or two yourself?

Well put ! ".. the economic

Well put ! ".. the economic crisis that began with the credit collapse of 2007 is entering a new phase in which countries are trying to steal demand and employment from each other, instead of from the future as they did before..The world is finding that without rampant credit growth, through which demand is borrowed from the future, it is very difficult to create enough work for people supplying domestic markets"

http://www.businessspectator.com.au/bs.nsf/Article/The-great-currency-rip-off-cant-last-pd20101004-9VRRR?OpenDocument&src=sph

I think a US/NZ exchange rate

I think a US/NZ exchange rate of 0.68 would be a very reasonable value for the Kiwi and NZ as a whole. So with our currency hovering around 70-72c I don't think it's that overvalued. Anything over 74-75c would be a different matter though. The American consumer is broke; they are not going to be the savior or driver of the world’s economy again for a very very long time. Get over it!  So of course the US currency is going to decline in value, it simply isn’t worth what it once was.  Rather than having a currency war, maybe it would be better to price international trade in a different currency? But then there really isn’t one out there that’s suitable, and maybe that is in fact the real problem.

By the way, in war, if one is to win, good allies are a must. So who’s ours?

So US and Euro are printing

So US and Euro are printing money because they have too much debt, want to stimulate the economy, etc...

And NZ will print money so it's good for our exporters?

Is that the nuts and bolts of what's happening??

  I think our fearless

 

I think our fearless leader, Darth Hickey, is onto it here...It has been a week since Brazil’s Finance Minister, Guido Mantega, declared that we are in the midst of an international currency war and that Brazil was joining in to try to keep its currency from appreciating further. 
That led foreign exchange traders to immediately bet $US14 billion that the Brazilian real will, in fact, keep rising.

Meanwhile central banks and governments in Japan, Colombia, Thailand, Poland, Taiwan, Russia, Peru, Mexico, Korea and South Africa are now either intervening directly in foreign exchange markets to try to force their currencies down, or talking about it.
China, of course, intervenes simply and directly by pegging the yuan to the dollar. American authorities are effectively intervening by holding interest rates at zero and talking about printing more money.

So, everyone is worried about exchange rates except Australia. The Australian dollar has appreciated 50 per cent since March 2009 and 20 per cent since June this year and is this morning sitting comfortably above US97c, but there has not been a peep from either politicians or central bankers.

Australia is an island of laissez-faire calm in a frothing sea of competitive devaluation. Why? Because they have neither a demand deficit nor high unemployment.

As 12-year Reserve Bank staffer and now HSBC’s Australian economist, Paul Bloxham, said in an interview with him on Inside Business yesterday, the RBA likes the appreciation of the Australian dollar because it helps reduce inflation. “Increasing interest rates is hard work. If the exchange rate does some of the work for you in terms of slowing some parts of the economy down, I think that's regarded as a good thing.” 
And Australia’s politicians are kept quiet by low unemployment. Brazil’s unemployment rate has fallen steadily from 12 per cent in 2004, but it is still an uncomfortable 7.4 per cent.

The world is finding that without rampant credit growth, through which demand is borrowed from the future, it is very difficult to create enough work for people supplying domestic markets. For China, make that rampant exports supported by rampant credit growth in the US. 
As a result, the economic crisis that began with the credit collapse of 2007 is entering a new phase in which countries are trying to steal demand and employment from each other, instead of from the future as they did before.

Martin Wolf wrote in the Financial Times last week that as a result of the crisis developed countries are suffering from chronically deficient demand. “US, Japan, Germany, France, the UK and Italy … are now operating at up to 10 per cent below their past trends.” 
Those countries are now trying to use the demand of other countries to make up the gap through exports. The simple way to achieve that is by debasing the coinage. As a result money is pouring out of the developed world and into emerging countries, pushing their currencies higher. They are now intervening to reverse that.

China’s peg means that while the US dollar may depreciate against the yen, euro, Australian dollar, Brazilian real and so on, it won’t depreciate against the yuan. 
That, in turn, means that something more direct may be needed, such as tariffs or embargoes targeted at China. In other words, a trade war, not a currency war.

As Alen Mattich wrote in the Wall Street Journal, competitive devaluation is like shipwrecked sailors trying to keep their heads above water by climbing on each other’s shoulders.

And you thought I was just a pretty face , eh Wally/Wolly...?

 

Why didn't you just paste the

Why didn't you just paste the link that NA included above?  Your point?

http://www.businessspectator.com.au/bs.nsf/Article/The-great-currency-ri...

And that possibility of Trade

And that possibility of Trade war is exactly why the Australians will then be in the unenviable position of holding the lolly-bag and deciding who their real friends are........ frankly I think it will be a no contest and the U.S. will influence any major outcomes.

I've seen the currency chess coming and even banged on about it a while back to both Roger.K. and Mike Jones who were both dismissive of the prospect at the time.... so I'd like to say a big UP YOURS boys on that........

But I do still see it only as a precursor to justifying a return to protectionist policy in saying "well there you go we tried everything and China would not play ball" and so.....

In fact China have now I believe behaved exactly as the Americans would have predicted and in the game of hearts and minds the outcome of that will soon be obvious. 

sometimes people like to read

sometimes people like to read rather than click on links.. as it takes you away from the discussion and the site..but then you obviously a paste man...it shows?

and your point was?

I would simply like to quote

I would simply like to quote the words of US economist Donald J. Boudreaux  on the benefits that free trade has brought us all:

Trade and civilization are intimately, indissolubly connected. Trade creates civilization. The greater the freedom to trade, the more civilized the society; the more civilized the society, the greater the freedom to trade.

People, to the extent they are civilized, do not forcibly restrict the range of persons with whom others can trade peacefully. People, to the extent that they are civilized, attach no significance to the nationality of those who offer peacefully to trade.

Historian Will Durant (1939) penned one of my favorite descriptions of the ultimate benefit of open, free commerce – pointing out that reason itself is a child of open trade:

The crossroads of trade are the meeting place of ideas, the attrition ground of rival customs and beliefs; diversities beget conflict, comparison, thought; superstitions cancel one another, and reason begins.

Put another way, protectionism not only keeps prices unnecessarily high and not only creates unjustified special privileges for the politically powerful few. Most importantly, protectionism breeds ignorance and stupidity, two arch-enemies of civilization.

People, to the extent that they are civilized, find the very notion of protectionism to be barbarous. 

 

Unfortunately Kim Jong Hickey, for something so boring as 'seeing to be doing something', counts himself now amongst the barbarians that would see us back to a repressive past; a past that has been done, and stupid men have learned nothing from thus are set to repeat it all over again.

Every column penned lately by Kim Jong Hickey, sees another jackboot into the vulnerable stomach of freedom.

Too idealistic, Tribeless.

Too idealistic, Tribeless. The Doha Round has proven that, and very little else! A game where all the participants abide by the same set of rules is fine. But that's not international trade. Isn't ;never has been, and never will be. New Zealand ,is like sticking to the road rules; no points for keeping left if you've been hit by a tourist on the wrong side of the road, and your dead.

I'm just pointing out the

I'm just pointing out the world/West is heading headlong to a whole new bunch of Gulags of our own making, and it's the Kim Jong Hickey's and Grugman's around the world who are taking us there all over again. (I'm sick and tired of these stupid savages).

I certainly would not argue

I certainly would not argue that a return to protectionism is  a backward step and that mutant behaviour is becoming the order of the day amid all the panic of staring into economic abyss.....

but to say Hickey has any responsibility for taking us there......you pay him way too much credit...... he is tapping the mood .....seeing the behaviour now rather than the numbers of it.......

Savages.............uncivilised.........yes..! and it's only ever a heartbeat away as a primal response to fear...................and fear becomes greed in peace times.

I note the three consecutive responses near yours are all based on fear ...spawning frustration and clearly an agitated state...............you are only ever a heartbeat away from your instinct  so don't let things get to you....

like GBH say's it's not the end of the world............it just sounds like it. 

What a load of

What a load of self-indulgent, self-righteous crap.  Bernard is clearly just trying to pen little terms - he was too late for "the new normal" - and won't be satisfied until he has a name like "dr doom".  It's just so hot right now.  And all his mindless little hacks who have nothing better to do at work than engage in message board debates all go crazy.

My sobriquet for Bernard is "

My sobriquet for Bernard is " Chicken-Little Hickey " ............'cos " Dr. Doom" is already taken . And Bernie reminds me of someone who ran around squawking " the sky is falling , the sky is falling . "

Anyone else got some nickname for our mournful maestro ? [ remember that his pinkies are on the " Banned " button ! ]

"Wave 5: The news is almost

"Wave 5: The news is almost universally positive and everyone is bullish. Volume is often lower in wave five than in wave three,  Unfortunately, this is when many average investors finally buy in, right before the top. ..... At the end ... bears may very well be ridiculed .."

http://en.wikipedia.org/wiki/Elliott_wave_principle

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Bernard, seriously mate you

Bernard, seriously mate you look tired. Bet the wife has said the same thing. Get some sleep or take a holiday man. Your looking poorly and your eyes looked stressed. Take a break and have a kit kat 

Bernhard is much more

Bernhard is much more competent/ valuable and looks even tired, better then that TVarse P. Henry, who without glasses looks like a hairy spud.

that's just his "public"

that's just his "public" stage appearance look..you oughta see him relaxing up on jervois quay supping a latte!

True Blood ain't got nuttin' on dat !!

Less time in the pool

Less time in the pool .....less dipping in to my "Viva the Revolution" donation box at the front

office would also benefit your health in the long run....Senor Bernard.

but without him we are

but without him we are nothing!