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NZ Finance Minister English told US Fed's Bernanke that US quantitative easing hurt NZ economy; "he thanked me for our point of view"

NZ Finance Minister English told US Fed's Bernanke that US quantitative easing hurt NZ economy; "he thanked me for our point of view"

US Federal Reserve Chairman Ben Bernanke thanked Bill English for his comments last year and then ended the meeting.

Finance Minister Bill English says he told US Federal Reserve chairman Ben Bernanke about the effects the Fed's policies were having on the New Zealand dollar.

In a discussion with Bernanke last year, English said he raised the point that the Fed's quantitative easing programme, which was devaluing the US dollar, was pushing up New Zealand's currency.

"He thanked me for our point of view and closed the meeting," English told the NZ Tourism Industry Association conference in Wellington this morning.

"Mr Bernanke's driving our exchange rate up," he said.

One of the reasons the New Zealand dollar had been higher recently was because the US had been printing money "flat out and devaluing their own currency,” English told journalists after his speech.

“We simply pointed out the implications of the policy for New Zealand. I think it was a story he had heard before because other commodity export economies like Brazil, Australia, New Zealand, South Africa are all suffering from the same effects,” he said.

Bernanke was very focussed with fighting unemployment in the United States.

“One of the risks is that the US appears to be going into something of a slowdown now," English said.

“But the core of their problem is not so much unemployment, it’s actually the very large amount of debt that they’re carrying, and the only way to deal with that is to pay it off or write it off, and they haven’t done either so far," he said.

'Eye on EU, but we're OK for now'

Meanwhile English said New Zealand was in reasonable shape to respond to what happened overnight in the Eurozone, where Moody’s cut Ireland’s sovereign credit rating to junk status. The focus of the Eurozone debt crisis has also moved to Italy, spooking global financial markets.

“We’re a bit less vulnerable to those markets because we were borrowing more in them when the going was good before it cut up rough. And secondly, because those markets are pretty unstable, New Zealand and Australia are looking relatively more attractive, so we’re finding a bit more interest in [global money markets] lending money to New Zealand,” English said.

The government certainly was not seeing any immediate impact on New Zealand from what happened overnight.

“If there is some kind of crisis around our ability to borrow money, we know what to do because we’ve been through it back in 2008,” English said.

It was important for a country like New Zealand to stay off the radar in terms of its levels of debt, which meant it was important for the government to work towards achieving a budget surplus as soon as it could.

This would ensure global financial markets regarded New Zealand "undoubtedly as a sound country that they can lend money too, knowing they’ll get it back,” English said.

English was answering a question on whether the Labour Party’s economic package due tomorrow, which is expected to show government debt tracking a bit higher than forecast in the short-term, would be accepted by ratings agencies.

“It’s important so that we stick to that kind of [debt and surplus] track, and any deterioration in it starts raising some questions,” he said.

'Our traditional friends will be stuffed for some time yet'

During his speech to the tourism conference, English continued to express his view that New Zealand’s traditional markets – the UK, Europe and the US – were stuffed economically-wise, and that industry in New Zealand had to embrace the rise of Asian economies, particularly China, which had a household savings rate of about 50%, meaning there was money there to be spent.

It would take the US, UK and Europe 10 to 15 years to sort out their problems.

“Europe, just like the US, has far too much debt,” English said.

Their options were to write the debt of for pay it off, “and they’ve done neither,” he said.

“The problem’s getting worse, not better.”

From the perspective of the tourism industry, “they’re not going to be very happy markets for some time yet.”

New Zealand needed to ensure it was not lumped in the group of small, highly indebted nations. Global financial markets were not going to just keep lending New Zealand money. They had found that lending money to these countries could be dangerous, English said.

“Our ratio of debt to foreign lenders is similar to Spain, Portugal, Ireland and Greece,” he said.

Even though New Zealand was looking to improve its foreign debt situation, it still needed to roll over the equivalent of 50% of its GDP in debt every six months, meaning it was still vulnerable to global financial markets.

(Updates with comments on Eurocrisis following speech.)

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22 Comments

How pathetic.  As if Bernanke would of given a toss. 

Bill should have kept this pathetic gem to himself.

Yes but he was pretty naive to expect Ben to give a rats arse about NZ. Even more pathetic for bill to to tell us what happened.

While Bernanke obviousley didn`t rush out and change US policy ,surely Bill English not only had a right to express his/our views to a partner in the world economy,but a responsibility ,as our Minister of Finance.If our representitives only brown nose our "partners" aren`t we then complicit in the results.While not a fan of English surely credit is due here.?

It only confirms to me that when push comes to shove the US first of all looks after itself,just like any good goverment should in my opinion.

Alex you mean to say that the FED looks after it's private interests only , has nothing to do with US govt & even less than that cares zero about the people in it's own country or abroad ,whether attacking them using violence ,social , fiancial, or any system it has control of !

"He thanked me for our point of view and closed the meeting," = piss off Noddy.

Now what Bill?

Suggest you get on a plane to Rio to get some up to date ideas that work. Oh, and leave people from 1&2 The Terrace behind.


Oh, and leave people from 1&2 The Terrace behind.

Exactly - until you come back. Then, if you wish a return to surplus, start cutting entitlements where the real damage is being done.

Updated with a few more comments.

Quite a few commodity exporting countries have been complaining to the US about QE.

The Fed would have known how its policies would affect other countries, but hey, I guess it's good that our policy makers (and those from other commodity countries) are actually going to them and telling them about it.

Can't hurt, although it doesn't seem to have done much...or did it? Could this have been one of the reasons we didn't see QE3? ........

Hold your horses! There's still plenty of time for QEIII.

I heard that Bernanke cried himself to sleep that night.

Still can't understand why our RB doesn't just buy the Government debt. Why go grovelling around the international debt markets and pay 5 or 6% to them instead of to our RB. The $300,000,000 per week is pushing up our dollar as well to add injury to insult.

Inflationary? No, the money is entering our system anyway whereever it comes from. Just pay back the RB when the crown accounts are back in surplus and that "money" ceases to exist.

Oh; and a big FU to "The Bernank" as well. 

Like a Flea at the wrong end complaining to the Dog.

Updated with some more comments from the speech.

He opened with:

"The Prime Minister is the minister of good news, and I am the mimister of bad news."

Cheers

 Bill should bill Ben for that brilliant briefing – at least to compensate for the trip to Ben - Bill's beverage, and Ben's bubble bath - in barticular.

I thought NZs excessive borrowing, both private and public  was driving our exchange rate up. The QE is driving the US dollar down, giving it less buying power.

Frankly the Americans can go to hell in whatever basket their Visa / Mastercard/ Diners/ Amex Card will buy them .They are not our friends anyway .

They have all sorts of barrriers to our Dairy exports , and want us to Can Pharmac. 

We should , like Brazil, resort to protecting our currency through taxing speculative transactions not supported by real trade 

I don't think they can afford the ticket to get in Boatman...probably have to borrow the price from Beijing.

You'd get no complaints from me for Bill English giving his point of view to Ben Bernanke if what he said had any connection to reality.

"One of the reasons the New Zealand dollar had been higher recently was because the US had been printing money "flat out and devaluing their own currency,” English told journalists after his speech."

The Federal Reserve doesn't print money. The U.S. Congress has the sole privilege of issuing legal in the United States. The bond market is merely used to settle debts already incurred by the U.S. government as it carries out its duties as determined by Congress' spending priorities. The Federal Deficit acts as a drain for the banks reserve balances who have accounts at the Federal Reserve. The banks can be both foreign and domestic which is why the Federal Reserve open dollar swap facilities with foreign as well as domestic banks and corporations after the GFC. I think the U.S. Establishment allows foreign powers to invest in Treasuries, because they're aware that in doing so the foreign exchange rates are held lower than otherwise and therefore the domestic assets are alot cheaper to buy for U.S. multinational corporations. 

"When securities in the SOMA portfolio mature, which happens every week with bills and every month for different maturity notes and bonds, the Desk determines whether to reinvest the maturing proceeds into new Treasury debt issued at primary auction, or to redeem the maturing proceeds. Typically the proceeds are reinvested, which would maintain the size of the SOMA portfolio and therefore the size of the permanent reserve-adding nature of the portfolio. Occasionally, due to portfolio guidelines or reserve needs, proceeds are redeemed, which reduces the size of the SOMA portfolio and effectively drains reserve balances from the banking system."

http://www.newyorkfed.org/aboutthefed/fedpoint/fed32.html

The reason why Bill English obviously doesn't understand the mechanics of the U.S. modern monetary system, is because he doesn't even understand the workings of our own system. That aside New Zealand's practice works very differently than the international norm. The banks here aren't subject to cash reserve requirements and they operate under a model which has been termed open mouth operations where the Reserve Bank takes a hands off position on managing interest rates, where they communicate their opinions as the appropriate  rates and the banks respond as if the Bank had managed the capital markets directly.

 http://www.econ.canterbury.ac.nz/downloads/mimpomo.pdf

Obviously the role of Treasury Minister role isn't as clear as it is for his counterpart in the United States and probably Britain. 

"I think it was a story he had heard before because other commodity export economies like Brazil, Australia, New Zealand, South Africa are all suffering from the same effects,” he said."

They're suffering those effects, because their primary producers are recycling their capital  balances back through their financial intermediaries in the developed world. They're the long term beneficiaries of the current high price of commodities. "Speculators" are merely the ticket clippers on the way through. There not the end buyers of the commodities who set the spot prices. As long as consumers (particularly China), signal their willingness to pay the exorbidant prices, the cost will remain high. QE just insures that "speculators" and middlemen make higher profits due to the prevailing low interest rates. So what? 

“But the core of their problem is not so much unemployment, it’s actually the very large amount of debt that they’re carrying, and the only way to deal with that is to pay it off or write it off, and they haven’t done either so far," he said.

Rubbish, the problem is not the debt, but the fact that U.S. lawmakers and capitalists are sacrificing their workforce merely for the sake of temporarily massaging their balance sheets. 

 

"Thanks to Wisconsin Gov. Scott Walker (R) prison chain gangs are no longer a thing of the past.  After successfully ramming through legislation that dismantles almost all collective bargaining rights for civil servants, Walker has now turned to prisoners to fill jobs that used to be held by unionized workers.

"According to the Madison Capital Times, part of Gov. Walker’s bill strips unions of the right to claim certain work as a “union only” job.  As a result inmates have been able to step in and fill what used to be good-wage jobs not for pay, but for time off of their sentences."

Read more: http://www.care2.com/causes/in-wisconsin-prison-labor-replaces-unions.html#ixzz1RxUM5DYc

"The company may cut as many as 10,000 jobs, or about 14 percent of its workforce, to revive profit growth, according to two people familiar with the plans."

http://www.bloomberg.com/news/2011-07-12/asian-stocks-euro-decline-as-bond-risk-jumps-on-europe-contagion-concerns.html

Hey instead of selling our SOEs. Let's just do our on QE and pay back our debt.

our influence in USA is follows-

we withdrew unilaterally from ANZUS - thanks to H Clark and D Lange

we banned their ships from  visiting our ports -   ungrateful considering they saved our lives from Jap domination  in WWII !

 

We didnt ban US ships, we banned any ship carrying a nuclear weapon....and not just the USA...any country...so incl UK.

Did we withdraw from the ANZUS or did the US kick us out? Reaity more like the US ignores us....

"National held power until 1984. After regaining control in 1984, the Labour government instituted a series of radical market-oriented reforms in response to New Zealand's mounting external debt. It also enacted anti-nuclear legislation that effectively brought about New Zealand's suspension from the ANZUS security alliance with the United States and Australia."

http://www.state.gov/r/pa/ei/bgn/35852.htm

Indeed, from the US state Dept website....we are "suspended"....

What influence did we ever have? none anyway.....a bully gives you the scraps and anything he doesnt want....get real.

regards

 

 

The US does not care about anyone outside of the US unless there is an advantage in doing so...ie at a price and the bill isnt often totally known.....and it will be very steep.....actually, I'll use the word rape.....

This passes onto the Fed. Of course the Fed does not care about anyone outside the US. Bernanke has an almost impossible situation to handle, the Govn is corrupt, inept and is determined to lurch even further to the extreme right.  It has no credible economic policy or theory, just voodoo economics....it simply decides on an outcome and invents policy, data and "models" to justify it...  In short they are trying to deny gravity....it wont end well, in the mean time we pay to hold them in mid air.

regards

steven calm down the irrational anti-americanism  -  spose you realise that during WW2 once the japs moved down the Pacific that   the NZ Prime minister went to US x 3 times  and pleaded for the President  to rescue us ?  -  fortunately they did eventually ! 

    ' spose you have  been to Wrights  Hill fortress and seen the nz currency the japs had preprinted for the invasion ?

I know who our real friends are  when it matters - and  if you read todays Dompost about Tongas loans you will see what happens if the US go back to isolationist policies