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PM Key "very worried" about US economy in face of possible third round of US money printing; Will get gauge on next moves for fixing US economy

PM Key "very worried" about US economy in face of possible third round of US money printing; Will get gauge on next moves for fixing US economy

Prime Minister John Key says he is very worried about the United States’ economic situation, and will use a visit there this week to determine where the US is heading in terms of its economic policy as markets wait for a possible third round of money printing from the US Federal Reserve.

That money printing has had the effect of devaluing the US dollar, meaning the New Zealand dollar last week rose to a fresh post-float high of 85 US cents on the back of better than expected NZ growth figures for the March quarter.

This morning, Key noted US Federal Reserve Chairman Ben Bernanke had not ruled out a third round of quantitative easing – or money printing – which had put a lot of pressure on New Zealand’s exchange rate. He would not comment on whether the New Zealand dollar could reach parity against its US counterpart.

“But I am very worried by what you see in the United States at the moment. They’ve got essentially [a] zero [official] interest rate, so in terms of monetary policy, no room to move,” Key said on TVNZ’s Breakfast programme.

“In terms of fiscal policy - how much money you can spend - they’re borrowing US$4.6 billion a day. Their [annual] deficit’s NZ$1.4 trillion,” he said.

Asked whether he would express concerns when meeting with US policy makers such as Bernanke, Key replied:

“It’s not for us to tell the Americans how to run their economy. Really we’ll go there and get a sense of what they think happens next. But they owe - they’re debt ceiling’s US$14.3 trillion - so a trillion is a thousand billion, just to give you a sense of how much money that is.

Here is the transcript of Breakfast presenter Corin Dann talking to Key about his US trip:

Corin:  Okay the US trip, is this a good time to be going, I mean in the middle of a debt crisis, do you expect to get the time you need with those people?

John:  Yeah I spose bluntly, we don’t get a lot of choice.  The President doesn’t give you lots of options, he gave us one day, and that particular day is Friday the 22nd, so that’s when we'll be there.  Look it's a great opportunity, we don’t get a lot of face time really.  When we go to things like APEC East Asian Summit these days we get to see the President, and that’s great but there's a great symbolism in the meeting in the White House, and there's a lot to discuss ….

Corin:  Is trade the top on the agenda? 

John:  Yeah, trade is…

Corin:  So where are we at in the time line of getting this free trade deal with those other countries.

John:  Yes, there's eight countries in the Trans Pacific Partnership, New Zealand and the United States are two important ones.  We want to see the deal completed.  I think by the time we get to Hawaii for APEC at the end of the year, I don’t think a deal will be signed, but I wouldn’t be surprised to see a sort of heads of agreement or a letter of momentum or support or whatever being signed.  So we are making moves.

Corin:  And the Pharmac issue – where are we at with what we're gonna give up on Pharmac?

John:  Yes we're going through all of those discussions.  I wouldn’t anticipate we'll be at that level with the President.  I mean they’ll be at kind of generally a higher level and its overall support for free trade only, we'll get down to the absolute details.  But I think it's important to understand the point that both myself an Tim Groser, our Trade Minister, have made on a number of occasions, and that is look, we're not gonna sign a deal that’s not in New Zealand's best interests, Pharmac works very well for New Zealand.  I think their bigger issue actually is around intellectual property, that’s really where their concerns are.

Corin:  Okay, you're meeting the Federal Reserve Chairman.  You might have a word to him about why he's pushing his dollar down and pushing ours up to 85 cents?

John:  Well you saw it last week where he originally came out and said he wouldn’t rule out a third round of quantitative easing, which is where the United States have been buying their bonds, and that you know puts a lot of pressure on our exchange rate.

Corin:  Do you see it getting to parity one day the New Zealand dollar?

John:  I don’t want to speculate, cos a lot of people would be very concerned by that, but I am very worried about what you see in the United States at the moment.  They’ve got you know essentially zero interest rates in terms of monetary policy, no room to move.  In terms of fiscal policy how much money you can spend.  They're borrowing 4.6 billion a day.  So their deficit's 1.4 trillion.

Corin:  So you'll express those concerns obviously?

John:  Yeah I mean it's not for us to tell the Americans how to run their economy, I mean really we'll go there and get a sense of what they think happens next but they owe – their debt ceiling's 14.3 trillion.  So a trillion is a thousand billion, just to give you a sense of how much money that is, and I think it shows why New Zealand's doing the right thing actually getting its debt under control and why our zero budget was right.  We can't afford to be that exposed.  But certainly it's putting a lot of pressure on our exchange rate.

(Updates with transcript).

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28 Comments

When is he going to start worrying about the New Zealand economy?

She'll be right, mate.

“It’s not for us to tell the Americans how to run their economy. "

Yep, just look at the response Bill English got just lately. However, given they are still the world reserve currency doesn't that give us some right to make comment or give advice?

I wonder what advice we could give though?

Maybe, "There is no alternative, how about build a cycleway?"

Or even better, pay welfare to their middle class families, take interest off their student loans, encourage them to introduce a capital gains tax riddled with loopholes and exemptions, and make sure that no state or federal sale taxes are levied on fruits and vegetables. That will fix America’s debt problems.  Genius.

Apparently John Key has no control over the NZ economy what so ever, it's all just out of his control. But yet he thinks can influence the US economy LOL.

I think he is.....any PM/party who wants to remain in power (if for no other reason) has to worry that the economy isnt about to blow up on them a few months/weeks from the election....   So his choice is a strangulation from the US de-basing or being kicked off a cliff from the US [economy] collasping, some choice.  Given consumer spending [was?] 70% of the US economy and its shrinking and with core US inflation around 0.5% and dropping the next step is deflation....and that's self-fullfilling....so of course QE3 is just around the corner...

regards

.Malarkey, for all intents and purposes, America is the NZ economy.

Aren't we hooked up to the "China-Australia train" these days?

see my comment just below - anyone who thinks America and Europe don't matter to us anymore is very wrong

lol we could tell them to get a CGT that would solve all their problems

anyone who thinks these US issues will have limited effect on us needs their head read!

Firstly, the NZ dollar will rise and get close to parity - a big bugger for our exporters

Secondly, continued US weakness will drag the Chinese economy down - that will affect us indirectly (via Aus) and directly  

Some may have seen this and it certainly puts a trillion dollors into perspective.

This is dollors compared to time as seconds:

One million seconds equates to approximately 11.5 days.

One billion seconds equates to approximately to 32 years.

One trillion seconds equates to approximately to 32,000 years.

So there is a huge difference between a billion and a trillion and we should be concerned about the situation in the USA.

Gavin Jones - thanks. We need more posts where the artificial is related to something real.

Most folk go glassy-eyed after a million, most don't get the exponential function, and the whole debate - if you can call it that so far - is being had in terms of a secondary driver.

There was a good interview (Kim Hill / Nat Radio) on Saturday, of yet another economist who 'didn't see it coming'. Thinks the sib-prime was the problem. Actually, if the energy had been there for the sub-prime borrowers to do things (it's called 'work') then they'd have been able to repay. If the energy had been there to allow others to do more work, there'd have been a market for the sub-prime folk's goods and services.

One day, we might address reality - but I'm not holding my breath.

yeah we need more reality - Pike River Mine and others  could have been opencast and we wouldnt be  having to spend a fantastic lot of unnecessary time and money and lives on the ambulance at the bottom of the cliff

People have been going underground to mine for coal for thousands of years. It is not complex or particularly dangerous if done intelligently, competently and with integrity. I know first hand, I grew up in a family who worked for the United Coal Mine Workers..- (Kentucky and West Virginia).

I can tell you some horror stories about land after it has been strip mined. (in the end, not really land, but more like a toxic waste dump for as far as you can see)

NZ now has third world regulations, and consequently we get third world results- 29 dead human beings and thousands of grieving friends and relatives.

I am waiting to see manslaughter charges brought against the Pike River management "mates" of the dead miners.  We are so quick to prosecute and lock up the two-bit petty criminals in NZ, meanwhile, our criminal "master minds"  hang out in flash restaurants and resorts, planning their next "financial innovation", like strip mining coal, off-shore drilling, new finance companies, or new "legal high" formulations- all the while manuvering for their ultimate Queens Birthday honors.

Absolutly waiting for their queens birthday honors...

...and the back hand sweetners from the Crown Corporation City of London, and if the local population dosnt agree, well send in a task force, activated from the District of Columbia to sort out the puny rebellion!

mmm sounds like a pattern and well if patterns teach us anything it is that patterns are repeated!

No - you need more reality.

If all the stored coal is burnt - and if you google 'sequestration' you'll note that it's all artist's impressions, sure sign it doesn't exist - then millions die.

The problem for someone like you is that for things to fit your preconceptions, things like climate change have to not be happening. Thus it will be with anything you find hits your hip-pocket.

I go with real truths, from first principles. You should try it sometime.

So, Gavin. If we pay our gross national debt offf ( of $172 billion - most of it residential mortgage lending) at $850,000 per day, and don't add any more to it ( the current $380 million per week that we are committed to, to stay afloat!) it will only take us... 60 years! I guess that's longer term mortgages coming up? (NB: Interest on our gross debt @5% = $23.5 mio..per day! How, and over how long, do we repay that, Gavin?)

google debt clock

" they’re borrowing US$4.6 billion a day"

Given that they're approx. 69 times our population I calculate that per capita we spend approx. 2.4 billion per day. (250m/7) x 69 = $2,464,285,714

Not really a small figure either.......

Share market crashed in '29...caused a ressession......

3 /4 yrs later the US turned to protectionism of local markets and printed money.....the the great depression kicked in.

2007 Finanual markets start collasping  2010/2011  3 /4 yrs later the US  prints money....

"When is he going to start worrying about the New Zealand economy?"

At least someone is concerned over historical events and the effects they had on NZ/world.

Then head back a live generation before that, 1879....same.

That has to be one of the most short sighted ill thought thru comments in a long time here.

Welcome aboard the reality train John.

Better late than never...

Doesnt matter the USA was bankrupt in 1933 and ceased to be country in form and function from that time on. It is to be simple a corporation a side branch of private for profit banking based in the City of London aka The Crown...all public record in the public domain...

Do your homework....

If I was our PM it would be   "  PM very worried whether Airforces  pre-loved  757 will get him to USA "   given the morale of our once proud but now sad airforce

Prime Minister John Key says he is very worried about the United States’ economic situation 

Why is he worried? its all part of the globalist agenda to which Key is a party to with the rest of our low level politicians. 

Reasonably obvious in plain sight, nothing hard to pick up on,  you only have to dig around abit to figure this out. The global elite have even told you more than once and left plenty of clues! 

Plenty of information about it....

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