HSBC economist Paul Bloxham suggests the RBNZ's May Official Cash Rate guidance 'was not a genuine reflection of the central bank's reaction function'

IE get it over with, we have no clue what you are going to do and do not trust any guidance you provide?

I cannot remember the Economics community quite so uppity about RBNZ / Communications / Guidance / Data

for a long time.

I don't think RBNZ could forecast the date for Christmas but I do thing the market is probably a bit too Dovish on near-term cuts. Inflation over the last three quarters is exactly where RBNZ wants it, they are unlikely to alter policy setting while they are around the 2% mid-point.

I see the Aussie are having a similar discussion over there:

"Beware of economic 'false prophets', warns Reserve Bank... Of course, eye-catching language sells newspapers, secures clients and draws crowds to the soapbox," Reserve Bank of Australia's Deputy Governor said on Monday. "But when the stakes are so high, claiming supreme confidence or certainty over what is an intrinsically uncertain and ambiguous outlook is a dangerous game"

https://nz.finance.yahoo.com/news/beware-economic-false-prophets-warns-…

Let's be clear here.

The May 'guidance' that rates wouldn't come down until Q3 2025 was utter, unadulterated b.s.

The RBNZ had absolutely no data nor historical grounds to base such b.s. on. None whatsoever.

I feel for those poor people that heeded this rubbish from the RBNZ and fixed long because of it.

The RBNZ should be paying the break fees of any person that fixed long based on their b.s.

Orr does so much jawboning that trust in RBNZ commentary is very low. 

Q. If the OCR and wholesale rates fall does that mean the government's revenues fall due to less inflation meaning lower returns?

NEO-CLASSICAL ECONOMICS AND BARE FACED LIES



Why on earth would we listen to anyone talking up his employer's book, when they are employed by one of the most evil banking institutions in the entire history of humanity?



Poet Lawrence Ferlinghetti asked… “whether man must burn down his house to roast his pig…” 

When he asked this question I'm not sure if he had monetary policy in mind, but the current Western neo-classical monetary policy used to tackle inflation is precisely that scenario.

Worse still, history illustrates that interest rate hikes have to be so utterly brutal that they need to be at the very least at the level of the true inflation rate, or higher – Paul Volker did this in the 1980s when the rates were pushed above 20%.



This is made worse by the fact that an economy can have inflation and deflation at the same time - IOW, severe inflation for essential inputs that keep the productive economy going, and for our society and families to even survive, but offset and masked by deflation in of the many non-essentials.   



Volker's strategy was spun at the time as successful from the point of view that it appeared to halt inflation when all it had done was destroy enough of the real economy and liquidity to make it appear successful.



In 1979 the federal funds rate had averaged 11.2% and Volker took them to a peak of 20% in March 1980. The prime rate topped out at 21.5% in 1981, which heralded (surprise, surprise - NOT) a rise in unemployment to over 10% and the 1980-1982 depression.

“Volcker’s Federal Reserve board elicited the strongest political attacks and most widespread protests in the history of the Federal Reserve (unlike any protests experienced since 1922), due to the effects of high-interest rates on the construction, farming, and industrial sectors, culminating in indebted farmers driving their tractors into Washington, D.C. and blockading the Eccles Building. US monetary policy eased in 1982, helping lead to a resumption of economic growth.”… Wiki quote.

Although I am a great admirer of Ron Paul – IMO the quote below reveals that even he was not aware of the utter falsehood of attempting to use rate hikes as a constructive monetary tool to address inflation.

“Being in Congress in the late 1970s and early 1980s and serving on the House Banking Committee, I met and got to question several Federal Reserve chairmen: Arthur Burns, G. William Miller, and Paul Volcker. Of the three, I had the most interaction with Volcker. He was more personable and smarter than the others, including the more recent board chairmen Alan Greenspan and Ben Bernanke.”

Volcker may well have been the smartest, but in my opinion, they all wreaked havoc on Mainstreet, and massively rewarded the financial economy at the expense of families, SMEs, and the productive economy.



As Volcker aged, he became more critical of the banking industry but that was long after he had spent his career indulging and implementing most of the destructive hoaxes of neo-classical eCONomics.



Interest rate hikes are not an effective monetary tool to address inflation – on the contrary, they instantly feed inflation just as hikes in energy prices do – you do not even require the most basic economic nouse to understand this principle – it should be self-evident to anyone with an IQ even approaching room temperature.

As Werner points out, it is not interest rates, but bank credit that determines economic growth, simply because ~97% of the money supply in our Western fiat currencies is created out of thin air by privately owned commercial banks.

There is zero basis for the official narrative that higher interest rates lead to lower growth and that low interest rates lead to high growth.

As with most aspects of eCONomics, the quickest way to get straight to the truth is to simply assume the 180˚ polar opposite of the official narratives. All of the empirical evidence demonstrates that interest rates are a lagging indicator and a farcically ineffective monetary tool”



Karl Popper called this the ‘immunising stratagem’ which scientists fancied could guard their theories from being challenged by the use of reverse engineering in what became known as the ‘deductive approach.’  This is my interpretation of the process…

1. Predetermine a conclusion that supports the banking cartels’ grand theft from Mainstreet
2. Invent a model that can give you that contrived conclusion
3. Identify the false maxims that can propagate the lie and present them as facts
4. Present these steps in the reverse order
5. The network that has the key to the giant printing press then buys up all of the networks and agencies required to manufacture the narrative, even when it is nothing more than a bunch of myths premised on deliberate lies

Safe Havens in times of financial strife – where are they now?

In the 1980s the level of total debt was so much less than it is now that the entire financial meltdown was at a totally different level. Today just the U$ Govt debt alone is a death spiral in itself, with an extra $1 trillion added every 100 days. It took almost 200 years for the U$ to accumulate $1 trillion in public debt - now it takes a mere 100 days. 

In 2024 the U$ will have to issue $10 Trillion in Treasury paper to finance more deficits and to roll over old paper at much higher interest rates. The revised cost of this debt will rise from ~$1 Trillion to $1.5 Trillion. This is a debt spiral where more and more money has to be borrowed just to pay the interest back – paying down debt is not even on the radar. They are technically insolvent just as 90% of Western countries are.



NZ is technically insolvent too - our total debt (including unfunded liabilities) is a higher percentage of GDP than that of Greece, which most assume is the archetypical economic cot case on planet Earth. Our figure at over 600% is more than 1200% higher than our public debt, but not a single financial commentator (apart from YT) ventures anywhere near this extremely uncomfortable reality.



Meanwhile, we continue to eviscerate the real economy and families, whilst we reward the parasitic financial economy with billions -  because we allow them to create the money supply that we should be creating as a public utility for the good of society and the domestic economy.



All of the big 5 Western fiat currencies have this problem including the three sometimes referred to as ‘default currencies’ – the dollar, the Yen, and the Swiss Franc – these used to be seen as safe havens to hide when the financial/geopolitical shite hit the fan.



Now none of these are safe any longer, and so the pressure will really come onto these currencies as there are now viable alternatives that countries can use in their accelerating de-dollarisation and fiat exiting strategies – these include…

• Gold stacking by central banks — this is at an all-time historical high at around 1000 tons per annum for the last few years – this is a no-brainer, especially now that Gold is a first-tier asset under the new Basel III regulations – this facilitates the process, out of plain sight.
• Silver – although not monetized like gold under the new international banking regulations, at a 90:1 valuation compared to gold at a historical average ratio of ~16:1 this has to render silver the most undervalued commodity on the planet – silver makes for a fascinating story given that it is both a monetary and industrial commodity and the fact that 85% is mined as a by-product of other PMs. Silver is the absolute wildcard when the big reveal of the Western fiat currencies commences – at 16:1 with gold at $2,500 oz that would put silver at $156, with gold at $3,000 – silver would be at $187, gold at $5,000 – $312, and at $10,000 – $624! Another way of looking at it is that silver has basically been demonetised since 1873, and if it reverted back to its primary historical value as a monetary metal, then it would be around 1/10 of the value of gold per oz, which with gold at $2400 per oz, that would price silver at $240. IOW two entirely different methods render a similar result.
• Any and all commodities that are needed in the future

To me, the Western safe havens no longer exist, as the main Western fiat currency economies now face a very unpleasant binary choice between either…

A. Severe hyper-inflationary depression and ruin or

B. Severe and extended debt liquidating depression - and ruin.



Until these Western fiat currencies and economies crash and burn there will be no reform any more meaningful than rearranging the deck chairs on the Titanic. The inevitable will be delayed for a few months because governments can still sell relatively liquid short-duration treasury bills, but long-dated paper will become more and more difficult to sell - given that all of these main Western fiat economies/currencies rely on selling their debt in the form of bonds, this is a disaster waiting to happen.



As debt becomes more and more risky and toxic, how are we going to see interest rates lowering to the extent these eCONomists are salivating over? Papering over these debt levels will only make matters worse and the compounding interest effects on multiple countries will only bring home the stark reality of a hyperinflationary depression or severe stagflation.



To me, everything about the tone of this article reeks of the mythology of eCONomics. Until as a country, we learn the stark difference between the parasitic financial economy and the real economy, plus implement massive monetary and fiscal reform, we will have zero means of escape from a debt death trap cynically laid by the global robber barons.



Once upon a time, the largest part of HSBCs business was the opium trade - not a lot has changed, except in this day and age it is mostly based on hopium and perpetuating the outrageous mythology and bare-faced lies of neoclassical eCONomics.   



https://globalsouth.co/2024/03/12/economics-part-iv-interest-rates-mani…



Colin Maxwell       

The whole concept of forward guidance is a mistake. They should just announce rate changes when they are implemented. As it is, we've just substituted 'markets responding to an actual change' with 'markets responding to a predicted change' - which *decreases* certainty and strong decision-making.

This seems very obvious to me from a game-theoretical perspective.