90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: Gold hits record high as talk grows of fresh US money printing; NZ$ up to near 74 USc

15th Sep 10, 8:58am by Bernard Hickey

Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news of fresh talk the US Federal Reserve will announce a new programme of US Treasury purchases next week.

This next round of money printing often referred to as QEII for short, or Quantitative Easing II, increased worries about a devaluation of the US dollar.

Goldman Sachs and Morgan Stanley issued notes warning about the likely need for the US Federal Reserve to try to restart the US economy through Treasury purchases to try to bring down longer term interest rates.

However, even Goldman Sachs says a US$1 trillion programme of bond purchases would lift economic growth by only 0.4% because US long term bond yields are already near record lows. The US 10 year bond yield is around 2.68%.

The gold price rose to a record US$1,267/oz on the talk of a US dollar devaluation.

Meanwhile, in Japan, current Prime Minister Naoto Kan beat challenger Ochiro Ozawa, sending the yen higher. Ozawa had pledged to raise more government debt and to force the yen lower so the rejection of his leadership bid helped lift the yen versus other currencies.

The New Zealand dollar surged almost a full cent to almost 74 USc overnight as the US dollar weakened.

Even the Chinese yuan strengthened versus the US dollar.

The Dow closed down 14 points after news Bank of America may have to buy back up to US$20 billion worth of toxic mortgage bonds.

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7 Comments

by Matt S | 15th Sep 10, 9:28am 1284499711

Got gold yet ?? .. Next target $1300... .

by Mark Hubbard | 15th Sep 10, 9:29am 1284499772

Re QEII, rising Japanese Government debt - which caused their earlier lost decade - will 'Western' styled economies never learn from history the folly of the big State.

Every planned economy rests on a planned society, and after much pain and hardship, every planned economy falls over when confronted by the reality of markets (and the freedoms of market economies). Every Western central banker and politician should be pondering the below, today's most important story:

http://www.stuff.co.nz/world/americas/4129284/Cuba-to-lay-off-500-000-workers

Quoting that article:

"Cuba said it is laying off nearly half a million workers, an eye-popping figure in any country, but especially in a nation where the government so totally dominates the economy.

The shift would mean that one-tenth of the island's 5.1 million-strong work force will be looking for jobs in the private sector by April 2011, a drastic change that could mean a radically altered economic outlook, especially for Cubans in their 20s and 30s who have known nothing but a paternalistic communist system ushered in by Fidel Castro in his 1959 revolution.

...

But they were not entirely surprising. Raul Castro has warned for years that the state could no longer afford to subsidize every part of Cuban life, nor pay workers who contribute little. In April, he floated the idea that up to 1 million workers were superfluous and must go.

The layoffs announced Monday will start immediately and continue for months, according to a statement from the nearly 3 million-member Cuban Workers Confederation, which is affiliated with the Communist Party and is the only labor union allowed by the government.

"Our state cannot and should not continue supporting businesses, production entities and services with inflated payrolls, and losses that hurt our economy are ultimately counter-productive, creating bad habits and distorting worker conduct," the union said.

...

Currently the state employs 95 percent of the official work force. Unemployment last year was 1.7 percent and hasn't risen above 3 percent in eight years - but that ignores thousands of Cubans who aren't looking for jobs because wages - which average NZ$27 a month - are so low. Ritter said the official rate was laughable. "

by David George | 15th Sep 10, 10:07am 1284502039

"We pretend to work and they pretend to pay us" seems appropriate. .

by Wolly | 15th Sep 10, 10:11am 1284502304

Will this be the new rallying cry for New Zealand Labour............err no!

by We Are Stuffed | 15th Sep 10, 11:30am 1284507050

The NZ dollar price of gold is no higher though. It is only the USD price that has increased.

by Steve Netwriter | 15th Sep 10, 1:46pm 1284515198

"The gold price rose to a record US$1,267/oz on the talk of a US dollar devaluation."

should read:

"The US$ fell to a record low of 1,267...." ;)

we are stuffed, that is not correct if you are talking about last night:

Charts of Major Currencies Priced in Gold over the past week and 21 days

http://www.neuralnetwriter.cylo42.com/node/3484

by Wolly | 15th Sep 10, 3:26pm 1284521202

Forget Gold....buy electricity!

http://www.voxy.co.nz/national/power-bills-set-push-kiwi-homes-red/5/63407

"The number of New Zealand households unable or unwilling to pay power bills on time is set to increase over the next six months according to debt recovery agency Baycorp.

Rising electricity prices, fuelled by ETS (Emissions Trading Scheme) levies and the increase in GST, are likely to result in people defaulting on their power bills in order to pay "more pressing" bills such as mortgages and groceries, the company says.

The average unpaid electricity bill stands at $615, about $100 more than a year ago. Nationally this amounts to nearly $15 million, of which about 20 percent is recovered within 12 months of the bill becoming overdue."