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PM Key says very little Govt and RBNZ can do in face of currency wars, high $NZ; US and China need to sort it out

PM Key says very little Govt and RBNZ can do in face of currency wars, high $NZ; US and China need to sort it out

There is very little the New Zealand government or the Reserve Bank of New Zealand can do about the currency wars between the world's major economies and the rising New Zealand dollar, Prime Minister John Key said today.

Key told a post-cabinet press conference that the government had always had some concern as the New Zealand dollar rises against the US dollar on the back of the weak domestic situation in the US.

The New Zealand dollar sat at 75.5 USc late this afternoon, and is up from 72.8 USc a month ago.

"We're at the level where it is starting to create some concern [for exporters]," Key said.

Meanwhile, Key said there was very little that could be done as America and Japan prepare for mass money printing and competitive devaluations of their currencies.

"That's ultimately something that China and the US need to resolve," he said.

What was needed was a strengthening consumer base in the US, he said.

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49 Comments

Helloooooo...the US consumer is dead....the funeral is taking place now!

So much for the export boom that promised 170ooo new jobs....up it goes in a puff of Bernanke smoke. Farming returns smashed down by exchange rate. Next to come will be higher rates and Bolly will be left naked as the tide goes out. Not a pretty sight.

The Kiwi could blast all the way to parity with the US toilet paper and the au to 1.5.

Pretty soon it will cheaper buying property in Hawaii than downtown in Noddy.

Agree wolly....their real un-employemnt is 17% FFS....if Key thinks that he's being dishonest, I dont for a minute think he's a cretin....

The US will NEVER recover...its used and wasted its resources....without that cheap domestic input and expensive foreign energy its dead, RIP.

regards

OK, forget the US consumer....and the next idea is?

regards

a- There is a fair bit of momentum building behind the of Marijuana de-criminalisation movement in California...

b- You may or may not be aware, Tobacco survived as a Currency for over 200 years in the state of Virginia... way longer than the formally mighty Greenback.

c- Voltaire(great French Dude) , was quoted as saying that "Paper Money always arrives at it's intrinsic Value"...that of the paper.

Maybe the best way to get value from this situation would be to.....Move to San Fransisco, Roll up a big fat Doubie in a USD100 bill... Kick back, and enjoy the show.

Chq this...>http://www.youtube.com/watch?v=tZXBTVULfiw

NZ should decriminalise marijuana as well - think what it would do for the tourist trade.  At the same time RAISE, RAISE, RAISE the tax on alcohol.  I can't recall the last time I saw anyone puke and piss in the street after smoking a joint. 

You gotta stop smoking that shit kate.

California is doing Bill 19? to do so?

We have tobacco and booze both not good....one more mild drug legalised doesnt stike me as bad news.

regards

dont use a US not unless you want that doobie laced with coke.

Hamrod....I switched to Pepsi and still found them soggy and hard to light.

Better to have dope in times of no hope than hope in times of no dope,Christ-stove!

Nice to see you Rob O The Northern Glen......yes draw a warm bath.. kick back... and pop on the something uplifting by Cohen ......and a shick safety....for those who wanna play at it.

Thanks for the laugh..! 

More amoosment from November 2009!

"With everyone and their grandmother screeching that it is about time for China to inflate the renminbi, despite that such an action would be economic and social suicide for the world's most populous country, SocGen's Albert Edwards once again stalks out the Black Swan in left field and posits the contrarian view de jour: China will aggressively devalue the yuan following a deep 2010 downturn coupled with escalating trade wars."

Deep downturn ( was that it a few months ago?) Trade Wars? Looks omminous......

YYYuuuuuuuuuppp!

You know Steven for an intelligent hominoid....you say some pretty stupid things from time to time...

You wanna dance on their graves....keep your knees high cause one of those zombies is about to reach up and pull.... you...in the hole with him.

huh?

You are mis-reading me.....no I dont want to dance on their graves....im not celebrating that fact just commenting that I think its un-avoidable from my perspective....and indeed yes the fallout will catch NZ and I would think myself I just dont know how bad.

Take some points to consider, John Key, Paul Krugman, countless others all say the consumer has to start spending again or there will not be a recovery....I agree with that 100%...so in effect what they are saying is until the consumer merry go round takes off again, we will be (at best) in the doldrums...the problem is I dont believe it can ever take off again, its a Norwegain blue.

Then consider that I am a proponent of Peak Oil ie we at about it for maximum oil production, and also oil above $80USD a barrel will keep the US for one for certain in a perma-recession and if its gets to $100 at most $120 we will see another recession and a bad one...

Now the key point that is the unknown is how long do we stay on this oil output plateau, 2 years? 5 years? 8 years? I cant see anyone [of quality to comment] saying its beyond this decade....no one reasonable/sane/believable anyway....so for the next 5 years output will be essentially flat....maybe 10 years.

Demand from the developing world in the mean time is growing at 2% a year....oil price is very in-elastic v demand....so the price is set for a big rise....

And this financial mess is looking at least a decade to clean up....if not two maybe 3.

So chances of the US consumer "recovering" are zero IMHO.

regards

 

 

 

For the record Steven I appreciate your considered response....which I might add is more thoughtful and less abrasive than the abridged version as follows.....

"The US will NEVER recover...its used and wasted its resources....without that cheap domestic input and expensive foreign energy its dead, RIP."

regards

"OK, forget the US consumer....and the next idea is?"

regards

Steven I have responded to this comment in context with a number of other comments you have posted over a period of time including one just the other day  where I pointed out your considerable resentment "to the West" and asked if there was any reason for that you could put your finger on.

So if I am reading you wrong then it has been for a considerable period of time.....just so we are clear.....I think you make a lot of valuable contributions to topics and don't deny on some topics ...you know your stuff.......but to me there is an ever present anti-American undertone throughout  a good deal of your postings just as there is a good deal of Anti-Banking System in mine.

I make no secret of my bias against Global Institutions that have defrauded generations to come out of a decent  future or the opportunity to strive for one...including the American People...........

In that regard I still believe where they go we will go albeit eventually.

I'm amazed the US$ isnt even lower.  Its never been the NZ$ thats high.

Fat lotta use he is, then!

But neva mind - we do have our cycleway.

Sadly Kate, The Cycleway does'nt connect useful destinations.

As a parasitic currency trader Key would know!

too too true Justice.....

I want to know if these pricks that wheel and deal in our currency pay any tax

If they don't why should we as busnesses finialise our books and admit liability for paying tax

when every day they are eroding our incomes

So the PM is an impotent, lying (fomer??) fx gambler who is part of the system that has destroyed the worlds economies and consolidated the wealth, and to come even more reral assets, into the hands of the select few, then sits back and says there is nothing he can do about it.

Backed up by the Bolly who is also impotent, and seemingly knows less about ecomonics than someone is his position should do, and/or is also a massive lier.

Why do we tolerate this Sh*t

We don't - ask Aucklanders.

Well I am an Aucklander, and I don't count voting for Len Brown in an election what should have been totally boycotted in any case, as not tolerating it. Assuming that is what you refer?

If that's the best we have then we are well and truly beyond help

Note: I did not vote, I left the country again and will likely not come back in a professional capacity 

Well until someone starts a decent Libertarian  party, then we don't have much choice in this country.  Voting for either National and Labour gets you more and more of the same: increasing doses of socialism, statism, and corporatocracy.

Though thanks to the Internet, Libertarian values and awareness are gaining momentum around the globe.

What would happen if the OCR was slashed to 1% and the the Govt passed law in ensure a 30% deposit on property purchase?? would this drop the dollar or is the US really that stuffed?

The NZ housing bubble would collapse.....so far  the tinkering this Govn has done is enough to make it falter....its a fine balancing act, they want to curtail it but not kill it....at the moment the actions seem about right for the wante doutcome.

regards

Just spoke to a freind went over to US for his work, now he is on the way back along with some others he knows of. He said that the local economy is Bug..ered, the retail  stores can not give stuff away and factories are closing down every day. B Obama will be a one term president.

yeah i've heard the same thing. they can't give it away.

 

in a way i feel sorry for barry o though.....he's up against a massive machine that is rotten through and has no incentive or will to change...from the supreme court to the senate, to the party apparatuses to the mighty lobbyists.....even if he wanted to change (which i admit is debatable) he's little more than  a figurehead....like the captain of the Titanic i suppose.

Johns looking a touch old and tired in that photo Im sure the spin doctors wont be to happy about that.

New National Party slogan:  "We got nothing" 

spot on Matt...........and that's why it's all had such a hollow ring to it.

"There is little the Goverment can do" ???

Really ?? There is a word "Currency control" perhaps he should read it up in the dictionary on what it means and learn a bit of International Financial economics instead of letting his Currency Trader induced brain talk first before thinking....

 

Thinking !?!?!   Steady on there Kin.. he is not programmed to think... Smile and wave boys, smile and wave.

Reminds me of Jimmy Carter !!!!

not sure what "international financial economics" means exactly.

dropping interest rate? government can't ask rbnz to just do that, government ask rbnz to keep inflation rate under control, partly using ocr as a tool. even if ocr drops to 0.1%, speculators would still see nzd as a commodity currency, rises with commodity price.

buy usd and sell nzd? fx market has a turnover of nearly 4 trillion usd a day, anything our government throw in will not even make a bubble.

piggy back exchange rate with usd like yuan? next day US announce NZL as an exchange rate controlling country and boom, 250% extra custom tax on all NZL imports.

 

So what does "international financial economics" mean exactly? what can our government do that you know and key doesn't, that could keep nzd/usd exchange rate down while the fed planning another round of money printing? all ears.

 

Trade financing costs set to soar under Basel III

Tuesday 12th October 2010

 

New Zealand businesses will find it harder to fund their export operations with the cost of trade finance set to soar fivefold under the new capital ratios proposed by Basel III, according to credit reference agency Dun & Bradstreet.

Under the new requirements being considered to strengthen the global banking system in the wake of the financial crisis, traditional trade finance facilities will have their risk weighting increased from 20% to 100%. These facilities, which include letters of credit, account for around 30% of world trade, according to report.

Dun & Bradstreet said it expect banks that provide trade finance will either pass this increased cost on to their customers or divert funds to other more profitable activities, resulting in deteriorating trade finance conditions for companies, particularly among those exporting to emerging markets where letters of credit are the primary means of securing sales and payment.

New Zealand is seen to be particularly hard hit, with exporters selling a significant portion of their goods to emerging markets in the Asia-Pacific region. If the reforms are passed, firms are expected to take on more trade funding themselves, which is expected to increase counterparty risk on international deals.

“There is no doubt that Basel III reforms will address real systemic weaknesses that emerged in the global financial system,” said general manager John Scott.

“However, regulators need to be mindful of the implication at the firm level and ensure that unintended consequence don’t emerge that could further do harm to the economy.”

The research firm said finance facilities have not historically been high risk instruments as they are supported by underlying transactions and identifiable goods, and is recommending that they be exempt from the Basel III capital requirements.

“A lack of trade finance contributed significantly to the sharp contraction in world trade during the financial crisis and we need to ensure we don’t create another set of circumstances that weaken the global trading environment,” Scott said.

Dun & Bradstreet said the reforms and their effects on slowing trade contributed to its subdued outlook for world growth, which expects the global economy to expand by 3% this year, and 2.7% in 2011.

slightly off topic, but the Hungarian govt in dealing with the big sludge spill over there has arrested the CEO of the company who did it, taken control of the company and seized it's assets.

http://www.guardian.co.uk/world/2010/oct/11/hungary-toxic-sludge-arrest

i guess some politicians are more prepared to act boldly than others......

Americans are driving inflation in commodities everywhere. 

Listen from 8.35

http://www.radionz.co.nz/audio/national/ntn/2010/10/12/business_commentator_-_rod_oram

There are solutions, but not if your name is TINA or John Key.

Cheers, Les.

www.mea.org.nz

Key - nothing New Zealand can do about the currency wars - spoken like a good currency trader.

 

Currency volitility is good for some bad for others - like to pick the winners. 

No John ! It was spoken  'like someone who knows , who is a pragmatic realist .

You want Alan Bollard to start gambling with more NZ tax-payers' munny ?

What kind of "gambling" are you referring to Roger? Can you explain how this "gambling"  works please? What assumptions are you making? Is this "gambling" approach the only one you have in mind? Don't tell me you too are a TINA. Is it true? I don't think so, TARA.

[How y' faring in the weather? Don't look good on the reports here, we just had another wakey-shakey this morning at least you are missing them.]

Cheers, Les.

www.mea.org.nz

 

Les : In case you havn't cottoned on yet , this " TINA " and " TARA " stuff  is mindless and annoying .

Do you want Alan Bollard to intervene in the currency markets ?

If he does , he is gambling . The foreign currency traders are massively big players ...... An upstart pip-squeak 'like the NZ Reverse Bank will likey be skinned alive ........ And who picks up the tab for that ?

[ Another 5.0 shake , lucky you ! We only got a side-lashing from the typhoon , the epicentre struck well north of us . My " Moeraki Boulders "  breakwater stood up well , to the test ]

 

Roger - come now, stay calm, mindless and annoying indeed. Anyway, am glad you are out of harms way. Now, back to annoying you....

Nope, not what you are describing for reasons you outline. I know they have a policy for intervening, but the criteria is quite strict and essentially means they aim at helping a swing happen earlier. So, instead of thinking only in the ortho'box, as per yourself and John Key, suppose we implemented a much less vanilla monetary policy that saw interest rates spreads narrow? (Its' really all about this, see an RBNZ paper by Cassino and Wallis.) That means a/some supplements to the OCR, and indeed some support from the fiscal/tax end of the game, eg. effective land/asset/capital and gains tax, so that in our three legged milking-stool of an economy, people try to grow more legs on the stool rather than simply point it all ($95bio+ debt) at the tax free leg.

So it is simply not true to say there is no alternative, there is and there are, and implementing such would have the beneficial effects the wider economy need. However that isn't necessarily in the interests of a relatively small group who enjoy the status quo - vanilla monetary policy and tax sheltering a plenty - hence the TINA position.

Cheers, Les.

www.mea.org.nz 

John, Les - a different approach is needed !

 NZexorts are obviously at risk under the influence of worldwide situation. Among many other problems protectionism is a major problem and worse to come.

Why does the NZMEA not focus on developing more widgets for the national use ? Most all NZinfrastructure needs are imported. We are depending not only too much on imported widgets, but also foreign money/ investment/ company skill/ knowledge - to an extent that  even the national security is at risk.

The private sector should engage the government for more commitment/ efforts in order to award infrastructure orders to NZcompanies. Higher NZproduction is clearly a very important issue and of national interest.

Now is a brilliant chance to develop the relatively low profile manufacturing industry and secure full employment and develop skill and higher wages.

Good idea Walter, I'll get onto it right away. Do you want us to stop doing what we are doing now though? If so can you say why and tell us where we are going wrong and what bits you don't understand? Cheers, Les.

Les, do what ever is needed to make positive progress. Your (NZMEA) are constantly fighting the government, when you should communicate and engage the government.

Firstly, listening what most minsters say in parliament, I think they have the wrong perception what production means. I told you several times education is the key to change that, among politicians, but also among the public. Of course without a culture change it is very difficult to achieve progress.

Where lay the potential to increase quality manufacturing here in NZ and what are the many advantages for our economy are the key questions. Can you please answer these questions- thank you.

Please, read and understand this with many previous articles about the same issue.

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