90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: China tightens again as Currency Wars rage and trade surplus balloons; Mexico to cut; Dagong cuts America

11th Nov 10, 9:00am 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 that China has tightened its reserve requirements for its banks by 50 basis points in an effort to slow down lending and inflation in its economy.

America's moves to print money are squirting out into developing economies, boosting inflation and commodity prices.

Mexico is set to cut interest rates to try to reduce the upward pressure on the Peso.

China also posted a US$27.1 billion trade surplus in October, highlighting its ability to generate cash and focusing the attention of world leaders in this weekend's G20 meeting.

The big debate is about how fast China should allow its currency to rise against the US dollar and whether America should have launched its pre-emptive strike of Quantitative Easing or money printing to devalue the world's reserve currency.

Meanwhile, Chinese ratings agency Dagong has cut America's sovereign credit rating to A+ from AA, expressing concern about its long term ability to repay its debts, many of which are to China.

The Dow fell slightly and Asian stocks fell after China's tightening move and on renewed fears about Irish debt.

Back in New Zealand, the Bank of New Zealand has cut its 1 year and 2 year mortgage rates by 4 basis points and 5 basis points respectively to 6.45% and 6.65%.

This is the first cut by a bank of fixed mortgage rates since September 3 and may break a stalemate in the mortgage market that has dragged on for months. See the full story here.

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20 Comments

by Wolly | 11th Nov 10, 11:09am 1289426966

Lowest October sales ever!...really...BS....however you should all note the RBNZ and govt are winning the war on the bubble....yes they are keeping it inflated and isn't that great news..for the banks!

So there you are Kiwi peasant, your govt is screwing you because they think the bank balance sheets are more important than seeing housing as affordable for YOU. Hard bloody luck if you thought your govt was working for YOU.

The best action you can take is to carry on dumping your debt asap and to walk away from buying property....the more of you who do this, the greater the pressure on the scam system and prices will collapse.........remember, you are the target for the banks.

Yes as I thought...the sales data started in 1992...so it's the lowest sales since 92!

by Gareth Vaughan | 11th Nov 10, 12:41pm 1289432460

Wolly, I hope this wasn't you! http://www.police.govt.nz/news/release/25982.html

by Gummy Bear Hero | 11th Nov 10, 1:05pm 1289433928

Nearly $US 4 / lb ! Time to cash in on some of that copper wire , Wolly .

by Wolly | 11th Nov 10, 1:18pm 1289434707

Sold it Gummy. Things are too dangerous right now. Risk of another big crash are increasing.

by Gummy Bear Hero | 11th Nov 10, 1:43pm 1289436193

Wolly : The US Federal Reverse is still inflating the world's bubbles . She's got a ways to go yet , before the " pssssssst " sound you hear is something other than your inflatable sheep losing air after nooky .

by Wolly | 11th Nov 10, 1:52pm 1289436761

Not so sure Gummy....that comment out of the States from one of those linked to the fed, about the creeps maybe not using all the QE2...it smells of the start of the turn. If the liars and crooks in Congress drive through an austerity boot up the bum for the economy, that will bring a rapid change to matters..rising US$ and so a very sharp correction in commodities. Could happen overnight. Not much point in having several kilo of gold when the rug is pulled. Put your money into frogs Gummy...they seem to know where to hang out...hehe.

by Gummy Bear Hero | 11th Nov 10, 2:02pm 1289437376

No doubt that matters can do a 180' shift on a dime . But I still see the Fed keeping interest rates where they are through all of 2011 .

Hey , speaking of ugly frogs , wotcha think of the prospect of Goofy / Klinger / Cunny winning the 2011 election ? ........... Winnie back , cousin Rodney out , it is very possible !

[ I said to the squeeze , " Hunny , you're 200 times taller and 2000 times heavier than the frog ............. But I didn't hear it shrieking at the sight of you " ............. I slept alone last night , go figure ]

by Wolly | 11th Nov 10, 1:16pm 1289434618

Nah...I had me hands full pulling up the first trans Atlantic Telegraph cable...bloody barnacles. The cops could stop it dead if they used their brains..get the law changed to require all copper traders to be registered...make the punnishments severe not just home leave from thieving and then offer copper cabling to buyers 'no questions asked wink wink'....nothing will friggin be done until somebody rolls up and makes off with the Beehive roof.

by steven | 11th Nov 10, 1:47pm 1289436475

Looks more like a 3rd world country every day....

regards

by Gummy Bear Hero | 11th Nov 10, 1:53pm 1289436812

NZ is a second world country ! Come here to the Philippines steven , and I'll show you how many folks live . You'll never have the temerity to call NZ a third world country again .

by Boatman | 11th Nov 10, 10:49am 1289425780

Does anyone think that Dr Bollard at the RBNZ could or should follow Mexico and lower interest rates to take pressure off the NZ$ if JAWBONING does not work and as a last resort?

What would the side - effects be of lowering rates ?

Clearly , unlike Australia he does not have as much room to drop

My view is that he needs to show the markets and speculators he is prepared to do something to intervene, doing nothing is likely to be more damaging in the medium term.

by Alan | 11th Nov 10, 12:04pm 1289430298

No - if they want to reduce the NZD rates, then sell NZD.

Easy enough to do (just ask BoE, BoJ, US Fed Res etc).

'Print' NZD and sell them for a basket of currencies (not just USD), that is trade weighted, and / or throw in some commodities (gold, silver, whatever).

That will drive down the NZD, but does not introduce any currency risk to the RBNZ since they have a balanced portfolion of currencies.

Alan.

by steven | 11th Nov 10, 1:49pm 1289436576

Cheap credit means more housing specualtion....if mexico isnt suffering from that particualr problem then no biggee for them...

For us to lower the OCR we would need something to counter that effect....

regards

by Alan | 11th Nov 10, 12:10pm 1289430638

Imagine the conversation at the G20:

Hey USA! Stop pwinting USD - its causing us pwoblems.

Its our currency - we'll do what we like!

You can't stop us selling stuff to yaw sheeple though, the WTO wules don't allow it! Hah!

You're free to OFFER to sell things, and we are free to choose whether to buy. Oh look, you've put your prices up, not sure we like that.

Only in USD - Same pwice here. Not our fawt.

:-)

Guess who loses least in a trade war?

Alan.

by steven | 11th Nov 10, 1:55pm 1289436908

Im not sure anyone knows that answer.....I suspect the US in the form of the GOP Congress will 'dump" on china next year in order to try and pass the blame and deflect it from them, certainly before the 2012 elections...however its a case of MAD....but the the GOP are a bunch of loons who think its their god given right.....so who knows. If it goes as I think, the GOP will stuff up the US main street so badly they wont be buying Chiniese or indeed anyone's goods....that will in turn damage China.....it might be China decides to finish the US off by selling its USD....

regards

by Vanderlei Luxemburgo | 11th Nov 10, 2:20pm 1289438409

what's that saying about people get the politicians they deserve?

it's a weird thing with the yanks - most of them are decent hardworking people, but they consistently vote against their own interests and fail to detect bullshitters.....as if they all expect to be millionaires any minute now.

by Alan | 11th Nov 10, 3:09pm 1289441357

Let's follow the line of reasoning that...

'China decides to finish the US off by selling its USD....'

If they sell USD, then what are they buying (selling for)?

1) Are they buying Yuan? If so, it drives up the price of Yuan against the USD which is exactly what the US wants, and China doesn't. Therefore, lets not go there.

2) Are they buying some other currency (or currencies - lets go with a bundle for the sake of argument)? If so, it drives down the price of USD, and up those other currencies. Okay, so that helps the US export to those other countries, but no impact on trade with China? But... China pegs the Yuan to the USD. How do they do that? Simple, they offer to buy and sell unlimited quantities of Yuan / USD at whatever cross rate they want to peg to (they do, after all, hold plenty of both). So..., if they sell USD, they have to also sell equaivalent amounts of Yuan else the Yuan will rise in value agains the USD which is not what China wants. So, they sell Yuan AND USD against other currencies. That drives down the US against everything but Yuan, and the US is happy (better terms of trade against everyone except China). However, it makes imports of commodities (oil, iron, everything that China needs) much more expensive, which they have to recover by increasing prices in Yuan (and hence USD) terms, thus reducing exports to the US which is not what China wants, so let's not go there.

3) They sell USD and buy commodities (we'll go with Gold to keep it simple, but could be any commodity). This drives up the price of gold, and down the value of the USD, but now we have the same problem as above (against the Yuan) so they have to sell BOTH USD and Yuan and buy Gold. Again, the US is happy (doubly so in fact) as the USD falls so their terms of trade improve, and happily their gold reserves (still huge) are rising in value. But, at the same time, it makes imports of commodities (oil, iron, everything that China needs) much more expensive, which they have to recover by increasing prices in Yuan (and hence USD) terms, thus reducing exports to the US which is not what China wants, so let's not go there either.

All up, looks to me like those 'bunch of loons' as you call the GOP get exactly what they want and it all works out well for the US?

What is option four for China? There must be plenty of other things they could do?

Alan.

by Gummy Bear Hero | 11th Nov 10, 1:11pm 1289434272

More of the " Currency Wars " when you're on Radio National with Jim Mora this afternoon ( 4:00 - 5:00 p.m. ) , Bernard ?

by Kunst | 11th Nov 10, 10:25pm 1289467558

A week ago I wrote why the 3^rd of November will make it into the history books. Although not being an expert in that field, I have great concern about the development.

On November 3, 2010, the Federal Open Market Committee (FOMC) decided to expand the Federal Reserve’s holdings of securities in the System Open Market Account (SOMA) to promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate. In particular, the FOMC directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York to purchase an additional $600 billion of longer-term Treasury securities by the end of the second quarter of 2011. http://www.marketoracle.co.uk/Article24003.html

In a terrible position, why does America starts a Currency World War, which also easy lead into a Trade World War as a consequence or worse ?

(e.g. Larry Summers economy adviser of Obama sais: Protectionism makes people poor.)

http://en.wikipedia.org/wiki/Federal_Open_Market_Committee

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a8tiXZ1vO5jw

http://en.wikipedia.org/wiki/Federal_Reserve_Bank_of_New_York

Who/ why are those people making such rather, unusual, strange and self- destructive moves – can someone help me out please ? Iain et al. ?

by Kunst | 11th Nov 10, 11:33pm 1289471634

More interesting reading about the massive problems ahead:

http://www.dw-world.de/dw/article/0,,6206130,00.html

http://www.benzinga.com/10/11/588044/atlantic-currency-war-from-german-perspective-the-united-states-lived-on-borrowed-money

Same here Roger - don't be to hard on me - remember 3rd of Nov. 2010 - changed the world - bye !