New Zealand Economy on ‘Death Spiral’ Due to Exchange Rate; Government Considering Emergency Monetary Policies
July 19th, 2007In case you’ve forgotten where I’ve been on this issue, let’s take a quick walk down memory lane, now that the New Zealand Government is considering emergency monetary policies, and the country teeters on the brink of ruin…
Cryptogon analysis from April 3, 2007:
Mainly, this is wealthy people from all over the place chasing better rates on cash bets. That’s really what’s behind this. In the process, New Zealand farmers are going to get nailed to a cross made out of yen and euros.
Obviously, the world wants what New Zealand has. If the New Zealand Government had any courage at all, they would stand up and demand tangible assets for New Zealand’s premium goods so New Zealand could move toward eliminating its high debt and finding a more sensible economic path to tread. The longer New Zealand plays by the rules established by U.S. and European bankers, the worse off the next bust will be.
By allowing this carry trade nonsense to continue, the New Zealand Government is ensuring catastrophe down the road. They’re trying to curb the spending of New Zealanders with higher rates while allowing this funny money casino to continue for wealthy foreigners. Who’s got the balls to stand up and say “No more carry trade swindling.†Helen Clark? HA New Zealand won’t even demand goods to be labeled with their country of origin so it’s fully nuts to contemplate reigning in the operations of the casino. But it’s too late now anyway. The NZ economy would sink like a rusty old ship that just had a massive hole blown through its guts, far below the waterline, if ANY move was made to even slow the funny money racket. Catastrophe later, I guess, is better than catastrophe now.
Cryptogon analysis from April 13, 2007:
I don’t know who’s behind the wheel of this thing, but it’s not Kiwis. There is some kind of insidious, international banking octopus thing happening here. New Zealand politicians are selling their own country out to a global criminal elite that is going to eat this land alive and spit what remains out into the sea.
Cryptogon analysis from June 11, 2007:
If it does get squeezed higher, regardless of the central bank’s actions, the New Zealand government could be forced to use non market methods to control the thing. * gasp * That would rattle the chook house. Of course, anyone in polite circles would call that “crazy talk†at this point; like much of the stuff on Cryptogon that eventually came to pass. The fact is, the New Zealand government is NOT in control of its own financial house. If it was, they wouldn’t have let this nonsense go as far as it has. Now, they’re going through all the motions, talking tough and maintaining appearances, but don’t be surprised if the global casino operators look at the Reserve Bank of New Zealand and say, “Pfft! How’s about a game of chicken, boy!?â€
Well, here we are… Things going down the gurgler and American Reagan-era banking cronies are on the radio, suggesting that New Zealand peg its currency to the U.S. Dollar, “an absurdity supported only by faith.” Or is that the Amero? How about a Pacifico? I know: The Newstralian Dollar!
Via: New Zealand Herald:
The New Zealand economy is on a death spiral by having a free, floating exchange rate combined with inflation targeting, according to a leading US economist.
Steve Hanke, fellow of the Cato Institute and professor at Baltimore’s Johns Hopkins University, said New Zealand should abandon its free-floating exchange rate and peg it to a key larger currency such as the US dollar, or a basket of currencies.
His comments come as the New Zealand dollar continues to soar towards US80c, a record since it was floated 22 years ago. It has risen 27 per cent this year alone, crippling many exporters.
The kiwi peaked around 4am at US79.45c but later slipped back and was at US79.26c at 11.57am.
Finance Minister Michael Cullen cause a storm when he hinted yesterday he could use emergency powers to suspend the Reserve Bank’s sole focus on inflation.
Most economists expect the Reserve Bank to put further upward pressure on the exchange rate next week by hiking interest rates for the fifth time this year and economists from at least two leading banks said a sixth hike is probable in August.
Prof Hanke, an adviser to the late former president Ronald Reagan, told Radio New Zealand today the currency cannot be allowed to continue its violent fluctuations.
The current framework left New Zealand “like a dog chasing its tail”.
To fight inflation the Reserve Bank hiked interest rates, but because New Zealand had higher interest rates than other developed countries because it is a small economy, that attracted a flood of capital from offshore where rates are lower, which pushed up the exchange rate.
He said that aggravated the inflation problem and the central bank then had to increase rates again and start the whole cycle again.
“In a way it’s a kind of death spiral you’re in.”
Prof Hanke said it was inappropriate in a small, open economy to have a system of inflation targeting and a free, floating exchange rate.
“It’s obvious to everyone that this isn’t the paradise that everyone thought it was.”
I have posted stuff about the yen carry trade on NZ political blogs for the last 18 months. Completely ignored every time. The media makes out it’s all about Japanese housewives playing the currency markets. How glib. Never hear a word about massive hedge funds registered in Caribbean tax shelters. You know, the anonymous ones shifting leveraged billions every day. Where do they think all this funny money fuelling the loopy housing market is coming from?
Mr. & Mrs. N-Z Public are not going to “get it” until after the TSHTF. I’m convinced it’s going to hit them like a tsunami with no warning. NO WARNING!?!? HA!!!
But hold on, isn’t one of the reasons that our dollar is rising in comparison to the USD is that the USD is falling? Has anyone even noticed this aspect of the relationship? I wonder how far the USD would have to plumet before they de-coupled again?
Kevin, in case you’re wondering this idiocy has been going on for the last twenty years. If you really want to depress yourself there is a book by Jane Kelsey that explains how the new-right took over this place so easily. Depressingly the summary is that it was more incompetence than conspiracy.
Aaron: “If you really want to depress yourself there is a book by Jane Kelsey that explains how the new-right took over this place so easily. Depressingly the summary is that it was more incompetence than conspiracy.”
Indeed. I have been struggling for a couple of years to get a handle on this. Here is my take. Around the world, half of all people have above average intelligence, so it is wrong to judge any nation by their slower people. Certainly, America has no shortage of idiots. But America’s elite is not stupid or incompetent, they only pretend to be. Anyone who thinks the Karl Rove, Zbig, or Henry Kissinger are stupid is a fool. America’s elite is greedy, amoral, and corrupt, but they have created exactly the world they wanted. And there is a deep and broad intelligensia in the US who are >99% in bed with some faction of the PTB.
On the surface, New Zealand appears to be more sane than the US. There are fewer religious nuts for example. But something is missing at the top. It is as if the +2SD segment of the normal IQ distribution has been exported. Even the professors at NZ’s top scientific institution are at best equivalent to the faculty at a small US state A&M school. And they are so mediocre, they are tragically unaware of their own mediocrity. Travel writer Paul Theroux variously described most of the elite New Zealanders he met as smug, silly, shallow, ignorant, and unimaginative (although Theroux did like former PM David Lange). While new homes in Spain must be built with solar panels, the NZ Green Party has wasted the year trying to pass a law making it illegal for parents to spank their children. The NZ elite is truly incompetent at every level.
By geography and natural resources, New Zealand could in theory become a Switzerland of the Pacific. It will never happen. This island simply lacks the intellectual human capital to compete in the 21st century, and has an anti “tall poppy” culture antagonistic to the future development of intellectual human capital. In a professed meritocracy, the ideal is equal opportunity that will allow hard work and talent to rise to the “top” (meaning the upper professional level of wage/debt slavery). In New Zealand, the goal of heavy social and economic engineering is to create equal social outcomes, a very different thing. Yes, Ernest Rutherford won a Nobel Prize, but he had to leave NZ to do it.
Frankly, NZ is doomed to lose in any battle of wits because she has disarmed herself. The international money managers are going to bitch slap this little island economy around however they please. Kiwis won’t even know what hit them.
I actually don’t agree that intelligence has much to do with it, after all people in NZ and the US are pretty much the same.
The book I was referring to (called The New Zealand Experiment I think) showed how the root of the problem started with ideas originating at a university in the US (imagine my surprise) which then became ‘the way’ amongst economists in the NZ teasury. Reading the book these people just sound like the most foolish fools that ever walked the earth. It was like a kind of group-madness took hold of them.
I have no doubt that they would have scored highly on IQ tests but I’m not sure what that would mean. For starters the IQ test we all refer to measures only about two of the 7 types of intelligence and even the smartest people in the universe are easy to manipulate if you work on their ego. After all, when the Brits wanted the US to join WW2 it was the intellectuals they directed their propaganda at.
Im case you’re wondering, I do have a university degree. Most of my lecturers were clearly insecure, incompetent fools – they may have had high IQs but their ability to operate in the real world was pretty piss-poor.
University degrees convince us we are the best of the best but in actual fact they are a form of brainwashing that teaches us to internalise the value system of their superiors. I seriously reccomend everyone read ‘Disciplined Minds’ by Jeff Schmidt which gives an iron clad arguement for why this is the case. It’s probably one of the most important books I’ve ever read and it explains so much about universities and people with degrees.
http://disciplinedminds.tripod.com/