Tuesday, May 15, 2007
One thing is for sure she wont win the next election
scoop.co.nz: Fixing The Mess
What matters crucially is whether the recent actions of the Reserve Bank are creating (or aggravating) the very problem that they claim to be solving. Or is the Reserve Bank simply ineffective at dealing to the investment housing bubble that it claims to be addressing?
Perhaps the first thing to note is that inflation in New Zealand is not a dragon; it's a pussy cat, safely under 3% as it has been for a while. Inflation is far from public economic enemy number one. Even in Zimbabwe where annual inflation is over 1000 percent, inflation is a symptom of an economic tragedy and not a problem in its own right.
Interest rates need to be cut, by 0.25 percentage points every six weeks, until the $NZ is down to a TWI of 60 (which probably means about $US 60 cents).
3 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. uncle tom said...
I believe NZ was the first country to set an inflation target, and then rely on interest rates to achieve that target.
This set a fashion that spread round the world...
I have argued for some time that this is an imperfect strategy, and that sooner or later, the BOE will find itself obliged to abandon the policy.
Will NZ now be the first country to abandon the policy? - and will the fashion for doing so also spread??
(If you've got any long-dated gilts or treasuries - get rid of them now!..)
2. tyrellcorporation said...
UT. How would you control inflation?
3. sold 2 rent 1 said...
What we are seeing is the final stages of a huge liquidity boom.
Interest rates are losing their effectiveness.
World money supply is growing at 18%. That’s a doubling rate of every 4 years.
Quote.
“inflation in New Zealand is not a dragon; it's a pussy cat, safely under 3% as it has been for a while. Inflation is far from public economic enemy number one.”
A few counties are now close to the top of their IR hiking cycle. As these countries start slowing down we will see IR fall. The key question is will IR still have any effect when being cut in a slowing economy?
IMHO I think not. Once the cutting starts, IR will be heading down to zero and the economies will collapse under their own weight of debt.