Kiwi favourite of speculators

Written By: - Date published: 8:15 am, June 5th, 2010 - 13 comments
Categories: Economy, monetary policy - Tags: ,

Read this story to understand why the real economy in New Zealand struggles to get ahead of a volatile currency driven by overseas speculators that devalues our exports. They also like to talk our interest rates go up.

If you’re in Christchurch, come to the Fabian seminar next Tuesday 8 June at Mancan House, 253 Cambridge Terrace, at 5:30 to discuss some alternatives with Rick Boven of the New Zealand Institute and John Walley of the Manufacturers and Exporters Association.

There’s got to be a better way.

13 comments on “Kiwi favourite of speculators”

  1. Jim Nald 1

    Will there be an mp3 file (for public or internal circulation) of the seminar to share with people who are not in Christchurch or can’t attend please?

  2. Jim Nald 2

    Note “over the years”, not “over the months” in the piece:

    ”Over the years, New Zealand financial management, in particular the central bank, has been outstanding,” Loomis’ Fuss said.

    A tribute to the Clark-Cullen Administration.

    • Hamish 2.1

      Actually it’s a tribute to Reserve Bank Governors Alan Bollard and Don Brash..

  3. ghostwhowalksnz 3

    Reminds me of online poker games. Most of the work by the promoter taking a fixed cut and they dont care who wins and loses, but the pros do care who wins. So they can use software to show them when novice players are in the game so they join in and take them to the cleaners.

  4. uke 4

    ” Average daily trades in New Zealand’s currency amount to about 43 percent of the nation’s gross domestic product, according to Bloomberg calculations using the most recent data from the Bank of International Settlements.

    That’s the biggest proportion among the 16 most-traded currencies, just above the level for the Swiss franc.”

    Incredible.

    Can anybody remind me what is intrinsically good about floating rate currencies and all this trading? (Other than helping create wealth through speculation.)

    • Jenny 4.1

      Can anybody remind me what is intrinsically good about floating rate currencies and all this trading?

      It made our Prime Minister a very rich boy.

      Oh, pardon me, I see you added: “(Other than helping create wealth through speculation.)”

      • Jenny 4.1.1

        Of course the phrase “create wealth from speculation” doesn’t really capture the ignominy of John Key’s calling. Key and the other financial speculators like him, don’t actually “create wealth from speculation”, they just move it out of the productive sector and into their own pockets, hollowing out the real economy in the process.

  5. prism 5

    Was there a film ‘Eat the Rich’? Would be a great Malthusian recipe. Also defensive posture as if the poor don’t, the reverse is likely to happen. All
    metaphorically speaking of course.

  6. Terry B 6

    ‘ Average daily trades in New Zealand’s currency amount to about 43 percent of the nation’s gross domestic product, according to Bloomberg calculations using the most recent data from the Bank of International Settlements.

    That’s the biggest proportion among the 16 most-traded currencies, just above the level for the Swiss franc.’

    Just to put that in contect that’s about NZ$80 billion a DAY or about two and half years exports.

    One of the problems I have with the Chicago school of economics is that the export sector never seems to have featured heavily in its thinking about monetarism. That’s probably because the sheer size of the American economy and the US dollar’s status as the defacto reserve currency of the world rather insulate the US from the impact of the sort of fluctuations the NZ dollar regularly experiences. economic theory suggests that exporters must become more efficient when faced with an appreciating currency with the Germans and the Japanese being the prime examples. The theory runs aground on the fact that neither the Deutschmark (and later the Euro) nor the Yen have never regularly experienced the 10-15% and more annual shifts the Kiwi does. I fear this will limit our ability to export high added value products other than to Australia which IMO is not a long term future because the market at 20 odd million is limited.

    There’s no easy answer to this – advocates of a currency union with the Australian dollar are deluded because it is also a highly traded currency. I’ll be interested to hear what’s said at the seminar (I like a lot of the stuff the New Zealand Institute has produced).

  7. RedFred 7

    Easy solution ….

    1) ditch the OCR – Not completely keep it as a back up

    2) Introduce compulsory super scheme with contributions that are mandatory & adjusted depending on inflation risk – Singapore does it, hardily a bastion of socialism.

    3) A NZ grown solution is an Interested Linked Saving Scheme… basically all debt attracts a surcharge that is manipulated according to inflation control requirements. Surcharge payment is then link to Kiwi Saver. Radical but makes sense in so many ways, it doesn\’t effect cost of credit either as we pay through the nose with the OCR as it is.

    See – http://www.erosgroup.co.nz/monetarypolicy.asp

    With the two you fix the major problems in NZ economy.

  8. RedFred 8

    @Terry B

    PS – the efficiency gains in Germany were made largely by cutting workers rights.
    Hence the political fall out for Germany coming to the rescue of Greece who has not made the same “efficiency” changes.

    PPS not sure Labour are into either of the above might be a bit Left, they will go for a review of the Reserve Bank Act and perhaps mandate the Reserve Bank to be more aggressive in direct market intervention.

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