web analytics

The real economy vs the casino

Written By: - Date published: 10:57 am, July 26th, 2010 - 14 comments
Categories: uncategorized - Tags:

For the business pages, it’s Reserve Bank week and once again the banks want the Governor to push up the price of money, while those in the real economy where the jobs are want interest rates kept steady. As they say, there are no signs of rampant inflation and growth forecasts are uncertain.

But the money markets want a one-way bet. And some of them were not subtle:

Darren Gibbs at Deutsche Bank said it was “virtually unthinkable” that the Reserve Bank would keep interest on hold.Roland Randall at TD Securities said such a move would be seen by the markets as the Reserve Bank “failing its first test of faith” which could prompt a selloff of the New Zealand dollar by currency traders.

On the other hand:

Some sectors of the economy have called for interest rates to be kept on hold until there is evidence of a broad-based recovery.

The New Zealand Manufacturers and Exporters Association said last month’s rate hike was based on an optimistic reading of economic conditions and that another interest rate increase could damage the recovery. Chief executive John Walley said the recovery was, at best “weak and unbalanced”.

“A dip back into recession in Europe or stagnation in China could see commodity prices fall further and very quickly,” Mr Walley said.

“The risks posed today by these potential shocks far outweigh any potential inflationary pressures a year or so down the track.”

And the old inflation bogey gets trotted out again.

Khoon Goh, senior markets economist at ANZ/National, said in Wellington last week that keeping interest rates down would stimulate the economy, but rather than increase productivity it would drive up consumption, fuelling another housing bubble.

“What the historical experience has shown is that if you keep interest rates too low for too long, yes it stimulates the economy, but it stimulates the wrong part of the economy.”

The twenty-first century risk is deflation, not inflation. If interest rates are kept too high for too long it also stimulates the wrong part of the economy – the financial sector. Holding rates in check this month is not going to start a housing bubble, but it may save jobs in manufacturing.

14 comments on “The real economy vs the casino ”

  1. vto 1

    Enough of interest.

    Debt providers can take an equity stake from now on. As is done in other societies.

  2. Lanthanide 2

    “which could prompt a selloff of the New Zealand dollar by currency traders.”

    Isn’t this actually what we want? The NZ$ should be more like 60 US cents, not 70.

    • Bored 2.1

      A very good reason for there to be as Keynes long ago suggested an international currency clearing house as opposed to a speculative market. What we actually need is an end to the whims and desires of a speculative bunch of financial types who set up the market to act as parasites.

  3. john 3

    Neo-liberalism,Reaganism, Rogernomics, Wodneyism, Jonkeyism, call it what you will has made a virtue of profit by speculation rather than creating real industry and wealth. Example? US stock holders made a mint offshoring their production to China ; dirt cheap wages boosted Company profits skywards everything great! in the Dow index, but an underclass of 40,000,000 Americans now exist on food stamps.( Also 50,000,000 Americans die from treatable conditions every year because corporate medicine doesn’t think they can pay to be saved!) The Casino made a mint by exploiting their own people!! Look at our news stock prices, like a casino going up and down figure prominently divorced from the reality on the ground. Eventually the Jonkeys and Wodneys move into their cloud cuckoo worlds permanently separated from the real world until the empty shell of the economy,as in the US, leached by the free marketeers collapses! Money must be tied to real work not monopoly exploitation ie: if you’re rich you can get richer! Do you want an asian style society of very rich and beggars on the street? That’s the choice ,we move forward together or we fall apart!

    • JJ 3.1

      Lol 50 million people die in America each year?

      • loota 3.1.1

        At least 50 mill, could be closer to 75 mill p.a.

        I’m moving over there next year as there will be no one left in Wyoming so can claim it under squatters’ rights 😆

    • ghostwhowalksnz 3.2

      The mortality for the US is more like 2.5 million per year
      Number of deaths: 2,423,712(2008)
      Death rate: 803.6 deaths per 100,000 population
      Life expectancy: 77.9 years
      Infant Mortality rate: 6.75 deaths per 1,000 live births
      Number of deaths for leading causes of death:
      Heart disease: 616,067
      Cancer: 562,875
      Stroke (cerebrovascular diseases): 135,952
      Chronic lower respiratory diseases: 127,924
      Accidents (unintentional injuries): 123,706
      Alzheimer’s disease: 74,632
      Diabetes: 71,382
      Influenza and Pneumonia: 52,717
      Nephritis, nephrotic syndrome, and nephrosis: 46,448
      Septicemia: 34,828
      http://www.cdc.gov/nchs/fastats/deaths.htm

      The current population will take 78 years to all die off ( as an average)
      Dont count on getting Idaho any time soon, allthough if you arranged for the numbers for the smaller states to go first, you could have Idaho in about 3 months time

  4. Herodotus 4

    The banks alread expatraite billions per year, now they are telling us (possable after making a bet on what the OCR could do) that we are flush and well into a recovery.
    After reviewing the retail sales stats, house sales, prices and the days that take to sell lenghtening by another 3-4 days,wage growth, our successful implementation of employment policies(!!!!!) the Res Bank govenor, if he does increase should enter the real world and not remain permanently within his office complex.
    Why do we employ our top Civil servant to destroy NZs potential and screw those of us who fund his salary?
    Sure he can hide behind the act, but does that not confirm Labs desire to widen what is currently the single focus of the Res Bank to protect us from the evils of the economy. How can we approach Aust economy when Bollard will just slash any recovery with high interest rates. So the masses and business pay for these high rates as money goes to Aust in the form of dividends. This is a race we cannot win.
    http://www.westpac.co.nz/olcontent/olcontent.nsf/content/FM_Bulletin_20100723/$FILE/RBNZ_OCR_Preview.pdf
    http://www.bnz.co.nz/binaries/w150710.pdf

  5. Nick C 5

    I dont see how raising interest rates would mean that the financial sector would make more money. They would sell money at a higher price but they would also have to borrow it at a higher price. What matters for banks is their margin, there is no evidence that will change.

    • Pascal's bookie 5.1

      What can they do if there is a difference between our rates and other countries rates?

      Is what they can do made more profitable if that gap is bigger?

      If it is more profitable, will there be more of it?

      Do they charge fees?

    • Herodotus 5.2

      If raising interest rates assisted in inflation to start to increase, with the ability and ease to axcess capital then the continuation of borrowing and speculation would occur. Remember we are programmed to spend and oil the consumer machinery. Govts would be less inclined to remain within their financial restraints (They need to tempt us with treats as health care, 65 pensions etc. for a nike swoosh every 3 years) i.e we would be living beyond our means again. Then there is the ability for banks to distance themselves when the crap hits the fan again. This is the secret The Capitalise Profits…. blah blah.
      Previously if there were rogue countries (e.g.Latin Americas) the consequences were limited to that countries sphere of influence, now with globalisation there is the domino effect. Of which I think we have not seen the 08 recession complete its course yet.
      Otherwise how would banks contiue their earnings requirements if no one borrowed or consumed?

    • loota 5.3

      Dude, higher interest rates mean that hot speculative foreign money would pour into NZD. The banks would have a lot more to play with and would have more capital to lend out, more credit cards they could issue, etc.

      All good profit making activity for the banks.

Links to post

Recent Comments

Recent Posts

  • Tokelau Language Week reminds us to stay united and strong
    Staying strong in the face of challenges and being true to our heritage and languages are key to preserving our cultural identity and wellbeing, is the focus of the 2020 Tokelau Language Week. Minister for Pacific Peoples, Aupito William Sio, says this year’s theme, ‘Apoapo tau foe, i nā tāfea ...
    BeehiveBy beehive.govt.nz
    12 hours ago
  • NZ announces a third P-3 deployment in support of UN sanctions
    The Government has deployed a Royal New Zealand Air Force P-3K2 Orion (P-3) maritime patrol aircraft to support the implementation of United Nations Security Council (UNSC) resolutions imposing sanctions against North Korea, announced Minister of Foreign Affairs Winston Peters and Minister of Defence Ron Mark. “New Zealand has long supported ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • Pacific trade and development agreement a reality
    Pacific regional trade and development agreement PACER Plus will enter into force in 60 days now that the required eight countries have ratified it. Trade and Export Growth Minister David Parker welcomed the announcement that the Cook Islands is the eighth nation to ratify this landmark agreement. “The agreement represents ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Securing a pipeline of teachers
    The Government is changing its approach to teacher recruitment as COVID-19 travel restrictions continue, by boosting a range of initiatives to get more Kiwis into teaching. “When we came into Government, we were faced with a teacher supply crisis,” Education Minister Chris Hipkins said. “Over the past three years, we ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Border exceptions for a small number of international students with visas
    The Government has established a new category that will allow 250 international PhD and postgraduate students to enter New Zealand and continue their studies, in the latest set of border exceptions. “The health, safety and wellbeing of people in New Zealand remains the Government’s top priority. Tight border restrictions remain ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • First COVID-19 vaccine purchase agreement signed
    The Government has signed an agreement to purchase 1.5 million COVID-19 vaccines – enough for 750,000 people – from Pfizer and BioNTech, subject to the vaccine successfully completing all clinical trials and passing regulatory approvals in New Zealand, say Research, Science and Innovation Minister Megan Woods and Health Minister Chris Hipkins. ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • International statement – End-to-end encryption and public safety
    We, the undersigned, support strong encryption, which plays a crucial role in protecting personal data, privacy, intellectual property, trade secrets and cyber security.  It also serves a vital purpose in repressive states to protect journalists, human rights defenders and other vulnerable people, as stated in the 2017 resolution of the ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Ministry of Defence Biodefence Assessment released
    The Ministry of Defence has today released a Defence Assessment examining Defence’s role across the spectrum of biological hazards and threats facing New Zealand. Biodefence: Preparing for a New Era of Biological Hazards and Threats looks at how the NZDF supports other agencies’ biodefence activities, and considers the context of ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • New Approaches to Economic Challenges: Confronting Planetary Emergencies: OECD 9 October 2020
    New Approaches to Economic Challenges: Confronting Planetary Emergencies: OECD 9 October 2020 Hon David Parker’s response following Thomas Piketty and Esther Duflo. Good morning, good afternoon, and good evening, wherever in the world you might be. I first acknowledge the excellent thought provoking speeches of Thomas Piketty and Esther ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Kaipara Moana restoration takes next step
    A Memorandum of Understanding has been signed today at Waihāua Marae between the Crown, local iwi and councils to protect, restore and enhance the mauri of Kaipara Moana in Northland. Environment Minister David Parker signed the document on behalf of the Crown along with representatives from Ngā Maunga Whakahī, Ngāti ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • New Zealand and Uruguay unite on reducing livestock production emissions
    Agriculture Minister Damien O’Connor and Uruguayan Minister of Livestock, Agriculture and Fisheries Carlos María Uriarte have welcomed the launch of a three-year project that will underpin sustainable livestock production in Uruguay, Argentina, and Costa Rica.  The project called ‘Innovation for pasture management’ is led by Uruguay’s National Institute of Agricultural ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • 3100 jobs created through marae upgrades
    Hundreds of marae throughout the country will be upgraded through investments from the Provincial Growth Fund’s refocused post COVID-19 funding to create jobs and put money into the pockets of local tradespeople and businesses, Regional Economic Development Minister Shane Jones and Māori Development Minister Nanaia Mahuta have announced. “A total ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Health volunteers recognised in annual awards
    Health Minister Chris Hipkins has announced 9 teams and 14 individuals are the recipients of this year’s Minister of Health Volunteer Awards.  “The health volunteer awards celebrate and recognise the thousands of dedicated health sector volunteers who give many hours of their time to help other New Zealanders,” Mr Hipkins ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Community COVID-19 Fund supports Pacific recovery
    The Minister for Pacific Peoples, Aupito William Sio says a total of 264 groups and individuals have successfully applied for the Pacific Aotearoa Community COVID-19 Recovery Fund, that will support Pacific communities drive their own COVID-19 recovery strategies, initiatives, and actions. “I am keen to see this Fund support Pacific ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Community benefits from Māori apprenticeships
    Up to 50 Māori apprentices in Wellington will receive paid training to build houses for their local communities, thanks to a $2.75 million investment from the Māori Trades and Training Fund, announced Employment Minister Willie Jackson today. “This funding will enable Ngāti Toa Rangatira Incorporated to provide its Ngā Kaimahi ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Training fund supports Māori jobseekers
    Rapidly growing sectors will benefit from a $990,000 Māori Trades and Training Fund investment which will see Wellington jobseekers supported into work, announced Employment Minister Willie Jackson today. “This funding will enable Sapphire Consultants Ltd. to help up to 45 Māori jobseekers into paid training initiatives over two years through ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Ruakura Inland Port development vital infrastructure for Waikato
    The Government is investing $40 million to develop an inland port at Ruakura which will become a freight super-hub and a future business, research and residential development for the Waikato, Urban Development and Transport Minister Phil Twyford, and Māori Development Minister Nanaia Mahuta announced today. The funding has been has ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Appointments made to Defence Expert Review Group
    Defence Minister Ron Mark announced today the establishment of an Expert Review Group to review a number of aspects of the New Zealand Defence Force’s (NZDF) structure, information management and record-keeping processes.  The Expert Review Group’s work arises out of the first recommendation from the Report of the Government’s Inquiry ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • No active community cases of COVID-19
    There are no active community cases of COVID-19 remaining in the country after the last people from the recent outbreak have recovered from the virus, Health Minister Chris Hipkins said today. “This is a big milestone. New Zealanders have once again through their collective actions squashed the virus. The systems ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Clean energy upgrade for more public buildings
    More public buildings will be supported by the Government to upgrade to run on clean energy, the Minister for Climate Change James Shaw announced today. Minister Shaw announced that Lincoln and Auckland universities will receive support through the Clean-Powered Public Service Fund to replace fossil fuel boilers. Southern, Taranaki, and ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Schools back donations scheme for the second year
    More schools have opted in to the donations scheme for 2021, compared to 2020 when the scheme was introduced. “The families of more than 447,000 students will be better off next year, with 94% of eligible schools and kura opting into the scheme,” Education Minister Chris Hipkins said. “This is ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Ruapehu cycle trails gets PGF boost
    The spectacular Mountains to Sea cycle trail in Ruapehu District will receive $4.6 million in funding from the Provincial Growth Fund for two additional trails, Regional Economic Development Minister Shane Jones announced today. “This is an exciting development for the local community, and one that will provide significant economic opportunities ...
    BeehiveBy beehive.govt.nz
    3 weeks ago