The Salesman

Written By: - Date published: 2:20 pm, July 20th, 2009 - 12 comments
Categories: economy, national/act government - Tags:

One of the stories from John Key’s days as a currency trader is that he was always more of a salesman than an analyst. He wasn’t good at picking markets and investments; he was good at getting people to trust him with their money. He got New Zealanders to put their trust in him too but he’s still no good at understanding the economy.

December 6: Key: “the NZD will print with a four in front of it at some point against the U.S. dollar’ ie. the currency will drop below 50 cents US. To be fair, it did dip just below 50, for four days but Key got the trend of the exchange rate exactly backwards. Now it’s getting up to 65 cents US.

April 16: “[Key] is betting that a falling Kiwi dollar will naturally allow the current account deficit to correct itself over the next one to two years’ This statement shows a fundamental misunderstanding of currency markets. Commodity currencies like the Kiwi were always going to start rising as soon as recovery was on the horizon. When investors are nervous about the world economy, they get out of out of the NZD, causing the price to drop. When recovery is coming, the appetite for risk starts to return, and up goes the price of the NZD.

1 July: Key: “[the] budget delivered a credit upgrade, not a downgrade”. He doesn’t understand (or pretends not to understand) the difference between a change in credit outlook and a change in credit grade. Remember, Key told us the Cullen Fund had to be slashed, Kiwisaver had to be cut, R&D spending had to go to avoid the negative judgement of the ratings agencies. Now Fitch has put us on negative credit watch saying ‘government debt isn’t a problem, the problem is you’re not saving enough, you’re not investing enough in R&D so your exports aren’t competitive enough and you have to import all your high-tech, and you can’t just keep on borrowing to speculate on housing’. Key cut exactly the government investment we need to correct those problems. Now he’s trying to weasel out of his cock-up by announcing that Fitch doesn’t matter.. hmm, tell that to the markets.

July 17: This last one’s slightly facetious but I think it illustrates that this guy isn’t the economic heavyweight we were sold. “[Key] met three Havelock North High School pupils selling.. socks for $9.99 a pair for charity. [Key said] this could be the way to fix the deficit “7.7 billion pairs”. Umm, 7.7 billion times $9.99 is $77 billion. The deficit is $7.7 billion.

With over 2000 Kiwis a week losing their jobs, we’re still waiting for the Key government to do anything to ‘take the sharpest edges off the recession’ as promised. We’ll have to keep waiting. The fact is, Key doesn’t have any answers and he doesn’t really care.

12 comments on “The Salesman ”

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  1. JakeQuinn 1
    20 July 2009 at 3:14 pm

    I kinda think this post is scrapping the bottom of the barrel marty… surely of all the criticisms that could be launched at Mr Key you could do better than the above list.

    nb. shortly after Key’s December 6 ‘prediction’ about the NZD, it dropped below 50c and stayed there (or abouts) for almost my entire over seas trip. trust me i remember, it blew my budget 🙁

  2. tsmithfield 2
    20 July 2009 at 3:20 pm

    I think you’re overstretching by quite a lot to have a ping at Key.

    1. The direction of the currency is very difficult to pick, even for the experts. A case in point. I was looking to hedge against the Auzzie when the NZ was quite high against it a few weeks ago. The currency expert at the BNZ advised me not to take too much because the Kiwi was on its way up. So I took 100k instead of 200k. The very next day the Kiwi slipped back down again.

    2. The value of the dollar will increase as the world economy strengthens. However, I doubt it is going to get to the heights of 80 cents against the US, as it did when the world economy was very bullish. Even though confidence is slowly returning to the world markets, it is unlikely to be anything like the level it was in the extreme bull market preceding the fall. Therefore, the NZ currency is likely to be relatively low for quite a while. So, to this extent, I think Key is right.

    3. Granted. However, I think the terms “upgrade” “downgrade” etc tend to be thrown around a bit loosely. While techinically going onto negative watch or whatever may not be a downgrade, in the eyes of our potential financiers, it may well be a downgrade or upgrade. So, it depends on how you look at it.

    4. Well, 77 billion would certainly fix the deficit, and some. So, it could be argued that Key got this very right.

    So far as unemployment goes, our rate is far less than the US and many of our trading partners. There is a lot of stuff being done behind the scenes to make doing business easier. I have pointed several times to the change in GST threshold for the payments method as an example that has helped us. Given that increased unemployment is agreed by most to increase in the current conditions, and given that we are much better off than most, then the evidence suggests that the steps the government has taken is working.

    So far as financial literacy is concerned, what do you all think of Phil Goffs idea of paying the unemployment benefit to people who lose their jobs, even if their partners are earning hundreds of thousands per year?

    • Bright Red 2.1
      20 July 2009 at 3:31 pm

      If you consider anything below 80 cents US to be ‘relatively low’ you’re always going to consider it low.

      When Key said he expected the dollar fall low enough to redress the current account deficit – it was at 57 cents, which is historically a pretty average number. It dropped to 55 cents shortly after but has risen nearly constantly since. It hasn’t been below 60 cents since the start of May. It’s not going to go down like he said.

      Currency markets are hard to predict with detail but that the dollar would start to rise (along with stockmarkets) at the mid point in the global recession was not.

  3. Bright Red 3
    20 July 2009 at 3:24 pm

    Nah, jake. the NZD rose in the days after Key spoke from 54 to touching 60.. then it dropped away, touched 49.2 for a day and leapt back up into the 60s. http://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chdet=1248042361210&chddm=231677&q=CURRENCY:NZDUSD&ntsp=0

    Key made that statement, what 7 months ago? For five of those months, the dollar has been higher than it was when he made his prediction that it was going to dramatically drop.

  4. Pat 4
    20 July 2009 at 3:27 pm

    “He wasn’t good at picking markets and investments; he was good at getting people to trust him with their money.”

    Mathematically the equation reads:

    John Key > Mark Briers + Bernie Madoff.

    Because John Key never got caught. Instead he became Prime Minister. Undoubtedly he is an evil genious, the likes of which this country has never seen.

    .

    • stormspiral 4.1
      20 July 2009 at 3:47 pm

      Na. No genius. I think he’s just dumb and plausible. Gambler’s luck.

      • BLiP 4.1.1
        20 July 2009 at 5:44 pm

        John Key is the bankers’ unwitting front man, especially groomed for years, packed and branded by Crosby/Textor and foisted onto a gullible poplace.

  5. Mike 5
    20 July 2009 at 4:12 pm

    That “take the sharpest edges off the recession” line cracks me up every time Key repeats it.

    It reminds me of old stoner flatmates smoking weed for breakfast to “take the edge off the day”.

  6. Ari 6
    20 July 2009 at 6:41 pm

    You do realise that it costs money to make socks, right? There’s a big difference between revenue and profit. 😉

  7. mike 7
    20 July 2009 at 7:56 pm

    Do you have anymore pics of JK looking tired Marty? Although not quite as desperate as this it adds a little colour your pathetic campaign..

  8. sk 8
    20 July 2009 at 8:47 pm

    When John Key was the opposition finance spokesman his only bright idea was that New Zealand should follow Ireland . .. we don’t hear much of that these days

    http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5857074/Fiscal-ruin-of-the-Western-world-beckons.html

    This post is not scraping the bottom of the barrel . . The reality is that beyond ‘minding the store’, it is not apparent that the PM has a thought in his head in terms of new policy . .. or an effective direction for NZ to be taking.

    This makes his ‘predictions’ fair game. .. or the better question is, what is the Prime Minister even doing making currency predictions??

  9. phil sage (sagenz) 9
    21 July 2009 at 7:59 pm

    crack on fellas. The laughing is not at key, its that you are stupid enough to think there is any point in your continued smear. Key made a great deal of money in currency and stupid people do not make money in currency. Your suggestions imply desperation and are on a par with claiming Santa Claus really does exist to adults.

    Sensible people forecasting currency may predict a target or a direction over a time period but never both. Key was right and you are bagging him for it.

    What is interesting is that the previous low of .38 to the dollar (1997 I believe) implies there is now an 11c risk on US default/US inflation premium vis a vis the NZD built into the trough of the rate. The socialist Obama spending plans are forcing a rethink in US economic direction.

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