Trump and the NZ housing bubble

21 comments on “Trump and the NZ housing bubble ”

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1. Stuart Wills 1

   16 November 2016 at 7:55 am

   We live in interesting times.
   Who would have believed that a person like Trump could sweep to power and then we hope that he doesn’t have too much say in what happens to New Zealand; however in the times of a global economy there will no doubt be some effect here.
2. adam 2

   16 November 2016 at 8:51 am

   I see Bernie is talking.
   • esoteric pineapples 2.1

     16 November 2016 at 9:03 am

     Here’s a great interview with Bernie on CBS This Morning following the election. He’s spot on, as per usual. https://www.youtube.com/watch?v=zlmuKtyhDKg&feature=share
     • adam 2.1.1

       16 November 2016 at 2:55 pm

       Yes I saw that, well worth watching if people have not.
3. adam 3

   16 November 2016 at 8:53 am

   Bernie Sanders: Now More Than Ever, It’s Our Revolution
4. Draco T Bastard 4

   16 November 2016 at 8:59 am

   If he did this, it would trigger a financial armageddon because US Treasury bonds form the foundation of the global financial markets and banking systems.

   There’s actually a real simple solution to possible negative effects – Sovereign Money. Stop basing our money upon that of another nation. We have our own resources, our own skills – our own economy.

   And if every nation did that we could eliminate the poverty that is a result of the present system.
   • Henry Filth 4.1

     16 November 2016 at 8:18 pm

     I’ve read “Sovereign Money” a couple of times, and whilst I can see how the model works at the national level, I’m having trouble understanding how international trade fits into the model.

     Do you think you could expand on this a little?

     Thanks
     • Draco T Bastard 4.1.1

       16 November 2016 at 10:01 pm

       Why would it be any different than now?

       Use one currency to buy another which then is used to buy products/services from the other country.
       • Henry Filth 4.1.1.1

         16 November 2016 at 11:54 pm

         Thanks.
5. AB 5

   16 November 2016 at 9:50 am

   Low interest rates are fuelling bubbles – housing, share-market. Virtually free money for anyone with existing assets as collateral (i.e. free money for the wealthy).
   This cheap money is supposed to go into productive investment that creates economic activity & real jobs. But that’s hard work and very last-century – now it’s much easier to chase tax-free, speculative capital gain.
   Meanwhile prudent savers who set aside something of their income from labour are trashed.
6. Gosman 6

   16 November 2016 at 10:35 am

   Why would Trump renegotiate Treasury bills so that he has to pay higher yields on them? Surely he is only interested in reducing his costs not increasing them.
7. Enough is Enough 7

   16 November 2016 at 10:53 am

   Although the state of the world economy scares the shit out of me, the Trump effect is exaggerated in my view.

   8 years ago we looked forward to the change that was coming to America as a result of the election of Obama.

   Today we fear the change that is coming to America as a result of the election of Trump.

   The hope that we had back then turned into nothing as result of the Washington machine.

   The fear we currently have is much the same.

   America has a true separation of powers. That was bad for Obama’s aspirations but will be good for curtailing Trump. Notwithstanding the Republican dominance of government, he will still struggle as he is in essence an independent and the career politicians on Capitol Hill will not simply roll over for him.
8. Michelle 8

   16 November 2016 at 1:36 pm

   enough is enough you cant blame Obama for not making the changes he promised the American system is set up so the rich and powerful white men maintain there power if you have the house and the senate you have to have a majority in both to pass legislation. Obama did not have this luxury and now we have the republicans who have an out right majority and we will see more inequalities in the USA under Trumpet who has blown his trumpet and it worked. To the poor whites that voted for him hard luck your gonna be poorer and worse of and to the stupid shallow American women that voted for him you have stepped back a hundred years so much for womens rights you have poo pooed on all of the gains made by women globally nothing to be proud of a very sad day but oh well Americans have spoken and as the saying goes you made your bed now you have to lie in it.
9. Infused 9

   16 November 2016 at 4:04 pm

   If you did the tiniest bit of research, you’d find the LVRs have kicked in some time ago and no, you can’t borrow large sums of money.

   If people were dumb enough not to think that interest rates will rise, then that’s their problem.
10. Red 10

    16 November 2016 at 5:30 pm

    Dow at record high contrary to prediction a trump win would crash the stock market, obviously investors and business are not that worried The chicken littles or Paul’s of this world should just settle down, sure something’s will go wrong some things will go right, the delusion is thinking one man can control it, trump is a capitalist, he has overseas interests, sure he will pair back a few things, try to deal with some inequality issues but he is not going to throw the baby out with the bath water, for all his bluster and rhetoric trump is no fool and I suggest he will go down a better president than Obama, who was a president who wanted be a celebrity vs trump who is a celebrity and wants to be president
    • WILD KATIPO 10.1

      16 November 2016 at 5:46 pm

      Yeah … Trumps America will be fine, so stop all the fear-mongering,… as for the rest of us, ….well….
11. greg 11

    16 November 2016 at 6:26 pm

    luckly i payed off the mortgage 2.5 years ago
    let the fun begin
12. Nic the NZer 12

    16 November 2016 at 10:36 pm

    This is very confusing, here are some relevant facts to orient from (with related quotes),

    “Trump has also suggested he would renegotiate US Treasury debt, just as he renegotiated the junk bonds on his casino.”

    Wouldn’t make too much of this. The US government largely owes its debt to itself that includes 16% Social Security investments, 13% Other us govt entities and 12% the Fed (which rebates its profits to the govt). That’s 41% of the US govt debt it simply pays itself the interest on,
    http://www.forbes.com/sites/mikepatton/2014/10/28/who-owns-the-most-u-s-debt/#5e2ee4ba1907

    “Treasury yields or interest rates also form the basis of mortgage rates globally, so rising US Treasury yields would also put upward pressure on longer term mortgage rates here.”

    Notably in many countries it has become obvious there is a link (dominated by the central bank) between cash rates and the interest rates on govt securities. Actual re-negotiating then could be enforced by the central banks dominating the interest rates on govt debt downwards anyway. In Japan investors pay the govt to borrow, because of a negative central bank rate. In the US the govt already pays extremely low rates due to the very low cash rate set by the Fed. In practice its easy to understand (imagine your a bank or financial institution), govt debt is a savings account, the cast rate is the current account. If the central bank sets a low (or negative) rate on your current account then the rate at which its better to put funds in the savings account changes (which effects the rate govt pays on its borrowings). Its also worth noting you buy US securities with US$ and they pay back US$, so if there is an effect it becomes diluted by traversing the Forex markets.

    “New Zealanders can expect higher home loan interest rates,”

    Ever noticed that loan rates in NZ pretty much track the OCR (with a margin)? Its not by accident its the essence of RBNZ policy. The 90-day rate is the rate NZ banks lend reserves to each other at.
    http://www.rbnz.govt.nz/statistics/key-graphs/key-graph-90-day-rate

    Later on there is some additional description incorporating this fact better,
    “But he said long-term interest rates could rise more quickly than they might otherwise, due to the potential for added inflation.”

    So the higher interest rates are something the RBNZ might impose in NZ given the higher inflation rate rises. The correctness of that prognosis fundamentally relies on how accurate the forecast of added inflation is of course.

    Shamubeel Equab is more clear on this,
    “He said many people could not cope if interest rates were to rise sharply. “But I don’t expect a sharp rise for many years to come because of the high levels of debt at the moment.””

    eg if the RBNZ doesn’t want mass defaults its unlikely to raise the OCR to begin with. The forecasts of central bank interest rate rises and ‘normality’ have of course been going on for many years now. In Japan they have been going on for decades actually.
13. UncookedSelachimorpha 13

    17 November 2016 at 1:06 am

    An awful lot of analysis…

    I think it misses a crucial point – since when did Trump have a policy? He says stuff, then he says other stuff, and sometimes opposite stuff. Suggesting he is likely to do something in particular, is a bold prediction. He will promote Trump and his Trump relatives, that seems likely, but beyond that I don’t think you can be confident in anything!
14. Murray Simmonds 14

    17 November 2016 at 5:37 am

    Somwhat oblique or off-topic, but there is a very interesting article on The Kondratieff Wave on this link:

    http://charleshughsmith.blogspot.co.nz/2016/11/now-is-winter-of-our-discontent-our-era.html

    The article is reposted on Zero Hedge this morning.

    Essentially it summarises cyclic rises and falls in the war-peace cycle since the American Civil war – periodic cycles of discontent of about 50-60 years. Trump presumably is a result of the fact that we seem to have hit a new trough.
15. greg 15

    17 November 2016 at 6:43 am

    the other side of the coin is savers have been subsidizing borrowers .
    those that are over there heads cant say they weren’t warned debt should always be treated with respect and we have all heard the stories of homes being used as atm machines , rampant speculation sounds like the piper is knocking. 2008 gfc was a warning the bailout and low rates bought us time to pay down our debt.

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