This doesn't seem sustainable if it is true. But if the rest of the world is doing it, why shouldn't we. Or that is the argument I hear in the paper from experts and economists.
https://www.zerohedge.com/economics/...-rug-pull-soon
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This doesn't seem sustainable if it is true. But if the rest of the world is doing it, why shouldn't we. Or that is the argument I hear in the paper from experts and economists.
https://www.zerohedge.com/economics/...-rug-pull-soon
https://www.stuff.co.nz/business/129...e-on-wednesday
RBNZ target 4.5% OCR ..thats 7%+ morg rates .... massive recession coming for NZ ...
Maybe not China central bank may have just started cutting rates if this article is correct. If the rest of the world is doing it, why shouldn't we?
https://www.zerohedge.com/markets/ch...-yields-plunge
Also saw this pop up, only 98.1% of property sales in the three months to June 2022 made a profit. Oh my god, cuts rates now Adrian. And of those 98.1% of sales, in dollar terms, the median resale profit also dropped to $370,000 from $418,000 in quarter one 2022.
Only $370,000 profit, although details are light regarding time held etc. this is a disaster that requires immediate govt/central bank intervention. How can a speculator survive on just $370,000 per house, unbelievable. Especially as they are adding so much to the economy and society as a whole. The backbone of NZs economy, buying and selling existing houses at great profit how would we live without them.
https://www.msn.com/en-nz/news/natio...ba7dd43c175e95
I notice some concern on the Black Monday thread about rising interest rates. A couple of articles to assuage their fears for the property market.
Migrants flock to open homes
https://www.oneroof.co.nz/news/42026
NZ population is still growing albeit more slowly.
https://www.nzherald.co.nz/nz/why-nz...FMOXTSJTEIMS4/
The grow and consume basis for the economy is still intact.
That said not sure when the 1,025,000 or so will be leaving according to the MYOB survey. What a bunch of muppets no wonder xero is taking market share.
https://www.newshub.co.nz/home/money...eaving-nz.html
Worse is that the news media and some politicians discussed it like it wasn't a load of cr*p. Maybe think before you print or open your trap. (good advice for me too)
Marama Davidson missing the mark once again along with the Human Rights Commission (ugh) asking for rent freezes and more govt control.
https://www.msn.com/en-nz/news/natio...fc2efd7594c04c
If the govt was not so involved in the price of capital through the RBNZ and looking for easy solutions with money printing, would we have house prices rising faster than CPI inflation, ultra low interest rates pushed up house prices so far that buying at ridiculously low yields then pushing up the rent (to match the rising prices) is the only way residential rental investment makes sense (that and RBNZ created capital gains). Anyone waiting for yields to return to more reasonable or normal levels will have been sadly disappointed.
Also shouldn't $37million a week in housing subsidies be solving the problem of high rents and helping the tenants and landlords, all part of the inflationary money go round that we have created with the financialization of the economy and government intervention to rectify the inequality it creates. Maybe focus less on the "wealth effect" and trickle down economics and provide a stable monetary system. Let investors base their decisions on return on investment rather than when the RBNZ will cut rates again.
https://www.stuff.co.nz/business/opi...its-money?rm=a
Limitless capital through money printing and suppression of interest rates so that the normal source of capital (i.e. people who save and invest) can get a return on their money that reflects the cashflow generated from the investment rather than relying on central banks devaluing currency and providing capital gain at no cost (except the inflation tax which hurts the poor more than the asset owners (take note Marama).
NZ the only wealthy country with no capital gains tax and a regressive GST that makes no concessions for its regressive nature unlike other countries and now we have the inflation tax and Jacinda who is worried about poverty (yeah right) can't work out whats going on.
Mind you I am unsure if Chris Luxons tax cuts for the really well off is a solution to poverty in NZ. Although at least he doesn't pretend to give a sh*t about the bottom feeders.
Maybe he is styling his economic policy on Sri Lanka. large tax cuts to get into power. Hope it works out better though. I am guessing the average kiwi is less self centred, selfish and stupid than the average Sri Lankan but I am not sure these days.
Latest news Adrian getting tough, raises OCR to level less than half the inflation rate. What a legend.
https://www.nzherald.co.nz/business/...ODZCFGHYUO77Q/
You've certainly changed your tune. It was only a little over a year ago you were saying:
May 2021
6 July 2021Quote:
Originally Posted by JBmurc
Quote:
Originally Posted by JBmurc
27 July 2021
25th August 2021Quote:
Originally Posted by JBmurc
Quote:
Originally Posted by JBmurc
NBR paywall - busy body group release paper that may as well be titled No S*** Sherlock - https://www.nbr.co.nz/business/popul...-house-prices/
"Booming house prices over the past two decades were more about globally low interest rates, the tax system, and restrictions on the supply of land than population growth or construction costs, a joint paper published today says.
The paper, released by the housing technical working group – a collaboration between Treasury, the Reserve Bank of New Zealand, and the Ministry of Housing and Urban Development – looks at the key drivers of the housing market over the past 20 years."
Stephens said the three agencies were committed to better understanding the links between the economy, government policy, monetary policy, and the housing market.
Wow, so the RBNZ and treasury are going to keep looking into it. We're saved.
I thought monetary policy only played a "bit" part in house prices according to Adrian?
Here is a link to a non paywalled article and a link at the bottom to the actual report (I haven't read it yet).
Interesting that rising rents are more closely linked to increased immigration. Perhaps Marama could address the causes for rising rents rather than suggesting rent freezes like a dumb a*se.
https://www.interest.co.nz/property/...d%20households.
I'm a full time share-trader of course I change my mind ... if you don't move with the times your get wiped out ... I was wrong too think the RBNZ would move much slower as we are such a HIGH debt to household income and most in RES property ...I never thought we would see 1yr fixed rates more than double within 12months ... who did ??? and now another potential 100%+ higher than last years record lows >>> from 2% to 7% !!! talk about kicking your working classes while their down fighting inflation across all basic living expenses ..
And its not me stating potential 4.5% OCR in the short term ...thats the RBNZ ...I think the pain for NZ households will be greatly felt across the country ... the spending spurge coming back to bite ... still think the OCR will be forced to drop before long into the 4%+ OCR... once the domino's start to fall esp in the property sector
I find myself agreeing with John Minto on tax policy. How far left have I swung? Further left than labour that's for sure.
https://www.nzherald.co.nz/nz/john-m...7II45S4XIJETA/
Although for all his annoying shouting John Minto would appear to be on the right side of history regarding the springbok tour and apartheid. Maybe not to hard core racists and rugbyheads but to most sane people.
He highlights that if national wanted to reduce tax they could lower GST, especially as this is a regressive tax and poor people are doing it hard currently with housing and the cost of living crisis. Chris would rather make a progressive tax less progressive. Chris Luxon knows who his voter base is though so it makes sense and he doesn't do too badly out of the proposed changes either. Why go into politics if you are not going to make life better for yourself.
Good old Adrian and the RBNZ hard out fighting inflation and the cost of living crisis.
https://www.interest.co.nz/banking/1...illion-will-be
Only a $8.5billion more available to the banks to pump into the economy. That should really slow inflation.
Lucky we have smart people like Adrian who understand the economy and how to make it better.
RBNZ Assistant Governor/General Manager Economics, Financial Markets and Banking Karen Silk said with the Government needing to increase bond issuance to support the Large Scale Asset Purchase programme, monetary support was needed so interest rates did not increase substantially. The options to reduce the OCR, then at 0.25% was inhibited. The FLP supported the lower interest rates.
Silk said the three year term of the FLP and two year application window were critical design features.
“They were designed to support commercial bank confidence to incorporate its use into their medium term funding programmes at the time of launch. And banks have incorporated that usage into those medium term programmes," she said.
“My point around it is that early removal [of the programme] would undermine confidence in this as a tool, which could potentially inhibit it from being used in future should it be required again in the future."
Translation; They have not even finished but expect to be using FLP in the future as they expect interest rates to be back to zero in the future.
I guess it is true they are at a point where it is "inflate or die" When they say "die" I think they mean deflation which according to economists and central bankers if we have deflation we might as well all be dead. A bit hyperbolic but the church used the fear of god to control people in the past so I guess central bankers use the fear of deflation to maintain this corrupt ponzi scheme.
Bernard Hickey confirmation bias.
https://www.interest.co.nz/property/...it-nz-inc-kick
Interesting how the labour shortage crisis only seems to be a crisis for business owners and politicians seeking to boost asset prices and suppress wage costs.
TOP party might be a viable alternative to National and Labour. Not as nutty as the others. Maybe Chloe could jump ship and win the Auckland Central seat so the TOP party can have a seat at the table and my vote will count.
Don't know all their policies so maybe shouldn't nail my colours to that mast just yet.
Will the pension be enough if you have to rent in retirement?
https://www.nzherald.co.nz/business/...MTVA4WH5X4HYE/
The number of retirees renting is rising and the article suggests they might struggle, but what they don't understand on the other side, the owner of the property will be getting RBNZ guaranteed capital gains creating the "wealth effect" which is good for everyone, or at least that is what Adrian thinks. I am unsure how many houses he has though, so his views could be skewed.
Also in the news today "middle aged couple buy a home in Auckland" that must be quite news worthy.
https://www.stuff.co.nz/life-style/h...in-the-regions
How we contribute to society could be part of the inequality problem. Who knew?? but we know neither Labour or National will change it. To be honest complicating GST doesn't appeal but a capital gains tax does. Also change the inflation target to -2% to +2%.
https://www.msn.com/en-nz/news/natio...ca8c6b65841ef0
Matthew Hooton admittedly ex national party staff member putting the boot into Labour.
https://www.nzherald.co.nz/business/...EECPRXUDMMVNE/
It took this Government's special idiocy to decide that which wasn't broken should be fixed, by moving the Reserve Bank away from its laser-like focus on inflation, approving the appointment of Adrian Orr as Governor and signing the so-called dual mandate in March 2018.
It may just be unfortunate wording or is he saying it take special idiocy to appoint Adrian Orr as reserve bank governor? I guess the results achieved speak for themselves. Best summed up in the last line of the article.
Labour governments can do many things and survive. Enriching property owners while slashing workers' real wages isn't one.
Also he notes who has benefited from Labour's and the RBNZs policies. I still marvel at the lack of anger from the people disadvantaged by the RBNZ's actions. Most NZers unlike me are very nice people, even when they are being screwed over they don't get upset.
Some bold Covid response was needed. But, as early as April 2020, the Government was warned by everyone from Treasury to me that its monetary and fiscal policies would hurt the young, poor and thrifty and benefit the old, rich and profligate.
Care was called for, but the Government disagreed.
It is no excuse that other governments did the same.
Infamously, ultra-loose monetary and fiscal policy transferred about $1 trillion to property owners at the expense of wage earners and savers. Now the data is in on real wages.
From mid-2020, real wages began falling and have done so for eight quarters. Since the Labour Cost Index (LCI) began in 1992, that has never happened before.
That said I do not see any policy from National that would change things for the people being screwed over. Labour don't deserve to get back in but National's tax cuts for the people who aren't struggling reeks of trickle down economics as well, just like Labour pushing up house prices. In the interests of fairness I have copied and pasted a post from Blue Skies from another thread highlighting some achievements from labour. Both articles quoted are opinion pieces so hopefully any numbers used are not just made up from either author.
The estimated cost of fixing NZ's water infrastructure is $185 Billion, just to maintain critical services. Wouldn't you want that debt/cost spread over all taxpayers rather than just the ratepayers?
National reduced the Police budget & closed many community stations, including the terrible decision to close the Fort Street station in Downtown Auckland city.
Nursing problems can be solved by further raising their pay (more than Labour already has) but that means higher taxes.
National put a lid on the Health budget for 9 years, effectively meaning it went backwards all while hospitals were having to put off maintenance & repairs & the population grew by another million or so people.
Labour has given the Health budget the biggest increase in funding of any govt. We now have funding for Cancer drugs which were not previously funded under National.
If you get Cancer, you are a hell of a lot better off under this govt than you were under National & that's a fact.
Do you have any idea 161,000 homes have been built since Labour came to office, over 41,000 homes in the year to June 2022, under this Labour govt 20,000 more homes built in 5 years, than in 9 years under National.
It's been a seismic shift, by far the largest addition to housing stock going back to 1991
Kiwibank estimates we will have housing surplus in less than 12 months.
I guess when Adrian talks of a "path of least regrets" he is talking about his own personal situation as I imagine he is in the group that benefited most from the actions of the RBNZ at the expense of others. Jacinda and Grant probably did alright out of it as well which would help if you wanted to keep your job.
What Adrian Orr learned at Jackson Hole | The Spinoff
Bernard provides five takeaways , and I edit those down to two.
- Growth rates have been hit hard and in a more permanent way than previous thought
- Covid may have changed labour supply and practices in permanent ways that could improve productivity
In a crazy financialised world a .3% return makes sense? Even a 3% return is hard to justify unless you are not going to spend anything on the rental property.
https://www.stuff.co.nz/business/pro...tax-data-shows
Mind you, the RBNZ guarantees 1%-3% tax free capital gain and has achieved well in excess of that annually over the last 30 years for asset values as they don't form part of the CPI.
So I guess I am the dummy wanting to buy based on yield.
Markets down today in the US as there was some slightly positive news. Good news is bad news for the market as the actions of the central banks are all that really matter when investing.
Don't panic here in NZ Adrian has ensured the system can cope with negative rates, at that point there is no upper limit for asset prices.
I wonder where all the savers and investors will come from when QT starts in earnest. Much easier to print new money than encourage people to save and invest.
Did QV general manager David Nagel just admit that immigration pushes up house prices???
https://www.stuff.co.nz/life-style/h...n-more-than-16
It is odd as from the John Key govt to a study by the RBNZ and treasury it almost seems like a conspiracy to deny this fact.
David Nagel said there had been some significant price falls now, particularly in the main centres where there had been strong price increases previously.
There was no immediate sign of things getting any better with interest rates likely to rise further and business confidence waning, he said.
“It looks as though it’s going to get tougher before it gets any easier for sellers. First-home buyers will continue to struggle for finance with tight credit conditions and affordability constraints.
“Plus there are still plenty of new homes in the pipeline, which will add further to oversupply, putting further downward pressure on prices.”
The reopened borders might help, but there were plenty of people heading offshore, he said.
“The market performs much better when net migration is positive, and that time might not be too many months away.”
Both Labour and National can shut the f**k up about concerns around the housing crisis or climate change as they both can't wait to juice the economy with more people. Townies love it, and sadly there are less and less country folk as land gets subdivided for housing.
Adrian even quipped that he can't print people. This would indicate his way of thinking and his concern for the bottom half of NZ struggling under his crazy monetary policy, real wages declining while enriching asset owners now an undeniable fact. Inflation has meant a wee pause in his easy money, low interest rate approach but immigration might plug the gap as we wait for the central bank pivot.
Surprisingly (to me anyway) it is a complaint against the Labour govt. Townies in Auckland are not sufficiently cheek to jowl in their living arrangements, businesses do not like paying higher wages to retain staff. Real estate agent aren't getting their commissions and developers need more people to sell houses to.
More people consuming more stuff equals more growth. Higher GDP, higher house prices, happier voters. A juiced up economy.
Maybe "revving" the economic machine is a better metaphor than "juicing". Juicing probably refers more to monetary policy and taking the punch bowl away or adding to it as the case may be.
You will notice it is mostly only developers, real estate agents, home owners, business owners and possibly some bleeding heart lefties (wanting to BE KIND) and maybe w*nkers who don't have enough variety of restaurant to visit who are concerned at the lack of immigrants.
I know Mike Hosking laments the dearth of cheap labour and house buyers without 50,000 immigrants a year coming into the country.
Deflation of prices, population and especially wealth will be the death of us all.
RBA getting some stick after raising rates. A review, although not clear what the complaint is. They are upset at the rate rises obviously but
The inquiry is aimed at modernising the central bank, which has come under pressure for its handling of pre-pandemic settings.
Panellists flagged that in the five years prior to the pandemic, the central bank was failing to meet its targets.
Personal Inflation Calculator
Since the 1990s, the independent bank has used interest rates to control inflation, as higher costs reduce demand.
With inflation rates averaging 1.75 per cent, well below the target 2 to 3 per cent, and interest rates already at record lows, the bank was unable to do much to drive economic stimulus and left the role to the government.
But the low interest rates ultimately helped to fuel Australia’s inflation crisis.
So if I read it correctly they are suggesting the RBA needed lower rates or more printing prior to the pandemic to reach their inflation target of 2-3%. It would be interesting to see what house prices and the ASX were doing over this time.
Unfortunately asset prices would not form part of the inflation measure. So after inflating asset prices, the extra stimulus during the pandemic kicked off CPI inflation and now that the RBA is raising rates to combat this they are being criticized as CPI inflation continues but asset prices deflate.
Personally I think they should have been criticized for creating excessive inflation of housing and asset prices but this was not part of their mandate and CPI inflation was low and dear I say it the people in power and owners of the assets would not criticize asset price inflation.
https://thewest.com.au/business/blun...haul-c-8248012
The makeup of the board is also up for review. Currently, there is just one monetary policy expert on the panel which votes on rate hikes. Obviously only the monetary experts understand: rate hikes = bad.
Economist/Arts student do you really need anything more than some vague theories and a strong opinion on matters of economics and monetary policy??
Asset prices up good, asset prices down bad. Pretty simple really. Lower interest rates and easier money. Hopefully they learned from the pandemic response that you can't give the money to the plebs or you get CPI inflation but if you run it through the banks, then asset owners with existing collateral can buy up the remaining assets without kicking off CPI inflation.
The issues paper makes the case for a reconsideration of monetary policy in an increasingly volatile world where inflation is driven by supply shocks, a fragile geopolitical environment, pandemics and natural disasters caused by climate change.
Really?? monetary policy does not drive inflation or deflation?? Has the money supply been expanding faster or slower than population growth or GDP or any other measure that might indicate a need to increase the money supply.
very confusing better leave it to an arts graduate.
Which is the bigger of two evils, inflation or unemployment? A difficult one for Cameron the economist.
https://www.msn.com/en-nz/news/natio...0ffe8225494f68
Perhaps I can help. The RBNZ interprets the term 'maximum sustainable employment' (MSE) or full employment to mean the level of employment at which the job market is tight, but not so tight that inflation is rising out of control.
Consumer Price Inflation for the June 2022 quarter, was
quarterly inflation rate was 1.7 percent
annual inflation rate was 7.3 percent.
The RBNZ inflation target is 2% (1%-3%)
When was the last time we heard about an employer not struggling to find workers? What about the loud and long demands to loosen immigration as there is a worker shortage. If this graph is right it shows that we are near lows in unemployment over the last 30 years.
https://www.macrotrends.net/countrie...mployment-rate
keep in mind unemployment is usually lowest just prior to a recession when it should climb.
What is Cameron on about, worrying about a potential but currently non-existent problem of high unemployment or a very real inflation problem, currently running 250% above target.
At a guess news organisation need to fill pages with whatever crap they can come up with or maybe Cameron has a big mortgage and doesn't like to see his house price decline.
If he is worried about high unemployment he should be suggesting we close the borders to immigrants now as unemployment will rise as the wealth effect subsides.
At a guess the RBNZ is not facing "a fight between unemployment and inflation." as Cameron suggests, what will be worrying Adrian is the fight to boost asset prices without boosting CPI inflation. His lame attempts to fight inflation proof enough for me. OCR 3% Inflation 7.3%. Look how fast and how far he drops rates when faced with deflation. What a cu*t.
Mike Hosking's opinion this morning
https://www.nzherald.co.nz/nz/politi...VSSNKBLAE25XU/
The usual Labour is doing everything wrong and we are on our way to hell in a hand basket unless National win the next election and save us.
He identifies the biggest problem.
The mistake we are making, is that we are handing out pay rises to anyone who asks and we are doing that because there is no labour. (hint: open immigration and suppress wages, thanks Mike)
As much as we might like getting more money, the pay rise isn't real, because the increases in sales production and productivity aren't there.
So someone is paying artificially to stop you walking out the door, eventually the bill for that falsity will come due, and that's when people start getting laid off. (Hint; accept your lot or lose your job, brilliant Mike)
It almost needs no comment. Obviously Mike's pay rises are linked to the numbers of listeners he has and as he is the most popular his wages are probably below where they need to be and there is nothing more useful and productive than talk back radio and opinion pieces in the herald.
How does Mike explain the rise in rents and house prices, no increase in sales or productivity there but he has never mentioned this as a problem.
I guess what Mike is saying in his simplistic way is that more immigrants mean lower wages (more supply) and higher house prices (more demand). Happy Days.
Fig 1 on the productivity commissions paper seems to refute Mike's claim about labours share of income. Although I haven't actually read it so the paper may refute my argument for all I know. 4 pages, I only look at headlines, the more inflammatory the better. Total ignorance is bliss but half ar*ed ignorance is rage inducing (i.e. reading headlines but nothing actually educational).
https://www.productivity.govt.nz/ass...ew-Zealand.pdf
Take a bow Adrian Orr.
https://www.theguardian.com/world/20...says-economist
New Zealand has had a WORLD beating jump in wealth due to rising house prices. The best in the world, and we have one man to thank for this Adrian Orr, our Kaitiaki of stable prices. Well done Adrian.
Labour has played a part, let us not forget that, especially as they are sooo concerned about poverty in NZ.
Not sure how Mike sees this as he states pay rises aren't real, because the increases in sales production and productivity aren't there.
NZ houses definitely a lot more buying and selling of houses they must also have become super productive as Mike would no doubt see the rise in wealth as success for aspirational NZers. Maybe ask someone who doesn't own their own home whether the house price rises are real or not.
Dual mandate of price stability and unemployment for the RBNZ.
https://www.stuff.co.nz/business/129...-under-control
Financial Services Council very worried about unemployment.
I guess this is because low interest rates and easy money pumping up asset prices has made them look like geniuses for the last couple of decades. Invest for the long term with us sort of style. Time in the markets rather than timing the markets. Bull et al may need to look away at that statement, SailorRob not so much.
I can understand why price stability is not as big a concern for them, one sector of society that is doing really well out of inflation.
Unemployment is hard on people but inflation is also hard on people so you have to choose.
Mood of the Boardroom in the herald thinks an independent review of the RBNZs actions over the pandemic is warranted. Not to dump on poor old Adrian but to make sure the same mistakes aren't made next time.
The UK going for growth with tax cuts and borrowing to fund the difference. Sounds like Sri Lanka and NZ once Chris gets in. Hope it works out well for everybody. Currency markets did not like it for some reason.
https://www.gov.uk/government/news/c...in-generations
Confirmation bias. An economist's opinion for what it is worth.
https://www.zerohedge.com/markets/ma...hing-gas-fades
The current global economic trainwreck demonstrates the deeply unethical nature of printing money and allowing central banks and governments to become lenders and providers of last resort. It harms the middle class on its way in and destroys it on its way out.
Artificial creation of money is never neutral. It favours the first recipients of newly generated currency, the government and the indebted, disproportionately, while severely harming deposits savings and real wages.
TeslaGod knows how it works.
Here is another view on Trussnomics
https://www.theage.com.au/business/t...26-p5bl36.html
This unflagged largesse injects demand into an economy already running at full capacity, constrained by a labour shortage and supply-chain disruptions. It draws forward consumption in a nation living beyond its means, with a chronically low savings rate and a structural current account deficit of 4 per cent of GDP (8.3 per cent this year).
The package is regressive in its distributional effects and needlessly provocative at a time of social convulsion. It tests the fragile Union almost to political destruction. It is more ideological than Margaret Thatcher’s opening bid and starkly different in fiscal character. The Lady was a budget hawk.
UK central bank showing the way, promising to buy an unlimited amount of gilts (UK govt bonds). Unlimited money, what a wonderful idea. Wish I could get some.
On the fiscal side tax cuts for the rich on the monetary side asset prices propped up with unlimited money.
The UK is turning into a utopia for the rich. I think Chris Luxon and National have the same vision for NZ, I am sure a spinless Adrian Orr will be more than happy to cave at the first sign we are leaving our own utopia for something historically more normal.
The UK CB will do "whatever it takes" just as other central banks have promised in the past.
https://www.theguardian.com/business...-market-mayhem
The reason for the promise of endless funds according to the guardian.
There was evidence of a run on pension funds that was forcing them into a fire sale of their assets.
As a result, Threadneedle Street has been forced to extend its policy response. In a “whatever it takes” moment, the Bank said it would buy an unlimited amount of government gilts to stem the market panic. This represents a U-turn for an institution that less than a week ago pledged to start running down its stock of government bonds, but the Bank was left with no alternative.
There it is, there is no alternative to money printing and debasing the currency. It is all about capital gain not cashflow.
Better load up on debt in today's dollars and buy whatever is left. Mind you that has been good advice for the last 30 years.
Is Liz Truss confusing "inflation" with "growth". I don't think so, if you recall inflation is a very regressive tax, the very best kind of tax.
Quick someone tell Adrian.
https://www.stuff.co.nz/business/130...ross-the-board
If it is good enough for the UK it is good enough for NZ. I think that is the reasoning for a lot of CB action.
Mohamed El-Erian would know a lot more than me.
https://www.youtube.com/watch?v=HN9fVqPBfI0
Funny when the talking head suggested the UK CB was "data dependent" Mohamed said no, just the opposite, inflation is going up in the UK supermarkets and the talking head clarified and said no I mean in regard to the CB "put". i.e. asset prices go down CBs print money to push them back up.
Reading the herald article
https://www.nzherald.co.nz/business/...EAZER6MSTLQQY/
The BoE suspended a programme to sell gilts — part of an effort to get surging inflation under control — and instead pledged to buy long-dated bonds at a rate of up to £5bn a day for the next 13 weekdays.
I have been trying to ramp up the fear in people nearing retirement on this site lately suggesting I would hate to be hitting 65 in the next year or two in the hope of encouraging an over reaction and increasing investment opportunities. Not very nice I know but a reminder to take everything you read on the web with a grain of salt.
Reading the herald article if I understand this right, pommy pensioners were pulling their money out of pension funds due to the fear. The pension funds were selling their gilts to meet the redemptions. I assume because this is the closest to cash. The CB gilt buying will prop up the gilt market while this is going on, once again saving the investing geniuses running the funds and keeping interest rates suppressed.
If the CB owns the overvalued gilts who is effectively taking the loss on these if inflation devalues the pound and the CB is holding long dated gilts at ridiculously low rates. Are they effectively socialising the losses for the asset owners once again?
5billion pounds a day for 13 days, sounds like a lot.
Not quite as simplistic as I thought.
https://www.smh.com.au/business/mark...29-p5blui.html
The UK pensions market is largely a defined benefit market, with the funds needing to match long-term liabilities with the assets they hold. When rates rise quickly the value of their bond holdings falls while the net present value of their liabilities doesn’t change as materially, threatening deficiencies in the funds.
In the UK that potential problem has been exacerbated by the widespread use of leveraged derivative strategies (called “Liability-Driven Investment” or LDIs) that are used to effectively hedge their liabilities. The LDIs are estimated to represent about £1.5 trillion of assets or, as the Financial Times noted, roughly the size of the entire UK bond market.
The collateral for those derivative positions is largely the funds’ fixed interest securities holdings. As rates spiked they would have been hit with what are essentially margin calls and forced to dump some of their bonds, creating a spiral that could only end in disaster for the funds, the wider market and ultimately the UK financial system.
They hedge their liabilities with "Liability Driven Investments". I assume the "liability" is to the investor in the fund.
I am a bit lost, interest rate rises reduce the value of their bond portfolio but aren't LDIs hedging this? I thought hedging was to protect an investment in all situations not make a bad situation worse.
Sounds like the UK pensions were using leverage (derivatives) to maximise their returns. When the collateral (UK govt bonds) crapped out they got margin called. Sounds like the financial system tried to contract but the UK CB saved the speculators once again.
The question is, shouldn't the risk takers suffer the losses not the UK general public and everyone else screwed over by money printing and inflation?
The people who ultimately suffer are the people relying on the pensions but shouldn't the morons (masters of the universe?, smartest men in the room?) running the funds be held accountable for their actions.
Bill Bonner points out the obvious.
Why was a 5% yield on a 30-year government bond cause for panic? It still leaves the yield on gilts 510 basis points below the rate of consumer price inflation. Investors who lend money to the government agree — if everything stays the same — to lose more than half their money. Nothing ‘normal’ about that!
Savers getting a raw deal from the banks according the RBNZ.
https://www.interest.co.nz/personal-...e-historically
I do not think the RBNZ is being ironic on purpose. Or maybe they are and are having a little joke at the expense of savers and banks.
The RBNZ worried about savers getting a raw deal has to be one of the most ridiculous statements I have heard in a long time.
Stop suppressing interest rates while pushing up inflation. That is a simple suggestion to stop savers getting a raw deal. let the market set interest rates without RBNZ interference or bring the inflation target to 0%, they are other ideas.
Worrying that the trading banks are screwing over savers seems a bit ingenuine from the RBNZ.
It just seems a bit hypocritical the organisation that has hurt savers more than anyone or anything else now stands as their protector or voice.
In Orr's own words, "inflation is a thief in the pocket"
Then it depends on why you think we have inflation, Putin?, supply chain issues? RBNZ dropping the OCR to .25% in Mar 2020 and leaving it there until Sept 2021 despite asset prices going ballistic (particularly housing), the RBNZ increasing its asset base from $25 billion in Dec 2019 to $96 billion in August 2022 (still expanding by the way but the pace has slowed) looser lending, etc etc.
To express concern for savers seems a bit ingenuine coming from the RBNZ. The RBNZ are scum if you have been trying to save without taking big risks. They have been stealing your money for the benefit of borrowers and if you think of money as a store of value and you work for wages they are also stealing your time. A heinous crime that goes unpunished.
I thought we were nearing a point where banks did not need savers anymore. They can just issue bonds that a central bank will buy with freshly minted money.
Lucky Ben got this now. It might be there is much less opportunity to kick the can down the road next time we have a crisis, but I suspect there is more printing to come before it becomes obvious that Ben's response to the 2008 crisis turns out to be stupid and amoral.
https://www.theguardian.com/world/20...ics-prize-2022
It might also turn out that the last 30 years is a gigantic failed experiment in money printing and financial repression. It might turn out that you can't print your way to wealth. At least not for society as a whole. I think Ben is doing OK working for Citadel though. The voices of anguish regarding rising rates seem to be growing in volume. They talk about things "breaking" rather than "correcting". Apparently interest rate rises are "breaking" the bond market.
No talk of reducing the inflation target. Adrian thinks 1%-3% is ideal although Arthur Grimes who came up with the idea has suggested taking it back to 1-2% after seeing what happened to the housing market.
A greater weighting for house prices in the CPI?
Hierarchy of objectives? (i.e. stating that the MPC should put greater focus on either price stability or maximum sustainable employment) "could mitigate risks around competing price stability and MSE objectives".
A heirarchy of objectives... does Adrian really need one, inflation at 7% unemployment at 3.3%, record lows for unemployment, does Adrian need targets when he has proven an inability to hit them?? His results appear to be an extremely overstimulated economy, which does not seem that hard to do, especially when following a path of least regret. Although Alokdhir on the Black Monday thread seems to be keen on a pivot sometime soon. Alokdhir's insistent call for a pivot or central bank intervention makes me suspicious that he is a professional money manager.
The sack is what Adrian should get but Robertson needs a weak governor to keep kicking the can down the road so Grant can try and buy another election, currently National hold the highest bid. I have to say Adrian is being stronger than other world central bankers but that is not saying much.
https://www.interest.co.nz/public-po...rent-inflation
Interesting
Not sure what "self-selected" and "representative" mean but assume individual and organisation views.. maybe?
Anyway not a lot of confidence in the RBNZ, but economics is an Arts subject so there is no right answer and a lot of guessing so how could anyone be confident in the RBNZ. I suspect central bankers are the only ones arrogant enough to believe they know what they are doing, despite history disproving that time and again.
I am confident they are way more worried about deflation than inflation and it might be a case of "whoops" did we not raise rates aggressively enough, oh well.
That said debt, demographics and technology are supposed to be creating deflation, I guess they could not keep up with the money printing, but for all I know there might be a sudden swing to deflation that will require more stimulus. That seems to be how it works in Japan.
Another educated guess about house prices. 15% nominal but 24% real. Scary how inflation makes everything more confusing.
https://www.stuff.co.nz/life-style/h...use-price-fall
Immigration spigot being turned on, "skilled workers" and "parents"
https://www.nzherald.co.nz/nz/govern...LHVW6QJX56BXY/
Do skilled workers include baristas and restaurant staff?
https://www.nzherald.co.nz/business/...26RGPYIFR36BQ/
Apparently we are 3,000 baristas short. Put the burden for climate change on productive farmers with our world beating climate change bs, while filling the cities full of people wandering around with their sippy cups of wa*kachino coffees. Clogging up the motorways and landfills while productive land is developed to house more people.
What about the brain drain? Weren't up to 1 million people leaving according to an MYOB survey that was much repeated in the media?
https://www.nzherald.co.nz/business/...PF6YKBSWMBTQA/
So instead of 1million leaving we had 47 net arrive. Could it be a war on inflation, not asset price inflation but wage inflation... you know, the bad kind of inflation, like CPI inflation. Finally the govt can fill the country up with more people consuming more stuff, not only that but they produced world leading climate change policy, "charging farmers for climate change" well done Labour. I am getting mixed messages is man made climate change bad? do more people consuming more stuff make it better? how does the wealth effect improve the climate crisis?
Charge the farmers because they use fertiliser to produce our food and their animals fart methane. It would be interesting to compare CO2 output from a week of Aucklanders sitting in traffic (one person per car, maybe 3 or 4 if it is a school pick up) compared to the total output of farms covering a similar sized area. For that matter Cars and house construction compared to total national farm green house gas emissions.
National should get a mention as well, as both parties are aligned on the immigration issue.
'Cruel', 'unacceptable' and 'overdue' - MPs react
National Party immigration spokeswoman Erica Stanford said reopening the skilled migrant category should have happened months ago.
Looking at the RBNZ Statement of Financial Position when they print money and buy bonds there is a corresponding liability increase to the NZ Govt. I would need to look at the govt financial statements but this presumably is a growing asset on the govt books? Their bond liability increases but this is offset by an increase in what the RBNZ owe them? Would it work like off balance sheet financing?(i.e. it does not really show up in the govt financial statements) Much harder to understand when it is a b*llsh*t construct.
Putting banks between the govt and RBNZ when buying and selling NZ govt bonds with freshly printed money hardly makes it any better other than the taxpayer is unnecessarily paying the banks when they clip the ticket, so that the printing of money somehow does not look so bad.
https://www.nzherald.co.nz/business/...NJUKQNNITG4LI/
Adrian points out in the article that he does not have a clue;
However, in early 2020 at least, no one foresaw inflation - and therefore interest rates - rising by as much as they have. All the focus was on avoiding deflation.
Orr, in the August interview, acknowledged it was fair to question whether the Reserve Bank could've cut the OCR by another 25 basis points to zero, instead of printing so much money.
He acknowledged the Reserve Bank overcooked its response to Covid-19, but said it was hard to specify whether the bank cut interest rates too much or kept them low for too long. or both?
He just has to keep inflation going as the top half of society do well in an inflationary environment, in a deflationary environment with honest money the current monetary system collapses and is exposed as something a lot less than perfect.
Adrian also points out the benefits of the money printing far outweigh the current costs. The trading banks are making a killing buying back NZ govt bonds from the RBNZ at much lower prices after Adrian raised the OCR and now tries to reduce the RBNZ balance sheet so the next round of money printing does not look so bad. Adrian the illusionist hard at work for the people of NZ. Maybe just the 60% who own a house or have some sort of asset base.
I must be way off in my understanding because it seems insane and amoral to me.
But you know what they say, the alternative would always be way way worse.
If Josie Pagani is right then maybe I will vote Labour at the next elections. Stopping immigration but not openly admitting to it.
https://www.stuff.co.nz/opinion/1301...ary-can-opener
Josie quotes, the Nobel Prize for Economics was won last year by David Card for his 1980 study on immigration and wages. To summaries more immigrants don't mean lower or constrained wage grow. I am no economist but the basic premise I learned is that if there is a greater supply of something the price goes down if demand does not keep up with supply.
Ben Bernanke just received a prize in economics too. What a joke.
Josie suggests one of the reasons we can't build enough houses is that we don't have enough builders. I would argue without 50,000 immigrants a year we would not have a housing shortage in the first place.
Josie also is concerned that the recent visit of India's External Affairs Minister, Dr Subrahmanyam Jaishankar, demonstrated that our lukewarm attitude to immigration is damaging our international relationships.
Jaishankar was publicly critical of New Zealand's unwillingness to renew visas for Indian students who left New Zealand during Covid. A trade deal is off the table, even though a growing India has the potential to be more important to us than China.
Just what we need more Indians, I have Indians ringing me almost everyday offering to help me with my computer Dr Subrahmanyam Jaishankar should focus more on cracking down on scumbags in his own country than foisting more of his burgeoning population on NZ.
The most common family name registered in New Zealand in 2020 was Singh, followed by Smith, Kaur, Patel and Williams. Hardly sounds like we are anti Indian.
https://www.dia.govt.nz/press.nsf/d7...7!OpenDocument
Josie says, the government spent the last 10 years thinking of ways to reduce immigration, compiling lists of immigrants with Chinese-sounding names, and blaming them for causing the housing shortage.
I think the ban on foreigners owning NZ residential real estate reduced pressure on the housing market a bit, but with 50,000 new NZers each year housing was always going to struggle to keep up.
I don't care if they are white and speak English, I have said it once I will say it again 5 million is the perfect population for a country our size, close the borders.
Josie suggests we imagine how different New Zealand would be if we'd open our doors, as requested, to more Jewish refugees in the 1940s. Hard to say as long as they weren't zionists who viewed NZ as the promised land, otherwise I would imagine pretty sh*tty looking at Israel and how they are treating the Arabs. They had their own state by 1948. A good example why mass immigration is a bad idea. Ask any Arab. Ask any Maori about mass immigration and democracy for that matter.
If Josie can't get a "real" coffee or lacks variety in her choice of restaurant maybe she should f*ck off to some other overcrowded country and give us some space.
More journalism less opinion pieces please Josie.
Luxon on radio this morning says he intends to ask Robinson to appoint Orr for only 1 more year, not a full term, as he'd be "gone by lunchtime" if National got into Government.
Who will buy the govt bonds to pay for the tax cuts if Adrian is gone? Who will create the inflation to take care of the debt? Has Chris really thought this through.
Does anyone have a clue what inflation is going to do.
https://www.stuff.co.nz/business/130...nchanged-at-72
The Reserve Bank had expected a much larger drop in annual inflation to 6.4%, and no bank economists had been expecting it to top 7% this time.
Sounds like bankers, money managers and economists relying on wishful thinking in their inflation outlook. I am sure Adrian is itching to pivot but the CPI numbers are problematic.
Troublingly for the Reserve Bank, the average annual rise in prices of goods and services whose prices are largely determined locally rather than overeas – so-called “non-tradeable inflation” – climbed to 6.6% from 6.3% the previous quarter.
So not all Putins fault then??
Massive failure by the RBNZ to do their job yet no heads are rolling yet.
Article in the Herald this morning, sorry paywalled.
https://www.nzherald.co.nz/business/...TOA6SGXJVW6AU/
The headline
Should banks help taxpayers cover the cost of money printing?
Another article that makes me realise how little I understand.
I was looking at the RBNZ Statement of Financial Position and the bank prints money and buys bonds which is an asset and there is a liability to the taxpayers of NZ But there is also a big liability for Settlement Institution Deposits which I assume is excess funds from the trading banks parked at the RBNZ earning the OCR in interest. With the rising OCR apparently this is getting costly for the NZ taxpayer.
I will have to take the time to find out what interest rates are being paid on the LSAP securities and compare that to the OCR. Obviously the banks make more blowing a bubble in the residential property market by lending out large amounts but might be sitting pretty clipping the ticket on the purchase and sale of govt bonds and if they can borrow through the LSAP program at a rate lower than the OCR, it sounds like a good deal for the banks.
As Adrian caused all this will he let the chickens come home to roost or will he back off on interest rate rises before taming inflation.
To his credit at 7.2% inflation in five years he will have reduced mortgages by 36% if the CPI is a good measure of general inflation.
https://www.rbnz.govt.nz/publication...al-report-2022
The RBNZ not seriously fighting inflation? According to Damien Grant that is the case.
https://www.stuff.co.nz/opinion/3007...ling-inflation
His conclusion,
Given the bank’s dual mandate of price stability and sustainable employment, a prudent observer could conclude that the bank is prioritising economic stability over price stability, and plan accordingly.
The grow and consume dheads will be unhappy still growing the population but much more slowly.
https://www.msn.com/en-nz/news/natio...a6454dae9d5deb
Still waiting for the 1mill exodus as outlined by MYOBs survey. Imagine what that would do for our CO2 emissions and fight against climate change.
Speaking of growth, this guy seems a bit extreme but suggests the end of the "growth road".
https://www.zerohedge.com/economics/end-growth-road
Speaking of end of the road, I wonder if Japan will show us if there are any downsides to too much debt and money printing.
https://www.zerohedge.com/markets/on...gb-market-will
Mind you what if it all collapses at the same time Nouriel Roubini admittedly is pumping a new book but he suggests the US central bank will wimp out and the dollar will collapse as well. Maybe not as fast as the yen I wonder. Do collapsing currencies will mean massive inflation??
https://www.zerohedge.com/markets/ro...nflation-fight
His conclusion.
Once the Fed is going to essentially prevent an economic and financial crash – or try to prevent it by … stopping raising rates, even though inflation is too high, then the dollar is going to start to sharply weaken. That is going to be the trigger for it. Because what is raising the dollar is tight monetary policy.”
So, what can you do to protect yourself? Roubini recommends buying gold.
Gold has not done very well because you have tight monetary policy and a strong dollar. But if central banks are going to blink and wimp out, gold is going to rise in value.”
Adrian is not being honest in this article he expresses concern that unemployment will rise as he battles inflation.
I think we all know his biggest concern is that asset prices will fall because that affects the people he actually cares about.
https://www.nzherald.co.nz/business/...NVK3AQTR2BN5A/
Back onto climate change this article is very telling.
https://www.nzherald.co.nz/business/...R4ACB65HRE5R4/
I don't know which is worse people to mean to pay a couple of bucks to save the planet or Air NZ suggesting that buying carbon credits will really do anything to save the planet. Maybe reduce sheep and beef farts as wealthy foreigners plant pine trees and ruin productive NZ farms as they can sell the carbon credits. I suppose it works in well with us all becoming vegan and eating less meat.
It also means they do not have to change their lifestyles or make any real sacrifice towards a cause they bleat on about all the time.
Has anyone ever done more damage to NZ than Grant Robya and Adrian Orr? I would doubt it.
NZ herald 26/10/22
Richard Prebble
New Zealand's October CPI inflation figure of 7.2 per cent shows our Reserve Bank has also lost control of inflation. The $9.7 billion budget deficit, despite full employment, shows our Government has lost control of the public finances.
New Zealand started from a strong position, thirty years of fiscal prudence. Now we are one of the most improvident. Relative to GDP only the Federal Reserve has printed more money. The economic research firm Berl says there has been "an estimated $142b increase in net core Crown debt. This is the equivalent of 47 per cent of GDP in the beginning (2019) year".
Government spending has continued. Our Government is still spending on the Covid make-work scheme, such as the $1.219b Jobs for Nature programme, so adding to the labour shortage.
The Reserve Bank's year-long interest rate rises have failed to curb inflation because the $55b of printed money is still in the economy. Trading banks' deposits with the Reserve Bank pre-printing were $8b, now they are $55b. The Reserve Bank is still printing money for its Funding for Lending programme, under which the trading banks have borrowed over $12b.
Future debt servicing Money that could no doubt have been better spent fixing hospitals, on the police, roads, schools etc
Article in the herald this morning criticising Adrian and the RBNZ. A Jenny Ruth article so does not seem to appear in the online herald. here is a link if you have a business desk subscription.
I think it may be the same article.
https://businessdesk.co.nz/article/o...money-printing
Much easier to criticise in hindsight but when Adrian was talking about setting up the trading banks for negative interest rates some people must have been thinking that he was an idiot at that time.
Why are trading banks making big bucks??
https://www.msn.com/en-nz/news/natio...c397abf2fb7f81
According to John Kensington, head of banking and finance at KPMG.
Kensington explains how New Zealand, up until Covid-19, had an "astonishing" period of economic growth where people were confident and bought up large in property, which in turn made the banks grow.
Really? are you sure it wasn't that since the 2008/09 bailouts people know that central banks had their backs so had no concerns taking on larger and larger amounts of debt. Is more debt the same as economic growth? Is John confusing economic growth with the wonder years when we had asset price inflation without the horrible CPI stuff that we have now. I guess as rents followed house prices up and people started living in cars it was not inflationary.
John Kensington would be a lot smarter than me so I guess he must be right. He also points out that the people making out like bandits in the NZ property market with Kiwis buying houses off each other for higher and higher prices is the Australian bank shareholders, so a large chunk of wealth heading offshore to Australia. Thanks Adrian.
https://www.msn.com/en-nz/news/natio...59261aae9eca20
I think we need to tell the world about our thin ozone down south as well and the increased chance of skin cancer.
I am not an expert but the largest increase in wages ever recorded. Is that inflationary??? Does this rise in prices follow excessive money printing?? Is the Funding For lending (FLP) program that finishes in December 2022 inflationary as well???
https://www.nzherald.co.nz/business/...GDRDDS733LX7A/
Also unemployment at record lows still despite the constant angst in the media about rising interest rates and rising unemployment. I would imagine most of the commentators are really worried about declining house and asset prices but don't like to expose themselves as selfish self-centred aholes.
The leveraged investors (and govt) will appreciate that Adrian is helping them long term as long as interest rates stay low while inflation runs rampant. I do not think this is an official mandate of the RBNZ but you would hope that Adrian is working on an unofficial mandate otherwise he looks like a fool and a total failure at the job he was entrusted to do which was to keep prices rising at 1-3%. maybe he thinks 7-8% is better.
Aaron - seen this?
Making stuff up and misleading Parliament
https://croakingcassandra.com/2022/1...ng-parliament/
So his arguments for his failure are that
1/ inflation in NZ is not as bad as other countries. I don't think that is in the Reserve Bank Act as a target. Not being as bad as other countries. Although most central bankers originally argued for crazy monetary policy "because everyone else is doing it"
2/ Its Putin's fault and if he did not invade the Ukraine inflation would have been within his target. "Yeah Right"
Politicians can't be too unhappy with Adrian, issuing bonds and giving money to people to buy votes can't really happen as easily or at such low interest rates if the RBNZ does not print up some cash to buy them.
I guess carbon credits will become more and more valuable as countries continue their grow and consume economies. Sad that NZs productive farming sector and employment in NZ takes a hit so Europeans can maintain their lifestyles with a clear conscience regarding climate change. What a load of BS. Farming pine trees is not particularly good for the land from what I understand. Apparently pine needles make a great organic herbicide though.
https://www.nzherald.co.nz/business/...OOVFJRSK44D5Q/
Dump costs for climate change onto farmers as well and it starts to sound more like townie politicians not wanting to upset their large city voter bases by dumping it onto the farmers as there are less of them to vote. Impeding one of the most important productive sectors of the economy is probably not in our long term interests but it will help politicians stay in power by responding to townies concerns about climate change.
I imagine every Aucklander is now insisting on catching a bus to work instead of sitting in traffic alone in their car.
Weird world eh Aaron
A guy on the radio the other day wa talking about how Germans are cutting down heaps of trees this winter so they can keep warm (shortage of gas and expensive energy blah blah0 ..... he was saying bugger emmisions and pollution as more important to keep the fire going and keeping warm
he loves to have a go at the peeps where he used to be.
Orr is ideologically driven, and riding the ego wave of his success with the Cullen Fund (when really any monkey could have done well enough), and he really didnt see the tide was turning until way too late.
“Following the Reserve Bank board’s unanimous recommendation to me, I am pleased to reappoint Adrian for another five-year term, effective from March 27,” Robertson said.
What a joke
“Adrian has demonstrated the skills, knowledge and experience to help steer the financial system through the 1-in-100 year economic shock of the pandemic. I am happy to endorse the recommendation of the Board. I have full confidence that he will continue to display the same integrity and leadership in performing his duties as Governor in what is still a challenging environment,” Robertson said.
A 1 in 100 year over-reaction by the Labour govt to a pandemic. I bet they would not do the same thing twice. Adrian might as he seems incapable of admitting to a mistake.
ACT leader David Seymour said he wrote to Robertson in September outlining the reasons why Orr should not be given a second term.
“He has shown poor leadership throughout his term, punctuated by high staff turnover and a failure to accept any responsibility for these issues.
“When appearing in front of the Finance and Expenditure Committee last week he refused to accept the Reserve Bank has got anything wrong, despite massively overstimulating the economy, causing consumer price inflation, asset price inflation, inequality, and now higher interest rates.
“He also carried out an extensive and expensive review into New Zealand banks’ conduct and found nothing of note but refuses to admit as much and claims changes are still necessary. He is incapable of accepting a mistake.”
One of the few times I agree with David.
Post No 2 on this thread from 2018
I was wrong - Orr has turned out worse than Wheeler
And my comments were pre-covid ...... fueling inflation back then ....and all actions been too late
Oh well .... another 5 years .... be even worse if his 'mate' Robertson is Finance Minister for another term
Probably barking up the wrong tree but I wonder if the trading banks made money being the middle man between the RBNZ and the govt. when they were printing money for the Large Scale Asset Purchases (LSAP). Wonder if Adrian funnelling cheap money to the banks through Funding For Lending (FLP) (still going until December) helped with bank profitability?
A bit rich for Jacinda to complain about bank profits if Grant Robertson and Adrian are assisting them. rather than just criticising the banks maybe she should be criticising Grant and Adrian's actions as well.
I think as the RBNZ sells the govt bonds back to the banks to prepare their balance sheet for the next round of printing they have made losses (for the NZ taxpayer) which I assume means the trading banks made profits. Not sure how it all works but an enquiry would seem like a good idea.
https://www.msn.com/en-nz/news/natio...ffc10c4c4d7065
To quote from the article.
Ardern didn't think it was a problem for the government to solve.
"It is not unusual...for companies, or indeed other operators in our communities, to assess whether or not what they're doing, at any given time, is the right way from a corporate responsibility perspective to be behaving. It doesn't always take government intervention for that kind of self-reflection to occur.
"I think it's time the banks operating in New Zealand did that very thing."
I am reminded of another quote I heard recently.
“disinformation corrodes the foundation of liberal democracy”.
Grant Robertson has no plan to look into bank profits unlike their studies into fuel companies and supermarkets.
These people are only about staying in power, it is disappointing.
https://www.msn.com/en-nz/news/natio...d200cc740ac7c4
Reappointment of Adrian Orr is a national disgrace. He is clearly incompetent and not fit for the office. Labour and Robertson quite happy having plenty of Useful Idiots holding important positions to further their agenda.
Out of idle curiosity, who should have been appointed as RBNZ Governor?
No idea but someone with a backbone who can maintain price stability and employment targets (which should not be RBNZs job). Adrian currently has inflation running at double the top end of his target range and house construction and the economy are so overstimulated we apparently have a labour shortage which is also exacerbating inflation as we get into a wage rise spiral (or whatever it is called).
Although I would argue the inflation target should be 0% (or -2% to 2%) not 1-3% and the reserve bank should not be responsible for the unemployment rate at all.
Might be better to ask the ex RBNZ people coming out to criticise Adrian's reappointment, there seem to be some such as Arthur Grimes or Geoff Mortlock
https://www.rnz.co.nz/national/progr...-reappointment
Not many coming out in support of Adrian's reappointment other than Grant and the RBNZ board. As far as the Board is concerned I imagine keeping sweet with Adrian and Grant and not rocking the boat means they can continue to collect their directors fees without actually doing what they are appointed for. I wonder what their annual director fee and workload for the RBNZ is???
Maybe Arthur Grimes wants the job back, even though he is the architect of inflation targeting he reckons the target should be lowered. That is a good start.
Here is another article that mentions that Graeme Wheeler and Grant Spencer were critical. Maybe they might know who best to replace Adrian.
https://www.interest.co.nz/public-po...k-independence
Adrian is so up himself the RBNZ has lost any shred of independence, to quote Bernard Hickey.
By early 2020 when the prospect of near-zero percent interest rates beckoned and the Reserve Bank was looking at its options for alternative monetary policy tools, it was becoming clearer that monetary policy and prudential policy decisions were becoming much more political. Money printing exercises in the United States in particular were seen enriching those with assets and widening inequality, but those debates never took place here.
The assumption was that these alternative tools would be ‘distributionally neutral’, which is true between home-owners, but not between home-owners and renters. We knew that money printing worked as a monetary policy tool by making the wealthy wealthier and hoping they’d spend some of their ‘wealth effect’ to boost the economy.
The $55b of money printing, the removal of the LVRs and the creation of the FLP combined with existing housing shortages and existing tax advantages to thrust house prices 45% higher in 18 months and wipe out another generation of renters hopes for the home ownership they know they need to build healthy and secure futures for their kids.
The Reserve Bank wasn’t just doing monetary policy and prudential policy. It was doing redistributional and social policy, and not in a good way. The lack of self-awareness or contrition was the final straw The Reserve Bank’s decisions essentially added $1 trillion to the wealth of home-owning households and it was clear in public to everyone except the Reserve Bank, Treasury and the Finance Minister’s office.
Grrrr
“I would immediately inquire into the impact monetary policy decision making has had. How much has that money printing added to the bottom line for banks? How much have they benefited from really cheap lending? And how much of that is being passed on?” – Willis.
& then who blames the banks for having excess margins ?
https://thespinoff.co.nz/politics/09...ge-to-politics
Might have over reacted. All good at the RBNZ according to an internal review.
https://www.nzherald.co.nz/business/...HXAONAAL4QZRE/
Don't have the time to check the views of independent experts Warwick McKibbin, a Professor at the Australian National University, and Lawrence Schembri, former Deputy Governor of the Bank of Canada but imagine like most economists they believe in the financialization of the economy.
The bank's chief economist Paul Conway also defended the bank's approach to inflation, saying the bank would have needed perfect foresight to have been able to have kept annual inflation within the target range of 1 to 2 percent right now.
https://www.msn.com/en-nz/news/natio...46f0da6b7c09d3
Golly gee whiz Paul I am not smart nor an expert on monetary policy but still I suspect the RBNZ more than doubling its balance sheet in one year between 2020 and 2021 might have played some part in the current inflation issue.
This does not take into account ridiculously low interest rates. From memory the forecast was a 10% drop in house prices pre lockdown. So the RBNZ saved us from this by pushing up house prices I don't recall just how much but enough to lock the next generation out of the housing market and causing desperate first home buyers to mortgage themselves to the hilt to get on the property ladder and they now face something much worse than a 10% fall.
A path of least regrets indeed. A path for a weak leader incapable of doing the job he was asked to do. You don't need an independent review you need to find someone capable to take over.
Bernard remembers 45% increase in house prices over 18 months.
https://www.msn.com/en-nz/news/natio...196c4f34f9fe71
All by design >> sadly ... certainly a LOT of very pissed off kiwis with are present administration ... I wouldn't think mr Orr could walk the streets without getting heckled rotten eggs thrown at him .. the whole we will keep rates low till least 2024 to help businesses/households from COVID affects ... to wow we got inflation lets jack rates 100% less than a year and now add another 100% in the ST ... that will help out suffering kiwis ...
It would appear inflation was already out of the bag ahead of the Russian invasion …..
https://www.stuff.co.nz/business/opi...eserve-bank-is
Just another article suggesting Adrian may not have done a good job with his path of least regrets approach.
https://www.nzherald.co.nz/business/...NAZ25VPA2S5TU/
To quote from the article.
as early as October 2020, the likes of former Reserve Bank chairman Arthur Grimes was ringing the alarm bells over house price inflation, and how very loose monetary policy was "destabilising asset prices".
Nonetheless, by November 2020, the Reserve Bank announced it would launch its second money printing programme, through which it would lend banks money cheaply to help them keep mortgage and term deposit rates low.
By this point, the Reserve Bank knew the REINZ's house price index had gone up by 6.2 per cent in the three months to September, and 11.1 per cent in the year to September.
It had already cut the Official Cash Rate (OCR) by 75 points to a record low of 0.25 per cent and printed $40b to buy bonds via its Large-Scale Asset Purchase (LSAP) programme.
By February 2021, Grimes said the Reserve Bank should start tightening monetary policy. By July 2021, he claimed the Government and Reserve Bank had engineered a "wellbeing disaster".
When quizzed about the housing market, Governor Adrian Orr has tended to argue it isn't the Reserve Bank's job to target house prices.
He also said the RBNZ only plays a "bit" part in the value of housing in NZ and he has mentioned the wealth effect he was trying to create, so the message he gives appears inconsistent or wrong.
I think the real reason he got it so wrong is that since 2008/09 central banks have gone crazy but they only seemed to inflate asset prices without affecting CPI. Adrian probably thought he could carry that on with few regrets, especially as he earns $800k a year and no doubt was comfortable with his house prices rising.
Not surprised Labour does not want an enquiry into the well being disaster they helped to create. It might start with the profits the banks are making.
Ganesh Nana from the Productivity Commission might be onto something.
https://www.interest.co.nz/public-po...nd-needs-major
Lets not just rely on more people to pump GDP but discuss the idea of holding a referendum on the population size we want.
I think we've got an opportunity to set our own path, and our own trajectory in terms of population, in terms of migration and population growth. Let's do that openly and explicitly rather than stumble into the rather large population growth we had pre-Covid."
Amazing how quickly that turns into a labour shortage. Either the wrong people are coming in or the RBNZ overstimulated the economy or maybe a bit of both.
Supply Chains all sorted yet we still have inflation.
https://www.zerohedge.com/markets/la...est-month-2009
Maybe not supply chains causing inflation then? Must be Putin or maybe there is a lag in inflation now supply chains are fixed.
Mind you the article does not say supply chains are all fixed but the LA port featured a lot in articles about the problem. Maybe Chinese lockdowns have slowed things down. Maybe a recession is on the cards.
With people spending and consuming less we get a reduction in GDP and a recession, yet no celebrations from the climate change townies?
Not sure what they think is the cause of climate change but based on their response to date not more people consuming more stuff obviously. More likely the farmers and the miners making the raw materials for the stuff are the problem so they should pay the price to battle climate change.
Not sure how climate change problems will reduce with central banks able to banish recessions with the printing press and low interest rates. It is almost like the politicians and greenies are saying one thing, yet doing another. I assume it is stupidity rather than deceit because they all seem very genuine and concerned.
Jeez, guru analyst Mark praising our Adrian and the RBNZ
https://www.nzherald.co.nz/bay-of-pl...3PFZ5OCBUAMXM/
His argument is that the RBNZ was less retarded than other world central banks, although on housing valuation metrics I understand NZ did exceptionally well despite Adrian being less of a loose cannon than other central bankers.
I like his conclusion that if Labour had let immigration keep up with the money printing, wage inflation would not be as bad.
Obviously Mark is a deep thinker, or perhaps his industry has been one of the biggest beneficiaries of central bank stupidity so he is more inclined to support the RBNZ's actions. Do you really need to do any research if the central banks will provide sufficient "liquidity" to keep asset prices elevated.
Interesting to hear the level of research done by some sophisticated investors and money managers investing in the FTX exchange. Real hard working visionaries by the sound of it. Probably just needs some more central bank "liquidity." Mind you FTX is crypto related so they should just invent a new crypto currency to provide their own liquidity.
In other central bank related news my margin lending rate will go up 1% at the end of the month from 6.95% to 7.95%. I thought Adrian was only going to do a .75 rise this week.
https://www.nzherald.co.nz/business/...AVKEE4ECDUZBY/
Yields on shares and fixed interest aren't rising as fast borrowing rates are they?
I am sure Mark Lister will not be as forgiving if Adrian tightens too much, I imagine money managers prefer loosening to tightening re monetary policy.
croak croak
dude loves to lay into our RBNZ and makes some very convincing arguments
http://croakingcassandra.com/2022/11...s-for-the-mpc/
When facing a recession a government should:
- Cut interest rates
- Cut taxes
- Increase its spending
We are facing recession and:
- Interest rates are rising
- Taxes are increasing
- Spending is being cut
But do we actually have a recession
yet?
Not sure what the first line of this article means.
https://www.rnz.co.nz/news/business/...of-loss-makers
S&P Global Ratings warns global debt is more highly leveraged than before the 2008 Global Financial Crisis as interest rates rise and economies slow.
Debt is leveraged??? I thought these words had the same meaning so debt on debt??
Still don't fully understand the UK pension problem with gilts
https://www.reuters.com/markets/euro...ts-2022-09-28/
To avoid being exposed to market volatility, the schemes typically hedge their positions through gilt derivatives managed by so-called liability-driven investment (LDI) funds.
The LDI derivatives appeared to make matters worse when there was volatility in the gilt market. I guess they were protecting against volatility in other markets.
Bring on the recession I say, it will be painful for many but probably in the long run it might be better than what we have now.
+0.75 TO 4.25 % Orrsome
One has to think not only of the investors ticking up loans to buy spec properties ...but all the businesses aka like farming .... they have had input costs sky-rocket and now that loan they took out to fund operations is coming around again to see 100% hike in interest costs etc ..
Right so its been average kiwis driving inflation orr !!!!\
Attachment 14334
Front page of the herald this morning Adrian telling the people of NZ to
Think about saving rather than consuming, I know that’s a strange concept,” he said. “Just cool the jets.”
It is almost funny, Adrian is telling us to cool our jets and think about saving while he continues with his Funding For Lending (FLP) through December because
The commitment to the FLP is important to ensure this tool remains credible for future use if required," an RBNZ spokesman told interest.co.nz.
And the reason for the FLP.
The FLP works by lowering interest rates and encouraging households and businesses to spend and invest.
https://www.rbnz.govt.nz/monetary-po...ding-programme
Mind you I am not sure how much is being handed to the banks at the OCR rate in December probably just a few million.
Adrian wants people to save?? does that make sense when inflation is 7.2% and deposit rates are 5% at best, and who wants to lock up their money when they know Adrian is probably quite happy to steal your money through inflation as it helps the borrowers and risk takers. What rate should the OCR be if he used the Taylor rule. I don't understand this but I had heard that to combat inflation the interest rate needed to be higher than the inflation rate. Certainly this needs to be the case if you want people to save.
Seeing this headline I thought Adrian was apologising Live: 'We are sorry' for inflation, Adrian Orr says after OCR hike
https://www.stuff.co.nz/national/300...after-ocr-hike
reading the article I see that this is the extent of the apology.
"We are sorry that New Zealanders have been buffeted by these economic shocks and are experiencing inflation well above the 1 to 3% target range," he told the select committee.
The economic shocks are to blame. Not out of control idiots running monetary policy across the globe who are also not able to take responsibility for their actions. Sign of the times.
Also I see that the govt is also getting the blame and rightly so running high immigration with loose monetary policy I wonder what percentage of the workforce is involved in house construction and whether the housing BOOM has made labour scarce. “They’re quite clearly saying there that the government is contributing to inflation, or certainly not helping the case to get it under control.”
Either way it is not Adrian's fault and he has done his best on his path of least regrets.
The funny thing is he is going to be hated a lot more for doing the right thing while very few people realise he is largely responsible for getting us here in the first place. You know he is itching to drop rates at the slightest signal CPI inflation is falling. He wants to save house prices and boost assets prices because everyone who mattered loved him back in the good old days.
An article that highlights how little I understand.
https://www.nzherald.co.nz/business/...4XHXHNAZER7HM/
From the article.
The RBNZ's two money printing programmes, launched in 2020 to lower interest rates, have seen banks' reserves held by the RBNZ balloon seven-fold to $49 billion.
The issue for taxpayers is that the RBNZ pays banks interest at the official cash rate (OCR) on these reserves, and the OCR is rising rapidly.
At 3.5 per cent (the current OCR), $49b of reserves would see the RBNZ pay banks $1.7b a year.
So the banks keep excess reserves with the RBNZ and the RBNZ pays interest at the OCR on this. As the Funding For Lending (FLP) programme was lending money at the OCR wouldn't this just offset. I guess the FLP funds were lent at the old lower OCR so banks can now deposit it back with the RBNZ as excess reserves at the current higher OCR?. Does anyone know if I have that right?
The Large Scale Asset Purchases (LSAP) was the govt issuing bonds, the trading banks buying them and the RBNZ prints up some funds and buys them off the trading banks to ensure it does not look like the govt just printing large amounts of money. The RBNZ is now selling these govt bonds back to the banks at a loss as rates have risen and they are selling them to reduce the RBNZ Balance Sheet so they can print some more money next time there is a crisis. Do I have that right?
Sounds like a good way to make money for the trading banks. The NZ taxpayers appear to be the biggest losers but is that how capitalism works? privatise the gains to the Australian trading banks and socialise the losses incurred by the RBNZ. Surely my understanding of all this must be wrong but I am not sure it is. Maybe someone can put me straight.
I hope Adrian gets a good chairman's role at a trading bank when he finishes at the RBNZ, he deserves it.
Obviously no one else on here understands how the RBNZ and monetary policy works either (or everyone has given up reading my posts. I suspect I may be thread poison).
Chloe probably does not understand either but she can see the results.
https://www.nzherald.co.nz/nz/chloe-...LSRX2XDFIIQQA/
Millennials whose lives have been scarred by house price inflation and recession, boom and bust cycles that concentrate then entrench wealth, are prone to laugh (or cry) about the “vibes” we’ve inherited.
Bernard Hickey, Shamubeel Eaqub, Max Rashbrooke and others all point out that the economic rules we have in place benefit some to the expense of others. Those vibes aren’t accidental; they’re consequences of deliberate choices. Different choices can be made with different priorities.
when low and middle income New Zealanders are being told to steel themselves through the apparently necessary pain. This occurs in the context of an estimated one trillion-dollar wealth transfer to the richest over the past two years of vibe policy.
I like the idea of replacing "economy" with "vibe" it reminds us that the study of economics is not a science (a social science maybe but not a real science) but a matter of opinion based on some mathematics that rely on assumptions that may or may not be accurate.
I must be poor as I enjoy Chloe's opinion pieces in the herald but don't really enjoy Mike Hoskings pieces. He seems to encapsulate American politics where it is just continually running down whoever opposes you. Its tiring and to me and not very Kiwi, but then again I am probably not aspirational enough.
And on an unrelated topic, I was reading an interesting discussion on bonds on the OCA thread but no one willing to put down actual calculations despite disagreement as to yield to maturity. It did highlight I need to understand a lot more about buying bonds on the secondary market.
I didn't want to disrupt the discussion but for anyone else who read this mornings OCA thread my understanding is that a bond is a financial arrangement so even a smaller investor would have to complete a base price adjustment at maturity and pay tax on any gain. The calculations are a bit harder for larger investors. Shares are excepted financial arrangements so the capital gains and losses on shares are tax free as long as you are not a trader.
He is an economist so you need to take what he says with a grain of salt but confirmation bias piqued my interest. It must have been the headline.
https://www.stuff.co.nz/business/130...-foot-the-bill
We made our children poorer': How a previous generation became rich and left their kids to foot the bill
A child born in 2000, will earn on average $50,000 less over their lifetime than someone born 30 years earlier, new research shows.
lifetime income of New Zealanders had been dropping since the 1980s, while the price of everything went up, leaving young people worse off.
Compounding the issue was the fact that previous generations “borrowed from the future”, enriching themselves while their children paid the price, Eaqub said.
“We promised ourselves things like universal super but never saved for it.
“We told ourselves that increasing house prices was a good thing and just let it happen without building enough houses. We chose to massively underinvest in social housing so that people that become poor become homeless.
“We made our children poorer,” Eaqub said.
Solutions are better than whining though. Is there a problem? Can we define the problem? What are the solutions?
Things looking up again.
https://www.cnbc.com/2022/11/30/fed-...-december.html
Pivot getting closer
https://www.msn.com/en-nz/news/natio...aaccf9b9310d55
30,000 immigrants next year. A bit different to the 1mill exodus as predicted by the MYOB survey.
"Thread Poison"......No! Aaron, IMO you are being rather harsh on yourself there.:)
CS is an articulate & consummate politician & can certainly talk the talk. But yes, after flicking aside the waffle that is lightly veiled as "voice of reason", after reading this oped, in my mind she clearly doesn't understand fundamental monetary & economic principles.
Possibly a cynical view, but remember she is a politician. Hence, she is likely to be jumping on the opportunity to ride on the back of the current topical narrative. Simply seeking to broaden her Church of supporters by looking more appealing to the 'mainstream'; whilst continuing to satisfy her core left-leaning support base.