They do not. Leveraged debt is a serious problem.
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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.