Best way to explain (effects of Q.E/stimulus)
If cash is poop
The bonds used as security is the toilet paper .
Invest in real estate/crypto or other financial assets not bond's or cash .
Printable View
Debt becomes irrelevant with inflation.
For example if I purchased 4 house's in 2010 with leveraged debt/With the devaluation of the Dollar/fiat currency today I can sell 1 of those houses to clear the debt on the other 3 house's.
Now here's the good news
I can use the income from the rent to recycle the equity and buy more property or Tesla shares.
The system is corrupt and designed for a people like me who are willing to use it to our advantage
Your welcome .
The only question then is will the central banks keep it going or not.
The last 30 years indicates yes and I would need to have a look into it further but back in the 50s and 60s they may have set up the 70s inflation along with the oil shocks.
Ray Dalio talks about long term debt cycles but from what he is saying he expects cash to become worthless before interest rates rise significantly.
Maybe you are being lulled into dreamland with your reliance on monetary policy.
https://www.nzherald.co.nz/business/...LM65BUPTGOR4Y/
Just when I think you may be understanding you are easily distracted by click bait media.
You obviously didn't take on Ray Dalios knowledge that what the central bank's have done is cyclical.
They have stopped printing money/interest rates may rise again/and the cycle will eventually repeat most likely with negative interest rates.
Article by Bruce Cotterill was interesting. Hard not to agree that spending on covid in hindsight now is starting to look wasteful.
https://www.nzherald.co.nz/business/...ZGOLFABDHNKHQ/
But at a 5% inflation rate as Ray Dalio points out you get rid of 50% of your debt after 10 years.
How likely is it we will see RBNZ raise interest rates more than .25% at the next meeting.
If everything is expensive and cash is even trashier. Maybe time for gold to shine as a store of wealth until after the madness has ended.
Amazing study by the treasury, the lead advisor to the govt on economic and financial policy.
House price growth decreases inequality overall. This is due to 64% of people owning houses and for most people that is their largest asset so when house prices rise they decrease the gap between the very rich and the home owners.
And here is me thinking Labour had forgotten their roots when all along they are just trying to get back to that good old NZ egalitarian ideal by boosting house prices with the help of the RBNZ.
https://www.interest.co.nz/public-po...ns-gap-between
Interesting article about economics, the main point is.
“There is no science, it's all made up, right?” Eaqub says.
“I mean, it’s whatever works at the time, and it keeps changing.”
https://www.stuff.co.nz/business/127...bout-inflation
The rest seems a confused mish mash confirming my view that economics is coming across as a load of bulls**t twisted to whatever suits your view.
David McLeish from Fisher Funds suggesting raising the price of capital will only add to the rising prices of everything else.
I am no economist but isn’t it the burden of interest rates that causes consumers to reign in their spending and slow inflation. Isn't a rising cost of capital that causes investors to allocate capital more carefully into things that will provide goods or services required by society.
Raf Manji suggests raising interest rates will lead to more inflation, and raise the price of petrol at the pump. I would have thought a rising $NZ reduces the cost of imports but I lack Raf’s intelligence so must be wrong.
I think it is Dileepa who suggests raising interest rates will cause a great contraction in economic activity. I agree with him on this point.
They ask why capital isn’t going into something useful like business rather than buying houses off each other at higher and higher prices.
Why would you invest in a business that takes effort and thought when owning a house, lets say $800,000 house going up 20% p.a. (thanks to easy money and low interest rates) earning $160,000 without tenants why would you invest anywhere else.
What I read is that raising interest rates according to these geniuses is bad no matter what happens although it would be interesting to see if they extrapolate this view to the future as more and more debt needs a bigger and bigger central bank response each time the economy tries to correct. They probably see negative interest rates as a sensible solution in the next crash. Why do we even listen to economists, they are all over the place but the main message is low interest rates and moah money.
Why don’t they just say “I am all right Jack” don’t rock the boat on asset prices I own some. The poor can pay through a loss of social mobility and the inflation tax we are imposing on them through loose monetary policy and low interest rates it is regressive so we won’t feel it as bad.
Effectively they are saying f**k the poor. What they will say is that in a depression the poor will suffer more but the reality the poor will suffer either way, it is just that they rich don’t suffer while crazy monetary policy inflates assets.
The RBNZ is going to hike 50bp today. All locals banks are saying 25bps....
You put alot of time and effort into this post.
What has this rant achieved?
Monetary gain: 0%
Dopamine rush to make you feel better:100%
If you choose to not participate in the system
You are saying "I want nothing "
And what is the system going to give you in return?
Nothing.
Because you and the poor produce nothing.
Is it starting to sink in?
Minutes from the November Fed meeting show members concerned about inflation and willing to tighten policy should it continue to run hot.
The meeting summary noted that the officials would be willing to raise interest rates “sooner than participants currently anticipated.”
You can make money in any market Bull or Bear with
Cash
Hedges
Puts
Shorts
Following mainstream media and there drivel that they vomit out blind's you to what you should actually be reading and spending your valuable time on .
You only have a limited years in your life.
I suggest to you Arron that you use it wisely.
Obviously no good on the real tough questions then.
But keeping to the thread.
An economist has called Adrian Orr "spineless" hard not to agree.
https://www.stuff.co.nz/business/127...-top-economist
In some of the most outspoken comments levelled at the Reserve Bank in recent times, Olsen said it had “doubled down on its spineless approach” by signalling “considered steps” in the OCR in future, when that approach risked letting inflation become more entrenched.
And today we have Adrian the man himself trying to talk down the housing market while keeping interest rates low.
https://www.msn.com/en-nz/money/home...?ocid=msedgntp
Good luck with that Adrian, obviously not your fault if people chose to become heavily indebted to get into an over inflated housing market that you might be largely responsible for inflating despite claims of only playing a "bit" part.
Actions speak louder than words, maybe making putting price/currency stability front and centre and less focus on pushing up asset prices would put the RBNZ back on top as a world leader for central banks.
I wouldn't take advice from Brad Olson, he's not a "top" economist.
He's a 24 year old man child who couldn't invest a basic understanding of macro economics.
He's another "media celebrity economist" who doesn't know anything but love's the attention from mainstream media vomit.
It's the reason why he still rents and eats too much Donuts.
It's not a matter of me enlightening you.
It's a matter of you wanting to change.
I'll give you a tip
Gold is used by the extreme wealthy to protect there wealth, not necessarily grow it .
If you're going to invest in gold, you need to offset this by going risk on in other assets like growth equities or BTC.
I'm sure gold is nice to look at but it's not going to increase your wealth any time soon.
A few posts back there was an article with a number of economists explaining why raising interest rates is bad and will likely increase inflation rather than decrease it although I was always taught low rates and easy money would increase inflation.
Fortunately for us Turkey has an amazing president in Erdogan who has cut interest rates and surprisingly inflation has increased. Who could have seen that coming.
https://www.stuff.co.nz/business/wor...rishing-turkey
Maybe some lesson there for other world central bankers who are trying to inflate their way out of a debt problem.
TeslaGod that last tip is probably not a bad tip but unfortunately I am extremely risk averse and conservative which inevitably holds me back. BTC is really a gamble on peoples faith much like gold admittedly but gold has a longer history as a currency.
A thought occurred to me last night, from your posts I understand you own real estate and shares.
Did you build any of the real estate or did you buy it off the developer or buy existing homes/buildings?
Did you start up any of the companies you are invested in other than companies you set up to own assets.
What do you actually produce? Aren't you just a rentier using cheap money to buy existing assets or riding on the coat tails of real entrepreneurs like Elon Musk. You don't actually add much I suspect, rentiers could be considered a bit like parasites living off society, buying up income streams but not actually producing any additional goods or services.
Your valuable advice aside, do you really add much to society or do you just try and draw off as much as you can with the aid of the RBNZ.
Disclaimer I am hoping to be a rentier and live off other peoples time and/or money, I just don't view myself as gods gift to mankind for doing so. I am upset as I have tried to build capital by saving and have been reluctant to use too much debt on the false assumption central banks job is to manage the currency and ensure price stability. It turns out their job is to save the banks and the overindebted every time there is a crisis by inflating assets a lot and inflating consumer prices a little bit to help pay off the debts.
Re: Aaron.
That depends on how you see me,
The majority of Kiwis invest in Kiwisaver , most of those investments are from overseas, doe's this make Kiwis parasites?
I believed in Tesla and Elon when the world thought the company was a joke, I invested hundreds of thousands years ago when the company was struggling
It's now single handedly destroying the use of the internal combustion engine, is that not productive for future generations?
I supply housing to the unhousable, the homeless, welfare dependant,drug addicts, mentally ill and businesses through community trusts .
Would you prefer they slept outside your dairy or local shops or in cars?
My investments add value and "produce" a positive impact on NZ and the world and how productive is a shiny yellow rock ?
I am financially rewarded handsomely and make no mistake I am extremely proud of my contributions to society.
Hate me on this "investors" forum as you wish, this will not change either my nor your financial position.
Since joining this "investors" forum earlier this year I have been called a
Parasite
Leech
Scum
Turd
Evil
Slumlord
Musk Rat
Now you understand why Graeme Hart no longer makes any public or media appearances anymore.
Capitalists produce the efficient allocation of capital - those that do it well succeed, and those that fail may eventually need to work.
In forex speculators provide liquidity and it similar I guess with stock markets and property tho TG doesnt say he trades.... so maybe not. But these sectors need investment. They need owners. What is the purpose of the stockmarket itself!?
It takes all sorts even in an economy
I didn't call you a parasite. I suggested someone buying up existing assets with cheap money not adding any value could be viewed as parasitic. I have very little knowledge about what you do or how you invest.
I wish Graeme Hart posted on this site. he has an interesting story as to how he built his wealth and could probably provide a lot of insight with his investing process.
I hope you don't think it is a case of tall poppy syndrome, it is more that you come across as a pompous ahole based on your posts and I suspect it winds people up, deliberate or not.
Maybe they are just jealous you come from Auckland the only city that matters with the best looking investors and they know it.
Arrogance is in my nature and key to my success
I make no apologies to that.
Why can't monetary easing go to the people a bit more directly?
It's a bit unjust when the entire nasdaq has doubled in one year (during a pandemic) while workers have wages declining in real terms
I don't think wages have been keeping up with asset price inflation for a couple of decades at least.
I wonder what is happening to house prices in Turkey.
https://www.reuters.com/markets/rate...ow-2021-11-30/
I did hear that despite Zimbabwe's hyper inflation, if you owned a house it wasn't nearly as bad as if you didn't.
Thought I would do a quick google on Turkish house prices. This is all I came up with.
https://tradingeconomics.com/turkey/...ry%20of%202010.
Not even sure what the graph represents but it is a residential property prices. I am guessing that prices increased 100% between 2018 and August 2021.
All the other central bankers must be so jealous of Erdogan. He is a bit more brazen than our own RBNZ but he is playing from the same playbook. Adrian has managed to increase house prices without destroying the NZD though.
Quoting Eminem and a picture of Gordon Gecko. You don't drive a late model european car by any chance? Just trying to build a picture.
Gordon Gecko might be more appropriate. Despite Elon accusing an honest man of being a peadophile because he didn't wants Elon's submarine amongst other things. Elon at least adds value and creates things.
Not sure why I am attacking you today, mustn't have slept well, must get back to my slave wage job.
Hope this helps.
Attachment 13273
Many Thanks.
Herald headline today "Mortgage rates have shot up but deposit rates are still low. Are banks ripping savers off?"
https://www.nzherald.co.nz/business/...RTCCI5D6BDUZU/
The answer is in the middle of the article.
"On top of that banks are able to access very cheap funding through the Reserve Bank's funding for lending programme which offers banks the ability to borrow money at the official cash rate which is currently just 0.75 per cent."
If I could borrow at .75% I am pretty sure I could be financially successful. Even at the current crappy yields the property companies look amazing value if your borrowing rate is .75%.
Where did all the debt come from to drive up the housing market? Is inflation transitory?? House price inflation isn't, it normally averages 7-8% per annum but currently much more thanks to Adrian and the team.
Where are all the libertarians and capitalists up in arms as this central planning creates great injustices in society. Shouldn't they be proposing some sort of market driven alternative to sort it out.
Even worse where are the bleeding and "kind" hearted liberals up in arms at the massive wealth inequality being created through central planning and the loss of social mobility for the lower classes.
Nothing like pointlessly screaming into the digital ether to start the day.
To be honest, I'm kind of surprised at the reception this analysis got so maybe I'm missed something? Yea "overall" inequality may decrease because the gap within the 'haves' reduces - offsetting the widening gap between the haves and have nots.
When we think of government policy w.r.t. inequality though, surely what we're referencing/ meaning is the gap between the haves and have-nots? Child hunger, crappy/ transitional housing, not going to school etc... All the stuff that hinders individuals from breaking out of the cycle and getting ahead.
The analysis pretty clearly pointed out that that gaps was worsening despite being masked by the headline figure - so pretty damning really, especially given the (claimed) aspirations of the current govt...
Ashley Church explaining that home ownership rates have hardly changed over 100 years.
Maybe I am worried about nothing.
https://www.oneroof.co.nz/news/40616
Thanks Adrian
https://www.nzherald.co.nz/business/...YPSRQVCCPCTXE/
Some poor people paying the RBNZ inflation tax while others enjoying the spoils
https://www.nzherald.co.nz/property/...P5XHRXQTRK4JY/
I hope when people finally get angry it is directed at the right people.
I'm just like Aaron
But much wealthier.
National Party leader Christopher Luxon says he's not going to apologise for his success.
The fact that he owned seven properties was due to his prosperous corporate career, Luxon told The Country's Jamie Mackay.
"No doubt I was successful in the commercial world and I was paid well and frankly, I think the public sort of get that."
Tesla God approves this message.
Simon Bridges and David Seymour want Adrian Orr to go. Probably because of the bi-cultural and climate change statements more than juicing the housing market. Appealing to their voter base I guess.
Doubt they would be complaining about him pushing up house prices if he was doing it while they were in power.
https://www.msn.com/en-nz/money/news...?ocid=msedgntp
The Unions like him which is odd as it is their members by and large that his inflation will screw over. I guess the union reps own houses and are wealthier than their average member.
Sam Stubbs likes him but I guess any fund manager would.
Orr is pink. Stubbs is "tinged" pink. Robertson is donkey deep pink. CTU economist is red. Only a Muppet couldn't join the dots; all which are all so perfectly lined up.
In regards to the monetary & fiscal bog mire that Orr & Robertson are dragging the country into, the question is, which one is the Dog, and which one is the tail?
I am assuming "pink" means left leaning. The monetary and fiscal bog has been building for a few decades I would have thought, but only recently started accelerating.
https://www.msn.com/en-nz/news/natio...?ocid=msedgntp
Bascand, who leaves the RBNZ in the new year, also pushed back against expectations the RBNZ should be expected to fix the shortage of houses or high prices.
Just a supply issue? Me doth think he protests too much.
My share portfolio is less than 10m
My realestate portfolio is 8 figures.
Tea breaks over tax slave, get your broke ass back to work.
....and just incase you missed it last time https://youtu.be/JhLDH8FGmhs
https://www.nbr.co.nz/story/treasury...udget-forecast
“The key reason we expect house price inflation to slow is rising interest rates. The higher OCR will translate to higher mortgage rates, reducing demand for housing. House prices are forecast to fall slightly on an annual basis over 2023 and 2024, shortly after interest rates peak.”
Treasury didn't get the memo that rock bottom interest rates are only a bit part in housing hyper inflation.
Geoff Bascand ex RBNZ said
"But they could not be expected to "fix" the housing market. "We can lean against house prices by increasing the cost and restricting the availability of credit, but we cannot alter the supply of land or buildings and should not be held responsible for the housing market.""
Although it looks like treasury and Tony Alexander do not agree with this statement.
The "leaders" at the RBNZ are doing all they can to deflect any responsibility for runaway house prices. They aren't solely responsible but I would have thought largely responsible. Do really strong "leaders" not accept the consequences of their actions?
New Zealand house price to income ratios are well above historic averages. To bring them back into line, either house prices fall dramatically, or incomes rise dramatically without flowing through to house prices.
Which is more likely? Is either likely?
Quick, simplistic fixes abound. Are any of them realistic?
It sounds like the supply side is ramping up with more houses being built but costs seem to be rising pretty rapidly, on the demand side immigration is down but expected to increase rapidly as more people consuming more stuff is the current economic model.
The RBNZ could help by raising interest rates but it can't as debt levels have got too high.
We could scrap inflation targeting. I haven't seen the study that proves constantly rising prices is good for society. Deflation is the natural state as business becomes more efficient prices should go down. Most people would prefer prices going down. Except asset prices.
Sam Stubbs' opinion of the governor's performance:
https://www.stuff.co.nz/business/opi...rnor-really-go
There have been arguments the central banks should not have the full employment job, just price stabilty. Do we have price stability?
“promoting and protecting financial stability and ultimately the prosperity and wellbeing of all New Zealanders”.
This is a big ask, but have the actions of the Reserve Bank helped or hindered someone wanting to buy a house, has it reduced or increased social mobility, who is most penalised by the current inflation tax being inflicted on all of us.
Has income and wealth been further concentrated in fewer hands (Sam Stubbs included) due to central bank policies.
Sam Stubbs would love central bankers no matter who they are. He is a fund manager, lower interest rates and more money make his job easy. I wonder if he will feel the same if Orr actually raises interest rates significantly to fight inflation and worries more about price stability than pushing up asset prices.
[QUOTE=Aaron;933113]There have been arguments the central banks should not have the full employment job, just price stabilty. Do we have price stability?
“promoting and protecting financial stability and ultimately the prosperity and wellbeing of all New Zealanders”.
This is a big ask ..... and a big risk
My take is that Grant Robertson has passed the buck to Orr/RBNZ so there is someone else to blame if things go bad.
Eg the 1BN extra into the economy by the Govt* to assist house buyers, via the RBNZ*, who gave it to the banks* who lent it not to first home or little kiwi battlers but to the biggest borrowers. (* without conditions it would seem)
Sam apparently thinks you can't blame the Govt, or the RBNZ, but the "greedy banks" who just do what banks do ...
My take (E&OE) may well be wrong, is the RBNZ has too many priority A responsibilities, may fail on a few ...
What do you think?
[QUOTE=Toulouse - Luzern;933143]My understanding of it all is pretty limited.
But what I see is central banks pushing up asset prices with lower interest rates and easy money. This is benefiting the "risk takers" while hurting savers and with inflation rising the poorest parts of society. Pushing up asset prices has exacerbated wealth inequality and in NZ it is getting to a point where it is starting to affect social mobility. Trickle down economics does not work and inflation targeting seems like an idea that has had its time.
Not sure what the extra $1BN was that you mention but Large Scale Asset Purchases by the RBNZ ended up being $53BN and was largely designed to keep interest rates low in the covid crisis. Mostly to the govt and I did read that the banks had more than enough money if they wanted it but they pushed back against the RBNZ as they did not want to get too reckless with their lending.
I think the RBNZ has made a great effort to deflect blame for the house price rises, but the govt has not done anything that would significantly reverse the trend either, tinkering with interest deductibility aside.
The RBNZ mandate to provide "prosperity and wellbeing for all NZers" is f**king ridiculous. The RBNZ is not an omnipotent organisation. The ability to print money might seem to give them great power but money printing is only handy up to a point and it is possible that the latest inflation figures indicate that point might be in sight. Anyone who owns a house is feeling prosperous but there is another 40% of the country who don't.
Sorry all over the place but as to your question I agree the RBNZ does have too many responsibilities.
A credit crunch, as predicted by TeslaGod at some stage earlier in this thread.
https://www.stuff.co.nz/business/mon...g-rule-changes
She said there had been five changes in a relatively small period of time – the CCCFA, LVR rules, rising interest rates, banks implementing debt-to-income ratios and the tax changes for investors.
“The introduction of so many levers in the marketplace is already resulting in a reduction in access to finance for New Zealanders. We don’t believe this is the intention and our member financial advisers are reporting the impact on the average New Zealander.”
Maybe if the interest rate lever was used and house prices crashed you would not have to dick around denying finance to poor people. All the other things seem to be a way to get
China has begun to lower interest rates/
China were the leader's in elimination*
China were the first to re open as the world went into lockdown in March 2020
There economy/markets benefited from easy credit/low interest rates
They were also the first to show signs of a slowing economy and deflation.
NZ will follow suit in the next 12 months if not earlier on the long term of the yield curve (lower longer term interest rates)
The US will soon follow after
Negative interest rates mid decade for NZ and US/OZ.
Robertson is screwed, short term inflation will only go higher hurting labours core voter's in the pocket.
The extension of the boarder closure is only going to push inflation higher.
The only way to drive short term inflation down for now is raise interest rates (painful for the middle voter's) and open the boarders to increase the labour constraints pushing down wages and prices.
Both are deflationary and with an election 20 months out it's going to happen, people vote with there wallets.
If you're struggling to pay 2.50 at the pump the last thing you are worried about is buying a house.
from BD
Both Quigley's and Robertson's responses to the staff exodus were in the nature of pulling a rug over an evident problem and telling us: move along, nothing to see here.
So, not encouraging, so far, that changes in form will lead to substantive changes.
“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
― Henry Ford
behind the paywall sorry.
https://www.nzherald.co.nz/business/...IEDIZ7K2CZC2A/
Just an economists view a .5% rise in OCR and a further 1.25% increase during the year before inflation eases and RBNZ can cut rates again to prop up house prices.
"Finally, falling house prices will reduce household wealth and provide an additional headwind to consumption growth," Udy said.
That says it all the wealth effect, trickle down economics more fiat money at negative real rates to boost consumption growth, open up immigration as well, then turn around and express concern about climate change, what a f**ked up world we live in.
You even forecasted negative rates.
At a guess it sounds like you became rich thanks to loose monetary policy and low interest rates driving up asset prices and helping anyone taking risks with debt. A process that has been continuing for the last 30 odd years. It might be possible that this could change and we are reaching the end of a long term debt cycle, but it seems unlikely monetary policy will change. Change will have to come from the people getting screwed over. For example the USA is ahead of us in this regard. The deplorables in the USA, have worked out neither party is working in their favour and Trump promised them something new, unfortunately he is a liar.
As to whether you are a prick, I don't know how to set up a poll but it would be interesting to get the votes from the general public on this site to confirm or deny.
No/ there is one last cycle.
It all ends around 2030
And a new currency will replace the dollar and the debt.
If we can survive the impending war that will eventually happen (as has happened since the beginning of the long term debt cycle)
If this article is correct then full employment should not be much of a consideration for Adrian. Price stability should be his focus. Reading more articles about supply side inflation lately. A bit like the bulls*it reason Bascand gave for house price inflation. Not enough supply, monetary policy played a bit part. That said if the wealth effect works and people buy and consume more isn't that demand side inflation creating a supply side issue?
https://www.stuff.co.nz/business/127...ty-and-profits
I think we have all heard the argument that if employees are not happy with their wages then they can go and find a job elsewhere. Maybe they have.
Maybe NZ businesses should be investing in young people in NZ and training staff and paying higher wages, very costly but long term is it better than importing cheap labour from the Phillipines or India.
Thinking about it further maybe the article is an indication the RBNZ has done too much.
Sharon Zollner for RBNZ governor I say.
Pretty bold prediction OCR up from .75% to 3% in a bit over a year. I 300% rise, how would this affect mortgage rates? Will they rise in step with the OCR? Or will they rise further? Not sure how it all works.
https://www.stuff.co.nz/business/127...dging-its-bets
Sam Stubbs doesn't say the RBNZ is out of control but suggests a mountain of money chasing the same goods and services is fertile ground for inflation.
Where did this mountain of money come from?
https://www.stuff.co.nz/business/opi...what-inflation
Interesting that in NZ real long-term bond yields are still barely higher than those prevailing just prior to Covid.
Market sort of saying we don't have an inflation problem ...that needs fixing
Is that NZ rates? Where do you get your information from. I should probably try harder to understand things.
I listen to a lot of market commentators who think deflation will be an issue. I guess the Federal Reserve is only buying $60,000,000,000 a month of bonds now. I wonder how they establish what interest rate they will accept before buying a bond. I don't know but I suppose that is only short term bonds. Would $720,000,000,000 annually even be noticed. I guess the RBNZ isn't doing any bond buying if we are talking about NZ rates.
Some commentators have also suggested there is no price discovery in bond markets anymore, I would have to look back for their reasoning behind this view. Possibly something about central bank buying.
Wars happen for more than just political or religious ideology.
Wars happen because money is to be made.
When the virus eventually runs it's course, there's always a good old war that needs the money printers to fire up again.
Just need Russia to make a move on The Ukraine or China to make a move on Taiwan$$
https://youtu.be/NHOg-lMPuaM
Total failure by the RBNZ.
https://www.msn.com/en-nz/money/news...?ocid=msedgntp
I wonder what they are doing to rectify the situation. I think the Maori word for this is kahore.
Interesting article, I assume Viktor knows what he is on about.
https://www.zerohedge.com/economics/...inguishedalong
The last couple of paragraphs were interesting he sees that "We're still very much driven by financialization, we're still very much driven by leverage, by assets and asset prices being acute to what we do."
"And so the role of Federal Reserve is not inflation or unemployment, that's not their mandate. Their mandate is being an interlocal, effectively, between two spheres. One is financial markets and capital markets, which are 510 times larger than the underlying economies."
He touches on a problem I think was raised by Karl Marx. How do the owners of society keep their businesses going if a large chunk of the consumers run out of resources. Seems a bit extreme but it is the road we are headed down if you look at wealth inequality over the last 30 years.
I have given you credit in past posts for predicting the March 2020 downturn years before it happened, but they kicked the can down the road once more so the March 2020 downturn was only very brief.
Jeremy Grantham has called a lot of crashes but sometimes he can be a few years too early, although his latest statement ramps up what he said a year ago.
p.s I think Jeremy has been pretty good at calling the bottoms as well as the tops.
What happened to Logen Ninefingers posts this morning?? He had a couple of what I thought were relevant posts about how central banks preventing every recession is not a great idea.
can you delete posts??
So the Fed is still only talking about raising rates and reducing the extent of money printing. Listening to a you tube video from Peter Switzer he reckons Jeremy Grantham is full of s*it and also that there is no way the Federal Reserve will raise interest rates like they are suggesting.
Closer to home an excerpt from a monthly update from a NZ wealth manager.
"Responding in part to higher inflation, the RBNZ is now targeting a cash rate of 2.5% over the next two years. Despite the current path, we remain unconvinced that the OCR will ever reach these lofty levels. Central to our thesis, is that debt serviceability, particularly for households, will be the key impediment."
Sadly they might be right but if we have continuing inflation is the RBNZ's job price stability or making the rich richer and protecting them from any downfall??? Something definitely wrong with society if this is the case.
I don't think you can allow inflation to run rampant. Brent crude has now gone through USD 90 a barrel and rising oil prices flow through every part of the supply chain. It's not as simple as just pain at the pump for motorists, it's higher costs for goods across the board. The choice is stark: either the RBNZ raises rates and the NZD maintains its purchasing power, or we become a banana republic battling high inflation.
No matter what the RBNZ does, households will face higher costs either way. If they raise the OCR it means higher interest costs, if they do nothing it means higher costs for goods and services. There is no way out of this for highly indebted households. So the RBNZ just has to raise the OCR and turn down the credit spigot and maintain the purchasing power of the NZD. People who took on large amounts of debt will have to manage as best they can; they've made their own bed and will have to live with the consequences of their own actions.
I don't think you appreciate the inflation free lunch. Prices will rise but so will wages (probably not as much) so the highly indebted get to pay back their loans with worthless tomorrow dollars. 10 years of 5% inflation halves your loan all else being equal. Hard on people who don't have any wealth but great for the risk takers or those already wealthy.
Inflation is a tax and it hits the poorest the hardest but after John Key raising a regressive GST to reduce progressive income tax rates it has become obvious. The poor don't vote so they get what they deserve good and hard.
It is hard to see central banks doing anything as they need inflation to clear the debt. The only problem is they seem to be increasing the debt just as fast as inflation is getting rid of it.
Why do you think property investors prefer interest only? It is because central banks can take care of their debt they don't need to repay it.
Inflation could also be considered theft, but it is state sponsored so it is OK legally but morally...? who knows.
https://www.rbnz.govt.nz/research-an...in-your-wallet
The balance is rescuing the poor from soaring inflation with rescuing the rich from asset-wealth destruction. I think we can guess which way it going to go based on recent history.
https://www.zerohedge.com/economics/...ly-hawkish-fed
If you can pay back your loans like that between inflation & the interest rate rises then well done. Will be interesting to see how much free cash flow highly indebted households have when they are hit by rises in two areas. When economists warn that rising interest rates could prick asset bubbles and cause prices to start falling then I pay attention. The US housing market crash was caused by defaults at the sub-prime end, not by defaults by the wealthy. But one area of the market faltering will flow through and effect everyone's equity position. Most people won't even realise they are over-leveraged until its starkly apparent that they are.
It is hard to see central banks doing anything as they need inflation to clear the debt.
It may be hard for you to see but it has already started happening. Price stability is in their mandate and it is politically untenable to have inflation running rampant and unchecked. The RBNZ has raised the OCR already and ANZ Bank's economists are now forecasting that the Reserve Bank will need to increase the Official Cash Rate (OCR) to 3% by April next year, compared to their previous forecast of just 2%. No point having our heads in the sand about this, rate rises are on their way.
[QUOTE=Aaron;938171 Listening to a you tube video from Peter Switzer he reckons Jeremy Grantham is full of s*it and also that there is no way the Federal Reserve will raise interest rates like they are suggesting.[/QUOTE]
I would suggest Jeremy thinks a lot more deeply than Peter Switzer.
https://www.youtube.com/watch?v=JlEGU2ypr1Q
https://www.stuff.co.nz/business/127...hoots-up-to-59
Inflation shoots up to 5.9%
Tom Pullar-Strecker
10:46, Jan 27 2022
The inflation rate has jumped to 5.9 per cent, Stats NZ has reported.
Consumer prices during the three months to the end of December put the annual inflation figure at its highest level since June 1990.
That was the same year that Jim Bolger became prime minister and Auckland hosted the Commonwealth Games.
The annual inflation rate was up from 4.9 per cent during the September quarter and is expected to keep pressure on the Reserve Bank to continue ratcheting-up interest rates.
The central bank will next reset the official cash rate on February 24.
ANZ’s economists had said it would be no surprise if inflation landed anywhere between 5.5 per cent and 6.5 per cent, while the Reserve Bank had forecast a 5.7 per cent lift.
ASB economist Mark Smith forecast that inflation would rise above 6 per cent in the current quarter, saying it no longer looked “transitory”.
“A broadening front of rising inflation is emerging that will be difficult to slow, and we expect annual CPI inflation to remain above 3 per cent well into 2023.”
The Reserve Bank clearly had “more work to do”, raising the chances of the official cash rate rising faster and to a higher level than the central bank had previously signalled, he said.
ANZ agreed that inflation had “some serious momentum”.
Stats NZ manager Aaron Beck said New Zealand was not alone, “with many other OECD countries experiencing higher inflation than in recent decades”.
National Party finance spokesman Simon Bridges said Finance Minister Grant Robertson needed to “rein in his spending to avoid adding more fuel to the inflationary fire”.
“With wage growth of only 2.4 per cent, well under half of inflation’s growth, New Zealanders are going backward. At the same time, we’ve got rising interest rates and record amounts of government spending,” he said.
No signs of any Reporting of the TRUE Inflationary figures when Govt pumped all those artificially created
Fiat bucks into the economy in the name of Covid-19 Support yet either ;)
You know the formula -
X = amount of real goods
y = monetary supply
Double Y - the fiat bucks have only half the spending power they had before
Have money in the bank at a lowly 1/2 of a percent ? - the bad news - it's now worth half of what
it was before Govt's Support scheme started on reduced spending power
The wage & salary earners may have thought they were better off out of increases
- well for just a few moments but then what lands in their hands afterwards has
half the spending power it used to have .. ;)
And for the really bad news - those depreciated dollars circulate round faster
Inflationary huh ? ;)
And for the Really Really Bad News - watch what the Govt's next moves will be to further
likely add to the misery of those suffering the Govt's recent past inflationary instalments ;)
but did anyone think they would be better off out of Labour's fiscal policies ?
Or did they deep down think "Conned yet again" ? ;)
Did Adrian get to the bottom of the Reporting Issue out of Labour's weird & wonderful large
LOAN Scheme (the one that stopped them in their tracks - so they didn't bother any more
while everyone was busy trying to figure out how to treat Huge Loans to your shareholder) ? ;)
Did Robertson sit on it to make it go away or did Orr quietly tell him 'No More'
after being sat on ? ;)
What I mean is that across much of the western world china and japan included I believe debt to GDP has increased significantly, more so over the last couple of decades.
Japan now can't raise interest rates without bankrupting the govt and the US seems to be heading toward a similar position. If these govts don't intend to pay back their debt then they can default or they can inflate away the debt. I think what we are seeing is debt being inflated away. This is also true for over indebted corporations (think zombie corps) and indebted investors (think interest only loans on residential property).
The borrowings that central banks have encouraged through low interest rates and loose monetary policy are becoming so large that destroying the value of the currency they are denominated in (inflation) is the only solution to getting rid of the debt. Central Banks will never have a problem with debt as they can always just print some more money to sort things out. That is why they are supposed to be independent of govt. as politicians can't be trusted with the money printer.
It turns out neither can incompetent (weak, greedy, lazy or possibly evil(take your pick)) central bankers.
Inflation running at almost double the top end of their inflation target would indicate failure by the RBNZ. The Large Scale Asset Purchases I think nztx was referring to a few posts ago was the RBNZ not the govt. That is why Orr and Bascand have both tried to downplay the RBNZ's role in a nearly 30% annual rise in house prices, they both know they are largely responsible and like me are probably wondering why they aren't being held accountable. To be fair in hindsight it is easy to see that it was a massive overreaction, probably not so easy at the time, but take responsibility for your actions Adrian Orr like any good leader does.
Aaron, you do not want to go down that path because it leads to hyperinflation. Believe me, endless money printing is not the answer to this problem, particularly when the US dollar enjoys the status of the worlds reserve currency. If they trash their money to the extent that you are suggesting then they will lose that status and they will never get it back. We could talk about Weimar Germany when we talk hyperinflation, but there are actually more recent examples including Zimbabwe and what is going on now in Venezeula and Turkey. Once a currency collapses you are not on a path to some sunny uplands of prosperity, you are on a path to starvation and dystopia.
I don't want to go down that path for all the reasons you mention and also inflation is considered theft (per the RBNZs own John Mcdermott) and morally reprehensible even though targeted inflation indicates a little bit is acceptable to an economist.
I am very upset that society is being lead down this path by weak central bankers who have given up on their price stability mandate. I think it has been pointed out that since Alan "bubbles" Greenspan responded to the dotcom bust with lower interest rates and easy money, the resulting debt problem in 2008/09 was solved with more debt, the March 2020 sharemarket crash was fix with even larger money printing. Do you see a pattern forming.
Even 0% was no boundary. Negative interest rates actually happened and they are happening (in real terms), this is insane but there is no rush to reverse course from what I can see.
You are right that it started under Greenspan with ultra-low interest rates leading to the US housing bubble which burst in 2007 / 2008.
The response from central banks was to blow up more asset bubbles to induce a 'wealth effect' (people feel richer when asset prices increase) and get people spending in the economy. 'Money printing' and interest rate suppression has been used to artificially inflate asset prices.
Asset bubbles are dangerous. They need to be defended by further central bank action, or they pop. For more than a decade, central banks have continued to inflate these asset bubbles. They say water finds its level. You cannot inflate assets far above their true values indefinietly. We are soon to pay the price for what the central banks have done.