ADRIAN ORR our NEW RBNZ GOVERNOR

[Aaron]

Thanks Adrian, admittedly only plays a "bit part" in inflation despite being responsible for price stability but 10% food inflation outstanding work if only it were house prices.

https://www.interest.co.nz/personal-...ate-food-price

National have a plan to fix inflation though (see at the bottom of the article.)

"National has a plan to fight inflation. We will address worker shortages, reduce costs on businesses, bring discipline to government spending, give Kiwis more money in their back pockets through prudent tax reductions, and focus the Reserve Bank solely on managing inflation."

1/ More immigrants lower wages. I have already stated my dislike for this. Lower wages but higher house prices (not a big part of CPI fortunately) Does not seem to reduce the need for more immigrants rather an upward spiral much like using debt to solve a debt crisis, more required each time.

2/ Reduce costs on businesses. Wages for one but not sure about others maybe tax cuts.

3/ Reduce govt spending. Cutting wasteful spending, no one would disagree with that. Cutting essential services? a hard job to tell the difference sometimes. Depends on your viewpoint.

4/ prudent tax reductions. Inflationary, but based on earlier proposals european car dealerships and yacht manufacturers might be the most affected by increased demand. Cutting taxes for the rich not only provides the magical trickle down effect but, if the plebs don't get any tax cuts they can't spend anything either therefore limiting the inflationary effects of any tax cuts.

5/focus the Reserve Bank solely on managing inflation. Long overdue, but don't expect it to be a priority in the face of house prices falling and while Adrian is at the helm a path of least regrets and sustainable house prices might reduce the effectiveness. Any other competent RBNZ governor should make this work without the full employment mandate. Opening the immigration spigot and not worrying about unemployment levels, should really knock wage inflation on the head.

[Aaron]

Reads like an opinion piece on immigration but interesting to the debate none the less.

https://www.stuff.co.nz/business/opi...omic-direction

At least National can provide a vision that all here on share trader can appreciate. Flood the country with cheap labour, it is good for a consumption driven economy, it keeps house prices high while allowing capital to thrive by sharing less with labour. i.e. lower wages means higher dividends or company growth. It also means we have a greater choice of restaurants and coffee shops.

Labour is kowtowing to business and the consumer townie economy, at the expense of our quality of life and can't explain the real reason for their u-turn on immigration for fear of losing their voter base.

[Aaron]

John Key explains the need for immigration at 5.04 minutes in "the migration changes are good but a year late. The reality if you go to a restaurant these days and can't get a booking is not because they are full but they can't find staff"

https://www.youtube.com/watch?v=ZeRFm2vSbOY

The only reason it was a year late is that according to John "The Labour govt are controlled by the unions and unions like the idea of higher wages" but John points out that this increases pesky CPI inflation, so silly workers will lose their gains through inflation so they should just accept low wages. Better to have a low wage economy servicing the wealthy home owning half of society who are doing all right. This from the man whose main achievement in govt was increasing a regressive GST tax to cut progressive income tax rates (what a cu*t). His other great achievement was overseeing a housing crisis which he denied was a crisis. Again, maybe it is perspective. Rising wages are a problem but rising rents and rising house prices are not, in John's world at least, there might be other Kiwis with a different view but you won't see them on TV.

He points out housing has come back but won't go through the floor because to quote 10.34 "migration settings are going to change" so per John immigration keeps wages down but keeps house prices up. At least he is honest, most media commentators continually seem to ignore or deny this reality.

Building costs are going up and John thinks only the labour component might go down. Building costs increasing without house price increases will see construction stop and with increased demand from immigration we are back to a John Key utopia and young Max Key's property development company can make money again.

John Key, ladies and gentlemen a real down to earth kiwi bloke what a f*cking hero. I know he is right in what he says and maybe I should just accept that is the way of things and knuckle under.

Voters vote for what they think is best for them and I guess as long as you own at least your own home then continuing down the same path as the previous couple of decades is the way to go.

Good to see a NZ thought leader concerned about restaurant bookings and house price rises and suppressing wages. I wonder what director's fees at ANZ have been doing after record bank profits thanks to Adrian Orr.

[Aaron]

John McDermott pointing out the obvious

https://www.interest.co.nz/business/...rmott-assesses

QE, McDermott says, gets into the financial system where it has to work through asset prices.

"So it has over inflated asset prices. It creates a distortion in terms of wealth distribution, it distorts business decisions, and it creates financial fragility in the system so everybody is over leveraged, there's too much debt in the system," says McDermott.

He also touches on another important point but does not expand on it (maybe he does in the audio). It might be significant in light of Japan's latest nothing burger to suggest it is moving away from QE and interest rate suppression.

"The business model relies on keeping QE going. So I think we need to say that has not to be New Zealand's future, we don't want a distorted financial system. So it's important to reduce it before we get hooked on that really bad habit."

You cannot reverse course without a major problem and you need more and more each time as we have seen since 2008 with 2020 being the biggest money printing binge on record. I have no faith that Adrian has the spine for the job as he is in the top half of society who benefit from QE and I imagine it would be hard to find someone in banking or finance with the honesty or integrity to keep to the mandated 1%-3%. Our inflation should be like Japan's interest rates somewhere between -.5% and +.5% with 0% being the target.

I vaguely recall rubbishing John McDermott in an earlier post as he said something I did not agree with, and I wonder if there is an easy way to find an old post as the search function on the site seems limited. At least for me. See my question in the newbies section

[Aaron]

Higher redundancies expected next year if we go into a recession and happening already to a lesser degree.

https://www.nzherald.co.nz/business/...C2B5I3ZA7DXX4/

Immigration ramping up at the same time.

Sounds like a recipe for lower wages and much higher unemployment for the new year. Well done the "Labour" govt. always planning ahead.

[winner69]

Aaron, happy new year. All the best for 2023

You might enjoy reading this guys stuff

Latest piece - Central bankers have created excessive unemployment for decades because they use the wrong theory -

http://bilbo.economicoutlook.net/blog/?p=51089

[Aaron]

Aaron, happy new year. All the best for 2023

You might enjoy reading this guys stuff

Latest piece - Central bankers have created excessive unemployment for decades because they use the wrong theory -

http://bilbo.economicoutlook.net/blog/?p=51089

Happy New year to you too.

If I follow the article correctly central banks have been running monetary policy too tightly for too long creating excessive unemployment and in the second half of the blog he supports MMT as a good idea.

He comes across as a bleeding heart liberal wanting full employment and money for all. I am for reversing the tide on capital over labour and rich vs poor but would disagree with his suggestions to achieve this.

Looser monetary policy has created full employment in NZ no doubt, but has it made life better for the poor working stiff? I would suggest loose monetary policy has pushed up asset prices(capital) much more than the price of labour. I also think loose monetary policy is what keeps the financialized system functioning. Latest case in point the UK and buying guilts to save leveraged pension funds. No doubt Bill would have approved of this.

Like all economists interesting theories but generally full of s**t. Reading his blog is one way to spend and unproductive rainy day, but probably the first and last time for me.

What are Bill Mitchell's views on the works of Gideon Gono and why do we bother paying taxes as Bill correctly points out, when our elected representatives can just print up some cash?

[Aaron]

An article pointing out the arrogance and uselessness of our RBNZ governor.

https://www.stuff.co.nz/business/opi...entral-bankers

Nothing new though.

[Aaron]

Confirmation bias from an economist and most likely a leftie.

https://www.zerohedge.com/markets/no...r-poorer-again

Are the assembled billionaires in Davos really worried about what was already projected as a mild recession that would reverse very low unemployment rates and very high (nominal) wage growth? No! What worries them are tight labor markets and nominal wage growth: that, and the asset-price recession in 2022 as interest rates rose in response.

With higher rates, the rich have already been in recession, and they didn’t like it. One year was quite enough, thank you very much, and now it’s time for central banks to make the rich richer and the poor poorer again, as before. Thus all the right headlines, speeches, data, and rumors are being mobilized in support of ‘Just not 2022!’ trades in 2023 – and working so far.

However, as mentioned, not all the headlines line up correctly for that happy, illogical narrative of no recession, no inflation, lower rates, and higher asset prices.

The Davos set needs central banks to work their magic after 2022. Although at the end of the article he notes.

Most fortress owners don’t tend to relax when someone is messing with their foundations, even ineffectually. At least not successful fortress owners. That is another argument mobilising against the happy, illogical narrative of no recession, no inflation, lower rates, and higher asset prices. Meanwhile, if the fortress were to crumble due to a Death Star-style weakness, it would topple onto everyone’s heads, including those doing the chipping away at it. Again, that backs recession, inflation, higher rates, and lower asset prices.

We will all suffer if central banks do their jobs but none more so than the wealthy.

Sounds like we need low interest rates and easy money as well as mass immigration (to cap terrible wage inflation and increase rental demand and house prices) to fix all of NZs problems.

[Aaron]

Cost of living increases, number one concern with the NZ voter??

https://www.nzherald.co.nz/business/...JT6HPYEZCUYTA/

6,000 immigrants in November (or 72,000 annually) and picking up steam. What does increased demand do to prices???

I forget the supply side. Immigrants push down wages, they only increase rent and demand for housing. Bad wage inflation sorted, good rentier inflation increased. Win Win for the right sector of society. No trouble booking a restaurant any more either.