ADRIAN ORR our NEW RBNZ GOVERNOR

[Aaron]

"The root cause of financial instability is cheap debt. Whenever central banks suppress interest rates below the rate of inflation, the resulting negative real interest rates fuel financial instability."
https://tradingdiary.incrediblecharts.com/

Interesting article negative real interest rates do not make sense. No sane investor would accept them in a free and open market for capital but unfortunately we are competing against central bank printing presses.

Gold gets hammered in the article. It is unproductive a bit like money in the bank. Are houses and high debt a good hedge against inflation. Probably over the long term very good. Over the last year not so much.

https://www.zerohedge.com/personal-f...e-changed-2010

I may have missed the boat on housing in NZ as an inflation hedge in the near term. Per the attached article the last 13 years have seen house prices increase 152% in nominal terms or 12% per annum simplified (152/13) or 7% in real terms. No one was complaining on the way up. Why should they complain on the way down.

[Aaron]

And so the hand wringing and whining begins. Dr Robert MacCulloch of the University of Auckland says of the recent .5% rise is "dangerous" and "immense pain" according to the headline. There would be no one better than a doctor of economics to understand these things. I imagine he was apoplectic when monetary conditions were so loose so recently. I suspect not as concerned as he is with tightening. Arts students are generally lazy and will always choose the easy options.

https://www.msn.com/en-nz/news/natio...6d2f5c9e&ei=14

[Aaron]

Probably a bit harsh on Arts students in general (see previous post). Pain is being felt.

https://www.nzherald.co.nz/business/...LS3XXA6QLMCLY/

Big builder in liquidation. I wonder if there will be as big a need for immigration. No good bringing in people to join the dole queue.

The Warehouse not paying a dividend, should check out the warehouse thread to see who saw this coming. Decline in consumption not good for an economy based on consumption.

https://www.nzherald.co.nz/business/...N4QWKJB7TIAOY/

[Aaron]

I have been arguing that suppressing interest rates and printing money are hurting the poor as asset prices go up to ridiculous levels and then inflation (cost of living crisis) is like a regressive tax hitting the poor harder.

Not so says this economist, raising rates will hurt the most vulnerable parts of the community including low-income workers with weak employment security, and heavily indebted households, would bear the brunt of high interest rates while those who were better off benefitted from an increased return on their savings.

https://www.stuff.co.nz/business/mon...o-save-economy

First Union policy analyst Edward Miller probably has a big mortgage and was probably blind to the damage being done by low rates and easy money, although it is not as easy to spot.

I wonder if he has considered real returns on savings or just nominal. Everyone is made poorer by debasing the currency we use.

Maybe we could agree someone more stable than Adrian needs to be in charge. First historically low interest rates for too long now the possibility of overshooting on the upside. Crazy stuff.

[clearasmud]

I have been arguing that suppressing interest rates and printing money are hurting the poor as asset prices go up to ridiculous levels and then inflation (cost of living crisis) is like a regressive tax hitting the poor harder.

Not so says this economist, raising rates will hurt the most vulnerable parts of the community including low-income workers with weak employment security, and heavily indebted households, would bear the brunt of high interest rates while those who were better off benefitted from an increased return on their savings.

https://www.stuff.co.nz/business/mon...o-save-economy

First Union policy analyst Edward Miller probably has a big mortgage and was probably blind to the damage being done by low rates and easy money, although it is not as easy to spot.

I wonder if he has considered real returns on savings or just nominal. Everyone is made poorer by debasing the currency we use.

Maybe we could agree someone more stable than Adrian needs to be in charge. First historically low interest rates for too long now the possibility of overshooting on the upside. Crazy stuff.

He had to do it. Wages inflation has hit 8.5% (cf Australia 3.4%) Wholesale rates have been falling due to competition etc.
5.25% isn't that bad.

[Aaron]

He had to do it. Wages inflation has hit 8.5% (cf Australia 3.4%) Wholesale rates have been falling due to competition etc.
5.25% isn't that bad.

But how did we get inflation and who is responsible. If it is always and everywhere a monetary phenomenon then Adrian caused it and now he is trying to stop it.

Who overstimulated the economy with interest rates too low for too long as well as money printing to fuel the fire.

According to Paul Glass in this opinion piece, the govt may have played a part and he puts forward some interesting figures. The sad thing is that all the money has not gone into infrastructure which will pay dividends to future generations but spent on the current population with the future generations to repay the debt for stupid wasteful spending. I imagine Paul as a well paid fund manager may lean to the right but the figures don't lie.

https://www.nzherald.co.nz/business/...O334PGJWJ4MRY/

A recession is coming but people are not preparing for it according to this article.

https://www.stuff.co.nz/business/131...nings-says-anz

I wonder why not? I guess once the RBNZ pivots and drops rates it is off to the races again does anyone really believe monetary policy will not be ultra loose at some time in the near future. Also since the pandemic we have discovered that govts can just print and hand out money. Why would you save for a rainy day if your money loses value year after year and the govt can just print and hand it out.

[clearasmud]

But how did we get inflation and who is responsible. If it is always and everywhere a monetary phenomenon then Adrian caused it and now he is trying to stop it.

Who overstimulated the economy with interest rates too low for too long as well as money printing to fuel the fire.

According to Paul Glass in this opinion piece, the govt may have played a part and he puts forward some interesting figures. The sad thing is that all the money has not gone into infrastructure which will pay dividends to future generations but spent on the current population with the future generations to repay the debt for stupid wasteful spending. I imagine Paul as a well paid fund manager may lean to the right but the figures don't lie.

https://www.nzherald.co.nz/business/...O334PGJWJ4MRY/

A recession is coming but people are not preparing for it according to this article.

https://www.stuff.co.nz/business/131...nings-says-anz

I wonder why not? I guess once the RBNZ pivots and drops rates it is off to the races again does anyone really believe monetary policy will not be ultra loose at some time in the near future. Also since the pandemic we have discovered that govts can just print and hand out money. Why would you save for a rainy day if your money loses value year after year and the govt can just print and hand it out.

The only decent RBNZ governer we had was Don Brash.
He knew NZ couldn't behave like the big economies.

[Aaron]

Just read an article about Argentina's inflation rate and wondered if there was a correlation to money supply growth.

https://tradingeconomics.com/argentina/money-supply-m2

https://tradingeconomics.com/argentina/inflation-cpi

Maybe it is due to supply shocks or the war in Ukraine????

[Aaron]

Interesting Australian article on wealth inequality since 2008-09

https://www.abc.net.au/news/2023-04-...ains/102200878

I wonder what has happened since 2008-2009 to channel all the wealth into the top 10%'s hands? Hmmm tricky. The cost of capital is near zero and the people with all the capital are doing really well. A tough one, perhaps we need some economists or central bankers to explain what is happening.

IMF also pointing out why we are getting poorer. Not just NZ and as Paul Conway said wages earners should just accept that they will be poorer due to his and Adrian's actions. Targeted inflation does not work if it is in wages. Trickle down economics only works if asset prices are boosted by insane monetary policy but not if wage earners try to keep up with the asset owners.

“Nominal wage inflation continues to lag far behind price inflation, implying a steep and unprecedented decline in real wages."

https://www.stuff.co.nz/business/300...phase-imf-says

The stability of any financial system hinges on its ability to absorb losses without recourse to taxpayers’ money.

Finance is possibly the only industry with an implicit taxpayer guarantee. No wonder bankers pay themselves so well.

[Aaron]

Immigration going back up.

https://www.stats.govt.nz/topics/migration

Demand for social housing going up as well. maybe unrelated.

https://www.nzherald.co.nz/nz/politi...D3RRHIDR24QEA/

Appeasing business owners and rentiers with more immigrants may not be making NZ a better place to live or work. It boosts GDP, our carbon footprint and demand in a cost of living (inflation) crisis. How much thought has been given to this. There might be a lot more labour available soon, if we are going into a recession. Is it wise to boost the number of people looking for work.

I guess it puts a lid on wage inflation, but shi**ing on workers by our leaders seems a little unpatriotic in our "team" of 5 million.