ADRIAN ORR our NEW RBNZ GOVERNOR

[TeslaGod]

What have 'the inflation is transitory' crowd seen that makes them think this incompetent government and clueless Reserve Bank can control inflation?


[/I]

You should buy real estate it's a great hedge against inflation.

[Panda-NZ-]

Is following everyone else the best idea? The USA and Japan central banks appear to have gone bat sh*t crazy.

Yes, because imports are more expensive too. So rich ungreatful, tax avoiding scum can't afford as many new cars or luxury boats.

[TeslaGod]

Yes, because imports are more expensive too. So rich ungreatful, tax avoiding scum can't afford as many new cars or luxury boats.

Hey I pay my taxes

Well I don't, but my company does ,

Sort of ,

Be kind.

[Panda-NZ-]

Hopefully this smiley face helps:

[Aaron]

.

I would humbly suggest that you both are right......and wrong.

Step back a bit and try look at the bigger picture. You possibly can't see the trees for the forest

When you look at the historical stats (as in over the last 50+ years) it quickly becomes apparent that Interest Rates and Asset Inflation don't always trend in unison. Yes, they can correlate for a period, but there are plenty of instances in history where any "expected" correlations are totally disconnected.

Coming back to 1st principles yes, interest rates provide the lender with a return/yield which MAY be compared to the rate of Inflation, but ultimately interest rate yields are really the market pricing its view of risk. Hence why we have been witnessing negative interest rate yields in some countries. The "Lender" is happy to PAY interest because they have the view that is the lowest risk proposition and they will at least get most of their money back!

I had better be careful what I say then as I suggested an obviously intelligent person was an idiot for suggesting there isn't a strong correlation between interest rates and asset prices.
Apologies to John McDermott - Motu Executive Director and former RBNZ Assistant Governor and Chief Economist.

I would have thought that when trying to work out a return or yield on investment and therefore a price to pay for an investment the cost of capital would be a factor, the lower the interest rate the more affordable an investment is.

When looking at commercial property the higher the required yield the lower the value of the property and vice versa.

As far as negative interest rates are concerned aren't some pension funds and insurance companies obliged to invest in things which have been traditionally considered safe. Such as AA rated bonds. They don't have a choice but haven't central banks have been buying billions in bonds depressing the yields (overseas) as well as setting the OCR (NZ) at low levels. Would anyone of sound mind invest in something that was guaranteed to lose money. I guess you are arguing they think they could lose more by investing in equities or property in the event of a downturn.

"Return free risk" as Jim Grant describes it.

This is from the NZRB website. The good old wealth effect.

Raising prices for houses and other assets
Reducing interest rates and making it cheaper to borrow and spend money can push up the price of assets like houses. It can also increase the share prices of equities held by the three million New Zealanders in their KiwiSaver accounts.

Higher house and share prices make people feel wealthier, encouraging them to spend and invest. While this can help us meet our core mandate – controlling inflation, maximising employment and supporting economic wellbeing – higher house prices affect housing affordability.

No direct correlation maybe but a strong suspicion of one.

[Logen Ninefingers]

More on runaway inflation here. Remember, according to 'Elon Musk Wannabe' there won't be any meaningful inflation in NZ.

https://www.stuff.co.nz/dominion-pos...-supplies-soar

A dearth of dwangs: Four-by-twos run dry, cost of building supplies soar
Tom Hunt
05:00, Aug 11 2021

A timber shortage means builders are struggling to get the basics of their trade with warnings that some building supplies will cost up to 35 per cent more before the year is out.

“People think tradies are expensive now,” Michelle McGuire​ from GenX Builders in Wellington said. “This is going to hurt an already hurting industry.”

Her partner and builder at GenX, Richard Wilman​, on Monday went to Bunnings and couldn't get any four-by-two wood, a staple of the building trade. Another merchant had some but was running low.

He was dealing with three different merchants as he tried to get the wood to finish jobs and was now ordering wood weeks ahead of when it was needed.

[TeslaGod]

"Elon Musk wannabe"

"Head up your arse"

"Weasel"

It seems I am not following the narrative on this forum.

Perhaps that is why I am in the financial position I am.

[Aaron]

"Elon Musk wannabe"

"Head up your arse"

"Weasel"

It seems I am not following the narrative on this forum.

Perhaps that is why I am in the financial position I am.

To be fair I only suggested you "might" be talking through a hole in your ar*e regarding the consequences of raising interest rates not that you were an ar*ehole.

Your financial position would indicate your view should carry more weight than mine.

Please continue to educate and inform, hopefully other posters such as myself can be more respectful toward someone with an opposing view.

[TeslaGod]

More on runaway inflation here. Remember, according to 'Elon Musk Wannabe' there won't be any meaningful inflation in NZ.

.[/I]

Long term deflationary force's such as

global sourcing

Price transparency

Automation

Demographics like retirees leaving the work force and contribute to deflation over time.These force's have not gone away and are only increasing.

The short term inflation we are experiencing will pass.

A rise in the OCR (which almost seems certain) will most definitely be reversed in a couple of years.

Most likely leading to negative interest rates down the line resulting in

Further asset price inflation

Wage's not being able to keep up

A worthless kiwi dollar

A shrewd investor should always plan ahead.

[Logen Ninefingers]

More on the runaway inflation here -

https://www.nzherald.co.nz/business/...7E5QETLN2KWVQ/

PlaceMakers' customers get price rise warning up to 15%: freight, raw material costs cited

12 Aug, 2021 05:18 PM

Fletcher Building's national retail chain PlaceMakers has warned customers of price rises across many different product categories, some going up 15 per cent, and Bunnings is suffering some product shortages.