Nzd.usd

[blackcap]

Surprised no one talking about this one today. NZD to USD is now at .5490. Seems there is a run on NZ govt bonds.....

[SBQ]

Surprised no one talking about this one today. NZD to USD is now at .5490. Seems there is a run on NZ govt bonds.....

That's because most NZ investors don't understand the economics of how gov't fiscal & monetary policies impact the NZ currency exchange rate. Unlike the USA, NZ is not in a position that it can just simply print money out of thin air. The announcements of splashing out billions to save NZ businesses comes at a cost. When the NZ Reserve Bank rate is near 0%, it doesn't matter what they do because internationally, they're not going to lend ; there are none because they've already fled to the USD. No one is standing in line when NZ bonds go up for offer. The next step will be negative interest rates where the public's cash deposits will go to service the gov't, similar to a tax grab (theft from the people who have cash). To those owning real estate will be hit in this process as jobs are lost and housing prices will collapse.

The USD is the world currency. When a person puts up their $ either to lend out or invest in US equities, they are basically saying they're betting on the American economy to recover and do better than any other country. That same person also could of lend the $ to NZ in NZ currency but that's like comparing the reliability of a car between a Toyota and a Volvo. The financial markets think the same, when huge capital outflows occur, our NZD gets weaker. When the NZ gov't goes on a printing / borrowing scheme.. again it will weaken the NZD because someone has to pay for it at then. Either in inflation or the slow erosion of standard of living. Now i'm not speaking of a mass exodus of people living NZ - we've seen this kind of thing before from wars and developing nations that have no fiscal or monetary controls. But to say that NZ is still the 'land of the milk & honey' is not even close to reality.