Header Ad Module

Collapse

Announcement

Collapse
No announcement yet.

Interest Rates

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Originally posted by Perry View Post
    Monetary policy vs economic policy? Not much - if any - mention of
    monetary policy or its relationship with economic prosperity.
    Interesting . . . .
    Hi Perry, I’ll have a go at explaining it, or at least telling it in the way that the boffins like to think of it.
    So money can be thought of as a tool, similar to a spanner or screwdriver.
    The Reserve Bank is supposed to make sure that there are enough spanners and screwdrivers circulating around so that people can build and repair things.
    That’s quite different from the Reserve Bank telling people how those spanners or screwdrivers should be used.

    What say some fool decides to make ornamental garden fountains by melting down the spanners, and that it becomes a fashionable trend, to the point of taking many spanners out of circulation.
    Now things can’t be repaired or built. Problem.

    The Government should be monitoring and legislating to make sure it doesn’t get to this point, but they are….otherwise inclined.
    So by default the Reserve Bank is pressed into a point of action.

    In a very real way, the Govt has passed the buck.

    Comment


    • Just trying to get my head around McDucks explaination re Monetary policy vs economic policy, It seems to explain the difference but ( perhaps my morning coffee hasn't cut in) doesn't help ( at least me) picture the working difference. So I'll have a go ( not sure I will do any better) Economic activity can be described as transactions (trade: Goods, services, and labor) between people. Money is the token used to mediate those transactions. Monetary policy involves: controlling the number of tokens available, and the trust worthiness of those tokens. Economic policy is much larger: It generally involves creating and sustaining an environment where the number of transactions that occur between people can increase.
      The mission of any business enterprise should include the aim to develop economic conditions rather than simply react to them.

      Comment


      • So how does the OCR (interest rate) control or have an effect on:
        the number of tokens available, and the trust worthiness of those tokens.
        Remind us/me, Austro: what's your mortgage rate
        and the other related figures in Austria?
        Want a great looking concrete swimming pool in Hawke's Bay? Designer Pools will do the job for you!

        Comment


        • I had to check: Our floating mortgage rate is 1 %. January 2013 Inflation rate was 2.8% (Up from a low of 2.1% in July/August 2012). Last meaure on house price inflation I can find is august at that stage the annualized rate was 11%



          I don't think the OCR has anything to do with the trustworthiness of the tokens, that is decided by the exchange markets. The OCR is a control on the number of Tokens. Effectively lowering the OCR increases the number of tokens available (it increases the amount able to be borrowed).

          A fixed currency system operated differently the gvt would fix the exchange rate and the markets would effectively set the OCR.
          Last edited by Austrokiwi; 01-02-2013, 08:28 PM.
          The mission of any business enterprise should include the aim to develop economic conditions rather than simply react to them.

          Comment


          • Originally posted by Perry View Post
            So how does the OCR (interest rate) control or have an effect on:
            “the number of tokens available, and the trust worthiness of those tokens”.
            Ha! Perry, you’ve struck on one of my hot topics.
            “the number of tokens available, and the trust worthiness of those tokens”.


            The phrase" trust worthiness" is so important here.
            Trust Worthiness in money is exactly the same as trust worthiness in people.

            You simply need to ask yourself what is it about people that makes them trustworthy, and the same can be said of money.
            “Not able to be relied upon” is the main one. The person may be lazy, selfish, foolish…etc. The final test is that, for whatever reason, that person won’t be there in the future when you need them.

            They are a distasteful property of reality that only helps to destabilise the great unknown that is the future.

            The whole idea of banking is based upon (as the story goes) surplus wheat being stored in ancient Egyptian temples in the good times, so that it could be used in the lean times. It’s all about stabilising the uncertainty of the future.
            Last edited by McDuck; 02-02-2013, 09:47 AM.

            Comment


            • Well, McDuck, interest rates may have an impact on how many of
              those (un-numbered) tokens get borrowed, I suppose. And if rates
              are low and lots are borrowed, maybe lenders bulk-borrow more of
              those tokens from overseas sources.

              Even then, there'd be limits. I don't imagine many tokens of any
              denomination would be being sought from Zimbabwe.

              I.e. Tokens/vouchers/cheques/currency all do need to have trust-
              worthiness. Something the Zimbabwe currency does not have.

              As I see it, the connection with actual production and services is
              a very important component, along with how much of anything
              said tokens/vouchers/cheques/currency are going to purchase.

              If the division-of-labour concept is carried a little beyond labour
              alone, it is the un-consumed capital saved that provides for the
              borrowers who do not have enough of their own.

              And, as has been hammered in other threads, it's not just the in-
              terest cost of borrowing that unconsumed capital that's often
              a problem. Frequently, there is not enough of it, hence the bleats
              often heard that NZrs are pathetic savers.

              And that leads us nicely on to (back into) the origins of those
              tokens/vouchers/digits that are lent to borrowers but which do
              not come from the accumulated savings of others: deficit bor-
              rowing. What does that do to interest rates, if anything?
              Want a great looking concrete swimming pool in Hawke's Bay? Designer Pools will do the job for you!

              Comment


              • Originally posted by Perry View Post
                ..And that leads us nicely on to (back into) the origins of those
                tokens/vouchers/digits that are lent to borrowers but which do
                not come from the accumulated savings of others: deficit bor-
                rowing. What does that do to interest rates, if anything?
                What did you mean by “deficit borrowing”? , just so we are on the same page.

                Comment


                • 1) If there is not enough savings in NZ, it must be borrowed from o'seas
                  countries where there are some good savers who have got into the habit;

                  ..................................................or

                  2) Artificial credit in the form that Jurgs has detailed and which has been
                  the topic of hot debate, hereabouts. I.e. 'money' that is a ledger entry
                  and is not backed by any form of currency.

                  The RBNZ imposes capital adequacy ratios on banks in the fractional
                  reserve monetary system that we have. But, the way Jurgs puts it does
                  make it clear that banks lend money they don't have. Not that Spaceman
                  accepts that, for a nano-second.
                  Want a great looking concrete swimming pool in Hawke's Bay? Designer Pools will do the job for you!

                  Comment


                  • Chalkie: Making money dance to a new tune

                    CHALKIE

                    Their ideas are contained in a working paper called The Chicago Plan Revisited, drawn to Chalkie's attention by a well-meaning acquaintance who did not realise the mental pain and suffering it would cause.

                    In a nutshell, the scheme involves changing the way money is created, replacing money created by the banking system with money created by the state.

                    The problem, say Kumhof and Benes, is that under our current system the money supply is effectively in the hands of private banks, who can't help screwing it up.
                    Far better, they say, to vest money-creating power solely in the government and have the supply controlled by a specialist monetary committee with a status like the judiciary.
                    www.stuff.co.nz/business/opinion-analysis/8210098/Chalkie-Making-money-dance-to-a-new-tune

                    Comment


                    • Originally posted by speights boy View Post
                      . . . under our current system the money supply is effectively in
                      the hands of private banks, who can't help screwing it up.
                      I wonder if that's a typo? Perhaps it should be:
                      . . . who can't help screwing everyone.
                      Among the wacky theories 'out there' is the one about Kennedy
                      and Lincoln and their plans to nationalise currency issue and the
                      bullet that quickly followed. Adolf did the same, but survived a bit
                      longer, it seems.
                      Want a great looking concrete swimming pool in Hawke's Bay? Designer Pools will do the job for you!

                      Comment


                      • Originally posted by Perry View Post

                        1) If there is not enough savings in NZ, it must be borrowed from o'seas
                        countries where there are some good savers who have got into the habit;
                        Taking your first example, what does that overseas money do to “our” interest rates?

                        I guess you can apply the “supply and demand” theory.

                        Say there are 100 slightly gold tokens, floating around New Zealand, looking for a place to be invested.
                        A farmer wants to buy a new tractor, and borrows 100 of those tokens, agreeing to give you 105 tokens back, when the harvest comes in.

                        Nice.

                        But say someone now throws in 200 more” overseas” slightly gold tokens.
                        The rarity of your tokens is destroyed.

                        The farmer will only offer to repay you 101 gold tokens when his harvest comes in.

                        There’s a big circular set of super destructive domino effects that flow on from this initial effect, but to keep it simple, I’ll leave it here.
                        Last edited by McDuck; 03-02-2013, 04:21 PM.

                        Comment


                        • Econo-babble is not called that without reason.
                          And one reason that I suspect is rarely heard or
                          seen in econo-babble is economic sovereignty.
                          Occam's razor* & the KISS principle are good.

                          * aka "principle of parsimony"
                          Want a great looking concrete swimming pool in Hawke's Bay? Designer Pools will do the job for you!

                          Comment


                          • Originally posted by Perry View Post

                            parsimony"
                            I couldn’t agree more.
                            The really funny bit about introducing foreign (slightly) gold tokens into the New Zealand (slightly) gold token supply is that it destroys not one,
                            but two things about the original New Zealand (slightly) gold token supply.

                            Firstly it destroys the amount of interest you can get back by lending out those tokens,
                            but more importantly it destroys how much you can buy with those tokens.

                            Think about it, with 100 NZ tokens chasing 100 apples, the apples go for 1 token each.

                            With 100 NZ tokens and 200 foreign tokens chasing 100 apples, the apples go for 3 tokens each.

                            Without so much as putting their hand into your pocket, the banks are stealing your tokens (buying power)
                            by simply introducing more tokens.
                            It is funny… you can’t help but thinking…
                            ”Work it out Einstein, your new loan just cut your own pay” (and eventually your job).

                            Comment


                            • Originally posted by speights boy View Post
                              Money is starting to flow from Bonds to Equities.
                              Interbank swap rates short and long term are trending higher.
                              Prices of perpetual debt issues which reset their interest rates every year based on the swap rates are trending higher.
                              My guess.....higher fixed rates this year.
                              Yeah, and with OCR going up either end of year, or early 2014, fixed rates will rise 3 or 4 months earlier.
                              But do you fix short and find out what rates are in 2 years time, or fix 5 years and find out how bad they are in 5 years

                              Since no one can predict one day to the next, prediciting 2 or 5 years out isnt looking on the cards is it.

                              Comment


                              • Originally posted by NovInvestor View Post
                                If NZD is pushed lower, a lot more funds from overseas property investors will flow to Auckland lol!
                                NI I know you are living the "Six months fixed is the new floating" system, when you decide to break out of that when fixed rates start to go up, are you going into 2 year or 5 year ?

                                Comment

                                Working...
                                X