Interest Rates

[McDuck]

I guess the first question you need to ask yourself is how much?

How much money is there?

How else are you going to see if it's growing or shrinking?

And since a real paper dollar, (that has already been worked for and saved), will compete with an imaginary loan dollar, (from a bank)..
(At a house auction say..)

Then it's difficult to choose what to count.
I mean they both have the same purchasing power.

This following fact surprised me.

" The New Zealand dollar is one of the most heavily traded currencies,
There are 5 billion NZD in circulation, with 105 billion NZD
traded daily in global foreign exchange markets."

Apparently, the main job our dollar has is as a bauble to be swapped by speculators.

[McDuck]

Which then goes to someone else, and they spend it.

Yup.
There is a lot of money that just circulates around and around the system.

Forget about thta stuff.

Ask yourself this.

How does money enter and exit the system?

For the purposes of the exercise, you can consider the system as all transactions in NZ dollars.

There are other larger systems of course.

I've got my idea in how it comes in and goes out.

But someone else might have figured other entry and exit points.

I'd be keen to hear of them.

[Perry]

But what if that someone is o'seas - outside the NZ economy?

Don't we often get told that the Oz banks source little of their loan money domestically?

Plus there's the awkward matter of credit creation. (Erroneously called 'money printing.')

It was an illusion so can be made to return to nothing inside the money magicians' box.

[flyernzl]

Which then goes to someone else, and they spend it.

[Perry]

But banks have debt, too, don't they?
If so, that adds a fourth option:
The bank uses your $500 to pay off some debt.

[McDuck]

So could you explain how do higher interest rates actually reduce overall demand in the economy?

New "fake: Money is introduced into the system through new bank loans.
When less people can afford the loans, there are fewer loans, and as a result less fake money about.

What is fake money?
What is real money.?

Fake money is money you say you will earn and pay back later.

Real money is what you have actually swapped your moments of your life for,
and stored on a bank vault (historically as gold coins).

A bird in the hand should be valued at two in the bush.
In this case, that fact has been overlooked.
intentionally.

The inflation figure is a measure of how backwards they have that actual real relative value.

[flyernzl]

We are now constantly being told that the Reserve Bank is raising mortgage interest rates in order to reduce demand in the economy.
I cannot see how that works.

If my mortgage interest rate increases so I now have to pay $500 more to the bank each month. That money does not disappear, it goes into the bank.
So the bank now has my $500.

What do they do with that money?
As I see it, they can do three things (probably a mix of all three):
- they can pay a higher interest rate to those people who have deposits at the bank
- they can pay the bank staff a higher salary
- they can pay higher dividends to their shareholders.

So admittedly my own spending has been reduced but the banks depositors, their staff and/or their shareholders have more money to spend so surely that makes up for my reduction?
So could you explain how do higher interest rates actually reduce overall demand in the economy?

[JBM]

I have no optimism about any dubious prognostication from Shonkey.

But new-build price increases are very real.

In '19 and '20, I bought three self-contained / cabin sleepouts. 26 square meters space total floor area, between them
.
Historical cost: $92,080

Current replacement cost: $259,597.

Because they were purchased in two different years, that's an averaged 282% increase since then. Ouch!

Yes NZD to Peso hasn't held its value to well since the looney lefties took over and blew up the balance sheet ...




RBNZ balance sheet >>>>> talk about tick it up ????? and the drop kick Orr blames average Kiwis for inflation ...??? really the ultra low rates or mass money printing ZZZzzzzz ????

[Perry]

I have no optimism about any dubious prognostication from Shonkey.

But new-build price increases are very real.

In '19 and '20, I bought three self-contained / cabin sleepouts. 26 square meters space total floor area, between them
.
Historical cost: $92,080

Current replacement cost: $259,597.

Because they were purchased in two different years, that's an averaged 282% increase since then. Ouch!

[Frezzinghot]

John Key:

Eventually, builders are just going to say… 'OK, I can produce this house for X, I can't sell it for Y, therefore I just won't build it.' I think what you'll see over the next 12 months is the freeze frame in terms of building and new supply coming on the market.

Unless the RBNZ start printing money again. Problem solved.

[Beano]

Sir John key ...10% interest rate next year
https://www.google.com/amp/s/www.new...-2023.amp.html

[chook]

Is it a matter of swings and roundabouts?

A cartoon from not-that-long-ago.

Yes its great getting 5% return and having dry powder for the avalanche of bargains that will hit the market 2023 - 24....

[Perry]

Is it a matter of swings and roundabouts?

A cartoon from not-that-long-ago.

[PC]

Don't forget that comrade commissar Cindy's socio-commie gummint is facing an election next year and will be desperate for some good news. (Might be a bit of nudge, wink, quietly going on.)

Plus - given the recent election results in USA. - it goes to show how far wrong the polls and pundits can be.

It's all those annoying deplorables being able to vote that's the problem.
Just wait for Dr Cindys "reforms" to fix it.

[Perry]

Don't forget that comrade commissar Cindy's socio-commie gummint is facing an election next year and will be desperate for some good news. (Might be a bit of nudge, wink, quietly going on.)

Plus - given the recent election results in USA. - it goes to show how far wrong the polls and pundits can be.