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Heresy the norm as central banks sidle closer to fiscal policy

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  • Heresy the norm as central banks sidle closer to fiscal policy

    N Herald 5:30 AM Sunday Oct 7, 2012

    Heresy is, unfortunately, becoming common in central banking. The world's most important central banks are printing money like there's no tomorrow.

    Interest rates have been near 0 per cent for almost four years and look like staying that way for another four years.


    New Zealand is a wee way from the zero bound but not that far. This week the Reserve Bank of Australia cut its OCR, Business NZ called for new RBNZ governor Graeme Wheeler to cut ours from its record-low 2.5 per cent, and markets priced in a 0.25 per cent cut over the next 12 months.
    Source

    Bold highlighting is mine.
    Last edited by donna; 09-10-2012, 11:02 AM. Reason: culled to conform to standard for quoting
    Patience is a virtue.

  • #2
    Yeah it's interesting times - I doubt NZ will be able to keep it up indefinitely unless there's a major change offshore - at home here there's too much pain in the export industry, businesses are hurting and the layoffs are happening.

    cheers,

    Donna
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    • #3
      The recovery is like a yo - yo , they reckon this might go on for another 5 years.

      So short term, what does this mean for PI?

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      • #4
        It means my cashflow gets better and better... until the money printing tips over the edge and prices go nuts.
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        • #5
          cashflow with low Interest rates etc fully agree as long as others expenses are in line with inflation.
          prices yes but so many lay offs this reduces the buyer pool?

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          • #6
            Every time I think about fixing, rates start going down again, I did fix some last year (thinking that reading all the economists reports I was on the money) but the majority isnt.
            Seriously was thinking about fixing in the next month, but when you keep hearing this sort of stuff, it changes you back again.
            Certainly once you fix your options are closed off, unless you go short term fix.

            Massive inflation in 5 years time to wipe off my debts I would not be too upset about.
            But probably a good time to batten down cashflow wise for when that starts to happen.

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            • #7
              Originally posted by Bluekiwi View Post
              Massive inflation in 5 years time to wipe off my debts I would not be too upset about.
              But probably a good time to batten down cashflow wise for when that starts to happen.
              It's pretty scary isn't it!? My *theory* is that I will have plenty of time to see a wave of longer term interest rate rises coming and lock in for 5 years. The way I see it, anything under 8% for 5 years is ok by me, so I'm happy to let it ride for now.
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              • #8
                Originally posted by Bluekiwi View Post
                Massive inflation in 5 years time to wipe off my debts I would not be too upset about.
                There seems to be this 'massive inflation is on the way' fear which is often referred to.
                I can't see that happening.
                We know how to control inflation.

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                • #9
                  Originally posted by Bob Kane View Post
                  We know how to control inflation.
                  yes, we do

                  by not creating more money out of thin air

                  what they want to do it create as much extra money as they can

                  but stop before everyone loses confidence in the currency

                  thing is we don't really know how to control confidence

                  and continue lying at the same time

                  politicians and lawyers have the best grasp on this

                  but as the fall of gordon brown and barry hart shows

                  once people start losing confidence

                  it can all slip away in an uncontrollable rush
                  have you defeated them?
                  your demons

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                  • #10
                    I find it really interesting that the Labour are joining the push for a lower dollar.
                    A lower dollar will of course result in higher costs for imported items, notably fuel. As everything in the country is moved around by fuel-dependent transport, every item will over time increase in price.
                    Effectively a wage cut.

                    Think about who a lower dollar will advantage: exporters, workers who will get jobs in export industries, people who have borrowed money (ie most property people), those people working in jobs where they have sufficient muscle to push through wage and salary increases to compensate.

                    Think about those who will be disadvantaged: savers, those people who are not in a position to swing wage and salary increases, probably most beneficiaries.

                    I can understand the Greens going for it, as they and their members are always in sheltered Government or Local Government-funded jobs where they can get salary rises to shield themselves, but non-union Labour voters will suffer.

                    As has been said, any Politician with an 'Idea' should be required to identify those who will suffer from it's implementation as well as those who will benefit.

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