Friday, April 27, 2012

QE Not Coming to New Zealand

This is the headline in the mainstream press today. Seems our Finance Minister here does not want "to follow in the footsteps of a number of larger economies and print money".

"Actions taken by the US, UK, Japan, and Switzerland were not relevant in New Zealand's context, as the Official Cash Rate here was still at 2.5%, while rates in those economies were at, or near, zero. Such a policy would also artificially pump up the values of certain assets, undermine the Reserve Bank's balance sheet, and create the possibility of future high inflation, English said."

"Artificially pump up the value of certain assets". Hmm. Now there is a man talking sense. This you would not hear from the likes of Tim Geithner or Ben Bernanke.

On the other hand, we don't have to print money here anyway. After all, what possible good would it do? The result would be our currency losing value in a mere blip of time. The 'big currency boys' have very much larger bazookas than us. Our pop-gun currency battle would end in tears.

Perhaps another reason Bill English knows we don't need to print money is the fact that we can inflate our money supply by converting, into NZ dollars, all the USDs and Euros that flood into this country. Just borrow more of those, after all, they are at very cheap rates. To prove that we are already doing this and have "artificially pumped up the values of certain assets", just look at the price of gold over the last year in New Zealand dollars. Today one ounce of gold sits at NZ$2037, this time last year it sat at NZ$1860. Are we already flooding our small economy with converted NZ dollars? You be the judge.

What New Zealand does hardly matters in the arena of global finance. However it does matter to New Zealanders. High deficits and misplaced property 'investing' are killing off capital available for growth. I will say this once again, there is no way we can ever pay off our debt. Selling state owned assets and private farms will not cut it.

The wolf is clawing at the door wanting it's dues. It would not like bags of fresh, devalued money thrown out to feed it.

Gold in New Zealand dollars: $2037.50 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $38.23 per oz
Previous all-time high: $59.19
per oz (30 Apr, 2011)
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