Oh the idiocy!

Elijah Lineberry's picture
Submitted by Elijah Lineberry on Wed, 2007-09-12 22:04

Alan Bollard has retained interest rates at 8.25% idiot Sad

His reasoning for this, as usual, is to keep inflation under control and he is blissfully unaware of several free market fundamentals which make this irrelevant, and mean his interference actually damages the economy, resulting in the opposite to that which he seeks.

There was the hysteria a few months back about the level of the New Zealand Dollar and Bollard, being economically illiterate, jumped in and started trying to push its value down, claiming it was an anti inflation measure!

Well, Alan, here is Economics 101 for you... Eye

In the socialist paradise of New Zealand circa. 1935 - 84 we had a fixed exchange rate, we had tarrifs on imports and a protected economy.

This in no way stopped imports coming into New Zealand and what used to happen was imported goods had to 'jump over the tarrif fence' as they got here, which was very inflationary.
During the latter part of this 1935 - 84 period we had high inflation to begin with, so imports not only jumped over that fence, but the importers would increase prices in line with inflation adding fuel to the raging fire. Sticking out tongue

If there was a good year with Exports the Government of the day would have to take all manner of measures to dampen down the economy...all of which failed.

In 1985 the Dollar was floated, and in subsequent years tarrifs on imports were abolished.

This meant we hung out a sign saying "Open For Business" and imports entered New Zealand without having to jump over the tarrif fence, which in itself was anti inflationary.

Having a free floating currency means we have a kind of 'Shock Absorber' on the New Zealand economy.

When we have a good Export year...such as this one...due to a variety of factors, such as exporters remitting their money back home, the World giving us a big 'tick' for how well we are doing and more exports in general, the Dollar rises due to increased demand for our Currency on currency markets.
This high currency value reduces the amount of money Exporters, such as dairy farmers at the moment, would otherwise receive for their exports.

As the currency reaches a high level imports fall in price...imports of a lot of fundamental products (like oil)...so on the one hand you have lower import prices, and exporters receive less than would otherwise be the case.

There is your 'shock absorber' ...THERE is your anti inflation measure! Laughing out loud

It is all very, very simple Mr Bollard.

The NZ Dollar went from 65 US cents to 80 US cents in a year.....and..gosh Alan, how bizarre you did not realise that was anti inflationary! you idiot!


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Anyone

Elijah Lineberry's picture

advocating a devaluation of our currency (such as Socialists, Bollard, Cullen, Trade Unions and other halfwits)...should look at this Shocked

Just astounding!

I, for one, am delighted with the NZ Dollar having a new standard level of around 75 US cents! Smiling

Mark

Elijah Lineberry's picture

I am sure we agree on around 95% of matters.

Bloomberg's take on it:

Mark Hubbard's picture

Bloomberg's take on it:

http://www.bloomberg.com/apps/...

And with no rate cut expected until second half of 2009, I guess I remain basically in short term cash at RaboPlus for the duration.

Well damn me.

Mark Hubbard's picture

We agree on this Elijah Smiling

As the currency reaches a

Lance's picture

As the currency reaches a high level imports fall in price...imports of a lot of fundamental products (like oil)...so on the one hand you have lower import prices, and exporters receive less than would otherwise be the case.

There is your 'shock absorber' ...THERE is your anti inflation measure!

Haha! That was my rationale. But alas, I figured that since 'smarter' people in higher paying jobs than me didn't think so, I couldn't possibly be right. Sticking out tongue

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