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abitare (99.45)

New Zealand Leaves Key Rate Unchanged at Record 8.25%

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January 23, 2008 – Comments (7) | RELATED TICKERS: GLD , SKF , SRS

If you want a guess at what rates should be to stop the dollar fall or you want a currency that is likely to hold it's value take a look at a real central banker:

Jan. 24 (Bloomberg) -- New Zealand's central bank left the benchmark interest rate at a record-high 8.25 percent to combat accelerating inflation, saying the prospects of slowing global growth haven't curbed the domestic economy.

``The New Zealand economy is projected to keep growing reasonably well,'' Reserve Bank Governor Alan Bollard said in a statement released in Wellington today. ``The labor market remains tight, domestic income growth is still strong and core inflationary pressures persist.''

The longest economic expansion in 60 years has soaked up labor, fanning wages and pushing inflation above the central bank's target, giving Bollard little scope to cut borrowing costs anytime soon. A U.S. economic slowdown that prompted Federal Reserve policy markers to cut rates at an unscheduled meeting this week may spread to New Zealand later this year, allowing Bollard to cut borrowing costs

``Interest rates are set to stay at the current high levels for some time,'' said Khoon Goh, senior economist at ANZ National Bank Ltd. in Wellington. ``We expect an easing toward the end of the year. The global slowdown will eventually have a large impact on New Zealand.''

New Zealand's dollar rose to 76.74 U.S. cents at 10:10 a.m. in Wellington trading from 75.96 cents immediately before the statement.

Guess how much real estate is going to fall if rates go to 8.25% 

7 Comments – Post Your Own

#1) On January 23, 2008 at 7:18 PM, bridgeboy0 (99.82) wrote:

So you think our interest rates are going to 8.25% because we have a tight labor market and strong domestic income growth? 

New Zealand is experiencing an economic boom time.  The US is trying to avoid dipping into a recession.  How do you find ANY similarities between the 2 countries?

I think the rate cut and income tax rebates may just keep us out of a recession (at the cost of inflation).  While this is good for precious metals and commodities, I don't think it is going to kill real estate if we avoid a recession here.

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#2) On January 23, 2008 at 8:48 PM, abitare (99.45) wrote:

For the record: I think the federal reserve system has been a disaster for the US. The dollar has decline 96% since it was created. The FED manipulation caused the Depression, led to the closing of the gold window, consfication of gold held US citizens.  

I do not pretend to know what MARKET rates should be and NEITHER should the FED. The FED raises and lowers rates trying to pretend that it knows what the market rate should be creates bubble, panics and destroys the wealth of the citizens. The FED's artificially low rates 1% created the housing and mortgage bubble that is now imploding and will hurt those who bought homes and those on a fixed dollar income. 

I bought an apartment with a 7.5% loan 30 year fixed in 2000. Now that these insane morons at the FED have lowered rates, the apartment would sell for 2-3X what I paid. But salaries have not gone up 2-3X?, but commodities and hard assets have.  The FED will have to raise rates if it intends to keep the US dollar as a reserve currency. Or the FED can  keep the rates low and we can have  Japanesse style deflation.

"The US is trying to avoid dipping into a recession." 

The more the FED intervenes the greater the panic out of the dollar and US market.  

"How do you find ANY similarities between the 2 countries?"

Compare the currencies. Which would you rather have in the bank US dollars or New Zealand dollars? People are fleeing the US dollar. Why do you think BRIC and commodies have gone up so much?

A recession is part of a business cycle, FED or government intervention will excacerbate the situation and posibly cause a panic or significant depression similiar to the depression the FED caused in the 1930s/

At best it may cause a Japanesse style recession.

Actually, your timing is perfect: Mish Shedlock explains it better:

Faith In The Fed: The Last Bubble To Pop A mad rush by Congress, Bush, the Treasury department and even foreign central banks to "Do Something" is now underway.

If the Fed, Congress, and Central Banks would just stop and think, they would realize they already "did" something. They created the biggest credit bubble in history and we are on the backside of the credit bubble bust right now.

http://globaleconomicanalysis.blogspot.com/ 

Or billionaire Jim Rogers can explain it here:

 

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#3) On January 23, 2008 at 9:42 PM, CycleFreak7 (< 20) wrote:

Wow, that is a great interview. It goes well with dwot's "Squandered Wealth" blog post.

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#4) On January 23, 2008 at 10:36 PM, abitare (99.45) wrote:

dwot - has wisdom and could charge people to share it.

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#5) On January 24, 2008 at 12:50 AM, dwot (99.55) wrote:

Well, thanks abitarecatania...

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#6) On January 24, 2008 at 4:43 PM, EScroogeJr (< 20) wrote:

Hahahahahahaha! If rates ever touch 8.25%, we may as well shut down the country and move to New Zealand.

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#7) On January 24, 2008 at 5:10 PM, abitare (99.45) wrote:

What interest rate is the nations largest banker borrowing at?

Merrill Lynch with $1 trillion in assets just issued prefered stock at: 9%

CFC to sell BAC 7.25% preferred shares

Citi is paying a high price for the capital injection -- the mandatory convertibles it is selling to Abu Dhabi pay a fixed coupon of 11 percent. 

But the FED funds rate is 3.5%?  I would not loan anyone money at 8.25% to buy a house in the US.

Some History for you: 

PAUL VOLCKER: "If you had told me in August of 1979 when I became chairman of the Federal Reserve Board that interest rates, the prime rate would get to 21.5 

Interest rates soared. While the 3-month Treasury Bill was climbing from 8% in September of '79 to 12.5% by year end, the Fed wasn't counting on long-term rates rising as well, from the 9.2% level in September to 10.1% by December 31st.

Into early 1980 interest rates across the board continued to rise and the economy tipped into recession (a mild one but an important one as far as the presidential election of 1980 was concerned). By the end of the first quarter, the long bond was yielding 12.3%. Treasury Bills were to peak that year in the second quarter, 15.6%. The inflation rate for the first quarter of 1980, as measured by the CPI was 14.6%.

By the middle of 1981, it was running at a 9.7% clip and for the year it was below 9%. Volcker was winning.

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