The Hive on the Deposit Scheme

October 16th, 2008 at 1:00 pm by David Farrar

The Hive is very worried about the flaws in the Government’s deposit scheme:

Why, if our hand was forced by the Aussies did we not adopt the same policy as the Aussies?

In particular – why did we not match Australia’s guarantee for bank lending in the international wholesale market?

Those countries that are running large current account deficits – NZ, Australia, US etc are in competition for an increasingly scarce amount of funds on the international wholesale markets. Most of the money on offer is from Asia. Now if you were an Asian investor with $100 million to invest who would you invest it with? An Australian bank which has this loan guaranteed by the Australian Government, or a New Zealand bank that has no guarantee from the New Zealand or any other government? The answer is obvious. The money will be loaned to Australia. Why would you take a risk on New Zealand when there is no risk in lending to Australia.

I imagine we could still get some credit, but have to pay more for it.

… we are a nett borrower economy. We are not at present (maybe Key’s 40% plan for the NZSF will help right this) able to generate the funds we need to keep our economy working from domestic savings. So we are dependent on a funding stream that looks as though it is about to dry up. Before too long the banks are going to have to literally stop lending. And this will mean chaos across the economy. New activity will stop and existing loans will be affected also. Don’t expect your fixed term loan to be rolled over when it expires, even on your house.

Does Cullen know what to do? He’s done okay when faced with the best economic weather since WWII, but does he have the answers now? The fact he has reversed his stance of increased borrowing for infrastructure suggests an element of making it up on the hoof.

Tags: , , ,

11 Responses to “The Hive on the Deposit Scheme”

  1. Adolf Fiinkensein (2,903 comments) says:

    Cullen will simply mimic everything National suggests but there is one thing he cannot do because he is physically and politically incapable. That is to actually REDUCE government spending and the number of useless civil servants.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  2. Lee C (4,516 comments) says:

    Does Cullen know what to do?
    No.
    Never did.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  3. Bryan Spondre (225 comments) says:

    Matthew Hooton reveals that John Key aka Johnann Keyski is actually a deep cover agent for Communism:

    First, we’ve all heard the story of how Key’s mother was an immigrant from Austria (or so they say – “Austria” is obviously code for the group of countries to its East) and that he grew up in a state house. Was there a shortwave radio under the floorboards? What kind of late night indoctrination sessions went on? What secret communications went back to Messines Road? Was Key’s lack of interest in the Springbok Tour because he was secretly plotting more radical political action?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  4. Brian Smaller (4,023 comments) says:

    “The fact he has reversed his stance of increased borrowing for infrastructure suggests an element of making it up on the hoof.”

    No. Right wingers have hooves, the left have Trotters.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  5. gd (2,286 comments) says:

    note the RBNZ site ask you to refresh to ensure you are reading the lastest version of the policy This is not policy on the hoof

    This is policy at a rapid gallop

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  6. Turpin (342 comments) says:

    Cullen couldn’t plan his way out of a paper bag without taking OPM off of them.
    So has he got a plan, No?
    It’s a day by day thing for him and I bet H2 is clueless too.

    Have they had a plan to get us into the top half of the OECD Again?
    No, not a credible one, otherwise they would have trumpeted it from the rooftops.
    They must be hoping National actually win so they can let John Boy fix up their perfidy.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  7. jackp (668 comments) says:

    Cullen doesn’t have a clue. John Keys has more options available to him because he has been doing this for 20 some odd years and made 50 million. It was a brilliant move politically taking 40 percent of the superannuation and put it back into New Zealand. Now Cullen is even more lost. Key has more depth.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  8. PhilBest (5,125 comments) says:

    Sorry, but the answer is, can the taxpayer in NZ pay for the next bailout that will be necessary? (remember, each one is bigger than the last). I actually think government guarantees are an invitation to disaster. Note that almost ALL the causes of the current crisis have arisen precisely where there ARE “government guarantees” or oversight or regulatory or political involvement. What we are going to see eventually, is not the triumph of big government and the death of the free market, we are going to see the big, messy death of big government.

    Can anyone say “Iceland”?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  9. OECD rank 22 kiwi (2,752 comments) says:

    Thanks to Cullen’s nine years of economic mismanagement New Zealand is the next Iceland in waiting. The only question is when will the trigger be pulled on this pending economic disaster?

    Just try and buy a block of cheese at your local supermarket when your bank has frozen all withdrawals and deposits on your bank accounts. Assuming of course that you still have a job at that point in time.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  10. somewhatthoughtful (466 comments) says:

    surely this isn’t really up to cullen though? Wouldn’t this policy be up to the reserve bank to maintain and develop, he just, somewhat cynically, announced it.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  11. getstaffed (9,186 comments) says:

    First the shock, and then the jokes. These were emailed into the BBC recently…

    How do you define optimism? A banker who irons 5 shirts on a Sunday.
    Sara, London, UK

    What’s the difference between Investment Bankers and London Pigeons? The Pigeons are still capable of making deposits on new BMW’s
    Rob, London, UK

    What’s the difference between an investment banker and a large pizza? A large pizza can feed a family of four.
    Tom, London, UK

    What have Icelandic banks and an Icelandic streaker got in common? They both have frozen assets
    Stuart Harley, West Malvern, UK

    Money talks. Trouble is, mine only knows one word – goodbye.
    Nigel Macarthur, London, UK

    For Geography students Only: What’s the capital of Iceland? Answer: About Three Pounds Fifty…
    John Green, Chessington, Surrey, UK

    Quote of the day (from a trader): “This is worse than a divorce. I’ve lost half my net worth and I still have a wife.”
    Sottovoce , Cambridge, UK

    Masked man holding a bank cashier up with a gun. Says: ‘I don’t want any money – I just want you to start lending to each other…
    David, Cambridge, UK

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote