Domestically, the Government’s planned asset sales will be the domingating political and economic issue. “The politics are fairly easy to predict – there will be a referendum, and the result will be a vote against. The unknown is how large the turnout is – the larger the turnout, the more damaging it may be.”

I agree with you on this point. The question remains though, do people feel strongly enough to allow it to change their vote in the next election, which ain’t that far off? It doesn’t appear the issue was a big contributing factor in the last election. Will Key have enough to influence the normal plebs, like myself, into putting our money on him, despite him having sold part of MY asset? It will have to be a very steady and improved economy during this next year to tempt me in that direction. I would probably require a few more carrots than what appears to be on offer.

I’m no media junkie, but I learned 15+ years ago that “journalists” are experts at taking casual throwaway remarks and turning them into page 1 fodder. Based on their well-honed ability to choose only the silliest and most extreme comments from an otherwise moderate conversation I have long since labeled mass media journalists as Stupidity Amplifiers. With very selective filters.

When they have a live one in their net then anything is possible.

Foreigners haven’t started dumping US treasuries yet. Until that becomes a reality I can’t see the political games having such a big negative impact on the US dollar. As I recall, what happened last year when the US was downgraded was investors actually bought US treasuries…

Also, the US is full of people with lots of assets to invest, and when things go pear shaped (as problems with US debt would imply) they tend to repatriate their assets back to the US, rather than leave them abroad exposed to risk and currency fluctuations.

So I don’t think the US debt issue is about to trigger capital flight out of the US, and into “safe havens” (in terms of debt) such as the NZ dollar. On the contrary, I see the NZ dollar selling off on bad news out of the US, and the US dollar strengthening.

The mid-long term decline of the US dollar is I think more due to their trade deficit. There is never a shortage of people who have sold junk to Americans looking to sell their US dollars back into their home currencies. There’s a persistent US dollar selling factor there.

However, if US unemployment continues it’s gradual fall, this could also lead to expectations for monetary tightening from the FRB being brought forward, and thus upward pressure on US bond yields. The decrease in interest rate differentials with NZ assets could see the NZ dollar weaken.

Another thing to look out for is the potential for the US to ramp up it’s domestic energy production. Energy imports contribute to the US deficit, but if this new technology being bandied about can indeed turn the US into a net energy exporter, this too could bring an end to the long term US dollar downtrend.

What’s wrong with women in Auckland? Don’t you like fly bye belles?