Print baby print

May 25th, 2013 at 6:25 am by David Farrar

Stuff reports:

Economist wants the Reserve Bank to intervene in foreign exchange markets for as long as it takes to bring the kiwi dollar down.

The Berl economist told deer farmers in Wellington the bank should become a daily trader till the exchange rate fell to “something sensible for our export sector”.

The dollar has traded close to US86c recently, falling to almost US80c this week, before rebounding to about US80.9c yesterday.

“Sooner or later the speculators – Japanese housewives and Belgian dentists – will find somewhere else to play.”

That may be one of the most risky and/or stupid strategies I have ever seen. In fact the more a Government intervenes in a currency, the greater the profits are for those speculating against it.

I can think of several countries that have tried that strategy – and all have lost.

The reason why they played in New Zealand was because they knew it was an easy win.

Asked if New Zealand had the resources to do this, Nana replied, “It’s called a printing press. I’m not kidding,” he said to laughter.

“You can afford it. The Government has the legal right to print as much dollars as it likes.”

The Green Party policy. Just print as much money as possible.

It certainly would lower the dollar.

It will also increase prices and bring  back rampant .

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38 Responses to “Print baby print”

  1. freedom101 (510 comments) says:

    April 1st has been and gone (I had to check). This is completely nutty. I hope that it gets plenty of air play and that Russel Norman comes in behind it. The Greens’ policies need lots of fresh air, sunlight and disinfectant.

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  2. George Patton (350 comments) says:

    Since Ganesh Nana is so supremely confident in his strategy, he will no doubt sell everything he owns and play the currency markets as he recommends the state does.

    Ganesh Nana may not have been on the receiving end of graphic sexual acts before, but if he played the currency markets, he might, but without any loving feeling or warmth.

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  3. hannity (152 comments) says:

    “The Green Party policy. Just print as much money as possible.”

    DPF are you ignorant, or just being dishonest again ?

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  4. Manolo (14,065 comments) says:

    Is his first name Ganesh or State?

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  5. Reid (16,634 comments) says:

    “The Green Party policy. Just print as much money as possible.”

    DPF are you ignorant, or just being dishonest again ?

    Yeah DPF, how come you didn’t mention the bit about… you know, the bit that makes it all make sense, even though on the face of it, it doesn’t. That bit. The bit that the biased press never mention whenever Wussell launches one of their bwand new ideas which would explain everything but which always seems to get lost in the kerfuffle suwwounding the bwand new idea, that bit.

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  6. Right of way is Way of Right (1,122 comments) says:

    I think his first name might be Ba, as in this policy is Ba Nana’s!

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  7. dog_eat_dog (790 comments) says:

    One decent trading bank in the US or London putting out a memo to us the NZD as a holding/safe currency mid-trade would undo whatever money we could print much quicker than we could print it.

    Also, can this economist explain to low income earners why they should have to pay more for everything, why food prices would explode with added pressure on the supply chain and why people who can’t afford to should pay more for petrol, etc? No, because discussing how it would affect our standard of living is being critical of a Green policy and no one in the media must ever do that.

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  8. David Garrett (7,544 comments) says:

    …and looking at this from the other end, I recall going to the US for the first time in 1978 and getting more USD in exchange than NZD exchanged…I have confessed to my economic ignorance here before, but why was that? (the exchange rate, not my economic ignorance) and why didnt the sky fall in back then?

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  9. Colville (2,300 comments) says:

    As a greedy Capitalist I want rampant inflation. I own a land. Inflation makes land prices rise. Also causes speculation in housing due to assured tax free capital gains. All great for me.

    Vote green! :-)

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  10. Komata (1,202 comments) says:

    Colville

    The problem is that by doing what you describe (and also being a land owner and ‘speculator’), you would be one of the socialist’s ‘Rich pricks’ and would have to be ‘disciplined’ for showing initiative, and daring to make money.

    Not allowed sir, not allowed – unless they themselves do it (and, such is the socialist way that they will, of course, be permitted to do so).

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  11. Mobile Michael (464 comments) says:

    I seem to remember the British fighting the currency speculators in the early 90s, and the speculators won. I think the British government and central bank have much larger resources than our Reserve Bank, so I’d back the dentists and housewive.

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  12. duggledog (1,589 comments) says:

    Ssshhhh keep your voice down DPF!

    After the dust settled I was going to buy more property!

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  13. MD (62 comments) says:

    Isn’t it long overdue for us to stop paying Berl? I’ve seen so much idiocy from them, that its’ way past a joke. Look at a council putting up a flakey business case for some ridiculous project, whose name will be on the analysis supporting the supposed benefits? If you see the project is being supported by an economic analysis from Berl, you just assume it’s dodgy. It may be that they do some very good work, but I’ve seen so much absolute rubbish that was just analysis to suit whoever was paying for it that the firm is completely tainted. If private enterprises want to pay them, it’s their call, but there should be a blanket ban on all government funding of economic analysis by them, and if a business case comes up with one then it should be sent back to get an economic analysis from someone else.

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  14. freedom101 (510 comments) says:

    Greebour will exempt the family home from their capital gains tax, so I guess we will all be living in $1m to $2m family homes!

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  15. bhudson (4,740 comments) says:

    Just more evidence that the Left are wealth destroyers.

    And indiscriminate with it. They’re quite happy to undermine what little wealth lower income earners have by raising the cost of living.

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  16. hj (7,066 comments) says:

    If National is so economically literate how come the Savings Working Group lambasted you thus:

    SWG Report:
    The Government’s role
    Clearly, there are serious questions to be asked about New Zealand’s economic policy and how we got into this mess. Why was it not better designed and managed, and more focussed, coordinated and strategic? Did the electorate simply get what it voted for, without realising what was really happening, or have New Zealanders not been well served over the years?
    Underlining the current difficult situation, the government is spending at an unsustainable level and running large deficits (the opposite of saving). As a result, it is borrowing a hefty $300 million a week. It needs to return the Budget to a surplus of no less than 2% of GDP as soon as possible.
    Looking ahead over the next 20 years or so, the government will face increasing costs from the effects of an ageing population. If the government is to keep its borrowing within a sustainable level (as it must) over this period, its options are to: substantially increase tax revenue, reduce government spending, or increase government sector productivity and performance. The first two options are clearly unpalatable. However, modelling shows that if the government can lift its performance and increase productivity by 2% a year for five years and 1% thereafter, there would be no need to raise taxes or cut government services. The SWG strongly recommends this.
    On other government policy issues, SWG recommendations include:
    – A much more strategic and integrated approach to policy generally.
    – Serious consideration of the impact of the level and variability of immigration on national saving, and the impact that this might have on the living standards of New Zealanders. There are indications that our high immigration rate has pushed up government spending, house prices and business borrowing.
    – Improving data on household and business saving.
    http://www.treasury.govt.nz/publications/reviews-consultation/savingsworkinggroup/pdfs/swg-report-jan11.pdf

    National doesn’t do what it is told because it has a people serving sector (developers, property investors, assorted vested interests) chewing in it’s ear.

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  17. hj (7,066 comments) says:

    I suppose you would all find land taxes unpalatable? The Property Council isn’t too chuffed (good sound economic reasons cough…)!

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  18. AG (1,832 comments) says:

    It will also increase prices and bring back rampant inflation.

    Lowering the value of the NZ dollar most likely would increase the price of many imported goods. However, this is exactly what everyone wants to see happen – including Bill English. See this, for example: http://www.stuff.co.nz/business/industries/8298754/English-grilled-over-high-kiwi-dollar

    English said the strong exchange rate was helping maintain household living standards.

    “The exchange rate amounts to the purchasing power of New Zealand household and one of the reasons that households have got through the recession in reasonable shape is that the exchange rate has, where it is, helped maintained their standard of living.”

    English later said that he would prefer if the New Zealand dollar was weaker, but denied he wanted to cut wages.

    If that seems to make no sense, it’s because it doesn’t – the fact is we all agree that the NZ dollar is “too high” and we all want to see it fall … it’s just one side thinks there’s no way to do this through interventionist measures, and the other side thinks there is. It’s not an argument about ends but means, and so English (and you) are being a bit naughty by pretending otherwise.

    As for the claim “printing money will cause rampant inflation” … Japan? The USA? Switzerland (which is pursuing exactly the policy Nana is advocating)? Well – turns out its CPI has been negative for the past eighteen months: http://www.tradingeconomics.com/switzerland/inflation-cpi. So, you now … facts.

    [DPF: Facts without analysis are well, crap. Japan is printing money *because* they have deflation. It doesn’t cause deflation.

    NZ does not have deflation. We have 1% inflation likely to get to 2% within a year]

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  19. wat dabney (3,809 comments) says:

    Economist Nana’s solution does indeed seem to be the same as the Greens': rape the poor through inflation.

    Nana and Russel both fail to appreciate that inflation is as much a moral issue as it is an economic one.

    I’d expect Russel to be clueluess about morals – he is after all a tireless advocate of coercion and violence – but I’d expect more from an economist.

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  20. Viking2 (11,565 comments) says:

    Buy more property, its the past present and future.

    Inflation will come sure as night follows day. Currency values change and the mindless belief that changing interest rates controls inflation will again be shown to be wrong. Increasing interest rates internally increases costs for everyone. Nothing could be more inflationary and past evidence will show that high interest rates just encourage the specualtors, oversea’s traders et al.

    The only way to have stable interest rates is to earn more than we spend. Then we don’t need to borrow so prolifically.
    If we earn more than we spend and we reduce our external deficit (which has been ignored forever), then we will be in a good place.

    That means less wasteful spending of our currency on behalf of both Govt. and population. It means importing less rubbish that ends up in landfills a week later,(you have all bought rubbish from shops like that), retaining our internal earning inside NZ and generally being more austere with our wants etc. until we reverse the NZ decline (which incidently has been forever.).

    We are constantly bombarded with calls for increasing exports etc. Well we have been doing just that forever as well and the question is have we improved or are we still running backwards?

    God forbid that we went back to the days of having to earn your oversea’s funds yourself before you can buy anyhting from offshore but that’s what may lie in the future again if we don’t rethink our spending and the way we generate income for NZ INC.

    Since the 80’s we have listened to the current monetary guru’s and we have not got a lot better. Indeed probably worse.

    Think about history.

    Meantime I am going to buy more property soon.
    Residental that is. Commercial property markets change and wax and wane. Residential is much more stable because we are going to have lots more people in NZ, all in need of a bedroom.

    Think about this.
    In 1900 there were about 1.5 billion people in the world. Despite wars, famines et al by 2000 there was 5 billion and it is increasing daily. There is no more land, so either we have a greater spread or a greater utilization of the same ground or ground surronding our present use.

    Either way is a winner for the Resdential market.( Providing you use your knowledge seeking capcity to be in the right place i.e. Haast would not be a good place).

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  21. burt (8,316 comments) says:

    The thing we seriously need to consider here is the left leaning government approach to taxation. In the context of printing money (and/or strong government spending) strong inflation is a given, rampant a possibility. Now on entering office the loopy left strong progressive tax forces will do something like lock and load a top tax rate of circa 40% on a threshold which will overtime be ridiculously low like $90k. 6 years on we have a situation where 75% of high school teachers are ‘rich’ by virtue of being in the top tax bracket.

    Some bleeding heart blinded by ideology finance minister will be crying himself to sleep because he is going to need to give tax cuts and the economy will be tanking with middle earners bearing the brunt of the tax burden. Just like 2005-2008 …. 1987-1990…

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  22. bhudson (4,740 comments) says:

    And another comment from the article AG linked to:

    [David Parker]”The idea that an artificially high exchange rate is good for New Zealand workers because it holds down the price of flat screen TVs is a nonsense if they can’t earn a decent wage.”

    Actually more because it holds down the cost of things like food, clothing, petrol and mortgages. Of course Parker wouldn’t want to inject that sort of honesty into the debate.

    Intervention in the exchange rate is to have the workers pay so that businesses can discount their products. It is volume over value – fool’s gold. Just another indication of how much Labour has drifted away from its roots.

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  23. burt (8,316 comments) says:

    bhudson

    The problem is nanny state mentality prevails in the left voting bloc. The sheeple trust the nice friendly big spending gummit will make it all ok. Just like they did before it all turned to custard last time, and the time before that.

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  24. altiora (279 comments) says:

    Viking2: you’ve nailed it.

    New Zealanders already have the power to do something, but they don’t have the courage of their convictions to use that power.

    They can start saving money, trying every day to be a more productive worker, upskill whenever possible, stop buying real estate using borrowed funds, invest in reputable companies, stop buying rubbish on the credit cards they don’t need, stop taking overseas holidays and instead visit any number of wonderful NZ destinations, and start buying NZ-made goods (even where those goods might be a few dollars more expensive).

    If we all did that, NZ would be far better off. But people don’t want to do this because it requires them to change their ingrained habits and laziness.

    We don’t need statist solutions; the people already possess the power. But of course, don’t expect any politician to espouse this obvious truth.

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  25. Elaycee (4,409 comments) says:

    Of course, Ganesh Nana failed to point out in his latest brainfart that any drop in the NZD will inevitably lead to an increase in cost of everything imported including the cost of fuel…. which in turn is passed on to all consumers. Which results in inflation…… and so on.

    Anyone who thinks that printing more and more money is good for the economy, just needs to think one word: Zimbabwe – where they have rampant inflation and an economy totally buggered.

    And Garesh Nana has merely confirmed what we suspected for a long time.

    He’s simply another Gweenie wet, disguised in a suit.

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  26. meanybeany (29 comments) says:

    Money printing is not causing inflation in the US and Japan because the economies there are operating at well below full capacity and deflationary pressures exist. In NZ, our economy is operating at much closer to full capacity and the Christchurch rebuild will likely bring about capacity constraints. Inflation is, therefore, the very likely result from any money printing

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  27. orewa1 (410 comments) says:

    When will the business lobbyists stop their ritual bitching about the “high NZ dollar.” The issue is actually the low US dollar. The US is no longer an appropriate headline benchmark for us.

    Its time we had a basket to measure against those currencies that really matter to us. China (now our biggest trading partner) and Australia would be a good start.

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  28. burt (8,316 comments) says:

    orewa1

    But but … Why would we need a benchmark for the great leap backward to the 70’s that the Labour/Green machine has planned for us. We could have fixed exchange rate and regulated retail pricing and if we get really lucky we might even get a wage and price freeze again.

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  29. hannity (152 comments) says:

    Reid (13,570) Says:

    National should carry on borrowing printed money, and get someone elses’ kids to pay back the interest bearing debt.
    Did I miss something out ,weid?

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  30. beautox (422 comments) says:

    It’s a joke that this idiot gets away with calling himself an economist. It’s like an electrician suggesting you replace your fuses with nails. He should be packed off to Australia right away, as they seem to be lapping up loony economists (well, at least until the next election).

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  31. loonybonkersmad (27 comments) says:

    Berl = Green Party economic policy. It’s simple.

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  32. David Garrett (7,544 comments) says:

    that PROFESSOR Geddis eh…What a guy…not only a legal guru but an economic one as well…

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  33. Alan Wilkinson (1,889 comments) says:

    @hj,your SWG: “Current long-term fiscal projections show that if successive governments keep debt to a sustainable level–as theyshould–then, if there are no substantial increases in taxes, their spending in real terms will decline each year for about the next 30 years. This is a seriously unattractive prospect.”

    Doubtless, for the bunch of bureaucrats and fellow travellers who produced this self-serving twaddle. For the rest of us, this would be an excellent outcome.

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  34. greenjacket (486 comments) says:

    “The Berl economist…”
    I understand the Berl economist also does children’s parties and during the holidays puts on kiddies’ shows at shopping malls.

    I suspct that in future that will be the only work available to Berl economists.

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  35. Sir Cullen's Sidekick (895 comments) says:

    Remember folks, uncle Nana will be the economic advisor to Deputy PM and Finance Minister Norman in Sheep Shearer’s government in 2014.

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  36. Jack5 (5,157 comments) says:

    DPF’s following statement, reprinted from above, is not completely accurate. He writes:

    …That may be one of the most risky and/or stupid strategies I have ever seen. In fact the more a Government intervenes in a currency, the greater the profits are for those speculating against it….

    The Hong Kong Monetary Authority not too long ago gave speculators a heavy pasting when they were betting the authority would have to devalue the Hong Kong dollar. They lost. Admittedly, China backed Hong Kong.

    The Swiss Central Bank in September 2011 imposed a cap of 1.20 Swiss frances per euro, and this continues. It has been reporting substantial profit. For example, about four weeks, ago reporting its result for the March quarter, the SCB reported its foreign currency position included GAINS of the equivalent of 6.59 billion NZ dollars.

    In an interview with Bloomberg recently (May 5), the Swiss Central Bank vice-president Jean-Pierre Danthine said it was not allowing monetary conditions to tighten because the Swiss franc still remained highly valued at 1.20 euros. The bank has repeatedly said it will take extra measures if needed.

    Danthine said the liquidity generated by the SNB’s currency interventions to defend the cap (the money printing DPF talks of) would have to be withdrawn in the medium and long term, though there is “absolutely no risk” of inflation at present.

    NZ is in a small minority of countries with free-floating currencies, now that the US is printing money. Japan, too. The Governement of Brazil, a champion of free floating since January 1999, this past week has been active in currency markets. The Financial Times reported this week that the Brazilian Government has sold more than two billion dollars of derivatives in the currency markets this year to prop up the real. None of the other BRIC countries (Russia, India, China) has a free floating currency as NZ does.

    Singapore, with its peg to a basket of foreign currencies, and Hong Kong with its US dollar peg, are examples of small trading economies that are handling their currency better than New Zealand with semi-floats. NZ should be looking at how they are faring. Perhaps what Ganesh and co should be talking about is whether we need a managed float – a basket. This got a bad name in Leftist Muldoon’s final days. Many other states have made it work, however.

    IMHO, our bureaucrats and politicians are smug when it comes to currency policy. They, or their advisers, listen too much to the trading banks, which may very well have a vested interest in keeping the NZ exchange rate high. They are certainly clipping the ticket on a lot of money coming in and out of the country.

    Radio advertising continues for mums and dads to get into currency trading. This is bubble stuff, and will inevitably end with hard luck stories in our leftist MSM.

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  37. Jack5 (5,157 comments) says:

    David Garrett (7.58am post) recalls his experience in 1978 when the NZ dollar was worth more one US dollar.

    In 1979, NZ introduced a crawling peg. By 1983 the exchange rate had fallen 23 per cent. In June 1982 came the Muldoon price freeze and a trade-weighted peg of the NZ dollar. Speculators bet NZ would be forced to devalue, and the Reserve Bank drew on its currency reserves. There was a crisis, and I think, a snap election. The kiwi dollar was devalued by 20 per cent immediately after the election. Under Roger Douglas a floating currency regime was introduced.

    NZ failed with a basket arrangement in that instance, but can you blame the arrangement, or was it a victim of the socialist policies of Muldoon, or even of the struggle as NZ continued to adjust after the loss of its dominant market, Britain, as that country moved into the EC?

    If Singapore can run a system using a (secret) basket of trading partners’ currencies, NZ ought to be able to do the same.

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  38. Colville (2,300 comments) says:

    If Singapore can run a system using a (secret) basket of trading partners’ currencies, NZ ought to be able to do the same.

    Ha! Some pinko would leak the confidential list to the pinko media to publish!

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