The Debt Problem
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The Debt Problem |
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Cullen
labels markets irrational as NZ dollar passes US70c mark
11.02.2004
Finance Minister Michael Cullen has continued his attack on the highflying
dollar saying the markets are acting in an "irrational" manner. The
New Zealand dollar momentarily crossed the United States 70 cents mark last
night and looks set to break its post-float high in the near future. Most of the
strength is related to the continuing decline in the US dollar, but Dr Cullen
told the finance select committee today that foreign exchange traders' analysis
of the strength of the dollar defied belief. The markets did not seem to take
into account New Zealand's current account deficit, he said.
The following chart is to the
end of the September quarter
Source Statistics New Zealand
December
deficit rises to worst on record
30.01.2004
By
JIM EAGLES business editor
The
shortfall between spending on imports and earnings from exports reached record
levels as the country engaged in its pre-Christmas spend-up. Statistics New
Zealand yesterday reported the worst deficit for the month of December since
records began in 1960. The provisional $506 million shortfall for the month was
well above the $297 million expected by economists.
NZ population is approx 4 million. The deficit for December
is $126.50 per head of population.
CPI inflation is 0.7% for December or 8.4% annualised. That is theft by
stealth if ever I saw it.
Notes and coin held by the public. Reserve Bank data. M1 $22,135m
a 9% increase year on year, M2
$52,293m a 4% increase year on
year. It is no wonder there was a spend up with that sort of a monetary
increase. That is truly inflation of the money supply.
Since the end of 1990
residential mortgages have risen from $15.6 billion to $82.4 billion and now
represent 45.5 per cent of bank lending compared with 24.4 per cent in December
1990. If my calculator is correct that means total bank lending is $181 billion
or $45,250 for each man woman and
child in the country. Add to that the deficit in the current account of
approximately $4 billion and each member of the population carries a liability
of $55,500. Remember that is ONLY bank borrowings, there is other private sector
debts to be repaid.
This all leads me to the conclusion that there will be a shift in
emphasis towards production in the near future as that is the only way we can
buy our way out of debt. The task is orders of magnitude harder with an over
valued dollar, a dollar destined to get stronger because we are seen by the
world as a producer nation.
More fool them.
Alan Lunt
allies1111@tacticalinvestor.com