Meesto ([info]meesto) wrote,
@ 2007-07-24 14:45:00
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Current music:The Sonic Infusion Episode 71 My House

Runaway Currency thoughts continued.
Runaway strength in a currency is indicative of an impending systemic failure. Since March '07 the NZD has appreciated 20% against the USD. That works out to an annualized rate 48%!

I keep thinking that KiwiSaver is the NZ Government's way of saying "sorry, your purchasing power is going to go down by 50%". Why else would they give away so much money over the coming years? By depositing up to ~NZ$2,000 into every participants accounts this year they NZ Government is able to take real money out of circulation creating, in effect, a huge sponge with which to sop up excess liquidity. Money which would have otherwise made NZ's monetary inflation look like the horror show that is currently going on. All it is really doing is tarting up the NZ$ and making the final outcome all that much worse.

I swear I can hear the sound of a huge, global financial train wreck going on. It may be that NZ is the cow-catcher on the front of the locomotive.


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[info]danjite
2007-07-24 03:43 am UTC (link)


How is the Kiwi$ moving relative to the Euro and the Yen? About the same as last year, no?

We are hearing much of the same here about the Thai baht zooming out of control and pending disaster- only it isn't moving against the Euro.

The only monetary unit I see moving is the dollar, and quickly downward. If one measure one's local currency agains the dollar, it appears your currency is going crazy. If one drops the dollar out of the world monetary equation, do things look as dire?

Here in Thailand, yes. We are a exporter and most of the exports are dollar denominated and the crash of the dollar is killing the export economy. As NZ is not as strong a dollar denominated exporter as Thailand, I doubt the demise of the dollar will be as bad there.

Alas, I have yet to get a good understanding of the economy there. You know it better than I and know your internal fundamentals.

AS for the huge, global financial trainwreck... I suspect it is only if your economy is US$ centric.

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[info]meesto
2007-07-24 04:55 am UTC (link)
The NZD is at all time highs with the Yen, and Swiss Franc and showing remarkable strength to the Canadian Dollar, the Pound and Euro (these last three at all highs for the past 12 months).

Across the board we are seeing a 30%+ move in relative strength to other currencies.

It is my perception that the paper-based fiat system is being cored from the inside out and is weakening structurally by the day. I would say that from inside the US that the train wreck will be less good than outside, but there won't be anyplace fiat currency which is completely "safe". Only temporary, relative safety will be found.

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[info]mundens
2007-07-24 06:42 am UTC (link)
Hmm, I'd have to agree with [info]danjite, we're only a touch stronger, against the important currencies .59 to the Euro (a year ago it was .49, a .1 change), .39 to the pound (a year ago it was .34, a .05 change), etc, but that can be accounted for because our economy is better off than theirs, and we have a lower debt loading as well.

The big change is the crash of the US dollar against everything else. The equivalent change has been from .69 to .81, a .22 change!

There is no "30% move" anywhere except for the US dollar.

The problem is that too many of our exporters are paid in US dollars. They should be asking for Euros or Yuan.

It would be interesting to see who is selling the US dollar cheap. Presumably it's China, showing it's muscle again, or just deciding it's time to get out of the dollar


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[info]meesto
2007-07-24 07:51 am UTC (link)
I have been basing my calculations off of previous interim lows which can be seen from around 18 months ago.
0.600 to 0.810 NZD/USD is a 35.0% move.
0.680 to 0.980 NZD/JPY is a 44.0% move.
0.745 to 0.975 NZD/CHF is a 30.0% move.
0.670 to 0.846 NZD/CAD is a 26.0% move.
0.328 to 0.392 NZD/GBP is a 19.5% move.
0.805 to 0.915 NZD/AUD is a 13.6% move.

An average of 28% loss of six major currencies to the NZD across the board. So I was off by 2% (my first figures were guestimates). And my guestimates were so close because I have been following this like a hawk for years.

So, in fact, I was being rather conservative with my summarised figures. I should have probably stated that I was working with an 16-18 month window as derived from the 5-year charts off of http://www.findata.co.nz/markets/ForeignExchange.aspx

How are you defining the NZ economy as being "better off than theirs"? The Hutt valley has seen the closure of the Colgate Palmolive plant in Petone, Firestone in Upper Hutt, and Queens St. Upper Hutt is peppered with vacant shops and a new mall which is still half vacant waiting on a "major retailer" to sign on? And there is a real estate office on every corner. That does not sound like a healthy economy to me.

Nor does it when the government (Cullen and Clarke) start strong arming the NZD by saying on the one hand that Act 12 might be invoked to manipulate the OCR on grounds to suit the remaining exporters in NZ or that "we might as well get used to a strong dollar".

Furthermore the RBNZ is crazy for intervening on the OMC Forex markets in an attempt to manipulate the currency lower while telegraphing that they are doing it. It's all in their own white paper that such action presents a contradictory message. I think it is obvious that they are all standing around slack-jawed and grabbing one lever after another in an attempt to cool things off so that we don't implode.

So I am sorry to say but yes there has been been some very significant moves of 30%+ in a number of currencies.

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[info]danjite
2007-07-24 11:51 am UTC (link)
Even against the possibility of your most pessimistic scenario, I aim to be your neighbor by March '08!

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[info]meesto
2007-07-24 06:15 pm UTC (link)
Well good! Don't let the local currency machinations put you off. They suck everywhere. The view is nice here and is a nice place to call home. Maybe you could set up shop in one of those vacant spaces?

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[info]danjite
2007-07-25 04:14 pm UTC (link)
Not going to set up shop- perm residency is a better bet if I become an employee of an existing corporation with the ability to fastrack visas.

So, I leave entrepreneurship for a few years and return to... hmm...

Either Technical Sales or IT Staff Management. Or maybe Business Operations.

I am cursed with an abundance of skillz!

Any ideas?

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