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Tuesday, October 14, 2008

Crown underwrites NZ$150b in 48 hours



These are all RBNZ documents. "Interest accruing on indebtedness" - great even the interest is guaranteed! Even the interest that is owed after it defaults is guaranteed! Even in other currencies! That generous Michael Cullen. I will note that it is a document marked "draft".

From what is left of Hanover's pyramid scheme - those guys are about to get bailed out while all the other guys just had their retirement money shredded? Is that what is happening here?

And we don't know if we have hit the bottom until we are well on top of it. These are incredibly uncertain times. But look at they key internal NZ financial indices from the RBNZ - remember the OCR is at 7.5% the whole time - firstly the govt. side: the 1, 2, 5 and 10 year govt. bond yields.


- and the private side: the overnight inter-bank rate, and then the 30, 60 and 90 day bank bill rates.

What does this tell us apart from the fact this panic has been felt in every corner of the globe... except China, if you've been following the last few posts. The last two days - this week - the vibe is calmer, but is it a corner we have turned - and where is that corner leading?

More rumours around of business deals falling through at the last minute because nervous banks won't settle at the moment. Let's hope that is more a reflection of that bank's economic gloominess than it is on credit availability. Our banks now have an additional NZ Government guarantee on top of the Australian Federal Treasury one that has always existed. What the world markets think of our double standard will be transmitted via the credit rating agencies.

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