NZD: No speaki Icelandi

I've made too numerous a post to mention on the subject of our vulnerable dollar and the way the RBNZ has encouraged the NZ currency to be (and they boast about it) the eleventh most traded currency in the world. But we aren't the 11th most powerful economy in the bloody world are we! We export fucking animal protein and trees for God's sake. We are *gulp* the next Iceland on the list.



Our dollar has tanked over the weekend. We owe these guys money. Lots and lots of money.


We can't just say, hey, forggedaboutit. It'll be more like: Whayagonnado, ah? Yougonado wha? Whayagonnado ah. Yougonna fugginwhackme, ah? C'mon Tony c'mon! Tony, Tony! Please don't turn your back on me Tony. please! Oh no Tony. No! I gottafugginwife. I got fugginkids, Tony! Tony! Oh Tony please! No! I'monma fugginknees'ere Tony! I'm on my fuggin knees. I gotta begya Tony! I'm a fuggin beggenya'ere. Tony, no! No!

Metaphorically that's the way it's going to go down. I'm not sure whether the banking parlance is accurate but it seems this is where we are heading. Many people apart from myself - economists, those types of people - have been telegraphing that message for some time now. It seems very close now. The Japanese that lent our Banks all that money want to roll it over at 45 Yen to the dollar, not 85 Yen. We're unnecessarily risky. We are an exotic dalliance one credit rating downgrade away from a nasty thump.

I was talking to the guy at the local (one of the many) $2 shops and he said the exchange rate has caused his costs to go up 20% and he said shipping costs had increased too. I guess he'll still be selling at $2 and taking the hit. On that score those shops I've seen emptied and for lease over the last few months through the inner Western suburbs of Auckland still haven't been let. These retail figures will flow through soon and the release just after the election of retail trade stats will be one to watch.

Having said all that about our fragility - in the long term - the US economy and central government is just so fundamentally, structurally weak that I regard the US Dollar as grossly over-valued even over the medium term. The Euro is a much better store of value, primarily because they have shown commitment to their 0-2% inflation target whereas America has over half a trillion greenbacks in circulation overseas and no inflation target - just short-term American interests - as a monetary policy.

I heard that Key as a currency trader made millions for his boss on the NZD in one day alone. How would Key play this one out?

And on the topic of the asset bubble, property, inflation and taxation: if you love great practical jokes and live in Auckland City keep your eyes out for the latest City Scene Council bulletin.

Everyone knows that for a year now the house prices have been declining rapidly... but the council have locked in the valuations they will be assessing rates at for next year on 2008 and that shows an annual average 12.5% increase in value across the city (since 2005). Not that the share itself changes except as so far as your property drifts from the average (I suppose). But the perception of increasing values has been driven by ratepayers receiving their rates bills with the reassuring assessment that their house had got itself a job somehow because it was earning about 30-$40k a year (growing in value). Bullshit. Unreal, bullshit that everyone was happy to go along with.

So the Auckland City Council has set it's long-term rates increases in line with its own projections on its costs - Council inflation. It set this at 5.1%. Funnily enough that is what the current annual national inflation figure came out as a week or so ago. This is part of the Reserve Bank's sullen premonitions over persistent domestic inflationary pressure. If the councils keep taxing and spending at over 5% then it locks in an above target expectation and the bank finds it difficult to trim in other areas to keep the overall cost of living from galloping away. The Auckland City Council area has about 10% of the total NZ population.