Kippers

Markets are looking decidedly dodgy tonight.
http://news.bbc.co.uk/2/hi/business/6925367.stm

Oil closing at it's highest price ever in NY.
Shares down all over, and US sub-prime making everyone very nervous.

Hope none of you invested in Bridgecorp (NZ).
Looks like investors will get back only 25c in the dollar


Kip

cypherpunk

Realistically even in the best case it's probably going to take a year or so to get there, barring major upsets, and it may never get there at all, but it's a nice thought.

julesnye

I'd be happy with $3.0 so maybe less than a year

cypherpunk

Everybody say hello to $2.70! I thought we wouldn't see that again for a while, but I guess it's down to all this rather scary credit crunch.

RobClubley

I can't claim to understand all that but...

The European Central Bank was forced today to wade into the eurozone’s money markets and inject €94.8 billion of funds to stabilise overnight interest rates after a new bout of credit jitters saw these spike upwards.



That's an inconceivable sum of money. Does that mean they just "invented" the cash to try and stabilise the market?

cypherpunk

I'm no expert either but as I understand it they printed the money to keep the interest rate down and provide enough liquidity to keep the trading system going. The way central banks set the Official Cash Rate is to promise to lend virtually unlimited amounts of money at just above the OCR. In practice trading banks can usually get the money cheaper elsewhere so they don't take them up on it, but in a credit crunch everyone else wants more than the OCR to lend money, so the bank has to intervene to keep interest rates within the range they have set.

P2L

could be the start of something ........

http://www.nzherald.co.nz/section/3/...ectid=10456927

julesnye

and now


1.00 GBP = 2.71922 NZD

Kippers

All money is "invented" money.
You just need paper and ink
It's just created by the banking system.
It comes into existence as debt, when you go in for a loan.
Banks can issue debt in many multiples to the deposits held in their reserves.
The reserve ratio used to be about 10 to 1 but if you check the NZ Reserve Bank web, there is no official ratio since the deregulation of the 80's.
Banks are just told to act prudently

This current pumping of world money markets can only lead to one thing, runaway inflation.
They are throwing good money after bad, trying to prop up the system and avoid the inevitable crash.

Incidently, if you check the NZ Reserve Bank site you will see the money supply in the NZ economy grew by 16.5% last year,......... and they try to tell us inflation is only 3%!
Of course real house price increases are not included in the CPI statistics, only rental prices.

In the US, food and energy costs are excluded from CPI figures. What are they trying to hide?
The US stopped issuing M3 (money supply) data in March last year, so who knows how many Greenbacks have flooded markets since then?


Kip

cypherpunk

There is some good commentary on the credit crunch in this blog. The liquidity injection by the banks was funded by repos issued against trading bank securities, so it didn't print any new money, just provided liquid cash secured against the trading banks' illiquid assets (mortgages etc.). As the blog entry explains the effects of the credit crunch if it persists will be deflationary to asset values (houses etc), as when the credit supply dries up few people can borrow to buy assets.

Kippers

The European Central Bank made extra credit available by tender to trading banks, and the trading banks drew down the funds from the ECB.
Money was then 'created' as the funds were withdrawn. There was no money in existence before this action took place. Even when they say it is backed by Central Reserves, the credit is additional to those reserves, and so extra money enters the system, ergo..... inflation!

The creation of more money without any corresponding value in a probably futile attempt to shore up panicking capital markets has reached epic proportions by Friday. Central banks worldwide injected unprecedented amounts of freshly digitized money to keep players afloat which raises the question which bank will go bankrupt in the next days.

http://prudentinvestor.blogspot.com/
http://seekingalpha.com/article/44169

Kip

southerncomforts

Few years ago we moved out to New Zealand at $3.95 to the £ worst think I have seen it was $2.12. Shame we did not have much then to change.

People are going to be shocked and complain soon about the price of Fuel as the Oil Price rise coincides with the drop in value of the NZ$. At least people have gotten used to the fact petrol will never be around $1 a litre like it has been for the last 15 years.

cypherpunk

It is all on time-limited repos though, from overnight to 14-day duration, so it won't have any permanent effect on inflation.

simonmarkellis

$2.73 to the £ - getting better

ned

Thats the thing though but, in the long run is it best to have the dollar weak against the pound (so that I can make a few extra quid after selling my house) or strong? (so that the income from my new job goes further)