Traditionally it is true that a strong exchange rate indicates a strong economy.
While that is still somewhat the case (for example the weakening USD reflects a weakening US economy) it no longer necessarily applies, particularly for small economies like ours. The reason is the huge amount of money now controlled by funds who are by and large chasing the highest interest rate they can find without investing in a complete basket-case currency. There is now much more money being thrown around by these currency speculation funds than there was even a decade ago. That amount of money can dwarf the normal tendency for a small currency to reflect an economies strength, particularly over a fairly short term (eg a few years). I think this is what is happening the NZD. The fundamentals say that our economy is NOT all that healthy. Our balance of payments deficit is absolutely terrible (8 or 9% of GDP?) and plainly unsustainable. If that is in fact the case and the exchange rate is being controlled primarily by demand for high interest rates rather than the state of our economy then that is potentially a problem... as it means the NZD can easily reach levels which are not healthy for the economy as a whole. All in my not very expert opinion off course! ;-) -----Original Message----- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On Behalf Of John Bird Sent: Friday, 27 July 2007 12:28 p.m. To: 'NZ Borland Developers Group - Offtopic List' Subject: RE: [DUG-Offtopic] Currency and inflation It seems to me that we are just getting back to where we once were. I am not an economist but I do recall hearing that one of the essentials of a healthy economy was a strong currency. -----Original Message----- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On Behalf Of Neven MacEwan Sent: Friday, 27 July 2007 11:29 a.m. To: NZ Borland Developers Group - Offtopic List Subject: Re: [DUG-Offtopic] RE: [DUG] basic question Phil Before you swallow all the Government drivel Id suggest you read this http://www.maxim.org.nz/index.cfm/Real_Issues/Print_Version?issueid=139 Neven > And inflation is a BAD thing. The problem for government is how to > reduce consumer spending. OCR is very crude tool but other measures > (limit overseas investment, capital gains tax, etc are dubious and > very hard to parlimentary support for). Kiwisaver MIGHT reduce > expenditure but I'll bet sharemarket soars as fundmanagers desparately > try to find places to invest will in turn put more pressure on dollar. > Shame government didn't have to balls to tackle the property market 3 > years ago. > > > ---------------------------------------------------------- > Phil Scadden, GNS Science Ltd > 764 Cumberland St, Private Bag 1930, Dunedin, New Zealand > Ph +64 3 4799663, fax +64 3 477 5232 > > _______________________________________________ > NZ Borland Developers Group Offtopic mailing list > Post: [email protected] > Admin: http://delphi.org.nz/mailman/listinfo/offtopic > Unsubscribe: send an email to [EMAIL PROTECTED] with > Subject: unsubscribe > > > _______________________________________________ NZ Borland Developers Group Offtopic mailing list Post: [email protected] Admin: http://delphi.org.nz/mailman/listinfo/offtopic Unsubscribe: send an email to [EMAIL PROTECTED] with Subject: unsubscribe __________ NOD32 2245 (20070506) Information __________ This message was checked by NOD32 antivirus system. http://www.eset.com _______________________________________________ NZ Borland Developers Group Offtopic mailing list Post: [email protected] Admin: http://delphi.org.nz/mailman/listinfo/offtopic Unsubscribe: send an email to [EMAIL PROTECTED] with Subject: unsubscribe _______________________________________________ NZ Borland Developers Group Offtopic mailing list Post: [email protected] Admin: http://delphi.org.nz/mailman/listinfo/offtopic Unsubscribe: send an email to [EMAIL PROTECTED] with Subject: unsubscribe
