New Zealand: Where Is the Outrage?
April 18th, 2007I’ve been scooping the U.S. media for half a decade, but I didn’t expect to do the same thing in New Zealand. The thing about doing it in the U.S. is that few people notice, well, except perhaps a few of you, dear readers and supporters. There’s lots of noise, and very little signal, on U.S. related topics.
New Zealand is a lot smaller, so when I sink my fangs into something here, weird things happen. I started to wonder when I saw so many Kiwi news organizations typing carry trade new zealand dollar into Google. Well, lookie there.
The fact that Cryptogon comes up for that search before any political or activist pages in New Zealand is shocking. (And no, being ranked above the New Zealand Herald is not an ego booster for me.) There are a lot of similarities between New Zealand and the U.S. and if Kiwis have any plans to limit the impact of those similarities and reverse the damage that has already been done, they need to understand how money works.
Where are New Zealand politicians on this!? Where is the ourtage?
Hint to New Zealand Media: Get real and talk about the criminal carry trade. Got it? Good.
Via: Stuff / Dominion Post:
Sheep farmers say they are heading back to the dark days of the 1980s, “crucified” by the Kiwi dollar at a two-year high.
The dollar is close to a 23-year high, going above US74 cents yesterday before ending the day at US73.9, up half a US cent from Friday, and 6 per cent up on a month ago.
Economists expect the dollar to stay high for the rest of the year, in part because the Reserve Bank raised interest rates last month and is likely to do so again late this month or in June. That would push floating mortgage rates above 10 per cent, and fixed rates above 9 per cent.
The high dollar is expected to reduce spending in rural towns, and may lead to forced bank sales of unprofitable, heavily indebted farms and speed up the trend for companies to move production overseas.
…
Federated Farmers said many sheep farms – especially those of young farmers with high debts – were becoming unprofitable.
“It is pretty grim and not looking any better, when the banks (last year) predicted a US58c exchange rate,” sheep farmers spokesman Keith Kelly said. Mr Kelly, chairman of the New Zealand Meat and Fibre producers council, added: “Sheep farmers in particular are being crucified by the high value of the dollar.”
The low returns from wool, about $2.50 a kilogram, and lamb, about $45 a head, meant many farmers were not spending in rural towns. “It is a huge drop and it is depressing.”
Well Kev, if you work hard and save your pennies, you may be able to save up enough $ for a down payment on that Anaheim dream home you’ve always wanted.
That was a joke…get it? 🙂
Other than scoop, is there a NZ media? Isn’t everything controlled by offshore corporations? (Including the NZ government.) The Waikato Times is a Fairfax publication (the company formerly owned by the Canadian neocon Lord Conrad Black).
As to the coming farm foreclosures, the strong Kiwi is a contributing factor, but hugely overpriced farms recently purchased with debt were doomed anyway. Farm land prices have soared beyond all reason. Grazing land around Hastings was recently $700 an acre, before it was discovered to be ideal for varietal grape cultivation. Now it is $15,000 an acre. Perhaps this is justified due to the higher economic productivity of viniculture.
However, Waikato dairy farms have soared in price while the Fonterra payout for milk solids has been flat. This is not economically justified, especially when the costs of the imputs (fertilizer, diesel fuel) are going up. This was simply a rural speculative mania. If everything goes well, a Waikato dairy farmer now might get a 3% return on investment for a year of very hard work. It doesn’t make any sense as a business plan, not enough earnings to pay the mortgage if the farm was recently purchased with debt. On the other hand, if he actually owned the farm and sold it, he would get an 8% annual return on his money at the bank and could retire to Whitianga and go sailing. Why farm?
Many of the new rural land buyers were really land speculators, using leverage to buy the farm and hiring a share milker from Uraguay to do the work. Nothing could save this Ponzi scheme from collapse. Rural land values will have to correct to historical ratios of farm earnings, just as city rental housing prices will have to correct to a historical ratio of rental income. The farmers who bought their property over 10 years ago at sane prices will be fine, in fact they will be on the gravy train in a couple of years as farm commodity prices (finally) begin to rise.
This is probably one of the only places where the most important precondition for being a farmer is being rich.
The high dollar may be good news for the fish here, if it makes it too expensive for even the Japanese to buy. And hell, in a country like this, from where all the wool is exported, a ball of yarn still costs $10 -$20.
With a strong dollar, NZ will be able to afford more oil for a little bit longer.
I pretty much agree with everything Alek says. The whole thing’s completely out of whack, but according to the govt/media, it’s just “business as usual”.
But at some point, all these off-shore NZ-dollar “investors” will cash in their funny money and pull the plug. At the moment, the “investors” are onto a double payday: 8%+ interest rates AND huge forex GAINS. But what goes up must come down, and we are almost at the apex of this particular Fujiyama fun ride*.
Let’s just see how the crowd goes wild when TSHTF. As to Kevin’s original question: “Where is the outrage?” Well, I have to say that the NZ corporate media has been dumbed down so much in the last 10 years (I’ve lived in Japan since 1997, just back visiting family at the moment) I am not surprised the public is in such a general stupor. Not everybody. My guess is about 80-90%. They’ll be totally blind-sided after swallowing this sh1t for so long.
In case you think currency exchange rates have nothing to do with you, check out what happened to all the gold mining jobs in Zimbabwe.
They had to lay off everyone because they had no foreign currency left to buy the cyanide needed to process gold.
http://allafrica.com/stories/200704200685.html
THE DOW IN GOLD: CRASHED 58% since 1999!!!
Kevin, If you want a visual image of how the US economy has crashed, here it is. Can you please post something about then after the PSYOP ‘DOW BREAKS 13000’ is completed?
http://goldsilver.com/dow_crashing/4-Dow-Gold.png
“In this chart I measure the Dow with money, not currency. It took almost 45 ounces of gold to buy 1 share of the Dow in 1999. Today it takes less than 19. Another way of saying it, if you sold 1 share of the Dow in 1999 you would have been able to buy 45 ounces of gold. Today if you sold 1 share of the Dow, the proceeds would only buy you 19 ounces of real money. So measured in real money, the Dow has crashed 58%.”
http://goldsilver.com/the_dow_is_crashing.php