[OPE] The Financial System Down Under II

From: Jurriaan Bendien (adsl675281@tiscali.nl)
Date: Sat Mar 22 2008 - 14:28:46 EDT

Especially for the benefit of Patrick Bond, here's the comments of Economist Brian Gaynor (sharp) with a glint of kiwi humor:

Liquidity problems in the financial sector impact on the real economy because global liquidity is now approximately 10 times world GDP whereas 40 years ago the real economy was bigger than the financial sector.

The clear message for New Zealand is that the highly rewarding borrowing game of the past decade is over. Blue Chip investors are probably the most unfortunate group as they joined the leverage game just seconds before the final whistle blew. New Zealand is in a particularly precarious position because we have taken full advantage of the global liquidity explosion to borrow heavily for consumption purposes and to invest in residential housing.

With the contraction in global liquidity expected to continue, the next big issue for the domestic economy is the Tokyo housewives and their New Zealand dollar deposits. If these investors take their money home there will be a reduction in New Zealand liquidity, we may then have to offer higher interest rates to attract alternative liquidity and the kiwi dollar could come under pressure at the same time. This is not a particularly attractive proposition for highly leveraged domestic companies and individuals. http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10499497&pnum=3(&
``Japan's interest rates are too low,'' said Hiroshi Ono, a 40-year-old sales clerk at a telephone company in Tokyo. Ono said he has made about $17,000 since March by borrowing $200,000 of yen and buying U.S. dollars to take advantage of the 4.75 percentage-point difference between Japanese and U.S. interest rates. Japanese investors are borrowing yen at the central bank's 0.5 percent overnight lending rate and buying higher-yielding currencies in New Zealand, the U.K., Australia and even Brazil to increase returns on 1,536 trillion yen ($12.5 trillion) in savings. The strategy is called the carry trade. http://www.bloomberg.com/apps/news?pid=20601087&sid=adnSs4grfQlQ&refer=home
Jeez, do I live to regret my mistakes or what. But anyhow you got to carry on, and you just can't know everything. If you do, there is nothing to say. Suppose I could take up painting or something like that.


My house is sliding into the sea
Skies are grey, since you've been away
The chickens aren't laying eggs no more
It can only mean you left me for sure
But I still think of you when I'm alone
Oh how can I ever repay you for what you do to me
And I still think of you when I'm alone
Oh how could I ever repay you for what your, doing to me

- Split Enz, Lovey Dovey

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