Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: mishedlo who wrote (999)	3/2/2004 10:49:01 AM
From: gregor_us	Read Replies (15) of 116555

Whether we like it or not, the US hedge funds and currency speculators are probably the major force in setting Australian interest rate policy. The Australian Exactly. Australia has the population of the State of New York. New Zealand the population of Connecticut. They both have substantial ex-pat populations. But most important, OZ and NZ are among the most open, free-market countries in the world. During a commodity boom, they roar. And, global forex and bond dealers are in control. After the 1997 Asian Financial Crises, the RBNZ put up short interest rates to defend the NZD. It accomplished nothing. The NZD crashed--and then crashed some more. The historical rewards for "playing" in the NZD and AUD bond and currencies have simply been too rewarding for speculators. On the other side of that, the history of econ. policy in both OZ and NZ has "proven" to both societies there's "only one thing worse than free-markets and free-floating currencies"--and that's control over same. The volatility in both the NZD and AUD continues to be ferocious--but interestingly, both countries adjust FAST to changes up or down in global growth. Not a bad solution...

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