
Originally Posted by
Squeak the Rat
Not trying to be doom and gloom, but we should be concerned as NZ's current account defecit continues to worsen. This *could* have some serious problems for our country.
For those that don't know, the CAD is the difference between the amount of money that gets brought into the country versus the amount that gets sent out. We are sending out heaps more than what comes in.
1st link I could find on google:
blah blah
Not concerned? Our situation is very similar to Argentina's pre-economy crash.
Won't happen? If we can't fix it (and we haven't been able to for 20 years), the silver bullet for fixing a high CAD is to severely devalue the dollar. Imports will be more expensive, and exports will bring relatively more revenue.
Still not concerned? Foreign investors will start to be. So will people who provide loans to NZ. Interest rates will go up, so more money will flow offshore to service loans. And on goes the cycle.
Errr, not really.
You know that our dollar is floating right? Argentina had a fixed exchange rate prior to 2002. Is it even possible to have a financial / currency crisis with a floating exchange rate?
Just let the dollar devalue, exports will increase, domestic interest rates will rise, capital inflow will occour, problem solved.
"They say that if I do bungy jumping too much, I might get brian damage."
"I don't even know who Brian is"
Bookmarks