Tuesday, June 12, 2007

Alan Bollard is insane.

If ever there was doubt that Alan Bollard is out of his depth, then his efforts earlier today supplied the proof. This is just insane, denying the cause of the high exchange rate -- himself and his interest rate hikes -- and seeking to lower it by letting off his peashooter full of our money into the nuclear battlefield of international finance. George Soros and the like will be rubbing their hands with glee.

Alan Bollard is insane.

See Stuff: RBNZ confirms intervention in NZ dollar.

UPDATE 1: Gareth Morgan calls it right:
Economist Gareth Morgan said: "Overall, this is high-stakes poker. I think we're gonna end up dog tucker here."
The "we" here, by the way, is those of us whose money Bollard is gambling with.

UPDATE 2: Gonzo comments:
This intervention may set the stage for some very nasty arbitrage. Let's hope the fund sharks don't take the bait.
"Hope" is all Bollard has. When the big sharks start biting, Bollard's going to lose our shirt.

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5 Comments:

Anonymous george said...

Yep. Guess who is pulling his strings, [and its not King Canute]

6/12/2007 01:56:00 am  
Anonymous Benn said...

I remember being in London when John Major (then Prime minister of the UK) announced that he was pulling out of the ERM (European Exchange rate Mechanism). This happenned after a week of efforts by the Bank of England to keep the pound high. The Bank all but exhausted its reserves in the attempt. It failed.

This has hallmarks of the same foolishness. When are people going to wake up and demand that the dollar be gold backed?

As for Witch-doctor Bollard, what a prat. He's about to get raped. The man is a Bollock.

As for the little grey history teacher that appointed him- should have been on the end of a kicking years ago. He's single mindedly managed to destroy more wealth than ANY other person living in NZ.

Benn

6/12/2007 06:19:00 am  
Blogger PC said...

I was there too, Benn.

I was in a meeting just above Leicester Square to discuss a building we were constructing there, looking out over a part of the square with an 'Evening Standard' salesman.

As the 'Evening Standard' headlines changed every thirty minutes, and with each new headline shouting out yet another hike in interest rates (ending the day as I recall some five percentage points above where they'd started the day), the faces of those in the meeting room slowly went white, and any interest in adding another floor to the building on which we were working vanished.

There were some very relieved faces there next morning after John Major and Norman Lamont admitted that the panic was over, that they couldn't fight George Soros, that the ERM was unmatchable, and that mortgage rates could go back to something more sensible.

6/12/2007 08:56:00 am  
Blogger sustento said...

I was there too except i was the mug quoting stg to all and sundry. it was without doubt the craziest few days of my whole time as a trader. The BOE in one ear and speculators in the other. Remember though the UK had technical duties to keep Stg/Dem within the parameters set by the ERM.

Note that once the lower band broke at 2.78 Stg/Dem eventually it traded down to 2.20 before heading back to 3.20.

Currencies go up and go down in their own time and at their own speed.

Whilst its understandable to want to intervene especially when the price spiked in thin markets, it goes against current policy which is clearly biased towards tighter conditions.

Globally rates are cranking up and this intervention makes no sense at all.

Good interventions come together with an interest rate move. The problem here is that the next move is the wrong way for the currency.

Go figure.

6/12/2007 08:58:00 pm  
Anonymous Sione (John) said...

There is no such thing as a good intervention, really. As a matter of fact they're all bad.

Sione

6/13/2007 12:29:00 pm  

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