Now that’s over

With that election thing finally out of our hair, we can focus on the fact that things aren’t looking good out there.

Krugman puts up a nice illustration of how this really is the fault of the Euro. (It would help if creditors and debtors just accepted that they need to take a bit of a bath)

And markets are now picking rates in NZ to be lower in a year’s time.  This is the extent of the positive news – again we are relying on European policy makers … I just don’t know if they deserve any trust anymore.

But, there is one thing I’ll give us here in NZ – a collapse of the Euro-zone isn’t necessarily going to be as bad for New Zealand as continuing uncertainty in financial markets.  The key is what happens to growth in Asia (given that it accounts for so much more of our trade now), and for now our dollar is pointing to a reasonable outlook for commodity prices.  But if there is anything we remember from September 2008 its that this can turn …

  • ArmchairAnalyst

    And yet the EUR/USD is stronger now than when it was introduced in 1999. The new Euro fell in value quickly after it was introduced. Seemed the market had the right view then (of course the USD has depreciated substantially too in recent years, but still…).

    • http://www.tvhe.co.nz Matt Nolan

      I’d say the relative value of the currencies over the past 12 years has a little bit more to do with relative inflation rates than their stability per see – although I agree there are fundamental issues

      Main difference for me is that US still has the political competence to avoid a complete financial meltdown – Europe doesn’t seem to have that ;)

  • http://www.grantaconsulting.com marta

    USD will fall soon. EU has its natural exchange rate at 1.25