RBNZ printed 71 Billion during Covid Response

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Forums › Finance and wealth management › RBNZ printed 71 Billion during Covid Response

Batman

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#302261 11-Nov-2022 07:24

https://www.nzherald.co.nz/business/reserve-banks-71b-of-money-printing-equivalent-to-90-point-ocr-cut/QFON7VBJQCIXZL4SEWRR6WZMCM/

Reserve Bank’s $71b of money printing equivalent to 90-point OCR cut

not sure what that means for lay people just thought the headline was a rather large sum

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#2994571 11-Nov-2022 08:43

It means a good deal of today's inflation is caused by government. Despite what they might say.

Next year will be horrendous economically... that money doesn't just disappear. . . it is all going directly into making goods and services more expensive.

mudguard

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#2994579 11-Nov-2022 09:26

surfisup1000:

It means a good deal of today's inflation is caused by government. Despite what they might say.

Next year will be horrendous economically... that money doesn't just disappear. . . it is all going directly into making goods and services more expensive.

But I guess what was the alternative? Lock down, close up and any business that didn't have the reserves to weather the storm got shut down?

GV27

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#2994584 11-Nov-2022 09:37

mudguard:

But I guess what was the alternative? Lock down, close up and any business that didn't have the reserves to weather the storm got shut down?

To not print as much $71B.

There's conceivably middle ground between printing a huge portion of cash and printing none.

There was no need to ditch LVRs for investors either. No part of the Covid response justified doing that.

Earbanean

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#2994588 11-Nov-2022 09:52

surfisup1000:

It means a good deal of today's inflation is caused by government. Despite what they might say.

Next year will be horrendous economically... that money doesn't just disappear. . . it is all going directly into making goods and services more expensive.

The RBNZ is not the Government.

GV27

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#2994592 11-Nov-2022 10:01

Earbanean:

The RBNZ is not the Government.

The Finance Minister has just reappointed the RBNZ Governor, on the back a unanimous approval from the MPC, whomst he also appoints.

RBNZ independence is frankly a myth.

networkn

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#2994607 11-Nov-2022 10:26

Earbanean:

The RBNZ is not the Government.

Do you really think the RBNZ did this without Government knowledge and tacit approval? The impact to the economy even if (and I seriously doubt it) printing that amount of money was totally necessary, would be required for the Government to understand the impacts of and cater for in their future financial planning.

robjg63

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#2994608 11-Nov-2022 10:27

Always loved NZers amazing ability to be 'wise' after any event....

Also the ability to ignore the same thing happening in the rest of the world and fixate that "it's only a problem here".

Nothing is impossible for the man who doesn't have to do it himself - A. H. Weiler

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Earbanean

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#2994614 11-Nov-2022 10:36

robjg63:

Always loved NZers amazing ability to be 'wise' after any event....

Also the ability to ignore the same thing happening in the rest of the world and fixate that "it's only a problem here".

Exactly. People seem to have forgotten that at the time the economic forecasts were dire. Treasury were warning of over 10% unemployment, mass business failures etc. Quantitative easing was the answer. I don't remember Luxon, Seymour or anyone else saying "no, don't do it". Now everyone is Harry Hindsight.

There was a cost to saving people's jobs and businesses. Now it's time to pay the piper.

MikeAqua

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#2994615 11-Nov-2022 10:37

Wow. Just wow. Leading to massive inflation and a cost-of-living crisis we haven't seen since the oil-shock of the 1970's.

Mike

networkn

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#2994617 11-Nov-2022 10:40

Earbanean:

Exactly. People seem to have forgotten that at the time the economic forecasts were dire. Treasury were warning of over 10% unemployment, mass business failures etc. Quantitative easing was the answer. I don't remember Luxon, Seymour or anyone else saying "no, don't do it". Now everyone is Harry Hindsight.

There was a cost to saving people's jobs and businesses. Now it's time to pay the piper.

You seem to have failed to recall the lengths that Labour went, to exclude the opposition from it's plans during the pandemic. Given Labour have full power, what good would protesting have done regardless? I told you so isn't a particularly useful phrase.

I'd be interested to know the 71B was justified as required, as opposed to a smaller amount for example?

johno1234

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#2994619 11-Nov-2022 10:48

networkn:

Earbanean:

The RBNZ is not the Government.

Do you really think the RBNZ did this without Government knowledge and tacit approval? The impact to the economy even if (and I seriously doubt it) printing that amount of money was totally necessary, would be required for the Government to understand the impacts of and cater for in their future financial planning.

The RB has operational independence but it is operates on policy determined by the government through it's mandates and board selections.

Most significantly the RB mandate was changed from "Manage inflation in a 1-3% band" to add a second mandate "Manage employment". I think it is clear that they have pushed far too heavily on the employment lever and did not pull back enough on the inflation lever.

Orr has been the worst RB Governor ever. Putting him on a 5 year extension ahead of next year's election was a bad idea.

MikeAqua

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#2994620 11-Nov-2022 10:50

johno1234:

Most significantly the RB mandate was changed from "Manage inflation in a 1-3% band" to add a second mandate "Manage employment". I think it is clear that they have pushed far too heavily on the employment lever and did not pull back enough on the inflation lever.

Manage employment is an interesting mandate in the context of a labour shortage crisis?

Mike

johno1234

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#2994621 11-Nov-2022 10:50

robjg63:

Always loved NZers amazing ability to be 'wise' after any event....

Also the ability to ignore the same thing happening in the rest of the world and fixate that "it's only a problem here".

Many commentators, including past RB economists, have been saying for the last year that Orr was too slow pulling back on monetary stimulus.

Now the chickens have come back to roost.

Earbanean

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#2994623 11-Nov-2022 10:54

networkn:

You seem to have failed to recall the lengths that Labour went, to exclude the opposition from it's plans during the pandemic. Given Labour have full power, what good would protesting have done regardless? I told you so isn't a particularly useful phrase.

I'd be interested to know the 71B was justified as required, as opposed to a smaller amount for example?

'Protesting' by opposition politicians wouldn't have changed the action. But opposition can and do object to courses of action all the time. That's what oppositions do. The fact is they didn't do that in 2020 - because they didn't think the course of action was wrong. Now they're scoring points as Harry Hindsight. Again, that's what oppositions tend to do.

Of course a smaller amount of easing would have been better. But that's the point, that's just hindsight. Back in 2020 we didn't know how bad it would be, we didn't know how many people would die, how long we'd be locked down, how long our border would be closed, how many people would lose their jobs, etc. So they acted swiftly and strongly.

Turns out the pandemic and its effect on our economy wasn't as severe as first thought. But that's hindsight - which is always 20/20 vision.

Or maybe you'd like to give us the link to your post from the first half of 2020, when you said COVID isn't a big deal and the RBNZ is overreacting?

GV27

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#2994625 11-Nov-2022 10:55

robjg63:

Always loved NZers amazing ability to be 'wise' after any event....

Also the ability to ignore the same thing happening in the rest of the world and fixate that "it's only a problem here".

There is a similar Kiwi logic in assuming that because we have similar problems, it's pointless to expect better from the people we pay handsomely to make these calls locally. The fact other places have it here is not a reason to excuse the speed and quality of our decision making here when it isn't up to scratch.

There were countless people questioning why investor LVRs were lifted at the time. No hindsight needed. Plenty questioned the RBNZ defending not hiking the OCR when inflation started to rise when they were towing the Fed line that inflation was 'transitory'. No hindsight needed.

Even RBNZ admits it should have lifted the OCR faster - in the internal review they made public after Orr was reappointed for a full five years. Dismissing criticism of it for not doing so because other places have inflation or because it's just 'hindsight' is close to towing a political line suitable for the politics thread.

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