With the latest news of another plunge of the NZ dollar we are told that this is actually a good thing. Well actually it is not. It is only a good thing if the worlds economy is basically sound. A low priced NZ dollar is good for exporters wanting to export their products and a cheaper dollar makes for better prices oversees. But if the worlds economy is not sound than no matter how cheap the dollar is no products will be ordered from oversees.
At this moment the US economy is tanking. It is over. Kaput. The house market is collapsing, the remaining jobs are disappearing and all the well paying jobs have gone to cheap labour countries like China. Foreclosures are ravaging entire cities and more and more people are living in tents and and from their cars. Even with the oil prices falling the biggest consumers the American people are not increasing their consumption and literally billions of miles are driven less than at the same time last year. This also indicates that the economy is collapsing. New Zealand exports meat and wood. Meat is produced in the US too and they will get first dibs, and the house building market is a thing of the past so wood is going nowhere either. Fonterra’s cooling warehouses are chock-a-block with dairy products going nowhere and farmers have been living of their credit to cover the low period. This is going to hurt everybody and a sinking dollar spells trouble for our economic system.
The plunge in the Kiwi dollar to a 5 1/2-year low is giving exporters a boost – but the lower currency will have to be sustained to flow through to farmers’ returns.
The Kiwi fell US5c to less than US55 cents over the weekend and at 4pm yesterday was trading at US54.4 cents, down about a third from a recent peak of almost US82c six months ago.
The Kiwi’s fall has been triggered by worries about a deep global recession, with investors jumping out of currencies perceived as risky.
Federated Farmers economics spokesman Philip York said the fall in the currency would have a big impact on meat and wool.
“All exporters would be pretty happy about it, including the manufacturers.”