Thursday, July 29, 2010

Official Cash Rate: Bollard Gets it Wrong, Again

Allan Bollard's decision today to raise the official cash rate by .25% to 3.00% is further evidence that Mr Bollard is out of his depth.

His raising of rates to record levels a few years back did nothing to damage the housing boom - the 2008 financial crisis took care of that.

Most of Mr Bollard's movements have been based by looking in a fogged up rear view economic mirror with little understanding of the current and future outcomes. His movements lack foresight, basic economic understanding and the ability to see the bigger picture.

What is clear is that the world is having economic problems, especially struggling with debt, and what New Zealand relies on to keep afloat, exporting, is going to be hurt again by this latest rise.

Likewise the mortgage holder is going to have problems, at a time when there is no spare cash to spend in a faltering economy.

One only has to look towards the United States near zero cash rate to see what problems this latest rise will cause - our OCR is too high.

The wise thing to do today would have been for Mr B to lower the cash rate to 2.5% and keep doing it to stimulate business lending and therefore the economy.

Any 3rd form economics student would have done the same.

Related Share Investor Reading

Alan Bollard Speaks, but who is listening?
Alan Bollard's indecision over OCR a worry to NZ INC
Bollard sits on his hands
Mr Conservative

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After The Panic

c Share Investor 2010

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