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Sunday, 26 April 2009

Company Raisings

The NZ Post is the latest of a long list of New Zealand companies raising capital through a debt issue this year. Fonterra, Fletcher Building,

Bus Depot, FreightWays, .. and the list goes on. This underpins a disturbing theme: foreign banks are increasingly unwilling to roll over debt. A New Zealand starved of foreign investment and offshore money could shrink our money supply and cause the current economic contraction to become even worse even quicker. Your thoughts?


Bill Daly said...

Interesting comment Will. But might it not also be that a New Zealand "starved of foreign investment" might trigger a more realistic look at what actually happens when a foreign bank "invests" in another country. It is after all just book-keeping, credit creation, and the transfer down phone lines of numbers. Shouldn't the money system follow behind to meet the requirements of the production system, rather than a country with ample physical resources being dependent for its material needs on "foreign investment"?

Steve Baron said...

I guess what Bill is saying is that there isn't enough money available in New Zealand to ensure businesses can expand and that there isn't enough money to purchase the goods and services available? Is that right Bill? Is this the "gap" Social Crediters refer to? Therefore the government should be printing more money (quantitative easing) Bill? However, could it be that there is actually enough money available, because these companies were able to fill their requirements through this capital raising process?

Anonymous said...

Having being burnt in the late 80s stock market crash I suspect many Kiwis lack trust in the markets especially after seeing 30+ finance companies fail recently, so they keep investing in property as a physical asset that cannot be stolen. Perhaps government could encourage savings by allowing interest on say Kiwibank deposit account up to $20,000 - at present interest rates the lost tax would be small. Better regulation of investments and most importantly a better regulator to monitor and publically report may restore confidence in the market.

Steve Baron said...

That sounds like the sort of comment an economist would make. Then again another economist might ask what the unintended consequences of this policy might be. What do you all think could be the downside to such a policy?

Jack Powell said...

There are times and situations when becoming more indebted is good sense, mostly when the borrowings being considered will be promptly converted into huge profits.
But at this moment, and in the current "bad and getting worse" scenario, I would suggest this way,: if you need to borrow, DON'T,
If you don't need to borrow, and can immediately turn such borrowings into massive profits, DO.
Otherwise, consolidate within the strictures of your current financial position, and be there when the storm is over and the pickings will be abundant for those who are still "On their feet"
Perhaps the reluctance to lend being shown by overseas financiers is simply a demonstration of their wisdom!
Jack Powell

Rusty Kane said...

Economic contraction to become even worse.

This will be even more inevitable when New Zealand looses its current Standard and Poor's AA+ rating, coursed by the large amounts New Zealand and New Zealand companies are now borrowing to roll over debt.