How the Reserve Bank of New Zealand’s Mistake Could Affect Your Investments
Investing is not just about having the right tools, but also having a clear vision of what you want to achieve and why. To make a living, you need skills. To get your income working, you need to learn new skills. Throw in a bit of curiosity for good measure too. Listening to different opinions from experts and learners can help you gain valuable insights and perspectives.
In this episode, I talk to a smart person who shares his views on the Reserve Bank of New Zealand (RBNZ), the central bank that has a huge influence on the economy and society. The RBNZ, like any other central bank, controls the money supply and interest rates, which affect everything from inflation to growth to debt. If the RBNZ makes a wrong move or has a hidden agenda, it can have serious consequences for the country and its citizens. The issue is, most everyday people think this is too boring, and there’s not a lot of people out there ‘explaining it like I’m 5’ with us.
One of the topics we discuss is the controversial decision that the RBNZ made in March 2020. When it purchased bonds at the peak of the market, it massively out of the money now. The RBNZ also lowered interest rates to record lows and kept them there for too long. They wanted inflation; they were hoping to create inflation and avoid deflation and recession. However, this strategy backfired (or it worked really well) as it created a massive housing bubble, increased inequality, and eroded the purchasing power of savers and retirees.
The RBNZ has so far cost taxpayers $12 billion from a bad bet. Are you aware of this?
How does this affect your investments? Well, depending on what you hold and how you diversify, it could be a great opportunity or a huge risk. As an everyday investor, you should be aware of the macroeconomic factors that shape market cycles and the potential secular shifts that could change the rules of the game. You don’t have to be a conspiracy theorist to question the actions and motives of the RBNZ and the government. You just have to be an informed citizen who cares about your financial future.
If you want to learn more about the RBNZ and its impact on your investments, listen to this episode and share your thoughts with me. I hope you enjoy it and find it useful.