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I freely admit there is no easy solution and this recession is a complex issue BUT……..

Given that it was banks and governments doing what they’ve always done that got us into this situation I can’t help but be worried when we keep applying the same old strategies to try and fix it.

Yesterday NZ’s inflation figures were higher than expected, although still very low, so taoday my mortgage broking busines is advised of a major NZ bank upping it’s interest rates from Monday??

So we have a soaring anti inflationary dollar, annualised inflation of 1.7% and we start raising interest rates to stave off inflation??

This is what we have always done before, but our current situation is unlike anything before.  Do we want to go out of our way to kill off any recovery when it is likely to commit suicide in due course anyway??

As I say I don’t have any easy, pat answers but we surely should be looking through our economy with a new set of “Wow we just about sucked a kumara big time in 09, let’s think about better ways to control our fiscal policy going forward” glasses.

If we follow this pattern again we will have rising interest rates driving up rents and deflating house prices, our dollar will stay through the roof and exprters will continue to bleed and we will set ourselves up for a bigger and harder fall when the US and UK economies come a tumblin down.

There must be a better way forward tahn to do what we’ve always done.

It is true in our personal lives and it is true for our nation.

PS: My pick is still that floating interest rates will stay below fixed so if you are reasonably risk tolerant stay floating with your loans.  If you can’t sleep at night then fix for the longest period you can at a rate of no more than 7.5%.

And if you don’t know what you are then take a dollar cost averaging approach

25% of your loan floating

25% fixed 12 months

25% fixed 30 to 36 month

25% fixed for 48 or 60 months

This reduces both the upside adn downside of interest rate movements and makes you feel really clever

Stay Inspired and Stay Safe ~ Dean Letfus

The Ethical Investing Strategist

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