INTERESTED IN VALUATION
Why would a central bank want to discourage investment into its economy? What could possibly be the advantage of that? Lower valuation of its currency! How? It’s all supply and demand at work again. First, let’s explore the cause and effects of supply and demand.
Remember the car dealership that is selling cars faster than the factory can make them? The high demand actually raises prices. The same is basically true with money.
Let’s take the New Zealand dollar as an example. It has a high interest rate. As I’m writing this book, the Bank of New Zealand is paying an interest rate of 8.25 percent!
Simply placing money in the Bank of New Zealand yields a nice profit, considering it’s not an incredibly risky trade. You would not likely loose much sleep because you are worried there will be a civil uprising, coupe d’état, or other civil, political, or financial unrest.
Generally speaking, New Zealand is a stable country with a stable economy. It’s based on British Common Law, has freedom of the press, and democratically elects is government. It’s not a crazy place to put your money. Yet it pays a high interest rate.
At this time, you’d be lucky to get close to 2.25 percent from a bank deposit in the United States, so 8.25 percent would be a great return on your cash. This is exactly why big investors like hedge funds love New Zealand.