Sunday, October 4, 2009
The NZ Dollar
(click on image to enlarge)
Recently I posted data on cheese and butter imports. Some asked me to cover the imports of MPCs. Actually, MPC imports have declined in recent months.
In spite of convictions by many that supply and demand explains everything. Adam Smith, the so-called father of capitalism, never gave currency exchange rates a second thought. Today, however, exchange rates are all important.
At the same time the New Zealand government ended subsidies to dairy farmers, the government devalued the Kiwi (NZ$). A low Kiwi is a form of subsidy.
MPC imports not only hurt U.S. dairy producers but also, the low Kiwi costs NZ consumers more for all imported items.
As the above table shows, there is a connection between MPCs and the relative value of the NZ dollar.