Here's our summary of key economic events overnight that affect New Zealand, with news that bullish American consumers are likely pushing back the likelihood the US Fed will cut its policy rate any time soon.
Financial markets now price in only two cuts this year, one in September and one in December and far less than the four priced in at the start of the year. And the conviction for these scaled back indications is easing rather fast. The latest pricing suggests the September one might still happen but there is more of a chance the December one will be skipped.
And that is because American retail sales posted impressive results in March, and February's results were revised sharply higher. Those revisions means they were up +2.1% in February from a year ago, up 4.0% in March on the same basis. Consumer spending belies consumer sentiment. What they do is way more positive than what they say.
Meanwhile, overall February business inventories remain in good control, holding their relative level to sales. There is no buildup of tensions on this front.
On this data, the USD rose yet again, bond yields jumped - again - and equity prices packed a sad that they are unlikely to get the rate cuts they were banking on.
It is not all positive however. The New York Fed's local factory survey reported that both new orders and shipments fell significantly in March and unfilled orders continued to shrink. Optimism among these businesses is subdued.
And we should note that carmaker Tesla is cutting 10% of its global workforce, or -14,000 jobs, on stuttering sales and profitability issues. Its share price fell another -5% in today's trading to be down -35% so far this year, down -59% from its peak on November 5, 2021.
Canada reported manufacturing gains in February from January, and even small gains from year-ago levels. Those gains, tiny as they are, also came out when inflation-adjusted.
In China, a new industry report from a corner of their economy details just how tough it has become to make deals there. Pay at China’s private equity and venture capital firms plunged as much as -40% year-on-year in 2023 as the industry’s downturn showed no signs of abating.
Just for the record, the People's Bank of China had its monthly review of its benchmark One-Year Medium-Term Lending Facility Rate, which is the main rate at which the central bank lends to big commercial banks, and it held it unchanged at 2.5%.
In Japan, machinery orders jumped +7.7% in February from January, reversing the -0.7% fall in January and far exceeding market expectations for just a +0.8% gain. That put them a healthy +9.4% higher than year-ago levels.
In the EU, industrial production rose again in February, making it the third rise in the past four months. Analysts were expecting this type of improvement. But despite this month-on-month rise, they still have some way to go to convert that into year-on-year gains.
We should also note that the rise and rise of the aluminium price over the past eight weeks took a sharp turn higher yesterday, taking it back to June 2022 levels. This shift is largely due to sanctions biting on Russian supplies.
In Australia, employers and unions are close to a national agreement that will allow workers to take double their holiday time off at half their pay. There are still details to be agreed, but the principle for this flexibility is being set.
The UST 10yr yield is now at 4.63% and up +11 bps from yesterday. The key 2-10 yield curve inversion is sharply less at -30 bps. And their 1-5 curve inversion is also less at -53 bps. As is their 3 mth-10yr curve inversion which is now at -75 bps and a very substantial flattening. The Australian 10 year bond yield is now at 4.36% and up +10 bps. The China 10 year bond rate is holding down at 2.29%. The NZ Government 10 year bond rate is now at 4.88% and down -7 bps from yesterday.
After starting in positive territory today, Wall Street has slumped and is heading for a -1.2% fall on the S&P500 in their Monday trade. The retail sales data just emphasised that Fed rate cuts are further away than markets had priced. Overnight European markets were mixed with London down -0.4% while Frankfurt was up +0.5%. Yesterday Topky ended down -0.7%. It was mirrored by Hong Kong, also down -0.7%. But Shanghai rose +1.3%. Singapore fell -1.0%. The ASX200 ended its Monday session down -0.5% while the NZX50 slipped just -0.1%.
The price of gold will start today higher by +US$20 from this time yesterday at US$2363/oz.
Despite continuing Middle East tensions and uncertainties, oil prices have slipped -50 USc overnight to US$84.50/bbl in the US while the international Brent price is unchanged at US$89.50/bbl.
The Kiwi dollar starts today at just over 59.1 USc and down -20 bps from yesterday and a five month low. Against the Aussie we are also down -20 bps at 91.7 AUc. Against the euro we are down -20 bps too, to 55.6 euro cents. That all means our TWI-5 starts today just under 69 and down its own -20 bps but that is only a ten day low.
The bitcoin price starts today marginally firmer at US$64,004 up +0.3% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.8%.
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183 Comments
You ever heard theres an equal and opposite reaction to events, like a see-saw, one down but not both
Such as Moteliers are making coin from misery, then they spend that coin. Then govt takes their cut too. It doesnt happen overnight. Averageman bought a commercial property, hope its not retail premises as those businesses are sinking while online is going up
And that is because American retail sales posted impressive results in March, and February's results were revised sharply higher. Those revisions means they were up +2.1% in February from a year ago, up 4.0% in March on the same basis. Consumer spending belies consumer sentiment. What they do is way more positive than what they say.
Finally, bear in mind that these data are all nominal - not adjusted for the surge in prices of everything, especially gasoline - so are Americans spending more... for less.
Adjusted (crudely) for inflation, this was a big drop in 'real' retail sales (non-seasonally-adjusted). REAL retail sales have declined for 12 of the last 17 months... Link
Fully agree. See the trend of the Gasoline RBOB YTD :https://www.marketwatch.com/investing/future/rb00
Americans have to drive to get to work,school, the mall, ........
In my defence: The link Audaxes posted was to a zero hedge article about short term expenses/retail sales of Americans. So yes, longterm is nothing to see, but short term MoM, YoY and YTD show steap increases which is the basis of Audaxes comment which I agreed upon. That markets, again overreacted, is another discussion!
Free school lunches for everyone! Unless you are stupid enough to be decile 10 or unborn.
"Households below the sixth equivalised disposable income decile receive more in transfers than they pay in tax. The top four deciles pay net tax, with the bulk of the burden on decile 10 households who each contribute about $75,000 per household more in tax than they receive in transfers and government-provided services.
...the work clearly shows that households in the top ten percent of earners bear a very heavy proportion of the cost of our tax and transfer system.
Treasury’s work relies on data from 2018/19. Since then, a new top marginal tax rate of 39% was introduced for earnings above $180,000, which will have increased the amount of net tax paid by top-earning households.
In 2018/19, government was not in massive structural deficit. In 2024, we are. Far fewer households will now be net taxpayers, because far more government spending is being covered by debt that will fall on future taxpayers."
http://offsettingbehaviour.blogspot.com/2024/04/net-tax.html
Sounds like someone needs to man up and realise that one of your responsibilities as one of the more powerful members of our society is to look after the dumb, the unable, and the impoverished.
Some of us here have been able by dint of birth, ability, or effort, to have ended up on top. Your job is to realise that being a better person begins with understanding that progressive taxation might be bad for you, but good for those weaker and less fortunate than you are.
End of the day, we're all Kiwis mate - do your bit, stop your bleating, and give a hand to the poor bastards who aren't keeping up with the play.
MediumPangolin 60% of our households were "dumb, unable, and impoverished"? I see you have no problem with the unborn paying for this government largess. How responsible of you.
How "progressive" is the tax system the punishes the middle income workers for getting ahead? Perhaps they are not dumb, unable or impoverished -just hammered by our kind, progressive tax system.
"A one-earner family with an income of $48,000 a year would have an effective marginal tax rate on anything else they earned of 57 per cent. If they also had a student loan to repay, it would hit 69 per cent.
If the family was earning over $70,000 would have a marginal tax rate of at least 60 per cent, with KiwiSaver and ACC payments on top of that."
Their parents should get a knock on the door from Oranga Tamariki. If they genuinely need financial help they should get it. but in most cases I'd say those families can afford a $1.20 loaf of budget bread and some jam. We have let parents get away with child abuse for too long, to the point where it has almost become the majority. My kids would never go to school without food unless I literally had nothing, which should not be the case in NZ.
To complicated. Every parent to receive generous child benefit. Then if a child arrives hungry there is no need for an investigation - the parents are guilty and the only decision is how to sentence them to a just punishment. Sentences would depend on circumstance but 24 hours starvation sounds about right.
That's a good point, but the criticism is valid too. For millennia people choosing to breed had to understand they had to be capable of providing for and supporting their children. If they didn't those children died early. Today it seems people's right to breed has been de-coupled from their ability to provide for and support any children they produce. The societal question needs to be is that appropriate?
Personally I do not see the right to have children as being separate from the responsibility for providing for them. The expectation that the state should provide is wrong and has significant consequences.
The same applies to retirement yet the pension is our biggest welfare handout cost.
The same also applies to investment decisions yet we have bailed out houses when they get shaken or wet.
Far more than we are investing if trying to ensure an educated workforce to fund these handouts in future.
Why are our biggest welfare beneficiaries always so angrily against children receiving some of the same?
Problem is this belief in "the state" as a separate institution.
The state is us. Make of that what you will.
We're all required to be personally responsible, to the best of our ability. Various factors will affect that ability. We also have a responsibility to each other.
Focusing on, getting riled up by the tax transfer/net tax payer imbalances is a simply a diversion tactic. It's another divide and conquer strategy pitting the "middle income", the "working" class, "working poor", and the "poor", against each other. It's failing to address the structural imbalances of modern rentier and finance capitalism. Meanwhile the transfer of "wealth" is continuing to be siphoned upwards, further exacerbating the imbalances and iniquities.
A majority of tax transfer recipients are full-time workers. Why is this? If we hadn't fucked up the "cost of living", the price of shelter and must have necessities for the last couple of decades, it wouldn't be necessary. And we're all responsible for this.
"Getting ahead". What are we getting ahead of? Our fellow man and woman? Once we're ahead, then what? Are we helping others get ahead or are we just running on the treadmill of getting ahead?
I agree with you Rick. This Govt should seriously look at a capital gains tax on all but family homes. An investment property is no different to shares, TDs, FIF or crypto - tax one, tax them all. I have self-funded my retirement by working hard, so have not applied for Super although now in my 70's.
For your first comment you, and others have a tendency to forget or choose to ignore that Boomers and most of the Gen Xs spent most or some of their lives being told they did not have to worry about their retirement, as money was being taken from them through their taxes to pay for their retirement. The message from the politicians is that money would be used to fund their pensions. Don't blame those who are retired today for their pensions. look to your politicians for what happened to those funds.
As to your other comments I tend to agree. Recent governments appear to have developed a mindset where they will bail out the apparently wealthy. This privatising profits while socialising risks is a concerning trend.
I'm not against the pension, actually, I'm against wealthy beneficiaries hypocrtically ranting about help to the poorer and younger (I'm not accusing you, just to be clear). They seem to lack any self-awareness, given all they've received from others at both ends of their lives.
The message from the politicians is that money would be used to fund their pensions.
Yes but we all know now that it isn't a piggy bank where you store it for later, it is built on the fundamental premise that the next generation will be bigger than the last in order to fund retirement. Now we have the system exposed for what it is, and the birth rate isn't there to prop it up, and there are many who have more than enough to be comfortable, and others who barely scrape by on it alone. You know what they say, if it aint' broke don't fix it. Well it's broke, and those currently funding it are seeing the likelihood of them getting the same treatment as unlikely at best, therefore why drain the balance sheet considering many benefits are already means tested to ensure those that genuinely need it, get enough to live without needing to also claim an energy supplement every winter to keep them warm enough not to cark it.
Yes we do know that now. But here's the question it's not about funding the pensions, it's actually about the fundamental trustworthiness of the politicians. I must admit Michael Cullen (who I am definitely not a fan of) seems to have created a super fund scheme that the politicians simply cannot stuff with as Piggy Muldoon did all those years ago. I cringe when people imply by their suggested plans or ideas that politicians as a group are trustworthy. History proves that this simply not true.
It used to be that it took a village/community to raise a child.
It would seem we've decoupled from this. It wasn't that long ago that families were having more children than they could afford - it's what gave us the "boomer" generation - but with smaller towns, more community spirit, traditional/conventional roles, still conditions of survival, they managed.
Plus a developing economy without the extremes and imbalances of capitalism, and the opportunities actually provided for people. Unfortunately coming from an era of perceived scarcity and deprivation - depression and war - we went to the extremes of materialism. Everyone out for themselves. Bigger cities and population and less community, institutions have installed themselves to fill the gaps. What used to be free and shared, childcare etc are now monetized losing its original essence. The survival instinct is less as we've become more dependent.
I'd also suggest from that era and prior we've had emotionally unhealthy adults raising unhealthy children and the cycle continues. One only has to observe the "adults" in power currently and the level of "mental" health issues in society.
We've had mass evolution of industry and technology, but we're yet to evolve as humanity.
I have no issue with the progressive tax system providing that tax revenue is spent wisely.
Unfortunately successive govts have spent tax revenue recklessly ie flag referendum, cycle lanes on harbour bridge, Auckland light rail to name a few.
So why would I want to pay them more tax when I know they’ll waste a large percentage of that tax revenue.
No, I paid to free a lot of slave offshore making me slave negative here. I got the idea off the CO2 industry. Now I virtue signal to my peers. I even get to sport a "Slave Negative" tick on my business and products. Let me guess, you are lecturing me and you not even slave negative?
Despite all the "progress", it never seem to be enough. In NZ its OK to drop out of school, go on the dole, live in a state house, and rob the supermarket and booze store. In Asia people try their best to make something of themselves otherwise they are genuinely poor.
The Lange/Douglas govt introduced GST as the great panacea and reduced income tax relatively. They then increased GST. Then Clark/Cullen t increased income tax. Key/English govt increased GST and reduced slightly income tax. Ardern/Robertson increased income tax and simultaneously oversaw a huge increase from bracket creep. To put it simply, now there is GST and even more PAYE, the latter is an unmissable target.
Why would U feel disturbed?
Also.... My understanding is that while Aussie paye tax is a little bit higher ( av. to middle incomes ) , their GST is 10%.
And.... Family home is exempt from CGT.
And ...petrol is much cheaper over in Australia.
"Massive free pass".... yeah right.
Because Kiwis throw their toys whenever any asset tax is talked about yet it's part of life in most places and Kiwi's don't appreciate how good they've got it.
Yes GST is lower which helps those on lower incomes as well as they have a $18,200 tax free threshold. These can be done because they have a broader tax system.
Yes family home is exempt which is standard. I don't get your point here. They do normally pay lots in stamp duty regardless.
Yes petrol is cheaper there. Again because they don't rely on consumption taxes as much as here with their broader tax system.
I stand by my massive free pass statement.
In addition to the reduction in income tax, part of the electoral mandate quid pro quo for the original introduction of GST was the removal of historical envy theft ticket clipping such as wealth/death taxes, stamp duties etc.
Labour are again reneging on their own promises
https://www.nzherald.co.nz/nz/politics/labours-chris-hipkins-says-wealt…
Concept of a wealth tax is actually ridiculously oversimplified. Not so much the target, but the implementation and maintenance. It would rely on valuations. Scores and scores of them annually and inevitable arguments to match and an enormous bureaucracy to cope. As well and ominously the management would need to authorise the government to compile and maintain a dossier of all of its citizens’ property and be able to audit all of that, with right of entry to households, as they saw fit. New Zealanders need to think hard about the implications here re their privacy and independence.
Too hard basket, there'd just be some sort of "Fair Gain Value" which is an assumed wealth and increase of valuation based on how well the entire financial system is operating. Then pay ummmmm... about x% of that.
I'm not sure where Wealth tax would fit in, who (other than Chloe) is driving this? There are surely better ways to structure our tax system to incentivise productivity. My fear is that the discussion about such taxes gets drowned out by the "envy tax" conversation, then we simply leave it as is.
Instead of dragging on a debate that will never end until one option exists, we should just say that Australia has a system that has worked for nearly 40 years, let's copy theirs and be done with it. I've lived there and it's just part of life, just like how we now take our own bags to the supermarket now without any thought (after an initial push back by some).
Depends whether they mean to tax all wealth, or certain types of wealth tax such as land tax. Land tax seems like the easiest option. Or even a full wealth tax where you need to estimate your wealth but if you get audited and are wrong you pay a big fine.
Personally I prefer income tax, but where the income from assets (including a gain in their value) is actually taxed and not easily hidden.
Yes I made it up. We don't need to do what other places do, we can come up with something new. If valuations are too cumbersome then there are alternatives - letting people estimate their wealth with a massive fine for significant undervalue seems reasonable to me.
LOL. Now I get it.
Okay! That could actually work. (I'm serious.)
Identify the top 1-3%. Select a few randomly each year to audit. If they cheat by more than 5% - fine them hard! The others would almost certainly fall into line.
Golly. It'd make excellent TV too. I'd certainly watch each audit and outcome.
Oh good lord. Take this from the top...
- Either (a) Govt spends money into the economy or (b) banks lend new money to borrowers
- People and businesses get paid and pay each other - generating the consumption of resources and energy
- Very quickly in NZ, the money circulating in the economy gets gathered up by people who earn a lot, or by people that own assets that enable them to extract rent from others (rentals, new world franchises, bank equity etc).
- People who work on low to average wages typically live week-to-week - their wages barely touch their pockets before they hand it all over to the rentiers
- Govt tries to tax back what it has spent - and this inevitably means taking more back from people that are hoarding cash (not as much as they should, but never mind)
'Taxpayers' do not 'fund' anything. They are just the people that return the money that Govt has spent into the economy.
"How can you see it differently?"...
Maybe because there are different ways to look at things.....especially when it comes to conceptual ideas....which is why monetary theory has proponents with different points of view.
In fact the whole of economic theory is like that.
What alternative theory is there for where actual money comes from? Money is created by balance sheet expansion, either by Govt or commercial banks working within the Govt's legal and monetary framework.
Govt shoved $30bn into the economy in March 2020 without collecting any additional taxation or selling any bonds. Where did that $30bn come from?
Those others are entitled to be wrong. That's the great thing about 'freedom of speech'. It makes it easy to work out who the fools are.
And fools are easier to fleece than smart people. First rule of marketing: The money collected from fools is the same as the money collected from smart people. But the marketing budget goes much further appealing to the fools. (Works a treat in politics.)
Either (a) Govt spends money into the economy or (b) banks lend new money to borrowers
Banks' holdings of Australian Government Securities have also risen recently, alongside an increase in Australian Government borrowing, which has contributed to the rise in bank deposits. However, the process of deposit creation is slightly different when the banking sector purchases debt issued by the Australian Government, since the Reserve Bank is the banker for the Commonwealth of Australia. When the Australian Government borrows from the banking sector, it holds the borrowed funds as a deposit at the Reserve Bank until the funds are spent. As the Australian Government spends these funds in the economy, such as in the form of JobKeeper payments to businesses, it adds to deposits held by businesses and, subsequently, to deposits of the household sector through employees of those businesses. Link
Yes, same in NZ. The proceeds of bond sales to banks are 'held' in the Crown settlement account at RBNZ. The transaction is broadly that the relevant bank's settlement account balance is debited by the sale amount, and the Crown Settlement Account is credited. But, from a consolidated Crown perspective the Crown Settlement Account is just an accounting gimmick. The balance of the Crown Settlement Account is a liability of RBNZ and an asset of the Crown. It is therefore always worth zero to the Crown overall - whether the 'available funds' are $40bn, $200bn, or -$100bn.
Why do you hate poor people so much? Of course the top ten percent carry a heavy proportion of tax. Just like someone on a $2m salary is significantly more burdened than someone on a $200k salary. Our household pays a lot of tax too, I don't begrudge people who receive transfers to help pay the rent. What a shitty situation to be in.
Next we'll have people crowing about how burdened they are for paying $65k in GST on their $500k launch.
Want to make these transfers go away? Fix the cost of living.
Definitely agree. I never give how much tax I pay much thought. What our household receives post tax is more than enough for us to live comfortably.
Anybody who begrudges how much tax they pay is more than welcome to take a pay cut. Claim these welfare transfers they're so envious of.
If education was the solution to everything, after 150 years of compulsory education we would be a whole lot better off. But we keep getting the same problems which usually boil down to something broken in human nature. The lack of education isn't the problem. It's some of the rich taking advantage of the poor and some of the poor taking advantage of the rich (even if it's to their disadvantage). Plus ca change, plus ce la meme chose.
Too much trying to make everything a business. Not everyone should be studying in a university. However, we undervalue it in terms of investment even if we put too many through university specifically.
We have a problem with under valuing primary education too, though. As John Key noted, smaller class sizes would be better but it costs more (and some folk belong to the untaxable classes).
Semi true. As educated as we are we appear less intelligent to solve modern day problems.
We're very uneducated in many areas of life and human nature.
It's an issue when education is predominantly focused on filling the mind, is a one size fits all. Some could suggest it's more akin to indoctrination than education.
"Teach a fish to climb a tree and he will always be stupid"
And now we need to educate students to be critical thinkers of said education and outcomes. They're the ones that have to pick up the pieces and become the new leaders.
Imagine if all our economists were actually taught to question the validity of their academia, truly studied the history and alternate ideas and philosophies, if they were given additional skills to see wider and join the dots in reality. We might have better results today.
If you feel that 150years of compulsory education should have gotten us more than we currently have, I suggest looking at the living conditions, average life expectancy, availability of goods and services etc 150 years ago. However I do get your point in that there could have been more if the likes of fear and greed didn't stifle new ideas and technologies that could benefit humankind and the climate.
Surely you accept though there'll be a lot of hard working families that might not be overly intelligent, but have a good work ethic, turn up to work each day, but unfortunately work in laborious industries that don't pay a lot. Not everybody is born to be some alpha male dog that screws everybody else over on the way to the top.
Do you think these people should be ineligible to have children? They're certainly not worthy of dignity it seems.
This is an egalitarian society, where there are systems in place to support those in need for a reason. We subsidise ambulance services somewhat, helicopter rescue if you have an accident in the wilderness and a coastguard to rescue you if your boats engine puts out or your kids go swimming in a rip current they can't get out of. The taxpayer funds the police to come if someone burgles your house or assaults you, would complain about personal responsibility then? The point of course is that everyone makes choices, some worse than others, but I would think that those who make poor life choices are not, for the most point, doing it with the goal of costing the system, debilitating their health etc.
I've been unemployed many times, in debt to pay bills, in stress being able to provide a home for my son and I, grappled with health issues and associated trauma, don't have any wealth, but I've never been poor.
I don't envy anyone and nor do I look down on anyone, who for whatever reason may be less able to help themselves. Everyone is doing their best with what they have.
You may want to look into this envy narrative you have. Sounds like there could be much unresolved anger within, judging by some of your comments.
I assume Kiwikids has been quite successful in his corporate career working alongside Luxon.
A common trait among highly successful people is a superiority complex combined with insecurities/feelings of inadequacy. This is not only the source of what drives them to success, but also spawns their highly toxic/nasty and abusive behavior. As you say, unresolved anger/issues within.
Blaming those less fortunate is a convenient way to justify one's own success, rather than accept systemic issues have helped contribute to their own success. Again, compensating for insecurities.
Yep, just not enough to balance out or encroach on the extremes to become a majority.
It can be linked to the "self made" narrative. There's no such thing as it fails to acknowledge the back's one's climbed, the input of others, the resources one has exploited, the knowledge and technology created by previous era's and ancestors, the policy settings and environment one has "made" it in.
One just has to look at the example of a "self made man" in Andrew Carnegie - insider trading, government manipulation, worker exploitation. At least he became aware of many issues and took action to redeem himself. It's as if he attempted to follow the "eye of the needle" proverb and give back to society. Not like our modern day hero's who self glorify with bigger yachts and spaceships.
The richest households are disproportionately hogging the bulk of the wealth the country generates, and not because they are some sort of genius business class or are providing net benefit to the country. They are there because the system is designed to concentrate wealth more and more to the top.
They top 10% are still getting net gains overall and the lowest are losing out.
As a compulsive misinformation peddler you know this. New paymasters from the fossil fuel lobby?
The majority of those transfers are going to those on superannuation, there are 842,000+ over 65's, it's literally 50% of the welfare budget.
Here is a link to the actual document.
Here is a link to the new one that was released very recently.
I'm more annoyed that people keep trying to frame it as if there is a bunch of working age people sitting around doing nothing collecting checks from the government when in reality the majority of transfers are going to superannuants. Sure there is some people of working age doing that who could be working but it's not that significant of an amount in comparison or cost.
Deficit spending is a part of it.
But there have been some policy changes by the Biden administration that have bolstered their economy and slowed offshoring and returned quite of bit of investment to home soils (and where the multiplier effect is greater). Overall, US consumers should be feeling pretty good. But half are Republicans and they'll whine their negativity about anything. The November result could spell a disaster for US economy if the winner turns of the spending taps too early and/or more tax cuts are handed out to the rich and the mighty USD becomes a little circumspect.
"The re-shoring is something that'll be 5-10 years in the making and ultimately be inflationary."
The Biden administration has been in for over 5 years now. And many would say, with some validity, that the on-shoring began earlier in a piecemeal way under that other fellow.
Could you explain why you believe re-shoring will "ultimately be inflationary"? I see no reason why it should be.
Rebuilding the lost capacity takes a considerable amount of time.
It'll ultimately be inflationary, because production naturally gravitates where the cost of labour is cheaper. The only way around that would be to have the American labour force to accept a much lower standard of living, and decades of graft.
This is a process centuries old. I'm not sure whether you've ever read Cantillons works.
USA deficit spending is about $2 trillion (6% - 7% of GDP). NZ has hit that level of fiscal stimulus twice in recent history - once in 2011 (Chch EQ) and again in 2020 (COVID). With 6% to 7% of GDP fiscal stimulus and less than 3% current account deficit, it is no surprise at all that the US economy is relatively strong.
By way of contrast, NZ Govt fiscal stimulus (G) will be around 2% this year, bank credit stimulus (B) will be around 3% and our current account deficit will be 5% to 6% (C). When C > (G + B), recession is pretty much guaranteed.
Fed assets dropped by about $1 trillion in the last year (to about $7 trillion). I don't think QT is that relevant to be honest.
Fed assets dropped by about $1 trillion in the last year (to about $7 trillion). I don't think QT is that relevant to be honest.
A few thoughts:
Size of domestic market.
Flexibility & rapid responsiveness to market & economic conditions. Facilitated by employment at will (of the employer), not as of right (of the employee).
Wide access to capital, labour, technology and education.
Competitive & comparative advantages in some industries and technologies.
"They are not over-regulated by over-the-top health and safety impost and not held to ransom by anti-capitalism in the name of the environment. "
So you've never done business in 'Merica then? Some places are still the wild west but these are becoming fewer and fewer every year.
They are borrowing one trillion dollars every 100 days. That's 10 billion per day.
Part of this is interest costs because they already have so much debt and interest rates are higher now. Their debt to GDP is over 120% vs our 35%. The higher government spending is what's making it harder for them to contain inflation, and in turn is costing them in interest.
It's not a stable situation and it's why other central banks are buying so much gold right now instead of US bonds.
It's completely stable - they don't care and they are big enough not to. As long as the US continues to pump US dollars into the global economy, there will be US dollars to buy bonds. If bonds don't sell, they will just not sell them and let more of their debt float (as reserve balances).
A few central banks are buying gold instead of bonds because they know that Trump and Biden appear to be quite comfortable weaponising their monetary dominance by 'seizing assets' (basically cancelling the money they owe on bonds, or, more plainly, reneging on their debt).
I keep seeing/reading/hearing that there is one last great money printing adventure left in the world fiat system before the FED mints their $1 Quadrillion platinum coin and trust breaks down completely. I have no idea how that manifests or the outcomes but looking forward to all the free money initially, but not the $1000 apples.
Even though it's resilient, their population are not doing well and the trend is not looking good. Their youth happiness (defined as under 24 years old) is in massive decline. From being top 10 or thereabouts a decade ago they are now around 65th in the world. They are only doing well in the economic measure of GDP per capita which is a pretty piss poor measure if your future generations are deeply unsatisfied.
This trend is consistent in Aus, NZ and Canada. All also have increasing generational inequality. So the lesson would be copy the US but bear in mind that it could result in our youth being massively unhappy and dissatisfied with life.
Interestingly the French speaking parts of Canada while in decline are nowhere near as bad as the English speaking areas. One hypothesis of the divergence in Canada is the way media operates in English speaking countries (focus on hyper local negative news vs the more international balanced reporting and analysis of Francophone areas).
Sorry, I should have been clearer, the messages they are getting could explain the discrepancy between french and English speakers in Canada. Increasing internal inequality is likely to be the main driver of unhappiness in US, Canada, Aus and NZ. Although they are still researching so may find other reasons. I did also read that intergenerational guilt about treatment of indigenous people could also be having an impact in those countries.
in some respects the size of the country itself means the economy is self supporting (but it is not bullet proof), add in that the US$ is the international reserve currency and there is quite a bit of international demand for it too. Other aspects complicate the picture, so ask Jfoe about those.
I'm not craving them to go up.
Misconstruing the myriad of factors that are pushing house prices higher as spruiking is a bad logical chain.
Private home ownership in NZ (and many other places) is slowly going the way of the dodo. If private home ownership is desired by the populace, they need to be better informed, in order to do something about it.
Despite continuing Middle East tensions and uncertainties, oil prices have slipped -50 USc overnight to US$84.50/bbl in the US while the international Brent price is unchanged at US$89.50/bbl.
I still think that there is going to be a 25bps cut in November, but with the recent news coming from the US, my confidence in such November cut is getting much weaker.
I am starting to think that the possibility of no cuts to the OCR whatsoever, for the whole of this year, is progressively becoming a very distinct possibility.
The resilience of the US economy is quite remarkable.
The UST 10yr yield is now at 4.63% and up +11 bps from yesterday. The key 2-10 yield curve inversion is sharply less at -30 bps.
The yield curve is displaying a rare and dangerous pattern which often threatens financial stability. All you need to know about the Bear Steepening. Thread. 1/
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