OCED Deflation? really? Why is everyone suddenly forgetting the huge oil bubble that was in the middle of bursting this time last year? You have oil going form $147-$35 a copy, now that is deflation! But can you include it as true market deflation or speculative deflation? It you throw that skewed speculative energy data out it is very obvious that inflationary effects are afoot in the true core CPI.

I just find the deflation argument in the CPI very very thin and particularly anorexic. There is deflation in other areas such as capitol assets but not in day-to-day consumer goods.

Re #5 - Bill English says "I'll be reminding investors that New Zealand's economic fundamentals are sound". So why do we need to borrow $40 billion over the next 4 years? Didn't George W say exactly the same thing at the time of the sub-prime mortgage crisis? Oh dear we are in real trouble!

I agree Troy, this talk of deflation is overhyped. You can have ordinary deflation as in Japan for the last 19 years just as you can have ordinary inflation like we have had. The US is paranoid about a hyper deflation death spiral much as Germany is paranoid about a hyper inflation death spiral, both based on real danger but taken to extreme.

Bernard I disagree with your analysis here
"It's all part of the story of many developed but recessed countries (US, Japan, UK, Eurozone) engaging in competitive money printing and devaluations, which is done at the expense of those countries (like New Zealand) who don't print and end up importing the printed money, inflating their property markets and killing their export markets."

To my mind the last property bubble was due to the low exchange rate attracting overseas new residents and non-residents to our shores plus a supply bottleneck created by idiotic regulation by central and local government. Excess demand met restricted supply.

On another note there seems little coverage of Japan here so your point 10 is very interesting. I understand their government debt is very high relative to GDP too. Plus their GDP has taken a very big hit. It appears you can be too export oriented.

Who decided that inflation , as opposed to deflation , is the lesser of the two evils . And why ?

ruru -

the rights are selling like hotcakes ...

that is the current shareholders are selling their rights to buy the new shares, get it?!?!??!?!

This is not really a good thing, as current holders are not buying more as their rights allow them :)

This doesn't really matter though as it is fully underwritten.

@ Market : What happens when the underwriting lapses, and the new shares are allocated? I wonder where things go after the .40c floor is removed?

Wild Bill is going cap in hand , to borrow $ 40 b. , offshore . If , as he says , the NZ economy is basically sound , and likely to emerge from the recession ahead of other OECD countrys , do we need the dosh ? ( is it gonna take that much to bail us out of KiwiRail / leaky home owners / Emissions Trading deficit / Sth C Finance / Allan Crafar / Fonterrible / Dunedin Sports Stadium / Wally ? )

The Japanese Reserve Bank can not effectively devalue the Yen because the rise is cause by a deleveraging of the Yen carry trade that has been in existance since the Japenese bust of 1980.

Of interest is what looks likely to be a new carry trade developing where the US dollar is borrowed for free and invested in high yeild economies/comodities.

How much will flow into NZ is an interesting point - we are already highly leveraged as a country - maybe one final manic phase befor correction?

ruru - looks like interest.co.nz selectively chose to ignore the second half of the PGC article. Not sure whether they are doing it deliberately or just an oversite.

"Then again, Stock Takes spoke to another fund manager who believed the company had changed its spots.

Having met new chief executive Jeff Greenslade and director and driving force behind the restructuring George Kerr, the fund manager said: "Our conclusion was that this will be one of the all-time great opportunities to buy cheap equity in what could be a vastly different company in three to five years' time", albeit a somewhat risky one.

His reasoning was that while the company had taken big hits over Marac's property loans, its earnings were likely to recover strongly from this.

He was encouraged by the new direction the company intends pursuing, including the unexploited opportunity to cross-sell various products to its sizeable customer base, including thousands of Perpetual Trust clients.

In addition, with a $50 million war chest, Marac would have the ability to play a big role in finance sector consolidation.

The fact that PGC and First NZ have managed to secure sub-underwriters for the $237 million rights issue indicates there are more than just one or two big investors prepared to back the company.

Word is that apart from Kerr himself, the list of sub-underwriters includes some "interesting" Australian names."

Roger Thompson: Wot makes you so sure that NZ Inc needs to bail out Wally? Wot do u know that we don't?!

lol

Cast our mind's back , to when the once rich Hunt brothers tried to corner the world's silver market . Wally's gonna top them , with copper . If anyone can , a Kiwi can . Go Wally !

Roger - "Something is needed, that's for sure." Read the last paragraph again. If the said other suggestions were implemented, (along with.... you know what..... effective asset/capital gains taxation) how much more beneficial would YOUR "hard work , thrift , and innovation" become?

(You continually miss something Roger, but I love your humour and insights.)

@ Roger. But that takes effort. Cant we just re-finance and the problem go away? Micro vs macro economic nature. Same in this argument it seems.

@ Crazy (if that is your real name). I like deflation. I have no debt.

Philly,how can I know what you don't know if I don't know what you know..... now I've got a bloody headache....

@Crazy bill

Ask yourself why food items are cheaper. Is it true market deflation or is it that the commodities bubble burst late last year? What is the more likely cause? It is hard to claim deflation when you use artificially high speculative data.

Grab what you can , Wally ! The gold bug will get you , eventually .

Les : Which part of that paragraph did I miss : The currency intervention / Rate cuts / Credit control volume / and QE . They all miss the point ! Not one of them is effective , to do what we need . I am beginning to think that Iain Parker is right , and frankly , that scares me nearly as much as a weekend at a Green's Party convention !

Interesting article on cows. The meat market looks to be weak for a while, my friends are talking about the fall in the beef schedule as a collapse.

from Mish

Economic Madness Over Pork Prices

In what amounts to economic madness, Japan to Buy Domestic Pork to Boost Prices After Demand Drops.

Japan, the world's largest pork importer, will purchase about 70,000 swine carcasses from local herds to boost prices after an economic slump cut consumption and sent stockpiles of the meat to the highest level in 20 years.

The government will spend 292.9 million yen ($3.3 million) on the purchasing program, the Ministry of Agriculture, Forestry and Fisheries said in a statement today.

Pork wholesale prices plunged 26 percent from a year earlier to 380 yen a kilogram on average this month in Tokyo, according to government data. Consumers are eating less meat as the recession cut wages and boosted unemployment. Japan's price- support measure may benefit exporters such as the U.S., Canada and Denmark as the domestic premium over imports may widen.

Japan's pork imports dropped 14 percent from a year earlier to 61,981 tons in July, according to data from the Finance Ministry. Purchases declined as Japanese demand shifted to cheaper food products such as chicken amid deflation, Fujii said in an interview today. In the year ended March 31, Japan imported 815,063 tons of pork, up 8 percent from a year earlier.

Mad Facts

* The Japanese Government is buying 70,000 swine carcasses even though stockpiles are the highest in 20 years.
* Japan is the world's largest pork importer, stockpiling supplies.
* Japanese consumers are switching to chicken because it is cheaper.
* Japan's "remedy" is an attempt to force pork prices higher.

Does this make any sense at any level?

Japan Ponders Currency Intervention

Currency intervention, like pork intervention, like gold manipulation cannot possibly work. Yet Japan never learns.

@AndrewJ, yes if the Americans are slaughtering that many cows...and over-prodicing milk at below cost....hence why Fonterra's price is down...

Deflation....

AndrewJ, it's the Japanese way of 'porking' the market. Maybe the RE mob here could take lessons and start buying up the properties on offer at the asking prices, using freshly dreamed up cash from the banks and thereby cause prices to rise and rise and rise. Jeez this financial crap is easy. Roger, it's just so hard to decide on these things.

For those of you that would like to see what artificial deflation looks like here you go:

http://www.zerohedge.com/article/h2so4-%E2%80%93-lei

BTW Do you remember what the price of Oil and Corn was mid to late last year? I do. I distinctly remember corn being such a problem Mexico was claiming that its population was on the brink of starvation. Also, after December the US over thinkers will say Deflation is over and then claim Inflation is on the rise and we are seeing a true rebound. Don't buy it since it's the same silly argument made with the same stupid YOY data sets.

Roger - with a credit control volume, rates cuts would be possible with nil increasing impact on inflation. Throw in some effective asset, capital gains taxation, and where would you expect NZD to be? Where would you expect income and corp tax to be, if we kept revenue neutral - why wouldn't you want that? Where would housing afforability be? Why wouldn't you want that? And yes, much of what Iain Parker says, IMO, is bang on. I didn't understand your Green party comment - why bring politics into it, when this is about commons sense?

No Les : Much of wot Iain says ( bless you , dear heart ) is NOT bang on !

My point being that we are looking for agencies to manipulate our currency/ interest rates / bobby calf index / you name it , to give us some advantage over our competitors overseas . Wot the flamming heck is so wrong with competing with superior product and price . Why do we have to use artificial devices to stay afloat ? Bloody hell , man , are we up to it , or we a bunch of namby-pamby wusses !!!!!!!!!!

Les : I think eveyones' brain cells get muddled when the Green-Party are in the mix ! Bless you , I am at the bottom of a Laphroaig 2001 single malt , and in an obstreperous mood........Watch out ! ( ha ha de ha )

William, You would like to think the payout is based on genuine market fundamentals. How significiant is an increase in the payout the week after Fonterra asks for a capital introduction from it's suppliers. Or an I just cynical

Allen: Yes, I think about it a lot. Here in NZ people can only seem to cope with their immediate wants. We are too obsessed with the price of houses , both those that want a house and those that have houses.
Most of us are oblivious to the fact that we have been well and truly fleeced and condemned to a life of debt.

The corporate raiders are going to continue to advance all but unimpeeded if the Green Party's co-leaders efforts on Agenda this morning are anything to go by. Guyon Espiner had her in all sorts of trouble implying that Greens are opposed to trade and why would that be so when it has just been announced that our exports to China have just increased 58% and would they repeal the CER with Australia, this had Metiria Turei in all sorts of trouble, when it should have been a monetarist attack easily repelled. Trade may have increased 58% with China in the year, may have increased by hundreds of million, but imports from China still increased and the trade imbalance still and will in all probability always remain in the many billions. As for repealing what is a favourable arrangement with Australia, the obvious answer is that would be stupid as it is a demonstration of what is possible when you enter agreements with nations who's wage costs and structures are comparing apples with apples. Free trade agreements with China are an age old demonstration of what happens when non slavery cultures allow slave made goods into their economy, they implode and become elitist themselves.
If you ever want to study up to date trade position figures go NZ Stats here
http://www.stats.govt.nz/browse_for_stats/imports_and_exports/overseas_c...
click on overseas merchandise trade tables pdf, then go to tables 3 & 4
Check out the massive trade imballance in manufactured goods $11.82 bill exported to $32.86 bil imported table 10, just goes to show how much of our economy is now made up by the hood winking financial sector.