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90 seconds at 9 am: ECB cuts off cash to some insolvent Greek banks; US, European stocks down again; NZ$ at 76.2 USc; Beau Sancy diamond sells for twice reserve

Posted in News
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Here's my summary of the key news overnight in 90 seconds at 9 am, including news from Reuters that the European Central Bank (ECB) has cut off emergency cash supplies to some Greek banks that are now insolvent.

The health of the Greek banking system and how it copes with heavy withdrawals of euros by depositers worried about a potential euro exit will decide Greece's future in the euro. Some observers have said the ultimate trigger for a 'Grexit' will be the collapse of Greece's banking system when the ECB, which is the only bank lending Greek banks money at the moment, cuts off supplies completely.

The FT reported overnight that bankers had seen 5 billion euros of cash withdrawals since May 6, with 0.75% of all deposits withdrawn on Monday and Tuesday.

These further worries that Greece will crash out of the euro zone and unleash yet more contagion across Southern Europe's bond markets and banking systems drove European and US stocks further down overnight, although not by as much as on Monday and Tuesday nights.

US stocks have just closed down 0.4% and European stocks fell 0.2%. Most of the action though was on European bond markets, where the Spanish 10 year bond yield rose to a painfully-high 6. 5% before easing back to 6.29% at the end of the day. The Italian 10 year bond yield rose well over 6% in early trade before closing at 5.98%. Many are now watching for ECB intervention.

Markets were calmed somewhat by the release of minutes from the US Federal Reserve's monetary policy committee showing several members were keen on further stimulus to get the US economy growing faster. The Fed has already assured markets of near 0% short term interest rates until late 2014 and has been buying longer term bonds to flatten long term interest rates too.

Markets see a 30% chance the US Federal Reserve will intervene again in coming months to carry out a third round of money printing or quantitative easing (QE III) to support the economy.

Meanwhile, all this turmoil saw the New Zealand dollar fall further overnight, hitting a fresh four month low of 76.2 USc. It is down from 82 USc just three weeks ago.

Related Topics

But to emphasise the topsy-turvy nature of demand for assets, the 400 year old 35 carat Beau Sancy diamond sold overnight for a record US$9.7 million, which was twice the reserve price, BBC reported.

Some investors are cashed up and hunting for 'safe haven' assets wherever they can find them.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment in the box on the right or click on the "'Register" link at the bottom of the comments.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current Comment policy is here.

42 Comments

"Markets were calmed somewhat

"Markets were calmed somewhat by the release of minutes from the US Federal Reserve's monetary policy committee showing several members were keen on further stimulus to get the US economy growing faster.
This reminds me of Einstein's definition of insanity - doing the same things repeatedly and expecting different results.  
 

Print baby, Print.... High

Print baby, Print....
High Inflation has to start soon 

not yet, Bill

not yet,
Bill Bonner
 
 
Down, down, down...

Oil is at a 5-month low. Russian stocks are 20% below their high. Commodities are back to 2010 levels. 

Everything is going down. Even gold.

Wait a minute. Since we know from Einstein that all motion is relative, everything CAN’T be going down. If everything were going down, everything would be standing still. Something must be going up as a point of reference.

So what’s going up?

Cash!

Cash is going up against oil, houses, stocks, copper, commodities of all sorts...and just about everything else.

Cash is king. 

Why? Because we are in a Great Correction. And in a great correction, prices are corrected. In a bubble, prices tend to go up. This tends to push up animal spirits...encouraging investors and business people to do things that they will later regret. They build houses no one can afford...and shopping centers no one really needs. Then, these things — and the loans against them — appear as “assets” on the books of banks, pension funds, hedge funds, private equity outfits...you name it. 

Later, as the correction continues, markets discover that these ‘assets’ are not worth quite as much as they thought. Prices go down. Some ‘assets’ become liabilities. They are underwater, with more debt than equity.

Labor rates fall too. There are fewer projects that “make sense”...and they need fewer workers. Business falls off. Unemployment goes up. Salaries go down.

As prices fall, they must fall against something. So they fall against cash. Cash becomes more valuable. You can buy more real assets with every unit. People who hold their cash through a correction usually do well. They are able to buy quality assets, at the bottom, at large discounts to their previous prices.

That’s why so many people are willing to lend money to the feds for such low interest rates. They figure it’s as good as cash.
The feds have fought the correction every step of the way...with everything they’ve got. They’ve tried monetary stimulus — taking rates down to zero. They’ve tried fiscal stimulus — with $1 trillion budget deficits for the last 4 years...and no end in sight. They’ve tried “unconventional” measures too — such as QEI, QEII and The Twist. Last year, the Fed funded more than 60% of the US deficit with printed money. And the Fed has increased its holdings of US debt some 3.5 times since 2008, from $479 billion in September, 2008 to $1.66 trillion in March, 2012.

So, put on your seat belts. Sit back. Relax. 

Eventually, the correction will do its work. But it could take a long, long time.

Regards,

Bill Bonner
for The Daily Reckoning

Hes talking deflation  

Hes talking deflation
 

But if he's wrong , and

But if he's wrong , and inflation eventually perks up , your cash is screwed . It's a 50 / 50 bet that one ........
 
....do you feel lucky , punk ........ well , d'yer !

yes I do feel lucky, if thats

yes I do feel lucky, if thats the right word...
:(
The great thing about cash though GBH is its liquid...so I can go out and buy shares or property at the drop of the hat...so if inflation raises it head then in a week I could be in any asset(s) I want. At most Ive lost a few %s....
Property on the other hand is highly illiquid in a dropping market, takes weeks if you can find a buyer...ditto shares you can only sell them if there are buyers, so was noted in 1929....I could lose 50%+
So this is 1) an asymmetrical play.....and 2) deflation is highly likely.....3) Inflation is many many months off if not years....like 5 or 6.
Of course that (cash) assumes that banks wont close and you lose your wad....which is frankly a real possibility.
regards
 
 
 

It could well be a burst of

It could well be a burst of inflation then chaos desending into a deflationary spiral

There could well be a burst

There could well be a burst of high interest rates as foreigners stop lending to "risky" countries such as NZ for some months....Inflation, nope it takes time to build...and ppl need to be spending and too many are broke.....
regards

........ or we could just

........ or we could just muddle through ( as we have for the last 4 years ) ..... lurching from minor crisis to mini-recovery in equal measure ........
 
And one day you wake up and realize that the stockmarket has put on 50 or 100 % ..... and you say , " hooly dooly , how did that happen Batman " ...... " I was intently focused on house prices and the forthcoming financial apocalyptic crash  , when the freaking stockmarket doubled ! " ......
 
....... sometimes life is queerer than the NZ Labour Party back bench ......

No it's not. The minute Apple

No it's not. The minute Apple announced a dividend (first in company history) the stock lost USD 90 billion in capital value.
 
The smart ones knew inflation, growth whatever you want to call it was over, especially the insiders who voted for such a cataclysmic change in direction.  

There is a difference between

There is a difference between praying (for inflation) and seeing it....the FED is seeing no inflation 2 years out....there is simply no way it can happen in main street IMHO....too many un-employed and too many broke from debt servicing and that is the bulk of the economy.
regards
 

Gosh, anyone just arriving on

Gosh, anyone just arriving on the Earth might get the idea that something smelly and brown had just hit a high speed fan.
 
 

It may be that guy in the TSB

It may be that guy in the TSB advert.

Yeah and it (greece) is being

Yeah and it (greece) is being flushed by the ECB....
regards

With now fast worldwide

With now fast worldwide developments/ events, erasers become more important then pencils.

The ones from southern italy,

The ones from southern italy, sicily to be precise...
regards

And these guys want a banking

And these guys want a banking licence
A mix of average property loan, truck and diggers loans and now lots and lots of inherited failed property assets. http://www.odt.co.nz/news/business/209544/victoria-property-fund-debt-inherited
Wonder what value these assets are on the books
All controlled by Kerr whose only interest is himself (just google SCF and Touchlight).
RBNZ would be absolutely foolish to allow these guys to have the credibility of a banking licence.
 

at least heartland are doing

at least heartland are doing something about it unlike our banks who sat by and watched crafar farms  destroy itself and unlike the finance companies who waited until developments collapse before doing anything
mr kerr does have a sizeable shareholding in heartland but nowhere enough to control.
 

Mr Kerr controls 20% of the

Mr Kerr controls 20% of the shares. When 60% are in mum and dad shareholders hands, whom have little/no voice and the Christchurch Old Boys are on the Board for him its his bank.
Be concerned.
Crafer was a large lesson to all the other dairy farmers on the edge. Do as we say or else this is what will happen. Crafer was too lippy to the banks for his own good and they were always going to get him. If they liquidated all the other dodgy dairy farms NZ would be extremely sick. If they all went on the market most would be in negative equity. Instead the banks have been clever and managed the price of dairy farms in a controlling manner. The banks have been very very active in managing sick dairy farms over the past 2-3 years. Watch what happens once the Fonterra shares are able to be sold. The banks will be forcing many farmers to liquidate their holdings to pay off debt.
 
 

Agreed, just using averages,

Agreed, just using averages, all the farm debt can not be refinanced on current lending terms. given the 20% to 30% that hold the concentration of new debt, the banks are very much looking after number one.
This thread looked at such http://www.interest.co.nz/news/59209/rbnz-sees-rebound-bank-profits-2009...
 
Specific examples we know of aside, the numbers imply are many farm operationsin that 20% to 30% that on bank valuation as going concern, have high mortgage debt outstanding.
Remember its the bank giving valuers specific instructions as to what valuation assumptions to use.
 
as for Heartland Ag, there appears no where or them to lend, the banks are already everywhere, unless they follow SCF lending criteria...
 

NZ a money launderer, well I

Don't be so surprised. It's

Don't be so surprised. It's what's driving the NZ property market. Have written about it on at least 3 occasions in the past 2 years.

Im not... ;] but its obvious

Im not...
;]
but its obvious NZ intended to do diddly, now maybe they will have to....
regards

Steven .. listen to the

Steven .. listen to the following BBC podcast .. it discusses in some detail how the princelings are getting money out of China and the lengths they go to .. this is just an extreme example of it .. but it's how its done. And it is being done ..
 
Owen Bennett Jones special edition of Newshour on the downfall of Chinese party boss Bo Xilai. The Bo Xilai Affair 15 Mar 12 - Tues 15 May .. you have 6 days to listen to it.

http://www.bbc.co.uk/podcasts/series/newshour

Next time you are in

Next time you are in Auckland, take a wander up and down both sides of Queen Street and then along Customs Street and observe the number of Chinese hole-in-the-wall foreign-exchange money-movers. They weren't there 15 years ago. They sure as heck aren't changing NZ $20 notes into NZ $5 notes.

I can confirm locations in

I can confirm locations in suburbia also iconolast.....

And through all this - our

And through all this - our Registrar of Companies is today the very same person who 'geniused-up' the present hands-off model, outsourced the building of it to a private entity, downsized the overseers to worse than non-existent, and happily presided over all of the carnage.
 
 

And what do our

And what do our ministers-Government do, they jaw bone. What is wrong with this Government?
They can VERY QUICKLY move to bailout their rich supports when SCF goes under, and give a tax cut that we CAN'T afford to the rich (no matter how DonKey claims otherwise). But we can't put enough teachers in a school (Animal farm and a Brave New World come to mind) or fix a money laundering allegation by Europe !!!
This is surely a HUGE RED flag. Are we to just wait until some SERIOUS fall out happens and then react? Closing the barn door AFTER the horse has bolted ..............and ................................fiddling whilst Rome burns     come to mind.....
 
I too wonder whether we're being used for money laundering via casinos and houses.
Put a tax on ALL non citizens (or non residents???) that own a property in NZ (Capital gains of say 25% and a registration fee of say 5%). Stop them owning more than one home by if needed a 100% capital gains tax on 2nd or more houses.
How come it's taken so long for this to be mentioned by the media, when Latvia 'black listed' us a few months back?
 
Someone please let me-us know this isn't as bad as it seems on first read.
 
 

Hi, The data I saw said we

Hi,
The data I saw said we had 2% more students but had put in 12% more teachers in that same time period, that idoesnt appear to substantiate "cant put enough teachers in a  school"
Then we look at the OECD figures and see NZ scores very well....in the top 6...
http://www.stuff.co.nz/national/education/6091397/NZ-near-top-in-OECD-ed...
So no it doesnt look as bad on first read....or second, or third.
regards
 
 

"....in terms of the

"....in terms of the particularly controversial matter of performance pay for teachers, the latest Herald survey 63 per cent of respondents supported it."...Herald!....
Go baby go...bash the sodding teachers black and blue...drive out the time servers and the bums who karnt spell...then we can have us a super doopa edukation system...so what if a shortage of fools prepared to teach is the norm...and what does it matter if classes go without a teacher....or have to kontend with a new fool each term......or if there are fights over who gets a seat and who has to sit on the floor....
What capable student today, witnessing this 'bash a teacher' policy( because that is what it is), would give the slightest thought about doing a degree that locks them into teaching....when they can gain a qualification that leads to a far nicer occupation with a good deal more in wages.....I would make very certain any students of mine got to see the nasty side of teaching, if they asked about teaching as a career...run like hell would be my advice.
 

"Australia's federal

"Australia's federal government announced an increase in the departure tax to A$55 from A$47 per person, effective July 1. That means a family of four departing Australia will pay about NZ$280 just to leave the country. The move was unveiled in Treasurer Wayne Swan's budget last week." herald
Next up will be the penalty tax for leaving an urban area and going country anywhere in Aus!
Issue personal ID cards and fines for not carrying them...cards that register when they pass the urban rural fenceline....
Toss in a tax when the card enters a pub.
Or a public dunny.
So many ways to steal from the peasants....aint govt fun.....time for MPs to have another fat pay rise I think.

Wolly: That's another form of

Wolly: That's another form of keeping them in "detention centres", just a bigger one .. need more money to escape from it .. here's where they get the big money from
 
In Western Australia, section 102 of the Children and Community Services Act 2004 is where you'll find the answer.

102. Leaving child unsupervised in vehicle
A person who has the care or control of a child and who leaves the child in a motor vehicle (as defined in the Road Traffic Act 1974) without proper supervision for such period or in such circumstances that ... is guilty of a crime, and is liable to imprisonment for 5 years.
Summary conviction penalty: a fine of $36 000 and imprisonment for 3 years.

Oooops....this was not in the

Oooops....this was not in the spin!
http://globaleconomicanalysis.blogspot.com/2012/05/real-estate-crash-in-china-underway.html

  • Year-on-year sales in Q1, for all real estate, was down 14.6%.
  • Residential property sales were down 17.5%
  • Office sales were down -10.2%
  • Sales in January-February were a disaster, falling 20.9% overall, compared to the first two months of 2011, -24.7% for residential.
  • Total amount of floor space “for sale” was up 35.5%, compared to the same date last year
  • Floor space of residential units “for sale” grew 47.4%.
  • At the end of 2011, total floor space “under construction” was roughly 4.6 times the floor space sold
  • A year and a half worth of excess inventory is hidden somewhere in the pipeline
  • New starts in April fell 14.6% year-on-year and 27.0% month-on-month, for property as a whole
  • Housing starts fell -14.4% year-on-year and -23.4% month-on-month
  • Office starts fell -21.0% year-on-year in April, and -45.1% compared to March
  • Retail property starts fell -18.7% year-on-year, and -36.8% compared to March
  • Land sale revenues in April (RMB 27 billion) were down -54.7% compared to April last year
  • Foreign funding for property development was down -91.4% in March and -80.8% in April, compared to the same months last year.

Japan's economy grew 1.0 % in

Japan's economy grew 1.0 % in the quarter ended March 31 ...... that translates to an annual growth rate of 4.1 % ...... consumption figures were 4.8 % up , annualised .....
 
..... those have to be the most impressive set of numbers they've posted since the time when the Emperor's royal palace was valued at more than all of California ......

GBH, did you see this

AndrewJ,  thanks.  The

AndrewJ,
 thanks.  The Similar Articles You Might Enjoy from your link was of interest as well.
 

...... their debt is

...... their debt is internally funded , from Japan's own savings  ..... whereas NZ is truely overburdened , our debt is payable to offshore banks , our government  discourages saving .......

Link please Gummy Context is

Link please Gummy
Context is everything
As they have shut down all their Nuclear Reactors I'm a wondering where the power and growth is coming from..

What link ........ dontcha

What link ........ dontcha read the business section of the NZ Herald ? ...
 
.... it's all there you know , Auntie Herald has it all .......