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90 seconds at 9 am: English signals crisis cloud for a generation and eyes mortgage controls; Spanish debt crisis worsens and safe haven yields hit record lows; NZ$ record high vs euro

Posted in News
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Here's my summary of the key news over the weekend in 90 seconds at 9 am, including news from the National Party's conference that Prime Minister John Key has announced plans for loyalty bonus shares for retail investors buying shares in the SOE floats, and that Finance Minister Bill English has said the dark cloud of the Global Financial Crisis could hang over the economy for a generation.

Radio NZ reported English said the global economic crisis may not go away for 15-20 years. He was also reported as saying action would be taken to stop banks lending heavily again.

"We don't want to let the banks get carried away with large growth in lending. We have the tools to limit their ability to do that and those tools are in place and can be used," English was quoted as saying.

Meanwhile, the European debt crisis worsened over the weekend. Spanish bond yields and the spreads to Germany yields hit record highs as fears grew the Spanish government would have to ask for a formal bailout to go with the bailout already agreed for its banking system. The spread between the Spanish 10 year bond yield and the Germany 10 year bond yield rose to a record high 613 basis points with the Spanish 10 year bond yield hitting a record and unsustainably high level of 7.32%. The Italian bond yield to German spread rose to 500 basis points for the first time since January. This indicates capital flight from southern Europe to Northern Europe in anticipation of a Euro zone breakup.

This is despite (or perhaps because of) a new austerity plan unveiled earlier this month. It also followed a request from the Valenica state government for a central government bailout and reports over the weekend that six more Spanish regions will ask for bailouts. The central government has set up an 18 billion euro bailout fund for the regional government that is funded by taking money from a lottery fund. See more here from Reuters on growing protests over the weekend. 

Greece may also be back in trouble again as Der Spiegel reported the IMF may stop further tranches of aid to Greece as it is missing its current targets. Greece's Prime Minister said over the weekend the heavily indebted nation was in a 'Great Depression', Reuters reported.

Spanish stocks fell 5.8% on Friday and the Dow fell 1% on the worries about the global economy. See more here at Reuters.

The move to take risk off the table saw appetites for 'riskier' assets such as the New Zealand dollar fall vs the US dollar. The Kiwi fell to 79.7 USc in morning trade from almost 80.5 USc this morning.

The shift to safe haven assets saw US Treasury bond yields fall to record lows. The 5 year yield fell to 0.57% and the 10 year yield fell to 1.46%.

However, the weakness of the euro saw the New Zealand dollar rise to a fresh record high over the weekend of 65.9 euro cents. See more here in BNZ's currencies report.

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?

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21 Comments

Forgot to put this

Forgot to put this in.
Deloitte Access Economics in Australia is saying Australia's mining boom will be over within 2 years.
http://www.smh.com.au/business/mining-boom-forecast-to-end-in-two-years-20120722-22ibe.html

So ask English the hard

So ask English the hard question, Bernard.
 
20 years out, there is no question about Peak Oil, and no question about population vs consumption vs depletion vs interest vs profit.
 
Those pidgies are roosting now.
 
So ask the querstion: What about a Steady-State economy? What about something sustainable in the long term (and economic growth is NOT sustainable in the long term, despite English rabbiting on that it is (Nat Radio news).
 
It'll up your ratings, BH. First in, all that. The Emperor is suggesting he has no clothes, first one to report will be remembered as a hero. The rest will be seen as sheep.

Has Bernard been granted an

Has Bernard been granted an interview with Wild Bill ? ........
 
...... if so , arsk him this : " Was your toadying to the FBI in locking up Kim Dotcom needed to appease the Yanks , and to ensure supplies of oil to NZ  from the USA in the future , when the USA becomes the world's greatest oil producer and exporter ? "
 
Second : " Will you dump the expensive wealth re-distribution packages , particularly WFF , which Labour introduced , and which you guys yourselves labelled as seriously dopey policies ? "
 
Third : " Wild Bill , why do you ignore the retirement commissioner , who has been warning for years of the cost blow-out of the universal super , as the BB's retire from the workforce ? "

FYI more from China

FYI more from China suggesting it can't repeat the 4 trillion yuan investment surge of 2008/09 that helped cushion Australia/NZ from the worst of the first round of the Global Financial Crisis. We may not be so lucky this time around.
FYI from Xinhua
http://english.cri.cn/6909/2012/07/22/2982s713055.htm
Premier Wen Jiabao has warned of new employment pressure amid China's economic slowdown, saying the country will face a more complicated and more severe situation in creating sufficient jobs.
China's economy is facing several outstanding problems with its economic growth, which will continue to weigh on the job market, Premier Wen said in a speech on employment delivered at a national conference last week.

Just sorted out installing my

Just sorted out installing my 5KW solar array.
Hope for the best and prepare for the worst.

What cost? Grid tied? Who

What cost? Grid tied? Who from? What are you running off it?

Interesting comment by

Interesting comment by English, they have done a lot of talking over the past few years let’s see them walk the talk.  The time has come to implement some of the controls he talks about.  They know what is going on and how to fix it, it just appears they lack the courage.  

Do they really know how to

Do they really know how to fix it?  Is it really possible to fix it?

Here here. I've noticed with

Here here. I've noticed with National in particular, that they talk an awful lot and do very little, other than 'pick on the weaker part of society'.
Yes we're ALL aware there's a housing problem, yes there are tools to put it right, but BILL you've missed the salient point, waht matters is the DOING what needs to be done, NOT the telling us you are aware of the things that can be done.
He's either very stupid, or thinks the typical voter is very stupid.........
Get off your fat a$%e and do something before the world financial crisis forces you to do what they DEMAND of you-us.
Time to step up to the plate and show us you're not as uselsss as a chocale fire guard, as you seem.
 

Factboy...agreed...another

Factboy...agreed...another thing English mentions is how "households are paying off debt" and he's happy with this...but they don't have any policy ideas (e.g. LVR controls etc.) to solve the problem...he's leaving it to households to solve, when they are the ones that helped create the problem.

Factboy......There is a

Factboy......There is a combination of factors at work to diffuse any meaningful changes to internal economy  particularly the overheated housing situation in Auckland.
Firstly yes voters by enlarge are stupid , ..Epsom is an excellent example of  sheeple behaviour regardless of property values....and pretending their somehow more educated.
Forgive the voter as he/she is hamstrung for any real alternatives to the continuance of a two horse race.
Secondly ....Billy Bob knows this...! and so on a broader scale has the comfort of not giving a flying frig what anyone thinks of the current fiscal outlook , because regardless of the day to day running of N.Z. financial accounts, Billy is busy pushing the agenda forward, ....to sell the SOE's and move a giant step closer to Corporate N.Z. or N.Z. Inc if you like.
Hard to believe that  "The Agenda" has precident over the Christchurch rebuild.....but the fact is Factboy.....it does.
Never forget.....Billy Bob was a reject for P.M......he hasn't forgotten, and that just plain affects his empathetic values.......
I've watched at least fifty plus interviews with him....bottom line ...he don't care, so he aint listening.
Good luck Bernard with that interview....I suppose if I have a question you should probably ask him it's.......
Er Billy, whats that on your boot there you haven't quite scraped off ...?

Hmm. I'm not so sure. Bill

Hmm. I'm not so sure. Bill English does understand the problems more than most I think. The difficulty is what to do about it - too much action and you "crash the hosuing market" (his words not mine) and too little and you ignite the next boom. If you crash the housing market you will not get re-elected and the dopey lot that fell asleep at the wheel last time will get in. To a poltician that is a very undesirable outcome.
I hate to admit it but he is probably right. Being an impatient type I would try to get on with things as fast as possible, but National have learned that changing things too fast provokes a backlash. It seems you can only change 0.5% to 1% of GDP per year without causing too much grief. If you try to solve the housing problem too fast you get too much unemployment and social dissolution (Spain, Greece, Ireland anyone?). So the glide path seems the prefered course.
Gliding gently from a daft economy based on buying houses off each other with ever more debt, to a production and saving based economy based on producing stuff the world wants to buy. Sounds good to me. If it can be done, that is.....

The best thing to help

The best thing to help housing affordability would be to get more supply happening. There is little danger that the market would crash because even if planning controls were relaxed new housing would still drip feed through.
Impatient though I am, I suspect the govt is pressing the Auckland council to liberalise its planning controls in the new unitary plan to be released next year.
 

Yes, I think that is what

Yes, I think that is what National are trying to do. I'm rather hoping their exposure to Christchurch and dealing with the local council there will stiffen their resolve too. Cheap sections is the way. We've got plenty of land, but don't seem to know what to do with it.

Too perceptive christov. You

Too perceptive christov. You need to re-train your brain. Only those that grew up in the John Wayne era where he gets up on a horse, and starts bouncing up and down and the scenery starts moving past, knew he wasn't riding a horse.

" him....bottom line ...he

" him....bottom line ...he don't care, so he aint listening."
I would suggest that's the same with all pollies....they never listen to things that on first contact they dont agree with....selective deafness....."done care" probably correct.
"stupids" I  think there are 4 types of ppl;
a) non-thinkers, the lemmings / canon fodder.
b) "technicians"; they can apply fixes to whats happened in the past and to some new situations/changes, tactical ppl.
c)  engineers/professionals who can successfully apply what they know or find to new events
d) and lastly the very rare breed, strategists (what pros should be). They see events before hand and avoid them, get to them or use them....
BBob is at best a technician....trying to be d) where it fits his outlook.
regards
 

FYI here's Spain essentially

FYI here's Spain essentially calling on the European Central Bank to print money to buy Spanish bonds.
The European crisis could get ugly this week.
http://online.wsj.com/article/SB1000087239639044357090457754289271500091...
"Somebody has to bet on the euro and now, given the architecture of Europe isn't changed—who can make this bet but the ECB," Spain's Foreign Minister José Manuel García Margallo said Saturday.
The ECB so far has bought around €214 billion ($260 billion) of government debt with its Securities Market Program, but hasn't actively used this tool for months. In the interim, Spain has had to pay dearly to continue attracting investors to its bond auctions.

via IMF?  funny thing is it

via IMF?  funny thing is it will take Trillions and the chances of it paying it back is zilch.  So at some point when the IMF asks for money to bail Spain and then Italy someone(s) is going to start calling it off.  I think we are on the hook for 5billion so far?  Spain and Italy is a magnetude (10x?) bigger..........
and I expect Ireland will also ask for similar BTW and fair enough...
regards

Is Germany really as

Is Germany really as financially well off as everyone makes it out to be?  If Germany has become so wealthy why does the state of Rhineland-Palatinate require subsidies from the EU to operate the famous Nurbergring?
http://www.zerohedge.com/news/floodgates-open-four-more-spanish-regions-seek-bailout-german-n%C3%BCrburgring-faces-bankruptcy