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90 seconds at 9 am: Fed signals no change until unemployment below 7%; markets fall; China's credit crunch worsens; Swiss say no; NZ$1 = US$0.787, TWI = 73.7

Posted in News
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Here's my summary of the key news overnight in 90 seconds at 9 am, including news the US Fed is in no hurry to change its policy settings.

Chairman Bernanke says he will continue with current settings, including the US$85 bln QE until the jobs situation is substantially better, and he confirmed they are thinking of tapering it down because the US economic situation is clearly improving.

But he says they are in no rush, although he suggested tapering could begin when the unemployment rate falls below 7%.

And he reminded us that there will be a long time between the end of tapering (which hasn't even started) and when they will need to raise rates.

Markets are digesting the news. The US dollar surged more than 1% in the few minutes after the announcement. Banks are reporting big demand for the US dollar. The Dow fell more than 1% as markets saw the Fed statement as 'status quo'. Gold and oil have fallen in US dollar terms. The bond markets don't like talk of tapering and UST yields are up.

In news from the rest of the world, China's credit crunch has deepened, and markets are nervous.

Russia has a problem selling its bonds. Today's failed auction is the second in a row.

And the Swiss parliament has rejected a bill designed to resolve a dispute over undeclared bank accounts held by US citizens, potentially setting the stage for American prosecution of the country’s banks.

At 10:45 this morning we get the 2013 Q1 GDP result. Markets are expecting a 0.6% quarterly growth, but I wouldn't be surprised if it is better than that.

The NZ dollar starts today sharply lower at 78.7 USc, 85.0 AUc, and the TWI is at 73.7.

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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8 Comments

And he reminded us that there

And he reminded us that there will be a long time between the end of tapering (which hasn't even started) and when they will need to raise rates.
 
That's a serious free ride for the carry trade merchants once the panic selling at the long end of the bond market tapers off - there is always a silver lining for the astute and canny bond trader.
 
Repurchase Agreement rates @ less than 0.25% financing T10 position @say 2.50+% yield - what can go wrong?
 
Opps forgot for a moment - other than wealth transfer from the unwitting - but hey who knows or cares about the 99%. They will pay in terms of higher mortgage rates while depositors suffer under the repression of low short end rates demanded by our central bank masters.

Personally believe the

Personally believe the headline real GDP figures will be the most misunderstood numbers since the last ones.

And Gareth Morgan is

And Gareth Morgan is correct...property buying trading gambling is the way to go in this farce economy. Forget saving up..that's for suckers believing the drivel spewing from the Beehive..buy using all the credit you can get and after a coat of paint..flog it for a fat tax free gain..then do it again.
Just as Bernanke cannot escape the hole he is in...neither can the NZ economy avoid endless property bubbling thanks to the freedom the 'banks' have to create credit and flog it off...
Average 3br box of Rhubarb and bog set to blow past the million mark within 20 yrs...staggering aint it.
 

Average 3br box of Rhubarb

Average 3br box of Rhubarb and bog set to blow past the million mark within 20 yrs...staggering aint it.
 
Not really the debasement of fiat currency systems has been with us forever. It's the willingness of people throughout time to settle for being continually underpaid for their efforts on behalf of others that staggers me.

There is no bubble. You

There is no bubble. You either choose to live in a pigeon hole apartment for $4500 per sqm with zero development opportunity or you buy at $1,000 per sqm landed house(average $650k 150sqm building and 500sqm land) which allows you to develop to house 8 people with 8 income streams. At say $1700 per sqm to extend to 8 bedrooms. The cost is still only $2,700 per sqm. Still very affordable in comparison to a pigeon hole apartment.

TPP, how we get sold down the

TPP, how we get sold down the river...
"What the public does know about the TPP has been learned through leaked documents. According to those documents, the Obama administration is seeking to grant corporations the ability to directly challenge regulations in countries involved in the talks"
http://www.huffingtonpost.com/2012/06/13/obama-trade-document-leak_n_159...
and the leaked document itself
http://www.citizenstrade.org/ctc/wp-content/uploads/2012/06/tppinvestmen...
and part 1 page 8.....
Further in there, looks like Govn depts would not be allowed to choose local suppliers of NZ made goods in preference to anyone elses. 
Context is everything of course....sort of.....lots of laywers will Im sure be looking for ways for their clients to make lts of money...at our expense.
Just why JK sees such things as our advantage I just dont know.
regards

If you don't think that New

If you don't think that New Zealand gains any advantage either from foreigners investing in NZ or NZ investing overseas, then it's entirely legitimate to conclude that no compromise of national sovereignty is warranted to protect the interests of international investors and so to facilitate and encourage inward and outward international investment flows.
 
If you do think that there are benefits from international investment which are worth pursuing, then it becomes a question of how much you're prepared to do in pursuit of them and where the balance lies.  In this case, the leaked text is so full of brackets and blank spaces that it's impossible to conclude that too much is being asked or sacrificed.  
 
In other cases where international investment protection agreements have been concluded, what is required of the host state has usually been no more than basic good regulatory practice which decently governed states ought to be doing anyway - evidence-based, properly notified and consulted, non-discriminatory (ie no imposing stricter requirements on foreign-owned firms than on domestically-owned ones) - and there are usually exceptions for measures necessary to protect health and safety and the environment. 
 
There may well be provisions preventing discrimination in Government procurement, although I think there are already such restrictions in place through the WTO.  It's not usually a good idea to require Government to buy local anyway.    If NZ-made offerings represent best value then Government purchasers will buy them anyway.  If NZ-made offerings don't represent good value then where's the benefit in forcing taxpayers to pay over the odds for poor quality and transfer wealth to uncompetitive NZ producers?
 
Further, we can't expect other Governments to be prepared to consider buying NZ if we're not prepared to consider buying foreign, so there are potential advantages for NZ exporters in an agreement.
 
 
 

It looks like ANZ Australia

It looks like ANZ Australia may be sending more call centre jobs to NZ - http://www.businessday.com.au/business/banking-and-finance/hundreds-of-a...