Here's my summary of the key issues that affect New Zealand overnight with news it looks like the Greek people have bought a damaging fight.
Syriza, the radical leftist party that swept to a convincing victory in Greece’s election, will team up to form a new government with a small right-wing party also opposed to Europe’s economic policies. But Europe’s establishment moved quickly on overnight to douse hopes it would relax the terms of Greece’s bailout, insisting that Athens honor its commitments.
The voters have had their say. Now we will see what the creditors think. Markets are betting the creditors will prevail. The euro rebounded from an 11-year low and European equities rose amid speculation fallout from the Greek election will be contained.
More than that, the eurozone's economic prospects seem to have perked up a but. Following the ECB's stimulus plan, purchasing managers are more bullish. Growth of business activity increased to its fastest for five months in January.
The latest Markit purchasing managers index rose from 51.4 in December to 52.2. New orders also grew at the sharpest rate for five months as demand picked up at the start of the year. In Germany especially, output growth strengthened across both the services and manufacturing sectors. France remains a laggard, but less so.
Somewhat surprisingly, the same survey shows that Japan is now expanding at a similar rate. Japan's exports are also growing strongly.
But none of these are at the level of the US although the impressive rate of expansion recorded there is definitely tailing off.
All this is in stark contrast to China which is stalled. In fact, overnight the Chinese government urged its local governments to "activate existing funds" - that is, speed up their spending plans to try and regain some momentum.
In New York, benchmark UST 10 year bond yields fell about -10 bps today to 1.80%. Swap rates in New Zealand are already falling and start today sharply lower - and now completely flat. The 1-5 curve hardly exists at just +3 bps. The two year swap rate fell -6 bps to 3.62%.
The oil price rose marginally to just under US$46/barrel range while Brent crude is now just under US$49/barrel.
Gold weakened by about US$10/oz and is now at US$1,280/oz.
We start today with the New Zealand dollar lower again. In fact since the start of the year the Kiwi dollar has lost about -5% against the greenback, -6% against the yen, and -2% against the Aussie. This morning it is at 74.3 USc, at 93.6 AUc and the TWI is at 77.4. Graeme Wheeler will be allowed a wry smile; he is getting his desired currency adjustment without risky intervention.
If you want to catch up with all the changes yesterday we have an update here.
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More climate extremes heading right this way:
http://www.bbc.com/news/science-environment-30985039
''Extreme weather arising from a climate phenomenon in the Pacific Ocean will get much worse as the world warms, according to climate modelling.Parts of the world will have weather patterns that switch between extremes of wet and dry, say scientists.The US will see more droughts while flooding will become more common in the western Pacific, research suggests.''
Plenty of chances to 'adapt' to the 'opportunities' of climate change coming fairly soon it seems.....
Love the doomspeak whiner. "...according to climate modelling."
Spare a thought for the reinsurance industry operating in the real world. From the FT yesterday:
"Blue skies create a reinsurance tradegy."
Nine huricane seasons without a cat 3 hitting the US coastline.
The giddily low odds that are implicitly being placed, for example, on the risk of Florida hurricanes are leading to primary (consumer facing) insurers gradually returning to the coastal property and casualty market, which they had abandoned years ago due to an apparently low risk/reward ratio."
Sounds like the reinsurers are hanging out for a real climate catastrophe - rather than a modelled future one - so they can jack up premiums.
http://m.ft.com/intl/cms/s/0/66808b76-a315-11e4-9c06-00144feab7de.html
ah nothing like cherry picking the data, as per normal.
If on the other hand we look at say snow storms,
http://www.weather.com/storms/winter/news/winter-storm-juno-blizzard-bo…
Seems some records are being set but even more interesting is the increasing in frequency of them.
"Storms of roughly this magnitude, in this the New York City area, have occurred in 1888, 1947, 1978, 1993, 1996, 2003, 2006, 2010."
1888 to 1947, 59years, since 1993 3~6years.
"A similar pattern would emerge if the focal area was Boston. Weather Wunderground lists these snow events for New York City, indicating that half of the heavy events since the mid nineteenth century have occurred in the last 12 years:
1. 26.9″ Feb 11-12, 2006
2. 25.8″ Dec 26-27, 1947
3. 21.0″ Mar 12-14, 1888
4. 20.9″ Feb 25-26, 2010
5. 20.2″ Jan 7-8, 1996
6. 20.0″ Dec 26-27, 2010
7. 19.8″ Feb 16-17, 2003
8. 19.0″ Jan 26-27, 2011
9. 18.1″ Jan 22-24, 1935
9. 18.1″ Mar 7-8, 1941"
some change.
Really even the etxreme right Republican party is now looking to back track on its there is no climate change issue stance, shows how extreme your outlook is.
Going to be some premium drift up there I suspect.
Try harder Steven. Cherry pick? How can the Global reinsurance market be a cherry pick?! Global and all that. Did you bother to read the article before spamming?
And the irony of your snow "cherry pick". Why it was only 15 years ago the global warming doomsters were telling snowfall would be "just a thing of the past."
"According to Dr David Viner, a senior research scientist at the climatic research unit (CRU) of the University of East Anglia,within a few years winter snowfall will become "a very rare and exciting event".
"Children just aren't going to know what snow is," he said."
http://www.independent.co.uk/environment/snowfalls-are-now-just-a-thing…
I'd feel sorry for the poor sad hand wringing doomsters if it wasn't for all the whack job green policies paid for over and over by joe taxpayer. Know anyone who wants to buy a second hand desalinisation plant? A few going cheap in Aussie - never been used. As new.
You specifically picked one part. Yet when you look at the last 2 major weather events in the USA alone they cost 100s of Millions of $s.
Simple really when you cannot get or afford the premiums you either dont do business or run without insurance in which case loans are probably not going to be available either.
ah trotting out the old out of context, non-peer reviewed documents or small oopsies again.
no new pages to point at?
oh but interestingly something else he said,
"Heavy snow will return occasionally, says Dr Viner, but when it does we will be unprepared. "We're really going to get caught out. Snow will probably cause chaos in 20 years time," he said."
So maybe if you took it in context and not literal.
oh and yes NYC cops it,
http://scienceblogs.com/gregladen/2015/01/26/the-great-blizzard-of-2015…
"This is a system that would normally not produce a lot of snow, but the odd configuration of the jet stream (once again) is moving the low pressure system through a pattern that will create an epic blizzard."
Thats the thing about predictions Steven you have to look at "old" predictions to see if they panned out or not. Yet again this one spectacularly didn't. You're the one who cherry picked snow - not me. "Children aren't going to know what snow is" doesn't sound very "occasional" to me. Did we hear any other climate scientists at the time chastising his public pronoucements? Perhaps someone at his University perhaps? Not a chance of that in the ever "it's worse than we thought" climate doom industry.
you base your arguemnt on one comment from an old piece not even in peer reviewed literature?
Never mind it seems Govns like the US and India now accept climate change, considering those who do not close to imbeciles if Obama's comments aimed at the GOP are taken at face value.
The peer reviewed literatue is little better - the IPCC predicted 0.21 C/dec warming for this century instead we have 0.04 C/dec - not even staticially significant let alone runaway. The senior research climate scientist from UEA CRU snow predictions were crap as were the IPCC warming.
If only all that reserach money went into cancer research or something useful.
Here is some peer review for you. Observation barely clinging on the lower bound. Check out the warming gradient since the last stat. sig. warming ending in '98. Woah- scarey stuff! And what would the chances of there being a large volcanic eruption to mess up all that "warming" = probably 1 in100 for an M7 so rather a large caveat.
http://www.climate-lab-book.ac.uk/wp-content/uploads/fig-nearterm_all_U…
Again you cherry pick your data or maybe are just inventing it? So I assume you are looking at the prediction for the century and then take the last 15 years as a trend by cherry picking without consideration for the next 85years or the last 100 years. You dont cite your data source anyway, so IPCC's report,
"Averaged over all land and ocean surfaces, temperatures warmed roughly 1.53°F (0.85ºC) from 1880 to 2012, according to the Intergovernmental Panel on Climate Change"
https://www2.ucar.edu/climate/faq/how-much-has-global-temperature-risen…
About 0.72Dec C per century for the last century.
1998 was an el nino year and an odd one that can be ignored when you do a long term trend. 2014 matches or exceeds it and it wasnt an el nino year. Again you cherry pick.
Really the "battle" is over, climate deniers have lost it as even much of the public can see the changes and accept the science.
Keep on trolling its all you can do.
No one knows what the next 85 years will do Steven - the last 17 years of failed predictions have proven that. Here is the data source for you - though I think you already know it. Any "invention" here? Nature - January 2014.
"Simulations conducted in advance of the 2013–14 assessment from the Intergovernmental Panel on Climate Change (IPCC) suggest that the warming should have continued at an average rate of 0.21 °C per decade from 1998 to 2012. Instead, the observed warming during that period was just 0.04 °C per decade, as measured by the UK Met Office in Exeter and the Climatic Research Unit at the University of East Anglia in Norwich, UK."
And as for last century we know it warmed jstt as fast 1860-1880 and 1910 to 1940 (pre SUV) as it did 1975 to 1998. Funny/inconvenient how it stopped warming significantly post 1998 when 20% of the post 1850 industrial CO2 went into the atmosphere. The head the CRU puts the last century quite simply for you. Surely he is not a biased opinion? Statistical significance and all that.
"Temperature data for the period 1860-1880 are more uncertain, because of sparser coverage, than for later periods in the 20th Century. The 1860-1880 period is also only 21 years in length. As for the two periods 1910-40 and 1975-1998 the warming rates are not statistically significantly different.
I have also included the trend over the period 1975 to 2009, which has a very similar trend to the period 1975-1998.
So, in answer to the question, the warming rates for all 4 periods are similar and not statistically significantly different from each other."
Phil Jones comments for last century and Ed Hawkins chart, linked above, for this this century so there is not much going on that hasn't happened in the past. Or can you see some runaway global warming trend on Ed's chart post '98?
http://news.bbc.co.uk/2/hi/8511670.stm
I too, am a 'climate change denier' and feel lucky not to have yet been burnt at the stake for not accepting your new religion 'mother planet earth'. I hope your tolerance will prevail long enough for me to digest the accurate 500,000 years of accurate climate data you will no doubt provide to convince me of my wrongdoing and evilness. Thankyou and long live peak oil.
You are cherry-picking short time periods which are insufficiently long to be statistically valid. It's all about the trend stupid.
https://tamino.wordpress.com/2015/01/20/its-the-trend-stupid-3/#more-7304
It's those damnable unintended consequences yet again, Profile. They didn't forsee that the warmer Arctic regions would generate longer-lasting and slower moving and far more southerly Rossby Waves (Google it) of the jet stream that bring polar vortex weather to the northern hemisphere, hence blizzards and colder than average east coast USA during 2014 while the rest of the globe was the hottest since 1880.
Yes the doomsters didn't forsee the population boom etc. etc. etc. not panning out either. I don't mind if doomsters get things wrong again and again - it's amusing to watch doomy predictions fall to the wayside. It's just when doomster gravy trains rush out and spend tens of billions on white elephant desal plants, for example, and divert science funding from real problems that is a tad unjust. Only in the climate doom gravy train would someone like Dr David Viner keep his job.
Warmer than 1880?! Run for the hills! You do realise it was warming at a faster rate between 1860 and 1880 than it is at present? (Google it). All that warming back then and no SUV's.
There was stuff all CO2 emitted 1860-1880 and 1910-1940 when it warmed 3x faster compared to 1998 to present day. 7x more emisions today than 1950. 1860 emission barely register.
http://www.mongabay.com/images/2006/graphs/co2_global_1750-2000.jpg
How Global Interest Rates Deceive Markets
http://d21uq3hx4esec9.cloudfront.net/uploads/pdf/150126_TFTF.pdf
Greece: in this connected world, no country will be allowed to go bankrupt so don't panic. Austerity never has worked in a depression so why would Euro think so now?
Just like banks - they have no risk, they will always be bailed out.
Everyone can get a bail out unless you are an individual or small business owner.
Greece should just be allowed to go bankrupt. Its debts need to be written down. The speculating bond holders should take a big hair cut and just learn the stupidity of lending money to those who try and borrow their way out of debt. Then Greece can be free to recover.
Same old same old austrian outlook. Yes lets ignore the evidence that Govn austerity on top of private/business austerity damages and shrinks an economy. Or that the EU banks (German and Swedish?) holding all this debt will go out of business and even good banks will find inter-bank lending impossible. that I believe would freeze up the World's financial system in a matter of days, even in NZ. No working banks, possibly no food, bound to end well.
Then there are the pension funds who are invested to give their pensioners returns they expect, and yes the hedge funds who are gambling or even trying to bring down the system for profit etc.
Now it isnt that I dont disagree in some ways, moral hazard is in play I suspect. Unfortunately Im worried in that slapping the ones who "deserve" to take losses said nasty side effects on those who dont aka a Second Greater Depression results.
Same old same old lets make Greece pay for the stupidity of lenders who lent them far too much money and now don't want to accept they made a mistake and take a significant loss of capital (like 50-60% write downs).
1. There arent any hedge funds that I am aware of trying to profit from bringing down the system. Thats a fallacy. What they are really doing is just using these derivative products to hedge their risk. To bad for Goldman and Co if they have to pay out.
2. Consider Iceland vs Greece and consider which way was better? Iceland was more the banking centre than Greece will ever be.
3. If Greece goes bankrupt it doesn't mean the world collapses. Thats silly. Birds will not fall from the sky. Your fridge will not stop running and the sun will come up tomorrow. NZ banks are restricted to how much short term overseas funding they rely on. It will send bond holders a message they bear the risk of default on the financial assets they purchase (which by the way, is the message it should send), many of them are hedged anyway (see 1 above). Yes interest rates world wide will then probably rise a bit and we would see some deflation in asset prices (prices which are way overpriced anyway), this had to come sooner or later anyway. Some banks might faulter and their shareholders could be wiped out (the ECB/member central banks could guarantee depositors a lot cheaper than the 1.1trillion QE they are embarking on). Germany and Sweden could easily recapitalise their banks anyway, lesson learnt for them then.
4. 'Possibly no food'? A bit overly dramatic. Historically many nations have gone broke, this would not be the first time its happened to Greece either. Then they recover.
5. Moral hazard should apply to those who are investors and making executive decisions at a bank etc. It shouldn't apply to common Mrs Blogs who saves her life savings in a bank, not consciously intending on making an unsecured 'loan to the bank', Mrs Blogs has no idea how finance or banking works.
6. Greece is already in a second great depression. What they need to do is come out of it, by going bankrupt, massively writing down their debts, then starting again.
1a) Do you really think some ppl out there are not figuring out how to make money from this? 1b) Since hedge funds are private entities unless someone makes a public statement we are not going to know, however based on what I have seen in the past I would say its highly likely.
2) Iceland and Greece are different in many ways.
3) Actually if Greece defauls and/or exits teh EU yes the world's economy could collapse into a Greater Depression k2 like the 1930s, yes that looks possible (if not probable). You just have to look at teh effects of Govn austerity in the last decade to see it has a negative impact.
4) How do you buy food if the banks are not operating? how does countdown buy wholesale? 3~5 days of food on the shelf and that is how much of the World's developed economies work. Sure and the only reason the Great Depression ended was the build up, ie govn spending on armaments leading up to WW2. Which is also a classic example of spending their way out of a recession by the way, ie real evidence of spending working.
5) Mrs Bloggs is an adult in an adult world, she is in effect the mince in shark infested waters. In terms of the executives in the banks no such hazard exists for them except job loss. Though Kuslter suggested the "Warren Buffets" of the world could meet a grissly ending from this. hard to argue against such anger when such people have knowinlgy and actively ruined your life.
6) Debts rarely get written off, Argentina has been trying to and is getting stopped I recall. Becides which the fallout is outside of Greece as the EU banks holding the debt face huge losses and maybe go bankrupt. So Mrs German-blogs finds her life savings swallowed up and gone, rinse and repeat throughout the EU. France's exposure? Sweden? Swiss?
1a). Not really. Most hedge funds are just that - hedge funds, a hedge against assets they hold. But if it makes you happy just pass a law that you can not collect insurance on assets that you dont own at the time of loss, and if you do the insurance should be limited to the loss, like with any normal insurance. Its not hard.
1b) The companies they hold the hedge with will know and can require proof of ownership and loss before they pay out.
2). Yes, for one thing Iceland is doing much better than Greece. But the world didnt end when Iceland went broke, which is my point.
3). If Greece defaults I dont think the world will sink into depression. I think a depression is coming anyway regardless of what Greece does, as you know Steven and the money printing and the capital destruction and the massive bubble in asset prices is just going to make it worse. I'm sure the world could muddle their way through.
4). I think it highly unlikely that a Greek default will close the banks in NZ. If anything more money will flood here (and away from insolvent countries) pushing down interest rates here (while lifting them there), as our government almost have their books in order, or at least close enough. Sure, give me a trillion dollars to spend and I'll make any economy look great! Of course I'll never repay your trillion dollars - but hey, you can rest in the assurance I've had a fantasticly great time spending it...
5). Mrs Bloggs may be an adult but neither her nor her husband Joe, like many millions have any idea how banking really works and the risk they face, they rely on government regulation to protect them from such. They should not be the ones lossing here. How about the central bank print and make their losses good and forget about the banks. The world would not come to an end in such a reality.
6). Bond holders get interest to in part cover their risk of default. You can't have the reward without the risk (even though you can hedge/insure the risk anyway - so I guess you can in a way). No, the banks would be gone, the depositors bailed out and at a cost far far less than 1.1Trillion. New banks will take over the assets. Life will go on. The sun will come up. Problems do come to an end. What they are doing is extending problems, not solving them and bringing them to an end. Eventually the defaults will be very large, as 'what cant be paid will not be paid'.
All very good and intelligent economist, - I take it back, not all of you are gullible fools.
Lets not forget the psychology at work here too (it is easy to do from 10.000 miles away), Germany caused two world wars in the C20th. and had lts war debts paid off; the first by the US and the second by the Allies in 1953. The Germans caused mayhem in the Greeks part of the world and it has not been forgotten there.
2) Iceland's "debt" was not public debt but private debt held by a handfull of banks who were massively over-leveraged v Greece which is predominatntly govn debt. There is also a thing of scale, 50billion EU v300 billion? greek debt. I would also suspect that the icelantic economy and govn income from it is/was failry healhty, unlike Greece.
3) I dont know whether a greek exit will be the trigger or not, but the EU right now is 0% inflation (give or take a bit) and then we throw in this? ho hum.
4) Well quite a few did think that during Lehman.
5) Mrs and Mr Bloggs are fools then. besides which I cannot see how its reasonable for adults to simply farm out due care with their income, that is naive to say the least.
6) Sure life will go on, but not like it is.
.
2. When it comes to default I dont think it really matters public or private, still someone has to take a haircut. A difference of 250 billion (or whatever) isnt that big. I am not suggesting a default on all of it - but at least half, say 150b, small amounts compared to the 1.1 trillion print the ECB is co-ordinating for Euro round 1 (and already people are saying it will not be enough), but hey the FED will be happy as they I bet a good amount of this will leak over to the US, so the FED can sit it out for a round. So bond holders get 50c on the euro, or nothing, my bet they will go with the 50c.... and Greece gets a chance to recover and grow again.
3. Well if you dont count asset price increases as inflation.
4. Yes they did, and we should have seen lenders really tighten up on lending and more banks close down and major deflation, but we didn't, as the central banks came to the rescue with trillions and trillions to keep the bubble bubbling. Bubble...bubble. Thats why I think we will not see serious deflation, as any minor amounts will be met with a wall of freshly printed money.
5. I wouldnt say that. Mr and Mrs Bloggs are just average citizens who work hard and save. Like most people they dont understand the risks involved, they are trying to be investors. Ask 95+% of the people on the street what the RBNZ OBR is and they will not have the foggest idea. Doesnt make them fools, just they have no interest in investing etc...
6. Yes. And a painful lesson will be learnt by some. No all together a bad thing. We have a social safety net these days, unlike the great depression, so we will muddle through. What they are doing allowing those who have already borrowed beyond their ability to pay to borrow yet more is just drawing out the pain for longer and longer.
3) CPI and core inflation do not measure asset prices as they are either in in-directly or are direct investments and hence dont count.
2) I think it does.
5) Mr and Mrs joe blogs are adults if they choise to be un-informed or mis-informed that is their fault.
6) If you look at Greece their social net is rather weakened, plus much of the developing world has no such net and they have hungry mouths and some of them nukes.
4) Bubble, yep in assets and hence you cant put that in inflation.
3. Like houses.
5. thats a little too right wing, no regulation for my tastes.
6. Yes - eg unemployment benefit for only 12 months, which is why dragging out their depression is more painful. At least half the debt just should be written off.
4. If you are going to make that rule, then okay. As long as we don't hear from you Steven crying 'deflation' when house and other asset prices drop, because that's 'not deflation'.
I dont think you understand what the CPI and core inflation has been invented for. Now if you want to invent your own measure to use to invest with be my guest. It would probably make gold a good buy., oopsie, 30% loss in the last 2 years? hmmm, maybe not.
4) yep that is acceptable to me, it isnt a measure that should be in CPI nor core inflation. Incl shares as well btw, in fact any investment like art etc.On top of that I dont consider the drop in oil price deflation in terms of determining a factor (CPI and hence OCR) to measure how healthy the economy is or is not. So just like the GST hike the RB looked through they should be looking through a temp drop in oil. But the reverse (ie back to high prices) is also true btw.
5) Sorry but while I think there should be legal laws / regulations around protecting peoples wealth from the likes of scum bags, sure. I dont agree there should or rather I cant see how there can be laws protecting people from loss due to their own inadequacy. Just consider for a moment who would guarantee that loss, it would be you and I and are children as tax payers.
6) many in the developing world dont get any at all they are left to starve. USA is limited to 5 years over a person's lifetime. Plus I think they can only get food stamps if Congress says yes, so being left to starve isnt a great way to ensure your society hangs together when it seems every man and his dog has guns and huge ammo stores.
Yep houses are an investment not to be in CPI. As 2 examples if I own outright increases dont effect my CPI, neither does interest, even 2) once I have a mortgage and a house increases dont effect my CPI, but interest rate does.
So really invent your own number like shadow stats and invest using it, good luck with that.
Greece is bankrupt.... it is a simple as that..... Thats the reality...
Luckily..they are a soveriegn Nation ...so they have alot of control on how they leave the EU...and how they "reset"... they have bargining power in negotiating its debt reduction...
Michael Hudson thinks so tooo.....
https://www.youtube.com/watch?v=_0OeltyE5YI&feature=youtu.be&t=4m1s
"bankrupt" Not strictly true as its looks like they were / are actually recovering economy wise after a 27% drop in GDP, but it was looking like a very slow road decade(s) long. Now? well sure they can default and leave the EU, just what that would do to their economy? I cant see them being able to borrow at all once out as they would have no guarntees so that leaves balancing the budget and/or money printing in stand alone mode.
The bigger issue surely isnt greece itself but the effect of writedowns on its debt that the EU banks will have to suffer. Another new banking crisis and one possibly to large to fix? oopsie.
1. It was looking like a dead cat bounce.
2. Once out they will be able to borrow. Lenders lend on a case to case basis, they just need to write down the debt enough to make lending to the Greek government a safe bet. I would consider buying their bonds if the government debt to GDP was under 30%. I'd feel happier about that than lending to governments with debt to GDP of 120% and at half the interest rate.
3. More foreign exchange. I for one would be booking a nice Greek Island holiday/cruise at half price.... and so will half of Europe. Not in Euros - too expensive. Tourism is very sensitive to price discounts.
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