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US confidence rises; US targets reverse mortgages; China targets local govt. debt; China targets AU university teachers; UST 10yr yield at 2.13%; NZ CDS spreads rise; oil down and gold up; NZ$1 = 72.5 US¢, TWI-5 = 74.6

US confidence rises; US targets reverse mortgages; China targets local govt. debt; China targets AU university teachers; UST 10yr yield at 2.13%; NZ CDS spreads rise; oil down and gold up; NZ$1 = 72.5 US¢, TWI-5 = 74.6

Here's my summary of the key events overnight that affect New Zealand, with news our election uncertainty is causing our credit spreads to rise.

But first in the US, consumer confidence rose to a five-month high in August as households grew increasingly upbeat about their labour market. And house prices rose further in June. Both pieces of data suggests a recent rise in consumer spending is likely to be sustained.

The US is planning to raise premiums and place tighter loan limits on some borrowers in their government guaranteed reverse mortgage program.

In China, they say they are making a big effort to control local government debt, which has now reached US$2.4 tln, or 21.4% of GDP. (The NZ equivalent level is 4.5% of GDP.) They have signaled this previously without much impact, but the public nature of these latest warnings indicate the issue has Beijing's full attention.

In Australia, there are rising concerns about the pressures the Chinese government is putting on their student nationals to pressure Australian university staff to support Chinese policies. Called 'red hot nationalism', some students are being used to protest academic freedoms that run counter to the Chinese narrative. The pressure can be effective because about 30% of foreign students are Chinese.

In New York, the UST 10yr yield is lower and now at 2.13%. It got down to 2.09% overnight but is recovering now. The NZ sovereign CDS spread is taking on some election risk and has risen from under 20 to almost 25 in just the past week. This has happened as most sovereign spreads have narrowed. This comes as more fund managers signaled they are shifting investment out of the country in the election run-up. And our 2-10 swap curve got flatter overnight in a bear shift and is now at just +92 bps.

The price of crude oil has stabilised at its lower level after a further small slip and is now just under US$46.50 a barrel, while the Brent benchmark is just over US$51.50.

The price of gold has gained a small extra overnight, up another +US$3 to US$1,314/oz which is a three month high.

But the Kiwi dollar is basically unchanged today at 72.5 US. On the cross rates we are still at 91.2 AU¢, and 60.5 euro cents. And the TWI-5 index is still at 74.6. And we should note that the euro has hit a 33 month high against the US dollar overnight, posing a heightened challenge for the ECB.

If you want to catch up with all the changes on yesterday we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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25 Comments

the Chinese are now attempting to do what Germany did in Europe, sometimes you can gain control without going to war, money talks and those without money will bend to those that supply money

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Yes, take a look at how vulnerable we are.

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Humm... Yes even I've been wondering how long both NZ and Oz will be able to remain independent before we're completely sold off. Will it be 20 to 30 years in the future or could it be sooner than that?

You only need to look at the decline in the Auckland housing market to see what a huge influence they've had now that China has enforced it's capital controls.

And I presume that we haven't had much reporting on our property auction results because they're just too terrible. Time for that foreign buyers tax if we want to remain independent.

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It is easy to forget who we are dealing with here with many, quite rightly in my view, noting the similarity to the worst of the Fascist regimes. There is plenty of grounds for concern; like this for example:
"Cambridge University Press has removed hundreds of papers and book reviews from the online version of one of its journals in China after a government agency threatened to block access to the website.

The 315 articles pulled from China Quarterly focused on issues that the communist state deems politically sensitive, such as the Tiananmen Square protests, Tibet and Taiwan, dating from the last few months back to the 1960s." https://www.timeshighereducation.com/news/cup-removes-journal-articles-…
Right here on Interest.co. we have a regular (propaganda?) column with a deeply pro China agenda for example. Who or what is behind that?

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Looks like fund managers are not optimistic about the likely economic outlook in NZ after the election, I had wondered about that myself. Would I be wrong to be expect a Labour-led Govt to result in rising economic performance and sharemarket returns??

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The Chinese students have learnt this tactic from the Western University system themselves. Anyone who is a minority can claim special victim status and get the power to shut down criticism and stymie hard fought for Western freedoms. Chinese people living abroad I have spoken to are generally quite protective of the Chinese government and social system and most have a poor opinion of Chinese dissidents.

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Living abroad is pretty widesweeping

Next question should have been - why are you living abroad? - why did you leave? Are you going back?

Did you ask? Any answers?

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I have found the same. Chinese are very patriotic. Their view of their own country is a quite different perception to that of outsiders. While this is understandable, one must query the basis for it.

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Can be arrogant too. But go very quiet when there is talk of pollution, hospital care, welfare....

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I've noticed this as well Zachary. The multiculturalism is entirely one way. We don't see China, India and the Philippines full of western people. In fact at my work I have Chinese people speaking their native language right across from me.

Westerners have had generations of stability and political correctness and have forgotten the core values and that they need to fight to keep them.

At first you get a few tasty ethnic foods. Then you get ethnic suburbs and churches. Then comes racial nepotism in the job market, selling off companies and lands. The politics starts off with Act billboards in mandarin then when we are a minority identity politics takes over and they control the country. All for some toilet paper money and some fuzzy social justice "progressive" feelings.

Now the Asians are being quite honest about the situation in their magazines and adverts. They think we're stupid. http://www.stuff.co.nz/business/67975887/property-solutions-singapore-d…

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They KNOW we are stupid. Unlike their's, our politicians refuse to act to limit foreign ownership and the river of money leaving the country. They are laughing at us and rightly so.

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  • The Fed funds futures market points to no more rate hikes this year and probably only one in 2018.
  • If that holds, it would mark a sharp departure from what officials have indicated. Officials have pointed to one more hike this year and three in 2018.
  • The Fed, however, is still expected to begin reducing its $4.5 trillion balance sheet this year.
  • Read more

    We have today around the world all the same signs; low interest rates, low inflation rates relative to specified targets, and economic growth that has been overall seriously deficient as well as more recently unable to break out of that state despite what otherwise seems to be everything going for it to do so. Until the issue of monetary tightness is resolved not for the US or dollars, but for “dollars” meaning global money, there should be no expectation for a change in economic conditions, even if we don’t know exactly how far from healthy they may be. Read more

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    Fascinating to watch the slowly, slowly of paradigm change;

    https://www.bloomberg.com/news/articles/2017-08-24/phillips-curve-doesn…

    As Thomas Kuhn noted;

    “Paradigm change is closely aligned to perceptual change and novelty emerges with difficulty, manifested by resistance, against a background provided by expectation” (Kuhn 1992, 64).

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    So long as something is underpinning the debt mountain globally, things will chug a long more or less unabated, to put it simply. What's underpinning the underpinning is another question.

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    faith that the future is bigger ..
    delusion in other words.

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    Yep. Sort of reminds you of a pyramid scheme, except in this case the pyramid is upside down.

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    This election is fast becoming a farce ( in every sense of the definition) .

    We should expect more from our politicians, and they should be called to account for the ludicrous promises they are making to a euphoric public that is enthusiastically lapping it all up.

    How gullible are we ?

    Do people really believe everything that has been promised ?

    Affordable houses for everyone, lower rents, proposing wage rates that would bankrupt my small business and lead me to close down, let alone considering what such high wages would do to a city like Auckland , which is already broke .

    High speed trains to Hamilton and Tauranga which sounds like something from Robert Muldoons Think Big handbook , a train line that will bankrupt us during construction and no one will use.

    Making the cost of seeing a doctor equal to less than the cost of a gallon of petrol or a can of Woodstock or doing load of washing at a laundromat .

    A Capital Gains tax that intends to tax Capital which is very much in short supply, and is nothing but a resentment Tax being touted as a new tax will miraculously reduce house prices.

    Its time to stop this BS in its tracks , because its creating unrealistic expectations , that some folk actually believe .

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    My choices are:

    Yellow party that only exists through a free seat, denies any concept of sovereignty and has erected billboards in foreign languages.
    Blue party that wants to sell the country out, sell my generation out and continue with a ponzi economy built on producing nothing of value.
    Red party of the lolly scrambles and feminism.
    Black party who's leader is a fraudster and has dumb ideas such as $20 minimum wage and gifting the supermarkets a tax refund for vegetables. Winnie at least admits immigration is selling us out.
    Watermelon party who's had ex leader was a fraudster and the one before that is now the head of commie Greenpeace.
    Gareth's wasted vote party.

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    "Gareth's wasted vote party." my prediction they will get 5%..the only party making any economic sense.

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    Gareth's wasted vote party indeed.

    As the only Party with a drug reform policy TOP could very well get through on the wasted votes.

    Why aren't they pushing this policy more? It's sure to hook a few in. His junk is better.

    TOP is the only party running with evidence based policy.

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    Good one DB.
    Following on from our discussion yesterday you might like to watch this startling revelation of how public opinion is being manipulated, particularly in regard to race issues.
    https://www.youtube.com/watch?v=XpVIVr13ZcI&feature=push-u&attr_tag=qSP…

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    David have you heard of BitChute? It's a peer2peer video platform. YouTube are censoring political opinions now. It's time to move eyeballs to an alternative.

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    For all TOP's faults, at least they are introducing something new. In this conservative, risk adverse, apathetic, financially ignorant and don't-rock-the-boat country that's at least something to be applauded.

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    Agreed, Boatman. both major parties are seduced by power rather than serious about good government. It's a worry. You are right there is a whiff of Muldoonism think big & even a hint of odd & false mechanisms like MRP dating back to Kirk. Not much worth in comparing the negatives but suggest National after 9 years, is the more cynical & calculating, with all the sudden interest in the little people. Seem to have just realised the ordinary folk on the street actually have the most votes, rather than the big corporate world that has been up until now the chosen arena.. English has about him, all the complacency of Bolger before his ill fated final campaign as PM. It has taken a mere slip of a lass, it would seem, to provide the catalyst to up end all of that and start dishing out policies, as nothing better than bait.

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    Are we going to get a Auction result article this week?

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