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Thursday's Top 10 with NZ Mint: Why an FTA with a dying empire is a mistake; Parallel imports threat; 'Just in time' becomes 'wait and see'; US food price inflation; Dilbert

Thursday's Top 10 with NZ Mint: Why an FTA with a dying empire is a mistake; Parallel imports threat; 'Just in time' becomes 'wait and see'; US food price inflation; Dilbert

Here's my Top 10 links from around the Internet at 10 to 9 pm in association with NZ Mint.

I welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.

I'll pop the extras into the comment stream.

I'm travelling today and am having real internet speed problems so apologies for not many videos.

1. 'There's no point' - Canterbury University economist Eric Crampton writes at PileusBlog.com about why we should cut America out of the Trans Pacific Partnership.

The Americans will never let us in to sell more dairy products and then they'll use the deal to try to shut us out even more.

We'd also get restrictions on copyright and Intellectual property.

That includes controls over our Internet Service Providers and a neutering of Pharmac.

America is a dying empire run by a corporate plutocracy that hopes it can keep the masses under their thumbs through Fox News and food stamps.

It's only a matter of time before it collapses in a debt default.

We should gently and quietly disassociate ourselves from the Americans.

Remember less than 60 years ago Britain was our major trading partner. Now Australia, China, Korea and Japan are much more important. Our foreign policy should be allied with the Australians and East Asia, not across the Pacific or Atlantic.

Here's Crampton.

Is it better to have a serious free trade deal among a smaller set of countries, or a weaker deal that brings in the States?

I’d put decent money that, if America signs onto the deal, there’d be years of costly arbitration before New Zealand had any kind of increased access to American dairy markets. For starters, American dairy farmers would argue that failure of the New Zealand competition authorities to prosecute New Zealand dairy cooperative Fonterra as a monopoly constituted a subsidy under US law and justified counterveiling duties.

Never mind that Fonterra has to rely on farmers voluntarily choosing to supply it with milk rather than supply one of its competitors, and that it’s legally required to supply some of its milk to some of its competitors, while the US dairy compacts and market orders are state-enforced cartels that do everything but shoot potential competitors. If the United States was happy to continue trade action against imports of Canadian softwood in the midst of Hurricane Katrina rebuilding, despite NAFTA, why ought we expect any better for New Zealand dairy?

In exchange for the illusion of access to American dairy markets, we’d likely get some pretty restrictive copyright and intellectual property rules.

2. 'It's extreme' - Auckland intellectual property lawyer Rick Shera has written a long detailed post here at Public Address about the extreme position America is taking on copyright protection in its initial talks on the Trans Pacific Partnership.

Parallel imports would go. The 3 strikes and you're out policy for downloading would be back. Prison terms for downloaders would be introduced.

Here's Shera.

The galling thing about all of this too is that we have been debating these issues for many years in a rational, multistakeholder, consultative manner not in the secretive manner in which TPPA is being railroaded through. In the copyright arena for example, we started to look at how our law should deal with digital creativity 10 years ago with MED’s publication of two comprehensive papers on IP in the digital age. 

Since then we’ve debated specific proposals in various legislation – Patents Act, Trade Marks Act, Copyright Act, plant varieties etc – they’ve all been revised to take account of these issues.  Parliament and successive Governments have repeatedly approved the fine balances that we have arrived at. This would run a coach and horses through much of that but at least our officials are not having a bar of it (PDF). They need our support.

3. 'Just break 'em up' - GFS News reports the chairman of Britain's financial watchdog wants to break up the 'Too Big To Fail' banks. Fair enough. Here's his thinking.

The chairman of the UK's financial watchdog has waded into the tense debate on the UK banking system, accusing banks of "tax avoidance and regulatory arbitrage".

Lord Adair Turner said on Wednesday night that consequently an independent review of the structure of British banks should not exclude breakups.  As he queried the internal structures of cross-border institutions, the Financial Services Authority boss said breakups may not be a "panacea", but "certainly should not be excluded".

In his speech to the Cass Business School in London, Turner also said that systemically important financial institutions should face an equity surcharge in lieu of "ideal" higher capital standards.

4. The American Dream - This 30 minute animated video is an example of the online revolt brewing in America against what the US Federal Reserve is doing.

I love how it now has Greek subtitles...HT Ian via email.

5. Useful resource to follow the Japanese crisis - Here is Reuters' blog on the earthquake. It's a great resource.

6. 'Just in time' becomes 'wait and see' - The New York Times has a useful piece looking at the knock-on affects of Japanese factory and distribution closures on global production systems.

Much of Japan’s industry seemed to remain in a state of suspension Wednesday, as the devastation from an earthquake and tsunami, combined with fear and uncertainty over the nuclear calamity, made it difficult for corporate Japan to think about business as usual.

And that has left many overseas customers and trading partners in something of an information vacuum, unsure how soon the effects of any supply-chain disruptions would make themselves felt — and how long they might last.

Even General Motors, a company that might seem to benefit from disruptions to Japan’s auto industry, finds itself in a period of watchful waiting. For one thing, the new Chevrolet Volt plug-in-hybrid from G.M. — whose sales could conceivably benefit from any production snags in Toyota’s popular made-in-Japan Prius — depends on a transmission from Japan.

7. Knowns and unknowns - Satyajit Das is an astute and sceptical observer of global financial markets. He wrote an excellent book called. 'Traders and Guns and Money: Knowns and unknowns in the Dazzling world of derivatives." Here he writes at Naked Capitalism about the impact of the Sendai earthquake and Tsunami.

He makes some interesting points. Insurance coverage may be less than 25%. Japan's tax revenues cover less than 50% of spending at the moment. Debt is 20 times revenues.

The Japanese banks have in the past been major funders of Australian bank debt...

The level of insurance cover is limited. In the case of Kobe, only 3% of property was insured. The level of coverage in the current disaster is estimated at around 15-25%. The rest will have to be financed by governments and individuals drawing on savings.

The government could finance the reconstruction from existing emergency reserves or cuts in other spending. Alternatively the government could pay for rebuilding by raising money through the sale of bonds.

Financial market have assumed that Japan will instead sell its overseas financial investments including US government bonds (holding of around US$900 billion) to finance reconstruction.

Japan currently has net foreign assets worth 57% of its GDP, against net foreign assets of 16% in 1995 at the time of Kobe. If such liquidation and repatriation occurs, then the volumes may be larger than 1995.

The ‘repatriation thesis’ sees US interest rates rising as the Japanese sell US$ bonds and the Yen increasing in value as the dollars are converted into local currency.

But it is not clear that this actually happened following the Kobe earthquake. Currently, there are no signs that the government, insurance companies or private investors are selling or plan to sell foreign assets to finance the rebuilding. Investors are acting on the anticipation of anticipation of events.

There are a number of reasons to believe that the repatriation thesis is speculative. Investors will be reluctant to sell foreign investments as they typically provide higher returns than Japanese assets. The government may prefer domestic financing, to avoid an increase in the value of the Yen, to maintain Japanese export competitiveness. As this was already a concern before the disaster, the imperative to avoid any increase in the value of the Yen will be significant.

8. The problem with LIBOR - Reuters reports Bank of America, Citigroup and Barclays are being investigated over whether they tried to manipulate the London Interbank Offer Rate (LIBOR), which is the key basis for many business interest rates globally.

9. US food prices explode - Further to the 'let them eat iPads' meme from yesterday, Zerohedge points out some ominous inflation figures out of America. They rose last month by the most since 1974.

Anytime an ecostat comes in at the 4th highest reading in its 64 year history, it’s worth taking note. 

As shown in the chart below, the finished consumer foods component of the Producer Price Index jumped 3.9% in February alone.  But not to worry.  The core PPI only rose 0.2% in the month and ‘inflation expectations [among blue chip economists] remain subdued’.  Paging Mr. Dudley…

10, Totally the only video I could find while working on a dailup connection in third world Sydney. John Key and Phil Goff want the All Blacks to wear red ferns rather than silver ferns.

Sorry. Tomorrow. May have to visit Starbucks. Shudder.

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25 Comments

A bull market in dogs?

http://www.telegraph.co.uk/news/worldnews/asia/china/8383084/1-million-for-worlds-most-expensive-dog.html

"The buyer told me he thought he was a good investment. As a male dog, he can be hired out to other breeders for as much as 100,000 yuan a shot. He could recoup his money in just a couple of years."

 

Good luck with that.

 

 

 

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@1 + 2

Totally agree, please keep working on this!

What can we normal people do, to get our politicians not to enter into this agreement with the US?

Bombarding them with e-mails?  Demanding a public TV discussion where the counter arguments are thoroughly made clear?  Crying out loud that we will not vote for the party who wants to get us into this? Initiative to get hundreds of thousands  signatures against this delivered to parliament?

My  and my 3 son's (years ago) made decision  not to buy American goods at all does not scratch them........

@4

There are more examples of online revolts brewing against practices in America:

http://www.youtube.com/watch?v=Y0uujL6Ttqs&feature=player_embedded#at=17

Am I now at a blacklist?

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Bernard,

kudos for including Rick Shera's OpEd.

and copyright is only the tip of the poisoned iceberg called "TPPA"...

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1.  Eric Crampton has hit the nail on the head with respect to a US/NZ Free Trade Agreement.  The agreement is a whole lot of smoke for politicians to blow up our collective asses.  We are a soft commodity exporter, providing products they produce (and heavily subsidize)  themselves.   The Canadian experience with potatoes, softwood lumber and meat products was a nightmare for farmers trying to break into the US market.   US regulators fought tooth and nail to block imports because of "infestation concerns" while flooding the Canadian market with their products. 

 

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Re TPP. a must read from Matt McCarten -  I've posted this before. This is a huge threat to our sovreignty - foreign corporations with more rights than Kiwi citizens!

"These negotiations aren't about trade; they're about giving overseas corporates a guaranteed protection of their overseas investments. The proposed TPP isn't just restricted to shares in a company.

Under discussion is the intention to extend TPP to guarantee investments in residential and commercial property, mining concessions, banks and finance companies, and intellectual property rights. It will likely cover private contracts to run prisons, hospitals and schools as well.

 

The corporate lobbyists insist on the inclusion that governments must consult corporates on any new policies that might affect their investment and afterwards explain what notice they took of that advice.

More brazenly, they want any government to forfeit the right to introduce laws or policies that reduce the value of their investment without full compensation. They also want the right to sue for compensation before secret international tribunals.

Essentially, foreign corporates are requiring the TPP to give them iron-clad guarantees to make profits and more power over a government than its citizens could ever hope for. It's breathtakingly arrogant and sinister.

And don't think these corporates are bluffing. Under NAFTA, which this TPP is based, tobacco giant Phillip Morris sued the government of Paraguay for trying to put a levy on cigarettes to cover smoking-related health costs.

Similar cases have included suing to re-start a toxic waste dump, and removing plain packaging of cigarettes. So far US$326 million ($435m) has been paid by governments to corporates in compensation. Even a community that tried to get rid of its foreign water supplier because of its non-delivery lost.

We know exactly where all this is heading in our country, don't we?

 

Under the proposed TPP this corporate theft will be legally protected from any future government. When our grandchildren grow up and realise that it has all been a grand con job they'll have to lavishly compensate these corporate investors to undo it.

Be warned. Our heritage and democracy is about to be sold to foreign corporate bidders."

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10693673

 

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Totally agree, and yet most people I speak to are TPP what?

A truly outrageous assault on NZ sovereignty.

And John Keys mention that any free trade agreement would entail 'hard choices' does not fill me with hope.

 

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Why is it that corporations have to have the same rights as individuals? What is the actual argument for this? Can anybody outline it?

 

It seems that a lot of modern right wing economic thought promotes freedom and responsibility - but only for poor individuals who can not hide behind a corporation.

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Much has to do with law. Common Law verse Admiralty Law or other wise known as the law of the high sea's.

You are also classed as a corporation and there for reside and operate under Admiralty law not common law.

Google it and do some research its a very interesting topic.

 

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Wondered the same... thanks for the pointer.

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If you haven't already, check out the film/book 'The Corporation' - I'm sure the film is online. It details the moment that a corporation became an individual and the spin-offs from that.

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The best thing you can read about this is 'Unequal Protection' by Thom Hartmann

'The rise of corporate dominance and the theft of human rights'

A MUST READ!

 

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There are 3 re-builds within our trading block , consequent to major natural disasters  :

Queensland , after the floods ; Christchurch after the 'quakes ; and 150 km of Japan's coast-line towns , after the 'quake / tsunami / nuclear reactor explosions .......

.... Now , who gets cracking and completes their re-build first , Japan or Australia . ? ..And who's gonna be last , by a country mile , still enmeshed in bureaucracy , crony capitalism , memorials , and touchy-feely-good meetings ... ?

....... Hey Bernard . ... why do you have to go to a Starbucks ( Shudder ! ) ? ....... Do they have BYOC ( Bring-Your-Own-Coffee ) cafes now ? ......

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so true GBH.....but then we will always fall back on the adage that we suffer primarily  from "geography"

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Geography ? ....... yeah , all bureaucrats in this country require a ruddy map to help find their commonsense ........ on account of it's seldom they've ever bothered to go there ..........

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Now there's an idea to put to Howard Schulz.

cheers

Bernard

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In the " annoying blow-fly that won't go away " category must be one Bernard Whimp  . This excretiable scum sucker is back to his old tricks of conning unsuspecting investors out of their shareholdings . And it is still legal . And the powers-that-be still roll-over and acquiese to his demands for complete listings and addresses of shareholders' in any NZX quoted company , that he chooses to target .

....... The con this time around is that he offers shareholders above the current market price for their shares ..... Nice morsel of bait , that ...... But  the fine print on the other side ( which few bother to read ......... twits ! ) reveals that Whimp's company will drip-feed payments to the acceptors ...... over the next decade ! ...... 10 whole years , whilst he collects all dividends , and attempts to stay solvent , and out of gaol .

You are warned ! Make a free call to your stockbroker first ! .... Sign nothing .

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GBH- true, but it's no different from Key/English looking to remove ownership of our energy source.

The movement of wealth is always upward into fewer and fewer hands - the tragedy is that the middle-class mums and dads thought they were part of the few.

Which perhaps proves Tolley right - more maths and literacy education needed.

 

 

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I think that was the great sell fo the middle class of the Reagan/Thatcher and post- era.

Indeed I think its still contnuing....somehow ppl now think dropping the upper rate of tax a bit is to their "real" advantage.....so the Q I have to ask is how the hell did ppl fall for it so easily?.....Brash an escapee from ACT  nearly won in 2005 based on a bribe....im not so sur eits maths and literacy as simply opening ppls eyes.....I think there are signs that the GFC and the internet are doing that though....education via experience is the best way every time IMHO....

 

regards

 

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Quite right, GBH.  We received our "offer" for Contact shares today.  My wife was impressed with the price, until I pointed out the fine print on the back. 

Might send back a falsified acceptance, to make life difficult for him. 

Cheers

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Excellent idea ! ....... If you can find a way , be just as annoying to that little oink , Whimp ...

... I went to school with him , and his younger brother . ...

There is an English  saying... " show me the boy to seven years of age , and I will show you the man " ...... That pretty much sums those two characters up !

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Funny you would say that, my understanding is his younger brother is held in high regard in this country. So much in life is a mere peception.

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#1 The TPPA will be the lock and chain that will kill any Kiwi business into the US for decades. Just look at Oz and their US business after their AUSFTA was signed, especially on their IP and Internet Copyright rules. ....Perhaps New Zealanders shoud have our own version of "facebook" and "twitter" revolution at the Beehive to stop this monster from being born?

#2 Japan repatriation will be different fron 1995 Kobe version. In 1995 Japan is still a rich country ala foreign and Goverment debt, but now it has net debt of 225% of GDP. This will make this reconstruction funding a different ballgame. It would be difficult to see anymore "QE" by the BOJ for reconstruction purpose and also it would be almost impossible for the Goverment to further fund reconstruction by debt (not when you owe 225% of GDP already).

The only option will be to sell foreign assets (ie NZ Bonds) over time to pay for the reconstruction. It is also difficult to see the Yen weakening due to the repatriation of funds into Japan and the BOJ weakening of the Yen makes no sense if its mandate is now reconstruction of Japan instead of export surplus accumulation.

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Re TTPA :   Wouldn't our kiwi policians be patriotic enough to want to ensure we don't lose     our sovereignty? It's their country as much as ours.

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I'd like to see a list of what's in for me vs what's in it for john Key?

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I will go onto the streets to demonstrate against the TPP.

 

When it was initiated as the P3 - it was a good thing - it allowed us to be in  control

Then it went p4 and beyond - and US saw that it may be locked out of Pacific so made noises to join

Got in, and has effectively hijacked it for its own purposes.

We do not need the US in it at any cost

We need to push the pollys and senior beaurochrats to understand that we will not accept their ego trip.

NZ should refocus on bi-laterals wiht people who are important to us - and if we have to remain in the TPP - should push hard again to get Intelectual proproperty, copyright, financial services, investment and investor state dispute out of the agreement again.

 

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