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Tuesday's Top 10 with NZ Mint: Macquarie Millionaire reveals Australia's debt bubble; The amazing Scrapstore playpod; China's new shadow banking crackdown; Karl Marx is Father Xmas; Dilbert

Posted in Opinion Updated

Here's my Top 10 links from around the Internet at midday 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.See all previous Top 10s here.

Bill Moss' whistleblowing is my highlight today.

1. What a Macquarie millionaire really thinks - Bill Moss, a former executive director of Macquarie Bank, has pulled back the veil on Australia's property price bubble.

He effectively says Australian commercial property is a debt bubble in a speech reported in The Australian.

This is extraordinary.

Related Topics

One the architects of Australia's own millionaire's factory at Macquarie Bank is saying that property prices are overvalued in a world without debt.

He's saying that young Australians have been locked out.

He actually says most of Australia's wealth has come from asset inflation via increasing debt rather than wages rising faster than living costs.

It's as if the magician has just revealed his secrets.

"Debt is necessary to inflate asset values; take it away and asset values fall," Mr Moss said. "Imagine a world with no debt and there would be less development, smaller buildings, cheaper finishes and fewer home owners.

"You will also see fewer property developers and fund managers driving around in Ferraris."

Without debt, most real estate would be cheaper, he noted. The average house would only be worth what a person could save during a lifetime without 90 per cent financing..

"Most of our wealth has not come from wages less living expenses, but from asset inflation."

Younger generations were not so lucky, he said. The under-30s missed the debt bubble and struggle to have a net worth, he said.

2. Watch the Singaporeans - Singapore is a trade-based economy that handles a good chunk of global trade into and via Asia.

It has just downgraded its growth forecast and reported an unexpected 4.5% fall in exports in September. Economists had expected a 3.5% rise, Bloomberg reported.

Singapore can often be the canary in the mine for global trade.

3. Where did the growth go? - All (yes 100%) of the income growth in America from 1989 to 2008 went to the top 10% of income earners, while incomes for the bottom 90% fell, this excellent interactive Economic Policy Institute graphic shows. HT John via email.

 

4. Fresh Chinese crackdown - WSJ reports the Chinese authorities are trying to crack down on shadow banking from within their own banks, often in the form of 'wealth management products' done off balance sheet.

It's the same old stuff. Off balance sheet vehicles to invest in property that are set up and run by banks.

Where have we seen that before?

China's banking regulator has issued new rules to rein in off-balance-sheet lending by banks that has stoked fears about excessive credit growth and the long-term stability of the country's financial system.

In a directive marked "extra urgent," according to people who have seen the document, the China Banking Regulatory Commission banned banks from moving loans off their books by repackaging them into investment products—an increasingly popular practice among banks trying to get around Beijing's lending controls aimed at bringing down inflation.

The move comes amid a surge in "shadow finance" in China, a term encompassing all kinds of credit created outside formal bank-lending channels, including loans arranged by banks but not recorded in their balance sheets. The informal credit boom has led to concerns about a potential increase in bad debt in the country's vast banking sector, adding to worries over Beijing's long-touted ability to manage its overall economy.

5. NZI Insurance's 'error' - Martin van Beynen writes at The Press about one couple, Grant and Dorothy Catchpole, who were told by NZI their house could be repaired when it obviously couldn't. NZI have since reversed their position, but it may be a sign insurers are playing silly buggers to save money.

NZI seemed to change its stance only after being approached by The Press.

In July, NZI assessors confirmed verbally within minutes of seeing the house that it was not repairable. The house had cracks in the concrete-slab foundation, bricks falling off the walls, varying levels and liquefaction beneath it. The Catchpoles were devastated to learn last month that NZI had declared the house repairable for $94,000.

Grant Catchpole believed the insurance company was "trying it on" because total replacement and various extras in the policy would cost it substantially more.

"I requested a copy of their repair assessment and there was no money allocated to repair the slab foundation, nothing to replace the cladding [bricks]. It was a total nonsense. I got stuck into them and requested another opinion."

A rebuild expert from Hawkins Construction did another assessment and agreed with the Catchpoles. "How many people are the insurance companies trying this on with and getting away with it? I have heard of people just giving in because they are too stressed out," Catchpole said.

NZI have responded to this. Here is their comment.

NZI says it has been consistent in it's stance to offering ongoing insurance to customers and did not 'change' it's view in response to questions from The Press. It is determined to assist it's customers and found the Press headline suggesting insurance is "worse than the earthquake" offensive to all those in the industry working to help with it's part of the rebuild.

6. Today's must read - I linked to a Nouriel Roubini OpEd in Project Syndicate a few days ago, which seemed to sum up so much about what is wrong with the very financialised version of US-style capitalism that has caused the world's economic problems in recent years. HT AndrewJ from memory.

Now he has put out a much longer paper on the topic and it's a cracker.

The squeezed and sinking 99% and the thriving top 1% (as the Occupy Wall Street protestors have it) may be a simplification of a highly complex situation. But it resonates with a deeper truth that unfettered free markets, deregulation and globalization have not benefitted all and that some of their pernicious consequences are associated with massive job losses, mediocre income growth and rising inequality.

To save globalization and its power to increase productivity and economic growth, we need to start seriously addressing its consequences, including the rise in inequality and the stagnating real incomes of most households and workers.

The increase in private and public leverage and the related asset and credit bubbles are partly consequences of inequality: The mediocre growth in incomes of the past few decades  created a gap between incomes and spending aspirations (“keeping up with the Joneses”).

In Anglo-Saxon countries (not just the U.S. and UK, but also others that followed the Anglo-Saxon economic model such as Iceland, Ireland, Spain and Australia in recent years), the response was a democratization of credit—via financial liberalization—that allowed struggling households to borrow to make up the difference between spending and income, leading to a rise in private debt. In the social welfare state economies of continental Europe, the gap was filled by the provision of public services (free education, health care, etc.), although not fully paid for with taxes, thus leading to the rise of public deficits and debt.

In both cases, such growing private and public debts eventually became unsustainable, leading to financial crisis.

Top 1% Share of U.S. Total Income at Highest Since Gilded Age

7. 'Will the hedges hold?' - Jesse Eisinger writes at ProPublica about the lack of trust now endemic in global mega-banking and why so few now believe the assurances that come out of stress tests, at least in the Northern Hemisphere.

The moment one examines almost any detail of the global financial system, faith falters once again. Take the uncertainty about the derivatives markets. Morgan Stanley has a face value of $56 trillion in derivatives. That’s really nothing. JPMorgan Chase has more — amounting to the G.D.P. of large countries — a face value of $79 trillion in derivatives. If something goes wrong with just one-tenth of 1 percent of those trades, it’s kablooie.

Now those are gross numbers. Many people would dismiss those totals as ridiculous and misleading. Anyone who brings them up is merely displaying ignorance. The banks’ derivatives portfolios are full of off-setting trades that net out at a smaller number.

Derivatives can be dismissed as a popular bugaboo, but they really are just a symbol of the larger problem. A litany of daily stories reveals all kinds of reasons that banks don’t trust each other. To take just one news item, almost at random: Bloomberg News reported the other day that a Danish bank was refusing French sovereign debt as collateral.

Nobody really knows how much exposure the American banks have to the European financial and political crisis, with the Treasury Department minimizing the issue while other outlets raise the specter of catastrophic problems.

So trust, naturally, is the casualty. “If you get in a period of stress, everyone starts questioning whether the hedges will hold up and whether the collateral is good enough,” said Mr. Gulberg, the banking analyst.

8. Guess what the CEO of the world's largest bank earns?  - US$10 million? US$100 million? No. Jiang Jianqing is the CEO of the Industrial and Commercial Bank of China and earns US$150,000 a year, Reuters reports.

Any wonder why China is doing better than most at the moment?

To be fair, these are politically appointed jobs and this job is just another rung on the ladder to senior political leadership.

It's different in NZ isn't it?

We wouldn't have a senior banker give up his job to become a politician. Let's say the last two leaders of the National Party?

Or we wouldn't have a senior cabinet minister leave government to become the head of a private banking arm of one of the big four banks?

Wouldn't happen here...

Like those of his peers at other Chinese banks, Jiang's salary has consistently fallen in the past four years, from about $240,000 in 2008, and he himself said in Hong Kong last year that he hoped his pay cheque would stop shrinking.

"We can't be paid more than the regulators who oversee us," Jiang explained last year when asked about the matter. "If the regulators have to take a pay cut, we will take a pay cut as well."

9. Totally relevant great idea - This video shows how a container load of junk put into a children's playground can improve learning and make kids happier. HT Eric Crampton via twitter.

10. Totally irrelevant video from Stephen Colbert on Socialism with a Karl Marx as Father Christmas.

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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Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current Comment policy is here.

80 Comments

Dear oh Dear Bernard you are

Dear oh Dear Bernard you are really starting to loose the plot completely with all this !% anti capitalist anti business stuff 

Colin I'm a capitalist. I'm

Colin

I'm a capitalist. I'm helping to build a business as I speak.

But I am in favour of properly regulated banks not being bailed out by taxpayers and I am against all the benefits of economic going to a small portion of the population.

What's wrong with the high tax rates and tough financial regulation of the 1950s and 1960s?

It was hardly socialism. In fact it was the most anti-communist era of all time.

Yet it also coincided with a period of widely distributed prosperity and relatively low unemployment.

Something is wrong with the deregulated laissez faire model that has been followed for the last 30 years.

It just hasn't worked.

Simply accusing those of being opposed to the radically laissez faire version of capitalism we have now as socialists is just plain lazy and defies reality.

Do you think the current system is working?

cheers

Bernard

Bernard - I think you have to

Bernard - I think you have to assume that anyone willing to defend the status quo must have some skin in the game (either a 1 percenter or an aspiring 1 percenter).

Colin / Bernard - there is

Colin / Bernard - there is nothing particularly laissez faire about the pefformance of Local Government that triggered the housing bubbles - but there sure is with respect to the financial mortgage fuel that worsened the housing bubbles.

In open markets where new stock can quickly be put in place to meet demand - the financial fuel only leads to overbuilding, as happened in Atlanta, Georgia, where the Miultiples "bellied out" to 2.1 and in this years Demographia Survey, were working themselves back to balance at 2.3.

Overbuilding of market stock is far far less of a problem, than the havoc created with bubbles and poor quality bubble stock.

Its the "scarcity trigger" that does all the big damage getting bubbles underway - then collapsing - as has happened in California, Florida, Ireland and elsewhere.

Texas has it about right with its pragmatic approach - (a) open land markets (b) proper infrastructure financing and (c) sensible Mortgage Consumer Protection legislation.

It sure is taking politicians a long time to learn in this country. We live in hope - with the direct Auckland / Houston flights starting up early next year. Then there will be no excuse for them failing to learn how to plan and build things properly.

Hugh Pavletich

www.PerformanceUrbanPlanning.org

Texas has a zillion or so

Texas has a zillion or so hectares of crap unproductive/marginal land to buid on....In NZ we are building on some of the most productive...the same land that earns our income. 

Take a look at the Waikato when you next fly in or out Hugh...the urband sprawl of large phallic symbol homes, complete with unused tennis courts, swiming pools and acres and acres of lawn for the ride on mower abounds.....god only knows how much productive land has been displaced as a result.....and this is with regulation.

RASTUS - THE RURAL

RASTUS - THE RURAL ROMANTIC

Rastus - with respect, you are all over the place '

(1) 0.70% of our total land area is urbanised, where likely 80+% of our population lives and likely 90+% of our GDP is generated. Cities are indeed the engine drivers of a modern economy - or at least they should be if the politicans and planners allowed it. One day Prime Minister John Key will understand this.....it is hoped. But he is an accountant - where they are required to have imagination bypass surgery. Which probably explains the dim grin.

(2) Far more agricultural land is taken out of production, because planners artificially inflate land prices, forcing an "affordability flight" out to the rural areas and outlying towns - to so called lifestyle blocks, in reality life sentence blocks. They own them for about three years, spending the last two desperately trying to get rid of them.  Go read "Lifestyle Block Mythology" within the Highlighted Articles Section on my website. There is nothing to be gained - and a massive amount to lose - by town planners retarding normal urban growth and consolidation.

(3) Kiwis "love" those dairy farms so much, they refuse to work on the things - so we import Filipino workers and pay them $40,000 a year with free accommodation to do the work for us. Much the same with horticulture - again Kiwis refuse to work on them, so we bring them in from the Pacific Islands instead.

Rastus - there is nothing particularly romantic about rural life. Most cant get out of it soon enough (yours truly being one), for the greater opportunities, better lifestyle and convenience of the cities.

Hugh Pavletich

www.PerformanceUrbanPlanning.org

Do you not believe "suburban

Do you not believe "suburban sprawl" is a problem though?

Don't get me wrong though, cities are not the problem. The way we build ours is though. We need our cities to be more like Hong Kong, Singapore, Kuala Lumpur and so on. We should be aiming to have high rates of public transportation (like greater than 2/3 of people getting to work via public transport), more apartment buildings, and less sprawl.

 

 

rpcas - you might like to go

rpcas - you might like to go to the New Geography website www.newgeography.com to read Wendell Cox's latest article on transport trends in the United States. % of private car use is still climbing. Convenient mobility is hugely important to people and their quality of life.

Kiwis dont want to live in high density. Go to Singapore and ask them what they think of it. If Singaporians were allowed to come and live here - there would be about 4 million of them here by next Monday.

Hugh Pavletich

www.PerformanceUrbanPlanning.org

Hugh - He does have a point. 

Hugh - He does have a point.  Draw a triangle from Lincoln to Oxford and down to Woodend.  How much land has been taken out of production for 4ha blocks that are completely useless.  Even the 500 000 or so corriedales that used to be there were more productive to the economy than the 4ha blocks.

Maybe not. The small holdings

Maybe not. The small holdings can be very productive. Not much needed but an agreement between four neighbours to develop a 12 acre plot as an arable unit! Multiply that a hundred fold...?

Agreed, some lifestylers are

Agreed, some lifestylers are very productove, more so than their neighbouring comercial farmers.  Sadly, my observation of the many of these blocks is that the owners can't  farm, or can't be bothered or simply want to show off, so they turn their properties into large areas of mowed grass.

Agreed, some lifestylers are

Agreed, some lifestylers are very productove, more so than their neighbouring comercial farmers.  Sadly, my observation of the many of these blocks is that the owners can't  farm, or can't be bothered or simply want to show off, so they turn their properties into large areas of mowed grass.

Another feature of the 1950s

Another feature of the 1950s and 1960s was that most people in the world (eg. Asia, Africa, Middle East) lived in poverty, and had no ability to sell their goods in our markets.  Now there are hundreds of millions of people in those countries who's living standards have increased (although not as far as anyone would want yet) as they have been able to perform work other than subsistance farming.

 

The big question is why a worker in NZ or the USA should be paid more than a worker in India or China for doing the same job?  The "99%" are really in a 1% of the world who want to enjoy a lifestyle that far exceeds that of the people who build the things they own and use.

 

The income inequality problem that Bernard likes to go on about is simply a repeat of the same inequality problem that briefly inflated the incomes of the "99%".  It's just that there are fewer and fewer people who can engineer being paid ridiculously more than everyone else.

From another perspective, why

From another perspective, why is a worker in India or China worth so much less then a worker in NZ or US?  Coorporations are acting in a way that would be illeagle in the country that they live in.

Hasn't that decision been

Hasn't that decision been made by consumers?  Generally speaking where consumers are given a choice between a cheap product made by low wage workers off-shore and an expensive product made by local workers they choose the cheaper option.  Corporations that have resisted this trend have suffered bankruptcy.  Would you pay an extra $500 to buy a NZ-made lounge suite?

Its to do with the capital

Its to do with the capital employed. The more capital used in a job the higher the income.

A person on a $500 sewing machine will be paid less than a employee in a $100m electronic chip factory.

A labourer with a spade will be paid less than labourer with a digger.

It's basically around the revenue per employee. (Which can also be thought of as productivity). The person on the sewing machine might only produce revenue of $100,000 per year so after expenses can only be paid say $20,000. The person in the chip factory may create $1m of revenue but can be paid $100,000.

There was an article (video of a speech) a month or so ago that was about the revenue per person in each industry in NZ and if we increase the numbers in the Tourism industry we will just get poorer because of the low revenue per worker. Its the same principle.

More capital = more revenue = high incomes

Capital is pretty mobile, and

Capital is pretty mobile, and it tends to go to the country where wages and land cost the least.  So if you are the labour chasing those wages, you can get stuck in a country where no-one wants you.

Just wanted to tip-my-hat to

Just wanted to tip-my-hat to you for your well reasoned and rational arguments/posts.

This website's comments section could use more of the above.

cheers

PS - Bernard H, Is there an easy way to modify your comments section so that registered members can SUBTRACT points - not just add them?

Some websites allow this and the result is that higher valued comments (by the readers) are in brighter colours, while the negatively rated comments are minimized/hidden - requiring a user to click on it to reveal the comment in order to read it.

This would enable us to reliably skip the useless comments which add nothing to the argument, which concentrating on the positive/popular comments.

cheers

Thanks :-)

Thanks :-)

So its even more obsene that

So its even more obsene that the top 1% in the US hold the majority of the wealth then? 

Lets focus on that before telling the 99% that they should happy with the peanuts they are left with becasue it's more than crumbs the rest of the world has...

How is it obscene for a pro

How is it obscene for a pro baseball player to earn $5m for being the best home run hitter in the world?  How is it obscene for an actor to be paid $10m for acting in a movie when their name on the marquee creates more than $10m worth of box office revenue?  There are definitely some shareholders who aren't getting value for money out of the executives they have employed, but if that's how they waste their investment, what does that matter?

Unemployment is occuring because the 99% aren't buying things made by the 99%.  Don't blame Wall Street for allocating profits, blame consumers for walking in to Wall Mart.

How about the fraudulent

How about the fraudulent banking system that creates inflation forcing people into more and more risky investments and working harder and harder just to survive?

John Maynard Keynes, the

John Maynard Keynes, the father of the branch of economics that utterly dominates our lives, had this to say about inflation:

 

Lenin was certainly right, there is no more positive, or subtle or surer means of destroying the existing basis of society than to debauch the currency.

By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of the citizens.

The process engages all of the hidden forces of economics on the side of destruction, and does it in a manner that not one man in a million can diagnose.  

How is it obsene to make

How is it obsene to make someone who earns 10 million a year pay more in tax so the burden can be lifted from the 99%.  Is it so terribly wrong if they net 5 million after tax instead of 8 million and live with a slightly smaller jet so that the other 99% have health care and affordable education?

Legend!

Legend!

Bernard the problem has been

Bernard the problem has been decades of spineless politicians who have bought their way into power using taxpayers own money.  Share dishonesty they have gamed the system more than any.

They have spent money like drunken sailors making promises that could not be paid for they created unsustainable welfare states promising entitlements which would never need to be paid for during their watch or in the future it’s the next guys problem. They have all practiced so called Keynesian economics and the voters have been stupid or perhaps selfish enough to believe them  

Politicians terrified of loosing support have along with reckless Central Bankers have sort to circumvent natural business cycles (recessions) each time kicking the can down the road further and further until it could not be deferred further. Rather than a series a moderate recession we are confronted with the current mess. Subjecting economies to sustained periods of low to zero interest rates eventually destroys the credit worthiness of markets at the same time leads to massive speculative behavior.

Credit has not been appropriately priced. Prudence treated with contempt. Inflationism used to keep the game going.

The Western world Governments (taxpayers) and consumers are up to their necks in debt most of it due to speculative behavior in housing markets, overconsumption and over promising.

The idea we have had operated Laissez Faire economies for the last 30 years is silly.

Sure there have been some big gaps such perhaps Glass Steagall in the main we are awash with regulation. What you seem to continually be suggesting is that we return to a period whereby some bureaucrat sitting in an office somewhere says what you can or can’t do. That’s what happened in places like Greece or the old eastern Europe.

Taxing the hell out those who have money is stupid look at who is in the top and how they got there.

 The system will sort it’s self out it’s part of a cycle a cycle of human evolution trillions will go down the plug hole unfortunately the die is set one simply has look after number during the process.  

So called natural business

So called natural business cycles are a monetary phenomonen caused by the charging of interest on debt.  Outside of a closed precisely controlled system you are guaranteed to have periods of bankruptcies/recessions.  They cannot be avoided by government, nor are they caused by government.  They are the product of simple math.  The only way this crisis could have been averted was a system without interest, or regular frequent debt jubilee's.  Anything else is can kicking.

Ask China 2008

Ask China 2008

China has no way near enough

China has no way near enough controll of its money to achieve a sustainable equilibrium.  Shadow banking is far more destructive then fractional reserve banking, no new money is created plus the interest rates are higher.

Whilst I agree mostly with

Whilst I agree mostly with your sentiments, defining what we have now as deregulated laissez faire is equally as lazy.

Where under a laissez faire system does it also state you should have corporate bailouts?

The financial industry is probably already the second most heavily regulated sector and yet look what happened.

We need to go back to a model of banking where shareholders have double liability stock, investment banks operate as partnerships and there is no such thing as government sponsored deposit insurance.

Risk and responsibility  

Risk and responsibility  

I only speak english but

I only speak english but doesn't Laissez faire mean do what you want, for your own benefit?  The banks did this by getting govt guarantees for their loans.  You think govt would have given them up without any pressure?  Obviously to me there was a lot of pressure put on by the banks and govt capitulated.  Why else would they pull such an unpopular stunt?  Govt did it in self interest banks worked for self interest sounds like laissez fair correct me if I am wrong.

dear oh dear colin are your

dear oh dear colin are your taringa painted on?

 

its not about being anti-capitalist, or anti-business. its about objecting to a system that has become so dysfunctional that its no longer sustainable or supportable.

 

 

All aboard the clue train,

All aboard the clue train, toot toot

Going by the truckload of

Going by the truckload of cash given to the TV boss this last year...as just reward for his strenuous work!...all the govt senior mandarins will be looking forward to xmas...as they can expect big fat juicy slices of extra cash in 012.....and because it is so difficult making these awfully stressful decisions about how much pork to handout...it's the justification bit that's stressful....inventing endless BS always is...the buggers doing it will also get big fat bloated salary increases.

Cartoon from 1912, one year

Cartoon from 1912, one year before the creation of the Federal Reserve...

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2011/09/Fed%20octopus.jpg

Via ZH

 

So they changed the name to

So they changed the name to Federal Reserve Bank System, bought a few more congressmen, and media spin, easy.

FYI and now Moody's is taking

FYI and now Moody's is taking a hard look at France's AAA credit rating with a view to a downgrade

http://ftalphaville.ft.com/blog/2011/10/17/704181/moodys-is-peering-at-frances-aaa-outlook/?utm_source=dlvr.it&utm_medium=twitter

cheers

Bernard

#1. The Bill Moss article is

#1. The Bill Moss article is even more profound, when you recognise that:

"Bill Moss: Macquarie Bank’s out-going property boss was paid more than $20 million in the year to 30 March and has made more than $40 million out of his shares and options over the years. More than a decade of big salaries running the burgeoning property business suggests he’ll have at least $150 million to his name by now, especially given his own considerable property holdings acquired over the years. "

That was 5 years ago. One wonders, in the light of his most recent comments, whether he has been buying or selling property! ( You wouldn't 'be frank' about property until you were 'out' would you?)

.... or he has found a way to

.... or he has found a way to short the property market. You can short some stocks on the Aussie stock exchange. Maybe Macquire and others are offering some dodgy CDOs?

Short simple put means

Short simple put means selling, so yes he has sold his property and will buy them back later.  In the end he will still own the property but will have made a profit on the difference between the sell and the buy.  Naked short selling is where you sell something you don't own and promise to buy it in the future.  You could sell bank shares which derive their value from the loans but you are betting on bankruptcies, which is different to house prices falling in value (though they are normally related).

Here's what happens when an

Here's what happens when an investment bank (in this case Goldman Sachs) gives advice to make insiders happy.

This time it cost the insider US$1.26 billion in a court case in America.

The details at Dealbook are just painful

http://dealbook.nytimes.com/2011/10/17/grupo-mexico-hit-with-1-26-billion-judgment-over-deal/#

Chancellor Strine also found fault with Goldman’s work for Southern Peru, stating that Southern Peru “was not ideally served by its financial advisers.” The chancellor criticized Goldman for abandoning traditional valuation techniques and shifting “its client’s focus to an increasingly non-real world set of analyses.”

Another sh*tty deal Goldman

Another sh*tty deal Goldman takes the fees and walks, no suprises, probably shorted the stock as well.

And here's Ambrose on the

And here's Ambrose on the situation in Germany.

Plans to increase the firepower of Europe's bail-out machinery with extra leverage threaten France's AAA rating and risk setting off a dangerous chain of events, a top German institute has warned.

http://www.telegraph.co.uk/finance/financialcrisis/8832798/Berlin-experts-fear-euro-break-up-from-bail-out-escalation.html

Take some debt, use leverage

Take some debt, use leverage to turn it into more debt, then use it to solve a debt crisis. Logic has been defeated long live financial innovation. 

A song popped into my head 'putting out the fire with gasoline' or something.

Perhaps you were thinking of

Perhaps you were thinking of the song by NOFX titled "We Threw Gasoline On The Fire And Now We Have Stumps For Arms And No Eyebrows" ?

LoL I think Merkel has heard

LoL I think Merkel has heard that song before.

Bernard, the most popular

Bernard, the most popular commenter on this article, had this to say-

 

 

 

micol

6 hours ago

 

This is just so funny, at least for those of us untainted by this spectacle of the sublimely and terminally stupid buffoons, these arrogant and pompous clowns scurrying about from meeting to meeting, without the faintest idea, not a single clue, not an iota of actual understanding or competence in regard to the horrendous gigantic turd they gave birth to, as to how to save it now.
They foisted this on Europe, paying for it by stealing the wealth of Europe for the last couple of decades, as Europe prospered, then borrowed and stole from the future generations until even that reached its limit, and now, they plan to tax your assets, take your property and land by stealth as in Greece, tax you every time you write a check or use your credit card, steal your pension as in Ireland. 

Steal your companies, render them useless after being raped for tax and regulations so complex and tiresome as to make them incapable of hiring your kids, Half of them without a job, leaving generations of young people with no hope and no work,

And now that they cant screw the dregs of whats left from the supine and shell shocked people of Europe they set about their "grand plan"

But its secret,, they cant tell you what it is, but you have to trust them, They know just what to do and what’s best for you.

But in part it goes like this, these monumental egotistical parasites, have decided that they can now help solve the problem of keeping their gigantic turd alive and kicking by inventing the most ambitious ponzi scheme ever devised. 

They will borrow from each other and then lend to each other and leverage each transaction up to the hilt and voila, 

There it is, in all its shining glory, a scheme to beat all schemes, with every country all pulling together to guarantee the banks and therefore the debt of all these broken and fractured countries.

Why not go the whole hog, Why not just declare Ireland as or Greece as the lender of last resort for all these trillions they have so magically pulled out of thin air.

Why not go even further than that, why not ask Mrs Spiros who lives ona farm in Rhodes and she’s 84 to be lender of last resort, or Mr Murphy the retired gardener from Cork.

The chances of this nonsense ever getting repaid is just about the same.

But there we have it. The same terminally stupid people, the same ignorant corrupt and self serving pompous morons are telling you that only they understand the problem, and it’s not their making, but only they know how to fix it.

And some people still listen to them; they still stand there listening to the utter garbage frothing from their mouths.

Except now I feel the tide is turning. Some people are not as stupid, and can see the reality of what’s happening, and soon there will be more blood.
And the response from the clowns, Oh no, they are right and you are wrong, we will not change, we will break every rule we made and we will send our troops and gendarme to Greece and Italy and anywhere else you maggots start your uprising.

We will not go away, we know best and you WILL do as you are told.
The whole of history is littered with the grandiose plans of politicians, who vow that their dream is the best one yet, that only they can see the glorious benefits it will bestow on you, that only they can be the ones in charge.

And every single one went down the toilet. The 1000 year third Reich lasted 5 years but this grandiose turd set up to replace it lasted a little longer,

But a turd is a turd, and this is undoubtedly the mother of all turds, set up by incompetents and managed by incompetents, 
Incompetents that in the final analysis are just as dangerous as Hitler or Stalin or Mao, because their stupid bloated ego's allow no possibility they could be wrong, and therefore cannot even begin to understand how mad and insane they have become, they can and they will take your freedoms and democracy from you.

They CAN and they WILL.

Please understand that, its already started and will only get worse.

The only people who can fix this are those that can see it clearly for what it really is, and understand how to break it up gently and flush it away carefully bit by bit.

But those in charge now have to go.. And go right now if you want to see even the vestiges of democracy remain in Europe.

And Portugal is now

And Portugal is now forecasting contraction next year of 2.8%, worse than expected.

The problem with trying to solve a problem of too much debt with austerity rather than forgiveness or restructurings is drives economies into recession or worse, which simply magnifies the problem of high debt/gdp ratios.

It's a debt death spiral. Greece is further along than Portugal. But same result.

http://www.france24.com/en/20111017-portugal-forecasts-economy-contract-28-2012?utm_source=dlvr.it&utm_medium=twitter

And yet everyday I keep

And yet everyday I keep hearing about some "PLAN".  What is the plan?

http://www.whatis-theplan.org/ 

I sent a message to Lanemen

I sent a message to Lanemen ...he don't know neither.

off thread but I see SFO man

off thread but I see SFO man Adam Feeley is on his last warning over Hubbard book and Bridgecorp  wine episode-  Crusher shouldve  sacked him  IMHO  .

imho GoNZo thats the attitude

imho GoNZo thats the attitude that protects all these fraudsters. I want an SFO boss with a rabid passion for sniffing out fraud. Dirty Harry with an IRD handbook.

The financiers have decimated our economy. Why, exactly, do you want to protect them? Whats in it for you?

Hear hear VL, drinking a

Hear hear VL, drinking a toast to the demise of the fraudsters with their own wine is fine by me and yes good to see some passion for success. 

Bit of fun here from the

Bit of fun here from the Borowitz report. A 'letter' from Goldman Sachs:

As thousands have gathered in Lower Manhattan, passionately expressing their deep discontent with the status quo, we have taken note of these protests.  And we have asked ourselves this question:

How can we make money off them?

The answer is the newly launched Goldman Sachs Global Rage Fund, whose investment objective is to monetize the Occupy Wall Street protests as they spread around the world.  At Goldman, we recognize that the capitalist system as we know it is circling the drain – but there’s plenty of money to be made on the way down.

http://www.borowitzreport.com/2011/10/17/a-letter-from-goldman-sachs/

http://www.mcsweeneys.net/art

http://www.mcsweeneys.net/articles/occupy-main-street

"This country was founded on the proposition that all land-owning white men with wigs are created equal. Somehow we’ve gotten away from that mission"

Moss makes current

Moss makes current professional valid points.

What would be interesting to know is whats going to happen to inflated values in the next 5 years?

Nothing, deflation or increase?

Sulik: The opposite is

Sulik: The opposite is actually the case. The greatest threat to the euro is the bailout fund itself. SPIEGEL ONLINE: How so? Sulik: It’s an attempt to use fresh debt to solve the debt crisis. That will never work. But, for me the main issue is protecting the money of Slovak taxpayers. We’re supposed to contribute the largest share of the bailout fund measured in terms of economic strength. That’s unacceptable. 

http://www.thetrader.se/2011/10/16/another-must-read-by-things-that-make-you-go-hmmm/ 

 

The heart of the problem is

The heart of the problem is taxation. In most/all Western countries, the wrong sources of income are taxed at the wrong rates. Furthermore, poorly thought out taxes and inevitable tax evasion create one big mess.

Solution:

We should only two types of taxes:

- land tax.

- financial transaction tax. Every share, bond, and unit of currency traded on the market would be subject to a tax.

 

Both of these would be very easy to monitor, there would be no "loopholes", and speculation in both the property and financial markets would be reduced. They would also target the sources of "un-earned income" that are responsible for much of wealth inequality, and  discourage un-productive investment and speculation. By removing all income tax, productive work would be further encouraged.

These two taxes would also remove all the types of taxes such as the capital gains etc that lawyers and accountants love. Furthermore, nobody could escape the first tax - because everyone has to live somewhere. 

If applied over the entire the Western world, the whole inequality/inefficiency problem would be gone!

 

 

Interest is unearned income. 

Interest is unearned income. 

Add that in too then. And

Add that in too then. And dividends as well. Anything that is "unearned", providing it is easy to do so, should be taxed heavily.

land tax is morally

land tax is morally wrong,

With a strike of a pen the council can rezone an area and you forced to sell because developers push the price of your property above what you can afford to pay. 

You inherit the family home that's been in the family for generations and are forced to sell it because your income can't support the land tax.

A regular capital gains tax on the sale of a property like every other country has adopted makes much more sense.

Land tax reclaims some of the

Land tax reclaims some of the windfall gain people get from decisions re zoning and such like, money that can then be used to pay for infrastructure and help internalise costs.  What is morally wrong with that?

What is moraly wrong about

What is moraly wrong about being forced out of your home becasue others decide it's worth more than you can afford, are you serious??

A capital gains tax achieves the same result on sale without destroying lives

Thanks, I understand your

Thanks, I understand your point now.

You know....  in a business,

You know....  in a business, statistics and "units of measure", are useful to get a sense of how the underlying business is performing..

What if I came up with an "expense deflator" that, on paper, reduced my expenses in my  business thereby making the overall profitability of my business look really good.

Of course, that would be complete madness.....  as these "metrics" are there to give useful information about the TRUE state of my business.

In economics ( politics ) the focus is on the "statistics" themselves....   If we have GDP growth....GOOD.. no GDP growth...BAD.

The point I'm getting to is that when the focus is on "Statistics", as an end in themselves ( eg. GDP growth ),...  then there is a very strong temptation, over time, to start  "fudging" the way the statistics are compiled in order to give a "bias" toward the desired outcome.

 

The biggest example, and a very important one is the way the CPI is measured in USA.

There is a growing view that inflation in USA is profoundly understated....

If so.... then that explains where the growth has gone... ie..  THERE NEVER WAS ANY.

http://www.nowandfutures.com/cpi_lie.html

 

http://economicedge.blogspot.com/2011/10/morning-update-market-thread-1017.html

 

 

Risk and responsibility  

Risk and responsibility  

It's true, debt interest

It's true, debt interest death spirals are the system.  Interesting times.

Ian, Thanks for reducing

Ian,

Thanks for reducing your posts to the essence of our real global problems! I have followed your posts and links for some time now. Clearly the issue needs to be repeated over and over until more and more people start asking 'what is the core of our global monetary problems'. And then we might get more lights coming on in many more heads, slowly...

Yes something I hadn't

Yes something I hadn't noticed, Iain your posts are much improved. Keep posting and keep refining. Wouldn't hurt now that you are on the way to mastering brevity, to link to your blog so new subscribers can read.

Similarly, prosperity is

Similarly, prosperity is dependent on surplus. Here’s another example. Imagine that you are a family of four, your yearly income is $40,000, and at the end of the year there is no money left – at the end of the year, there are zero extra dollars. But then a 10% raise comes along, which equals $4,000, and your family can EITHER afford to have one more child OR you can enjoy additional prosperity by spending a little bit more on each person. But you can’t do both. There is only enough surplus money in this example to do one thing, so you have to choose – will it be growth, or will it be additional prosperity? And what is true for a family of four is equally true for a town, a state, a country, and, yes, our entire world.

Through this example we can tease out a very simple and utterly profound concept, that growth does NOT equal prosperity. For the past few hundred years we have been lulled into linking the two concepts, because there was always sufficient surplus energy that we could have both growth AND prosperity.

That is, we didn’t have to make any hard choices between the two.

The economist Malcolm Slesser, of the Resource Use Institute of Edinburgh, Scotland, has calculated that over half of the world’s energy is now used to simply grow.

So here’s the question: What’s going to happen when 100% of our surplus money or energy is being used to simply grow? The result is going to be stagnant prosperity.

And what happens if there’s not enough surplus to even fund growth alone? Well, when that time comes, we will experience both negative growth and negative prosperity – not exactly the sort of future I am looking forward to 

If changing the measurements

If changing the measurements brings about a better awareness of the crisis ahead, and an improved understanding of the cause and effect then it would be a great impeteus for change.  People do not understand the exponential function, and therefore expressing things as a doubling time, or measuring the speed would probably be quite extraordinary.  For example it took the US 300 years to create it's first trillion dollars, it took 4 months to create the latest, yet the money supply has been growing constantly between 5-15% for the entire period.

I dont think you need to

I dont think you need to change measurements....just have to get ppl to look at them.........

I think the US is a 9trillion economy?  so 12/9= 1.3 (ish) months for a trillion?

regards

Oh no, how could this be?

Oh no, how could this be? they told us the boom would last forever.

 

 

Prospect of weaker milk prices cheers Danone
 

Prices at Fonterra's globalDairyTrade auctions fell to a one-year low this month, while Stewart-Peterson, the US-based broker, said that "historical price patterns suggest that 2012 [prices] could be down as much as 20-30%" on 2011's, on a year-average basis.

http://www.agrimoney.com/news/prospect-of-weaker-milk-prices-cheers-danone--3730.html

 

  Fears of third NZ credit

 

Fears of third NZ credit downgrade

 

http://www.stuff.co.nz/business/industries/5808378/Fears-of-third-NZ-credit-downgrade

 

That will be right after the election.

Hmmm Moodies focus on Govn

Hmmm Moodies focus on Govn debt and not external overall debt.....which as we can clearly recall kicked Ireland into next week.....actually next decade.....

So anyone sane and competent should a) read Steve Keen, b) look at NZ overall debt, c) Downgrade us to A because our position is ugly....

Fortunately for us the ratings agencies are so idelogical bent to right right and neo-classical economics that they wont look at it properly....until it blows up then our rating will drop very fast.....BE wont be listening of course.....he'll be praying to his little tin god....

 

regards

Even better downgrade us to

Even better downgrade us to D, then we just default now when it will be less painfull instead of brrowing to fund our debt and interest.  Can kicking is alive and welll right here, and deliberate blindness to the retiring BB's.  I would like to see what NZ's total unfunded liabilities is.