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Thursday's Top 10 with NZ Mint: IMF says currency intervention OK; NZ$1 mln of South Canterbury money paid to 'female companions'; The Earth is Full; 3 Little Pigs and the insurance job; Robocopters play music; Dilbert

Posted in Opinion

Here's my Top 10 links from around the Internet at 7 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. See all previous Top 10s here.

My must read today is #1, even if is very wonky, and my must watch today is #3, although #6 comes a close second.

1. Even the grownups are now saying currency intervention can make sense - The IMF, which for decades has been a fan of utterly free market solutions, is now putting the case for currency intervention by inflation-targeting central banks..

Jonathan Ostry, the IMF's deputy research director, has written a blog post aimed at inflation targeting central banks who are wondering how to keep their economies stable at a time of intensely volatile exchange rates.

I wonder if our Reserve Bank is watching.

Or our government.

Or even the Labour Opposition.

Here's Ostry explaining why inflation targeting economies should look at it.

He does talk about emerging economies a lot, but I think it could equally apply to us. We're small, easily buffetted and dependent on commodity prices.

In a recent paper, I—together with my co-authors Atish Ghosh and Marcos Chamon—conclude that central banks in emerging markets do have a second instrument (FX intervention, in addition to the policy rate) that can be used to manage both inflation and exchange rates.

And, more to the point, use of this second policy instrument is likely to make central banks more, rather than less, credible. The reason is that when the exchange rate gets too far out of line (in relation to medium-run fundamentals, and looked at from a multilateral, rather than a unilateral perspective), obstinately refusing to acknowledge the issue is not tenable. Much better to adjust both policy instruments in an effort to achieve dual targets.

The idea of using more tools to address economic problems is one that has been gaining traction in the wake of the financial crisis, which has brought home that a narrow view in which all will be well as long as central banks deliver stable consumer prices simply doesn’t hold water.

Policymakers need to target many aspects of economic performance, and make use of a broad array of tools (including macroprudential regulation, capital controls, etc.) to deliver macro-financial stability.

2. 'Payments to female companions' - NZ Herald reports Datasouth Group director Gavin Bennett today pleaded guilty to NZ$103 million of fraud, including spending more than NZ$1 million on 'female companions.'

Bennett ran a ponzi scheme borrowing from South Canterbury Finance, and therefore, ultimately, the New Zealand taxpayer, which lost NZ$23 million to Bennett.

3. How to get away with it - Fund manager/blogger Barry Ritholz makes the point in this Bloomberg video that the big mortgage fraudclosure settlements in America are nothing more than a business expense. I'm still shaking my head at the brazenness and cynicism of the 1% in America.

4. The austerity is not working - Now in Ireland, which had been seen as something of a recovery story, there are problems.

Reuters reports the EU is looking for even bigger budget cuts.

Ireland may need to make further changes to its budget this year if the economy continues to deteriorate, the European Commission said on Wednesday in a draft of a report obtained by Reuters.

Halfway through an unprecedented austerity drive, Ireland is implementing 3.8 billion euros ($5.08 billion) worth of tax hikes and spending cuts to reduce its budget deficit to 8.6 percent of gross domestic product (GDP) this year.

5. Watch out for Portugal - Brown Brothers Harriman's Marc Chandler points out that not all European debt is benefiting from the ECB's Merkozy trade lolly scramble.

Portugal is the real outlier. The 10-year yield is up 203 bp. Why Portugal? It is implementing the agreed upon reforms. That is both good news and bad news. It is good news in that is offers a contrast to Greece and make for easier relations with the Troika. It is bad news because the reform are insufficient to put Lisbon on a sustainable debt path.

The key may be the real economy. It may under-perform even the lower expectation. On Thursday, Portugal reports January industrial production and retail sales figures. While the core of Europe may seeing some signs of economic stabilization, the Iberian peninsula is not. While weak economic data tends to support a sovereign bond market, this may not be the case with Portugal.

Portugal’s aid package assumes it can return to the capital markets in the second half of last year. This seems less likely with each passing day.

6. The Earth is full - Here's Paul Gilding with a TED talk on 'The Earth is full'.

'There's a problem with infinite growth on a finite planet. The earth is eating itself alive.'

7. The real story of the 3 Little Pigs - Here's The Guardian with the true story. It's amazing what a big mortgage will make you do.

8. A quirky chart that won't mean anything - Libertarian Republican Ron Paul would beat Barack Obama, this poll shows. HT Zerohedge

9. Totally amazing time lapse video - HT Henry Blodget

Timelapse - The City Limits from Dominic on Vimeo.

10. Totally fun video of robot quadrotors performing the James Bond theme.

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?

We welcome your comments below. If you are not already registered, please register to comment in the box on the right or click on the "'Register" link at the bottom of the comments.

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.

33 Comments

#8 Go Ron Paul!!!!  

#8 Go Ron Paul!!!!  

Was my post edited?  

Was my post edited?
 

Well as raving loonies for

Well as raving loonies for the GOP candidates go, he's the least wacky by far....
regards

(6) Yet another speech by an

(6) Yet another speech by an activist that happens to consume more resources than the next guy flying around the world, whilst at the same time telling everyone else they can't because we need to save the planet.

  • Release of his book The Great Disruption by Bloomsbury Press in the USA, Europe and Australia in 2011. Associated with this was a two month book tour across Australia, UK, Netherlands, Belgium, USA and NZ and follow up speaking engagements around the world.
  • Speaking engagements around the world to business, community and government audiences, having delivered well over a hundred such speeches around the world in the last decade.

 

Notwithstanding trying to

Notwithstanding trying to shoot the messenger - do you actually have anything meaningful to say about the message?

Despite his continual 'the

Despite his continual 'the science says' and 'we need to act' and 'we can do it', there was very little of substance in the talk beyond platitudes, perhaps we need to buy his book (and fell a few trees) to find out more.
The issue is somewhat of a co-ordination problem, how can you continue to tell the regular guy/family that they must do all of these things, whilst at the same time be part of an elite that swans around consuming more in a year than the regular guy/family could do in 10.
It seems to be a question of how we allocate resources:
a) by using the price system
b) environmental dictators (politicans).
c) some other yet to be invented system
As I see it these blokes want to use 'b', and have been more than happy to work with government to distort the price system.

Fair enough. I confess I was

Fair enough. I confess I was underwhelmed by the presentation - there was an air of the revivalist  preacher about it. It was very short on data.

another phony, hypocritical,

another phony, hypocritical, eco-fascist conman

like he says 'I don't need to

like he says 'I don't need to bore you with the data,  the evidence is all around us" -  a warning based on scientific reality and how we face a future fighting for our own existence
revivalist preacher - here's a sermon on "unpredictable contributions" saving man from himself in the "church of the technological sky daddy" - pure science fiction
http://www.ted.com/talks/peter_diamandis_abundance_is_our_future.html
telling people what they want to believe in is always popular whereas the truth is usually less than overwhelming.

You are aware how small the

You are aware how small the down side is to creating less pollution and doing less consumerism? You really don't need to prove that the consequences are irrevocable in any way to justify the notion of sustainability. Far from it in fact we would be a better species by taking the consequences of sustainability into account, whether or not there is actually an underlying imminent threat.
 

Less consumerism!  <shock,

Less consumerism!  <shock, horror>
Our society is based on growth (as he mentions in the video).  Always more.
Just the other day I went to the auto spares shop to buy a demister cloth - you know the ones you keep in the glove box for the car windscreen.  Well it turns out they only sell them in a pack of twenty two.  I kid you not.  I asked the sales person "why????" and he said it's just not worth selling smaller packs.  Well, no way was I going to pay $25 for a cloth (even with twenty one spares), so no sale.  If too many people say no however then our society based on infinite growth will fail.  Same examples with clothes, buy five for ten bucks, buy two pair get the third free etc.

Matt - how about raising the

Matt - how about raising the level a bit?
 
Thinking without pre-ordained bias is always a good start.
 
:)

#6 Paul Gilding must first

#6 Paul Gilding must first admit ONE thing:
Our monetary system is a crock of s***. THEN maybe we can begin to move forward

I was surprised he didn't

I was surprised he didn't mention it.  You're right though, we cant change the way we use resources under the current monetary system.  I wouldn't be surprised if we end up with the most likely scenario.  Full speed ahead, nothing changes, we havn't learnt a thing.
http://www.youtube.com/watch?v=b97zJxKEqAk&feature=watch_response

  Unless February 29th is the

 
Unless February 29th is the new April Fool’s Day, I’m pretty sure Alan Dlugash locked up DOTY with this remark:

People who don’t have money don’t understand the stress. Could you imagine what it’s like to say I got three kids in private school, I have to think about pulling them out? How do you do that?”

Dluglash is describing the horror of scraping by on $350,000 a year. Really. How could you lucky bastards ever understand?
Guest Post: And The Douchebag Of The Year Award Goes To……
   

Mr Bennett will be laughing

Mr Bennett will be laughing his head off...at worst he gets three years in the slammer and then he's off to recover the millions he has stashed for his post prison life of fun...!

"I wonder if our Reserve Bank

"I wonder if our Reserve Bank is watching"...NO.

"Or our government"......Certainly not

"Or even the Labour Opposition".....give me a break.
Currently the RBNZ is preoccupied waving the LVR green flag to the bank bosses....gotta keep that bubble intact folks...peasants have no right expecting to be able to afford to buy their own property without big fat mortgages. 

Actually Wolly they have not

Actually Wolly they have not starting waving the LVR flag yet,
http://www.mortgagerates.co.nz/article/976498964/rbnz-considers-options-to-contain-housing-bubble.html
they just think its a good precaution to have (and I agree, but there is potential it might make the housing market worse immedately). Give over the lever and then you can start complaining about RBNZ inaction.
You can hardly blame them for following the Reserve Bank Act can you.
 

Not when it was written by

Not when it was written by the banks...!

Umm, yes Wolly they are going

Umm, yes Wolly they are going to follow their foundation legislation. That really is the right way for the institution to behave. Even if the RBNZ act calls for all bank staff to turn up in clown shoes and scarlet wigs Dr Bollard still has to follow it doesn't he.
I think you might be getting to the knub of the issue though, because we can expect the banks will undoubtedly have a big say in any LVR changes to the legislation. You can tell what they want from their 'conservative' lending strategy.
The voters have to take some responsibility for what the government passes and the special interests it focuses on (yes, that includes you Wolly, and me) because we are not calling for them to disband when they engage in unrepresentative behaviour. But you can't decry the nanny state (as you do) and simultaniously blame the government (and their departments and branches) for not taking good care of everything by writing 'good' legislation.
 
 

Only10 years too late.  They

Only10 years too late.  They weren't that concerned about it 10 years ago, why now?  Do they finally realise they were asleep at the wheel and they need to be seen to be doing something?

". The ISDA ruled today that

". The ISDA ruled today that the bond swap was not a "credit event", having been asked if the presence of a CAC - legislation to force bondholders to take a loss - constituted a default. But that left unanswered the question of what would happen if 100pc of bondholders didn't agree to take a loss and the CAC was brought into play to force the issue."
http://www.telegraph.co.uk/finance/debt-crisis-live/9114691/Debt-crisis-and-EU-summit-live.html
More to the point, what will happen to the price of other bonds now that the market knows the ISDA is a toothless bunch of brown nosing frauds.?

They lied to us...I don't

They lied to us...I don't believe it....!
"Growth in U.S. manufacturing unexpectedly cooled in February and consumer spending was flat in January for the third straight month after accounting for inflation, casting a pall over the economic outlook."
http://www.reuters.com/article/2012/03/01/us-usa-economy-idUSTRE7BM0AB20120301

"We need to improve our

"We need to improve our competitiveness. Only if Europe manages that will we have a future in which we are able to shrink our budget deficits and safeguard our wealth and jobs in Europe," German Chancellor Angela Merkel told reporters.
http://www.reuters.com/article/2012/03/01/us-eurozone-idUSTRE82015720120301
This marxist 'east German' backstabber has never had a proper private job in her life.

"The unemployment rate in the

"The unemployment rate in the eurozone continued to rise in January, hitting another record high.
The jobless rate in the 17 countries that use the euro rose to 10.7% in January, while December's figure was revised up from 10.4% to 10.6%.
There are now 16.9 million people out of work in the bloc, Eurostat said"
http://www.bbc.co.uk/news/business-17219160
Move along please...recovery and growth in progress...mind you don't trip on the lies and fall face first into the BS.

The Crisis is inevitable. 

The Crisis is inevitable.  QED "there is no hope"
Where are the Economists who are addressing this issue, of everything is running out and will soon be gone? Too busy playing "I am the only one who is right". 
 
We actually need (proper) scientists in control of govt, and the economy.  Not smilers, wavers, and printers. 

You mean you would like to

You mean you would like to see (for example) ministers who have backgrounds in the areas in which they work?  An energy minister who actually has a backgroud in engineering for example and not woodworking and crafts (Gerry Brownlee)?  Hmm, you could be onto something there...
How will it happen though?  By what mechanism would we end up with people governing the country who are working in fields they have experience with?
As it is democracy really only works when you have 'excess' in a society.  Plenty to go round so that everyone can vote for more for themselves.  When it becomes clear to a large enough group (I have heard that 5% is about the portion) that we're hitting some hard environmental limits (limits on water, food, gasoline for the SUV) we will see a fast transition take place to alternative ways of leadership.  OK we're seeing the beginnings of that happening in the US and Europe already, so maybe it's not much of a prediction.
Much like the sudden transition the TED speaker mentioned where one day you're company is building cars, then four days later you're not allowed to and instead you're building military weapons.

Exactly, people should be

Exactly, people should be appointed because of expertise in a given field.  When a scientist explains a policy plan, or directs resources using scientific principals, you can believe him because it follows the scientific method, things are defined, and it is demonstrable, provable and repeatable.  When a politician or economist says we are going to have a surplus in 2014, you have every right to question him, because nothing has been defined, the variables are unmeasureable, the theory is not provable, or repeatable.  Alan Greenspan can't even define money.

#3 Similar to the MF Global

#3 Similar to the MF Global story - they're facing a $140,000 fine for over a billion dollars of wealth appropriation.
http://jessescrossroadscafe.blogspot.co.nz/2012/02/nyt-no-criminal-case-but-mf-global-may.html
This shouldn't come as a surprise, because this is the US, where high criminality is flippantly excused from the top of the tree; "Wall St got drunk", or, "what Wall Street did was immoral, but it wasn't illegal"...
All signs point to a collapsing empire.

Re#2 It's not really a ponzi

Re#2 It's not really a ponzi scheme. Ponzi used the money from new investors to pay out the old investors (and took his cut along the way). It looks like Bennett just made fraudulent loan applications and pocketed the money. Quite a different type of scam really.

was he making his interest

was he making his interest payments on earlier loans  using the next loan he took out? maybe that makes it a kind of Ponzi scheme?
 

Good point, I was assuming

Good point, I was assuming you need more than one victim to be like Ponzi. Pretty crap 'know your customer' systems from SCF to hand out millions in loans to fictitious customers...

I am in shock ....nay... in

I am in shock ....nay... in stunned awe at Jonathan Ostry's conclusions in regard to appying interventionalist tools when seen as a necessesary  tool for stability......such genius....the pondering over  Foie Gras and Bollinger..it must have taken.....tuhh! uh Duh, do ya think so Jonny...you could have come here and learned that from bloggers a few years back....the difference..? oh yeah , you got the microphone and platform to belt it out from like it was from revelations or somesuch...sheesh...what next Jonathan..? the IMF to start understanding orderly defaults...?
 Irrespective of the advantage of having a 2IC from the IMF's research arm spout this change in thinking by the IMF there will be an agenda to it....there always is with the IMF.
 Dear  Jonathan....read your bloggy thingy learned nothing , other than, you or someone who pays you ( for now) has been thinking,.........well done, keep it up,no telling where it may take you.