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Wednesday's Top 10 with NZ Mint: How Gold crushed Buffett's Coke; China's Feast coming to an end; Greek kids to malnourished to exercise; NZ dairy farmers poor pasture managers; Dilbert

Posted in Opinion

Here's my Top 10 links from around the Internet at 4 pm in association with NZ Mint.

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

I'll pop the extras into the comment stream. See all previous Top 10s here.

My must read today is #8. Satyajit Das has a nice summary of why China's growth of the last four years cannot be repeated.

1. How Gold crushed Coke - Jim Grant from Grant's Interest Rate Observer points out that Gold has outperformed Coke since 1996.

He says the precious metal has 'humuliated' the likes of Warren Buffett in this Bloomberg interview.

Grant also points out how the Fed is manipulating interest rates.

He says bond investors are almost better off in cash than in 10 year Treasury bonds, which is a 'desert in value'

"Many of us understand the meaning of Quantiative Easing. But many of us are wondering the what the meaning of money is."

Grant suggests the Fed set up an 'Office of Unintended Consequences.'

He says the worst case scenario is when the 'Titanic' actions of the world's central banks spin out of control into inflation. He's also bearish about China and China's housing market.

2. How America really works - This video from Bill Moyers, a well respected US journalist, and David Stockman, the former budget director for Ronald Reagan, explain just how America's political system works. Any of New Zealand's negotiators in the Trans Pacific Partnership (if there are any left after the latest round of job cuts) should watch this.

Stockman speaks candidly with Bill Moyers about how money dominates politics, distorting free markets and endangering democracy. “As a result,” Stockman says, “we have neither capitalism nor democracy. We have crony capitalism.”

Stockman shares details on how the courtship of politics and high finance have turned our economy into a private club that rewards the super-rich and corporations, leaving average Americans wondering how it could happen and who’s really in charge.

“We now have an entitled class of Wall Street financiers and of corporate CEOs who believe the government is there to do… whatever it takes in order to keep the game going and their stock price moving upward,” Stockman tells Moyers.

3. Enough red meat already - This may not be good for New Zealand's sheep and beef farmers. MSNBC reports a Harvard study has found people who eat a daily serving of red meat are 13% more likely to die early and 14% more likely to get heart disease or cancer...

The Harvard scientists followed almost 84,000 women and 38,000 men in the Nurse’s Health Study and Health Professional’s Follow-Up Study for 28 years. It found those eating a daily serving of red meat were 13 percent more likely to die in the study period, and approximately 14 percent more likely to develop heart disease or cancer. Those numbers go up to 20 percent more deaths and an estimated 18 percent more heart problems and cancer for those who reported eating a daily serving of processed meats such as hot dogs, salami and bacon.

In the realm of health risks, these are not huge numbers.  Daily cigarette smoking adds risk of some 2,000 to 4000 percent for these hazards. But across the U.S. population, Americans love of meat likely accounts for about 1.5 million excess deaths every decade, according to research from the National Institutes of Health.

4. Kids going without food in Athens - Jon Henley reports via a Guardian blog from a Greek teacher that students are now too weak because of malnourishment to do Physical Education (PE) in schools. 

It has been a common secret among PE teachers for some time now that they don't expect pupils to do PE any more, because many of them are underfed and get dizzy.  They need to be discreet, as these underprivileged children don't wish to be exposed to their peers. In my previous school, the teachers arranged among themselves to give the school canteen some money, so that the canteen could give the child a snack, without embarrassing the child.

However, this was not enough. In many schools today, it is the parents' associations who come together, gather food and discreetly arrange to allocate it to those families of the school who are suffering.

5. 'Casinos don't represent the values of a great city' - Ken Griffin is the CEO of the giant hedge fund Citadel Capital, so he should know a thing or two about gambling. But even he, a conservative Republican, is against Chicago having a casino downtown.

I wonder what John Key thinks.  Well, we have an idea. Key would like to grant Sky City more licenses for pokie machines in exchange for a big convention centre in the centre of Auckland.

Here's Griffin speaking at the Chicago Tribune:

"There is no great city in America that has a casino (downtown)," Griffin said. "And there's a reason for it. Casinos do not represent the values of a great city."

 

6. Yet more austerity - Just days after the last Greek bailout/austerity deal was announced, Reuters reports Greece will need yet more austerity.

Greece will have to slash a further 5.5 percent of GDP in government spending in 2013 and 2014 to meet agreed fiscal targets underpinning the second international bailout for Athens, a European Commission report said.

he report, obtained by Reuters, said a package of savings adopted by Greece in early 2012 worth 1.5 percent of gross domestic product should allow Athens to meet the target of bringing the primary deficit down to 1 percent this year.

"However, current projections reveal large fiscal gaps in 2013-14," the Commission report said, adding that the shortfall for the two years totalled 5.5 percent. Therefore, substantial additional expenditure cuts will have to be announced and adopted by Greece in the coming months, in particular when Greece updates its medium-term budget in May 2012," the report said.

7. Still great farmers? - As a dairy farmer's son, I have a sense of how important pasture management is.

Here's a useful blog post from Massey University Farm Management expert Tom Phillips on how New Zealand's dairy farmers seem to have lost the knack of being good pasture managers.

The work of the NZ Dairy Consultants working in Ireland & the UK has been critical to those farmers now being global leaders in grazing & pasture management.

What I don’t understand is what has happened in NZ. The past research at No. 2 Dairy Ruakura & the Lincoln University Dairy Farm  & past Consulting Officer efforts have focussed on good pasture management & high utilization.

I’m told that now fewer than 20% of dairy farmers regularly measure & monitor (pasture wedge graph) pastures. Why? Why don’t NZ farmers passionately care for their pastures? Where’s the pride in having spectacular pastures gone?

My suggestion is that capital gains are now more important to farmers than production gains.

8. 'All feasts must come to an end' - Satyajit Das writes at Naked Capitalism about China's debt and investment fueled growth of the last four years. It's a nice, wide summary.

Just like the Japanese after the collapse of the bubble, Chinese householders will be forced to pay for the restitutions of their insolvent banks. Savers will pay a disguised tax – low deposit interest rates and high borrowing rates. In effect, the bailout will entail a large transfer of wealth and income from households to other parts of the economy, amounting to several percentage points of GDP.

This will reduce wealth but also slow consumption growth, at a time when external demand for Chinese products and Chinese trade surpluses is decreasing.

Das also makes this good point about increased Chinese capacity. This is one of the reasons I'm less worried about inflation than some others.

China’s investment boom may also be exacerbating industrial overcapacity. The greater portion of investment has been in infrastructure, rather than manufacturing.

A 2009 report prepared for the European Chamber of Commerce outlines the over-capacity. In its analysis of six major sectors, the report identified the following capacity utilisation rates: steel 72%; aluminium 67%; cement 78%; chemicals 80%; refining 85%; and, wind power 70%.

In 2008, China’s steel capacity was 660 million tons against demand of 470m tons but the difference is similar to the European Union’s total steel output or the combined output of Japan and Korea. China’s excess in cement is larger than the total consumption of the US, Japan & India. Yet China continues to add capacity.

If China be unable to absorb this new capacity domestically, then it might seek to increase exports, in order to maintain production and growth. This would increase a global supply glut. To the extent that Chinese growth is driven by such spending on unproductive investments, it is both wasteful and ultimately economically destructive.

9. A trust deficit - Berkeley Economics professor Barry Eichengreen writes at Project Syndicate about the real problem in Europe.

The deficit that prevents Europe from drawing a line under its crisis is a deficit of trust. First, there is deficient trust between national leaders and their publics. We saw this most visibly in the person of former Italian Prime Minister Silvio Berlusconi, who fortunately has been kicked to the sidelines of the political scene. But even the most stalwart European leaders have lost their followers’ trust by baldly saying one thing today and the opposite tomorrow.

Second, there is a lack of trust among European Union member states. The real reason why the northern Europeans have been unwilling to provide a “big bazooka” – that is, extend more financial assistance to Southern Europe – is that they don’t trust the beneficiaries to use it wisely. They fear, for example, that additional securities purchases by the European Central Bank, aimed at bringing down Spain’s borrowing costs, would only lead the Spanish government to relax its reform effort. As a result, Germany and its allies are prepared to provide just enough assistance to keep the ship from capsizing, but not enough to set it on an even keel.

10. Totally Jon Stewart on the #kony viral video 'sensation' on the Ugandan warlord Joseph Kony. I haven't touched this until now. Not sure what to think.

'Why won't Rihanna retweet my Kony video?"

 

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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22 Comments

What cabbages  !      Retail

What cabbages  !      Retail is in the Proverbial dont they realise ?
Pumpkin Patch, the children's clothing retailer, posted a first half loss on costs to close its US and UK stores. The shares gained as it reported growth in sales.
The Auckland-based company turned to a loss of $30 million in the six months ended Jan.31, from a profit of $8 million a year earlier. Sales rose 17 per cent to $161.1 million. The stock gained 2.3 per cent to 88 cents and has surged 28 per cent this year.
 

Key caught as he always was

Key caught as he always was going to be.
 
Tangled webs. Homing pidgies.
 
Was it TV3?  Well done them. Nothing like reminding folk of the truth.
 
 

Re #3   Everybody should read

Re #3
 
Everybody should read 'The China Study'. Heart diease and Cancer follow in the footsteps of dairy products and meat protein, as does osteoporosis. Why the Chinese would want to import the diseases of the western lifestyle diet beats me! New form of population control maybe.
One of the benefits (amongst a few) I have noticed from ceasing consuming dairy products is the almost total disappearance of body odour from perspiration. I work in forestry and sweat a bit!

What I don't get, is that

What I don't get, is that according to the following,  80% of Chinese are lactose intolerant ...
http://en.wikipedia.org/wiki/File:Laktoseintoleranz-1.svg
... so is it that less than 20% of Chinese are consuming our dairy products?
 

I have wondered that too.

I have wondered that too. Apparently there is a gene that turns off human's lactose tolerance  after weaning and it is Westerners who have the mutation that breaks the gene's function. I guess it is the result of natural selection from Northern Europeans who used a lot of milk products. 

Thats still 260 million

Thats still 260 million people, give or take

Actually, the China Study has

Actually, the China Study has been thoroughly debunked by a number of people including blogger Denise Minger (http://rawfoodsos.com/2010/07/07/the-china-study-fact-or-fallac/) so be very careful about following its advice.  Its own data contradicts its conclusions. 
Minger found that, contrary to the book's claim that meat is the big killer, it was actually wheat that correlated strongly with most of the health problems documented.

Truth is it's processed meats

Truth is it's processed meats and processed dairy products that cause health issues not unprocessed products.  The study mentioned here was on processed meat for a reason, it's the oxidised, rancid and preservative packed meat that causes problems not the natural stuff our bodies were designed for. 
Even raw milk has benefits containing enzymes that help lactose digestion and healthy bacteria all of which gets nuked when it's pasteurised and then they add emulsifiers to thicken it up once they've needlessly removed all traces of fat. 

Re 5 Maybe it would be

Re 5 Maybe it would be cheaper all round to cancel Sky Citys casino license and then use the vacant build on the cheap for a convention centre.

3. Also milk I think was

3. Also milk I think was shown to be at best dubious.......and then there is A1 and A2 milk...we do mostly A1
regards
 

#2 David Stockman is bang

#2 David Stockman is bang on!
Unless Americans grow a brain and realise they were robbed in the TRILLIONS via the bailouts then we can NEVER move on with any certainty and that applies globally.
Without accountability you will have no economic confidence from here on out. Americans should be rioting, burning Wall St and the NY FED to the ground, hanging these criminals in the street. 
"Too big too Fail" = your number one enemy and must be destroyed at all costs, here in the US and abroad

"Grow a brain"...subsidy

"Grow a brain"...subsidy first...the American farming tradition...

10 years after you retire,

10 years after you retire, who's children this current day do you expect to provide the muscle to support you?  
(In Nelson if you're still there)
 
 

Re. #7, NZers have been

Re. #7, NZers have been getting progressively worse atmanaging pasture - I believe it's more to do with multiple farm ownership, scale of operations leaving pasture management to underlings and higher surpluses allowing managers to be employed by those who used to be owner operators. Recipe farming, as a method of reducing the downside, has been employed which is around increasing  stocking rate and pluggin in the supplements. Limits risk but as ever, limits profit as well.

ITYS - I think it's a sign of

ITYS - I think it's a sign of a collective arrogance. Rather than fitting in with Mother Nature, the  general feeling seems to be that we can now manipulate her at will. Same arrogance gave us the leaky homes fiasco - rain still falls down, no matter ho highly the occupants regard themselves.
 
A little humility and a bit more biodiversity might not go aslray....

UK Treasury considers super

UK Treasury considers super long-term borrowing plan
http://www.bbc.co.uk/news/business-17361330
The government is considering issuing a new long-term bond it hopes will cut the country's interest payments for years, the BBC has learned.
At present, the UK government, like others, issues bonds - a form of IOU - which pay interest before being paid back after a fixed term.
A long-dated bond typically gives the government 30 years to repay in full.
The new plan is looking at issuing bonds with a 100-year repayment date, or even longer.
 
Wow, the UK government is considering taking out a 100 year loan.

"George Osborne is to exploit

"George Osborne is to exploit Britain's historically low borrowing rates by making plans to issue "perpetual" government bonds which will never have to be repaid.
 
In an unprecedented move in the modern era, the chancellor will unveil plans in the budget to relieve the debt burden on future generations by extending the length of bonds to 100 years or into perpetuity.
 
Britain last issued perpetual gilts in the aftermath of the first world war. These are still being paid at a rate of 3%, which makes it cheaper to carry on paying the loan than pay off the whole debt.
Note that Osborne pledged to eliminate Britain's structural deficit by 2015-16 and to ensure that government debt is falling as a proportion of GDP by 2014-15"
 
http://globaleconomicanalysis.blogspot.co.nz/
Golly gosh didn't we get a similar 'promise' from a bloke named Bill...?

http://www.bloomberg.com/news

http://www.bloomberg.com/news/2012-03-14/bernanke-says-frustratingly-slow-u-s-growth-impedes-lending.html
Bernanke running out of spin and BS...now he's down to blaming the slow US growth rate and poor bank profitability on guess what!....on the slow growth rate and poor bank profitability....go figure.
.....................................................................................................................................................
Oh lookeee here...what a surprise...the US govt has been telling massive lies.
"Making 9 Million Jobless 'Vanish': How The U.S. Government Manipulates Unemployment Statistics"
 
http://www.marketoracle.co.uk/Article33590.html

#1. Saying gold has

#1. Saying gold has outperformed Coke since 1996 makes about as much sense as saying soy beans have outperformed the All Blacks since Tuesday night.  From 1996 Coke's annual dividend has risen from 56cents a share to $1.88 (last year). This year looks like it will be $2.04. Coke remains unassailable as the biggest, most recognisable brand in the world.  A famous ad man once said if he was given a billion dollars to overtake Coke as the #1 brand he would give it back and say it can't be done. Gold's dividend has remained constant...still zero.
This one reminds me of one of Bernards loopiest observations: he once did a piece showing us how copper had outperformed housing...duhhh.   

This is the axe blow to the

This is the axe blow to the Hickey call for QE....mass inflation on the way.
"ECB president, Mario Draghi, has effectively transformed the eurozone's toxic banks into zombie banks, addicted to his supply of cheap credit to keep them alive.
Across Europe hundreds of banks open their doors every day only because of Mr Draghi's intervention. These lenders may look like banks, call themselves banks, and, to their customers, feel like banks, but they are in reality wards of the ECB, going through the motions of banking.
These banks can make little impact on the real economy, and their main purpose in life is merely to survive and maintain the status-quo. They cannot afford to make loans and be the agents of Europe's economic recovery as they remain too bloated with toxic debt and are, to all intents and purposes, insolvent.
 
This latest round of monetary base expansion pushed the balance sheet of the ECB to over 3 trillion euros, which is $3.9 trillion. This is higher than the FED's $2.8 trillion"
http://www.marketoracle.co.uk/Article33596.html
Make no argument..this article has a very clear and accurate message for fools..politicians and so called economists.
 

At the Kiwi level, because

At the Kiwi level, because for some reason the fact we are on islands seems to separate brains from reasoning...when the Nats get round to reducing their borrowing...the recession will begin to bite.
That is the consequence in NZ of feeding on cheap credit...we have seen it with households stuffing themselves with the mortgage drugs...and lately we have been living on the govt stuffing the country with debt...
No body has had the guts to scream out "enough of this farce...the borrowing will be slashed and the debts will be paid off and policies that honestly favour saving will emerge"
Instead we have had a diet of utter BS...endless humbug and blather...all wrapped up in hope that the world can go 'back to the future' on this stream of media shite about recovery growth and improved saving.