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Monday's Top 10 with NZ Mint; QE direct; a gold audit; 'worse than it sounds'; Argentina pays up; trains =1, affordability=0; freakonomics; Dilbert

Monday's Top 10 with NZ Mint; QE direct; a gold audit; 'worse than it sounds'; Argentina pays up; trains =1, affordability=0; freakonomics; Dilbert

Here's my Top 10 links from around the Internet at 10:00 am today in association with NZ Mint.

Bernard will be back with his version tomorrow.

As always, we welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.

See all previous Top 10s here.

 

1. The US audits its gold holdings
Ron Paul has had a 'win'. His haranguing has gotten the US authorities to do a detailed audit of the gold held in the New York Fed. Apparently there are 34,000 gold bars stored there that are owned by the US Federal Government.

But it surprised me to learn that this vault stores another half million bars. Who owns them? And how much is at Fort Knox in Kentucky?

The answer is that the NY Fed holds about 7,000 tonnes and Fort Knox holds about 4,500 tonnes.

The audit, which began in January, took place 80 feet below the Fed's limestone and sandstone Italian Renaissance building in Manhattan's financial district. Visitors to the vault make their way through a steel and concrete entrance where a 90-ton door rotates open.

Inside, a massive scale is ringed by 122 blue cages that hold about 530,000 gold bars — 34,021 of which belong to Uncle Sam. The auditing team counted the U.S. stash, selecting more than 350 bars from which to extract samples for assaying.

The process involved about half a dozen employees of the Mint, the Treasury inspector general's office and the New York Fed. It was monitored by employees of the Government Accountability Office, Congress' investigative arm.

The bars were first weighed on a small electronic scale, then transferred to a table mounted with a long, thin drill used to burrow into the gold, said a person familiar with the operation who was not authorized to speak publicly.

2. The next big oil production frontier?
The Russians are going all-out to exploit their oil reserves in the Arctic. The Moscow Times reports:

Prime Minister Dmitry Medvedev on Thursday appointed his deputy, Arkady Dvorkovich, to oversee the creation of tax and customs incentives for oil companies developing hydrocarbon reserves in the Arctic, in a measure aimed at increasing economic feasibility and attracting more private investors to resource potentially rich maritime territories.

3. New Japanese eco house cuts electricity consumption by 88%
Annual electricity costs at an experimental housing unit were cut by almost 90% by using solar panels, a storage battery and a fuel cell, Osaka Gas Co. and Sekisui House Ltd. have reported. More from The Japan Times.

From July 2011 to June 2012, the three-member household reduced its power costs to 584 kwh, from 4,830 kwh during the prior 12 months after their house was refitted with the panels, the firms said Thursday. Osaka Gas and Sekisui House aim to begin marketing the "eco-house" system by 2015, after lowering the equipment costs, particularly for the storage batteries, which cost around ¥10 million (NZ$150,000)

4. 'It's worse than it sounds'
The slow-motion collapse of the government status quo across the Western world is obvious, but the reality is the opposite of what Twain said about Wagner's music - it's worse than it sounds for many big American states. That's the message of a recent report from Richard Ravitch and Paul Volcker reported in the WSJ that deserves far more attention than it has received.

The other novel Ravitch-Volcker observation is that no one knows for sure how deep these problems run, because the states are running bookkeeping cons that disguise the fiscal realities. The task force uncovered "chronic dependence" on gambits like assets sales, "temporary" raids on rainy-day funds, and shifting current spending to future years "as an ongoing budget strategy."

California, Illinois, New Jersey and New York are even securitizing their future tax revenue—that is, not merely borrowing with bonds that must be serviced but selling their projected tax collections to investors. So to "balance" their budgets today, they're making it far harder to correct them in the future and locking in higher tax rates. Even Greece doesn't do that.

The message of the Ravitch-Volcker report is that some large portion of the states are replicating the dysfunctions of Washington—adding to entitlements that crowd out priorities like schools and bridges, and then concealing the real danger when they're not ignoring it. State and local governments now spend $2.5 trillion, and rising. Without 49 more Scott Walkers, the fiscal mayhem has only begun.

5. Sovereign defaulters pay up eventually
Even sovereign bond defaulters pay up in the end to salvage their reputation. Argentina is 'celebrating' the payoff of some bond promises that were made in desperation back a decade ago. Then, that nation’s economic disaster left thousands with a grim choice after their government seized dollar-denominated deposits to stop bank runs in 2002. They could switch to devalued pesos and regain access to what was left of their savings, or accept a piece of paper promising to repay the money in dollars over the next 10 years. Those few that believed the government promise and took the second option have gotten their money back plus a modest return. The Globe and Mail has more:

Few had any faith in the government’s promises back then. Argentina had just defaulted on more than US$100-billion in foreign debt, banks were shuttered, the economy was in ruins and streets were filled with pot-banging protesters whose chants of “throw them all out” would send five presidents packing.

But Argentina has mostly paid up after all, making good on 92.4 per cent of that defaulted debt so far, including US$19.6-billion in U.S. currency over the years to cancel the Boden 2012 bond. Most of the hard-luck investors later sold the bonds at a loss, but as the government makes its last $2.3-billion payment on Friday, the few stalwarts who kept the faith have been made whole, while earning a modest 28 per cent profit over the years.

 

6. Indian reincarnation
This last weekend, the ship once known as the Exxon Valdez came to its final resting place on an oil-stained beach in Alang, India, where it’ll be recycled in the world’s largest and most notorious shipbreaking yard. Environmentalists inside and outside of India are outraged.

The ship - now renamed (I am not making this up) the Oriental Nicety - like almost all ships scrapped in India, is filled with hazardous substances. Under Indian law and international treaties to which India is party, that should render it illegal to import. And yet, not only is it being imported, it’s one of hundreds of ships that are brought into Alang every year for recycling. More from Adan Minter at Bloomberg:

The environmental community likes to avoid the term “recycling” when it talks about places like Alang. But that doesn’t mean there aren’t very strong green arguments in favor of them. Of these, the most compelling has to do with energy savings. On average, the manufacture of recycled steel requires 74 percent less energy than the manufacture of new steel from virgin ores dug from mines. Because re-rolled steel doesn’t need to be remelted in a furnace, the energy savings are even more significant (though no figures or studies support that suggestion). For India, such savings means that an already overtaxed power grid can be devoted to providing electricity to poor people rather than steel mills, and valuable open space can be conserved rather than dug up for new iron-ore mines.

7. The tunnel vision problem
While Auckland's mayor Len Brown has 'tunnel vision' for his billion dollar rail plans, he is ignoring the housing affordability crisis that is particular to Auckland. The strangling of new supply is having a devastating effect on those at the margins. While Len ignores, at least Housing NZ is trying some stuff and it seems ironic that Wellington has to patch up his blind spot. The only thing that will fix it is building new houses faster than the growing demand. Even more irony is the Left whining about a Housing NZ project in Glenn Innes. Can they count?

But housing Kaitaia's homeless is coming at a serious cost in Glen Innes, where Housing NZ is removing or renovating 156 houses to make way for 78 new or renovated state units, 39 homes for community providers and about 140 privately owned homes.

Come again? I make that "removing or renovating 156 houses" for a gain of 257 357 units, plus those in Northland. Seems like doing something positive about the issue to me. Sure there is some disruption, but it's a crisis for heaven's sake. We just need more houses. Time to Len to divert 'his' billions into someplace meaningful. Forget the train set for now.

8. It's pouring
Second quarter ready-mix concrete data is now out and shows a sharp rise in production, somewhat more than expected. These rises were across the nation with every region except Gisborne and, interestingly metro Auckland, recording increases above the same quarter a year earlier. The biggest rises have been in Christchurch.

9. Free money - QE for the people
The US Fed seems to have come to the conclusion that more QE is a waste of time. The markets and most commentators think more money printing is coming (but I win a coffee if there is none before the US presidential elections!). I think the Fed is right - QE hasn't worked as expected because there has been way insufficient trickle-down. So the private chatter is searching for a new approach, and one alternative is ... more but different QE !?! Anatole Kaletsky at Reuters has the thinking:

One such radical measure is too controversial for any policymaker to mention publicly, although some have discussed it in private: Instead of giving newly created money to bond traders, central banks could distribute it directly to the public. Technically such cash handouts could be described as tax rebates or citizens’ dividends, and they would contribute to government deficits in national accounting. But these accounting deficits would not increase national debt burdens, since they would be financed by issuing new money, at zero cost to government or to future generations, instead of selling interest-bearing government bonds.

Giving away free money may sound too good to be true or wildly irresponsible, but it is exactly what the Fed and the BoE have been doing for bond traders and bankers since 2009. Directing QE to the general public would not only be much fairer but also more effective.

10. Being a street-corner crack dealer isn’t lucrative
Steven Levitt: The freakonomics of McDonalds vs. drugs

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26 Comments

#7 We did it to ourselves.

On the brighter side, by electing Len Brown we got a less devious mayor than otherwise might have been. Is that a positive?

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#8.  Concrete stats.  What a great measure of whats happening.  Much better than the dense 'financial' numbers we get, that are effectively meaningless.  Who's got a list of these.  With links.  eg.  Housing starts.

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# 7 It seems strange that South Aucklanders (the ballot ballast for Len Brown) is quiet for so long, them being the ones most affected by the rising house and rental prices. After a quick and short Demo in Q St, (with LenBrown attending) the pressure from the Islanders seem to have dissipated and Len is again playing with his train set.

Perhaps they (both Len and Phil) thinks this is just a temporary situation as Chch desperates flood into Auckland to buy up whatever they could to live in after their fiasco in Chch ??

 

With the world imploding every so slowly this price push in Auckland seem difficult to sustain in the long term .

 

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#10.....wow....4 years 25% of dieing...v being on death row, 2%....

Why did they do it? no other options....no other way to escape....

regards

 

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David #7, last time I checked 39+78+140=257.  Still more than 156 though!

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You are right! I can't count either.

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The chart for Readymix is encouraging, must mean commercial and industrial construction is recovering.

Do you have the MDF & Sellotape figures?  Be interesting to see if residential is echoing the same growth.

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David,

The only thing that will fix it is building new houses faster than the growing demand.

 

Never thought of stemming demand?  That might fix it.

As a hypothetical, choke off immigration for 5 years and see what happens.

 

But that will never happen. Growth lobby (National & Labour alike) won't have a bar of that.  And I'm guessing you are firmly in the growth lobby as well if you haven't thought of stemming demand as a possible way of taking the pressure off.

 

If the inflows of immigrant population equalled the outflows then that would be an interesting scenaio. 

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Not even that, if its many chinese simply buying from abroad as an offshore store of wealth, just stop that being allowed....

So is this demand truly for occupation or just to hide $s?

What worries me is, if this is an offshore  phenomenon what happens when they cash up? then we could have lots of [empty] houses and a crashing market.....

Sadly while I like minimal regulation, I wonder that the only way is selective...the dogma isnt in saying none and isnt in saying everything, its an intelligent application in the grey areas inbetween.

regards

 

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David Chaston: says:  The ONLY thing that will fix it is building new houses faster than the growing demand.

Now that is a really profound statement. How did you arrive at that conclusion?

 

Have you sensitivty tested that?

Have you checked the rental vacancy rates?

 

A simple sensitivity check is to ring the local power company and ask them how many domestic residential power meter connections had a zero consumption over the past 3 months.

 

Another record of un-occupied residential properties is the local water boards with customers with zero water consumption

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Yes, if the market don'twork the way we want, just stop the market from working !!! 

 

How great is that ??? The ECB has been doing that for the past three years...it's working great !!!  So are the Feds in USA.... 

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http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=108…

FedEx's US-Auckland flight to speed up trade

more on the hollowing out of the NZ economy

 

 

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And the FedEx plane goes on to Sydney and Australia.  And presumably on around to the US.

What wrong with us selling to those places and delivering via that plane.  The plane flies out as well as in. 

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#1 Not really a 'win'. The audit only covers the gold content, it does not cover ownership impairment - gold leasing or gold swaps or over subscription issues. We know from the last partial audit of the FED it is involved in gold swaps, dispite Ben's denial to the contrary.... so the audit will not even touch on where is the gold that is behind these swaps/leases.... ah.... the art of misdirection...

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I know what you mean, but isn't the point of gold having possession? 

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Yes it is scarfie.

The problem is there is more paper gold sold than actual gold available to be delivered, that's at the centre of the whole fraud. I doubt that central bank gold doesn't have the purity it's supposed to, at least not at the FED - which is what the whole meaningless audit will prove of course. 

The problem is it's the governments and central banks supporting this fraud... as traditionally cheap gold means cheap oil, which the western economies need full supply cheap oil to grow their economies, but Asia taking physical delivery has stuffed up the paper market, now the multi-trillion $ p.a. gold market is falling under strain and has the potential to take down the whole international system with it. That's why it will probably be played out to the very very end (ie gold will not move up, the exchanges will shut and the following day gold will be revalued mutiple times higher - that's the only way to solve the GFC).

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#7 It's all about perverse incentives in Christchurch and Auckland. 

 

Basically local government is about owning and maintaining stuff for centuries. Not only that but substantial change happens veeeeeeeeeeeery slowly. A one-term councillor in most councils would be lucky to have voted for any genuine new thing. Sure they will have approved some capital upgrades and a lot of repairs and maybe helped knock a thousand dollars out of a $100m line item. But contributed to something you would look back on thirty years and say "I did something great"- no chance. So a more appropriate election cycle would be about twenty years not the current three. 

 

But three it is and Bob and Len know they have a few short years to do something 'historic' - housing the homeless in Christchurch and Auckland does not meet the criteria. So why not some uneconomic but highly  visible projects especially since you can dump the costs compulsorily on ratepayers.

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Yes David C.....The Glenn Innes story on the ground is a little different to the way your painting it.....I made comment on this as far back as early last year when  a number of  State house sites were earmarked for  private sale and development while others were restructured on existing sites to become more tennament like complexes.

 Perhaps nothing wrong in that itself ,given that those sites closer to the top of Line Rd would fetch a pretty penny to make funding of the sites on the lower escarpment near G.I. financially neutralish.

Have you ever taken a drive down a Street called Mayberry place in G.I...?...you should.

When you crowd a demographic of people of this socioeconomic strata ( the vast bulk on welfare) into small areas you get the problems associated with it.

While it may be easier to police in a contained area, policing in no way encourages (again the vast majority ) to rise above their circumstances........the view of the world held in Mayberry Place....is truly one to behold....

P.S. if you care to take the drive.....not after sunset...eh.

So the essence of what I'm saying is housing these people ( in a more cost effective condensed manner) and saying you have somehow improved their lot......is just incorrect.

i don't really know what the whinging left are on about, but I do know throwing tennament housing and money(welfare) isnt working.....to get them working.

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There is a similar situation with high density housing in Northcote. I do know the local Constabulary refer to it as "the reservation".

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yes, maybury st has its problems - but it's not as bad as all that. the people in gi are really friendly and i haven't seen any stats that show it's more dangerous that anywhere else in akl.

perception is really important and the streetscapes could be improved a lot. the whole area doesn't have many squeaky wheels, so basic infrastructure leaves a lot to be desired after decades of neglect.

here's another experiment - walk down boundary reserve west (access off pilkington rd), cross over tripoli rd and walk down boundary reserve east to the water front, but bring your gumboots. try to spot a park bench, toilet block, playground, path, flowers, anything that resembles a normal park. then try the same thing north of west tamaki rd in any park you care to find. what's the difference? why are parks south of the great divide in such a poor state of repair?

if you're interested in local gi/tamaki transformation issues then check out this blog:

http://transformingtamaki.blogspot.co.nz

 

 

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tamaki blog...I would agree with your comment on the freindly nature of people in G.I..... and forgive my spelling of Maybury.

 Not sure if your aware thare has been a programme to move all drunks vagrants loiterers of all walks along and away from the shopping areas, and so they are likely to  be congregating further toward Triopli rd.

 I have a bit to do with volunteer assistance for peope in the area in a more kind of hands on way in Maybury and other locations , and I can assure you the outlook for most there is miserable, with alchohol playing a large roll in social problems  and theft between neighbours is high indeed.

As to why the parks south of the boundary are in poor repair , it demonstrates an attitude that is reflected upward to council from parks authorities of a why bother or don't bother too much for fear of vandalisation , miscreant congregation and the like.

The point I make here is ,there ...is.....a hearding mentality....being demonstrated by Local government authorities to contain and supervise with availabe rescources in what is percieved as a cost efficient programme.

That may be financially prudent, but does not begin to address the questions socially, in regard to self worth of a not too inconsideable section of the community. 

I stand by what I had to say about Maybury place, and a chat with the local constabulary (off the record) would back that up.

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#8 At times it is at full capacity in canterbury, some conceret jobs are booking up all capacity in Canterbury for 24-36 hours just for one commercial assignment.

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Leemee get this straight : I can lower my household electricity costs by 88 % if I spend $ 150 000 first up , for solar panels , batteries & the like ?

 

..... and Bernard reckons that the Japanese are bankrupt ! ....... bloody silly maybe , but clearly not bankrupt  .....

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The first thing to consider is, are you prepared to accept a lifstyle change as went enter the post peak oil era or not.  If you are not then the costs above are what you will pay for your huge energy use in the future, if you are rich.  If on the other hand you are happy to change your lifestyle or ar enot rich then your option is limited to use far less and swap your accomodation to say something like earthship.com. 

So thats the choice you have GBH....very libertarian....

regards

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What " peak oil " ? ....... who spun you that pile of malarky .......... the world is full to the brim with hydrocarbons .......

 

..... you'd do better to spend the $ 150 000 on two rentals ( take out a mortgage , of course ) , than waste it on some damn fool electricity saving devices .......

 

Buy a house or two near an oil field , or a gas refinery ...... there's no shortage , you'll soon get the drift ......

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A 5kW off grid solar power supply is more like $40K.  What they describe above sounds like a much smaller grid tied system - 2kW? - which is more like $15k-$20k so I suspect the quoted figures are out by a factor of 10?  They probably they meant 1 million yen or they got ripped off really badly.

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