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Monday's Top 10 with NZ Mint; The coming violent phase; Iran oil not needed; Benjamin Lawsky; Germans head to Singapore; 2 directional threat; competitiveness is Job 1; Dilbert

Posted in Opinion

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. History as science
Will we get a sudden surge in violence peaking about 2020?

Laura Spinney has been reviewing the work of someone who thinks so.

Advocates of 'cliodynamics' say that they can use scientific methods to illuminate the past. After all, we have brought analytical technique to industry, rocket science, and the financial industry - why not history? But historians are not so sure. They like the way they have always analysed things - and telling others what is 'important'.

To Peter Turchin, who studies population dynamics at the University of Connecticut, the appearance of three peaks of political instability at roughly 50-year intervals is not a coincidence. For the past 15 years, Turchin has been taking the mathematical techniques that once allowed him to track predator–prey cycles in forest ecosystems, and applying them to human history. He has analysed historical records on economic activity, demographic trends and outbursts of violence in the United States, and has come to the conclusion that a new wave of internal strife is already on its way. The peak should occur in about 2020, he says, and will probably be at least as high as the one in around 1970. “I hope it won't be as bad as 1870,” he adds.

2. Entertaining spectacle, economic disaster
Greece had the Olympics in 2004 and look what happened to them. Joshua Mills at the NY Times reviews the completely dodgy logic that is used to lure sports events and the resulting infrastructure. (Been to an event in Auckland's Queens Wharf 'Cloud' recently?)

Playing host to the Olympics rarely turns out to be an economic benefit for a country or city, and sports economists have convincingly documented how silly the expectations sometimes are, as Nick Watanabe of the University of Missouri did with regard to the London Games (“Yeah, so if we don’t include costs, there is a profit”).

The 2004 Olympic beach volleyball stadium in Athens, seven years after the Games.

3. Does the world need Iran's oil? Apparently not
Iraq has overtaken Iran as the second-largest Opec oil producer for the first time since the late 1980s, a symbolic shift that signals the huge impact of western sanctions on Tehran and the steady recovery of Baghdad’s energy industry. How will Iran respond, especially given it is under pressure in Syria?

It’s been about a month since the full extent of the West’s oil sanctions against Iran went into effect. And so far, they seem to be working better than expected. Iran’s oil exports have fallen by about 1.4 million barrels per day, which “substantially exceeds” an earlier estimate of 900,000 barrels, according to an Aug. 9 report by Goldman Sachs energy analyst David Greely.

That’s a 50 percent cut in Iran’s crude exports in the past year, quite a bit steeper than the gradual “20 to 30 percent” decline predicted in June by Iran’s government, which gets about 80 percent of its revenue from oil. At $100 a barrel, that’s roughly $100 million a day in revenue that is no longer flowing into Iran’s coffers. And inflation is starting to take hold - the price of chicken has tripled since last year.

4. Crime of the century V
The New York State Department of Financial Services superintendent, Benjamin Lawsky is following the form of some big crusading NY officials; Eliot Spitzer and Rudy Guiliani both of whom made careers out of bringing crooks and crims to heel, including those in the financial industry. Jonathan Weil at Bloomberg wonders if he can handle the pressure - from all sides. Go Ben.

If what Lawsky alleges is true, Standard Chartered deserves to lose its state license. If that meant the bank couldn’t process dollar payments for clients that have operations in New York, so be it. Just because a bank has $624 billion of assets shouldn’t make it immune from the law.

Since 2009, the Justice Department has entered deferred-prosecution agreements with six banks, including Barclays and Credit Suisse Group AG, over transactions with Iran and other banned nations in violation of U.S. sanctions. Most violations involved stripping information from wire-transfer documentation to hide the role of a prohibited person or country. Lawsky’s order against Standard Chartered shouldn’t jeopardize other agencies’ investigations. If anything, it should make Standard Chartered more eager to settle with them.

Federal regulators and prosecutors are the ones who created the power vacuum here, by going so soft on the banking industry for so long. Lawsky is filling it in, and evoking memories of how Eliot Spitzer challenged the securities industry a decade ago when he was New York attorney general. We’re about to find out whether Lawsky has the chops or the stomach for the role.

Apparently, Standard Chartered "helped build the damning case against itself" according to Reuters.

5. Swiss help German 'loophole opportunists' escape to Singapore
The German state of North Rhine-Westphalia has made headlines by buying data on Swiss bank accounts in a crackdown on German tax evaders. But now they have found evidence that Swiss bank UBS may have helped Germans shift their assets to Singapore before a tax treaty between Germany and Switzerland goes into effect next year. Spiegel Online has the story.

The idea was to go after wealthy Germans who had stashed money in Switzerland to avoid paying taxes back home. But now German tax authorities' hunt for tax evaders could turn into a headache for Swiss banking giant UBS.

German investigators who recently purchased data on UBS bank clients have come into possession of documents that show how Swiss banks allegedly help clients transfer their assets to Southeast Asia to evade taxes, according to the Friday edition of the Financial Times Deutschland. "For the first time, we have a paper trail to Singapore," a source close to the North Rhine-Westphalian state Finance Ministry told the newspaper. North Rhine-Westphalia, Germany's most populous state, has led the way in buying Swiss bank customer data in a bid to catch German tax cheats.

6. A two directional threat to the financial system
This thoughtful post at Australia's MacroBuiness.com.au highlights the vastly different ways the world's 'capitalist' systems respond to the international banking players. Who is gaming who? See #5 above. Is Singapore gaming Europe? The life of a regulator is getting very tough.

The locus of power has long been the point where banking and politics intersect. But the way they interplay is very different in different parts of the world. The capital markets may be global, but the banking systems on which that activity rests remain national. The tension between the global and the national is making the current situation intractably complex.

7. 300 kms on a single charge
A small battery company backed by General Motors is working on breakthrough technology that could power an electric car more than 300km on a single charge in the next two-to-four years, GM's CEO says. The Daily Telegraph has more:

Speaking at an employee meeting, CEO Dan Akerson said the company, Newark, California-based Envia Systems, has made a huge breakthrough in the amount of energy a lithium-ion battery can hold.

GM is sure that the battery will be able to take a car 100 miles (160km) within a couple of years, he said. It could be double that with some luck, he said.

"I think we've got better than a 50-50 chance," Mr Akerson said, "to develop a car that will go to 200 miles (320km) on a charge," he said. "That would be a game changer."

 

8. 'Job 1 is fixing competitiveness'
Printing money would lock in an uncompetitive economy and remove any imperative for politicians to take hard-but-necessary decisions. A central banker talking sense. The European Central Bank should not buy Spanish and Italian debt because it "makes no sense" and will take away the pressure on politicians to act, Belgium's central bank governor has said.

Luc Coene told Belgian newspapers De Tijd and L’Echo that buying the bonds of these countries would only serve to weaken the ECB and do nothing to resolve underlying issues of competitiveness.

“It makes no sense for the ECB to start financing those countries,” said Mr Coene, “It would only lead to the ECB taking on the whole public debt of Spain and Italy onto its balance sheet," he said.

"That would in turn weaken the ECB and do nothing to resolve the underlying problems."

Rolling back the last decade's debt splurge will involve the pain of adjustment. How come people believe this can happen without a cost? The most people seem to accept is that 'someone else' must pay - or the latest fad, printing money where there is apparently no cost and no pain for the mistakes that have been made and the debt that has been accumulated. Sounds like a snake-oil solution to me.

9. 'The cult of equity is dying'
Bill Gross, the PIMCO supremo and someone always worth reading, and he warns we should prepare for inflation because it will become the policymakers' preferred way out of our mess.

This long-term history of inflation adjusted returns from stocks shows a persistent but recently fading 6.6% real return (known as the Siegel constant) since 1912 that Generations X and Y perhaps should study more closely. Had they been alive in 1912 and lived to the ripe old age of 100, they would have turned what on the graph appears to be a $1 investment into more than $500 (inflation adjusted) over the interim. No wonder today’s Boomers became Siegel disciples. Letting money do the hard work instead of working hard for the money was an historical inevitability it seemed.

Yet the 6.6% real return belied a commonsensical flaw much like that of a chain letter or yes – a Ponzi scheme. If wealth or real GDP was only being created at an annual rate of 3.5% over the same period of time, then somehow stockholders must be skimming 3% off the top each and every year. If an economy’s GDP could only provide 3.5% more goods and services per year, then how could one segment (stockholders) so consistently profit at the expense of the others (lenders, laborers and government)?

Unfair though it may be, an investor should continue to expect an attempted inflationary solution in almost all developed economies over the next few years and even decades. Financial repression, QEs of all sorts and sizes, and even negative nominal interest rates now experienced in Switzerland and five other Euroland countries may dominate the timescape.

The cult of equity may be dying, but the cult of inflation may only have just begun.

10. 260,000 un- or under-employed workers won't take 5,000 rural jobs
Waikato University reckons importing cheap labour from the islands is a winner-for-all. You agree? According to the June HLFS there are 156,400 unemployed people in New Zealand (that's 'actual' not s.a.) plus another 109,500 who were employed but wanted more work. And yet, farmers can't fill the jobs they have and need to go to Tonga to find workers.

A new government program designed to bring seasonal workers from the Pacific Islands to work in horticulture and viticulture for up to seven months per year is proving a win-win initiative for both New Zealand and the Pacific source countries.

With funding from the World Bank and the Department of Labour, Professor John Gibson, Halahingano Rohorua and the World Bank’s David McKenzie are researching the impact of the Recognised Seasonal Employer (RSE) Program, and their initial findings show that the scheme is succeeding in targeting poorer, less well-educated migrants from Tonga.

The RSE draws 5,000 temporary migrants a year from 11 eligible Pacific Forum member countries. Based on the results of household surveys in both Tonga and Vanuatu, the researchers found that males with lower levels of education are more likely to apply for RSE than those with more education. In Tonga, they found RSE migrants were also more likely to be less well-off.

There’s strong international interest in temporary migration programs like the RSE as a way to relieve labour shortages in developed countries and aid development in poorer countries where population growth often greatly exceeds formal employment growth. Such schemes allow workers to send remittances home and gain new skills without the source country losing the worker permanently and the host country facing long-term assimilation costs.

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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27 Comments

Re3 - "Oh, and then there’s

Re3 - "Oh, and then there’s the whole issue of a slowing global economy. On Friday the International Energy Agency cut way back on its forecast for global oil demand for 2013. ”
 
says it all.
 
re9 - spot on. A ponzi it always was.

Re #2 Add to the Cloud, the

Re #2
Add to the Cloud, the Viaduct Events Centre, Sitting there empty too. Surely just one of these would have sufficed?

PDK, I have always been

PDK, I have always been meaning to ask you, how would you organise things to get us out of the mess we are in and to prevent or alleviate the bigger mess that is likely to occur?

Good question.   Fiscally,

Good question.
 
Fiscally, abolish fiat lending. It requires growth, and the planet can't deliver. Best we adapt intelligently, than batter ourselves attempting what is clearly impossible. (Hamster 1, Bart nil).
 
If borrowing is needed, it should be flat-fee at best.
 
We probably need to inflate the current buying-expectation away, given that there isn't enough planet to underwrite it. Steve Keen is mostly right there.
 
We're globally overpopulated (7/2 over) so a crash-course of non-catholic style is needed. NZ is OK population-wise, but the likes of Clare Curran don't understand this, nor HugheyP..
 
Then it's a matter of getting on a sustainable footing. Meaning food systems, transport systems, infrastructure, have to be weaned off oil. They can't totally, so we're looking at rationing energy- sorry, free-marketeers, but that's what happens on a finite planet. Bleating about nanny states won't change the amount of water in an aquifer, or oil in a field.
 
Intergenerationally, we need to understand that the oldies currently - even those who think they're doing it hard - had it incredible easy, relatively. A temporary availability of energy was the only reason life got as good as it did. (Those who deny, try not switching anything on, and not filling your tank - see how life goes).
 
The youngies have to be given every chance - they're being handed a bad hand. One of my next articles (2 months out) will look at ways to give them a foot in the door. Rather than trying to make them 'little bricks in the wall' (the current Govt push in education) we need to be giving them useful skills. Hammers, spades, sort of thing.
 
Given that the 'stuff' won't be there to underwrite 'income', a lot of what has to be done, socially, may have to be done voluntarily. Or perhaps, you put in x hours of work unpaid, rather than be taxed. Some of that would be the public servants too, so a lessening of the tax on others. No point in removing Govt - what has to be done has to be done, best it is done ex-profit-margin.
 
 

I think a lot of borrowing is

I think a lot of borrowing is only done as gambling/speculation/gratification. So I suspect that the next decade or 2 of depression and deflation will burn into the phsyce not to borrow. I know my grandparents constantly warned me on it....it even effected my parents who were born during the GD.
"weaned" time is very short now me thinks....too short....what worries me is that NZ with its low population density will be seen by the super-rich as a great place to come and lord over the natives, welcomed with open arms by the Govn (whether National or Labour),  parasites can and do kill hosts.
Rationing, yes....and its either via coupons or via price, and price I agree wont work,
"what has to be done, socially, may have to be done voluntarily"
best it is done ex-profit-margin
yes, bye bye tribeless et al.
Let me know the URL of that piece....I have kids too....
 
regards
 
 

"bricks in walls" is

"bricks in walls" is toast...it assumes an ever increasing complexity allowing specialisation which uses more energy.
Interesting thing is the upper layers of society / Pollies say we need more engineers etc yet make sure their children do not so these poorly paid careers....they go into law etc...
So while I agree with you on trades and real skills I also think we need thinkers.......its easy to follow a plan, making the plan is the hard part, realising you even need one harder and rarer still.
regards
 
 

Mmmm.  While i am not

Mmmm.  While i am not rubbishing your idea of abolishing fiat lending both a gold reserve currency and a fiat currency managed to produce world wide economic messes eg 1870s, 1930s and 2000s  Would Keynes' idea of the Bancor help to stop that?  Self sufficiency and sustainability I do like that.   I think that the collapse of the world wide economic system with its reliance on the sale of debt and then the on sale of that debt is inevitable. Hoefully that will mean a return to self sufficiency and sustainability but surely that will mean more Government intervention.  I am not adverse to that because I would not like an economic structure that relies soley on the kindness of others.  But while saying that here in Christchurch there has been much kindness and generosity shown to others so perhaps the goodness in mankind might prevail.  But somehow I doubt it.

But was it that it was the

But was it that it was the fault of a gold standard or fiat or that these were corrupted by Pollies/us for short term gain?
Look at how many hundreds of years the gold standard worked for, yet of course even the Roman empire clipped coins.  Really I think fiat probably can work fine as long as its not abused......I suppose the challenge is to produce a system that is fool and Pollie proof.
For me what seems clear is that diminishing returns sets in for any system at some point....then to keep the margins up corners are cut....
regards
 

The problem is not the

The problem is not the currency, it is people. People will pervert any currency standard, really the method only prescribes the time span. It seems there is only a short time span from when a money supply isintroduced to then corrupted from being a means of exchange, to people making unearned income from that money. This unearned income enables people to be non productive and the natural cycle is for the number participating in this scheme to grow intil the cycle can not be supported and collapses. That is where we are now, on the verge of collapse. Going to be some hungry people going forward.

Scarfie: well put. There have

Scarfie: well put. There have been money-lenders chucked out of temples before today.....
 
Patricia - there have been studies of altruism, and the nedd for it in a functioning society. I seem to remember Haldane was one of a chain in the research, can't remember the book.
 
Maybe it's 'The Altruism Equation'.
 
Individial enterprise came first, altrusim, cooperation and Government were subsequent. There are a few around here seem not to have studied history.
 
:)
 
 

Aymen, ahmen, amen. Only the

Aymen, ahmen, amen. Only the timing is in doubt; no politician wants the responsibility upon his/her head.

Two weeks ago I heard an

Two weeks ago I heard an American oil "expert" say on Radio Australia that within 20 years the USA will be both self sufficient in oil/gas AND be the worlds biggest oil/gas exporter. He also predicted that price of oil will collapse given the massive shale and coal seam discoveries. It's going to be fun to see them Saudi's learning to ride camels again.
Ergophobia
 
 

The fact it was make believe

The fact it was make believe will leave you disapointed.
There are lots of goodd sites that explain peak oil, eroei and why hvys and shales wont work....not in scale or at a cost we can afford.
Saudi's have enough oil for their own use stretching out 100+ years, unlike the rest of us but cars are not made in saudi so you right in that sense they wont be using that much oil/petrol.....
 
regards

Just to throw some

Just to throw some perspective using simple numbers....by all measn correct any mistakes as Ive done this very fast.
The world ideally wants to grow at 4% per annum, that takes 2.5% more energy...
So today say the USA produces 8mbpd, in 20 years that is 12.7mbpd...except of course that ignores domestic use increases which will easily swallow that up, but anyway......
The world mean time has gone frrom 86mbpd today to wanting 137mbpd in 20 years time.
137 mpbd - 86 = 52 mbpd more...(rroughly)
To meet that the USA would have to be outputting 12.7+51.7 Mbpd = 64mbpd
Or for the next 20 years the USA oil output would have to increase at 12.5% per annum....
fat chance.
Then lets takes the ddecline rate of the existing oil fields, 4% seems pretty reasonable.
So 86 million produced today will with 4% decrease per annum be 41mbpd in 20 years.
but it gets worse....
Internal use is growing, so saudi is eating its own output....
Lets say 5% per annum...
We will be lucky to see 38mpbd on the open market in 2032.
So that means the USA alone has to be NET exporting 100mbpd....for business as usual...
pigs might fly.
Then throw in the problem of oil being an in-elastic commodity, ie it takes a huge price increase to drop consumption a small amount.....
That alone spells a huge depression.....
So the Q is really is BE and JK that incompetant? in which case they are not fit to govern.
The only thing I can say is labour are no better.
regards
 
 

The bottom line is that

The bottom line is that Maugeri has made some very optimistic assumptions about global average decline rates, failed to provide adequate justification for them and misrepresented the estimates made by others. Adopting more realistic estimates would significantly change his results.

"However, I do think it is entirely reasonable for us to expect him to use basic skepticism in his work. First and foremost, who funded this study? BP. Who funds the Harvard Belfer Center on Energy? Dubai Energy Iniative."

http://www.theoildrum.com/node/9327

 

Then there is the real

Then there is the real problem factor -- if we use more than around 20% of currently known reserves of oil, gas and coal we will have emiited enough carbon to ensure a global temperature rise of over 2 degrees.  That would be disatrous.  Why are we looking for more? The priority has to be shifting to low carbon energy.  It will cost.

#5 Not for nothing was Andy

#5 Not for nothing was Andy Xie sacked for saying what everybody knows "Singapore Financial service sector survive because it is a centre for illegal money for the region" It seems now it has graduated to "for the World" too.
 
#9 The Elite write the rules for this world...financial and political. Who are the "investors" as opposed to "workers" ? The Elite of course. Any wonder their share of spoils is always higher than natural ???  Why are the Central Bankers of the world hell bent on increasing inflation to solve the problems they had created the past decades ??
 
#10 Please check key words "Poor Tongan" and "less educated" vs "Unemployment benefits in NZ" to find your answer.... 

Re #4 I cannot understand why

Re #4
I cannot understand why the US govt does not remove Standards US banking liscence permanently and completely.  Anything less and they are putting a price on their acceptance of state sponsered terrorisim against the USA.  They should do the the same for HSBC which not only laundered funds for terrorists but also crooks (drugs presumably), if I understand things correctly.  There can be no other reaction to this attack on any nations security or law and order.  Having done this I would warn all other banks and go through them with a fine tooth comb and treat them similarly.

You have to think the issue

You have to think the issue through completely. With regard to Standard and Chartered, the money originated in Iran and travelled through (some? several?) banks, landed in the London office, then on to NY where it simply did a U-Turn. If the US cancels Standard and Chartered's licence, then UK should also. And who else? The laundry wasn't in NY.  Where would you stop.

Banks are always comming up

Banks are always comming up with smoke and mirror excuses like this.  The time is long past to stop putting up with the bullshit, lop off a few heads and pull the scumbags into line.

All banks are up to some type

All banks are up to some type of laundering, some don't get busted for obvious reasons.
 
Obama needs to demomstrate to the electorate he is bashing banks, just not those financially supporting his presidential campaign.

No 10 as rewritten by Steve

No 10 as rewritten by Steve Keen (just kidding)
Banks lending to NZ Farmers require more and more of NZ Farm income to be paid to them as Interest payments requiring NZ farmers to under invest in plant and equipment and to look for cheaper and cheaper labour so that more and more of the farm income can be paid out as interest payments via bidding up of land prices.
Farmers who are prepared to pay out the largest amount of the farms potential income through poor land management, cheap labour and lower inputs of machinery and equipment gain title to the land via debt.

It's screwy WINZ can't deal

It's screwy WINZ can't deal with the issue of 150,000 unemployed, at the same time we need to import people from Vanuatu to fill jobs.  Typical Kiwi underperformance from the bureaucrats on that one.

Re #1 - this is nothing new.

Re #1 - this is nothing new. Isaac Asimov invented the study of futures and their accurate prediction for the "Foundation" trilogy. He called it "psychohistory".

W.R.T Imported labour we need

W.R.T Imported labour we need WORKING FOR BENEFITS just like we have  WORKING FOR FAMILIES .
The Status Quo just seems so wrong on so many levels

Tell us how this would work,

Tell us how this would work, please?

Re #4    Banks use of 

Re #4    Banks use of  wirestripping shows they are no better than the often derided "Offshore Trust & Company"  industry.
Being an accredited Bank, which has the right / ability to generate wire instructions, gives them control over source / destination of funds data, which is very rarely questioned.
It implies a level of trust in the information contained on the instruction, because it was issued by an accredited Bank.
The Offshore Finance Industry do not have the ability to alter the details on wire instructions, hence the proliferation of nominee directors, shell companies etc.
Both the Banks involved in wirestripping, and the Offshore Finance Industry are trying to achieve the same thing.    Obfuscation.
The difference being,  Bank CEO's seem have an inherent    'Get Out of Jail, Free'   card.