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Tuesday's Top 10 with NZ Mint: Southern Europe's commercial property collapse; The real reason for ChCh's 'Green Frame'; The problem with biofuels; Letterhead for pirates; Dilbert
Here's my Top 10 links from around the Internet at 1 pm today in association with NZ Mint.
As always, we welcome your additions in the comments below or via email firstname.lastname@example.org.
My must read today is #5 on the Somali pirates who send their ransom requests with a 'Kind regards' on their own letterhead. Brand building in action.
1. Southern European commercial property collapse - FT.com reports that just 3 commercial property transactions were registered in the whole of Spain in the June quarter, down from 58 the previous quarter.
It reports just two were sold in the whole of Italy in the quarter, down from 58 the previous quarter.
This shows the extent of the collapse in investor confidence and fear about a Euro-zone breakup.
Things may have calmed down in the last couple of weeks as the European politicians go on holiday and markets believe the latest jaw-jaw from the European Central Bank will actually happen.
But there is something ugly brewing in Southern Europe that no one has come even close to solving.
My pick is another crisis moment in the European financial system some time in September.
The total value of transactions for offices, shops and industrial property in Spain was €67m for the second quarter, down 74 per cent from €260m in the first quarter. The inactivity meant Spanish property transactions were below those of neighbouring Portugal for the first time.
“Heightened risk aversion, particularly among cross-border institutional investors, has led to an almost complete collapse in southern European acquisitions,” said Joseph Kelly, director of market analysis at RCA.
2. Holding up land prices - Christchurch blogger Puddleglum at The PoliticalScientist.org writes a long and detailed piece on the Christchurch CBD plan and 'Green Frame' that suggests it's great for the big land lowners in the CBD and is partly aimed at reducing land supply to support land prices. HT @benkepes
The Blueprint (p. 35) – in keeping with the concerns of CERA’s economists – says this about the frame:
The Frame in tandem with zoning provisions, reduces the extent of the central city commercial area so that the oversupply of land is addressed. It will help to increase the value of properties generally across the central city[Lucky landowners in the remaining 7% of the previous land area of the central city, I guess] in a way that regulations to contain the central core, or new zoning decisions, could not. The Frame helps to deliver a more compact core while diversifying opportunities for investment and development. The Frame allows the Core to expand in the future if there is demand for housing or commercial development.
This is quite an interesting ‘green frame’. To begin with, it is being proposed in order to correct for the ‘oversupply of land’ in the central city. That is, it is proposed in order to correct for the projected, prolonged nose dive in central city land values.
3. 'We need new instruments' - Reuters reports Bank of England Monetary Policy Committee member Adam Posen has called on the central bank to find new instruments to fight inflation.
He seems to be suggesting the BoE should be buying private sector assets as well as government bonds...
Posen said the BoE could be more effective in fostering economic recovery with access to other instruments to keep inflation close to its 2 percent target. "I have no question in my mind that what we're doing with QE is preventing things from getting much worse, but that doesn't mean you couldn't have an additional or better instrument," he said. Posen, an outgoing member of the Bank's MPC, challenged the view of central bankers that only elected governments can buy private-sector assets.
"I personally view the teeth-gnashing and garment-rending about what's fiscal and monetary as too much drama for too little content," he said.
4. 'The poor will starve so the rich can drive' - George Monbiot at The Guardian makes some points about the droughts hitting Africa and America, along with the increasing use of corn to create biofuels.
By 2021, the Organisation for Economic Co-operation and Development says that 14% of the world's maize and other coarse grains, 16% of its vegetable oil and 34% of its sugarcane will be used to make people in the gas-guzzling nations feel better about themselves. The demand for biofuel will be met, it reports, partly through an increase in production; partly through a "reduction in human consumption". The poor will starve so that the rich can drive.
The rich world's demand for biofuels is already causing a global land grab. ActionAid estimates that European companies have now seized 5m hectares of farmland – an area the size of Denmark – in developing countries for industrial biofuel production. Small farmers, growing food for themselves and local markets, have been thrown off their land and destituted. Tropical forests, savannahs and grasslands have been cleared to plant what the industry still calls "green fuels".
5. Pirates with their own stationary - Reuters reports on some very well organised pirates off the coast of Africa. They see themselves in the business of kidnapping for ransom. It's a service business.
In 2011 Somali piracy cost the world economy $7 billion and earned the pirates some $160 million in ransoms, according to a recent report by the International Maritime Bureau. Rogues though they may be, these pirates in many cases are surprisingly well-organized, down to having their own packets of paperwork -- on letterhead -- for their victims.
Reuters obtained a copy of one such packet, presented to the owner of a hijacked oil tanker and the owner's insurer after the ship was taken. Due to the commercial sensitivities, the names of the insurer and ship owner were redacted from the document, as was the size of the ransom request.
But what remains is colorful enough, and somewhat surprising. The cover sheet, in memo format, is addressed "To Whom It May Concern" with the subject line "Congratulations to the Company/Owner."
"Having seen when my Pirate Action Group (P.A.G) had controlled over your valuable vessel we are saying to you Company/Owner welcome to Jamal's Pirate Action Group (J.P.A.G) and you have to follow by our law to return back your vessel and crew safely," the memo begins.
6. 'Another storm to break' - Reuters reports PIMCO's Thomas Kressin reckons capital flows flooding out of Europe (see #1 above) are about to create a new crisis.
“Now there are growing signs that the crisis of confidence in the euro zone has assumed a new dimension,” Kressin wrote. “Whereas initially investors fled to the safety of the euro zone’s core, now they are taking their capital out of the euro zone altogether.”
The Swiss central bank’s sales of the euro to rebalance its reserves are “reinforcing” pressure on the single currency, according to Kressin. Its purchases of top-rated Europeangovernment bonds, particularly bunds, are also forcing down yields on those securities, he said.
“When the storm clouds gathered over ‘little’ Greece at the end of 2009, it seemed unthinkable that the debt crisis and the flight of capital would shake European monetary union -- once proclaimed as ‘irreversible’ -- to its very foundations,” he wrote. “Now, though, another storm could be about to break.”
7. 'Follow the Icelandic model' - Bloomberg reports the IMF is saying the Icelandic model for dealing with a banking crisis seems to work best. Iceland forced the bondholders of its bankrupt banks to take the losses, rather than spread them across taxpayers, as the Irish did.
Iceland also imposed capital controls. Fair enough.
Here's the IMF, who weren't always so 'unorthodox' on these issues. Remember the screaming from the rooftops when Malaysia imposed capital controls?
“Iceland has made significant achievements since the crisis,” Daria V. Zakharova, IMF mission chief to the island, said in an interview. “We have a very positive outlook on growth, especially for this year and next year because it appears to us that the growth is broad based.”
Iceland refused to protect creditors in its banks, which failed in 2008 after their debts bloated to 10 times the size of the economy. The island’s subsequent decision to shield itself from a capital outflow by restricting currency movements allowed the government to ward off a speculative attack, cauterizing the economy’s hemorrhaging. That helped the authorities focus on supporting households and businesses.
“The fact that Iceland managed to preserve the social welfare system in the face of a very sizeable fiscal consolidation is one of the major achievements under the program and of the Icelandic government,” Zakharova said. The program benefited from “strong implementation, reflecting ownership on the part of the authorities,” she said.
8. Everywhere but here - A KPMG report on privatisations of state assets globally find they fell by half in 2011 from 2010 because of the global financial crisis.
New Zealand is about to be out of step with the rest of the world.
9. Switzerland trying to cool housing market - Bloomberg reports the Swiss National Bank (SNB) is considering forcing banks to hold more capital to cool down a housing market where prices are up more than 4% in the last year and up 40% in the last 10 years.
Yet our central bank is relaxed about price inflation running at nearly 6% nationally and between 15-25% in parts of Auckland...
Here's what the radical central bankers in Switzerland are thinking of doing.
Thomas Jordan’s fight to protect the Swiss economy is set to widen beyond currency marketsand too- big-to fail risks as the central bank chairman considers how to curb the biggest real-estate boom in two decades.
The Swiss National Bank may act to stem what it called risks from “excessive credit growth,” economists from Bank Sarasin to UniCredit Group said. An option available to the central bank would be to force lenders to hold additional capital of as much as 2.5 percent of their domestic risk- weighted assets to help buffer against losses.
"What is New Zealand if not the Canada of Australia?"
"Evidently New Zealand's time zone is 7 years behind ours."