Here's my Top 10 links from around the Internet at 10:00 am today in association with NZ Mint.
Bernard is on his summer break and will be back on January 22, 2013, from Wellington.
As always, we welcome your additions in the comments below or via email to david.chaston@interest.co.nz.
See all previous Top 10s here.
1. Inequality
Quick question: How much of the wealth of the US was owned by the top 1% in 1915? How much today? A: 18%, 24%.
To me that is a surprise - I thought it would have been greater, both then and today.
However, I do agree that the shift is worrying and needs to be reversed - and there is no evidence that is happening.
Income inequality is a topic of huge importance to American society and therefore a subject of large and growing interest to a host of economists, political scientists, and other wonky types. Except for a few Libertarian outliers, these experts agree that the country's growing income inequality is deeply worrying.
Even Alan Greenspan, the former Federal Reserve Board chairman and onetime Ayn Rand acolyte, has registered concern. "This is not the type of thing which a democratic society - a capitalist democratic society - can really accept without addressing," Greenspan said in 2005. Greenspan's Republican-appointed successor, Ben Bernanke, has also fretted about income inequality. Yet few of these experts have much idea how to reverse the trend. That's because almost no one can agree about what's causing it.
I wish we had equivalent New Zealand data. Let me know if you can point to it.
2. The myth of technological unemployment
Worried about being replaced by a machine? You've got 200 years of company says Matthew Yglesias at Slate.
In 2012, a lot of firms employed a lot of new labor-saving technology in order to increase profits. That's true. But the same happened in 1992 and 1972 and 1952 and, for that matter, 1852. But whenever you have a prolonged labor market downturn, the salience of this fact increases and you start hearing more and more talk about how there isn't as much need for workers anymore because of mechanization.
In the contemporary context, people often use the word robots in this context because mechanization is obviously a trend that's been going on for more than 200 years so robots makes it sound more plausible that something new has happened recently.
Machines are replacing workers, in other words, but they've been doing so since the cotton gin and the spinning jenny. Over the long run this leads to higher incomes and more leisure. But across short spans of time, the ups and downs in the level of employment and the number of hours available to people who want to earn more money is driven by the ups and downs of the business cycle.
3. World Bank cuts its 2013 growth forecasts
A frustratingly slow economic recovery in developed nations is holding back the global economy, the World Bank said on Wednesday, as it sharply cut its outlook for world growth in 2013. They forecast that global gross domestic product will inch up 2.4% this year, from 2.3% in 2012. In its last forecast in June, the bank projected global growth would reach 3.0% in 2013.
Policy uncertainty [in the United States] has already dampened growth. Should policymakers fail to agree such measures, a loss of confidence in the currency and an overall increase in market tensions could reduce U.S. and global growth by 2.3 and 1.4 percent respectively.
4. Today's raw market data ...
A quick holiday update:
| as at 11:10am |
Today 9:00 am |
Yesterday |
Four weeks ago |
One year ago |
| NZ$1 = US$ | 0.8404 | 0.8398 | 0.8339 | 0.7936 |
| NZ$1 = AU$ | 0.7963 | 0.7949 | 0.7959 | 0.7697 |
| TWI | 75.36 | 75.28 | 74.38 | 71.09 |
| Gold, US$/oz | 1,676 | 1,680 | 1,696 | 1,656 |
| Dow | 13,516 | 13,530 | 13,320 | 12,488 |
| Copper, US$/tonne | 7,945 | 8,030 | 7,825 | 8,185 |
| Volatility Index | 13.24 | 13.55 | 16.34 | 22.20 |
5. Want to be CEO? What's your BMI?
New research suggests those extra kilos, large waists undermine perceptions of leadership ability. More from the WSJ:
While weight remains a taboo conversation topic in the workplace, it's hard to overlook. A heavy executive is judged to be less capable because of assumptions about how weight affects health and stamina, says Barry Posner, a leadership professor at Santa Clara University's Leavey School of Business. He says he can't name a single overweight Fortune 500 CEO. "We have stereotypes about fat," he adds, "so when we see a senior executive who's overweight, our initial reaction isn't positive."
6. Using finance to expand their markets
Big tech companies are pushing new finance arrangements to keep the growth in their sales. Apple is now offering Chinese buyers a two year installment plan. This is innovative in the sense that it has been telecom retailers who have done that until now. A sign that Apple is going down-market in some regions? How long before they sell their personal loan portfolio to GE Money or similar. More from Bloomberg:
Urban workers in China had average monthly pay of about 3,585 yuan in the first nine months of last year, according to data from the National Bureau of Statistics. Apple “has likely approached maximum penetration in China’s higher economic stratas, and now needs to be able to appeal to students, workers and rural residents to sustain robust growth,” said David Wolf, China managing director for market consultant Allison+Partners in Beijing. “Financing is traditionally the best route to make expensive luxury items affordable to those unable to save the cash for them, and if Apple pulls it off it will be a pioneer in consumer credit in China,” Wolf said.
7. Personality change?
"Financial conditions in the euro zone have significantly improved since the summer, when euro zone risks peaked because of German policymakers’ open consideration of a Greek exit, and the sovereign spreads of Italy and Spain reached new heights. Since then, risks have abated significantly." Who has this less-doomster view? Nouriel Roubini. Lower risks, but the same problems however.
While there is a much lower likelihood of disorderly events in the euro zone, there are still significant obstacles to deeper integration, as well as country-specific economic and political vulnerabilities. The biggest obstacle to the formation of a banking, fiscal, economic and political union is that Germany is pushing back against the time line for action, with the initial skirmish on ECB supervision of euro zone banks. This backpedaling reflects deep German skepticism on whether the resolution of the euro zone crisis requires a move toward greater union. Without a more credible commitment to austerity and reforms from euro zone periphery countries, lurching forward would imply that risk-sharing will turn into a large, long-term transfer union, which is unacceptable to Germany and the core. Thus, Germany will do whatever is necessary to delay the integration process, at least until after elections in fall 2013.
8. Mercantalism 2013?
US retail behemoth WalMart is commiting US$50 billion to "buy American" over the next 10 years. Does this indicate a shift in how Americans see their self-interest? Or is it tokenism, a passing fad? After all it will be less than 1.5% of their total purchases. More from the NYTimes:
The chief executive of the American Apparel and Footwear Association, said the challenge for Walmart would be finding vendors who could meet its price points with American production, which was generally much more expensive than overseas production. "The trend has been to be offshore," Mr. Burke said. Overseas production is "indicative of consumer demand for product at a lower price."
9. Trust evaporating
Germany’s Bundesbank is to repatriate gold reserves held abroad to tighten control and combat currency crises in the future, pulling a chunk of its holdings from New York and all its bullion from Paris, reports Ambrose Evans-Pritchard in the English Telegraph. HT to a number of commenters yesterday who follow English papers.
The move marks an extraodinary breakdown in trust between leading central banks and has set off ferment among gold enthusiasts, with some comparing it with France’s withdrawal of gold from the US under President Charles de Gaulle as the Bretton Woods currency system crumbled in the early 1970s.
10. Today's quote
"The only reason a great many American families don't own an elephant is that they have never been offered an elephant for a dollar down and easy weekly payments." Mad Magazine
27 Comments
1, Inequality. Redistribution of wealth simply doesn't work. The trend of monitoring Living standard improvements and/or declines is not a measure of real wealth. Real wealth for any individual is the ability to create that wealth for themselves and to be able to do this repetitively.
The redistribution of taxes by Government ensures that real wealth is not achieved by the majority.
The current owners of the lare percentage of wealth use the system in the opposite manner to the large percentage who don't have wealth. The wealthy act as individuals while the rest act collectively. Acting as an individual and taking responsibility for your wealth and direction has obvious merits yet few understand this. You can be the herd in the paddock and get milked or you can own the herd. The real wealthy simply know that owning the herd makes financial sense so they ensure the herd is large in numbers and the US is a pretty big paddock and you can spread yourself around the globe.
There are two choices grow up and take responsibility for yourself and your direction and be the individual that you are or mill around in collective groups and lose the individual that is you.
That's short-term stupidity.
Sure, the Tragedy of the Commons suggests thaty for each individual, the best path is to go for all you can get, vis a vis the herd.
Sure, there will be (less) winners in such a system, and (vastly more) losers.
Ultimately the process ends in a dust-bowl - and at that point even the most wealthy are worth nothing.
It'll get ugly as they try to hang on, though. Syria and our local SOE sales are both indications of 'the wealthy hanging on'. Just differ in degree. For now.
One point on The Tragedy of the Commons is that there was no tragedy. Recent reseach has suggested that Commons worked really well for a very long time. Communities were smaller, everyone knew everyone else and if you crossed someone you were in big trouble. It was the enclosures of the commons that was the real tragedy. Basically privatising something owned in common. Sounds familiar doesn't it.
Today sociopathic behaviours are the norm, Poor behaviours push out good behaviours and the sociopathic individuals can live amongst us without fear of trouble.
Plan B - The easiest way to avoid a sociopath is to know the profile of one. They are individuals just like the rest of us but they have no respect for individuals and a great desire to control and manipulate in a variety of different ways.
.. .. " they have no respect for individuals and a great desire to control and manipulate in a variety of different ways " ......
Ummmm , are we talking about sociopaths , or the NZ Labour Party ? ..... I'm getting confused here ...
... but it seems that the UN bureaucracy can see clearly enough , and have slammed the performance of ex-Labour supremo , Herr Helen ! .... meebee interest-free-student loans and WFF hasn't lifted the impoverished out of the gutters in the Sudan ?
When David Shearer has the 100 000 U-Beaut $ 300 000 Kiwi homes built for us all , will they be painted in colours other than red ? .... will the shower heads have waterflow restrictors inside them .... squiggly mercury filled eco-lightbulbs throughout .... sugar and fat limit alarm units in the kitchens ....
PDK - A manipulator wants control. The dust-bowl can only occur if people don't stand up to the controlling manipulators.
Personally I like seeing people achieve, you feel good for them. I dislike seeing people achieve through disfunctional and dishonest practices. Some people rarely take time to differentiate between the two.
Agreed.
Are you gonna help me stand up to Joyce, Groser, Heatley, Shearer, Parker and Co, on behalf of future generations then?
7 billion people can't all 'achieve', of course. That's nothing to do with manipulators - just the consequence of too many sheep being in the paddock for too long.
One way of looking at what you are talking about is the conflict between
one person and one vote vs one dollar one vote
At the moment one dollar one vote is winning
On redistribution. It has been argued by MMT advocates that the real purpose of taxation is redistribution. Why do we need redistribution? Because wealth tends to concentrate over time and concentrated wealth is not useful for the type of economey we have- mass manufacturing/production of goods, services so we need a mass of people to buy the stuff.
Plan B - Well as I said before redistribution of wealth keeps the herd where they are wanted. Inflation and deflation can be better managed by Government and the herd is blissfully unaware they are even part of the herd.
Most mass goods for sale in NZ are produced in other countries so the redistribution of wealth doesn't end up in the country of final sale but the country of production. So most wealth generated in NZ is exported firstly by the redistribution and secondly by repatriation of dollars from foreign investments in NZ and that's NZ wealth destruction.
Stop the tax and you stop the rort.
eh?
Just stop buying overseas crap, stop borrowing from overseas people, and stop selling our real wealth (land, resources) to overseas people.
Sure, it's a rort, but nothing to do with tax. It's to do with mass arrogance; the assumption that they could live beyond their means, indefinitely and at exponentially-increasing rates.
PDK - It has everything to do with the tax. It is not mass arrogance......it is more likely ignorance that is the problem. Yes there is mass assumption of entitlement but everyone from the Government down is living beyond its means as the means comes down to the ability and willingness from those in the private sector to keep paying.
Governments tax people to redistribute the wealth....where does the redistribution money end up? The beneficiary or civil servant spends it on goods and services. Many of those goods and services are provided by off-shore companies as they are cheaper manufacturers and suppliers of those goods. The wholesale price of those goods and services has to be paid for and so a large percentage of the tax redistribution ends up leaving the country.
All the people who receive Government payments whether they are employed by the Government or get some sort of benefit spend their money where they please. Everytime a good or services comes from an off-shore entity the wealth leaves NZ.
Look at Governments total spending and you will see why redistribution of wealth via the taxation system is destroys wealth.
Your "Stop buyng overseas crap" is rediculous". We are very reliant on many types of products that are imported and frequently do not have an option to buy the same goods that are locally made. How much of the cheap food on supermarket shelves is imported? Take a look at clothing mainly imported and even if you do buy local designer clothes they import the fabrics. How many places in NZ make footware? What about medications, electronics etc? As I have always stated TAXATION is the issue !!!!!
reckon youze both onna same page dere NE .. PDK gets there quicker, in less words.
Dunno about your neighbourhood, but, around my neck-o-da-woods, every time there is a hard rubbish collection, ya wanna see the bunnings stuff gettin put out, particularly bunnings plastic furniture, made in china. Funny thing is, in the evenings, when all the scavengers cruise by in their vans and cars and trailers, they never touch the stuff. And there ain't too many civil servants and beneficiaries around our way. Dat's a lot of petro-chemicals goin into landfill.
Where I don't agree with him - I presume it's a him - is about taxation.
Those cheap goods are not made here, and are made there, because of slave-level wages. We had footwear manufacturers (I was involved in supplying them with our own locally-made/designed machinery) but you couldn't pay low enough wages in this country, to compete.
Lets be honest about that.
agree with you.
If I recall correctly, NE has expressed an earlier desire NOT to be known as "him", preferring instead "she/her"
NE refers selectively only to those recipients of taxation as the exclusive consumers of imported junk, implying income redistribution is the problem.
I make the point that NON-recipients of re-destributed income by way of taxation are also voracious consumers of imported stuff, junk and otherwise.
I considered your assertion to be inclusive of all, to which I agree.
You go the distance in a straight line, NE gets to the same place via a detour.
Detour? That's what's happening to Lance Armstrong......
Taxing only redistributes; motorways are built, hospitals run, police keep folk in line, kids get taught. Those navvies, nurses, cops and teachers, spend in turn. The roads, hospitals, jails and schools all need built.
The privateers want to profit from those activities, and try and paint them as inefficient, by way of softening up the public. All things being equal, the private sector must be more costly, by the profit margin. But - taxing isn't the problem; that's just one small-eye perspective, an individual feeling 'poorer'. Who/whatever NE is, they lack big-picture perspective. Big-picture, whether the work is done via tax/govt, or privately, the energy requirement and resource-depletion involved is the same or worse.
#2 - a total journalistic failure.
Labour is work, right? What was it that did the work, in ever-increasing quantities, during this process?
And will/can it continue?
All that 'growth/displacement' was courtesy of long-stored sunlight, no more, no less.
Interesting article about one of our few listed companies that is not a former government department.
http://www.idealog.co.nz/blog/2013/01/calling-next-jan-cameron
They refer to it in the article as 'Crapmandu' which gives you some of the flavour. Idealog is a mainstream NZ Magazine so it is a bit surprising.
On this side of the desk we are just readers who express an opinion on the various articles. We all realise this and no harm is done. However, when we read your side of the desk we expect some integrity, otherwise what is the point? I, for one, cannot understand why journalists would, or would want to, publish items that don't have integrity. I may as well read a comic as read someones one eyed veiw, without ballance.
That brings me to #2
My one eye sees exactly as expressed in number 2, however when i open the other eye much more is revealed.
In the eighteen hundreds, machines did the work of many people and those people became unemployed. But they got new jobs building those machines and the engines that powered them. By the nineteen hundreds many new products came onto the market creating more jobs and so on.
In the second half of the nineteen hundreds the cog and cam started to disapear and be replaced by hydraulics and computers. These new machines were able to penetrate even further into peoples jobs. We then moved on to globalisation and what jobs were left went overseas.
We all know that in the first part of this centuary, up to the crash, we had almost full employment. We may argue, "see machines didnt take your jobs as new jobs were created" What is does not say is that those jobs were in the ow paid service sector. And as we also know even those service jobs are moving offshore.
To me then, this is the two eyed view
Does anyone still believe the "service economy" is anything other than a sick joke?
All of the countries that have pitched their economy to a non tradeable services future are in deep trouble or are headed that way. Sure it has mopped up unemployment in the short term but has inevitably led to structual current account and fiscal deficits, deeply negative net international investment positions and elevated levels of private debt.
You can't grow a prosperous economy by mowing each others lawns.
Glad to see someone debunk the "robots are causing unemployment" myth, although I'm surprised to see something so sensible on Slate. Mises.org has already had a few blogs on the issue but this Slate article will reach a much wider audience.
And why are people surprised inequality is increasing when so much money is being printed? Does anyone really expect the recipients of that counterfeit capital (banks, stock market investors etc), to be the poor?
The standard measure of inequality is the Gini coefficient (0= equality, the bigger the number the worse the inequality). NZ is worse than Australia/ Canada/ (most of) Europe and better than the USA. The Wikipedia page on it has a fairly detailed description of the mathematics of the formula.
As it is a fairly stand metric used by the World Bank, UN, CIA, OECD etc. In New Zealand MSD prefer to use a different figure (cynics might suggest Gini makes the country look worse than the metric they use) but do compile the Gini figures based on the Statistics New Zealand Household Economic Surveys for international comparison purposes. A quick google of New Zealand Gini Coefficient by year, finds
http://www.nzchildren.co.nz/income_inequality.php
There seems to have been a sharp upturn in inequality in the late 80s- early 90s, and depending on his years figures we will see if 2011 was a recovery or the start of a new rise.
#6 - AAPL
Reggie Middleton has long since riffed about Apple's margin compression, and correctly called the AAPL stock price 'surprise' of late last year, in 2010. #6 is an instance of exactly this dynamic (margin pressure....).
They should stick to their core business.
#5 doesn't apply when you own the company, rather than having to fight your way to the top. i.e. Nathan Tinkler, Gina Rinehart, Clive Palmer, James Packer, Kim Dotcom
NZ and Australia's rich list, could equally be called the obese list.
David, you say that you were surprised that the top 1% share of wealth was not greater...almost implying even this sort of disproportionate share is ok... or maybe you have mixed up income and wealth...the article says the top 1% ‘earn’ 24% of total US income (ie annual $).
However the same 1% own 40% of total US wealth (ie all assets)…and this may be an under-estimation because it is based on US domestic assets and we now have some idea of the extent of additional wealth squirreled away in offshore havens.
http://finance.yahoo.com/blogs/daily-ticker/top-5-facts-america-richest-1-183022655.html
It’s not just that single statistic that is worrying…it’s the relationship (or lack of it) with the other 99%’s share of the remaining pie…
The bottom 80% own only 7% of the total wealth (assets) of the US (see ref above)
The richest 400 Americans alone own as much as the bottom 50%
"crushing downturn in the European car market."
http://globaleconomicanalysis.blogspot.com/#PdIF0EXKSpfmcxuK.99
"Machines are replacing workers" so we use more energy, a machine is just an energy conversion.
Man is actually one of the most efficient, low cost machines, but not energy dense.
"In other words" no you are wrong....see my line above.
"but they've been doing so since the cotton gin and the spinning jenny. Over the long run this leads to higher incomes and more leisure."
Which paralleled our use of more and more fossil fuel...ergo, with less energy we will have lower incomes and less leisure.
So far we have had the effect of stagnation of peak oil, no effect of a drop, yet.
regards
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