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The comment stream
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The news stream
- Does foreign ownership threaten patriotism? 102
- 90 seconds at 9 am: Now the Greek creditors turn 46
- Alpine water storage needed now to counter dry spell 19
- Little focuses on small business jobs 18
- Calls for OCR to remain at 3.5% 16
- Property investment; Why bother? 16
- 90 seconds at 9 am: On the move 13
- Govt to sell up to 2,000 houses in 2015 8
- 'A social housing state of the nation' 6
- "A rate curve inversion is coming" 6
Tuesday's Top 10 with NZ Mint: Austerity doesn't work when everyone does it at the same time; QBE eyes offshoring 3,000 jobs; 'The Italians are revolting'; China's netizens revolt too; Dilbert
Here's my Top 10 links from around the Internet at 11 am in association with NZ Mint.
As always, we welcome your additions in the comments below or via email to email@example.com.
My must read today is #1 from Paul Krugman on why austerity isn't working. Cue Italian voter revolt at the austerity imposed by its German creditors.
1. The problem with austerity - Paul Krugman points out in his NY Times blog that austerity and politics are driving markets and economies right now, in all the wrong directions.
Italian election results now coming through shouldn't really surprise too many in the markets.
Yet markets are acting surprised.
Voters don't like austerity.
Austerity doesn't work when everyone does it at the same time. It's true within countries and it's certainly true when many countries all attempt to do it at the same time.
That's what is happening in Europe.
With southern Europe, northern Europe, Britain, America (and New Zealand) all trying to cut and tax their way to growth, there's no suprise it's not working and the voters don't like it. Politics rule all in the end. Even bond vigilantes.
Slow motion replay. Meet trainwreck. Here's Krugman:
Consider how things were supposed to be working at this point. When Europe began its infatuation with austerity, top officials dismissed concerns that slashing spending and raising taxes in depressed economies might deepen their depressions. On the contrary, they insisted, such policies would actually boost economies by inspiring confidence.
But the confidence fairy was a no-show. Nations imposing harsh austerity suffered deep economic downturns; the harsher the austerity, the deeper the downturn. Indeed, this relationship has been so strong that the International Monetary Fund, in a striking mea culpa, admitted that it had underestimated the damage austerity would inflict.
Meanwhile, austerity hasn’t even achieved the minimal goal of reducing debt burdens. Instead, countries pursuing harsh austerity have seen the ratio of debt to G.D.P. rise, because the shrinkage in their economies has outpaced any reduction in the rate of borrowing. And because austerity policies haven’t been offset by expansionary policies elsewhere, the European economy as a whole — which never had much of a recovery from the slump of 2008-9 — is back in recession, with unemployment marching ever higher.
2. Even the Tories are saying austerity isn't working - Here's the chief economic adviser to London Mayor Boris Johnson saying Britain needs to pull itself out of the austerity death spiral.
The UK needs three things – to spend, lend and change. The economy is suffering from a lack of demand. There needs to be more spending by the Government on both infrastructure and construction and people and firms with the ability to spend need to be given the confidence to do so. There has to be more lending by the banks. And the supply side of the economy needs a helping hand and thus there has to be change – which is all part of repositioning the UK in the changing global economy.
3. Here it comes - The very strong New Zealand and Australian dollars make it profitable to outsource services jobs. The Internet makes it very possible.
Now it's happening in earnest in Australia where the AFR reports QBE is planning to outsource 3,000 jobs to the Philippines. A whole wave of job losses are approaching, particularly in telecommunications, financial services, medical services, legal services and educational services.
QBE has more than 16,000 employees in 52 countries and more than 4300 Australian staff in its Australian underwriting business.
The QBE document shows that it is planning a “group shared services centre” (GSSC) in Manila. It says the “captive-based GSSC back office” in Manila would include finance, procurement and information technology operations. The plans, to be phased in over the next three years, would also include Australian, European and North American claims functions in the back office. The plan is yet to receive final approval from the QBE board.
In an email to Australian staff on Monday, QBE Australia chief Colin Fagen said the insurer would use its global footprint to achieve profit growth.
4. Italian deadlock - Further to #1 above, here's the latest detail on the Italian deadlock that has freaked out global markets this morning. What did the markets think would happen? That voters would love the spending cuts and economic contraction that the bond investors love?
More than half of Italian voters voted for politicians such as comedian Beppe Grillo and comedian Silvio Berlusconi that want Italy to pull out of the euro.
A huge protest vote by Italians enraged by economic hardship and political corruption pushed the country towards deadlock after an election on Monday, with voting projections showing no coalition strong enough to form a government. With more than two thirds of the vote counted, the projections suggested the center left could have a slim lead in the race for the lower house of parliament.
But no party or likely coalition appeared likely to be able to form a majority in the upper house or Senate, creating a deadlocked parliament - the opposite of the stable result that Italy desperately needs to tackle a deep recession, rising unemployment and a massive public debt.
Such an outcome has the potential to revive fears over the euro zone debt crisis, with prospects of a long period of uncertainty in the zone's third largest economy.
In any market the price of the next best alternative is the price that counts. The labour market for youth is no different. Any kid wanting a job has the option of working at the same rate or slightly lower than they last person employed. That means all kids – not just foreign students – have to be prepared to work at these sweatshop rates or else forego work. And kids are working but they’re getting exploited doing it.
We’ve heard anecdotes about youth workers – ordinary kiwi kids – being employed without written contracts; working for weeks serving customers alongside paid staff and contributing fully to the revenue of the business only to be told they their work days are unpaid “training days”; working long shifts without breaks which flies in the face of health and safety laws; being dismissed without a fair process; the list goes on. All the conditions we have listed breach current employment law. Are these kids likely to take complaints to the Department of Labour (now buried within the new Ministry of Business, Innovation and Employment)? And risk getting branded a troublemaker? Yeah right.
The knee jerk reaction of many readers to this will be – “So what? The kids are getting experience and references, the willing ones are getting ahead. And it’s creating work”. The so what is this – society has decided what the minimum wage should be, if you don’t like it get society to change its mind. If we want a country of entrepreneurs who can only get ahead not by being smarter at how they use their staff, but by cheating society’s laws then we’re on the right track.
6. Why Economists need to embrace Big Data mining - Carnegie Mellon statistician Cosma Shalizi talks in this Inet video about the way economists are creating flawed models and should learn a few tricks from data miners. HT dh in yesterday's comment stream.
Cosma Shalizi urges economists to stop doing what they are doing: Fitting large complex models to a small set of highly correlated time series data. Once you add enough variables, parameters, bells and whistles, your model can fit past data very well, and yet fail miserably in the future. Shalizi tells us how to separate the wheat from the chaff, how to compensate for overfitting and prevent models from memorizing noise. He introduces techniques from data mining and machine learning to economics -- this is new economic thinking.
7. Why bond yields will stay low - Here's the contrary view from Gluskin Sheff's David Rosenberg (via BusinessInsider) to all those people picking higher interest rates and a bond market blowup.
In his latest report David Rosenberg writes that "the era of consumer frugality ostensibly never went away despite a 125 percent four-year rally, in the equity market". The recent payroll tax hike has delivered an 8 percent blow to discretionary spending for those making $40,000, and this is causing 46 percent of the population to curb spending, according to the NRF.
"With all this, and knowing that there is over an 80 percent correlation between booths Fed policy and underlying inflation and the direction of bond yields, I fail to see the bear case for the fixed-income market, and find the argument that the reason to be negative is because rates are so low to be highly unimpressive. Like anything else, motion will be caused by some force. And I don't see the secular forces that brought yields to where they are today to be changing anytime soon."
8. The drama in China's real estate records - Tealeaf Nation reports on how netizens in China are protesting against moves to stop people searching real estate records to find corrupt officials owning more than 1 properties...
The corrupt officials in some cities have banned the searches...
In an opinion poll conducted by Sina, 87.7% of participants opposed the ban. The sharp contrast between the government's justification of the ban and Web users' objection to it mirrored the public's long-standing mistrust of the state, but was also exacerbated by the circumstances under which the regulation was put forward.
The last several months have seen many grassroots anti-corruption campaigns online. Officials and their relatives whose real estate assets apparently exceeded what their legal income could conceivably acquire were variously called "house uncle," "house sister," "house wife" and "house grandpa" by Web users as they were identified and condemned. In most cases, the government caved to public pressure and investigated these individuals. Multiple officials have been removed and legal processes against them have begun. In the absence of effective top-down supervision and limited opportunities for political participation, many regard online sleuthing as a last resort for citizens who want to oversee their civil servants.
Even though it remains unclear how many of these cases began with use of the official information system, many Web users believe that the new prohibitions are intended to counter the burgeoning sleuthing movement. Netizens perceive policymakers' denial of this connection as nothing more than a lie.
9 China's hottest real estate market collapses - Here's France24 with the detail of Phoenix Island's collapse.
It was billed as China's Dubai: a cluster of sail-shaped skyscrapers on a man-made island surrounded by tropical sea, the epitome of an unprecedented property boom that transformed skylines across the country. But prices on Phoenix Island, off the palm-tree lined streets of the resort city of Sanya, have plummeted in recent months, exposing the hidden fragilities of China's growing but sometimes unbalanced economy.
A "seven star" hotel is under construction on the wave-lapped oval, which the provincial tourism authority proclaims as a "fierce competitor" for the title of "eighth wonder of the modern world".
But the island stands quiet aside from a few orange-jacketed cleaning staff, with undisturbed seaside swimming pools reflecting rows of pristine white towers, and a row of Porsches one of the few signs of habitation.
Chinese manufacturers once snapped up its luxury apartments, but with profits falling as a result of the global downturn many owners need to offload properties urgently and raise cash to repay business loans, estate agents said.
10. Totally Jon Stewart on the Tyranny in Texas. It seems Texans see Abraham Lincoln as similar to a certain German dictator who's name can set off spam filters.