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 to bernard.hickey@interest.co.nz.
See all previous Top 10s here.
My must read is #1. A dry but thought-provoking piece of research.
1. Youth unemployment will scar a generation - It was great to see figures yesterday apparently showing stronger employment growth in the March quarter and a fall in the overall unemployment rate to 6.2%.
But the youth unemployment rate including those not in education, employment or training (NEET), is still 15.9%.
New Zealand likes to think it's better off than the rest of the world.
But International Labour Organisation figures show the global youth unemployment rate was around 12.4%.
Why are we so poor at employing our young?
What is this government doing about it?
The weakening of the global recovery in 2012 and 2013 has further aggravated the youth jobs crisis and the queues for available jobs have become longer and longer for some unfortunate young jobseekers. So long, in fact, that many youth are giving up on the job search.
The prolonged jobs crisis also forces the current generation of youth to be less selective about the type of job they are prepared to accept, a tendency that was already evident before the crisis. Increasing numbers of youth are now turning to available part‐time jobs or find themselves stuck in temporary employment. Secure jobs, which were once the norm for previous generations – at least in the advanced economies – have become less easily accessible for today’s youth.
The global youth unemployment rate, estimated at 12.6 per cent in 2013, is close to its crisis peak. 73 million young people are estimated to be unemployed in 2013.1 At the same time, informal employment among young people remains pervasive and transitions to decent work are slow and difficult. The economic and social costs of unemployment, long‐term unemployment, discouragement and widespread low‐quality jobs for young people continue to rise and undermine economies’ growth potential.
------------------------------------------------------------------------------------------------------------------------------------------
Keep it safe. Keep it in a New Zealand Mint safety deposit box. Details here »
------------------------------------------------------------------------------------------------------------------------------------------
2. We're famous - FTAlphaville cited our story on the RBNZ's intervention in this piece.
------------------------------------------------------------------------------------------------------------------------------------------
New Zealand Mint. Experts in gold & silver bullion, commemorative coins and jewellery. Details here »
------------------------------------------------------------------------------------------------------------------------------------------
3. How Chinese subsidies changed the world - Here's Usha and George Haley at the Harvard Business Review with a piece showing just how subsidised China's export sector is.
New Zealand talks (and assumes) a lot about free and fair trade. China is the least free and fair. We should be just as unfair and selfish. Our biggest success is a state mandated export monopoly that strives to create market power globally. That's Fonterra. We should do the same with red meat.
Government subsidies to produce technologically advanced products and undercut foreign manufacturers have buttressed China's trade prowess. Since 2000, the value of Chinese exports more than quadrupled. In 2009, China surpassed Germany to become the world's largest exporter. In 2010, it overtook Japan to become the second-largest manufacturer, and its foreign-exchange reserves became the largest in the world. Last year, China overtook the U.S. to become the biggest trading nation (as measured by the sum of goods exported and imported).
In the Chinese industries we studied — solar, steel, glass, paper, and auto parts — labor was between 2% and 7% of production costs, and imported raw materials and energy accounted for most costs. Production mostly came from small companies that possessed no scale economies. Yet, Chinese products routinely sold for 25% to 30% less than those from the U.S. or European Union.
We found that Chinese companies could do this only because of subsidies they received from China's central and provincial governments. The subsidies took the form of free or low-cost loans; artificially cheap raw materials, components, energy, and land; and support for R&D and technology acquisitions.
Since 2001, when China joined the World Trade Organization, subsidies have annually financed over 20% of the expansion of the country's manufacturing capacity. The state has willingly paid the price of economic inefficiency to accomplish political, social, economic, and diplomatic goals. Huge Chinese subsidies have led to massive excess global capacity, increased exports, and depressed worldwide prices, and have hollowed out other countries' industrial bases.
------------------------------------------------------------------------------------------------------------------------------------------
Available now. Our brand new 1 oz Taku gold bullion coin. Details here »
------------------------------------------------------------------------------------------------------------------------------------------
4. Caps on Chinese foreign investment? - Caijing reports a senior Chinese economist calling on the State Council there to limit Chinese investment abroad to a maximum of US$150,000 or 50% of their portfolios.
About 51% of the ultra-high-net-worth Chinese, those with at least 100 million yuan of investable assets, said they had money invested overseas, according to a Wall Street Journal article, which cited a report by consulting firm Bain & Company Tuesday.
The revelation that Zhang may have rather wantonly flouted the rules has led to a wave of outrage on Chinese social media, with scores of Weibo users decrying the way the rich can often buy their way into, or out of, seemingly anything in contemporary China.
"Do money and power top the law? Can the rich just use money to solve everything and get what they want?" wrote one Weibo user.
6. Don't trust the numbers - FTAlphaville says China has been reporting massive growth in exports, but the numbers may be dodgy because of over-invoicing to disguise capital inflows to get around China's capital restrictions.
We’ve looked through half a dozen strategist notes and not one of them thinks the export data is accurate, which you can see reflected in all the business news coverage of the numbers. Only Taiwan among China’s major trading partners has so far published its own trade data, and they are way out of alignment — China shows 49.2 per cent year-on-year growth in exports to Taiwan while Taiwan shows a 2.7 per cent fall in imports from the mainland. The numbers for Chinese imports from Taiwan are similarly out of whack between the two countries’ statistics.
7. Not so fast - It's widely assumed by economists and all the very serious people that China's economy will overtake America's to become the world's largest by about 2017.
Ambrose Evans Pritchard at the Telegraph reckons there are now growing doubts about that.
China's catch-up spurt has a few more years to run in the Western hinterlands perhaps, but when the full story comes out we may find that nationwide growth has already fallen below 7pc.
Mr Li complained in a US diplomatic cable released on WikiLeaks that Chinese GDP statistics are "man-made", confiding to a US diplomat that he tracked electricity use, rail cargo, and bank loans to gauge growth. For a while, analysts use electricity data as a proxy for GDP but the commissars kept a step ahead by ordering power utilities to fiddle the figures. China's catch-up spurt has a few more years to run in the Western hinterlands perhaps, but when the full story comes out we may find that nationwide growth has already fallen below 7pc.
China's Development Research Council (DRC) expects growth to drop to 6pc by 2020. It could be much lower. The US Conference Board says it will average 3.7pc from 2019-2025 as the ageing crisis hits. Michael Pettis from Beijing University thinks it is likely to slow to 3pc to 4pc over the next decade, deeming this entirely desirable if it comes from taming the runaway state enterprises.
If so, China's growth may not be much higher than the new consensus estimate of 3pc for a reborn America, powered by its energy boom and the revival of the chemical, steel, glass, and paper industries.
8. 'It was a data regularity until it wasn't' - Larry Summers makes some good points in this Reuters column about relying on house prices always rising. It's worth remembering for all those buying property in Auckland at the moment.
All participants in policy debates should retain a healthy skepticism about retrospective statistical analysis. Trillions of dollars have been lost and millions have been unemployed because the lesson learned from 60 years of experience between 1945 and 2005 was that "American house prices in aggregate always go up."
This was no data problem or misanalysis. It was a data regularity until it wasn't.
9. China's person-power shortage - Demographics drive everything so it's worth studying the problems with Chinese demographics every now and again. They show China faces worker shortages in the not too distant future.
“The engines powering China’s rapid growth over the last three decades, including labor supply, are weakening,” said Chang Jian, a Hong Kong-based economist at Barclays Plc who formerly worked for the World Bank. The long-term growth rate of 8 percent “once regarded as a bottom for China is now increasingly a ceiling.”
Nationwide, China’s working-age population share had the first back-to-back drop last year since at least 1995, statistics bureau data show. A survey of 325 members of the American Chamber of Commerce in China in November and December found that rising labor costs were the biggest business risk in the country.
China’s household-registration system, or hukou, constrains consumer spending by excluding migrant workers from social benefits and forcing them to save more money for education or in case of illness, Goldman Sachs Group Inc. said in a May 2 report. Easier rules would have increased consumption’s share of the economy by about 3 to 5 percentage points in 2011, according to Goldman Sachs.
10. Totally Clarke and Dawe - They float a radical idea.
Joe Hockey has a 'preventer'. Handy thing.
9 Comments
Bernard, thanx for posting #3, not because of the subsidies but because it backs up what i have been saying for a vey long time.
"massive excess global capacity, increased exports, and depressed worldwide prices, and have hollowed out other countries' industrial bases."
That is why we did not have inflation during the recent boom years, and why we will not have inflation in the future.
"Massive excess global capacity"
The world is capable of producing goods faster than we can borrow the money to buy them.
And, on the subject of inflation and deflation.
Recent articles have said that the IMF and others are "Baffled as to why the world has no deflation"
The answer, to me at least, is simple.
When an economy collapses it is because of a collapse in demand. For a short period thereafter there is deflation as businesses run down stock which they had built up. Then the supply dries up and the economy reches a new equalibrium at a lower level of GDP.
Now with all this money printing the world has far more money than supply and this should cause deflation, but it hasnt.
This is because there are at least two markets. The investment market and the peoples market, where goods and services are bought and sold.
Most of the QE has gone into the investment market causing inflation in that market (witness the DOW) while the peoples market remains sluggish.
Look at it this way.
Say Bernard had a company and the shares were worth $5 each.
Now those shares jump up to $20 each. Has that effected Bernard's sales, NO
Now the shares drop to $4 each has that effected Bernard's sales NO
That is because they operate in two different markets.
#1 As the report suggests - solutions lie in labour market policies - and not of the sort that pay young people less than a living wage. In the US, JFK labelled it 'affirmative action' in an attempt to resolve racial discrimination/inequality. Clearly, we now have youth inequality. It's easy enough to regulate for better corporate citizenship.
Also related, here's Elizabeth Warren talking a whole lot of sense again in the US;
A study this year by the Congressional Budget Office found that for every dollar the federal government offers in student loans, it makes 36 cents in profit.
Shameful.
Fabulous Accounting Industry News.
UK watchdog probes KPMG in fresh blowThe UK accounting watchdog has launched two separate investigations into KPMG, only weeks after the firm was caught up in an insider-trading scandal involving its Los Angeles audit practice.
http://www.ft.com/cms/s/0/3e6973e4-b8bd-11e2-a6ae-00144feabdc0.html#axz…
Wow Local KPMG Partners must be so proud, why don't they simply work under their own names ?
That massive leak of offshore tax haven a month or so ago? It seems the UK, US, and Australian governments have been interested as well
http://www.bbc.co.uk/news/business-22466922
#8,While there may be no threshold beyond which debt automatically becomes catastrophic, and while the British and American experiences are both suggesting that fiscal contraction in a slack economy where interest rates are near zero is inimical to growth, it is a grave mistake to suppose that the debt can or should be accumulated with abandon.
Sound familiar...? you little Million dollar a house Uriah's...?
Bloomberg News in trouble for getting its news by spying on the high paying business users of its terminals http://www.theatlanticwire.com/business/2013/05/why-billions-are-stake-…
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.