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Tuesday's Top 10 at 10: Charlene Chu and China's 'Minsky Moment'; How Australian term depositors have more protection than NZ's'; China's over-capacity and deflationary driver; Helicopter drops; Dilbert

Posted in Opinion Updated
This daily collection of links and comment was previously sponsored by NZ Mint. We'd welcome a new sponsor.

Here's my Top 10 links from around the Internet at 1 pm today.

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 today is #9 explaining why deflation is a problem globally.

1. China's credit growth - China now dominates New Zealand's economic outlook so it's worth watching any credit bubble that might be brewing there.

Ambrose Evans Pritchard is in good blood curdling form with this Telegraph piece quoting Charlene Chu from Fitch Ratings about China's credit-fueled investment spending and how sustainable it is.

Rightly, she points out the whole she-bang is state controlled in the end so the Chinese government can simply write off the debts and start again.

The trouble is it will slow things down while the write offs happen and the new credit growth dissolves. David's Top 10 yesterday had an excellent chart showing the ructions in China's short term funding markets in recent days.

Here's Chu with a shot across the bows of the China bulls:

"The credit-driven growth model is clearly falling apart. This could feed into a massive over-capacity problem, and potentially into a Japanese-style deflation," said Charlene Chu, the agency's senior director in Beijing.

"There is no transparency in the shadow banking system, and systemic risk is rising. We have no idea who the borrowers are, who the lenders are, and what the quality of assets is, and this undermines signalling," she told The Daily Telegraph.

Bank Everbright defaulted on an interbank loan 10 days ago amid wild spikes in short-term "Shibor" borrowing rates, a sign that liquidity has suddenly dried up. "Typically stress starts in the periphery and moves to the core, and that is what we are already seeing with defaults in trust products," she said.

Fitch warned that wealth products worth $2 trillion of lending are in reality a "hidden second balance sheet" for banks, allowing them to circumvent loan curbs and dodge efforts by regulators to halt the excesses. This niche is the epicentre of risk. Half the loans must be rolled over every three months, and another 25pc in less than six months. This has echoes of Northern Rock, Lehman Brothers and others that came to grief in the West on short-term liabilities when the wholesale capital markets froze.

The ratio of credit to GDP has jumped by 75 percentage points to 200pc of GDP, compared to roughly 40 points in the US over five years leading up to the subprime bubble, or in Japan before the Nikkei bubble burst in 1990. "This is beyond anything we have ever seen before in a large economy. We don't know how this will play out. The next six months will be crucial," she said.

2. Where's the guarantee? - Also keep an eye on the losses being inflicted on the regular savers who held convertible debt in Britain's Co-operative Bank (completely unrelated to the one here).

Here's Philip Aldrick from the Telegraph with the report on what Britain's savers are learning in a post-guarantee world. It's all very Cyprus and Open Bank Resolution...

Holders of £370m of permanent interest bearing shares (PIBS) issued by the Co-op and Britannia Building Society before its takeover are expected to have their coupons cancelled, making them effectively worthless. About £60m of PIBS are held by members of the public, paying interest annually of between 5.5pc and 13.5pc a year. PIBS are typically owned by pensioners, attracted by the steady guaranteed income.

Under the terms of the rescue, the Co-op Group will offer them new bonds instead that will cut the value of their holding by more than half. The insider conceded the group was aware there could be an outcry among retail investors but argued there was little choice because of where they sat in the capital structure. PIBS are the mutual sector's equivalent of shares, which arguably could have been completely wiped out had the bank been listed.

3. Speaking of guarantees - Most New Zealand term depositors in our banks are under the mistaken impression they are first in the queue to get their money back if New Zealand's big banks ever had to be restructured. They will actually be second in line behind holders of covered bonds, many of whom are European banks and pension funds. Fitch points this out in this review of Australasian covered bonds which points out Australian term depositors are first in the queue there, but second in the queue here.

Asset encumbrance has increased for Australian and New Zealand banks as a result of issuing covered bonds, but it is likely to remain low relative to many international markets due to issuance limitations. Depositor preference in Australia provides a greater structural subordination risk, although Fitch has not notched the ratings of senior unsecured debt below bank Issuer Default Ratings (IDRs), as the banks have strong asset quality and high levels of collateral coverage. New Zealand does not have depositor protection.

4. Country-by-country tax reporting - There's a growing drive overseas for multi-national companies to have to report to shareholders what the tax is they pay country by country to essentially embarrass them into paying their bills in the various countries they operate.

Needless to say, the multi-nationals are not so keen. Here's the FT on the plan being considered by the G8.

US business groups have been opposed to even the smallest foray into the kind of country-by-country tax reporting debated by Group of Eight leaders, highlighting the challenges in implementing such provisions even if agreement is reached in Northern Ireland.

A key plank of the G8 agenda to boost tax transparency by multinationals has been to force them to at least disclose how much tax they pay in each country.

In the EU, the debate surrounding country-by-country tax reporting is more advanced. In the wake of the US Senate hearing on Apple’s schemes to minimise its international tax bill last month, the EU floated a proposal to expand such reporting requirements beyond the energy sector – and banks – to every multinational.

5. Thank goodness - FT reports how a bid to create new synthetic collateralised debt obligations has failed. Whew.

An attempt by two big Wall Street banks to revive notorious credit boom-era securities blamed for exacerbating the global financial crisis has failed after investors balked at buying some of the derivatives on offer.

JPMorgan Chase and Morgan Stanley have scrapped a plan to sell “synthetic collateralised debt obligations” – sliced and diced pools of credit derivatives – after failing to find investors willing to take on all of the deal’s different pieces.

6. Sympathy for the Luddites - Paul Krugman has some, and that's why he's suggesting a guaranteed mimimum income of sorts.

Education, then, is no longer the answer to rising inequality, if it ever was (which I doubt).

So what is the answer? If the picture I’ve drawn is at all right, the only way we could have anything resembling a middle-class society — a society in which ordinary citizens have a reasonable assurance of maintaining a decent life as long as they work hard and play by the rules — would be by having a strong social safety net, one that guarantees not just health care but a minimum income, too. And with an ever-rising share of income going to capital rather than labor, that safety net would have to be paid for to an important extent via taxes on profits and/or investment income.

7. 'What we need is real helicopter drops' - The idea of printing money and then dropping dollar bills from a helicopter onto the population below so they pick up the money and spend it is an attractive one for those trying to fight deflation and depression, or at least more attractive than the current version of money printing, which involves handing it over to banks, who promptly sit on it. 

Here's interfluidity with a discussion:

So, David Beckworth has a fantastic piece arguing that, in service of an NGDP target, the Fed might sometimes coordinate with the treasury to arrange “helicopter drops”, which Beckworth defines as” a government program that gives money directly to households”.

Japan has been the king of “helicopter drops” under the money-financed government spending definition, but has never undertaken the sort of direct-to-household, unconditional transfers that Beckworth proposes. Beckworth is very clear that he supports heli drops precisely because “[f]iscal policy geared toward large government spending programs is likely to be rife with corruption, inefficient government planning, future distortionary taxes, and a ratcheting up of government intervention in the economy.” Direct, unconditional, uniform transfers to households are nearly immune to corruption and involve no increase in the degree to which government directs the use of real economic resources. (See thisexcellent piece by Matt Bruenig.) Japan’s fiscal policy, on the other hand, has been notorious for cronyism, and has directed oceans of sweat and concrete into infrastructure.

8. A surplus of Chinese graduates - NYT has a nice piece on a swathe of Chinese graduates struggling to get jobs as the economy there slows down.

9. Overcapacity fueled by subsidies - That's the diagnosis of China's problem in this excellent FT piece by Jamil Anderlini.

The solar industry is only the most pronounced example of broader overcapacity in China. Its rise and fall has followed a pattern that is becoming familiar across the world’s second-biggest economy.

The problems stem from China’s industrial policies and a vast array of subsidies that allow whole sectors to spring up overnight. Ambitious local officials are keen to lavish government money on what they hope will be success stories that can further their careers.

“When you have administrative measures you get huge overcapacity and this country has created overcapacity in a whole lot of areas,” says Hank Paulson, former US Treasury secretary, who often visits China. “It’s not just clean technologies; steel, shipbuilding we can name all the areas.”

From chemicals and cement to earthmovers and flatscreen televisions, Chinese industry is awash with excess capacity that is driving down profits inside and outside the country and threatens to further destabilise China’s already shaky growth.

 

 

(Updated with cartoons)

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58 Comments

#2. and to think that this

#2. and to think that this time last year Cameron, Osborne and the Bof E, with the EU bullying them, wanted to "sell" (read give away) several hundred Lloyds branches to the Co op! Have you ever been into a Co op shop of any kind? Filthy run down things.
Ergophobia  

So are Kiwi first in line if

So are Kiwi first in line if they have deposits in a bank in aus?

all depositors are ranked

all depositors are ranked equally regardless of residency. Cash Management Accounts were excluded. Possibly still are. People simply open seperate accounts with each (multiple) financial institution and credit union and building society - heaps available - spread the wealth around

And if so, how do we set one

And if so, how do we set one up from NZ.
May as well make use of the Aus$250,000 guarentee.
But I'm sure the Nats will put and end to matters if we can easily do so. They don't want the average Kiwi to have a choice. Better they're a slave to overseas banks !!!

Interesting question

Interesting question Factboy
If you wish to open an account with ANY financial institution in AU you have to go through a 100 points test, like producing documentary evidence that you are a real person, like a passport, drivers licence etc, any 3 will do
 
But, and here's the interesting bit
 
Over the past 6 years electronic, internet based savings accounts have sprung up. You can open an account with any of the majors without going through the Identification process. The account has to be linked to or attached to any other originating bank account. You can ONLY transfer money in and out via internet banking.
 
Be interesting to know if you can link an AU-iSaver account to any NZ domiciled bank account.
I am told you can use internet-banking for international transfers.
I suspect it can be done.

Thanks you for that

Thanks you for that Iconoclast !!!
I'll have a go and see what's what with that idea. I get the general gist of what you're saying.
 
Cheers

Local ANZ officer told me to

Local ANZ officer told me to ring the ANZ in Australia directly (gave me the #) if I wished to be eligible for the guarantee. She said that opening a foreign currency account locally did not qualify for the Australian Government guarantee. I would need to front up in Australia to achieve the proper validation. Cannot confirm or deny the veracity of this edict, as I didn't pursue the option, because I don't have much faith in Australian integrity since the under arm bowling incident.

Stephen:  couple of

Stephen:  couple of things
(a) A couple of months ago there was a discussion here as to whom the the government guarantee applies to and it was categorically stated it was applicable to ALL depositors regardless of domicile

(b) Up until a few years ago the international banking system used Swift Numbers to identify each bank - it was a combination if letters and numbers ie the swift number for ANZ in Australia is ANZBAU3M - now they have discarded that system (I believe) and introduced a numbering system akin to (ISD) international phone dialling - where you can link your banks accounts together directly and or do international transfers using internet banking

iconoclast - I have no exact

iconoclast - I have no exact idea. The person who told me the above is a local branch officer here in suburban Wellington. But she did investigate after I made rather explicit demands that she should extract the necessary info from her superiors, as my intent was serious - which is always in doubt until the money arrives - you know the joke "check's in the post" etc.

I would push it - as gibber

I would push it - as gibber says downthread - all secondary accounts feed off the authentication of the primary account - and there should be no reason why ANZ.AU cant treat ANZ.NZ as the authenticating account

Ok will ask again tomorrow -

Ok will ask again tomorrow - but just out of interest the Swift Code bank identifier system looks alive and well to me - I recently sent ~NZD 400,000 converted to STG to my brother-in-law in the UK and I am positive all the identification was Swift Code related but will check that also.

the comment about the swift

the comment about the swift code was based on a visit to my local ANZ branch about a year ago, going through the hoops over an unrelated matter, and one of the bankers yelled out what is our Swift Code, and the manager who was attending to me said - oh we dont use them now - its a number

And to get an AU based

And to get an AU based account. You need to have passed the AU Governments 100 point system.
 
And to have had that authentication be done by someone who is a staff member of the AU bank.
 
I doubt having the authentication being done by an ANZ NZ staff member is going to cut it from the 100 point scenario.  Happy to be proved wrong if someone works out how to make it happen
 
(Updated: Looks like Factboy has a pointer to a web page that documents how to get  a Comm bank account set up through contact with ASB staff.

while I was listening to the

while I was listening to the discussion about the govt guarantee applying to overseas account holders I got the impression opening an account for overseas based depositors seemed to be an every-day occurrence. How to do it wasnt discussed and how it was done wasn't discussed .. but I definitely got the impression is wasn't that hard ..

Stephen Hulme, Gibber,

Stephen Hulme, Gibber, Factboy:
Here's a clue for yous .. some years ago I received a bearer cheque made out to me for $100. I owed my son $100. So I got his savings bank account pass-book off him and went down the local ANZ branch .. filled in the deposit slip .. handed the pass-book and cheque and deposit slip to the teller .. explaining while the cheque was made out to me I was depositing it in my sons account .. I showed my ID .. she said .. ooooh you cant do that .. it's illegal .. I said rubbish .. was referred to senior teller .. no-can-do .. that's illegal .. (same again for the head-teller) then referred to branch manager .. yep .. no-can-do .. that's illegal .. digging my toes in by this time (I was pretty shitted-off by then).. we got on the phone to ANZ-Regional Head-Office .. oh, that's ok .. that's just an in-house internal set of rules for the doofuses in the branches who don't understand banking ..

what I'm trying to say is

what I'm trying to say is that the real knowledge of the banking system is no longer available in the branches - it's in the head-office or regional offices.

try ANZ international in

try ANZ international in Wellington
http://www.nz.anz.com/personal/accounts/moving-new-zealand/international-banking-services/
They should be able to liaise with ANZ Melbourne and should be able to do the 100 point check list crap based on your existing account for you
 

Here's a really useful page

Here's a really useful page on doing so
http://www.marketingfirst.co.nz/2011/05/how-to-set-up-an-australian-bank...
 
Has anyone got a better site or have comments about the above method, or have they got a better way?
 
I reckon if enough Kiwi's did this, the Aussie banks in NZ may as well give us the same guarentee as they do to Aussies. i.e we will no longer be second class savings citizens in our own country.

Hey that link seems to be

Hey that link seems to be useful. Especially if it works as stated.
 
 

I am told you can use

I am told you can use internet-banking for international transfers
 
Yah. And if I choose to transfer money from my AU CommBank account to the daughter company NZD ASB account I find it cheaper to go via Ozforex to
 
a) escape Commbank fee for international transfer to its  subsidiary
b) escape ASB fee for international transfer from its parent
c) overall get a better transfer rate than that offered by Commbank
 
Regarding setting other accounts up. They all feed off that initial 100 point test that proves you are a real person.
 
So, if you want to have an account that will benefit from the AU govt guarantee, best set up an AU based account.

ho ho ho - ozforex - agreed -

ho ho ho - ozforex - agreed - 2% round trip versus 10% round trip

I still use swift codes, did

I still use swift codes, did a TT to a USD bank account last week. When it came to an australian bank account to meet the bank guarantee requirements I had to present myself at a branch is aussie to set up base account and deposits off that. No exceptions with my my bank.
I asked the question here before and never received a clear cut reply so sourced a legal opinion.

#6. Our Working for Families

#6. Our Working for Families is an important model.
#7. Arguably when the Fed, BOE etc spent money to fund their government's fiscal deficits, including to fund welfare, health and day to day living, this was a form of real helicopter drops. The bit that lent money to banks to sit on; was not. Bridges to nowhere are never a good idea; although some infrastructure of course is useful. (The Americans could have spent more on fixing their roads, bridges etc)
In our case for example, we were quite rightly apparently going to part government fund rebuilding Christchurch in any case. Quite why we borrowed money offshore to do so, is still lost on me. The Americans, Brits, Japanese et al most definitely would have printed the money. 

#7  I don't favour "QE for

#7  I don't favour "QE for the public" with the current credit and tax system in place but with the appropriate reforms to the financial sector Steve Keen's debt reducing jubilee might work as a reset. Would smash the status quo wide open
http://www.scoop.co.nz/stories/HL1204/S00101/debt-jubilee-for-new-zealand-the-great-reset.htm
 
Not that neo liberals would admit it but even Milton Friedman was against private banks controlling the money supply, and an advocate of public credit (and withdrawl) as necessary

http://inflation.us/charts.ht

http://inflation.us/charts.html
 
How anyone can stick to the 'working for families' mantra, at this point, I don't understand. What part of 'it's history, so far overshot there is zero chance of reconciliation' don't some folk understand?
 
Keen's closer to it than most, but the collective global cranial disconnect re 'old value' vs 'new value, would close the system down just as surely as a sieze-up.

pdk, I'll bite, as I assume

pdk,
I'll bite, as I assume your WFF rant was aimed at my comment. How is it history, or overshot? How else would you try and have essential but low paid workers manage to live? I note as far as I can tell the Nats have not even hinted at changing the programme. If it was such a disaster, and given Labour brought it in, you would think the Nats would be all over it if it was history, shot and unreconcileable as you suggest. 
Yet strangely you seem sympathetic to Steve Keen's plan to print tens of billions and wipe out everyone's debt; as well as giving say $100k to everyone who doesn't have any debt. I actually respect Keen, and his plan may have theoretical legs, but it is incredibly radical, and if you read your linked paper has unintended consequence after unintended consequence, each with its own massive band aid.
Simpler if necessary to apply some capital controls now and not screw the exchange rate by borrowing offshore. If we fail to take some of those steps now, and then debts are unmanageable, we either end up with very stressed banks, a lot of bankruptcies and foreclosures, or we let inflation go to say 5% for 2-3 years, maybe backed with tax cuts at the low end (which go to all income earners) to keep low income people especially and the economy going. I would prefer the steps taken now, while maybe we have time, rather than the higher inflation process.
All pretty orthodox, and not all that hard.

Good on you. Nothing like

Good on you. Nothing like thinking, even if it ends up reinforcing pre-held ideas; and much better if you find out you were wrong.
 
Take a piece of blank paper (an important thing - represents clearing the mind. Draw a bell-curve (slice through a pith-helmet), with a horizontal line underneath. The area contained - and we can alter the upper profile - represents the ultimately recoverable amount of any given resource (which is what money is ultimately a proxy for; processed resources). Think of it as an infinite series of vertical bar-graphs.
 
Now growth. Is expressed in terms of doubling-time. 3% growth doubles in 24 years, 10% in 7 years. 19 doublings to the million, no exception to the math.
 
As it pertains to the graph, draw a vertical line down the middle. The area on the right, is the last 'doubling. One move. Draw another half-way between the left-hand-start of the graph, and that mid-line (1/4, in other words - actually, in volume terms it'd be closer to the middle). See where I'm going? With 1/8 of a resource depleted - and it may have taken many, many 'doublings' to get there - there are only 3 doubling left, with 1/4 gone, 2 doublings, and with 50% gone, an 'as much as we've donein total, to date' to go.
 
Now draw that M1-2-3 exponential graph, atop the left side of the bell-curve. See how it fits? So we ran a fiscal system that accounted for growth in resource consumption - and indeed we could have done nothing else. The problem comes when the vertal graph diverges from the levelling-off bell-curve. We can alter the shape - but not the area - of the bell, so if you force the upper curve to fit the vertical line you continue to presume desirable/possible, the right-hand end must steepen, and must very quickly become vertical. The longer you leave it - and it won't last long regardless - the steeper the cliff (Seneca event).
WFF, like investment-returns, interest-charges, profit-taking, money-creation, good-intentioned child-poverty moves, cumulative personal gains - is part of the vertical graph. Just increasing the expectation vs the underwrite. It's ponzi territory now.
 
So the target should be actually having the resource(s). Keeping ownership of generation is valid. Keeping ownership of land is valid. Water too. Equality - who get's what share of that which is contained in the graph - is the Labour/National/current Green thing.
 
Ultimately, they all have to address the pending Seneca, reduce consumption, remove growth from the system. Keen is closer to that - Daly too - than anyone.

PDK, Am aware of your views

PDK,
Am aware of your views on the imminent ending of many resources, fossil fuels in particular; and while the evidence doesn't suggest to me that it is quite as imminent as you often suggest, clearly more scarce and expensive to get oil will have an effect on the world's ability to consume in real terms. Real (and not nominal, which is of course a different thing) GDP growth on a world scale may well become difficult. 
I am certainly an advocate of NZ pushing to maintain its market share of real consumption, for which it will need to maintain its share of prodcutive ability, and its ownership of the capital things that will be important in delivering that production, as in the end our consumption will have to closely correlate with our production plus or minus capital returns (they in our case being very negative after years of neglect of the capital side of the country's balance sheet). 
And then there is the question of how our market share is in turn shared around among ourselves; Krugman's particular point. Most of the developed world including NZ has had growing inequality of incomes. From memory the bottom 50% of Americans have had no lift in real incomes since the 1970s. NZ will be similar.
Working for Families is an important way to somewhat modify that imbalance.
I can only infer from your resistance to WFF that you would like to run a survival of the fittest system, (ironically where the fittest are the people who have the most proxies as you call them) where even the working poor are encouraged to die off as rapidly as possible.
Apart from the very dodgy ethics of that policy, the essential workers do stuff that I very much appreciate. So I'm keen they live a decent life; at least relative to everyone else, if indeed our lives have to all get leaner.

Not "like" but what nature

Not "like" but what nature is. I fail to understand why ppl get emotive and try and claim others want bad things to happen rather than its a comment that bad things will happen and actually doing something about it will make it less bad.
If WFF cant be paid, and indeed neither can welfare because there wont at some point be the economy to support it, what alternative is left?
We've been through a short period where the govn has had to borrow large sums to keep going with the promise to pay back based on a recovery to business as normal. So we are going to see another, worse recession fairly soon, what happens when it dawns on the lenders most countries cant pay this borrowing back?
So the money dries up, what then? to keep the ponzi scheme going? print it? Much of our economy requires oil and other imported materials, how do we sell enough stuff to buy in those essentials when no one trusts our script?
So what else? well all thats left is to "steal" it from the rich by increasing taxes significasntly and the saved. Dont be surprised if we see various funds like kiwisaver forced to take on council and govn debt in increasing %sas its our patriotic duty to invest in NZ.
So really I think its going to be bloody hard....and thats not because PDK and I want it so.
regards
 

steven, In my view you are

steven,
In my view you are confusing many things. Nevertheless on a couple of your key points I agree with you. In borrowing offshore and hoping; as the current government's settings have the country doing, we are definitely on the wrong path. Regardless of any resource crunch, at some stage you would expect our current account will need to be in balance, and that will be a shock of sorts to people who have become accustomed to cheap annual holidays in Europe.
WFF and welfare are primarily about sharing around whatever resources/ consumption we do have, not specifically growing it.  You call them stealing from the rich. Assume for a moment that PDK's worst assumptions do in fact come true. And that the world, NZers included, have to curtail consumption dramatically. There are a couple of choices; the rich carry on consuming as ever, and the rest are encouraged to die off asap, through stopping of all welfare, and even WFF. Or in fact steps are taken to share consumption around, concentrating on the necessities of life. In challenging WFF and welfare, you and PDK are opting for the "kill as many people off as possible" option. Not one I buy into.

Stephen L You say: I'm

Stephen L
You say: I'm certainly an advocate of NZ pushing to maintain its market share of real consumption, for which it will need to maintain its share of prodcutive ability, and its ownership of the capital things that will be important in delivering that production, as in the end our consumption will have to closely correlate with our production
 
Consume. Consumption. Produce. Production. Interesting words in isolation. Yes, consumption is the RHS side of the equation, and Production is the LHS of the equation. One is a precursor to the other.
 
Apply this in a visceral and blatant local context. OIL is a significant component of NZ Export data. It has a defined exhaustion date. See below. Tiwai Aluminium smelter produces an intermediate product which is a proxy for exporting electricity. It seems to have and end date. That production appears to be about to shift from export production to domestic consumption. it's end date is on the horizon now.
 
So answer me this .. how long can NZ continue on without answering the big questions PDK is asking? Can we keep increasing the consumption/demand side of the equation. How do we increase the production/supply side of the equation? Can you refute the following?
 
by iconoclast 30 Jul 2012
by iconoclast 21 Oct 2011 repeated from last year
http://www.interest.co.nz/property/56293/further-improvements-nzs-balance-sheet-needed-theres-sustained-pick-national-property
One reason why NZ needs to consider closing its doors to immigration. Over the past 10 days 2 comments have been posted (by some-one else) drawing to your attention that NZ consumes 160000 barrels of oil per day. That's 13 barrels of oil per person per year for every one of 4.4 million ppl. Man, woman, and child. A cost of USD $800 per year per person. (NZD $1000). However that is (currently) offset by NZ production of 90000 barrels per day which is exported, leaving a net cost per person of USD $500 pa. The problem is those fields producing the local 90000 bpd will be exhausted within the next 10 years. Which means in 10 years time the imported costs to the existing population will increase from USD $500 pp to USD $800 pp in constant $ terms.

 
HOWEVER, for every new migrant arriving in NZ, the incremental cost is an immediate additional imported cost to the economy of USD $800 pa per person.
 
AT current July 2012 cost of USD $90 pb the annual additional (imported) cost is now USD $1170 or NZD $1450. Thats crude oil, not the processed refined cost.

and what pray do we do about

and what pray do we do about all the NZers who have lived abroad earning $s but paying no NZ tax as some at least decide to return?  and will expect support?
and yes I agree on closing the doors, no options especially with un-employment where it is....
regards

What about all those kiwis

What about all those kiwis that sell yards of foreign currency and come home laden with the equivalent of export NZDs. Do they get preference for personally unwinding the damaging current account deficit?. Capital maybe under valued compared to resources - but you can turn to barter if you so wish and remove youself from the workforce- as you probably consume more than you add to the nation's welfare.
 
Lets get down to iconoclast's basics - which cohort is going to be called upon to sacrifice a family member or more if we wish to bring this discussion to it's logical conclusion?

Sh - what about them? If they

Sh - what about them? If they turn that into something that makes them resilient to what has to be 'close and coming', they're on a winner. If they leave it in the bank, invest it, or use it to extend more debt, they're on a loser.
 
Capital is obviously in trouble in two ways: Nicole Foss rightly points out that, all things being equal, the exponental ramp in credit-based trading of existing stuff, is a ponzi. Alone, that would suggest a ponzi-bust down to early '70''s values of things (like houses). Good luck watching the global financial system cope with that!
 
But ultimate scarcity (the debate about that was probably the reason she (the Automatic Earth now) and The Oil Drum parted ways. Ultimate scarcity says that you bid for the necessities, the poorest drop out and die. That has to give rise to inflation.
 
Which predominates, in light of the change and during it, is more your expertise than mine. I wouldn't be wanting to be in debt, or trading in a non-essential.
 
I see my actions as using fossil fuels while they are around, to get into a position where I can cope when they are not. Totally valid to scale that, totally stupic to create ever-bigget FF-requirinf infrastructure.

I wouldn't be wanting to be

I wouldn't be wanting to be in debt, or trading in a non-essential.
 
More to the point you are a non-essential, as are all of us.

Stephen Hulme - I anticipated

Stephen Hulme - I anticipated you'd run away, go lightweight at some point. It's not the first time. Why is that, do you think?
 
If you want to make a real contribution, think through the following: The objective must be to see NZ (we can't realistically influence others, more than we did by leading by example in the past) through what must happen in the next decade or two. Nat and Act, as they exist, have no answers and no ability to obtain any, The remnants of Douglas Labour don't / won't for the same reason. (You'll know who is in/out). Traditional cloth-cap Labour won't either - because it's still about growth/consumption.
 
So Labour has to morph - do what Lloyd Geering did to relifgion back in the 60's. Anyone wanting to make a difference, could do a whole lot worse than initiating that morph. I'd start with getting Hodgson to run a workshop - he gets it.

Stop waffling - outline your

Stop waffling - outline your final solution so I can make preparations in defence.

You can't have been

You can't have been listening.
1 - get out of debt (restricts manouevring room)
2 - keep a mental picture of a world with scarce/expensive energy.
3. if you've a house, make it energy-efficient, reduce it's need for maintenance. Even if it's not 'cost effective' now, a point often missed.
4. get food-resilient. If you've space, grow there, if not make arrangements. Water likewise. Energy likewise.
5. Choose how many peope you can support in you particular ark. That's up to you, re your social conscience, and the resources you have available.
6. Then, when you've done all that,  do what I do - urge others to get resilient too.
 
or you could get angry, denigrate the messenger, and use that emotion to drive denial. It's not an uncommon approach.
 
 

None of the above constitute

None of the above constitute a final solution - just cosmetic adaptations to defer the inevitable apocalypse you keep reminding us of. State a more lasting solution or please stop trying to frighten us.

Stephen Hulme - there are

Stephen Hulme - there are macro solutions, and personal ones. I gave you the personal ones requested. You used the fact that they didn't address the macro, as an excuse to run away. Again.
 
 

No need to address my

No need to address my concerns, your personal preferences are your own - some find too much information offensive and as you note the majority of citizens are indifferent to your private views - surely their actions, that you rail against, constitutes irrefutable evidence.

Surely the most important

Surely the most important personal issue folks need to think about at an individual level is aging.  Harsh as it may seem - those who don't make it to retirement save alot of resources.

That is a very good Q, money

That is a very good Q, money isnt a resource, its an IOU, and hence worthless. the deficit will be defaulted on, but since it was craeted out of thin air anyway, going back to that is no biggee.   In terms of ppl coming in with wealth, i commented on that and I said then my worry would be lots of (multi-millionaires) arriving here buying their way in ie welcomed by our useless pollies.
What we are contemplating here is in the limits to growth and it being re-visited and re-validated.
The post below and indeed BH's post some weeks ago lays out that within 50 years we are at peak everything (or importance) pretty much.  However the kicker is we are 6 years past peak oil and on an output plateau...which cant last foreever...not unless forever is 5 years for you. 
Second we eat fossil fuels, so by 2030 there will be at most 1/2 the present oil output available to buy that suggests that we wil be at 1/2 (or at least significantly less) of the present world's population.  So just how are we choosing to do that reduction right now? well by ignoring it so at some stage do it fast and violently it seems. Rather than fertility control, ie chose to have less new family members.
Barter, yes, localisation for NZ....farmers markets etc....the problem is one of swamping the lifeboat. 
 
regards
 
 
 
 
 

So just how are we choosing

So just how are we choosing to do that reduction right now? well by ignoring it so at some stage do it fast and violently it seems. Rather than fertility control, ie chose to have less new family members
 
So why don't you and PDK address this problem, It won't go away by ignoring it? NZ needs essential solutions instead of the eternal "crying wolf" mantra. 

Stephen Hulme - that's

Stephen Hulme - that's straight-out blame-shift.
 
And wrong.
 
I've been arguing this stuff since '75. Got onto a local Council (and Regional forerunner) when I was barely 30. Got up and explained what I explain here (but we had 30 years to do more, then) . Got on a Labour LEC - with someone called Benson Pope, and a local called Rosson - who didn't want to know (and more than one of whom didn't know how to listen). Thought the Fitzsimmons/Donald iteration of the Greens would persuade, they weren't listened to, and her classic Hansard interchange with Cullen demonstrates this.
 
Folk like us have indeed got the 'essential solutions' pretty much thought out. Note that this may not mesh with promises of endless growth (hope for whoever is dissatisfied with their lot, in other words), nor with continuing BAU.
 
You set up the forum (I suggest 30-odd leaders/strategists) and I'll run the workshop. Free. (you can pay my bus - not plane - fare). I'm serious. But I'll bet I'm not taken up on the offer....
 
 

Well its not just PDK's and

Well its not just PDK's and my problem, anyway to start with walk the talk,
1) So we have limited our children, all born before we realised this issue, none after. 
2) Try and educate ppl in say here that there are economic issues, so they have a choice. These issues are long term, ie 5, 25 years...its dismaying how many of our so called leaders lack a strategic view and vision.
3) I use public transport powered by electricity, I bought a house in the location I did to meet the likely excessive cost of petrol and even its scarcity/ratioing).
4) Reduce my carbon foot print and energy use in any sensible way I can.
5) Reduce debt as fast as possible.
6) Be prepared to move/change direction /plan if the information available says do so, mind set.
7)  Get across to the Green MPs I have contact with and indeed anyone Green party linked  that pork barrel politics and soft peddling the hard Qs isnt acceptable leadership.
8) Educate the children to avoid debt but plan to be essential, ie skills and education for the future that cannot be done without but need little debt to achieve (A doctor would be great, but not the debt).  No one will be doing a media studies degree or other such useless crap...or at least not with my support, its their choice after all.
9) Have discusions on what solutions there are.  The likes of Philbest's and HughP's "technology will fix it" ignorance gets exposed for the faulty belief system it is.  As PDK says we need to own the essentials that our Nation needs, however at some point I expect we can simply as a soverign nation take them off whomever currently owns them anyway, so no biggee.  Sell what isnt viable, ie the Air NewZealand's of the world, fat chance, but anyway.
10) Build my own and children's skills that are most valuble in a simpler lifestyle.  Things like how many ppl could shoot / catch / trap / prepare their own meat?  Woodworking? metal working? all good life skills.  
11) Community...try and find ppl with a like minded outlook.
regards
 
 
 
 
 
 

c'mon yous guys ..

c'mon yous guys .. yous'a'doin a philbest on me .. talkin all round the point .. SH knows exactly what you mean

Icono - as his

Icono - as his later-than-yours (2.41) post suggests, yes he does.
 

iconoclast, Am actually

iconoclast,
Am actually sympathetic to the idea of slowing immigration for a number of reasons. I probably better could have talked about maintaining our wealth/ production/ consumption share per capita than in total; as chasing the total can be a fool's game if it needs very high immigration to deliver it.

SL - no,no,no. You sail right

SL - no,no,no. You sail right past the point. Perhaps folk like you - and Bernard "I think there's more growth in the system yet" Hickey - don't have cranial wiring capable of addressing the rapidity whth which exponential numbers ramp. Try filling a wine-bottle under the tap, and anticipate turning the tap off when it's exactly full. Beats you every time.
 
GDP is a nonsense measure - and destined to get more adrift as we go on. Let's call it 'real activity". Yes, it will decline.
 
"Maintain market share of real consumption". Yes, with 3x too many people on the planet, you're doing that now. Drop the word 'market' though, hey? It suggests a mind-set. Just 'share' is the concept, real is good too.
 
Productive ability? Spare me, you're going to reduce resources, so you can buy more resources? I can't help you there - that's just silliness. (Perhaps it the mind-set above - the inability to dissociate the idea of 'money' from the resource - processed or not - it is expected to buy.
 
You have to abandon the current fiscal concept, go straight past go without picking up the 200, and posess the utility.
 
I have no problem with your desire for equality - lean that way myself if I ever think about it - but if you don't address the bigger issue, you're wasting your time. And - given that 5 billion-odd have to depart, faster than old-age attrition will force, who exactly do you want to get equal to whom? Maori used to save the tribe, but fight/kill/eat anyone else....

double post - so I'll use it

double post - so I'll use it to reply to Kiwimm below;
Exactly!

Looking at inflation-adjusted

Looking at inflation-adjusted gross world product we see that 1900 = 1102.96 and 2012 = 52008.53. This gives an annual growth rate of 3.5% which is a doubling time of 20 years.
 
So assuming a peak now, we have 20 years until all resources are gone i.e. by 2032.Let's assume we are wrong about the peak and we have underestimated the total world reserves by half i.e. we have twice as many resources. What year does this give us until all the resources are gone? Answer is 2052. A time when most of us and our children will be alive (pending starvation/wars/pestilience etc).
 
4 times the resources = 2072
8 times the resources = 2092.
Anyone want to venture that we have more than 8 times the total resources (assuming we have used 0.5 in all history to date then 15 times that much left)?

Worse of course that doesnt

Worse of course that doesnt take into account the effort needed to take/extract whats left. So the resources available will follow a faster drop as we cant afford to extract them. So 3 possibilities, 1, we wont get to 2032, we'll get to say 2022 and then whats left will stay there too expensive to get out.  Or second, more and more countries will simply disappear off the world's economic map...they wont be able to compete (buy) so wont (that suggests a wee bit of anarchy).   Lastly since we wont be able to get whats left as fast it may not be 2032 but 2042, but really what the economy going to be like on significanlty less resources than it needs?  I cant see the latter option anyway....its too polite and nature isnt polite.
regards
 

Agreed. My post above is

Agreed. My post above is based on the assumption that it is possible/economical to extract the resources. This is likely not the case.
Those who says high prices will dampen demand are also correct but dampened demand = less resources used = less wealth = lower standards of living.
 

How does less resources used

How does less resources used equate to less "wealth" and a lower standard of living?  What is this "standard" of living you refer to?
 
I'm currently staying in the jungle of Costa Rica where there is certainly less financial wealth but the quality of living is much higher.

I was framing it from a

I was framing it from a Western perspective (wealth = financial assets). I personally don't equate wealth only to money. Security, health, skills and family all rank higher.

Mathematically, assuming a

Mathematically, assuming a peak now, here are the total depletion dates based on rate of usage.
 
3.5% annual growth – 2032 (as above)
3% annual growth - 2033
2% annual growth - 2035
1% annual growth - 2037
0% annual growth (current usage forever) - 2040

#4:   XBRL has been lying

#4:
 
XBRL has been lying around practically unused for yonks now -  a solution looking for a problem.
 
As it's a self-describing reporting technique, getting international tax reporting going could just be the problem it's been looking for all these many moons.
 
When the pupil's ready, the master appears.......