Post RSS Feed 
Podcast Feed
Top 10 at 10: Real estate agencies’ big profits; NZ not in Ring of Fire; Bernanke safe; Dilbert
January 29th, 2010Here are my Top 10 links from around the Internet at 10am. I welcome your additions and comments below or please send suggestions for Tuesday’s Top 10 at 10 to bernard.hickey@interest.co.nz I’m taking Monday off for Auckland Anniversary holiday. Better bloody be sunny… If not, I’d like some of those tic tacs the doctor is handing out.
1. Ring of Fire – The manager of the world’s biggest bond fund, Bill Gross, is closely watched. His monthly newsletter is a must read. This month he produces an excellent chart called the ‘Ring of Fire’, which points to those nations where there is a risk of default and slow growth because of high debt levels and budget deficits.
We’ve adapted the chart to include New Zealand’s numbers, which suggest we’re in the safe camp with relatively low deficits and public debt. This may help explain our relatively strong currency. But we still have some big private debts? How long before some of them are dragged onto the public balance sheet? We may yet see some of that from the remaining finance companies.
Gross says studies of past crises show deleveraging and slower growth are inevitable. There is no quick fix and or way to paper over the cracks and keep powering on.
These examples tend to confirm that banking crises are followed by a deleveraging of the private sector accompanied by a substitution and escalation of government debt, which in turn slows economic growth and (PIMCO’s thesis) lowers returns on investment and financial assets. The most vulnerable countries in 2010 are shown in PIMCO’s chart “The Ring of Fire.” These red zone countries are ones with the potential for public debt to exceed 90% of GDP within a few years’ time, which would slow GDP by 1% or more. The yellow and green areas are considered to be the most conservative and potentially most solvent, with the potential for higher growth.
2. Plenty profitable – Alistair Helm at Unconditional has an interesting post on how profitable real estate agency offices were last year at the pit of the recession in the housing market. It turns out average profit at the largest offices was around 22%, while even the small offices saw 19% profit. I’m surprised at how profitable they were, even after the slump in sales. Just imagine what they were making at the peak of the boom. Or is that because sales people took the hit with lower commissions? Is there room for agency offices to charge lower commissions? We’re still much more expensive than in Australia.
3. Hunt for smoking gun – A Congressman called Darrell Issa is trying to hunt down documents to prove Federal Reserve Chairman Ben Bernanke over-ruled advice from his own officials to bail out AIG, Naked Capitalism reports. It may be too late to stop Bernanke’s reappointment. His reappointment passed an initial vote this morning, Zero Hedge reported.
4. Greek bailout? – The New York Times is reporting European finance officials are preparing a bailout package to help Greece out of its fiscal hole and avoid a default that could tear apart the Euro.
Despite public attempts to discourage such expectations, discussions are under way, although the shape or scale of a possible bailout package has yet to be determined, according to officials in several capitals, all speaking on condition of anonymity.
“Greece failing is not an option and lots of people think that we will have to intervene at some stage,” said a euro-zone finance official, who was not permitted to speak publicly because of the sensitivity of the matter. “It doesn’t have to happen, and we hope it won’t, but it would be better than seeing a default.”
As a condition of any aid package, the Greek government led by Prime Minister George Papandreou, a Socialist, would be asked to provide a more detailed program to bring the country’s deficit of 12.7 percent of gross domestic product under control. European Union rules call for a maximum of 3 percent of G.D.P. Officials insist that any bailout must not put into doubt the credibility of the euro itself.
5. Capital constrained – One of the reasons lending growth is struggling all over the world is that impending changes to rules set by the Basel committee on international banking regulations will force banks to put aside more capital to back their lending. They can do this either through raising more capital from shareholders or simply reducing their lending. Guess which one they’ll choose. Another option for corporates struggling to get loans from their banks will be to go direct to retail investors with retail bond issues. That’s what Fonterra and others are doing.
Morgan Stanley’s Huw van Steenis reckons Europe’s big banks will need to find €83bn by 2012, or shrink their risk-weighted assets by 11 per cent, or €1,000bn, FTAlphaville reports.
We think banks would be likely to reprice loans and reduce credit further – we already model less than 1% loan growth for European banks in 2010. We think Basel 3 and US proposals could mean – unless amended – corporates face a higher cost of credit and need to take on more liquidity risk, as the banks are asked to shed risk.
6. ‘You ain’t seen nuttin yet’ - French trade credit insurer Coface reckons the next global credit crunch is likely to be even more violent than the past two years of turmoil and will probably arrive within four or five years, The Australian reported.
The three credit crises since the oil shock of 1982 had each lasted two years, but they had arrived after prosperous gaps of eight years, then seven years, and then five years, and there was every reason to think that the acceleration would continue, Coface chief executive Jerome Cazes said.
Analysts for Coface had already identified worrying market bubbles “that are pretty threatening”, chief economist Yves Zlotowski said.
“The 2010 recovery in industrial countries is fragile and it is now at high risk because of those bubbles,” he said.
Those threats included overcapacity in many sectors of Chinese industry, an asset price bubble already forming in overoptimistic stockmarkets and the explosion of public debt in some developed countries.
Mr Cazes said the greatest danger was not that countries such as Britain, Greece and Ireland would default on their debts but that they would be forced to cut their spending before the recovery had taken hold.
7. Withdrawal method – The Federal Reserve’s programme of buying mortgage backed bonds is drawing to a close. The whole world will watch what happens when the Fed stops printing money to buy toxic bonds. What will happen to interest rates then? Zero Hedge has done another big analysis on what the Fed is doing. The key is that the stimulus is ending.
The Atlanta Fed put out a report on the status of the Fed’s purchases of MBS. The report confirms that 91% of the anticipated $1.25 Trillion of paper has been bought. This leaves about $110b of buying power left for the Fed. There is only nine weeks left until the anticipated time that this program will end. This implies an average of only $10b of intervention per week. The most recent purchase was for $16B. Look for that weekly number to fall pretty quickly from now on.
8. Risky business – This chart courtesy of FTAlphaville shows the markets are now judging sovereign debt risk in Europe to be almost as risky as corporate, which is profoundly shocking when you consider governments have the power to tax and corporates have to sell stuff for a living. The blue line is the risk premium for corporate debt. The red line is the sovereign risk premium.
9. Unfunded pensions – The deficit in California’s State Teachers Retirement System has doubled in the last 18 months to US$42.6 billion, which means teachers will have to contribute as much as 14% more in regular payments from next year, Business Week reports. It’s dawning on everyone now. Pain from a debt-fueled consumption bubble can only be delayed. Eventually the pain will come in the form of higher taxes or savings and lower consumption. HT Troy via email.
10. Totally irrelevant photo – The ultimate boy’s toy. A couch that doubles as a snooker table.
11. Totally relevant video – Jon Stewart from The Daily Show on Obama’s new-found campaign against the ‘Too big to fail’ banks.
| The Daily Show With Jon Stewart | Mon – Thurs 11p / 10c | |||
| Obama Takes On Bankers | ||||
|
||||
Tags: Top 10 at 10
You may also like to read:
Loading ...
January 29th, 2010 at 11:22 am
Spooky how quiet things are… must be a long weekend somewhere.
January 29th, 2010 at 11:46 am
Perhaps having Telecom’s XT network still playing up stops them from commenting from the beach?
January 29th, 2010 at 11:49 am
#2: I would like to see a version of that graph with public debt replaced by total debt.
January 29th, 2010 at 11:56 am
Or just the same graph but with private debt. But then again maybe everything really is going swimmingly in this happy little country of ours and we have nothing to worry about….
January 29th, 2010 at 12:21 pm
Ooooh maybe now is the time to contact Kiwibank with RT’s proposal that they open an estate agency….
Just a fee. not percentage based…..
January 29th, 2010 at 12:29 pm
And we’ll start up a peoples’ communication network , to compete with Telecom . If it works , we can call it XTC , ‘cos we’ll be so happy , to be able to conduct business and socialise , without recalling the carrier pigeons .
January 29th, 2010 at 12:36 pm
AP has a comment,
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7095818/Funds-flee-Greece-as-Germany-warns-of-fatal-eurozone-crisis.html
“A few European nations are exhibiting dangerous weaknesses. That could have fatal consequences for all countries in the eurozone” (Minister Rainer Brüderle)
“Adding to worries, Moody’s has issued an alert on Portugal’s “adverse debt dynamics”, saying Lisbon needs a “credible plan” to reduce a structural deficit stuck at 7pc of GDP rather than “one-off measures”.
“The deeper concern is Spain, where youth unemployment has reached 44pc and the housing bust has a long way to run. Nouriel Roubini – the economist known as ‘Dr Doom’ – said Spain is too big to contain. “If Greece goes under that’s a problem for the eurozone. If Spain goes under it’s a disaster,” he said. “
January 29th, 2010 at 12:39 pm
@RT: a wifi network, get ppl in local areas to joing together and make one huge mesh….run mobile phones over them as well…
regards
January 29th, 2010 at 12:49 pm
@Steven
Nice idea, until the point where it hits the ground…..then a new ‘payment plan’ would be devised.
January 29th, 2010 at 1:06 pm
and how did everybody like phil goff’s pay freeze idea? ain’t he a genius?
it’s obvious that he needs to go on the attack, play the ball not the man and all that, but who the hell is advising this guy?
January 29th, 2010 at 1:27 pm
@gow
Have to agree…. why wasn’t he commenting on the TWG if he had to speak? Maybe there is a ‘Grand Coalition’ on this.
I think Mr Key was embarrassed when asked to comment.
Are Labour choosing to throw the next election as a matter of policy?
Maybe Mr Goff has a better job offer?
January 29th, 2010 at 1:30 pm
KW John: “Local” many ppl phone friends locally, but also its a mesh and voice isnt a huge bandwidth hogger…64k…per line. My wife uses her mobile phone connected to wi-fi in the house and skype’s…
@GoutW: PhiL G’s plan is a joke…its minor….shows how small his mind is….
regards
January 29th, 2010 at 1:37 pm
ummm…. setting up your own real eastate agency may be the next best thing to setting up your own religion.
January 29th, 2010 at 1:49 pm
No:1 doesn’t matter if we aren’t in the so-called ring of fire! If those countries fail then SO DO WE. NZ ain’t in some financial vacuum. And don’t believe the debt figures for a second. If we didn’t have a problem we would not be borrowing 200 million a week
No:6. I’d say 2 years. Having said that i predicted US banks ‘would fail in 2009′ back in 2006. It was 2008 most failed. ohwell. close
January 29th, 2010 at 2:17 pm
Spot on, Bill and Sam. NZ is right up there with countries like Iceland and Ireland when it comes to net Private debt.
If our government carries on with its operating deficit and borrowing like it is we will get into the zone of fire eventually.
In the 1980’s, NZ governments bit the bullet and spent 20 years paying back the debts accumulated by Kirk/Rowling and Muldoon; especially the 9 years of Muldoon. All that debt had certainly NOT “stimulated” the economy; and I doubt it will “stimulate” economies this time either. We are very much in a time of the blind leading the blind.
But at least last time, people had low mortgage debt, houses were affordable and land was cheap. This time, the very generation that will one day have to pay higher taxes and cope with govt spending cuts (as in the 1980’s and 90’s) will already themselves be NZ’s most privately indebted generation ever. Roger Douglas is right to call what is happening, “fiscal child abuse”. We were already in trouble with the sustainability of national superannuation even before any of this happened.
January 29th, 2010 at 2:28 pm
Bernard Hickey, what do you mean?
“…..I’m surprised at how profitable (Real Estate Agencies) were, even after the slump in sales. Just imagine what they were making at the peak of the boom. Or is that because sales people took the hit with lower commissions? Is there room for agency offices to charge lower commissions? We’re still much more expensive than in Australia…..”
Do you mean Australian Real Estate Agents Commissions are much lower? That is interesting.
With politicians looking at ways to financially penalise Finance Industry management who have been earning fat incomes for years, only to have their industry’s practices cause a crash; the question I’d ask here and now, is why shouldn’t Real Estate Agents also have this sort of dampener imposed on their tendency for boomtime mania?
January 29th, 2010 at 3:58 pm
I sold a house in Australia in 2004 and the RE Agent’s commission was a standard 2%, much cheaper than here.
January 29th, 2010 at 4:22 pm
Do you pay your own advertising?
January 29th, 2010 at 4:30 pm
veedub states – I sold a house in Australia in 2004 and the RE Agent’s commission was a standard 2%, much cheaper than here.
In the UK commissions are usually 1 to 1.5%. When I first came to NZ I was amazed at how high real estate commissions were. Real Estate is now the only business that charges a percentage of the sale price. This practice will also eventually stop in Real Estate when capital gains are no longer the norm.
January 29th, 2010 at 4:59 pm
@Andy
Couldn’t agree more 1% – 1.5% with advertising included is the norm in the UK.
To be fair agents here do do slightly more work, but not that much more. Perhaps people are prepared to accept the very high costs because like so many things here few people know how other countries operate.
January 29th, 2010 at 5:02 pm
Andy Rogers and anyone else who is interested: I am getting involved in argument HERE about what are the causes of housing bubbles and unreal capital gains, interrupted by disastrous “busts”:
http://www.interest.co.nz/ratesblog/index.php/2010/01/29/rbnzs-bollard-defends-inflation-targeting-with-supplementary-tools-rejects-anzac-dollar-singapore-approach-or-capital-controls/
January 29th, 2010 at 5:29 pm
You need to check the facts. Barfoots charge just over $29,000 to sell a $1mil value house. Most others are similar.
Check all the major Australian franchises and you’ll find their standard fees are very similar. I sold a QLD property in 2007 via Professionals and the fee was identical to NZ. I sold another via Ray White in 2004 in QLD and it was the same story. Important to get facts right before publishing. But of course then we couldn’t practice tall poppyism eh.
January 29th, 2010 at 7:10 pm
No, I didn’t have to pay advertising on top of the 2%.
January 29th, 2010 at 7:22 pm
Morgan Stanley’s predictions —
http://www.stuff.co.nz/business/world/3276192/World-stockmarkets-tipped-to-plummet
January 29th, 2010 at 8:10 pm
Sorry all….
I have never understood why estate agency works on a percentage – regardless how small.
Do they work harder to sell the more expensive property?
Please explain.
January 29th, 2010 at 8:36 pm
Commission rates in Vancouver. Bottom line we all have a choice in NZ, if we want to sell privately and pay close to zero fees, we can. If we want to list with an agent, we can. What more can you want???
http://www.ianwatt.ca/RealEstateCommissions
January 29th, 2010 at 9:32 pm
@KW John
Estate Agencies work on percentage because they can – ie people here allow it to happen. I worked in it for a short while and you get taught all the right things to tell people who ask why go with an agency rather than sell privately. The biggest reason is probably the Realtor and Harcourts magazines and the advertising potential. If a private sale could advertise through the realtor i suspect more people would choose that route.
January 29th, 2010 at 9:48 pm
Actually on $500,000 a QLD fee can be a max of approx 2.8% and in NZ around 3.5%. NZ agents will need to provide a level of service, professionalism and results to justify their fee. I stand corrected on my prior comment, my QLD fees paid were a tad cheaper.
January 29th, 2010 at 10:02 pm
I have sold privately. It was a house from a family estate which was in another town. But with obtaining a copy of the title and produced a little leaflet ,did some research of recent area sales to establish an asking price, taking a photo and placing a couple ads in the real estate section of the local paper , running a couple of open homes we got a more than satisfactory sale.( Even a real estate agent to the Public Trust guy afterwards we did very well on price) Left all the post sale legal work to the lawyers. Everyone was happy. Its not difficult.
January 29th, 2010 at 10:25 pm
Last house I sold was in Jun 2006 and I paid $5k on a $520k house in Auckland, so less than 1%.
No-one actually pays the headline rates they start out with any more than anyone pays sticker on a new car.
You have to compare actual commission rates paid rather than their published rate cards.
Alan.
January 29th, 2010 at 10:29 pm
I totally disagree Alan. I think you’ll find that a lot of people don’t have the confidence or skills to negotiate the sale fee down. Agents are very good at talking themselves up. I’d say many many people pay the top rate.
January 29th, 2010 at 10:40 pm
Agree with Alan, I sold my house and paid agent 3.0% commission, including all costs. No sell – no cost to me.
January 29th, 2010 at 10:45 pm
@Clare
Thanks…I’m sure I state the obvious (good at this) if I suggest that percentage based remuneration is likely to be inflationary. Most transactions are probably measured in ‘housing dollars’ i.e. houses are effectively exchanged and the only ‘cash’ extracted goes to the real estate agency.
Other costs (legal etc) pale into insignificance.
Why accept this? No option I guess…..
Am I right to regard this business as a major part of house price inflation (along with the easy credit that allowed the excess)?
Maybe this is why ‘housing dollars’ are not included in the CPI – they’re even funnier than the rest of the money.
Well done Ross.
@Alen – Sell, cost to you? Or do you regard it more as a dealer’s fee?
January 29th, 2010 at 10:59 pm
John, what I mean is if don’t get asking price and pull out of market won’t pay any “breakage fee” or advertising cost. As a seller I insisted to pay agent fee as a percentage .
January 29th, 2010 at 11:37 pm
@Alen
Got it, sorry, on hobby horse again.
I guess 3% was reasonable to you or you wouldn’t have done it. Just think of it in terms of the number of days/weeks/months one might work in order to regain the money, or does this get factored in to the ‘inflated’ house price their skills can achieve?
No insult intended – I just don’t see their payment as proportionate to, for example, the legal fees, or even, for another example, the costs of a good building inspection.
Some sellers even pay for advertising as an extra!
January 30th, 2010 at 4:20 pm
An agent’s fee is 3% or thereabouts. That’s a one off, once only fee. How much does your mutual fund charge on the total amount you have invested with them per annum? It’s common to pay 2% of the fund’s value per annum. So if you have $1mil in such a fund you will pay circa $20k per annum to have it ‘managed’. Want to rent your investment property and get a property manager to manage it? It will cost you about 7.5% per annum. Many professions charge fees. Shop around, negotiate, get good value – whatever you decide to pay in fees – it’s your choice. It’s all about self responsibility. To say “fees are expensive” is too general a statement. A classic example of not taking personal responsibilty for your decisions.
January 30th, 2010 at 5:15 pm
@Alen: That’s exactly right, and what happened with me.
I just pulled out the records I kept, and this is what the situation was for me in 2006:
I had always said I wanted to get $520,000 out of the deal net of selling costs. The agents had suggested they could get $550,000 to $560,000 and we should market at $559,000 initially. This was a surprise to me – I thought about $540,000 was more like it, but hey, if they think they can get $560,000 then go for it
The commission was calculated as $500 + 4% on the first $300,000 + 2% thereafter). So on $550,000 is would have been:
$500 + $12,000 + $10,000 = $22,500 (if my maths are good?)
$550,000 – $22,500 = $527,500 so that would give me what I wanted….
After a few weeks (can’t remember exactly) the agents reported that the market wasn’t responding, and we should consider dropping the asking to $549,000 – what a shock!
Now, of course, this would now net me less than $520,000 but I said nothing about that, and to go for it.
Suffice to say that the ‘final’ offer came in (as much as anything is ever final of course) and was for $525,500 exactly.
This would mean my net would be:
= $525,500 – ($500 + $12,000 + 4% x $225,000)
= $525,500 – $21,500
= $504,000 (again if my maths are good!)
I just said it straight to the agent (at this point I am paraphrasing from memory of course):
Alan’s Question) Is that the best price you can get them to offer? If you go back, are you able to negotiate anything more?
Agent’s Answer) That is the best price I can get, and I think it is the best price I’ll get from anyone in this market.
Alan’s Statement) Okay – fair enough. It is entirely up to you then. I’ll counter-sign this offer right now if you want me to, as long as I net $520,000 after your fees. What do you want me to do?
Agent then thinks about it, states they don’t have the authority and has to call their boss, and comes back and offers to drop the commission to $10,000 ($515,500 net to me if we assumed that was $10,000 inc GST).
Alan says, “Absolutely no problem – I appreciate your efforts. Thanks for trying, and give me a call if you get any other offers.”
Agent decides to call ‘boss’ again, and Bingo! Their commission is dropped to $5,500 including GST.
HTH,
Alan.
January 30th, 2010 at 5:33 pm
Good man Alan – keep telling that story.
January 30th, 2010 at 6:04 pm
yup well done Alan… done the same myself.
$5,500 in marketing fees…incl GST, very reasonable indeed.
bargain.
January 31st, 2010 at 8:08 am
Bernard : Re. Passing that potato compounds the pain (NZ Harold) : Follow grannie’s advice and chew yer food properly , greedy guts ……………. Never pass a gummy bear : Always stop for a chat .
January 31st, 2010 at 9:00 am
Hey RT…I may have missed it…BH said they would let us all know the right pathway for savers to get at the aussie deposit rates…have you seen any report on the site about this.
January 31st, 2010 at 9:29 am
Wally,
We’re working on it. Great idea.
cheers
Bernard
January 31st, 2010 at 9:54 am
Here’s my piece in the NZHerald on the global ‘Minsky Moment’ we won’t be able to avoid.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10623218&pnum=0
Here’s the chart showing US Debt to GDP
http://thecitizenpatriot.files.wordpress.com/2009/05/debt_to_gdp_with_light_blue_arrow.jpg
cheers
Bernard
January 31st, 2010 at 10:53 am
Bernard
When you do you work on moving money to AUST to take advantage of the higher interest rates keep an eye on the cross rate this is where the banks make a killing.
dairy news from the States for those interested;
January 31st, 2010 at 11:00 am
The real problem : The government will opt to hide the economic filth in a flood of immigration and rely on the population being too bloody thick to know a con when it boots them up the bum. Noddyland is a zoo where the monkeys rule.
January 31st, 2010 at 11:00 am
Bernard : The Minsky moment can be likened to your call for a 30 % fall in house prices ; in that it should occur , but may not . And even if the event happens , it is unlikely to do so in your time frame . ………….The market can remain wildly over-priced longer than you can maintain your short position .
January 31st, 2010 at 11:09 am
Our tade figures are going to get very ugly. Dairy looks to be sailing of the end of the ocean as the USA becomes a major exporter for the first time,lamb is below cost of production,beef is very low. There is a huge shortage of stock. Its so bloody wet in HB that the grapes are covered in bot and the grapes are still green. The apple industry has been destroyed by costs, the squash are rotting on the ground.
The ‘Monkeys in the Zoo’ would be better than the guy’s running the show at present. I don’t know how long you can ignore the Elephant in the room but eventually he must stand on your foot or cr*p on you.
We have to create enough new debt to pay the interest bill, looks like this is not happening in farming at present.
From the WSJ;
January 31st, 2010 at 11:24 am
Andrewj,
The harsh reality that no dairy producer or processor yet seems willing to elucidate is that demand for dairy commodities is shrinking while supply remains relatively stable.
January 31st, 2010 at 11:25 am
Another good post by Greg Pytel. Time to go blow any deposits Ive got left
http://gregpytel.blogspot.com/2010/01/davis-2010-cunning-plan-how-we-will-all.html
January 31st, 2010 at 11:27 am
PeterR,
Thats OK, lots of empty storage space around the ports this year.
January 31st, 2010 at 11:31 am
If an early autumn frost arrive…it will be a billion dollar bomb going off in the wine industry. My bet is there are some secret meetings going on in the Beehive on this very issue.
January 31st, 2010 at 11:38 am
Wally, the bombs gone off. There is a hell of a lot of pressure contained in a whole lot of Bullsh*t, I don’t know when its going to escape but Keep your head down.
January 31st, 2010 at 11:48 am
“Gisborne’s emergency services are keeping a close watch on river levels in the region after an overnight deluge dumped more than 200mm in some parts, with more rain to come”…(stuff.co)…..is this the bomb you ’speak’ of AJ?
January 31st, 2010 at 12:12 pm
Andrewj,
Storing increasing quantities of powder into a falling market didn’t work well last time. And I don’t know that this time the banks would provide the money required.
The end of this season would appear to be a good time for Fonterra’s shareholders to cash in as many shares as possible – provided it is still possible by then.
February 1st, 2010 at 10:54 am
PeterR in relation to..
“The end of this season would appear to be a good time for Fonterra’s shareholders to cash in as many shares as possible – provided it is still possible by then.”
Are you suggesting ‘gaming’? Is this strategy still possible?
The above scenario doesn’t look good for Fonterra shareholders (or NZ), but the debateable effectivness of Fonterras strategy and leadership is only part of the sum surely, with central policy been a significant other( banking and taxation policy).
I shudder to think of the future prospects as a farmer without belonging to and supplying a strong healthy co-op.
February 1st, 2010 at 11:02 am
Don’t worry all. Guru Groser came on Morning Report this morning, assuring us in dulcet tones that we have merely to cling onto the coattails of Chinas 10% growth, and in 20 or 30 years, India will be where China is now???? so we should be in there too….
I emailed Morning Report, and suggested that regurgitating such demonstrable horseshit is not reportage, it’s mere promotion of spin.
Read: propaganda.
It’s about time we had the real debate in this country – whether you can have exponential growth without extraction of finite resources, and if you can’t (Brownlees attack on the Doc Estate and Heatleys on the water-space says you can’t) what should we do about creating a sustainable system?
Bah, humbug.
February 1st, 2010 at 3:04 pm
I’m very chuffed that someone as knowledgeable as Bill Gross seems to have shone a light on the area my own muddled thought process had been going, although he doesn’t seem too concerned about whether debt is internal or external. Maybe it is less important than I thought.
NZs position on the ring of fire chart looks just too good to be true.
How do I search for old posts by the way?
February 1st, 2010 at 8:30 pm
Great blog, no comment necessary
In our pride, denial and hubris, we as a nation still fancy ourselve a productive Empire. That is a falsity, a facade, a delusion we cling to the way an addict clings to his illusions: we’re not addicted to debt, nosiree. We’re just borrowing trillions of dollars every year to get through a “rough patch.”
If trillion-dollar deficits are required from now until Doomsday, that’s an addiction to debt. Claiming otherwise is the magical thinking of an addict in complete denial.
Let’s set aside the pathetic bleatings of denial and the magical thinking which borders on psychosis for a moment and face the painful truth: what will happen should the Federal government stop borrowing and spending $1.3 trillion each and every year? What will happen when the Fed stops spending $1.2 trillion each year to prop up the housing market? What will happen when the Fed stops buying Treasuries to prop up the market for securities which will never be paid back at anywhere close to current value?
What will happen when the nation has to live within its means, without resorting to these trillions in welfare every year?
We all know what would happen: the U.S. economy, addicted to credit, debt and leverage, would crash.
Like an addict going cold turkey, there is no way to restore health except to end the addiction to borrowing and creating trillions in “free money.”
What can we say about someone who believes that piling up more debt in an economy alrady crushed by debt will somehow create new demand for more debt and thus “consumer spending”? We would have to say that is magical thinking, the equivalent of thinking that one can eat cheesecake, Big Macs, fries and sodas every meal and not gain weight. It is magical thinking on a scale so colossal that it borders on psychosis–a complete detachment from reality.
Welfare, addiction, denial, magical thinking: these are not foundations of a healthy economy or mindset. They are a “sickness unto death,” to borrow a phrase, an alienation, a hubris, and a state of denial so profound that the sanity of the addict/believer must be questioned.
That is the current mindset of the nation’s leaders and much of its populace, who prefer the grand illusions of permanent adolescence, a childlike state in which they don’t want any new taxes but they also don’t want a single dollar of their entitlements cut, either.
Can there be any more profound detachment from reality than this childish demand that we live beyond our means indefinitely?
http://www.oftwominds.com/blog.html
Cheers,
David.