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US labour market tight & stable; China uses debt as weapon; investors withdrawing from China; EU data weak; air travel booms again; freight rates fall; UST 10yr 3.81%; gold and oil on hold; NZ$1 = 56.6 USc; TWI-5 = 66.9

Business / news
US labour market tight & stable; China uses debt as weapon; investors withdrawing from China; EU data weak; air travel booms again; freight rates fall; UST 10yr 3.81%; gold and oil on hold; NZ$1 = 56.6 USc; TWI-5 = 66.9

Here's our summary of key economic events overnight that affect New Zealand, with news we are ending the week awaiting in a risk-off mood where commodity currencies like the NZD are being hit ahead of the key US jobs report and inflation-averse central bank officials.

Last week there were +167,000 new jobless claims in the US, a small rise, leaving 1.229 mln people on these benefits, and remaining near an all-time low level.

Separately, almost -30,000 job cuts were reported for September, and even though it is a three month high it is only a very small rise in the context of the size of their labour force (153 mln).

Labour market data is front-of-mind in markets today because we are awaiting the September non-farm payrolls report which will be released this time tomorrow. It is expected to report an expansion of +250,000 new jobs, and more for private-sector payrolls.

China may be on holiday, but they remain active in international bodies. They have successfully convinced the UN Human Rights Council ((UNHCR) to not debate (even talk about) Xinjiang abuses, and it is not the first time their views have prevailed. It reinforces the fact that most UN countries are not democracies, and are increasingly siding with anti-democratic forces. As the lender of choice for many countries over the past decade, Beijing now has the power to cut them off, lend more or forgive some of their debts. Debt is a powerful weapon.

It can cut both ways. Overseas money continues to flow out of Chinese stocks and bonds as a rapidly cooling economy and interest rate shifts drive investment to other destinations. Foreign investors' holdings of Chinese bonds fell for a seventh straight month in August, dropping by -US$150 bln to NZ$870 bln. This bond market outflow, the biggest in data going back to 2015, comes as the world's second-largest economy suffers a dramatic loss of momentum.

EU retail sales came in weak. These are reported on a volume basis, ignoring the effect of inflation, and they were down -1.3% from the same month a year ago. Germany led the fall; they held little-changed in many other larger countries in the bloc

German factory orders fell sharply in August in new data out overnight. They were down a troubling -2.4% from July, down -4.1% from the same month a year ago.

But neither data stopped Germans buying new cars. They rose +14% in September, driven by a rush to buy EVs. The move away from ICE to EV cars is a very fast-developing worldwide trend, a transition happening very much faster than anyone predicted.

Overall, the IMF is gloomy about the global economy's prospects in their October assessment.

Global passenger air travel seems to be recovering very strongly. August international travel volumes are more than double the level of a year ago and are now at 80% of their pre-pandemic levels. Asia-Pacific levels are lagging however because of Chinese restrictions. Elsewhere, it is in full recovery mode.

Global air cargo volumes dipped in August, but are being called 'resilient' because they are only -3% lower than pre-pandemic levels. Cargo volumes in Europe are the laggard here. In the circumstances, this is actually a positive report; trade is holding up.

There were more big falls in shipping freight rates for containers by sea last week, down another -8% in the week alone and putting the spotlight firmly on the struggling trade to and from China. Overall, these freight rates are now lower than the five-year average pre-pandemic. That is a very fast retreat, down -68% in a year.

Meanwhile freight rates for bulk cargoes are rising and at two month highs, and while they are far lower than year ago levels, they are running at about pre-pandemic levels.

The UST 10yr yield starts today at 3.81% and up another +5 bps from this time yesterday. The UST 2-10 rate curve is little-changed at -41 bps. But their 1-5 curve is slightly less inverted at -13 bps. And their 30 day-10yr curve is unchanged at +98 bps. The Australian ten year bond is +5 bps steeper at 3.86%. The China Govt ten year bond is unchanged at 2.76%. The New Zealand Govt ten year will start today at 4.18%, and up +12 bps.

On Wall Street, the S&P500 is lower by -0.5% in late Thursday trade there but is up +4.9% so far this week. Overnight, European markets were all about -0.5% lower. Yesterday Tokyo ended its Wednesday session up +0.7%. But Hong Kong fell -0.4%. And of course Shanghai remained closed for public holidays. The ASX200 ended unchanged and the NZX50 ended down -0.5%.

The price of gold will open today at US$1712/oz. This is down -US$3 from this time yesterday.

And oil prices start today unchanged from yesterday at just under US$87.50/bbl in the US while the international Brent price has risen to be just on US$93.50/bbl. The OPEC+ announcement of a sharp supply cut seems to have had little price impact so far - which is somewhat surprising. Analysts are still expecting that to happen, but it is interesting that markets aren't pricing it in.

The Kiwi dollar will open today at 56.6 USc and another -½c lower than this time yesterday. Against the Australian dollar we are unchanged at 88.2 AUc. Against the euro we are a tad softer at 57.7 euro cents. That all means our TWI-5 starts today at 66.9, and -30 bps lower than this time yesterday.

The bitcoin price is now at US$20,087 and down -0.9% from this time yesterday. Volatility over the past 24 hours has been modest again at just under +/- 1.4%.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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84 Comments

Looking at the Natural Gas future price difference between Henry Hub and Dutch – still 7x plus… https://en.macromicro.me/collections/4854/mm-natural-gas/39414/global-natural-gas-prices

And the exported volumes from US: https://en.macromicro.me/charts/39673/us-lng-exports-by-regions

Someone is making LOTS of money.

It could have long-term impacts. DE/EU might be able to survive this winter, but energy cost increase will drive many companies out of the region….

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A price Europe is happy to pay, helping keep the US MIC well funded, to ensure the Russians do not storm the continent.

 

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Russia has absolutely no reason to 'Storm the Continent'.  Just like the Russians never intended to bomb their own pipeline or Putin is causing all the western world inflation or Putin is killing innocent children.  Stop reading the WEF news casts and use a little critical thinking.

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🤡

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A few of those someones are in Australia - companies like Woodside sending LNG tankers on a long trip for windfall profits. Not a market that NZ can participate in, luckily for local gas consumers. 

As the investments in US export facilities and European import facilities come into use the difference between the regions gas prices should reduce. Whether this happens fast enough to save the day is another question. You'd think the political will would be strong enough to overcome those consenting and environmental impacts that would normally slow down building new LNG terminals...

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So it certainly was a great idea to blow up the Nordstream pipeline then.  Always a good idea to sideline the opposition. 

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It's a little ironic isn't it? By handling things just a little differently Putin could have arranged it that Europe would effectively fund his invasion of Ukraine. 

I read an article yesterday that indicated it was a common Soviet practice to build in self-destruct mechanisms to infrastructure, which was used to add weight to the postulation that Russia blew the Nord Stream pipes. No one really knows who did it and those who do, ain't talkin'.

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So, Russia (not the USSR) left a few large bombs attached to the side of pipes of an European exclusive economic zone, which happens to be a NATO training ground (for Frogfoot stuff and de/mining among other things). Talk this one through for me further Murray.

You are wilfully soaking this stuff up. Can you be slightly critical of the most absurd of this wartime propaganda?

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Did you not get the tone of my comment Tim?  I didn't say i believed it. I said the information was used to support an argument..... I then went on to say no one knows..... Which part of that comment gives you rein to take the stance you have? Do you have evidence to support your view? Or are you just naturally grumpy?

I do tend to think it is more likely the Russians blew the pipes. I also think that if they did, it was foolish at best but would be a part of a wider strategy. But there is no evidence yet as to who did it or why. I'd love to know your opinion and why?

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If you don't believe it's plausible/believable why post it? Your not obligated to.

For Russia to have done your USSR sabotage story, they would have to have have installed a bomb in each of these locations (instead of anywhere else in the Baltic) when the pipeline was constructed knowing if they were caught it was war/Article 5 with NATO (why start one this way?), let them remain undetected while NATO was running drills overhead for years and then some trigger them without getting caught. The why they would do something this convoluted?

There is evidence the US was involved (this best being searching for one of the pipes with a plane (and they missed finding the Russian bomb)) but not enough to overcome the high burden of plausible deniability so we can still believe whatever.

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Amazing the Putin protagonists think the Americans did it.

You're applying a logic to it that if the Russians saw it from your perspective they wouldn't have invaded Ukraine in the first instance. A common error in measuring 'opponents' is assuming they think like you. Why would they do something so convoluted? Look at Putin's track record; he has accused NATO of attacking it - they weren't, He has accused Ukraine of carrying out ethnic cleansing in Donbas - they weren't. Convolution is just another weapon he is using against the west to sew confusion and discord.

Secondly, i'm an analyst by profession these days and i generally don't discount any perspective unless there is evidence to prove it is bogus. So on that matter during my airforce career i was a aircrew on P3 Orions so could give you a lesson on detection of metal objects beneath the sea (magnetic anomally detection) and I can assure you that using an aircraft to search for pipe lines would not identify if explosives were attached at all, but would only give a rough indication of the size of an object. Depending on the depth of the pipes, they may not have been detectable at all from an aircraft as the MAD range is strongly dependent on the size of the mass. So your using that example is not evidence to support a case for the US bombing the pipes (although it is not evidence that they didn't do it).

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So many of the pro-Putin positions require a starting point of extreme hostility from the US/Ukraine on one side, that Ukraine has no sovereign rights as a nation outside of being a proxy/puppet state for Russia and that Putin is an otherwise nice guy who has not instigated or made any aggressive moves whatsoever. 

If that's your starting point, then sure, anything is possible.

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Sure bud you blow up your own multi billion dollar pipeline because you couldn't find the "Off" tap ? The Americans can get away with it because we have thousands of idiots with no critical thinking skills. The USA wants to piss off Europe and plunge them into a freezing winter and have them blame Russia for it. Kind of payback I guess, I always wonder if England knew of the coming Pearl Harbour attack and opted not to tell the Americans, why you ask ? because they knew full well it would pull the USA into WWII if they didn't tell them.

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That Pearl Harbour theory is a beauty. Enough smoke to indicate a fire somewhere in there for sure. Yet the Americans had got sufficient warnings from their own intelligence too, if they had bothered to put two & two together. No doubt about it they were slack. And so too was General MacArthur, equally ill prepared, only  a few days later in the Philippines. Similarly Stalin ignored warnings of Barbarossa, thinking the Allies were attempting to dupe him out of the lucrative trade he had with the Nazis. It must have been galling for those secret agents to risk great peril, only to be dismissed.

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Worse analysis I've read so far, and that is saying something. 

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The point being that, (I think) the evidence/theory is of so low quality, you could have decided we did not need to read it. Its a >30 year old doctrine (I'm guessing for Eastern Block defections) survives though a change in system of government and was implemented. Was there a recent document or press release referencing it still being used? We already have the maintenance cart being sent down the pipe with a bomb theory for means, which is relativity much more plausible.

I know it was the lowest bar but you chose to argue against the double nested bracket throw away comment  (sorry for missing </s>) not why this theory is convoluted and absurd.

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I think what a lot of people tend to forget is Putin was KGB. He grew up under the Soviets, but also his mindset. There is this about him in a Stuff article "Putin was a self-described childhood "hoodlum" who took up martial arts at school to "assert my position in the pack". Yet his aggression was not limited to the judo mat, with Russia's future leader frequently scrapping it out on the streets of his home town. "I realised that in every situation, whether I was right or wrong, I had to be strong. I had to be able to answer back," he said in 2012"

And one of his strategies today seems to be convolution, in that through devious means he sews confusion and discord. Pull it all together and blowing the pipes fits better with Putin than anyone else as he tries to escalate the confrontation over Ukraine with Europe, probably so he would be justified in using his nukes. As I have indicated before there was no need for anyone else to have done it. The US would never be able to profit hugely from supply bulk gas to Europe. Europe needs too much of it and the infrastructure is too complex for it and would take too long to create anyway. On the other hand from the US and Europe's perspective when ever the current crisis is over, however it ends, there will be a need to rehabilitate Russia and that will require trade. These pipe lines will be crucial to that. (And in there is another rationale for Putin to blow them and then blame the west for it) 

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Murray - on this one, you're well down the rabbit-hole.

Was it that your military background fed you some rah-rah?

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No rabbit hole PDK. That's the pro-Putin brigade. Just a balanced perspective of likelihoods.

As you routinely point out, lots of people in denial about what's in their face.

On another matter, what's you view of the Wikipedia article Kiwimm links to below? sort of puts nuke power out of the picture due to cost, suggesting recent suggestions of pumped hydro or similar like the big plant in China I linked to as better options?

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"It's a little ironic isn't it? By handling things just a little differently Putin could have arranged it that Europe would effectively fund his invasion of Ukraine." 

He was doing pretty well until the USA blew up the pipeline. Amazing isn't it, nobody in the west has the balls to even put the USA on the suspects list. 

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Murray as not noticed that the Russians have a big tap on their end of their pipeline.  Nor worked out the tap was completely in Russian control.  But he still believes the Russians did the bombing to stop the use of the pipe. 

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Rubbish KH, try to not be an extremist. If you'd read any of my posts on this topic you would recall that i have suggested that neither side needed to blow the pipes. But someone did. The question is who and why? If you look at the pattern of Putin's rhetoric and behaviour, this fits closest to the most likely ones who did it.

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The russians did it to seed uncertainty, leave it to conspiracy theorists to blame USA, Nato, Ardern or whatever; and as a veiled threat to Western pipelines xc.

Do and deny, or deny and do ;very Putin.

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The USA is probably the only country with the ability to do it, but who directed the MIC to execute this hideous act (only country to ever use nuclear weapons)?  American people are not like this, their military is so detached from their society.  I am leaning to the globalists and the WEF crowd, who Cindy is a puppet of.

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Wrong. Plenty of countries have the ability to do this. 

You continue down your rabbit hole. 

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I'm sure Russia have the capability to do this on paper. However, there does seem to be growing evidence that their paper capabilities do not match their physical capabilities.

However, it does seem the US has more to gain from this than Russia who already control the flows. If we could assume Russia are rational actors it's hard to pin the blame on them. Unfortunately for the people of Russia, their recent actions are not consistent with their leaders being rational actors. 

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However it plays out, where the Ukrainian offensive reaches or what Russian counter attacks regain, it is certain that the border between these two countries will remain in conflict. If Putin backs down he is finished for sure. Perhaps he might be finished beforehand. Therefore one thing is certain,  the only thing that might stop the conflict is a regime change in Russia and that introduces the hard cold fact, centuries on centuries proven, that only Russians can change Russia.

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At this point Foxy, i think you're correct. The Russians have embedded too deep a hatred into the Ukrainian psyche for them to be forgiven for an awful long time, and regime change would just be a small first step in that process.

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It's Putin brinkmanship, show how committed you are to the outcome and what you are willing to sacrifice. 

It also kills any internal dissent and cancels the possibility of reopening the lines any time soon. 

Putin is in a corner and is trying to make sure the rest of Russia can't alter course, it's a classic military strategy when you are trying to push an army that is not very motivated to fight for you, deny yourself (and them a way to surrender or retreat) 

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Transpower has issued a Grid Emergency Notice (GEN, lol), until 0930. Part of the Cook Strait HVDC system is in outage, and, whodathunk, there is little wind assistance despite high wind speeds.  Wind is 109Mw vs Coal at 421, Gas at 551 a few minutes ago.  NI demand is 4Gw ish.  Live data at  https://transpower.co.nz/power-system-live-data" is....Interesting.

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Surely after all the rain we've had the hydro dams are full...?

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All topped up but limited capacity on the transmission leg across the Strait, so unable to be delivered.  Read the TP notices for reasons.

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Pumped hydro?

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Mainlanders will be happy - someone has cut the cable! That'd fit with the global politics of the time? We can watch as Te Wai Pounamu slowly drifts away from Aotearoa new Zealand.

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Awesome, if they just want to cut us a cheque for our contribution to their various earthquake rebuilds, we'll be happily on our way.

We'll even throw in Wellington as a gesture of goodwill. 

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I used to have a lot of fun in the 80s and 90s when the rivalry peaked between the two islands and we'd meet new people. It was inevitable that we'd get asked where we were from, and those from the South Island mostly replied "The mainland!" I'd reply "Welcome to New Zealand. How long is your visa for? We'll make sure you don't overstay!" Always got a bite and some laughs.

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but was it the Americans or the Russians that cut the cable?

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throw in the Ukranians as an option as well

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I live on the SI and have no problem with sharing our power, but do feel excluded by the use of Aotearoa representing New Zealand.  The SI is, as you rightly point out - Te Wai Pounamu and the NI is Aotearoa.

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The NI is Te Ika a Maui. Where do you get your distinction? Aotearoa is an accepted Maori name for NZ and as far as I'm aware does not refer and never has, to just one island. Indeed as some would point out, it better fits Te Wai Pounamu than Te Ika a Maui, as the clouds form over the alps, not the NI.

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Michael king, whilst researching the Penguin History of NZ which is endorsed by significant Maori, suggests that the name was a European invention likely in the very early colonial schools to provide an example of what the Maori might have called NZ. But he too indicates that on the waka, coming from the NE, the clouds over the alps would not have been visible. He suggests that Maori did not have a name for the land as a whole. Interestingly he also states the original meaning of Maori was just "people" and that the did not differentiate between racial differences. That was a European construct. This fits with my own experience. In the mid 1970s I met elderly Maori chap who was a native speaker of Te Reo, and I asked him what the meaning of Pakeha was. He told me that he understood it to be "stranger from another tribe". Politics however have changed all that.

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Even with minimal wind we're at 80%+ renewable generation, thanks to hydro and geothermal. Looks like hydro isn't generating at full capacity, not sure if that is HVDC limits, some plants being down or some other reason. 

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Great link, thanks.

There is not a breath of wind in North Waikato this morning and looking at NZ on windy.com most of the country has a still and frosty morning. That is the problem with wind power, it doesn't work on the coldest days. Wind is giving 109 Mw out of a 1040 MW capacity vs coal at 421Mw out of a 750Mw capacity. We can feel good about the fact that the largest percentage is coming from Hydro. 

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that's the great thing about hydro storage.  Holds it back when the intermittents are generating, release it when they aren't.

Of course that assumes the national grid is working....

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Wind really is a big con job. I would guess that for the associated costs we could have upgraded Sth to Nth transmission and be in a much better place.

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Without all that wind generating most of the time, the lakes would be empty and there'd be nothing left to flow north. 

Every generation method has its flaws which is why we need a mix. When the wind blows, it means we can keep water at the top of the rivers for when it is needed. Once Onslow is built, we will be able to store the wind power when the wind blows strongly and release it when it stops. 

The simple fact on the ground is that the gentailers have been going hard building wind power for the past decade, because for all its flaws it's the cheapest method we currently have. It's intermittency does mean that it can never be the only, or even the dominant, supply. 

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How will you store the wind power?

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Wind blows strong -> cheap power prices -> Onslow buys power to pump water uphill

Wind stops -> expensive power prices -> Onslow sells power by releasing water

This mechanism smooths out both the peaks and the troughs in power prices and allows more intermittent generation to be built and used. 

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-> Bottle neck at Cook Strait.-> North Island ??

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Yes, possibly. We'd have a decade or so to upgrade once the Onslow decision is made. 

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This is great - NZ could easily do both; Onslow in the South and Compressed Air in the North.

A facility like this could be centered near the Manawatu Wind farms, and feed back into the Northern side of the HVDC Cook Straight Links.

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No, the cheapest energy we have is fossil fuels.  That is what has made your life so comfortable.  And that is what will drive it in the future.

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Not the case in NZ, otherwise the gentailers would be investing in fossil fuels rather than trying to quit their thermal generation as fast as possible.

Maybe your calculator works differently to theirs?

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Troll.

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Not true, solar and wind are cheaper than fossil fuels for generating electricity

https://en.m.wikipedia.org/wiki/Cost_of_electricity_by_source#/media/Fi…

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That article sort of undermines nukes, and possibly the newest designs. Pumped hydro then? Greenies would have to buy in then.

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NZ has some of the best onshore wind sites in the world due to us being a long, thin, mountainous country surrounded by water in the roaring 40s.

Wind map australia & New Zealand - VORTEX (vortexfdc.com)

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Belgians building offshore wind islands.And they are worried about Russia attacking power lines

https://maritime-executive.com/article/belgium-plans-to-build-a-man-mad…

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We're hanging on here till 9.31am......

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When I discussed the contribution of Distributed Generation a couple of days ago there was a heap of responses.  But none of those really related to distributed generation,  as usual they were more obsessed about the cost of my household setup.

But todays break in the transition system underlines the possible contribution. It reduced the need to transfer power vast distances.  Distributed Generstion supports the national grid.  It adds to the repetoire. 

 

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Distributed generation reduces network vulnerability too. Renewables in the NI and/or new modular nukes? Can't believe the Government is still pushing the coal fired power stations.

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which government is still pushing coal fired power stations?

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Essentially all of them through inaction. No initiative to replace them from the Government, with something cleaner. Instead they sit hands off and let the power companies manage it. And they go profit first so no change.

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> as usual they were more obsessed about the cost of my household setup.

No point talking about benefits without an idea of the costs.  Lots of things i would love to get if they were free...

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TP.  Reinforcing my point.  

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(DP)

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Debt is a powerful weapon.

West must force private lenders to ease Africa’s crippling debt, say campaigners

Banks and traders have been ‘let off the hook’ by G7 despite being more to blame for the looming crisis than China

How West Uses Climate Agenda to Keep Africa's Oil & Gas Underground to Satisfy Own Appetite

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Correct the climate agenda is to try to stop us consuming fossil fuels and replace them with inefficient, costly, unsustainable energy sources indebting our country ever more.  The WEF goal is to control the masses through debt and Cindy the puppet kindly obliged.  

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Is that you Profile? 

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Profile's dad. He's a fossil lover...far too into grannies.

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Yeah importing fuel will make us much richer than using some free wind, steam, sun and water. 

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The OPEC+ announcement of a sharp supply cut seems to have had little price impact so far - which is somewhat surprising.

Fed hiking rates to crush oil demand and send US economy into recession fast. OPEC+ cutting supply to offset reduced US oil demand and send US economy into recession even faster so Fed is forced to cut rates. Link

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10 year bonds up again, very volatile. The traders will be loving it.

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high market vol is normal just before a crash day

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"It reinforces the fact that most UN countries are not democracies, and are increasingly siding with anti-democratic forces"

Yet another reason that NZ should pull out of the UN..

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Correct, democracies do not lock their citizens out, lock them down and force a gene therapy experiment on everyone.  Democracies do not take away our freedom of speech.  Democracies do not arrest peaceful protesters.  Democracies do not hijack our media.  Totalitarianism comes to mind.  1984 has arrived.

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Muh freedom? Dey took our jerbs?

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I missed the bit in 1984 where everyone gets bored of people banging the same drum over and over again.

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I still have the right to judge you based on your comments

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Be very careful mate, you think you are  anonymously here but your not. When a van with "Vote Labour" on the side of it pulls up in your driveway and a couple of big burley guys wearing white coats carrying a straight jacket hop out you had better head out the back door fast.

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🤡

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