Here's our summary of key economic events overnight that affect New Zealand, with news the fight against inflation is making little progress in the US.
First up, the American inflation rate fell less than expected in September although the shifts were minor. It came in at 8.3% in August and was expected to fall to 8.1% last month. But in the end it came in at 8.2%. The key takeaway is that they aren't making any progress yet getting it down. Their 'core' rate was unchanged at 6.2% from a year ago. Month-on-month, the rate actually rose.
Clearly the Fed has more work to do to change the trajectory, and markets are assuming it will continue to fight inflation as its #1 threat. The next Fed hike is now expected to be another +75 bps. The US Treasury 10yr bond yield roared above 4% on the news, but it has settled back under since.
Their benchmark 30 year fixed rate mortgage rose to 6.92% pa, plus points of +0.08%, hitting the 7% mark for the first time in more than 20 years.
New US jobless claims rose last week to just under +200,000, a six week high even if historically still very low. But the number of people on these benefits fell to just on 1.2 mln, a new records low. Their insured unemployment rate is now down to under 0.8% of their 155 mln employed workforce, the lowest ever in a record that goes back more than 50 years.
There was another US Treasury bond auction earlier today, this one for their 30yr maturity. Like all others recently, it was very well supported. It delivered a median yield to investors of 3.85%, which was well above the prior event a month ago of 3.45%.
The US Congressional Budget Office says the American federal budget deficit was -US$1.377 tln in fiscal year 2022, about half of prior year’s deficit of -US$2.776 tln. They say tax revenues were +US$850 bln (or +21%) higher and outlays were -US$548 bln (or -8%) lower than they were in the 2021 fiscal year. That means the 2022 deficit came in at -5.6% of US GDP, far lower than the prior two disastrous Trump years of -14.9% and -11.9% of GDP. They expect the much better economic management will continue. (The New Zealand full operating budget deficit for the same period came in at -4.7% of our GDP. see pg 6.)
One direct echo of the high US CPI data was heard in Japan. Their currency fell to a 32 year low, and markets are assuming their central bank will act again to restrict the devaluation.
In Japan, producer prices rose to a five month high, rising +9.7% in September from a year ago, and blowing past the market consensus of +8.8%. This was the 19th straight month of producer inflation and the highest since April. Elevated commodity prices made worse by the yen’s rapid decline drove the rise. Given that Japan is the world's third largest economy, on a global scale this data is pretty significant.
Later today we are expecting both consumer and producer price data from China. There the changes are expected to be modest and low, primarily because their economy is in a stall, held back by pandemic lockdowns that seem to be spreading.
Just how hard the domestic economy is suffering can be seen from Chinese excavator sales data for September. They were down almost -25% from a year ago, but export sales rose almost +75% over the same period.
China's lockdowns, as grim as they are, might have more public-health sense than we give them credit for. Bloomberg is pointing out that since emerging in late 2021, the highly transmissible Omicron strain of SARS-CoV-2 has splintered into a dazzling array of subvariants that are now driving fresh waves of cases around the world. The proliferation of such a diversity of variants is unprecedented, and pits numerous hyper-mutated iterations against each other in a race for global dominance. That’s turbo-charged Covid, making it one of the fastest-spreading diseases known to humanity, and further challenging pandemic-mitigation efforts in a global population already weary of frequent booster shots, testing and masking. An un-locked-down China would face an enormous public health threat.
But that did not stop a very unusual Beijing protest, right at the time the capital was focused on the anointment of Xi as Party helmsman (a title only Mao has also held).
In Australia, their October inflation expectation rate came in at 5.4%, unchanged from September. It been moderating since June, so "consumer expectations therefore appear to be responding to significantly tighter monetary policy", they say.
One place you can see a sharp response is in the sales of new homes. Their home building lobby group says new home sales declined by 15.7% in the three months to September, compared to the previous quarter. That is quite a pullback.
Globally, freight rates for containerised cargoes are still falling fast, especially in the China trade (Shanghai to Los Angeles was down -13% in a week). They were down another -6% last week alone and are now much lower than five-year average rates. Bulk cargo rates slipped as well.
And we should note that in Victoria, people in several towns have been told to leave immediately as swollen rivers threaten communities in what authorities have called a “significant flood emergency”.
The UST 10yr yield starts today at 3.94% and up +4 bps since this time yesterday. (At one brief point earlier it hit 4.06%). The UST 2-10 rate curve is more inverted at -49 bps. And their 1-5 curve is also more inverted at -21 bps. But their 30 day-10yr curve is steeper at +103 bps. The Australian ten year bond is up +7 bps at 4.06%. The China Govt ten year bond is little-changed at 2.75%. The New Zealand Govt ten year will start today at 4.52% and unchanged.
Wall Street is up a strong +2.4% on the S&P500 in their Thursday session. It has been a rollercoaster session and at one point it was down -2.2% as the CPI data implications were absorbed. Overnight, European markets rose by about +1% except Frankfurt which was up +1.5% and London which only rose +0.3%. Yesterday Tokyo was closed down -0.6%, Hong Kong closed down another -1.9%. And Shanghai ended its Thursday session down -0.3%. The ASX200 ended essentially down -0.1, and the NZX50 fell -0.5%.
The price of gold will open today at US$1665/oz. This is down another -US$6 from this time yesterday.
And oil prices start today +US$1.50 firmer than this time yesterday at just on US$88/bbl in the US while the international Brent price is just over US$93.50/bbl.
The Kiwi dollar will open today at 56.3 USc and a +¼c higher than this time yesterday. Against the Australian dollar we are firmer too at 89.5 AUc. Against the euro we are a little softer at 57.5 euro cents. That all means our TWI-5 starts today at 66.9 and unchanged.
The bitcoin price is now at US$19,149 and a mere +0.3% firmer than this time yesterday. Volatility over the past 24 hours has however been moderate at just +/- 2.8%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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177 Comments
Calling the Fed's bluff? All things point to more tightening required but I suspect people are starting to realise that there isn't much more headroom for them to go without the whole thing collapsing in on itself.
NZ will be in a similar boat. We can all see the basic logic behind 0.75 in the next review and many would say it's a bare minimum. But if the Yanks are betting the Fed won't follow through then that's going to be the prevailing sentiment around our tables as well.
Of course, that is based on the assumption we won't overdo it (which I personally think we will) and then leave them too high for too long once the pain really kicks in (which we'll also do). So the choice is the path of least resistance or doing the right thing but still finding a way to do it wrongly.
"Of course, that is based on the assumption we won't overdo it (which I personally think we will) and then leave them too high for too long once the pain really kicks in (which we'll also do)."
What's the old saying, something about Central Bankers always arriving late to the party then staying too long?
by HouseMouse | 14th Oct 22, 1:20pm Shares head higher? most informed commentators expect further significant falls in shares.
Yep that's interesting, but pretty general
Tell me more
Yes but the overinflated bubble has been obvious for a long time now, anyone that didnt hedge against it by deleveraging property investment or building savings only has them selves to blame (i think its a small number). The FHB who bought in the last couple of years should have known better and will be young and able dig out of it in time.
My point is that I think that up to a 40-50% drop in prices will not surpise most people and wont have the massive effect that many are expecting - it will affect a few. and the increasing immigration should level it off a bit buy creating demand again.
The property market ideally will be left to sort itself out and hopefully lead to the affordable housing that the majority wanted, assuming the impact is negligable on the core of the economy (accepting an impact on retail and hospo) then then its actually a very good outcome for most.
The impact will be felt in construction, hospo, retail.. everywhere, poorer people spend less. Agree the bubble was obvious but most are too greedy to perhaps leave a bit on the table near the top last year. Most seem to prefer the pain of running with the masses over leveraged. to top it off our kiwi savers are lower as well as the professionals never advise you to change from aggressive to cash... luckily some of us don't believe its time in the market vs timing the market
Right. So the smart Cafe owner sells there Cafe asset to prepare for a recession?
What world do you live in where your average small business owner is predicting recessions and selling the business that generate their income in preparation for the recession they don't see coming?
Talk about hubris.
A business owner (of any size) who isnt prepping and looking out for bad times is probably on borrowed time.
And i know plenty of people who sold cafes, manufacturing businesses, investment properties, shares and retail in the last 24 -36 months.. cashed up either for retirement or to look for under priced businesses to buy in the recession.. do up and sell in the next boom. Its very deliberate and the sign of a good businessman.
If you running a business for a job typically doesnt work. If you dont realise you are buying a business at the peak it rarely works. If you are running one to make money whilst you run it and ideally for a decent profit when you sell it (which really is the whole point of owning it) or float or whatever.. then you better know what part of the economic cycle you are on when you buy, grow, list and sell.
To be honest most the asset gains i made were done by timing markets.. i suspect its true for most. A much easier way to make sizable chunks.
I agree a lot of business owners wont get this.. esp after an extended 10 year boom.. i expect a lot will fail. But thats their learning.
The professionals who run these KS funds don't give a stuff about the average investor, they don't stop and think about poor johnny where should I get more bang for there buck, your money just gets plowed into any old asset, they just spread it around and hope and pray, then charge you for the non service
I too agree with this comment. It's something that should have happened at the start of the pandemic. Why the pandemic wasn't seen as a godsend to reduce property prices is beyond me. We were all braced for it at the time and prepared to face the expected consequences. When house prices just took off instead it seemed like we were living in clown world.
Love how "FHBs should have known better" but it took a once-in-a-lifetime pandemic and resulting meltdowns to end the rampant grift that their elders had set up - yet the FHBs are the ones who get the finger-wagging treatment.
You can't help be impressed how one group of people manage to always be in the wrong for simply trying to put a roof over their head, and not having infinite foresight or the ability to put their lives on hold even longer while a correction that was already seven years overdue played out, all the while major political and institutional figures were banging on about keeping prices high and preparing for negative interest rates.
If older Kiwis hadn't made such a mess of housing, FHBs wouldn't have been so desperate they felt like it was now or never. But anything that doesn't fellate the egos of older Kiwis at the expense of young people must continue to go unsaid, so you're not allowed to say that bit.
It's funny how people in their 20's are expected to be experts in finance when buying their own house, effectively absolving the banks from their implied duties to make sound financial decisions on behalf of their clients, that's why they demand a profit for their services? Just like not everyone is an expert in electrical or plumbing, hence paying good money for someone qualified to make the decisions and do the work for you.
Maybe if the house burns down due to faulty wiring, the insurance company should blame the home owner for not choosing a better electrician?
absolving the banks from their implied duties to make sound financial decisions on behalf of their clients
Lol. Banks dont set the OCR or cause world events that affect mortgage rates or employment. The owness is on the individual to learn before borrowing vast sums of money. It irks me that people dont bother and then expect sympathy or bail outs. If you choose a shoddy electrician - then either you should have checked references or you or the insurance company can sue them).
Buying a house is a big risk. being sure of repayments, its value and what the economy will do is the same as any investment... down to you to check it out and make sure you are comfortable with it all. When prices go up everyone is happy to accept it.
The banks have experience and are privy to much more information than every day Joe. The banks should be well aware that they don't control the OCR or world events. The fact that their lending costs are so precarious says more about the robustness of their lending structure (fractional reserves) than anything else. Unlike in the USA with non-recourse and 30 year terms here in New Zealand the customer is lumped with all the risk.
I'm not talking about sympathy bail outs, it'll likely be investors with their hands out for those anyway.
I think 40-50% falls *would* have a massive effect. For a start, it would completely destroy the residential construction sector and a number of related sectors.
I don’t think a 20-25% fall (currently about 12% nationally) would have a massive effect, but anything north of 30-35% would.
If land values are over half (sometimes 2/3) the value of a property I fail to see how it's definitely all-around bad for the building sector. A drop in house prices is a drop in the land price as well as the value of the improvements. A house price drop should affect those worst who bought land up large in a speculative gamble.
A lot of people have no assets and live hand to mouth. A lot of the others only own their PPOR with a small mortgage and some kiwisaver.
For all those ones what is there to hedge
Some people have shares that they self manage and many of them have been caught in the REITs and RV companies.
In the medium to long term it is those that live hand to mouth on low salaries that will benefit the most from bringing inflation down and reducing house prices (and with them rent). Which is a great thing. So the OCR should rise quicker to make it so.
Currently the poor must feel like the proverbial frogs in the pan with the heat slowly being turned up over a looong period.. as their rent rises, they have less to save and essentials like food, energy and clothing become luxuries. And why - to protect wealthy gambling property investors!
It wasn't obvious if you read Granny Herald, it was just going to double every 10 years don't you know? Throw in a monthly "I got on the ladder with thrift and hard work (and some help from mum and dad)" article. Add a central bank signaling lower rates as the new norm with possible negative interest rates to come. Stir in house inspections with some Karen traipsing through your house every few months and rent reviews with increasingly paranoid and predatory landlords. Mix in a govt that said high house prices were great then a new government that did the exact opposite of the mandate that got them elected (make housing affordable again) and then tried to keep the increases coming as they added houses to their personal portfolios. A new Christian leader of the opposition with a cool 7 properties signaling it's okay to deprive people buying their own home when you can make money off them instead. The final nail in the jumping on the FOMO bandwagon would have been constantly watching complete muppets get rich by sitting on their arse.
Seriously, who wouldn't have FOMO'ed?
What absolute rubbish. That type of nonsense is typical of the type of misinformation that so easily spreads on social media.
The cure for Ebola is avocado on toast. The oil from said fruit migrates to the eyeballs leaving them hydrophobic, thereby preventing water loss from the eyes and that raisin effect.
China the nation of its origin.
Jeffrey Sachs as Righteous Rogue Elephant
WowProf. Jeffrey Sachs: "I chaired the commission for the Lancet for 2 years on Covid. I'm pretty convinced it came out of a US lab of biotechnology [...] We don't know for sure but there is enough evidence. [However] it's not being investigated, not in the US, not anywhere." Link
Gain of Function research was banned in the USA, so they moved the work from Uni North C to Canada and China... Fucci is donkey deep in this mess. There is absolutely no lineage of pre human virus found in any animals in the wild.... they where using mice with human ace2 cells for testing, in all other cases SARs MERs etc there are well documented animal paths as he virus slowly adapts and infects humans...
Three options: 1) from the wild; 2) deliberate mutation by scientists release by accident; 3) deliberate mutation by scientists deliberately released.
A commission of enquiry is needed not to decide which of these is right but to put in place policies that will prevent 2) or 3) in future.
Yup. There's a real ethical issue with vapourising the jobs of those who get up and go to work while those who won't are functionally impervious to that kind of thing.
I would love to see it scrutinised though the lens of modern political notions of 'fairness' - which admittedly seem to be pretty weak when it comes to justifying tax increases.
I'll just put this out here so we see who's really on benefits in NZ:
https://figure.nz/chart/2eIStXKBWssxMIze
*grumble grumble* something about paying taxes all my life and voting against compulsory superannuation in the 70's.
Meanwhile, if a single pensioner lives to the average life expectancy of 82, without adjusting for inflation they'll receive $400k in benefit payments ($24k p.a.). The equivalent of 30 years of a median ($65k) income earners entire annual PAYE/ACC.
Hop onto One ZB and listen to all the superannuitants going on about the dole bludgers refusing to take on a casual contract, minimum wage, split shift job 2 hours from where they live.
Remembering of course that the number of unemployed are a lever for the RB to pull to control inflation.
Superannuants are not considered to be 'beneficiaries' in a pejorative sense. The term "beneficiary" is generally used euphemistically and thus pejoratively when used to describe recipients who are unemployed or single parents. For the elderly it is a well deserved and rather modest reward to assist them in their dotage.
Interesting. On one hand 'dotage' means a period of senile decay marked by decline of mental poise and alertness. But on the other hand only creatures with very large brains have grandparents. From an evolutionary point of view consuming resources while unable to produce off-spring is counterproductive. It is justified by the transmission of cultural wisdom. You can be young and brainy but not young and wise.
Judging by the balanced intelligence met at U3A meetings only gold card owners should have the vote. But on the other hand our world is run by Trump, Biden, Putin in their seventies as is Auckland's mayor and so will president for life Xi next year. Maybe wisdom is an attribute found only in some elderly females.
And that's only the official list of government benefits. I'd like to see a list of who isn't receiving a benefit of some sort. One that includes anything over and above fair compensation for services performed but accepted as so called 'norms'. I guess they're called entitlements, not benefits.
I don't see any mention of the impact that interest rate rises are having on CDS on existing bonds. 10 year bonds issued 18 months ago have taken a hit in value, and if there are any swaps on these instruments these must be close to triggering defaults.
Numbers I have seen bandied about are values 30 to 45 pct lower. there was talk that this was behind the emergency actions of the Bank of England a few weeks back.
CDS is to cover defaults..... A bond has the same coupon all the way through (Unless its inflation linked etc or a base rate +points). so if you have a 5% bond and rates goto 10% you have lost the income of the extra 5% so the face or tradable value of the bond you own decreases proportionately. its not a default, the bond issuer still have to pay only 5%, its you who suffers for holding the bond.... CDS trigger on well defined legal default events only. its insurance effectively that you wont get your money back. The gilts issues where around high leverage in a low interest rate world, HM Treasury where never going to default, but the leveraged pension funds where being margin called, to meet margin they had to sell something, most likely equities... its a doom loop to be avoided.
And there is only one way to prevent this doom loop, put more money into circulation to pay the interest on the debt. So inflationary.
The BOE has finally shown what was always coming, being backed into a corner with only two ways out. But really the inflationary path still leads to a similar outcome down the road a bit.
Dollar funding crisis reaches...Switzerland. This isn't (just) Credit Suisse, though.
While the world was focused on the UK and its gilt-y pound, the warning signs were everywhere how this was and remains eurodollar business. Global dollar shortage, emphasis on "global." Now Switzerland has seen US$ funding eroded within its borders - or maybe from outside - to the point the SNB is activating US$ swap lines with the Fed. Either way, sure seems like that escalating third deflationary wave markets (*especially* Japanese bills) have been warning about.
IT snafu? Swiss NB yesterday posted results of its US$ auction (effective today) as is standard practice. $6.3B bids accepted from 15 banks. Those $s come from FRBNY. FRBNY says "There are no results available at this time." There are results. Link
Thinking about a post a couple of days ago, and some historic comments here perhaps someone could provide some answers? A number of people routinely comment that the RBNZ really doesn't have much choice to follow the Fed in addressing economic concerns in NZ. Your comment points me to a question niggling me, is that is there some form of 'unofficial sovereignty' amongst central banks, with the Fed ruling them all? Or is it just that the US economy is so big that they are all subject to the whims of the fed?
Adrian Orr direct quote:
“We are a small economy and must accept the fact that saving and investment decisions in the rest of the world determine the bulk of our interest rate levels."
https://i.stuff.co.nz/business/126856502/adrian-orr-says-reserve-bank-o…
Thanks Fitz, HM. Next question - how much control of the Fed does the US Government have? I'm thinking here that if the Fed has that much influence, then any action it takes has significant political implications, and potentially a significant impact on foreign policy too?
I call BS.
Some observers mistakenly consider the Federal Reserve to be a private entity because the Reserve Banks are organized similarly to private corporations. For instance, each of the 12 Reserve Banks operates within its own particular geographic area, or District, of the United States, and each is separately incorporated and has its own board of directors. Commercial banks that are members of the Federal Reserve System hold stock in their District's Reserve Bank. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. In fact, the Reserve Banks are required by law to transfer net earnings to the U.S. Treasury, after providing for all necessary expenses of the Reserve Banks, legally required dividend payments, and maintaining a limited balance in a surplus fund.
Then why is the USA government $30 trillion in debt. The reserve banks are not operated for profit? Then why are they buying MBS, gold, stocks and who knows what else. PPT? They seem more like an investment firm than a 'lender of last resort'. But hell they are Federal.
Lol - Murray...I get the feeling that you are having a spiritual awakening. That is, that, you might only just be starting to understand monetary policy, geopolitics and the international world order.
If you haven't - have a read of Ray Dalio's 'The Changing World Order'. This will clarify the areas that you appear uncertain about at present.
I don't think I'd call it a spiritual awakening IO, and i find a lot of formal texts on the subject to be somewhat confusing (yes they are - no they're not - the devil is in the detail) and also pretty good anaesthetics. But like many others i suspect, now quite strongly, that i have been more than a little naive with respect to expectations on our RBNZ. My next question for example would be what would the US government do if our Government and RBNZ diverged significantly from what the Fed was doing (or directing) and decided to do something radically different?
When you finally come to accept that interest can't be magicked up from somewhere/nowhere you might get to understand that the structural issue lies right there. That bankers are not in control of interest rates, well at least not the trend.
The outcome of interest on a money supply is predictable. If you go back through my posts here from 2013 you will see I did in fact predict where we find ourselves today. I'm not the first of course, Aristotle realised the ramifications.
This is not about just interest Scarfie. it's actually about the whole economy, so you can't even break it down to the or a market. I also think you place the wrong emphasis on interest as we discussed a couple of weeks ago - interest is nothing more than a fee for using money that is not yours. Central banks setting a base interest rate (OCR) is just them saying to the private banks "this is what we'll charge you for the money we release to you". In the end that money plus the fee must be returned. One would then hope the person who borrowed that money put it to good use and was able to pay it back plus the fee at the end of the term!
But the total amount of money in an economy (before 1971 - set by the amount of gold bullion owned by the Government) is a very important factor. It impacts so many things but fundamentally the value of the currency is the starting point. An indication of the problem is that the Government allows the private banks to issue credit, which as PDK points out, is a bet against future earnings of the borrower. But when there is no effective restraint on the banks, they can and do create imbalances in the economy, and worse. While the Government is endeavouring to create and support a productive economy, those banks are hoovering up significant portions of the benefits of that 'productive economy' and taking it out of the money-go-round - effectively limiting what can be achieved. The banks are marking this as "profit", but it does include money that people have not spent, but have saved as well as the income earned from their lending.
But if the tools the Government can use is restricted because we are being dictated to by the US Fed, creating and managing that productive economy and restraining the banks might just be a lot harder than many expect!
If you go back through the dialogue here on interest.co you will see that PDK taught me one thing and got me thinking. I did get thinking, then I was able to feed back with my results to help others understand. You almost had it in our last discussion, just fell over at the last hurdle. I think you will get it.
One of the things PDK would say is always go back to first principles when problem solving.
What I am saying is interest is structural. It lies at the heart of the very problem you are trying to solve. Once you put interest on a money supply you set up exponential growth of finite resources. You have to grow the pay the interest. It looks like it works, for decades even. But eventually it comes undone.
There is probably a very good reason the bible discusses debt forgiveness, destruction of unpayable debt is the only way out. It can happen voluntarily, or physics will come along and win the day.
Edit. If you follow Snider, he is saying the same thing I have been saying since about 2013. Central banks follow the market, they don't lead it. Currently there is a liquidity shortage to which the central banks are responding. Most of all the FED by virtue of having the reserve currency denominated in USD. I'd also say the USA is in control of the systems that regulate the flow.
Now PDK's stocks vs flows might be a perspective to look at here...
I do understand what you're saying, but that is what the banks are doing to screw us. They've manipulated the system so much that that is what is happening. But I'm going back before that, to what the very original principle of interest was about. When you argue the perspective you've put forward, you're essentially buying into what the banks have sold us. Look at interest as a hire fee, and it looks different. Banks are trying to control the money supply all the while raking of a cut, plus the cream. They only get away with that because Governments let them. My thought stream and the discussion I have tried to initiate is taking first principles of money supply back to the basics where at all levels it is controlled and managed by the Government on behalf of the people. this would require the private (trading) banks to be more regulated and restricted in how they do their business. This is, without re-imposing the gold standard, the government going back and taking control of the total money supply in the economy, as it did before Breton Woods in 1971.
What has happened to banking and Government economics in the last 50 years, while could be suggested as transformational, is not necessarily beneficial. Currently as you indicate as interest is applied today, it bleeds of the supply of money, which defeats any efforts at government control, and as you indicate that supply must essentially be bottomless. But the world cannot continue on that model. It has to change and the only way that must happen is for restrictions to be placed on the supply, in other words restricting the consumption of resources, and only governments should and can have that power.
It is corrupt at all levels, treasonous even, politicians and bankers. I'd go as far to suggest that neither group have far enough forward vision. Too many layers and complexity though.
I was have a discussion with Andrewj today and I said if a corporate down the road owns all the apple orchards, and centralisation of orchards is a fact, then the corporate doesn't have to pay the price for the cheap immigration it wants to bring here to increase it's profits. As Andrew rightly points out, what happened to the free market sorting out the problem? These businesses believe on one hand in a free market at which to operate, but on the other hand have the leverage to lean on politicians to get a free ticket. If there are foreign owners of the corporate then they really don't have to pay the price. If local then they will, but are too stupid to understand their own effect. The politicians are definitely too stupid to thing about the downstream consequences.
But flawed as their thinking is, the framework under which they operate is not their doing. If they were smart they'd see the framework and change it. They are not, and don't. So we get to where we are, a predictable outcome.
I think the principle I created, Scarfie's Law of Maximum Extrative Yield Applies. I think just a technical way of expressing greed. Most people will in general take what the can get away with. They'll even find excuses to support their extraction, such as a landlord provides and essential service. It is all BS stories.
So while I point to the structural issue with interest, the predictable outcome. Ultimately all forms of unearned income are immoral and lead eventually to bad outcomes. Long time frames though so people can't see it.
Btw, having been in the military you have been exposed to a different way of managing the affairs of people. Collaboration. The model there is good, the example not so good.
I think you make a good point. Business would impose the "free market" rules on others while they are stacking the deck for themselves. That is the point I've been making for several years now, that the "free market" has never been and can never be because regardless of theory, any market is a human construct, not a natural phenomenon, and therefore subject to human manipulation and humans will ALWAYS try to stack a deck in their own favour. So the market cannot now or ever fix the fundamental flaws within the economic structures that are imposed these days. Thus fundamental change is required.
That's exactly the problem FL, except that the money isn't created. It is credit that is issued which is a bet against future economic activity, and that being able to produce not only the amount of the loan (credit) and then some to pay the fee for that loan (interest). That bet is pressure on the Government to ensure there is sufficient money in circulation to meet the credit issued plus the fee. Thus the banks, being to all intents without restraint, are driving the government to print money. And it is the banks who are profiting off this. All other business's are effectively subservient, because it is the banks who are to all intents controlling the money supply, directly and indirectly. Indirectly, as we have seen they are also having a huge influence over just what economic activity is occurring. We saw this because when the Government released a large amount of money to the banks to support business through COVID, the banks ignored the government instructions and pumped what money they received into housing, further exacerbating an already unbalanced economy.
Making the RBNZ responsible for house prices is frankly stupid, unless it is also given the authority to restrain the banks activities, which it doesn't have.
So the banks will not support productive economic activity such as manufacturing unless it is already established and proven. Which means new manufacturing can never start if it is dependent on bank support. So in the end it is the banks who are slowly but surely destroying this country.
If you look at the origin of lazzez-faire/free markets, it's even more astounding. It was originally taken from the Tao te Ching, the teachings of Lao Tzu. These teachings are similar to the other spiritual concepts of Buddhism, Vedic yoga, Christ etc that espouse an ethical way of living.
It's my understanding that markets were originally a place to gather, to trade freely with each other and form social connections. Reputation for honesty, fairness, quality and service was what got you repeated custom. Unfortunately our perverted economics has made it all about 'the market' and has become increasingly disconnected from the qualities and function of the market place.
It's also suggested that humans are not hardwired to compete and stack the deck in their own favour. That it has happened is the result of environmental conditions of the culture one is raised in. One could suggest our culture is fundamentally flawed and it's taken hundreds, if not thousands of years to become this way.
But you're correct, the free market that we've been taught to believe in is BS. Much like we have police and laws to regulate individual behaviours to negate harm, the market also requires regulation. Unfortunately much has been inherited and embedded in our thinking. Many of our laws and social constructs are created by those in power and not for the benefit of the people. There are also teachings of universal or cosmic laws that if practiced individually and with like minded community will become the new collective. There is much for us humans to unlearn and relearn.
China's lockdowns, as grim as they are, might have more public-health sense than we give them credit for.
Pretty stunning admission this week by a Pfizer exec that they had no evidence of the vaccine's ability to reduce transmission when they started rolling it out (ostensibly to reduce transmission):
https://www.news.com.au/technology/science/human-body/pfizer-did-not-kn…
Perhaps never-ending lockdowns are the only way to stop the spread. Something for us look forward to I suppose. Maybe a good time to buy NFLX?
I've seen this news link and it's misleading. Pfizer have level 1 evidence that the vaccine reduces infection rates and severity of infection.
On a population basis if less people get infected, and those that do are less sick then the vaccine is successful. Transmission could be unchanged but if less people die or require ventilation then it's a go.
The issue is side effects vs benefits. The delta data was compelling but with omicron the margins are closer. That's where the discussions get interesting.
What Pfizer had are results that are heavily fudged to show what they wanted them to show. In an unfinished trial which they broke by vaccinating the control.
This is not surprising this is pharma 101.
In the real world the vaccine obviously and clearly does little to nothing to stop spread.
And I have not seen anyone able to differentiate between the effect of an obviously less dangerous omicron strain and the supposed effect of a vaccine that this strain evades effortlessly.
And the comment on lockdowns is just nonsense.
Only in quant little nz do we still believe lockdowns have an even remotely positive cost benefit ratio.
Clinical trials take years not weeks. Saying vaccines reduces infection and severity of infection is ludicrous. And who performed Pfizer's trials? Either Pfizer or sponsored by Pfizer. In NZ the vaccinated are the ones getting really sick with the new variants, not us pure bloods. Same happened in the USA. Remember Pfizer is a profit driven corporation, with no concern for human health and is quite happy to perform an experimental gene therapy on humans, with no chance of being sued, under the emergency use act.
Everybody gets this mild cold, just how does your immunity deal with it. And Pfizer screwed with your immunities. This clinical trial is still in progress.
Time to move on Fossil, all that stuff is irrelevant really. Ultimately it was your choice to take the vax or not. Most people I knew took it but I was one of the few who didn't. What I find strange is that I have still not had Covid, or if I have had it I didn't know about it at the time. People are responsible for their own decisions.
Like any vaccination released in the last 100 years I guess? I remember seeing a meme recently on an "oldie goldie let's look down our noses at young peoples" page gloating about how they took one for the team when they took the Polio sip that was developed in the 50's. I tried to find it, but it got lost amongst the "we drank from garden hoses, played on metal slide and had manners beaten into us" memes.
We talked about this one yesterday morning too. The initial study into the vaccine was on preventing infection and it was extremely successful. That was enough to put it into use.
Transmission was studied later. Perhaps part of the delay is that transmission is harder to measure than 'did the guy we stuck a needle in get sick within 2 months'.
If anyone claimed anything about transmission based on that first study they were mistaken - we didn't have the evidence at that point, it came later.
What a disgusting rewrite of history this is. The whole passport policy, stopping education and play, sacking medical staff etc. etc. was based on the lie that the experimental gene therapy stopped transmission. Now we reap the mental, economic and child education whirlwind.
All for a virus with a median age of death higher than average life expectancy.
I think you've misunderstood my post. Transmission was not measured in the initial Pfizer trials, hence the original post being unsurprising. The first evidence that the vaccine was worth taking was based purely on protection yourself, as the initial study proved quite clearly - 95% protection against Classic Covid. Transmission evidence came later, but before NZ got anywhere with our vaccination program.
By the time Omicron came along, all that evidence became much less significant and from that point on the decision making becomes much more complicated. We were slow to adapt to that reality.
Where's the evidence it stops population transmission? There are many success stories or trends of the rollout of the first 2 does (up to 6 months later) but it's not universal. A lot of the zero covid countries held until they started vaxing and many countires had a different testing regime for the unvaxed.
Most of the success stories come from a vax rollout that finishes in the early spring, which is hardly surprising for a seasonal virus. I would like to point out we had we had unseasonal weather last week but just keep that in mind and don't read to much into it. The radio ads have also switched to requesting us to test more rather than get vaxed.
There is a section on transmission half way down the page, follow the references to your hearts content.
https://www.cdc.gov/coronavirus/2019-ncov/science/science-briefs/fully-…
Transmission to others is much harder to measure than individual protection from disease, just spend a few minutes thinking about how you would conduct such a trial. We made a collective decision to stick the vaccines into arms, or at least vulnerable arms, based purely on the evidence of 95% protection from the disease before any transmission evidence developed.
Most of the evidence they reference is classic or Delta variant. Omicron is quite a different beast.
From the conclusion: "...suggest that any associated transmission risk is substantially reduced in vaccinated people."
There is no real evidence there. The closest is asymptomatic infection from studies, short time period with some >14days statistical tricks or split testing requriements selected by a vested interest. You can find plenty of data that suggests no difference in infection numbers due to vax.
The household transmission studies might be the simplest way to measure the effect on transmission - references 171-176 from my original link. If you were fully vaccinated, the chance of your household contracting the disease is reduced, perhaps by 50% or so. That looks worth having to me. As the CDC put it -
"Studies from multiple countries found significantly reduced likelihood of transmission to household contacts from people infected with SARS-CoV-2 who were previously vaccinated for COVID-19"
Like I said, and you hinted at earlier, it is very difficult to measure this in the way we'd ideally like to. Hence the use of guarded language in the conclusion.
So you are not willing to accept evidence like the Danish study covering tens of thousands of non self-selecting cases, but if I can find a random country with current low vaccination and high cases you'll listen to that? Even though I've been quite clear I'm only talking about original variant Covid and to a lesser extent Delta, while Omicron is current dominant strain?
Some of the population chose to be vaxed and end up in the vaxed group and the vice versa. How is that not choosing the group? Anyway household transmission is a weak justification for anything beyond a recommendation.
"if I can find a random country with current low vaccination and high cases you'll listen to that?"
Absolutely, if we count from the beginning to now or even just early 2020 to to a logical point. You cant just cut it off right before surge in cases or northern to southern hemisphere without adjustment. The problem with this is the unvaxed (lets say <20-50% first dose) generally did not have the money for mass PCR testing.
What a shitshow of a paper to highlight mfd. The only vulnerable age group studied, 70-78, had higher secondary transmission in the vaccinated households than the unvaccinated households! 38% secondary attack rate for vaccinated vs 18% for unvaccinated.
https://www.nature.com/articles/s41467-022-31494-y/tables/1
Denmark now doesn't recommend vaccinations for under 50's so not a great vaccine mandate choice either.
"Who will be offered vaccination against covid-19?
People aged 50 years and over will be offered vaccination."
https://www.sst.dk/en/English/Corona-eng/Vaccination-against-COVID-19
Risk vs benefit for young people:
"We estimate that 22,000 - 30,000 previously uninfected adults aged 18-29 must be boosted with an mRNA vaccine to prevent one COVID-19 hospitalisation. Using CDC and sponsor-reported adverse event data, we find that booster mandates may cause a net expected harm: per COVID-19 hospitalisation prevented in previously uninfected young adults, we anticipate 18 to 98 serious adverse events, including 1.7 to 3.0 booster-associated myocarditis cases in males, and 1,373 to 3,234 cases of grade ≥3 reactogenicity which interferes with daily activities. Given the high prevalence of post-infection immunity, this risk-benefit profile is even less favourable. University booster mandates are unethical because: 1) no formal risk-benefit assessment exists for this age group; 2) vaccine mandates may result in a net expected harm to individual young people; 3) mandates are not proportionate: expected harms are not outweighed by public health benefits given the modest and transient effectiveness of vaccines against transmission; 4) US mandates violate the reciprocity principle because rare serious vaccine-related harms will not be reliably compensated due to gaps in current vaccine injury schemes; and 5) mandates create wider social harms."
Everyone still got 'Covid', economy busted, society locked down, mental health deteriorated, reliance on an unproven experimental gene therapy to enrich Big Pharma, children living in fear, huge government debt, tourism dead, people locked out of their country, but at least you are grateful Aggie. Study the science (as I did) as Fauci said and you will not be so grateful.
The FED will go 75bps.
On a purely economical basis the RBNZ has stubbornly high inflation, low unemployment, a housing market that is still higher than when the record low interest rates were introduced pre covid, and FED activity that's suppressing the NZD.
Orr should match the rise as a minimum.
Everyone is talking about housing market crash but house prices are still up 25% to 45% since the start of pandemic boom, so can understand the level of ponzi, which was only and only possible as was promoted by RBNZ and supported by government.
Thankfully the myth that whatever happens, RBNZ and/or government will be forced to rescue is being debunked and is, as finally economy fundamentals have taken over and no more room to kick the tin or manipulate.
A large population of elderly unvaccinated, and a health system without huge capacity.
It would be back to 2020 with mass graves and intensive care units being set up in school buildings.
They should bite the bullet, buy some mRNA vaccine (or steal the intellectual property and make their own) and line them up.
You can see there's still far too much liquidity and QT need to speed up. The inflation news in the US was disastrous for equities so they fell -2.2% then miraculously, they rose again to +2.4% a massive differential of 4.6%. I think this is explained by the excess money having nowhere else to go, and re-entering the share market.
Agree that too much money has been pumped into the system, which will take time unless reserve bank acts swiftly and beyond - raising OCR by 0.5% may seem to many as RBNZ is doing but the scale is so big that in comparioson rbnz is taking baby step though in the right direction but to reach destination will have to run and possible may fall but will have to get up and keep runing.
We will have to face the worse before getting back to normal, earlier the better.
"Bloomberg is pointing out that since emerging in late 2021, the highly transmissible Omicron strain of SARS-CoV-2 has splintered into a dazzling array of subvariants that are now driving fresh waves of cases around the world. The proliferation of such a diversity of variants is unprecedented, and pits numerous hyper-mutated iterations against each other in a race for global dominance."
Vaccination into a pandemic is the root cause of subvariants - you may fact-check this yourself.
"The proliferation of such a diversity of variants is unprecedented".
Of course it is "unprecedented" when an action is taken against the long-established medical practice of never vaccinating into a pandemic.
What a top night!
"Here come the figures. Here they come, and they are....." zzzzzttt....power failure.
Power flickers back on an hour later and market have gone from bottom to top, and the figures made little difference. They will, in due course. Relief rally or not
But at least the UK seems to have twigged to what it all means.
House market crash will take prices back to 2013, warns City economist. Forecast comes as it emerged banks were preparing to slash mortgage lending even before mini-Budget
One suggestion:
The most likely explanation is a technical one. The S&P 500, at its low, had retraced half the gain it had made from the Covid low in 2020 to its peak in January 2022. That’s an important level for market technicians, and when it was hit, it appeared to set off a wave of profit-taking in put options that had become profitable, which translated into actual buying, especially as those who were short the market got squeezed. Sometimes markets move more because of positioning and trading, not for any fundamental reason.
And sometimes, even a 3% gain is just noise.
The US Congressional Budget Office says the American federal budget deficit was -US$1.377 tln in fiscal year 2022, about half of prior year’s deficit of -US$2.776 tln.
US inflation is currently being driven by the rising costs of rent, education, healthcare and food. Rents tend to *increase* with higher interest rates as costs get passed on, and imagine a world where the strategy for reducing the cost of healthcare and education involves choking demand!!!
"Rents tend to *increase* with higher interest rates as costs get passed on"
Unfortunately real world data doesn't back that up.
https://www.barfoot.co.nz/news/2021/will-rents-rise-as-interest-rates-g…
It is marginal, but the correlation between the change in OCR and change in new rents is positive in NZ (0.55 to be exact). To be fair though there are a lot of other factors at play so I would have probably been on more solid ground if I had said that there is no evidence that increasing interest rates will lead to reduced rents.
Doesnt matter what the OCR is NZ still needs a lot more;
Nurses
Doctors
Truck Drivers
School Teachers (many in AKL are retirement age)
Mid Wives
Cheifs
People to build the hospitals we need as current ones will fall over in an Earthquake. Many of the NZers who could work choose to receive ebenfits and accomodation supplements etc rather then work, you cannot fire these people due to rising OCR. with so many missing working people OCR rises make little difference as there are no marginal workers to lay off.... indeed once we get to the layoff stage, the economy may be a depression levels.
The problem is for every migrant that might be needed and fill a job vacancy we get a partner, some dependent children and now maybe a few elderly as well. If there's a specific, very skilled, very rare shortage - say a neurosurgeon - bring in 20 and our shortage is solved. For everyone else (nurses, teachers etc) it's adding more to demand than supply.
Cheifs? Don't we have too many of these already and not enough indians?
How do you sell those roles to the people when society obviously doesn't value them? There's no wealth or status, appreciation or recognition. STEM's the way to go, social media entrepreneurs, landlords and economists.
UGLY
House prices could plunge by a third, experts warn (yahoo.com)
·Freelance Writer
28 September 2022·4-min read
Owners may be forced to sell if mortgage repayments rise significantly over the next few months. (Getty)
Soaring interest rates could result in a substantial reduction in house prices next year, experts have warned.
The Bank of England has warned of significant increases to the base rate to help guard against increased inflation after sterling tumbled against the dollar following chancellor Kwasi Kwarteng's mini budget on Friday.
With mortgage payments set to significantly increase as a result, and with inflation continuing to rise, experts predict a tumble in the housing market.
Ian Mulheirn, the chair of Generation Rent and executive director of the Tony Blair Institute, told Newsnight: “It would be very hard for buyers to pay the prices that houses are currently at, so we could be looking at drops [of house prices] of a third in real terms.”
Interest rates are expected to climb sharply as the BoE attempts to control inflation (Yahoo News UK/Flourish)
Mortgage rates are set to soar as the Bank of England raises interest rates (Yahoo News UK/Datawrapper)
The warning comes amid continued market turmoil following the mini budget, in which Kwarteng revealed plans to massively slash taxes, in particular for the UK's highest earners, and to vastly increase government borrowing.
Just a few weeks after Liz Truss took office, Tory MPs are already hitting out at her approach, with one prominent backbencher calling his party leader’s plan “inept madness”.
It comes as the Bank of England was forced to launched an emergency bond-buying programme to prevent borrowing costs from spiralling out of control and to stave off a “material risk to UK financial stability”.
Rising interest rates mean homeowners who are due to come off their fixed rate deals face a large increase in borrowing costs.
According to UK Finance, 600,000 fixed rate mortgages are due to end in the second half of 2022, and 1.8 million are due to end in 2023.
Some experts believe house prices may drop by a third in 2023. (Getty)
Homeowners may be forced to sell their properties as monthly payments become unaffordable, causing a price crash in the house market.
Lending giants are already hiking their mortgage rates and withdrawing products following the market turmoil prompted by Kwarteng's announcements.
Even once lending resumes, analysts say that borrowers would face higher costs – making house buying and existing mortgages unaffordable for many.
Housing market analyst Neal Hudson told the Financial Times: “For the last few months, we’ve known this is a possibility but it’s looked like the worst-case scenario. Now we are heading for that scenario.
“I’m still not 100% certain the market will crash… but it’s the main assumption now,” he added.
It comes as Britain’s biggest banks are set to be stress tested against scenarios more severe than the 2008 financial crisis, to see whether they can withstand inflation rocketing to 17% and interest rates hiked up to 6%.
The Bank of England will put eight of the UK’s leading banks under a hypothetical scenario to determine how resilient the sector is against severe but plausible recessions.
It will imagine a housing market crash whereby property prices will plummet by around a third over the first year and commercial property prices will slide 45% during the duration of the five-year scenario.
The worst-case scenario imagines inflation peaking at 17% in 2023 and averaging at 11% over three years, UK GDP falling by 5% over the first year, and UK unemployment more than doubling to a peak rate of 8.5%.
https://www.nbr.co.nz/on-the-record/arderns-star-has-fallen/
If I had to bet my house on it, I would pick Jacinda Ardern to announce that she is stepping down before Christmas. She won’t lead the Labour Party into the next election. She can’t. The announcement must surely be coming.
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