Here's our summary of key economic events over the holiday weekend that affect New Zealand, with another quick news wrap-up so you can get back to 'time-off'.
Firstly, for those who missed yesterday's update, we now expect the Barfoot December results tomorrow (Wednesday).
We start today in the US, with lower inflation expectations for both food and rent that are depowering price increases there. Consumer inflation expectations for the year ahead fell for a third consecutive month to 3% in December from 3.4% in November and the lowest level since January 2021.
American consumer debt levels are due later this morning and only a modest +US$9 bln rise is anticipated.
Meanwhile, the US Fed balance sheet was reduced by a net -10% to US$7.7 tln in 2023, and this was despite the emergency addition of almost US$400 bln in March to cover their SVB/regional banking crisis. That lost them three months of progress.
And we should perhaps note that in the wake of the latest Boeing 737MAX troubles and fleet grounding, Air New Zealand does not have any of these aircraft. Boeing's stock suffered a sharp -10% fall yesterday but no more today.
In the EU, overall sentiment recorded a moderate gain in December, perhaps a surprise given their lackluster recent economic performances. The rises were driven by higher confidence among consumers, and managers in retail trade, services, and construction, while confidence in industry remained broadly unchanged.
Maybe part of that improvement can be attributed to a good rise in November exports from Germany, and a modest rise in November factory orders there.
We should also note that from the start of 2024, all Chinese tariffs on New Zealand dairy products expired and these exports are duty-free into China now. China is our largest export market, taking more than 34% of dairy exports. Likewise, New Zealand is China’s largest source of dairy imports, accounting for 46% of China's total dairy imports. Chinese firms have bought up Westland Milk, Oceania Dairy, as well as being involved in exporting both fresh milk and infant milk powder products, and these direct ownership links have powered these exports.
The UST 10yr yield starts today at 3.98% and down -7 bps from this time yesterday. The key 2-10 yield curve is unchanged however, still inverted by -34 bps. Their 1-5 curve inversion is morel inverted, now by -89 bps. And their 3 mth-10yr curve inversion is also more inverted, now by -142 bps. The Australian 10 year bond yield is now at 4.10% and -7 bps lower. The China 10 year bond rate is now at 2.57% and holding. And the NZ Government 10 year bond rate is actually +6 bps higher at 4.71%.
Wall Street has started its Monday session with the S&P500 up +0.7%, despite the Boeing slump. Overnight, European markets were up something similar, except London which was little-changed. Yesterday Tokyo ended its Monday session up +0.3%. But the Chinese markets sank with Hong King down -1.9% and Shanghai down -1.4%. Shenzhen was also down -1.9%. Singapore ended its Monday session little-changed. The ASX200 ended down -0.5% and the NZX50 was down a relatively minor -0.1%.
The price of gold will start today down -US$12/oz at just on US$2033/oz.
Oil prices are sharply lower, down -US$4 at just over US$70/bbl in the US. The international Brent price is now just under US$75.50/bbl. A surprise price cut by Saudi Arabia has jolted this market - mainly because the Saudi's feel they have been gamed by Iran, Russia, and a number of other intermediate producers like Angola and Nigeria.
The Kiwi dollar starts today at 62.5 USc and marginally firmer from yesterday. Against the Aussie we are holding at 93 AUc. Against the euro we are softer at 56.9 euro cents. That all means our TWI-5 starts today just under 70.8 and little-changed from this time yesterday.
The bitcoin price starts today higher again, rising to US$44,972 and a further gain of +2.4% from this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 2.4%.
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Inflation Expectations Tumble To Lowest Since Jan 2021, As Do Wage And Spending Growth, In Latest NY Fed Survey Link
And there we go Bank of America Corp. expects the Federal Reserve to announce plans to begin tapering the runoff of its Treasuries holdings in March, coinciding with its first 25 basis points interest-rate cut. Link
What history tells us about rate cuts
The idea is straightforward: the economy struggles, and the Fed cuts rates to help. But is the impact as direct and positive as we're led to believe? Let's dive into the history and outcomes of these rate cuts.
My current thinking is that houses are actually being sold at fair market value, there is no "ponzi", its just limited supply, high demand, and high cost to build. Some of this could be improved slightly (e.g. increase supply via regulation changes or decrease demand via tax changes), but it won't make significant difference. House prices are dependent on interest rates, but that doesn't really change affordability; in fact they are much less affordable now then when interest rates were lower. Maybe we all just need to accept that houses are going to be bloody expensive no matter what happens.
“Ultimately there’s no natural income streams to be able to service and repay loans. What you have is capital gains which are contingent on the game continuing. So it’s a Ponzi scheme. says Werner. - https://wire.insiderfinance.io/richard-werner-qe-infinity-707e2c627e03
Sourced from the employers income from whatever business they are in hopefully, not good if the employer has to pay the worker from working capital.
The same dollar can go through multiple hands in a month.
Customer pays employer, employer pays worker, worker pays Bank (mortgage), bank pays term deposit holder.. you get the idea.
At last...someone asks the right question.
Where indeed...theoretically from 'growth'....and what does that mean?
Growth of what?
In our current system , it means money supply, but no one can measure (or control) it...problematic.
So we have a system that no one can control, but it underpins everything we do....but nevermind we have Central Banks..they'll sort it (lmao)
Yet most of us are able to pay our mortgages so it seems that there are natural income streams that are sufficient to service and repay loans.
Mortgages come from increasing the money supply (pvte bank credit creation) out of thin air. You should ponder as to why house prices increase at a nominal value greater than people's ability to generate income. What Werner is implying is that natural income streams come from productive activity. Property ponzis come from non-productivity activity such as credit creation. So ultimately if you're simply relying on greater credit creation to maintain your ponzi, you're diluting your monetary value and exposing your economy to booms / busts, inflation.
Ultimately there’s no natural income streams to be able to service and repay loans
That's just plain wrong. We have rent and for those that own their own homes it means they save money on rent. Rents go up with inflation as does the value of property. However the initial investment cost remains the same. Mild Inflation is the friend of property owners.
The "tankies" on this forum really want to believe that property is a Ponzi scheme for some reason. I guess because property is a bulwark of capitalism and prior to that, feudalism. It's a bit "old school".
Every year, average rent goes up. What is the source of the money which pays rent? Do you really believe it is magicked out of thin air?? Nothing existed before, then suddenly, money! And that money circulates the economy until it is used to pay rent??? Well, yea, you'd be right. And that is debt. Reliant on more debt to pay for the previous debt, subsidised by the government which also creates money out of thin air when it spends. So questions like, why do we have an accommodation supplement? To further support the expansion of debt. To pay back the debt of yesterday.
Rent is actually a great example, glad you brought it up. There is no productivity in rent. Nothing is produced in order for the transaction of rent to be made. It is entirely unearned. So the capital attributed to real productive enterprise wanes as rent increases its share of the economy, those pesky natural income streams fall. Though cafes and boat yards fare reasonably well.
Ultimately, and this is a big consideration, without rapid population growth, the country cannot consume enough to produce enough income to further fuel ever growing levels of both debt and wealth division.
For debt to increase, the security of income must be paid. For that, rent. For the increase in rent to be paid, incomes of the worker need to increase, so productivity must increase. So investment in productivity must increase. But we are heading in the other direction and investing in non-productive assets. There is simply not enough to consume to support this growth forever, and thus a highly financialised world which relies on debt to pay debt backed by assets which increase in "value". At some point, the bags will be held by the last bag holders, and the debts will be called. And at that point, there will be financial collapse. Who knows when, but it is inevitable.
Yes, and the sun will supernova at some point in the future as well.
Currently, people pay rent with money earned by wages, salary, benefits, investments etc. Imagine if you said, "What is the source of the money which pays for food? Same answer. Money comes from labour and resources. This is not peculiar to property.
Yes, and those wages, salaries, benefits are getting lower and lower, GDP per capita dropping. Not to mention our account balance is also falling. So back to the initial point, lower income to service higher debt - which only works as interest rates are pushed lower and lower and lower. We're two years into a significant tightening cycle, which means all that debt is more expensive than ever. In fact debt is not really growing at all, soon it will be contracting as more money exits the economy than is created.
Those resources, that food - that is not growing at a pace that can keep up with the creation of money for speculation.
It can really all be summed up quite easily; how many average income full time working 25 year olds do you need to stuff in a $1m 2br townhouse to make the numbers work for positive cashflow investment, currently? 6?
Well, there are quite a few 2br townhouses for around 600k and renting out for $540 a week or something like that. My daughter and her boyfriend just moved into such a place and everything is quite comfortable. Currently the return for the landlord may not be as good as other investments but things will work out just fine over time.
The only saving grace is that rent will continue to go up with inflation whereas the debt goes down with inflation.
Yes. When I hear this at the water cooler, I usually agree. But what most people don't understand is:
- Income growth has been lower than asset price growth across the Anglosphere for 30+ years. People really struggle with this one.
- Rents are constrained by income growth. Except if you go into slumlording and try to fit as many bodies as possible into a property.
- If the cost of shelter takes a greater proportion of share of wallet, less is spent into the consumer economy so less revenue, profits and pressure on wages. This has a symbiotic relationship with the property ponzi. On the way up, on the way down.
I consider money to be debt full stop. Fiat currency has always been a promise to pay, rather than any intrinsic value in and of itself, hence why when banks stopped using gold as the currency which can be mined from the ground, and moved to notes which were marked as along the lines of "I promise to pay the bearer on demand the sum of", they essentially got a government-backed licence to loan credit into being under the guise of profiting from it over the long term.
Debt is the way the monetary system works. You get a loan which is in effect payment for your labour for the next 25 years up front with you slowly paying it back. You pay for the house and then that house value is money in actual existence. You finally beat the system when the mortgage is paid off and you are totally debt free. Really its not that hard to grasp, new money is lent into existence and of course total debt is always rising, after all the population is rising and inflation is only making things more expensive over the long term. This system will not collapse, it will be something else that takes it down be it wars, climate change or a major pandemic.
Sounds like mum and dad gave you that advice too.
of course total debt is always rising
No, it has been rising for a while now. But the underlying securities which support much of that debt have taken a haircut, cannot be sold to repay the debts, and as the initial point was made, the income streams needed to support this debt at todays interest rates simply do not exist. The only way to make them exist would be to push interest rates lower than during covid as we are in an almost purely financialised environment.
Nothing can be produced to pay back the debt, only a greater fool is needed.
Debt is the way the monetary system works.
Global debt to GDP is approx 3-4x. If interest rates are at zero, all good. But a 1% increase in debt servicing has an oversized impact and toll on the sheeple. The irony is that they have to take on more debt to service the debt and consume. Audaxes links to this phenomenon below.
https://www.zerohedge.com/markets/consumer-credit-shocker-november-debt…
Total global debt is 307 Trillion or 307 Million Million or USD $307,000,000,000,000. That is equal to approx $61,000 NZD for each of the 8.045 billion people on the planet today.
The average global personal income is NZD 15698 per year. The average global household income is NZD 19734 per year. The median per-capita household income is only NZD 4710 per year
What could possibly go wrong.
Not the same thing, The whole of Africa has a massive corruption problem. Other countries like Argentina have been losers for decades and have multiple defaults. Plenty of countries in trouble financially and there are obvious reasons for that that even people that don't even live there can see.
"House prices are dependent on interest rates, but that doesn't really change affordability; in fact they are much less affordable now then when interest rates were lower.". Revisit this statement by the end of this year, the house prices are likely to be about what they are now but interest rates will be lower.
"Maybe we all just need to accept that houses are going to be bloody expensive no matter what happens" Yes indeed!
American consumer debt levels are due later this morning and only a modest +US$9 bln rise is anticipated.
Banks don't take deposits and they never lend money. They are in the business of purchasing securities. When one gets a bank loan, the loan contract is a promissory note. The bank purchases that contract from the borrower. Now the bank owes the borrower money and it creates a record of the money it owes, which we call deposits - source.
What is this book about? It is about the taking of collateral, all of it, the end game of this globally synchronous debt accumulation super cycle. This is being executed by long-planned, intelligent design, the audacity and scope of which is difficult for the mind to encompass. Included are all financial assets, all money on deposit at banks, all stocks and bonds, and hence, all underlying property of all public corporations, including all inventories, plant and equipment, land, mineral deposits, inventions and intellectual property. Privately owned personal and real property financed with any amount of debt will be similarly taken, as will the assets of privately owned businesses, which have been financed with debt. If even partially successful, this will be the greatest conquest and subjugation in world history.
Price action maybe partly related to Standard Charter's forecast for $50b-$100b of inflows into spot ratty ETFs in 2024 (released y'day). Assuming that the ETF is approved.
You have to ask yourself whether or not this is ethical to release such info so close to the ETF deadlines and announcements. What if the ETF were not approved? Just because SC can affix a disclaimer to protect themselves, it doesn't seem kosher to me. That to me is a more vicious rug pull than the SEC following their playbook.
There has never been, nor should we ever expect, any correlation between the words ‘ethical and ‘financial system’.
Yes indeed. TBH, when the brand-name grifters are promoting the ratty ETF as the best opportunity on the horizon, it makes me a little uncomfortable. It's all happened so quickly and these people simply cannot be trusted. Anyway, my colleagues playing in that sandpit are still very much stuck in normie-think. Still plenty of skepticism and opposition.
They absolutely cannot be trusted. As usual it will be about whatever makes them the most money. And that could be the saving grace preventing a possible rug pull. This will be one of the most successful ETFs in history and the big boys will make bank. They will absolutely also be thinking they can make money from directives, but I think they will fail. Honestly I think we have been lucky that the ETFs have been denied for a decade. With 19.6M BTC out of 21M already mined, it means the sheer concentration of BTC in the hands of holders is simply too high for them to do what they did with gold.
Typo there. Derivatives not directives. The gold ETFs are a great example of market capture. It's criminal in more ways than one. But most people simply don't care so they're allowed to go on their merry way manipulating the price and clipping the ticket along the way. The central bankers and politicians are happy as their incompetence is not exposed in front of the sheeple who still believe the monetary and financial systems are sound.
Centra Tech Conned doesn't have the same ring to it, don't you think?
Although that scam was only conning people out of $30 million, the total scammed from all the fraudulent ICO is in the billions. There are a lot of con artists out there and people need to be wary.
Although that scam was only conning people out of $30 million, the total scammed from all the fraudulent ICO is in the billions. There are a lot of con artists out there and people need to be wary.
"Billions" is chump change. Put in the work and you won't wrecked by crypto scams. It's usually those who haven't put in the work and normies dipping their toes that fall for this stuff.
What happens when everyone gets a degree. Is the taxpayer getting value for money?
"Second, employers can no longer rely on applicants with university degrees to be more capable or smarter than those without degrees."
Meta-analysis: On average, undergraduate students' intelligence is merely average
https://www.frontiersin.org/articles/10.3389/fpsyg.2024.1309142/abstract
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"2024 will mark 40 years since the great acceleration of policy reform that began with the election on the 4th Labour government..."
... what was the big shock in today's data was the blowout surge in revolving credit, which in November exploded by a whopping $19.133BN, a record surge from the $2.9BN in October, and the second biggest monthly increase in credit card debt on record!
This, despite the average interest rate on credit card accounts in Q4 flat at a record high 22.75% for the second quarter in a row.
Credit card companies are making more money on penalties than they’re actually making an interest. Well, all of that is counted in the national income accounts under providing financial services. It’s a service when you increase the penalty on depositors. This is the kind of grey area you get when they won’t acknowledge that the phenomenon of rent is unearned income whose payment becomes a cost of living and a cost of doing business and a cost to companies that have to pay labor to pay various forms of economic rent, but it’s not part of the production. So the statement that American GDP is growing overlooks the fact that the actual product is tapering off or shrinking. All this growth is from the wealthiest 10% that are making their money through rent extraction. It’s an extraction activity, a zero-sum activity. The money that the financial sector or the landlord or the monopolist gets is not adding to the product. It’s a transfer payment from the consumer or the renter or the debtor to the rentier at the top. Our economic statistics pretend to be empirical, but they are not describing how the world really works at all. They’re describing a kind of parallel universe. Link
It's highly likely that if your British ancestors came from Ireland, Scotland, of England during the 1800's most emigrated because English land owners (landed gentry) had deprived them of the land that they had used to support themselves:
In Ireland the English land owners took back the land that the Irish rented off them to grow potatoes to feed themselves. There was a potato blight that rendered the potatos inedible so they couldn't feed themselves or sell the surplus to pay the rent to the English landlords. This brought about the great "Irish Famine" where 1.5 million Irish died of starvation.
In Scotland the English land owners re-took the land the Scots depended on to grow their cereals or keep a few cows. The English land owners did this so they could have a larger territory to raise sheep on. This process was called the :"Highland Clearances"
In England the English land owners helped themselves to the village common where most of the poor had a plot just large enough to grow food and keep a cow on. The English landowners then fenced off the common and held it for their own agricultural use leaving the commoners to starve. This process was called "The Enclosures".
Land confiscation by the English Landed Gentry was one of the reasons that your ancestors, and mine, emigrated to New Zealand. It was that or literally starve.
So don't listen to those stories where a great aunt tells you your ancestors came from noble Norman stock or similar.
Throughout history and even now money has never been the universal currency. It is arable or farmable land alone that throughout history has been the universal currency.
Great grandfather aged 26 arrived here in 1850. Lived in the middle of Yorkshire, a farm labourer, probably had never seen the sea but survived from all accounts a pretty nasty voyage. Took opportunities in NZ that never would have remotely existed to end up as a respected farmer, mentioned in the NZETC. Searching back at the family history then and earlier, astonished by the sheer number of those sent to the gallows, robbery, theft of bread or similar, forgery, dud promissory notes, libel, perjury, vagrancy, and even bigamy and/or adultery. Blimey no wonder then anywhere else was a land of milk and honey.
33 years later and the Nikkei is back. Performed much better than NZ and Aussie indexes.
Japan’s benchmark Nikkei 225 stock average briefly gained over 600 points Tuesday morning on the back of recent rises in U.S. stocks, hitting the highest level since the collapse of Japan’s bubble economy in the early 1990s.
At 9:09 a.m., the Nikkei average was up 612.86 points, or 1.84 pct, from Friday at 33,990.28, the highest since March 1990, in the midst of the bubble economy. The Japanese market was closed Monday for a national holiday
https://japannews.yomiuri.co.jp/business/market/20240109-160730/
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