Here's our summary of key economic events overnight that affect New Zealand with news inflation is getting a renewed push higher by more commodity price rises.
Inflation expectations reached 5.2% in the coming year in the US, according to the latest Fed survey. That is a new record high for this survey. In three years, these expectations are up to 4.0%. The same survey shows that median year-ahead home price change expectations decreased slightly to 5.9% in August from 6.0% in July, marking the third consecutive monthly decline.
The US monthly Budget outcome for August was a deficit if -US$171 bln and almost exactly as analysts had expected. That puts the full 12 month deficit at -US$2.8 tln and falling. This is -12.5% of US GDP. (Last year to August it was -15.0% of GDP. Pre-pandemic it was -4.5% of GDP. New Zealand is currently running a Crown deficit at about -3.6% of GDP.)
In China, they are battling a raft of high-profile bankruptcies and stresses especially in their property development sector. Evergrande is the most prominent, but Soho has taken a heavy knock. And of course HNA is still working its way through its crisis, selling more assets. But more than property companies are involved with high-leverage stresses. Beijing's recent push to clean up much of these leverage stresses is probably justified; the only question is who suffers the losses.
Hong Kong reported its industrial production for Q2-2021 as a +5.6% gain in a year. But that only looks good because Q2-2020 was pandemic-affected. Compared to Q2-2019 there is no gain.
Japanese producer price index inflation has stayed high at +5.5% in August even if it was marginally lower than for July. But it is near its high since 2008.
India also reported an inflation rate, this one for CPI for August and it came in at 5.3%, marginally lower than expected and marginally lower than in July.
Germany reported wholesale prices for August and they jumped more than +12% in a year, the highest rise in 47 year after the first oil crisis back when inflation was untamed. The current rise is only a marginally lower rate.
And we should note that natural gas and coal prices re still rising worldwide even if oil prices aren't. And electricity prices are especially vulnerable in Europe because of the unreliability of renewable sources.
In Australia, their central bank is introducing new eligibility criteria for securities to be accepted as collateral in their market operations. Floating rate notes (FRNs) and marketed asset-backed securities issued on or after 1 December 2022 that reference BBSW must include robust fallback provisions. All self-securitisations, regardless of the date of issue, must include robust fallback provisions.
It is being reported that Australian Federal authorities have approved mass vaccinations at worksites, with the aim of vaccinating 1 mln people that way. But that would take the potential to only 73% vaxxed. They need another 3.5 mln to step up somehow if they are to be near a 90% vax rate.
They need urgent action to get on top of their outbreak. There were another 1257 new community cases in NSW yesterday with another 1179 not assigned to known clusters, so not much material improvement there. They now have 14,633 locally acquired cases in NSW. Victoria is reporting another 473 new cases yesterday, so it is getting worse quickly there now. Queensland is reporting four new cases. The ACT has 13 new cases. Overall in Australia, more than 42% of eligible Aussies are fully vaccinated, plus 25% have now had one shot so far.
The Monday session on Wall Street has brought a small -0.1% slip in early afternoon trade. Overnight, European markets were all firmer by about +0.5%. Yesterday the very large Tokyo market rose +0.2%. But Hong Kong dived -1.5%. Shanghai rose +0.3%. The ASX200 closed up +0.3% and the NZX50 Capital Index closed up +0.8%.
The UST 10yr yield opens today at just over 1.33%, so a marginal slip at the start of Wall Street trading for the week. The US 2-10 rate curve is at +1131bps and marginally flatter. Their 1-5 curve is unchanged at +74 bps, while their 3m-10 year curve is little-changed at +128 bps. The Australian Govt ten year benchmark rate starts today at 1.25% and down -2 bps. The China Govt ten year bond is at 2.90% and unchanged. The New Zealand Govt ten year is now at 1.91% and up +3 bps.
The price of gold has risen +US$5 today and now at US$1792/oz.
Oil prices have risen +50 USc overnight so in the US they are now just over US$70/bbl, while the international Brent price has risen to just over US$73/bbl.
The Kiwi dollar opens today at just under 71.1 USc and little-changed since this time yesterday. Against the Australian dollar we are -30 bps lower at just over 96.5 AUc. Against the euro we are little-changed at 60.2 euro cents. That means our TWI-5 starts today at just on 74.1, and also little-changed. We are still right at the top of the 72-74 range of the past ten months.
The bitcoin price has stayed down, now at US$44,442 and -3.1% lower than this time yesterday. Volatility in the past 24 hours has been high however at just under +/- 3.9%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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78 Comments
I’m in day 12 of managed isolation after returning from a business trip to Zambia.
Covid is functionally over in Zambia, or I would not have been invited.
Stats for you guys. Population around 18m. Covid deaths 3600, case numbers 207K, vaccine rate about 2%.
Covid was managed without lockdown. They did close schools, restaurants and bars. Bars and restaurants re-opened in the two weeks I was there. Zambia could not afford lockdowns.
Personally I didn’t wear a mask unless it was courteous to do so, didn’t social distance and shook everyones’s hand. The locals liked that I did that and I got a lot of kudos for it. I wanted to give my immune system a look at the virus, and I back myself not to catch it.
At the lodge where I stayed I had a chat with the 70 year old Scottish woman managing the place. She’d had a mild dose of Covid back in Scotland. Of the sixty native Zambians working at the lodge they only had four mild cases.
The company that I consult to has similar numbers also only had a small number of cases with one woman being hospitalised. That woman is the chef and is obese.
I socialised with some farmers, three of whom had self treated with Ivermectin and Zinc. They said they felt like they wanted to die for a few days but the treatment cleared the severe symptoms in 48 hours. They were not anti vax, but were well informed about the world not be taking the vaccine. The associate I was working with was anti vax but succumbed to company pressure and had the Johnson and Johnson version. He was pole axed by it, very sick for a week.
The farmers there in general are probably like farmers everywhere, right wing. They were laughing at the state of the Wests’ response to Covid. Biden in particular is seen as the laughing stock of the world, Jacinda not far behind in locking the country down for one case.
The trip was a technological success. Perfect combustion for the second time since I’ve worked as a combustion engineer. Thing about that is no one else has done it and it is why they keep me going back.
Interesting trip that is for sure.
Thanks perspective Scarfie. NZ advantaged by being isolated at the South East end of everywhere is something of a double edged sword. For our nation slips too easily into being too insular. In this case the inherent complacency caused by the protection of remoteness persuaded our government that it was not necessary to follow up on the success of the March 2020 nationwide lockdown with an early , fast and well planned vaccination program. Your comment reminds me in turn of a comment by a very wise and perceptive importer in Germany in the 70/80s, he said to me something like “New Zealand looks at the world through a pair of binoculars but held back to front.”
"I wanted to give my immune system a look at the virus, and I back myself not to catch it."
'Backing yourself' might be useful in a business context, or sport. But you can't prevent yourself getting a virus by an exercise of self-belief or confidence. I'm glad you had a good trip, and the rest of your post was interesting, but please stop using that kind of language about health issues. It's really dangerous to encourage people to think that they can avoid getting a virus that might kill them if they just have the right attitude.
It is called Terrain Theory, and it hasn't been disproven in the same way Germ Theory doesn't have the supporting evidence people think it does, or scientists make out is there. I thought that if there was one lesson from Corona it is that scientists don't know as much about the immune system as they think they do.
On a technical level I back up my belief with action, I live well. I keep the first two stages of my immune system, the innate system, in tip top order so nothing will get past it. Vaccines only work on the adaptive system and are useless for a healthy person. Healthy defined as absence of disease.
Anyway, I'm the best person to decide what is best for my immune system so you can keep your thoughts of controlling and manipulating others to your beliefs to yourself.
If there was ever a commentator suffering from a chronic superiority complex, it would be Scarfie.
Economics, psychology, physics, chemistry, and now microbiology and immunology. We are truly blessed to be in the presence of Scarfie and his infinite breadth of wisdom.
I looked into Terrain Theory after Scarfie mentioned it in a comment and have been working on improving my own terrain ever since. It makes sense to try and get your body to optimal health for a whole lot of reasons including surviving a pandemic. I kind of always knew that but it did reinforce my motivation.
It was a very brief amount of research. I had already concluded that certain bodies were more susceptible to poor outcomes. I see now after doing another speedy google that some are equating Terrain theorists to germ theory denialists. That seems a bit unfair. I interpreted following Terrain Theory as attempting to develop the body into an optimal germ fighting and repelling machine. The fact that some are being tarred as "denialists" kind of makes me more curious now.
At the very least Scarfie's comments did encourage me to try and broaden my horizon. I'm not going out to test how resistant I am but I am trying to cover all bases. A layered defense strategy: social distancing >PPE>robust terrain.
Good on him. I've been experimenting with various red wines to boast my terrain so far the results are mixed. A Few glasses I feel good and can function fairly well the next day, but after four or five, I tend to be a bit slower the next day and can have a slight headache. I think some more experimentation needs to happen.
He couldn't do worse than a commentator yesterday.
People can - usually are - right about some things, wrong about others. How right, and how wrong, depends on how far back they went before building their suite of knowledge. The further back, the closer to First Principles. The closet to First Principles, the better the chances of being correct.
Economics, as taught in the post-WW2 era, started too far away from First Principles. And built itself a Leaning Tower.
Which is falling down around their ears. We are facing exponentially-accelerating inflation (due to planetary-parts depletion) but zero chance of raising interest-rates (without collapsing the house of cards). Samuelson has one sentence - one - about it in nearly 1,000 pages: "And future generations may find that their resource needs are difficult to meet because of the careless use of resource by their forebears". But he doesn't link it to debt-overhang, to degrowth, to energy reduction, to entropy, to overshoot. And that failure continues, in spades; as the ETS nonsense demonstrates.
Rationing includes ALL sources. Meaning you get a ration of X litres (LOE) of fossil energy per time-period. That won't entitle you many miles in an airline seat, regardless of your 'wealth'. Collectively, it kisses goodbye to the system where 'wealth' is marked in $ anyway. But X litres per Y time per person, is about as un-regressive as it is possible to get.
We need to see that the flaw in your comment yesterday, was assuming 'all else being equal' - a common and frequently fatal assumption.
As I said - you need to start from facts.
Bahaha. Still trying to make it work.
Wealth influences your access to technology. Technology dictates how efficiently you can use a given set of resources (i.e. energy).
Ergo, those who are rich have higher returns to the ration than the poor = regressive.
Those are the facts.
Lets look at the flipside of your position: do you really think that all the people who did get Covid got it because they just didn't have the right attitude? If they'd just taken a leaf out of your book and 'backed themselves', they wouldn't have caught a virus? So if they did, and they got really sick or even died, it is at least partly their own fault for not having enough self-belief?
While Scarfie can be a little black and white, to be fair we do have to recognise and understand that our personal health is pretty much dominated by a life time of accumulated choices. the consequences of some of those choices can be ameliorated somewhat by changing the way we eat, act and structure our lives, but in the end there is much we do not and cannot control. Scarfie may have been blessed with just the right genetic mix that ensures that he can adjust his lifestyle in such a way to maximise the outcomes to the full benefit. His blinkers seem to be that this may or will not be the case for some or most of the rest of us. We can try, with limited success, but not to the same level, and that is why we take all those other precautions.
I will be getting the vaccine, (had my 1st dose) so won’t be able to test this out. I know I have a very strong immune system but others are not so lucky, or I would have been willing to put it to the test. I just can’t believe that the vaccine appears to be the only course of action to control the pandemic. No talk of other treatments that could at least support the immune system or mitigate the worst effects of contracting covid, which gives me great concern.
How much can you trust Zambia's covid numbers? Did they test everyone who died?
In comparison, most European countries are above 1000 deaths / million. Hungary is around 4000 / million (even with many months of lockdown - albeit implemented way too late), and their govt isn't exactly interested in pumping those numbers up either...
Perhaps Zambians have a naturally high resistance to the disease? Or is the entirety of Europe lying?
I also went to Zambia March last year, I got back to NZ days before we locked down. When I left and entered New Zealand there was nothing to indicate that authorities around the world were panicking about a virus. On the contrary when I entered Zambia I had a thermometer pointed at my forehead that was written on a form I then had to fill out. They were measuring tracing right from the outset, while New Zealand was still mired in indecision.
Zambia is an up and coming economy that is very professionally run. There are a growing middle class, at least in Lusaka, and signs of Western style developments in terms of shopping centers and housing everywhere. The car fleet is modern, probably better than Auckland. They've just elected a new President that has a background in business and is widely regarded, speculators have driven their currency up against the USD by a large margin because of this.
I work along side both white and native Zambians, all clever people with university degrees.
Oh for the Crypto guys, the USD is their second currency and is sometimes preferred over the local currency.
most European countries are above 1000 deaths / million
Not at all. You only have to look at the excess deaths on the euoromomo website to see the truth.
2020 excess deaths = 392,000, 2021 excess deaths = 193,000, total excess deaths since pandemic began = 585,000. Europe population = 748 million. European deaths per million = 782.
interesting stats, 1.7% death rate and very low and slow vaccination rate and they are using three vaccines
Coronavirus - Zambia: COVID-19 Statistics Daily Status Update (12 September 2021) | Africanews
This might help explain the stats...
https://www.indexmundi.com/zambia/age_structure.html
Compare that to the uk
https://www.indexmundi.com/united_kingdom/age_structure.html
refer to Comrade X I suggest. Adoption of New Zealand by the CCP as he/she promotes, would solve all of that. In setting up their regime in 1949 CCP embarked on the extermination of estimated 75mill of their population. Therefore 5 mill New Zealanders would be a cakewalk. Just kidding.
because it doesnt fit the narrative!
Vaxes and more boosters are the ONLY option! Everyone knows this .... its science
"Top health official hopes booster jabs will last for longer"
Hopes!!!!… thats true science
Striking contrast in opinions between kiwis living inside and outside NZ. Inside the propaganda bubble covid is so ghastly and terrifying that it justifies complete suspension of all civil liberties, abandonment of the Nuremberg code of medical ethics, abandonment of the doctors Hippocratic oath, establishment of a police state, and the wholesale destruction of the NZ economy. Outside NZ covid is .. meh, a mild annoyance.
Interesting & thanks David, I only visited for the first time two years ago. I'm taking my information from the guys I'm working with, which is growing stuff. Zambia has huge untapped potential I am told, which could of course mean exploitation. But there is very little, if any, horticulture there and most fruit is imported. If they tap into that it would help the trade balance. They've got good rainfall, so I drive past a massive irrigation damn on my commuting there. You can see the wheat being grown with the aid of pivot irrigators when flying in. Lots of small farmers also, the company I'm dealing with has 8000 supplying them.
Your link might explain why they have a new president, more a matter of ousting the old one. New guy is said to be worth hundreds of millions, so is said to know business and is expected to drive things in a positive direction. Wikipedia says he is the largest cattle farmer in the country. On that note I had a T-Bone cooked in the Brai one night that was unbelievable, as good a cut as I've had anywhere. Better than the crap served up here in supermarkets.
I learnt that the native labourers for the company I consult to earn $150 USD a month. Not sure if that is indicative of what workers on farms in general are getting, but it probably isn't too far off the mark. Lots of cash transactions so I'm not sure if GDP is a good measure.
I guess that the world is locked into "what is good for the wealthy is good for everyone". There is no path that a leader can take to invite suffering for all through allowing a partial collapse. We've all seen the magic that central banks can produce to keep us afloat and unemployment stats low, and it's a requirement to continue this.
This is right, IMO all governments will just keep extending and pretending. They are all (as are 95% of people) of an ancient mindset, that resources are endless on this earth and that they can just keep finding new and better resources. But as we hit physical limits, governments are using fakery with printed money, endless impossible to payback "borrowing", which is both removing their childrens ability to do anything and the fakery is painting over profligate current resource usage. At the same time the outputs from our current/past usage is harming our biosphere, so children face a very uncertain future - not many resources left, required to pay back their parents borrowings and a degraded biosphere with adaptation required to huge temperature rises. This is what PDK keeps talking about and we should all take a good hard look at ourselves, while spreading the message that we have rapidly painted ourselves into a resource/borrowing/pollution corner, which will require massive changes to our global economy to survive as a civilisation.
The only way we can keep the magical thinking going is if we have another biosphere, or we expand into space. However the energy required to lift enough people off this rock will make this impossible, without massive technological leaps which are likely 100's of years away (anti gravity/teleportation/portals etc, basically the wildest things you see in SciFi). Then even if we were in space, our nearest star system is so far away people would need to be in stasis or a generation ship to get there, again the tech is centuries away.
https://twitter.com/michael_saylor/status/1437386724443926535?s=20
Microstrategy have stacked another 5,050 Bitcoin for ~$242.9m
They now hold ~114,042 Bitcoin of the total 21,000,000 or 0.54% of the fully diluted (total that will ever exist) supply.
They do not intend to sell for a decade at least, so those coins are effectively off the market. And that is just one company, you do the maths..
Ok so you think it might go to zero, fair enough. But on the flip side that you are wrong, what probability do you give to: (remembering that we are at 45k atm and have already been to 65k) over the next 10 years?
1BTC=100,000 usd? (my eg: 50%)
1BTC=500,000 (10%)
1BTC=1,000,000 (1%)
Now on the off chance that that we do get to these numbers, if you gave the above probabilities for the next 10 years, and you are willing to risk 5% of your $1,000,000 portfolio (50,000) and you brought that at todays price. you would get 1.11 BTC
Goes to zero: Max loss is $50,000
100,000 potential profit (Profit x probability) $27,500
500,000 $45,500
1,000,000 $9,550
https://www.youtube.com/watch?v=yPgH2sK_psg
Listen to anything by Greg Foss, he is all about probabilities and asymmetric trades. Put your pride aside and just get a small amount. Even Paul Tudor Jones wants to have 5% of his portfolio in it:
https://www.theblockcrypto.com/linked/108337/paul-tudor-jones-bitcoin-5…
Yea it doesnt quite make sense, this is what I was trying to get to:
100,000 50% Loss 50k, Profit 55,000 Risk to reward 1.1
500,000 10% Loss 50k Profit 455,000 Risk to reward 9.1
1,000,000 1% Loss 50k Profit 955,000 So a risk to reward of 19.1
So the question then becomes would you risk 50,000 for the 10% chance that you will make 455,000 within the next 10 years? and that is using the binary option of it either reaches that price or it goes to zero (less than 1% chance and getting lower every year)
'decentralised'
'the great thing about crypto is that the market can't be manipulated by a few players'
Convicted fraudster Michael Saylor has no option but to double down on Bitcoin, his whole company is now a crypto holding trust. Anything other than the most extreme and public devotion to BC would be cutting his own throat.
My conviction is strong, as they say, that bitcoin is ultimately worthless. But I've been wrong before. What galls me is those who urge the naive and feckless to go all-in on something something so wildly speculative. If you can afford to lose money, sure, go for it.
It's not very good as a currency because a) it's deflationary, b) there are already more functional currency technologies out there for speed and practicality, (like EFTPOS, which is ancient), and d) the largest part of a currency's value comes from the strength of the nation-state behind it; they can force people to use it for taxation and other things.
It's not very good as a speculative asset *long-term* because it doesn't have any value beyond the sunk cost of paying for it. It doesn't generate rent, like a property, or return dividends, like a share. Anyone can create another digital currency (and they have); the only advantage BC has is name recognition and again, the psychological weight of the sunk cost fallacy; "so much has been paid for this that it must be valuable!" It's too flimsy a premise to provide long-term value. It's a perfect *short-term* speculative asset precisely because no one knows how to value it. The entire speculative value is based on the assumption of selling it on to someone else for a higher price, so any value at all can be placed on it; that also makes the valuation meaningless, because you could do the same with any shitcoin at all. It has thrived in the perfect atmosphere of high-liquidity low-rate asset-grabbing frenzy; I don't think it can survive a period of asset drawdown, because there is no point at which a holder can reassure themselves that it's worth keeping on the basis of real returns.
Looked pretty good to me also. Bitcoin is not a currency but its a great way to make a quick buck by continually buying low and selling high. It goes through quite well defined pump and dump cycles. Probably a bit of fun for those with $1000 to throw at it like your at a casino but I'm not really that interested.
Well, in the first 2 sentences, you refer to 'speed and practicality' and you use EFTPOS as the tech that enables it. We already know that Strike is a far superior P2P solution that wouldn't exist with BTC. EFTPOS cannot and doesn't transfer value around the world at no cost. Just because something is not relevant to your own world doesn't make it irrelevant in the bigger picture.
I used EFTPOS as an example of a very outdated tech that is still more practical than using crypto. Phone-based banking is huge throughout the world, it's now fast and practical, and it doesn't rely on the crypto ecosystem at all. Meanwhile, I have workmates (in tech!) who will spend hours trying to figure out how to convert their crypto to fiat, and end up paying more than even exorbitant Western Union for the privilege. ETH gas fees of hundreds of dollars to exchange a few bucks. It's a joke.
Ok, try to have an open mind here:
a) It is not deflationary, it has a reducing rate of inflation. And because it is digital, it is infinitely divisible. Ergo the 21 million coins could be used to value all the wealth in the world. Bitcoin Block Reward Halving Countdown (bitcoinblockhalf.com)
b) Counterparty risk and final settlement. Your eftpos transaction goes through multiple hops and counter parties, each of which can be easily reversed, blocked or canceled. Bitcoin is final settlement, ie the asset has changed hands, and it is straight peer to peer with no third party involved. It is truly final.
It is also the 5th largest currency in the world, and also legal tender in El Salvador, so it technically and legally is a currency. Trying to deny this is literally burying your head in the sand.
The lightning network has all of the above features, while also being instant.
C) currency is what the market decides will meet their needs better, not what the government mandates what it thinks its citizens should be using. For example Executive order 6102 banned US citizens from owning gold, and confiscated it if you tried to go and pick it up out of the bank, but did htat stop it from being a currency (both in the USA and anywhere else in the world)?
Money converges on the scarcest good in an economy, that will best hold the users value over time. We all know that Fiat currencies are programmed to lose 2% minimum per year, so I can tell you with 100% certainty that in the future, your NZD will buy you less goods.
Money is used to purchase other goods. Holding cash does nothing for you either.
What about fine art, second hand cars in America, diamonds, or gold and silver? What do they all have in common that leads people to think they will be worth more in the future? they are SCARCE. If there is no supply, but increasing demand, then price goes up. Bitcoin is the ONLY thing known to human kind, other than time, that is truly scarce. There will only ever be 21 million, and no matter how much energy or effort you put into trying to create more, the difficulty adjustment mechanism will not allow it. It is 100% price inelastic.
"Anyone can create another digital currency (and they have)" Bitcoin has no one in control and is fully decentralisd. any "new" copy of bitcoin has someone who created it, who can and will change the underlying code base. This this is why Ethereum, arguably the second most "decentralised"(it is a relative scale) will never be money, because they can change the issuance rate when ever Vitalic and his mates feel like.
You CAN NOT create another Bitcoin, it took a lot of factors all coming together for it to happen.
Please take the 30 min or so to read this:
Planting Bitcoin. Sound Money (sanum pecuniam) | by Dan | Medium
Bitcoin also has capital invested in the security of the chain and is linked to real world costs. Miners have to invest a lot of capital in mining rigs (8k each) mining facilities (millions of $$) and electricity (hundreds of thousands a month) to mine bitcoin. This also secures it against attacks. And because it is literally an energy token, it preserves the first law of thermodynamics, that you can not create something out of nothing.
Your long term isnt long enough. For example, anyone who has held Bitcoin for 4 years has NEVER lost money (currently). And when was the last time human civilization saw the real time monetization of an item? Not since the adoption of gold thousands of years ago. Of course it is going to be volatile and unpredictable. The market is still in early days of figuring out what it is worth. That is how a market works.
So its current valuation of 45k or so is meaningless? i think you have a bit of a conundrum there...
Yes, urging people to go all in is irresponsible and reckless.
Everyone should use appropriate risk management suitable to their personal risk level, education and calculations.
I personable have everything that isnt locked up in my hose in Bitcoin and other coins with a small amount of emergency cash.
You could say that "My conviction is strong that bitcoin will ultimately become the global reserve currency"
Since 1974 eh.
Makes you wonder wtfhappenedin1971.com
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