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Jobless claims leap in the US; China returns to work fitfully; public debt explodes at tax revenues sink; borders shut; international air travel dead; UST 10yr yield at 1.07%; oil up and gold down; NZ$1 = 58.2 USc; TWI-5 = 66

Jobless claims leap in the US; China returns to work fitfully; public debt explodes at tax revenues sink; borders shut; international air travel dead; UST 10yr yield at 1.07%; oil up and gold down; NZ$1 = 58.2 USc; TWI-5 = 66

Here's our summary of key economic events overnight that affect New Zealand, with news nothing good is happening.

The American level of new jobless claims has skyrocketed to just under 300,000 last week, up from 211,000 the previous week. This will just be the start and is an early warning of what is about to happen to employment there. And pain will rise as continuing claims actually fell, meaning more people had their jobless benefits end last week.

Already, the US is seeing a surge in foreclosures and evictions in their housing market.

The next regional factory survey is out from the Pennsylvania manufacturing heartland and it is not good. It reported a dive in new orders.

Data for the US 2019 current account was released overnight and their deficit widened somewhat. But as a proportion of US GDP, it is -2.3%, and down from -2.4% in 2018.

On Wall Street, a minor rally is being attempted, with the S&P500 up +1.8%, but that really only embeds the recent very sharp falls. Since the start of March the S&P500 is down -18% and since the start of 2020 it is down -24% keeping it firmly in a strong bear market.

At least in China, there seems to be more movement in getting significant parts of their country back to work. Fear of reinfection runs high however.


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Around the world, governments and central banks are all announcing "whatever it takes" policies. The ECB promised at least €¾ tln in euro support. The US Fed was already in for US$1½ tln and the US Government is in for at least US$1 tln. Australia chipped in yesterday with at least AU$100 bln. These are already enormous levels of financial support, all within the past few days, and all vastly higher than for the whole GFC. More debt and more money printing hardly seems a long term answer. These huge short term band-aids will undoubtedly grow substantially from here. And just what will the global financial system look like when the virus emergency wanes, as it undoubtedly will? Massive debt cancellation will have to be on the table, surely.

Around the world, tax revenues are about to plunge just at the time public debt is about to soar.

And this crisis may in fact spell the end of cash notes and coins in retail transactions, except for hoarding.

The latest compilation of Covid-19 data is here. The global tally is now 229,000 of officially confirmed cases and rising by the hour now, up +80% in a week. There are now 148,000 cases outside China and European cases now exceed the Chinese cases. The Chinese recovery rate is up to 87%. The American explosion continues, with total cases over 10,000 and they are up 105% in one day. Ironically, the Americans are advising against overseas travel but it is destinations who are most at risk from travelling Americans. Spanish cases are also still rising very fast, up +54% in one day. The number of confirmed infections is also up +50% in a day in Australia. The global official death toll now is now well over 9000 and will undoubtedly exceed 10,000 early in the weekend. More people have now died in Italy from coronavirus than have died in China. New Zealand has eight new cases of Covid-19, all overseas travel related and bringing the total to 28. Our borders are now shut.

In Australia, Qantas and Jetstar have cancelled all international flights; only rescue mission to repatriate citizens will now be flown.

And yesterday we should note that Aussie jobs growth was strong in February. But no-one thinks this will continue much longer.

The UST 10yr yield hasn't been able to hold yesterday's sharp rise, down -13 bps and now at 1.07%. With sharply higher long-term risks, investors want to be paid better, even for benchmark bonds. Rate curves are still sharply positive as short pricing stays very depressed. Their 2-10 curve is staying up there at +71 bps. Their 1-5 curve is a little less positive at +46 bps. while their 3m-10yr curve is still out there at +103 bps. Most other government bond yields have retraced today too. The Aussie Govt 10yr yield is down -8 bps now at 1.30%. But the China Govt 10yr is up +1 bp at 2.79%. And the NZ Govt 10 yr yield isn't following the international trend yet, up sharply again and now at 1.77% with another+30 bps rise in a day.

Gold is down -US$14 to US$1,472 today.

But US oil prices have bounced back sharply today, up almost +US5/bbl to just over US$25/bbl with the Brent benchmark just over US$28/bbl. Volatility is sure to become normal in commodity pricing now.

The Kiwi dollar starting today with a recovery from yesterday's pummeling. It is up ½c to 58.2 USc - still, we are still near an eleven year low. On the cross rates however we are little-changed at 99.4 AUc. Against the euro we are also sharply higher that yesterday's low at 54.5 euro cents. That means our TWI-5 is now just over 66.

Bitcoin has leapt higher today, now at US$6,195 and an +18% jump from this time yesterday. The bitcoin rate is charted in the exchange rate set below.

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

Our exchange rate chart is here.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

172 Comments

While WHO was worried about "racism" they forgot to check the back catalogue.
"U.S. President Donald Trump says the drug Hydroxychloroquine has been approved by the Food and Drug administration and will be available for prescription immediately."

From 2005 - "We report, however, that chloroquine has strong antiviral effects on SARS-CoV infection of primate cells. These inhibitory effects are observed when the cells are treated with the drug either before or after exposure to the virus, suggesting both prophylactic and therapeutic advantage."

https://virologyj.biomedcentral.com/articles/10.1186/1743-422X-2-69

Green shoots of recovery

When this is all over, people who freaked out, including the government, are going to be looking pretty dumb and immature.

No. Regardless of new possibilities , right here, right now, now there is a massive amount of work, change of behaviours that need be addressed.

Assuming light at end of tunnel, the tunnel, physical and pyschologkcal, is huge

Assuming this will go on for ever is insane.

skudiv
How long do you expect for life to return to "normal" (e.g. pandemic passed with few new NZ cases and most countries showing same signs as current China/Korea, borders open, threats of national shutdown passed etc) and,
How long before local and global economies are in some sort of reasonable recovery mode (e.g. NZ level of unemployment and number of bankruptcies stable or falling, NZ and global share market no longer in fall mode but showing some signs of consistent recovery)???

Everyone is going to get it, the countries where it is spreading quickly will recover quickly, the countries where they quarantine everyone for months on end can't even start to recover until the quarantines are lifted, even then everyone will still get it. The countries that recover first will have an absolutely massive advantage over countries that quarantine themselves for years.

This isn't a judder bar and we recover. It takes years to recover from these things and this one is espically bad.

Yep.

“- Colonel Berman: One thousand gallons of Mop & Glow... my God, do we really need that much?
- Ray Elwood: Well, cleanliness is next to godliness.”

Weekend tip: Check out Buffalo Soldiers, they also squash a bug!

Is it just me or does anyone understand Henry Tulls posts?

Pretty random.

Someone is still in the denial phase. The world has changed forever, there will now be a new normal.

Hahahaha, nothing ever changes, 9/11, GFC, swine flu, ebola zaire, whatever, the world goes on. The world changing is just a fantasy.

You must be living under a rock if you think that 9/11 and the GFC didn't change the world. I guess that explains it.

If you think 9/11 didn't change anything, you must be a window licker

Depends what you call recovery, I'm surprised that Trump would allow this to happen it's probably won't help him to get re-elected: BBC US jails begin releasing prisoners to stem Covid-19 infections. "US jails are to let out inmates as cases of coronavirus infections are being reported in prisons.
The Los Angeles County Sheriff's Department reduced it's inmate population by 600 in the last two weeks, officials said on Tuesday. Our population within our jails is a vulnerable population just by who they are, where they are located, so we're protecting that population from potential exposure."
https://www.bbc.com/news/world-us-canada-51947802

Tough choices, do we take the red or the blue pill?
https://claycomopolitics.wordpress.com/2020/03/19/is-covid-19-presenting...

Take the chloroquine pill!

I ordered 10 packets a while back. Extremely hard to get hold of. You will also need to take Zinc pills, this should help stop RdRP.

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The reason the Gov't is behind on this is because one and 1/2 eyes are on the economy. This is going to be around until we get a vaccine and thats going to decimate our economy total destruction.

With that in mind Im off to the Fielding sale, because I need stock on my farm, my business needs to keep going, I need it to pay the bills and so do the agents, truck drivers and exporters.

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You should really look at getting out of producing tangible products for export and get in to something productive for NZ like property speculation or the banking industry.

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You've brought a smile to my face, thank you.

You've brought a smile to my face, thank you.

Two faced...

Plutocracy I hope like hell there's no bailout for them in the pipeline

good paper, I would echo pretty much all of it, except that CDC figures https://www.cdc.gov/mmwr/volumes/69/wr/mm6912e2.htm estimates on numbers requiring ICU suggest the death rate without suppression, amongst younger people is likely to be much higher than what imperial college model has used - so the choice of optimal policy is less clear.

The reason Govt exempted the Pacific Is from travel restrictions probably had more to do with the Apple/Kiwi and wine industries than any virus control.

Yep and you can bet that Turners and Growers was pulling the strings. 75% German owned.

Ahh, that makes sense now.

Offer them $2.065m and as you just might own in Parnell....( assuming you can write a cheque for it, as raising finance might prove trickier today than yesterday)
Quite probably a 'special case' (overseas owner that has to sell?) but it's coming to a town and suburb near all of us...

Last sold in 2004 for $1,125,000. The asking price is basically the price of the section and appears about right.

So $2.065 looks about right then ;) But it will make a mess of the comparative stats at whatever it goes through at....(" Did you see what that one went for versus its CV!")

Actually Zac it was last sold in July 2009 but the prices is undisclosed which usually means a foreign buyer according to the Council records. And it does look in an ok condition and is in a very nice sought after area. So yes it's surprising they would want to drop the price so much, Must be an overseas investor trying to recoup their losses.

The advertising blurb says, "The home itself is a project:. Fairly steep section too.

Doesn't matter it's in Judges Bay, the simple reality is no local can afford it at the original price tag and probably not even at the vastly reduced option.

Bluntly, this is going to cost more than a few trillion dollars. It will have unpleasant financial consequences for a very long time.


(John Mauldin)

(And as for hoarding notes and coins? That will last as long as it takes to print a new batch and give current owners of the old stuff 28 days to put it in a bank account - otherwise, it's worthless)

The issue with quoting the case statistics is that many countries aren't bothering to actually do the testing. I would suggest that in come countries (South Korea) they have a good handle on this but others are flying blind.

Very true... the guy I am watching Dr John Campbell says you need to take the official number of infected people and times it by 10 or 20 to get a figure that’s anywhere near realistic.

Case case clustar and repeat.

Does Germany have the most accurate figures or are they an anomaly? If the former then this is the first bit of good news.

https://www.google.com/amp/s/www.telegraph.co.uk/news/2020/03/18/does-ge...

https://www.google.com/amp/s/inews.co.uk/news/health/coronavirus-germany...

Yes Germany is clearly the front runner now, they've been even better than South Korea. They're showing us that the fatality rate is much lower than Italy suggests, but their numbers also indicate that there are probably over a million infected Italians at this point.

I believe the fatality rate will turn out to be 0.2% or less. This would be the figure if everyone was tested regardless of symptoms.

And if so then this overreaction would be a truly disastrous one.

And if so all the Monday morning quarterbacks will have a field day. Note atm Getmany is an outlier so the current measures must be continued / strengthened.

It's tempting to think that Fritz, but the evidence from Italy of overwhelmed hospitals without enough beds or ventilators suggest that even if the fatality rate is that low, this reaction is necessary.

Time will tell. I am not convinced. But everyone is entitled to their opinion.

South Korea have been pretty awesome at testing and checking everyone and getting a lid on spread - their active case total (the key indicator of success in stopping it) has been slowly dropping for a week or two. Their fatality rate started out at <0.5% is currently just over 1% and and given about half of ICU cases die is likely creeping up towards 1.5% - another few weeks will give a clearer picture.

"Ironically, the Americans are advising against overseas travel but it is destinations who are most at risk from travelling Americans."
Ironically the exact same thing happened with China and this was not criticized at the time.

Never miss a chance to take a dig at the yanks.

It seems everyone loves to hate em

Something has changed in the US share market this week; it’s become less extreme. At first I thought we might be nearing the bottom but looking forward, I suspect the next news cycle will revolve around the cost of this pandemic for businesses.

Some clarity on costs may mute volatility but I doubt it’ll lift the mood.

Looks like we are back to defending 20,000 on the Dow.
I suspect it's as good a level as any because there's nothing underneath to support it. Those who shorted over recent weeks are probably square now, and if it goes, who'll want to buy?

Just from a technical analysis perspective it looks like the move down may be finishing. When the bad numbers come through and the markets realise this is going to cause problems into the start of next year there will probably be another move down. If it ends up a 2 year problem the market will take another big hit.

Definitely feels like there's much further to go for the Dow.

I can see Australia and the EU getting on top of their infections with 2-3 months of lock-downs as China has however I seriously doubt the US will be able to achieve the same unfortunately. I think as bankruptcies and unemployment spill through the economies there'll be a bit more downside for sure.

My Pure Speculation:
NZX/ASX/FTSE within 10% of the bottom.
Dow/S&P another 30 odd % to go.

Thoughts?

200,000 plus cases, when we hit a billion and 40 plus countfies on lock down we will have a bottom. ThevUS is going to be a shambles. The home guard on on the streets, it will be ugly.

The rain in the waikato this morning and the weekend will make a lot of people happy and ease their stress. The moisture maps are already improving and look better from next week. Stay strong and healthy all

Some much needed positive news. It's times like these I would rather be a farmer than a city slicker.

Good news for our farmers. Was driving through Waikato few weeks back...was looking very dry indeed.

HB has no rain forecast at least till April.

Bugger how do you make do

Im ok because I stopped trading but lots of farmers desperate and also running out of stock water, it's all the way to the mountains which is unusual.

It's going to be a long winter here whatever happens now.

But those Aquafers must be full or do the dairy farmers pump em dry? (City Slicker)

no aquifers are very low and yes big irrigators are still pumping tonnes of water. River flows are getting critical. The Regional councils shouldn't be in charge of water consents they treat them like ownership, which could be the meta game.

I was in Owhango today. Its even dry there. Crazy

While I am in self isolation I was just looking at my Kiwisaver balance and was wondering why it is that Kiwisaver retirement funds are gambled on the stock market. I don't have any in growth funds but the proportions I have in moderate and even conservative funds are taking a real hammering. The bit I have in a cash fund is trundling on OK of course.
In saying this I am cherry picking this most extreme health/financial event. So a bit of hindsight. But I would have thought that Kiwisaver funds should just be boring old cash funds for everyone as the default. And if people want to gamble on the stock market that should do so with other discretionary funds if they have any.

I still think this is one of the reasons behind the market inflation. You can't tell me that a billion a year in KS contributions isn't creating some sort of distortion.

Lol I'll assume you're taking piss. Have been waiting for lots of commentators to put their hand up and admit on this one. So far nothing

Cash funds might be losing purchasing power in real terms from here on in.

Over 30-40 years of contributing, the risk of your money failing to grow to its potential is enormously larger than the risk of losing money by being in a risky fund. There is significant research on this - if your time horizon is long (>5-10 years), go aggressive and don't touch it.

How on earth does debt get cancelled in modern economies? I think this is just wishful thinking, once you create credit, it cannot be destroyed, unless it is for something intangible like fines etc.

For instance, if we just said nobody has to pay their mortgages, but everyone gets to keep their property... does anyone not see a problem with this? Banks would virtually go bust overnight (no income), while there would likely be a revolution as the non property owning class realised they just got screwed. How about student loans? That would just force the government (i.e. taxpayers) to take on the burden as (my understanding) these loans are securitised. Someone please explain?

The only way I see it working is mass inflation from money printing inflating away the debt.

“At the end of every seven years you shall grant a remission of debts.” Deuteronomy 15:1, which is the manner of remission where every creditor shall release what he has loaned to his neighbor. This is the debt forgiveness directive every 7 years. ... Historically, society is destroyed by debt every time.Feb 6, 2015

Depends.

If you're going to cancel debts and give houses to folk then you'll need to also give houses to folk who don't yet have them. It's only just at that point that everyone gets a house.

At the moment I would presume the plan the banks want and the RBNZ may start singing for is essentially to destroy older savers / pensioners and younger hard working savers to protect their own portfolios and wealth. Which, in fairness, those folk should probably get very, very angry about and instigate a wee bit of angry revolution about.

It sort of did when the Rural Bank imploded.

As % rate was adjusted up the balance outstanding went down.

You're right blobbles, Banks aren't able to cancel debt on a whim especially on mortgages. That's why the GFC cased by the US, hit most of the Western world quite hard. Oh except for NZ and Australia since you were cushioned by China so you didn't even notice it. But here's what happened in the the UK, when property repossessions by the banks hit a 12 year high with home owners losing 40,000 properties in 2008.
Article from The Guardian. https://www.theguardian.com/money/2009/feb/20/repossessions-homeowners

Some discussion in recent day on how the banks will behave; this comment from DCs report "Already, the US is seeing a surge in foreclosures and evictions in their housing market." is a strong clue. This predatory attitude from banks, and some others like landlords, needs to be squashed rapidly otherwise it will drive a steeper and more rapid economic collapse and where the bottom will be anyone's guess.

Land tax, capital gains tax, taxes for multiple properties? The incentives haven't been right, but thats because your typical voter owns a property and doesn't want it to lose value...Once we accept that our own greed and voting habits are partly to blame, then we might be able to move forward with some actual prudent policy to erase the sub-optimal behavior we've been witnessing.

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Seeing some of the comments on threads here yesterday, the concern is that the response will be self-absorbed and parasitic. Everything will be done to preserve the portfolio wealth of one or two generations, off the back of preceding and succeeding generations of Kiwis.

“A society grows great when old men plant trees whose shade they know they shall never sit in,” goes the proverb. The danger we face today is that of too many being the human equivalent of Kauri dieback instead.

Yes. But business as usual does this too. For example the increase in debt that the councils are taking on with no thought to ever pay it down. Completely living beyond their means. That goes 100% to future generations. It's absolutely disgusting in my view.

Rick if your language is an indicator you need to stop talking and start thinking. The over generalisation by accusing preceding generations (also called boomers) is political BS. Not all boomers are wealthy and not all own multiple homes and there are plenty of non-boomers who are and do. Please try to avoid these generalisations as all they achieve is show that you are a shallow thinker who believes too much in propaganda and conspiracies.

Do note I did not use the term boomer as I'm aware that not all are the same, nor are all the ones who will seek to transfer wealth through this time boomers. However, watch and see whether the attempted actions seek to undermine and hollow out savers and reward speculators and banks during this time.

Agree Rick - if savers get wiped out, I don't understand how people will ever have faith in our banking system. And if that occurs, our society starts failing. Do you reward prudence, or unjustified risk taking (i.e. excessive debt). Based on 2008, we should have learned that excessive debt is not the solution....yet here we are. There will be riots if savers take the hit on this.

I also agree that the banks need to be held to account, and a number of my posts including the one above indicate exactly that. But the transfer of wealth to try to protect their position will be done by anyone who thinks they have some to lose, and this will be based on a wealth basis not a generational one.

The majority of older generations who have a bit of wealth today are there by dint of hard work, discipline and saving. The 'free market' was introduced into NZ in the early 1980s, so it is the people with some spare cash and who were in a position to monopolise on that since then who will be the ones we are referring to.

I am a boomer, and I do own my own home and am mortgage free, but that is the limit of my wealth. It took a lot of hard work, and serious discipline, and patience to get to here, and frankly I get very tired of being accused of somehow rorting the system to achieve this! The young these days seem to want everything on a platter with out appreciating just how hard it was to get to where we are today. I never had a new car until five years ago, my first overseas holiday was four years ago, and I feel like I am just scraping by. But I am in my 60s and those who are criticising me are in their 30s, an age when I could afford to do nothing! They need to suck it up!

Of course individuals are different. Generalisations only highlight general trends over large populations. Unfortunately good folk like yourselves are affected by the poor example of of the Smashed Avo Warriors who laid into young generations while enriching themselves at their expense.

Young folk today would certainly welcome free education and affordable housing (thanks to massive efforts to make it so) on that platter of previous decades, rather than $2 shops and massively inflated asset prices. Every generation works hard. But inflating asset prices through portfolioed politicians and their voters has only functioned to take wealth from following generations.

Maybe when young folk see older generations voting for affordable housing etc instead of only the enrichment of themselves there will be greater appreciation for the older powers that be.

Then take it to your politicians Rick. They are the ones who introduced the economic policies, or who perpetuate them to create the current environment. Do not blame the people who are subject to them. I did not decide to make houses cheap, and besides 'cheap' is a relative term. I remember my father celebrating a pay rise to put him over $6000 per year! Houses then cost $20 k - $40 k. My parents were not in a position to buy an existing one, but they could buy the section and then build the house themselves. Into the early 70's the family vehicle was a Model A Ford. It was all we could afford! Free education? Pretty much a myth. i never got into university out of school, as my family could not afford to pay accommodation and other costs, for anyone other than my sister, so it was never offered. There may not have been fees (?), but the rest was not free! The difference from then to now is down to the politicians not the people who grew up in those times!

Then take it to your politicians Rick. They are the ones who introduced the economic policies, or who perpetuate them to create the current environment

That's exactly what is required. But until the older generations of voters do so as well, this will continue to be perpetuated.

"There may not have been fees (?), but the rest was not free!" - whats the rest board and accom?
" The difference from then to now is down to the politicians not the people who grew up in those times!" Yes but who is voting these politicians in (hint - boomers)

Murray - so just to clarify, you'd be ok with the housing market crashing because its based on debt that may not be able to be serviced? Just checking for heuristics/biases in your views.

If you already own, have been prudent and haven't taken on too much debt, then this shouldn't be an issue because it might be the best outcome for NZ, long term - from a utilitarian perspective.

IO I have argued for years that the house prices need to fall dramatically. Depending on your perspective as to whether this is a 'crash' or not. My only concern here is for the First Home Buyers and their debt,who I suggest will need some level of protection. But everyone, without exception, will be significantly better off if the average house value was $100K not $500K or $1 mill. The 'value' of a house; paper value, is just that, a figure written on paper and is meaningless until it is converted to a credit balance, or in the current times, cold hard cash in the hand.

The banks may squeal a bit but I am talking about our communities and society here. So yes I would be OK for a 'crash' in housing values to occur, but as indicated I would expect to see some conditions on it.

Speaking of self-absorbed and parasitic, a recent article from NZHerald's oneroof 'Should you buy a house during a pandemic?' (To which the answer is yes, of course, because it's oneroof) Sharon Cullwick, the executive officer of the NZ Property Investors Federation, is described as being 'anxious that landlords are seen as businesses too, and will qualify for the government relief subsidies'

Yes, because handing out yet more subsidies for landlords who have been creaming it over the last decade in any case and also get essentially massive subsidies already through the accommodation supplement is exactly what the government ought to be prioritizing right now.

Wow...incredible.

Benefit receivers now looking for more benefits while criticising impoverished benefit receivers.

Yeah, pathetic

RS “A society grows great when old men plant trees whose shade they know they shall never sit in,”

A great saying, love it

I agree with you. I think the society in general and low income families and individuals in particular need a respite. I really wish I knew how this could work in practice. This does require a comprehensive plan. I think the banks and landlords must accept to share a portion of the economic pain (e.g. banks stop charging interest, landlords agree to reduce rents) but then the government must step in to help with cash flows (help the debtors to repay the principal portion of their debt to help banks cash flows and to pay the rent to help the landlord to float financially).
I think that the government "help" can be a long term loan to younger people (lets say under 55) repayable when they can get a job. I do see in necessary too that the wealthy pay more tax in future to cover "bad debt". I think a scheme like that can help the society at large. But it does require negotiation with and acceptance by more wealthy to at least agree no return and preferably some short term economic losses.

If we had land tax, capital gains tax, then we'd have additional funds to pay the burden that the government may now have. But no, it wasn't politically popular. We want the wealth, but no the burden of that wealth. Madness.

Unless you have a machine to go back in time, this is not helpful. I personally think that even if have had all those additional taxes, it wouldn't have a major difference as governments would have spent it to the last cent. Also, with heavy taxation a lot of the said "wealth" would disappear and there will be no tax base.
Denmark taxes 60% of its GDP, i do not think that they are in a much better position than NZ.

If we had land tax, we'd have less money flowing out of NZ (>$5 billion per annum) to Australia thanks to the inflated prices we currently have. The money would go into the land tax instead of only into interest sent off shore, and thus could be recirculated through NZ's economy rather than merely being lost.

and I believe that our wealthy can be convinced (some persuaded by reason, some less persuasion more pressure) to part with a portion of their wealth if the alternative is to lose it all. It is not without precedent in our history. All wealthy nations, cities etc used to pay tributes to nomadic barbarians to dissuade them from attacking their cities and looting everything. It worked then, it should work now. They must agree to pay a greater tax when the recession is over. This is the only way that the government of the day can increase its own debt to cover the interim.

What's your definition of wealthy?

This is interesting:

99% of Those Who Died From Virus Had Other Illness, Italy Says

Things could be worse, at least the disease is not too hideous like smallpox and mostly spares the young and fit. A computer with no innate empathy for humans would calculate that the human race would be stronger once the virus had swept through everybody. Stronger in many ways, younger, fitter, with more medical facilities per person and even economically in a better position.

It spares the young and the fit from death. But it does not mean they will be fit once the virus is done with them. There are plenty of reports of young people suffering lung damage from the virus.

Yeah vaping causes lung damage but that does'nt stop them.

20% unemployment by the end of May, no amount of government bail out will help a lot of areas/industries. Funding will need to shift from helping businesses to helping mental health workers. As I said before the stats on suicide will go through the roof on this one, I just hope the government is taking this into their calculations when imposing all the restrictions and time frames, the economic lag will be 10 plus years.

( One week of isolation - Mrs W got a "Merry Christmas!" present of breast cancer and we're going through the after surgery process) and I'm pacing the floors and making innumerable posts on interest.co.nz to pass the time! This seems like longer than the proverbial "Week in politics"...)

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All the best, and a speedy recovery to Mrs W.

You both have my best wishes and prayers BW. I hope it goes well for you both.

I was there 2 years ago with my wife. Wishing you well. I hope your wife's treatment is not disrupted by medical overload from Covid-19. Hang in there - my wife is not back to normal - but she has a new normal - she has been back to work for 18 months.
BTW great staff at Auckland's North Shore and the City Centre hospitals. If it was my choice I'd have let Air New Zealand go to the wall and given all that cash to our medical staff from cleaner to consultant - sort of a danger money pay bonus.

Very sorry to hear that bw, best of luck to your wife, it must put CV19 into perspective for you.

Keep smiling: a positive attitude is key. I'm a cancer survivor (prostate) so this comes from the heart.

Haven't mental health/suicide stats already been really bad? Possibly those people could see how broken our society is (debt ponzi, slave to the banks) - and didn't need caronavirus to really hit it home? Just a thought...

Yeap, but are those people who are losing their jobs/homes sacrificing their lively hoods for the elderly and vulnerable in society and thus now themselves vulnerable and broken. AN interesting analysis of this situation.

Very very little thought seems to be given to this. The mental health impacts are going to be immense. Another sad consequence of this overreaction

A lot of cancellations now affecting Auckland City Mission too. They are in need of volunteers.

I have a feeling this will be our equivalent of a wartime effort.

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China numbers....do you believe or not. Lets face it they not exactly a leader in global truth and non censorship. Virus seems very targeted in taking out those already compromised with some other issues. Going to be a once in a life time six months.

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Don't believe China in the slightest. Purely a propeganda exercise. First case 17th november, No quarantine till mid Jan at which point with growth rates we have seen everywhere else there would have been >10000 cases. China claimed <200. Likely they got to a million cases, and there are numerous reports of the dodgy handling going on - Govt destroying data, leaks showing under-reporting by orders of magnitude, individuals who get sick in provinces reporting no cases....

Foreign reporters deported. That is very telling. Its real data clampdown time....

I've been wondering the same, however I think communism has an advantage in crisis situations. Our media outlets, which should be the regulator in filtering out what's true and what's hypocrisy, are just running fear and loathing campaigns because it gets views. They both promote toilet paper hoarding and shame it. They have inflated this problem far more than it needs to be, and people are still buying into it.
China didn't have that problem.

Chinese also look after their families much better than us westerners - we ship our parents off to a retirement home so we can be left to consume and live our lives (work til we die) in peace, whereas the Chinese often have 3 generations living under one roof. Families help families, friends help friends. No toilet paper fighting over there.

Sounds like you have never been to China. They fight in the supermarkets over goods for Chinese New Year. Would definitely have been hording and fighting going on, if they weren't welded into their homes and half starved to death.

Sounds like you are making comments based on videos you see on Tiktok.

Personal experience from living there.

I've seen multiple street fights in China over nothings. Even had a taxi driver who got out of car and got into a fist fight with a truck driver who cut him off. There is a lot of anger and tension in Chinese at best of times, WuFlu would exacerbate it.

"Communism has an advantage in crisis situations".

Yeah, what an advantage when you're able to arrest doctors and censor the truth, delaying the response and causing countless unneeded infections. It's terrible when the Western media actually attempts to give us the reality of what's happening, I'd rather be told everything's fine by my communist overlords!

My social worker friend says her cases in South Auckland are usually large extended PI & Māori families. Whānau is a Māori-language word for extended family living in the same area. When Covid-19 hits it will hit these families hardest.

My own European/PI family has twelve of us in three generations living in adjacent properties. Sooner or later one of the kids will bring the virus home from school and then the 3 family members with medical conditions will be at risk. I don't worry too much about shopping or taking semi-empty buses - it is not that hard to keep a metre away from others and wash your hands regularly but what do you do when the world's most beautiful three year old rushes up to you for a hug?

“My father once told me that respect for truth comes close to being the basis for all morality. 'Something cannot emerge from nothing,' he said. This is profound thinking if you understand how unstable 'the truth' can be.”

― Frank Herbert, Dune

"with news nothing good is happening.... Bitcoin has leapt higher today, now at US$6,195 and an +18% jump from this time yesterday."

Pick one.

In other news, all the checkout machines at Countdown ran out of cash last night (or at least, they were refusing to top up the machines). I've never seen that happen before.... I'm sure its nothing to worry about.

I hate it when people pay cash at the supermarket. Hate it even more when they think a supermarket is a bank for cash withdrawals.

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Use self check out then and get over your first world problems...

I once had a shopper ask for $700 and the checkout operator had to go around the other tills to gather the cash.

Banks tell their customers to withdraw cash this way so as to not incur fees from their own ATMs, or worse, withdrawing it from the bank's actual branch.

So how long until the financial stimulus packages for citizens are released in Australia? and more importantly....

How many seconds later will the howls start from all the Kiwi's that are ineligible to receive them?

"And just what will the global financial system look like when the virus emergency wanes, as it undoubtedly will? Massive debt cancellation will have to be on the table, surely."

Which is the same as a Massive wealth cancellation
The issue going forward though is incomes, not wealth claims
What kind of financial system works in a (permanent) deflationary environment ?
Can the supply chains still function without income / surplus / growth?
How can businesses survive if the go to (= economies to scale) is in reverse?
As the financial system (currently) directs energy flows …. what will take its place to direct energy?
Historically the answer to all the above is force

Wealth transfer, not wealth cancellation..

nope
cancellation
Debt = wealth
Its basically a whole lot of promises (debt) that can never be honoured
To write off debt is to write off wealth is to write off income

I must be missing something... since when have banks cancelled debt?
Debt to them is an asset - as we pay interest on it
They SELL the debts to other firma that turn them into securitised debt tools - remember CDO's and GFC??

Not all banks own the debt on their books anymore, and forgiveness would be difficult if not impossible

It is far more likely that homeowners equity gets wiped out first, then banks 'restructure' the outstanding debt over a longer period that will
a) lowers payments to affordable levels, and decrease outright defaults
b) Increased the amount of total interest they earn over the new term
c) banks wealth stays the same, homeowner loses own equity to new 'market' valuation
d) Of course this is only an issue if there are defaults in the first place

Where did you get this fictitious debt cancellation = wealth cancellation idea? it's a bit far fetched... and based on a ton of assumptions above that have not yet happened

you need to get your head around what "wealth" is
Its just a DEBT claim over something … hoping that generates returns of some sort into the future
All Money is Debt is Wealth
they are one and same
To write off/cancel debt is to axe an income stream

All of your assumptions above assume interest rates will be positive
Without growth and in constant deflation that is not the case

"All Money is Debt is Wealth" I disagree...they are very very different animals
Who is writing off cancelling debt which is an income stream? This does not make sense...

Money is a form of exchange and debt is well.. debt..., and wealth is something else entirely, as wealth can be measured in both money or time
Negative interest rates benefit debtors subsidisng debt servicing costs and penalising savers
How can Money = Debt = Wealth, you are correlating uncorrelated things

You are assuming the worst case scenario, that we are in constant deflation? or we are already in a depression and that it will not pass...
Either way that assumption is currently incorrect,

are we are in a bear market right now? yes, do we have constant deflation? no

Headline is crack up, everywhere is grim except the place where the Covid 19 outbreak started

No ones over-reacting right..?

There definitely seems to be more Panic for this than Ebola, MERS, SARS, Birdflu, Swineflu....

Although I think a lot of it comes down to the trustworthiness (or lack there of) of the originating country.

Maybe controlling the media is not such a bad thing then, stops mass hysteria from breaking out.

Maybe just telling the truth and being honest from the outset would also work. If there is actual trust in Govt, then the rumours and conspiracies don't get as much traction.

Well there's a blast from the past

You were in Chch, years ago, from memory. Hope you're going well

Anz picking house price drops of at least 3.5% this year, and possibly up to 10%

I don't even know why they bother making these forecasts....worthless.

Very true.I wrote that, though more to show that even the usually bullish banks are worried.
Heck, next thing we know Ashley Church will be worried!
What we can be certain of is prices won't go up for quite a while

Air NZ gets a bailout, but a pre-req is cancelling an already announced dividend.

If AIR had retained earning for a rainy day instead of spending every penny it had on dividends and buybacks it wouldn't be in the situation it is. The prerequisite should be to retain cash reserves to cover at least 3 months of normal operations.

AIR NZ is not alone, the practice is rife across the industry: https://www.bloomberg.com/news/articles/2020-03-16/u-s-airlines-spent-96...

Isn't Simon Bridges heir-apparent the former recent CEO of Air NZ? Executive salaries benefited from pumping up the share price at expense of retaining captial. Should be the end of his political ambitions. He left a company in a state where it was unable to last a fortnight?

What's your basis for thinking Bridges is ex AirNZ?

https://en.m.wikipedia.org/wiki/Simon_Bridges

I'm pretty sure he means "Simon Bridge's heir apparent" as in the guy that's going to replace Simon.

"The agreement also allows for the conversion of the loan to equity at the request of the Crown."
Nationalisation is coming to essential industries. Like it or not; agree with it or not, it's coming...
(PS: The same thing will happen in the 1000/1 chance one, or several of the Aussie banks get into strife; we'll end up with the local subsidiaries on the Public Balance Sheet)

Bw, the government already owns more than 50% of air NZ. Even if they increase that ownership to 80%, what will change? Or you mean something else, like the government buying all the remaining shares and then delist Air NZ and run it as a public benefit entity?

Yes. Air NZ share price drop to cents in the dollar ( who wants them at $0 dividend?); Government mops them up on-market', converts debt to equity - Voila! Nationalise airline. ( Or worse! Government mops up shares at near current price, to avoid balance sheet losses across current holder, and we end up paying a lot more for the process than necessary)

I still do not get what you mean by Nationalise, it is already nationalised as it is controlled by the government. My question is how the increase in the ownership % will affect the nature of the company? will it stop operating as a for profit, market oriented entity?
Share prices may drop to 1 cents, but they will only remain 1 cent if you see no future for aviation industry. I do not think any sensible person thinks that airlines will not go back to being profitable businesses in future.

Semantics, I guess! I don't consider anything 'nationalised' if it has a freely tradable shareholding listed on the NZX. Once it's 100% on the Government's balance sheet - it's gone from public view - Nationalised.
And my view is that - nothing is going to be the same after this lot. Nothing. Not airlines; banks, household 'wealth' - nothing. But, as I continuously say, "It's different views that make a market!" and those who see 'value' in a non-dividend paying airline are welcome to retain/add to their shareholding.

BW I do not have any crystal balls to see the future in. You may be right. I am not sure if not paying dividends will be a thing in future. It may be. It may be not. Share markets have not been as significant as before in capital markets anyway. Many upcoming companies are using alternative capital sources likes private funds and the likes anyway, IPOs have reduced drastically in recent years. I do not think that is a good thing really as this means that investing opportunities become a cast thing. Only the very wealthy ever get to invest in good business. At the other end, you will get governments owning everything. I do not see how this will improve things.

Here is link to the Imperial college modelling.
Take the time.

https://www.imperial.ac.uk/news/196234/covid19-imperial-researchers-mode...

We need focus on the few opportunities we got. And avoid the loss of opportunities.

Peter Schiff, always one to be claiming a crash is just around the corner is finally right. https://www.zerohedge.com/markets/schiff-real-crash-here

We don’t need more money. We need more stuff.

Adding money doesn’t add anything of value. It’s just paper.”

Donald Trump has been comparing the coronavirus crisis to World War II. Peter made the point that in World War II, there weren’t any corporate bailouts.

Not only did people not get bailout checks from the government; the government tripled taxes.”

Crux folks is how many ICU beds and ventilators does a country have v how many critical cases of infection.
If the surge is too much and too concentrated, many more will die as health system over-whelmed.
All government action is designed to spread the surge over 6m rather than 2m
So, if anything , so far NZ government is NOT over-reacting
Question is: what happens to all the debt
As Mr Chaston alludes to, it will have to be written off.

I think Steve Keen beat him to it

:)

We can at crisis times like this thank our lucky stars NZ has a sound public service capable of delivering quality advice, especially important given the mostly low horse power coalition running the show at the moment. I know several senior govt policy people. They are very sharp individuals who are giving every waking minute of their day to help steer us through this.

If they're of your 'blame the Eco-fascists ilk', they'll be of little use.

Too steeped in 'economics', probably. As your comment subliminally suggests: 'through this'. That supposes a resumption of endless growth, unless I miss my guess?

Not gonna happen, the physics is agin yer. Irrespective of name-calling. We need to be formulating a de-growth construct, and we're late already.

:)

Declaring 'eco fascists to be of little use' is the sinister language of identity politics tribalists: if you don't have the 'right' beliefs you are excluded, or worse. The proposition is nonsense at a practical level, given history is littered with examples of people who were very useful to the advancement of society despite being monsters. The odious Johann Asperger as just one example. You do miss your guess; only a flat earther would believe our planet can sustainably support endless economic growth. But sanctimonious lecturing underpinned by radical resource allocation theories that would radically reorder our society is not going to produce many converts.

apols, I thought you had made that statement in a prior thread. Sorry if it wasn't you.

Nah. Not me. That physical consumption has limits is one of the few things you and I are probably in agreement on. No apol necessary, I'd rather you launched one of your blistering responses. Which always brighten my day.

People are smart, organisations are stupid, particularly in times of great flux as clear thinking individuals are undermined and hampered by the watering down politics and delays of achieving consensus. That is why the model for military is always single commander, not committee decisions.
I have no faith in western governements dominated by non-technical people with no risk management or logistical experience and no ability to work through any fast changing crisis. As is being borne out - manufacturing specialist countries, technocracies (east asia and germany) have been vastly more competent in their response.

Foyle. Yes, I agree. But this is our system and I'm not entirely convinced I'd like NZ to be run as a technocracy - most of the time. My observation was more one of comparison with other comparable western government efforts. eg Italy and the woolly mammoth Johnston's UK. And also from an element of distaste at the MSM depiction of our walk on water PM as the great, all wise, scientifically smart leader when the reality is she is only a little more than an auto cue reader delivering messages crafted by smart behind the scenes bureaucrats.

I am not reassured that the behind the scenes bureaucrats are smart in these circumstances - they typically lack creativity and their judgement is strongly skewed towards following the herd - the same fundamental problems that led to the GFC and other great crises in modern history.

Quote from Mr Black Swan (Taleb's) twitter 6 weeks back (from a wall street guy) was that all his trader acquaintances were prepping like mad for Wu Flu, while all his bureaucrat acquaintances were unperturbed and just waiting for others to tell them what to do. That is our govt in a nutshell.

https://www.ccn.com/u-s-dollar-shortage-to-weaken-economic-activity/

A $12 trillion USD shortage of dollars (and this article is 5 months old.
It states when a crisis happens, it will get worse
Well here we are.
This shows how much of an international finance mess we are in and no one has much of an idea how to address it, or even of its existence.

11 more cases, bringing us to 39. Can the govt stop pretending they have anything under control? They had their chance, they blew it. Time for lockdown to eradicate it.

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