US Fed fires up unlimited monetary action as US Congress fiscal action stalls; US still not in lockdown; Germany readies huge fiscal package; long recession feared; Aussie job losses leap; UST 10yr yield at 0.75%; oil sinks and gold jumps; NZ$1 = 56.8 USc

US Fed fires up unlimited monetary action as US Congress fiscal action stalls; US still not in lockdown; Germany readies huge fiscal package; long recession feared; Aussie job losses leap; UST 10yr yield at 0.75%; oil sinks and gold jumps; NZ$1 = 56.8 USc

Here's our summary of key economic events overnight that affect New Zealand, with news it's even grimmer today than yesterday.

First up today, the US Fed has announced its money printing operations are now unlimited. Today, the NY Fed has entered into US$61 bln in repo transactions, US$30.1 bln on mortgage-backed security purchases, and US$62 bln in US Treasury purchases - all in just one day so far, and their day isn't ended yet. That is a massive daily total of +$150 bln just to keep their financial system ticking over. This is how the US Fed's "whatever it takes" policy works.

Wall Street is falling still however, with the S&P500 down -3.2% in mid-afternoon trade. It was down double that earlier, clawed some back, and has started falling again. Update: The S&P500 closed down -2.9%.

Industrial giant Boeing is closing its main facilities near Seattle. That will hurt a lot. Of course, they are not the only ones hurting - the pain is nationwide in both their factory and service sectors.

So the Fed has announced more programs to back-up bank lending to companies so they can access working capital at this time. The Fed is essentially guaranteeing such bank loans so that they will be made, even in damaged credit conditions. This is real life-support "lending" - even when it is quite unclear if any of these "loans" can be paid back.

Meanwhile in Congress, they can't agree on a fiscal package. Republicans don't want to include provisions for the low-paid and uninsured; Democrats are baulking at the lobbyist-inspired corporate welfare grab the Republicans are promoting. So nothing is agreed.

The US Fed is the only effective functioning responder, but is using tools that can't deal with the underlying problem.

And the US Administration is avoiding any lockdown mandate to protect the economy - lockdowns are now only state initiatives. That means the virus explosion will only get much worse before it peaks - and for a country as large as the US it also means they are now a global virus threat.

Much of Europe is now in lockdown. EU consumer confidence has dived, but only by about as much as was expected. It could have been much worse.

Germany is readying major fiscal stimulus that could exceed €0.8 tin, even approach €1 tln.

Both the IMF and the OECD now see a long economic recession ahead. And that is principally because the US won't deal with the core viral issue properly. Sacrifice now for a quicker return doesn't fit the Administration's re-election goals.

India is suffering serious economic fallout, and their stock market crashed -37% since the end of February.

And while China is getting back on its feet, the economic shock waves will roll on relentlessly. Businesses that restarted are finding few orders, especially few international orders.

In Australia, more than 300,000 people could lose their jobs in the first wave of heavy cost-cutting as businesses desperately attempt to stave off collapse. Welfare lines have mushroomed all over the country. Worse, beer production is under threat in Australia.


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The latest compilation of Covid-19 data is here. The global tally is now 355,000 of officially confirmed cases, up +11% in one day and almost doubling in a week. There are now 273,000 cases outside China and almost all of them are in five core countries. The US is the big new global hotspot with +8000 new cases overnight and no recorded recoveries in the country. That contrasts with Italy whose caseload rose +5500 in a day and a recovery rate up to 12% now. No other countries come close to these daily infection levels although there is still rapid growth in most European countries. Switzerland and the UK will rise above South Korea in a day or so as the Koreans are clearly getting on top of their contained infection community. The other country with amazing control is Japan with only 1100 cases recorded since the first identification on January 22. In Australia, their confirmed caseload is up to 1682 after quadrupling in a week. The number of New Zealand cases is now up to 102.

Large parts of the developed world are now in complete shutdown. More than one billion people are in these lockdowns.

The UST 10yr yield is falling again and still on its wild ride. It is now at 0.75% and down -14 bps since yesterday. Rate curves have moved sharply positive as short term rates stay collapsed. Their 2-10 curve is still very positive at +49 bps even if that is a pullback. Their 1-5 curve is more positive at +41 bps. and their 3m-10yr curve is still out there at +74 bps even if less. The Aussie Govt 10yr yield is now at 0.92% which is a net fall of -15 bps in a day. The China Govt 10yr is down -4 bps to 2.72%. The NZ Govt 10 yr yield is now at 1.46% and a dip of -2 bps since yesterday.

Gold has risen sharply today, up +US$46 to US$1,545/oz.

US oil prices are little-changed US$22.50/bbl although the Brent benchmark is lower at US$26.50.

The Kiwi dollar is also starting today a little lower than this time yesterday and now at 56.8 USc. Given what happened yesterday that is a very minor reaction on currency markets. On the cross rates however we are little-changed at 98.6 AUc but that disguises a fall yesterday and an overnight rise back up. Against the euro we are also little-changed at 52.9 euro cents. That means our TWI-5 is now at 64.7 and holding the lower level we have been at for almost a week..

Bitcoin is now up to US$6,292 which is a daily rise of +3.7% 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?

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145 Comments

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13
up

Thank you for calling the real economic outlook Interest.co.nz. I will pop some money in tomorrow.

I tried, and couldn't find the "I am not a Robot" button. I'll give it a forth go later!

Typical reason for not seeing the "I am not a Robot" button is the broswer you are using has an ad block extension enabled - if that's the case, disable it and try again - then you should be good to go

I've been contributing monthly for a while now

Thx for that!

Anyone know how we can get financial relief from the government?my partner and I are self employed and were wondering how to go about getting an income.

I will give at the office on Thursday..........surely.

What does this mean for Auckland house prices though?

16
up

Blood, blood everywhere. Also known as a Blood Bath.

Who was it that said that the time to buy real estate is when there is blood running in the streets?

It's when the blood stops running on the streets

Everybody said that. Don't forget that one only loses money on real estate if one sells at a loss. If one does not sell one has neither profitted nor lost.

They’ll go down, just like everywhere else in the world.

Buy into the school zone you always wanted while others are in fear?

School from home. Live where you want.

Popcorn time is what it means. The retreat of the tide is starting here https://www.stuff.co.nz/national/health/coronavirus/120510118/rental-mar...

Good luck to those Qtown owners is all I can say. Regardless of how much they discount, there will be limited demand due to the death of the tourism (and other) sectors there.
Best bet is to hope that some urbanites might decide to hang out there for a few months, but limits to that possibility.
It's going to be a bloodbath there.

The whole of NZ housing market is not going to be immune. I just hope that the slump will not be catastrophic, but only severe.

Comment from Queenstown.Tourism has not died; it is only having yet another downturn. About the fourth since I started investing here. The Fritzes of this world said every other downturn was the death of tourism in Queenstown. They were consistently wrong each time.My suspicion is that we will promote ourselves to the 3 million kiwis who registered as returning from overseas trips in 2018. If we get a million of them to come South instead of to a Fijian resort without ever seeing Fiji, or the Gold Coast, thinking that is Australia, we will do alright. If the foreign financed, foreign owned hotels, completely staffed with foreigners on temporary visas, go broke, is that our problem? If the Chinese restaurant, Chinese owned, Chinese staffed, only ever patronised by Chinese tour groups, on Chinese owned tours, goes broke, is that our problem? If the foreign owned properties, bought during the boom, now get sold back to Kiwis for 1/3 or 1/2 price, is that our problem? That is what happened in every other bust. In the near future, there will be oodles of opportunities. Looking forward to them.

My comment was not meant to imply a permanent death. Just a temporary one. :)
Yes it will bounce back, but it will be a while.
And in the mean time house prices will sink.
But Qtown is stunning and it will come back

Yeah Qtown is coming back......as a ghost.

Its starting...

I can hear the noise of the bubble bursting.

Difficult to predict. But I would not be surprised to see up to 50% price slump.

The Boeing case is curious. It is a huge company and for the US, cannot be allowed to go under as it is a significant supplier to the military including F18 Super Hornets and F15 Eagles. The latter also forms a significant source of export income. So some serious questions need to be asked about it's financial management. Lockhead Martin by comparison seems little concerned. Something smelly under the surface?

Finance. More so with the engineering issues on the grounded planes.

10
up

Stock buybacks also an issue - no rainy day fund

Yes, financial mismanagement at its heart.

It is only mismanagement if they do not get parachuted free money from Congress. Right now it looks like perfect financial positioning to maximise Federal funding. I'd be shocked if this sort of arrangement was not soon standard practice in all too-big-to-fail enterprises.

I agree with this. Why would you manage your 'too big to fail' company in a way that is fiscally responsible? Why not take huge risks? Because if those risks pay off, you beat your competition, and if they fail you get bailed out. So it's win-win.

Your comment just highlights that the current model of economics/finance/politics is broken. Its wrong, it lack morals and it isn't working. Whats the point in beating your competition if you fall when they fall?

Fair point. Guess you could argue it's very effective exploitation of taxpayers.

Arguably they used to be a company with a vision of making great planes. Then Finance turned them into a set of assets on which a return was expected, as their main priority.

Haven't the NZDF ordered some planes from Boeing to replace the ageing Orions? Over a $2 billion project according to this article. Hopefully Treasury have currency protection if NZD continues to plunge the way it is and Boeing can produce the aircraft.

https://www.beehive.govt.nz/release/building-base-p-8a-poseidon-fleet

Yes P8 Poseidon's. Typical military contract and a lot on order around the world. Only raises the red flag a bit higher. Something shonky going on under the covers there!

Hope they're wearing a condom more like.

Lockhead won the joint strike fighter contract, so they have orders to infinity. Boeing, and with their civilian aircraft issues....don't.

The JSF won't be orders to infinity, it is too expensive, no more capable, and in some areas less, than F16s, F18s and F15s. the only thing it has of interest is stealth and technology haqs already moved somewhat to negate that. But having said that LM produce a lot more than the F35, and their resilience is a whole lot better than Boeings.

We are starting to see some of the mechanics. The Government side of things, the planning has been going for 2 weeks. 12th March looks like when things started.
Not sure the difference between the NCMC and the All of Government Team.

"I'm confident that this all of government leadership is the best way to support the community.

"These are restrictions to save lives."

He said the team he led had been in action for about two weeks and the National Crisis Management Centre had been activated on 12 March.

"We have multiple streams of work underway in policy, operations, communcations and in the legislation space. We are a very large group of public servants working on our Covid-19 response."

The team was working alongside local government and the private sector.

"All of this work is urgent," he said.
https://amp.rnz.co.nz/article/edd489d9-351c-41ea-a19f-c09efcdb975b

"UK transport secretary Grant Shapps effectively nationalised the railways on Monday in response to the coronavirus outbreak."

"Republicans don't want to include provisions for the low-paid and uninsured". Well that's not going to win the majority of votes in the main election is it!

Just read the two articles. This is for me why I can't take the landlord bashing in this country - they aren't the problem they're the symptom (not that some LLs don't need a good bashing)

Most landlords in this country are middle income earners at best. They are Mum and Dad investors just trying to eek out a little extra for retirement using one of the few avenues open to them (or at least one they feel they can control).

It's understandable, though, that people would attack them because they are coal face of the bigger issues they don't understand (do any of us?). However, the energy wasted on attacking small fry middle class investors would be better spent attacking the real problem - which I think is social dislocation of mega businesses from communities, and obscene wealth at any cost - all propped up by the people who are meant to represent us.

Worth watching at home over a beer or bottle of vino :)

https://londonreal.tv/the-truth-behind-the-coronavirus-pandemic-covid-19...

The covers are coming of the American society's true colours. The music will get louder quickly! "Can you hear the people sing?......."

Wait to the shoot irons get dusted off.

Won't be just the wild west this time!

Crazy times.
Hopefully the checkout operators are going to get paid a little more than minimum wage and the store owners are in there helping out.
Still wondering how we can afford the coming levels of welfare, there's so much to pay for.

probably better to wonder what happens when we don't.

11
up

Some of the nicest and kindest people I met lived through the 1930's depression - it might actually be good for humanity.

Goodness knows we could use it.

we don't pay them back
like all loans
you only need to be able to service the (now closing on Zero % interest)
its called capitalism to infinite and beyond

It’s called money creation to infinity and beyond.

The crux here is it is the RBNZ and not the private banks buying up the Government Bonds. Not sure how that works, but I am aware that there is a school of thought (Social Credit?) that this is how the system used to work (the RBNZ issuing money into the system) and how it should work, rather than the private banks doing it. I suspect that when this is all over the Government will be able to just write that money off.

Decided to brave a last minute shop to the Warehouse for last minute kids supplies and it was super busy.
99 percent had no masks on including 100 percent staff but funny enough they had surgical type gloves ???.
I think they should be supplying all staff with masks rather than play it down.
Also amazed at how many older and overweight unhealthy types that seem to think they are bullet proof and just laughing because I had a mask but I know they are all the types with underlying health conditions.
I am low risk hopefully but it realy does my head in that people are so stupid but I guess they may pay the price for it.
We may become another Italy soon and if so our medical system cannot help all these people.

Risk of dying remains extemely low. “…So do data from outbreaks in confined environments, such as the one on the Diamond Princess cruise ship. Out of 3,711 people on board, 712 were infected and eight died.
This unintended experiment in coronavirus spread will help researchers estimate the number of fatalities that would occur in a fully infected population, Levitt said. For instance, the Diamond Princess data allowed him to estimate that being exposed to the new coronavirus doubles a person’s risk of dying in the next two months. Most people have an extremely low risk of death in a two-month period, so that risk remains extremely low even when doubled.
…But he also blames the media for causing unnecessary panic by focusing on the relentless increase in the cumulative number of cases and spotlighting celebrities who contract the virus. By contrast, the flu has sickened 36 million Americans since September and killed an estimated 22,000, according to the CDC, but those deaths are largely unreported.
He fears the public health measures that have shut down large swaths of the economy could cause their own health catastrophe, as lost jobs lead to poverty and hopelessness. Time and again, researchers have seen that suicide rates go up when the economy spirals down.
https://www.latimes.com/science/story/2020-03-22/coronavirus-outbreak-no...

"The North Atlantic archipelago is badly affected by the coronavirus outbreak. With 92 cases out of a population of some 51,000, the proportion of reported cases of contagion is far higher than in the rest of the Kingdom of Denmark which the islands are part of."
The population full of mecury because of the Grind - nature fighting back?

This and last nights update says NZ 10 year is on 1.46%, but with RBNZ QE yesterday Treasury states it ended trade down 50 bps to 0.94% ?

Yes, that's it, and here as well:

https://www.tradingview.com/markets/bonds/prices-pacific/

Plus, of course:

https://www.rbnz.govt.nz/statistics/b2

But I've seen it on 1.48% here:

https://tradingeconomics.com/bonds

So why the differences, and what actually is it ?

The price action in NZGB 10y over the past week has been remarkable. The sell-off later in the week was funds raising liquidity for collateral calls, then bludgeoned by QE yesterday, .9 to 1.8 back to .9

Seems that 1-2 weeks into European lockdowns they are all starting to reduce new cases, as expected. Meaning it is going to come under control (in the west at least) think we can all breathe a sigh of relief at that The next nightmare is the 3rd world where many can't afford to isolate.

....which means...how long until the 2nd and 3rd Waves hit those areas that have the 1st Wave under control, again? I don't envy Ardern's task of deciding when to call "It's alright now! You can all come out ..."

No, next nightmare is US where there is no nationwide lockdown.

It’s almost as if the US want their infection rates to sky rocket. They can then blame coronavirus rather than their inept financial management since the GFC.

WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF. AT THE END OF THE 15 DAY PERIOD, WE WILL MAKE A DECISION AS TO WHICH WAY WE WANT TO GO! - Trump plan?

His priority is to get re-elected, he is really being exposed by this as a clumsy orator. The election was his based on economic performance and now the CHiNA virus has scuppered him.

The "important" good folk can already isolate in their boltholes, they might think. The poor folk who voted for them despite voting for worse outcomes for themselves will bear the brunt.

US is not homogenous. More than half of all US cases are in New York, average infection in the rest of the US is only about the same as Australia. State by State approach is possibly the most appropriate at the moment - though interstate spread makes that less effective - may need border controls. Going to be incredibly hard for US to administer an effective country wide shut-down.

Agree. I think that is pretty much the same way China approached it. I suspect inter-state measures are needed as well, but the coordination of those sorts of national edicts is shockingly inadequate. The Executive branch and Congress are being exposed as unable to organise a party in a brewery.

Their last civil war was about state Government power v Federal Government authority. Time for #2?

Don't think so. There is a lot of state autonomy built into the system. State and local government have shown themselves to be implementing controls as needed, but what I think they really need is Fed Govt to ramp up nationwide supply initiatives, particularly for the health sector. Declaring a national CD emergency would be appropriate and I don't know whether they've done that yet.

Exactly. It's a yuge mistake to think of the USA (and Australia - another federation) as a single country. North Dakota, South Dakota, Montana, Alaska cases are, for contrast with NY basket cases, in the low teens as of a few days ago.

Given the time frame, isn't that essentially just a reflection of how internationally connected those locations are? The same dynamic would be at play between Auckland and Invercargill without bringing state lines into it.

Aside from it having a very high population, they are doing a lot of tests in NY.

Exactly. They are going to be the next Italy - with steroids. The US are going to pay with many, many lives for the stupidity of Trump and his supporters.

One thing a lot of the 3rd world have in their favour is that the median ages are typically less than 20. Italys is 46. NZs is 38.

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

"Dr. William Grace told Ingraham that they have 100 patients and have had zero deaths after the use of Hydroxychloroquine.
Grace said that a big reason older people die from the coronavirus is that their lungs fill up with fluid as part of an immune response to the virus. Hydroxychloroquine works, Grace notes, in both inhibiting the immune response and inhibiting the replication of the virus."
https://therightscoop.com/watch-ny-doctor-says-his-hospital-already-usin...

Caution required?

A previous version of this article incorrectly stated Dr. William Grace's relationship to Lenox Hill Hospital in New York City. Dr. Grace is not employed by the hospital and his opinions given below are his own.

There are other trials, listed previously, so not just the say of one doctor. Effectiveness on corona virus goes back to 2005 studies.

"Didier Raoult, director of a university hospital institute in Marseille, explained that he had conducted a clinical trial in which he treated 25 Covid-19 patients with hydroxychloroquine. After six days, he said, only 25 percent of patients who took this drug still had the virus in their body. By contrast, 90 percent of those who had not taken hydroxychloroquine continued to carry the Covid-19."

In the wake of this announcement, French pharmaceutical giant Sanofi offered to donate millions of Plaquenil (a trade name for hydroxychloroquine) to continue the tests, while the French government’s spokesperson Sibeth Ndiaye hailed the “promising results” and promised to expand clinical trials for this treatment."

https://www.france24.com/en/20200320-will-an-old-malaria-drug-help-fight...

Trials happening in NZ too;

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12318588

Given the world over is working on this, I suspect we'll have a prescribed treatment regime endorsed by WHO inside a month.

All the lobbyists in the US are rubbing their hands together. US government is writing blank checks with printed money, they are descending like hyenas onto a fresh kill. Eat as much as you can before someone else takes what you could have eaten or you get scared away by bigger prey. US govt is in panic mode so will acquiesce to any and everyone. It's a lolly scramble of epic proportions which will go beyond anything seen before. I am picking they will have printed over 10t by August, more by the end of the year.

Given the scale and significance of the problem the worlds leading nation deserves a thoughtful competant leader - almost anybody would be better than Trump.

Will you bet on that? I am sure that there are plenty of people who are worse than him, as incompetent and deplorable he is.

Given that he outlawed mortgage foreclosures, I wouldn't be too quick to criticise. A colleague has just told me her neighbour asked his bank for a mortgage holiday and was bluntly rebuffed. While JA is talking about talking to the banks, I can't see her going as far as Trump. I guess when you get someone who doesn't follow any rules, some of his actions will be great ones!

Iwas trying to get a friend to seed a daily report from the UK but he's closed his business and bolted to the country, thinks he chances are better in the regions if he gets sick. Will ask around.

Oh and we had maybe 3 mls of rain last night, it's a start so no one is complaining. Some 25 year old poplars have lost all their leaves which I've never seen before. Friends in Sweden are complaining that the pollen count is over 5000, so the snow must have well gone.

Some local farmers are stressed because they cannot sell livestock and having to rely on bought in feed, Im sure they could sell but would lock in losses that are hard to live with. If it starts getting cold and we are getting close to frost risk now then story will change.

its like ive been saying for ages
Cities are an energy consumption PIT
they belong to times of surplus
maybe its dawning on people we have entered a different time

The interesting thing is that suddenly FARMING is an essential service
well who would have thought

Surely cities are progressing towards the ecology of a beehive or termite mound. I hate cities myself but their energy consumption per capita ought to be less than rural and small town energy consumption. Average delivery distances shorter and efficiencies when discarding waste.
So rephrase it as wealthy people are energy consumption PITs.

I would imagine they're referring to how they require a lot of resources and often these have to be sourced from far away.

cities are basically the MOST EFFICIENT way of setting up a consumption pit - but they are still a consumption pit
The whole driver of growth & economic "progress" is to waste/consume as many resources as quickly as possible (to lift living standards)
Cities are great for this
But when supply issues hit for any reason, the reverse is true

Without cities you would not get the economic "growth"
But you would also be far more resilient and sustainable

So, your argument is that if cities were banned then humanity wouldn't be motivated to lift living standards (or consume resources at increasing rates)? Or is it that humanity wouldn't achieve as much efficiency while lifting living standards?
Sustainability makes sense to me in general, but that doesn't mean we can't be more efficient in the utilization of a fixed amount of resources and cities can and do drive efficiency.

Depends how we measure efficiency? Are we talking time efficiency, effort efficiency or economic $ efficiency? Efficiency stops at the level one can't make profit.

the ONLY thing cities are efficient in is consuming energy surplus … MORE consumption is better
Which is what economic growth (as we have relentlessly pursuing) is all about
Sorry, there is no Green - Growth happy medium

But we got so efficient we are now in a MASSIVE population overshoot
And when SHTF, the cities have to be starved of the dwindling (production) surplus

cities are also a population sink - city folk have less kids than provincials.

I would challenge that these days. :)

Then how come meat is the most expensive in the past few years? Mince is about $20 kg! really strange times.

duopoly, prices spiked with China having AFS, prices for mince should be right back by now, $15kg max if from local butcher.

two weeks back I bought eye fillet for $20/kg from local supermarket I think a lot of restaurant grade stuff will be cheap this year.

So much depends on how effective the lockdown is. A perfect lockdown and the virus is eliminated. But people are fickle so every effort should be made to incentivise us to keep to the rules. How about getting our leading politicians to promise that when a fortnight has passed after the last indentified case of Covid-19 that they all hug one another publically on TV. The thought of Simon and Jacinda and Winston and James having a good hug will motivate me to keep disinfecting our door handles, mouse and keyboard for 28 days.

The one way we can surely eliminate the virus is to give it no ability to keep transfering. But asking NZ population to self isolate and social distance is probably going to work as well as making it illegal to use a cell phone whilst driving.

Tinder needs to be shut down.

Queenstown mayor Jim Boult is very concerned about the town and district. Quoted in Mountain Scene, Boult mentions that 20% of home owners in the district rely on Airbnb or something or other to pay their mortgage.

They must have rainy day funds, surely???

Dont care sorry about these people..run a business - capital low - fail

Dont care sorry about these people..run a business - capital low - fail

Well it's not clear the extent to which they're running a business or banking on Airbnb, etc to make mortgage payments. In some ways, Queenie has dug its own hole. For a place that relies on the service industry and workers, the town has not adequately addressed the welfare of the workers who make the place tick.

It's one of the capitals of greed and rapacious business practice. Very vulnerable too to external shocks, or internal ones (major earthquake, flooding)

AirBnB is a business with the same rules we all have when running one.

Do we have any idea the quantity of those US Fed liquidity injections that are being taken up/accessed by foreign central banks - including us?

The US Fed open market operations are exclusively undertaken with US primary dealers- what they do with their reserve claims lodged on the liability side of the central bank ledger is not well defined. Except:

"The Fed buys Treasury securities from the public, and replaces them with currency and bank reserves (base money) that someone has to hold, at every point in time, until the Fed sells its bonds and retires the cash. All monetary policy does is to change the mix of government obligations held by the public. Only fiscal policy – specifically deficit spending – changes the total amount of those obligations". - coutesy of Hussman Funds

"There were two major evolutions in money and banking that seem to fall outside the orthodox narrative. The first was a shift of reserves and bank limitations from the liability side to the asset side. The second was the rise of interbank markets, ledger money, as a source of funding rather than required reserve balancing: replacing the old deposit/loan multiplier model". Courtesy of J. Snider from Alhambra

Reserves are considered the base money factor together with cash in the now defunct money multiplier/fractional reserve regulatory control mechanism. Banks now create credit by purchasing customers IOUs with their own IOUs, which masquerade as deposits. Regulatory control is exercised at the asset level via RWA regimes and other controls, not over the liability ledger, as was the case in the past.

Thanks! I'm trying to follow that - but my understanding of these matters is really poor. What I was trying to figure out was what percentage of the Federal Reserve money printing is directly aimed at saving US industries vs saving the industries in other countries (e.g., Fonterra here for instance). My hunch is that, although those of us outside the US might think what they are doing is madness - I just wonder whether much of their money printing relates to the (perhaps unlucky) fact that they are the world's reserve currency - and the world needs to keep dollar transactions going - hence the Fed has to do what it has to do. It's all very scary - one wonders whether they might move to a new dollar at some stage in the near future.

Interesting idea. I think the USD is the number one currency because the USA is the number one economy. For example, people in Argentina use USDs because their own government issue, the ARS, is, well, not to put too fine a point on it, crap. When the local government issue starts falling in purchasing power it makes sense to buy USDs, as is happening across Euroland. This is just common sense, to which is added multiple incomprehensible layers of derivative exposures which are essentially leverage in both directions.

My question relates to the opening up of international swap lines with other central banks;

International swap lines: Using another tool that was important during the Great Recession, the Fed is making U.S. dollars available to other central banks, so they can lend to banks that need them. The Fed gets foreign currencies in exchange, and charges interest on the swaps. The Fed has cut the rate it charges on those swaps with central banks in Canada, England, the Eurozone, Japan, and Switzerland, and extended the maturity of those swaps. It has also extended the swaps to the central banks of Australia, Brazil, Denmark, Korea, Mexico, New Zealand, Norway, Singapore, and Sweden.

I assume the money printing they are doing overall includes the amounts being taken up by this swap facility? Maybe not. But what my thinking is is that they are to a degree propping everyone up with liquidity at the moment. What happens if/when they close that facility?

Kate, last time round the Aussie banks got money from the Fed. Secretly. Revealed later, after the dust had settled. Google it.

So anyway, if it happened last time, no reason it won't happen this time.

Here’s some NZ property news that could/should be reported on and discussed on here: Rental market flooded with former Airbnb properties. How far will this ho to address the reported shortage? https://i.stuff.co.nz/national/health/coronavirus/120510118/rental-marke...

Just checked TradeMe too...some folk advertising "special rate for 2-5 months". I wonder if that's a bit ambitious. A special rate might need to be a new normal rate.

Then at the end of 5 months they'll want to kick them out and or put up rent and discover the current legislation leaves them stuck. No sympathy.
As a town they have ridden the wave with little to no thought for the consequences.

The smart owners already sold as tourism was already slowing and the virus was well know in January if you still have a property now you will take a bath and then some.

Wonder how many of those empty houses around the country (being used as tax free stores of capital) will get listed when rumors of price falls start circulating the herd at the same rate as the virus?

What supply shortage?

Spoke to some backpackers (been here for a few months) who are very happy with sudden surplus of accommodation. They don't want to be in campgrounds/hostels now where there are up to 20 people sharing kitchen/bathroom facilities. They had just got a house they will be renting with another couple for the next 3months.

Eckhart is always calming to listen to in times such as these:

Staying Conscious in the Face of Adversity | A Special Message From Eckhart Tolle

Probably better for your emotional wellbeing than Mike Hosking or the great warlock himself Ashley Church.

Here are they are together. Damn, they talk fast.

https://www.newstalkzb.co.nz/on-air/mike-hosking-breakfast/audio/ashley-...

Hell I don't think I would listen for even comedy value. Listening to them talk at the same time is a horrid thought

Both of them will probably go down as representative icons of an era (only in NZ) that seems to be slipping away by the minute

Gas buddy in the States just put out a warning, while gas prices are now $1.99 a gallon they can see falls as high as .75c in the pipeline.

You reckon prices will come down more at the pump here? My tank is a third full, I was thinking to fill up now but might wait a bit

LiveSquawk
@LiveSquawk
·58m
RBNZ Lends Zero Via TAF Facility; Offered NZ$2B

New Zealand Finance Minister Grant Robertson interview Tuesday
RBNZ Governor Orr is independent to conduct QE
RBNZ have a NZ$30b y program but can do more
RBNZ bought NZ government bonds, but can buy other instruments if needed

Monday saw QE operations from the RBNZ.
The RBA and BOJ also undertook actions on liqudity

Interest, the definition of 'essential services' (tucked inside the Covid19 Levels blurb here) includes the airy statement 'including their supply chains'.

This raises the eternal question of exactly what constitutes 'essential' parts of a 'supply chain'.

E.g. the 3-waters functions of TLA's are certainly Essential. But suppose a water main blows (we've had four instances in our street over the space of 18 months). That'll need a digger, a tip-truck at minimum. One of them blows a hydraulic hose. That needs the Hose Guy to roll his truck and fix it. So he's Essential too. The Hose Guy gets a flattie on the way to or from the fix, that needs the Tyre Guy to either roll his truck, or stay open. So the Tyre Guy's Essential too.

You can by now discern where this is going. Just how far down the 'Supply Chain'/Bill of Materials does the Essential designation flow? And how to give certainty to the Hose, Tyre, Parts, Mechanics etc firms as to how Essential they are?

There's going to be plenty of trucks on the road shifting livestock, primary products to ports, and of course toilet paper to supermarkets.

There's no doubt that some people able to service the fleet will be needed.

Provincial towns which service farming may do better than most. All farm r&m service providers are 'essential'. That adds up to a lot of business still ticking over.

Australia CBA / Markit preliminary PMIs for March.
Manufacturing 50.1 vs. prior 50.2
Services 39.8 vs. prior 49.0
Composite 40.7 vs. prior 49.0
CBA comments:
"The sharp deterioration in PMI readings during March underline the increasing impact of the coronavirus on the Australian economy. The services sector is being hit hard by the cancellation of events, general fears about social interaction and a very sharp decline in offshore demand as travel restrictions bite. The manufacturing sector is faring a little better. But the leading indicators are flashing warning signs. The deterioration in supplier delivery times is accelerating, highlighting the disruption to supply chains. And the lower Aussie dollar is pushing input prices up at a rapid rate". "The one slightly more positive indication from the flash PMI readings is the relatively muted pull back in the employment indexes. This response offers some hope that, with the right mix of economic policies, the damage to the labour market from the coronavirus can be contained"

All my dire predictions in this blog over the past month have come about, including this one.
Survivalists are stocking up on these, in case what happened in historic plagues in Britain happens in this plague; the physically stronger took the food of the physically weaker. Imagine the stronger indigenous and Pacific peoples striding up Remuera Road with hunger driving them on:

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12319308

Funny that but most of those lined up look like they are from Howick.

Is there anyone that's not an essential business?

Watch Hitchhikers Guide to the Galaxy. They sent all the non-essential people off on their own spaceship... and it was somewhere different from everyone else :)

https://hitchhikers.fandom.com/wiki/Golgafrinchan_Ark_Fleet_Ship_B

Yes good to keep a sense of humour, so a good question you raise :-)

This is worth watching over a good wine or beer :)
ttps://londonreal.tv/the-truth-behind-the-coronavirus-pandemic-covid-19-lockdown-the-economic-crash-david-icke/

For all you doom and gloomers, thinking that the world is ending!!
Give it a break, you are not doing anyone any favours.
If you think you are helping the situation, you are not.
You can believe what you want In Your dark little world, but keep it to,yourself, and just keep paying your bills!!!
Yes it will be tough on the people that haven’t got any sav8 gs or income but rest assured the world is not ending!
NZ and especially ChCh will be just fine.

How would one keep paying their bills if unemployed and/or the benefits provided by government don't cover all of their expenses?

It doesn't take much to expose fragile circumstances. That property you may recall I mentioned to you a year (?) ago, that a FHBer family member bought in Christchurch? It's on the market as of today - sadly for them, along with 2 other adjacent properties. Pressures like those we see about us make couples/families think about the future - and individual directions for each of them.
They won't be the first casualty of this mess, and neither will they be the last....and it won't be just Christchurch.

It will be interesting to see what happens to the ridiculously high price of primary produce in this country's supermarkets, can't charge $35kilo for snapper in a recession...

What's that in CNY nowadays?

I guess that products which can't be produced at a cost lower than what the market will bear simply won't be produced. Can't say I'm sad about the prospect of our fishing stocks having a chance to recover.

The high price is usually the supplier charging the local consumer the same premium price as an export consumer, i.e. price gouging.
Case in point most recently, pork. When the asian pork epidemic broke out it caused overseas demand for nz pork to spike so dramatically before christmas even pork trotters were priced like wagu beef! Last week the prices have literally collapsed due to zero demand off shore.

But what else would you do? Regulate prices?

How about $20 per kilo for friggin mince? Rip off merchants

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