Here's our summary of key economic events overnight that affect New Zealand, with news of more monumental economic changes.
The first estimate of US Q1-2020 GDP is out and it makes disturbing reading. In real terms, their economy shrank at an annual -4.8% rate in the period, obviously most of that caused by a very sharp retreat in March. But in fact, we all know that the real impact didn't occur until April so this is just a precursor to a much grimmer Q2 result.
Some perspective is required. 'Real' changes are one thing, but we live in a nominal world, and that Q1 fall was -US$191 bln, taking their economy size to US$21.5 tln. A -US$191 bln drop in 3 months is a global-scale shock, and equivalent to wiping out New Zealand's annual economic activity. Annualised, it is also equivalent to the combined GDP of their twelve smallest states, including Alaska, Delaware, West Virginia and a whole bunch of Plains (6) and North East (3) states. It is also the equivalent of wiping out almost all of Pennsylvania, the sixth largest state by GDP. And given that Q2 will be worse, the economic cut will be very deep indeed. Some analysts expect Q2-2020 to fall as much as -30%.
Many eyes are now on May rent payments which are almost due. It is unlikely to be a happy time for most landlords.
The US Fed's meeting this week has just wrapped up and apart for restating their commitment to do whatever it takes, they announced no new policy initiatives.
American mortgage market activity is falling away, and that is despite record low American mortgage rates - although still quite not as low as in New Zealand. Their real estate sales activity was more than -16% lower in March than the same month a year ago, but in good realtor speak, they are calling the dive 'temporary'. But it is likely to get very much worse in April.
Very large job losses were announced overnight with Boeing (-16,000) and British Airways (-12,000) leading the way. GE also announced major cutbacks (-2600) in its airplane engine division.
Worldwide, passenger air travel fell almost -50% in March. It will be lower in April.
Major job losses in Japan and Singapore show the global extent of the cutbacks, with -7% of Asia-Pacific's working hours wiped out in April.
In South Korea, they reported surprisingly robust industrial production growth in March (up +7.1% year on year) but the same was not true in Thailand where their equivalent change was a crash of -11%.
In Australia, regulator ASIC has told banks that when assessing new customers, they should not assume income levels will return to pre-coronavirus levels.
The latest compilation of Covid-19 data is here. The global tally is now 3,167,400 and up +84,000 from this time yesterday which is an unchanged rising rate.
Now, just under 33% of all cases globally are in the US, which is up +25,000 since this time yesterday to 1,027,300. This is a slower rate of increase. US deaths are now almost 60,000. Global deaths are about to exceed 225,000. Brazil is another country getting a very fast rise in cases, up almost +40% in the past seven days. Officially, more than 5000 people have died in Brazil so far. Both numbers are likely to vastly understate the size of their crisis. On the official basis, Brazil is about to push past China's infection level.
In Australia, there are now 6746 cases (+15), 89 deaths (+5) and a stable recovery rate of 84% (unchanged). 93 people are in hospital there (-16) with 38 in ICU (-5).
There are 1474 Covid-19 cases identified in New Zealand, with +2 new cases yesterday and more than the prior day's +3 increase. Nineteen people have died, unchanged, all geriatric patients. There are now just 6 people in hospital with the disease, with none in ICU. Our recovery rate is now up over 83% and rising.
In equity markets, the S&P500 is up +3% in afternoon trading today. That comes after the enthusiastic rally in Europe carried on with most markets up another +2.5% overnight. That is probably on the expectation of massive new ECB stimulus coming soon. Yesterday, key Asian markets were lackluster, and the ASX200 was up +1.5% while the NZX50 fell -0.9%.
The UST 10yr yield is unchanged at 0.61%. Their 2-10 curve is marginally steeper at +43 bps. Their 1-5 curve is unchanged at +20 bps, and their 3m-10yr curve is also marginally steeper at just under +55 bps. The Aussie Govt 10yr yield is now at 0.93% and little-changed since this time yesterday. The China Govt 10yr is marginally lower at 2.51%. The NZ Govt 10 yr yield has recovered +5 bps to 0.79% after yesterday's sharp fall. But it remains well below the Aussie equivalent.
Gold is down another -US$4 to US$1,705/oz.
Oil prices are slightly higher today. They are currently at just over US$15/bbl, a +US$2 gain but still well below the cost of production for almost all firms. International oil prices are up a similar amount to just over US$22/bbl.
The Kiwi dollar has firmed again overnight against the greenback and is now at 61.1 USc. On the cross rates we are holding at 93.5 AUc. Against the euro we are still firm at 56.3 euro cents. That means the TWI-5 is now at 67, and a six week high.
There has been a spectacular rise in the price of bitcoin overnight and it is now up to US$8,901, a leap of +US$1,150 or +15% since this time yesterday. "Halving hype' is behind the jump. 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 ».
183 Comments
I'm also totally confused whether to sell. Right now my thinking is that shares might be good for hedging against my gold and BTC, but honestly I have no idea. Any advice welcome
If the fed carries out its reported 'unlimited QE' surely that would spell disaster for the USD? Part of me wonders if all these reports of stimulus are to help people exit markets, and the fed really has no intention of devaluing the USD with unlimited stimulus.
Time for my morning rant .............NZ Unemployment and the Fuel Price
Firstly , the Herald has just pointed out how unreliable the Stats on unemployment are , AND more importantly the paucity of actual detail of those who have been affected , their ages , skill-sets , etc , and the Government should do something about it .
We have a really good government run Stats office , so why are they not doing their job properly ?
2/5ths of my immediate family have lost their well paid high skill jobs in the past 30 days due to redundancy and business closure and 1 out of 5 is on short hours down to just 10 hours a week on standby .............none of them have registered as unemployed , and are unlikely to do so , as we all have savings and dont qualify for welfare . ( and which we would never want anyway ).
So I reckon the unemployment stats are understated by tens of thousands
If we as a middle a middle class , relatively high-income family are experiencing this then who knows who else is in the same boat ?
SECONDLY ..........
Just went past Gull and BP on Albany highway , and the price of Petrol and Diesel remains stubbornly high when crude prices are almost at zero .
How is this even possible ?
How long do these multinational and local fuel companies think they can fleece us to this extent ?
We as New Zealanders should boycott them , one at a time, until they come to their senses , and the boycott should be in alphabetical order starting with BP .
Each boycott should last 90 days or until they drop the price to reflect conditions in the market .
After BP its Gull (Boran NZ LTD) then MOBIL then Waitomo , then Z
One more time Nymad pls.
Using known taxes in both countries and comparing to how Victoria's prices have fallen I get a comparable $1.50 to mid 1.60s price for AKL 91 fuel
https://www.google.com/amp/s/amp.news.com.au/finance/economy/australian…
They are even taking the proverbial in Oz suggesting fuel be free.
https://www.google.com/amp/s/7news.com.au/lifestyle/motoring/will-petro…
Yes. And if we use comparable taxes to Saudi Arabia, we get a price of around $0.40.
I fail to see what your point is. Unless it is that there should be some world retail fuel price that ignores distance, scale, market structure and demand.
This here article should give you some intuition on why prices are what they are in New Zealand.
https://www.interest.co.nz/news/103818/govt-promises-law-change-year-ma…
@NYMAD ........No , I dont , please enlighten me .
When crude goes up , the price at the pump goes up immediately , literally in minutes , even before the media gets wind of the increase in crude .
The crude price fell from US$60 / barrel in December to around US$ 30 in February ( well before the lockdown)
Its subsequently fallen to US$12 (OPEC this morning )
The retail price everywhere on the planet ( including Australia ) has almost halved .......... except NZ
When its convenient , we are told that we are part of the global community and we have to pay global -parity prices for Fuel , Milk , Lamb beef , pork , Fish , cheese , fresh flowers , you name it .............until its no longer convenient .
At that point , we are "different"
Its frankly bullshit , and immoral to try and use that as an excuse for this shakedown by everyone in business
The retail price everywhere on the planet ( including Australia ) has almost halved .......... except NZ
Well. No. The price of retail fuel has not halved in Australia.
When its convenient , we are told that we are part of the global community and we have to pay global -parity prices for Fuel , Milk , Lamb beef , pork , Fish , cheese , fresh flowers , you name it .............until its no longer convenient .
But we DO pay world prices for oil.
You are are constantly confusing the relationship between spot prices, futures prices, and evidently, retail prices.
@nymad ..........I do understand the dynamic around pricing differentials in everything from types such as Brent / WTI / Opec basket / Singapore spot / US light / Venezuelan heavy , to extraction costs , transport , refining , storage , and fully understand that futures for June delivery went negative last week .
That's not the point .
The point is that the world is in MASSIVE oversupply of oil at all stages from crude to refined .
There is a thing called the clearing price , and thats the price that clears the market of the backlog or over supply , and the end user , that is you and I , should be able to take advantage of that .
Somehow we are different
The people we buy our fuels and oils off have a ridiculous oversupply, and nowhere near enough storage, which is not their job anyway, as they are all traders, not storers(sic). So of course the only reason we are not paying reduced prices for fuel is because of the crooks and scam artists running the retail fuel outlets. Everyone reading this column, and taking part in this discussion, knows this full well, and those disagreeing are just pulling our legs for their own entertainment, and to see how long they can keep it all going.
The price of crude oil is currently below the cost of extraction in some places. That might not be a huge problem for mega rich Saudi princes but the rest of that supply chain does have to make a profit or close up shop. It would be interesting to know the freight cost component as a percentage of the retail price down here as well.
But with that in mind, as soon as the old stock is gone the price will fall. Although, nobody is buying much of that old stock yet.
Boatman I have been saying this for last few weeks, GR and his crew are way out of there depth and all they know is to delay a few tax payments and throw a wage subsidy at businesses, which was never going to help pay the majority of the overheads (and to hold companies at ransom that they had to at least pay 80% to employees during this time).
If GR is waiting until the budget day to announce anything major, then it is too late for many many thousands, the business world needs detail details details to forecast, plan and hopefully invest and create jobs, not media hype and meaningless talk. But all I think (I was hoping they would prove me wrong) they will do is throw more welfare payments which is NO substitute for FT or even PT work, not just for financial reasons but also mental health reasons.
@Foyle , you are 100% correct , but overheads are a small part of the pump price at a retail level , so I refuse to buy fuel at these prices , and they can sell it to the next fool .
I reckon we could hold out for 2 months without buying any fuel , and thats only around $1000 for my family , but if 100,000 Kiwi families do the same intentionally or unintentionally , that $ 100,000,000 in lost sales .
And lost sales of $100 million in any industry is enough to put a mighty big cracker up their backsides
@basil brush ............please read the NZ Commerce Commission report which came out 7 months ago , into fuel prices and , margins .
Overheads vary too widely to be specific and depend on location , sales volumes , rents , staffing etc , but well run PFS are by and large very profitable businesses
I see the PM's tag lines have had their desired result and stuck with you. Don't let that get in the way of the facts and a true understanding of; the NZ fuel market and importantly right now, international oil markets and significant changes occurring to global shipping.
I agree with you. Something doesn’t add up to me either. Back in the day when crude went over $100/barrel (I think it peaked at $115) 95 octane in Auckland peaked at $2.27. Now crude is $22/barrel. Doesn’t take a maths genius to figure out that sometimes doesn’t add up.
Can I suggest something? If you want to boycott the pumps get an EV. 3 years ago I got a Leav for $10 K and 5K Diesel SUV to tow the caravan 4x since Christmas and the odd time to the supermarket to keep the battery alive. Done 28 000 k in leaf saving 26 660 litres (vs Sub Impreza it replaced). Can go everywhere in Aucks in the Leaf, surf out west, have taken it up to Ruakaka with a top up in Kaiwaka, or surf at Tawhranui with a 12 min top up on way back in Warkworth. Power use be about 1/5 of fuel and no maintenance $. Plus think of everyone’s healt; no noise pollution-mental Health, no fumes cardio/respiratory health. No1 killer in NZ now Cardio conditions, No1 morbidity for cardio health- air quality
Lets just be clear that 60% of that electricity you are using in your electric car is produced from burning hydrcarbon fuels. Possibly more this year due to low water levels producing less hydro. Still less particulates produced overall than petrol/diesel I presume?
Its a good way for the future though and I think the goal for NZ is total renewably sourced electricity at some point in the future.
Can anyone give me the approximate electricity cost of running a Leaf? because my electricity bill is already over $200 a month! With Genesis I am being charged an average of 33c perkwh? twice your rate!! Maybe cause Im out in the boonies..where of course there are no charging stations and it takes 1 1/2 hrs to go to the closest large supermarket.
Sorry to say bud but your figure of 60% hydrocarbons burned for electricity is wrong. It might be so in some places around the world I’m sure. Once I read that 45 or 55% of the US electricity comes from burning crude oil. 85% of our electricity in NZ comes from renewables. Go and look it up. Last year we went from 80 to 85 % I’m proud to say. Go and look it up. Geothermal and wind power is on the rise plus solar panels on people’s homes are slowly appearing.
Ive been hearing these comments for years, based on miss information. Just a simple google search will lift all the figures.
Another common misconception is that we’d be all drowning in lithium ion batteries in years to come. Not true. Once no longer fit for fast charge and fast discharge as in EV application they’re reconditioned to use as house storage batteries for solar power as they’re still good for slow charge and slow discharge. 24 Kw is peanuts in terms of an EV (what my leaf has) but heaps for a house. (Average US household apparently use 20kw/day).
Running costs of the Leaf; I’m on Nova 29c/kw, Leaf 24kw battery State of Health is 72%. From low to full takes 15kw (measured on a meter) so $4.50 to cover 100 km (95-105 depending on how I drive it). Don’t forget the servicing cost for petrol car means free electricity. One $220 average service on the Impreza every 10 000 km to the Leaf means 5,057 km worth of free kms. Nothing to service or repair on the Leaf apart from breaks and disks. When I bought it I took it to my garage to test the break fluid as that’s the only fluid it has and got a wheel alignment as I do with all cars I buy. No moisture in the brake fluid, long life, lasts 12 years, good until 2024. Also consider repairs on all the moving parts of an internal combustion engine, only 20 something moving parts on an EV. Biggest cost on a 2nd hand EV is the Batery. I think about $8.5 k in NZ but will get cheaper over time. I haven’t heard of anyone changing a Leaf Battery in NZ. By the time I want to change it the cost savings in fuel would’ve paid for a new battery or the car in the first place. All the enviro stuff is a bonus.
The entry level 8-10 grand leaf won’t do your 1-2 hour trip though. Take your other car for those long drives, or hire a Juicy for $50/day. Still save you money over the long term. I recommend at least one cheap Leaf to every household in NZ as Most households have multiple cars. We have 3. My wife’s Prius C 2012 nz new high k’s, $ 9,200 Nov 2018 does 4,6ltrs/100 k (comp to 6.2 her Yaris used to), diesel Merc does 6.8 ltrs taken surfing on open road or just under 10 towing 12 000 kg caravan. Day to day we trash the Leaf as much as poss.
Get a leaf! Or a Tesla if you got the $ ;-)
Here’s the link. I just typed into google NZ renewable electricity amount. It’s 82 % at the mo. It must be in real time. The %85 was from a Herald article I read last year.
https://www.google.co.nz/search?q=nz+renewable+electrisuty+amount&ie=UT…
From the USA, New Zealand & Australia get a favourable mention.
Border control, the big social isolation.
Tucker Carlson & Miranda Devine.
https://youtu.be/Iqbiosrn5Ko
Describes NZ as having a very left wing government. Miranda describes how we followed Trumps lead to great effect.
Tucker under the impression NZ entirely shut their border mid March when that was not remotely true. Not having a policy of sending sick covid patients to rest homes was a big help. TBF letting cruise liner tourists visit rest homes after the border closure wasn't our finest hour.
https://www.trtworld.com/magazine/the-massacre-of-italy-s-elderly-nursi…
https://www.newshub.co.nz/home/new-zealand/2020/04/coronavirus-new-hawk…
You can lead a horse to water but you can't make it think - neigh neigh
https://www.politifact.com/factchecks/list/?speaker=tucker-carlson
That's hilarious good joke of the day Henry well it's Fox news always good for a laugh, pity that some of the Fox presenters didn't take the Covid-19 all that seriously like Trump, that has now cost some many lives in the US. I see the the US is now at 61,112 dead from Covid-19.
Vox news article: A disturbing new study suggests Sean Hannity’s show helped spread the coronavirus. "Throughout the coronavirus pandemic, media critics have warned that the decision from leading Fox News hosts to downplay the outbreak could cost lives. A new study provides statistical evidence that, in the case of Sean Hannity, that’s exactly what happened." https://www.vox.com/policy-and-politics/2020/4/22/21229360/coronavirus-…
You only got that 100% wrong on Tucker CJ. Tucker was one the few to take it seriously. Acted faster than Jacinda.
"NEW YORK (AP) — Fox News Channel’s Tucker Carlson says he felt a “moral obligation” to meet with President Donald Trump and warn him personally about the seriousness of the coronaviruspandemic.
Carlson told Vanity Fair that “I didn't feel it was my role” but was convinced by his wife to meet with Trump at Mar-a-Lago on March 7. Two nights later on his Fox show, he issued a pointed warning to viewers to prepare for the coming storm."
@middleman........... we need to understand more about this "increase" in retail deposits ...........there may be proceeds of Bond / gilt sales , including people selling their Bonus Bonds .
OR , is it something else ?
A lot of people have reduced spending , so retail bank balance "increases " may just be less spending .
As an example our household spend has reduced by nearly $1000 in April , we bought zero fuel , I reduced insurance on the cars to 3 rd party fire and theft ( they are not being used at all ), we spent Zero on entertainment , eating out , theatre tickets or travel , spent zero on clothing or footwear , spent zero on DIY , and were very careful in our spending at the supermarket buying only essentials
The US Fed's meeting this week has just wrapped up and apart for restating their commitment to do whatever it takes, they announced no new policy initiatives.
To support the flow of credit to households and businesses, the Federal Reserve will continue to purchase Treasury securities and agency residential and commercial mortgage-backed securities in the amounts needed to support smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions
How does that work for:"Holy God. We're About To Lose Everything" - Pandemic Crushes Overleveraged Airbnb Superhosts?
...overleveraged Airbnb Superhosts, who own portfolios of rental properties built on debt, are now starting to blow up after the pandemic has left them incomeless for months and unable to service mortgage debt.
I think central government responses could do more damage than good now. Not that rates are at zero any QE is just going to pump asset prices, then force people/business into more debt, which will only make issues worse. Think it could be time for defaults and debt restructuring.
Velocity is constant. Only appears to drop if we wrongly assume equation MV=PY is correct. It isn't: Most money is used for transactions that aren't part of nominal GDP (PY), namely for asset purchases.When bank credit creation (true def of M) up for asset buying, V seems to fall Link-scroll up
Physics envy in that there equation. Looks like P1V1=P2V2, otherwise known as Hooke's Law. In his day it mattered that you could actually measure each variable independently and thus check it worked experimentally. In psuedo science you just posit a variable you cannot measure that will make the equation work at all times and all places. Sigh. Strangely this doesn't mean it might not be true, but it is not science as we know it.
"...overleveraged Airbnb Superhosts, who own portfolios of rental properties built on debt, are now starting to blow up after the pandemic has left them incomeless for months and unable to service mortgage debt."
Could this happen to Airbnb hosts with properties concentrated in the following areas:
1) Queenstown
2) Wanaka
3) Taupo
4) Central Auckland
5) Rotorua
Appears it was not only Cuomo’s New York policy of sending ill covid patients to rest homes to recuperate. Also done in the UK and Italy. No wonder these countries has such high death rates. Luckily Trump can be blamed for all this.
"Matt Hancock, the Health Secretary, said hospital patients who tested positive for Covid-19 would continue to be discharged into care homes despite evidence that the policy is fuelling outbreaks and deaths."
https://www.telegraph.co.uk/news/2020/04/15/discharging-coronavirus-pat…
https://www.trtworld.com/magazine/the-massacre-of-italy-s-elderly-nursi…
https://www.al.com/opinion/2020/04/law-firm-to-jefferson-county-dont-se…
Headed by the Toddler and Chief Mr Trump. Who had back peddled his comments and tweets multiple times in regards to the Coronavirus. Everything from calling it a "virus hoax" and compared it to the flu, to telling people that they could "inject disinfectant to try to cure the virus"!!!
Following heavy criticism from medical professionals, Mr Trump said his remarks were made sarcastically.
If he didn't say it, then why did he claim he said it "sarcastically"?
https://www.forbes.com/sites/stephaniesarkis/2020/04/24/trump-now-claim…
he did say it, even he says he said it. but he's trying to backpedal it with the sarcasm claim, and its hugely amusing watching his water carriers' contradict him.
He didn't, he just fell for a classic distinction used by quack cancer cures the world over. Many products will kill viruses (and cancer cells) in vitro, but would be far too dangerous to use in vivo. I don't think that anyone will seriously be taking up his suggestion to check whether injecting or cleaning the lungs with disinfectant would be a good strategy.
Yes, Trump's quotes are frequently misrepresented and exaggerated, which is a real shame, because they stand alone quite nicely as demonstrations of how his brain works (or fails to).
And that was well over a month ago. Surely the Commander in Bleach heard about that.
Latest idea I've seen is that when you get caught out on a lie just say you've been "sarcatic". Suggest a few here defending the Commander in Bleach use the word.
https://www.google.com/amp/s/amp.theguardian.com/commentisfree/2020/apr…
I should have been clearer - Trump asked 'Medical Doctors' to check whether disinfectant would work - I mean I don't think they will be wasting their time entertaining his brain farts. Although he didn't directly suggest people try it themselves, some people inevitably will. We just have to be clear about what he actually did and did not say, to remove ammunition from those who for whatever reason want to defend Trump. What he actually said was concerning enough, no need to embellish.
Mfd, Yes its your last point that's really worrying. The how Trumps brain fails to work, it's called incompetence. Most people know that ingesting disinfectant cleaning products is extremely dangerous and harmful and yet there he is blandly suggesting it as a treatment for the coronavirus.
And yes the US public did take him seriously that's why US hotline calls about disinfectant have risen after he suggested injecting the substance to treat coronavirus. Even the governors of Michigan and Maryland on Sunday blamed the president for the spike in such calls. Hence why Trump tried to back track and say his remarks were made sarcastically, which no one believes.
BBC Coronavirus: Trump 'can't imagine why' US disinfectant calls spiked. https://www.bbc.com/news/world-us-canada-52450692
I think the last laugh is on you Boatman. We all know that Trump is political toast, There's no way he's ever going to live down these latest incompetent blunders not when it's over such a serious matter.
Quote from Trump watch the video of him saying it if you don't believe it. Mr Trump made the disinfectant remarks on Thursday, after an official presented the results of US government research that showed Covid-19 could be killed in minutes by bleach.
"I see the disinfectant where it knocks it out in a minute. One minute," Mr Trump said. "And is there a way we can do something like that, by injection inside or almost a cleaning?"
Doctors dismantle Trump's treatment comments. Following heavy criticism from medical professionals, Mr Trump said his remarks were made sarcastically. (Trump back peddling) Disinfectants are hazardous substances and can be poisonous if ingested.
BBC article: https://www.bbc.com/news/video_and_audio/must_see/52421673/coronavirus-…
I personally believe "Dic-tator for Life" is what America needs. ...so no need for further E-lections. Ever.
Just build walls around and around their Boarders.....and protect them from all this insanity of a Presidential "Pardon, did I really say that...I was just being sarcastic".
But what do I know...America gets what it deserves, the highest debt in all man kind, then complains when they have to dig for more, with a broken shovel at the Top.
And this is all fueled by the USA counter feight dollar, holding us all by the Golden Shorts and curlies. And Golden Face at Face value leads by default.
The previous lot, at it again.
Futures of us all......a derivative in every pocket....Yours. Oil say it again. A right rip-off in all accounts.
Duh!.
From Richard Duncan this morning. He is good for watching the numbers.
The new Macro Watch video shows that, without the unprecedented support that the government and the Fed are providing to the economy during the Coronavirus crisis, it is likely that all the major banks in the United States would go bankrupt.
It is easy to understand why. Banks are highly leveraged. The loans they have extended and the investments they have made are very much larger than their capital.
If the government were not supporting individuals and businesses, a very large percentage of those individuals and businesses would default on their bank loans. And, if the Fed were not buying trillions of dollars’ worth of financial assets and pumping credit into every corner of the financial markets, asset prices would crash and the banks’ investments would experience extraordinary losses.
If the Government and the Fed were not intervening on a multi-trillion-dollar scale, there would be a Great Depression in the United States. In a Great Depression scenario, the losses that the banks would incur on their loan books and on their investment portfolios would quickly exceed their capital, at which point the banks would be bankrupt.
The government and the Fed must continue to support the economy to prevent a new Great Depression. As long as they do, their actions should continue to keep the banks from failing. However, if the government and the Fed don’t act aggressively enough, the United States could suffer a systemic collapse of the financial sector. Should that occur, a new Great Depression would be unavoidable.
Therefore, the government and the Fed must continue to support the economy and, thereby, the banks. However, the public needs to understand and bank CEOs must be made to acknowledge that the banks are on government life support and that they owe their survival to government intervention.
Consequently, the banks should be required to stop wasting their capital buying back their own shares and paying dividends. Moreover, they should be required to pay much higher tax rates in the future in order to help the government recover some of the trillions of dollars it will have to spend to keep the economy and the banks from collapsing.
"Bank CEOs must be made to acknowledge that the banks are on government life support and that they owe their survival to government intervention."
It's actually the other way around. The Government(s) are on life support from the banks, who are not about to give up that control under any circumstances.
Who would be the winners if (1)The Government abandoned The Banks, or (2) if The Banks abandoned The Government?
In either case, it isn't The Government!
Rent subsidies go towards paying mortgages, which in turn go to American banks. Isn't it time the Government abandoned rent subsidies which are also keeping housing unaffordable for so many ? In a time when rents are going to fall, it's the perfect tie to "pull the plug"
It's election year, here and the US.
For this reason both governments will pour money into the economy, households and banks so things don't go under.
Plus we have a spend, spend, spend Labour government. Always good for the Wgtn region.
The people don't know how lucky they are. The background context for NZ could be much, much worse. But it's not. So things won't be as bad as some people think.
Pretty hard to go broke with 3% interest rates.
A lot of people and businesses can just go dormant and things will be flat for quite a while.
Yes the currency's getting whacked but NZ will come through if those made unemployed go find other jobs in other industries. Any job. And if they weren't recent home buyers helps too. But many tourism and hospo low wage workers probably weren't homebuyers anyway.
Something I've been saying here for years is that the economic system we are working under does not go backwards, it keeps running itself until it goes off the cliff. We're at the point where one foot is over the cliff, and the other still on land at the top of it. Only question is how much weight still on the grounded foot.
Well I had a weird thing happen yesterday. I had to take the rubbish to the dump.
There were cones outside and the young guy nodded me in. There were a couple of women sitting on chairs outside the box that goes as an office. Masked and gloved a little frightening, I wound my window down and they asked why I was there, then thrust a clipboard in front of my face. I had to write my name, address, phone, car Reg reason for being there and sign it. Then they moved the cone and I threw a lonely green bag over the face. Off course I suspected the pen was infected all along.
My father always said the Nazis and Communists escaped Europe and got jobs in local councils, biding their time, now their children have formed the new Stasi and have made a move for total control. We could fight but they have taken all our guns.
perhaps some common sense
https://www.aier.org/article/open-up-society-now-say-dr-dan-erickson-an…
Am pleased to report:
Property sale listings across the country have universally declined in all the major centres. Stock listings on hand are the lowest they have been for the last seven months based on Trademe figures. The declines are relatively small in percentage terms between 1 and 4 percent. Both residential and commercial properties.
See my comment above. Hard to go broke with 3% interest rates. Things could be much worse if it weren't for this. Turnover will be down making pricing a bit harder for property and there will be less real estate agents as some can't survive.
But not as doom and gloom as a lot of people think. Yes the economy will come back smaller but households and government went into this in a much stronger position than pre GFC.
Don't get me wrong, there'll be pain for some but a lot won't be as badly affected if they adapt.
Homeownership is one of the fundamentals of Life.
But it shouldn't be at the expense of that Life.
Committing 30 years worth of disposable income ( Or more. Two incomes are actually needed) to the acquisition of ones' shelter is an indictment of the way we have constructed the homeownership model in this, and may other, countries.
Homes aren't supposed to be a speculative asset; creating personal' wealth' at the expense of others disposable income. ( the Next Fool theory of property speculation)
They are supposed to be a place of family formation and protection, from where productive endeavours are created.
WHEN that time reoccurs, and WHEN homeownership is within the reach of the average Kiwi family without sacrificing the rest of their financial life, then it will be for the 'longterm wealth for a family'.
You speak as if people don’t want to own homes. No, they do. I’m one of the dreaded anti-landlord DGM brigade. I would like to own a home, with my wife and potential family, but I can’t, because I’m on an average wage. I could ask for the maximum possible mortgage we would qualify for, which might, maybe, stretch to a really crappy 2-bedroom unit on the outermost fringes of Auckland. Whereupon we would face staggering weekly commute expenses, and also live in a crappy house in a depressing area far from family and friends. For the privilege of which we would be paying half our weekly income for the next 30 years.
Now maybe the capital gains on this shitbox would make that all worthwhile, as it has for some in recent decades. Personally I suspect not. I think there is, in fact, a limit to how far property price gains can exceed income growth. To me, buying a house at current prices seems like an enormous risk. I might be wrong about that, but I don’t think I’m stupid.
And I won’t pretend that an enormous drop in house prices wouldn’t be in my interests at the same time as hurting others. Thing is, I want to be that responsible middle-class citizen who builds a community. The housing bubble is exactly what’s stopping me. Wanting a more rational and equitable housing market isn’t a Communist plot, it’s profoundly conservative.
A generation of stale, pale, males, now aged 55-75 are attempting to pump the market a little more. Thinking the falling interest rate policies of the last 35 years are normal and what they know about property investing to be true. Instead of realising that asset appreciation has simply been the result of falling interest rates since the 1980's and we've reached the end of that cycle. They've never looked to see what happens when the long debt cycle ends, because they've only experienced investing in the prosperity phase of the cycle. Everything they think they know could soon be turned upside down.
You have no idea if I was right or wrong in 2018 and 2019! And how do you classify right and wrong? Are they black and white positions to take?
If by wrong in 2018 and 2019 you mean that my investments (in NZ, Aus, EUR, Jap, USA) went up significantly, or that I reverted a significant part of my wealth to low risk assets towards the end of last year after the 2/10 inverted? Or that while the NZD falls in 2020, my wealth increases? Ok, then I've been wrong in 2018 and 2019 and 2020.
Judging by the members of my senior activity class (now abandoned due to leisure centre being closed) a large proportion of those "stale, pale, males" are female - of course these energetic female pensioners may have inherited from dead husbands. Certainly extrordinary ladies.
Not only not male but I realise they include South African Indian, Hong Kong Chinese and various other unspecified nationalities. Seems as if buying investment property has been an immigrant thing. It was for me from London 18 years ago and seeing Auckland prices a joke compared to what i had left behind. By joke in that context I meant very low - now the joke is the opposite.
As Dalio put it, when you're getting towards the end of a long debt cycle people starting taking leveraged gambles on price appreciation without the ability to ever pay back that debt. Which is exactly what has happened here and Aus the last 10 years or so.
The assumption is that 'we'll just inflate the debt away like we have in the past'. I'm not sure sure this time.
Absolutely correct, houses are meant for people to live in and make homes in, ownership is best for them and for society as a whole. They most definitely should not be considered a never losing casino for speculators and every man and his dog seeking to become a landlord, Will be awesome when that culture is shot to bits.
You have no idea if I was right or wrong in 2018 and 2019! And how do you classify right and wrong? Are they black and white positions to take?
If by wrong in 2018 and 2019 you mean that my investments (in NZ, Aus, EUR, Jap, USA) went up significantly, or that I reverted a significant part of my wealth to low risk assets towards the end of last year after the 2/10 inverted? Or that while the NZD falls in 2020, my wealth increases? Ok, then I've been wrong in 2018 and 2019 and 2020.
Property investors say that property is a long term game, yet many insist on discussing (and predicting) short term property price movements (such as less than 5 years).
To discuss property price movements for each year is useful for:
1) property traders,
2) those who want to promote transactional activity in property (mortgage brokers, real estate agents, etc),
3) those who want to create audience interest (i.e media).
4) those who wish to use equity release / deposit recycling techniques - so that property investors can revalue their property portfolio upwards and borrow to maximum allowable levels to use the new borrowings as a deposit on their next property purchase.
There are likely others that I've missed.
Most people in NZ are not in any of the above categories.
Yet, is talking about median house prices in Auckland increasing by 11% in the last 12 months even relevant for the long term oriented owner occupier of a house in Auckland? For the vast proportion who do not require additional borrowings, most likely no.
So for the long term oriented property owners, if property prices fall up to 15% as predicted by some, that will take median property prices in Auckland back to 2016 price levels. Most owner occupiers who have purchased since then would therefore experience some unrealised loss in their equity.
The loss by recent property purchasers is likely to be far greater in tourism reliant locations such as Queenstown.
The prevalence of discussing short term property price movements is akin to many discussions by the general public in 1987 of shares and share prices. When large numbers of recent new entrants are discussing the prices in a particular area, it illustrates discussion of a potential area of speculation - like Bitcoin, internet shares circa 1999 / 2000, houses in Ireland circa 2006/2007, shares of marijuana companies listed in the US, etc. This is what drives buying competition and drives up prices potentially to unsustainable levels.
All going good and well....
https://www.propertynz.co.nz/sites/default/files/uploaded-content/websi…
"Property sale listings across the country have universally declined in all the major centres. Stock listings on hand are the lowest they have been for the last seven months based on Trademe figures. The declines are relatively small in percentage terms between 1 and 4 percent. Both residential and commercial properties."
So the decline in properties available for sale (listed on Trademe have declined between 1 and 4 percent.
Here's the important part: at current price levels, what has been the percentage change in ACTIVE buyers? Has that declined by 50% or more?
That is effective demand. That is how the property market goes from a sellers market to a buyers market. Buyers are likely to be ACTIVE at lower price levels. That's where the lowball offers come in.
Here's a real life example. (Apologies to BW in advance). Recall BW's offer to buy the house that their relative is selling. BW is unwilling to buy at the asking price by the seller. BW is INACTIVE at that price. However BW is ACTIVE at a price 30% lower.
Remember the underlying demand and underlying supply framework, used by most property market promoters, says that there is a housing shortage, so property market prices should be rising. Do they even understand how those numbers are calculated? Or have they simply accepted that there is a housing shortage? The underlying demand includes INACTIVE buyers, so this has no bearing whatsoever on the market clearing / transaction price.
The underlying housing shortage numbers have been taken out of context from their original purpose, and used by property market promoters to sell their desired narrative in order to support their vested financial interests. Many of the general public have bought this narrative. Then if property prices fall, people start to question the narrative. (In a strong economy with GDP growth, low unemployment, & population growth, why did the median house price in Auckland fall from their peak in March 2017 by 11%?)
Also underlying demand excludes a large number of buyers who are ACTIVE in the property market. Who are these ACTIVE buyers you may ask? They're the non owner occupiers such as property traders, property investors, property developers of infill projects, etc ...
One needs balls of steel to invest in Bitcoin ............Bitcoin is something I will never get my head around .
My first rule of thumb is to never invest in something you dont understand , or cant figure how it makes money or gets a yield .
I would not go anywhere near it
Its not an investment, its supposed to be a currency. Too volatile to be seriously considered one though imo, but could be a good place to park cash for a while. The only way out of this mess is for governments to massively debase currencies to protect asset prices.
A more sensible (long term) approach would of course be for the over-levered to take their medicine, asset prices to correct to more sensible levels (short term pain for all), increased regulation to stop the same thing happening again (e.g. DTIs). But that aint gonna win any votes!
“An Australian prime minister who ends up in conflict with China cannot expect any support or solidarity from the Australian business community,’’ Mr Turnbull said."
Ditto NZ, morals go out the door when money is involved.
https://www.news.com.au/world/coronavirus/global/china-hijacks-health-m…
YD&broke. Have a crack at explaining what 'standing against the CCP' would look like. Some serious thinkers are currently attempting just that and their economic projections for NZ make sobering reading. Alternative markets for the products we send there would be extremely difficult to find.
Retrospective but maybe if over the last 40 years we didnt rely on mass producing primary goods to a single market that has had questionable trade and social practices, we wouldn't have such dire economic prospects. Also, if we didnt leave the floodgates open for foreigners to sweep up our productive assets and takes billions of revenue offshore we would have had the funds to replace our tired and nearing obselete infrastructure. Then, to top it all off, we used immigration as a tool to create "wealth" and cheap labour and hence the property bubble followed.
But alas, we are here now.
The way I see it there will be immense pain in the medium term regardless of how we tackle it. But more debt is not the answer. Especially debt in non productive assets. We need to make NZ for the Kiwis, not for the few millionares at the top. Anything to avoid becoming New Taiwan
Many, Many people who sold out to China, are be holden and cannot a ford to turn their backs on yauning debt.
Some even built large equity, which is key to their futures employment as experts in their bank, may tell you.
Unless one understands how man kind and many others can be bought and sold in these days of financial manipulation and debt contract shun.
We must never under estimate just who benefits from any key figures in banking and govern meant taxation and over sold equity systems.
Be aware that systems that man can fix for their own benefit, can be a ladies desire too. No small wonder we cannot afford to reduce taxes and fees like rates and rents and other over inflated beneficiary lots as lots more were needed to keep the home fires burning. Tis why we also imported rich and loaded family benefits from Asia and all points east and west, to buy up our what used to be a clean and pleasant land of hope and glory.
A -US$191 bln drop in 3 months is a global-scale shock
191 B doesn't seem all that much compared to World GDP of around 100 T. If world GDP was $100 that would be like 19 cents. It may be around NZ's total yearly GDP but we only represent 0.067% of the global population. Are things really that fragile?
A drop of 1T to US GDP would return it to what it was about a year ago.
We are, after all, expecting a significant downturn so this doesn't seem all that shocking. Worse to come I imagine.
The NZ Govt 10 yr yield has recovered +5 bps to 0.79% after yesterday's sharp fall.
It's a disgrace - nothing more than a roller coaster with big DV01s. Central bank financial stability actions in play - graphic evidence - 5D tab.
Casino economics be damned.
Not sure if this has been mentioned here:
https://www.zerohedge.com/markets/survey-finds-50-million-americans-hav…
Unemployment in US might be closer to 50 million as opposed to the official figures.
Anatomy of a fiat currency collapse:
https://www.zerohedge.com/geopolitical/anatomy-fiat-currency-collapse
Renters United have released a report based on a survey of nearly 2000 of their members.
Some interesting, disturbing but not surprising findings:
- two-thirds of households have seen incomes drop by more than one third
- more than half are worse off even after govt support is taken into account
- 70% feel their circumstances warrant a rent reduction but only 5.9% have received one (it's not clear how many have requested)
I was just about to link to this.
https://www.stuff.co.nz/business/121347482/staff-angry-and-scared-after…
I wonder how frequently the government is recalculating how far into the future we'll be paying off the bill for COVID-19 given not just redundancies but more and more facing wage cuts = future tax continues to shrink?
Their real estate sales activity was more than -16% lower in March than the same month a year ago, but in good realtor speak, they are calling the dive 'temporary'. But it is likely to get very much worse in April.
Confused that realtor are speaking that the dive is 'temporary' but at the same time that will get worse in April.
Definitely will get worse in April and worse worse in May and worse worse worse in June......may be by 'temporary they mean a year or two.
Everyone is still seriously underestimating the impact of this Pandemic on the economy. Unemployment figures are going to be stunning and that will not include those that do not qualify for it or have taken a pay cut or reduced hours to try and keep their jobs. Its going to get really bad and then even worse after Christmas and the New Year.
Indeed. Looked at a couple of properties pre lockdown. They wanted 2x CV, and neither sold, no surprise. Never got a follow up call from the agent, clearly to cool for having the listing to follow up actual buyers (aka their actual job). I'm going to suggest .5x CV when they finally get around to ringing the people that viewed the property.
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