Here's our summary of key economic events overnight that affect New Zealand, with news jobs are being lost at an unimaginable pace and consumer demand is shrinking with it.
We get the crucial American non-farm payrolls report on Saturday (NZT) and they are sure to be just awful with a 4% unemployment rate suddenly approaching 20% if you count the sharp moves of many to exit their labour market. Today the pre-cursor ADP Employment Report is out and that records a national payroll drop in April of more than 20 mln people. Every sector took huge hits, including ironically the health sector which shed -1 mln jobs alone. Presumably, that's because it is largely a private sector and the pandemic is a public health issue and woefully under-resourced. Manufacturing lost -4.2 mln jobs. The hospitality sector lost -8.6 mln jobs. Job losses of this scale are unprecedented. The total number of job losses for the month of April alone was more than double the total jobs lost during the whole GFC. All up, their service sector lost more than -16 mln jobs.
And this is reflected in the service sector PMIs for April, which fell to an index level of under 27 in the Markit survey, an all-time record low.
There is a growing drive to re-open the US economy "to save jobs" despite the public health risks.
One American industry hit hard is trucking - the ADP Report says 3.4 mln jobs were lost in the wider distribution sector in April alone - and orders for new trucks crashed in April fell to just 4000 and the lowest monthly level in 25 years. In airfreight, the sudden grounding of the passenger fleet is seeing airfreight rates rise very sharply, more than quadrupling in some key markets.
While US diplomacy shifts to blame mode, China seems to be successfully reopening its economy boosted by internal tourism in its recent May Day holiday period. Car demand seems to be up, helping factories recover some momentum. (One thing driving Chinese car demand is the wish to not be in public transport crushes.)
Meanwhile, news reports suggest White House officials have already considered cancelling all or part of the US$1.1 tln debt owed to China in response to the coronavirus outbreak. This has had an immediate effect on US interest rates and it seems the US will now have to pay more to borrow - a bit of an own goal here by the White House. Every basis point rise in interest rates costs the Federal deficit another US$¼ bln per year, and these rates rose +6 bps today alone. Many other large foreign creditor/funders of the US deficit will be reassessing their position now.
The EU says it is in a "deep and uneven recession" with southern countries suffering harder than northern members. Overall retail trade has crashed, also in an unprecedented way. (It is worth clicking on that retail link to get the scale of the retreat.)
The latest compilation of Covid-19 data is here. The global tally is now 3,711,400 and up +80,000 from this time yesterday which has settled back after yesterday's jump.
Now, just under 33% of all cases globally are in the US, which is up +18,000 since this time yesterday to 1,211,100. This is a slightly slower rate of increase. US deaths are now more than 72,000 and they aren't really getting on top of the pandemic. Global deaths now exceed 260,000. The infection accelerations in Russia, Brazil and India are looking very grim indeed.
In Australia, there are now 6876 cases (+26 since yesterday), 97 deaths (+1) and a higher recovery rate of just on 87%. 62 people are in hospital there (-4) with 27 in ICU (unchanged).
There are 1488 Covid-19 cases identified in New Zealand, with two new cases yesterday, up from zero the previous day. One probable and one confirmed case were reported. Twenty-one people have died (+1), almost all geriatric patients. There are just two people left in hospital with the disease (-2), and none are in ICU. Our recovery rate is now up over 88% and still rising.
In Australia, a new study shows that they have taken a -AU$100 bln hit to their economy from the pandemic, a combination of job losses, pay cuts, reduced hours and share market falls. And it is the dollar cost of the share market falls that have been the largest so far, hitting the well-off disproportionately in dollar terms.
Wall Street is flat today, digesting a string of poor earnings releases. Overnight, EU markets fell by about -1%. Shanghai returned to trading yesterday with a +0.6% gain, Hong Kong with a +1.1% rise. Yesterday the ASX200 fell and the NZX50 rose.
The UST 10yr yield is rising in opening trade in New York, now just over 0.71% and a +6 bps gain. But it is only a rise at the long end. Their 2-10 curve is up now at +54 bps. Their 1-5 curve is also steeper at +22 bps, and their 3m-10yr curve is up at +63 bps. The Aussie Govt 10yr yield is up +9 bps at 0.95%. The China Govt 10yr is up +3 bps at 2.55%. And the NZ Govt 10 yr yield is following the trend, up +9 bps to 0.68%.
Gold is sharply lower today, down -US$22 to US$1,685/oz.
Oil prices are lower today. In the US, they are currently at just on US$23/bbl and a fall of -US$1.50. International oil prices are just on US$29/bbl. Although US crude oil stocks didn't expand as much as expected last week, downstream product stocks rose very sharply.
The Kiwi dollar is -¼c softer overnight, and is now at 60.2 USc. On the cross rates we are also lower at 93.8 AUc. Against the euro we are a little softer at 55.7 euro cents. These dips mean the TWI-5 is down to 66.3.
Bitcoin is +5.2% higher today, now up to US$9,272, and in New Zealand dollars it is above $15,000 for the first time since February. 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 ».
190 Comments
How can the US just cancel a debt with another country? Isn't that called default? The consequences of that could be extremely dire.
Trump looks like morphing from Captain America into Captain Panic and it is not even the end of the beginning. Carnage, utter carnage.
QE of 3 Trillion by USA
Trumps a lunatic what else can we expect this is why he has to go. Even if he claims this is in compensation for the economic damage from the Covid-19 and holds China accountable. The the rest of the world could ultimately seek to cancel any of their debt with the US, considering they are not making much effort to prevent the spread of the virus and are actually allowing it to mutate in to other virus strains which by their inaction that could prove to be even more deadly.
And what will the democrats offer if they are elected? I feel for the US. This might just be the point in history where they give the middle finger to the rest of the world and isolate themselves. Is that a world you want to live in? I doubt you do.
Any one would be better than Trump! There are currently 1,252,584 infected Americans with 73,797 dead, highest in the world and what is Trump doing about this; nothing! He shifts blame for his incompetence and tries to force states to reopen for business as usual.
He IS doing something! He's shutting down the Coronavirus task force. Hang on, no he's not, because it's "so popular".
Anyone but Trump is exactly right. Biden appears to be an absolute drop kick and part of the political establishment, virtually unelectable in this environment. But he might get in because Trump is so terrible.
When your choices are "bad" and "horrific", it's a terrible indictment of the systems used to get to power. I bet a lot of Republicans are longing for the days of Bush, which was also bad, but not quite horrific.
The problem is people get so fixated on Trump they lose sight of the bigger issue and put so much time and energy into getting rid of him by lobbying for Biden. They don't realise they're giving the other side of the same coin a mandate to f^ck them in the ass just like Trump has. I think most people can see past playing the identity politics game, as all it does is give breath to corrupt politics that we all suffer from.
Trump was voted in for a reason. That reason hasn't gone away, so if you want to get engaged in the US politics, don't let the anti-Trump narrative blind you to that fact.
America keep it's nose out of other people's business, pull all it's troops back inside it's own borders? Like that'd ever happen.
Curiously the US military is very quiet about the impact of COVID19, after the Navy debacle. And the military hierarchy did what they always do best when someone raises a concern that they try to ignore, but aren't allowed to. They squashed the whistle blower! I suspect there are major problems not being talked about.
The Navy brass has recommended Crozier be given back his command:
https://www.navytimes.com/news/your-navy/2020/05/05/fired-tr-commander-…
The issue that they may face is that no one is allowed to make Trump's team look bad and anyone who does will face revenge at some point.
dp
Mutate to other strains? Where did you hear this nonsense?
There has been a newer more virulent faster spreading strain develop that has come out of Italy and overtaken other slower spreading strains in the world over last 1-2 months.
Stop living under a rock, do you think that viruses don't alter and adapt? Perhaps you should read more, Oh wait you're a Trump support so I guess that's not your thing is it.
Here's an example of the global spread of the virus in picture form so hopefully that's easier for you to understand. Coronavirus Mutations Travel Worldwide: https://www.scientificamerican.com/article/virus-mutations-reveal-how-c…
Every person that catches the disease is another several million chances for mutation to happen, they are a random event, and inevitably eventually one mutation will be "successful".
There are already samples of covid-19 that have been sequenced with 30 mutations. https://nextstrain.org/ncov/global?m=div&s=Fujian/IM3520004T/2020
Several million is an underestimate. Roughly 10 million chances per breath or if you are sharing living space with an infected person 100,000,000,000 expelled virus particles per day. You don't need a high mutation rate for evolution to work when the numbers are that big.
Believe me mate, everyone has become virus experts in the last six weeks.
Yes I'm surprised how quickly people can do PhD's these days!
Speak to lil Mickey at the Herald.
He knows a guy.
Whilst there would be far reaching unforeseen consequences if the US does this.... have we seen any sign at all of any countries with major economies, indicating that they would take China's side in this spat? All I am seeing is increasing anti-CCP rhetoric . Even in Germany. I think it could be perhaps even more likely that many would follow the US and default on their debts to China too, cease assets and infrastructure that China has invested in etc. The narrative is already out there for them to do it.
And at what point , when we (the world) back China into a corner, does this deteriorate into war? There needs to be a solution, but is this helping?
We are already *in* trade war. We're are headed quickly into cold war. But I don't necessarily think that eventuates in hot war.
I think modern war will be cyber war. If you can hack a countries online infrastructure you can wipe out their wealth, turn off their electricity and cause total devastation and chaos without sending any soldiers. It's already happening all the time.
And let's not forget that America actually holds the keys to the internet. They could cut off any country any time. Other countries are well aware of this which is why Russia, for instance, took the entire internet offline briefly, to test their own separate internet on their own servers. Countries could maintain their own national internet easily enough, but they would become cut off from the global one... which would be devastating.
There is a case to say that given the expansion of Chinese Private debt post 2008 that a monetary war has been taking place for 12 years already.
US no longer holds a monopoly on global traffic. If they forced all of their own corporations operating globally to toe washingtons line they would have an impossible compliance monitoring task due to insufficient resources.
Trump will simply draw up a simple invoice on China for US$XX trillion and that can be “set off” in simple bookkeeping methodology. A simple solution by a simpleton perhaps?
And he would probably win a democratic mandate to do that too. I think a lot of people in America would love Trump to do exactly that. And not just in America either.
Germany's Bild newspaper already printed a 162 billion invoice for China.
What is China's response?
Dump their US debt on the market for cents onbthe dollar and destroy it?
Dp
Bugger knows? Bugger knows on any of it. The whole mess is getting more chaotic and volatile by the day.
I'm not trying to suggest I am in favour of any of it, of course. Just that there seems to be a lot of momentum building at a time of unprecedented debt, financial vulnerability, fear, uncertainty and political nationalism. I'm not an alarmist, cyber and currency warfare has being going on this whole time, then along comes trade war and on top of that shite pile... a frickin' pandemic.
Hard to wrap the head arround it and plan, that is forsure. Just guessing, ass covering and crossing my fingers.
Samez dude. Samez.
Many of his contractors from construction works of his will probably attest to his ability to use this solution. The guy has form in bilking.
We should send one to the States for the Spanish Flu that started in the US (inflation adjusted).
Real capital is grounded in the production of real things of real value, of course, and when it’s detached from all that, it’s no longer real capital. Money represents capital, and when the capital isn’t real, the money represents…nothing! And ceases to be real money. Just now, America is producing almost nothing except money, money in quantities that stupefy the imagination — trillions here, there, and everywhere. The trouble is that money is vanishing as fast as it’s being created. That’s because it’s based on promises to be paid back into existence that will never be kept, on top of prior promises to pay back money that were broken or are in the process of breaking. The net result is that money is actually disappearing faster than it can be created, even in vast quantities. Link
Oooh, scary. Except that every other country is doing it to a greater extent. The US is still the most powerful economy and not the most corrupt. The USD is still supreme. Would you store your emergency short term reserve of cash in Argentinian pesos, Turkish Lira, Russian Rubles, Euros, Yuan, Yen, Swiss franc, gold, GBP or Yuan instead?
The USD is still supreme
The fungible associate, the eurodollar is the world's reserve currency and dwarfs US based dollars in reach and numerical size. Moreover, many non-US SIB banks can create it out of thin air wholesale balance sheet capacity. The fact that they currently decline to do so is the source of our present global economic demise.
Exactly. US commentary tends to not be aware there are two USDs, domestic and international. As you say, they are fungible. If that fungibility were to break, then maybe the USD loses its reserve status. No other currency comes anywhere close.
Nonetheless, the eurodollar is independent and beyond the jurisdiction of US authorities and others for that matter. And many are content to let it remain that way regardless of the chaos it contributes to international financial affairs.
As I have pointed out elsewhere, China is a huge net food importer and extremely dependent on the West, particularly the US. It's hard to win a war when all your enemy has to do is... stop sending you food.
Classic Trump! If you’re in financial trouble, just default and blame it on your creditor. Like he did with Deutsche Bank, when he defaulted and then sued them for predatory lending practices (against a poor innocent with no financial acumen..!)
Anyway, it’s a strategically terrible idea. If China decide that US debt is basically worthless to them they could destroy the dollar. It would cause China a lot of pain too, but they are societally and psychologically far more resilient than Americans. China’s not very popular abroad right now, it’s true, but that wouldn’t stop the markets from reacting in panic to a massive sell-off of US debt.
I take it that by mentioning that the US may not pay China what it is owed, it increases interest rates amd becomes another method of inflation creation?
Even now they could vote him back in. Biden, though Goofy, might have a chance of winning where the more extreme Democratic candidates had no chance. I'm surprised that Trump has not joined Lincoln, Garfield, McKinley, Kennedy, Jackson, Roosevelt, Truman, Ford, Reagan yet.
It will of course be called a fine or compensation, for the mendacity and malevolence that China displayed in not telling the world the danger they had had created/unleashed for 4-6weeks after they knew for nefarious political reasons. Don't doubt that most of the world will get behind it, it will be politically popular to punish China, and is free money after all. But tit-for-tat would likely be China claiming all foreign owned assets in China, and then rest of world claiming chinese owned assets creating a huge disengagement and anger that will last generations.
International law is a servant of politicians, not the other way around - it is routinely ignored when inconvenient by every country, including China (south china sea grab, uigher genocide etc.)
US has the power to do this, and possibly the will (would certainly be electorally popular), even though would probably cause economic problems for generations to come with the erosion of trust in govt and difficulties they would have in borrowing and trade. USSR's repudiation of Tsarist debt caused it huge problems in trade for many decades.
US has the power to do this
Power to do what, without China's consent?
This actions lead to war
*Scratches head* Here's me thinking only the lender could "cancel" a debt. Oh well.
China has U.S bond. U.S can simply refuse to pay back on the grounds of Covid damages.
This is standard trumpanomics. His whole life has been built on using other peoples money and then walking away from the debt through bankruptcy or otherwise after the business has been run into the ground. He has actually said this is a legitimate and common way of doing business and has said it is the lenders fault for trusting him!!! Bankruptcy may be legitimate in some circumstances but he has used it as a staple way of operating his businesses in the past and now he has been transfering his methods to the USA Government in the form of unsustainable debt way before Covid.
It is both a financially and morally bankrupt method from a lowlife that is destitute of any positive character traits or economic education.
His immature and insane rantings have made the USA a complete joke with the rest of the world and this is just another example of his insanity. He is not educated nor does he comprehend one iota of macroeconomic policy nor the history of the effect of previous historic isolationist policies.
This guy is simply insane. I feel very sorry for him due to his mental state and hope enough US voters can see past their right wing nationalistic leanings in time for the elections. As someone has said previously, the next US election will be a national IQ test for the USA.
Just highlights the character of folk who would look at such an approach and deem it something to admire. A poor person on the benefit is abominable, but this, oh this, now this is an example to be admired, appointed leader, and defended vociferously!
What a strange wagon folk have hitched themselves to.
Speaking of hitch, what a time it would have been to have Christopher Hitchens alive. First for the initial Clinton (whom he fairly despised) vs. Trump (for whom you cannot imagine him holding any respect), then for the subsequent term and the current shambles.
Wars have started over less
The USA still has greatest firepower in the world. If China should venture forth militarily they can’t move south or west without first overcoming Taiwan, Japan, Sth Korea. One move on any of those and all hell will break loose and the man who has the biggest thumb on the biggest button is as unpredictable and unaccountable as any identity history could ever throw up. Everyone knows that and everyone worries about that.
Russia has a nuclear armed missile arsenal capable of extinguishing life on earth as we know it and an increasing number of them are hypersonic, which no country at this point can stop.
Yes and it is why all us little folk truly hope that the great leaders of the great powers have studied enough history to comprehend the meaning of pyrrhic!
Russia claims these are peacemakers
Aye there it is. What used to be called in Napoleonic times, and before and after, “the balance of power.”
Oh & ps The Colt 45 Peacemaker, the most popular hand gun in the wild west.
In fairness, Western European countries were pretty happy to host US troops and warheads after World War 2, as it provided a foil to Soviet expansionist plans (any attempt to invade would automatically lead to conflict with the USA). Unlike Ukraine, who had promises of assistance but no locally hosted military presence to be offended by Russia's recent invasion. Arguably a reason why the USSR was not unhappy with the idea of disarmament in Europe.
And tied up in that is Europe’s dependence on Russian energy and Russia’s dependence on that income. Hence why Germany soft pedals any anti Russian sentiment brewing in Brussels.
Germany needs pipeline oil and gas to underwrite their acclaimed manufacturing status. Reliance on easily disrupted seaborne supplies from elsewhere is unacceptable.
German Government will continue to support companies participating in Nord Stream 2
Russia is extending the same to China.
Russia knew from the get go that China will have to reposition herself towards Russia's energy (and not just oil) because neither tanker oil, nor LNG can compete with pipelines, especially the ones which are already built and operational, not to speak of a cluster of gigantic Russian processing plants being built right on China's threshold to provide all needs not only in crude and gas but in high value added products of hydrocarbons processing. You know, like Amur Gas Processing Plant. Link
Russia showed the world what an effective military force can do in Syria, while the US mocked arround.
The US war machine isn't what it is talked up to be.
If the US starts anything with China, Russia and others will join in. The US struggles with small wars and couldn't fight on several fronts.
I'm guessing they would struggle to find the dollars to fight a war at present and when you see the US spending hundreds of thousands to kill a handful of people. China has a billion troups to kill and more on the way.
Trump can only cancel the debt with China if the American military can crash China without a significant loss. It was very likely back in 1996 when Clinton sent the aircraft carrier to Taiwan Straight, but not in 2020. It is another political smoke grenade Trump threw out to save his re-election. He's been trying everything he can to cover up his incompetency and offload the blames to China since the COVID19 unleashed itself on American home soil. CCP and Xi are no saints in this whole COVID19 situation, but you cannot blame them for all the mess occurring in the US.
Agree, the US with it's spy capabilities knew more than most on what was coming and did not act. They are at fault.
The US war machine struggles with relatively small countries with limited arms. To take on China and most likely Russia at the same time would be a one sided battle.
The US intelligence community knew, as did their health experts. But it's not their call to act. All they can do is attempt to inform a nigh on impossible to inform executive branch and hope that it acts.
Still on their own ass.
Bitcoin... save us!
Like throwing some coins in the pokies on your way out of a bankrupt casino
Fun Fact, if you dollar costed averaging, starting at the worst possible time (when it was $20k), you'd be up 35% - probably about 45% in NZD (that is after 2.5 years of DCAing)
no doubt - you can make money at the pokies
but anyone who thinks bitcoin is the answer doesn't understand the question
There's 2 questions:
Q: How can I make a huge return in the shortest time possible risk be damned? A: pokies
Q: Where is consumer confidence in the markets, and therefore what's the best long term value store? A: Shifting from fiat (cash confidence eroding) to gold and bitcoin.
Silly analogy.
Expected real return of the pokies is strictly negative.
Expected real return of bitcoin investment is not strictly zero.
The point is - the discussion isn't about return, it's really about risk.
Which is more risky at the moment?
Fiat with QE, Trillions being poured into a dying market to prop it up, Madly inflated assets, economists with no clue whats happening?
Or a purely capitalist, independent easily transferable value store mechanism that's immune from the crazy?
I've moved all cash positions to bitcoin, after a frank discussion with my wife about our exposure in both markets and what we're prepared to lose. The decision process is more to do with retaining purchasing power heading into a depression than making an insane return. I have zero confidence we've changed the habits that caused GFC08. In fact we've exacerbated them.
Great post. I have done a similar thing. Its a small percentage of my total wealth, but I hope it will smooth the ride. I don't see bitcoin as a x1000 bet anymore, and I expect as its market cap grows eventually we will see less volatility. Once you take out the greed from the equation and understand the macro economic forces at play, I see this as a reasonable move.
Okay. So how are the distributions of the returns different?
They both truncate at -100%. Much more than that, I dunno. The distribution for pokie returns is straightforward to derive. Bitcoin, not so much.
I'm not saying that bitcoin isn't risky. I was saying that it was a silly analogy to compare pokies and bitcoin.
I think we're in agreement here. Was a response to the comment above about pokies.
The pokies is the opposite of an investment strategy.
Okay, but what if fiat ends up surviving another 20 years? Everyone was saying the exact same things in 08 about hyperinflation etc. Not saying it won't happen this time around, just saying we don't know and have no real way to probability-weight outcomes.
Switching all your eggs from one extremely risky basket to another extremely risky basket doesn't seem like a particularly good solution to me.
Fun fact - there was on guy on reddit last year by the name of lonewolfnz who lost all of his money through crypto.
Nah, on reddit he was kiwibitman80 or something similar..
hamandeggs
I agree. In a previous post Lonewolfnz referred to his wife saying that Bitcoin was a disaster. I am inclined to believe her.
I recall after lonewolfnz made a sneaky $US12,300 buy, the price of Bitcoin dropped two days in a row and on the third day it recovered about half the previous two days; he then posted smuggly that he had made $1400 while he slept. Sounds exactly like a gambler - remembers the wins, forgets the loses.
Playing (not investing in) Bitcoin is exactly like the pokies; as most know making a bigger bet to cover previous losses - which is what is suggested - usually ends in busting your bank and loses.
No one has yet explained the factors driving Bitcoin - other than herd mentality - so it really about gambling and luck.
Will only save the brave ones who have bitcoin - pity you could not do some more research before posting such comments ham. Ludite springs to mind.
Lol
Yes I'm sure those govts with fiat currencies will be so embarassed when fiat fails and you're waving your bitcoin at them...
NZ are now showing the extra slowing tide in front of Australia. Our stricter lockdown has prevented further big clusters to emerge. That Melbourne cluster is terrible from the meat works. It’s so important businesses and people maintain social distancing when we go to Level 2. I think when we open up Anzac border we should firstly choose those states that Are reporting next to 0 cases like Queensland and NSW.
I don't think that will happen unless the state borders are closed in Aus, which is pretty much impossible.
The State borders are closed
When is closed not closed though? Closed with these exceptions... border towns OK, essential workers OK, people that get approved by some person OK... then there are ones that aren't closed at all (Victoria/NSW/ACT) which could mean essential workers or border towns are spreading the virus. Is everyone crossing those borders required to be in a managed isolation facility like NZ does now?
Different levels of isolation going on across all those borders will make it near unworkable and liable to cause re-infections...
I simpler response would of been "I stand corrected".
State borders are closed. You thought otherwise.
I am happy to admit when I am wrong, however my point is that NZ border closure requires all people coming in to be in a managed isolation facility for 14 days (although this somehow doesn't apply to billionaires on private jets?). The same is not required of interstate border movements in Australia as, far as I can find out.
I would consider NZ closed, but I would not consider Queensland closed as it only requires self isolation (which is often broken, as we know) and makes heaps of people exempt. Then there is the difference in normal isolation measures as well... read about them here: https://www.health.qld.gov.au/system-governance/legislation/cho-public-…. NZ looks like it has all it's clusters of infection known, however Australia appear to still be discovering theirs. So the "COVID-19 hotspots" in the Queensland regs may cause unknown outbreaks in Queensland.
Of course all of this is a moving target still, we would need to have consistency across jurisdictions before opening, else there will be a good chance people will fall through the cracks and new outbreaks will be possible.
NSW are reporting new cases every day, you mean WA, NT, SA, Queensland, they are the ones with no new cases and we could open a travel bubble with them as long as they keep there borders to NSW and VIV closed until they get down to the same levels as the other states and NZ
https://www.smh.com.au/national/covid-19-data-centre-coronavirus-by-the…
Doing provincial or (Oz) state lockdowns, with strict improvised border controls does seem sensible to get NZ running again. Only Auckland is still coming up with new cases, most provinces in NZ have seen no new cases for 2-5 weeks.
Some ugly but telling stats from overseas. Were going to be ok, we have the most resilient sector in the entire world. Houses.
Don't forget tourism!!
US is asking for trouble by deciding it can cancel debt. It would likely devastate it's own and global financial systems as it's bonds in many ways serve as their base (how many times do you hear things compared to the US T-Bills rate etc). But maybe it's a good thing for the world to stop using the US as it's defacto currency... What replaces it though should be an international currency pegged to resource and energy. I just don't think it will happen yet, countries are still to insular to think about such global issues. We have too many alpha males strutting like peacocks who could never cede power.
An international currency pegged to resource and energy?
Well, that sounds like an utterly infeasible disaster in the making.
Great idea. Whoever invents Nuclear fusion ends up owning the whole world.
It does, I agree. Hence why cans will be kicked further and further until we realise we need a monetary system designed for a resource limited planet.
"an international currency pegged to resource and energy.."
This is what we currently have
Except we have busy adding in LEVERAGE for the last 40 years in the form of debt (just adding IOUs for the future)
Take away the leverage, and you wipe untold "wealth" claims / (financialized) income streams
The pie is actually way too small to support the global economy & supply chains without this faked income
Agree, rampant future draw down of resources all over the place. We ain't escaping this planet any time soon (well not in the numbers we need), so we need to create a system which takes into account current real price of resource usage, not delude ourselves that future generations resource use can be spent now without consequence. We don't have that right now...
Something that might be interesting to look at... what % of the NZ workforce is currently paid by or supported by the govt? Take public sector workforce, add beneficiaries, add those on wage subsidy. I would hazard a guess that it would be 80%+
How impossible does that become to disentangle if that were the case? If the public sector is that large that means the private is ancillary to it, even dependant upon the public sector to have enough turn around to be profitable. Obviously a bloated public service is inefficient and wasteful of resources. But then again, if the purpose of the economy is simply to drive consumption then the public service is basically like the UBI people always talk of except only to a certain subset of the population.
Reminds me of the age old issue Switzerland has with its military. There are always calls to cut it back, that the service is unnecessary and hugely costly. But because of its size so many businesses and structures are dependant on business with it. I guess the cure would have to be a 'planned retreat.'
All news / data are bad but still Barfoot machinery is active again - Trying to cash on fear of FHB of loosing out - FOMO.
Got an email from Barfoot with subject line : Property Update - Auckland Property Market Bruised But Stable
Really........BRUISED.....but......STABLE
How do this people get away with such false propoganda/narrative.
Me and my partner were laughing this morning when our core logic valuation for this week was 969K up from 950k we brought our house last June for 840k 60k under RV we got a good deal. but surely it has to be trending down in value not up.
Rateable values are unfortunately just a figure the councils come up with to continually justify an increase in revenue. Ours has been over valued for about 18 years now. Also the land value and house value are so out of whack its a joke, but they get a much bigger % of rates from the land so they rate that about 50% more than it is worth and the house about 50% less. Its pretty funny that they don't think people understand what they are doing but then councils have been the butt of jokes due to their ineptitude for as long as history devised them so......sad.
Need to stall for time to offload massive debts on to younger buyers in order to live comfortably now?
Losing
'Meanwhile, India reported its monthly PMI survey…and services printed at 5.4, down from 49.3. That is not a misprint: 5.4, or half what we saw in the weakest Eurozone member readings for April. Confidence-building it isn’t.'
https://www.zerohedge.com/markets/rabo-voluntary-lockdowns-are-worse-of…
Jesus H Christ.
I find it strange that whenever stock markets are going gangbusters the narrative is "wow look how good OUR economy is, this is great for everyone!".
Yet the minute they start falling we seem to hear how hard it is on the wealthy cause they own all the shares.
I find it strange that whenever stock markets are going gangbusters the narrative is "wow look how good OUR economy is, this is great for everyone!".
Currently only economy is only monetary and fiscal measures by the government. Bigger the dole, money thrown by government bigger the jump in stock market.
Economy is no more Demand and Supply.
Yes there are a lot of myths around the stock markets. One of the biggest is that if you buy shares on the stock market you are investing in a company. Not true. You are investing in the stock market. The company is unlikely to benefit directly from your buying the shares. The only way a company benefits is when they offer more shares which you buy, or if you participate in an IPO. Additionally the conventional wisdom is to use the stock market valuation as a measure of a company's worth, but so many companies which produce absolutely nothing, and bugger all profit are valued by this method at $billions. Rubbish really.
I was just saying the same thing about the stock market and "ïnvestors" to my son yesterday.
Anyone who buys into a stock at any time other than an IPO or share issue event is just gambling on the basis that there may be a bigger fool, or that the company may continue to operate and pay out a dividend over time. Both of those events are likely to turn bad at the same time, like now for instance.
And to compound the gambling there are CDOs and derivatives of all sorts on which you can leverage up your potential losses and many people do, this is in no way investing, it is pure gambling
If there wasn't a secondary market, it would be significantly harder and more expensive for companies to raise money - how much would you spend on an IPO or capital raising knowing that you wouldn't be able to cash out, or that it would be expensive and take a long time to find a buyer?
A functioning stock market is all part of the picture and supports capital raising. When you buy shares, you increase liquidity and contribute to the market, even if you're not directly supporting a company (although I do prefer to buy shares direct from companies when I get the opportunity)
you must be glad you didnt invest in apple, Microsoft, amazon, facebook, google when they were all just rubbish companies that didnt produce anything. sometimes a company comes along that can revolutionise the way we live and interact and it can take years and years for them to grow in scale and profits to justify their valuation but when they d if you are in early you are rewarded.
telsa is a classic example now, valuation does not match what is happening, share price is crazy, they may succeed they may not but they have changed the world now mainstream manufactures are all moving to electric cars.
if they do succeed those that brought shares early will be well rewarded, at the moment even elon musk tweeted the share price is too high
My point, was that yes if you had been sufficiently prescient and an initial investor you would have done very well, and rightly so, because you enabled the creation of this new entity. BUT anyone else that bought in later by just buying the Dip and thinking they were very clever were just gambling outside the actual entity, not adding any value at all to the entity, except in a side manner possibly by raising the share price so that the company could sell more shares itself and build itself up further down the track.
I hate telsa with a passion for some reason. I think maybe its just the fanfare that goes along with them but every man and his dog is buying shares in a company that is relying on someone not making a better battery. I also think nissan has more potential to become the next toyota of electric cars. Samsung is testing electrolight technology in batteries and i for one would much rather bet on them. If someone could teach me how to short telsa i would i think its the biggest scam in modern day history.
Tesla has been the most shorted stock in the US for some time. Even higher than Apple which has a market cap 10x bigger. So you're not alone in thinking that way. Short sellers have also lost over 12 Billion this year betting against Tesla. I don't recommend it.
On futures: The market can stay irrational longer than you can stay solvent.
Musk is a bit of a marketing master mind. Look at the cult following he gets for both SpaceX, Tesla and Boring Co. Hats, t-shirts, flamethrowers!
MS and Apple actually produced lots, although I don't agree with their current valuation. As to the others, their revenue is from advertising, but what do they actually produce? They are however enablers on the backs of MS and Apple and other tech hardware companies.
Companies, borrow money (e.g. by issuing bonds to the public) to buy back their own shares. Apple, Starbucks IG are just few examples who have raised billions of dollars to buy their own share (the narrative is that their shares are currently under priced, so from a corporate finance perspective, it makes sense to replace this most expensive financing source with cheaper debt). So the companies actually manage their share prices. It is ludicrous that share buy backs are allowed.
if you know apple you will know they have all there cash offshore 230 billion and they dont want to bring it back because of US tax laws, so to pass on there profits to there shareholders they have borrowed money in the US
https://www.forbes.com/sites/kellyphillipserb/2016/08/17/apple-ceo-says…
Yes. If it had anything to do with earnings per share you would see the Dow at around 16000-18000, NZX about 7000-8000. Total disconnect at present. I'm 90% cash and waiting......
XX12 Musk and Daddy can talk their wealth up and down and out into the stratosphere.
Shorting, spouting and worth every penny...sorry cent, sorry, electric Plug.
Even talked himself out of Billions.....Duh.
When he plugs himself in he is electrifying...all in the name of the Futures. Never made a profit....like most of America..(General Motors....now demoted to Privatised spondulix so called.......equity USA style.)..
Can print and be damned, (Like a Trump)...unlike us Forgery is the way of the future......Gotit yet.
Trillions are printed into life. Then when they ask to be forgiven....they print some more....World is nuts...but mainly in America, where you can Swap a heap of old rubbish Picked by Pickers...and flog it to viewers. ...on the TV....for a profit...
We have a fantastic frost out the window, going to be an amazing day. Most of the rain we had has gone nowhere and back to square one again.
Talked to a local farmer he normally has 1200 cattle but he's down to 600 and half those are all on feed. he has a top farm on really heavy soils, it's worse for the rest if us.
You can go on facebook to the Hawkes bay drought page and see some photos. hopefully this link works.
https://scontent-syd2-1.xx.fbcdn.net/v/t1.0-9/95230403_3540633192630639…
https://scontent-syd2-1.xx.fbcdn.net/v/t1.0-9/95430688_1015943398601894…
Wow, those photos are shocking. Yes, that is a drought. I see by the moisture map above Hawkes bay is still very dry. We got about 100mm over the last few days, even had ponding. Cold this morning but no frost. I'll count my blessings today.
Damn, made the mistake of clicking on your link and it worked. That's really next level dry for NZ.
and taken in the last few days. Nth Canterbury is okay this year but they just got out of a dry period that lasted for nearly 3 years.
Now you can see what I mean when I say, we are not coming out of this after 10mm of rain. The place is dust.
I'm on the tractor planting oats, not expecting much but the seed is cheap so I'm giving it ago.
It looks like a low might form off the East Coast and feed some rain into Hawkes Bay next week. Fingers crossed.
Government has spent 17 million so far on drought relief package - farmers backbone of the country and well looked after each year.
Small change compared to Covid relief
where did that all go? All I have seen is some money available for consultancy
Drought relief packages include rural urban communities/towns.
The Government package includes:
$10 million to respond to immediate needs such as delivering water for consumption, sanitation, wastewater systems, stock welfare and horticulture
$421,000 to extend the reach of Rural Assistance Payments – which can be used to buy water
$2 million to support farmers and growers following today’s large-scale drought classification across the North Island, parts of the South Island and the Chathams
Government support for rural sector adverse events over the past few months
Northland - $80,000 for Rural Support Trusts
Gisborne, Manawatu, Rangitikei, and Tararua districts - $150,000 for Rural Support Trusts
Waikato and South Auckland - $80,000 for Rural Support Trusts
The Government provided $200,000 to Southland after flooding in early February for a mayoral relief fund and Rural Support Trusts
$500,000 of Taskforce Green support was provided to Southland post floods
Rural Support Trusts and industry groups provide:
advice and help farmers deal with stock and feed issues
one-to-one support for farmers to ensure wellbeing and that people are looking after each other
to run events so farmers can come together
The declaration of adverse events for the above regions has also allowed for:
IRD to provide tax relief to those who need it
Rural assistance payments to farmers who can’t meet essential living needs
That must be so disheartening. Just unbelievable. Very sad.
Really sad to see :( It had been wonderful to see the rain falling over the last week, but to see it not helping where it's been most needed is terrible.
Must be something in this climate change shite after all, that the boomers diss in such huge numbers compared to the rest.
Well, nobody expected the dire consequences to arrive already!
Should Government now not pay for earlier having asked them to clear schedules and hold capacity over March and April?
The terse response came after a letter, obtained by Stuff, revealed that the Ministry was having second thoughts about compensating private hospitals for the costs they'd incurred during the level 4 lockdown.
https://i.stuff.co.nz/national/health/coronavirus/300005587/coronavirus…
This goes to the now condition of the health response, a fact in getting out of lockdowns. It now seems there will be no tracing app. Means interest in condition and now performance of contract tracing & testing process more so.
https://foreignpolicy.com/2020/04/29/federal-reserve-global-economy-cor…
"Economic history suggests that deflation, not inflation, is by far the more likely—and in some ways the more dangerous—destination of the Fed’s current trajectory without yet more unprecedented action."
Some of you should read a little bit of history. First World War, USA had to be forced in. 2nd World War, their voters would not let them in until Pearl Harbour. The foreign military involvement of any country in other's affairs is a direct reflection of the political power of their Industrial Military Complex. At present, they run USA. However, that can change, easily enough. History is packed full of nations not paying each other. NZ Dairy Board became NZ distributor for Lada motor vehicles from Russia, as that was the only means of paying for their milk powder and butter.
The big issue is rising interest rates, which will not happen, as far more powerful people owe, than are owed!
Re the Military Industrial Complex; "However, that can change, easily enough.". Disagree where the US is concerned. President Eisenhower warned about it's power in his last speech. And dig a little under the surface and there is the suggestion that they have manipulated US politics for decades.
Certainly an intriguing environment in the USA. Witness the recent organised rabble rousing in the states to generate anti-lockdown protests, with the online efforts targeting a number of states being traced back to one astroturfer / rent-a-rabble agency that had previously provided the same services around anti gun control and anti climate change rabble rousing. Looking increasingly like doyens of industry protesting for the right to force low-paid workers back to the workplace, including through trying to eliminate federal welfare.
There was no inflation, let alone any real risk of a runaway situation.
Going back to those early Open Market Operations during the Great Contraction, only Roy Young, Governor of the Boston branch (they were called governors back then rather than presidents) seemed to have appreciated the singular value of a reserve bank credit – which wasn’t much.
As Milton Friedman and Anna Schwartz noted in their 1963 book A Monetary History, while glossing over his statement, Young had been the lone dissenter (10 to 1) among the Committee Members voting for the 1932 authorizations for those big Open Market Operations.
…[Young] questioned whether purchases of governments which piled up reserves in the centers would result in the distribution of these funds to other parts of the country. He was skeptical of getting cooperation of the banks without which success appeared difficult…He cited the experience of 1931 as an indication of the futility of government purchases.
While that was true during the deflationary collapse, it also proved to be true during the recovery. As much as the level of bank reserves had been raised in between, without the cooperation of the banking system itself there was no chance of those “excess” reserves being used for anything other than self-written liquidity insurance.
They are otherwise inert.
It had been a paradigm shift, and a big one. As Friedman and Schwartz later note on the folly of raising the reserve requirement, banks weren’t going to just go back and act like it was 1925 again. They’d learned a valuable lesson, those who survived, as the system had itself destroyed so much credit and monetary capacity unrelated to the Fed. In the thirties, what was destroyed had been depository (the multiplier); in the 2010’s, it was wholesale (balance sheet capacity).
And a big part of that was understanding on a visceral level how you couldn’t count on the central bank. Better to build up a huge liquidity cushion on your own and hunker down.Link
"Better to build up a huge liquidity cushion on your own and hunker" and I'll suggest the same applies at the household level as well!
Can anyone explain to me how monetary policy still matters now in an environment where we probably have dropped income to households and companies of 20% or more? How do the holes in household and company balance sheets get filled without defaults?
Great article
Odd headline as the story contradicts it.
“The scheme did not have negative effects on employment,” said Anthony Painter, chief research and impact officer at the Royal Society for the encouragement of Arts, Manufactures and Commerce, a U.K. charity. “If anything, it was positive -- an important rebuke to those who think it would lead to more people being lazy.”
2% more of those in the group getting the UBI worked than those in the control group.
Kate but further down the article goes on to say, in relation to that 2% increase The results in 2018 are somewhat skewed by a model introduced by the government penalizing jobless people who didn’t actively seeking work.
Well, from personal experience, when I'm happy I have more energy, and motivation.
""a negative income tax, whereby low income earners would stop paying taxes to the government and instead receive a payment"". The Finns seem to be more imaginative than us. Better school system too. Would -ve income tax work? What would stop me employing my wife and her employing me - we do tend to work for one another anyway but getting paid by the govt for making her a cup of tea sounds good. So a good idea may sink under a weight of bureaucracy. Get round it by limiting it to GST paying employers?
Fascinating school system. From what I've read of it in the past seems to be grounded in good science. E.g. 45 minute classes with physical activity between each, based on the attention span of children. Not unduly overestimating the value of homework to learn. Producing results.
My sons school teacher rang me one day. Son was about 9. Male teacher complained he was fooling around with his chair and wouldnt stop and concentrate. I was a bit taken aback. It seemed a bit ridiculous. Anyway I said to this young fellow, make him run around the field 4 times then he will be right. The teacher scoffed and basically hung up. I pretty much gave up on teachers at that point.
Son has his own business, employs a few people. Earns a good wicket. And he is a great dad. School was centred around the girls. Boys didnt stand a chance. He never went further than year 12. Scraped through ncea I think. He was an active normal boy that wanted to be doing stuff. School is torture for a lot of kids. I liked it, it wasnt til I was a parent that I understood how poorly designed it is for a childs mind.
Spot on advice you gave to the teacher. I agree. I used to get in trouble constantly for being distracted and bored in school too. Was probably just lucky enough to have parents who would spend a lot of time reading with me from interesting, competent writers (the likes of CS Lewis) from a very young age.
Yep, actually it was the teachers response that got me a bit agitated. He had come to me for help. But when I told him what would work he dismissed me like the classroom dunce. Teachers are always right. You cannot argue with most of them. Their opinion is the only opinion that matters. Obviously it is a carry over from having to be iron clad on their answers to children, as children are great at pulling anything apart but many teachers take this into every aspect of their lives. I dont know if anyone else has noticed this.I would suggest schools can be a very negative place because of it.
Understandable.
I had some brilliant teachers across the years (including a nuclear physicist) and some others you could not question. It was never the brighter and more secure ones who would not entertain questioning.
The teachers have their own terrible dealings with parents too, so it's possible you got that fellow on a bad day too. I have a teacher friend who's a scholar and a gentlewoman...but sheesh, working in a private school in Auckland you'd be stunned at some of the ridiculous, entitled and downright stupid requests and statements she gets from her pupils' parents. I wouldn't necessarily want to ask her anything immediately after she's dealt with a string of silly Parnell/Remuera know-betters.
Yes I have family members who are teachers (and doing it for decades) - they tell me kids of recent years are little s#$%! Perhaps its technology, who knows. But they think levels of ADHD etc is far worse these days and as you say, parents think little Johhny can do no wrong.
One is a high school teacher and swears the kids are becoming less capable (shes been teaching that level for 40 years). Many can't read properly but think they're going to university.
We already have a version of this. Very low base tax rate, Working for families, accommodation supplement, Winter energy payments.........
US beef fragility by Temple Grandin
https://www.forbes.com/sites/templegrandin/2020/05/03/temple-grandin-bi…
AJ - do you really exist? Nobody can read so much. But thanks for this link that I'd never have seen it otherwise. The concept "Big is fragile" - that is worth contemplation. I now realise it is the underpinning of my comments against the proposed Light Rail in Auckland.
He is really three people all sharing the same name, all in different parts of the world so they can read the news 24/7.
But really he/they is a wonderful host and has a great little piece of paradise there in the Hawkes Bay. Tough to see the weather taking a big bite out of his business. Question I'd like to see him answer one day is what sort of buffer to banks build into their loans to farmers for the effect of bad years? ON what calculation have farmers traditionally built their own buffer?
From my experience the buffer is called the overdraft. It's there for the bad years and paid back in the good. Not many farmers I know, that have debt, carry any significant cash surplus. And the ones who have a cash surplus in bad years, tend to by more land - gotta stay in debt, keep the tax bill down.
Temple has a good point. The meat plants have got too big. Which creates fragility. I supply two small outfits. They do well against the big boys. It is important we keep supporting these small processing facilities. We need a range of outlets.
670 000 Americans die of heart disease every year. Just saying................
And that is sooooooo catchy
Meaningless yet bitchy reply. Well done !
And a lot more will die of heart disease if they can't access their healthcare system because it's overwhelmed with a novel virus too. Not to mention having heart disease makes you more likely to die from the virus.
And yet at all costs those in power resist giving them access to affordable healthcare, lest it impact shareholder returns.
Yes but you wouldn't want the McDonalds or CocaCola share prices to fall via reduced consumption (at least that is how capitalism appears to be working).
Obesity vs wealth.
Pandemic vs wealth.
How Governments Broke the Oil Market
https://mises.org/wire/how-governments-broke-oil-market
It will likely take “several years before the output lost due to the virus outbreak is fully regained.”
https://wolfstreet.com/2020/05/06/service-sector-falls-off-cliff-in-the…
The Spanish Flu was followed by the Roaring 20s. Hoping we get a bit of that.
Why stop there? Followed rapidly by the great depression of the late twenties and most of the thirties, that in turn followed by the 2nd world war. Can. hardly. wait.
You might call it crackpot stuff - but there's a theory about this called "The 4th Turning". It's an 80-90 year historical cycle theory. Regardless of what you believe makes for an interesting read https://en.wikipedia.org/wiki/Strauss–Howe_generational_theory
Yes but that was after WW1. This time we've had the boom before the pandemic.
Dalio thinks were more like the 1930-1940's now. Low interest rates, low growth. Risk of another world power challenging another. Reset of the debt system, possibly a new Bretton Woods type situation.
Didnt we have Mr Ford after that. Not sure of timing. But as well as the 'automobile' having a great influence over mobility and getting goods to market, there was Mr Ford paying his staff enough to buy his cars. I think this line of thought has wound down. And the banks became Ford. Now their ability to make us rich is gone too. So what is next?
Didn't Mr Ford have a saying about banks...will see if I can find it...
"It is well enough that people of our nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning'.
100 years later, could it be any more applicable?!
Companies owned by foreign governments have been excluded from Australia's JobKeeper subsidy scheme that provides funds to businesses to pay workers.
Sounds sensible to me.
NZ often does things which makes my skin crawl.
Trump 2020....
Anyone who wants that job must be more than a slight bit nuts and locked up.
Same goes here, hospital pass!!!
Thought this was interesting. Take a look at the directions and rates of US National Debt and the Federal Tax Revenue.
Not sure of the accuracy of these figures/rates, but nothing else shows the trend and problem/s we have coming up.
There is no way in hell anyone can even dream of sugar coating this mess we are in
But it hasn't just crept up on us Boatman! It was about 2013 when I started thinking, we're heading for a cliff again, by 2015 I was convinced and started raising flags...but you just got shot down as a 'doom gloom merchant with a bad attitude'. By 2017 I thought most of NZ had gone mad. And all the stress and mental health issues was just a symptom of people knowing that the lifestyle we were trying to push wasn't sustainable.
COVID is just the pin that has pricked the bubble which was becoming very fragile.
Exactly the same for me IO! I have been continuously shocked as to how long it's taken and how much the bubble inflated before the shock has come. Who knows though, they may just inflate it more as a "way out" of the mess.
Im dgm, from around the same time frames. It's funny cause I don't like the echo chamber effect of reading your and others posts on here but I just can't follow the "others" logic. And what's more I'm not sure I want to be correct.
Might be the canary in the coal mine. The model we've been running isn't sustainable in my opinion - but if you want a different type of echo chamber go over to a property investment site and see the rhetoric going on there.
I don't like having to take the stance I have, but everyone appears to be deluded by their own self interest (all the way from Mum and Dad property investors, to the government, to the financial markets and the central banks themselves) and can't see the train they're riding on is/has been heading for a cliff. Scary when you can see the system is broken but all people care about is buying their next rental or the CV of their home.
I'd have been better off not knowing, with my head in the sand I would not have been paralysed in business decisions. Probably could have made a fortune in that time. Mind you, what is a fortune and what how would I secure it? So really I am quite happy I'm in a flexible place where I can respond quickly to changes that are coming.
And now NZX50 back to value where it was 5 months ago?????? KaBOOM
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