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American confidence falls as do retail sales; Fed and ECB extend programs; China targets fury at HSBC; China online debt in focus; UST 10yr yield at 0.58%; oil lower and gold at new record high; NZ$1 = 66.6 USc; TWI-5 = 69.9

American confidence falls as do retail sales; Fed and ECB extend programs; China targets fury at HSBC; China online debt in focus; UST 10yr yield at 0.58%; oil lower and gold at new record high; NZ$1 = 66.6 USc; TWI-5 = 69.9

Here's our summary of key economic events overnight that affect New Zealand, with news the weak economic news just isn't going away.

American retail sales rose +1.1% last week from the prior week, but compared to the same week a year ago they are dragging, now down -8.7% and worse than the prior week's -7.5% year-on-year fall.

That would be because consumer confidence fell sharply in July, and the fall was more than expected. They are less optimistic about the short-term outlook, and worried about the labour market.

Wall Street is unable to book any gains today, and is down marginally in afternoon trade. Overnight, European markets were also mixed. Yesterday, Shanghai and Hong Kong both rose +0.7% but Tokyo slipped -0.3%. The ASX200 also fell, by -0.4% but the NZX50 ended the day little-changed.

The US Fed is meeting and the results of these discussions won't we released until tomorrow our time. But they have extended their emergency loan facilities due to expire in September until December.

In Congress, partisan disputes look like there will be no action on the two relief plans proposed. In fact, the Republican plan may not even be supported by a large minority in their own party. There is little legislative time before existing support programs expire.

In Canada, China is making every effort to get a Huawei daughter released over money laundering charges. And that may include sacrificing HSBC in Hong Kong as it looks for scapegoats.

And in China, their central bank is turning its attention to the partnerships between banks and online platforms, a channel that has driven explosive consumer lending growth recently - and has the potential of major systemic risks.

In Europe, they have extended their ban on bank dividends through to the end of 2020.

New data from airlines shows just how locked-down some economies are. Australia reported the world's largest fall in domestic passenger traffic, and international passenger flights were -97% lower globally in June compared to the same month in 2019.

The latest compilation of COVID-19 data is here. The global tally is 16,540,000 and that is up +209,000 since this time yesterday. Global deaths reported now exceed 655,000 (+5,000).

A quarter of all reported cases globally are in the US, which is up +62,900 from this time yesterday to 4,461,100. US deaths are now just over 151,000 and a death rate of 456/mln (+3/mln). However, the number of active infections in the US fell marginally yesterday to 2,145,700.

China is fighting new coronavirus outbreaks on nine north east cities. And the flooding in central and southern China is intensifying after more heavy rain.

In Australia, there have now been 15,304 cases reported, another +369 since this time yesterday, and still concentrated in Victoria but also small pockets in Sydney's suburbs. Their death count is up to 167 (+6). Their recovery rate has slipped back further to under 62%. There are now 5706 active cases in Australia (+243) and almost all are community transfer.

The UST 10yr yield is weaker today and down -3 bps to 0.58%. Their 2-10 curve is unchanged at +44 bps. Their 1-5 curve is also little-changed at +13 bps, and their 3m-10yr curve is marginally flatter at just under +49 bps. The Aussie Govt 10yr yield is down -2 bps at 0.88%. The China Govt 10yr is going the other way, up +3 bps at 2.94%. The NZ Govt 10 yr yield is also up and now at 0.85% after a +2 bps rise.

The gold price has pushed on up to a new all-time high of US$1,954/oz and another gain of +US$14/oz for the day. And gold consumption in China shrank -38% in the first half of the year due to the pandemic and high and rising prices.

Oil prices are lower today by about -US$1. They are just above US$40.50/bbl in the US and the international price is just on US$43/bbl.

And the Kiwi dollar will also start today softer against all-comers. Against the US dollar we are now at 66.6 USc. Against the Australian dollar we are down at 92.9 AUc. Against the euro we are at 56.8 euro cents. That means our TWI-5 has slipped to 69.9 but still in the general range we have been in all year.

The bitcoin price has risen again, up another +1.1% since this time yesterday to US$10,974. 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 ».

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The CCP has expressed considerable ire at Huawei being shut out of 5G infrastructure across the world as many countries push back based on suspicions of them using their access to data networks for spying, and those suspicions being supported by the identification of extra circuitry on computer boards supplied by them (Huawei). During the debate over this, it has also been identified that all business's in China must comply with directions from their state security apparatii, which suggests that if Huawei was directed to install spying circuitry then they would have no choice (that assumes that Huawei, in the first instance are an innocent party). Then for the CCP to be prepared to go to such lengths to secure the release of the daughter of Huawei's founder from Canadian custody tends to add merit to the West's suspicions, and that she knows some detail behind what is going on. Should the Canadian or American security services get to talk to her, and if she does start to spill, then her welcome home may be a little chillier than she would hope. For that matter it may already be, if they suspect that she has already been compromised.


Only the most naïve would believe the CCP will not use Huawei for their own gain.

NZ response to China that will not sell soul for economy.

The blatant arrest of a Chinese telecoms executive in Canada on behalf of the US is shrouded in obscure legalistic claims. But the bottom line is clear; the US is abusing the legal process to pursue lawless economic interests. Link


So says Moscow/RT !! Zero cred.

Prove US sanctions on Iran are approved by the UN and thus conform to international law.

I reckon that sometimes and quite regularly RT is more truthful than either the NY Times or the Wash. Post. And then there's CNN !

Like all the best propaganda outlets, RT mostly deals in facts.
It's just *which* facts they choose to report, and what spin they put on them...

Interesting link Audaxes, from a site financed by the Russian Union? Genuinely neutral and unbiased?

You can ask the same of much of the press in the West.

The Butter Battle book comes to mind.... Notice DC rejects by source, rather than by content. Doesn't matter who says what; it matters what is truth (there were truths in Mein Kanpf). Boils down to dispassionate investigation - and there's precious little of that.

Yes, that is why I posed my comment that way. While Putin is an autocrat, that alone does not put Russian sources into discredit, but how does one establish which source is accurate? The article has a clear bias.

The Canadian holding of this individual would be done at the direction of their Court system, and as we share similar ideals, I am assuming that the Americans would have had to present credible evidence to support their request to hold her? But then they also invaded Iraq the last time based on 'credible evidence' of the presence of WMD. None of which were found in the aftermath. One of the very few things I agreed with Helen Clark on.

One of the WMD found was 1080. A highly toxic chemical used to poison water supplies as a WMD, meanwhile in NZ it somehow becomes safe to use when it is dropped via air all over the country by the ton and finding it's way into the water supply.
The Nazis experimented with 1080 to use as a weapon but found that it was to dangerous for the soldiers to use as they were also poisoned despite safety procedures.

How many humans have died due to 1080 poisoning in New Zealand in the last year? I can't recall hearing about any, although you're probably right that this could all be a massive cover up by our nefarious government!

1080 is classed as a hazardous substance, toxic by inhalation, to the skin and if swallowed. It has been blamed for illnesses like cancer and hormonal disruption, although authorities say there is no evidence human health has been harmed by its normal use.

However, research has shown 1080 can cause deformities in animals foetuses.

After over 60 years of 1080 use in NZ there have been no studies on community health following 1080 drops but the Govt claims it is safe despite the international studies showing otherwise.
Even a basic study on the long term effects on those who have been involved in handling 1080 during the drop procces has not been conducted
For decades the Govt stated that DDT was safe despite the compelling evidence against that view.
This doco is an excellent example of the Govt stating that a chemical is safe when it was not. We may as well swap out DDT for 1080.
Let us spray. TV3 when they reported real news as they were self funded.

Are you against all pest poisons Kez?

Not at all mate. I use them myself but targeted and backed up with physical action i.e. I will use poison to stop an infestation and back it up with a mild detergent mixture that cuts off an eggs ability to resperate and it dies also manual control.
I'm an ex apple orchardist, I've have spent weeks on tractors spraying poisons because poison needed to be applied if their were pests present or not, just spray. I studied horticulture at Massey in the early days of research into counting / trapping pests to ensure that spray was not needlessly applied, it took 10 years for that to filter down to the orchards.
Applying 1080 then doing nothing untill the given population becomes unmanageable in two to three years is mindless in my view. It creates a boom bust cycle that enables the faster breeding species to flourish inhibiting the slower breeding species ability to recover.
Are you based in the Sth doing pest control?

Yea orchards spray a hell of a lot of stuff don't they. Not good for the bees that forage around. Nah I'm involved in planting/riparian work. Just find it interesting to see the pro vs anti toxin debates and the different reasons for/against.

Over 60 years of 1080 use and the native bird life still in major decline, iif it was doing any good we would have a hell of a lot more birds.

"The main clinical presentation of 1080 poisoning is metabolic acidosis, a symptom also observed in many disease states including heart failure, alcohol poisoning, several types of cancer, and malnutrition, among others (Seifter, 2012). Given the overlap of symptoms with many common diseases and no identified biomarker, 1080 poisoning is extremely difficult for medical professionals to correctly diagnose. Even if a correct diagnosis is made, no known antidote exists for 1080, and current treatment protocols consist only of general supportive measures to maintain airway, breathing, and circulation (Rippe & Irwin, 2008)."

No, I'm not a rabid anti-1080 zealot but it interested me to know that if someone had been poisoned it would be easy/natural to misdiagnose.

Fluoroacetate itself is not toxic, but must undergo a “lethal synthesis” (Peters, 1952) and be converted to fluorocitrate to elicit its effects. Since fluoroacetate is stereochemically similar to acetic acid, it is able to interact with the enzymes in the citric acid cycle where it is converted to fluoroacetyl-CoA and then enters the citric acid cycle (Savarie, 1984). Citrate synthase catalyzes the reaction of fluoroacetyl-CoA and oxaloacetate to form the highly toxic compound fluorocitrate (Peters & Buffa, 1949). 

But in NZ this ignored and we test for 1080 residue.

Anyone that is considering voting TOP this election should read this. TOP wants to drop this over Stewart Island despite the international studies showing that it is persistent in the environment for 70 years.

Just like all the press around the world. They tell you what they are told to tell you and play down or don’t report on what they don’t want you to know. That is why alternative forms of news are proving more and more popular now.

Yesterday's briefing from the Chinese Foreign Ministry, with the final paragraph regarding Meng /Huawei

In attempting to copy and paste , I was redirected to update Huawei details on mothers computer.

Here are some facts regarding Huawei:

Angola, Argentina, Armenia, Austria, Bahrain, Bangladesh, Belarus, Brazil, Cambodia, China, Cyprus, Egypt, Estonia, Faroe Islands, France, Germany, Hong Kong, Hungary, Iceland, Indonesia, Iraq, Italy, Kazakhstan, Kenya, Kuwait, Latvia, Malaysia, Maldives, Mauritius, Moldova, Monaco, Mozambique, Myanmar, Nepal, Netherlands, Oman, Pakistan, Papua New Guinea, Philippines, Poland, Portugal, Qatar, Russia, Samoa, Saudi Arabia, Serbia, Slovakia, South Africa, South Korea, Spain, Turkey, United Arab Emirates, United Kingdom, Uzbekistan

Australia, Japan, New Zealand, United States

And now the UK

UK is playing tricks again.

Its final decision if any will be made after the US election.

Also, they promise to take all Huawei products out by 2027, 7 years later???


Meanwhile, Germany may also change:

The German government is not expected to make a decision on its 5G rules until September. While Deutsche Telekom backs Huawei, Germany’s head of foreign intelligence has said the Chinese firm cannot be trusted and should not play a major role.

Chancellor Angela Merkel has long advocated “change through trade”, arguing that China can become a more trusted partner through engagement. But she is finding it harder to make that case as China takes a steadily tougher line on Hong Kong and broader geopolitics across Asia and the Middle East.

NZ has been fine going with Nokia equipment.

If Huawei wants to play in the game then the CCP should sort out its trustworthiness and stop interfering in the domestic affairs of other countries (the complaint the CCP loves to make).

And that’s why TikTok saying they’ll never share data with CCP is completely baseless. The company has to if ordered to by the CCP, it’s as simple as that. And that makes all Chinese companies essentially a front for CCP based on their screwed up laws.

It may well be OK for TT to refuse to share data with whoever. But if, on the way to TT (perhaps via a router, modem, repeater, switch, or suchlike), the data is forked and one copy is sent on to the ChiComs, then TT is in the clear, the CCP has its data, and everyone's happy. Ish.....

Say farewell to your overseas holidays and / or family visits folks.


good , about time, if you can afford a holiday at this time you can afford to pay for your isolation on the way back.
same for those that have lived and paid taxes offshore for 5 years or more heading back for safety. these same people will most likely head off as soon as vaccines start to become available.
as for people coming back or heading off for a drying relative that should be clear and concise so no loop holes i.e a parent, grand parent sibling or child that has less than 6 months left, no 2nd cousin etc.
as for payment that also need to be concise, i.e has to be paid within two years if you live here or paid before you leave if you live offshore

Absolutely - we should be funding people who choose to go on holiday. This is your choice folks.

Really? We should fund people who chose to go on holiday?

That was probably meant to be "shouldn't".

Crikey, China must really be hurting - gold consumption in China shrank -38% in the first half of the year.

No wonder they are shrieking so loudly about the US and the Aussies and HSBC, gotta give the people someone else to blame for the plagues and famine that seem to be afflicting them. First swine flu, then covid, and now flooding of the food basket.

I wonder if hoarding or buying for investment via paper gold counts as consumption? Funny how the price still keeps going up

Grapes of wrath, Roger?

Indeed... This also means they NEED more food from elsewhere. So they can huff and puff for us calling out their atrocities however how much substance can be behind their threats of reducing trade?

The pandemic continues to rage in the UK. "In Week 29, the number of deaths registered was 3.0% below the five-year average, this is the fifth consecutive week that deaths have been below the five-year average"

That's a very selective way of reading that data. The excess deaths vs the average over this year in the UK is more than 40,000. The current rate of below average deaths (if continued) would take more than 5 years to remove the excess deaths to date. There is also a period of 10 weeks before the pandemic where excess deaths are below average which cannot be attributed to COVID so your 5 week sample is not significant.

There is not enough evidence to association causation either - the lower current deaths could be as a result of lockdown reducing other communicable diseases, less journeys may mean less road deaths, less eating out means less food poisoning etc etc

Lockdowns reduce all manner of deaths - some you might expect like road and workplace accidents and influenza deaths, but also suicides and curiously a 40% reduction in premature births has been consistently noted.

"In the future, I believe this misbegotten episode regarding hydroxychloroquine will be studied by sociologists of medicine as a classic example of how extra-scientific factors overrode clear-cut medical evidence.
...Since publication of my May 27 article, seven more studies have demonstrated similar benefit. In a lengthy follow-up letter, also published by AJE, I discuss these seven studies and renew my call for the immediate early use of hydroxychloroquine in high-risk patients."

Seen another study that suggest Hydroxychloroquine is only of significant benefit if taken with 2-3 days of infection, or before (prophylaxis), in which case it can roughly halve number of symptomatic cases.
Taking it after you have symptoms has no benefit.

Foyle. So similar poor partial result as for most drugs.

Hydroxychloroquine could save up to 100,000 lives if used for COVID-19: Yale epidemiology professor
One study found that early administration of hydroxychloroquine makes hospitalized patients substantially less likely to die

Researchers at the Henry Ford Health System in Southeast Michigan have found that early administration of hydroxychloroquine makes hospitalized patients substantially less likely to die.

The study, published in the International Journal of Infectious Diseases, determined that hydroxychloroquine provided a "66 percent hazard ratio reduction," and hydroxychloroquine and azithromycin a 71 percent reduction, compared with neither treatment.

In-hospital mortality was 18.1 percent overall; 13.5 percent with just hydroxychloroquine, 22.4 percent with azithromycin alone, and 26.4 percent with neither drug. "Prospective trials are needed" for further review, the researchers note, even as they concluded: "In this multi-hospital assessment, when controlling for COVID-19 risk factors, treatment with hydroxychloroquine alone and in combination with azithromycin was associated with reduction in COVID-19 associated mortality."

Bang up job from the media and political class. Well done.
“In most countries people significantly over-estimate the spread and fatality rate of the disease. In Sweden and the UK for example, the public think 6-7% of people have died from coronavirus – around one hundred times the actual death rate based on official figures. And across countries, people think 5-12% of people currently have coronavirus.”


Are you doing PR for the virus?

I would love to hear his comments after he contracted it? (My point being it is easy to throw around this statistics cherry picked off the internet - as we merrily live in a covid free zone and have no appreciation of what some counties are battling right now)

Ad hominem deflection from a point that needs to be highlighted.

USA has 3million deaths per year, and has to date had 150k from covid. A 5% bump equal to about 2.5 weeks of normal deaths in USA, with a cost to date in USA of something like $8Trillion (expected to rise to 16) that is ~$50million per death. Seems pretty clear that the long term assessment will be that we over-reacted and that more economic damage will have been done than was warranted by normal valuations of life.

Look you have a point, but COL would prefer that you left this until after the election. It’s unhelpful to work against the fear campaign that is evidently working so well.


Narrow your topic myopically, and you end up talking such nonsense. Even if you raise a partially valid point.

Yes, the planet is grossly overpopulated. Yes, that will readjust, and whether we do it ourselves or via depletion, it won't be pretty.

But the complaint (that we've trashed our 'economies' unnecessarily) is bullshit. Our economies are based on linear draw-down of natural resource-stocks. They are therefore doomed to cease anyway. Which leaves the Foyle comment as being nothing more than a self-vs- all who follow justification. Has to be invalid.

PDK - do you see the present as the tipping point for the population or merely a small discrepancy before a mass extinction-like event?

Over 1000 deaths per day..and you say we are over reacting still?

Yes over-reacting. About 7-8000 deaths a day in USA ignoring wuflu, so that is only adding about 10-15%, median age of wuflu dead is about 80, when your life expectancy is only about 6 years, and most who die are already suffering from co-morbidities that reduce their life expectancy anyway. catching wuflu has a risk equivalent to about 3-5 months of your normal risk of death, and less risk than dying in a car crash for under 30's. We should all wear masks in public and otherwise just get on with life as normal.

Its not the deaths caused by COVID per se that is the problem rather the avoidable deaths that other patients face due to an overrun health system.

There is crew that have pushed this every week and still the evidence stacks up against them week after week.
Clutching at straws.

Florida and the other southern states may beg to differ with their views and that was after some degree of restrictions placed on movement/businesses. You cant have such a dramatic increase in hospitalizations over a short time frame and not have repercussions for other seriously ill/injured patients. Imagine what chaos would ensue if there were no restrictions.

Sorry mate, I was agreeing with you. Writing isn't my strong point.
I mean that there is a crew pushing that this is a nonevent, BAU open the gates.

So you're saying money is more important than health and lives? Interesting value system?


Absolutely. There comes a point where one life of a 90 year old male isn't worth $100,000,000. That money is better spent on the health and well being of 10,000 kids (for example)

But it is not one 90 year old is it? If for example the Chinese Government had reacted appropriately or the US or any of the other countries, the virus could have been shut down a lot faster and more effectively without anywhere near the cost that is now coming at us. But instead denial and dithering is going to cost big time, and in lives as much as money.

Just as well kids can't get Covid19, oh wait...

Who's more likely to survive? And who has greater future potential?

No future potential as you sacrificed them.

Whats the average age of death again? 80?

You are in denial if you are pretending that our society doesn't do that all the time - judgements are made on where and when to spend limited money to save lives daily, because there is no limit to how much you can spend on health and safety without some life-value cutoff being applied. EG in Pharmax QALY system - which puts a ~$50k value on a 'Quality of life year'. Median age of wuflu deaths is about 80. Almost identical to life expectancy. so each covid death represents on average only a few QALYs, which in normal times we would value at far less than $1million. The 10's of billions spent in NZ on wuflu avoidance is massively disproportionate.

A tiresome trope. The COL politicians sat opposite dying Stage 4 Breast Cancer patients and did nothing. Their bad luck not to be terminally ill before an election.

This comment indicates one-dimensional thinking. All non-trivial decisions are trade-offs.

Usual problems with your logic :
- it is 150k deaths in the USA SO FAR ; the number will sadly grow
- it is 150K deaths with with partial lock downs in place - would have been much greater already without the lock downs.

You divide a projected number ( ~16T ) for the cost- by the actual to date number of deaths not including inevitable future deaths or deaths prevented - pretty obvious manipulation to get a result you prefer ...

USA has to date probably had about 10% of their population infected (true IFR is about 0.5%). So at worst would see about 6x this number of deaths, which for 16T would be $20million per death averted (if you had no deaths, but those deaths haven't even been averted). The economics plainly just don't stack up.

If you are going to do numbers at least do them right on basic level ..

$20M is a bit different from the $50M you referenced to start with , is it not ?

How does 10% of population infected ( estimated by you .. ) translate to 6x numbers of deaths to date "at worst" and not 10x - actually it would be even a greater factor if infections were allowed to occur all at once , overwhelming the medical system completely.

You are also effectively assuming that just letting the disease rip through would have no economic cost at all - which is obviously false.

8Trillion short term 16Trillion long term estimated cost for USA. Most epidemiologists estimate only 60% of population will ever get the disease before the R0 drops below 1. The number of economically active people affected is tiny, even in highish risk 50-60yr olds only 1 in 500 infected dies, and that was before drugs were figured out to roughly halve it. The personal risks to working people are generally tiny, the financial costs to society of lockdowns etc immense - far beyond what a realistic assessment of their value warrants.

Foyle, please explain the long term effects of getting Covid19?


Only 38 people die in fires each year, and look how much we spend on the Fire Service and building safety codes! That's millions of dollars per fire death! Why the paranoia? Let's disestablish the service and deregulate building... I'm not missing anything, am I?

Bang on point!

The fire service isn't just there to save lives, it saves buildings, property etc. They also try to prevent fires from spreading and causing more material damage. So yes, you were missing something imho.

My point was... you have to look at the counterfactual. The cost of fires is relatively small in our society *because* we spend money on prevention...

How many $10's of millions do fire and earthquake drills etc cost NZ every year in lost work? Do they ever save anyone (I suspect that if they do it is on the order of a person per decade). Not even remotely worth the time wasted, particularly in low risk workplaces like office buildings. Same as the vast majority of health and safety activities - just govt bureaucrats pushing unnecessary costs onto NZ without consideration of the appalling cost benefit ratios.

You forgot to mention the car crashes and suicides they attend

I'm getting the point of those Perth Mint PM electronic transactions as were explained yesterday after seeing silver drop by $3. If you were watching it you could have either pocketed the coin or purchased an extra Oz's. If I'm understanding it correctly.

In all seriousness - you should already know.
The young Robin Hood trader in The States who didn't understand how his Options trades were reported to him; thought he'd lost $750k when I reality he'd likely make a $30k profit went and stood in front of the 5.19pm to Grand Central in desperation.
His brokers said they will 'change the way they report from now on', which is no consolation to his dead body.
(NB: His brokers were just reporting the way they always had and assumed any professional trader would know how to read what they had posted. Those with less than 'professionl' level skills are most at risk in this environment, when it is the pros they are competing against)

If he was playing he knew the risks or he was stupid.
Darwinism. If we cuddle everyone in cottonwool, the population will get even more thick.

Before getting on a bus do you sign something to say that you understand the risk that you may be injured or die as a result?

The point being, he hadn't lost at all.
Your comment " If I'm understanding it correctly" is the concerning part. You should have no doubt, and that part of your post becomes redundant. That's part of economic Darwinism, or call it Survivalism if you like.

The socialist view that we must cuddle everyone and make them safe is impossible. More stupid reliant people are created as a result creating a downward spiral for the human race.

Just a socialist thing, or are both sides therefore "socialist" given the Right-wing media driven dumbing down and antipathy to higher education? Or is pseudo-conservative's schtick more of dumbing them down so as to be more exploitable for profit?

No but I do trust the number on the bus will take me were I want to go.

Lol. So this young bloke thought it was a one way ticket to money. I'm sorry but the world isn't like that.
He knew the risks!
Anyway you are concentrating on one person and ignoring the vast majority that made money. Those people can now afford a lifestyle that excedees what they would have had. It isn't much of a stretch to say that many lives were saved and created by that.

Global cracks are appear to be widening. Investment fundamentals still in lala land. Will the about to retire in the US wake up to the truth that their US pension funds are....missing/evaporating/stolen. Take your pick.

We talk about the trillions of $'s created that can not be paid back but nothing about the 'boomer' pensions that will not be able to be paid in the near future.

Banks Balk at Compensation for 'Big Bang' Rate Losses

Banks and money managers had been racing to cement gains and avoid losses before the shift from the Eonia benchmark to the new euro short-term rate. The benchmark is used to help value hundreds of billions of euros of swaption contracts.

The Crown's debt raising calender for August is fully booked at around $4.0 billion - and that excludes T bill issuance. Hmmmm....Plenty of RBNZ inflationary OE feedstock?

Then why hasn’t quantitative easing produced inflation? The answer is rather simple: quantitative easing is nothing but an asset swap. It doesn’t change the total amount of government liabilities in circulation. It only changes the form of the government liabilities that must be held by the public. The central bank buys interest-bearing government bonds, and in return it creates zero-interest base money (currency and bank reserves) that must be held instead.

QE creates a pool of zero-interest money (or when the Fed pays interest to banks on their excess reserves, low-interest money) that someone has to hold at every point in time until that base money is retired. That can certainly encourage yield-seeking speculation in financial securities, as each successive holder tries to get rid of these monetary hot potatoes. That process of speculative yield-seeking stops only when a) risky securities become so overvalued that investors become indifferent between safe, low-interest liquidity and those risky, overvalued securities, or b) investors become risk-averse enough to be happy with safe, low-interest liquidity, in which case, as investors discovered during 2000-2002 and 2007-2009, even persistent Fed easing may do nothing to stop a collapsing stock market.

What QE does not change is the total quantity of government liabilities in circulation. That decision isn’t under the control of monetary policy, but is instead determined by fiscal (tax and spending) policy.

This is a critical distinction. See, government deficits are funded by creating pieces of paper – namely government bonds, or if the central bank buys those bonds, base money. If the public believes that the government has a credible ability to retire its liabilities, or at least keep them from growing at a rate that’s not too different from the growth rate of the real economy, then people may be entirely content to hold those pieces of paper without being revolted by doing so. In that situation, the central bank can buy government bonds and replace them with base money, and vice versa, as much as it wants, and it won’t change the underlying belief that those pieces of government paper are “good” – regardless of which form they take.

Again, QE is simply an asset swap. QE doesn’t produce inflation, and whatever inflation we get will not be the result of QE. What inflation requires is public revulsion to government liabilities, and what produces public revulsion is the creation of government liabilities at a rate that destabilizes the expectation that those liabilities remain sound.

Why anyone would desire that outcome is utterly beyond me, and frankly, I’m alarmed by the entire notion of “targeting a higher inflation rate,” because my sense is that the associated revulsion would become very difficult to control. Still, if you want more inflation, the way to get it is by running government deficits that are out of line with sustainable norms. The U.S. has already placed itself on that course, but it’s not clear that we’re at the point of revulsion quite yet. Link

A bizarre thing happened yesterday

I sat on a seat in the promenade of the local mall watching the passing parade while madame did her retail expedition, which included shopping for some cosmetics. After her expedition we rejoined and went into the supermarket to grab a few things. Approached the check-out counter. In front of us was a bikie looking bloke dressed in black, long beard, black doh-rag on his head, short-sleeve wife-beater Tee-Shirt, tats from here to kingdom come, stub-ear-rings, tats up his neck sides and back. Very socially he turned to me and said gidday, how're ya doin. Great. That started a series of pleasantries when out of the blue he raised the topic of fragrances. He explained his sister worked for Chanel perfumes. He waved his hand under his chin and wafted the air towards me and said can you smell these frangrances. I said what??. He asked if we could smell his fragrances? huh??? He said the main one was "Le Bleu" by Chanel. I stepped back a step and madame stepped forward and said L'heure Bleue was by Givinchy not Chanel. And so started a freaking-friendly ding-dong about which house produced which freakin perfume. The guy was smothered in the stuff. He pulled up his smart-phone and began searching for proof of what he was saying..Meanwhile the check-out girl was rolling her eyes I was stepping back out of the way. The customer behind us was becoming perplexed. When we got back to the car I said to madame - shit you're now going around supermaket's looking for an argument. Really. the french pronunciation of both is identical to the untrained ear. As far I'm concerned Le Bleu is the name of the French Soccer Team. Anyway, looked up L'Heure Bleue and its made by Guerlain not Givinchy. Now I can rest easy

I'm just stunned that a tatted up biker knew anything at all about perfumes. Just goes to show you can't judge a book by its cover.

Would loved to have been a fly on the wall :-D

The dollar and US government bonds have been losing their appeal as safe-haven investment destinations of late. Instead, gold and alternative currencies, like the Swiss franc and Japanese yen, have become preferred sanctuaries for investors looking to shelter from the economic fallout from Cobvid-19.

Over the past week, trends that had already begun to appear in financial markets accelerated. The dollar fell to a 22-month low and general consensus is that the world’s reserve currency may remain under pressure for some time to come. Gold surprised even the most optimistic expectations when it broke through $1,900 – a record high – and headed towards $2,000 before taking a breather.

All this as the global number of Covid-19 cases passed 16 million last week, US infections are closing in on 4.5 million, and new cases arose in countries that were thought to have overcome the virus. The Bureau for Economic Research notes that the trajectory of the virus exacerbated concerns that the Covid-19 crisis may be prolonged.

Concerns about the sustainability of a nascent US economic recovery appears to be undermining the value of the dollar after jobless claims rose last week in one of a number of signs suggesting cracks are appearing in the US economy as states pause or roll back the reopening of businesses.

Failures to pay back loans just about to start. Not cohesive with a system restart.

Days to the General Election: 23
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