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China, Japan and the EU reports improved economic data; commodity prices top out; US PMIs expand fast with prices; US housing in supply squeeze; UST 10yr at 1.62%; gold and oil firmer; NZ$1 = 71.7 USc; TWI-5 = 73.3

China, Japan and the EU reports improved economic data; commodity prices top out; US PMIs expand fast with prices; US housing in supply squeeze; UST 10yr at 1.62%; gold and oil firmer; NZ$1 = 71.7 USc; TWI-5 = 73.3

Here's our summary of key economic events over the weekend that affect New Zealand with news a sharp V-shaped economic recovery is worldwide now, making the 2020 downturn one of the shortest recessions on record.

In China, their tax take is recovering sharply in 2021, basically split between Beijing and local governments. Income taxes are up an impressive +27%, and their GST is up +24% year-on-year. This is clear evidence the Chinese economy is on a good upswing.

In Japan, there is also some evidence that consumers are feeling more bullish than they have for a long time.

In Europe, we may be seeing a revival in their overall economy too. The May flash PMIs shows demand surging at its fastest rate for 15 years. Both manufacturing and services are benefiting, with strong rises for new orders, and employment growth seems to be following. They also recorded their sharpest rise in output price inflation on record. The German rise is at the core of these gains, although other countries are now showing faster expansions. The UK and France are among them.

All this positivity among business prospects is improving consumer sentiment - but they haven't yet got to the stage where optimists outnumber pessimists. A net scepticism still pervades Europe's consumers.

The UK has reportedly offered Australia a path to zero tariffs - but to be phased in over 15 years. But that is causing sharp pushback from the British rural sector. A similar deal will no doubt be offered to New Zealand, making a UK FTA virtually useless to us. We have trade progress in the TPP and RCEP that is actually moving our needle.

Globally, iron ore and copper prices look like they have topped out. And shipping prices are showing the same. After hitting an index level of 3200 and its highest in more than ten years, the Baltic Dry Index has settled back to over 2800.

In the US. the latest May updates of factory PMI's shows them expanding faster, in fact to a series high. And their service sector is expanding faster than that. Both are in full recovery mode. With all key categories rising (new orders, employment, etc.) the main interest in these surveys is on the price pressures. This survey noted: "The steep rise in costs fed through to the sharpest increase in output charges since data collection began in October 2009, with record rates of inflation registered for both goods and services as soaring demand boosted firms’ pricing power." The inflation genie may be out of the bottle.

But some Fed officials are now warning that a softer period may be ahead - especially for employment.

Consumers may be flush and buying, and factories roaring - but there was a surprise in their residential real estate market. April sales volumes were expected to rise +2%, but the data shows they actually fell -2.7%. April was supposed to bounce back from the -3.7% retreat in March but it compounded the earlier month fall. That is six straight months of declining sales since October 2020. It is as though Americans are shunning their housing market as mortgage rates start to rise - even though those rises are quite minor. "Supply" has been the excuse for a while now and that may actually be the case. Median prices are +19% higher than a year ago. Further, mega corporate landlords are snapping up many homes before the public can bid on them.

Canadian retail sales in March were stronger, up at an annual rate of +3.6% when a +2.3% rise was expected. (The year-on-year gains is pandemic-affected of course.) From March 2019 they are up +8.6%.

The latest global compilation of COVID-19 data is here. The global tally is still rising, now 166,825,000 people have been infected at some point, up +566,000 per day and a slowing increase as new case numbers ease on India. But they remain very high in Brazil. But an outbreak of black fungus is piling on the misery in India. Global deaths reported now exceed 3,457,000 and up +12,000 per day. Vaccinations in the world are still rising but at a slower pace, now up to 1.65 bln with +180 mln doses given in the past week. In the US almost half of their population (49.5%) have had at least one dose. Approaching 40% of Americans have been fully vaccinated (130.8 mln people). The number of active cases there has fallen to 5,808,000 with fewer new infections than recoveries recently and steady progress.

The UST 10yr yield starts today softish at 1.62% from this time Saturday. The US 2-10 rate curve is at +147 bps and unchanged. Their 1-5 curve is also unchanged at +78 bps, while their 3m-10 year curve is stable at +162 bps. The Australian Govt ten year benchmark rate is down -1 bp at 1.67%. The China Govt ten year bond is unchanged at its new lower level of 3.09%. And the New Zealand Govt ten year is unchanged at 1.84% making it a -7 bps fall in a week.

The price of gold starts today up at US$1881/oz, a rise of +US$39 in a week.

Oil prices start today marginally firmer at just under US$64/bbl in the US, while the international Brent price is just over US$66.50/bbl.

The Kiwi dollar opens today at 71.7 USc. Against the Australian dollar we are at 92.7 AUc. Against the euro we are at 58.9 euro cents. All of these levels are unchanged from where we left them on Saturday. That means our TWI-5 starts today still at 73.3 and a -1.1% weekly devaluation.

The bitcoin price is now at US$33,021 and another -7.5% drop from this time Saturday. Volatility in the past 24 hours has still been extreme at +/- 11.3%. The Bitcoin price has fallen -27% in just one week, -35% in a month.

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

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89 Comments

Hot tip: Good opportunity to buy Bitcoin at a discount folks.

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Keep buying all the way down to $25k and sell at $10k

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Better hope that curve is not symmetrical, from here its down a bit more then a brief recovery before it disappears into oblivion. If I was to take a bet I would say its gone burger.

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Short it mate, put your money where your mouth is :)

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Pretty much sums up the market at the moment eh! I'm gambling, but you can also gamble by gambling that my gamble was in fact a gamble.

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Not sure if you've noticed IO but leverage is right through everything RN. It's a disease, brought on by a broken system completely awash with cheap credit.

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Yep thats the rookie retail trader strategy mate. Buy at 55-60 then sell at 30. Buy High sell Low!!

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I remember that guy, what ever happened to him?

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Renting a park bench I hear?

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There's a waiting list for park benches. Government is about to announce KiwiBench. 100,000 new benches over the next 10 years.

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Ezy.

I don't think many on here were playing this market in late December '17 but i can tell you that this thing can ping-pong downwards longer than most can stay solvent, and sane.

Sure, there will be counter-rallies but it won't reach new ATH's until the masses are driven to total despair and bankruptcy.

Source: been riding this bi-polar S.O.B. since '14.

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Very true. There's plenty of people that wished they'd secured some Bitcoin in 2011, but few would have held onto it since then.

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There's plenty of people that wished they'd secured some Bitcoin in 2011

Depends. Being on the end of Mt Gox would not have been fun. Most of those buying BTC on the fringes in 2011 was not the ultra-orthodox faction of the crypto fan boys.

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Anyone who remains a fan-boy of bitcoin while we're seeing 30-50% drops gets the big picture IMO. Everything else is a punt in the crypto space. People calling belief in Bitcoin out as a type of religion are not all wrong. It's the bible itself that states:

"Now faith is the assurance of things hoped for, the conviction of things not seen."

The bottom line isn't having faith itself, any investor needs that in the product they're putting their money into. The difference is whether or not the faith is justified. If the object of that faith doesn't stand, the outcome is destruction. However, if the outcome matches the conviction, then that faith is rewarded (although I can afford to lose my Bitcoin, but can't really afford to lose my life). Exactly the same principle applies to the USD as a global reserve, and I think we're going to see that same conviction tested around the world when inflation kicks in.

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You confirm my point. Remember it was Socrates who said 'all I know is that I know nothing.' Most people like at that at surface level. If you ponder the words, it also shows humility and a scientific philosophy. The BTC ultra-orthodox are really not that much different from everyone else.

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I got Gox'd back in the day.

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Were interesting times. Gox was a common point of discussion among foreigners involved in the tech space in Japan. The Japanese authorities have dealt with the aftermath very well. Considering it was a foreign company, I'm surprised how fair and balanced they were.

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I was never Gox'd because I held all my Bitcoin in a non-custodial wallet. All my BTC purchases were made through VirWoX buying Linden dollars with a credit card that I'd then swap into Bitcoin. Fun times.

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If you didn't use Gox, you couldn't be 'Gox'd.'

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the buying opportunities just keep on coming.

The enthusiasts should leverage to get more...

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Leveraged trading is for dummies. Hodl is the only worthwhile strategy. I'm down precisely 0 BTC. Meanwhile, the sword of damocles that is inflation looms large.

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Leveraged trading is what we've done since Fiat started.

The combined forward bets far outweigh the remaining planet.

Doesn't matter what your token is; Bitcoin, dollar, sestertius, shells. If the underwrite ain't there, it ain't underwritten. And no token-issuer, crypto or fiat, is keeping track of the remaining resource/energy underwrite.

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The big difference between Bitcoin and every other asset/currency you mention though, is that BTC incentivises cheaper more efficient energy production. The core issue with our energy consumption isn't the amount we're consuming, but rather the way we're consuming it through coal/gas being unsustainable. Until Bitcoin, all we had was the impending threat of some future state no one could identify with, so no behaviour changed. On top of that we've got a rather obtuse global carbon trading scheme that is being rorted worldwide. In BTC though, we've suddenly got a huge carrot tied directly to energy production and consumption to incentivise the whole world to build cheaper electricity with greater output capacity. If it wasn't for this things would be looking rather depressing IMO.

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> that BTC incentivises cheaper more efficient energy production

nonsense

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PDK, you should go back to the farm and teach the cats how to do quadratic equations. Easier.

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Couple of weeks ago you could buy a house in Auckland for about 15 btc. Now that same house will cost about 30 btc. Inflation.

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@ Ezy. After your ceaseless promotion of bitcoin, did you just above say you did not have any??

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No, he is saying he has sold or forcibly lost (through liquidation) 0 Bitcoin on this drop. So he still has as many sats today as he did last week :)

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Absolutely. 1 BTC = 1 BTC even when 1 BTC = $0 USD so keep buying.

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wow, harsh. You can buy heaps of them at $0 USD.

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Ezy,

You posted middle of last week that you had bought in to BTC around ~40k USD, and that it was unlikely to get down to $33k as it was so oversold... Yet here we are...

I see a series of lower highs and lower lows, and in almost all crypto not just bitcon.

At least with tulips you can get flowers.

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If you jump on the crypto forums you'll relise that its just an even better chance to buy the dip

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IO,

I should find one of these forums and see what is being said...

Just as in many other specialized forums, I would expect to find significant confirmation bias, banning of contrary opinions, etc.

For me, the lack of functional utility for crypto, and the high transaction costs (and the underlying energy wastage) is a bit dismaying. Then again, I could have made a fortune buying early and selling to greater fools. The real question is when will there be the greatest fool... "The markets can remain irrational longer than you can remain solvent" is an appropriate quote IMO.

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As I say, the behavior makes me think of a cult.

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I'm perfectly comfortable admitting I'm wrong @Yankiwi - I thought there was enough support at 38k but there wasn't. Now the levels of support are at 33, 31 and 30. The RSI is still pointing to BTC being highly oversold. The MACD is still below the signal line though, although looks like the trend is starting to reverse.

Spoiler alert: In the next month I'll be buying stupid amounts of Bitcoin and hopefully the price will stay low until I'm done.

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You are so conflicted. Last week you were betting new ATH in BTC by 20th June

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Yes, 4 days ago. And you said the bull market was over. Only one of us will be right.

A novel idea: How about we wait until June to see who it is though?

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You need to learn what makes a bull and bear market. Doesn't matter what it is in 1 month time, it is currently a bear market.
Hint: You are already wrong.

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Grow up. Anyone for or against Bitcoin who knows the space and understands the halving cycles knows exactly what I'm talking about. If you want to nitpick your way out of a massive own goal be my guest though.

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Can you give me a link to my own goal, where I made a prediction about BTC price? You made both your prediction and mine. Schizophrenia?

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LOL this is why the fear & greed index is at 10 :P
Still going to 100k min this cycle, and yes my money is where my mouth is.

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Technical analysis is bullshit, especially in crypto. It's a new entity, propelled wholly by the emotional state of 'investors', so the dataset is useless. Besides which, the level of analysis and data-mining in the current age means chart-watchers have no edge -- everyone else has instant access to exactly the same charts and exactly the same Youtube analysis of what this or that green candle or duck's hernia 'means'.
The only technical analysis that would work is ESP -- or perhaps a very clever AI trained on herding behaviour vis-a-vis irrational assets.

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It depends on what you're trying to do. For leveraged trading on a short timescale I'd 100% agree. But to spot longer term trends there's a bunch of useful tools, and RSI and MACD are definitely two of them. Also S2F and overlaid halving fractals. If you look at the 2013 fractal it's an extremely close match to 2020 https://twitter.com/RaoulGMI/status/1396526484152541189

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There's just enough of a kernel of possibility to make it difficult to show it's bs. After all, markets are social constructs, so they at least in theory could display complex patterns (eg birds flocking or fish schooling). That said, I agree that crypto + technical analysis does seem to a particularly concentrated form of nonsense.

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I agree, the relevant model would be something like schooling fish.
Except these are schooling fish who are assiduously studying the patterns of schooling fish and adjusting accordingly. Mind-bogglingly recursive.

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Yes lots half truths where if you want to believe in it, you will, but when you really question everything, none of the explanations for why it's so great are that good in my opinion. Lots of fairly weak arguments. It's hardly showing its store of value or inflation hedge attributes at the moment.

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“Be greedy when others are fearful and fearful when others are greedy.” - Warren Buffett

+222% over the past 12 months.

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I thought Buffett disliked Bitcoin - but you're using his quote to say that something he dislikes, is in his words, worth buying?

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He is, self admittedly, a technological dinosaur. He does not invest in what he doesnt understand. His company has also underperformed the S&P500 for the last decade as he hasn't moved with the times.
His and Charlie Mungers opinion on what they do not understand is ignorable, but their underlying ideas aboutbuying when there is blood in the street still stands, whether they are applying it or not.
https://alternative.me/crypto/fear-and-greed-index/
Track that against the BTC price and tell me what you see.

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Will the RBNZ flinch !

Mr Orr will just follow fed...no brainer ........least regret approach as safer to follow the herd and escape responsibility / blame.

What will Mr Orr do on DTI and Interest Only Loan.......Wait and Watch approach despite all data suggesting otherwise even after two moths of housing policy and LVR....Still will be wait and watch in anticipation till eternity (Mr Orr may advice on DTI but definitely nothing on interest only as it may actually target speculators and Stop the ponzi).

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Does anyone know when the update will be? I thought it was some time in May. We're now in the final week of the month. Let me guess, the 31st?

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These dates are scheduled about a year in advance. The next RBNZ MPS is at 2pm on Wednesday, May 26, 2021. The dates for the rest of 2021 are here.

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Thanks!

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Hi David - your view on below, as would like more discussion, as now what Mr Orr does is not just a economic issue but is more a Social issue and almost all experts / media sees it from only economy perspective.

DTI is needed to protect FHB from over streching. It is bad as FHB are not able to buy a home ( Thank Mr Orr and Robertson) but what is worse than not able to buy a house, is to buy a buy a home under FOMO by overstreching and repenting later as even slight change in interest rate or curcumsrances can be disastrous ( no one can deny that house prices are over stretched far beyond and need some control to bring normalcy - just warning does not help - needs action).

Sad situation for FHB but reality is that action/ inaction of Robertson and more of Mr Orr has finished FHB, specially in Auckland as Mr Robertson did took some action and now is the turn of Mr Orr as both government and RBNZ have to compliment each other in action to get the result and no one by itself can achieve a balance.

Now just have to see, how shamelessly Mr Orr defends his inaction to delay, mocking FHB on his highness holy appearance on 26th May.

Stopping Interest Only Loan is must ( more than DTI) as it targets speculative demand unlike tax changes which affect all investors - stopping IO loan on new purchases will mostly target speculators/flippers and should be at earliest as will make a huge difference in speculative demand thereby helping in reducing FOMO - only way to TRY and contain the ever growing ponzi.

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He (always) needs more data. It's only when house prices look like they may fall a measly 10% that he doesn't need more data.

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Tom wash your mouth out. The four letter F-word is not to be countered, surely you mean a slowing of growth?? ;)

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Yes in modern newspeak and management speak we have "softness" for falling.
Notice rises are called rises, not "hardness" which might have the merit of a little innuendo humour at least

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I prefer "negative growth" lol

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Or volatility

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I suspect Mr Orr's next step might well be retirement. Will be due to sickness, or some other reason probably, but will be a "get out of jail free" card for him. It means it won't all pop on his watch.

Meanwhile I was comparing build costs in NZ over the weekend vs Aus:
Absolute mansion (350sqm) on over 1000sqm of land less than an hour our of Melbourne: https://www.realestate.com.au/property-house-vic-officer-136345894. Which comes in at around $2500 per sqm INCLUDING land.
We are trying to build about a 230spm home about the same distance from Wellington and it's likely to cost ~$1.2m. Ours is medium spec and is likely to come in at around $3700 per sqm NOT including land. Yes we have some blockwork because it's on a hill, but jeez!

Crazy cost of land and building in this country, it's truly batty and most certainly doesn't help the housing situation.

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Just saw a new build in Hastings, moderate size (228sqm, 4 bed 2 bath), asking nearly $1.3M. Insane stuff.

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Yep, here it is: https://www.trademe.co.nz/a/property/residential/sale/hawkes-bay/hastin…

20 km away in Napier, some properties in Parklands (similar sort of development to Hastings' Frimley) has seen prices go silly in recent months with one recent sale at $1.35M for a house of similar proportions to this one and most recent sales over $1M. I guess the vendor of this new-build in Hastings has seen what is happening in Parklands and set his price accordingly. Where Frimley prices weren't so long ago 50K - 100K less than Parklands for basically the same size house and property, now they seem to be at about the same level.

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The infrastructure works (3 waters and earthworks) for Stages 8, 9 10 & 12 of Parklands Area 3 are out for tender at the moment.

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Exactly. Compare that to the Aus one I posted, which is over 100m2 bigger and has 3 lounges on a land size almost guaranteed to be double what this one is. And the Aus one is less than an hour to a world class city (Melbourne) while being at least 30% cheaper and almost certainly better build quality.

NZ new houses are bat sh!t crazy expensive for absolutely no reason. The government really needs to lower this to have any goal of mitigating the housing disaster in NZ.

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And out of that they somehow manage to pay the tradesmen 20-30% more too (in Oz)

Consent, consultants and compliance. Only in NZ 3 C's are as costly as these!

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The UK has reportedly offered Australia a path to zero tariffs - but to be phased in over 15 years. But that is causing sharp pushback from the British rural sector.
US exports to China grow at ‘expense’ of Australia after Beijing’s trade ban

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Short term pain for long term gain.

Australia will be a winner in long term. If China is bullying now, just imaging what will happen over the year as Australia and other countries get more and more dependent on China.

What has happened to NZ. It is on the way to becoming a colony of China, if not already - traded souverignity for so called prosperity.

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Audaxes, ignoring for a moment the channel this comes through, it's hardly a conscious policy decision just markets playing out surely? I think the British rural sector are going to really need those EU subsidies now... ops.

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Not if you happen to be Huawei.

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If as I do, you assume Huawei's a state vassal then the ins/outs of their fortune are directly related to policy decisions. This is quite different from supply/demand market-place movements that are driven at the broker level vs the policy level. Perhaps I am under-playing the CCP's reach into all levels of their trading?

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This is quite different from supply/demand market-place movements that are driven at the broker level vs the policy level..
Indeed.

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All the inflation signals are in this briefing, supply is still constrained through logistics failings and forward buying, demand is juiced through helicopter money, what can show up to avoid interest rate rises now?

Ignoring the mostly inconsequential RB mincing, what macro factors could appear to avoid the uplift?

Interesting as it will be a brief spike and timing the exit from assets in the subsequent crash will be the trick.

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Deleveraging can make a lot of money disappear very suddenly. The inflation spike is real, but it could prove to be transitory if asset prices hit an air pocket and suddenly everyone feels poorer. Demand could fall very fast.

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I'm calling BS on a strong world economy and any form of "Growth" from this point onwards. I think all figures should be compared to pre covid levels not now. Increasing world population and decreasing resources so the only people that will see the benefits are going to be at the top in fewer and fewer numbers. The future outlook is pretty bleak beyond 2050, fortunately I probably will not be here or else to old to care.

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The future outlook is pretty bleak beyond 2050, fortunately I probably will not be here or else to old to care - boomer by chance?

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Or just realistic - if we continue consumption and population growth unchecked until 2050 the human species will be well on the way to annihilation.

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Audaxes - Actually I think David Chaston said 'China' rather than 'world'.
Carlos - well said. It's interesting that the discussion on the street has moved past the media (certainly past RNZ) since Covid.

He also correctly identified 'productivity' as a difference between inputs and outputs, other thread.

Where he goes adrift, is in copying the teacher of economics when they the physics of input and output. That ignorance collaterally ignores depletion of resources, depletion of energy resources, and remaining 'sink' capacities. It appears to also assume circumvention of the Laws of Thermodynamics, in that it assumes percentage gains in input-vs-output, perpetually.

That collective belief has led us to the predicament facing human-kind, yet there are still folk lauding a regime which ends with the eradication of most of us. Nuts.

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What does not go past the publicly-funded, left/socialist propaganda mouthpiece that is RNZ is essentially all that has no virtue-signalling-virtue. That is to say most things that are not the economic equivalent of cat movies on youtube.

In regards to the productivity I think you have made your point well as normal but there are areas of innovation that will keep our peak for longer. Substitution in energy and food from resource pools that are less finite will extend the peak. Have you read any of Marian Tupy's work? Admittedly he is purposefully trying to be counter-narrative but I'd be interested on your thoughts?

" The lives of most people, planet-wide, have dramatically improved in recent decades, extending a trend that began with the industrial revolution. In many important ways, things are looking better than they every have before. "

https://www.youtube.com/watch?v=VIANLddo-ec

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I've read lots from the Cato Institute, I've read Simon, Lomborg etc.

The problem is in what you measure. Let's imagine the Titanic not hitting ice, but having to continue voyaging forever. If you measure, say, the increasing levels of Titanic passenger comfort but don't address the depleting coal-levels in the bunkers, you can indeed say things are getting better and better.

But you'd be effectively lying, if you failed to explain the temporary nature of the phenomenon. This is where the MSM fail, RNZ in particular, given its non-advertising freedom and its public-information obligation.

What we have done is to consume more and more, faster and faster. From a finite set of stocks. If that's all you measure, it looked good until about 1970 (if you knew what to measure) or until about 2008 (if you were the type who needs hit over the head to understand). Of course 'productivity' would plateau - which in turn would show up those who believed a false posit.

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Audaxes - Actually I think David Chaston said 'China' rather than 'world'.
Really?

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Sorry - was reading the article, not the pre-headline.

:)

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"World economy in strong upswing"
In GDP growth terms, is there any evidence of quarterly growth in major economies in last 6 months exceeding 3% on an annualised basis?
Last time I looked GDP growth in EU for instance was negative last 6m. That is a large slab of world output.
Japan is not firing either (world's 3rd largest economy)
China is commencing reduction in stimulus and has shadow banking problems reported on Interest recently.
S America is a Cv19 mess, as is India.
The "recovery" such as it is, is based on pumped up government debt and massive priming from interest rate cuts plus lots of temporary "forgiveness" schemes that are due to be withdrawn in many countries.
World has put off economic consequences of Cv19 with anaesthetic.
Anaesthetic wears off and when we all wake up the welcoming scenario will be excess inflation and falling living standards.
CB will dare not raise rates til April 2022 when the inflation will be well baked in.
Falling living standards = less to service debt with.
This equation and result of inflation utterly absent form any analysis on here or elsewhere.

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You can't fight the narrative that the PTB wants promoted and financial journalists happily oblige them. Since GDP includes government spending then it is pretty easy to game the figures using 'borrow, print, and spend' and then claim you have a very strong economy.

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I largely agree, but I'm not sure about the inflation. A lot of what you describe above is deflationary rather than inflationary in the medium-long term.

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The modus operandi of every central banker is to waterboard the general population with debt.

With that debt they maintain control.

The world would likely be a better place if they were all rounded up and shot.

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It would be appropriate justice; they're been rounding things up for years.

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I wonder how long before the REINZ HPI resembles the bitcoin chart - both speculative assets. Although one supported by the central bank and the other not. As a result, one has lost 50% of its value the other has not. One wonders if the RBNZ with its magic powers can avoid the other speculative asset from also losing 50% of its worth.

https://www.interest.co.nz/charts/real-estate/median-price-reinz

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