90 seconds at 9 am with BNZ: Quake cost estimate doubled; US economy decelerating; Irish bank breakup

90 seconds at 9 am with BNZ: Quake cost estimate doubled; US economy decelerating; Irish bank breakup

Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with BNZ, including news that Treasury has estimated the total cost of the Christchurch earthquake at around NZ$4 billion.

That's up from the NZ$2 billion initial estimate from the Earthquake Commission.

That includes costs to insurers, households and governments. See more on Treasury's initial forecast here.

Meanwhile, the so-called Beige Book report from 5 Federal Reserve regions in the United States shows widespread signs that the world's largest economy is decelerating.

Also in Europe, the Irish government is set to wind down Anglo Irish Bank after bond yields there reached record high, signalling increased fears about Ireland's position.

In Greece, the National Bank of Greece has launched a capital raising of 2.8 billion euros, sparking fears that a Greek debt restructuring and default is near.

However, the Dow rose 46 points overnight and the New Zealand dollar was firm around 72 USc after good bond auctions in Poland and Portugal calmed some of those fears for now.

The Gold price remained near its record high set in June of US$1,265/oz.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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34 Comments

This is Obama's dilemna. "Let's get Americans back to work" ~ doing what? There's 9.6 million jobs that are unlilely ever to come back.

 

Anon "Back when the Yanks actually made stuff"

Well news just out Anon, they're getting right back into it, and right here in Godzone. 

"GE eyes credit cards, and 'manufacturing financial services' around groceries & jewelry"

That's gotta be great news... right?

http://www.interest.co.nz/news/ge-eyes-credit-cards-and-manufacturing-financial-services-around-groceries-jewelry

Steve Keen is making a fool of himself , with his constant barrage of completely wrong predictions ............. Not unlike our own " Chicken Little " Hickey .............

.............. We love you Bernard ....really we do ...............heh heh ha !

OK ; two examples : firstly , that house prices would fall by 30 % over the next twelve  months : BZZZZZZZZZZZZ : Wrong ! They didn't .

Secondly , on RadioNational , that the USA was entering a depression : BZZZZZZZZZZZZZZ : Wrong ! Growth is still positive .

Gotta run , buddy . Off to Thailand . Catcha later , Steve-O . Cheers

As he said, he didnt allow for a huge OZ Govn stimulus that posponed that event....so he isnt "completely" wrong, just has wrong timing...it isnt over til the fat lady sings....

The USA almost certainly is entering a depression, 90%+ certian (for me)....again not completly wrong in that "complete" would infer the opposite of a depression, a boom...we certianly dont see that and fact I dont know where you get US GDP is growing, url?

http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Symbol=USD

This is clearly neg GDP since January 2010....it would be interesting to show where we are with other stats....and lets not forget we see this in the light of a huge Govn stimulus...

"Absent temporary fiscal stimulus and inventory rebuilding, which taken together added about 4 percentage points to U.S. growth, the economy would have contracted at about a 1 percent annual rate during the second half of 2009."

http://www.aei.org/outlook/100928

That only just kept un-employment below 10% by a whisker'

"Friday's grim labor report is the latest confirmation that our economy is not recovering. A loss of 131,000 jobs and a stagnant 9.5% unemployment rate are bad enough. But a deeper look—at the little-known civilian employment-population ratio—shows how hard it's going to be to pull out of our crisis, and why the Obama administration's policies are unlikely to do the job." (GOP's are even mor eunlikely to work, but therer you go).

http://online.wsj.com/article/SB1000142405274870438850457541928028379459...

and is all but finished....indeed the real un-employment is in the region of double that "official figure"....certianly greater than 16% and probably around 18~20%, maybe as high as 22%, that is great depression numbers....and it isnt over yet.

Further we have dis-flation, this will tip at its present decline into deflation probably before the end of the year......

http://www.aei.org/outlook/100971

"U.S. year-over-year core inflation has dropped to 0.9 percent--its lowest level in forty-four years. The six-month annualized core consumer price index inflation level has dropped even closer to zero, at 0.4 percent. Europe's year-over-year core inflation rate has fallen to 0.8 percent--the lowest level ever reported in the series that began in 1991. Heavily indebted Spain's year-over-year core inflation rate is down to 0.1 percent. Ireland's deflation rate is 2.7 percent. As commodity prices slip, inflation will become deflation globally in short order."

At which point the official US un-employment rate will begin it rise again....

If this isnt the edge of a depression and a global one I dont know what is.

regards

We're lovin you too GBH. I predict a looming shortage of gummy bears....followed by mass panic and hyperinflation. A regular gummy bear disaster... ;)

cheers

Bernard

Decelerating, eh?  Implies slowing - much "nicer" than reversing, I suppose.  Gotta keep the notion of a return to the perpetual ponzi party in the psyche of the masses,

Haha. Yep, never panic those in the penny stalls. They'll block the entrances and your real benefactors in the boxes can't get out.

:-)  Yes, I await the time when some world power has the guts to say, hey folks, here's the policy plan for the reverse to inequality, affluence and waste. 

The 'winners were in First Class.

The losers were in Steerage.

Time you looked aroung at the slope of the deck

The problem with that analogy rc..is that ....That particular notion is what got the developed world where it is today ...because it implies an infinite value to an object that clearly has a finite value....

The additional value is in the mind of the purchaser who ..albeit consciously or otherwise creates the gap in affordability by that increment with each purchase.

Wow!  The fair price for any house on any particular day is simply what someone will pay for it.  If a house isn't selling, its simply overpriced and not meeting the market.  Over time, perhaps over the next few years, your percieved price might return and you'll get to sell it but you will have had to incur the holding costs as well as the oppportunity cost of having the funds tied up.  And you just might have run out of patience by then and finally sold.

Anyway i'm in Christchurch and am one of those "cheapskate losers" renting down here.  Damn glad that I don't own a house down here right now and instead of a house getting busted up over the weekend I've instead had one of my best ever weeks on the aussie sharemarket.  I continue to see upside in the sharemarket over here but zero upside in houseing here for some time.

That sounds like an excellent and well thought out strategy.  In order for it to work, all a seller needs is to find a complete idiot with a time machine who can access 2006 lending standards.  Easy!

We sold one during the little 'blip' at the end of 2009.  Interestingly, the folks who bought ours withdrew an offer they had on another place at the time - the owners were stuffing around with counter-signing - and so they bought ours instead.  That other place BTW is still on the market looking to better/equal a price they paid in 2007.  It's mainly those who bought at the peak prices (or who still 'think' in terms of peak prices) who are struggling to sell.

Don't exactly disagree CommonS.......the question that hangs for me is whether that "Train Wreck" has been assisted in it's momentum with deliberation.

Fanciful....maybe....what is the human response when something of your making is getting to be...or beyond your control....?

To restart an industrialised economy you must be competitive...(or protectionist).

With the global inflation of the wage index coupled with the silly salaries paid to those who perceive themselves the new ruling class.....

Only a ground zero style collapse will force a new beginning....

Everything since the first real shock waves hit with the sub prime collapse has gathered momentum toward this as an outcome.

Through careful manipulation the U.S. no doubt hopes the rest of the developed world will have to share in the ...Ground Zero scenario for it to work.

You only have to look around to see that perceived ..Wealth..... is evaporating before you very eyes.

While the correction to global property values may be a welcome side effect...the conundrum arises when the people who will be required to engineer and control outcomes where possible........are too  preoccupied finding ways to protect their own wealth from ...evaporating.

Nicely put. The trouble with a re-boot, is that it will almost certainly be a continuation of the denial of limits and finites. It will also be a continuation of the failure to value natural capital (including those finites) properly.

The danger is that we did it on supplies of easily-available energy. Our offspring's generation won't have that luxury, yet they are being asked to carry our unpaid debts (pollution, degradation, deforestation, desertification) . Not dissimilar an approach to throwing a tied-up sack-full of kittens off a bridge.

And yet the small minds think all that you need is an endless supply of cheap land adjacent to major centres, and she'll be hunky-dory.

You gotta wonder.

The sack of kittens is a suitable analogy PowderD...see response to commonS... ultimately it will be Human desire that will determine outcomes for better or worse not physics.

To that end I would never rule out War as a possible outcome.

Bottom line ....China still needs to play ball.....sticky sticky.

Steven orig 2...it's through desire that gravity was overcome in our quest for the stars.

As to the tide I would not disagree...but reclaimers may beg to  differ.

I would agree with you that it is short term in the bigness of time...but then that is what we are good at short-sightedness  and small minded thinking ...it's our mortality that gets in the way.

Dear Anonymous, steven-orig2, Dean Left-us (broke), rc, Nutter, annonentity, Commonsense

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cheers

Bernard

I have a suggestion Bernard......get Billy Bob on the chair and ask some hard questions...your ratings will go through the roof...

Come ooooooon mate if Guyon can do it.....you can if only for the squirm factor.

  http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10672182

More rubbish reporting at the Herald....construction to get a "fillip" from the quake damage....ie damage is good....more damage is better...doh!

Clearly the Herald believes the 4 billion dollars will not be a cost to anyone. It's free munny right Herald?

Dopey sods. How soon before everyone....every bleeding property owner in Noddy discovers their premiums are set to rise by 10% at least, plus gst....so the EQC can repair the hole in the account and the insurance can make a little hay while the disaster lingers. That'll be 4 billion plus that will be sucked from the future to be the "fillip" that the Herald fails to understand.

Oh and let's not forget the tax rise to come to collect the millions to be dished out to the uninsured....and will the higher premiums mean fewer people will take out insurance!...dam right it will.

YES...........WE..............CAN...!

Only with a lot of fertilizer which they then convert into ethanol....

Makes no sense...

regards

 Several Money Morning readers have pulled us up on our views about the Christchurch earthquake. Their argument has been that the earthquake actually will be positive for the New Zealand economy. How?

Because most of the cost of funding the rebuilding will come from insurance claims.

Therefore there won't be any drain of funds from the private sector. The household that had $10,000 in the bank account will still have $10,000 in the bank account because all they need to do is file an insurance claim and the insurer will pay for the rebuilding or repairs to the home.

So, because of that the householder will be able to spend or save their money as they wish.

The other argument goes that it will also be positive for the economy because it will draw additional labour into the Christchurch area, most probably from overseas due to a skills shortage in New Zealand and that this will lead to more spending and more job creation.

All of which will be good for the New Zealand economy.

Apologies for bringing up this subject again, but we do like to tie-up loose ends where we can. So, are the insurance and job creation arguments reasonable?

In short, no. Let me explain...

First off, as usual, those that use the insurance argument only address half the story. Insurance is, well insurance. It's there to insure against the worst. Insurance isn't supposed to be profitable.

As soon as you consider the profitability of something then it becomes an investment, not insurance. Very few people in Christchurch right this minute, or even in the medium term will be thanking their lucky stars that an earthquake flattened the city.

Even with insurance, it's likely that most people will be worse off now than they were three weeks ago. While they may be able to claim insurance for rebuilding or repairing their house or business, it doesn't avoid the fact that they house or business has been destroyed.

It doesn't avoid the fact that they'll have to live in temporary accommodation for several months. Accommodation that will most likely be of a lower standard than their home before it was damaged.

Aside from that, how will the businesses generate revenue if they have no shop or factory to operate from?

How will individuals generate income if their employer doesn't have a shop or factory to employ them in?

Again, maybe they have insurance policies to cover for this, but it's unlikely to provide them with the same level of income as they'd get from their fully operating business or job.

As we recall, personal income protection only covers a maximum of 75% of your salary anyway.

And are the people who worked in the shops or factories skilled enough to get a job as a builder, carpenter or glazier so that they can "benefit" from the supposed economic boom from the earthquake?

Or, just as builders, carpenters or glaziers may descend on Christchurch in their droves looking to profit from disaster, is it not equally likely that shop workers or factory workers, dentists and hairdressers may leave Christchurch in order to get work they are qualified for elsewhere?

Not to mention the fact that insurance companies aren't charitable organisations. Sure they may be able to pay claims from reserves, but odds are they will want to rebuild the reserves. And that means potentially increasing future premiums for those that have claimed, and perhaps those that haven't claimed.

And finally there's the issue of the demand for scarce resources. With hundreds or thousands of buildings to be repaired or rebuilt this will naturally cause the price of building materials to rise.

Because earthquakes happen so suddenly there obviously isn't the time for building merchants or timber yards to prepare in advance for the increased demand. Therefore prices for timber and bricks and bathrooms and kitchen units will be higher than they otherwise would have been without the earthquake.

That means households in other New Zealand cities will also have to pay higher prices as the demand increases and as businesses realise they are able to increase prices to meet the demand.

Naturally, higher prices for these goods means less money is available to be spent or saved elsewhere in the economy - remember even those not covered by insurance will now have to pay the higher prices too.

And due to the higher demand and higher prices it may be that to rebuild the same house would actually cost more than the amount it was insured for. So you may be in the position of having to rebuild a smaller house as a consequence of the increase in building costs.

Remember, building insurance is based on an insured amount, not whatever the cost is to replace it with an identical building.

Look, the fact is, despite the claims made by the economic ignoramuses in the mainstream, a disaster is called a disaster because it is, well, a disaster.

The idea that a disaster provides an economic benefit appears to be some sort of perverse Keynesian inspired invention to support the equally fallacious claims about make-work projects.

You know the ones, paying one group of people to dig a hole and then another bunch to fill the hole back in again. Because on the surface it appears to create jobs it's deemed as a positive to the economy.

It's no different with natural disasters.

Would anyone seriously have argued two weeks ago that it would be good for the New Zealand economy if they blew up Christchurch and then built everything from scratch? We wouldn't have thought so. But if it is such a good idea why didn't anyone suggest it?

They didn't suggest it because they know that it would be madness.

Whether cities have been destroyed by natural disaster or by man makes no difference. Destroying something for the sake if it doesn't result in a positive outcome for the economy.

The reality is it's a drain on the economy as resources have to be diverted from elsewhere.

We're not making complicated arguments here. All that's required is to think about the associated consequences of particular events, not just the immediate effects.

It's something that unfortunately most of our chums in the mainstream press are completely incapable of doing.

Cheers.
Kris Sayce
For Money Morning Australia

 

Yes but it makes for great spin. I expect the pointy heads will run with it for yonks. Hell, they can see through the spin way over there in aussieland .  Love the bit about inflated prices smacking everyone. Wonder what that will mean for Bolly's gameplan to pork property for longer with a lower rate.

Wally ..? you been taking pointers from Iain Parker...?all that reading stuff is exhausting...no I'm not drunk....and you did say ...Dear readers...didn't you Wall..?

I did I did it just slipped out Christov!...I thought it was most appropriate to drop that wee aussie comment in today...so much crap about the quake being good for the economy and that it would lift gdp etc etc....hope you read it all. I see the Kiwi has returned to its glide into the ground. Bolly will have to start buying it to prop the old bird up.

yes but you have to see the bigger picture -

Germany (both parts) was being pumped up with external money - some of it propaganda driven, some in fear of a repeat of the Weimar debacle.

Japan was simialr - American money injection post-war. There was a joke here that all we had to do ws declare war on the US, surrender immediately and wait for the dosh to roll in!

That historical benefactor, is of course, bankrupt.

Many sensible comments here, but within the BWF, although there is an overall loss, there are both winners and losers.

In a major catastrophe where the losses are primarily economic, as opposed to say deaths and injuries, the big losers are generally the reinsurance companies, located outside NZ in this case.

Back to reality...one quake is as good as another...I still reckon JK stayed home to boot some bums in wgtn because there is no way that place is ready for a 7.1 let alone the expected 8.5

Maybe JK could have a whip around his old mates on the munny market while he's in Pommyland saying gidday to the Queen. He must be good for a billion or three.

Someone pointed me to this

http://www.predictweather.com/ArticleShow.aspx?ID=306&type=home

Not the kind of thing I'd be too worried about, although after these last few days I might plan a holiday around March 20th. It won't be in Wellington.

The situation is in reality a bit more complicated than first impression. In the intermediate term there will be demand for goods and services in the Canterbury region and in a good majority of cases this will be with monies released by EWD, insurance and reinsurance (good for those with the insurance).

For example, the number of houses with damaged kitchens will be a boost to those making kitchens (good for them) But the extra demand will have spill-over effects elsewhere in the country due to the sudden unusual concentrated demand in Canterbury, and soon consumers will have to pay more for a new kitchen in the likes of Auckland, Wellington etc etc (not good).

Global Collapse of the Fiat Money System: Too Big To Fail Global Banks Will Collapse Between Now and First Quarter 2011

Full story: http://globalresearch.ca/index.php?context=va&aid=20853