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

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,

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.

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

Please register so you can comment after we turn off unregistered comments from this Sunday September 12.

A reminder to all that we are moving to registered comments from this Sunday. We welcome any registered commenters. We don't welcome commenters making abusive, defamatory or racist comments. They'll be deleted. We want to have good clean fun that makes us smile and think rather than swear and huff and puff.

Registered commenters can edit their comments and more easily include links out. We won't be spamming people. The box to register is in the right hand column.

Here's more detail. http://www.interest.co.nz/opinion/heres-why-wed-you-register-be-commente...

We welcome any suggestions for other changes too to improve the quality (and quantity) of the debate here.

cheers

Bernard

  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.

 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



 

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.

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).

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