90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: Euro weakens on renewed Irish debt fears; Gold above US$1,400/oz; NZ$ down after PSA find

9th Nov 10, 8:59am by Bernard Hickey

Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news the Euro weakened overnight vs the US dollar as fears about sovereign debt on the fringes of the Eurozone returned to haunt the markets.

Concerns are growing about Ireland after its latest budget cuts announced last week failed to convince bond markets that it can dig itself out of the mire without a bailout from other countries in the Eurozone.

EU Economic and Monetary Affairs Commissioner Olli Rehn has arrived in Dublin for crisis talks. Ireland has been unable to raise funds on bond markets for months and needs to return to borrow funds by the middle of next year.

Irish Bond yields reached record highs vs German yields overnight, which is a sign of increased nervousness among bond investors who fear Ireland may default, forcing them to take losses. Ireland's budget deficit is running at over 13% of GDP.

Meanwhile, the gold price rose through US$1,400/oz to a fresh record high as investors continue to hunt for safe havens out of US dollars in the wake of the US Federal Reserve's widely criticised decision to print US$600 billion to lower the value of the US dollar and market interest rates.

The New Zealand dollar fell slightly to around 78.8 USc after news that a bacterial infection called PSA that can kill Kiwifruit vines has been found on a farm in the Bay of Plenty. Kiwifruit generates up to NZ$1.5 billion a year in export revenues and makes up almost half of all horticultural exports.

News that New Zealand's budget deficit for the three months to September 30 was NZ$2.2 billion worse than expected also dragged the NZ dollar lower. Weaker GST returns and lower corporate tax returns dragged revenues more than 8% lower than expected. See more here from Alex Tarrant in Wellington.

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24 Comments

by andyh | 9th Nov 10, 9:09am 1289246993

Why Irish eyes are weeping (or a morality play on the dangers of overinvestment on housing in small nations):

http://www.irishtimes.com/newspaper/opinion/2010/1108/1224282865400.html

A fascinatingly horrible read. The Irish are a very likeable lot - I travelled there muchly in the 1990s, and even then it was clear the headlong expansion could not last, particularly once the real estate Ponzi scheme got going in earnest.

by Nicholas Arrand | 9th Nov 10, 9:25am 1289247913

It's truely awful, andy. My wife has a friend of 30 years, who years ago went 'back home' to Dublin after the troubles subsided ( they came here to get the children away from them), and we spoke to her 2 weeks ago. In a call last year with Kathleen she said 'things were bad, but we're okay'. 2 weeks ago, she started crying. I don't want that to happen here.

by andyh | 9th Nov 10, 10:02am 1289250142

Indeed Nicholas. The frightening thing is we are but a few short steps from a similar scenario erupting in Oceania; it goes:

Step 1. Australian housing market hits wall (signs this may be happening) and starts to slide, Australian banks over-exposure to home lending makes them creak. At the same time China slams on the breaks to stop over-heating caused by US attempts to export inflation, curtailing demand dramatically for Aussie exports

Step 2. NZ economy goes sharply into reverse as demand from 2 biggest trading partners falls - Aussie banks here over exposed to housing/agricultural debt, also start to creak. Full scale banking crisis erupts on both sides of Tasman as asset prices fall. Respective currencies plunge.

Step 3. Aussie banks rescued, losses socialised via bank guarantee's and so on...........

by Wolly | 9th Nov 10, 9:12am 1289247137

Look what the reds inside the greens have in store for YOU....

"A home rating scheme aimed at helping improve the energy efficiency of homes should be made mandatory, the Green Party says........

The initiative involves a free online tool providing information about cost-effective upgrades, and there is the option of an official Homestar rating which can be used to market a house.

The official rating will be calculated by an accredited auditor, at a cost to the home owner.

Green Party housing spokesman Gareth Hughes said the scheme was a "good start", but would miss out the coldest and dampest homes because it wasn't mandatory."tvnz

Nanny state rubbish!......be careful here, the Green/reds are determined to run your life their way. What you always wanted, a warrant of fitness for your house which you have to update every 5 years! or whenever you want to sell it...and the Green/reds will make sure there are thousands of 'accredited auditors' because that creates lots of jobs...for Green/reds

by powerdownkiwi | 9th Nov 10, 9:37am 1289248645

you have no excuse for that rubbish, Wally. I've been pointing out here, for a while now, just why that is so.

The Greens know about the limits to growth, and about the energy constraints which will erupt (exponential growth always hits the wall at acceleraing speed)

The only way to be prepared, it be as invulnerable as possible.

While most of the turkeys don'r 'get it', the best way to advocate is to push for the energy-saving action giving most return. Basically, by the time the turkey-types learn, it'll be too late.

The best push with the most return is home insulation, followed by water heating, and home heating. There is not time to wait for the idiots to catch up, and because the idiots won't do it with understanding, they have to be herded.

Come on, old son, it's all out there for the reading :)

by Wolly | 9th Nov 10, 10:00am 1289250010

Hang on a minute mate....are we incapable of being allowed to make our own decisions about this...must we hand our lives over to the Green/reds to run.....have you forgotten the Clark era shower head farce....where does it stop...this becomes "mandatory" and then it's on to what next?....restrictions and enforcement....bugger that.

by Kunst | 9th Nov 10, 9:58am 1289249924

Reading through the major parties agenda the “Green Party” is about the only one, which really understands the time we live in and accordingly has build a honest policy for a better New Zealand.

..and what about the right, left, blue, red calling rubbish in modern policies – grow up Kiwis - support the cause and not the colour(s) !

by Basel Brush III | 9th Nov 10, 11:15am 1289254509

I cannot agree the Greens policies overall but they are the only party that has no agenda to hold power or is for personal aggrandisement.

Good on 'em

by Gummy Bear Hero | 9th Nov 10, 11:33am 1289255628

And the Greens are the only party to tell John Key to bugger off , just prior to his landslide beating of Labour in 2008 . ........... Twits !

by michael | 9th Nov 10, 10:31am 1289251903

Acredited auditors, better known as "Greds".

by Kunst | 9th Nov 10, 9:40am 1289248829

The catalogue of measures taking by the big economic powers to fight each other has taken unprecedented proportions on many fronts - means for Noddyland back to the basics of life and business towards self- sufficiency - before it is too late and we are going to be eaten alive.

by Rob of the North | 9th Nov 10, 10:24am 1289251487

hey..BOO!...can i just interrupt this pessimists picnic above for a different line of thinking?

One solution - proposed by World Bank President Robert Zoellick in the Financial Times on Monday - is to return to a modern version of the gold standard.Unlike the original gold standard - abandoned during the Great Depression of the 1930s - he does not advocate rigidly fixing the value of currencies against the price of gold.

Instead, Mr Zoellick suggested that a future system of flexible exchange rates should reference gold - instead of the US dollar - as a common point of valuation.The implication of Mr Zoellick's suggestion is that countries like China would rely much less on buying US dollars, and more on buying gold and other currencies to build up their reserves.

"I would subscribe to Mr Zoellick's comments about the urgency of getting on with this," Mr Magnus at UBS told the BBC. "The world system is becoming very chaotic and we need to kind of reinstitute a set of rules and behavioural codes which govern the international relations between countries," he said, adding that he had "absolutely zero expectation that anything like this will be forthcoming at the G20 summit"

Hmm..that last para is sounding a bit pessimistic..i'd better take my non-pessimism drugs!

by Gummy Bear Hero | 9th Nov 10, 11:26am 1289255186

And boody-Boo to you too . Hey , tell me summit Rob , hasn't the world economy always been chaotic , except for brief lulls where central bankers stepped in to prevent bubbles from bursting , only to make them bigger ...... and eventually even more chaotic when the inevitable prick ( not me ! ) comes along ?

Meebee the guys at the world bank have been supping from the same well-of-silliness that Bernard sucks from !

I take note of a comment that St. Nick made , some time back , that when the last of the sensible commentators have thrown in the towel and turned their backs on capitalism , the worst of the GFC is likely to be behind us .

Gold Standard : Aha ha de haaaaaaaaaaaa !

by Didge | 9th Nov 10, 10:31am 1289251866

Since returning from overseas and purchasing an eighties era brick and aluminium home. I have installed a heat pump, double glazed windows, added both ceiling and underfloor insulation and a moisture barrier under the house as well as solar heating. Yet my house only rated a lowly 2 on the Homestar scale of 1 to 10 which i have just completed.

One subject in the test that I think is stupid is that they consider some 75 plus of my garden's landscaping should be in "native" plants. I probably know a thousand times more than whoever came up with that silly idea. One can achieve excellent environmental inputs to one's home and outdoor living areas without using a single native plant.

Indeed with the distinct possibilities of climate change over coming decades we may find that many of our local natives will be moving ever southwards or to higher altitudes.

I am starting to wonder if wetter winters and quite droughted summers are now about to be the norm in the Waikato and beyond.

by RJ | 9th Nov 10, 11:27am 1289255268

The Irish should have just defaulted-refused to pay the money back.

by GG | 9th Nov 10, 11:40am 1289256005

@ Powerdownkiwi

I agree with your analysis around environmental contraints.

However, we are deluded if we think that the Greens remain an environmental party. They have been highjacked by a socialist agenda a while ago, which as an environmentalist I find very disappointing.

How on earth can a environental party advocate increasing state subsidies for higher birth rates (via extending WFF) when population growth is the single most environmental challenge facing the planet. All environental challenges are directly related to over- population. A true environmental party would be advocating taxes on removing all subsidiaes for child birth (such as WFF and DPB) beyond replacement levels of 2 per couple.

Also the Greens advocate increasing the number of refugees to NZ. Again, this is environentally damaging as the environental footprint of someone from a 3rd world contry moving to a developed country is massively higher. The money on refugees is far better spent on helping the 3rd world country to improve litracy, practice sustainable farm practices and to empower woman to reduce their birth rates and to cause less environemntal damage.

NZ needs a true environmental party which advocates sustainable social, economical and environmental policies.

by andyh | 9th Nov 10, 12:36pm 1289259381

GG - spot on, the Greens handicap themselves massively with their idiotic obsession with socialistic minutiae (think the anti-smacking law). I don't think they really understand where peakoil (and peak resources) really take us, and how it will invariably lead to the slashing of the money available for 'social spending'.

Here's to the emergence of a centre/centre right environmentalist/peakoil aware political movement - it will be small (social) government, environmentally aware, anti-immigration, resource protective (with a keen eye on defending what we have).

by Kunst | 9th Nov 10, 1:03pm 1289261024

Yeah - hammering the “Greens”, because they are touching important issues of our society which other parties just avoid to stay away of trouble in order not to lose voters, which obviously works perfect with you guys.

It is always interesting how much people are tolerating from the main parties. Anyway here a tip - vote for capable people not for parties.

by powerdownkiwi | 9th Nov 10, 7:46pm 1289285208

GG- absolutely agree. The old guard understood, the new wave appear to be just maori/socialist.

There is a problem, of course - itf you tell it like it is, all the denial comes out, in the forms like Wolly's 'don't tell me what to do'.

So maybe they've tried a new tack, hoping to get more votes.

It's all too late, now. The garbage hits the fan long before two election cycles are over, probably before one is, and maybe during this one. They haven't the lead-time left.

They're nearest to being right, though.

I'm told that when the Greens were talking to the Nats about the insulation accord, one of the latter came over at a break, and said "we haven't a clue what you're on about".

There's a lot of it about.

by Didge | 9th Nov 10, 11:44am 1289256297

Hear hear.

by Wolly | 9th Nov 10, 12:05pm 1289257541

Me too!

by Gummy Bear Hero | 9th Nov 10, 12:47pm 1289260039

And me ! Well said GG and andyh.

by hamrod | 9th Nov 10, 1:17pm 1289261838

Absolutely agree on points about the greens and thier conflicting support for non-envionmental policies ie population growth. If we can't make our economy work without population growth shouldn't that ring a few alarm bells for the greens? Theres nothing green about an ever increasing usage of resources for an ever increasing population.

The sooner we face up to the reality that an increasing population means we're going to have to start rationing resources and prepare for that to happen the better off we'll be. The sooner we focus on getting our economy improving with less people the better off we'll be.

by rc | 9th Nov 10, 12:20pm 1289258407

Word