90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: Irish bailout impasse; Fear of Euro contagion; NZ$ up after better retail sales; Serepisos' tax woes

16th Nov 10, 8:57am 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 that Ireland may have to pump yet more cash into its banks as it remains steadfastly opposed to a European bailout.

Meanwhile, the Europeans want Ireland to use the bailout to avoid contagion spreading across the peripheral European nations, including Portugal, Spain, Greece and Italy, collectively known as the PIIGS.

Regular bond holders have stopped buying the PIIGs debt and now only the banks are buying it. They in turn receive their funding from the European Central Bank, meaning the ECB is effectively propping up the PIIGS in the hope their economies eventually fire up again and can improve confidence. This is all to stop European bond yields from rising too much.

See an excellent piece here from Ambrose Evans Pritchard at The Telegraph on the background to the Irish debt situation and the potential for contagion and euro breakup.

Meanwhile, the New Zealand dollar firmed over the last 24 hours to over 77 USc from nearer 76 USc after slightly stronger than expected New Zealand retail sales growth in the September quarter ahead of the October 1 GST increase. See more on the retails sales growth here from our own Alex Tarrant.

Also in New Zealand, the Dominion Post reports that the Inland Revenue Department has moved to liquidate 5 companies owned by Wellington property developer Terry Serepisos, including the company that owns the Wellington Phoenix football team.

Serepisos has unpaid tax and GST bills of almost NZ$3.6 million.

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22 Comments

by David George | 16th Nov 10, 9:15am 1289852124

The Status Quo's Fundamental Paradigms Are Broken

"Anyone who believes the Savior State will endure without any adjustment in the coming decade is simply ignoring the facts and hardening their faulty beliefs. That refusal to learn from facts is not a successful survival strategy.

I don't have "all the answers" or a crystal ball, but it seems clear that "more of the same" is not a sustainable option. New applications of technology and new social/economic models (both localized and international) will have to be developed, tested and adapted which require less energy and resources. "

C H Smith, superb as usual.

http://www.oftwominds.com/blognov10/paradigms-broken11-10.html

by powerdownkiwi | 16th Nov 10, 9:29am 1289852958

great link

by andyh | 16th Nov 10, 9:16am 1289852193

According to this the Aussie housing crash is already underway:

http://www.moneymorning.com.au/20101115/aussie-house-price-crash-has-be…

by David George | 16th Nov 10, 10:02am 1289854929

The Ben Bernank's big plan is coming unstuck. Yields on Treasuries up across the board this morning. Ten year is not far off 3% from well under 2,5% a week or so ago. US mortgage rates up as well.

Wasn't QEII supposed to lower interest rates?

by Gertraud T. | 16th Nov 10, 11:55am 1289861754

No, Kiwidave, Bernanke declared several times his aim is to create inflation, he fears deflation like hell. Had two good links of his speeches in this respect, but cannot find at the moment.

by anonentity | 16th Nov 10, 10:02am 1289854944

I'd imagine when the cold light of reality finaly hits the over stimulated Aussie Housing market.They will go the way of the American housing market...Too many kids have got into debt because of the first home byers insentive..its a bit like giving a dying animal some adrenaline..it only works for so long.

by realist | 16th Nov 10, 10:36am 1289856982

Oh dear,Mr Serepisos is finally been caught up with, and who holds the 2nd mortgages, yes 2nd mortgage on most of his properties, why none other than SCF....what a mess.

by Gareth Vaughan | 16th Nov 10, 2:36pm 1289871411

Realist, are you referring to the second mortgages noted here? - http://www.stuff.co.nz/business/4002149/Inside-the-230m-Serepisos-real-…

by scarfie | 16th Nov 10, 10:51am 1289857900

Interesting that Bernanke was quoted a number of times in the book I have just finished on the 1930's depression. Looks like he has a scholastic background in that area, and as such is trying to fix things the opposite to what was tried then. Trouble I see is no method will work to fix the indiscretions of the preceding decade.

Here is a good one for you Bernard, you may want to double check my figures.

In my Architecture studies Technology are core papers. And this year we have covered environmental and sustainable design(ESD) quite heavily. (with thermal performance being a separate series of lectures withing the same papers)

Anyway one senior lecturer bought up OECD figures regarding efficiency of different economies measured in Tons of oil per $1000 USD in GDP. NZ is one of the worst and we are going in the wrong direction. I can't recall the exact figure, but we are worse than the US, which according to wikipedia is at 7.8.

No here is the good bit:

7.8 Tons @ 7.3 barrels per Ton = 57 Barrels

57 Barrels @ say $75 each = $4271

That is the US consumes $4271 of oil to make $1000.

NZ is worse!

Is it my maths or is something terribly wrong with that equation. Just to break even oil would have to be at $17-50 a barrel. And given the discourse on peak oil that occurs here regularly that isn't going to happen. As I said yesterday we are facing a paradigm shift.

by powerdownkiwi | 16th Nov 10, 12:27pm 1289863625

Scarfie - your math is right, even if the numbers are not. Since the Industrial Revolution, we've used fossil energy as the booster-rocket. It was valued at it's extraction cost, which often included slave-wages and/or political repression, and ignored ultimate scarcity.

The booster-rocket is half-empty of fuel, but instead of intelligently readying ourselves for depletion, we used the first half empiricly building infrastructure which needs more of the stuff than ever, to keep going.

In essence, we didn't properly account for the real cost of the one-off resource. We fail that test in many other ways too - dairying not paying its way with water quality, for example.

I think you might be wrong on the comparison - I have it somewhere, but I think the US is the most inefficient of the lot. At some point, I seem to remember they were 5% of the global population, using 25% of the energy supply.

this is as good a backgrounder as it gets:

http://www.energybulletin.net/stories/2010-11-12/end-growth

by Neven911 | 16th Nov 10, 12:42pm 1289864564

Scarfie

What you need to consider is the type of industries that contribute to GDP and don't use a lot of oil...let me think...Wall street Bankers and the London City would be two examples

This is where simplistic analysis like the one your lecturer quoted are so misleading, NZ is 'bad' because we are firmly entrenched in the real economy, The flip side is that those economies that disconnected themselves from the real economy are now imploding.

Neven

by Software Junky | 16th Nov 10, 12:59pm 1289865578

Really interesting analysis scarfie ... the cost of energy to GDP ratio is a great measure that I have never seen before. I would like to see more on this if anyone has any links.

Your math is wrong somewhere, btw ... at US GDP $14.3 Trillion (http://en.wikipedia.org/wiki/US_GDP), and oil consumption of $410 billion dollars a year (at $75/barrel) (http://en.wikipedia.org/wiki/Energy_in_the_United_States) The GDP is far greater than the cost of oil ... although there is also the cost of refining, and the cost of other energy sources used in the 'manufacture' of that GDP figure too ...

by Christov | 16th Nov 10, 11:49am 1289861341

Would be nice to see a little on China drawing the line in the sand on hot money inflows.......the ugly makeover is about to get downright spiteful......still you can't blame them the U.S. should have considered that while enjoying the upside of hot money inflow.......if your looking for the excuse the Americans want to return to protectionism....this will be the match that sets the fuse......go search SAFE...current activities.

Oh and hello how are you...well...happy....anything new....Bolly still steering the the P class through mountainous poo infested water...?....what a guy eh...the man should be in a costume or something of that nature..

Happiness upon all who frequent this site......I could have said.. peace upon... but it had a bad flow.

by Andrewj | 16th Nov 10, 12:02pm 1289862130

Hudson

http://www.counterpunch.org/hudson11152010.html

by Christov | 16th Nov 10, 12:12pm 1289862760

ta for the link AndrewJ .......good read.....shaping as though only direct intervention by GOD hisself can save O MAMA.....but internal politics aside they have some real big fish to fry in the interim .....

by Andrewj | 16th Nov 10, 12:42pm 1289864541

http://www.telegraph.co.uk/finance/economics/8135582/Contagion-hits-Por…

Spain's central bank governor, Miguel Angel Ordonez, lashed out at Dublin on Monday, calling on the Irish government to halt the panic and take the "proper decision" of activating the EU-IMF bail-out mechanism.

"The situation in the markets has been very negative due to the lack of a final decision by Ireland. It is up to Ireland to take that decision, and I hope it does," he said.

The outburst reflected suspicion at the European Central Bank that Dublin is holding the eurozone to ransom, allowing the crisis to fester until it extracts a pledge from EU officials that it will not suffer a loss of economic sovereignty or be forced to give up its 12.5pc corporate tax rate under any deal.

drjonathanwilson 11 minutes ago Perhaps it is time for the Germans to renew their understanding of sunk costs.

Yes they have invested a lot of treasure over the last 50 years in building a new Reich.

But what is the net present value of that German investment?

All the Germans need to know is that it is now quite clearly a negative value.

The whole shebang is insolvent - at least this time around they have not paid for their 4th Reich investment with both blood and treasure before it collapsed

Jonathan

by David B | 16th Nov 10, 12:47pm 1289864828

Let Ireland collapse, nation of ingrates! Given that they are responsible for two of the world’s most monstrous abominations, River dancing and Bono's sunglasses (three if you count the Irish Rovers!), abandon them to their fate I say, AND may it be long and miserable.

Actually aren't they responsible for governments' around the world being forced to give government guarantees to banks to prevent a run on funds during the GCC? Didn't they do it first (without first telling anyone) and everyone else was forced to follow? So they can be blamed then for our own Government’s bailout of SCF to the tune $1.7b. Gee thanks, Paddy, grab 2 bill for us would ya?

by scarfie | 16th Nov 10, 2:28pm 1289870899

Okay here are some links. I posted this oil info up here not because I am entirely convinced, but to get some oversight into them. I am still uncertain as the OECD figures look quite different than what I was given, and also look similar to the second link below. However the third link if you read under energy gives the same figure that I was given at university. Looks like a disparity there, but not sure if I am reading it wrong.

http://stats.oecd.org/index.aspx?queryid=23095

http://en.wikipedia.org/wiki/List_of_countries_by_energy_intensity

http://en.wikipedia.org/wiki/Usa#Energy

Looks like some good links posted for me to read also:)

Cheers

Scarfie

by powerdownkiwi | 16th Nov 10, 2:49pm 1289872176

Scarfie - not sure if I've given you this:

http://anz.theoildrum.com/node/7114#more

One of the problems is tracking the off-load. For instance, much of the consumption in the US is of stuff made in China. So you have to factor in some of China's oil consumption, as part of US GDP. That's not the same as counting a simple import.

I suspect it would be a challenging exercise, and not sure what it would prove.

The big energy picture is volume-over-time, quality, and availability-for-export.

not sure if I've given you this one, but it shows how the 'when' is a waste of ascertation time:

http://www.hubbertpeak.com/bartlett/hubbert.htm

by powerdownkiwi | 16th Nov 10, 2:53pm 1289872420

http://www.eia.doe.gov/aer/txt/ptb0105.html

by scarfie | 16th Nov 10, 6:32pm 1289885531

Thanks for those links. Interesting reading but the hubbertpeak one was pretty heavy for an afternoon read. Whew!

At uni we have had some interesting discussions this year around sustainability, and at the same time doing another paper about critical thinking. The young ones suck it all up, but with some experience under my belt it is easier to filter the information.

A useful comparison was how much energy to build a house today compared ot 100 years ago(in NZ)

Here is another good one for you. It takes 1000 tonnes of water to grow a tonne of wheat.

A few weeks back I was trying to find out as much about gold as I could and found this site.

http://minerals.usgs.gov/minerals/

Most minerals only have around 20 years known reserves at current demand.

But it is the oil-fertiliser-food production-population cap that I picked up from outside the curriculum that has my attention the most.

by scarfie | 16th Nov 10, 6:32pm 1289885556