Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with the Bank of New Zealand, including news that the Irish bailout and Germany's compromise on losses for bondholders after 2013 have failed to calm nervousness on European financial markets.
Spanish and Portugese bond yields hit record post-Euro highs vs German bond yields as bond investors worried the European debt crisis that has spread from Greece to Ireland will now spread to Portugal and Spain.
Bank bond holders are particularly nervous about Germany's insistence that they take some of the losses in any bank bailouts after 2013. Germany agreed to a softening of that stance over the weekend, but it is still concerning bond holders who have come to expect state-funded bailouts will always protect them from losses in banks.
Meanwhile, the Dow fell more than 1% and the New Zealand dollar fell to 74.5 USc as volatile financial markets drove people away from riskier assets to 'safer' assets in US dollar bonds.
Back in New Zealand, Christchurch property developer David Henderson has been bankrupted for the second time, owing NZ$142 million to the IRD and a group of finance companies including South Canterbury Finance, Allied Farmers, Equitable and Strategic Finance.
Finally, in Fiji, the owner of Fiji Water has stopped bottling at the Fiji Water plant after President Bainimarama increased a 'water extraction' tax from 0.3c/ltre to 15c/ltre
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Just to start the comment ball rolling after brekkie!
Three questions loom large about the coming year.
- Is the global recovery on track?
- Can the euro survive?
- Whither China?
Not exactly an original list but originality is not the test of relevance.
The short answers are “yes,” “yes but,” and “somewhere new,” somewhere markets haven’t really figured out yet.
The first question actually matters most to us, since without growth, financial stability is at least implausible and arguably impossible.
As for the euro, its innocence is already lost but redefining its future has an in-built timeline, which suggests 2012 will be the crucial year, not 2011.
Still, post Ireland, we are learning that the EFSF is less immediately about sovereign debt sustainability than preventing another fateful bank run that it's believe could impact not only the single currency but also pose a new threat to systemic stability – and by extension, global recovery.
For a variety of reasons – not least the potential global fallout –it's thought that that will not be allowed to happen. But make no mistake, if in the end populism prevails over crisis led reform and last minute deals to save the system, we might have to revise our answer to question one.
And not just revise but reverse.
That would worry no one more than the Chinese leadership, who it appears came to the euro’s rescue back in the summer when it was supposedly under attack from a group of hedge funds.
Whether true or not, we do know that sustained and rapid growth at home – which still requires decent growth abroad – remains the Holy Grail for China, the indispensable key to internal social and political stability. So should the euro find itself once again in extremis, one should not rule out some potential Chinese intervention in the name of enlightened self interest.
Or in the language of the Middle-Kingdom – the pursuit of international “harmony.”
Exactly what China’s leadership means by “harmonious development” at home is uncertain, but there are some potentially very interesting answers as we head into the new five-year plan, not to mention some big implications for commodity prices, inflation and even the future of the dollar, as the Chinese struggle to contain rising inflation expectations, which to their visible irritation appear to have been pumped up by the reaction to the Fed’s decision to press ahead with QE2Three questions loom large in our thinking about the coming year.
- First commenter off the block..Sir Wolly?
Robo...you will need to factor in the U.S. /Sth Korea creating little distractions from business as usual....combine that with the coitus interuptus the internal crackdown on the China financial's...and the brakes being applied to slow growth to a more manageable speed.
In all I think will result in a downturn for our Asian export market.
And you gotta wonder when the local mouth piece...media.. starts telling us just how fantastically our exporters are doing in those markets currently...........talking it up wont keep it up.....even the RBNZ are coming to that realization.
And if the Euro falls, either completely or just nominally, how does that help the States efforts to inflate their way out of this mess? It will mean a higher dollar; lower US exports; a slower US recovery and accompanied slower US domestic demand ( ie: less Chinese imports) and then everyone is in trouble....along with Europe. Oh. Pretty much like we all already are.....
Funny thing is Robo...so did Lange and ...that...was now, a long time ago.
Didn't John Boy also coin the concept of N.Z. as a financial Hub........ahubbahubbahubba ding..ding.
Perhaps we could export our critique to the world of how they run their affairs.
While being uncertain of our own path we could lecture them on where they are going wrong.
Or we could join Bolly....sit back ...watch it unfold....and give historically informed commentary .
happy day to you.
A.hubba ding ding.huh?
very clever Christ-stove.....cryptic code for Big Al ..not sure whether he could be classified as a financial "hubbard" these days..don't stir up those bloody southerners ..they're only just coming to terms with the " new normal"....they thought it incl. their sisters?!!
http://www.informationclearinghouse.info/article26947.htm The terms of the EU/IMF's €85 billion ($113 billion) bailout for Ireland are much worse than analysts had anticipated. Ireland will be required to use its National Pension Reserve Fund (NPRF) to shore up its insolvent banks and to maintain government operations. At the same time, senior debt-holders will not share any of the losses brought on by the banks reckless lending. According to Bloomberg News, "Prime Minister Brian Cowen told reporters there had been no support in talks to ask senior bondholders to lose part of their stake on loans made to Ireland's debt-crippled banks." Thus, 100 percent of the EU/IMF's €85 billion "Financial Rescue Package" will be paid for by Irish taxpayers.
This is a very bad deal. Irish workers have already endured nearly 3 years of depression-type conditions with shrinking wages, soaring unemployment and dwindling home equity. Now Brussels is taking aim at pensioners to save bondholders in Berlin and Paris from any losses on their bad bets. And that's not all. Here's an excerpt from the government's statement:
"The facility will include up to €35 billion to support the banking system; €10 billion for the immediate recapitalisation and the remaining €25 billion will be provided on a contingency basis. Up to €50 billion to cover the financing of the State.....If drawn down in total today, the combined annual average interest rate would be of the order of 5.8% per annum."
This is nothing but extortion. If Ireland wants to put its banks on solid footing, there's a way to do it that doesn't involve years of debt-slavery for its people. The government can underwrite the banks with a €10 billion loan from the Pension Reserve Fund that will guarantee deposits while the banks are nationalized and restructured. It is an excruciating process, but it's been done many times before. Ireland does not have to accept indentured servitude if it chooses not to.
And why would the government even consider paying an interest rate of 5.8% per annum? Interest rates should be the same as they are for the banks; 1 percent. Should a sovereign nation get a worse interest rate than a crooked banker who ripped off millions of investors? It doesn't matter that we struggled for 800 years to achieve independence, that millions died in the process; it doesn't matter that the folk memory of harsher times is still very much alive; none of this mattered to the few generations that have dismantled our country institution by institution and thrown the Irish people to the wolves..... Our political system is in ruins. The people have lost all faith in their elected representatives. They feel that welfare for the wealthy, bailouts for crooked corporations and rewards instead of punishments for embezzlement and thievery is the rule of the land. ... Our independent republic is less than a century old and already it's in smithereens -- we're in the gutter and being dictated to by the UK, Germany, France and the IMF. Mr. Ajai Chopra is our new vice-chancellor, our new Taoiseach, our new overlord and big boss and we've just been recolonized, first by our own brood of inbred gangsters and now by international bankers....But the blame game serves no useful purpose now: we're all fxx!#ked." (Ireland is Bankrupt...a letter from an Irish citizen)
http://www.independent.ie/opinion/columnists/gene-kerrigan/gene-kerriga…
This isn't a bailout or a rescue, this is a hold-up.
Yes, idiot Irish bankers loaned billions to idiot Irish developers, with the blessing of idiot Irish politicians. The resulting credit bubble eventually and inevitably burst -- and the developers (and many mortgage holders) can't pay back the loans, so the banks are insolvent.
And the collapse of the property market deprived the Exchequer of revenue it had come to depend on, causing a huge government deficit. But that's just part of the picture.
That money with which the banks gambled came from somewhere. In recent years, Europe was awash with cash, money saved by prudent citizens of stable economies. Idiot German and French and UK bankers needed someone to borrow that money and pay interest on it. They were delighted to pump countless billions into the vaults of the idiot Irish bankers. With the blessing of idiot EU politicians, bureaucrats and regulators.
"National can provide nothing but bluster and bravado in the face of bleak predictions for economic recovery," says Labour's Finance spokesperson David Cunliffe
What he forced himself not to say was:
" National can provide nothing but bluster and bravado in the face of bleak predictions for economic recovery from the awful mess left by the Labour govts," says Labour's Finance spokesperson David Cunliffe
There is a slight difference!
http://www.voxy.co.nz/politics/cunliffe-recovery-simply-not-happening-under-national/5/73983
Black swan flying.....!
"The drought season has come two months early for farmers in much of the North Island.
Federated Farmers says some of those in the agricultural sector from Northland to New Plymouth are already trucking in water to their farms as the tanks have dried up."
http://tvnz.co.nz/national-news/drought-arrives-early-northern-farmers-3929393
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