Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news that US President Barack Obama has proposed spending US$3.7 trillion in the coming fiscal year.
Only US$2.1 trillion of that is supported by taxes and other revenues. The remaining US$1.6 trillion or 10.9% of the budget will be borrowed.
Republicans have attacked the plan and called for more aggressive spending cuts. Obama is proposing to reduce deficits by just US$1.1 trillion over a period of 10 years.
This is widely seen as unsustainable in both political and financial terms.
A battle is looming in Congress over Obama's plan to lift the US government's debt ceiling from its current US$14.3 trillion.
If it is not lifted, the US government would not be allowed to borrow more and would have to either default on its debt or stop spending.
This political drama in America matters for New Zealand because any budgetary or funding crisis in America is likely to lift longer term interest rates globally.
US government interest costs are expected to triple to 3.1% of GDP by 2016 as the US government borrows a further US$4 trillion over the next four years.
Debt servicing costs will rise to 82% of America's budget deficit by 2016 from 12% last year. This compares with Portugal at 69% now.
Yet, astonishingly, the US 10 year bond yield actually fell overnight by 2 basis points to 3.61%, while the 30 year Treasury bond fell 3 basis points to 4.66%.
The US Federal Reserve is still buying some of these bonds, effectively printing money.
Meanwhile in New Zealand, there were mixed signals on the health of the economy.
Retail sales in the December quarter were weaker than expected, but Freightways -- an economic bellwether -- published mildly positive results with 9% growth in volumes.
But it said it was cautious and was not seeing broad strength in activity.
See more here in Freightways' result.
The New Zealand dollar was mildly weaker over the last 24 hours after weak retail sales figures and some encouraging signs of recovery in the US economy.
It fell as low as 75.5 USc overnight.
9 Comments
Boredom setting in eh, Bernard.
Over an hour since your posting and no one interested?
Na it's just that any one who can count astronomical numbers plus interest and expotential growth and GDP of non stop econobabble figured this all out about 10 years ago. So it's old news.
buggared if i can see how you can classify it as old news when it only happened yesterday?
when you're holding a lot of gold stocks ( as i am ) then anything that affects US interest rates interests me....so, lack of postings today either means no-one has any money or the old troopers like Wolly etc have bored themselves to death and given up posting.
thanks BH...very useful esp. when the FEd stops playing pass the parcel and the music stops?!
Rob have followed this stuff for a long time it's becoming a self fulfilling prophecy.
First up this is a artifical induced set of circumstances. History shows us this game plan.
I too have investments in gold, silver, oil, food and water etc etc...Im self directed and so far things are playing out how I suspected they would 10 years ago. Actually the only thing that has really surprised me is how long this giant ponzi scheme has kept going. As with all investors/traders the key thing is timing and time frame. Very tricky to pin down.
Chances are high that one world currency is part of the AGENDA controlled by the same bankers who bought you GFC. The bankers and there owners are working on destroying the USdollar, you can not do that overnight so you move in small steps, known as...
problem, reaction, solution.
One world Govt conspiracy theory mixed with pragmatism and common sense...i like it!
que sera sera ?
Cui bono!
I've found the mind works best like a parachute, open.
Labour MP to resign, see release below:
Labour MP Mita Ririnui has announced he will leave Parliament at the end of this year to pursue new opportunities working with his people in the Bay of Plenty.
“It’s been a wonderful 12 years, many of which I spent as a Minister helping shape policies designed to improve the lives of Māori throughout the country. It doesn’t get any better than that.
“It’s now time to go and work on some new challenges. My focus will be on leading Tauranga iwi through the settlement process and providing them with any guidance and assistance they may need. I also intend to be involved in the post-settlement challenges that iwi will be confronted with. These are exciting times.”
Mita Ririnui was born and raised in Tauranga and represented Waiariki from 1999 till 2005. He has previously served as Associate Minister of Treaty Negotiations, Health, Corrections and Forestry.
“It was a highlight of my career to be given the opportunity to move the address and reply motion in 1999, effectively launching nine years of the Labour Government.
“I appreciate the experiences and opportunities I’ve had during my time here. I’m proud of my achievements and I wish my Labour colleagues all the best for the upcoming election.”
Maybe he sees a new future in politics for himself when in 2013 amid the chaos resulting from the fallout of the second dip of the GFC gives an opportunity for the United Northern Tribes to take back their lands and independence as guaranteed under the Declaration of Independece of 1835.
See if that can spark some life into this thread:)
"Only US$2.1 trillion of that is supported by taxes and other revenues. The remaining US$1.6 trillion or 10.9% of the budget will be borrowed."
The 10.9% is compared to GDP, not the budget. 43% of this year's expenditure will be borrowed.
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