90 seconds at 9 am with BNZ

90 seconds at 9 am: Bernanke ready with QE3; gold at record high; Fitch cuts Greek rating; China growth sustainable

14th Jul 11, 8:48am by David Chaston

David Chaston details the key news in 90 seconds at 9 am in association with Bank of New Zealand, with news that Fed chairman Bernanke has been testifying before the US Congress that the Fed would consider a fresh round of money printing if it became necessary. But he also said he now expects US growth to exceed 3% in the second half of 2011. Meanwhile his Fed colleague Stanley Fisher has said they are worried about how markets would react to more money printing. He won’t support more, and noted that the “money put out is not being put to work”.

The US is clearly at the limit of monetary policy effectiveness.

Markets liked the Benanke comments and the Dow is higher. Oil is higher too. But so is gold which has just hit a new record of US$1580/oz. And silver zoomed up 5% on the day.

In Europe, Fitch cut its Greece rating to one notch above default, CCC. The locals aren’t happy about that. And EU bank stress tests are about to be announced, and there are expectations that things could get ugly for banks at the margin. Perhaps a new Lehman moment beckons.

There was good news from China, with Q2 growth there at 9.5%, higher than estimates. And reports that this pace is sustainable as growth moves inland and broadens.

Here at home, the NZ$ powered ever higher overnight against most currencies, reaching a record vs the euro of 0.5913

And there are some big data releases out today. GDP at 10:45 this morning, the Labour Party tax policy at 2pm, and we are expecting the Real Estate Institutes June house sales data as well.

Bernard Hickey is back tomorrow.

No chart with that title exists.

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45 Comments

by Kunst | 14th Jul 11, 9:06am 1310591160

Are our experts dreaming – away from reality ?

The world is struggling, but finally great news for New Zealand’s economy.

BNZ chief economist - Tony Alexander this morning on AMP Business (TV One) – economy is recovering - growth expected to be 4% + !!!????

..and we are still not hearing one word from established NZeconomists on how much impact, worldwide climate change, natural and political events have on our economic performance – our daily life’s.

http://www.independent.co.uk/environment/climate-change/climate-change-will-damage-your-health-1787948.html

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5949991.ece

http://ideas.repec.org/a/eee/resene/v32y2010i3p341-362.html

by hamrod | 14th Jul 11, 9:27am 1310592456

3% growth in the US? 9.5% growth considered sustainable for China? What planet are these guys on?

by andyh | 14th Jul 11, 9:24am 1310592299

Clear the decks.

Moody's has just put the US on potential credit downgrade watch............

by Colin Riden | 14th Jul 11, 9:30am 1310592606

David, I think your comments regards the markets (Dow, Oil) appear to have already been overtaken by events.

by Wolly | 14th Jul 11, 9:39am 1310593192

You might as well sit back and enjoy the circus acts. Bernanke's printing has failed but he will go on printing. Commodity prices will rise to adjust for the extra american toilet paper. So the Kiwi will head to parity.

In the other circus tent we have the piigs on the high wire act.

In short, the morons have run out of road to kick the cans down.

This would not be a good time to buy govt bonds..or bet on corporate growth..or borrow from a bank.

And the band played on.

by powerdownkiwi | 14th Jul 11, 10:06am 1310594765

Actually, it's time to buy/make/scrounge ploughshares.

And swords.

Pruning-hooks optional.

I was at a lecture last night (about lignite, as it happened - now there's an energy nonsense about to happen) and the discussion afterwards ranged over all the energy/work/population/climate change/pollution gamut.

We all accepted that a fiscal system based on growth, and which has never disentangled itself from physical goods/services, was doomed.

That it was doomed from 'peak' on, and would never recover it's levered overrun.

That the 7 billionth child will be born in October, but that we will be down to 2-4 billion by 2050. One way or another.

That the climate refugees will be pissed off.

That the young will be pissed off.

That the disenfranchised/disposessed will be pissed off.

That the deluded believers (those who thought they could 'invest their way to wealth, and that exponential growth continues indefinitely) will be pissed off.

We sure ain't seen nuthin' yet, Brer Rabbit.

by David Chaston | 14th Jul 11, 9:58am 1310594280

from Dan Bell ...

"The NZD/USD made a new post float high over 0.8400 this morning after credting rating agency Moody's Investor Services placed the Aaa bond rating of the United States government on review for possible downgrade.

"The United States may lose its top-notch credit rating in the next few weeks if lawmakers fail to increase the country's debt ceiling, forcing the government to miss debt payments, Moody's Investors Service warned on Wednesday. Moody's was the first among the big-three rating agencies to place the United States' Aaa rating on review for a possible downgrade, which means a negative rating action is impending.

"In a statement, Moody's said it sees a "rising possibility that the statutory debt limit will not be raised on a timely basis, leading to a default on U.S. Treasury debt obligations."

by scarfie | 14th Jul 11, 11:07am 1310598471

Jesus look at the NZD go. Just pulled back a little after a 1c gain on the back of the GDP figures, combined with the Moody's news & Bernanke.

Time for a rethink.

by Gareth Vaughan | 14th Jul 11, 11:34am 1310600078

Haircuts for Blue Star bond holders - http://www.nzx.com/news/5283420/Blue-Star-bondholders-take-haircut

by goNZ | 14th Jul 11, 1:07pm 1310605624

if it wasnt for powerdownandloser types intimidating the govt and voters and hobbling NZ from using its natural resources, we could be the wealthy country we used to be. Pathetic really, that single issue campaigners have so much clout with decision makers

by powerdownkiwi | 14th Jul 11, 1:16pm 1310606215

goNZ

That's almost too stupid to answer.

But I'll ask you a couple of wee questions. I'll keep them simple.

If all wealth is resource-based - how would you describe wealth when the mines are empty?

What would be the options of the people (our direct descendants) at that point?

Actually, I'll ask another one: Do you understand growth and doubling-times?

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

So how long does your paradigm last, again? Or are you both wanting to get 'rich' from this approach, at the same time as 'not using very much'.

It's nothing to do with 'losers', it's to do with intelligence.

by powerdownkiwi | 14th Jul 11, 1:29pm 1310606983

Because

http://www.odt.co.nz/opinion/opinion/34180/hard-times-here-stay

http://www.odt.co.nz/opinion/opinion/62584/vote-seuss039s-lorax-prime-minister?page=0%2C1

Particularly note the last two sentences of the latter. That poster's lack of appreciation of consequences is see-throughable by the target audience of The Lorax.

For an adult not to think it through, has to be below par, surely? Credit where credit's due, etc?

by andyh | 14th Jul 11, 3:11pm 1310613118

Perhaps you could provide sound examples of nations which have been run purely by technocrats - I would struggle to identify much technocratic/scientific ability in any of the successive general secretaries (or members of the politburo) of the Communist party which ruled the USSR up until its demise.

Perhaps Stalin secretely split the atom while we werent looking, whilst Brezhnev did crucial work in isolating Penicillin and Andropov cloned sheep in his spare time..........

by powerdownkiwi | 14th Jul 11, 3:55pm 1310615739

You do try and put words in folk's mouths, don't you.

And come with sooooooo much preconception/mental baggage.

No, I'm not advocating any typecast political system. A wartime Cabinet did the kind of thing we will need, under Churchill. As I recall, he listened to Barnes Wallis....

I prefer a democracy, but that requires an informed, intelligent society, and we're out of time for that. The lead-time is gone.

by martinv | 14th Jul 11, 3:15pm 1310613321

I believe PDK has performed tons of research and thought things through for himself and come to conclusions that will result in wide-spread and profound changes for life as we know it.

The independent research I have carried out brings me to the same conclusions as PDK. The difference is he goes around trying to enlighten people.

Suppose you know a rather large train has departed from city A to go to city B. You know that it will travel over a mountain range and down the other side through town C where there is a sweeping bend in the tracks. Suppose you know that not all of the brakes on the train are working, but most are. Suppose you know that the train weighs a lot more than it should (the carriages they based the weight calculation on were much lighter than the rest). Suppose you know that the way the brakes work on the train - if the driver hits the emergency brakes, the regular brakes will disengage and the emergency brakes will engage by themselves. Suppose you think it over and come to the conclusion that the train will not make the bend. What would you do? I'm making the most of the knowledge to benefit myself and those directly around me. PDK is instead down there in the town telling everyone they had better prepare for a train wreck.

The train did actually come down the mountain (true story) and when it started to accelerate, the driver activated the emergency brake. The main brakes disengaged and the emergency brakes took over instead which resulted in the train actually accelerating as the emergency brakes melted or short order. The train sped down the hill and derailed at the bend.

Of course we don't KNOW anything for certain, but what if you're pretty sure about something, should you act on it?

If you explain to people in the town about the train and all the problems with it and the potential result, yet people just get annoyed because you keep bashing on about something horrible happening (a train crash), would you think they are stupid?

by martinv | 14th Jul 11, 3:44pm 1310615070

I mean we have PDK (and a growing number of others) who are harping on about Peak Oil and energy and exponential growth and how this translates into quite a different future than the one most people imagine/wish/desire themselves in. The vast majority of the audience either (a) don't listen, (b) don't want to hear bad news, or (c) cannot quite fathom what it means.

a) "Hey, there's some guy in the town square shouting something, but hey it's lunch time so let's go and buy some food and talk about bright shiny objects or about other people instead".

b) "Stop telling us the world's going to end; what's with all the negativity dude? I think I'll go and talk to a more positive person".

c) "Train? Brakes? Braking systems? ... My grandfather was a conductor on a train you know. We would go to the seaside on the weekend. It was splendid."

by powerdownkiwi | 14th Jul 11, 3:50pm 1310615407

Martyh - I suggest you're either still bringing too much cognitive baggage to the discussion, or you're taking the mickey

I'm tending to the latter.

by powerdownkiwi | 14th Jul 11, 4:05pm 1310616355

that, Martyh, says you're not listening.

Or not understanding.

What part of 'energy underwrites everything' didn't you get?

Sure, the price and amount of transacting will drop off, as will incomes.

How long do you think 'the market' would cope with that paradigm? It couldn't even cope with 2008 (had to fall back of socialsing the debt). How would it cope when the situation is a permanent downward-heading roller-coaster ?

So what other type of societal organisation are you proposing? I lever did like Tina Turner....

You are a Nact lobbyist, aren't you. Is your time being logged?

by iconoclast | 14th Jul 11, 4:40pm 1310618424

MartyB. Economics is not a "financial science" it is in fact one of the "social sciences" which is concerned with the behaviour of individuals and the collective and they way they can best allocate resources. The decision to allocate time and resource to creating a painting only exists at the time the painting is done.

by powerdownkiwi | 14th Jul 11, 5:47pm 1310622451

Well, I think you have to count everything, big picture.

You fail that thest by a good margin - is that seriously the best you can do, or are you again stirring?

What do you think underwrites the later payment for the painting?

Somebody, somewhere, did something with something, if it was earned.

That's work, which takes energy.

Alternatively, it was not worked for, indeed may have totally non-underwritten (perhaps a mortgage sprung on an increased value of an existing dwelling, to take a random example).

Sooner or later, the cumulative 'values' of the latter will pop, although of course there will be swings and roundabouts - I'm talking average.

Bollard spoke recently of the 'lost dollars, stretching to the sun and half-way back if laid end-to-end. I said at the time, and say now - Bollocks. They never existed, because they were never underwritten. Figments of imagination.

Of course, all energy eventually entropys as heat - maybe we cold burn the painting and see if it loses value......

by Ms de Meanour | 14th Jul 11, 6:18pm 1310624327

So a painting by my great-grandmother and a painting by Van Gogh have roughly the same value?

by iconoclast | 14th Jul 11, 6:32pm 1310625151

At the time of creation they both have the same value. While they both sit in an attic they both have the same minimal value. But when you decide to pay $1 million for grandmas painting you will be using a stream of earnings earned and stored elsewhere, unless you borrow the money in which case you are borrowing someone elses stored/saved effort.

by steven | 14th Jul 11, 6:29pm 1310624945

"It doesn't, not in economics. "

Some economists get it....others stick to their broken models like a drunk to an empty meths container....

"Take for example a painting. It costs $100 in materials to produce. many years later it is worth millions of dollars. Why"

Because we have excess energy so can afford such a luxury...if you were about to freeze to death as you fire was about to go out, would you smash up the paiting or not? I know I would smash it.

regards

by steven | 14th Jul 11, 6:51pm 1310626317

Depends on "cold"

regards

by iconoclast | 14th Jul 11, 4:31pm 1310617902

Paid-party-political-hactivist word-smith PR-spin-merchant would be more like it

by iconoclast | 14th Jul 11, 6:36pm 1310625384

I stand corrected. Does pro-bono sound better.

by Ms de Meanour | 14th Jul 11, 5:10pm 1310620237

The part of "energy underwrites everything" that I don't get is what exactly it means.

If you mean that nothing can be produced and nothing can be done without some level of energy input of some kind at some point - well, yes, of course. For example, martyb's painting could not have been created without food for the artist, light for him to paint by, manufacture of paints, paintbrushes, canvas etc.

But you seem to be saying that energy is not just an essential component of value creation, it is the only component of the value of anything. Before I disagree with that, have I properly understood that to be what you are saying?

by iconoclast | 14th Jul 11, 5:20pm 1310620821

MdM: I interpret PDK to mean energy is the enabler or the catalytic component of everything - I think.

by powerdownkiwi | 14th Jul 11, 5:54pm 1310622895

MdM / Iconoclast - Iconoclast has exactly. Lots of things have lots of components, I'm looking at the common denominator.

We have to get to some form of trading (I don't give a fig if it's called money, but as you can see from the Marty poster, that has so much cognitive baggage it's almost impossible to disentangle) which can cope with zero growth, and then negative growth..... quite an ask....

My thoughs have led to identifying the denominator - that with which things happen, and without which they don't. It's energy.

I know it would be difficult to ascertain, but no more than current value-assessment :)

by Ms de Meanour | 14th Jul 11, 6:14pm 1310624074

You wouldn't accept human brainpower as a factor with which things happen and without which they don't?

by steven | 14th Jul 11, 6:30pm 1310625015

Not really......

regards

by martinv | 14th Jul 11, 6:31pm 1310625073

Sounds good to me however there is no pending shortage of human brainpower, so it doesn't need discussing. There is a pending shortage of energy according to PDK (and many others).

by Ms de Meanour | 14th Jul 11, 6:46pm 1310626018

Ah, but that's precisely the discussion. There is no pending shortage of energy. There may be a pending shortage of fossil fuels, but that is not the same thing at all - and it's human brainpower which will ensure that they are not the same thing.

by martinv | 14th Jul 11, 6:54pm 1310626498

"There is no pending shortage of energy. There may be a pending shortage of fossil fuels, but that is not the same thing at all" - I think you are right about that.

"and it's human brainpower which will ensure that they are not the same thing." - maybe. A big maybe. I hope we (as in humanity) are bright enough to figure something out, but I'm in the camp where I'm not holding my breath.

by steven | 14th Jul 11, 7:04pm 1310627076

Simple, we have to subsitute fossil fuel with something else to sustian our society and food production ie population...what else is there? answer there isnt anything....available in the scale, time, cost and return ratio....so our population has to shrink back to a level that can be sustained, certainly < 2 billion....also that means our society has to become simpler.....strange but we have children born in the Internet age who live computers, yet I suspect they will outlive them.

regards

by steven | 14th Jul 11, 6:59pm 1310626767

It is essential, yes.....what can you do without it?

Only? I suppose in a way the answer has to be yes....why do you think it isnt? certainly in macro terms without energy we wouldnt enjoy the standard of living we have today...in the micro sense atoms have energy...so what you are saying is somewhere in between this isnt the case?

I am more than happy to discuss this btw....as far as I can see when you break down any good into its compnents and you keep breaking these down as well eventually it comes back to energy.......

So a thought process, that is done by life, life needs energy....certainly fire off some examples.

regards

by LloydM1 | 14th Jul 11, 5:17pm 1310620628

Marty I won't speak for anyone else.
The last thing I am is superior to anyone , some people are more innately tuned in into things, others research & learn , yet others still use a holistic approach to life, some expect the country owes them a living or gives a stuff about them.
My time back on the boards has been for research, it's been entertaining for me actually. I wonder if because people on here are mostly fixed views & believe in failed broken systems that it should be hard work to help he place out, or else because views are fixed , they become a lost cause, or worse a barrier & contributer to a bankrupt Nz.
Nz requires as many people who somewhere feel there is a major problem be they students of learning , or whatever profession or vocation they come from , to take an interest. The self interest must stop , the arm chair economists & supporters of failed systems must open their minds for the good of their country.
Superior absolutely not, a desire to help , absolutely, because it's broken & needs to change.

by goNZ | 14th Jul 11, 2:48pm 1310611720

the mines wont be empty for a 100 years plus and the sea bed never so dont worry about it

stupid is the correct description of current surrender to environmental fundamentalists

by powerdownkiwi | 14th Jul 11, 3:45pm 1310615148

gostop. The only geometrical form capable of supporting infinite growth wwould have to be flat - all other forms are finite.

Flat earth just about sums you up.

Done any research on the energy required to retrieve one atom of copper (say) every 3 centimetres, at the average ocean depth (2.5 miles) ? There's a ton of pressure at 1 mile, and 8 tons at the deepest point. Good luck.

I'd try research, maths, first principles, and thinking if I were you.

Much better approach than blind ideology.

Your homework for tonight - how many doubling times for 1 to become 1 million?

by goNZ | 14th Jul 11, 5:07pm 1310620065

hey PDK cheer up man - and drill,baby ,drill - unless you want 1 million windmills on our hills ...

were you the guy that suggested Wgtn CC bring in 40kmh max speeds - sounds like a real powerdown idea !

by powerdownkiwi | 14th Jul 11, 5:27pm 1310621256

One - I'm pretty happy. Thanks for your concern, but when you don't have to work more than 20 hours a month, life's there to enjoy.

Two - you don't need either. If I can run my 6-year-old energy-efficient house on the power it takes to run a 75 watt light-bulb, so can everyone. We could run the country on one Benmore penstock.......

Speed limits? No, wasn't me, and down at those speeds it doesn't matter.

I would, however, advocate a reduction from 100 to 80 k on the open road, especially for square-backed trucks. Air resistance goes up on a cube law, and a friend who works in A&E did some research on the health dollars that would be saved via the lower impact speeds - it crossed the other way exponentially too.