90 seconds at 9 am with BNZ

90 seconds at 9 am: US paralysed by Republican inability to act; IMF warns France; Greece will default

28th Jul 11, 8:00am 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 everyone with a home loan, especially one on a floating rate, will be watching Wellington at 9:00am today for the OCR announcement. Bernard Hickey is in the Reserve Bank lockup and will bring you all those developments as soon as they are publicly released.

Meanwhile, it was another day dominated by events in the US with their debt ceiling impasse. The Republican leader of the House of Representatives already seems unlikely to convince Democrats to back his two-stage proposal to lift the debt ceiling. But now his own party may not back him because independent analysis shows that his plan would cut public spending far less than he claimed. There will be no resolution today, and that means unease in financial markets is mounting. The confidence that the politicians would eventually get this thing over the line is disappearing fast and investors are making emergency plans. Interestingly, the Fed is completely sidelined in all this. It can't help.

Gold is still above US$1,600/oz but that market, too, is confused about its direction. Oil is similarly rangebound. But the Dow is retreating quite fast.

In Europe, their issues are moving fast also. The IMF has warned France over its deficit. And, Standard & Poor's says Greece will default even with the rescue package in place.

In China, their regulators are moving to crack down on non-bank finance companies.

Given all this global uncertainty, New Zealand's trade surplus, rising business confidence and positive economic growth stands out. But we can easily be overwhelmed by global events. The big question for homeowners is whether to fix your mortgage interest rate in the face of this turmoil. All eyes will be on clues coming out of Wellington at 9am.

And we will be launching a new calculator today to help make that assessment. Look for it online soon after the OCR annoucement.

Bernard Hickey will be filing stories and video assessments from Wellington today and will be back in this seat tomorrow.

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21 Comments

by Wolly | 28th Jul 11, 8:11am 1311797470

Bollard will say how great we are and in the same breath say how endangered we are, which will go to excuse his doing nothing..at least not until after the election...

So there you go Beast...you are free to roam and plunder because Bolly is a good two years and 4% behind your arse.

by We Are Stuffed | 28th Jul 11, 8:44am 1311799498

Gees Wolly, you certainly have a Way With Words:)

by Wolly | 28th Jul 11, 8:51am 1311799860

I charge by the letter!

by SimonP | 28th Jul 11, 10:10am 1311804611

You'd be a wealthy man if you did :-)

by powerdownkiwi | 28th Jul 11, 8:49am 1311799740

'The big question for homeowners is whether to fix your mortgage interest rate in the face of this turmoil"

David - with the greatest of respect, there is a bigger question.

Interest rates will trend to zero - they can't do anything else at the point where exponential growth meets finite limit.

That's a given.

The question is whether those folk will be able to generate enough income to repay their principle, given the increasing scarcity of energy in the system. Seems to me, that food, power, clothing and shelter will rapidly claim part. then all, their 'income'.

The Bard was right, post Peak -

Neither a borrower nor a lender be;

For loan oft loses both itself and friend,

And borrowing dulls the edge of husbandry.

by Andrewj | 28th Jul 11, 9:08am 1311800880

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100011129/flee-to-mars-if-america-commits-worst-error-since-1931/

Flee to Mars if America commits worst error since 1931 drjonathanwilson 38 minutes ago For those who do not read Ambrose's column regularly he said 4 years ago, whilst watching in horror the speed and size of the contraction of the money supply, that it was time to "be afraid, very afraid" - and then Lehmans collapsed and we all know what happened next. Ambrose's record speaks for itself.

However is Ambrose right to conclude this time around that an immediate balancing of the US federal budget would lead to instant US and by extension global recession or depression?

If one views the calculation of GDP as some sort of linear equation where the reduction of one variable with the others held constant then a 40% cut in Federal budget would result in a about 1-2% contraction in US GDP.

However if one takes the view that a 40% cut in the Federal budget results in resources used by the state being released for more productive use (outputs with a market based value) then the immediate effect of such a resource release is to increase the US ecnomic output gap.

This increase in the output gap is deflationary and provides the Fed with the opportunity to ease monetary conditions further - yes QEIII. But this time instead of QEIII being applied to the purchase of US Treasuries it can be applied to substantial reductions in corporate, household and consumption taxes.

Therefore rather than seeing the world through linear GDP eyes which leads to despair, the reality is that a 40% cut in the Federal budget opens up an extraordinary opportunity for a massive monetary stimulus to the US economy through private sector demand lead investment.

Jonathan http://market-ticker.org/akcs-www?post=190805 http://www.oftwominds.com/blog.html

by powerdownkiwi | 28th Jul 11, 9:47am 1311803250

AJ - those who seek to linearise anything which is exponential, seek to lie.

Maybe to themselves (if they've got vested interest in the system continuing).

Maybe to others (if they've got vested interests in others believing in the system continuing).

But it raises the hope that the graph may not go vertical, and that is incorrect - in 100% of cases!

I was at a lecture last night - one of 550 - where it was pointed out pretty conclusively that we're at the tipping-point now, and that growth-based finance can't survive.

BH should have been there, rather than watching Bollard sponging up on E Deck. Kind of like interviewing Thomas Andrews rather than Hugh McElroy would have make more sense to a Titanic reporter.

by Wolly | 28th Jul 11, 9:11am 1311801093

There you are Beast.....away you go...a free hand to do your worst because the RBNZ thinks the fx rate will keep you in check...harrrrrrrrrrhahaha...what a bunch of fools...they don't know you very well at all do they!

And the lesson to those who save is......suckers

Hope all the children learn it well...save and you will be debased and made to pay with lower real returns that are taxed, designed to bailout the borrowers and deeply indebted, because they are more important in a highly indebted economy dependent on bank credit.

by We Are Stuffed | 28th Jul 11, 9:14am 1311801240

So what do you say to the young Wolly? Don't ever save....spend every cent you earn?

by Gertraud T. | 28th Jul 11, 10:17am 1311805020

It looks like 2011 will be the year cold fusion attempts to make it on the commercial stage.

http://coldfusionnow.wordpress.com/2011/07/25/roy-virgilio-releases-more-details-on-piantelli-research/

by powerdownkiwi | 28th Jul 11, 4:40pm 1311828000

Longtime no see Gertraud. :)

The fellow doing the lecture last night worked on it - in the 1970's. It was 'twenty years away'.

http://2ndgreenrevolution.com/2009/04/02/nuclear-fusion-still-20-years-away/

To morph physically from one source of energy to another, had to have been done pre-peak. It also only does electricity - which means a lot more copper, aluminium, concrete, steel.....

It may be part of the mix - I suspect that as things get desperate even lignite will be attempted (although by that level of EROEI - you're just one above peat and the Irish never did too well on that - society won't resemble what it is now.)

I think there's a danger at the moment, to go for the magic elixir / stroke / technological fix. That process falls over statistically, alle same Russian Roulette.

We really have two choices - reduce our population and consumption and pollution globally, or accept that in a very short time (less than 100 years) there will still be humans, but "perhaps a few breeding pairs in Antarctica" to quote someone who has given it more thought than most.

Sadly - given the reality that after 20 years, no reduction in atmospheric CO2 has been achieved globally (and the only instrument proposed is fiscal, go figure!), I can't see international co-operation re resource-use reduction.

by goNZ | 28th Jul 11, 4:59pm 1311829156

Joseph Mengele being doing lectures for you guys again ?

by Sepherial | 28th Jul 11, 5:12pm 1311829923

Depends on if you believe what Dr Goebbels has told you...

by goNZ | 28th Jul 11, 5:13pm 1311829980

Just in case PDK hasnt passed this onto you -

"Environmentalism Refuted"

http://mises.org/daily/661

Mises Daily:Friday, April 20, 2001 by George Reisman

by Sepherial | 28th Jul 11, 5:45pm 1311831900

Ah yes Austrian Economic's been there done that read that ... I quite enjoyed Mises and Rothbard as well, what was one of his books thats right What has Government done to our Money!

"Enviromentalism refuted"

So what?

Enviromentalism is another ism it was hijacked years ago.

by powerdownkiwi | 28th Jul 11, 6:24pm 1311834240

Chuckle :)

There's is's and there's isn't's - it's nothing to do with 'isms.

Truths, and spin.

Me, I prefer truths. Even if they're not so welcome, it's better to know what you're dealing with.

by powerdownkiwi | 28th Jul 11, 9:24pm 1311845050

Gertraud -

http://www.theoildrum.com/node/8140#more

"Daily Bell: Explain the term "pathological science" if you don't mind?

Taubes: It is a term invented by the Nobel Laureate Irving Langmuir to describe what he called "the science of things that aren't so." Cold fusion is a classic example of pathological science: it doesn't exist. It's a non-existent phenomenon, but that didn't stop dozens, maybe even hundreds of researchers from studying it or publishing papers about it, etc. And those researchers, as Langmuir put it, were mostly the ones who "are tricked into false results by a lack of understanding about what human beings can do to themselves in the way of being led astray by subjective effects, wishful thinking or threshold interactions."

by Andrewj | 28th Jul 11, 3:04pm 1311822240

Governor Christie on National Debt Talks: The Need for Bipartisan Compromise

http://www.youtube.com/watch?v=ptpSMVmlGO8&feature=player_embedded

by KW John | 28th Jul 11, 11:33pm 1311852781

"It won’t be long before 3D printers start appearing on your High Street, just as photocopiers did decades ago"

bit of light relief.... love the idea that it can be open source (e.g. reprap), and build parts for itself....

Bit more thought and maybe all those 4 litre milk containers could become useful!

by Wolly | 29th Jul 11, 6:55am 1311879356

"Obama administration officials will brief the public no earlier than after financial markets close tomorrow on priorities for paying the nation’s bills if the U.S. debt limit isn’t raised, a Democratic Party official said.

A Treasury official said in an e-mail earlier today the department would provide more information on how the government would operate in the absence of borrowing authority as next week’s deadline approaches." bloomberg

And deep inside the bureaucracy somewhere beneath Washington DC there sits a pointy head who is destined to have his name recorded in history....as the man who stopped the President's pay and the pay for all the members of Congress and the Senate...right now his finger is on the Delete key and he is drooling in anticipation...

by Wolly | 29th Jul 11, 7:16am 1311880580

"...earlier this year Sir Robert said his investment strategy was for available money to be invested in property, although when pressed he said that from time to time up to $8m cash was left "lying around"..stuff

I say Bob...about that invitation to drop round for drinks any time....!