90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: Creditors still haggling with Greece; Decision with EU ministers in usual crisis meeting; EU blocks Iranian oil imports; NZ$ over 81 USc

24th Jan 12, 9:00am by Bernard Hickey

Here's my summary of the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news the world's financial markets are warily watching a meeting of European finance ministers for any news of a debt restructuring deal between private creditors of Greek debt and Greece's donors.

The talks ended over the weekend with creditors saying they could not agree to a bigger haircut, while Greece's fate now rests with its donors who want the creditors to take a bigger haircut.

The IMF, the European Union and the European Central Bank want to see Greece's debt written down enough so its debt to GDP ration can drop to a sustainable level.

The problem for Europe though is that continued budget cuts is creating an austerity spiral that is deepening the debt crisis as the debt to GDP ratios increase along with the falls in GDP. See more here at Reuters.

The latest large European nation to warn of a contracting economy was Spain.

The Bank of Spain warned overnight the Spanish economy would contract 1.5% this year as unemployment nears 25%. See more here at Bloomberg.

Meanwhile, the EU has banned imports of Iranian oil and exports of European oil drilling equipment to Iran as it steps up pressure on the budding nuclear power.

Iran hit back with a warning it may close the Straits of Hormuz. See more here at Reuters.

The oil price rose 0.7% to US$99/bbl for West Texas Intermediate on the NYMEX this morning.

The New Zealand dollar was firm over 81 US cents in morning trade. See more here in BNZ's currencies report on our site.

It is also solid at 62 euro cents and 52 British pence, which is making it difficult for British and European tourists.

Auckland Airport saw record traffic of inbound tourists last week, but the majority are from Australia and Asia.

They typically stay for shorter periods and spend less money per night.

See more here from Auckland Airport.

(Updated with more detail).

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30 Comments

by Andrewj | 24th Jan 12, 9:06am 1327349169

"At times like these, survival is the most important thing," Soros tells Newsweek.

"The best-case scenario is a deflationary environment. The worst-case scenario is a collapse of the financial system."

"We are facing an extremely difficult time, comparable in many ways to the 1930s, the Great Depression. We are facing now a general retrenchment in the developed world, which threatens to put us in a decade of more stagnation, or worse," he said.

George Soros: Collapsing US Economy to Spark Street Violence

by powerdownkiwi | 24th Jan 12, 9:34am 1327350851

AJ- this was my favourite essay 30 years ago. It still stands the test of time.

http://www.panarchy.org/boulding/spaceship.1966.html\

It's worth reading every word, and if Soros had...... he'd have seen it coming :)

by Gummy Bear Hero | 24th Jan 12, 10:44am 1327355066

46 years is a mighty long time to wait for " it " to come ! ...... the fall-out shelter would be getting kind of manky in that time , the store of rusted baked beans tins running low , and the tofu turned to boot-leather ....... " it still stands the test of time " means that you're still waiting ...

..... tsk tsk , what a waste of 46 years believing in the words of a guy so uptight that he never got pissed !

Never trust the word of a " tea-totaller " : either they're liars or they're anally retentive !

[ .. and while we're at it , why did this clown proclaim the second law of thermodynamics to be " grim " ..... what's grim about it , it just is what it is ....... much alike Popeye the Sailor Man , who for my money , had a better handle on life than Boulding did .. ]

by powerdownkiwi | 24th Jan 12, 11:27am 1327357640

Fear and Denial in Los Banos.

It'll be a runaway best seller.

by SimonP | 24th Jan 12, 9:48am 1327351734

The problem with quoting Soros is that he almost always has a vested interest in what he is saying:

"The euro must survive because the alternative — a breakup — would cause a meltdown that Europe, the world, can’t afford," says Soros, who owns $2 billion in European government debt he bought from MF Global, the securities firm run by former Goldman Sachs chief John Corzine that went bankrupt in October.

by Houses Overpriced | 24th Jan 12, 10:01am 1327352512

Thats exactly what i thought when i read that!!!

by powerdownkiwi | 24th Jan 12, 10:09am 1327352971

agreed - always read with filter overlaid. You have to do it hereabouts quite a lot....

by DC | 24th Jan 12, 10:03am 1327352613

FX rate must be hurting exporters. How long can they go on? (And that's our jobs)

by Wolly | 24th Jan 12, 10:43am 1327355033

"The ECB’s balance sheet is up 38% since July 1st of last year. The same period saw the Fed’s balance increase by one per cent! Talk about printing money."

http://globaleconomicanalysis.blogspot.com/

I spose the NZ Cabinet will meet this morning in the Beehive upper floor where the pig trough is kept....there will be some very happy members for sure...rents on the rise and the landlords subsidy rort is chugging along on taxpayer dosh.

by kiwipete | 24th Jan 12, 10:53am 1327355624

It's true that Soros has a vested interest if he has 2 billion invested in European sovereign debt. I think he is right though in saying that an orderly exit from the Euro by Greece etc would be less disastrous than a catastrophic collapse.

by Andrewj | 24th Jan 12, 11:20am 1327357213

What he's saying is 'play it my way or im going top take my ball home'. Give me the money or I will collapse the system.

>>>

hypertiger

"I can hire one half of the working class to kill the other half."--Jay Gould, robber baron (Absolute capitalist/successful entrepreneur ), 19th Century

4 STAGES OF A SUBVERSION:

1. DEMORALIZATION

2. DESTABILIZATION

3. CRISIS

4. NORMALIZATION

Those are effects which can be capitalized upon...because they are natural occurances or effects of the choice to take more than you give.

once you choose to take more than you give...it becomes harder and harder to sustain within a static rule system...so then the rules have to be changed...an example is the rule change in 1971 to eliminate the fixed exchange rate system to sustain the plunder system.

but of course once all the rules are thrown out the window the system eventually begins hitting natural resistances and the system destablizies...

It eventally begins to crumble and it turns into a crisis...

it collapses and you all start over again...normalization or remoralization...

by Wolly | 24th Jan 12, 12:28pm 1327361285

"These observers have also noted that measures that restrict land supply, slow growth in the immediate area where the policies are in place and push up housing prices can be very attractive to individuals who already own their own homes,"

http://www.stuff.co.nz/the-press/news/christchurch-earthquake-2011/6299221/City-rebuild-queried-house-prices-too-high

Even more attractive are Reserve bank policies that fully support the banks selling cheap credit at 100%LVR levels ....and govt policy that rewards landlords who buy up all the once cheaper properties to take advantage of the landlord subsidy...

Toss in the gst rise which simply resulted in fewer new houses...wonderful policy mix...fabuous capital gains to be had...explains why the IRD has had staffing cuts at the same time..hahahahahaa

And who are these property owners?....why gosh they are National Party members 100%

by Wolly | 24th Jan 12, 12:31pm 1327361510

Did I claim Kiwi were just plain thick and getting dumber by the year?

"Shocked police have issued safety warnings after finding several mothers breastfeeding while driving in a recent road blitz".herald.

by Andrewj | 24th Jan 12, 1:18pm 1327364310

and they were smoking, on the cell phone and one had a can of beer jammed between her legs, women can multi-task ha.

by Wolly | 24th Jan 12, 1:35pm 1327365334

No worries cos they had their seat belts on...round baby and click.

by stp | 24th Jan 12, 12:46pm 1327362377

"The visible hand:

The crisis of Western liberal capitalism has coincided with the rise of a powerful new form of state capitalism in emerging markets" - from The Economist:

http://www.economist.com/node/21542931

by Wolly | 24th Jan 12, 1:05pm 1327363546

"The crisis of liberal capitalism has been rendered more serious by the rise of a potent alternative: state capitalism, which tries to meld the powers of the state with the powers of capitalism. It depends on government to pick winners and promote economic growth. But it also uses capitalist tools such as listing state-owned companies on the stockmarket and embracing globalisation."

I think it's the only book Cabinet member are allowed to read...those who can!

The rise and rise of Kiwibank...soon to be the sharp end of govt porking in the market, especially in 014....expect the credit to flow like booze at a Hamburg festival...anyone wanna fat loan at low rates to buy stuff and set up a new business...phone us..drop in...demand whatever to want...no strings...no fees....

On the Terrace we can see Bollard busting all the prudential rules to allow covered bond rorts and maximum LVRs..." I gotta boost the market cos the banks depend on me"...it's the RBNZ jingle sung to the 'Sink the Bismark' tune....

by Nic the NZer | 24th Jan 12, 1:08pm 1327363692

Showing mostly that the author never read Adam Smith.

"Rather interestingly these issues were foreseen by the great founders of modern economics, Adam Smith for example. He recognized and discussed what would happen to Britain if the masters adhered to the rules of sound economics -- what's now called neoliberalism. He warned that if British manufacturers, merchants, and investors turned abroad, they might profit but England would suffer. However, he felt that this wouldn't happen because the masters would be guided by a home bias. So as if by an invisible hand England would be spared the ravages of economic rationality. That passage is pretty hard to miss. It's the only occurrence of the famous phrase "invisible hand" in Wealth of Nations, namely in a critique of what we call neoliberalism" - Noam Chomsky.

So the invisible hand and the visible hand are in fact the same thing.

by Wolly | 24th Jan 12, 12:55pm 1327362919

And from Cameron's govt too......!

"Chief executives’ pay awards should be set partly according to how much they pay their rank-and-file staff under new government rules proposed yesterday"

http://www.telegraph.co.uk/news/politics/9034299/Executive-pay-to-be-linked-to-rank-and-file-salaries.html

Watch closely now...the NZ useless media will manage to miss this chance by a country mile....not for them to ask English or Key if they support similar policies in NZ....

Sad isn't it...we are lumbered with media failures...meanwhile the Sir Humphrey club is welcoming in so many new members who have managed without any real effort to leap over the $500,000 per year salary hurdle....bugger the dregs at the bottom of the heap....they have to learn to be happy that they get to put the bosses orders into operation and grease the wheels. Marryatt is not the only one. The state tv bloats are swimming in money.

How large were the Dotcom bonuses for the senior immigration bosses....quiet...that's a state secret....move along or go straight to jail.

by Wolly | 24th Jan 12, 1:18pm 1327364302

" American, British and French flotilla sailing through the Strait of Hormuz, a vital channel for oil shipments that Tehran had threatened to blockade if the sanctions were imposed."

http://www.independent.co.uk/news/world/middle-east/west-strikes-first-at-irans-economy-as-eu-imposes-oil-sanctions-and-warships-gather-6293685.html

"The aircraft carrier USS Abraham Lincoln, escorted by an American guided-missile cruiser and two destroyers, HMS Albion and a French warship, La Motte-Picquet, passed a few miles off the Iranian coast to emphasise that the strait remains an international waterway and attempts to shut it down will not be tolerated"

by Andrewj | 24th Jan 12, 1:19pm 1327364382

and to think its all just to keep the price of oil high.

by powerdownkiwi | 24th Jan 12, 1:43pm 1327365785

AJ - eh?

Where do you get that from?

by Andrewj | 24th Jan 12, 2:06pm 1327367187

my consiracy friends. If consumption is falling the only way to keep the price up is to restrict supply.

by Kunst | 24th Jan 12, 2:15pm 1327367734

Political and economic confusion in that region can easy lead into something much more serious.

by powerdownkiwi | 24th Jan 12, 2:31pm 1327368694

yep, thats conspiracy theory.

This is about ownership - money is secondary to ownership, always.The big players understand this - the pentagon

http://www.guardian.co.uk/business/2010/apr/11/peak-oil-production-supply

and the Germans

http://www.theoildrum.com/node/6912

even the Brits, although this source has me looking for confirmation

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x3468980

here's the graph

http://www.indexmundi.com/energy.aspx

No need to boost prices in that scenario.....

by Les Rudd | 24th Jan 12, 2:56pm 1327370182

The Peak Oil types might like to record or watch (just timeshift the ads Bernard,) this:

"Secrets Of The Seven Sisters G 22:05 - 23:00 TVNZ 7, tonight.

This series retraces a century of oil history in the light of the secret pact that gave birth to the…"

Some bits seem a bit loose and conspiro like, but interesting nonetheless.

by iconoclast | 24th Jan 12, 3:02pm 1327370563

I have read Anthony Sampson's book "The Seven Sisters" .. in order to fully appreciate the significance of it you need to research the history of King Ibn Saud and the formation of Saudi Arabia and Ibn Saud's meeting with Roosevelt on the USS Clancy after WW2 and the betrayal of Ibn Saud by Roosevelt.

by Kunst | 24th Jan 12, 3:32pm 1327372360

Reading or/ and hearing of economics in 2015 – and I’m getting almost a convulsive laughter.

by Bernard Hickey | 24th Jan 12, 6:56pm 1327384587

And here's the latest via Reuters on this:

Euro zone finance ministers Monday rejected as insufficient an offer made by private bondholders to help restructure Greece's debts, sending negotiators back to the drawing board and raising the threat of Greek default.

http://www.reuters.com/article/2012/01/24/us-eurozone-ministers-idUSTRE…

cheers

by Wolly | 24th Jan 12, 8:11pm 1327389111

I find it hard to believe but there are many people who think the ECB can print a route out of the hole without destroying the euro...incredible.

Some 400 billion euro or dollars I cannot recall which, have departed the piigs for germany and places beyond or into gold.

Yet still there are some who speak of recovery!

As for the pollies expecting the creditors to roll over...how stupid can pollies be?

And then we have the fact that many creditors carry default insurance on their bond investments....who would be dumb enough not to push the default button in that case.

Then we have the trillions yet to be refinanced..by whom?...who would be dumb enough to buy any EU state bonds other than German.

So where is the BS recovery coming from?...the answer is there will be no recovery...no growth....no return to the past...the place is a total F_____ financial and political mess.

And I didn't mention the FACT that following any Greek debt fiddle, Portugal and Spain will demand the same debt reductions....doh

So the EU is dead for years to come...which will do what for world markets?....and China is about to wake up to a property crisis as soon as the insiders escape with their loot....so wham goes Australia's money tree...which means what for NZ...

Oh of course..Bernanke will gallop to the rescue with yet more printing...utter BS.

Sorry did somebody mention the prospect for massive ..LIKE REALLY MASSIVE unrest across the piigs and in France....fire bombing....just plain terror attacks...hits on bankers..and anyone thought to be part of the cause...