90 seconds at 9 am with BNZ: Greece agrees to austerity deal, but donors still nervous; China stimulus less likely despite export slump; Bank of England prints again

Here's my summary of the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news Greek politicians have finally agreed to a new austerity deal, but its donors at the 'troika' of the European Union, the European Central Bank and the International Monetary Fund have yet to put their stamp of approval on the deal.

After weeks of delays and political infighting, Greece's leaders agreed to a programme of wage cuts, public sector job cuts and some pension cuts, but only after reducing the size of the pension cuts and finding 300 million euros of cuts elsewhere. These politicians face elections in April and have been reluctant to be seen imposing yet more austerity on voters.

However the Troika remain distrustful of Greece's ability to follow through on the deal after more than two years of broken promises and failed attempts to control Greece's deficits. The Troika deferred a final decision overnight. See more here at Bloomberg.

This uncertainty meant European stocks and the euro only rose slightly despite the apparent resolution of the Greek situation, which has weighed on markets for months. See more here at Bloomberg.

Meanwhile, there was a US$25 billion settlement deal announced overnight between US Federal and State governments with five big banks over 'fraudclosure' claims. This follows the discovery that some banks were falsifying documents to help foreclose (start mortgagee sales) on home owners after they lost documents. See more here at Bloomberg.

Signs of some recovery in the US jobs market boosted the US stock market. Jobless claims there fell unexpectedly last week.

Closer to home and of more importance to our economy, China yesterday revealed higher than expected inflation figures in January. The increase in the annual inflation rate to 4.5% was seen reducing the prospects for a fresh round of stimulus by the Chinese authorities.  See more here at Reuters.

The Australasian and Asian economies are depending on China being able to repeat its stimulus from late 2008 and early 2009 to again help stave off the effects of the fresh slowdown in Europe. The European slowdown is however slowing down China's export growth engine. China is expected later today to report a 1.4% fall in exports in January from a year ago. See more here at Bloomberg.

Meanwhile, emphasising the dire state of the British economy, the Bank of England announced a new round of money printing overnight and kept its official interest rate at 0.5%. The bank increased its programme for buying of gilts or British government bonds by 50 billion pounds to 325 billion pounds. See more here at Reuters.

The New Zealand dollar remained firm but slightly below its recent five month highs as celebration of the Greek deal remains muted.


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You can only ever beat Wolly on a Friday.

president of property

Re:  Bank of England printing
Bank of England Governor Mervyn King is mimicking “ruinous” Federal Reserve monetary policies that led to the current financial crisis, Societe Generale SA’s top- ranked strategist Albert Edwards said.
It is high time the debate turned towards the causes of our current situation rather than the symptoms.

But what do you do except print money?
Engineer a massive debt restructuring that wipes out shareholders, bond holders and depositors in that order?

Initially the Fed should be forced to mobilise this gigantic bank check bouncing backstop into the public arena.
The ECB should do the same.
If the public is to bear the costs of money printing they should surely be able to productively utilise the proceeds.

I guess fractional reserve banking was doomed the day it was implemented, if that is what you mean by causes. Surely it is this combined with "fiat" that is the cause?
Anyway I think you have to look past the "should" in this game and look at the behavioural side of what they "will" do. Clues are found in history, human behaviour doesn't change. So I believe this is a better guage for which to base any sort of prediction. I think it is a more certain position to take based on the opposite of what would be the "right" actions for leaders to take.
Print until it falls over is my pick as there does seem any other course of action that woud be tenable for those with the choices to make.

Money printing is fraud.
Devaluation a nonsense.
According to Ludwig van Mises....
" In plain language it is to be described in this way: The British citizen must export more British goods in order to buy that quantity of tea which he received before the devaluation for a smaller quantity of exported British goods."
A valuable stable money is the bedrock of a successful economy. You have choices with a valuable currency. Input costs are constrained, wage costs are protected by worker purchasing power and the exporter can sell LESS goods for an equivalent number of imported goods or simply lower his price!
We are wealthier with a valuable stable currency. This competitive devaluation race is headed nowhere good. The sooner currencies are once again constrained by a link to gold the better.

Implement the Chicago plan.
This should insulate the NZ financial system from other financial systems collapse, and afterwards it would be very difficult for massive asset bubbles to form in the economy. Of course a lot of new stimulus (which will immediately be available to the government) should be used to make the restructuring fair.

"Engineer a massive debt restructuring that wipes out shareholders, bond holders and depositors in that order?"
Yep.  Just give me enough warning to ensure that I am no longer a depositor when it happens.

I hear many 'experts' suggesting it would be futile for NZ to 'print', in order to counter the printing of the superpowers and lower our exchange rate.
Could we not return to a 'fixed' ER temporarily, as our own counter measure,
Or at least, have the PM and Governor 'jawbone' the idea in order to discourage currency speculators??


The Federal Reserve's Explicit Goal: Devalue The Dollar 33%

I think the explicit outcomes cited in this story are what prompted Bill Gross to gear his Total Return Fund. That is get short dollars amongst other things.

The alternative to printing money isnt nice but as your material points out, we are kicking the can down the road
The whole issue is a people issue, not an economic one. The econimics are simply symptons. Greed, lack of productivity, bad decisions and fraud.
BH how about some material on the history of what happens when you print money. The banks pay you to do research and report. We are busy working.
What about Yugoslavia in the 1980s? Fiat money?
Try wikipedia. I think The Yugoslalavians did it in the 1980s



Propaganda Wars : Their Version – “Markets don’t fail”.