90 seconds at 9 am: Germany rejects Greek request for more time to meet austerity targets; Bundesbank says ECB money printing 'like a drug'; NZ$ at 81 USc

Here's my summary of the key news over the weekend in 90 seconds at 9 am, including news Germany has again rejected a request by Greece for more time to achieve its austerity targets.

Chancellor Angela Merkel said Germany would support Greece's continued presence in the Euro-zone, but again rejected a plea in weekend meetings with Greek Prime Minister Antonis Samaris for more 'breathing space' for Greece to sell more assets and return its budget to surplus.

Greece's economy has contracted more than 20% in the last two years and it remains in a death spiral as private sector develeraging is being accelerated by cutbacks in government spending and new taxes.

However, Merkel was careful to warn colleagues in Germany not to speculate on Greece's exit from the Euro-zone. See more here from Bloomberg.

Reuters reported French President Francois Hollande saying Europe will have to decide on Greece's fate after a donors' report due in October.

Meanwhile, Bundesbank President Jens Weidemann, a former close adviser to Merkel, said in a front page article in Der Spiegel that renewed purchases of government bonds by the European Central Bank would not solve the Euro-zone crisis.

“We shouldn’t underestimate the danger that central bank financing can become addictive like a drug,” Weidmann said in an interview with Der Spiegel. “Such policy is too close to state financing via the money press for me.” See more here in Bloomberg.

Weidemann's predecessor, Axel Weber, quit the ECB last year in protest at the ECB's now dormant bond-buying programme. Political opposition to the ECB's apparent 'Big Bazooka' plan is growing inside Germany.

The New Zealand dollar begins the week solidly around 81 USc.

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Trade-offs between inequality, productivity, and employment

A very good read thanks Andrew. Heck it took a bit to get through, going back to a few times.Lol. What is discouraging though is judging by the standard of problem solving that occasionally occurs here, most are simply not smart enough to understand this thinking. All manner of fanciful ideas on how to fix the problems, but they inevitably fall into the category of "as long as I can preserve my lifestyle and wealth".
I guess the article can be summed up at "the parasite killing the host". I guess it isn't surprising that a lot here don't understand this because they fall into the parasite category.

I was hoping for a few hits and some debate. Ive read it twice and a few of his other articles.

As I say I don't think more than a handful here are capable of debating at this level. I hope I am wrong. I also hope I am wrong that we won't change and will plunge into the abyss when europe does. Where is see a specific problem for New Zealand lies in this  "But in very polarized societies, transfer programs provide an insurance benefit to the rich, by ensuring poorer people’s dependence on production processes that only the rich know how to manage. This diminishes the probability the poor will agitate for change, via politics or other means. Inequality may be more stable in technologically advanced countries, where inexpensive goods substitute for the human capital that every third-world slum dweller acquires, the capacity and confidence to improvise and get by with next to nothing." we are dumbed down and have lost the no8 wire mentality. We might be food rich, but I still see starvation happening in our cities if oil supply is restricted. Even into the 80's there was clothes manufacturing happening, but the trade skills have been lost.
So a big question mark for me over how this plays out for New Zealand.

First and foremost a change in the money supply has to occur, for that is the mechanism for wealth redistribution.

It gets even better as you read through the comments, this is NZ to a tee and explains the question that Kunst occassioanlly asks (& Bernard) about why America isn't revolting.
The payments to the majority of the population for not rioting or rebelling look better if they are dressed up payment for our work as mistresses, grooms, jugglers … or yoga instructors. Of course in a differently organized world, we could dispense with most of these jobs and take the benefits of increased productivity in some combination of shorter hours for productive workers and a shift toward more intrinsically fulfilling (craft-like) forms of productive work.

Well that's in their DNS.....something like the tree of blah (liberty?) has  to be refreshed with the blood of patriots and blah from time to time.

Forgive me Steven , but I feel your a touch bla...zay about the Liberty Tree and it's significance  in American History.
 For what ever perversions to the Concept of Liberty , historians and politicians alike have ingrained upon it with their grubby little hands, or sullied it with their mocking reverence , The Concept  of what many gave their lives for should in no way be impuned with flippant disregard.

I certianly do not...
I think the issue is very significant and indeed recognisable that sacrifice is sometimes needed to ensure a just outcome.

That is a shame, even Churchill would admit....certainly.

huh? you have lost me.

I tried to edit that response "Churchill " in view of your clarification and was denied acess, WTF moderator...? no acess to edit now...?

buggy interface have a second go....

"the parasite killing the host"

I agree with that piece.
Of course you end up with more ppl fighting for a bigger share of a shrinking pie....sadly it seems that is how its going to go ie fighting.

What I find interesting is comment No 3. who fancies himself and his workmates as part of the 1% with a "strategy" of buying up property as their "store" of wealth.
Gotta laugh - as what he really needs to realise is that he's just another "sitting duck".
Quite funny really as the Occupy movement seems to have made a fundamental error with their maths which has served to make a whole bunch of Americans "believe" that they are  somehow in control of their destiny if part of the 1%.

Gee - he's reading my mind.
And just think .. our very own JK did an apprenticeship at the NY Fed.

perhaps he's smarter than the rest of us.( not including you)

Hahaha - now you're reading my mind.

That is remarkable Mist....you are the first person I have ever noticed to use Steven's trademark..... teh ...the whoel could have been anyones...but the teh belongs to Steven 
 As Python would say " Silly little point, still ....does seem to matter...eh"


China announces £800bn stimulus to boost confidence

China has announced a total of 8 trillion yuan (£800bn) of "stimulus projects" to try to boost confidence in an economy that appears to be cooling faster than expected.

The price of fuel is starting to really hurt in the States. I saw Diesel at $4.60 a gallon yesterday.  Im paying about 44.40 for premium gas.  Its going to hurt .
If the looming global oil crunch has been postponed for another decade or two as widely alleged, this is far from obvious in today’s commodity markets.

Well well well. Escalating oil prices concurrent with a global resession.
Who would have picked that?
Recieved, read and enjoyed, by the way, AJ. Thanks!

Well well well. Escalating oil prices concurrent with a global resession. (sic)
pdk, recession for whom?
Not this mob or this lot.
This is a recession like no other kind. The spin is maintained to further allow transfer of the remaining wealth of those least able to defend themselves to those that believe they are most deserving.
ANZ New Zealand, the country's biggest bank, may pay its Australian parent up to NZ$1 billion worth of dividends over its current financial year. Such a payout would be its highest dividend since 2009.

When you have a high salary and job security, sure you want deflation for yourself personally. Of course the impact on others is horrendious  but you dont care.....your incredibly high wage is worth more every day and your workers pay dropping makes your bonuses bigger.
la la land the lot of them.

Exactly - amazing how gullible we are.  I get the impression most people just don't want to accept that absolute global serfdom is all intended; driven by mere mortals who see themselves as entitled to every last drop of the surplus of others labours - nothing to do with markets, chance, cycles, supply/demand, scarcity, natural phenomenon etc.;

The ANZ bank chief, struggling on $10m a year, helpfully suggested a cut in the benefit would "encourage" idlers to shift to the mines in WA, where they could earn plenty of moolah. He promoted the US approach of making people hungry, in order that they may be more incentivised to find a job, even if it means shifting (Grapes of Wrath anyone?). 
If you view people as simple inputs into the supply chain, then of course this makes absolute sense. Economists up and down the land will be nodding vigorously at this proposal. Surely, there could be no "rational" argument against this obvious market failure. 

Wow, I'd stopped following the price but now WTI is $96USD...!
Iran has gone off the market but thats Ok we dont need it....yeah right.....if thats because of Iran's 1.2mbpd.....only 1.2mbpd...?  has been taken off so far...
Obama might yet panic.....

There is so little tax here that when the price moves its really moves at the pump much more so than home. They even have a graph on the pump telling you how much tax is paid and where it goes.

The significant piece is this,
"Kamakshya Trivedi and Stacy Carlson from Goldman Sachs say a disturbing pattern has emerged where each tentative recovery in the world economy sets off an oil price jump that it turn aborts the process. A two point rise in global manufacturing indexes leads to a 30pc rise in oil prices a few months later."
Only 3 to 5 years behind what  the ASPO "kooks" said it was going to be like...
like duh.

thats $4.40 for premium, no edit function this morning.

Not just Greece or ......
I think September/ October 2012 is going to initiate massive changes on many fronts for the entire world http://www.youtube.com/watch?v=1NYAelvn-V8

September 12th  Walter.....big day  indeed.

yes, yes! iPhone 5 is coming out.

yes that too...JackJill....a weclcome distraction on the day no doubt.

iPhone 6 is already out in China, guess they didn't get the memo...

“We shouldn’t underestimate the danger that central bank financing can become addictive like a drug,” Weidmann said in an interview with Der Spiegel. “Such policy is too close to state financing via the money press for me.”
The Markets hanging out for Bernake's delivery should sit  up , take note and factor in that statement as you can bet your sweet bippy a number in  the Fed share the viewpoint., albeit they are not the Goverment......oddly enough nor are the ECB...yet.

Stephen H , not sure many have taken time to read this or you'd be on ten plus about now.
 I have been championing the sentiments of much of this article here for some time....so I'll pop some of it in and hope to generate some interest in at least reading it.
 Cheers for a most excellent link.
 But I’ll delve into another comment from Dr. Posen that goes beyond monetary quackery to touch upon a critical issue.  Wednesday from Bloomberg (Karin Matussek):  “It is in Germany’s commercial and economic interest to restructure the debt of euro-zone countries in trouble, Posen said, according to the transcript of an interview released by the [BBC]… The debt crisis is the result of decisions by the Germans who acted similarly to sub-prime lenders in the US…  ‘It was German government decisions and German banks who lent the money to all these countries so they could buy German exports,’ said Posen. Germany has ‘been running a scheme and so just as everywhere around the world you want to restructure the debt, you can’t make it all on the borrower.’ Lenders have to ‘take a hit’ as well, he said."
Curious how those contemptible subprime lenders and Germans all contracted the same lending disease.  Does Dr. Posen somehow absolve the role that extraordinarily loose global monetary policy played in incentivizing the so-called “schemes” run by U.S. subprime lenders and the German banks to finance their respective Bubbles?  Will Dr. Posen and others accept the reality that inflationary monetary policy is locked into a precarious state of exacerbating global imbalances, where excess liquidity and mispriced finance incentivize the ongoing accumulation of untenable debts by borrowers and uncollectable financial holdings by lenders (not to mention leveraged positions by the inflated speculator community)?
It may today be rational for mortgage lenders to take a hit and renegotiate mortgages with U.S. subprime borrowers, and perhaps for Germany as well to forgive debts from Greece, Portugal, Ireland, Cyprus, Spain, Italy and so on.  And, while we’re at it, China, Japan and the developing nations might as well begin to prepare for hits to be taken on U.S. Treasury and agency holdings.  And let’s go ahead and have the Japanese public take a hit on their nation’s untenable debt load.  Geez, I guess U.S. banks and corporations might as well get working on the write-downs that will be necessary on their inflating holdings of government obligations as well.  And there are these tens of trillions of pension benefits…

Well they either get to work out the terms of debt forgiveness or have it forced on them by default. My thoughts are the institutions are not set up to forgive.

Not unless by Mutual Default scarfie....when the lenders of substance protect their  postions on debt slaves they tend to become the fly in the ointment...such as Germany.

Seems Romney wants to get rid of Bernankie,
"But now we have Mitt Romney declaring his intention to replace Ben Bernanke for, um, pursuing aggressive monetary policy to fight a recession (not aggressive enough, but that’s another issue). Romney:

I want to make sure the Federal Reserve focuses on maintaining the monetary stability that leads to a strong dollar and confidence that America is not going to go down the road that other nations have gone down, to their peril."

So Neill F. a slot in maybe?
So if anyone doesnt think Romney will plunge us into a depression like no other.....good luck.

Ben "the subprime crisis is contained" Bernanke is a fool that doesn't understand the way money really works. And that goes for Greenspan as well.
How else can you explain their tolerance - encouragement even - of a monumental credit/debt expansion well in excess of the underlying collateral and productive capacity. Ok so we don't have a gold standard but our money is created as a debt supported by existing collateral AND future production. Strip out speculative value and neither have a hope of rising at double digit rates to equal the credit growth. Real simple stuff but these two geniuses couldn't see the looming problem and it's implications.
Every effort, scam, dodgey accounting and outright lie is being made to ensure that the debt is kept on the books. Printing money, zero interest rates and mark to fantasy balance sheets can't hide the fact that the underlying economy is bankrupt. No one believes that this is how wealth is created anymore than they would crush a new pack of potato chips so they've got more.
Get someone in there that has a clue FFS. I vote for Simon Johnson.

Good post there Kiwidave.......Every effort, scam, dodgey accounting and outright lie is being made to ensure that the debt is kept on the books.
Could not agree more, I do however think Bernake has attempted to recant through carefully designed speeches, lets not forget Ben has been the Yes Man to parties of interest, yet over the last while at least you can see a man who has been complicit nervously reproaching those he has done the bidding for.
Kiwidave that is not to say I have ever been a fan of Bernake, just to say even he , now can see the extend and pretend cycle for what it really is ....stalling the inevitable.

If you look at history this is the normal course of events.  Where do you think 'clipping the coin' and' debasing the currency' came from? What you're hoping for has most likely never occured.
'No one believes that this is how wealth is created anymore than they would crush a new pack of potato chips so they've got more.'
Belief is extremely powerful, it's just like religion, try telling believers it doesn't exist and see what happens.

Actually I think they could, for Greenspan I think it was because he didnt want it like that....Bernanke really inherited Greenspan's mess and a Congress and administration hell bent on not fixing the issues.

It may just be Hubbard Steven...read the hiccup in the following statement...
"I always listen to people who have counsel and advice, but my view has been that I would want to select someone who is a new member, excuse me, a new person to that chairman position, someone who shared my economic views," Romney said on the Fox Business Network.
Further to that here is nothing quite like publically admitting you like Yes Men.

and the "a new person" suggests from outside so the "economist" who jumps to mind is Neill F.  hence an explanation of why Neill F has been prostituting himself over the Ryan plans(s) starts to see the light of day.
NB when you look at the way the entire administration works its all appointments dictated from the top down.....
One of the hardest things I find about working for yes men is that what they want changes on the situation/lobbyists/polictics etc. In that position you cannot consistantly apply any policy based on what was said or wanted in the past. What you end up doing is referring the problem "up the tree" as you dont know what to do and you will get hammered/blamed if its not what is wanted or if it turns out badly.....I find it very hard work, easily the worst aspect of a job IMHO.

For those wanting to go back to the gold standard here is a review of the effect such as , Spain V UK.
So the only way spain has to get competitive is by internal devaluation, ie pay cuts and job losses......
and then swe see why certain ppl want it....fanatisism really......and there is no humanity in a fanatic...
"Commodity-backed money is basically a solution to a non-problem. Or at least it’s not a problem you have if you don’t accept a Randian deeply moralized view of market outcomes. The existince of fiat money is embarassing to that kind of ideology,"
"In this sense fiat money is like, oh, Social Security. The problem it creates for conservatives is not that it doesn’t work, but that it does — which is a challenge to their philosophy. And so it must die."
There you go....
and we might as well throw this one in,
"What does that tell us about how a gold standard would work? Faced with the kind of shock we’ve just experienced, the real price of gold would “want” to rise. But under a gold standard, the nominal price of gold would be fixed, so the only way that could happen would be through a fall in the general price level: deflation."
lets repeat that,

Hi Steven.
Krugman is just plain wrong. He is grasping at straws.
1. Fiat money doesn't survive. It never has. Thats the point. Gold is the only money over time the world has ever known. 
2. 'Faced with the kind of shock we’ve just experienced, the real price of gold would “want” to rise.' No it wouldn't - if we where on a gold standard the shock would have never happened in the first place. Krugman is being very short sighted and cherry picking history. 
2. The Republicans haven't said they would return to a gold standard, only that they would have a 'commission' look into it. They are only playing politics in an election year. They have no intention of actioning any change to the status quo. Gold is far to cheap (or fiat far to overvalued) for them to give any meaningful backing to any major currency - they don't need a commission to work that out - just a simple look at the price of gold and the claimed gold ounces held by the US government gives around 200-300 billion worth (much of which I and many others don't believe is even there). They are trying to pick up the thousands of Ron Paul supporters, which may obstain from voting and therefore give Obama the election. Going to a gold standard would mean the government would have to live within its means and raise revenue based on increasing taxes or cutting spending, rather than debasing the money supply and stealing the wealth by stealth, I promise you Mitt will opt for the later.
3. QE - something possible to a large degree with fiat paper, but it has not saved us. The GFC is far from over. Its just delayed the final outcome. All paper is debt, you can't solve the debt problem by printing more debt obligations.
4. Yes deflation in terms of gold has been going on for a while and it will continue for years yet.
5. Like all propaganda against gold the reverse is the actual truth. Gold is the choice of free informed people and stands as the protector of property rights and freedom from tynanny.
'It is a strange thing to count true lasting wealth as holding the debts owed from one party to another, especially when both parties are broke'. In time this comment will become more and more obvious to more and more people. Personally I hope it doesn't come too too late for most...

As opposed to your self as a Libertarian.....think I'll go with PK...
Like the shocks that happened in the past?
"Now, the gold bugs will no doubt reply that under a gold standard big bubbles couldn’t happen, and therefore there wouldn’t be major financial crises. And it’s true: under the gold standard America had no major financial panics other than in 1873, 1884, 1890, 1893, 1907, 1930, 1931, 1932, and 1933. Oh, wait."
3. QE, arguable it has saved as as we have not gone into a Greater Depression....arguable that QE and Govn spending was simply too small when faced with the private debt problem.
4. was answerd in that piece already....If you tale gold at 100% constantly and its price rises against anything else then yes thos eother things appear to deflate. However gold isnt  a stable commodity that you can pin an economy to.
5. Ok nothing like being a fanatic is there...."informed" yeah right....so because I dont agree with the kooks Im not imformed.

Steven, I wouldn't put myself always in the Libertarian camp... I used to be in the paper camp (I mean gold is just a barbaric metal right?), then I did some research over the years and woke up to what was really going on...
Why don't you also add in the financial panics of 1811 and 1837-41? The financial panics where caused by NOT being on a gold standard (ie fiat paper credit), ie printing more paper than they had gold for (THATS A FIAT SYSTEM). For example, the US printed more money to pay for WW1, caused a credit bubble in the 20s which then collapsed into the 30s, (they collected the gold in - at the old $ rate of coarse, and revalued it overnight - the problem was they revalued it too low which they thought they could get away with as it was illegal to own gold and trade in it domestically. They did the same for the Vietnam War until France called their bluff (wanting gold not paper) forcing Nixon to close the gold-$ convertability window.
Now you blame printing huge amounts of paper money and the consequences of that on 'being on a gold standard'? Really? Is that what you mean by 'gold standard'? How can there be a financial panic when gold has no counterparty risk and can not be defaulted on?
Without going on and on for pages a great book to read is 'The Coming Battle - A Complete History of the National Banking Money Powers in the United States' by M W Walbert. ISBN 0-9656369-0-9. In reality it is the banking catel/money power that caused what you 'blame' on gold.
3. I think you need to look at some government debts? Try Greece for starters. Then add oh, say, half the western world? Time will prve all things, but if they just would have let them fail the fall out would have been small compared to what we will be faced with in the future....
4. And paper fiat is? Yeah right. The US government is activitly in the gold market pushing it down, then retreating their positions. They do it though the Exchange Traded Fund. They are even stupid enough to state such on their website, plan as day. Its a war that been going on for years. Wall street invented paper gold so they could get to control the action, but they are in trouble as too much paper gold has been created by the bankers. Thats why Gordon Brown had to supply the physical and sell down Britians gold - to bail out the bankers from default that would have brought down the system.... Actually gold is the only stable commodity you can pin the system too.
5. When people want a gold system, a monetary system with no counterparty risk, one where the increases in productivity get shared with everyone though mild deflation, one where saving aren't eroded, or put at risk just because you want to put something away for retirement, one where governments live within their means, one where they can't go to war unless the necessary taxes are sanctioned by the people? they are a kook are they? Really? Is that what you believe? I mean REALLY? 

4. Heres their own web site - in effect stating they manipulate gold and other currencies (in fact by inference all markets), and have been doing it for decades.
"The Secretary is responsible for the formulation and implementation of U.S. international monetary and financial policy, including exchange market intervention policy. The ESF helps the Secretary to carry out these responsibilities. By law, the Secretary has considerable discretion in the use of ESF resources.
The legal basis of the ESF is the Gold Reserve Act of 1934. As amended in the late 1970s, the Act provides in part that "the Department of the Treasury has a stabilization fund …Consistent with the obligations of the Government in the International Monetary Fund (IMF) on orderly exchange arrangements and an orderly system of exchange rates, the Secretary …, with the approval of the President, may deal in gold, foreign exchange, and other instruments of credit and securities."

The notion of a Gold Standard is a total misnomer, because there has never truly been such a thing at least as most people understand it, due to the fact that even at its height in the 19th Century, even so-called fiat paper money comprised a neglible portion of the total money supply.
It is interesting to note that on July 19, 1844, under the auspices of Peel, England [sic - should refer to the United Kingdom] had adopted the Bank Charter Act, which represented the triumph of Ricardo’s Currency School and prohibited the issuance of bills not backed 100 percent by gold. Nevertheless this provision was not established in relation to deposits and loans, the volume of which increased five-fold in only two years, which explains the spread of speculation and the severity of the crisis which erupted in 1846."
^ http://mises.org/books/desoto.pdf
Austrian economists even go so far to describe fractional reserve banking as fraud and that it therefore should be illegal. Even in the Soviet Union credit arrangments were practiced within their economy, so one could only imagine the think of enforcement methods that would be need to stop transactions without gold as an intermediary. 
The whole argument of gold vs fiat is a hollow one in its entirety, because gold money and paper money are both fiat monetary systems. The only public bodies to have sufficient legitamacy to provide and enforce  a universal form of payment were governments. Historically governments weren't inclined to, let alone able to provide a sufficient amount of coinage to provide for the needs of ordinary people. The idea that economies were operated entirely by exchange of money for labour and goods is only a very modern phenomon. Money is defined as an object which can be used as a universal form of payment, but for the vast majority of people throughout history didn't have access to such a thing,
So in the medieval era, the Church and later ordinary shopkeepers and tradesmen stepped in by issuing private currencies that acted as a receipt for the customer's tab which the proprietor had credited upon the purchase of goods or services there. The basis of most societies have been on credit whether informal, implicit agreements beween, neighbours or formal, legal contracts between strangers. Currencies have just been tokens that serve as tangible proof of the relationship. Money is just a generally acceptable token backed up with the legitamacy of government mandate. There lies the irony of "hard money" proponents as they have strong aversion to the power of the State, yet their demand for a "Gold Standard" money is impossible without the coercive intervention of goernments.
"As the smallest denomination, it was rarely hoarded ... Besides, farthings were not produced in anything like the quantities of the penny and halfpenny because, although they were useful to ordinary people, they were not so much used by the wealthy and powerful; and because, for the moneyers, they yielded the least profit of any denomination."
"Parliament stopped the production of copper small change in 1644, which had been a hated royal privilege (as it was a monopoly)...This pause in the making of low denomination coins continued until Charles II began making copper half pennies and farthings in 1672. Thus for nearly a quarter of a century there was a shortage of small change."
Village grocers and tavern-keepers stamped their own farthings and halfpennies, usually after buying the dies from London or Birmingham, and circulated them as substitutes for official money because The Mint at that time failed to consider the needs of the poor.

Sorry about the formatting. It doesn't appear like that until I post the comment. 

Use a double line between paragraphs :-) This changed earlier in the year.
Good discussion.

I am not sure what you are trying to say or get at Anarist, but many of the statements are false.
Do you want me to point some of them out? I'll just pick one then...
1. 'Money is just a generally acceptable token backed up with the legitamacy of government mandate.'  
No, that is what legal tender is. Real money needs no government mandate, legal tender does. Gold needs no (and indeed has no) government mandate, yet it trades as money on every major bank currency desk (not commodity desk note). Gold holds no counterparty risk (unlike fiat - every bit of which is only an asset as it is someone else's liability (its a claim on someone else) and that liability can be inflated away to zero, yeah!). 
The market chooses gold as money, one of the reasons is its very high production stock. Infact I'll let the lady from Sesame Street make this point as I think she makes it better than I could:
Now then, think. I am an oil state. You are a western country that wants my oil. I care nothing for your legal tender laws as they mean nothing to me. I do not want my grandchildren in poverty because you have swapped our nation's oil wealth for your 'paper' that you have inflated away to nothing. Think me a fool if I did this? I am not stupid, I know the history of fiat money. I will trade you oil for gold though - and if you think me still a fool as you dig up gold from your soil and trade it for a commodity oil.... think again as the day will come when I have no oil but have converted it to gold, and you neither oil nor any gold left. The reason why gold has been suppressed by the western central banks is so they can get cheap oil to their economies, that is also why 'paper gold' trading in many trillions now days was invented as Wall Street wanted in. It all coming apart now though.... Let's think of China then... think they will accept a trillion dollar loss on their US holdings? Go live in China and then think again....
You need to rethink your thoughts on 'money' my friend.... regardless of the conclusion you come to the market is going to reprice gold as the real reserve money (technically it already is, it just being repriced as such).

Depends what you mean by 'work'.
If you mean it will put the masses into debt servitude, to an elite class of power hungry maniacs then yes, it will probably work.

...and the middle class become poorer... the rich get richer... and the poor - well they never had anything in the first place... but they become more dependant of government... which in turn becomes more dependant on money printing to meet its 'social obligations'... the money creation in turn really benefits the rich though.... it reminds me of...uh.... the 'accomodation supplement'... its the middle class that looses in the end....

I notice he doesn't address interest, which is really the issue rather than the supply per se. I imagine even a fiat currency would work nicely without it, in that circumstance any expansion of the supply (printiing or leverage)would be harder to hide.

Scarfie, I don't think interest is a big deal (as paid interest becomes principle and paper money is just mainly digits in a computer - its not even paper). Fiat eventually fails as more gets printed than the goods and services that can be delivered.
The real problem is with human nature, not economics. Real money does not have to circulate or transact to have value - it can sit in a vault for 100 years and go to your grand children. Gold has not always been legal tender currency, but it has always been money. Everything else is thoughts blowing in the wind.

Actually interest is a monumental problem, because even without it compounding, interest payments rapidly exceeds the amount of the principal. In ancient times Babylonian scribes were taught sophisticated mathematical techniques to calculate the rate at which debts doubled. Interest rates were generally around 20% which is fairly typical today for the likes of credit card and consumer debt. The scribes were able to calculate that it would take five years, which for a wealthy lender would be a good thing, but when you are the debtor it more often than not meant the loss of what little wealth you had, then the liberty of first your children's, then your wife's, and eventually you're own as you were forced into debt slavery to work off your debt.
Interest irrevocably causes a severe redistribution in income within society, inevitably upwards.
This is why, governments have recently had to provide legal recourse such as bankruptcy arrangements, though in the United States its interesting to note than major credit companies campaigned for reform to the legislation which would be tougher on the debtor, even before the onset of the Global Financial Crisis. Me thinks their claims of not knowing what was going to happen weren't terribly sincere.
But the passage of the 2005 law had been a prize the financial services industry had chased for over a decade. Credit card company MBNA (later bought by Bank of America) was one of the most aggressive backers of the bill. MBNA had penciled out that the new law would increase its profits $85 million a year, by extracting an extra $100 a month on average from consumers in bankruptcy.
Read more at http://www.nakedcapitalism.com/2012/05/the-bankruptcy-reforms-of-2005-creation-of-a-new-debtors-prison.html#YgJeSVhLci5GWAcY.99

This is the idea behind day trading, and other speclative transactions (what I'm doing on forex).  By having a easy to hit target, with low cost of ownership, turned over many times; it can inflate to a fortune, and should be illegal outside of real trades.
Mist set up an algo and trade it at continuous compounding:
29.6936% = (100(e^0.26-1)).

Mist - this explains your false belief in the dollar somehow being superior to things like energy supply. You need to ignore the real planet, to believe you can buy bits of it as a result of that kind of nonsense.
Nothing is being created - if you 'win', it's because someone else 'lost'. What a sad way to live.

"If you're interested in such things, you will note that the best way to take advantage of compunding, is not to increase the interest rate (which does help), but instead shorten the length of time per period and increase the number of periods per year.  (turnover rate, in business tederms)."
I'm well aware of that phenomenon Mist, its fairly standard for the likes of loan sharks and consumer finance companies to calculate interest on a monthly basis in order to disguise the real interest cost, which massively increases the interest burden on the loan. The Babylonian financiers were also conscious of this effect, though the government administration appear to have an ambigious perspective on finance. On one hand condoning the practice of finance, because they gained so much from it and then swinging toward the opposite extreme when the social turmoil became too great, to the extent they periodically granted debt forgiveness, though this wasn't without its cost.
"The legal limit on interest rates for loans of silver was 20% over much of Dumuzi-gamil's life, but Marc Van De Mieroop demonstrates how Dumuzi-gamil and other lenders got around such strictures -- they simply charged the legal limit for shorter and shorter term loans! Curiously, while mathematics during this era was extraordinarily advanced, the government failed to understand, or at least effectively regulate the close link between time and money...Although the debt edicts provided periodic relief to the citizens who had gotten themselves mired in debt, they had a negative effect on interest rates, and on the productive use of capital. The mere threat of an edict would be enough to limit long-term loans for investment. The risks of such a loan were too great, since the chances of it being forgiven by the king sometime over its tenure were high. Such uncertainty about the political future induced lenders to increase interest rates, in order to compensate for the increased risk of loss. Although meant to provide relief, the edicts effectively increased interest rates.

I think you might be referring to usury.
Interest doesn't threaten the financial system as a whole (although many believe that) as interest paid becomes principle in the hands of the lender. Back when I was a kid, interest rates were 17,18,19% and the system was not under threat, under fiat interest can go on forever as they can just generate more and more money (its only digits in a computer). The interest is repaid in part via human labour, so interest is a way of extracting human labour from the system. Edward Griffen in his great book and best seller 'The Creature from Jekyll Island' does a better job than I of explaining it. Most libraries can get you in a copy if you were really interested. In Auckland there are several copies floating around in the library system...

How about wage deflation?
Or asset deflation? Most people up to their eyeballs in debt from mortgages on inflated house prices. When their house value collapses, they're left with debt larger than the house value.
So can see why those in charge would prefer to use some inflation and growth to get out of the mess.
Not sure cheaper digital gadgets from technology and manufacturing improvements  = deflation.

Taxation is wage deflation south paw.....Japan has found ways to "muddle through it " deflation I mean.

Wow, yet another libertarian.....seems there are all of 1000 in NZ, most of them live in here it seems.
Actually no, just about anyone ie job public who has a job and hopes to hang on to it...you know many ppl have a mortgage and want to eat, fears a Great Depression.
In terms of TVs etc goods only get produced when there is a profit. TV makers go bankrupt in recessions/depressions then there will be no TVs, job losses etc. Then the price of any TVs still being made will skyrocket. Also there is huge difference between improvemenst in technology reducing the cost to make better products and wage deflation type scenario.
Someone with cash, yes OK they might welcome deflation, except for the effect on everyone else. For instance end up with un-employment at say 25% and those with cash are going to be heavily taxed to pay for that....or there are other options,
be careful what you wish for.

not sure how you equate someone calling out that deflation is good for some is equal to being a libertarian?
You can almost smell the fear from the banksters when deflation is mentioned.... Perhaps the worst deflation from their point of view is deflation of bonuses.

"Read Peter Schiff"  I think is enough of an indication.
banksters, of course they have fear....they have pillaged uncontrolled for 30 years and now the probable outcome is a Greater depression. For me its in-arguably going to lead to such ppl going to jail, the public's wrath I think will leave no other option except maybe, revolution and a few of them hanging from lamposts.
Also pollies as their promises ring empty....
The not-funny thing is we have pursued more and more libertarian pollies and freedoms for 30 years and watched these de-regulations get hijacked by the greedy.  As the saying goes the theory works fine until it meets practice....

just because someone quotes Peter Schiff doesn't make him a libertarian.
I have yet to see anyone put up a cogent argument for *why* deflation is so dramatically bad for *ALL* society.
I can see how deflation is bad for:
a) bankers
b) real estate agents
c) proponents of the growth lobby
d) Any one who has leveraged up.
e) politicians (who want to use the bogus CPI to drop the real cost of benefits)
I can see deflation being good for:
a) retirees
b) many poorer people
So I struggle whenever you rant on about deflation. As I have *yet* to see a really good argument against deflation (or stability of the money supply) as opposed to inflation

Sorry but the Inflationistas are wrong.
There's is too much deleveraging to happen.

BH - so you believe oil will drop in price, even as the costs to extract it rise? (the same is true of a number of commodities) Or do you believe minning costs will drop also?
How is that 30% drop in housing working out for you?

AS oil has gone up nearly two bucks in the last few hours think I will keep out of the debate

Pity we dont know whether its the speculators or real prices.
heating oil season as well.

Pity doesn't come into it and it probably is speculators as it always is - there are reasons why oil companies have financial dealing rooms as big as any bank. End users are price takers regardless of how the price is determined.

I think you are being bitchy.......all that's out is BH's timing.  NB I see 60%+ not 30%....
I find it incredible that ppl can only look at one aspect of a situation such as you are doing now, so,
Oil price drop, well look at 2008 we saw a huge price drop followed by a recovery in the price to $85.  Of course then there was a supply and demand with noticable excess in the market, today there is probably not. ie numerous complex factors.
There isnt excess because a) Iran is being forced out of the market, b) output drops by other nations that for 4 years have shown declines.  Failure from places like Iraq where the expectation was for noticable increases...simply its questionable if even in this mild recession there is any spare capacity....
The dire situation is the marginal price at $90 for new fields. if companies cant get that, well you figure it out. Add in 5 to 8 years time delay and ponder maybe where we will be in just a few years. So no mining prices wont drop, it wont be extracted not unless Govns throw (lots of) money at it.
When Ambrose says we went past cheap peak oil he isnt kidding, the economic events though are looking even more dire than most thought. The marginal price is actually looking like a price that will never see the oil extracted  because we wont be able to afford it. That means a far more severe and prolonged oil shortage than has been hinted at....60% house price drops start to look the minimum.

It's about the price at the margin, of an essential item.
When you back off demand, get in amongst the easy oil, you're at $40. When you increase demand - and not by much at that - it's into $100 sources, deep water, shale, tar, bios.

Yes..Saudi for one needs oil for its handouts to keep its ppl quiet....I think they have said it needs to be $60+.....their old wells well maybe pumping at <$25.....new ones? suspect a lot higher and thats just saudi....
In 2008 we saw a collapse to $35.....I think at the time some writers in ASPO etc seemed to expect that to be repeated ie this time around, it hasnt happened....I wonder if it will now....too many fields at over $50....maybe well over...
Then yes oil is essential so its in-elastic....so a small shortage causes a big price spike...which 3 to 6 months later knackers economies...
"$100" but as we know its EROEI and not price...got to wonder now just how fast things could/will unwind....

Ah yes its all about timing.... holding people to their past predictions when they go making new ones is being 'bitchy' steven?
We have waited 5 years? Are we to wait 50? Will property be down 30% in 50 years time?
We do seem to agree about oil at least, its not the daily price movements thats so important - its the marginal cost of production. Its not like we are going to run out of oil in our lifetimes but we are running out of cheap oil. I think $100 oil is here to stay, the price will spike above and below this. Swings of 30% certainly would be common, but in the end the price will trend after the cost of production (which is up). Similar cases can be made for all sorts of commodities.... and thats inflationary, as commodity prices effect everything we buy - esp oil, ie higher prices over time and we will have less of it.
Household in NZ have 300 billion of debt and 800 billion of assets. Thats not the end of the world (and we don't have a subprime market - if you can't service the mortgage you can't borrow the money from the bank). Not everybody in NZ buys investment property on an LVR of 90%+ and many investment properties are cash positive now days (with interest rates so very low).... if Bernard is still waiting for a crash I think he will be waiting a while and Im not holding my breathe.... if he is waiting for deflation (which hasn't occurred yet) he also has some time to wait... 

Economist - the problem is that the oil is 'work'. So we will be bidding more and more for things to happen, that we took for granted. Excavation, transport, food, infrastructure.
I contend that the problem will be repaying debt (including interest, which has to trend to zero, and then below, when the energy isn't there to fuel the work).
Bernards problem is that if there were unlimited 'supply of land', with no competing land-use and no servicing-distance issues, he might be right. But if you add that 'less work do-able', the income side falls over, so 'cheaper' is of no use in relative terms.
Essentials in contention - land, water, food, shelter - will become more expensive relative to incomes. I suspect non-essentials will tank.

Yep, the essentials will go up and that's what most people spend most of their income on PDK, so that's inflationary. Non-essentials will probably just be produced in less quantities as they will not be produced for less than the cost of production, as any business man will tell you, but they will be less in demand as incomes get taken up with the rising cost of living. 
To have deflation

  • the costs of production have to decrease accross the board,  - in other words we have to make massive productivity gains - which probably will continue in products that have a high technology component though (its been that way for a while).
  • or the money supply needs to collapse, but unlike the 30s they can print more... and central banks exist to stop this from happening and support the banks... they will not let a system collapse that they control until they have set up a new system they also control...(they havent done that yet). For example in under 60 seconds I can type out 100 trillion and refinance all the sovereign debt in the world - at zero % interest.... most deflationists point to the 30s and the deflation collapse back then... but interest rates were hiked and the money supply contracted... the opposite is true today and we are on a purely fiat (unbacked) monetary system so they are not comparing apples with apples. We will have negative interest rates which will destroy capital and savings and we funnily enough will end up in the same boat as the 30s - ie the masses will be broke.

Outside of some major break through like some form of cheap cold fusion, I don't think there is an easy way out.

Well I guess its a bit picky I suppose to pick on BH predictions without going on the line and making some.... so...
Housing will not fall by 30% nor by 60% but amble along at close to the inflation rate for a few years, sure central Auckland and Queenstown and some other areas are probably a bit overpriced, but a drop in central AKL of 10% (if indeed that much) wouldn't be deflation - just a correction. Rents in AKL will go up, probably also close to the wage inflation rate...small shortages of rental accomodation will continue... interest rates will stay lower for longer than most even now suspect (therefore making housing more affordable for buyers) the promised government surplus will not eventuate and the Australian mining boom will weaken on the tales of a slower China. Europe will be a disaster with the Germans eventually either giving into money printing or the euro will split into two parts - a southern weaker currency with a stronger northern one.... The return of NZers from their OE will increase (and increase the demand for NZ housing) as NZ economy outperforms relatively speaking based largely around its food exports (people need to eat). The US will print its currency into hyperinflation oblivion, going well and truely over the fiscal cliff.... but monetising the entire debt... which will destroy the purchasing power of millions of people... Some parts of the US will look more like 3rd world countries, (that's currency destruction for you)... Gold in some form or other will be remonetarised by the huge bond market funds who will discover in time that sovereign bonds aren't the safety the world now thinks they are.... they will also pile their trillions into commodities and real assets and it will surprise many how high they will go... people will of course blame the speculators for this and demand government controls which will eventually make the situation worse...

Stand your ground , economist ....... Bernard is a prominent figure in media circles ( no , that's not a cheap crack at your former girth , which resembled the earth ) , and if he makes prognostications , some folk will believe him , and may adjust their personal finances accordingly ......
........ the 30 % house price crash was a dud prediction .....
And now it's deleveraging that he's 100 % sure of , no inflation on the horizon ........
........ now , Gummy's no expert , but it sure as hell-fire looks to me that central bankers around a sizeable chunk of the world ( USA / Eurozone / UK ) are trying desperately to inflate their debts away .......
Hang in there , economist !

I'm not moving ground Gummy, just because I think there are pockets of slighty overpriced homes in NZ... I just don't see the crash BH has been calling for. You can't get a house loan unless you can service the mortgage and interest rates have fallen making housing actually more affordable.... so a crash is very unlikely... (as people still have jobs and nominal wages are rising, not falling - if we had mass unemployment then BH may be right but unemployment would have to at least double - or even triple, to hit housing like that - also very unlikely). A boom in prices is also unlikely given peoples adversity to debt.... we will have an inflationary depression which is what we are heading for - that's what I said many months ago... I see no reason to change that view.... BH is also advocating a NZ version of QE to lower the currency (lowering the currency btw is inflationary in itself to say nothing of the extra billions that would be printed)... Sadly, I think NZ probably will do a form of QE eventually but certainly not this year... that would be a few years away... like I said, in the end it will be an inflationary depression... not a deflationary one...
Yes of course they are trying to inflate their debts away. What else can they do? The whole issue about QE or no QE is irrelevant as they do the  same thing by 'currency swaps' ie - the FED creates a trillion and lends it to the ECB, who in turn creates a trillion and puts it up as security to the FED, this transaction never appears on the balance sheet of either (unlike traditional QE), thats exactly what happened just prior to Christmas last year which is why I said in an earlier post at the start of the year there maybe no 'QE' until 2013. Benanke is just a show pony, the real deals are done with smoke and mirrors...

The key to prognostications , as Bernard knows full well , is to appear overwhelmingly confident ....... that suckers in the uninformed to think your case has validity .......
..... yet at the end of the day , Hickey's ability as a haruspex is no better than Ken Ring's ...

GBH: upstairs there, at 12:23 pm, steven is overwhelmingly, confidently, absolutely, set in stone, dismisses 30% contraction and forecasts 60% .. dont ya reckon that beats Bernards -30%

..... yes , but is steven a well known finance commentator on the mass media around NZ ?
Bernard needs to choose his words more carefully , as some people around our great land may alter their personal finances , based on his utterances ......
..... I notice that others ( Uncle Ollie / Brian Gaynor / Liam Dann ) lay out an argument , then draw a possible conclusion ...... don't recall any of them saying emphatically  " this will happen " .....as if their prognostication is carved in stone , 100 % guaranteed ......
Keep practising the fine old art of haruspicy , Bernard  !

Four years ago I would have agreed with Bernards 30% deflation/contraction.
Three years ago I would still be of the contraction view
Two years ago I had second thoughts, it should have begun
Now, this year, I've changed my mind. I dont think it's going to happen.
Now in the Inflation Camp. And GBH's Dow 15000

I like what your saying there economist.


Zimbabwe's credit bubble bursts

Chinhoyi - According to the official figures, Zimbabwe's economy is booming. The agony etched on the faces of those in the auction rooms in Chinhoyi, watching helplessly as prized possessions go for a song, tells a very different story.

Zimbabweans from all walks of life are drowning in debt after the implosion of a three-year credit bubble. High rollers are losing mansions and limousines; ordinary people chickens and pots and pans.

The only ones doing well are the auctioneers holding the sales and the newspapers advertising them.

As well as hammering some of the southern African country's biggest firms, the crisis is threatening the stability of its banks and piling more pain on a population of 13 million traumatised by a decade of drastic economic decline up to 2008................






Eastman Kodak is to sell it's consumer film business . The bankrupt company is selling assets , in a bid to re-emerge as a viable company . And for those of us who grew up with Kodachrome film , this is indeed the end of an era ......
....... one wonders what Bernard will load into his camera , as he searches the neighbourhood looking  for a property crash to snap , on his Gloomstermatic ......

It's interesting to note those who cannot separate emotion from fact.
Iconoclast may well be right - the Dow may go to 15000 - even beyond - but it doesn't represent work actually being done, and thus wealth actually being created.
It will represent no more thatn a lot of scared punters trying to preserve their 'wealth'. Without underpinning, that's a bubble.