90 seconds at 9 am: On QE watch

90 seconds at 9 am: Dow up 0.5% to near 5 year high on hopes Fed will stimulate more; NZ$ at 81.8 USc and near 73 on TWI; Eyes ahead to Euro ruling, RBNZ meeting, Fed decision

12th Sep 12, 9:02am by Bernard Hickey

Here's my summary of the key news overnight in 90 seconds at 9 am, including news the Dow rose 0.5% to near a five year high overnight on hopes the US Federal Reserve's Open Markets Committee (FOMC) will reveal more stimulus on Thursday night New Zealand time.

The S&P 500 rose 0.3% and is up 14% this year. It is also 20% above where it was when Lehman Brothers collapsed in September 2008. See more here at Bloomberg.

All this appetite for riskier assets and prospects any fresh money printing by the Fed would devalue the US dollar saw the New Zealand dollar rise to 81.8 USc overnight. The Kiwi is also higher against most other currencies and the Trade Weighted Index (TWI) rose to 72.8. It has risen 3.4% in the last week.

The Kiwi dollar was also helped by Fitch's announcement overnight it would affirm New Zealand's foreign currency rating at AA. It said the government could afford to let its budget surplus target slip by a year without forcing another cut in its credit rating. See more here on Fitch's announcement on our site.

The next few days is shaping up as crucial for global and local financial markets and economies.

Later tonight the German Constitutional Court is expected to approve Europe's bailout funds, but there remains the risk of awkward caveats or a rejection that could throw a spanner into European Central Bank President 'Super' Mario Draghi's 'Big Bazooka' plan to launch unlimited buying of bonds. See more here from Bloomberg on European stocks rising in anticipation of the German court ruling.

Then at 9 am on Thursday morning the Reserve Bank of New Zealand is expected to release its latest monetary policy decision and release its September Quarter Monetary Policy Statement. The RBNZ is expected to leave the Official Cash Rate on hold at 2.5%. Most economists expect it to remain there until midway through 2013, or even into 2014 as inflationary pressures remain weak and the economy struggles to bounce back quickly because of a slowing global economy, a strong New Zealand dollar and Christchurch earthquake rebuild delays.

Then later on Thursday night the FOMC releases its decision, which could include an extension of its pledge to keep interest rates near 0% until well into 2015, or a fresh round of Quantitative Easing (QE) or money printing to buy US government bonds. Some are even suggesting the announcement could be of 'unlimited' bond buying, similar to the plan adopted by the European Central Bank. See a preview here at Bloomberg.

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71 Comments

by Roelof | 12th Sep 12, 9:10am 1347397845

Hey Bernard... Only just listened to ur interview with Steve Keen.

It is a goodie...

One to get our kids to listen too.... ( he talks in a way that economic idiots like me can understand)

Apply what he says ..and add in the dynamics of supply and demand ....and u have a large part of the answer to discerning markets such as Real Estate..

Cheers Roelof

by scarfie | 12th Sep 12, 9:50am 1347400218

Great video and reading between the lines you can see the dangers that exist with the resource ceiling. If you are already at the maximum level of debt servicing possible before going into recession measured as a percentage of GDP, then what happens if GDP starts falling?

If you read between the lines further Steve also hightlights the moral hazard of interest, which by its very nature constantly increases servicing cost as a portion of the money supply. That is exactly why a jubilee is required and will come whether voluntary or not. Also interest requires growth, so we are now staring down the barrel of a double barrelled shotgun. This is the limits to growth plus the natural end, or debt ceiling, of an interest bearing currency.

Bernard if you go back and read the (M.V)+i=P.Q article I sent you, that explains the mechanics behind what Steve Keen is saying, with my addition of how growth limits are actually a greater risk than deleveraging.

The real solution is of course to introduce a currency that does not bear interest.

by gelous | 12th Sep 12, 9:34am 1347399271

Roelof, where is this interview you speak of? I saw Steve Keen's lecture at Auckland Uni last week and would be keen (pun definitely intended) to hear him and Bernard rapping together. Link please?

by scarfie | 12th Sep 12, 9:35am 1347399301

http://www.youtube.com/watch?v=hKgfE-CVgo0

by gelous | 12th Sep 12, 9:37am 1347399436

Thanks scarfie.

by Christov | 12th Sep 12, 11:59am 1347407964

Bugger me,...I had no idea Keen and Ihad so much in common philosophically speaking.

Conclusions arrived at in lay thinking obviously do not require a PHD to have some merit.

1. the concept of a Jubilee , although he details just how that could be trialed and the inflationary effect observed.

2. Separating the speculative market from the productive , as in putting the Capitalist Industrialists back in control instead of the Banking fraternity.

3. The corner the RBA and RBNZ have painted themselves into regarding pandering to Banking interests while aiding the acceleration of private debt to GDP.

4.My theory that QE111 will not be as we have known it Jim, but targeted to a productive outcome , rather than just bolstering the speculative markets on a basis that is nothing more than feeding a Junkie...the dose may provide relief, but does nothing to cure the addiction.

5. That the banking industry Globaly has behaved nothing short of irresponsible in lending practices, therefore should take some losses in proportion to the unsustainable debt traps they have created....all the while with the apparent blessings or(non interference) of the FED, BOE,ECB,RBA,RBNZ, and so on.

If a lay person can reach such conclusions long ago, it can only mean there has been a political will and involvment in creating the debt slave environment.

Bernard , your headine says fed will stimulate more...?, but then the piece says "could ", so which is it ..... will or could...come on Matey, nuts on the line here...!

by meh | 12th Sep 12, 2:45pm 1347417950

Valid points Christov that make sense.

The only issue I have with Keen's work is that he lays all the blame on the lenders. Borrowers/taxpayers/consumers are just as responsible and need to accept some/most accountablity as well.

The debt jubilee concept makes sense but what's the inflation risk? Suddenly a whole lot of consumers have extra equity or cash to spend. Once they've spent said equity/cash what happens then? The majority are only going to consume more. Many financial assets are (partly) repaid and those portions disappear - what happens to physical asset values? Do they stay inflated?

Are the Capitalist Industrialists any better? They contributed to the debt burden just as much while paying significant sums to management while cutting wages/laying of the very people that without the company doesn't exist.

If a lay person can reach such conclusions long ago, it can only mean there has been a political will and involvment in creating the debt slave environment

Political will - maybe, involvement, yes, most definitely greed and corruption and ignorant sheeple.

by Christov | 12th Sep 12, 3:12pm 1347419576

Meh...I took it from the interview that trialing the concept of Jubilee was do-able on a measured scale to observe the inflationary effect.

I too had wondered about curbing the debt appetite of the want it all want it now...generation, and if the potential for failure ,due to the borrowers behaviour would be quite high.

Oddly the concept of leverage has been implanted in the psyche of many average people , who have no basic understanding of the mechanics to it, leading me to conclude, finance institutions have simplified and imparted the thinking or instrument to users without furnishing information that may prejudice such practices.

I guess you could view it as Tier leveraging, with both depositors and borrowers left holding a baby they didn't create.

Yes ,your right ,they share in the responsibility even if ,they don't grasp that you cannot leverage something from nothing without consequence, and in that ,may need protecting from themselves, as in structured reforms for lending preventing imbalances to average income ratios.

You will note I said the Banks must stand some of the losses and at no time did I say all.

Do watch it again worth a second look to pick over.

by meh | 12th Sep 12, 3:25pm 1347420353

Thanks Christov. I wasn't implying that you believed banks should take all of the losses.

by iconoclast | 12th Sep 12, 3:55pm 1347422154

Christov: 3. You put you finger right on it with "The corner the RBA and RBNZ have painted themselves into" .. that's it in one .. both the RBA and RBNZ are snookered with no painless way out .. (pain for who?) .. explore that one thought and run it through Steve Keens proposition again ..

by Christov | 12th Sep 12, 4:14pm 1347423287

Thoroughly agree iconoclast...as my posts on just that concerning the RBA's posturing over the last two weeks or so would allude to. They are in a perfect damed if they do damed if they don't place........and they did it to themselves while ( serving..?) the interests of others.

All the Jawboning they can muster ,won't amount to a hill of s*#t if ,they can't lay the bets off.

Maybe something in the public notices might become appropriate.

by Kate | 12th Sep 12, 12:28pm 1347409738

Hahaha - my bet is on will - if yours is too I hope it doesn't crack any nuts.

by Christov | 12th Sep 12, 12:53pm 1347411224

My bet Kate has been consistent no , not as we know it , so it's a qualification rather than a flat out no.

Just baiting Bernard there Kate...he's stated print on the last four announcements, wrong on every one.....so a bit of gloating from me in that , for the life of me I cannot understand why the repeating of a process that is nothing more than a delaying of the inevitable should be accepted as a given, suggesting mild insanity by the process co-ordinators and recipients.

by Les Rudd | 12th Sep 12, 12:55pm 1347411347

Here is Steve Keen's Canty Uni lecture:

http://lecture.canterbury.ac.nz/ess/echo/presentation/717bb6dd-7ff3-4380-903d-b96392ef6293 I can't find the double-shot interview BH apparently did with him anywhere on Interest.co? Les. www.changenz.co.nz

by Christov | 12th Sep 12, 12:54pm 1347411277

Here Les.......http://www.youtube.com/watch?v=hKgfE-CVgo0

by Les Rudd | 12th Sep 12, 12:58pm 1347411531

Thx Count, seen. But why isn't it on Interest.co? I was Uncle Dick over the weekend and when I surfaced tried a couple of searches on Interest.co and can't find it?

by Christov | 12th Sep 12, 1:08pm 1347412102

Maybe Steve K wanted a Royalty Les....if advertised that is....?

Or maybe Bernard feared the slagging he'd cop from GBH.....?

by Les Rudd | 12th Sep 12, 1:24pm 1347413049

Maybe ...

Couldn't be the second option, Gummy induced fear. If so Bernard would have given up yonks ago.

Who knows, maybe it's people who simply want bank induced private debt ignored continually, something Keen does do very well. He's onto it. Some ripper charts.

Say, who has ignored bank induced private debt continually, to a magnitude that could easily have posed a risk to financial stability? Not very prudent eh.

RB-a-seeing-ya, Les.

by Stephen Hulme | 12th Sep 12, 1:40pm 1347414048

Say, who has ignored bank induced private debt continually, to a magnitude that could easily have posed a risk to financial stability? Not very prudent eh.

RB-a-seeing-ya, Les.

Les, your subtle dig if I read you right has not been a well managed outcome after geared asset values are inflation adjusted - see graph courtesy of Colin Riden.

by iconoclast | 12th Sep 12, 1:54pm 1347414846

Is Steve Keen a lone voice in the wilderness?

He makes "too much" sense.

Is he less regarded than Krugman & all those other US and UK and EU experts.

Bernanke and King and Draghi have had 4 years of QE and TARP bailing out the banking system and not working.

Keen is right. QE should be targeted at the general public - not the banks.

But, then it's not an AU and NZ problem, is it. NOT YET, anyway.

Is Parker talking to Keen?

by Christov | 12th Sep 12, 2:25pm 1347416718

As I said earlier Les..... That the banking industry Globaly has behaved nothing short of irresponsible in lending practices, therefore should take some losses in proportion to the unsustainable debt traps they have created....all the while with the apparent blessings or(non interference) of the FED, BOE,ECB,RBA,RBNZ, and so on.

If a lay person can reach such conclusions long ago, it can only mean there has been a political will and involvment in creating the debt slave environment.

Complicity Les, while claming independence from a captured position.

A grande scale of Victims identifying with their Kidnappers.

by Gummy Bear Hero | 12th Sep 12, 3:02pm 1347418962

.... would it be any worse than the slagging I give Bernard for being a constant gloomsteriser ?

I'm here to share the love , and the enjoyment of a life well lived , Count ...... not to get ratty 'cos some perma-bears still believe in the complete twaddle that Steve Keen peddles ......

.... you won't destroy the entrepreneural spirit in democratic capitalist countries .... no matter how often the depressionists paint a picture that says " this time is different " .......

by Christov | 12th Sep 12, 3:26pm 1347420398

you won't destroy the entrepreneural spirit in democratic capitalist countries .... no matter how often the depressionists paint a picture that says " this time is different " .......

I am glad to hear that GBH.,......but to be fair I think it a tactic of Keens to create that kind of reaction in order to engage...as he points out in his slagging of Delong..kind of the ,be loved , be hated , but never be ignored philosophy.

I don't think he is out to destroy the entrepreneur in us , just to bring some sanity to where endless debt leveraging will lead us to.....

Leverage is all very nice when it's working, particularly for those who are not part of the Fulcrum.

And that is the crux of it here GBH, the Fulcrum is not built in reality to withstand the leverage applied, unchecked, unwarranted, unabated,

A most happy day to you my good man....keep on being you, nothing wrong in that.

by Christov | 12th Sep 12, 3:38pm 1347421086

P.S. GBH...may I ask , did you watch the interview...? I would like to think you did.

It's just that I don't see his statement of returning power to the Industrial Capitalists while depowering the Banking or Speculative Markets...................as Twaddle.

I hope betting has not come to be included in Entrepreneurship

by wtf | 12th Sep 12, 3:57pm 1347422237

Used to be called Fordism, a social compact where in return for the industrialists making a lot of money and not being canibalised by cut price foreign competition, the workers would receive real wages high enough to afford the products they were making without going into massive debt. Slavisly following neo liberal dogma despite the reality of the outcomes is insane and bordering on criminal.

“In the 15 years since the Lange government was elected and New Zealand opened up to the forces of globalisation, we have performed dismally, both economically and socially….Prospering in an age of globalisation requires us to determine simply and clearly what is really important to us, and then to focus on insightful and unconventional strategies which will deliver success on these matters. That requires us to exploit not only the spirit and drive of competitive individual entrepreneurship but also the power of co-operative endeavour. Both must be harnessed to make New Zealand residents the ‘owners’ of unique capabilities, so that overseas customers and capital are dependent on us.”

- Hugh Fletcher 1998

by Christov | 12th Sep 12, 4:32pm 1347424324

Cheers wtf.....Prospering in an age of globalisation requires us to determine simply and clearly what is really important to us, and then to focus on insightful and unconventional strategies which will deliver success on these matters. That requires us to exploit not only the spirit and drive of competitive individual entrepreneurship but also the power of co-operative endeavour

The practice of buying and selling houses to each other seems to be the highest level of Entrepreneurship we achieve on the wider public scale all underwritten by those very Banking systems touting the rewards for competitive individual entrepreneurship, without participating in the development thereof.

by Christov | 12th Sep 12, 9:06pm 1347440796

Geesus..GBH...I am surprised at the no response, but fair enough, I'd guess my welcome run here is just about up anyways, no problem , just in the nature of things.

Stay well, stay happy, and the very best of luck to you Mon Ami.

by Gummy Bear Hero | 13th Sep 12, 2:49pm 1347504553

Oh , hullo again , Count .... sorry , but I can't keep up ..... you're a nippy wee varmit around the site .......

....... um , no .... I mist the Steve Keen interview ..... that's surely a little treat I'll reserve for someday when every TV channel has nuttin' but reality shows , 24 / 7 ......

Unlike in days of yore , the Gummy one has limited internot access ....... I am in Austrailer , now ...

Ciao , baby !

by Kunst | 12th Sep 12, 4:36pm 1347424619

Reality is – time will change Gummy.

Gummy - a number of entrepreneurial friends in Switzerland with small to middle size businesses for years are telling me of massive changes and struggling times ahead.

Gummy - good business practice is looking and planning into the next number of years and not back dreaming about 2007.

by Elley | 12th Sep 12, 4:48pm 1347425293

Irrelevant post but I was thinking of you on Sunday (!). My cousin who's a senior lecturer at Victoria University in Wellington (School of Chemical and Physical Sciences/Raman Laboratory) told us that he and his wife were planning to go back to Europe within 12 months at most, and were looking at settling in Switzerland.

It was a bit of a downer for us seeing that even though we only saw each other once a year, having them in NZ made us feel a little less isolated from family (they'd moved here a couple of years after we did, and the four of us were in the UK in different cities before that). But anyway, I am wondering what the opportunities might be for them over there (she's a Six Sigma/business improvement consultant).

by Kunst | 12th Sep 12, 4:59pm 1347425985

Hi Elley,

Big numbers of Germans are flocking to Switzerland, looking for better paid jobs. In general there is massive competition among job seekers right now.

by Elley | 12th Sep 12, 5:07pm 1347426430

Ah OK, thanks. He's highly specialised as well so it may not help. Probably less competition but less opportunities too. We'll see.

In the meantime, we'll celebrate our 10 years in NZ in 10 days. Well, I suppose I should organise a celebration anyway!

by speckles | 12th Sep 12, 6:36pm 1347431811

I know a number of euro kiwis that have moved there recently, secured great positions, would not call them heavy weights in their are of expertise, if you are good seem a lot of opportunities, they do have a preference for the germans though.

by Gummy Bear Hero | 12th Sep 12, 7:00pm 1347433222

.... you dream of living back in 2007 , Walter ? ..... " Pah " , say I , " pah to 2007 " .......

The present is / and the future will be - so much better than moldy old 2007 ......

...... think big , bold & pizzazz , my friend ..... Pizzazz !

by notaneconomist | 12th Sep 12, 10:02pm 1347444128

GBH - Thank-god for entrepreneural spirit always rising to the rescue. Given some of the comments on this site - I think a few people are hoping for a debt jubilee so they don't have to do their own hard yards, thinking and inventing.

Well all I can say is that if the people are so dumb that they didn't know what they were doing in obtaining their loans from the bank, then how will that dumbness go away by giving them a Jubilee handout?

by Christov | 13th Sep 12, 7:50am 1347479405

I'm in no need of any handouts Notaneco... I just don't see the need to advertise the I'm alright Jack position.....your jibe is wasted on me and a tad puerile I might add.....

If your fanny flavored icecream starts to taste like shit , don't take such big licks...eh..?

by notaneconomist | 13th Sep 12, 8:56am 1347483372

Christov - my comment must have hit a raw nerve judging by your response. Maybe a dose of anti-inflammatories? Nah....

The Victorian era, rib removal popularity, obviously had effects I had not considered before.

Possible outcome - no nanny-state teat suckers.

by Gummy Bear Hero | 13th Sep 12, 9:06am 1347484007

I must've mist summit here , 'cos Mr notaneconomist's comment is spot on the money : The Steve Keen debt jubilee would be the final straw for us innocents , who'd had to endure bailing out banks / & finance company investors .......

...... enough of the namby-pamby running to Nanny State for protection from your own follies !

That is not the true spirit of free trade & enterprise .......

...... indeed some would argue , that had the stoopid government kept out of Christchurch , the re-build would now be well underway , and alotta business folk & homeowners would be feeling in charge of their own destinies ......

by Christov | 13th Sep 12, 9:32am 1347485551

...... enough of the namby-pamby running to Nanny State for protection from your own follies !

GBH , you know full well that is not a concept I'd support nor subscribe to, to boot I think your oversimplifying the point Keen is trying to make and turning into an issue of state control.

For me the interests lies in how to begin to depower Banking institutions that have been allowed to run amok at the expense (yes the expense) of the working class stiff, investor,entrepraneur...etc....all the while sanctioned by institutions required to monitor their behaviour in the public interest.

Now I don't see myself as a Marxist...but I am prepared to listen to ideas that may lead to a rebalancing of directional control... that in no way implies I want more State power or growing the State service.....just responsible monitoring and impementation of policy to act decisively when policy is breeched.

As to the debt jubilee....come on now , regardless of what merit I see in it , do you really think the idea is ever going to refloat....not likely ,is it....but, in indulging the idea ,other ideas are born from compromise....or5 we could just kick the can some more ...ad nausem.

You have a most excellent day Mon Ami...it is truly a beautiful one here.

by Gummy Bear Hero | 13th Sep 12, 9:38am 1347485901

There is one pure simple & clean way to protect us from the banks' poor behaviour :

" No one is too big to fail " ...... just tattoo that on bankers' foreheads , they'll get the message every morning , staring back at them in the mirror ....

.... no bail outs !

Catcha later , alligator ........ warm & sunny here , friend !

by notaneconomist | 13th Sep 12, 2:46pm 1347504403

Christov - perhaps you are over-simplifying and not recognising the States part in all of this.

I am some what surprised at your blinkered thinking. Who do you think creates the system? Who do you think writes the banking legislation? Who do you think sets the targets the RBNZ has to follow? Why are housing prices absent from inflation figures? Which Govt expanded the public sector the most in the last 10 years? How many migrants came to NZ during the 2000's? How many kiwis came home after Sept 11? Was this accounted for by the Govt of the day? The State has a very large role in all this and to suggest these issues of State are perhaps seperate from the debt is pretty absurd in my book.

by Christov | 13th Sep 12, 9:15pm 1347527711

Who do you think creates the system? Who do you think writes the banking legislation?

The same people I hold responsible for making the corrections in Banks lending behaviours Notaneco...as I pointed out above , why is it you have trouble reading from the top down, still glancing about for points to argue on..

Blinkered...? not on your life sunshine......Your telling me above Govt. is responsible for the banking mess that is the GFC, your telling me below the Govt should keep out of Private enterprise......which is it bucko...?

They (GOVT)would need to be involved to make policy changes to prevent repetitions of behaviour they ( Banking Institutions ) have been all to ready to practice.

Now if your going to sit there and tell me , that from Wall st . to the BOE that the GOVT. is responsible for iilegal practices used by those institutions.....you would be a fool.

If your just suggesting they were neutral , untill exposed , you would be closer to the mark.

The Bankers (Globaly) that have been involved in systematic theft at the expense of Joe Average made the choices they made wittingly and readily.......get that straight...........

and you want them to self regulate.... get a reality check my man.

and to suggest these issues of State are perhaps seperate from the debt is pretty absurd in my book.

Now you just go show me where I said that ,implied that ,or WTF ever that ....are you on medication....? because I know full well I didn't say it....so you dreamed it ...yeah..?

by Christov | 13th Sep 12, 9:14am 1347484488

No your comment hit nothing in the way affecting me Notaneco.....But yes, I do take umbrage at those who subscribe to being enlightened without being prepared to listen at least without predjuice to other points of view and any merits they may have to offer.

No...one...single....sage...has the answer to this unholy mess that is the GFC...if they did they'd have found a cure for unbridled greed and self serving behaviour.

Answers are to be found in bites and compromise.

Just for the record he bucko..I have no debts.....save the one Bernard says I owe Gen X.

by Gummy Bear Hero | 13th Sep 12, 9:22am 1347484959

Hullo Count : Bob Jones says you got no debt to Gen X ....... didya read that article he wrote in the Herald yesterday ?

...... he's no great fan of Mr Hickey nor of Mr Oram is he ! ........

Those guys have a bad dose of " mintoitous " ....... Minto's no longer just a sweetie , he's now immortalised by Sir Bob as an arch gloomsteriser ..... fecking funny as , wish Jonesy would pop up more often for a verbal spray ....

by Christov | 13th Sep 12, 9:36am 1347485801

You already know I'm a fan of Bob's no nonsense approach to things GBH...yes I did , as a matter of fact , and saw plenty of merit in what he had to say......

Maybe Bernard could do a river interview with him, just for old times sake.

Gotta duck off , for a bit.....cheers .

by notaneconomist | 13th Sep 12, 11:14am 1347491656

Christov - You made the assumption that I didn't listen without prudjudice to another view point and merits. I actually carefully considered what Keen had to say and actually viewed some of the other online interviews.

In regards to the debt jubilee concept - a primary source of debt relief is available to people already - it is called bankruptcy. The debt jubilee concept on the surface may sound like a good principle but would only create cycles of more financial bubbles as it would create another period of heavy borrowing with the expectations debt relief would be provided on a repetitive cycle.

"No....one.....single...sage....has the answer to this unholy mess that is the GFC...if they did they'd have found a cure for unbridled greed and self serving behaviour".

The situation could be resolved very quickly but too many people are in control of the private enterprise purse. You cannot grow Government and its Agencies to astronomical size and provision them with the tools to control every facet of the Country and the people.

Entrepreneurs like to act quickly and efficiently while public employees like to act slowly, inefficiently and hold the card of control. The difference in these mindsets clash. There are plenty of psychology tests that one can par-take in to see which category an individual best fits and often these tests are standard for most types of employment.

Bureaucracy is strangling private enterprise and entreprenuership. A Govt role is to protect individuals rights not set a path of impediment at every opportunity in the false name of "good for the people". The fact that large business is now having to jump into bed with Govt through PPP agreements to operate effectively actually proves that all business is being strangled big or small. Big business just has the benefit of more clout to get into bed with Govt and do a deal and small to medium sized business generally lacks this ability.

NZ is like many other countries who are struggling with too large a Govt and public sector. Some of NZ's Govt run corporates bare a strong resemblance to Fascist type organisations. They behave in a way that is Totalitarian and Dictatorial. Real democracy is a myth and Govt has the power to over-ride the wish of the people and does this continuously. Government does not want to protect people's rights or their property as that would mean they would have keep their hands off it as well.

It is the unbridled greed and self-serving behaviour of Governments and their Agencies that is the problem. And the people keep their concentration on single issues rather than the broader perspective and that is not helped by the likes of Keen.

by steven | 13th Sep 12, 11:38am 1347493108

I think you just self-convicted yourself with your own words.

"I do take umbrage at those who subscribe to being enlightened without being prepared to listen at least without predjuice to other points of view and any merits they may have to offer."

regards

by Christov | 13th Sep 12, 12:03pm 1347494633

Gees Stevo....bit harsh ....but if that's how you see it...Ok.

by steven | 13th Sep 12, 12:11pm 1347495099

hehehehe....

regards

by Christov | 13th Sep 12, 12:05pm 1347494729

Notaneco

You cannot grow Government and its Agencies to astronomical size and provision them with the tools to control every facet of the Country and the people.

ummm1 you'll have to show me where I said , implied or even supported that notion.

You made the assumption that I didn't listen without prudjudice

That you didn't.....ahhhh nope, the only assumption there was me referring to you....nope.!

The debt jubilee concept on the surface may sound like a good principle but would only create cycles of more financial bubbles as it would create another period of heavy borrowing with the expectations debt relief would be provided on a repetitive cycle.

Without policy to discourage such a recurrance , of course it would.....did not read that in my response to meh...?

No , notaneco that's my comment, and it covers us all , Government pigs supping at the public trough do not have the monopoly on greed, as the Global Banking Fraternity has clearly demonstrated.

Here's what I think you could do , go back to the top and actually read the comments I've made in perspective , without re-interpreting them.

You will find many things we agree on already...such as..

NZ is like many other countries who are struggling with too large a Govt and public sector

Real democracy is a myth and Govt has the power to over-ride the wish of the people and does this continuously.

Coming back to my point..."No....one.....single...sage....has the answer to this unholy mess that is the GFC...if they did they'd have found a cure for unbridled greed and self serving behaviour".

We do not agree on your response.......The situation could be resolved very quickly but too many people are in control of the private enterprise purse.

In your rebuttle to Keens interview..... you say...In regards to the debt jubilee concept - a primary source of debt relief is available to people already - it is called bankruptcy. The debt jubilee concept on the surface may sound like a good principle but would only create cycles of more financial bubbles as it would create another period of heavy borrowing with the expectations debt relief would be provided on a repetitive cycle. .......

While I would love to see you debate your rather oversimplified view with Keen, I would not be holding my breath you'd last a round because I think now ,you, did not listen , further that you cherrypicked points on which you thought you might score a point.......and is that not what your trying to do here...?

Don't misunderstand me, don't misqoute me, and you'll find we have little to argue about save open mindedness.

by steven | 13th Sep 12, 12:16pm 1347495369

Good reply but its very typical of the poster and the demographic IMHO. I think the saying there is no humanity in a fanatic sums it up well.

regards

by wtf | 13th Sep 12, 12:39pm 1347496743

I think you're missing the point notaneconomist. Keen's jubilee idea isn’t just to pay off debts and restart the current credit system – it is to completely reform and re-regulate credit to prevent the same lunacy of the GFC happening again.

Keen and Michael Hudson believe much of recent lending has been predatory or odious. Sure you can argue people accepted it freely but when everyone around you is doing the same thing it hard to stand against the tide. The banks as businesses obviously want individuals and companies to take on as much debt as they can possibly service - that's their business model and how they make their profit. However if most of that debt is for mortgages it crowds out the free income available for the entrepreneurial spirit and private entreprise you are talking about.

The great problem of our time is the financialization of our economic life – our business and corporate enterprise, our personal life and the government itself. The debt problem is the most burdensome since medieval war-torn states and ancient Rome (and even then, there was no corporate debt; tangible capital was debt free).

By financialization I mean capitalizing every form of surplus income and pledging it for bank loans at the going interest rate: personal income over and above basic expenditures, corporate income over and above cash flow (that is, after meeting the break-even cost of doing business), and whatever the government can collect in taxes over and above its outlay.

From the banker’s point of view, equilibrium is reached at the point where the entire economic surplus is committed to be paid out as interest. The whole economy is capitalized – and the capitalized value of its income pledged to bankers is taken as the measure of the nation’s financial wealth. It is as if economies grow by being able to borrow more from banks against their earning power, rather than by tangible capital investment and rising living standards.

The problem is that paying out all the economic surplus as interest leaves nothing over for living standards and what economists in the 18th and 19th centuries described as the human capital formation (training and education) required for labor productivity to rise….

- Michael Hudson

Keen's jubilee needs to be implemented with total tax and welfare reform as well as new bank regulations. Keen’s suggestion is that the level of all types of credit available to the economy from the reset point be reduced by an amount equal to or greater than the new money created. There would be no getting your cake and eating it too. The intention is a low debt, entrepreneurial, capitalistic economy, something no longer possible because of the massive overhang of private debt. Whether or not people took it on of their own free will is now a moot point.

by notaneconomist | 13th Sep 12, 2:16pm 1347502612

WTF - may I remind you that NZ has been in a very similar position before. The hardship experienced by those who were in NZ at the time has been a complete waste as we have repeated the cycle.

Many people forget the hard times endured and the next generation comes along having never endured any of the hardship and new politicians and political parties enter the circle, new legislation and policy is implemented and the system churns away, the process starts again. Politicians make promises, Bureaucratic empires expand and debt creeps up.

Already society has forgotten "why" people fought in WW2. The Universal Declaration of human rights is a bankrupt document sitting on a shelf although the intention of the document was to set a clear path for all individuals in the future. This document was written and signed by most countries because of WW2.

To rely on new policy and regulation as being the thread that holds the Keen concept together is naivety at its best. For it doesn't not take into account future changes that will be made or promised. Society and life is not stationary. Hence the cycle will repeat.

Economics only gives a picture/measure of what has occured it is not a natural science it is a social science and until people understand that including most economists then the problems will always exist.

by wtf | 13th Sep 12, 3:00pm 1347505258

I completely agree with everything you have said above - economics is like politics, a social science, dynamic and moves in cycles and super cycles. That's why it used to be called political economy with thinkers like Smith, Mills and Marx.

But if the debt overhang is too great do you let it collapse into mass liquidation as per previous depressions and hope the next generation "learns" from it (the punitive hard arse solution) or try and do something more proactive to correct the problem.

I agree with Christov, along the lines of Michael Hudson, that the financial industry and certain political elites have become so rapacious and distorted things for their own benefit there is no auto correct mechanism available for the economy and society as a whole that does not involve widespread economic loss, political and social turmoil.

To me the Keen type jubilee offers a possible way to soften this process and at the same time putting the banks back in a box rather than leaving them to determine how the economy is run at the moment by their control of credit.

by notaneconomist | 12th Sep 12, 10:02pm 1347444132

by steven | 13th Sep 12, 12:22pm 1347495747

You just have to look at the way the stock market perks up on the prospect of more QE to figure out that dumbness and greed is banking on the free handouts continuing.

A Debt jubilee actually wipes out the loan sharks. I dont like the idea I admit but its the lesser of other evils.

Consider that for the last 30 years the top 1% have not only skimmed off all ther profits of the other 99% but also brough the world's economy to its knees and are hell bent on making it face plant in the name of their personal profit.

In that case you can arguably say that with a jubilee what we are really wiping out is the profit that was stolen from the 99% that they never had.

Its like handing someone a whip to beat you with.....duh.

regards

by Andrewj | 12th Sep 12, 1:02pm 1347411722

http://www.interfluidity.com/v2/3513.html#comments

by steven | 13th Sep 12, 12:39pm 1347496742

http://www.interfluidity.com/v2/3513.html - a good read,

"Candidates with prestige degrees end up disproportionately holding higher paid jobs, for reasons that have nothing to do with what the degree says about them, and everything to do with what the degree offers to the person who hires them."

fasinating

thanks

regards

by steven | 13th Sep 12, 12:46pm 1347497218

Which also leads on to keynes,

http://topics.nytimes.com/topics/reference/timestopics/people/k/john_ma…

"His basic question was: How do rational people behave under conditions of uncertainty? The answer he gave was profound and extends far beyond economics. People fall back on “conventions,” which give them the assurance that they are doing the right thing. The chief of these are the assumptions that the future will be like the past (witness all the financial models that assumed housing prices wouldn’t fall) and that current prices correctly sum up “future prospects.” Above all, we run with the crowd."

So the likes of some etc come in here looking for assurance..and when they dont get it blanket fashion attack the contarians.

ho hum

regards

by Les Rudd | 12th Sep 12, 1:04pm 1347411869

This is boring, when can we have another David Parker article on sorting NZ's crappy, daft-as-a-brush monetary policy?

by Christov | 12th Sep 12, 1:16pm 1347412571

Oh David's got his hands full right now Les, beating off (oops !) a resurgent Cunliffe and other enimies of the New Labor Right.

http://www.listener.co.nz/current-affairs/politics/the-enemies-of-the-new-zealand-labour-party/

by Les Rudd | 12th Sep 12, 1:37pm 1347413839

Entertaining stuff Count. No matter what happens to them between now and when they next govern, while they have abanoned the cross-party concensus on monetary policy I believe they won't abandon party concensus that monetary policy (etc) needs to and will be changed. It'll be fun to watch when it eventually happens. Then there is CGT ..... just incase anyone is asleep out there, Gummy.

by steven | 13th Sep 12, 12:25pm 1347495908

Not to mention running around like a headless chicken looking for a way to convince the voter that there is a better way to measure how well Labour is providing for them except via growth we will no longer have.

regards

by Andrewj | 12th Sep 12, 2:23pm 1347416628

Several UK-based investment banks have been accused of mis-selling financial products to Italian cities and regions.

Nomura, UBS and Deutsche Bank are among those accused by Italian prosecutors of mis-selling derivatives in deals worth 35bn euros (£28bn).

The banks deny wrongdoing, but refused to comment further because the matter is now before the Italian courts.

BBC Newsnight discovered that London's financial watchdog was made aware of the mis-selling, but failed to act.

Now those Swap derivatives look as if they could further damage the entire Italian economy - the third largest in the eurozone.

http://www.bbc.co.uk/news/business-19545849

by Stephen Hulme | 12th Sep 12, 3:03pm 1347419032

Andrewj, the swap kickin clause as described by the author in the video is exotic and just about unbelievable in my opinion - comic finance if the consequences were not so real - hard to believe the local authority employees signing these deals were not in on the bank action from the get-go.

by raf | 12th Sep 12, 3:47pm 1347421671

The Dutch Social Housing sector managed to drop a few guilders on their "hedges" also.

http://www.bloomberg.com/news/2012-06-19/banks-unwind-swaps-that-cost-d…

http://www.bloomberg.com/news/2012-09-05/dutch-limit-derivative-sales-t…

There are other scandals in the offing. It's amazing that 20 years on from Hammersmith and Fulham, Orange County and Gibson Greetings Cards, the lessons have not be learned. How these local authorities and pension fund "managers" manage to get themselves serious market risk is completely beyond me.

However, it's odds on that this history will continue to repeat until the compensation structure changes or, more unlikley, people start to understand the risk of products they invest in, even if on behalf of other people!!

by wtf | 12th Sep 12, 3:47pm 1347421624

Matt Taibbi did an article in Rolling Stone in 2010 on how the big investment banks were ripping off local bodies with municipl bond products. Hmmn Private financing of Public infrastructure that went all wrong for the rate payers but great for the banks.

http://www.rollingstone.com/politics/news/looting-main-street-20100331

by Christov | 12th Sep 12, 2:29pm 1347416950

Well you see A.J.....there was this baby, and it had some candy, and ...um... they just can't help themselves can they ...? either party I mean.

by Christov | 12th Sep 12, 2:40pm 1347417629

Here is a good read on a lovely winters day....if your Keen, it won't take Delong.

http://noahpinionblog.blogspot.co.nz/2012/09/keen-attempts-purge.html

by wtf | 12th Sep 12, 3:39pm 1347421164

I wonder if a good way to set the cat amongst the political pigeons is a NZ Jubilee Party with a populist appeal of not only QE for the public (along Keen's idea of say $50-100,000 per adult) but combined with a radically different and simplified tax and welfare regime and policies that discourage speculation, especially in existing property but allow new, cheaper construction. ie prevent the sort of bank funded leverage in the future that caused both our sharemarket and property bubbles.

What are two of the main factors that are driving Kiwi's offshore and stopping them from returning? One is the high price of property relative to incomes. Another is student debt. If a couple had say $200,000 between them to retire their student debt and most or all of their mortgage, or if mortgage free start a new business and/or build a new house, would that not be a vote winner especially for the under 40's? Wouldn't that shake up the status quo!

I really think we have reached the point where only a jubilee and increased Public Credit, a great reset, will allow us to break out of the downward spiral of increasing bank debt and interest, increasing asset sales and remittances to foreign owners and falling real incomes with rising inequality.

by meh | 12th Sep 12, 4:26pm 1347423997

http://globaleconomicanalysis.blogspot.co.nz/

Canadian Exports Collapse, Expect Plunge in GDP; China Factor; US Recession Factor