90 seconds at 9 am: Eurozone to get Tobin Tax; German confidence surge; carbon price collapse; Japan's war on deflation; iron ore prices to fall; NZ$1 = US$0.840, TWI - 75.4

90 seconds at 9 am: Eurozone to get Tobin Tax; German confidence surge; carbon price collapse; Japan's war on deflation; iron ore prices to fall; NZ$1 = US$0.840, TWI - 75.4

Here's my summary of the key news overnight in 90 seconds at 9 am, including news that EU finance ministers give the green light overnight for 11 eurozone members, including France and Germany, to ready a new tax on financial transactions.

Six eurozone members won't impose the tax, and neither will another ten in the wider EU. It is aimed at banks and there are fears it could drive business out of Europe, or at least away from those countries adopting it. The tax - also known as a Tobin tax after the economist who originally came up with it 40 years ago - is expected to be charged at a rate of 0.1% of the value of any trade in shares or bonds, and 0.01% of any financial derivative contract.

Staying in the EU, German investor confidence has surged to a 32-month high in January, according to a closely watched survey released overnight.

And separately, the price of carbon hit a record low in Europe yesterday as the over-supply of emissions permits continued to undermine the carbon market. The price fell below €4.80 in early trading, before recovering to above €5.00 by the end of the day.

In Japan, a somewhat reluctant central bank has set an ambitious 2% inflation target and pledged to ease monetary policy 'decisively' by introducing open-ended asset purchases. This will be a big deal. There are apparently no taboos left in their fight against deflation, and Japan's new prime minister who is pushing hard for the policy, hailed the move as 'epoch-making'. Still, sceptics suggested the country was still far from turning the corner in its long fight against deflation. The Japanese have grown to accept, even like, never-ending price reductions. But it is strangling the country.

New Zealand food exporters will face a tough time in Japan as the yen is expected to tumble even further as the policy bites. Russia has also started complaining about the spread of 'currency wars'. These types of policies are tough on commodity exporters.

In Australia, it seems the iron ore price gains which are at a 15-month high are unsustainable, and one analyst is forecasting a price tumble of over 20%.

It seems that low listings and lack of houses for sale are not only a New Zealand problem. In the US this is the reason given that their real estate market slipped 1% in December to a seasonally adjusted annual rate of 4.94 million, but 2012 still ended with the best sales in five years.

The New Zealand dollar starts today having crept slightly higher overnight at 84.0 USc, 79.6 AUc, and the TWI is at 75.4.

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London will be licking it's lips at the prospect of all that Tobin trade heading their way....

Yes, pure arb stuff.
Recalls to mind an old story about wool.
Seems that baled wool had two differing allowable moisture contents, across two adjacent jurisdictions.
So a perfectly viable business model used to be:

  • Buy wool by weight in the jurisdiction with the lower moisture level.
  • Throw a bucket or six of water into the bale until the higher level of moisture was reached
  • Sell the wool by weight into the jurisdiction with the higher moisture level.

A nice case of wash, rinse, repeat.
While it all lasted....

Great news re the Tobin Tax.  Lets hope that this is the start of an inevitable world wide trend.  Can't understand why they are going easy on derivative trading.  I throught that the idea was aimed at those sort of instruments. Cynical view might be that they may be more interested in preserving some of this trade to maximize their tax take.
One of the linked publications had an interesting article on global warming and sea level rise.   http://www.nytimes.com/2013/01/22/science/earth/seeking-clues-about-sea-level-from-fossil-beaches.html?src=me&ref=general
According to this a 2 deg F rise could eventualy raise the ocean by 10 plus meters.  I thought that their target was to keep it under 2 deg C and that they will struggle to achieve it.  Official sea rise predictions seem to be rather conservative and keep being revised upwards by scientist who seem rather afraid of causing panic.  This situation has the characteristics of a classical catestrophic event in the mathmatical sense, so my sense is that big changes will happen very quickly, and on a geological timescale anybody can see this happening on a year to year basis.  Why the hell is the government wasting billions of dollars rebuilding Chrischurch on the original site where the ground level is 6 meters above sea level in the square.  There is a good chance that they will be pulling it down again inside 100 years and rebuilding it again somewhere closer to the alps.

I live 200m from the beach in Christchurch, and walk the dogs on it every morning.
I think I'll spot it coming:  and humans are after all adaptable creatures.  I'm sure a line of containers filled with sand will hold Neptune at bay for a century or two if needed:  it's worked for Holland for a few centuries already, I hear.
But I do sometimes stay awake at night worrying about the Sky Falling on me.....

This carbon tax reminds me of a mad idea i read many years ago.
A city in America, can't remember which one now, placed a height restriction on all buildings, however you were alowed to trade in heights.
A developer that wanted to go above the height restriction could buy the unused height restriction from another building
City churches made a fortune.
Seems we still have looney people today with equally looney ideas.

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