Here's my summary of the key news overnight in 90 seconds at 9 am, including news that central bankers were in the spotlight overnight.
The outgoing Fed boss Ben Bernanke said that the Fed will probably need to hold down its target interest rate long after ending US$85 bln in monthly bond buying, and possibly after unemployment falls below 6.5%. Low American rates are here for a very long time yet. The the Bank of England came out with the same sentiment.
The ECB went even further, raising the real possibility of imposing negative interest rates - that is, a charge for holding a deposit, possibly -0.1%.
ECB President Mario Draghi said earlier this month that the central bank was “technically ready” for negative deposit rates. Such a measure is one of the few tools left that the ECB has to try and stimulate lending. Whether they would want to use it so soon after cutting the refinancing rate to a record low of 0.25% is debatable. There is apparently no consensus on this issue within the ECB Governing Council and it is likely to face stuff pushback from Germany.
Meanwhile, American consumer prices are staying low. They dropped 0.1% in October, and are up 1.0% over the full year. US retail sales for October were higher than expected. Business inventories also came in a bit above expectations.
But US October home sales (excluding new builds) were down in volume, up in price on a shortage of listings. The US national median existing-home price for all housing types was US$199,500 (or NZ$240,000) in October, up 13% from October 2012, which is the 11th consecutive month of double-digit year-on-year increases. Median New Zealand prices are now 70% higher than their US counterparts.
In Japan, they posted record exports - especially to the US and China - based on a weaker Yen, but also its biggest October trade deficit on record. Export growth was overwhelmed soaring costs for imported fuel in the wake of their nuclear power industry’s shutdown.
Across the ditch, the Aussie-Indonesian row is escalating and getting nasty. It will have big implications for them, and there may be spillover on us - although we could benefit if we are careful.
Little to report on stocks, oil, gold, or benchmark interest rates overnight.
The NZ dollar starts today at 83.0 USc, 88.5 AUc, and the TWI is at 77.5.
The easiest place to stay up with today's event risk is by following our Economic Calendar here »
No chart with that title exists.
31 Comments
-ve interest rates on deposits.... wow... I wonder what the unintended consequences of that would be..???? (The immediate consequence would be the draining of excess Bank Reserves..)
If I was in the EU.... I would withdraw all my money and buy Real Estate...
There aren't many choices.
Does the ECB really think this is going to help generate economic activity..???
To me... it looks like the slow destruction of our Western world version of Capitalism.
Maybe some of those European depositholders would buy Auckland Real Estate..??
Would the ECB really make deposit rates -ve......???? surely not..
I think its for big corporations sitting on cash piles, so not retail deposits as such. Possibly for banks as well so they are pushed into doing what QE intended, lend it out.....even if no one wants it.
Deposits V housing, well it depends on the expected losses relative to one another. The only way left to not lose (maybe) your "money" is cash and cash like things. So literally cash and short term Govn bonds, say 6months? I have no knowledge of this as, I owe money, ie mortgage.
So either loss of value as even the 1 or 2% inflation we have errodes the "cash" or take big risks in housing and shares and just about anything else that could wipe out 50% of your capital.
Destruction, yes we designed or evolved an economy based on growth supported by fossil energy the output of which has now peaked and will decline. Ergo growth is going negative...perma recesion, perma low OCR as a trend. So sure we might see bried recoveries and bried increases in the OCR, but really a saw tooth of decline.
regards
So either loss of value as even the 1 or 2% inflation we have errodes the "cash" ...
Those with industrial sized quantities at their disposal, gained at near zero cost, can live through these events by just gently dispensing the ill-gotten gains, why bother to worry about the housing needs of others? Isn't the government depleting it's stake in the national housing stock, as an example to all?
"The only way left to not lose (maybe) your "money" is cash and cash like things."
Even cash is a loser over the medium to longer term .
The Guardians of "cash" or "Money"... in regards to its "store of value".. are the Central Banks... and I think they have lost the plot.
ie. Money very much has a depreciation component ( just like a car )..... and that depreciation rate is alot more than the CPI rate..
So... holding a depreciating asset that earns you no return only makes sense over the short term..
In normal circumstanes yes I agree on cash. Right now however this looks like an 80 year old event. So in deflation your cash is worth more, unique while it lasts, yes its short term.
The problem is knowing when that short term is going to start and getting out before because once its started all assets become illquid. cash is still cash and liquid. I got it wrong a bit, sold out my shares 3.5 years back, however Im not that dismayed having watch how this is going.
Hugh Hendry said something like "a short man amongst dwarfs is a giant".
regards
Would the ECB really make deposit rates -ve......???? surely not..
Only if the the Chairman of The Federal Reserve Board of Governors didn't reflect upon his actions in such a casual way:
At one point during the evening, when pressed about whether his Quantitative Easing program was good for Wall Street at the expense of Main Street, he flat out denied it, saying that such a premise is "simply not true".
He defended his printing $85 billion per month, suggesting that fixing interest rates at zero is beneficial for society because, among other things, it allows people to 'buy cars'.
I saw these words coming out of his mouth and thought to myself, "Is this guy f'ing serious?" Cars. Wow. As if going into debt to purchase a rapidly depreciating consumer item is somehow a victory for the people. Read more
Only kidding - those with a better handle on these matters think not due to excessive losses on excess reserves. Read more
Isn't it just currency manipulation by another name? These central bankers with all their complex models are simply attempting to reduce their currency, they may not see it that way but the actions are the same. So if the ECB charges for deposits then presumably those deposits get sold for USD. Academics are truly talented at making the simple appear complex.
Detroit seems to be responding well to his stupidity.
It is bankrupt, they also build crap cars, USA QE, or not, they always did. Gas guzzlers too.
ECB is just as bad. Money to burn, rather negative I think.
Here in la la land, crap vehicles are a depreciating asset, for the image conscious, put on the crap inflated house to pay over the odds for, yet again.
All surely odd, not sure who is the more stupid.
Them or us.
All throwing funny money onto a funeral pyre, causing their own destruction.
Still, it is a work in progress here.
A bit like selling yer own Ma n Pa a few million way over priced power shares you already own on credit.
Then expecting them to rise, so the lazy sods can inherit the inflated funds for their profligate pension lifestyle later on.
Rather self defeating.
If you catch my meaning.
Dumb and dumber.
Nope....what we have had is 30~40 years of self-centred libertarian like free market greed, its failed. Worse of course the "solution" from many of this ilk is we need more of it, so its getting worse. It seems some cannot and will not throw away their political blinkers and face reality.
la la land economics. A very few mega winners, many losers. I suggest you consider what happens to the few when the many find they have nothing left to lose.
I Have to hope that democracy will be the safety valve, otheriwse lots of examples in history.
regards
Rogernomics? World economy? Sure we dont have black or white, but to try and claim that what we have had is closer to socialism than free market is rubbish.
No problems with understanding english, when its written/spoken. However gobbledegook from you, yes but then not surprising.
regards
steven says: we have had 30~40 years of self-centred libertarian like free market greed
c'mon steven, get off the grass, you are not talking about good'ole new zealand are you, coz you haven't been here long enough, and when you say "we" you cant possibly be talking the collective "we" on our behalf, as in all new zealanders, living in new zealand
must be the royal "we"
The world, global economy context.
What was Rogernomics btw? was it all repealed? hardly.
We as in we are all in the same economy.
Vampire squid ring any bells?
expansionist austerity?
Greatest inequality since the 1930s Great Depression?
Hardly Keyes or socialist.
regards
Now doncha be quoting Alicia Keyes on a reputabobble Finachewal Blog like Interest!
Leave it ter Dylan:
"I was thinkin' 'bout Alicia Keys, couldn't keep from crying
When she was born in Hell's Kitchen, I was living down the line
I'm wondering where in the world Alicia Keys could be
I been looking for her even clear through Tennessee
Feel like my soul is beginning to expand
Look into my heart and you will sort of understand
You brought me here, now you're trying to run me away
The writing on the wall, come read it, come see what it say
Thunder on the mountain, rollin' like a drum
Gonna sleep over there, that's where the music coming from
I don't need any guide, I already know the way
Remember this, I'm your servant both night and day
The pistols are poppin' and the power is down
I'd like to try somethin' but I'm so far from town
The sun keeps shinin' and the North Wind keeps picking up speed
Gonna forget about myself for a while, gonna go out and see what others need"
Bring it on Steven......I'm having a bad day..........that's what happens when I do damn compliance BS....all that Socialist regulation bollocks that you and others think I need.....
When I spend one third of my year doing compliance BS, something in the system is severey wrong......so don't go telling me that we live in a Libertarian Society because we do not! Have you got that.......and furthermore do you understand it!
There is only one Government Department in the Country who wants to listen to the people of NZ and that is the GCSB..........how screwed up is that.......so what are you gonna say......that the Libertarians and the free-market of the last 30 to 40 years created that too?
Why should I collect GST at my cost in my time for the IRD?.........that's because the system you spout as democracy says it is Ok for a few to be National slaves as long as it is not all the people being a slave. Well, would that happen under a Libertarian Society? No it happens under the heavy hands of Socialist elite.
Why should I keep employee wage records and pay their PAYE for them again at my cost and in my time? Again this kind of BS would not happen under a Libertarian Society....it happens under a heavy Socialist society.
Now would you like me to start on Affordable housing.........again Socialist Policy settings not Libertarian morals are causing the prices to escalate.......
I could continue on the compliance issues for hours.........but it would be wasting my time......and falling on ears that either don't want to listen, or don't comprehend because the created problems desiged by the many only affect the few........and you make out you believe in equality.........and that others are just selfish Libertarians..............
When one must have a certificate to do just about anything bar from wiping their butt (and yes there is GST, other taxes and rates, and the right to wipe your rear-end and actually requires a certificate called a birth certificate) we have problems.......When you realise that the only certificate you don't have is a death certificate......you know the system is well and truely screwed. Would a Libertarian design such a system - hardly.
People who advocate that this is a Libertarian problem of the last 30 to 40 years either do not understand Libertarianism and free-markets or they are dishonest and corrupt.
Why don't you go and live in somewhere like Cambodia or Sierra Leone? Then you wouldn't have to worry about the "red tape", or compliance costs you're whinging about.
I would applaud you if you were arguing for a libertarian society on the basis of moral principles, but you're not. You want the benefits of the current social democratic legal and political framework without its costs. Sure its maybe annoying and an onerous burden, but thats the cost of the political and regulatory framework, which delivers a comparatively stable economic system we all enjoy.
Who would have been able to provide our public utility infrastructure we have today if not for the government? It was funded by the public purse for a very good reason, because no one else had deep enough pockets to develop it themselves and it wasn't economic for a private company to run it thereafter, given we have a small population dispersed over a landmass the size of the United Kingdom and much of it very sparsely populated.
Anarkist.......perhaps you are leveraging very well off the Political and regulatory framework of this comparatively stable economic system that you talk of that Private enterprise is funding.
Perhaps you don't have to face the endless applications/form-filling/financial costs of the system. Maybe you have never had a relative sick in hospital or a death in your family and you weren't penalised by the heavy hands of bureaucrats for a late filing of your GST, PAYE or any other piece of compliance despite informing them of what should be a valid reason for late filing. Not only do you have to pay the IRD a late filing fee you pay them interest on the numbers of days you were late.
Maybe you have never had your house broken into and the Police not able to turn up. But those same Police can sit on the roads catching someone going a small amount over the speed limit.
Maybe you have never had to fork out thousands of dollars to a Council in RMA fees. Maybe you have never had to import or export goods and jump through every loop required.
I have no qualms in supporting the NZ Bill of Rights, Universal Declaration of Human Rights, documents that make up the constitution and the Crimes Act. I would however consider it very moral if all the Civil Servants, Bureaucrats and Councils across NZ would also support and practice these in full........The fact is that when these people break the Social contract of the aforementioned legislation the only recourse is through the Courts. And not everyone has Kim.dotcoms time and resources to take action. In fact I would suggest that if there was a specialist Court that dealt with Bill of Right issues that it would be packed with such cases that it would make the surgery waiting lists at our public hospitals look a small queue on a Friday night at the local take-away.
Socialists always like to banter on about the collective benefits of their model without any analysis undertaken on what alternative model benefits would be. It's called protecting their self-granted priviledges.
Snodgrass T.........I'm across more than one industry..........
Building, Forestry, Agriculture amongst others.
It's not my accounting systems they are very good and all automatically interactive.
Too much time is wasted on non-accounting, non-financial type acitivites.
Try dealing with EQC, Councils etc on a regular basis. OSH for my 3 industries is a bloody nightmare. You can get a warning from the labour Dept because a roofer didn't put his work boots at the bottom of a scaffold ladder for changing into when coming off the roof.
I have to change hats all day long depending on which industry I'm dealing with.
We have drifted, or even paddled towards more free market, things have gotten worse and worse for most ppl.
The best analogy I can make is we are swimming closer and closer to a rip tide and swallowing more and more water in the process. At some satge, once caught it will drown us.
On top of that we create teh society around us we wish to have as a majority, dont like being in it well move elsewhere.
Yes compliance is a pain in the ass. Un-fortunately if you dont set standards you get ppl who will rip you off.
I have no idea why you do PAYE for others that is yoru choice. Dont like it well you could move somewhere where it isnt required.
No I have not said we live in a libertarain society, but equally we do not live in a socialist society, we have a mixtutre of both and thats changed in the last 40 years for no apparent gain for most ppl.
GST, yep collect it, dont like it well leave or go to jail. 2 best places for a libertarian IMHO, not here or in a [padded] cell.
regards
Steven.....maybe you should consider that NZ needs private enterprise. The reason we are swimming closer to the tide is the fact that Socialism has enormous expectations on private enterprise.which is has a stripping effect in time and resources that would otherwise be committed back into the production of new jobs, goods and services which would make the economy healthier faster.
All employers are required to do PAYE for their emloyees. There are many variations if you have contractors depending on how they operate within the taxation system. So sometimes you are obligated to deduct withholding taxation and some may look after their own tax.
In regards to GST - you obviousy feel very comfortable that others are enforced just because they are in business and registered for GST to be collecting the GST on your spending and passing it on to the IRD.
We didn't used to have all this bookwork and compliance BS. It has slowly been introduced bit by bit.
You have a very limited knowledge on how the internal economy is constructed. Some of your opinions are extraordinarily naive. You obviously enjoy the trappings and luxury of the Socialist system of which most people in private business do not get access to.
You fail to grasp the external workings of the Global economy and how that intereacts with our internal economy. Unless NZ'ers start in large numbers to become informed of the internal and external factors then there will be more people falling through the cracks in NZ. As I have stated on this site previously the best thing is to raise the wealth of all NZ'ers. Unfortunately Socialism does this by redistribution and that redistribution does not create real wealth for the recipients. Socialism is divisive.
Yes I am free to leave the Country but have you considered the affects if private enterprise all thought screw you and left and took their business's and money with them. Most of the physical assets in NZ would become foreign owned. Now try getting a tax-take off those foreign investors when NZ has so many taxation agreements in place.
steven
First
I can assure you Roger Douglas was no libertarian. Far from it. Then, you wouldn't know would you. You weren't here. Obviously you are parroting the opinions of others without doing your homework. Roger Douglas was a pragmatist that understood no man can serve two masters.
Second
Your texts slip far too easily from the local to the global and back without context to the point they become incoherent.
Been a reality for two years
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