90 seconds at 9 am: A WTO deal

90 seconds at 9 am: US jobs grow strongly; WTO agrees finally; China exports rise, as do their interest rates; UST 10yr 2.86%; NZ$1 = US$0.827 TWI = 77.8

9th Dec 13, 6:59am by David Chaston

Here's my summary of the key news overnight in 90 seconds at 9 am, including news of finally, a world trade agreement.

But first, in the US a third of economists surveyed are predicting the Federal Reserve will reduce bond buying in December after the non-farm payrolls report came in much stronger than expected showing back-to-back monthly payroll gains of 200,000 or more for the first time in almost a year. Their unemployment rate fell to 7%.

In Bali, the World Trade Organization agreed to the first major agreement in the group’s 18-year history, a pact designed to smooth trade at borders and safeguard food security programs in developing countries.

The price of bitcoins has fallen very sharply after China moved against it. It hit US$1,000 per coin late last month, but has been quoted as low as US$575 over the weekend in some exchanges following the Chinese move.

Staying in China, their trade surplus widened last month to the largest in more than four years as exports exceeded estimates, in a sign global demand is picking up. The size of the export gains were surprising. Imports however only grew modestly.

Also in China, they have taken another step towards market based interest rates by allowing banks to trade certificates of deposits at the wholesale level.

For years, Chinese retail deposit rates have been held at artificially low levels - as low as 2.25% - to encourage investment. But interbank Shibor rates have risen quickly recently, up 40 bps in the past week to 5.2% and there are some reports that trades are being done at 6.5%. The cost of money is rising fast in China.

US stocks ended last week on a strong note with the Dow back up over the 16,000 level. Oil was up, gold still low, and the UST 10yr benchmark bond yield was up again now to 2.86%.

The NZ dollar starts today at 82.7 USc, 91.1 AUc, and the TWI is at 77.8. The Aussie ended last week at the same level as the 2008 high. The record post float high against the Aussie was exactly 8 years ago at 95.5 AUc.

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22 Comments

by powerdownkiwi | 9th Dec 13, 7:52am 1386528730

any 'trade deal' does nothing to increase the quantity of physical resources available, per time, per head, or at all. This on a planet where we're down to fracking and lookin at Chatham-rise 'mining' of phosphate to underwrite our dairy.

So the 'winners in the old game (increasingly-bigger corporates) have nothing left but to push for the removal of restrictions. Which are made for societal, or environmental reasons.

So we are further down the blind pursuit of money track, and choosing to ignore the ramifications even more via less ability of Govts to legislate). Given where we are now - clearly impacting the planetary systems we need to keep us alive - this is an ignorant lurch in the direction of wrong.

But hey! It'll be easier to sell each other more deck-chairs, and now we can make them out of the lifeboats. What could be better? We'll make trillions.

by steven | 9th Dec 13, 9:30am 1386534651

"restrictions. Which are made for societal, or environmental reasons" except of course their own restrictions like re-sellers are not allowed to buy and ship in across borders are still in place. So really what we are doing is increasing the efficiency of monopilies of some at the expense of the many.

I wonder at what stage we are going to wake up. Look at Greece and the rise of the extremist parties when things get tough and enough ppl are hurting they vote for the not imbedded bunch of losers main parties we have now, ugly.

Kind of interesting listening to the dis-connected from reality left..."oh we'll have light rail to solve our issues" "We'll have WOFs for rentals" which then puts ppl in tents in a park....great outcome.

regards

by cowboy | 9th Dec 13, 10:41am 1386538877

first paragraph correct, pdk.

second incorrect.

The big corporates always push for MORE restrictions not less. eg in the building (materials, plumbing and electric) more steps, more planning, more testing, more product required. In farming; more inspections, over the top paperwork, metering of elements not affecting the quality of final product, push toward importing of feed. etc

this is because a big business needs lots of feedback to operate, that is expensive. They hire specialists to do tasks which cost more but outputs more. Most importantly they need market share.

The best way to achieve these things is push up the cost of production through compliances and restrictions. If a large corporate farm imports 200ton of cereals for feedlot cattle, then add two more staff for report and measurement is very small increase - throw on 20 more cattle and 20 more ton of deliveries. No problem.

But an efficiently operating small system with zero tons of cereal, throw on 20% more labour and you go from 2 to 3 staff, the cost of which could be problematic if they have to start up a cereal import system to add 3 more cows....that's a feed pads, storage, monitoring, eff systems, training for all involved, extra communication and coordination for additional staff, extra handling equipment - heck could be need 10 more cows to handle the extra costs of putting on 3 more cows! Suddenly they've gone from top quality product from a highly efficient low input system, to a average product from a barely functional mid/high level input system AND thus unable to compete against the large coporation....which is exactly what the large corporate wants, market domination.

by Neven911 | 9th Dec 13, 10:46am 1386539193

Cowboy

I think you misinterpret PDK, Coroporates push for less regulation of the activites they do (because that benefits them - trust us fracking is fine!) and more regulation on how it is done (because that benefits them by making competition more difficult - trust us we are the experts)

Neven

by cowboy | 9th Dec 13, 11:33am 1386541990

yes I agree.

But. they are the ones pushing for more regs (eg fencing off waterways despite the eco damage it causes). where pdk was saying they push for less (eg sparkies can sign off their own basic work).

Look at who was pushing for mining into conservation reserves. Government and a few industry players. who was saying no? everyone else.

by powerdownkiwi | 9th Dec 13, 10:53am 1386539606

Interesting comment.

Worth reading, and made me think - which is more than the troll below did!

Yes, business strives for exclusivity. You can indeed go there by calling for compliance, and outlasting the smaller operator who struggles to pay it. But foreign investment is the game here, and it's the foreigners who have their internal compliance sewn up. The move here is to remove local rights to protect themselves - be it fiscally, of environmentally.

Not sure which came first - supermarket-driven lower food prices driving the move to larger farme, or larger farm owners pushing out others by undercutting - but I suspect it's the former. Small farmers hung on until they couldn't; the margins weren't there.

It just tells you how late in the Limits to Growth game, we are. These folk, if you asked, either think there is another doubling (at least) ahead of us, or that they can 'win' in the period of increasing restrictions, by being 'richer'. That's just 'inverted quarantine', and it never works. Someone should tell them.

by cowboy | 9th Dec 13, 11:54am 1386543277

The former in the 1960's with the fall of high street.

All on the back of factory style processed goods and refrigeration.

The question is what ownership model to use - the high volume one requires high volume and few profiting owners to work. The low volume supports more people but the capital available to invest/develop is lower. Are we interested in having many good people? Or a few rich with fancy toys?

by notaneconomist | 9th Dec 13, 10:53am 1386539610

Hugh - The Universal Declaration of Human Rights:

Article 13.

(1) Everyone has the right to freedom of movement and residence within the borders of each state.

When Councils and Governments put restrictions on the "right to freedom of movement and residence" we get the problems we have now.

Freedom of movement and residence allows people to live where they choose not where some Council plan dicatates.

If people have freedom of movement and residence they can live where they can afford to live.

by notaneconomist | 9th Dec 13, 11:25am 1386541556

Tomorrow the 10th of December 2013 is Human Rights Day. Rather ironic that we rarely hear of this day in NZ. It should be a significant day that is celebrated.

http://www.un.org/en/events/humanrightsday/

by Gareth Vaughan | 9th Dec 13, 4:13pm 1386558811

No Hugh, but perhaps we'll get a comment from you featuring links to numerous articles on it?

by powerdownkiwi | 9th Dec 13, 11:11am 1386540661

Ah, a biblical approach. So common in the sticks, and so often accompanied by the whiff of snobbery.

Try not starting with pre-held prejudices, although I did enjoy your last sentence. Hint - I've hassled Hugh long and often about half that equation - the afford' bit, income. Have a listen to the child poverty bit on Nat radio this morning, then the Fonterra chappie. I doubt Ryan grasped the dissonance, but it was classic.

by cowboy | 9th Dec 13, 11:23am 1386541398

The link is not easy to see for such people, they do their job, they have huge companies making millions...but it's all tied up in equipment and supersize-me wages for the few.

The result of such systems is that it is expensive to hire lots of small people to do simple jobs - more cost effective to automate and reap IRR...but projects like that create debt, which is covered by cashflow, but until the debt & INTEREST are repaid (and taxes paid), the company sees no profit, nor can it afford realmoney expansions until the detb is cleared.

Net result is companies continuously in debt, unable to hire widely (having to hire narrowly and expensively), and more families unable to afford the basics because of the accumulation of costs into basic products.

Analysing such things is not their job. or anyones.

by steven | 9th Dec 13, 12:08pm 1386544106

and if there is nowhere they can afford?

regards

by Ms de Meanour | 9th Dec 13, 12:54pm 1386546884

Isn't Hugh's point precisely that that is more likely to be the case when regulation restricts the supply of land for housing?

by MikeM | 9th Dec 13, 9:36am 1386534995

No way the Fed will taper this month. Given the emphasis of careful communication to the markets by Bernanke in his latest speech, one would think it too late to introduce tapering dialogue before year end.

by Stephen Hulme | 9th Dec 13, 9:57am 1386536259

Thankfully, "The TPP's Not Dead Yet (But It's Close)"

by iconoclast | 9th Dec 13, 10:26am 1386538001

David Chaston. For your information. Bitcoin briefly touched $1,200

by Stephen Hulme | 9th Dec 13, 10:47am 1386539244

"A picture is worth a thousand words"

by powerdownkiwi | 9th Dec 13, 10:59am 1386539994

"in a world of dying fiat"

Nice turn of phrase - accurate too.

by steven | 9th Dec 13, 11:53am 1386543185

In this case maybe 1200....though what gives a bitcoin any actual worth? the belief its redemable for something real. If it isnt? well tulips spring to mind.

regards

by Boatman | 9th Dec 13, 11:16am 1386541018

Hoo Boy ! If China's overall borrowing costs increase steeply due to increasing Interest rates , it could be hugely problematic for all of us .

Much of the specualtion and projects that have been financed by cheap money would otherwise have never seen the light of day if normal robust IRR models had been applied.

These projects non-viability will be exposed when the tide goes out , and we see who has been swimming naked.

Many private citizens in Hong Kong , Shanghai and Macau have hocked themsleves to the eyeballs to speculate in Shares and Property and if rates increase steeply they risk getting wiped out .

The potentially harsh realities of this are not immediatley evident but given the scale of everything in China it is bound to have unintended consquences on an equally large scale

by Christov | 9th Dec 13, 12:26pm 1386545175

The undercurrent is more likely a rally to demoralise the bitcoin market, a stomp it out before it gains any real traction , and you will have noticed the Fed using past heads to infer the bit bubble.

China's about turn on it probably after thought on any possible destabilisation of the debt they are owed.

All hail the Fed...all hail Lower for longer....all hail the theft through monetary means ..

Can I get an Ad Nauseum.....brother.