Here's my summary of the key news overnight to keep you up-to-date over these holidays.
It has been a good holiday selling season - at least up to Christmas Day.
And especially online.
In New Zealand, Paymark reported sales are up 7.1% on the same period a year ago.
In Australia, their Boxing Day sales were reported to be strong, and some online ordering systems crashed due to excessive use.
It is a similar story in the US - in fact, last minute orders on Amazon were huge, although it didn't crash their systems. But it did overwhelm the UPS delivery system, who had planned for a rush but go much more than they bargained for.
Maybe part of the American surge is because more people are working. Certainly fewer than expected are claiming for unemployment benefits.
A healthy rise in durable goods orders underpins the sense of recovery.
The stock market closed high on Christmas Eve in New York - and was not the only market to be up. Oil is up, gold rise above US$1,200/oz and benchmark UST 10 yr bonds jumped to 3.0% yield as the shift to stocks gained momentum ahead of the year end.
In China, their rush on cash - their seasonal liquidity issues - have been helped out by a big central bank intervention. Their inability to get on top of these recurring cash crunches is not a good sign although the Government is warning it is the 'new normal'.
China is saying growth in 2013 will be 7.6% and above their 7.5% target. They have adopted the same target for 2014.
The NZ dollar starts today at 81.5 USc, 91.8 AUc, and the TWI is at 77.2.
The easiest place to stay up with today's event risk is by following our Economic Calendar here »
No chart with that title exists.
105 Comments
And the problem is debt.
And the problem is compounded by the excess borrowings to pay for the tacky Christmas party, the tacky Chinese gifts, the yauning gap, the leveraged idiots, the entitled targeted recipients, the flexed exchange rates, the simple derivatives of your uberlords.
And the gears are stuck in the brains of so called economists, theoretical to the last.
And they need to fill their Mcmansions with even more tacky items. So we import it. Then muck spread it around the farm, fill the landfill, wrinse and repeat.
On that day, the PBOC injected 300 billion yuan ($494 million) to targeted recipients, but the move didn't calm fearful investors. The seven-day repo rate finally declined on Tuesday when the central bank resumed reverse repos.
Happy New Year.
I do wish I felt more confident, but crap houses are maintained by crack-addicts, drunken layabouts and piss artists, stealing from the elderly to maintain the habits of the landed gentry, they so wish to emulate, all around the World.
If it was not so ironic, it would be a Christmas Carol to sing about.
Jesus would be spinning.
And Mamon is delighted.
Well said.
regards
dse.co.nz had problems....busy day maybe.
7.6% is a doubling of their output in 10 years. To grow output 4% takes about 2.5% more energy....so China's demand for fossil fuels looks a large thirsty, oil aint gonna be cheap.
regards
So, here we are, last week of year
And getting all ready (with beer)
To face Fundamentals
So buy up them Rentals
'Cos '14 is just gonna Tear!
Is this the key question for NZ?
If China cannot continue to consume evermore energy to double its output in the next 10 years how sensible is NZs monoeconomy dependence on milk exports to China?
Auckland house prices up 29.3% in the period Oct 2011 to Nov 2013 - full report here properazzi.co.nz
No its a bubble, money is being lent cheaply as opposed to wage increases, hence yes stocks are being over-bought and yes property, but no inflation across the board.
regards
If he was right wouldnt all commodities decline?
http://www.indexmundi.com/commodities/
Apparantly not?
Mind you cant say he's ever appealed to me....think he's a nut job.
regards
You are fortunate that Professor Fekete is too busy to make an ad hominem attack upon you ... and no doubt , he's too much a gentleman to express his personal opinion , should he ever encounter you ...
I have often noted that Steven is completely incapable of graping one single most basic economics principle, so his breathtaking arrogance about matters of complex monetary theory and so on is entirely typical of the kind of people Hayek always warned about - they are the ones who will rise to the top in a Statist, "planning"-mad system and completely destroy civilisation.
Unfortunately, such people are already in a lot of quite influential positions - the Auckland Council Planning Dept for example. And numerous other bureaucracies churning out anti-economic, ideologically based drivel.
It seems that "no bureaucracy" is better than "bureaucracy", period. The one exception is Singapore's system, which the wise Lee Kuan Yew set up on a system of short tenures only. The best people from the private sector are selected to come in to work for bureaucracies for short periods only, and know they are back out into the private sector after 2 years or something like that. Kind of like compulsory military service.
Everywhere else, bureaucrats should be presumed to be untrustworthy ideologues and troughers.
Uh huh, a mises/austrian "professor" says commodies are dropping but one simple graph shows otherwise.
You are right in that mises/austrian is too basic, Ive long ago moved on from something so overly simplistic, especially when it shows its a failure in the real world.
Wrong on my wish for "planning"-mad system"s I dont want that either...but what I also dont want is anarchy which effectively the free market is.
regards
As I said Phill Best, love your work but ...ah...S.K. still hasn't got a clue what your talking about.....the very best to you in the New Year...!!
Everywhere else, bureaucrats should be presumed to be untrustworthy ideologues and troughers.
Yes they should, even those who don't come with the self serving motives, because the longer they remain the more they become assimilated , all the while thinking they are changing the pen for swine...
Maybe John Boy should keep that in mind...?
Have you got a link to that one Count? I must have been away and missed it.
Happy New Year Scarfo.......http://www.interest.co.nz/property/67888/reserve-bank-analysis-suggests-recent-migrant-inflow-could-increase-house-prices-7-an
A hummdinger of a thread lot's of thoughtful opinion . All the Best talk soon
Andrew J, the Feds desire to control all central banking strategies underpins the unwillingness to return to or instigate a gold standard. I would assume the inevitable strategy for the U.S. Is to action an exit strategy when it favours their repayment quantum the most. I do not profess to know just how they are going to pull that one off, but it is safe to say to date they have successfully reduced the value of all assets globally in real money terms or as one of your commenters has put it before stolen the wealth of a generation or two. So, yes it appears to be an endless road with an endless supply of empty cans to kick, but , as sure as I can be nothing lasts forever, and so a reckoning point is,has been projected on the foreseeable horizon.
who wins? Who loses ? I don't know but it will be about settling the ante with China and re-establishing confidence in the USD as the reserve currency, the U.S. As the dominant Market. The BOJ and Euro Central will be major players in the Feds end game albeit for different reasons.
"I cannot look at myself in the mirror; everything I have believed in I have had to reject. This environment only makes sense through the prism of trends."
- Hugh Hendry
What jumps into my mind when I read that Andrew is Capitulation, that can be a sign of either a bottom or a top.
This does not make sense to me..?? (Antal Fekete comments )
At the level of the prductive economy commodity prices simply follow the laws of supply and demand.... eg. milk powder prices
Maybe A Fekete is talking about the speculative component of commodity trading.???
AndrewJ ... can u elaborate..??
The speculative component of trading in commodities and in numerous asset classes, renders it impossible to disaggregate the real honest supply and demand effect, at least with the current state of mainstream economic theory.
The monetary whiz-kids are either so utterly ignorant of this that they should not be running the system (on grounds of competence), or they are part of a deliberate racket against humanity.
So in other words, he cant prove he's right.
yeah right...
regards
So, so true, but it can be hypothesized the speculative component has unbalanced the base value of the commodity and the like.
As I've said here many times Phill the speculative component has become the driver of markets instead of the passenger.
Philbest...I get that... but I dont get the assertion that :...
There is a vicious downward spiral in operation: falling commodity prices chase interest rates lower, and falling interest rates chase commodity prices lower. "
This make no sense to me at all... He is suggesting that there is a causal link between increasing Bond Prices and declining Commodity prices..
They are simply 2 different sectors...and with Commodities being made up of many different mkts.
Here is where I think I see some sense in it.
Inflation of the money supply is manifesting in inflation in the prices of speculative asset classes. Shares, property. Especially property.
Liquid capital is being diverted into these. Especially property. This is starving the productive capital sector of investment.
The inflation of property prices is slowly squeezing out discretionary income in the economy and causing economic stagnation by several mechanisms including the "reduced discretionary income" one (productivity is constrained too). This results in lower demand for actual commodities.
It is the perennial cleft stick of "aggregate demand" and Say's law. What the macroeconomics whiz-kids leave out is the role of economic rent in the whole system. The more economic rent there is, i.e. zero sum wealth transfer, the less consumption - and production - of actual "stuff". Now it is the consumption - and production - of actual stuff that is the bottom line for "wealth". It is all very well to have a top 1% getting richer and richer from zero-sum transfers, but those transfers actually reduce the consumption and production of actual stuff that IS "the economy".
This is a colossal hole in the entire Keynesian assumption about "aggregate demand".
So let's stimulate. It doesn't matter where the money comes into the economy. Let's give it to the banks to play with the asset classes that make up their "reserves". DUH.
This is a colossal hole in the entire Keynesian assumption about "aggregate demand".
So let's stimulate. It doesn't matter where the money comes into the economy. Let's give it to the banks to play with the asset classes that make up their "reserves". DUH.
I pretty much agree with what u say.... Though I make a big distinction between the idea of the effects of economic rent and the idea of how new money enters an economy and the effects of that.
The exponential grow of the FIRE economy parallels the exponential growth of Money Supply ...particularly since the end on Bretton Woods. ( this has less to do with economic rent and more to do with the idea that every new $ created devalues every $ already in existence... a stupendous transfer of wealth)..
A great analogy would be a Counterfeiter (who doesn't get caught) who creates money and appropriates wealth by swapping his "money" for whatever he wants....( It is not a free lunch as he is debasing money in the same way that gold coins were debased by having less gold in them. ) The counterfeiter is stealing..without anyone being aware of it.
It is no surprise that average incomes , in real terms, have been declining since the 1970s'.
In my view the only equitable and fair way to intoduce new money into an economy is to simply give every citizen an equal amount of it... to spend as they see fit.
The way they do it now, is inequitable and is a transfer of wealth to the Banking system and to those close to the Banking System... ( In fact, allowing the Banking system to be the ones to expand the Money Supply seems to be the ultimate privilege.... "a licence to print money" ... a "counterfeiters dream come true"...which they have profited from immensely )
http://www.rbnz.govt.nz/research_and_publications/reserve_bank_bulletin/2008/2008mar71_1lawrence.pdf
This is the kind of story which really makes me think of moving away from NZ.
We have Horizons (water nazis) and Canterbury (air nazis) and the likes of RBNZ promising OCR hikes if we have any kind of decent year, and OIO giving away NZ's future to anyone with enough foreign cash to wave at them, MPI thinking up harder and harder restrictions for no real reason, Government trying to push our wages into the danger zone, and Labour/Employment guys trying to make sure every business dies in red tape.
Yet in Chile, they _want_ to build industry!
In Russia, a small business can afford the equivalent of 250k - 500k of robotics!!! With government assistance to help ensure it happens!
Could NZ _be_ any more anti-NZers?
we capitalised our returns. We wanted tax free capital gain rather than taxable profit. It suited the banks too.
Now we are at the end of the easy increase inproduction, countries like Chile are just beginning, and can s return %20 + out of dairy farming.
Even if you don't move someone else will, use cheap money and invest in production for a good return eventualy deflating the value of milk below your cost of production but still way above theirs. Have a good new year.
Geeze AJ, you sobered me up before I even got a chance to get blind drunk.
Interesting comments on Chile, from what I have seen they have a similiar economic model to NZ, what Chileans call the 'Chicago School', however unlike us with our land, they've kept their copper mines.
How feasable these days is it for a kiwi to set up a farm over their and show a 20% return?
Any 12 ton diggers in good condition, around your neck of the woods by chance?
12 tonne diggers I could do. I have met a guy who buys and sells them, he got a 22 tonne one a few weeks ago super cheap. He buys a few off the Army. I met him as I was looking at a generator and the army runs everything on 230 volt . Army generators go cheap. Im going to talk to the guy again next week and will get some info for you. 12 tonne diggers are babies over here. Also he told me of a big auction place just outside Sacramento which sells a lot of diggers. Ritches https://www.rbauction.com/
A mate in Chile just did a conversion, its still possible but harder close to the main dairy areas. He told me some big welfare issues are about to blow at Manuka farms.
Hi Aj - Happy New Year to you and yours. How did you get on with your generator? We are looking for a 80kw one. Being quoted around $18k. Checked out ebay but not a lot ship to NZ.
Manuka farm welfare issues sound ominous - perhaps David C could do some digging. Fonterra's newest director, Michael Spaans, is a director/shareholder of Manuka, as well as being on the DairyNZ Board that is charged with setting 'Best Practice for the NZ Dairy Industry. Last thing Fonterra shareholders need is to have Fonterra dragged thru the -tve media again due to actions, or lack of, of a Fonterra Director regarding animal welfare issues on one of his farms.
Omnologo, Irrigation services in Clive just purchased a digger on ebay, they sent it all the way to Napier for them and its was a great deal.
Thanks for the info AJ, and all the best for the New Year.
historically we've kept in the demand section of the curve (vs the oversupply) by continually making damn sure we have low cost of production. But as mentioned elsewhere, the government doesn't think that's acceptable, despite (1) the obvious historic and economic proof, (2) the numbers, (3) actual experts with experience telling them, (4) every accurate business model everywhere , telling them the importance of keeping costs low.
creating money through banks is ineffective, as it's already "negative money". Inject 100 mil into the economy, charge 3% (or 7%), and you've just taken 3 mil (7mil) OUT of the [consumer] economy.
Its a good little earner for some.
This isnt really Keynesian as such, more quasi-keynesian being instigated by non-keynesian central banks in blind panic.
Also consider that,
a) If they had not stimualted we'd be in a depression and deflation right now and that's pretty bad if its the size of the Great Depression or larger which looking at the debt mountian today v the 1930s is pretty ugly.
b) like a strong medicene for a) there are are nasty side effects. QE has the nasty side effect of this mad speculation in everything caysing huge bubbles. It seems thats the effect of the "free market" taking advantage.
c) It does matter where it comes from, QE is an attempt not to simply print and cause wage inflation that cannot be easily contained.
If you look at the commodities and lower demand then why is milk solids higher? oil/petrol? We saw the price collapse of oil/petrol in 2008. Since then despite QEing on a huge scale oil is back up at recession causing levels.
d) You comment constantly on high housing costs yet ignore petrol/energy costs as that doesnt to fit your mantra. For instance inflation in property only really effects the FHB, its not effecting anyone with no or a small mortgage. Also rents while high are flat at present, an increase in the capital value of the rental isnt of impact to the renter. Fuel on the other hand effects a lot of ppl (and businesses), especially in surburbia where they commute. PPl in work go through 1 to 1 1/2 tanks of petrol a week, adding 10cents a litre has a far bigger immediate effect across the board....
regards
He rarely makes any sense. He appears to be a hard core libertarian type and from that a gold bug/austrian/mises type...so really thats not very surprising.
He's right that we'll see deflation, but that's caused by the very austrian / gold stanard policies he advocates.
regards
Now come on Steven , your being a little contrary for what ..? the hell of it..?
Appears to be a gold bug..? or someone looking for a return to a standard , something that has a certain measure of consistency about it.....nothing wrong with that. IMHO
Sod Gold for me, but yes the speculative has run amok and the Fed among others has fueled that bonfire into a firestorm.....was destabilisation the intent ...?in order to control that which had got out of their control...? the gold thingy is prolly one of the better examples of deliberation on the part of the Fiat experiment (?)
Short story....the U.S. got pantsed, called the big stall, did eveything to level the playing field, planning to exit their exposure to the very cold wind currently shinking their testicals.
Just can't seem to get the pants back up while the knees are bent......Capiche..?
[ Deleted. personal abuse. C'mon, that is completely unnecessary. Besides, its supposed to be a 'season of goodwill'. Please refer to our Comment policy. Ed ]
Ironic..... a guy accuses someone of "rarely making sense", and in the same comment says the coming deflation is in the process of being caused "by the very austrian / gold standard policies he advocates"...... which policies exist in, remind me, how many national economies in the world......? Ah, that's right, none at all.
For my part, I have never said that the current monetary policies will result in deflation. I have said that house price bubbles will crash. This is not dependent on monetary policy.
I have said I am with John Cochrane; "Inflation and Debt". Hyperinflation will kick in at the point when there are no longer buyers for sovereign debt.
I recall your previous comments about this suggestion some weeks ago, consisted entirely of ad hominem insults about John Cochrane. I will faint with surprise if you react now with any constructive comment that shows that you actually do have the first clue about these things.
Philbest: Your comments are invariably well constructed and good food for thought. Why you bother to keep posting them regularly to this forum is beyond me. It attracts probably no more than a couple of dozen regular commentors and new faces are rare and seldom stick around.
Many ex regulars would applaud the point of your deleted post. If the editors of this blog want to sabotage their own comment stream let them. The result is inevitable and will be well deserved.
Happy New Year Snodders ! .... jolly good to see you around the traps ...
... you raise a good point , whether they're " trolls " or not , certain depressive malcontents do spoil things for those of us who take a pragmatic-optimistic few upon financial matters , the climate , and the future of mankind ...
Which is why PB is to be applauded , for having a thick hide and the stamina to post his good messages , despite the heckling and abuse from the haters of the human race ...
We wont see hyper-inflation....first anyway, deflation first, then inflation, yes sure.
8><---
na, cant be bothered, you wouldnt and dont want to understand. Hence the only way is really is for you to see this unfold, but then you are such a fanatic that I doubt even the nasty reality bearing down on us will sway you. Of no matter, people will look back and see who said what and how it unfolded.
John Cockrane I dont recall but if this is any indication, then yes, he's a wee hard core right winger living in la la land.
http://online.wsj.com/news/articles/SB100014240527023048669045792659324…
regards
but Roelof, milk powder prices don't cover the cost of production, so how can they be said to follow the laws of supply and demand?
Are you sure about that...?? I though milk powder prices were at high levels..?? ( I'm not a farmer)
There is no law that says something can't be sold cheaper than it costs to produce.... ( many producers have experienced that )
BUT... over time if cost of production is higher than mkt price ... then I would expect supply to diminish..
What u say ...does not negate the basic principles of supply and demand.
they (WMP) are at high levels, unsustainably so in fact. But compared to any other standard factory made product it's still not returning positive yield when all costs are accounted.
(see recent articles on labourers doing long hours and paid day rates not hourly rates). See the amount of under the radar labour that gets done (like many self employed and small businesses). etc, including lack of future planning funds.
Actually there are laws which say you can't continual price under cost, however it takes money to challenge such ideas -if- you can even find a lawyer skilled enough to take on the cahallenge in NZ. most farmers are too busy doing labour intensive work to cut costs, or underpaying others and feeling rosy too be able to act. (the laws pertain to tax evasion (trading for a loss deliberately evades and blocks proper profitable and taxable trade, and also it blocks new entrants into the market. Ok for test runs, loss leaders etc, but not continuous...unless you have the people in hand in the right places to pick'n'choose metrics).
The standand "profit" marker of a darm business is the Effective Farm Trading Surplus (EFTS). It avoids all those off-balance sheet costs such as paperwork involved in relearning and updating wage systems and other similar activities, and the cost of equity. That way a farmer can point to the EFTS of 110k and say I'm doing well...but ignore that they're using 15M worth of asset to do the job (and have 60k of off-the-books costs).
That's why pure farming for the last 40 years has either been generational (the rent/plant is free $0) or it's farmed for capital gain, with the EFTS just used for drawings and debt servicing.
The more complaince and restriction that is brought in (eg hourly wage tracking vs days) then the less efficient the system will be, until only the big factories who can influence the market price by tightening supply will be left standing. Small holders will just need too many labour hours to keep up with all the rules, and even if they can pass on the cost at that point, the volume traders can push them out. The only winners will be those with money to invest in shares in the farm factories (labourers will get what they're given.
Zanyzane: there are cities in modern history that have had house price inflation during times of monetary responsibility; the reason being that they adopted "growth constraint" policies.
There are also plenty of US cities with "freedom to build" where it is impossible to start a house price bubble even with the loosest monetary policy in history.
The same US cities that bubbled 1999 - 2007 are doing it AGAIN NOW. But not a squeak of price inflation in the "free to build" cities that did not bubble last time either.
Business and consumer confidence at record highs, best terms of trade in 40 years, massive building boom underway, immigration strongly positive, house prices up 29% in a couple of years....fantastic, let's keep that OCR at 2.50%, can't go wrong.
NZ, yes?....parts of it, yes....rest of world? hmmm.
NZ, if our unemployment was way better, then yes....its flat or slightly improving....
regards
How it's being funded is irrelevant, it's happening
It is even worse than this. As long as you have a quota scheme in urban land and a Ponzi racket in the urban land market, some 2/3 of available liquid capital will be "sunk" into dead weight zero sum price inflation in urban land.
Imagine the difference in economic stimulus between a city where new house prices are 20% land (for a quarter acre) and 80% actual building; and one where it is 60% land (for 1/10 of an acre) and 40% actual building.
This is one of the reasons for THIS:
http://online.wsj.com/news/articles/SB10001424127887323549204578315714070017932
While the US Federal Reserve is desperately trying to stimulate California, New York, Illinois and Michigan; the boost to actual productive investment and discretionary income in the non-Ponzi States is massive.
The UK actually did something like what Southern USA is doing now, in the 1930's:
http://www.voxeu.org/article/escaping-liquidity-traps-lessons-uk-s-1930s-escape
It was a fluke though. They were such bad learners, they established the world's first official Ponzi racket in urban land in 1947; called the Town and Country Planning Act. And have been strangling their economy ever since, blowing the advantage of centuries of global connections which still live on in the finance sector in London. Which sector is usually the only one in an economy that is able to withstand inflated land costs, in fact it thrives on them, because finance is a major "ticket clipper" on land price inflation and the associated credit expansion.
Sorry ZZ you'll need to explain the borrowing argument better to me. Any infrastructure tends to be funded with borrowed money, so lets not improve/replace infrastructure if it has to be? And in this case mostly from the private sector, but also cash from foreign insurance companies. The OCR only goes up if either the economy is performing strongly (in NZ 3% plus growth falls into the category) or inflation has developed into a problem before that, as can happen. In this case its the former, with the latter following if the RBNZ doesn't act early enough all else being equal next year.
I will remember the same misguided sentiments back in the mid-2000's that let inflation get out of hand and the OCR having to go to 8.25% to crush things to put it back in the bottle - the most misguided are those that still claim higher interests were thedirect cause of that when in truth its was the relucance of the RBNZ to do it early, and modestly, that created the inflation, and inevitable lead to much higher interest rates and consequences...Bollard later admited the RBNZ's mistake, at least they learnt something.
it was gfc that put things back in the bottle. problem is certain sectors see a bit of grow and inflation lifts on the backi of something else, and the rest of the economy gets a kick in the guts (in the bad way)
Cowboy - NZ was well and truly heading into recession with several qtrs of negative growth well before the GFC kicked in. The RBNZ had been slow to act and then timid when it did in the 2003-06 period, inflation got above 4%, so in the end they had to take rates far higher than they likely otherwise would have needed, and crushed the economy in doing so. Some don't seem to remember even recent history, and seem to want a repeat of that, but I for one, want to see a gentle easing off the accelerator, and a more modest controlled rise to a lower level that might do the job but without the same damage.
Bollard and Brash with their high interest rate policies(global high being our norm at an average of 7%) both have stupidly driven NZ manufacturing to the brink of niche and cottage industries.
I don't think so....
It has more to do with the likes of Helen Clark who throw on layer upon layer of compliance costs on our manufacturers and then open us up to Globalization.. A free trade agreement with China was probably the final nail in the coffin for many small manufacturers.
Forcing our manufacturers to comply with all sorts of regulations and then happily allowing imports that comply with nothing ...is a form of hypocrisy..
I know of several small/med manufacturers who closed up shop and GAVE their intellectuall property to Chinese companies and then became importers... A logical decision by the manufacturer who could not compete...but utter, complete Madness by the Politicians and advisors who came up with these "Globalization policies"
I also disagree with your views on low interest rates as we already have excessive credit growth... I know your view on compulsory superanuatiion to reiegn in excess liquidity ..but I don't like it. It is highly regressive and comes from the same philosophy that might advocate rent freezes and wage and price controls.. ( a command style economics)
I know u use Singapore as an example and I have been slowly learning about that country. .... but their setup is very, very different to ours....eg. all land is leasehold, monetary policy targets exchange rate rather than interest rates, high compulsory superannuation with high employer contributions etc.
I do see what u are saying about relative interest rates on a Global level.... and that is a problem that has the Reserve Bank scratching its' head.
I'm not aware of any relationship between low interest rates and a vibrant, dynamic and innovative economy...?????
Xero has not grown thru debt.... (as far as I know) it is all thru equity investment..???
XERO is a well managed , adequately funded tech company , with a product business people like ...
... but speculators have pushed the share price beyond rationality ... They have priced in alot of perfection ...
And if the company has a hiccup anytime ahead , misses a growth forecast or something , expect the share price to be crushed .... even if the actual company is still in robust health and vigour ....
... on the sharemarket , it is not uncommon for commonsense to become totally disconnected from investors' behaviour .... not uncommon at all ...
Same was said about Amazon and Paypal
Zanyzane...whoops...yes ..I got that wrong.
Land in Singapore is mostly freehold...
I was confusing China with Singapore...
I think the real answer here is not to rely on pure interest rate to control credit _growth_.
interest rate reduces velocity of money, which reduces long term econmic benefit (a bad thing).
reduction in credit availabililty reduces real growth, and places all non-borrowers at disadvantaged to the leveraged.
leverage has bad effects when interest rates are high and the borrower is a price setter (ie is effective free or even neg effective interest rate).
putting money into retirement funds etc: compulsory it's just a taxation which destroys ability for companies to pay real wages and update their processes. voluntary with bonuses...well to be effective it must be invested...invested means someone somewhere must be borrowing it....
For someone who thinks only he sees the big picture, understand one of those, only about 30% of NZ households have mortgages, youre very clearly one of them as you can't see the bigger picture. Higher interest adversely affect the minority of households, the majority benefit. Yes it can impact businesses adversely and households if job losses occur, but currently business confidence it as at 12 year highs... all I talk of is a modest early rise in the OCR to make sure that guys like you arent crippled with a far bigger move because it comes too late.
If NZ interest rates were exceeding high as you sugegst we'd likely to have had bouts of deflation over the past couple of decades whereas in fact we've have elevated inflation compared to other parts of the world..and this c@@p about bring the banks in line with the OCR ?..don't you undertand even the basics of what makes up a borrower's interest rate despite a number of posts I've made to you that you have failed to refuted...love to see you do that and expect the likes of Stephen H to agree with you....in response all you do is bang on about bank profits rising which is what any business should be planning to do.
The banks cost of funds that they add their margins to is currently NO WHERE near the OCR level and hasn't been since 2008. Either refute that, or if you admit its true, tell me why you think its greatly relevant to the OCR in this environment. Yes, when the RBNZ hikes, banks will raise lending rates, but so will their investment rates, thats the relevance in a normal market. Then tell me how their margins compared to overseas banks...I don't give a damn about bank profits if they manage their businesses well, and provide me with world class services at a competitive global cost...business that can do that make substantive consistent profits
GrantA, where's the evidence that "modest" inflation targetting has measureably been successfully employed to control the price level. The vast majority of research I've encountered, begins begins with the assumption of its efficiacy and then proceeding to selectively use data to justify their case while offhandedly admitting that even in those countries without inflation targetting regimes were similarly successful at reducing inflation over the same period.
In fact all evidence is to the contrary. Given interest is a business expense and homeowners tend to be middle class professionls, a rise in interest rates provoke a short run rise in prices as businesses who can pass the cost onto consumers and those who can't fail which leads to supply shortfalls. In the long term prices fall or plateau when interest rates reach their peak at near 10%, but only once a certain threshold of business failures, personal bankruptsies, falling dollar, collapsing housing values, consumer confidance has bottomed out.and business investment stalls.
There are a few exceptions which reveal the flaws in the research touting the inflation targetting policy.
Its easy for Bollard to admit a "mistake" when one can't prove or disprove a hypothetical.
One wonders at the purported effectiveness of ITP in controlling prices given the vast majority of core iflation during the mid 2000, was comprised of central government cost plus purchasing, price gouging by large local companies with a dominant position in their sectors, exorbidant charging of of fees and feckless spending by empire building by local government. Prices would have self corrected eventually as consumers were faced with spiking energy and food prices (excluded from inflation), a slowing economy, a high dollar taking its toll on the export sector, rising finance costs due to GFC, rising mortgage costs, and stalling wage growth
The economy would have self corrected eventually iin any case as consumers and businesses were faced with high food and fuel costs, rising cost of international finance due to collapse of finance industry and GFC, tthe impact of high dollar taking its toll on exporters, rising housing costs, , jittery foreign investors not so eager to invest, when our interest rates are more in line with international norm. No need for baseless fiddling with interest rates though the monetarists, wouldn't brook the loss of their political influence, and make no mistake the ITP isa political tool masquerading as an prudential economic device. Nonsense, is it any wonder that our country has seen a historic gap in household wealth which has only widen over the last ten years since the ITP has been in operation and the vast majority accruing to those gaining from a regime that favours those with high levels of capital assets, especially housing.
Fair questions to ask Anarkist and I don't know the answer to that as we don't tend to get modest inflation targeting, we tend to get delayed targeting and then a hasty sharp rise when things don't self correct. Every situation throughout each cycle is different but I lived through the 1970's and the mid 1980's inflations where it got completely out of hand before eventually they used interest rate to crush the problem, and alot with it. There were different drivers for each, but when you've got inflation running about 16% p.a. (and I well remmeber getting cost of living wage increases of 20% p.a. in a couple of those years) how long do you wait for markets to self correct ? I don't know the answer to that but 16% did huge economic damage and was a complete and utter failure if we were waiting for markets/economy to self-correct.
ZZ - EVERYTHING was skyrocketing, not just land. The one thing that wasnt was NZ's global competitiveness. They were times I will not forget and would never want to see revisited and probably won't with an inflation targeting CB. The late 80/early 90's were hugely worse for NZers than this little GFC to date and inflation was the real killer.
ZZ - I agree they were fantastic years those early 80's...life was never so good until it blew up completely for almost everybody. We had come out of Muldoon's draconian stifling unsustainable regulation into a free world and went to excesses in everything and blew ourselves up completely and rightfully so (hence I throughly agree with Anarkist that there's a balance of regulation thats always being tested). When you have Govt' racking up masses of debt, and inflation rising rapidly, any businesses will do well in that regard in that initial environment (many weren't really even real businesses - we only had to get up in the morning to make big profits and double digit wages rises were the standard expectation - wages were globally competitive but unsustainable), but inevitably the debt comes home to roost as it did by the mid to late 80's, and we know how many businesses didnt survive that - you had to live through those times.
We had managed the economy ineptly and lost global competitiveness for our products, and arguably thats what we've been recovering from since then. Few who actually lived through that period trying to bring up young families will want to live through that period of "globally competitve wages" again.
Hey GrantA I appreciate your receptiveness to my cretique of a policy that you support especially given how polarized debate around here has become.
For myself I'm only thirty years old so my knowledge of the economic events during that period comes from secondary sources, but what I've learned suggests the political and economic regime of today is dramatically different to those days. We have a markedly weaker labour movement, vastly freer capital markets, much looser business regulatory environment, and governments prepared to constrain their activities to mitigate market failure. I include OSH regulations and compliance and social welfarre in that context because business in this country have shown that they're incapable of ensuring the safety of their workers (as dramatically demonstrated in the Pike River Coal disaster and recent rash of deaths in the forestry industry), so government have needed to step in and set minimum safety standards and protocols to ensure compliance. furtthermore the National Government retention of Working for Families tax credits and accomodation supplement are tacit acknowledement that working people aren't being paid enough to provide them with an adequate standard of living. That's without accounting for a decline in people's standard of living. I wonder how much research there has been into how many households are affected by precarious living arrangents. Those who are forced into living in overcrowded, temporary accomodation such as backpackers, holiday parks, caravans parks, hostels etc for the sake living within the income provided by WINZ, attempting to cope with the increasing costs of living, and meeting the demand of labour mobility. Having experienced it personally very recently., Its not a pleasant situation. Perhaps we'll soon reach the stage faced by Walmart employes where the company has begged its customers for donations to support their underpaid staff.
IMHO the markets today are much more flexible and have much more latitude to adjust and self correct. We have a compliant and precarious working class, a government more responsive to the needs of business, and a more flexible market structure. Your generation need to dispell the boogyman of the 1970s. Economic and political conditions have drasticaly changed, both here and overseas.
To be honest Anarkist, the 70's wasn't so much my issue, its was the 80's....different situation each of them. The really big change that has occurred since then to my mind is globalisation. It has unquestionably been instrumental in reducing global poverty, particualrly the third world, but in freeing up markets which created that admirable achievement, its also arguably lowered the previous standard of living of the developed nations, most of whom whom had protected labour...you just can't have both.
Politicians are always pampering to the electorate, sponsors and the well healed.
Calvin Bear
There has been a secular expectation for a long time that 'crisis' will result in large scale leadership action being forced to take place which will resolve the problems that individual members of the public - and a lot of business too - are having to deal with continuously.
The word itself has of course been manipulated by those with the leverage to do it, to advantage themselves at everyone else's cost. 'Crisis,' that is to say real crisis, happens only to the less leveraged in the power game. The only genuine crisis for governments and large interest groups has been Edward Snowden.
Snowden took the debate away from the money and power test of ethics, and replaced it back onto the framework of absolutist social and political morality to which the politicians had to acknowledge a tie (their own) to.
The market could go up dramatically and there would be no crisis for either government or banking. The market could Crash massively and there would be no crisis for either government or banking - merely, it would make their jobs temporarily more interesting.
Personally I view this question of crisis and reality economics including real flows of liquidity and risk uptake and production, as entirely a psychological question, with psychological outcomes rather than money ones deriving the resolutions to the dynamics in any given situation.
Were there to be a Crash this coming year, government would step on the people viciously using quite a lot of armed force and intimidation. And this is because it could not rely on the political idea that there has actually been any kind of grassroots felt recovery caused by Bernanke's unorthodox Central Banking strategies.
Governments are incapable of inventing useful things like say, Edison or Marconi or Westinghouse did. They are incapable of BEING Steve Jobs-like characters.
Consequently they are entirely incapable of creating real economic growth. As has been pointed out by quiet a few here, monetary policy sponsored growth is fundamentally what economists focus on because down this path there is the pontential for government and banking to have actual effects on outcomes.
I like monetary policy sponsored growth because it presents me with an easy way to make money. Bernanke has not been engaged in traditional Monetary Policy styles of growth - he has specifically crossed the Rubicon of political independence and democracy theory and turned certain bankers and media barons into oligarchs. And this still provides certain 'easy' opportunities as long as you can suck your breath in and hold your gob-smacked mouth closed.
Stalin was totally nuts and he held on to his power through increasingly extreme and humanistically bizarre actions. There is no evidence to suggest he did not enjoy his craziness and privileged lifestyle. He had a family and attended dinner with them having to duck out occasionally to get update briefings from his torturer-in-chief. That a Christian Obama can authorise drones to kill targets on Christmas Day does not seem odd to the modern mindset.
And that is the basic problem.
How far has the frog already been boiled?
http://wallstreetexaminer.com/forums/index.php?showtopic=1073623
One of the big dangers of keeping an exchange rate low ( thru printing money) is that if something happens that causes "Capital Flight"....
Happened to Asian tiger Countries in the late 1990s' and the likes of Indonesia this yr.
Very easy to print money to keep ones exchange rate low.... but almost immpossibe to do the opposite ( cause ur exchange rate to strengthen if it gets too low).. You needs lots of Foreign reserves for that.
Especially risky for Countries with current acct deficits.....like NZ...... I think
Sure agree ZZ, globalisation is unquestionable a good thing for the world as whole, my point was merely that it tends to even out living standards between nations, some well up (third world), some flat, and the overly regulated ones, down. Each one of those developing nations have different situations but keen to hear some specific examples of what some have done differently in your view in adapting their monetary policy that has made life so good for them.
http://www.gatewaytosouthamerica-newsblog.com/gtsa-general/parallels-be…
GrantA, your response to ZZ''s comment about the 1980s suggests, that you include the mid to late 1980s, characterized by the RBNZ's brief flirtation with ultra orthodox monetarism (fruitless effort to control money supply) and Roger Douglas' reckless regulatory liberalization crusade without the necessary concurrent checks on fraud and unscrupulous behaviour.
Your description coincides with an article I read chronicling the authors own experience and assessment of the business conditionns and legal/political environment of the time.
You can read at the top of my comment.
Yes I know Chris Lee and had some involvment back in those days. I was in banking then and well remember the days of up to 1000% overnight money market deposit rates that occurred especially around tax time when the RBNZ had little feel for the cashflows in the system. I well remember many of our corporate borrowers fully drawing down their 20% overdrafts and whacking it on the money markets earning those 600-1000% returns overnight
Unquestionably Douglas's deregulation occurred without enough controls around it and many will argue far too fast accordingly - Douglas may well agree these days. But live through those last few Muldoon years before that, years of deregulation of price fixing, fixed exchange rates, where even little minor things like wanting to take $1,000 overseas on holiday required a formal RBNZ application and hold-your-breath approval. We were fast heading toward having the IMF step in and God help us if we had come under their control, and we would have been
So very easy three decade later to play Harry Hindsight and criticise, the facts were that something had to happen immediately, Douglas did so. Probably too fast, but it had to be done, and however he did it many were going to get hurt no matter what. You can not suppress a market for such an extended period of time like Muldoon did without major consequences down the track. For the 2013-2023 "decade" the withdrawal of QE (that some even suggest we should contemplated starting) will prove that once again and it frightens me.
Anarkist... I've just finished reading Alan Gibbs biography... great account of living thru the late 60s' to late 1990s..
He mentions the Aussie iron ore boom that busted in the early 1970s'... The big buyer was Japan...
One thing I disagree with u on is the idea that we have a much looser business regulatory environment today... Sure ..it is quite different today... but I do think with the information age has come layers and layers on regulatory compliance bullshit.
someone posted a link to this: http://pc.blogspot.co.nz/search?q=building+industry+authority
The "integrated building code" story gives me the sense of what is wrong today ...in regards to Bureaucrats and their love of regulations.. I'm sure it applies in many different sector.... The article also mentions the idea of "regulatory capture" where big business is involved in creating the regulation.( in this story it was CHH and Jame Hardie..I think) .... not good
Ironically ...this has resulted in housing becoming more expensive.. ( a builder friend has told me the lastest regulatory cost is the mandatory use of scaffolding )...
On the news a few weeks ago was a story of a couple who run a Balloning business being charged $600-700 just to change their address on the Civil Aviation database.. ie. change mailing address... ( Civil Aviation could not use the standard response that it reflects "cost"...)
Maybe that is one of the results of "user pays"... A form of corruption where it becomes a licence to gouge income ...and grow whatever beauracratic organization it might be.
Exactly...!
Everyone, Google "broken windows fallacy".
Don't worry the decline will be even more intense http://www.stuff.co.nz/business/farming/agribusiness/9544400/Farmers-face-penalties-for-dodgy-fires
What's the point of having an industry that is based on skeleton cost commodity production, if you can't add more compliance costs.... what are farmers supposed to do with such items, they're not allowed to use public landfill, and nothing is holding down the cost of recycling organisations in a barrel-of-fish market....
Time to start facing the music I think.
You are onto it, nice to see. I think the decline trend has been for longer than 40 years.
It is the height of stupidity to rely on a comfort blanky of rural produce exports for which the terms of trade have been declining for decades, and keep strangling our urban economies potential and leaving resources in the ground.
Turning 40% of our country into the world's cattle yard, yet sobbing our hearts out about one hillside dug into for a mine or a new urban development, the sum total of which can't come to 1% of our land area if we tried......... this is civilisational "decline and fall" decadence and loss of reason. "Whom the gods would destroy, first they make mad".
NZ led the world in sheep and wool technology. The market has faded since it's heyday.
Our low cost of production from small efficient operations is being destroyed.
What really **bugs** me about it, is that the people doing the destruction are the ones who profited most from the old times. It's all the new entrants that struggle to survive.
That bodes ill for NZ culture.
As for the mine, why bother with clean air provisions and expensive micromanagement of small waste, when big companies can just open coal mines and make lakes of pollution.
Like the energy savings I make..then I drive past all those town folk with kW's of xmas decoration, or driving to recreation activities (or recreation activities which create pollution). where's the sense?
only if you're in Auckland (and possibly Wellington)
Parts of it ? you can only work on averages in an economy...Yes but the unemployment rate is about the average of where its been over the last 30 years and is still drifting lower. Yes, parts of the rest of the world have MAJOR issues to resolve over the next decade plus, but equally for the moment theyre mucking through, as they have been for the past year. At some point they won't, but neither you or myself, anyone on this forum, indeed anyone anywhere knows when that will happen, or how it will happen....what it its another 2-3 years ? In the mean time we set monetary policy based upon how the economy is performing, and adapt/change/reverse as conditions change rather than sitting expecting something that can not be forecast in its nature or its in timing.
Grant A - you've got to be kidding me. All though the would explain many of the major screwups being made be the "report readers" in power.
If I ran a business with 500+ employees and only handled them based "on averages" for performance, do have any idea what I'd have in 10years? (an unemployment cheque that's wot!)
The _WHOLE_ point of *management* if to identify what is working, what is not, what is surging too fast, and to identify the difference between what needs to be shed and what needs to be put in position for the next step.
That is _management_. Absolutely impossible by the very act and definition to "manage on the average"
Cowboy, I don't understand why your business example has any releveance when I'm talking monetary policy only here, which was all I was talking about, and as usual on here, manipulated by some to suit their own agenda....of course in a business you can more specifically target issues and people. But with monetary policy you can't have an Akld or Chch OCR, or an Akld or Chch dollar, so the RBNZ is forced to operate on the averages which is my point...if its is possible please explain it to me and the other guy here. GDP might be running at 3.5% across the country on average, but it might be 7% in Chch and 1% in Levin but it can't target both differently. Yes its way less than perfect and hence other tools/strategies are always worth looking at, and LVRs are one of those and something I think was well worth trying.
monetary policy is different WHY??
The business example has relevance, because I could use the same _management_ application to apply to everything from cooking my dinner (I threw out 6 rotten eggs yesterday, I have 0 today, does not equal 3), to doing martial training (identify the poor and dangerous, build the most effective). To major engineer projects involving force vectors and materials design. That's why I emphasis on the word "management".
And yes, I could work out ways to manage it (CHCH and Levin).
But why is that my job?
And how, absolutely incredulous as it seems to me, could any profession think they could just decide to average such things out and decide real management was "too hard"!!!!!!!
(if the Persian empire could do it, I'm sure it's possible in the computer age)
Re: LVR comment. Seriously Grant! I have my shocked face on!! If I ran a multi-million dollar company, and was V-P of whatevers, And I came up with a half baked, no-management-approach, obviously faulty, scheme such as the LVR mess and said to the board that "I thought it was well-worth trying"..... mein gott, man!!! And that's a measly company where most things are in place, not the chaos and destiny of a soveriegn nation.
LOL...different because its can't be specifically targeted which is why so many complain about it, but no one has come up with something consistently better to control inflation. I appreciate that its not your job cowboy, and I'm sure the RBNZ equally love to find other tools of "management" (LVRs are obviously their attempt at that - I always questioned its success but it was worth finding out ), but youre doing yourself an injustice if you have some good ideas that can be passed on. If you have a valid sugegstion as to how monetary policy can be targeted better, be vocal, thats all the discussion is about.
If it turned out to be 7% in Chch, 1% in Levin, especially for 3 or more years running I'd be getting very worried.
That's precise why declaring it to be 3.5% is foolish, dangerously so. Just do a 10yr projection, with indicator cases selected from each sector, to enable some drill down to see just why that is.
Such mismanagement when there is clear duty-of-care and contract and authority is part of the position is inappropriate. Prosecute HUAC style and seize and trace assets level of neglect involved. Can you not see what would happen in 10yrs, creating the difference between the Levins and Chch of the country if both were subject to same decision and requirements (ie policy compliance and costs for lcouncil and pop) - and if you've got Chch @7 and Levin @ 1 what then of others??? (as those are probably not the bounds)
Oh my God, I give up...
LVR doesn't work. It targets the wrong people to achieve what it claims. That's exactly how Trump Snr managed to build his empire of hovels and force the US government to give him dispensations. They have the equity to hold the market to ransom, LVR enforces this....ie any "Cheapness" you see is cheapness to the same people who would have paid more anyway. And so they tend to pay more to hold up the value of their property - there was one chap who was buying up in one Wellington suburb so much he was depressing his own equity holding (he was pushing down on prices with quick buys in the lower end, the high turnover meant the area average sale price dropped, and his "deal" properties suddenly lost market value, just about snookered himself!) He ended up having to pay higher prices just so he didn't overleverage his other properties.
The only reason RBNZ U-turned on the "new builds" is that under common building practice used in NZ the new builds with all the paperwork and site work are much more expensive than the market value of the asset they produce (premium value of new car on lot). Builders find that with spec houses - you can't use it, or even temporarily put someone there because it drops the prices so dramatically! Untouched "new" you can recoup costs and make ok margin, especially if you chose the site & project work well.
Thus how is Auckland ever going to build the government's promised thousands of new builds if they keep the LVR bar high, no-one could afford to get in the door!
A business is micro an economy macro, thast why when National puts in "business leaders" they are so awful.
Average is all we have...live with it.
regards
That's why we pay politicians and government employees good wages, so we get average people.
I completely understand steven. However acknowledgment of a status quo does not mean it should be considered acceptable, and the first step away from accepting average work from average people who don't know any better is to raise awareness.
That's also why anyone who is above average, should already be looking beyond the current system and looking for more effective systems of management. These are good managers and leaders, defined unsurprisingly, because they aim and achieve beyond the average. One notable sign of good management is the constant search for better management ideas and the opinion that the status quo is not acceptable and average is guaranteed to be "second place" (or worse).
The first step in such management is what is trying to be achieved.
Such "averaging techniques" just what are they trying to achieve? And is it occurring?
No, it is not occurring. Why not? Because they declare it a government and social policy and thus not governed by rules of management, maths, engineering, finance or any other field. Similar to any other NFP organisation, success is achieved when the puppets are happy with each other, not by the outcome of their "effort"
Maybe part of the American surge is because more people are working. Certainly fewer than expected are claiming for unemployment benefits.
Or maybe....
http://www.usatoday.com/story/money/business/2013/12/26/jobless-claims-…
What a wonderful way to reduce your unemployment rate.
There IS THIS:
http://online.wsj.com/news/articles/SB10001424127887323549204578315714070017932
America does have a significant core where free market values are far more prevalent, and it shows. If America could be cut up into separate economies, the Southern States would be the world's strongest economy right now by a wide margin.
Population and business is relocating at a frantic rate, to where the opportunity is. Long live localism and inter-jurisdictional competition.
Does anybody out there have an opinion on Dunnfunds which is to be launched 2014 to invest in rental property.25k minimum investment.These things are popular in USA.
IMO - all the risk, and you get to split the reward (after costs - ususally including founder fee).
Alan Bond was over from Aussi pushing similar things but got nowhere.
These are "Toll Bridge" operations for the benefit of the operator
Ask yourself what the promoter and manager will extract out it.
The answers to that will be found in the following 2 questions "if you put in $25,000 and 1 month later you want to exit" how do you exit? and how much of your $25,000 you will get back?
It's the spread between the entry and exit price
not saying they're all bad, but they're a quick way for less than effective manager to make some solid cash. Can also be a solid vehicle...if you trust your equity partners that much - after all many commercial and industry buys are grouops.
Yeah common problem with that use of capital/capitalism. That's the trap people enter when they chase productivity over value, in reality it's a variation of price-war philosophies, which never helps anyone.
Cool start of idea for refrigerator.
Inner door so all the cold air doesn't rush out when you go for the milk in the door.
Split level inner door, so only half the air is lost when you want top or bottom.
Means less energy use, faster cooling, less defrost needed as less humid warm air re-entering fridge.
Cool start of idea for refrigerator.
Inner door so all the cold air doesn't rush out when you go for the milk in the door.
Split level inner door, so only half the air is lost when you want top or bottom.
Means less energy use, faster cooling, less defrost needed as less humid warm air re-entering fridge.
So long as that contribution makes sense to you I'm happy Steven - but totally irrelevent to the context in which the "average" was used by me. Get used to it ? I am getting very used to it from about three of you on here.
"Get used to it ?" wasnt aimed at you Grant.
I think there is an un-realistic expectation of some on the degree of control possible / practical especially when scale kicks in.
Happy New Year btw.
regards
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