90 seconds at 9 am: Athens defiant

Greek brinkmanship; Grexit preparations; HSBC exposed helping tax cheats; NZ swap rates rise; NZD up; NZ$1 = 74.2 USc, TWI = 77.6

10th Feb 15, 7:22am by David Chaston

Here's my summary of the key issues that affect New Zealand overnight with news of market worries about how the new Greek government is handling itself.

The Bank of England and the British Government are openly preparing for a possible Greek exit from the euro-zone.

This news comes as the new Greek government ratchets up the volume of their defiance of ECB and EU positions. They are about to hire back all the public servants culled from public payrolls over the past five years, raise the minimum wage, and sue Germany for World War II.

It's naked brinkmanship that could have all sorts of unintended consequences.

The New York Times is reporting more reputation woes for HSBC and a litany of tax evasion services offered to wealthy clients. The data comes from a large international dig by many independent journalists and is very damaging to the huge British bank which is not denying them. News outlets in many countries are picking up the story including Australia.

Much of the data is not new, just the public reporting of it in an integrated way. So far elements implicating New Zealanders have not yet surfaced.

Overnight, commodity shipping costs matched a record low set 28 years ago as China’s fast-slowing demand for coal and weaker bookings before their New Year holidays compounded a fleet glut. At the same time world trade is growing driven by bigger, faster and fewer container ships.

In New York, benchmark UST 10 year bond yields consolidated in today's trading and are slightly lower at 1.92%. In New Zealand yesterday we had a strong rise and steepening of our wholesale rate curve. It rose between +8 and +10 bps with the 10yr up +12 bps.

The oil price also consolidated overnight and is basically unchanged at US$53/barrel with Brent crude at US$58/barrel.

Gold has seen small gains to US$1,239/oz.

We start today with the New Zealand dollar about ¾ of a cent higher than where we left it yesterday. It is up to 74.2 USc, at 95 AUc, and the TWI is now at 77.6.

If you want to catch up with all the changes yesterday we have an update here.

The easiest place to stay up with event risk is by following our Economic Calendar here »

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25 Comments

by MortgageBelt | 10th Feb 15, 8:05am 1423508738

NZD climbing again. Due to what factors?

by Stephen Hulme | 10th Feb 15, 9:23am 1423513432

You're joking, right? Try this for starters - where else amongst other diminishing select destinations to place printed issue?

by @tony | 10th Feb 15, 10:39am 1423517952

Please can you turn what that link says into english for non economists....

The graph looked interesting...

by cowboy | 10th Feb 15, 10:53am 1423518826

If QE and other measures were working then why do they need to do this? And effectively it's just borrowing more on the credit cards to pay the debts they already have... debts backed by a shortage of assets which they don't actually own.

Especially when there are places like Greece who are going to start paying wages to more government staff ... from what money? Minimum wage up...from whose pockets?

Sue modern Germany for a war started by people grandparents and great grandparents??

by King of the whiners | 10th Feb 15, 9:24am 1423513463

The UK's Guardian continues to lead the way in piecing together the HSBC scandal:

http://www.theguardian.com/business/2015/feb/09/hsbc-files-swiss-bank-c…

''From information contained in leaked files from HSBC’s Swiss subsidiary, the Guardian has been able to reconstruct a diary of a year in the life of HSBC's cash machine. Large cash transactions are a classic warning sign to bankers. But instead of blocking the withdrawals or even interrogating them, the bank repeatedly handed out packets of untraceable banknotes.

Specialist UK tax barrister Jolyon Maugham says: “Why on earth would you travel to Switzerland to take out sterling in cash? Why would you not just ask the Swiss branch to wire the money to your bank account in the UK? I struggle to see an answer to that question that doesn’t involve you wanting to obscure from the UK tax authorities the fact that you have money in a Swiss bank account.”

Why would anyone believe that the rich of the South Pacific behave any differently? And why, oh why can't we get this superb level of investigative journalism down in this part of the world?

by KH | 10th Feb 15, 10:04am 1423515866

Journalism !. I am reading names involved with HSBC from media all over the world. But this morning in Stuff they talk about a NZer with tens of millions at HSBC, but no name.

No name. You gotta wonder why ?

by King of the whiners | 10th Feb 15, 10:17am 1423516635

The Herald reports:

'The client is one of 110 people or entities linked to this country (NZ) that had Swiss HSBC accounts holding as much as US$152 million in total in 2006/2007.'

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=113…

NZ financial journalists should be all over those 110 accounts.......

by steven | 11th Feb 15, 7:09am 1423591793

"NZ financial journalists" where would we find some do you think?

by cowboy | 10th Feb 15, 11:20am 1423520415

Same reason I shower at home rather than at a friends or vice versa.

I choose to.

It's called privacy.

Where I actually shower, and where I keep my money is NONE of your business and none of the governments business either. That's why it's called _my_ money.

If they think they need to know this about _my_ property then they have already stepped well beyond their purview, and certainly can't be trusted with anything important or personal of mine.

by King of the whiners | 10th Feb 15, 11:51am 1423522284

It most certainly IS the government's business if you are rorting the tax system (as is clearly the case in the HSBC situation), and by extension your fellow citizens.

No doubt you would be the first to condemn 'benefit cheats and dole bludgers' for their attempts to rort the system, and by extension their fellow citizens......

by cowboy | 10th Feb 15, 5:47pm 1423543637

My money, my property.

The ones rorting the system are the government, who just write rules that they think entitles them to things which they are not entitled (aka theft via legal manipulation, aka Rort"

How is me choosing to access through private treatise my own property (money) a 'rort'?

Do you even know what a rort is?

by King of the whiners | 10th Feb 15, 6:34pm 1423546499

I have no idea why you are waffling on about property when the HSBC story is about tax evasion and banks acting illegally. Do try and stay on topic.

by OMG_WTF | 10th Feb 15, 9:50am 1423515046

Because it just is ignored?

by steven | 10th Feb 15, 10:26am 1423517160

"At the same time world trade is growing"

um?

http://www.harperpetersen.com/harpex/harpexRH.do?timePeriod=Years10&&da…

So in 2005 the index was 1872, today 468 (ish) and since 2011 its been 468 ish. At best you can say in the last 2 years there has been a slight trend up.

Otherwise looks pretty flat to me and still around 1/4 of its height.

BTW, bigger sure, but fewer, so savings on crew, which is substantial, $10KUSD+ per day? if you can run 2 instead of 3 ships, yep.

I odnt have air freight off hand, that would be interesting to see.

by cowboy | 10th Feb 15, 11:22am 1423520550

A slight trend up :)

Yes but it was down. then it was a couple of percent, and now it's several more percent.

A rise from a couple to several , is a large magnitude of increase !!!

We must write short term reports exclaiming this massive recovery, and read other reports from similar minds to confirm our findings.... *head* *desk* "but that's the way things work"

by steven | 10th Feb 15, 10:16pm 1423559760

Bear in mind David C is a private entity, no Govn involved, bound to be right. btw,

"The Baltic Dry Index which is seen as a leading indicator for world economic growth tumbled to a 29-year low at 559 points last week."

http://www.telegraph.co.uk/finance/economics/11398175/The-global-financ…

I just wonder how DC gets to things are, well improving I suppose, confidence fairy? bastion of the free market and all that.

by @tony | 10th Feb 15, 11:18am 1423520307

http://www.businessinsider.com.au/r-germany-rejects-greek-claim-for-wor…

by Boatman | 10th Feb 15, 11:44am 1423521866

I suspect the thing with HSBC is an underlying culture going back to its formation in Shanghai 160 years ago after the Chinese opium wars .......... risk taking , and sailing too close to the wind .

Being a supposedly "British " domiciled bank was just to give it an air of respectability.

It may never change .

In the early 1980's I worked for Standard Chartered PLC , another diverse Bank operating in Asia , Mideast and Africa , and we always looked upon the guys at HSBC as a bunch of high flying chancers.

by King of the whiners | 10th Feb 15, 11:57am 1423522655

And I would expect that all the other banks operating out of Switzerland have been doing much the same thing (but have yet to be caught).

After all UBS (that paragon of Swiss banking) has been mired in scandal for the past 5 years:

http://www.forbes.com/sites/rogeraitken/2014/10/08/fx-rate-rigging-scan…

Only the details of the scandal are different, but it epitomizes modern day banking....

by Boatman | 10th Feb 15, 11:54am 1423522446

Re the Greeks , for goodness sake they should just do what Iceland did .

Iceland's default has now been forgotten and its economy is stable again and successful.

Bankers know the risks in lending , thats their business .

They also know that sovereign debt is never 100% gaurenteed , every banker on earth knows that .

The banks face massive write-offs , it simply means losses to shareholders ,losses to Bondholders , a lower tax bill due to bad debt provisions , some balance sheet restructruing , and lower bonusses for execs.

They will get over it .

Greece can never , ever repay their debts , not in 100 years , so they need to default , and get on with rebuilding their gutted economy .

Today Iceland is stable , and is successful after the default .

The Greek tragedy is 7 years old and counting , its become a farce !

by steven | 10th Feb 15, 12:38pm 1423525081

Not the same thing by a long way. Iceland BANKS defaulted or I think 3 of them due to excessive leverage and unable to keep borrowing,

"The 2008–2011 Icelandic financial crisis was a major economic and political event in Iceland that involved the collapse of all three of the country's major privately owned commercial banks,"

private default, not public. The icelantic Govn did not default and was in good enough shape.

then there is the effect of grekexit to consider on EU banks, as Greece is inside teh EU. its quite likely that an exit could cause a EU wide bank freeze up and hence cause a recession to be triggered which would probably go world wide.

I really dont think you want to go there.

by KH | 10th Feb 15, 12:46pm 1423525583

Exactly correct Steven. the Iceland government did the opposite of the Irish government.

When the Iceland banks got into trouble the government did not bail them out. Because as we know the bailout is in fact lumped onto the taxpayers. And the people who have been doing well out of the silly stuff, get off scott free.

In Ireland the government did drop the taxpayers in it. Inexplicable change of direction. Possibly as a result of paper bags of cash changing hands. (or an HSBC fund transfer in Switzerland.)

Now who would pay off the politicians ? If that happened anywhere. You might think it the people who were going to lose money, but as a result of a very strange government decision, are effectively paid off by the taxpayers. When the taxpayers did not get to decide that.

by Boatman | 10th Feb 15, 1:03pm 1423526600

Okay , I accept that Ireland and Iceland both had issues with private sector debt , but Greece is largely , but not wholly , govt debt , ongoing budget deficits, and poor tax compliance .

That said , we need to recognise that like Haiti , Bolivia Zambia , Mozambique and other extreme cases the debt can never be repaid by Greece .

I have been to Greece , its a seriuosly unproductive country , other than tourism there is basically no real productive sector that makes anything .

Its a tourist paradise , and really cheap , but its not productive , as in say New Zealand, where we work our arses off in an almost Germanic fashion, and really produce stuff that others want

The Greeks bottle some olive oil and make some nice cheese, and produce some terrible rotgut alcohol called Ouzo , but so does everyone else .

by Boatman | 10th Feb 15, 1:17pm 1423527439

C'mon Steven , are you suggesting kicking the can down the road further?

Okay , so you are worried about the systemic risk and freezing up .............. well that risk has been on the table since 2008 , nothing new .

The banks have had 7 years to make provisions for writedowns , at 10% perannum , its nearly all gone , thats if they took a prudent approach

Europe is being strangled with all the problems hanging over its head like the Sword of damocles .

How long must it go on ?

Its time to take a deep breath and just get on with it .

The Bond markets will go into freefall , but so what ? Its a casino anyway , the unters know they can lose their shirts and their shorts

In 3 years time we will ask what the fuss was about

by steven | 10th Feb 15, 2:34pm 1423532040

Within context yes. If you look at how greece is doing, it is (or was) actually recovering but very slowly, too slowly. The point is really the austerity and payments are crippling its recovery, a lesser repayment would probably help its economy recover faster, reducing risk.

The banks have I think made no (or little) such provision. To do so would a) reduce their apparant profits and hence their viability and b) reduce bankers bonuses.

Now I dont disagree that Greece seems to be almost endemically corrupt in terms of tax avoidance, what looks like a bloated public service and wonky retirement scheme which needs fixing.

"how long must it go on" well the choices are, until it implodes or gradually exits its troubles. Frankly I think its going to implode, but when it does I'd suggest most ppl and that includes yourself will be agast at the consquences.

Bond markets? well those are the pensions schemes of many, ditto share markets, sure wipe those out 90%, I think it would be ugly to say the least. think you are bomb proof?

Uh no, if you think in 3 years we would be out of this "Great Shrink" you are very much mistaken. Look at the Great Depression that was 5+ years starting to recover from massive losses of wealth, jobs and income. The event to look back on is I suspect the Long Depression circa 1870s.

An interesting parallel,

http://www.counterfire.org/articles/a-marxist-history-of-the-world/1549…

that was more like 20 years than 3.