90 seconds at 9 am: Australia's half percent

China nears full convertibility; Greek sideshow continues; English says rates too high; PwC says third of Australia in recession; UST 10yr yield 2.26%; NZ$1 = 69.1 US¢, TWI-5 = 72.4

22nd Jun 15, 7:39am by David Chaston

Here's my summary of the key issues from over the weekend that affect New Zealand, with news PWC is claiming more than a third of Australia is in recession.

But first, China said over the weekend it is close to its goal of allowing the yuan to be exchanged for foreign currency without any limits on the amount. That will promote a new surge in Chinese overseas investing by "qualified domestic institutional investors".

As the Greece crisis deepened - if that were possible - the run on their banks is accelerating. And the ECB is stepping in to shore them up, even though Athens continues its defiant tone. How this will all end is still still uncertain. Earlier this morning the Greek prime minister presented 'new proposals'. They are locked out of bond markets and their bailout aid is now frozen, and they are almost out of cash. They say they have enough money to pay public sector wages and pensions this month, but not make the IMF or bond market payments, and failure to make those will result in a default. They have pinned all their hopes on creditors rolling over existing arrangements. More euro-zone minister huddles will go on this week.

In the end, though, while interesting, the Greek problems are merely a regional sideshow and will have little direct influence on New Zealand whatever the outcome. But Bill English is still worried about how the uncertainties will play out.

English has also commented on the RBNZ's interest rate settings, saying "they’ve found they’ve fixed too high.”

In Australia, the AFR is reporting on some groundbreaking work by accounting giant PwC which shows that 20% of their national income is produced in just a half percent of the country, led by the central business districts of Melbourne and Sydney as well as the iron-ore-rich Pilbara in the north-west. More than one-third of Australia is in recession, they say, with those few and shrinking handful of locations generating most of its wealth.

Back in New York, UST 10yr benchmark yields fell sharply on Friday following the ratcheting up of the Greece crisis and are now at 2.26%.

US oil markets are pretty much unchanged with the US benchmark price just under US$60/barrel, and Brent crude is now just under US$63/barrel. US rigs in action have now stabilised - however they are starting to rise in Canada.

The gold price is up to US$1,200/oz.

The Kiwi dollar was pretty much unchanged over the weekend although it has lost about 1c over the past week, It starts today at 69.1 US¢, at 89 AU¢, and 60.9 euro cents. The TWI-5 is at 72.4.

If you want to catch up with all the local changes on Friday, we have an update here.

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59 Comments

by scarfie | 22nd Jun 15, 9:11am 1434921069

A thought for the day, there is a saying that when you give someone something they need rather than them earning it, they won't appreciate its value.

Could it also be said that when you are able to create something for free to give away (albeit at interest) then you won't appreciates its value either?

by Stephen Hulme | 22nd Jun 15, 10:07am 1434924440

English has also commented on the RBNZ's interest rate settings, saying "they’ve found they’ve fixed too high.”

I would call it a ruinous, public falling out at the head of the table - not a good look - unfolding events definitely involve more extend and pretend and the inevitable overflow of consequences. More milk anyone?

New Zealand central bank Governor Graeme Wheeler needs to get inflation back to target and some observers think he has “plenty of room” to cut interest rates, Finance Minister Bill English said.

“He’s been out of the zone for years now, below the midpoint for quite a long time,” English said in an interview late Thursday, referring to Wheeler’s 2 percent inflation goal. “He’s meant to be following the Policy Targets Agreement, that’s the bit I look at, and one day somebody will start asking the minister of finance questions about whether he’s actually following the agreement or not.”

by iconoclast | 22nd Jun 15, 10:18am 1434925081

Stephen Hulme - do you agree with this?

http://video.news.com.au/v/360719/Australias-housing-threat

by steven | 22nd Jun 15, 10:41am 1434926481

Wow, not so much a shot across Wheeler's bows but a full salvo....

Though really kettle calling pot black IMHO. Maybe if BE's Govn actually did something about the housing market in that time span. Which for 4+ years they have not, and after being elected in 2008 and giving tax cuts that porked the market, maybe BE should not through rocks in a glass house.

by Stephen Hulme | 22nd Jun 15, 11:16am 1434928602

I think the problems and consequences are more severe surrounding the failed white gold rush - hence the ill-conceived public outburst. The dairy expansion endeavour is another failed National Party "Think Big" project.

by Stephen Hulme | 22nd Jun 15, 10:50am 1434927039

Hard not to. Global foreign wholesale funding is fickle at best in an uncertain world. Apparently ~33% of NZ bank funding is reliant on such exposure.

by Brendon | 22nd Jun 15, 11:37am 1434929864

The Australian apartment construction market has gone nuts. Read about it here.

“Since mid-2012, development site prices have have doubled,” he said. “Three years ago you could buy in North Sydney at a site price equivalent to $148,000 a unit. Now its not less than $300,000.”

“The big issue now is construction costs. That is a major factor starting to rear its head.

“You used to be able to build, six stories or under for $250,000 a unit. Now it is $300,000. And high rise has gone from $325,000 a unit to $400,000. And there is difficulty in engaging a builder, even at an elevated price, because they have so much work on.”
http://www.afr.com/real-estate/one-developer-is-selling-sites-not-apart…

Is Auckland just part of some ‘booming’ global property mania?

I am thinking something like the 19th century Anglo boom bust cycles. Prof. Belich describes it well. Especially “Replenishing the Earth: The Settler revolution and the rise of the Anglo-world, 1783-1939″

I have seen some graphs for urban land values in Australia (unfortunately behind a paywall at MacroBusiness) and the graph has recently gone vertical. This is unsustainable.

by steven | 22nd Jun 15, 10:28am 1434925698

So I take it you think it should be higher?

IF so where should the OCR be? 7%? 10%?

by Stephen Hulme | 22nd Jun 15, 12:11pm 1434931884

Global deflationary forces abound in a world dominated by ZIRP/NIRP. Thus higher rates may up end the irrational obsession of pumping productive assets prices beyond self sustaining productive output capacity.

"It's real good Waimate West country, as good as you get. It was a unique opportunity.

"Willing buyer, willing seller - the price reflects the market," he said.

The low market value of Fonterra shares and dairy cows facilitated the sale.

Several banks approached the family to help finance the sale, which low interest rates made attractive.

"Everything lined up, except for the payout," he said. Read more

Hence, more than priced for perfection.

by iconoclast | 22nd Jun 15, 12:07pm 1434931668

Strange

Wonderful potential for improvement - or - something's not right

metrics

(a) last year produced 200,000 kg/ms @ (say) $6 kg = $1,200,000 gross revenue pa

(b) Waimate farms achieve $80,000 ha x 186 hectares = $14,880,000 gross revenue pa

Big difference

by The Oracle | 22nd Jun 15, 12:36pm 1434933388

Waimate West - the cheapest MS producing land in NZ hence the premium - lowest beta farms in NZ; last to fall, RBNZ int. rate cuts underwrite dairy industry. Monetising world debt is the only way out; $USD velocity of money uptick means inflation (lag to QE is over) - Fed is purposely behind the curve! (already > 2% when calculated correctly). In this light, this farm is a steal if owner can weather payout storm/service the debt - Kyle Bass's of this world are going to productive assets on that inflation scenario & if you're going to productive assets in NZ, then this farm is Triple A. Deflation is artificially induced - mkt has already called that bluff on the bund... market is starting to dictate rates again.

However as for the statement "the Greek problems are merely a regional sideshow and will have little direct influence on NZ whatever the outcome" is misguided IMO; Grexit undermines the Eurozone - clear contagion trigger due to security (NATO & Russian ships sitting in Med...) & monetary confidence (talk of Weimar). China off 13% last week - money is running out the exits - watch the VIX on Grexit!

by Stephen Hulme | 22nd Jun 15, 12:49pm 1434934173

Deflation is artificially induced - mkt has already called that bluff on the bund... market is starting to dictate rates again.

The bund correction was a function of a reality panic - Greece was no longer being lined up by the Troika with other people's funds to pay the German banks what it collectively owed - that thankless task is to be funded by German sovereign debt extension. And by deduction a rolled Greece would lead to others.

by The Oracle | 22nd Jun 15, 1:45pm 1434937529

Agreed - 5bp to 75bps today (1,500% yield increase) - the tide has turned, but not panic. 15/10/14 - US 10 year - the most important number in finance - Flash crash - a statistically 7 to 8 standard deviations event - an event that is supposed to happen only once in every 3 billion years.

These Keynesian policies prolong deflation initially; look at all broad money measures in Euro & US - real economy hasn't yet touched it yet, the question remains whether we can muddle through in meantime? In the meantime, I trust in the Exter pyramid lesson.

Greece's drop in output is already > than 1937 drop in US... demand & supply always wins. Some say Greece has played Germany like a violin (no capital controls - € leakage) - what happens if Greece decide against debt extn by 30th? Portugal, Spain, Italy...

by steven | 22nd Jun 15, 1:21pm 1434936073

So to be clear, if I understand your words its that the general deflationary environment we are in is artificially created.

So what pray is the "natural" situation? how is the artificial effect done?

by steven | 22nd Jun 15, 1:42pm 1434937359

"Thus higher rates may up end the irrational obsession of pumping productive assets prices beyond self sustaining productive output capacity. "

and we can see this in shares, with silly P/E ratios and many other investments/speculation, simple its greed. Just consider that this over-pricing is based on the current system. When oil goes into declne the earnings are going to be significantly worse unless the asset holds a Govn granted monopoly, which means that there will never be a reasonable return on the capital gambled.

So where should the OCR be?

I await with baited breadth.

by The Oracle | 22nd Jun 15, 2:03pm 1434938635

Here's one take on it:
http://www.project-syndicate.org/commentary/low-inflation-quantitative-…

OCR should be exactly where they are - small nation maintaining premium vs. Big players to attract capital flows (tightening fiscal policy should deflate the bubble in non-productive property). Devaluing the kiwi thru reduced rates while soft commodities are low is sensible.

by steven | 22nd Jun 15, 2:32pm 1434940342

"The low rate of inflation in the United States is a puzzle" so do you really want to listen to someone who see's this as a puzzle? I suggest not. Not when others have perfectly adequate working models explaining it.

http://krugman.blogs.nytimes.com/2015/06/02/the-inflationista-puzzle/?m…

"As Tony Yates points out, however, there’s nothing puzzling at all about what happened; it’s exactly what you should expect when interest rates are near zero.

And this isn’t an ex-post rationale, it’s what many of us were saying from the beginning. Traditional IS-LM analysis said that the Fed’s policies would have little effect on inflation; so did the translation of that analysis into a stripped-down New Keynesian framework that I did back in 1998, starting the modern liquidity-trap literature.

We even had solid recent empirical evidence: Japan’s attempt at quantitative easing in the naughties, which looked like this:"

by The Oracle | 22nd Jun 15, 2:52pm 1434941579

Correct & I'm all for empirical evidence; but Japan's was debasing their currency when other central banks were tightening monetary policy. Now we have all major central banks (US, Europe, China & Japan) easing - no global offset. Do you consider that the play has now shifted & that the keynesian approach is a mistake?

by Andrewj | 23rd Jun 15, 2:56am 1434984961

It is noteworthy that the next most expensive country in the world to buy land is New Zealand (€8532/ac) where the agriculture sector is dominated by dairying.

The next dearest European location to purchase land is Denmark at €7,934/ac followed by Britain at €5,448/ac.
http://www.independent.ie/business/farming/irish-farming-land-is-tops-i…

by David Chaston | 23rd Jun 15, 8:22am 1435004540

That is very superficial analysis quoted there.

The real NZ equivalent data (May 2015) is ...

Average NZ all farms (excluding forestry blocks and horticulture units) is €6,999/acre (and not €8,532/acre). Almost 20% overstated.

The regional range in NZ is €1,895 to €10,443 per acre over all types of farms.

If you just focus on dairy land, the May data is ...

Average all dairy farms is €8,645 per acre and closer to the FT data.

The regional range in NZ is €3,112 (Nelson) to €14,224 (Taranaki) per acre.

Looks to me like your article is mixing up all sorts of land use. Hardly rigorous analysis.

by bw | 22nd Jun 15, 11:02am 1434927736

The price of money, interest rates, has lost its meaning. I doubt anyone thinks the World can survive a 'normalisation' of interest rates. We are all too far down the road of indebtedness. What does become the more important question is "What happens in a Deflationary World?". Those who have debt will initially cheer on 0% ad infinitum. But if the collateral underlying assets is losing its capacity to back new or roll-over debt ( ie: asset prices fall and keep going!). how much as a bank, if you were one, would you lend out? If I were still a banker, it would be less and less, if anything at all, regardless of the interest rate. Interest rates might stay low, and distressed assets of all kinds could meet whatever market they are trapped in, as their owners cannot refinance or extend. When that happens, the downward spiral of asset prices really gets going....

by Roelof | 22nd Jun 15, 11:44am 1434930283

bw.. I agree ... normalization of interest rates is along way away..
Govts. and Central Banks are ruthless....
They are not going to allow deflation..
As long as a Govt/Central bank has " Seigniorage' ... they will print money..., (in the face of these deflationary forces ) and that money will chase asset prices.... ( in my view)..
we are witnessing the death of Savers.... By the time this is all finished ...noone will be a saver.. unless it is by force.. ( eg. Banks , pension funds..etc forced to hold Govt debt. instruments )
This is what Financial repression is all about.... Savers getting sacrificed..
This gives us the paradox of being in the middle of the biggest asset boom of all times... while being in a deflationary environment... ( a boom that seems pretty much unrelated to underlying economic fundamentals.. )
In this "New World'..there is an utter and complete mispricing of risk..... and an accelerating trend of the division of wealth..
( my view )

by bw | 22nd Jun 15, 11:56am 1434931014

And that all makes sense! But here's what must be terrifying' them'; those that do the money printing bit ( not that it's money printing in my view. It's good ol' issue debt to be repaid with someone's effort at some later stage.). It's that it hasn't and isn't working! We are all told it is. But deep down we, and they, know it isn't. So the World become one giant game of 'if I get in; capitalise on whatever it is I've jumped into, and get out, then that's all good!" Pretty much like lending to Elder Finance. Most of us knew it was a bad bet; but those who got in at 11%, and out, looked good. So it will be for the wider financial system. Debt creation without underlying productivity can't go on ad infinitum. And it won't. John Key could come out this arvo and announce that "All Kiwi wage packets from midday today, are to be nominally doubled - all of them, and debt remain constant" That's in effect what is trying to be created. But it wouldn't work! Why? Because productive efforts will never repay the debt ( higher wages without good productivity) that has been created. Sure, those who have debts today will look good - until this afternoon when all asset prices will have bee re rated, and then what? The next lot will have to pay the debts. My suggestion is...that WE, all of us here today, are 'the next lot'!

by Roelof | 22nd Jun 15, 12:16pm 1434932165

Check out this chart http://bonnerandpartners.com/hidden-reason-us-stocks-bonds-soaring-doll…

This ..in simple terms... is "Money printing"... It is money creation.. ( Central Banks expanding their Balance sheets) Look at China ... ( the country we have aligned ourselves to )..
This in not "debt"....
(The Japanese Central bank buys most of its Govts. bonds... This is monetizing the Govt debt.)
I never thought I would ever witness Central Bank money creation to this degree...
This is just one tool in the whole deleveraging process...
AND... yes... I agree with you.... its probably not going to end well..
The game changes when we start seeing some real inflationary pressures.... and the Central Banks will be between a rock and a hard place... ( the mkts will reprice risk and return )
just my view.. at the moment..

by Stephen Hulme | 22nd Jun 15, 12:51pm 1434934314

Much as QE does, this helps push up asset prices in the US. In turn, this boosts the US economy, which helps US consumers buy more Chinese-made goods.

I don't think those on main street in the US have derived any economic benefit from the narrow economics of financial asset price inflation.

Furthermore, the linked article omits to mention the PBOC declined to sterilise the injected renminbi, leaving a legacy of wasted infrastructure blotting out the landscape - a belated, but nonetheless, forged stock market bubble is failing to rescue the situation - but it maintains an affected air of prosperity for the few and attracts much needed foreign investment for ever more speculative investment via cross currency basis swaps lines.

by Ergophobia | 22nd Jun 15, 2:22pm 1434939724

Agreed SH. All they have succeeded in doing is exporting more full time jobs to China and putting Americans into crappy bits of service jobs, plus getting the stockmarket into really dangerous levels that has to collapse one day - and that's where all the pension provisions are! Nightmare.

by Anarkist | 22nd Jun 15, 7:16pm 1434957408

Roelof, how otherwise do you imagine TPTB, would be able to reinforce this tottering house of cards, to prevent it all come crashing down and falling into the abyss?

Do you think the Australian's would prefer the Chinese economy goes belly up and the demand for Australian resources and real estate come grinding to a halt? Or for the Chinese to stop exporting their goods to the United States and cease funding the U.S. trade deficit and public debt? Or the demand for our dairy products to cease and for China to stop funding our own trade and capital account deficits?

Low interests rates, which are essentially the signifier of return on capital are low, not because of Federal Reserve, but largely a consequence of an excess of capital sloshing around the world lacking profitable avenues of investment which can provide for a meaningful return. Fundamentally it is an issue of the real world economy is unable to accommodate a global society's current and future demand for financial claims (currency) to support them in a manner to which they have become accustomed.

It's not a matter of lack of physical goods and services, but a lack of access to financial wherewithal which would allow them call upon those resources at the inflated prices charged by those who already own those resources. It's politics that is the fundamental mechanism which actually allocates resources within society. It's a fundamental fact that the neoliberals have been able to deceive the public into thinking, is actually a function of the market, but even a cursory survey of the evidence allows one to conclude the erroneousness of this claim.

Decisions on the allocation of electricity, natural resources, transport, legal services, medicine, finance, and land all have major political influences both in terms of who get access to those resources and at what price.

by steven | 22nd Jun 15, 1:37pm 1434937021

Interest rates will never be "normalised" to what was seen 10~20 years ago.

The savers, yes those with jobs, not the saved. There is a difference, if you are the saved ie an OAP then deflation in goods is a huge tax free income boost. of course the risk is then the bank holding your cash fails and you lose it all.

maybe you should consider that the asset boom is due to greed, a side effect of trying to stop the entire economy imploding?

Mis-pricing of risk? yes indeed that however is a determination by individuals and entities based on greed.

"unless it is by force.. ( eg. Banks , pension funds..etc forced to hold Govt debt. instruments )"

Yes I expect this. Indeed I expect that existing systems like kiwi-saver will be suborned into holding Council and Govn debt by central govn "you will invest 50% of your book in NZ or else" either directly or by teh collapsing of other assets driving ppl out of them, Like the stern of the titanic rising higher and higher with the bows going underwater.

by tim12 | 23rd Jun 15, 10:43pm 1435056228

There is deflation in spite of QE. If you read one of stevens posts above it talks about "the liquidity trap". Whereby monetary policy has less effect on price as interest rates approach zero.
This kind of makes sense to me. I think of a farmer I know who bought a farm in the 1980s, and another in the 1990s and another in the 2000s. for his whole career he had interest rates trending downward and commodity prices and his land price inflating. The farm he bought in the 1980s cost about $1000/ acre, I'm guessing today it's probably $14000/ acre.
My point is because of inflation he didn't have to pay off the farm , the inflation helped pay it off. Now we look at today. Farms are overvalued compared to what they can earn, and interest rates are getting to the bottom of where they can possibly go. I know of a young farmer recently who borrowed I'm guessing $4million to buy a farm. My question is this, how can inflation help the young guy pay off the farm when the only way for future interest rates to go is up? Will we ever see inflation in the next ten years like we have seen in the last ten years, how is it possible?

by steven | 22nd Jun 15, 1:27pm 1434936451

What''s normal? If you go back say pre 1900 what was normal inflation? normal interest rates?

Can we survive "normalisation"? no we cant.

Are we due a huge correction in vastly over priced assets? yes. Most assets are based on the expectation of growth for ever on a finite planet. ie more ppl(consumption), more energy used and cheap and available etc etc. When for fossil energy that isnt the case and the output per day drops then the income off assets drops and significantly the assets are hugely over-priced, like 60~75%.

by iconoclast | 22nd Jun 15, 12:31pm 1434933106

As the Greece crisis deepened

Easy to forget - It has been going around the dance floor for 5 years now

by Anarkist | 22nd Jun 15, 12:22pm 1434932530

iconoclast, the Greek crisis officially began in 2010, when the European Central Bank, forced the governments of the PIIGS to bailout the private banks, under threat of the removal of the ECB's Emergency Liquidity Assistance. Now former Bank governor, Jean Claude Trichet is lying through his teeth in his denials to the Irish parliament, that he even had any prior knowledge about the Irish government's and Irish Central Bank's decision to bailout their banks, despite the European Central Bank releasing documents last year which refute his denials.

http://www.nytimes.com/2014/11/07/business/international/ecb-threatened…

http://www.irishtimes.com/business/financial-services/trichet-denies-ec…

by iconoclast | 22nd Jun 15, 12:33pm 1434933188

Updated to 5 years: The parallel is the Auckland housing crisis

Ignore it for 4 years, deny it's a problem for another 2 years, wheel out the deniers, talk in circles, have meetings, make threats, yap, yap, and eventually it's not a problem

by Anarkist | 22nd Jun 15, 8:19pm 1434961172

What troubles me, is the fact that domestic and international powerbrokers don't think of the Auckland housing crisis and the turmoil in the Eurozone are problems, rather for them they are opportunities. They are the elites, far removed from such considerations as job security, an adequate income to allow one to eat, access to healthcare, a roof over one's head, or a pension to allow one to eke out a living through old age.

Its all part of the blueprint for social and political change which was drawn up back in the the late 1970s in the wake of the political and social turmoil of the 1970s. International powerbrokers began to draw up a blueprint for social and political reform in response to what Samuel Huntington, described as an "excess of democracy", basically excessive demands for participation in political decision making, especially by formerly marginalized groups..
http://www.chomsky.info/books/priorities01.htm

The template for the current political, economic, and social landscape, was initially drawn up during a 1967, US. Congressional hearing by George Ball, former undersecretary of State, who addressed the Committe and made a speech where he said.

"For the widespread development of the multinational corporation is one of our major accomplishments in the years since the war, though its meaning and importance have not been generally understood...But to fulfill its full potential the multinational corporation must be able to operate with little regard for national boundaries - or, in other words, for restrictions imposed by individual national governments.

To achieve such a free trading environment we must do far more than merely reduce or eliminate tariffs. We must move in the direction of common fiscal concepts, a common monetary policy, and common ideas of commercial responsibility...For the explosion of business beyond national borders will tend to create needs and pressures that can help alter political structures to fit the requirements of modern man far more adequately than the present crazy quilt of small national states. And meanwhile, commercial, monetary, and antitrust policies - and even the domiciliary supervision of earth-straddling corporations - will have to be increasingly entrusted to supranational institutions."

The elites have been quietly making preparations for these reforms behind the scenes for some time and guardedly signalling their intentions through the media and IMF briefings since 2006.
http://mattstoller.tumblr.com/post/77315135524/nafta-origins-part-two-t…

"Why should things be any different this time? The answer is that the conditions that encourage reform in Europe may just be slotting into place.

Most countries that reform do so under a sort of corollary to Alexis de Tocqueville's dictum that “the most dangerous moment for a bad government is when it starts to reform”. In economics, the best time to reform is a dangerous moment: during or after a crisis. The bad times persuade voters that change is needed. The recovery afterwards masks the short-term costs of reform and helps the benefits to come through more quickly... But these crises hit only individual countries. A problem for Europe as a whole is that it has not had to endure the sort of misery that makes reform preferable to doing nothing. "
http://www.economist.com/node/5437093

My theme this evening is somewhat different. I still want to argue that when governments introduce reform is a dangerous moment. But my focus is on the difficulties that all governments inevitably encounter in judging what reforms to introduce; when; and how fast. Opportunities for reform are infrequent and if critical efforts go wrong, reforms get discredited. Once that happens it can be difficult to get another chance to introduce reform. And successive reforms failures make each subsequent effort that much more difficult—and more costly...Crises force significant policy reforms on a government. Hence my reference to a dangerous moment. In a crisis, there is little enough time to act, let alone think. The exact nature of the crisis will determine what reforms are needed and in what order...Loss of confidence in a government's ability to deliver economic growth and prosperity can precipitate a different sort of crisis situation. This is arguably what happened in 1984 in New Zealand when the Labor government came to power aiming to reverse decades of relative economic decline...Governments acting in a crisis situation appear to have a better chance of implementing reforms...In fact, crisis seems sometimes to lead to a suspension of "politics as usual" and provides a government with considerable freedom—more than is usual in politics—to undertake reforms.

New governments may enjoy something of an advantage, especially those in democracies that enter office with a mandate for change."
https://www.imf.org/external/np/speeches/2004/091004.htm

by Roger Witherspoon | 23rd Jun 15, 8:53am 1435006426

Great comment. I would add a couple of points. The first is that the opportunity for reform that opens in a crisis is a double edged sword. The nature of a crisis is that it is not clear what is really going on but doing nothing is no longer an option. This means it is easy to lurch in the wrong direction - that is how extreme regimes come to power (of whatever hue or stripe - Nazi, Communist or military dictactor). I have found the whole Greek story rather horrifying as society lurches from corrupt centre right to corrupt centre left to extreme left (although so far they seem pretty decent) and presumably if that doesn't work, to extreme right.

The other point I'd like to make is that each new government will have to address whatever problem caused the fall of the preceding party. They do not get to choose which problem they want to address. This is why Obama has been such a failure - he was not equipped to deal with the financial crisis that brought him to power. So he was easily outwitted by the financial powers of the day, implementing exactly the same policies that Bush would have. A generational opportunity for reform was wasted.

by Anarkist | 23rd Jun 15, 1:39pm 1435023565

Roger, what we're seeing is an advanced predatory form of social order, which is assiduously sold to us on the basis of freedom and democracy. Sure they are power, appealing idea, who would refuse it if it is what is on offer? But what we have in society, is far from what is promised, we are awash in rules, regulations, protocols, and suffer penalties should we not comply.

What you guys don't realise, is all going according to plan. They are not making mistakes. They don't want to fix problems, for them turmoil and suffering is an opportunity in enforce political and social structures which cement their positions in society and to extract power to claim more resources from the rest of us.

https://www.youtube.com/watch?v=aC19fEqR5bA

It culminated in a research project carried out by the American thinktank, called the Council on Foreign Relations, which was aimed at determining what political and economic reforms were needed to be carried out that would alleviate the necessity of accomoditing rising demands for change that threatened the current social order. One of the publications was a book entitled, Alternatives to Monetary Order, the purpose of which was to conceptualize the reframing of world monetary arrangements that would best ensure the continuation of the pattern of economic relationships, favourable to the interests of the United States. Its conclusion was, œThe obvious danger in such a regime resides in its potential instability. Some limited loosening is by no means unequivocally undesirable. It can be seen as a rational response to the earlier tendency, which was most manifest in the 1960s, for economic integration to run far ahead of both actual and desired political integration, thereby forcing countries into suboptimal policy choices. A degree of controlled disintegration in the world economy is a legitimate objective for the 1980s and may be the most realistic one for a moderate international economic order. A central normative problem for the international economic order in the years ahead is how to ensure that the dis-integration indeed occurs in a controlled way and does not rather spiral into damaging restrictionism.â€
Alternative to Monetary Disorder (Fred Hirsch and Michael Doyle, CFR)
http://ideas.repec.org/a/eee/inecon/v8y1978i3p457-459.html

I myself was horrifed when I read an excerpt of the above and to confirm it authencity I actually ordered a second hand from Amazon. I assure you it is, shocking though it may be.
And the mechanism which they used to achieve their purpose was the high interest rate policy of Paul Volcker, Federal Reserve Bank goveror, which he freely admitted below.
www.newyorkfed.org/research/quarterly_review/.../v3n4article1.pdf

by Roelof | 23rd Jun 15, 10:11am 1435011093

Anarkist... thks for sharing this... I found it interesting .. and thought provoking..

by iconoclast | 23rd Jun 15, 10:58am 1435013881

First paragraph - yes - powerful - those who feed at the top-table - leave it to others to clean up the mess and suffer their consequences

by profile | 23rd Jun 15, 11:43am 1435016599

C'mon Icon - not just the top table!

https://mobile.twitter.com/LordTyMckenzie/status/612750093687590912/pho…

by iconoclast | 23rd Jun 15, 12:31pm 1435019486

The magnitude of the carnage is different
http://www.interest.co.nz/news/76110/us-house-sales-surge-new-greek-off…

Do you think they care?

by Anarkist | 23rd Jun 15, 1:47pm 1435024059

Yes the lack of perspective is astonishing. A bit of rubbish from a gathering of 23,000 revelers compared to the utter immisseration, impoverishment, and suffering of countless lives throughout the world.

by steven | 22nd Jun 15, 1:44pm 1434937481

The problem is the Greeks dont want out and shortly they will be out of $s. Then what? default? i wonder how the banks across the EU will fair on that one, dominoes springs to mind.

by cowboy | 22nd Jun 15, 2:00pm 1434938459

I think the Good Ship Greece is about to go, all the VIP rats are clear of the ship, so just waiting for the final scuttle.

by steven | 22nd Jun 15, 2:39pm 1434940752

Where do they think they can run to? will all/enough banks in the EU will survive the default? if they cant then what about the World's banking system?

by The Oracle | 22nd Jun 15, 2:55pm 1434941714

Russia of course; some say China could de-peg & launch a gold-backed currency tmrw...

by sharetrader | 22nd Jun 15, 11:44pm 1434973476

The debt levels of most of the big ten are over 200% of GDP China is the biggest at 282% if one topples no amount of printing is going to help. Those that hold gold reserves will come out strongest. And a few countries are repartitioning the gold from England back to their own countries

by bender | 22nd Jun 15, 1:30pm 1434936612

How long does it take for a govt of neocons to wreck a country's economy and traditions? Look's like about 9 years here (took Bush/Cheney two years but they had help from their Saudi colleagues).

by steven | 22nd Jun 15, 1:47pm 1434937635

Not really, what we see is an end play that was 50~80 years in the making. ie once the world's population climbed above a sustainable 2billion we were on borrowed time as we ate out the reserves.

by cowboy | 22nd Jun 15, 1:58pm 1434938321

Same as Rome. Lot of the same politics. We have better logistics - they ran out of wood, and were overpopulated.

We're waiting for the overpopulation to finally beat our logistics. Meantime those at the top aren't worried because as long as they're on the top it doesn't matter what happens. Its just a matter of priorities.

by steven | 22nd Jun 15, 2:41pm 1434940874

Rome wasnt really about running out of wood.

https://www.youtube.com/watch?v=ddmQhIiVM48

by scarfie | 22nd Jun 15, 7:39pm 1434958775

Exactly the sort of thing I have been saying about complexity right here for some time, seems the problem isn't so much an energy shortage but a stupidity surplus.

by Anarkist | 22nd Jun 15, 8:37pm 1434962228

https://www.youtube.com/watch?v=w-Oqd2dZIhM

No, it's not a case of stupidity, but a consequence of complexity having diminishing returns, where efforts to address problems have cascading effects in increasing further complexity, with its attendant economic, social, and political costs.

by cowboy | 22nd Jun 15, 9:23pm 1434965038

Well there was also issues of the Roman government trying to crackdown on peoples' rights, especially the poor. There was also a competition between the triumvirate, and between government and senate.
However the wood issue was a big one- corn isn't much use to the working class with a way to cook it, and other places also required heat. Taxation (including indirect levies and fees) was also a massive problem as it destroyed the infrastructure economically.
but wood was a big issue. To re-create that sustainable resource took many years is optimal climate and handling. While other places were compete for trade to run iron forges, the commercial backbone of Rome was over stretched, also straining the infrastructure...but "the experts" aren't prepare to accept that infrastructure could be a burden...but the wood commodity is something that was noted at the time as a very real issue and has an external facet the problems causers can accept..

If you want to give a video as discussion point. can you chuck up a couple of bullet points, I don't bother watching much discussion videos. too little data:time ratio.

by Anarkist | 22nd Jun 15, 10:23pm 1434968605

The speaker's thesis is that the factors which lead to the decline and collapse of the Western Roman Empire have parallels in our own day.

His contention is that the our global industrial society shares a dependence on carbon based forms of energy which had limited availability in the face of increasing demands due to the exponential growth in social complexity. Much of that growth in complexity was due to the need to address the problems associated with prior increases in complexity, and thus having diminishing returns in the resources invested in that complexity.

It's my conjecture that the debasement of the Roman currency was an effort to accommodate high prices due to increasing scarcity of resources demanded by increasing populations and the social complexity associated with the administration of the Roman Empire which was responsible for resolving the manifold problems which they had to grapple with.

One can't discount the existential dimension of the Roman Empire which drove the Romans to allocate tremendous amounts of resources to monumental construction in some of the remote corners of the Empire, such as the city of Baalbek, then in the distant Roman province of Syria. In our case, our thought leaders hold the notion of continuing economic growth, production of material goods, and expansion of markets into a widening number of domains have a similar mystical dimensions.

by Guido | 23rd Jun 15, 2:25am 1434983100

Neocons? I though it was the Neolibs.

by two otherguys | 22nd Jun 15, 2:05pm 1434938706