Australia mulls a 15% GST; RBA mulls a rate cut; China PMI's wobble; Fed tightens capital rules; US GDP soft; UST 10yr yield 2.15%; NZ$1 = 67.8 US¢, TWI-5 = 72.9

There is that word 'unexpectedly' again. I expect the word unexpectedly will unexpectedly become more commonly used....

In respect of the Fed's new bank capital demands to eliminate a reliance on tax payer bail ins, a potential difficulty in terms of shadow bank type credit creation capacity comes to pass.

To further facilitate an orderly resolution, the proposal also would require the parent holding company of a domestic GSIB to avoid entering into certain financial arrangements that would create obstacles to an orderly resolution. These "clean holding company" requirements would include bans on issuance of short-term debt to external investors and on entering into derivatives and certain other types of financial contracts with external counterparties. These requirements will reduce the risk of destabilizing funding runs at the holding company, reduce holding company complexity, and enhance the resiliency of operating subsidiaries during an orderly resolution. The proposal also includes regulatory capital deductions for Board-regulated banking firms that hold unsecured debt of the parent holding companies of domestic GSIBs.

Which identity gets the credit rating - the holding company or the sub? If it's the former are holding company credit guarantees extended to the latter?

Which raises the issue of the Fed's failure to account for current methods of debt creation beyond the capacity of the traditional fractional reserve model.

Our analytical framework to understand what modern banks do is muddled by trying to draw parallels with what traditional banks do. Traditional banks engage in credit intermediation by issuing loans and insured deposits, linking ultimate borrowers with ultimate savers.

Modern banks do something quite different. Modern banks are dealer banks (Mehrling et al. 2013 ) that finance bond portfolios with uninsured money market instruments, and rather than linking ultimate borrowers with ultimate savers, they link cash portfolio managers and risk portfolio managers who in turn manage ultimate savers’ savings.

Cash and risk portfolio managers are ‘natural’ complements to each other. Cash portfolio managers are cash rich but ‘safety poor’ since they are too large to be eligible for deposit insurance. This drives them toward insured deposit alternatives such as collateralised repurchase agreements (or repos; see for example Pozsar 2011 and 2012 and Pozsar and McCulley 2012).

In each and every one of these cases, risk portfolio managers repo securities out and cash in, and on the other side, cash portfolio managers repo securities in and cash out. Cash portfolio managers have their safety (thanks to the securities posted by risk portfolio managers as collateral) and risk portfolio managers have their enhanced return (thanks to the funding provided by cash portfolio managers in exchange for collateral).

Dealer banks are intermediaries between risk portfolio managers and cash portfolio managers. Risk portfolio managers interface with dealers on the asset side of dealers’ balance sheets and cash portfolio managers interface with dealers on the liability side of dealers’ balance sheets. In this process dealers intermediate risks (credit, duration, and liquidity risks) away from cash portfolio managers and toward risk portfolio managers using repos and derivatives. This is risk intermediation (see Figure 1, and Checki 2009, Pozsar and Singh 2012, and Claessens et al. 2012). Read more

The good news is the lack of reference to depositor funded bail ins. Unlike the neoliberal republic demands of the RBNZ, the Fed recognises the destabilising nature of calling upon retail depositors to monitor banks' risk taking endeavours and exact measures to counteract indiscretions.

So GST is a regressive tax, thus hammering to ppl with less (or no) disposable income harder. Meanwhile the ppl with disposable income and the ones that dont need more $s in their pockets, will pay less. Yes that makes sense, the only real unexpected thing is that ppl still believe this neo-con pile of crap.

"Analysts said this impact is likely to be temporary" funny thing but I have small feet and what I am finding is now for years one now stocks small sizes due to the "low demand" On top of that shoe shops seem to only have 1 pair per size if you are lucky in common sizes, (1/2s often not). Bit ad hoc I know but this doesnt seem uncommon, ie stocks are being run down and I suspect much wont be replenished until the economy actually picks up. Thank god for Amazon is all I can say.

The number of pop-up stores in Wellington has definitely increased. Main chains liquidating their stock??

90 seconds you say?

And finally, Standard & Poor's say that winning a rugby World Cup is worth a boost in stock values in the weeks after the win. No word, though, on what it does to house prices.

The Dunedin ratepaying underwriters of the Forsyth Barr Stadium will no doubt be expecting some magical largesse to offset crippling rates bills.

Dunedin city councillors are preparing for a fresh war of words over Forsyth Barr Stadium, following confirmation it needs another $1.81million a year from ratepayers.

The extra costs, together with a nearly $1million budget hole to be plugged by mid-2015, would see nearly $20million in extra ratepayer funding pumped into the venue over the next decade. Read more

I seem to recall this issue was discussed at great length a few years back.

I believe it was called GFC1.

Loading up the unsuspecting ratepayers for a commercial gamble for a commercial gambol for a suitably named stadium, should have been doubly barred.

Playing around with other peoples money is not what the poor suckers expect, from the people sucking them dry and skimming a few bucks for themselves.

Household and Commercial Rates have gone through the roof, while the poor savers take a hit. Now it is the turn of the ratepayers, who are also savers to get a double whammy, yet again.

Doubling down on an investment is doubly irresponsible, by all accounts.

Especially on a falling market.

So please get yer hands out of the ratepayers and savers pockets you damn parasites, this is not what we bargained for when electing a bunch of idiots.

Nor should a "private' funded stadium, be named after a financial entity, expecting a kick-back.

Please note.

This is not the first time, you have been warned. Fiddling and paying around with taxpayers and ratepayers money is not funny.

Criminal proceedings should be mandated and back dated for this type of criminal intent.

When will we ever learn, GFC2 is coming the same as GFC1.

Blatantly obvious to expect much else.

The signs are writ large.

Dunedin Town 0 Muggin(g)s 1.8 Million and counting.