90 seconds at 9 am: Here come digital currencies

Quake to cost insurers $5.3 bln; Key says China will replace US on trade; VW cuts staff; Singapore trails digital currencies; PwC launches digital platform; UST 10yr yield at 2.35%; oil up but gold slumps; NZ$1 = 70.1 US¢, TWI-5 = 76

21st Nov 16, 7:25am by David Chaston

Here's my summary of the key events over the weekend that affect New Zealand, with news the development of digital currencies is speeding up.

But first, the Kaikoura/Wellington earthquake that struck last week could cost the insurance industry as much as NZ$5.3 bln, according to catastrophe modeler AIR Worldwide. Losses to land, which is covered by EQC and not by insurance companies, is not included in this assessment.

Prime Minister John Key said yesterday at the APEC summit in Peru that China would fill the void left by the United States if America backs away from the TPPA under Donald Trump.

In Europe, Volkswagen has announced plans to cut 30,000 jobs worldwide with about 23,000 of the losses in Germany. VW is still dealing with its emissions-cheating scandal and is losing market share, especially in Europe. It says it is shifting to develop new electric and self-driving cars.

Singapore is showing that digital currencies are coming fast. The Monetary Authority of Singapore said it would trial its own digital currency for interbank payments using blockchain technology. Separately, PwC is launching a platform for banks and central banks to develop blockchain and crypocurrency solutions. One advantage will be the ability to avoid traditional and costly payment systems like the Swift network or global credit card companies like Visa and Mastercard. It will also allow money to be programmed with rules. For example, payments can automatically be made when a certain third-part event occurs and is verified.

In Australia, banks are saying their profit margins are under threat, and it is savers who are being targeted to make up the shortfalls.

In New York, the UST 10yr yield has now risen to 2.35%.

The US benchmark oil price will start the week marginally higher, and is now just over US$46 a barrel, while the Brent benchmark is now just over US$47 a barrel. There has been a big jump in the rig count in the US and Canada, offset somewhat by an fall elsewhere.

The gold price is sharply lower, down by -US$16 to US$1,209/oz and a new nine-month low.

The New Zealand dollar will start today just a little lower on a stronger greenback, at 70.1 US¢. On the cross rates it is still at 95.5 AU¢, and against the euro at 66.2 euro cents. The NZ TWI-5 index is still at 76.

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

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

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21 Comments

by scarfie | 21st Nov 16, 8:26am 1479670012

I doubt that crypto currencies will fix the structural issues with the worlds money supplies.

by Didge | 21st Nov 16, 8:55am 1479671740

http://futurism.com/building-big-forget-great-wall-china-wants-build-50…

by Alter Ego | 21st Nov 16, 9:35am 1479674149

I doubt the TRAILS will be a trial. (Proof readers do not actually notice...errors).

On the other hand, when the power goes out, all commerce will cease....for example how would Kaikoura and other hard hit places .....manage without petty cash...IOUs??.

The problems of the world have been magnified by debt. If the old ways of doing things returned, then we could not spend, what we could not...afford.

And inflation, would be a thing of the past.....not the be all and end all.

Credit where credit is due...NAH...stuff it. I do not even trust any bank to give that...any more.

In the interests of the OBR, screw you.

by Stephen Hulme | 21st Nov 16, 9:57am 1479675420

Prime Minister John Key said yesterday at the APEC summit in Peru that China would fill the void left by the United States if America backs away from the TPPA under Donald Trump.

I notice the linked article thought to ignore the act of "gravitas" the prime minister decided would resolve the TPPA suspension issue.

Joking aside.

The threatened TPP trade pact could be rebadged as the “Trump Pacific Partnership” to satisfy the US president-elect who has vowed to scrap it, New Zealand’s prime minister has said.

John Key suggested “cosmetic changes” to the Trans-Pacific Partnership so that the US could be kept on board under Donald Trump, who has attacked free trade deals.

“The Trump Pacific Partnership for instance, that’d be fine,” said Key, with a laugh, during Apec talks in Lima, Peru. Read more

I guess laughing off the cost of failed utopic adventures is all that remains other than the taxpayers being out of pocket?

by Stephen Hulme | 21st Nov 16, 9:33am 1479674002

In Australia, banks are saying their profit margins are under threat, and it is savers who are being targeted to make up the shortfalls.

Paying up to stall fleeing depositors, that are in reality sticky, is another broken myth. Thankfully, the Australian saving cohort is to some degree protected from poor bank lending practices by deposit insurance.

by Stephen Hulme | 21st Nov 16, 9:43am 1479674605

Companies in the DJIA reported higher average and median year-over-year growth in non-GAAP EPS compared to GAAP EPS for Q3 2016. For the 21 companies in the DJIA that reported non-GAAP EPS for Q3 2016, the average non-GAAP EPS growth rate was 10.8%, while the median non-GAAP EPS growth rate was 5.1%. For these same 21 companies, the average GAAP EPS growth rate for Q3 2016 was -3.7%, while the median GAAP EPS growth rate for Q3 2016 was -1.2%.

As Deutsche Bank writes in a note on Friday afternoon, "be mindful of the gap between GAAP and non-GAAP EPS and net margins" Read more

by moa man | 21st Nov 16, 9:46am 1479674773

All this digital currency stuff is nonsense.
A fad.
It will take only one major hack to make people want folding notes back in their wallets.
Cash is King.

by Henry Filth | 22nd Nov 16, 3:43am 1479739404

Boy are you in for a nasty shock.

Have a look at what the Swedes are doing. Summarized as "cash is for tourists and criminals"

by rastus1 | 21st Nov 16, 9:54am 1479675263

Perhaps when negotiating these free trade deals Mr key might like to add in recipricol agreements regarding access to tax information? We have a very benevolent welfare system in NZ, but I do wonder how the sytem is expected to determine income and assets for many of our new citizens?

by Chris-M | 21st Nov 16, 10:01am 1479675671

Why do we need one of the large bully countries as part of the trade agreement. Wouldn't we be better to do a trade deal amongst the more modest counties that suits us, rather than be bullied into something less desirable. Having established our agreement, we would be in a far better position to admit one of the larger countries on our terms rather than theirs.

by Stephen Hulme | 21st Nov 16, 10:14am 1479676473

International prices must be fairly set so exports are not artificially expensive and imports are not artificially cheap. Imports from nations where labour rights are trampled need addressing. These are concerns that sensible thinkers on the left have raised for years – most notably the Nobel prize-winner Joseph Stiglitz, who has long worried about the corporate capture of trade deals. His warning that President Obama’s Trans-Pacific Partnership operated under rules that would harm the economy and US workers was a call that went unheeded by Democrats until it was too late. Work must be done to resolve the tensions between democracy, the nation state and global economic integration. Trade deals need to show nations are open for business by putting people’s interests, not corporate interests, at their heart. We may be at a turning point in the nature of capitalism. Read more

by Chris-M | 21st Nov 16, 10:42am 1479678151

Agree completely and we are more likely to be able to achieve that by negotiating a deal with smaller economies that are not dominated by large multinationals or other vested interests that are not aligned to those of the general population. Having done that we are in a far better position to call the tune and if they don't like it, they can remain out in the cold.

by billsay | 21st Nov 16, 10:03am 1479675831

"earthquake that struck last week could cost the insurance industry as much as NZ$5.3 bln"

Maybe in the first instance it can be viewed that way, but you can be sure it will be those who do insure houses/contents who will ultimately bear all this cost via future increased premiums.

by Stephen Hulme | 21st Nov 16, 10:22am 1479676939

Yes. There is no pool of wealth generating potential other than locked in ordinary citizens. Collectively they pay for everything. Transferring wealth away from them to corporations is a state authorised industry with no offsetting equal.

by middleman1 | 21st Nov 16, 12:27pm 1479684437

Normally yes but not for insurance disasters. NZ is such a small market for reinsurers that they will never 'recover' what they have spent in CHCH and now Wellington.
In NZ policyholders will not pay for the full cost of recent disasters in our premiums - at least not in most of our lifetimes. Recent claims history and perceived risk play some part but the availability and price of reinsurance capital mainly determines how much we pay for catastrophe cover.
We coat tail off the large Aussie insurers reinsurance programs which partly insulates us from the real cost of reinsurance and also have one of the most efficient disaster risk transfer vehicles in the world, the EQC fund. (note this is not a commentary on their claims operational effectiveness !)
Advocates of separation from large international insurers and going it alone with our own domestic insurance companies have short memories.
Recent commentators have argued that spending on disaster recovery is not a 'boost to growth' given the amount spent equates to the amount lost. That is technically correct except it ignores the economic efficiency gain from replacing old infrastructure with new. New replacement buildings are also worth more to overseas buyers than their predecessors.

by Andrewj | 21st Nov 16, 10:59am 1479679190

the tweets from Taleb
Obama:
Protected banksters (largest bonus pool in 2010)
"Helped" Libya
Served AlQaeda/SaudiBarbaria(Syria & Yemen)

2) (Cont) But in the end what Obama did that is unforgivable is increasing centralization in a complex system.

3) Don't fughet Obama is leaving us a Ponzi scheme, added ~8 trillions in debt with rates at 0. If they rise, costs of deficit explode...

sorry David but the link is from zerohedge
http://www.zerohedge.com/news/2016-11-20/nassim-black-swan-taleb-sums-o…

by Andrewj | 21st Nov 16, 11:32am 1479681142

the former CEO of the two largest Swiss banks, Grübel warned that central banks have "crossed the point of no return" which will ultimately “end in a crash."

Joining Deutsche Bank in slamming NIRP, Grubel said that banks are losing hundreds of millions of francs each year to negative interest rates paid to central banks.

Worse, he warned that central banks will eventually lose their credibility in the markets but that this could take 10 years or more, at which point it will "all end in a crash." What happens then? The former CEO believes that the final outcome will be wholesale financial nationalization: “after that all banks could belong to the state”
http://www.zerohedge.com/news/2016-11-20/former-ceo-ubs-and-credit-suis…

by MikeM | 21st Nov 16, 11:33am 1479681205

Must be getting close to setting up a Give a Little for Australian banks? :)

by middleman1 | 21st Nov 16, 12:29pm 1479684593

We shareholders are already doing that through reduced profitability arising from higher APRA capital adequacy ratio requirements.

by Stephen Hulme | 21st Nov 16, 1:53pm 1479689592

Yes, indeed.

Dickens writing in his book Little Dorrit observed that credit systems tended to be, "…a person who can't pay, gets another person who can't pay, to guarantee that he can pay."

by 2bobmillionaire | 21st Nov 16, 4:15pm 1479698146

5.3 billion sounds a lot,luckily there are no new zealand insurance companies any more except for FMG.china will fill the void,they are certainly filling the planes,they would have been 80% of the economy passengers on the flight i took to brisbane last month.i would think the PM has it covered and have a white flag pressed and ready.VW deserves a boot up for fraud anyway.i agree digital currencies wont fly and having an aussie bank acct can confirm they are definitely screwing their depositors.