'Sad piece of jingoism'; 'A short sharp shock'; America admits wants to inflate away debt; Cat printer hell; Dilbert
Here are my Top 10 links from around the Internet at 10 to 2pm, brought to you in association with New Zealand Mint for your reading pleasure.
I welcome your additions and comments below, or please send suggestions for Monday's Top 10 at 10 via email to bernard.hickey@interest.co.nz.
I'll pop any surplus suggestions I get into the comment stream
1. 'Don't upset the apple cart' - Gareth Morgan writes at NZHerald about Labour's move to block foreign acquisition of New Zealand land.
His argument is that we can't afford to put up the shutters while we spend more than we earn.
He's right.
The trick then is to spend less than we earn.
Will the world end if we say no to more foreign purchases of land and other assets? I doubt it. And even if it did, what would happen?
The New Zealand dollar would fall sharply, making our exporters more competitive and forcing people to buy fewer imports. And the problem is...?
Here's Gareth in his own words.
Our overseas creditors are quite happy to keep lending to us at the interest rates we're happy to offer so long as we (a) keep paying the interest and (b) enable free conversion of those debts to other assets we own that they can buy. Ban foreigners from buying our assets, though, and there certainly will be a sharp shock to the system.
If foreigners can't use New Zealand dollars to buy New Zealand assets why would they be willing to hold New Zealand dollars?
Those dollars would become like debentures in just another New Zealand finance company, in quick time worth much less than their face value - in effect the kiwi would cease to have any asset backing. It would fall and that would deter further lending from overseas. In other words, the demand for New Zealand land from foreigners can be seen as the flipside of our penchant to spend more on imports than we earn from selling our stuff to foreigners.
2. 'A sad piece of jingoism' - Meanwhile Stuff reports BusinessNZ's chief executive Phil O'Reilly described Labour's move as a 'sad piece of jingoism'.
One of New Zealand's advantages for attracting investment was the consistency and clarity of rules governing business, Mr O'Reilly said, but the recent debate could become a "potential black mark" for companies that were considering investing here.
"The problem with this kind of thing is it starts to sow the seeds of confusion amongst investors, that they won't know the rules [about ownership], that they'll be a moving feast," Mr O'Reilly said. "That will be the quickest thing that will scare sensible businesses off ..."
3. How some Americans are starting to feel - This polemic from Charles Hugh Smith is titled 'The Loss of Trust and the Great Unraveling to Come.' It's hard not to agree with most of it, even though it comes across as a sort of rant against a grand conspiracy. I'm not a believer in conspiracies. Most messes are cockups.
But it's true the bankers in America have defended their interests well at the expense of taxpayers and the economy more broadly. The problem for us is this is the world's biggest economy by a long shot. HT Kiwidave
This sort of currency hegemony is wearing thin around the world. So the Fed is not only perfectly happy to impoverish Americans via skyrocketing commodity prices and rising import prices, its dollar-destruction policies are driving the rest of the world into creating another reserve currency.
The "free ride" the U.S. has enjoyed as holder of the only reserve currency will end, and the nation will have to live within its means. The Fed's incompetence and ownership by the Financial Power Elites is painfully obvious. Which is more pernicious and destructive hardly matters, but it seems its incompetence adds a positive feedback to its servitude to the bankers.
Was propping up the stock market to give the ruling politicos a boost on November 2 worth the destruction of the dollar? Obviously not. If they haven't already lost faith in the Federal Reserve, the citizenry soon will. They have already lost trust in the Federal government and the political lapdogs who occupy the seats of power.
The Great Unraveling has just begun, and there is much more to come.
If you can't read it, this cartoon says: "The future of manufacturing. By 2030 we will see acres of foreign-owned rusty squalid sweat shops full of exploited economists mass producing cheap productivity commission reports for the virtual world museum of defunct economic theory and practice." HT John via email.
4. 'We can't make it here anymore' - This song from James McMurtry below seems to sum up the mood in America at the moment. HT Malcolm via email.
Now I'm stocking shirts in the Wal-Mart store
Just like the ones we made before
'Cept this one came from Singapore
I guess we can't make it here anymore
Should I hate a people for the shade of their skin
Or the shape of their eyes or the shape I'm in
Should I hate 'em for having our jobs today
No I hate the men sent the jobs away I can see them all now, they haunt my dreams
All lily white and squeaky clean
They've never known want, they'll never know need
Their sh@# don't stink and their kids won't bleed
Their kids won't bleed in the da$% little war
And we can't make it here anymore
It's clear now America has decided to default on its debt through money printing and inflation.
How long before Europe and the UK try to do the same. Should we?
"The U.S. economy is best described as being in a bona fide liquidity trap," and given the challenges now faced by the nation, "much more policy accommodation is appropriate today," Federal Reserve Bank of Chicago President Charles Evans said.By saying that above-target inflation will be tolerated for a time, the Fed may be able to get an overly low level of inflation back to something more acceptable. But he cautioned that it would have to be a policy communicated with clarity.
Mr. Evans said that such a regime, which he called price-level targeting, "would be a helpful complement to our current and prospective strategies in the U.S. There are quite a number of academic studies of liquidity-trap crises that find either price-level targeting or temporary above-average inflation to be nearly optimal policies."
6. China says No again to calls for a fast appreciation - Just in case everyone missed it, the Chinese are still telling the Americans to go jump when asked to let the Renminbi appreciate vs the US dollar. Cue Currency Wars. Read the quote. This is not going to end well. Reuters has the report.
The accelerated yuan appreciation of recent weeks will not last long because China's trade surplus will soon peak, an official state newspaper reported on Monday. An article in the overseas edition of the People's Daily said there had not been sufficient improvement in the economy at home or abroad to justify a speedy rise in the exchange rate.
China freed the yuan from a 23-month peg to the dollar in June and has let it gain about 2.8 percent against the dollar since then, with most of its rise coming after August. The article cited Wang Jun, a researcher at the Chinese Academy of Social Sciences, as saying that China should not and would not bow to foreign pressure.
"If the yuan rises quickly under joint pressure from the United States and some other nations, that will mean China is manipulating its currency, won't it?" the report cited Wang as saying.
7. When are Americans going to shut these monsters down? - Here the New York Times reports on the practices of JP Morgan and how it makes money from its customers.
The cynicism and greed is simply breathtaking. I'm still shaking my head at how American taxpayers have bankrolled these Too Big To Fail banks and allowed them to set the rules (and their own bonuses). Heads on pikes anyone?
How JPMorgan won while its customers lost provides a glimpse into the ways Wall Street banks can, and often do, gain advantages over their customers. Today’s giant banks not only create and sell investment products, but also bet on those products, and sometimes against them, putting the banks’ interests at odds with those of their customers.
The banks and their lobbyists also help fashion financial rules and regulations. And banks’ traders know what their customers are buying and selling, giving them a valuable edge. Some of JPMorgan’s customers say they are disappointed with the bank.
“They took 40 percent of our profits, and even that was O.K.,” said Jerry D. Davis, the chairman of the municipal employee pension fund in New Orleans, which lost about $340,000, enough to wipe out years of profits that it had earned through securities lending. “But then we started losing money, and they didn’t lose along with us.”
8.' Nudge, nudge, wink, wink, say no more' - Caroline Baum at Bloomberg captures the mood of scepticism building around the Fed's second round of money printing.
Can the Fed the really be sure it is not throwing the match onto a bonfire?
If I were a central banker getting ready to embark on another round of quantitative easing, I would be very afraid. Here’s why. Central bankers in the U.S. are being bombarded with market-based signals suggesting their fears of deflation, or falling economy-wide prices, may be misplaced. Gold prices continue to set new highs. The U.S. dollar, the global reserve currency, keeps sinking amid expectations the Federal Reserve will dilute the existing stock starting at its Nov. 2 to 3 meeting.
Commodity prices, both industrial and agricultural, are on a tear. The CRB Spot Raw Industrial Price Index, which includes scrap metals, cotton and rubber -- but not oil -- hit an all- time high this week. Junk bond issuance already set a record for the year, with demand for high-yield debt narrowing spreads to Treasuries. Investors are pouring money into emerging markets debt issued in local currencies by countries that used to be considered banana republics.
Mexico sold $1 billion of 100-year bonds last week, double the announced issue size, at a yield of 6.1 percent. Just ask yourself: Would you lend money to Mexico for 100 years? Exactly.
If the Fed’s goal was to make investors move out the risk curve, it succeeded. An alternate interpretation: Zero-percent interest rates are causing a misallocation of capital, a nice way of saying, “asset bubbles.”
9. Totally irrelevant video - An Australian comedian is very grumpy with Julia Gillard about the way she pronounces 'Negotiate'.
10. Totally irrelevant video - A cat is very grumpy with a printer. Hilarious.
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