Here are my Top 10 links from around the Internet at 10 to 10pm, brought to you in association with New Zealand Mint for your reading pleasure.
Many thanks for your patience today. It's been one of those days.
I welcome your additions and comments below, or please send suggestions for Thursday'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. Now we know why - John Key's musings a few months back about being 'tenants in our own land' seemed to suggest he was willing to look seriously at tightening our foreign ownership laws.
The eventual decision to fudge it seemed strange at the time.
Now we see why he's worried about shutting the door.
He doesn't want land prices to fall.
NZHerald's Adam Bennett has the story with the key quote from Key.
"There's a balance to be had here when it comes to foreign ownership of land. If we completely ban it, land prices will fall."
"Those farmers that have a lot of debt on their property will find that they owe the bank more than their property is worth and will be forced off the land and I don't think that's healthy."
2. 'Too big to fail' - This protection for land values is something of a Key put. Cactus Kate hits the nail on the head here.
What Key is saying is that his policy is to avoid anything that does not keep land prices as high as they are even at the moment (forgetting the peaks of two years ago) to avoid negative equity situations. Same with residential housing as well we can assume because we wouldn't want the market to move up and down would we? Little wonder New Zealanders keep buying more land. There is absolutely no risk attached to it when the leading politician comes out with intentions such as that.
Where is Key's worry about negative equity when it comes to SME's? Silence. And dare I say it, most property developers have all fallen over in the recession, leaving a vast shortage of people to take the risk in the future to build new properties to support a growing population and the construction industry.
How does John Key feel about their situation? Surely if we can't let farmers get into negative equity, the same argument could be made of bailing out property developers? But I bet that doesn't happen anytime soon. They aren't as warm and fluffy and don't have their own Union.
3. Same old same old - Cactus Kate also has a good dig at the government's obsession with protecting land holders at the expense of small business owners. She points to a government lending scheme in Hong Kong for small businesses and how there's little similar here in New Zealand.
My link here is a bit self-referential, but Kate has a great point that hadn't occurred to me.
While this scheme has of course distorted the free market here it is an example of re-distributing income received in taxes from the increased wealth in the property sector into real small business who actually employ large amounts of Hong Kong people. It adds weight to Bernard Hickey's argument for land tax or a Hong Kong style stamp duty on transactions to raise funds in property boom times and redistribute it to the productive sector.
The problem in New Zealand is that the very small in numbers, but powerful Farmers Union, Federated Farmers wouldn't have a bar of it. They want all their capital gains to themselves and all their tax deductions from interest on their excessive borrowing.
If however New Zealand is going to be more that a country that sells land to itself and foreigners, SME's with all the entrepreneurs and productive talent there are going to have to be either given a hand up or have obstacles to their success removed to level the playing field up against business and individuals who merely buy and sell up chunks of land.
4. If only they could borrow - Shariah law bans Saudi Arabians from borrowing money to buy houses. Now the banking lobbyists have found their way into Saudi Arabia's byzantine legal/political/religious system to get a law change to encourage borrowing to buy houses. Bloomberg has the story. An interesting culture clash.
There might be a few in America's financial and economic system who wished Shariah law was in place a couple of decades ago in America. HT Gareth via email.
Saudi Arabia, the most populous of the Gulf Cooperation Council countries, favors a strict interpretation of Islamic law that’s overseen by religious authorities. Lending for the purpose of receiving interest payments is banned, prompting Islamic finance arrangements akin to shared ownership or payment by installments. Sixty percent of the country’s 28.7 million people are below the age of 25. Less than 1 percent of all Saudi home purchases are financed by mortgages. That compares with 7 percent in neighboring United Arab Emirates and 66 percent in the United States, Deutsche Bank estimated in November.
5. Now they're turning on each other - American banks are starting to sue each other over the fraudclosure crisis, including the Federal Home Loan bank of Chicago suing its parent (!) Bank of America.
HT Troy via email.
“The defendants did not tell the bank the truth about the loans that comprised the mortgage pools,” the lawsuit said, according to Bloomberg. While the Federal Home Loan Bank believed the securities were “safe,” “in fact the bank purchased a toxic stew of doomed mortgage loans,” Bloomberg quoted the complaint as saying.
In addition to Bank of America, defendants include Citigroup Inc., Goldman Sachs Group Inc. and Wells Fargo & Co. Representatives of the banking giants either declined to comment or couldn’t be reached immediately by Bloomberg.
6. Even Krugman is turning on Obama - Barack Obama, a man I described as a liar and a fool last year, seems to be losing the support of even his strongest backers.
Obama has bailed out his mates on Wall St at every turn and his latest decision not to impose a foreclosure moratorium was the final straw for Paul Krugman at the New York Times. HT Troy via email
As NAME ISSUE HERE has come to light, the Obama administration has resisted calls for a more forceful response, worried that added pressure might spook the banks and hobble the broader economy.
Stimulus, bank rescue, China, foreclosure; it applies all along. At each point there were arguments for not acting; but the cumulative effect has been drift, and a looming catastrophe in the midterms. Or to put it another way, the administration has never missed an opportunity to miss an opportunity.
And soon there won’t be any more opportunities to miss.
7. Tensions ahead of G20 - The Currency Wars are concerning everyone ahead of crucial G20 meetings in Seoul next month, including India's Prime Minister and the Governor of the Bank of England, who has called for a 'grand bargain', the FT reports. HT John.
The G20 seems fatally split.
“I’m worried about the global situation,” Mr Singh told the Financial Times.
The Indian prime minister’s concerns about the fraying cohesion of the G20 were echoed on Tuesday night by Mervyn King, the governor of the Bank of England, who warned that tensions over exchange rates could degenerate into trade protectionism.
“That could, as it did in the 1930s, lead to a disastrous collapse in activity around the world,” he said in a speech.
Indian officials have warned that the G20 is split between debtor countries, such as the US and the UK, and creditor nations, led by China with its large foreign exchange reserves. Undervaluation of currencies and monetary easing were complicating problems and leading to a dangerous divergence of opinion among global leaders. The officials said that the group, which came together two years ago to help stabilise the global financial system, had lost its cohesiveness as it approached the summit in Seoul, the South Korean capital.
A “clash of interests and a clash of perceptions” could result in a stalemate at the summit that would impede progress towards recovery.
8. Talk about inflation - Or maybe it's just a good investment? Bryce Moller is selling his mint condition 1963 Kombi Camper on TradeMe and the bid is currently up to NZ$37,200.
That's equal to US$28,272 at today's exchange rate. Bryce sent me this original advertisement with original price in 1963 of US$2,220. He thinks it might have been a good investment. An alternative to gold?
Here's his thinking.
We were getting 1.39 to the U$US back in 1963 making the price say NZ$1600 Rough calc for IRR shows that at the current bid I have a 7% annual return over the last 47 years. If it sells for $50,000 as the CEO of Trade Me suggests (on the radio link) then my annual return is 7.8% (or 3000% over the entire period). - bit rusty on these calculations so used an on-line one, hope it's correct.
My point being with all this new money sloshing around in Western economies looking for somewhere to go be it commodities or equities or whatever, and with inflation possibly poised to roar away, physical assets such as this could be a good - and fun kind of small bet.
9. 'Money money everywhere' - Patrick Chovanec writes at Bloomberg about the boom going on in China, helping to explain the surprise monetary policy tightening in China this week. A must read I reckon.
Money, money everywhere. At least that’s what it feels like at the moment in China. Awash in luxury cars, condos and expensive jewelry, the Chinese are enjoying what looks to be an unstoppable boom. But inflation figures due to be released should give pause to those who assume China’s economy is on sound footing.
To an extent few fully appreciate, China’s astonishing growth rates these past two years have been fueled by an even more astonishing expansion of its money supply, by more than 50 percent. Until now, the inflationary consequences have been largely camouflaged in the form of rising asset prices.
High-end property prices in dozens of Chinese cities have doubled during the global financial crisis. Sales of gold bars have done the same this year. Fine pieces of jade are selling at $3,000 an ounce, up 50 percent in the past couple of months, while packets of certain types of dahongpao tea are going for $30,000 a kilogram. Art and wine auctions in China are pulling in record prices, while the Shanghai stock market surged 8.5 percent last week to the highest level in almost six months.
Asset-price inflation is tricky because it doesn’t feel like inflation. When the price of bread doubles, it feels like it’s getting harder to make ends meet. When condo prices double, it looks like smart investors are getting rich. But it’s only a matter of time before asset inflation starts working its way through the rest of the economy as broader price inflation -- and puts China’s policy makers in a serious bind.
10. Totally irrelevant video - Stephen Colbert on the expiry of the Bush tax cuts
| The Colbert Report | Mon - Thurs 11:30pm / 10:30c | |||
| Tax Shelter Skelter | ||||
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