Here's my Top 10 links from around the Internet at 10 past 6 pm in association with NZ Mint.
I welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.
I'll pop the extras into the comment stream. See all previous Top 10s here.
Plenty of charts and a bonus video. Have a great weekend.
1. Capital controls work - Harvard economist Kenneth Rogoff and Peterson Institute economist Carmen Reinhart, who wrote the widely acclaimed study of deleveraging called 'This time it's different', have a written a piece at VoxEu in tandem with IMF economist Nicolas Magud in praise of capital controls. Yes really.
New Zealand has been a purist for a couple of decades on capital controls.
The assumption is we would get beaten up by the George Soros' of the world if we tried.
But is that really the case? Others such as Brazil, Turkey, Chile and Malaysia have used them successfully.
Many countries have used various means to slow down the hot money that can push up currencies and kill off exporters.
I hope our Reserve Bank is looking at such measures, including reserve requirements for banks accepting such hot money.
Our results are based on a meta-analysis of 37 empirical studies. The main findings can be summarised as follows.
Capital controls on inflows:
- Make monetary policy more independent,
- Alter the composition of capital flows, and
- Reduce real exchange rate pressures (although the evidence on the latter is more controversial).
- Do not reduce the volume of net flows (and hence the current-account balance).
2. 'It was low interest rates stupid' - Helen Mees aruges at VoxEu that the US Federal Reserve's low interest rates are to blame for the US property bubble. Fair enough.
This chart shows US equity extraction from home values.
At the Paris G20 meeting on 18 February 2011 , Federal Reserve Chairman Ben Bernanke squarely laid the blame for the financial crisis and ensuing economic crisis on global imbalances, or the so-called global saving glut (for a review of the arguments see Suominen 2010).
What the Chairman failed to mention is that the Fed’s easy monetary policy in the early 2000s played a crucial role in bringing about the global saving glut.
3. 'Still a safe haven' - Nouriel Roubini reckons the US dollar will remain a safe haven and reserve currency, if only because the alternatives are woeful.
"I'm not in the camp of those who think there's a chance of a long-term dollar collapse," the New York University economist said in a telephone interview with Dow Jones Newswires. "What are the alternatives?"
"A (US) debt default or credit event is unlikely," Professor Roubini said. "But a credit agency may still downgrade" if it felt spending and deficits weren't sustainable in the longer-term, he added.
Wall Street ratings agencies, Professor Roubini said, may actually fear the ramifications of a downgrade from US officials. "If an agency downgraded the US, I think they'd probably have to headquarter themselves somewhere else," he quipped. "Politically it would not be popular."
4. It just won't work - Former Bank of England policymaker and now Dartmouth Economics Professor David Blanchflower says on Bloomberg austerity is just not working for Europe.
5. Rachel Ray is a good cook. The sub editor for the front page of Tails is not a good editor.
6. The rich are secretly fearful - That they don't have enough money. Graeme Wood at The Atlantic reports on a survey of the Super Rich that found they're a grumpy lot.
The study is titled “The Joys and Dilemmas of Wealth,” but given that the joys tend to be self-evident, it focuses primarily on the dilemmas. The respondents turn out to be a generally dissatisfied lot, whose money has contributed to deep anxieties involving love, work, and family.
Indeed, they are frequently dissatisfied even with their sizable fortunes. Most of them still do not consider themselves financially secure; for that, they say, they would require on average one-quarter more wealth than they currently possess. (Remember: this is a population with assets in the tens of millions of dollars and above.)
One respondent, the heir to an enormous fortune, says that what matters most to him is his Christianity, and that his greatest aspiration is “to love the Lord, my family, and my friends.” He also reports that he wouldn’t feel financially secure until he had $1 billion in the bank.
A vast body of psychological evidence shows that the pleasures of consumption wear off through time and depend heavily on one’s frame of reference. Most of us, for instance, occasionally spoil ourselves with outbursts of deliberate and perhaps excessive consumption: a fancy spa treatment, dinner at an expensive restaurant, a shopping spree. In the case of the very wealthy, such forms of consumption can become so commonplace as to lose all psychological benefit: constant luxury is, in a sense, no luxury at all.
7. Here's hoping - Bloomberg reports the Basel Committee are looking at forcing the 'Too Big To Fail' banks to put aside an extra 3 percentage points in capital to stop them blowing up the world when they leverage their balance sheets to make big bonuses for executives.
The Swiss government has proposed raising the minimum common equity requirement for UBS and Credit Suisse to 10 percent from the 7 percent level set by the Basel committee.
The Group of 20 nations asked the Basel committee in November to draft the extra requirements for banks deemed too big to fail. The Basel group brings together regulators from 27 countries including Brazil, China, India, Germany the U.K. and the U.S.
“Several of my colleagues on the Basel committee have referred to the Swiss proposals as a source of inspiration,” Mark Branson, head of banking supervision at the Swiss Financial Market Supervisory Authority, told journalists on March 22.
Increasing the Basel requirement by 1 percentage point is “just not worth it,” he said. “Certainly what’s being talked about at the moment is more than that.”
8. Here's a chart showing New Zealand's per capita GDP is no higher than it was in 2004. Thanks to BNZ for the chart. Do people understand what this means? Real wages should be lower. Instead they are higher because we borrowed the difference. Nuts.
And here's a chart showing what has happened to New Zealands productivity over the last decade or two. We haven't earned our way to greatness. We just borrowed our there...
9. Another great chart on what has happened to US house prices in real and nominal terms since 1900. Prices still have a way to fall.
10. Totally useful video from Jon Stewart explaining what's wrong with Barack Obama's reasoning for the Libyan no-fly zone.
11. Bonus video - Here's John Clarke and Brian Dawe do their thing on Australia's carbon price debate.
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