Here's my Top 10 links from around the Internet at 2 pm am in association with NZ Mint.
I'll pop the extras into the comment stream. See all previous Top 10s here.
I welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.
Gummy bears galore below.
1. The great tax for debt switch - Former US Labor Secretary Robert Reich is onto something here when he talks about how rich Americans have switched from paying taxes to lending money to the government.
How is it different here?
The income tax cuts in New Zealand last year have seen some people save more in bank accounts.
We are now seeing those funds being used by banks to buy government bonds.
The irony is the rich are getting 2.5% after tax from their banks (if they're lucky) and the banks are getting 5.5% from the government in interest on the government bonds.
Sounds like someone is making money out of this and it's not either the government or the richer savers.
But in America the rich lend to the government directly.
Forty years ago, wealthy Americans financed the U.S.government mainly through their tax payments. Today wealthy Americans finance the government mainly by lending it money.While foreigners own most of our national debt, over 40 percent is owned by Americans – mostly the very wealthy.
This great switch by the super rich – from paying the government taxes to lending the government money — has gone almost unnoticed.
You hear a lot of worries about foreigners dumping Treasuries if they lose confidence in the dollar because of our future budget deficits. What you hear less about are these super-rich Americans, who are just as likely to abandon Treasuries if spooked by future budget deficits.
The great irony is if America’s super rich financed the U.S. government the way they used to – by paying taxes rather than lending the government money – that long-term budget deficit would be far lower. This is why a tax increase on the super rich must be part of any budget agreement. Otherwise the great switch by the super rich will make the income and wealth gap far wider.
Worse yet, average working Americans who can least afford it will either lose the services they depend on, or end up with a tax burden they cannot bear.
2. How Gupta misled McKinsey - Bloomberg reports in depth on the scandal of Rajat Gupta (the insider trading director of Goldman Sachs) and how the shock is now spreading at McKinsey, where he was the boss for so long.
At McKinsey, a firm known for keeping secrets, Gupta harbored a few of his own. As the managing director and then as senior partner of McKinsey for four more years before he retired, he ran his own consulting business on the side -- a violation of McKinsey rules.
He and Anil Kumar, a former McKinsey partner who last year pleaded guilty to passing confidential information to Rajaratnam, set up their own consulting company. Gupta also independently advised Genpact Ltd. (G), a Gurgaon, India-based firm that manages business processes for other companies. That work, too, broke McKinsey’s rules.
“It has always been a clear violation of our values and professional standards for any firm member to provide consulting or advisory services outside of McKinsey for personal monetary gain,” says Michael Stewart, a McKinsey partner and director of communications.
3. Vancouver more expensive than New York - Canada's housing bubble is something to behold and the action in Vancouver is worth watching, in part because it is very Auckland-like, with plenty of fresh Chinese money flooding in.
Vancouver’s Royal Pacific Realty had such a surge of business during the first two weeks of February that agents and assistants worked day and night shifts to find homes for Chinese buyers visiting during the Lunar New Year. “It was unprecedented,” said Royal Pacific Chief Executive Officer David Choi. “I called them sleepwalkers.”
Sales of detached homes, townhouses and condominiums in metropolitan Vancouver jumped 70 percent in February from January, to 3,097 units from 1,819, and were up 25 percent from a year earlier, according to the Real Estate Board of Greater Vancouver. In March, sales climbed 32 percent from February, to just shy of a record for the month of 4,371 transactions set in 2004. Sales increased by 80 percent from two years ago.
Buyers from mainland China are leading a wave of Asian investment in Vancouver real estate as China tries to damp property speculation at home. Good schools, a marine climate and the large, established Asian community as a result of Canada’s liberal immigration policy make Vancouver attractive, said Cathy Gong, who moved from Shanghai to the Shaughnessy neighborhood on Vancouver’s Westside about three years ago.
“The schools here are the best and there are a lot of Chinese people here,” said Gong, whose son is in sixth grade at Shaughnessy Elementary School. Eastern Canada wasn’t an option because “I cannot bear cold weather,” Gong said. Vancouver has the second-largest immigrant Chinese population in Canada after Toronto.
4. How Wall St is killing America - Time has an interesting piece looking at new company formation and where all the talent goes in America.
A new study from the Kauffman Foundation, a Kansas City, Mo.–based nonprofit that researches and funds entrepreneurship, has found that over the past several decades, the growth in size and importance of the financial sector has run in tandem with lower — not higher — rates of new-business formation. In the 1980s, when Wall Street really took off, the number of new firms created fell, and in the 1990s, it plateaued and has been stagnant ever since.
Basically, the facts show the opposite of what Wall Street would have us believe. A number of factors explain that, but one of the most important, argue the study's authors, is that the financial sector is sucking talent and entrepreneurial energy from more socially beneficial sectors of the economy.
5. Targeting the big four - Bloomberg reports Britain's anti-trust regulator is targeting the big four accounting firms, KPMG, Ernst & Young, PwC and Deloitte, on charges they distort industry practices and block rivals.
Different here? We'll wait a while before our Commerce Commission does anything.
“We have been concerned for some time about the extent of competition in this market, with only four large players and substantial barriers to entry,” the London-based watchdog’s executive director, Clive Maxwell, said in the statement.
The investigation may result in a referral of the case to Britain’s Competition Commission, which for the first time could force changes to the industry. Dominance by the four firms, which audit 99 of the 100 largest U.K. companies, has been under review by the OFT since 2002, while a U.K. government committee investigating the financial crisis called for a probe of the industry in March.
6. Watch out for China - The Australian reports Australia's new Treasury Secretary Martin Parkinson has used his first speech to warn about the risks of a Chinese meltdown.
TREASURY chief Martin Parkinson has raised the spectre of China's boom turning to bust - with devastating consequences for Australia - if Beijing persists with manipulating its exchange rate and spreading inflation throughout the world.
Dr Parkinson said moves by the Chinese to clamp down on domestic inflation could slash demand for Australia's minerals.
"China's approach to monetary policy is a source of global inflationary pressure, but more directly for us raises the risk of action (by the Chinese authorities) to restrain inflationary pressures in ways that impact on our export sectors," the Treasury secretary said.
By keeping its exchange rate closely linked to the US dollar, Dr Parkinson said China was importing US monetary policy, which was designed for an economy with double-digit unemployment, almost no inflation and weak demand. By contrast, emerging countries such as China have strong GDP growth, little spare capacity and rising incomes.
"Unfortunately, the path being pursued is dislocative for the rest of the world, including Australia," he said.
"Volatility in China's future growth path cannot be ruled out."
7. Red flags for markets - Barry Ritholz has spotted two big red flags suggesting global markets are about to take a big tumble.
We note that the Russell 2000 broke its 50-day moving average today and the Hang Seng pierced its 200-day last night. We also just posted the S&P 500 looks ready to test its 50-day.
These two indices are key indicators of the global markets’ propensity to take risk. We’ve written several times of how the Hang Seng is the indicator species for global risk.
Sure we can bounce as it looks like traders are getting pretty negative and short here and you know how the market will punish when too many are offside, but the Russell and Hang Seng may be signaling a coming summer of risk aversion and capital preservation. No time to be a hero, in our opinion.
8. Too much debt - This IMF chart below shows how global public debt has risen and fallen vs GDP since 1880. It's not a good look. Click on the chart for a bigger version. Suffice to say our debt levels are late 1920s like.
9. GDP or Happiness? - Nobel prize winning economist Joe Stiglitz talks below about why GDP may not be the best measurement for economic and social progress.
The US spends 16% of GDP on health but has worse health care outcomes than France, he points out. This is counted as a GDP positive.
The US has ten times the number of prisoners than other industrialised countries, which is also counted as a positive for GDP.
Any different here?
10. Totally Gummy Bears video - Especially for Gummy Bear Hero
Space invaders with Gummy Bears. Game Over. Lunchtime.
40 Comments
And China has been forced to ration electricity. Remarkably early for the usual Summer aircon demand surge. This economy is running too hot. A refusal to lift prices is increasing the damage.
This is the stort of thing that makes the peasants grumpy.
http://edition.cnn.com/2011/BUSINESS/05/17/china.power.outage.ft/index.html
Chinese provinces are rationing electricity as soaring coal prices squeeze power generation companies, underlining the challenges facing the world's largest energy consumer as global fuel prices rise.
Chinese electricity companies are facing financial pressure from the increase in global energy costs as Beijing hesitates to increase state-controlled electricity prices because of concerns over inflation.
While the price of thermal coal -- which fuels 70 per cent of China's power plants -- has risen by nearly one fifth since last year, Beijing has raised electricity tariffs by just 2 per cent during the same period, and the price gap has prompted some stations to close or reduce generation.
I was in Yunnnan a month ago on a high speed train - 200 kph - twice the power went off and we virtually ground to a halt for a couple of minutes before taking off again. Both times the train was on a gentle downwards slope. And you couldn't blame the wind turbines since they were not working at all ( apparently they need "wind", LOL )
And America is working on building a new long range bomber at a cost of US$550 mln each...
America is eating and fighting and spending and gambling and borrowing itself to death.
And just has no idea that it's doing it.
http://www.reuters.com/article/2011/05/18/us-airforce-bomber-idUSTRE74H03R20110518
The plan calls for the Air Force to field 80 to 100 of the new bombers to replace the current fleet of bombers, which include 66 B-1 bombers, 20 B-2 bombers and 85 B-52 bombers.
That means the overall program will cost $40 billion to $50 billion over the next decades -- a huge opportunity for big weapons makers like Northrop, Lockheed Martin Corp (LMT.N) and Boeing Co (BA.N), which are bracing for declining defense spending in other areas.
Bernard Bernard.....you just dont get it do you..? if you owed a lot of money to people far far away....why would't you want a long range bomer...? really quite a logical step...if you thought there may be difficulties paying them back.........You don't even have to use it ...they just have to know you can.
God wish I had one.
Bernard : A Vancouver real estate agent has a beachfront property just a couple of miles from me ........... When we first met , and I asked him ( who could resist ) if he thought that real estate in his home city was overpriced ........ He looked nonplussed at me , and said , " how do you mean overpriced ? "
[....... The kids and me thank you for the Gummy Bear vid ........ 10 lbs of them ......... arrrrrhhh , yummy Gummy ...........snork-gobble-slurp ... arrrrrrrrhhhhhhhh ! ]
Justin Case anyone is worried that China may emulate NZ's 100 % Pure status , cop a load of this www.bloomberg.com/news/2011-05-17/chinese-watermelons-explode-maybe-from-growth-chemical-xinhua-says.html
......... Pip Pip !
geez you're soft Gummy. What's a bit of forchlorfenuron between friends? Especially good special friends like china, who like to send us exploding watermelons and all the P ingredients our entreprenurial gangs need.
What very very good friends they are.
We eat biscuits about once every few years, and then the man makes them from scratch. Chocolate chocolate chip they were last week. Next batch is destined for a fund raiser for the SPCA on Tuesday, then no more cookies for me for another loooooooong time. Ditto sweets. Don't eat them. :)
Can't trust China. Deadly dog food, tragic toothpaste, malfeasant milk etc. etc.
Agree totally.
Most big Govts are currently spinning to make everthing look more rosy - eg: QE
I laugh at the persistent use of the word "recovery". It's seeped into and is firmly entrenched in the media. The average Joe listening to the news or reading headlines probably thinks the world is actually in recovery!! Lol
FYI from HughP on China's property lending boom
I was in Shanghai and Beijing recently. All one can say as a developer is that it is not an economy, but instead a bureaucratically driven “make the numbers” economic circus, with its stratospheric property prices, overbuilding and idiotic “image” developments. Nothing much would be paying its way and the non performing loans situation could not be anything other than horrendous.
Its going to be a hell of a bang. The mother of all bubbles.
I was in China last year and it seemed pretty good, but did note a lot of under-employment at the big stores with immaculate young women standing around bored to tears with little to do.
They don't gossip to each other, just stand silently and patiently until eventually a customer required some service.
Roubini on the PIIGS
http://www.project-syndicate.org/commentary/roubini38/English
"Greece is clearly insolvent. Even with a draconian austerity package, totaling 10% of GDP, its public debt would rise to 160% of GDP. Portugal – where growth has been stagnant for a decade – is experiencing a slow-motion fiscal train wreck that will lead to public-sector insolvency. In Ireland and Spain, transferring the banking system’s huge losses to the government’s balance sheet – on top of already-escalating public debt – will eventually lead to sovereign insolvency.
The official approach, Plan A, has been to pretend that these economies suffer a liquidity crunch, not a solvency problem, and that the provision of bailout loans – together with fiscal austerity and structural reforms – can restore debt sustainability and market access."
So plan A is dead........
"The only alternative is to shift quickly to Plan B – an orderly restructuring and reduction of the debts of these countries’ governments, households, and banks."
and they wont......
"Europe cannot afford to continue throwing money at the problem and praying that growth and time will bring salvation. No one will descend from the heavens, deus ex machina, to bail out the IMF or the EU. The creditors and bondholders who lent the money in the first place must carry their share of the burden, for the sake of the PIIGS, the EU, and their own bottom lines."
Nope...not listening......tra laa laa tra laa laa.....
****bang****
Oops no one saw that coming...honest!
regards
#4 China vancouver invasion
It is already happening to parts of Auckland, parts of North Shore, Chowick and Central Auckland suburbs.
Then we have to recent leaflet drop warning against immigration invasion (mainly chinese I guess). 25% asian ethnicity in Auckland in a few years is mooted.
The problem is not the immigration itself because apart from a few criminal elements that tag along most new citizens are very law abiding although ignorant of elementary rules that get them into minor problems.
The problem is the numbers cannot be easily assimilated without the inevitable ghettoisation that has always happened elsewhere.
Greece could solve it's situation if the average person decided to actually pay tax.
I was there last year for a couple of weeks and one can't help but notice there are very few big Department stores, even in Athens. Many Greeeks prefer to be self-employed, running their own little businesses and so managing to pay little tax.
Makes one wonder if they bring the same approach to NZ and Australia when living and working in NZ or Aussy??
The Vancouver effect is alive and well in Akl. In central areas of Akl anecdotally it seems 30-40% of current home sales go to Chinese. With new listings slowing to a relative dribble you can bet your house on the probability average prices in Akl will be up near $600k by the end of this year. I want to buy a house so I'm not happy about this! But it's happening whether you like it or not.
John Key is becoming a bit of a problem for New Zealand. Much in the Way that Helen and Cullen were treated for many years, we are treating Key with a respect he just does not warrant.
At Interest.co.nz and many mainstream media publications he is often referred to as a business man or a former banker. His career in the main however was dominated by his job as a currency trader. Anyone who flatted with a currency trader in Auckland, Sydney or London during the period that Keys was working can attest to the fact that you would not put a currency trader in charge of the flat kitty if you wanted to eat. They simply didn't care, they could eat at work, nothing was a problem, no worries mate sort of thing meanwhile the phone had been cut off.
The mentality of a Currency trader is trained for the extreme short term, minutes and seconds. they have the attention span of a goldfish. Many banks around the world ended up being dominated by the traders who won over from the bankers. Traders have been a complete disaster when it comes to running banks. It is one of the reasons that banks got into so much trouble is that ultra short term trader thinking won out over long term.
There is nothing particularly wrong with Key, that is why fellow currency traders allowed him to be a boss, if they did not like him he would not have been able to remain the boss.
So we have a country run by a vaguely likeable not too clever, but not stupid B-Com holding currency trader. And we wonder why things have not picked up in the past 2.5 years.
We have to hold him to account at the very least. I actually think we should kick him to touch, but I get the idea that New Zealand runs on the nightly news cycle and he has a not too unpleasant a face with a softish kind of humour thrown in. But we should not put any faith in him to make decisions about the future of New Zealand. It is simply something he is not particularly good at. If he was good he would have made some good decisions by now, try naming one?
You're right , buddy , JK is old "Jelly-back Key " ........ he has risen beyond his sphere of competence . Frankly , JK is a nice guy , but he is not a leader ......... ( neither is Phil Goof , for that matter ) ............
........... but this is the end result of MMP , you get populists , and smiley-wavey soft-cock interviews with Sainsbury or Campbell .........
The country needs a derring-do sort of pollie who says " feck the ruddy polls , I'll do what the country needs " ...... not " I'll do whatever gets me re-elected " ......
....... Truely , we are stuffed !
How's that DSK eh?
Instead of Marie Antoinette's famous utterance this French presidential hopeful favours "let them eat cock" Anyway, looks like he might have picked on the wrong one. Turns out the poor girl was living in an aids victim only lodge. Sounds like justice might prevail after all.
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