Here's my Top 10 links from around the Internet at midday 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.
1. He actually said this - Prime Minister John Key thinks New Zealand can look for foward to a decade or two of very high commodity prices.
"Whenever we've had very high commodity prices, New Zealand has prospered, and we may well be in for a decade or two of very high prices now so that's good news for New Zealand," Key told reporters at the Field Days at Mystery Creek.
So let's have a look at that.
Firstly, I haven't seen any official forecasts of high commodity prices for 20 years.
Secondly, Treasury's budget forecasts are actually for a 1.7% fall in our terms of trade next year before a steady rise back to where they are now by 2015.
The Reserve Bank does believe there's been a structural shift, but made the point in this April paper we're only going back to levels seen in the 1960s and 1970s.
It all depends on China continuing to grow at 10% into the wild blue yonder.
Key seems remarkably sure of himself. His claim that New Zealand has also done well when commodity prices were high is debateable. They were very high in the early 1970s. Then we had two decades of very high inflation...
The video is here at TVNZ and he made the comments at around 1 minute 29 secs.
2. The problem with low interest rates - Former IMF Chief Economist Raghuram Rajan writes convincingly at Project Syndicate about the danger of artificially low interest rates.
Clearly, someone is paying a price for ultra-low interest rates: the patient and uncomplaining saver. Interestingly, if traditional spenders such as firms and young households are unwilling or unable to take advantage of low interest rates, low rates could even hurt overall spending, because savers like retirees receive lower financial incomes and curtail spending.
This is not a heretical concern. As with any tax and subsidy, the net effect depends on whether those taxed cut back spending less than those subsidized. Economists have sensibly advocated that China raise the interest rates that it pays on bank deposits so that Chinese households earn more and consume more. Some Japanese now wonder whether their ultra-low interest-rate policy could be contractionary.
Equally worrisome are the distortions that easy money creates. Evidence from the recent crisis suggests that ultra-low rates prompted a wide range of portfolio adjustments, whereby Asian and Middle East central banks and funds ended up holding the safest low-interest securities, while the US and European financial sectors went on a risk-taking binge.
3. The extinction of retirement - Michael Pento from Euro Pacific Capital writes here about why many Americans may not be able to retire and when they do their savings won't buy much.
The sad facts are; Americans are have negligible savings, the real estate market is still in secular decline, stock prices are in a decade's long morass, real incomes are falling, public pension plans are insolvent and our entitlement programs are bankrupt. If the pillars that seniors have relied on in the past fail to miraculously regenerate (and there is certainly no reason to believe they will), all that most retirees will have will be freshly printed greenbacks that come from a never ending policy of government deficits and an obliging Federal Reserve.
Unfortunately, the inflation that will result from such policies will sap most of the purchasing power that those notes possess. In other words, for most people retirement is now an illusion, and many Americans will find themselves working far longer, for far less real compensation, then they ever imagined. The quicker we realize this, and plan accordingly, the better off we will be.
4. Debt ceiling chicken - PIMCO CEO Mohamed El Irian has warned via Project Syndicate the US Congress to lift the debt ceiling or risk catastrophe.
Two scenarios for the timing of an interim compromise are possible, depending on whether it is a one- or two-step process. Most observers expect a one-step process for bipartisan agreement before August 2. But politicians may need two steps: an initial failure to agree, and then a quick deal in response to the resulting financial-market convulsions. In the meantime, the Treasury would temporarily re-prioritize and slow outgoing payments.
This two-step process would be similar to what happened in 2008, when Congress was confronted with another cliffhanger: the Bush administration’s request for $700 billion to prevent a financial-market collapse and an economic depression. Congress initially rejected the measure, but a dramatic 770-point drop in the stock market focused politicians’ minds, bringing them back to the table – and to agreement.
But the two-step scenario involves incremental risks to the US economy, and to its standing in the global system. And the longer America’s politicians take to resolve the debt-ceiling issue, the greater the risk of an inadvertent accident.
This brings us to a third, and even more unsettling possibility: a longer and more protracted negotiation, resulting in greater disruptions to government entitlement payments, other contractual obligations, and public services. Creditors would then ask many more questions before adding to their already-considerable holdings of US government debt, generating still more headwinds in a US economy that already faces an unemployment crisis and uneven growth.
5. What Goldman's up to - Jesse Eisinger does his thing at NYTimes' dealbook on Goldman Sachs vs the US Senate.
By shorting C.D.O.’s, Goldman also distorted the pricing of the underlying assets. The bank could have taken the securities it owned and sold them en masse in a fairly negotiated sale, though it likely would have gotten less for them than it was able to make by shorting the C.D.O.’s it created.
Because of Goldman’s actions, the financial system took greater losses than there otherwise would have been. Goldman’s form of shorting prolonged the boom and made the crisis that followed much worse.
Goldman executives surely hope to change the subject from the firm’s specific actions to a more general discussion of how much and when it shorted. We shouldn’t let them.
6. Totally what Airbus thinks the 'new' airplane might look like. These dream sequences always seem to show lots of room between the seats...
I'm 6 foot 5 inches so that seems attractive, until reality hits.
7. Hot particles - It seems 'hot' radioactive particles are getting trapped in the air filters of cars around Fukushima in Japan.
Are they then getting imported into New Zealand? Are we checking them at the ports?
8. Here we go again - Bloomberg reports Ireland's new government has decided to impose a haircut on senior bond holders of Anglo Irish Bank and Irish Nationwide.
Prepare for fallout.
Irish Finance Minister Michael Noonan said senior bondholders should share in the losses of Anglo Irish Bank Corp. and Irish Nationwide Building Society, reversing a policy of protecting owners of senior securities.
“We don’t think the Irish taxpayer should redeem what has become speculative investment -- we don’t believe it should be redeemed at par,” Noonan said. He said the IMF “understood our position fully.”
The government had previously said it wouldn’t seek to impose losses on senior bondholders unless the lenders need additional capital. The central bank said last month neither would need further cash injection.
The European Central Bank has also opposed any moves to force losses onto senior bondholders.
9 A growing angst - Cass Business School Management professor Stefan Stern asks in this Independent column if many young managers within large international corporations are losing the faith in the glory of multi-national corporatism.
All they see is brutal workloads for the highest (and most ludicrously) paid and stagnation for the rest.
Corporate life has always been competitive. And career ladders are narrow. There are bound to be only a few winners and a lot of losers in this game. But something more intense, and more damaging, is happening.
The "delayering" – the removal of tiers of management and flattening of corporate hierarchies – has meant career advances are fewer, yet bigger and less gradual. The career ladder has many fewer rungs on it. But some management jobs have got much bigger, to the point of being almost impossible.
10. Totally a video by Brian Dawe and John Clarke - Pat Pending talks about an invention for dealing with asylum seekers.
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