90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: Fears grow about Italian, Greek and US debt; Markets slump; Euro hits low vs Swiss franc; NZ$ falls from highs

12th Jul 11, 9:02am by Bernard Hickey

Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news of slumping global markets on fears about Italian, Greek and American debt.

The biggest worries are focused on Italy's fiscal situation as Prime Minister Silvio Berlusconi is feuding with his finance minister Guilio Tremonti.

Berlusconi described Tremonti as not a team player and said of him: "He thinks he’s a genius and everyone else is stupid."

Italy is a much bigger problem for financial markets and the Euro zone than Greece or Ireland if it were to struggle to repay its debts.

Italy is Europe's third largest economy behind Germany and France and has the third largest amount of public debt in the world behind America and Japan.

Italy's public debt stands at 120% of GDP and it owes Europe's banks around 1 trillion euros, which is six times the exposure they have to Greece. See more here at New York Times.

Italian stocks fell 4% overnight, while the Euro fell briefly below US$1.40, a key level. It also fell to a record low vs the Swiss Franc as investors fled to safety in Europe.

Italian two year bond yields rose 70 basis points to 4.14%. See more here at Bloomberg on the Euro's fall here.

Elsewhere, European finance ministers were locked in crisis meetings and appear to have decided to abandon Greece to a partial and controlled default. Greek bond yields are now almost 30%. See more here at Reuters.

European stock markets fell. See more here at Bloomberg.

Meanwhile, Barack Obama has pledged to push for a big deficit reduction deal to lift the US debt ceiling, including tax increases.

However his Republican opponents are refusing to accept tax increases, raising the risk that America could default on its debt by August 2. See more here at CNN.

The worries on global markets saw investors move out of riskier assets and currencies, including the New Zealand dollar, which fell to 82.8 USc from 83.5 USc.

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37 Comments

by powerdownkiwi | 12th Jul 11, 9:48am 1310420920

All got your togs on? Tides going out. Smile. :)

by Wolly | 12th Jul 11, 9:54am 1310421287

It's not the tide PDK...it's a Tsunami surge sucking it out...exposure then a hammering...!

by We Are Stuffed | 12th Jul 11, 10:04am 1310421876

polish up your krugs and sovereigns.

by Vanderlei Luxemburgo | 12th Jul 11, 10:06am 1310422000

Seems incredible that Silvio may have distracted by other matters and not attending to the big issues. Bunga Bunga

by scarfie | 12th Jul 11, 10:48am 1310424499

When I look at the advertising on interest.co, I can't help but wonder how the revenue stream will hold up if it all turns to custard:)

Meanwhile here is some PDK bait. http://www.youtube.com/watch?v=om4AgcRQJSs&feature=player_embedded

I can see a few flaws in the reasoning though.

by Kate | 12th Jul 11, 10:53am 1310424785

I reckon Interest.co.nz should form some kind of alliance with this initiative;

www.pureadvantage.co.nz

They could use the increased visibility this stie would afford.

by scarfie | 12th Jul 11, 11:10am 1310425808

Thank you for that, you know what am trying to do and it fits:)

Looks worthy that is for sure, hopefully it has legs.

I have tried to get these guys to help me http://www.irl.cri.nz/, but after an initial response I haven't heard from them again. I would have thought they understood the time pressures involved with the patent process. Sigh.

BTW if you check sella you will find my product there also, with my contact details.

by Kate | 12th Jul 11, 11:22am 1310426520

Yes, I hadn't thought of your product, of course an excellent fit.

Will address the woodburner when we return from overseas - happy sales in the meantime!

by powerdownkiwi | 12th Jul 11, 11:36am 1310427386

Scarfie - I'm happy to co-write your book.

Working titles would be:

One flue over the kakapo's nest.

Yunca Tom's Cabin.

by KW John | 12th Jul 11, 1:39pm 1310434787

Can't find it Scarfie, still intrigued - what have I missed....(give us a clue).

by scarfie | 12th Jul 11, 1:44pm 1310435075

Key word 'supercharge(d)', look under heating or firewood:)

by LloydM1 | 12th Jul 11, 1:56pm 1310435785

Scarfie which site or vehicle would one be searching the keyword. Keen as to see your work.

by scarfie | 12th Jul 11, 2:02pm 1310436139

Lol Bernard will kick me off soon. Sella or Trademe:)

by LloydM1 | 12th Jul 11, 2:17pm 1310437071

Cheers scarfie I'll check it out. Was conscious of not promoting other sites on this commercial one. My absence from Nz has meant I have to play catchup in some respects. Such as one of the sites you mention. Maybe one day we will work out how to mutually benefit in the braid sense without having to concern over trivialities. Fantastic that you are taking an active role

by Bernard Hickey | 12th Jul 11, 10:52am 1310424779

FYI Gareth Morgan comes out in favour of a Capital Gainst Tax at NZ Herald

http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=10737829

cheers

by Kate | 12th Jul 11, 10:59am 1310425156

Go Gareth - and I note that he's got a book coming out, The Big Kahuna - yeeeeha - I'm hoping it will be a prescription for the future - a fair, equitable and prosperous future. My only worry is we'll have to wait another election cycle to make a start.

by JB | 12th Jul 11, 11:16am 1310426160

Given the implementation complexity of what Gareth M has proposed by way of an annual charge for income at risk free - perhaps you could advance the arguments for and against a universal land tax where we have the current rating system in place to implement cleanly and easily.

Much simpler if we did it with NO EXCEPTIONS and could then be at a very low rate.

They have one in QLD with a $ minimum.

Friedman arguses it is the least worst tax and I suspect JK & BE are going to be looking for additional revenue before we are all much older.

by Matt in Auck | 12th Jul 11, 11:12am 1310425930

despite all these major international issues JK and the bank economists think we are all going to be just fine - more than fine, JK sees a "glory age" ahead!

Its naive in the extreme to think China is going to keep booming at 11% GDP growth as the majority of the world struggles. I'm not a doomsdayer - we'll leave that to PDK and Steven - but I can definitely see China slowing down due to its own problems and global ones. And with China slowing that will feed back into the global struggles

But somehow NZ is different, we aren't affected by major global issues, our economy will start booming again and house prices will rise!!!!

Wrong! We are going to have several years of sickly growth. Its unlikely to be the end of the world, but it will be far from prosperous

by Fish | 12th Jul 11, 11:39am 1310427566

i completly agree with bernard! so true

and dont get me started on silvio

by powerdownkiwi | 12th Jul 11, 11:41am 1310427660

Matt - the thing you need to study is cognitive dissonance.

My physics Prof mentions it - agrees he's out of his area of expertise, but that it's the only explanation for comments like yours.

by LloydM1 | 12th Jul 11, 12:36pm 1310431010

PDK , does anyone believe we can just have honest politics that is in the best interest of any given country? Is it possible to find get close to truth in a topic given the level of disinformation across the spectrum ?

by powerdownkiwi | 12th Jul 11, 12:49pm 1310431787

Lloyd - probably not.

The trouble is that we have a dumbed-down populace - subliminally hammered into thinking they'll come out better off while never having felt better, all having gotten a bargain while being told where to go.

Shallow news, short attention-spans, short bytes, a generation of newsies who don't read, study or research, but who have been brought up confident in their omnipotence.

Nope - it would be political suicide; see where the Green image is going, suits and economics.

If you don't promise growth, you're dead. Don't thell them they'll come out better off, they'll drop you.

And the reality is: they're all about to come out worse off, if you're measuring things fiscally.

There are other measures of wellbeing....

by LloydM1 | 12th Jul 11, 1:02pm 1310432538

I've alluded to in part here & elsewhere that we live inside a game where we are the pawns, & even very clever people refuse to accept that every single system we have be it made made construct or natural are almost completely controlled , we are not free. That bothers me on a deep level , hence my desire to start something & see where it goes. My belief is that inside many people know something is seriously wrong, but are too scared to admit it , & hope that if they just keep playing the game they will somehow win.

by powerdownkiwi | 12th Jul 11, 1:18pm 1310433509

True - there will be the believers that all will somehow be well, the cognitively-dissonant, the unsure, and the thinkers.

The thinkers are the ones who will have/be retiring debt, growing veg, building glasshouses, becoming energy efficient/ self-sufficient.

Judging by the burgeoning of Farmers Markets, Organic food, and chicken-keeping, they're a growing number. Loss of wealth will bring the others over. They'll be punch-drunk at first, may need guidance.

The worst of the lot will be those who fell the furthest - high opinions of self married to non-existent skill-sets. The scum tends to want to float to the surface, and may need dealt to.

by LloydM1 | 12th Jul 11, 1:42pm 1310434928

In the US there is an aggressive attack on private farms, farmers markets & even private properties where people are growing their own produce being arrested , harassed. See the armish farm closed & farmers arrested for selling raw milk, legally for aeons , to willing purchasers. When you look at the food safety bills bein passed, herbal remedies being banned & GMO madness stealthy spreading , my concern is , can we resist this corruption?
I asked if Nz has a food security strategy in another thread, I don't think people understand the degree of seriousness & attention this subject should be attracting , but as yet I don't see that.

by scarfie | 12th Jul 11, 1:39pm 1310434799

The dissonance is partly explained in Myers Briggs Typology. The (S)ensing person deals with information on face value whereas the i(N)tuitive links that information with that is already stored. Sensing are better at task focus, while intuitive are better at strategy. Combine the intuition with (T)hinking (vs {F}eeling) and you have a group that represents a quarter of personality types but only 9-19% of the population. More to the point are those that have personality types that are rule and process bound, but represent a larger portion of the population, such as ISTJ & ESTJ. Because of their dominating personality they can be over represented in postions of authority. Dangerous!

by Colin Riden | 12th Jul 11, 1:23pm 1310433780

Charles Hugh Smith - worth repeating again:

The real disunity is between a doomed Status Quo and those willing to deal with reality. Right now those willing to deal with reality are few, but they have the distinct advantage of reality on their side, while the Status Quo has only propaganda, artifice, phony political theater and empty promises.

The disunity stems from the public's innate desire to hold onto the empty promises and cling to the hope offered by the Status Quo that these grandiose, impossible promises will be met, despite the abundant factual evidence to the contrary.

Every attempt to lead the public toward the realization that the present is unsustainable will be crushed by a frantic assault of the fiefdoms, cartels and players who will lose power and profits when the Status Quo crumbles under its own weight.

Promises always sound better than reality until a crisis punctures the promises. But the anger generated by this deflation of "too good to be true" promises threatens both rationality and stability.

http://www.oftwominds.com/blogjuly11/shape-of-things6-11.html

by Alex13 | 12th Jul 11, 1:38pm 1310434696

Matt, another skill – and a much more useful one – that is worth learning is the ability to recognize arrogant self-important boffins who are full of .... ok, full of themselves; and learn not to listen to them / ignore their patronizing comments.

by LloydM1 | 12th Jul 11, 1:51pm 1310435510

Alex for sure, but many of these types have been overly represented in positions where they can affect the country's well being of people & environment. Negative outcomes & events seems to prevail as the rule. Ignoring those in power can become difficult given their intrusive desires.
Would be awesome to just get on unhassled & ignore such people, but it won't make the problems go away.

by powerdownkiwi | 12th Jul 11, 1:59pm 1310435973

Alex13

I rest my case.

Rather than address the message, you choose to ridicule it via the messenger.

You need to do the same study.

What part of the physical limits of this planet to sustain growth, do you deny? And why?

by Billy | 12th Jul 11, 11:47am 1310428051

Despite all the concerns expressed by economists and analysts, Euro'S PIIGS have always been rescued/bailed out at the last moment. So much so that I'm beginning to wonder if they will ever be allowed to default.

The same goes for the USA's debt ceiling. It's just going to be raised again.

by Wolly | 12th Jul 11, 11:56am 1310428560

"A group of Kiwi soldiers are being applauded for their ingenuity after coming to the aid of a disabled US Apache helicopter in Afghanistan."

...bet I know what our lot were thinking..hehehe!

http://www.3news.co.nz/Kiwi-ingenuity-praised-in-US-chopper-rescue/tabid/417/articleID/218403/Default.aspx

by andyh | 12th Jul 11, 12:04pm 1310429099

Absolutely essential reading:

http://www.theoildrum.com/node/8120#more

''Indebted OECD countries like the UK (the USA, Spain and Italy) require strong economic growth to produce the tax revenue surplus to pay the interest on existing debts and to pay down the principal sums borrowed. Following the 2008 / 09 crash the return of strong growth that was wanted and needed has not materialised according to plan in many countries and there are just hints that the mainstream are beginning to appreciate the underlying problem, namely high energy prices. But here in lies the Catch 22. Strong economic growth, in an energy constrained world, will inevitably lead to higher energy prices, snuffing out the growth before prosperity can be delivered. Understanding the roots of the problem is the first step''.

by Wolly | 12th Jul 11, 12:18pm 1310429924

"Ageing war veterans having to pay to attend commemorations in Europe while the Defence Minister enjoyed luxury travel on the taxpayer does not "sit well" with Prime Minister John Key" herald

So do something about John.....replace Mapp with someone who gives a stuff.

by Bernard Hickey | 12th Jul 11, 12:24pm 1310430240

FYI

Yet more extend and pretend announced by the European leaders from this crisis meeting.

http://www.reuters.com/article/2011/07/12/us-eurozone-idUSTRE7691HM20110712?feedType=RSS&feedName=businessNews&dlvrit=56943

Euro zone finance ministers promised cheaper loans, longer maturities and a more flexible rescue fund on Monday to help Greece and other EU debtors in a bid to stop financial contagion engulfing Italy and Spain.

They also declined to rule out the possibility of a selective default by Greece to make its debt mountain more sustainable, despite the European Central Bank's fierce opposition, one participant said.

by Andrewj | 12th Jul 11, 12:32pm 1310430750

http://www.telegraph.co.uk/finance/globalbusiness/8631219/German-Nein-l…

by Wolly | 12th Jul 11, 4:18pm 1310444307

Ahem......I reckon a lifting of the pension age to 67 should proceed on the condition that pensions be increased by oh about 10%.....my birthday has nothing to do with this.