Here's my Top 10 links from around the Internet at midday 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.
The Jon Stewart videos are well worth watching. And let's hope that was the last All Blacks loss in a long, long time.
1. Finally - New Zealand Winegrowers Association Chairman Stuart Smith has come out in this Stuff article criticising government policy on the exchange rate.
I've been stunned at how meek many exporters and business groups have been when talking about the currency.
Business NZ CEO Phil O'Reilly spoke recently in a bloodless way about winners and losers.
Is this because there are so few manufacturers left?
Or are they all so scared of upsetting their National mates.
The exception is the NZ Manufacturers and Exporters Association (NZMEA).
But the rest have been quiet. Until now.
Here's Smith:
Smith said there was only one issue on every winegrowers' lips this week and that was the exchange rate.
"It's been up, it's been down, but it's been over its long-term fair value for a considerable length of time and that's mainly due to Government policy," Smith said. Wine exporters traded largely in US dollars, even in Asia.
Smith believed the Government should intervene but was under pressure from banks to retain the high dollar because it helped keep their foreign debt costs down.
"The best place to start would be to encourage the banks to source more of their money from within New Zealand."
It's a sobering and wide-sweeping roundup of the global economic problems with an Australasian spin. He even mentions Bluff.
Here's 'Macca':
Three overriding problems block the view of happier days:
1) Further fiscal stimulus to support the world economy over its looming slump looks a very remote prospect. Most government balance sheets are now fully extended and those that still have capacity to make a difference to the world outlook (the USA, Germany, China) face high political barriers or other constraints.
2) The break up of the Euro-Zone now seems the most likely scenario and, as noted above this only offers lose/lose outcomes the scale of which is uncertain but surely very large.
3) Increasingly, the focus of investors and policymakers is turning to the underlying problem which is that the world faces a shortage of final demand. This is structural, not cyclical. Successive attempts since 2000 to reflate economies with “money dumps” have failed. The latest round of QE dollars simply went into asset speculation or bank reserves. Commodity prices rose (including oil which ironically bit the hand that fed it), and so did stocks. The real economy did nothing. No new lending, no new jobs, no signs of life. The Fed may still be forced into QE3-but they will not do so with any conviction that the real economy will respond in the short term. The objective will be inflation and further USD devaluation (upon which I comment below.)
So the big picture is that of a shrinking or static world economy, a developed world with no gunpowder left in the fiscal or monetary magazines and deep structural issues which remain unresolved.
3. Servicing our Narcissm - Neal Gabler writes at the New York Times how mountains of information and the use of Twitter and Facebook is blocking out the development of big ideas. HT Troy via email.
Here's the thinking.
No doubt there will be those who say that the big ideas have migrated to the marketplace, but there is a vast difference between profit-making inventions and intellectually challenging thoughts. Entrepreneurs have plenty of ideas, and some, like Steven P. Jobs of Apple, have come up with some brilliant ideas in the “inventional” sense of the word.
Still, while these ideas may change the way we live, they rarely transform the way we think. They are material, not ideational. It is thinkers who are in short supply, and the situation probably isn’t going to change anytime soon.
We have become information narcissists, so uninterested in anything outside ourselves and our friendship circles or in any tidbit we cannot share with those friends that if a Marx or a Nietzsche were suddenly to appear, blasting his ideas, no one would pay the slightest attention, certainly not the general media, which have learned to service our narcissism.
What the future portends is more and more information — Everests of it. There won’t be anything we won’t know. But there will be no one thinking about it.
4. The negative feedback loop - PIMCO's Mohamed El Irian writes about the need for policy action on both sides of the Atlantic to break a negative feedback loop of budget cuts and falls in GDP.
America has little time to waste if it wishes to avoid years of insufficient economic growth, devastating unemployment, rising income and wealth inequality, and eroding social cohesion. Let us hope that a refreshed President Obama will return to Washington willing to respond and lead; and let us hope that, for their part, members of Congress will return in a much more constructive mood, able to work with the President to break an increasingly damaging negative feedback loop.
5. Big swings something new - Barry Ritholz points out at The Washington Post that the big swings in stock markets are new and bigger than normal. He also points out there have been secular bear markets that lasted decades.
The rally that began in March 2009 looks to be running out of steam. Indeed, those gains have been among the best post-crash rallies of the past century. Only the 1932-33 and 1935-37 runs saw stronger rallies over a two-year period. The first saw the Dow Industrials double in two months. It gave back nearly all those gains by March 1933. From that low, the Dow once again doubled by July, only to give back about 26 percent by October 1933. And the next bear market rally — a two-year screamer from March 1935 to March 1937 — saw an astounding 135 percent in gains. That ended in yet another collapse, this time of 56 percent.
Over the past century, numerous “secular” long-term trends have played out. The results have been surprisingly predictable. After the 1929 crash and Great Depression, markets floundered. It took until 1954 — 25 years! — to return to the nominal market highs.
The long economic trend after World War II was very supportive of markets. Millions of servicemen returned home, married, had kids, created the baby boom. We created suburbia, built out the interstate highway system. And after years of footing the wartime effort, the private sector could once again refocus on peacetime production of goods and services. All of this begat a huge expansion, and from 1946-66 we had a 20-year secular run in stock markets with 500 percent in gains.
6. Where's the Libyan gold? - As rebels over-run Qadaffi's forces in Tripoli this morning, a few people at Zerohedge are wondering where Libya's 143.8 tonnes of gold might end up.
7. The case against credit rating agencies - Here's Michael Hudson at Counterpunch:
"In today’s looming confrontation the ratings agencies are playing the political role of “enforcer” as the gatekeepers to credit, to put pressure on Iceland, Greece and even the United States to pursue creditor-oriented policies that lead inevitably to financial crises. These crises in turn force debtor governments to sell off their assets under distress conditions. In pursuing this guard-dog service to the world’s bankers, the ratings agencies are escalating a political strategy they have long been refined over a generation in the corrupt arena of local U.S. politics."
"The tactics by banks and credit rating agencies have been successful most easily in cities and states that have fallen deeply into debt dependency. The aim is to carve up national assets, by doing to Washington what they sought to do in Cleveland and other cities over the past generation. Similar pressure is being exerted on the international level on Greece and other countries. Ratings agencies act as political “enforcers” to knee-cap economies that refrain from privatization sell-offs to solve debt problems recognized by the markets before the ratings agencies acknowledge the bad financial mode that they endorse for self-serving business reasons."
8. China's Redback - The Economist writes well here about whether China can turn its yuan into a new reserve currency. It has a long way to go. The detail around Dim Sum bonds is interesting.
Foreigners will be keen to acquire yuan, and reluctant to part with it, for as long as they think it is artificially cheap. That perception was only reinforced by China’s external surplus of $69.6 billion in the second quarter, a big jump from the previous three months. That may have prompted China’s central bank to let the yuan rise to a rate of 6.4 redbacks to one green.
9. Wall St Aristocracy - Bloomberg used the A word to describe how the Fed secretly channeled US$1.2 trillion in funds to America's big banks during the crisis of 2008/09. I suspect this will become an influential story.
Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley (MS), got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.
“These are all whopping numbers,” said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. “You’re talking about the aristocracy of American finance going down the tubes without the federal money.”
10. Totally Jon Stewart on the Warren Buffett call for the rich to pay more tax.
11. Bonus Jon Stewart on Class warfare. It says something about the state of American politics right now.
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