Friday's Top 10 with NZ Mint: The Eurozone on the brink of something awful; John Clarke and Brian Dawe discuss money printing; The problem of low interest rates; Dilbert

Friday's Top 10 with NZ Mint: The Eurozone on the brink of something awful; John Clarke and Brian Dawe discuss money printing; The problem of low interest rates; Dilbert

Here's my Top 10 links from around the Internet at 1pm 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.

Today's number 10 is a cracker. John Clarke and Brian Dawe discuss quantitative easing. Printer instructions are discussed. Go the All Blacks!! I have a ban on exclamation marks in our articles. So the fact I used two of them in the space of one sentence shows how much I really, really want the All Blacks to win.

1. Europe's intractable problems - This weekend is shaping up as crucial for the global economy.

And it's not because of the rugby (although Go All Blacks!! again for good measure).

Believe it or not, this will be more important for our economy, for interest rates, unemployment and asset prices than anything else this year.

Europe must come up with some sort of solution or all hell will break loose.

And it's not just me saying this. The US Treasury Secretary, the IMF, the World Bank and the Bank of England have all said this in the last couple of weeks.

But the signs last night are not good for a resoulution tonight. Another summit has been scheduled for next week because the French and Germans can't agree.

The problems are fundamentally intractable. Significant parts of Europe cannot support their debts and the current measures being used to deal with that are simply driving their economies deeper into recession, thus increasing the debt burden. Germany is exporting its surplus to the rest of Europe and lending them the money to buy it, but now they can't pay.

Various attempts to try to extend and pretend the debt away, or shuffle it from one balance sheet to another, have obviously not worked.

The only long term solution is some form of debt jubilee where large amounts of debt are wiped out, banks are recapitalised and Europe creates a single fiscal authority. But voters, bankers and taxpayers have sharply divided interests in all of this and vastly unequal influence.

If a solution cannot be found the Eurozone will break up in an uncontrollable and disastrous fashion some time in the next couple of years.

Or months.

Hold on tight folks.

Here's the New York Times with the latest doubts on any deal:

Doubts grew about the effectiveness of a key proposal for stemming Europe's deepening debt crisis as it emerged that officials have ruled out a plan for the euro-zone's bailout fund to directly guarantee bond issues.

Instead, European officials are discussing a scenario in which governments issuing bonds would borrow from the bailout fund to guarantee a portion of the bond issues—a move that would increase debts for already troubled economies.

2. Band aid for a gunshot wound - Yves Smith writes at Naked Capitalist about the Euromess with clarity here, explaining the impossibility of all the fiddling working, and how precarious the banks are when they say a 44 billion euro haircut on Greek debt would bring them down.

The officialdom could patch up things for quite a while if the powers that be let the ECB monetize the debt (eventually, you could have an inflation problem, but with the EU and global economy so slack, “eventually” will take quite a while to show up).

However,everyone in positions of authority seems to believe in certain-to-fail-much-faster austerity instead. So the permissible short-to-medium term fixes involves lots of complicated programs, multi-party negotiations, and in some cases, political approvals. The timeline for the governmental maneuvering seems badly out of line with what Mr. Market requires.

The day before yesterday, Eurozone banks “threatened” that they’d have to be nationalized if the haircuts on the aforementioned Greek funding deal were increased from 21% to 50%. Note credible estimates as early last year put the level of writedowns needed on Greek debt at a minimum of 50% (75% was not an uncommon number) and Greece has undershot forecasts repeatedly since then.

The idea that nationalization is a horrible outcome to anyone other than bankers shows how far down the rabbit hole we’ve gone. But aside form that, recognize the implication: increasing the haircuts from 21% to 50% on Greek debt would tank banks. Even if we use the total amount of Greek debt outstanding, €350 x .29, we get €102 billion. But that figure is high, since what is relevant is the debt held by banks, not the total. A FT Alphaville story reported the private debt target for participation in the earlier restructuring plan (the goal was 90% participation) was €135 billion. Gross that up and you get €150 billion, and take 29% of that, and you get €44 billion.

If a mere incremental €44 billion loss across Eurobanks is such a devastating event, the banks are pretty wobbly as it is. Mind you, we all know that, but the banks have just said that, loudly and publicly. And pretty much no one expects the resturcturings to stop with Greece.

3. Here's why Wall St didn't tank last night - Just as Europe threatens to unravel, the US Federal Reserve poked its head above the parapet to suggest it might print a bunch more money to buy US mortgage bonds.

That kept the stock markets calm for another day. How long might that last?

Again, it's the same old stuff. Moving toxic mortgage bonds from the balance sheets of banks onto public balance sheets inside central banks.

No wonder taxpayers are grumpy.

Here's Jon Hilsenrath at the Wall St Journal on this kite flying speech by US Federal Reserve Governor Dan Tarullo.

The idea would be to target any new efforts by the central bank at the parts of the economy that are most severely impeding a recovery—the housing and mortgage markets—by working to push down mortgage rates.

Lower mortgage rates, in turn, could encourage more home-buying and mortgage-refinancing, and help the economy by freeing up cash for consumers to spend on other goods and services. Mortgage rates are already very low, but some Fed officials believe they might be pushed lower. Moreover, Fed officials believe their past purchase programs helped to lift stock markets, by driving investors from low-risk investments toward riskier investments.

4. Wall Street is fighting back the only way it knows how - By threatening Democrats that they might withdraw electioneering funds.

If there's any doubt that America is a corporate run plutocracy rather than a functioning democracy, this should remove it.

Here's Politico on the latest behind-the-scenes shenanigans after a few Democrats quietly voiced their support for the Occupy Wall Street movement.

After the Democratic Congressional Campaign Committee sent a recent email urging supporters to sign a petition backing the wave of Occupy Wall Street protests, phones at the party committee started ringing.

Banking executives personally called the offices of DCCC Chairman Steve Israel (D-N.Y.) and DCCC Finance Chairman Joe Crowley (D-N.Y.) last week demanding answers, three financial services lobbyists told POLITICO.

“They were livid,” said one Democratic lobbyist with banking clients.

The execs asked the lawmakers: “What are you doing? Do you even understand some of the things that they’ve called for?” said another lobbyist with financial services clients who is a former Democratic Senate aide.

Democrats’ friends on Wall Street have a message for them: you can’t have it both ways. President Barack Obama and other top Democrats are parroting the anti-corporate rhetoric running through the Occupy Wall Street protests, trying to tap into the movement’s energy but keep the protesters at arms’ length.

But many bankers aren’t buying the distinction. And some financial services lobbyists and industry insiders say the liberal line will make swing givers think twice before opening their checkbooks this year.

5. No wonder they're protesting - David Cay Johnston writes at Reuters about figures that have just emerged about jobs and paychecks in America for 2010.

The figures from payroll taxes reported to the Social Security Administration on jobs and pay are, in a word, awful.

These are important and powerful figures. Maybe the reason the government does not announce their release -- and so far I am the only journalist who writes about them each year -- is the data show how the United States smolders while Washington fiddles.

There were fewer jobs and they paid less last year, except at the very top where, the number of people making more than $1 million increased by 20 percent over 2009.

The median paycheck -- half made more, half less -- fell again in 2010, down 1.2 percent to $26,364. That works out to $507 a week, the lowest level, after adjusting for inflation, since 1999.

6. NZ an easy place to do business - This International Finance Corporation/World Bank list of which countries are the easiest places to do business puts New Zealand at number 3 for the second year running.

It's a useful website that's worth a click through.

7. The problem of low interest rates - Global Macro Monitor writes at The Big Picture about the astonishingly low interest cost of all the US public debt right now.

It's all because of record low interest rates, which are dangerous in a profound way, explained here:

The chart may surprise many given the huge run up in the U.S. federal debt over the past 10 years.  The data show that the total public debt stock has increased from $5.7 trillion on September 30, 2000 to $14.8 trillion on September 30, 2011.

The net interest cost to service the debt, however, has fallen as percent of GDP due to the sharp drop in the average interest rate paid on the debt, which fell from 6.63% in 2000 to 2.886% on September 30, 2011.  Growth also contributed to the drop and as a rule of thumb if the average interest rate is below the nominal growth rate, the ratio falls.

The danger of massive borrowing at record low interest rates is that it makes the borrower extremely vulnerable to an increase in rates.  This was the case of the housing bubble.   This is the case of Greece.   Furthermore, debt and leverage is rewarded in a declining interest rate environment and punished as rates increase.   A repeat of the 30-year secular decline in interest rates is not likely.

Rising interest rates can also reduce market confidence in a heavily indebted borrower’s ability to service its debt, which in turn reduces market access and increases the rollover risk of maturing debt.   Default, bailout, or, in the case of a country with an autonomous central bank, hyperinflationary monetization of maturing debt becomes the only options.    

What puts the “acute” in an acute sovereign debt crisis is the inability to roll over maturing debt.  No doubt Secretary Geithner understands this and, as the chart illustrates, is trying to extend the average maturity of the public debt.

8. The case for a hard landing in China - Darrel Whitten at Seeking Alpha puts the case for a hard landing in China.

According to the McKinsey Global Institute, the proportion of China's total debt to gross domestic product was 159% at the end of 2008, even before it began the massive stimulus program that racked up piles of local government debt.

The IMF estimates the stimulus-instigated loan spree raised credit from 100% to almost 200% of China’s GDP, including off-books trusts, letters of credit and sub-radar loans from Hong Kong. The 30% annual pace of loan growth is unprecedented in any major country in modern history. It is double the pace of America's housing boom and Japan's Nikkei bubble in the late 1980s, and may match US loan growth in the late 1920s, according to the Telegraph’s Evans-Prichard. By comparison, a study by Fitch Ratings found that credit in America rose by just 42% of GDP in the five-year period before the housing bubble popped, and rose by 45% of GDP in Japan from before the Nikkei cracked in 1990, while it rose to 47% before the Korean crisis in 1998.

The lesson from other such excess credit bubbles in history is that such bubbles are impossible to deflate in an orderly manner and inevitably end in crashing stock and property prices that leave mountains of unpaid debt. The modern (Keynesian) solution for such crashes is an effective transfer of irrecoverable debt in the corporate and private sector onto the books of the government through deficit spending and an equally large increase in government debt—as is seen in the sharp deterioration in government finances in Euroland, the U.S. and Japan. Further, once this government debt reaches 80%~90% of GDP, it begins to choke off economic growth. Thus Barclays Capital has predicted the next global recession would trigger a "hard landing" in China, with gross domestic product sinking well below the 8% mark seen as the minimum for assuring enough job creation to keep up with urban migration and preventing social unrest. China bears like Kynikos Associates’ Jim Chanos see an incipient property bust, the scale of which could make Japan’s infamous stock and property market bust from 1990 look relatively mild.

9. The problem with China's falling consumption rate - China's economy needs to switch from one based on investment and exports to one based on consumption if the world's capital and trade imbalances are to be resolved.

That's why there's such tension around China's undervalued exchange rate (which stops this switch from happening) and worries about overinvestment in China creating dangerous asset bubbles and bad loans.

Here's a great chart showing how each segment of the economy is growing (investment exploding while consumption falls in relative importance) and how the problem is getting worse, not better.

Here's Beijing based economist Michael Pettis explaining in more depth.

Aside from the extraordinary decline in the consumption rate, it is interesting to see what happened to the trade surplus.  At 6.4% of GDP in 2010, it is extremely high, but well off its record levels in 2007 and 2008, when as a share of global GDP China’s trade surplus may well have been the highest in modern history.  Notice that as it declined from its peak, investment surged. 

This is just what we would have expected.  The negative growth impact of the sharp drop in China’s trade surplus may have forced GDP growth rates to nearly zero, and the sudden and violent expansion in investment was necessary as the counterbalance to keep growth rates high.  Changes in the declining consumption share of GDP have had very little impact on changes in GDP growth.  And it continues to decline.

10. Totally irrelevant video from Clarke and Dawe because it's a Friday - John Clarke is an economist talking about Quantitative Easing and some advice he's giving to central banks.

"Take printer out of box and place on table with printer facing window."

And I laughed like a drain.

Go the All Blacks !! (Right, that's my quota of exclamation marks used up for the year)

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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FYI The world's millionaires and billionaires control 39% of global wealth, says the Global Wealth Report from Credit Suisse (and they should know). Interestingly, Australia was the 5th biggest generator of wealth for the rich in the last year.

http://blogs.wsj.com/wealth/2011/10/19/millionaires-control-39-of-global-wealth/

Here’s another stat that the Occupy Wall Streeters can hoist on their placards: The world’s millionaires and billionaires now control 38.5% of the world’s wealth.

According to the latest Global Wealth Report from Credit Suisse, the 29.7 million people in the world with household net worths of $1 million (representing less than 1% of the world’s population) control about $89 trillion of the world’s wealth.  That’s up from a share of 35.6% in 2010, and their wealth increased by about $20 trillion, according Credit Suisse.

The wealth of the millionaires grew 29% — about twice as fast as the wealth in the world as a whole, which now has $231 trillion in wealth.

The U.S. has been the largest wealth generator over the past 18 months, according to the report, adding $4.6 trillion to global wealth. China ranked second with $4 trillion, followed by Japan ($3.8 trillion), Brazil ($1.87 trillion) and Australia ($1.85 trillion).

And now the Europeans want to ban the refs because they don't like the rulings...

http://online.wsj.com/article/SB10001424052970204618704576643001322995600.html

The European Commission is leaning toward proposing a ban on the issuing of sovereign credit ratings for countries in bailout talks, a top official said on Thursday.

Are they just posturing?  NZ got two downgrades in one day, and yet the impact on govt bonds seems very muted.  I mean do the buyers have no idea what is going on?  Are they just lending based on what the ratings agency says?

World problems on many fronts accumulating and accelerating !

 Just another case of “Climate change” massive influence - causing damage in the billions.

Thailand, home to many parts makers, plays a critical role in the global supply chain. If disruptions are prolonged, it could upset manufacturers worldwide, according to Merrill Lynch Japan Securities Co.

About 320 Japanese companies suffered damage from the floods.

 http://www.nationmultimedia.com/business/Global-fallout-of-Thai-floods-30167951.html

Climate change, really?

Thai officials reported progress in diverting floodwater round Bangkok into the sea today but some people in the capital were still warned to move to higher floors as the government struggled with the worst flooding in 50 years.

http://tvnz.co.nz/world-news/bangkok-still-in-flood-danger-4479241

OMG go to page 33 and read on:

http://www.genevaassociation.org/PDF/Geneva_Reports/Geneva_report%5B2%5D...

Damages caused by natural and men made disasters, Climate Change and as a consequence increased costs are underestimated and will not only  have a massive impact on economies, but societies.

For God sake – where does the money come from just to pay for the damage ?

 ..and then have a look at this picture Dublin under water today

http://www.irishweatheronline.com/news/environment/flood/video-dublin-under-water-as-months-rain-falls-in-6-hours/42933.html

 open links on the right hand side – huuuiii !!

More economic damage - heavy rain and flooding in Italy and Spain.

http://www.euronews.net/2011/10/26/seven-missing-in-italian-floods/

#4 interview with Wall Street Insider about how OWS is causing cosy relationship between Obama and WS to deteriorate:

http://theulstermanreport.com/2011/10/17/wall-street-insider-the-obama-white-house-wants-us-gone-all-of-us/

This may interest some of you. My daughter lives in Nth California, she is not earning so I rented her a house,got her a car etc. Im just paying the monthly bills ( must change my BOA account)  In the last two months  another daughter has been living with her, the hot water and fridge are gas, the bill for gas is for the last two weeks,$6.20 so 12.40 a month, same as last month. The air con and rest of house are on elec, last month $27( they try not to use the air-con too much).  The car is an Nissan Maxima 3.1 liter, tank a week $50. The house is $700 a month which is high when you consider the price of houses, if she stays any longer I will buy her a house, she looked at one a couple of months back, 40 acres(needs a horse) 3 bedroom 2 bathroom 5 minutes from town  it just sold for 128 k.( why keep money on deposit in NZ when the OBR comes into effect next year) She has an internet deal, $48 for first month then $29 a month, 12 month term, includes cell phone, unlimited internet.  These are actual bill's Im paying today.  Im just a little surprised how cheap it is, are we are being gouged?

As a matter of interest, Andrew. How does one get on with ownership, as a non resident? From a personal point of view, I'd battle with getting whatever "points" are needed for residency in The States, and have wondered about the practicality of being able to live-in what one buys over there, without a permanent visa.

I just asked a Kiwi friend who has a house in Nappa he said that he had no problems at all. NZ tax system may get to him after a while though. You can get in on money as long as you have enough, they welcome you same as  here in NZ.

What is her health insurance costing you?

Though I assume TVs, fridges etc are very cheap if the prices ive seen are anythgin to go by. For instance I just bought a dewalt 735 planer for $1150NZ on "special" its $499US on ebay so half the money....blades are $40~45US v $250NZ here.....we also seem to be at least 12 or 18months behind on TVs models....

Gouged, yes sometimes I think we very much are....however I dont see ppl/companies  making huge profits ie if its was so why doent the NZx look very healthy? why isnt telecom or vodafone highly profitable?

Perplexing to say the least.

My bank maager tells me they are happy to lend to residents, you dont need to be a US citizen, she will apply for a green card soon.I will employ a Lawyer to give me advice on purchasing a house. Im trying to get the unit price of electricity off her now. Food is way cheaper she buys at Trader Joes and she was eating Atlantic Cod, I think she said it cost her $4 for the meal for 2. When she is back here, she go's on and on about how expensive it is,  nearly as bad as Canada. I think they budget $50 for food for the two of them pr week.

Insurance I get this end, its about $800 a year nz. The insurance is much cheaper with these guys

http://www.1cover.co.nz/online-travel-insurance.jsp?gclid=COqpkuLc-KsCFU...

I should add that the car insurance is $300 a year not as high as I thought, a 2002 Maxima with 100k miles was $4,000, they have gone up in price due to shortage after the cash for clunkers deal. Also no WOF on cars, so it is much cheaper to run a car but im seeing more old cars  on the road that look pretty dodgy.

If that's travel insurance for an NZer (presumably on holiday) you might find a claim declined if your NZ insurer, for example, has to send your daughter home for some kind of long term treatment.   They would look at whether she was/wasn't a permanent/semi-permanent resident there (such as a student or green card holder).

Purchasing travel insurance is of course cheaper in NZ because for such long term illnesses (such as those requiring a period of rehab), they factor in the fact that once the patient gets home (at their cost), the government takes over.  Not so, of course, if one rehabilitates in the US.

Not sure this applies to the insurance you bought but might be worth checking out.

My daughter is always honest, she insured as a student. She realises that she would be sent home infact its spelt out on the policy. What does health insurance cost a month in the States for a young adult? Id hate to think how many people can no longer afford health insurance in the States that along with student loans is a biggy. That along with the,

>>>

Forty-six million people on food stamps.

One hundred million who have not had a real raise in 40 years.

Twenty-five million without real jobs. Twenty million who will never have real jobs.

One out of five mortgaged homeowners who are underwater.

>>

 It makes one wonder if the future is sustainable.

The U.S. Census Bureau said in September that the number of people without coverage rose to 50.7 million in 2009 from 46.3 million in 2008.     

   (That went to an estimated 52 million a year later).   

   And for those with insurance, both the premiums and the deductables are increasing at an alarming rate:

Forty-nine million Americans reported spending 10 percent or more of their income on insurance premiums and out-of-pocket costs last year, according to the Commonwealth Fund study.... Employer-based insurance expenses rose 43 percent from 2003 to 2009, while deductibles on these plans increased 77 percent, Collins said.  

I have a nephew who fully qualified last year as an imaging (x-ray) technician.  Of his class of 25 students graduating - he was the only one to have found work at the time of graduating (he graduated top of his class, and that mattered), and his work was a casual contract - no guarantee of hours and no benefits associated with the employment offer.  This type of employment contract is becoming more commonplace there - as employers look to introduce more "flexible" employment arrangements... meaning low pay, no guarantee of on-going employment and no benefits (i.e. costs) as would normally be associated with permanent employment.

http://www.bloomberg.com/news/2011-03-16/americans-without-health-insurance-rose-to-52-million-on-job-loss-expense.html 

A big problem in the US as I see it, is the same one we have here - employment opportunities for youth.  My sister (a widow), for example, wanted to retire at 60 but she's going to keep working given how her 401K investment is looking decidedly sicker of late, and given her house lost $60K in value in a single year.  Which means some recent graduate in medical technology (the specimen/lab folk) will have to wait possibly another 5 years (maybe more!) before she vacates her spot on the permanent staff.  Not good.

-On the other side they have 30 million with wealth (excluding family home)  greater than 100k USD, which is well more than India and China combined in that catergory. Note even adding in a few other large economies does not even help the world catch up i.e only a couple million meet that critera in UK and Germany respectively.

So even though we talk about the top percentile of the 1% world wide, the next broader group of wealth is simply in the USA. I still bet on them for that reason.

The flip side is the opportunity, I have a client who I mentored to set up  a chain of resturants in Califonia. His background is as  difficult as it gets..growing up in the  the slums of Mexico city. At 27  last month purchased the house in his local suburb of his dreams for 250k.  No real debt and making a life of independence.

-I gained a legal opinion and have had d travell insurance with full disclosure which provide cover initially  for my situation. I have my home in NZ and own an appartment in LA which is my home base while  working on the west coast.

 -I now pay for health insurance in the US, as I'm now over 40, it cost $5,700 pa for a male at my risky age  which means if i get  a rare form of cancer of something rare/extreme i have access to the best medical tratement available on the planet. Seems smart at my stage of life.

ps Concern static income look at the salary survey in the personal finance section on this site, what struck me is those income levels have not moved since I woked in Auckland in the mid-90s as a grad. Yet where has property moved to over that period...simply less opportunity in NZ than the USA ....

So even though we talk about the top percentile of the 1% world wide, the next broader group of wealth is simply in the USA. I still bet on them for that reason. 

What are you betting on?

That the US will become the last bastion of the middle class? The "safest" place to be when TSHTF?  The most likely to prosper in the long run?  The place with the lowest number of destitute as a percentage of population?  The least likely to run out of natural resources first? The best place to increase one's capital wealth/stores?  The least likely to suffer inflation or deflation?  The least likely to stagnate?  The only fiat worth anything in the long run?....

All of the above?

Something else?

Kate, have you read denninger this morning?

http://market-ticker.org/akcs-www?post=196363

 

And it's not only the federal government robbing them.... take LA's local government for example...

http://www.citywatchla.com/lead-stories/2373-will-we-continue-to-be-city-halls-atm

We went to Manhatten's financial sector this last visit (had Aussie's with us who wanted a picture of the bull) - it was in such a state of disrepair.  I thought how odd the "suits" looked while walking on the crumbling sidewalks in front of the tacky takeaways and other decaying shop fronts.  When I read how OWS took over the park - I thought well, at least the homeless that had been napping there with their shopping carts full of possessions would now have a nice tent to stay in and meals being prepared on site.

 

www.worldnomads.com.au is also very cost effective for kiwis overseas.

Kate, insurers like the one above originally targetted kids doing OEs. So long as you are a NZ resident, (not necessarily a NZ tax resident) you can live just about anywhere and be covered.  You can renew online from anywhere.

My kids have used World Nomads for over 4years while on OE and have had no issues when claiming from them.  One got repatriated back home for treatment and they were very good to deal with.

Thx for that, Andrew. The reason I asked was because my better half has some properties on 'her list' in The Carolinas, and I thought we might get more adventurous than just Aussie, in due course. I worked in NY and LA many moons ago and remember the hassle at immigration each timeI I went in and out.; even if it was just a hop across th boarded to Canada! I only had a B1 (?) visa, from memory. Cheers. ( Oh, It's Friday! Goody....)..........................

Nicholas , I applied for a family visa we  got a 10 year multiple entry visa for all of the family six month at a time, the problem is we are the only country that has passports that last for 5 years and cost over $200 to renew. Why?

I guess 'we' have to pay off the national debt from some form of revenue raising :) Lucky I have an EU one as well. But that would mean leaving my NZ half on her own for 5 years. I wouldn't cope.....Have a good weekend and let's hope the EU doesn't explode on us during that time. Otherwise my alternative passport might not be worth much.....

NZ isn't the only country to have 5 year passports.  It is the way the world is moving.  Our kids have EU passports (just renewed) and they also are only valid for 5years now.

Yes it obviously keeps the world much safer when compared to the ten year passports. Nothing to do with revenue raising I can't imagine &^%

NZ was one of the first to introduce this 5 year passport. It amazes me just how often NZ is the first to do certain things, which at the face of it seem reasonable, then you grow up and realise that most often there is usually just a monetised reasoning in the background.

Generally, I think some of the costs we pay relate to our wages generally being higher here.  Such a large proportion of people in the US are on the minimum wage.  Here, many jobs which could pay minimum wages because the jobs are largely unskilled, still pay above the minimum rate.  Not so in the US as the labour market is less competitive (i.e. higher rate of unemployment, along with a less favourable social welfare system).

We were in Hawaii earlier this year and took a full day bus tour of the main island.  The driver contracts to the tourism company (owns the vehicle and pays all the costs) - they pay him a min wage hourly rate for driving  (US$7.50/hour) - so he relies on tips to make a living.  In the restaurant/service industry - my understanding is a waiter, for example, gets less than the min wage on a hourly rate basis - all tips must be declared - and if the value of the tips doesn't take the worker to up to or over the min wage, then the restaurant owner has to make up the balance.  And with the downturn, alot of restaurants are closing/cutting back on hours of operation because the dining population in hard times is reducing the amount they tip - sometimes not tipping at all depending on the type of establishment.

It a world wide problem Kate, there are a lot of working poor in NZ on the min. wage.

I always find it intersting people see it when they vist overseas but not aware at home.

Let me put it this way. London is at least 40% cheaper in terms of living costs than NZ for myself. I simply do not know how people can live in NZ, and we see that many of them simply can't.

Cost of food, utilities etc all much cheaper, and weight of numbers will of course help with this. NZ is a MASSIVE RIP OFF. This is only going to get worse, and we will see more and more suffering and social degredation as a result.

Are any of the current systems designed to add to or relieve further suffering (Rhetorical)!

Ive asked my daughter to go down to the supermarket and write down the prices of  a range of basics, when she gets back to me I will post the results. I asked for Chicken, steak, bacon, milk, cheese,butter, bread,vege's and fruit. If anyone wants something added let me kinow.

Andrew

here is what has happened to US wages

50% of All Workers Made Less than $26,000 in 2010

Today we get our first look at American wages in 2010 based on payroll taxes reported to the Social Security Administration. David Cay Johnston picks out the most important takeaways, including:

1) Half of all workers made less than $26,364, the median wage in 2010. That means the typical wage is at its lowest level since 1999, after adjusting for inflation.

2) The number of millionaires increased by about 20 percent.

3) The size of the missing workforce is 10 million. The number of working people fell by 5.2 million since 2007. But that’s not the entire job deficit, because, based on population growth estimates, 4.5 million more would have joined the workforce between 2007 and 2011. Add it up, and you get a 10-million-worker gap.

What you see in the graph above is that median pay took a nosedive after 2007, effectively wiping out all gains made in the previous eight years.

Americans are getting poor faster than they got rich.

Ask what the price of a dozen local beer is too please AJ.  I am sick of paying huge prices here and I am about to start homebrewing.

Oki doki

Yes, but I had heard that the US is laregly broke, so is their pricing structure throughout country for various things sustainable? They have got huge problems over there.

snap

Fukushima is an utter tragedy. The lies and lack of response from government... horrible to think of the suffering to come.

Again, I raise the question: What is really going on in Japan ? Some suggest some food is contaminated, even exported and should not be consumed. What is the actual economic and environmental situation in Japan ? How safe are imported goods from Japan ? The NZhealth department  should negotiate.

http://www.youtube.com/watch?v=2JUx3guPOKc&feature=uploademail

no, no tell us Sore-loser otherwise people - while rates are low borrow more today (Olly) and get burned tomorrow.

Deflation.

"Here's a gem of a quote just for you. And a word you will need to memorize and understand: Deflation............"

"......And besides, we also have the distinct feeling that the October 23 Euro summit, if (or make that when) it takes place - there are even rumors of postponing it - will have as one of its major issues the default of Greece. As in: sorry, we need to save France now, can't do both."

"Which is why, while Bloomberg reports that Morgan Stanley predicts that EU (including UK) banks will need to sell assets, reduce lending and overall reduce short-term funding as much as €2 trillion, other voices say they won't be able to achieve that much, because they can't sell enough assets. Ergo: they’ll need to reduce lending even more.

Along the exact same lines, Bank of America is shrinking, and right into oblivion down the line. How any regulatory body, be it the Fed or the FDIC, can possibly comply with BofA moving $53 trillion in derivatives to its consumer deposits book is beyond us. What is it? Despair over desperation? Thinking you can get away with anything? Still, whoever's made to pay (Hello, Occupy Wall Street, protest this! Occupy BofA. Occupy the FDIC.), the effect remains what it is: Incredible Shrinkage.

And that, dear reader, is how you spell deflation.

And debt deflation. And credit crunch. This cannot be prevented. It is written in stone. Not even Occupy Wall Street or Syntagma Square have the power to undo the inevitable. They can, however, have a loud and major voice in seeing to it that the pain is evenly distributed. It is not now."

http://theautomaticearth.blogspot.com/2011/10/october-20-2011-like-gypsi...

Im reminded of one of those Hollywood B movies where teh evil genius says "Things are moving along nicely"...and you just know its not going to be nice for the good guys.

regards

 

Steven, she had some good short videos up yesterday, I enjoyed the decoupling one.

http://theautomaticearth.blogspot.com/2011/10/october-17-2011-diamonds-i...

Sorry Steven, I cannot understand your logic on deflation.

Sure, there are contraction forces happening big time, but can you not see that whatever the number is that credit is shrinking by, the FED has demonstrated that it is prepared to meet it, and more with QE in its various forms?

The FED is inflating big time, bailouts tarp are just small time ($1 trillion or so ($3,000 per person in USA)). Bloomberg was able to get a partial audit which revealed that it was in fact $16 trillion plus ($53,000 per person in USA) "08"in 0800. This is again small time compared to what is actually going into Europe at the moment.

There is no upside limit to how much money can be printed its infinite, it’s just a matter of shifting the decimal point across a few places on a computer screen. Whereas there is a downside limit to deflation. This is why on balance there has been no price deflation (or price inflation to speak of). This is just history repeating itself over and over.

Once it is out there is no particle way to get it back that is what is written in stone. Are you not taking this offsetting increase in money supply into account or do you not believe the FED will further debase the currency enough to offset deflation?

 Interested in your thoughts.

Paying off loans is deflationary.  The Fed QE/Twist, Tarpe, and others, never made it into the real economy.  That is consumers were not spending that money or borrowing it.  It is sitting in treasury bonds, futures, and stocks, and CDS/other derivitives.  So there has not been the inflationary pressure yet.  The Fed just prints 1Trillion, this creates inflation only once it enters the real economy, currently is has only inflated stocks etc.  Consider the money multiplier, once this Fed money is lent out, it can increase 9x, that is it can grow into 9Trillion very quickly.  Banks that don't lend are like vacum cleaners of the money supply, sucking up money in interest and principal.  This is very deflationary, because deflation is a monetary phenomonen.  It is a direct result of less money in the system.  Consider a deflationary enviroment, the price of hard assets falls in relation to cash.  Now consider banks full of money, cuts in profits, due to no lending growth, and deflation is even more conducive to defaults.  At some stage they will want to lend, given the low price of assets, and lack of income.  Once this happens, the 1T+ of fed money, plus the extra money sitting in the balance sheets of the banks from all the interest they have recieved.  You are looking at tens of trillions flooding the market very quicly, as I understand it, this is hyperinflation, and the way money collapses.  (there have been over 3,800 fiat currencies that have collapsed so far...)

Sure I have got all that, I was just curious why Steven doesn't seem to take into concideration that the central bank is printing the shortfall of currency that has been taken from the money supply.

Sure, the reserve bank is making up the difference, but that does not do any good sitting in commercial bank capitalisation does it (It might be good for bankers bonuses, or bond holders who took bad risks). It only makes up for the short fall if that money is loaned, which means somebody needs to start getting into debt. Maybe we could find a few more property tycoons like Terry Seripisos to borrow a couple of million each? Would that be useful?

If the reserve bank had re-capitalised the government accounts then the money might actually enter the economy, but no we couldn't have that, that would be incredibly dangerous. You can't possibly offer people policy they would support in a democracy.

This is because they are not....

The bank has to print money and it has to get out into circulation....most of it is sitting in US banks computers....they dont want to lend, and many dont want to borrow, or cannot...(no job)....then the banks shoot CCs from 7% to 33% and expect ppl to be able to cope with that....and like it.

End result they withdraw from consuming and when consuming == circulation and consumers is 70% of a 10trillion economy a few hundred billion badly positioned doenst cut it.

Hasnt it dawned on you that for nearly 4 years there is no core inflation to speak or ie its 2%?  That is a pretty long time to see no inflatiojn or accelerating inflation in fact the signs are for dis-inflation.

 regards

 

OK, well it should be pretty easy to understand why I see deflation, the real thing is you dont agree with the "logic" behind it overall it seems ie you are only looking at printing? thare are a lot of other factors, all bigger. I suggest you read Keynes, look for zero bound theory via Paul Krugman, but the killer one to read is Steve Keen/Minsky, its debt and deleveraging that will kill our global economy.....triggered by expensive energy IMHO  The 1930s is a classic example we seem to be repeating......well worth reading up on, the similarities are striking.....credit glut, over-capacity etc.

NB where is the inflation? QE has done nothing but delay, its caused some commodity inflation specualtion which is dying back. Throw in that it looks like congress for one wont allow more stimulus and in fact wants to get Obama kicked out at any cost to Americans or the world....there are also mumurings on Bernanke, I suspect they will want him gone as well...ASAPP.....bye bye QEing.

History,  deflation v inflation....if you go back far enough, ie pre-1800s there was little inflation....if there was it was usually corrected with slight deflation after a time, all very gentle. Post 1800s we have had more financial "engineering" the result was mega booms and depressions, the Long Depression of the 1870s, the Great Depression of the 1930s and today the second long depression (or Great Austerity as I like to call it) of the 2010s....so it does indeed balance out....We have had 30+ years of inflation, its now time for 30 years of deflation.

There is an upside to the amount you can print, no one will lend you money....and no one will sell you goods.......also money is a call on future energy...if there isnt the energy the IOU cant be cashed.....ever, its worthless.....

The proof to start with is in the eating. Its now 4 years? into this mess...where is inflation or at least signs of accelerating inflation? its nowhere in fact we see more signs of dis-inflation. Core inflation is still 2% and shows signs of dropping....

I see several things to support my view point,

In the real world,

1) We have to consume more every year to absorb the new factory capacity coming on line.....so we have significant deflationary pressure there just from China I may add....they are growing at 9~10% per year.  The goods have to go somewhere, so it has to be sold cheaper and cheaper. So its not a case on consuming the same amount say 1,000,000 toys and we see that only say 900,000 were sold but we needed to sell 1,100,000 toys  to absorb the extra labour and capacity, it has not happened...you need to account for that....IMHO.

2) Unemployed, the US real unemplyment is at least 16% and Europe isnt good either, youth un-employment is typically 25%.....Chinese factory owners are moving to central china where labour is way cheaper....so we have huge labour over-capacity....that means downward pressure on wages...that is deflationary.

3) There is a mad rush into US treasuries, so much so that the interest paid on them is less than even core inflation (1.75% ish v 2% ish).....this means many ppl have put billions into accounts that lose $s every day. These are the "rich" ppl, I sont think they are dumb myself far from it (NB their exit strategy will be interesting, en mass in is one thing en-mass out is another, that should be nasty for the slow ones).

4) History repeating itself, indeed Long Depressiona nd Great Depression....this is the third "great event".

5) Offset in money supply (gain), again velocity of money, Paul Krugman explains why this isnt happening.....also its the banks holding it, so the "release" of $ isnt getting to Joe public's pockets.

6) Supply side or voodoo economics, it hasnt worked....its caused this mess and the loons believeing in it are still mostly in charge....

7) Govn austerity programs, this is hugely deflationary and we are seeing that....again PK warns of this....and the IMF and others.

8) Corporations are cash  rich unlike in the 1930s so mostly having shed staff and having huge cash reserves they dont care, and are not hiring, this is hugely deflationary....so this downward event will be slower say 6 years instead of 3 (ignoring the Peak oil lights going on and the dawning that impact on share value which will be bad).  Peak oil might cause thsi to be a slowish start then accelerate.....

9) As Pual Krugman says if you had listened to the WSJ's editorial and not him you would have lost a lot of $...his theories and Steve Keen's are the soundest and most logical I have found.

I have made my call, Im going with the deflationists and big time, its your money, place your bets.

;]

regards

My joke today:

It seems the whole nation wants to buy one – on one of the many credit- cards. NZ$ 988.- !!!!!!!!

http://www.viagogo.com/Sports-Tickets/Other-Sports/Rugby-Union/Rugby-Wor...

'rebalancing the economy'

Have people noticed that the words 'rebalancing the economy' have disappeared from the soundbites after two and a half years of saturation use.

The last question time from parliament did not mention rebalancing.

What has Bill English decided? Are his backers now happy with his rebalancing?

Is the government now satisfied that, in 3 short years, they have taken no government debt to a 'rebalanced' position of huge deficits...

Don't worry; before this election there wont be any real economic analysis. We've had the World Cup... then there will be the countrywide tour of the trophy with JK alongside Henry and various ABs for photo sessions... a few more pix of JK with Cameron (pity the electoral rules didn't allow him to have the Queen over) ... maybe another politics free radio hour....and, oh yes...could you pop down and vote for .... what?

Here is the new soundbite return to surplus.  Like return of the Jedi, or return of the King, it's a great story, but doesn't really attatch itself to reality very well.

There was also the oxymoronic "jobless recovery" that was in vogue for ages.

Re: #3 Are we sure Pimco's Bill Gross didn't pay for this infomercial type article?

Sure seems to fit with his book if this article is correct

This is classic ViSuAl KoMbAT I like weapons of financial destruction.

http://www.zerohedge.com/contributed/10-21-11-need-i-remind-you-yet-again-end-near 

Record earnings, and fewer jobs, and less pay.  That is market effiency, the govt must be paying people to buy the products?

“The central irony of the crisis is that while it was caused by too much confidence, borrowing, and spending, it is only resolved by increases in confidence, borrowing, and spending.” (Lawrence Summers, 2011)   huh?

http://www.zerohedge.com/news/goldman-some-lessons-past-four-years  

The new Building Code (actualy a few thousand years old, but would have prevented leaky homes)

Building codes have a long history. What is generally accepted as the first building code was in the Code of Hammurabi which specified:

  • 229. If a builder builds a house for someone, and does not construct it properly, and the house which he built falls in and kills its owner, then that builder shall be put to death.
  • 230. If it kills the son of the owner, the son of that builder shall be put to death.
  • 231. If it kills a slave of the owner, then he shall pay, slave for slave, to the owner of the house.
  • 232. If it ruins goods, he shall make compensation for all that has been ruined, and inasmuch as he did not construct properly this house which he built and it fell, he shall re-erect the house from his own means.
  • 233. If a builder builds a house for someone, even though he has not yet completed it; if then the walls seem toppling, the builder must make the walls solid from his own means.  

#1  There is no solutions to the EUro crisis, just different types of bad outcomes.  I will laugh so hard if they have a meeting, decide on nothing, agree on nothing, have another meeting rinse and repeat.  It's been floating stocks higher every time.  Amazing, really amazing.  What is the good outcome?  I would haet to see NZ going down this path, and may have a good look at whats really going on. 

There is no plan B especialy considering government borrowings.

Laugh or cry? I feel a face plant coming on.....

Anybody with sense would be out of the markets IMHO....the ones left are the greedy and stupid.....

"Stocks higher" that for me is what sums up the mess we are in....the companies have not announced new products, or greater production its purely speculation. It produces nothing of value.....if we took away the stock market I wonder that our economy / business sector wouldnt actually function better.

I think we are near the end game, before it was Germany and France together trying to look after each other.....a mutual M.A.D. hug....now its looking like they are at or will be at each other throats......France is now looking to use Germany to save itself.....I cant see how that ends well....

But you know they have can kicked for 3 years....so maybe they will can kick for some time yet.....well into 2012 maybe.....I wouldnt bet that way myself.....

regards

I have a small business formed with private capital, functions well enough.  Fonterra is a good example of a big business that was formed through "private" (mostly bank financed) capital.  The Fonterra model is baisically the theory behind stock markets.  Private capital to fund the development of a business.  Nowdays its a pure free market, instant information, buy low sell high, it has nothing to do with business, but it is a way of making money of other people.  The index is still trading pretty accuratly according to Elliot wave theory.  Bounce happening, drop, retest, some kind of reversal pattern, big drop, bounce, etc.

FYI from an emailer

Here is a video that I found interesting:
"Modern Economics Has Failed Us, Says Economist Graeme Maxton" at

http://finance.yahoo.com/blogs/daily-ticker/modern-economics-failed-us-says-economist-graeme-maxton-131229788.html;_ylt=AiLy96_.jLrl.QYJ9BpNsSm7YWsA;_ylu=X3oDMTFjMjE5ZDU1BHBvcwM1BHNlYwNGUERhaWx5VGlja2VyQmxvZwRzbGsDbW9kZXJuZWNvbm9t

Here's an extract from the accompanying write-up:

"Today's Daily Ticker guest Graeme Maxton, economist and author of "The End of Progress: How Modern Economics Has Failed Us," says it's because economists and market participants have neglected some of Smith's most important teachings, including that of social responsibility.

"The gap between rich and poor has gotten far bigger than it should have," Maxton tells Aaron Task in the accompanying clip. "We're not taxing the rich, as Adam Smith said we should, we're underpricing the world's resources, and we're not intervening in markets when we should."

Maxton says Smith was not solely about profits and gains. Smith was just as interested in morality. However, modern economists have ignored that notion and focused primarily on "this belief that the markets were self-correcting."

The result: greater income inequality and instability that "will last for years to come," says Maxton.

Maxton is convinced the global economy will continue to struggle and probably deteriorate because our ability to borrow and consume to seemingly limitless bounds has come to an end. (See: 'The End of Progress': Expect Decades of Slow Growth, Author Graem Maxton)

"We can't have economic growth without adding more debt," he claims. "In 2008, the world economy reached a turning point. It wasn't just a bump in a road. We reached the end of a 30-year period of history and we can't carry-on the path anymore."

All the best,

Peter

Peter, Bernard - looking into current developments on many fronts – the world will never recover again, simply because among the powerful in societies ethic and moral requirements and standards don’t prevail.

Growth propaganda by “Political Town Criers” like PM Key and others are irresponsible, even unethical and should be challenged.

There is only one planet: http://www.youtube.com/watch?v=EQqDS9wGsxQ

..and societies pay already high prices, just to repair what we destroy(ed).

Highly recommended: Listen to all 3 videos.

http://www.youtube.com/watch?v=_fMWwpI0MMA&feature=relmfu

Why end of growth can mean more happiness

http://www.youtube.com/watch?v=cl8ZHDQQY7I

Hey Parksy have you seen these guys?  I couldn't stand looking at their site for too long the way it is laid out but thought of you when I read the content

www.perfecteconomy.com

We have failed, to correctly implement, each and every economic theory I have ever heard of.  That seems to be the problem, the theory is correct but we keep getting it wrong.  I have come to understand that any economice theory, that is contingent on humans acting in a particular way, will not work.  I think the debate over capitalism/socialism/Free Market etc is a moot point.  Blaming modern economics or old fashioned economics just doesn't cut it anymore. 

"I cannot calculate human madness"  - Albert Einstien - Lost 20,000stg on the south seas shipping bubble.

Some things are clear to me.  The current system is based on growth, and unstable, frought with risks, and unsustainable.  There are no realistic solutions under the current system, to the debt + interest trap.  It is a trap, the best outcome is to put it off for as long as possible, as the EMU is discovering.

I say the whole system needs a ctrl+A delete.

It's about time we took this seriously, aknowleged the elephant in the room and move forward.

Thats exactly what I was thinking about earlier, the primal instincts rule.  I was looking for a link on wikipedia but the lizard brain theory wasnt it.  I thought it came from the limbic system but not there either.

Is there any sound well considered argument for keeping the current debt based interest bearing, growth dependant system‽

This is the elephant in the room.  I can see no reason, other then the debt slave, who cares, product of the system type mentality.  Encapuslated in "it's just the way it is".

Sound money eliminates the need for risky investments, interest free debt forces responsible lending, and promotes private capital formation.  Sounds good to me.

 

All those could be achieved without interest, without fractional reserve banking.  All this system rewards is those that have, and those that are lucky.

FYI the latest on the Euromess from Reuters

http://www.reuters.com/article/2011/10/20/us-eurozone-idUSTRE79I0IC20111020

Deep divisions between France and Germany mean they will make scant progress on strengthening the euro zone bailout fund at a summit on Sunday, in a sign that Europe's leaders are still some way from getting a grip on the bloc's debt crisis.

France and Germany said in a joint statement on Thursday that European leaders would discuss a global solution to the crisis on Sunday but no decisions would be adopted before a second meeting to be held by Wednesday at the latest.

cheers

Bernard

And S&P threatens to cut France's credit rating...

Standard & Poor's will likely lower the credit standing of five European nations, including top-rated France, by one or two notches if the region slips into recession and government borrowings increase, the rating agency said in a report.

http://www.reuters.com/article/2011/10/21/us-sp-europe-ratings-idUSTRE79K0SA20111021?feedType=RSS&feedName=businessNews&utm_source=dlvr.it&utm_medium=twitter&dlvrit=56943

cheers

Bernard

There are some very, very clever people out there in Euroland ( even cleverer than me!) and if they haven't come up with an answer to our problems by now, one has to ask " Is there a good solution out there?". From an uninformed view, my answer would be... "No."

Keep having meetings.  Here is the philosophy behind it.  Imagine traveling between two points, now find halfway between them, now find halway between halfway, and the start, now find halfway between those two points, then find halway between those two points, and keep repeating.  You can litereally do this forever and get nowhere.

In this case 3 irresolvable connected problems, and by helping 2 you cause the third to suffer.  But maybe there is another unadmitted/unknown.

http://www.zerohedge.com/news/truth-behind-europes-%E2%82%AC17-trillion-triangle-terror 

Just hurry up and ctrl+A delete imo.

Nice one very good.  Incredibly complex problem, and it also has many more dimensions, regarding the different personalities making the descions.  If it was up to one dictator, or supreme authority, then maybe there could be a peacable resolution.  Getting everyone to agree won't happen guarantee it.  It's like the middle east peace talks x 20.

There are real solutions to the EMU problems, but none of them are acceptable to the leaders.  They have already decided what they want the solution to be, but it is impossible, like trying to make 1+1=5, while only adding another 1.  This is why they are trying to put the problem off into the future which is making the debt bigger and bigger.  This quote from the link posted by Soreloser

According to insiders, Wolfgang Schaeuble, Germany's finance minister, could not resist taking an "I told you so" approach - he had been, after all, the first to call for an "orderly" default for Greece 18 months ago, at a time when the cost of such a move was less than one third of the price today.  

I would like to see them make such a massive mess out of this and take as long as possible stuffing it up.  This is helping create awareness about the inherent problems in the current monetary system.  The worse it gets, the greater the anger, and emotions are what drives us.

This market is only working on technicals, there is no reason stocks, or Fx should be as high as they are based on fundamentals.

And here's why China can't/won't rescue the world again this time

China is unlikely to cut interest rates or change its monetary policy stance until the pace of consumer price increases slows to less than 5 percent, Yu Yongding, a former central bank adviser, said.

“Inflation is under control and the inflation rate will fall,” Yu, a researcher with the Chinese Academy of Social Sciences, said in Beijing today. “I don’t think there will be any major changes in policy either further tightening or loosening” until cost-of-living gains decline, he said.

http://www.bloomberg.com/news/2011-10-21/chinese-inflation-is-under-control-former-pboc-adviser-says.html

More good news out of America...the 97 million above poverty line households...each now is liable to fund only $640,000 of govt debt, on top of their own personal debts....... . http://www.marketoracle.co.uk/Article31080.html

You really don't want to know the bad news....!

And now for the comedy act....the American wizz bang pointy heads like Timmy the Rat expect to be listened to and obeyed by the fools in Europe..."Do as we say!"

A tsunami warning has been cancelled for New Zealand after a 7.3 magnitude earthquake struck the Kermadec Islands this morning.

http://www.stuff.co.nz/5834076/Tsunami-warning-cancelled-after-7-3-quake

More HAARP testing?

I'm going out on a limb....I reckon National insiders will pop the immigration spin game post election and are already in cahoots with media bosses to sprook the public perception on immigration...no need for them to ask the real estate mob to lend a hand.

The point is both political and of fundamental importance to any balancing of the budget let alone a surplus story emerging.

If Nats don't do this...they face defeat 014 by which time the foolish voters will have forgotten about the mess Clark made and left behind. And Labour will most certainly revert to form....meaning you can expect them to flood the place with what they will regard as excellent immigrants!

Take your pick....wealthy migrants wanting to build new homes and invest in new enterprise that creat jobs..................or unskilled immigrants with little or no English language skills putting more pressure on the state benefit system and allowing Labour to spout happy news stories around the huge increase in state house building activity funded by yet more massive borrowing.

Do you want the building sector growth story based on new capital or based on increasing your future tax liabilities to repay the fatter govt debt! One way leads to an increase in govt revenue and a more likely surpluses to begin paying down the debts, plus the creation of private sector new employment for the school leavers--------------or would you prefer the socialist road to unionism and debt misery with no end.

WOLLY: on "wealthy migrants wanting to build new homes and invest in new enterprise that create jobs"

They open $2 shops, which don't create new jobs for the locals, but do increase imports.

No Wolly the choice is between wealthy immigrants who like to indulge in property speculation or people who want to work.

Right...wealthy people don't want to work....doh!

I will give you one example AR....the Millbrook Golf Course near Arrowtown....who financed that AR?....who took the risk to buy the land and invest millions to create a world leading tourist attraction that created a heap of employment and still does....come on AR....tell us who it was?

Were the developer and the financier the one and the same and do they still have skin in the game?

The bloke what put in the millions dug the golf course and built all the infrastructure with his own hands....jeez icon what do you expect!....of course he contracted the work out to local firms and yes he recently put more capital into extending the course and completely renovating the whole place....The staff on site are in the dozens...permanent employment.

And for any other haters of foreign investment...http://www.millbrook.co.nz/resort/

Go and have a read....you might learn what enterprise means!

 

Yeah there is a problem with making these generalisations.  I see wealthy immigrants who live here for a few months each year, and the only apparent benefit to NZ is their financing of speculative capital gain land development schemes, and/or paying people to build very large houses.  

Then again I am at the other end of the country to Millbank, maybe it is different there?

The workers part of my comment is directed more at the value to us of not-wealthy immigrants doing what is actually highly productive work like cleaning hospitals.  Yet we seem tougher on allowing such immigrants in than the wealthy.

And before you point it out yes I am using immigrant in a wide sense that includes anyone with residency.

Gosh, do I hate those generalisations. Hubby and I are French immigrants - not wealthy as in super-rich but well-off, at least by NZ standard.

We did build a new home and started an IT business, not a $2 shop. It may not employ people other than my husband and I because that's not our focus right now but most, if not all, of the projects we work on and software we develop are for products being sold overseas by NZ companies.

Seeing how much I dislike shopping, I can assure you that my family and I don't contribute to NZ's import problem. Oh and indulging in property speculation is not for us and we do want to work (and believe it or not actually enjoy our high-tech, highly-skilled jobs). Doh. [Go All Blacks].

Fraid it's an engrained fault in the Kiwi character Elley....always rubbish those more enterprising than yourself especially when they come from overseas and using their savings and applying their skills, they turn a bit of wasteland into a very successful business.

Wolly, you mis-understand me. That's a good story. Need more of them. There is too much speculative international money looking for a quick buck. Hit and run. I look at the $50 billion of hot-money sloshing daily through NZ system, and wonder what it's doing.

Sorry icon...my fault. It's a favourite destination for me. Imagine 100 similar investment decisions being made by wealthy foreigners wanting a better, safer life down here.....That's what John Key ought to be banging a drum about.

It is the Millbrooks in NZ that attract the big spending tourists and lead to the permanent employment options. Unfortunately it is the criminal attacks on tourists that ruin it all. I see another one has been bashed lately.

 

Hi there, the system may have changed and in-demand professions too. At the time we applied for permanent residency 9 years ago, there was a points system. From what I remember, being youngish (we were 27, tick), applying as a married couple (tick), having top degrees (tick), being healthy (tick) and a few more things gave us enough points to qualify. We could have used the "will transfer 100K to NZ" box to get more points but didn't as we didn't need to (although we did transfer all our savings to buy our first home a few months later). 

Don't worry, they made it hard and most unmotivated people would have given up half-way through the process: putting the files together took me 6 months of near full-time work (eg, had to provide + translate every single school report since year 9!). Hope that answers your questions.

I guess it also depends what you call IT. Going by the amount of work we get as contractors, there doesn't seem to be that many people who are specialists in embedded system design & devt (requiring expertise in software + electronics), are also able to develop all sorts of desktop & web-based applications and have enough experience to successfully lead projects from start to finish.

I think you dont understand the policy. 

We just employed a south african fresh off the plane, very good skill set and experience.....so nope IT has its needs. Now when we look at ppl with poor skills and experience in IT as in most things, yes there are plenty of those....

Elly would seem more than capable than quite a few rednecks I could name.

regards

One for steven!

 http://www.bbc.co.uk/news/business-15402145

 "Norwegian oil firm Statoil has said there are twice the oil reserves it previously estimated in its newly discovered North Sea field.

Statoil now says the Aldous Major South field contains between 900 million and 1.5 billion barrels of recoverable oil."

1 weeks worth of oil?  Sweet.

Wolly and this proves what?

You really have no "bigger picture view" at all.....

We use 86mbpd (million barrels per day)

so thats 10 to 20 days of world daily oil consumption....

Excellent news, eh?

Say we take a 5-6% drop per annum in oil production, call it 4mbpd......with a world demand increase of 2.5%.....so every year we have to find 5 or 6 or so mbpd extra....and we found this one field....its likely we would get say 100k barrels per day out of it, maybe 250k.........so how many of these tiny fields per year and every year do we need?

10?

20?

30?

Do the math....

regards

5840, at 4mbpd, and average production of 250kbpd.  Was good to see Bernard Hickeys growthless society article linked on theoildrum.

I like it.

By the "truth" I refer not to some eternal truth, but to an understanding that the financial model presented by the Status Quo as "reality" is in fact an illusion that serves the interests of those controlling massive concentrations of wealth and political power. Simply put, the present-day financial Status Quo is unsustainable, and it will devolve or collapse under its own weight of internal instabilities and lies. 

 "Philip Hammond said that since Britain had played a central role in toppling the Gaddafi regime, British companies should seek a central role in the reconstruction of Libya too" telegraph

Fabulous....next on the list for self destruction...Syria....time for another dictator and butcher to be chased into a drain and then wasted.

The Brits will sell Libya Land Cruisers and a fleets of new Rolls for the next generation of corrupt thieving lying politicians...the Yanks will flog them out of date missile systems...the Germans the engineering and the french....err   arh    ummm    what the hell do the Frogs make?...can't do nuclear power anything....how about a banking system...hahahahahaha

Land Rovers wolly, Land Rovers.

oh yeah...olg age

huh? Rolls Royce is a very old car company pre world war one or something....one of the oldest and finest marques ever IMHO.

Not my cup of tea....I admit.....

regards

"basically" I dont agree....

http://www.rolls-roycemotorcars.com/#/ghost/

Cars are still made in a factory that just makes RRs from what i can see.

regards

Might have to head down and see what these dirty hippies are up to on Monday. ;-)

 

Good for you Ian, getting involved, education is what its all about.

Bernanke's plan.  Buy MBS, lowering the return on apparently safe assets will force investors into risky assets.  This sounds like pure veil to me.  It's also a bit of a blinder to what is really going on.  MBS are getting more risky by the day, as I have posted before re. Primex.  So the reasoning behind the risky assets is flawed to start with.  Also considering how risky stocks have become given all the current events unfolding globally, trying to force pension funds into this market sounds genercidal.

Heres the link

http://www.zerohedge.com/contributed/bernanke-%E2%80%93-%E2%80%9Ci%E2%80%99ve-abandoned-dual-mandate%E2%80%9D 

Thinking about his comments on pushing people into more risky assets, I can only conclude that he haets everyone that isn't TBTF.  MBS have few types of buyers the main ones are Investment banks, and Pension funds.  Investment banks are government guaranteed TBTF, Pension funds are shark food, and cannot afford to have negative real returns offered on treasuries.

This stinks, its like changing the speed limit from a maximum speed into a minimum speed, too encourage risk taking, and force people to spend less time traveling.  It's called risk for a reason, it means likley to be worth less then what you paid for it.

A bit.............

 

Confused

 

On Greeks, Gadaffi, and Goldman Sachs, and furthering the history lesson on Greece
http://www.smh.com.au/business/you-take-it-where-you-can-get-it-20111021-1mc9c.html

Wolly, Elley, AndrewR

I agree with Andrew R. It's a question of relative perspective. Of wide-open spaces, prairies, savannahs, bush, creeks, mountains, beaches, coast lines, city of sails. To someone coming from Hong Kong to Auckland it would be paradise. To someone having grown up in Auckland, it was, but no longer is, paradise. To someone going from Auckland to live in HK, it would be a nightmare. A person having grown up in Marlborough, migration to Hong Kong would be what? A difficult transition lifestyle-wise. A child, born in Auckland, of Hong Kong parents, returning to HK for a look-see at their origins homeland, they would have some difficulty. A young child, born in Auckland in the last 5 years, on reaching adulthood will know only their own past, and probably consider Auckland a great place. Whereas, any Aucklander of Wolly's vintage, who grew up there, can only think of paradise lost.

Elley and Wolly, you both share the same location. The South Island. Unless you have spent extended time in Auckland and researched the history of the place, what it was like, and what it is like now, some attitudes may be difficult for you to understand.
 
Here is a repeat of a post from 27 Jan 2011. Memo to Messrs Hickey, Vaughan, Chaston .. Here is a serious suggestion for you all at interest.co.nz to consider .. be original .. get out from behind your keyboards for a couple of days and go and interview a half-dozen old-timers, third or fourth generation aucklanders who grew up there, and have been pushed out, sold-up, and moved to less over-crowded places, slower-paced places, and ask them why, what happened. Ask them what has happened to auckland, and whether they or their offspring like it. For a lot of people, auckland has become a safe-haven from the Sitiveni Rambuka coups (ethnic cleansing) and the Frank Bainimarama coups (ethnic cleansing) and then when sovereignty over Hong Kong reverted to chinese control, the huge inbound suitcases full of cash into new zealand .. has turned many auckland suburbs into enclaves ... walk up many of the CBD streets and you have to know mandarin to read the lettering in the windows of the shops ..

Things have changed, (I have no difficulty with change) but the changes havent been for the better, and the causes of those changes are continuing un-abated.

Yeah we sort of knew all that icon...point is none of us can stop the political freight train once it decides immigration is the route to take...and going by the way most Kiwi behave in a property bubble....you'd better just get out of the way.

My suggestion is that a new age immigration media sprooked govt spun trend will be what Labour expect will keep them in power after 014...!....yes I am suggesting the socialists will be back into the pig trough...because no way can Bill produce a surplus by then and the foolish voters will pick promises over bad memories of Clark......So you had better expect National to grab the option to pump immigration post this election. They will have just 3 years to get things humming.

Those were the very words spoken by a King Country Maori chief back in the1860s as he took aim on a Red Coat !

 Whatever haircut is agreed upon (and 90% is what is needed but that will not happen), note that EU is shooting for a mere 50% agreement from the bondholders. Rest assured the EU will label the actions "voluntary".

Regardless what the EU says, there is a very good chance the rating agencies will correctly label the action involuntary, thus triggering CDS payouts.

There should be a 100% chance the rating agencies will label the haircuts involuntary, but don't count on it.

Indeed, the only thing one can count on are more rumors, lies, manipulations, and magic proposals. Eventually the market will spit in the face of such proposals but unfortunately I cannot tell you when, nor can anyone else.

 http://globaleconomicanalysis.blogspot.com/

A 200% haircut is what is needed.  Keep in mind that only about 35% of the debt is actually able to be defaulted on.  They can't default on the bonds held by the IMF or the ECB, these are special loans, and must be repaid, normally by selling any physical assets, mining rights etc. etc.  More bonds are held by Greek banks, a default would leave thier balance sheets wiped out, and they would need a bailout from the govt which is broke, so no defaults there.  Then there are the Greek pension funds, and foriegn banks, which leaves about 35%, or about 47% of GDP, a 100% default would take debt to GDP down to about 90% of GDP.  Which means that only 5% of GDP is going out on interest payments, this is still 18% of Greek government revenue, and they will still need more financing from the ESFS/IMF/ECB.

I expect them to buy another week or two, to give french banks time to create deflation, then they will allow Greece to default, and watch as Itali, keels over.  The curtain is being lifted on the debt charade, and the world is waking up to fact that this is how we have been played.

Greece just got bailed out so it can get into even more debt! What psychopath of the Keynesian school thinks that this unbelievable trajectory is anything but a complete and utter waste of money? German, and US taxpayers, are merely giving Greece money so it can increase it debtor status with French and a few other European banks

http://www.zerohedge.com/news/revised-troika-forecast-sees-total-greek-debt-gdp-peaking-186-here-what-happens-next 

The first problem I have is the muck throwing this guy does....he accuses them of "Keynesian" this isnt Keynesian its cutting your own throat aka Austrain school of economcs style....I just wonder how ludricious ppl get air time.....0/10 for zerohedge yet again.

However he's right in that the Greeks cant pay this back.....$149% is way beyond the ability of a Govn that is in a dead tail spin for income to pay back, ever....I dont think even 75% is doable for them.....so a huge haircut is in order.....75% now looks necessary/achieveable.....maybe....a 35% GDP / debt ratio has to be aimed for or it wont work.....tha banks and the greeks deserve what they are getting me thinks.....

regards

50% wont do it......I doubt even 60%....so 75%+ 

So roll on the CDS blowups....

Got to the stage I fell like a man waiting for the firing squad...FFS get it over with.....

regards

IF you thought our PM's return to surplus forcasts were ambitios check these ones from the Troika report on Greece.

 

Reduced fiscal adjustment needs

. The nominal fiscal targets are maintained through the program (mid-2013) and after that, the primary surplus is assumed to improve further until it reaches 4 percent of GDP for the period 2014-16. The primary surplus steps down to 4 percent of GDP in 2017-20 and to 4 percent of GDP in2021-25 (a level which in the past Greece has been able to sustain). Since few countries have been able to sustain a 4 percent primary surplus, it is assumed that from 2026 onwards, the primary surplus is maintained at 3 percent of GDP. Under this path, which requires sustained and unwavering commitment to fiscal prudence bythe Greek authorities, the overall fiscal balance would not drop below 3 percent of GDP until 2020. 

Anti-AGW Koch Brothers funded a study to show AGW was a myth, but it backfired.....the data won.....

And for the wattsupwiththat junk site readers....his work is described as pure BS....

http://thinkprogress.org/romm/2011/10/20/349544/berkeley-temperature-stu...

http://thinkprogress.org/romm/2011/02/14/207519/exclusive-richard-muller...

"You know that because you are prestigious, independent institution, you can bring fresh eyes and credibility to this supposed problem.

How would you go about killing this potentially not-bad idea?   How about picking a co-chair whose knowledge of the subject has been widely criticized?  How about including a bunch of prestigious scientists who know very little about the subject and who have little involvement in the actual study?  How about having your only actual climate scientist — presumably chosen for extra credibility — be Judith Curry?  How about having a family member of the ill-informed co-chair be project manager?   How about taking money from one of the biggest funders of anti-science disinformation in the world?

So use dodgy ppl to do it....

"It is Muller whose conclusions are an artifact of poor mathematics.

You’d never know it from Muller but the Hockey Stick was affirmed in a major review by the uber-prestigious National Academy of Sciences (in media-speak, the highest scientific “court” in the land) “” see NAS Report and here."

Yes THAT hockey stick.....LOL

Or the financial founder/bank roller,

"It’s hard to imagine a more irresponsible and anti-scientific person than Charles Koch."

"Greenpeace details how Koch Industries has “become a financial kingpin of climate science denial and clean energy opposition,” spending over $48.5 million since 1997 to fund the anti-science disinformation machine."

Of course the deniers like any true [dis-]believers wont bother.....your science and econonics beliefs is pure voodoo......carry on buying houses and gold guys (n ' girls?).....we'll get to see pretty soon who's right I think....Steve Keen and PK with a Depression...v um......well....and hyper-inflation..........

regard

The evidence for climatic warming is pretty conclusive now.  As the role of CO2 as a greenhouse gas has been known for over 100 years, the only possible argument remaining against AGW is that there is some undiscovered negative feedback loop. Wishful thinking?

Yes, the loops are all positive.

regards

Which is the interesting point.....they have held things together this long because they have been allies....now its up to Germany to bail France out.....oh and just about all of Europe....

Merkel's political career is toast either way....

regards

A powerful earthquake with a preliminary magnitude of 7.3 struck eastern Turkey on Sunday, the U.S. Geological Survey said.

 

 "The Labour Party's water policy for the general election calls for farmers to pay for the water they use." radio nz

If it moves...tax it...if it breaths tax it.....if it has a pulse tax it...tax tax tax

Labour........................idiots.

How much water do you use a month? What state is the water in when it leaves your property? How much of it evaporates at a loss to the river system and those downstream of you?

We all should pay for the water we use, some do it through meters others through rates....if farmers are using water then they should be paying for its use, simple.

regards

How valuable is fresh water in NZ?  If coorporations can sell then govt sure as hell should tax it.

Nothing is so easy as harvesting votes from the envious......Labour's latest idiocy takes the cake for being the loon idea of the election...and we all thought their CGT would win....

 

Why shouldn't farmers (or everyone else) pay for using water owned in common by us all?

"owned in common"...oh gee wizz AR...your marxism is showing...having a wee envious moment are we?

Pop off to Cuba AR and there you can wallow in the pleasures of all things being owned in common....a real go ahead place....off you go.

Hi Wolly.  Make up your mind -- am I to zoom off to Cuba (can you pay my airfare :-)) or am I to hang around at some religous service where a plate with Goofy's face on it is passed around?

Anyway who "owns" the water in a river or in a lake? You, me, or maybe the owner of the river or lake bed? or ia it just there for whoever to take?

 

What do you call it when you win a gold cup by 8 - 7 , that you first won in 87.....!

 "David Cameron was given a vicious dressing down by French President, Nicholas Sarkozy, yesterday as tensions reached boiling point among European leaders arguing over how to save the euro.

Mr Sarkozy was reported to have told the British Prime Minister that he should "shut up" during a meeting of the European Union's 27 leaders.

"We are sick of you criticising us and telling us what to do," he was quoted as saying by EU officials, losing patience at what he perceived to be Mr Cameron's hectoring from the single currency's sidelines. "You say you hate the euro and now you want to interfere in our meetings."

http://www.independent.co.uk/news/uk/politics/sarkozy-tells-cameron-to-shut-up-in-euro-clash-2375098.html

No wonder Cameron has decided not come down under....he has frogs to fry at home.