Here's my Top 10 links from around the Internet at 1.30 pm in association with NZ Mint.
I welcome your additions in the comments below or via email tobernard.hickey@interest.co.nz.
I'll pop the extras into the comment stream. See all previous Top 10s here.
Jon Stewart is essential watching at #10.
1. Keep an eye on China's housing market - The good news yesterday on Chinese growth helped boost our currency overnight.
But it's worth watching the fast slowdown in the Chinese housing market.
Home sales rose at their slowest pace in three years in 2011 and the slowdown was marked in the final quarter of the year.
If it slows too fast the Chinese leadership may do something to ease the restrictions put in place last year.
Some are pointing to the end of the party congress in March for action.
“The property industry visibly slowed down quickly in the fourth quarter,” said Alan Jin, a Hong Kong-based property analyst at Mizuho Securities Asia Ltd, who expects the data to worsen in the next two quarters because “developers are already short of capital.”
China’s residential values fell for a fourth month in December, according to SouFun Holdings Ltd. The government said last month at an annual economic planning meeting that it won’t back away from real-estate industry curbs this year that are damping home sales and pulling down prices.
2. 'Easy and cheap money drives out good money' - PIMCO's Bill Gross argues in this FT.com opinion piece that very low interest rates may actually cause deleveraging.
Gresham’s law needs a corollary. Not only does “bad money drive out good,” but “cheap” money may as well. Ultra low, zero-bounded central bank policy rates might in fact de-lever instead of relever the financial system, creating contraction instead of expansion in the real economy. Just as Newtonian physics breaks down and Einsteinian concepts prevail at the speed of light, so too might easy money policies fail to stimulate at the zero bound.
Historically, central banks have comfortably relied on a model which dictates that lower and lower yields will stimulate aggregate demand and, in the case of financial markets, drive asset purchases outward on the risk spectrum as investors seek to maintain higher returns. Near zero policy rates and a series of “quantitative easings” have temporarily succeeded in keeping asset markets and real economies afloat in the US, Europe, and even Japan. Now, with policy rates at or approaching zero yields and QE facing political limits in almost all developed economies, it is appropriate to question not only the effectiveness of historical conceptual models but entertain the possibility that they may, counterintuitively, be hazardous to an economy’s health.
3. 'Cash for trash' - The ECB's LTRO (Long Term Refinancing Operation) was the big news of the last month. It seems to have settled things down.
But here's how Bill Gross describes it in a Tweet. HT Zerohedge.
What does
#LTRO stand for? 1. A shell game; 2. Cash for trash; 3. Three-card “monti;” or 4. All of the above.
Here is the stark reality of what forced the ECB to offer unprecedented three year loans at absurd rates and most alarmingly, the acceptance of collateral that no other financial institutions will accept. The ECB has sacrificed its balance sheet in yet another EU "kick at the can".
5. The evolution of capitalism - John Kay makes some good points about how the nature of capitalism has changed since the days of Marx. There are now many more limited liability and publicly listed companies where a managerial class rather than a muscular owner makes the decisions.
I'm not sure what it changes, but it's an interesting insight.
The business leaders of today are not capitalists in the sense in which Arkwright and Rockefeller were capitalists. Modern titans derive their authority and influence from their position in a hierarchy, not their ownership of capital. They have obtained these positions through their skills in organisational politics, in the traditional ways bishops and generals acquired positions in an ecclesiastical or military hierarchy.
If the first half of the 20th century was a time of fundamental change in the nature of business organisation, the second half was a time of fundamental change in the nature of business success. The value of raw materials is only a small part of the value of the production of a complex modern economy, and the value of physical assets is only a small part of the value of most modern businesses. The critical resources of today’s company are not its buildings and machines but its competitive advantages – its systems of organisation, its reputation with suppliers and customers, its capacity for innovation. These attributes are not, in any relevant sense, capable of being owned by anyone at all.
6. The bifurcated society - Rick Bookstaber has written an enlightening piece at Credit Writedowns on how computers are taking the jobs of the middle classes, leaving a poor proletariat and a few very rich masters of the universe.
We have had an axiomatic view that when technology uproots us from jobs it opens up new ones, and the new ones are even better in pay and in job satisfaction. After all, somebody has to make all those robots. It is a comforting thought, but it is not really an axiom, perhaps just a lucky result that has obtained over the course of the industrial age. There was always a West where the workers could go, an expanding population, undeveloped countries, and new products and demand. The same may continue, but it doesn’t look like it is.
Which sort of makes sense if we are moving toward living in a virtual world with virtual industry taking on increasing prominence, and with those industries not particularly labor intensive (or for that matter capital intensive – at least nothing like the era of steel and railroads), or not labor intensive for those with motor as opposed to cognitive skills. We aren’t thinking too much about this right now. We focus on running out of resources, not on running out of new markets, more specifically new markets – both of new consumers and new products – that bring as many new jobs with them as are being displaced by machines.
7. Recession locked in - Tim Duy does a great job on his blog of cutting through all the noise in Europe to the basic problem that even the LTRO carry trade can't fix.
The actions of the European Central Bank greatly eased the immediate financial pressures in the Eurozone. But the underlying problem of internal imbalances remain, and the European response is still not addressing those imbalances. Instead, the commitment to the fixed exchange rate combined with Germany's failure to recognize that their current account surplus must turn to deficit if they ever hope to be repaid promises to lock the Eurozone on the path of ongoing recession.
8. The Great Gatsby Curve - Paul Krugman refers in this New York Times blog to a speech by Alan Krueger, the chairman of the Barack Obama's Council of Economic Advisers, about inequality.
It includes a great chart showing New Zealand having a relatively unequal and not very socially mobile society, at least in 1985.
The chart shows that the more unequal a society gets the less mobile it becomes, which is sort of axiomatic. What's interesting is that America has become more unequal and less mobile over time.
Here's Krugman's take on Krueger's chart:
As he shows, America is both especially unequal and has especially low mobility. But he also argues that because we are even more unequal now than we were a generation ago, we should expect even less social mobility going forward.
Very illuminating — and disturbing.
9. Control fraud - William Black writes about the control fraud inherent in the relationship between Apple and its Chinese suppliers. HT Ed Harrison at Credit Writedowns. This is a must read in conjuction with the must watch from Jon Stewart below.
Anti-employee control fraud creates real economic profits for the firm and can massively increase the controlling officers’ wealth. Honest firm normally cannot compete with anti-employee control frauds, so bad ethics drives good ethics out of the markets. Companies like Apple and its counterparts create this criminogenic environment by selecting least-cost – criminal – suppliers who offer components at prices that honest firms cannot match. Effectively, they hang out a sign – only the fraudulent need apply to be suppliers. But the sign is, of course, invisible and cannot be introduced in court so Apple and its peers also get deniability. They are shocked, shocked that its suppliers are frauds that cheat their employees and put them and the public’s health at risk in order to make a few extra yuan or dong for the senior officers.
Fraudulent suppliers, therefore, have compelling incentives to locate in nations and regions in which they can commit fraud with impunity. The best way to evaluate the fraudulent CEOs’ view as to the risk of prosecution for their frauds is to observe whether they take cheap means of hiding their frauds. When the CEOs do not even bother to avoid creating a paper trail documenting their frauds one knows that they view the risk of prosecution as trivial. Nations that are corrupt, have weak rule of law, weak or non-existent unions, poor protections for workers, a reserve army of the impoverished, and have few resources devoted to prosecuting elite white-collar crime provide an ideal criminogenic environment for firms engaged in anti-employee control fraud. The ubiquitous nature of anti-employee control fraud (and tax fraud) in many nations explains why U.S. industries have been so eager to “outsource” U.S. jobs to fraud-friendly nations. Companies like Apple also discovered long ago that Americans often made poor senior managers in these nations because they objected to defrauding workers. Not a problem – there are plenty of managers from other nations that have no such ethical restraints. Foreign suppliers run by Asian managers are increasingly dominant.
10. Totally relevant Jon Stewart video on outsourcing, in particular the Foxconn complex in China that makes iPads.It relates well to #9, #8 and #6.
35 Comments
calling all Troglodytes ! franosullivan has this goody on nz herald today
As Norwegian model shows, the possibilities posed by resource exploitation deserve more attention than kneejerk rejection
Looking beyond ideological responses to oil exploration will give truth to David Shearer's promise to listen before setting economic policyIt will be a test of Labour leader David Shearer's mettle if he overrules the troglodytes in his own caucus and puts Norway at the top of the list of small nations he promotes as exemplars for New Zealand's economic development.
Norway's 4.99 million citizens enjoy a standard of living New Zealanders can only dream of. The country has the highest human development ranking on the OECD index. It has a comprehensive social security system, has universal health care and subsidised higher education.
It also has oil.
This is a major asset which Norway hasn't hesitated to exploit to grow a thriving economy which, on a GDP (PPP) per capita basis, scores double the performance of New Zealand. This can be seen on the International Monetary Fund's 2011 index where fourth-ranked Norway registers US$53,376 on the chart measuring gross domestic product at purchasing power parity per capita basis. New Zealand is way down the list at 32nd place (US$27,966).
The two nations that Shearer does promote - Denmark and Finland - do score substantially higher than New Zealand. This pair of nations provided a higher economic dividend for their citizens because they have developed high-value jobs in other sectors than their agriculture bases. But Norway's performance is superior. This small Scandinavian country has huge resources: petroleum, natural gas, minerals, lumber, seafood, fresh water and hydropower.
And frankly, with Denmark (ranked 19th at US$37,741) and Finland (ranked 21st at US$36,723), there is no contest as to which of this clutch of Scandinavian and Northern European nations is the better economic performer.
That it why it is a pity Shearer didn't have the opportunity to exert his choke chain and stop the absurd responses by Labour MPs Parekura Horomia and Moana Mackey to the news that US oil exploration company TAG Oil wants to launch an aggressive East Coast basin programme.
Instead of doing their homework first - including examining the economic upside if a successful oil drilling programme can be launched accompanied by sensible environmental protections - the two East Coast-based MPs opted for kneejerk mode.
That Mackey - who is Labour's energy spokesperson - could so quickly blow away the potential upside from successful drilling speaks volumes. But this MP proclaims New Zealand's economic future does not lie in it being the "Texas of the South". She is reported as claiming TAG's plan is evidence of National's "drill it, mine it, sell it" mentality. Labour is focused on renewable energy.
Horomia was reported as saying it was a "known fact" that the East Coast was rich in fossil fuels like oil and gas but he was staunchly opposed to offshore exploration. It was a real issue for "iwi" and the company needed to show its hand.
These closed mind ideological responses are not what Shearer promised when he said late last year that Labour would "listen" before forming economic policies.
If he can't get this point across when his caucus meets next week for the first time in 2012 Shearer will not make much headway with the business community.
There is room for real creative thinking around how New Zealand capitalises on its resource potential.
BusinessNZ chief executive Phil O'Reilly was on point when he wrote in yesterday's Herald that New Zealand was blessed with iron sands, coal, petroleum, phosphate, precious metals and rare earths.
O'Reilly also pointed to how Norway set up a public fund from surplus oil revenues to pay for the health and security needs of future generations.
This is an example I alluded to in a previous Business Herald column I wrote promoting the possibility New Zealanders could "become the oil sheikhs of the Pacific" if we harness these resources skilfully.
But there is room to go much further than O'Reilly has suggested.
Labour could usefully explore whether the Government should relaunch another SOE - call it "Petrocorp" for old time's sake - and take a lead role in the exploration itself. Add that to the investment fund that the open-minded Shearer thinks could usefully hold all the state's commercial assets and there would be the prospect of launching a commercial revolution in the state sector.
Shearer would have no difficulty squaring such an approach with moves in other social democratic regimes. But his caucus needs to step up.
As the NZ Institute reports New Zealand has remained about 10 per cent below OECD average income levels for the last two decades. New Zealand also does not compare well against income levels achieved in Australia, which has managed to maintain a GDP per capita about 25 per cent above the OECD average.
We need all the gift horses we can find.
goNZ - no, no and no again – don’t go the same way then other countries looking for megalomaniac short term ambitions.
1) Industrial accidents
Worldwide national debt levels are now so high, that infrastructure maintenance/ services are at risk. In some cases this will lead into frequently and massive failures of entire technological systems. The consequences will just add to the cycle of more costs and more debt, broken societies and more damage to environment, water, air and soil - our planet.
2) China and other economic powers cannot do it and will never do !
Visionary, clever approaches in economies are the key to compete properly on tough international markets today – long term.
……in addition internationally New Zealand is in such a great position to adopt an economic strategy.
- We are one of the friendliest and most beautiful nation on earth.
- We are far less corrupt then most other countries.
- We already are familiar with the image/ strategy.
- R & D is based on ethical principles.
- We are nuclear free.
- We do not have heavy or big chemical industries (ex. Colmalco)
- Tourism is one of the major earners.
- We are one of a few modern countries to be geographical remote from others.
- We are not overpopulated - with rather small pollution grades.
Of course for a “100%NZ pure green and clean” strategy improvement need to be made on a number of fronts.
hey gonzo i dont specifically have an issue with the extractive industries, but Norway's setup is very different to ours. They have higher royalty rates, demand more out of foreign companies, and ensure that their own industrial and technical sectors get a hefty share of the action.
if we were to do that then i'm for it, but at the moment i'm sceptical that our politicians have what it takes to get norway-esque results.
No goNZ - just read what I said and no more .
http://www.youtube.com/watch?v=HbZgT-uSFMM&feature=player_embedded
Walter : This is better than watching whales in Kaikoura ...... cooking the big fat lazy buggers !
www.highnorth.no/library/culture/recipes/no-wh-me.htm
....... but don't forget the gherkins . Most important when chowing down on a succulent whale meat steak , to have the gherkins . Oh yes .
WE are paying the wages for this new list MPs little bike ride and festival - cool eh?
One politician is seeing first-hand what life's like for cyclists on our roads.
Green MP Julie Anne Genter is biking 550km from Christchurch to Mataura, just south of Gore, where she'll attend a climate change festival.
She says she's heard that it's an unwelcoming stretch of road for cyclists, and she wants to highlight the need for more investment in cycling and walking.
"It's sort of an accident of traffic engineering that we've ended up with the transport system that makes it really hard to do anything but take a car," she says.
Ms Genter is aiming to cycle around 80km a day to reach her destination by the weekend.
I cannot believe that he is talking about the fish in the sea as something that ought to be treated as "social wealth" that all of us own and none of us own, when there are so many examples of over-fishing around the world to show that it is precisely where there is no individual private ownership that you get under-investment and unsustainable exploitation.
If nobody owns a resource, then nobody has any incentive to invest in increasing its value, since the cost of such an investment will fall on the individual and the benefits on everybody.
If everybody owns a resource, then nobody has any incentive to seek to preserve it; I might refrain from utilising the resource, but all that that will achieve is that somebody else will utilise it instead of me.
Suggest you investigate "the tragedy of the commons".
Actually the overfishing of many fish populations shows that market systems completely fail to regulate the expoitation of shared resources. This makes market systems with few regulations a very poor way to manage natural resources, if market systems are justified they clearly need be regulated to a great extent.
Public interest campaigns like 'the great fish fight' have shown that vast swaths of the public do take an interest and can influence corporate self interests and put pressure on government policy. They also show that the regulations which are in the public interest are not the same regulations in the corporate interest, which is why the public are typically disen-franchised from this process if possible. The worst thing which could possibly result is for the public to be legally dis-enfranchised from this with a loss of collective ownership. The clear result would be for many to wake up one day in the future to realise they have lost not only ownership of something, but it is gone from nature and can never be returned.
Given that the necessary investment to increase the value of fish stocks is to stop exploiting them and their environment and requires no particular economic effort, they will kind of do the hard part themselves if left well alone, I find this idea that less collective ownership would be better for the environment rather strange. It should be more than apparant that if public opinion had more influence and corporate interests less influence there would be more fish in the sea, and steps towards more sustainable fishing practises.
kin - of course there is a correlation what can be done. New Zealand is mostly depending on foreign knowledge, skill and expertise for such major operation.
Foreign companies TAG, etc. in New Zealand are of course profit driven. Pike River demonstrated resources for safety and technology are often neglected.
You MUST be having a laugh?
NOrWAY, where income tax gets up to 40% (income over NZ$161,000 - poor old Tony Marriot would NOT be happy), there is a wealth tax of 1.1% on personal capital over NZ$150,000; 7.8% National Insurance contribution (11% if you are self employed); 25% VAT; 28% Capital Gains; up to 15% inheritance tax; 2.5% stamp duty; local rates at up to 0.7% (which equates to NZ$2500 on a median price home in NZ)
So the government takes up to 47.8% of everything you earn (51% for self employed), taxes your savings (and any interest you earn on it, of course) and a quarter of everything you spend goes straight to the govt (although only 8% for food and 4% for passenger transport)
So Shearer gets your vote if he follows Norways ecconomic policies then???
goNZ - Fran’s article clearly lacks depth and balance.
Is the public aware of highly controversial methods of: Hydraulic fracturing, known as ‘fracking’ or ‘fraccing’, a mining process which involves pumping mixtures of water, sand and chemicals into bore holes to break apart rock seams containing oil and natural gas.
http://www.sciencemediacentre.co.nz/2011/08/11/impacts-of-hydraulic-fra…
http://www.radionz.co.nz/news/national/81969/ban-wanted-on-extraction-method
I find it quite remarkable that politicians, ministers and policymaker make statements of increasing the exploration of mining/ drilling, even when safety issues are not guaranteed.
As the economic past clearly indicates New Zealand doesn’t have the financial, technical and operational resources in place to manage such major projects.
"First of all, most U.S. banks and most European banks are still sitting on tons of mortgage-backed securities that they can't unload. And the U.S. housing market isn't getting any better, nor is Spain's, Ireland's, or China's.
Sure, foreclosures are down lately. But that's because of foreclosure moratoriums resulting from lawsuits. There are estimated to be 10 million homes for sale and over 11 million homeowners holding onto upside-down mortgages. What's going to happen when banks get on with foreclosing and start dumping houses again? It's about to happen.
All that nonsense about dispersed risks - don't believe it. There is no dispersion that matters because all the big banks in the U.S. and Europe and plenty of others hold the same asset mixes, the same duration mortgage pools, and the same sovereign debts.
But in the place where things are smoldering and there's kindling everywhere, European banks are buying more of their sovereign's toxic debts to stave off a collapse of the prices of the debts already on their books. It amounts to a crazy leveraging up on the same bet that sovereign debts will pay off 100 cents on the dollar.
And where are they getting the money to buy more of this crap? From the ECB, which is printing it against the backstop of the same countries who need banks to buy their constantly rolled-over debts.
It's musical chairs, and sooner or later the music is going to stop. Greece looks like it will be the first one standing, or in this case, falling down. Portugal could be next, or Spain, or Italy.
Greece has more than $1.26 trillion (1 trillion euros) of public sector debt outstanding. Do you think that a real default isn't going to crush a lot of banks? Wake up. And if you think that Greece defaulting (or even forcing a 50% haircut on private investors, that would be banks, folks) wouldn't spill over into other countries and across the globe... wake up"
Hello Mr. Wolly : All sunshine and rose`s in Marlboro ?
..... following on from Mr. Bernard's piece on inequality , BBC Radio aired part one of a documentary on inequality in the UK , this morning . The top 1 % of the population are receiving 145 times the average wage of 26 000 UK pounds / annum .....
Thats the "working rich" the next class up earns far far more, without working. They earn money because they own the stuff. I'd harp on about it all day as well, but nothing is going to change, as long as we have a monetary system. Already we are starting to hear about how jobs are getting replaced by technology, and those are just a few, far more jobs are reduntant because of technology, but it is cheaper to use labour, or in the case of retail people woul rather drive to shop, and be asked "may I help you?"
The world has changed, but there is a lot of vested interest in keeping it the same.
…..precisely it is raining heavily - have you people not realised it is time for the umbrella – the time is over to dig/ mine/ drill holes and drown in it.
..and then what about for the future - a hailstorm and an umbrella - "Swiss cheese umbrella - worthless HA !
..and then yes goNZ - like Norway does human capital, which we are (New Zealand) exporting all over the world for free – HA !
Human capital accumulation was the primary force behind the economic transformation of Norway; natural capital was secondary. Human capital accumulation can lift living standards without natural capital (as in Japan and Singapore, for example), but natural capital is of little help or worse without the human resources necessary to harness it
http://www.voxeu.org/index.php?q=node/1199
Gonzo may not need to emmigrate afterall if we keep getting good news like below - it must be absolutely gutting to have your Malthusian theories of woe and gloom constantly harassed by events
New Plymouth's mayor says the creation of five hundred new construction jobs for the area is a welcome boost.
Methanex has signed a ten year contract with Todd Energy that will enable it to restart its second methanol manufacturing train at Motunui, north of New Plymouth.
Five hundred new construction jobs will be created.
Harry Duynhoven says it's welcome news after hearing a hundred staff at the Practical Education Institute will lose their jobs when it closes at the end of the year.
"It's great to have a bit of brilliant news at a time when things are a little glum, we're always pretty positive here in Taranaki and we get on with it."
"Obviously all the folk in the construction field will be very welcome and the jobs will be certainly welcome here."
Mr Duynhoven is delighted Todd Energy is continuing to invest in the region and develop its prospects there.
The Government is predicting the deal will lead to a $250 million a year increase in exports.
A report for Todd Energy shows it may generate up to $1.2 billion in government revenue from royalties and taxes.
Yet again you demostrate that you are a lightweight. Putting forth information that on the face of it appears encouraging but with a little research proves false. Methanol is believed to have a negative EROI(obfuscation being the cause of the uncertainty), so these 500 jobs become a burden not a bonus.
#8 - it's not just social mobility that is effected by income inequality:
http://blog.ted.com/2011/10/24/how-economic-inequality-harms-societies-richard-wilkinson-on-ted-com/
No doubt about it, LTRO is not going to fix the economy, what it does, is maintain the existing power structure, by creating the optical illusion of normalacy. Money is just and idea, or maybe a religon, everyone pretends the stuff that is created out of thin air is real.
Bloomberg has reported that the Greek private creditors have "reached a deal" with Greece on existing debt which "would give creditors 32 cents per euro", or a 32% recovery according to Marathon Asset Mgmt CEO Bruce Richards
Naturally, should this deal come to happen, we can't possibly see how Portugal, Spain or Italy would then sabotage their economies just so they too can enjoy 68% NPV haircuts on their bonds.
How much is a big mac in NZ?
Good bunch of links today.
Long piece positing that in the face of peak oil etc, NZ could be the first developed nation to form a solid state economy http://fleeingvesuvius.org/2012/01/11/will-new-zealand-be-the-first-dev…
Cheers all
"With peripheral countries facing tough bond payments every month, it's too easy to miss the longer term - the retirement. France and Germany have big liabilities, reaching 3 times their GDP."
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