Here's my Top 10 links from around the Internet at 7 pm 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.
My must read today is #1, even if is very wonky, and my must watch today is #3, although #6 comes a close second.
1. Even the grownups are now saying currency intervention can make sense - The IMF, which for decades has been a fan of utterly free market solutions, is now putting the case for currency intervention by inflation-targeting central banks..
Jonathan Ostry, the IMF's deputy research director, has written a blog post aimed at inflation targeting central banks who are wondering how to keep their economies stable at a time of intensely volatile exchange rates.
I wonder if our Reserve Bank is watching.
Or our government.
Or even the Labour Opposition.
Here's Ostry explaining why inflation targeting economies should look at it.
He does talk about emerging economies a lot, but I think it could equally apply to us. We're small, easily buffetted and dependent on commodity prices.
In a recent paper, I—together with my co-authors Atish Ghosh and Marcos Chamon—conclude that central banks in emerging markets do have a second instrument (FX intervention, in addition to the policy rate) that can be used to manage both inflation and exchange rates.
And, more to the point, use of this second policy instrument is likely to make central banks more, rather than less, credible. The reason is that when the exchange rate gets too far out of line (in relation to medium-run fundamentals, and looked at from a multilateral, rather than a unilateral perspective), obstinately refusing to acknowledge the issue is not tenable. Much better to adjust both policy instruments in an effort to achieve dual targets.
The idea of using more tools to address economic problems is one that has been gaining traction in the wake of the financial crisis, which has brought home that a narrow view in which all will be well as long as central banks deliver stable consumer prices simply doesn’t hold water.
Policymakers need to target many aspects of economic performance, and make use of a broad array of tools (including macroprudential regulation, capital controls, etc.) to deliver macro-financial stability.
2. 'Payments to female companions' - NZ Herald reports Datasouth Group director Gavin Bennett today pleaded guilty to NZ$103 million of fraud, including spending more than NZ$1 million on 'female companions.'
Bennett ran a ponzi scheme borrowing from South Canterbury Finance, and therefore, ultimately, the New Zealand taxpayer, which lost NZ$23 million to Bennett.
3. How to get away with it - Fund manager/blogger Barry Ritholz makes the point in this Bloomberg video that the big mortgage fraudclosure settlements in America are nothing more than a business expense. I'm still shaking my head at the brazenness and cynicism of the 1% in America.
4. The austerity is not working - Now in Ireland, which had been seen as something of a recovery story, there are problems.
Reuters reports the EU is looking for even bigger budget cuts.
Ireland may need to make further changes to its budget this year if the economy continues to deteriorate, the European Commission said on Wednesday in a draft of a report obtained by Reuters.
Halfway through an unprecedented austerity drive, Ireland is implementing 3.8 billion euros ($5.08 billion) worth of tax hikes and spending cuts to reduce its budget deficit to 8.6 percent of gross domestic product (GDP) this year.
5. Watch out for Portugal - Brown Brothers Harriman's Marc Chandler points out that not all European debt is benefiting from the ECB's Merkozy trade lolly scramble.
Portugal is the real outlier. The 10-year yield is up 203 bp. Why Portugal? It is implementing the agreed upon reforms. That is both good news and bad news. It is good news in that is offers a contrast to Greece and make for easier relations with the Troika. It is bad news because the reform are insufficient to put Lisbon on a sustainable debt path.
The key may be the real economy. It may under-perform even the lower expectation. On Thursday, Portugal reports January industrial production and retail sales figures. While the core of Europe may seeing some signs of economic stabilization, the Iberian peninsula is not. While weak economic data tends to support a sovereign bond market, this may not be the case with Portugal.
Portugal’s aid package assumes it can return to the capital markets in the second half of last year. This seems less likely with each passing day.
6. The Earth is full - Here's Paul Gilding with a TED talk on 'The Earth is full'.
'There's a problem with infinite growth on a finite planet. The earth is eating itself alive.'
7. The real story of the 3 Little Pigs - Here's The Guardian with the true story. It's amazing what a big mortgage will make you do.
9. Totally amazing time lapse video - HT Henry Blodget
Timelapse - The City Limits from Dominic on Vimeo.
10. Totally fun video of robot quadrotors performing the James Bond theme.
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