Friday's Top 10 with NZ Mint: China's impatience with Australia's miners; 'No worries. Just punish the savers'; China's slowdown may cut Australian house prices 5%; The amazing Ida Minerva Tarbell; Clarke and Dawe

Here's my Top 10 links from around the Internet at 4pm in association with NZ Mint.

I welcome your additions in the comments below or via email

I'll pop the extras into the comment stream. See all previous Top 10s here.

My inspiration today is #7. What a great story.

1. China's wariness of Australia's mining boom - Chinese investors in failing Western Australian iron ore mines are getting tired and wary.

They've pumped a lot of money in and appear only to have driven up prices and costs.

There's also production delays.

The junior miners relying on cheap Chinese money may have to look elsewhere, or stop investing.

It raises questions about whether Australia's mining boom, and therefore its economic growth, can be maintained.

Reuters reports on the growing impatience from the Chinese investors here, and a slowdown in steel output:

China on Monday chopped its economic growth target for 2012 to an eight-year low of 7.5 percent, while the chairman of CISA on Tuesday forecast China's steel output growth at just 4 percent this year, less than half the 8.9 percent growth the previous year.

China's apparent crude steel consumption is expected to grow between 2.6 and 4.6 percent a year up to 2015, CISA said in its five-year forecast made last year, slowing from between 11 and 12 percent a year in 2005-2010.

"It is clear that eastern Chinese infrastructure is already saturated. The real estate sector is also probably close to being saturated," said Jiang Feitao, steel policy researcher at the China Academy of Social Sciences.

2. The problem with debt - If you think I'm an uber-bear, have a look at Tyler Durden at Zerohedge:

Global financial assets were only slightly greater than global GDP in 1980 but 3 3/8 times greater in 2010 with the increase in debt outstanding rising from a fraction of GDP to 2½ times accounting for the rise. The collapse of the credit bubble shows Ponzi debt had pervaded the credit structure, so deleveraging and a drop in asset prices to levels that incomes and production could sustain was necessary.

Governments immediately engaged in an all-out battle to prevent this necessary correction. As a result, the People’s Bank of China balance sheet has expanded by an average rate of 43% a year over the last five years, the Fed’s by about one-third, the Bank of England’s by over one-fifth and the ECB’s by one-sixth. Printing money on this unheard of scale reversed a significant part of the 2008-09 losses in asset markets – but the cost has been the rising insolvency of governments and banks.

Insolvency will keep dragging the European economy down until sovereign and bank balance sheets are repaired. Eliminating the Ponzi debt without fracturing the entire credit system is impossible.

3. 'No worries. Let's just punish the savers' - A can of worms has been opened by one of the members of the US Federal Reserve's Open Markets Committee.

Sarah Bloom Raskin has acknowledged that the strategy being followed by global central banks to deal with enormous debts and keep banking systems stable is to let inflation run ahead of term deposit rates by a little bit, essentially punishing savers. It's called the Great Repression.

She points out that most Americans have most of their wealth in stocks, rather than term deposits, so that makes the strategy OK.

In New Zealand, it's the other way around. New Zealanders have NZ$106 billion in term deposits and NZ$49 billion invested directly and indirectly in equities both here and overseas. Ouch.

Here's Raskin explaining why term depositers should pay at the expense of stock market investors:

"Critics of the Federal Reserve's accommodative monetary policy are correct that the low level of interest rates represents a strain on households who rely on income from interest-bearing assets," Federal Reserve governor Sarah Bloom Raskin said. But she also said this burden needs to be seen in its proper perspective, as "less than 7% of total household assets are directly held in transaction accounts, certificates of deposit, savings bonds, and bonds."

Instead, the vast majority of household wealth resides with stocks, real estate, company ownership and other forms that can benefit from Fed policies that seek to spur growth with very low interest rates, the official said.

4. Look out and up north - The Age reports Standard and Poor's has warned a slowdown in China's economy could trigger a slump in Australian house prices of more than 5%.

Yesterday Standard & Poor's released a report titled China Soft Landing Would Moderately Impact Australia's Housing Market. ''Australian house prices could decline by more than 5 per cent in 2012 if China's economy experiences a soft landing with GDP growth at about 8 per cent,'' it stated.

Vera Chaplin, Standard and Poor's managing director of structured finance, told The Age: ''Australian house prices are indirectly linked to the performance of the Chinese economy.''

5. What a hard/soft landing looks like - The New York Times' Keith Bradsher reports from inside China on what's happening with the real estate slowdown.

Su Weizhong and three other clerks late Monday morning stood at a desk with little to do at a plumbing supplies store in the wholesale market. “A year ago, there were people in every shop, looking and asking about the prices,” Mr. Su said. “Projects are finishing, but there are absolutely no new projects this year.”

Two Guangzhou real estate brokers said that prices here had dropped by up to 20 percent over the last year. The nationwide slowdown in real estate cost thousands of agents their jobs and led to the closing of hundreds of brokerage offices.

“There is no buying sentiment in the market right now,” said a broker here who gave only his last name, Leung, because he feared retaliation for publicly questioning government policies.

Exports have also been weak this winter, a trend expected to continue in February statistics due out later this week, after adjusting for the Chinese New Year. Zhu Wei, the export manager at the High Hope Zhongding Corporation, a maker of festive lights and lanterns in Nanjing, said in a recent telephone interview that orders were down 30 percent from a year ago and still sliding, mainly because of the slack economy in Europe.

6. As the 0.1% get richer - The huddled masses get poorer. In America. According to the Centre on Budget and Policy Priorities.

7. We need a Ida Minerva Tarbell - Steve Weinberg points out via Bloomberg that she is the investigative reporter who singlehandedly brought down John D Rockefeller's Standard Oil in the early 1900s.

Tarbell’s main finding was that Rockefeller had used predatory tactics (some of them legal in the most narrow sense of that word) to create an unlevel playing field. That occurred mostly in Rockefeller’s dealings with the railroads crisscrossing the U.S. to haul freight. Although the railroads had been aided extensively by government and were therefore in theory a quasi-public utility, Rockefeller treated them like his private transportation company, using his vast influence and shrewd negotiating skills to extract favorable rates that no competitor could match.

Tarbell’s expose led to public outrage, permanent stains on Rockefeller’s previously exemplary reputation and a Supreme Court antitrust decision in 1911 breaking up much of Standard Oil -- although not destroying its reach in the oil industry.

During the first decade of this century, bankers, lenders and stockbrokers created a similarly unlevel playing field mostly outside the understanding of journalists. Inadequate reporting contributed to the painful economic collapse that continues to harm tens of millions of hardworking people.

It is not too late, however, for a modern-day Ida Tarbell equivalent to appear.

8. Australian gold export slump - BusinessInsider has picked up on a slump in Australian gold exports.

In seasonally adjusted terms, exports of non-monetary gold fell $1,070m (56%) to $856m.

Non-monetary gold, btw, just means gold not held by monetary authorities.

9. Here comes China's Caterpillar - Reuters reports China is now ramping up its production of construction equipment and the buying of brands and technology offshore.

Sany (600031.SS), often referred to as China's Caterpillar (CAT.N), and other top domestic construction gear makers such as XCMG Group and Zoomlion Heavy Industry (1157.HK) (000157.SZ) are stepping up their overseas hunt for assets that will give them more than just technological know-how.

They're not just dismantling production lines and shipping them home, but going after brand recognition and established distribution networks, driving China towards its three-year goal of becoming the world's top exporter in the $150 billion global market for equipment like bulldozers, excavators and forklifts.

10. Totally John Clarke and Brian Dawe - Clive Palmer, a Queensland billionaire and living national treasure, says he would like to buy the ABC.

"I'll give you a hundred million for it."

"If you're not careful we'll end up in country controlled by the government."

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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Bernard - I'm a bit surprised to see you include this "punish the savers" article.  I thought you were advocating that the NZ Reserve Bank increase the money supply to fund infrastructure, create jobs, lower the dollar and stimulate the economy.  Have I got that all wrong?

Rhys, what if the RBNZ increased te money supply to fund infrastructure etc etc but with no taxation on savings.  Would that work?

Increasing the money supply is a tax on savings.  Just not so honest.  If there are $100 in circulation, and I have $1 in the bank, then the money supply is increased to $150, my $1 is worth the equivalent of 75c compared to what it was previously.

Too simplistic explanation, blah blah blah.  You forgot to include the liquidty trap, blah blah blah, spare capacity blah blah. 

Yes, I tend to get a little careless with my footnotes on a Friday afternoon.  In future I may adopt your technique of making use of the general reference shorthand "blaah blaah", to show that the reader ought to consult a textbook or two for details. ;-)

Gravity is simple too, still seems to work ok

I am tempted to post Einstein's general theory of relativity.  Very interesting BTW.

So if the tax rate was 25% then tthe abolition of the tax wwould make it virtually the same, sort of, and then it would, on what you say, have then the effect of $ 1.50 when spent.

Yes - you could stop taxing the country and just print money instead.  Greece has tried this, but with the added twist of getting someone else to print the money.

No Rhys, that is just a throw away line.  If the problem is that people aren't saving enough and the Banks aren't lending for the economy to get going then if the RBNZ prints, some money - enough for instrasture etc -  you kill two birds with one stone.

It never works

Fed Z1 Update: They Failed

The Fed's Z1 update is out and we have a wee problem here.
This latest update proves that The Fed's actions thus far have failed.
The goal, you see, is to stabilize the debt to GDP picture.  And, for a little while, it looked like it might.
Let's go down the charts.


Luckily we don't have that problem.

How about an inflation indexed tax system on savings and borrowing.
 - Interest on savings would be taxed on interest earned above the inflation rate.
 - On borrowings, no tax deductability on interest up to the rate of inflation.
Net effect
 - Neutral to the government at worst possibly positive as interest on a lot of private debt is not tax deductable at present.
 - Encourage saving.
 - Discourage the practice of farming inflation on fixed asset investment.  (un productive and nationaly damaging property investment)

That's some serious tweaking of the tax code you're talking about there.  Would I be allowed to game the system by investing in short term instruments that would mature before it was possible to calculate the inflation rate for the period of the investment?

That would not help you.  You would miss out on the inflation tax deduction.  Any way no gaming if I ruled the world.

Well as it is a Friday afternoon...
Let's say that inflation is calculated by the CPI, which is published in the month after the quarter being surveyed.  If I had reliable information at the beginning of the quarter that prices were to increase or decrease during that quarter, I could take out a 6 month loan and put it on deposit for 3 months.  The 3 month depost would be taxed on the information available in the short time scale, and the 6 month loan would receive a rebate based on the long time scale.
Given that Statistics NZ calculate the CPI on publicly available information (albeit slowly), there would be an opportunity for a relatively safe arbitrage bet if you had a method of calculating what data they were to collect.  For example if there were a war in Iran you could fairly safely assume that the petrol portion of the CPI basket would go up.
For both deposits and loans it is possible to structure the product so that interest is calculated daily or on maturity, which would also help with placing the interest into the most tax efficient time period.

I don't understand why you are looking at not paying tax.  Taxes after all pay for a whole lot of things that we need to enjoy a functioning, caring society.  One (unkind?) consequence of not paying tax is bludging off everyone else.

Ironically many of the people who post here about their dislike of inflation also dislike tax. When the government runs a budget surplus, this can be deflationary, because it draws money out of circulation. Not that this is likely to occur to somebody who is arguing about budget deficits 'causing' inflation.

How about we game the inflation rate, so you can pay tax and negative yields.  Sorry, forgot we already have that.

Unfortunately putting your money in the bank at the moment is about as attractive as holding it in Air NZ airpoints.  Unless you compare it to some of the other alternatives ;-)

As he said, "it's a can o worms".   Shhhhhhh don't tell the sheeple what is "really" happening.

Maybe I'm just crazy, but I had always imagined that it was the holders of bad debt that should've borne all the losses of the GFC. I mean, they understood that there was a risk in investment, they are the people who stand to gain by winning and they also ought to be the ones that stand to lose when the investment fails. Am I just living in fairy land here?

The main problem with living in fairy land is that you miss out on all the free lunches

Iain, in the future, you may want to look at scan to text software, there is freeware out there.  Saves all that typing.
or try google.

please keep your comments shorter

Seriously ? ........ that is one of his shorter ones ......
...... the longer tirades go on & freakin' on , like speeches at the annual Labour Party convention ..
You have been there , right .......Bernard ?

Money printing isn't necessarily bad as long as it doesn't boost inflation too much.
I'm grumpy that essentially the Fed has decided (for all of us) to benefit equity owners (and particularly bank equity owners) at the expense of term depositers.

Bernard, it is very sad, that you too are advocating money printing, who would decide what "doesn't boost inflation too much" and why oh why are you not grumpy enough to go to the root cause of the economic (financial) malaise: fractional reserve lending and Fed system?
You are the person with access to media and hence access to the wider population, who is ignorant about the real facts about how money is created. Get the discussion going!
But no, my apologies to even think this way, I am aware you have to be careful for obvious reasons.
But then the question is,  are we a free country if even the people in the know don't dare to rattle the cage?

Hard money is equally as bad, if not worse for the current form of economic system we have.  You cannot have a consumption based economy in a hard money system.  I first noticed the failure of FRB, but after more thought, it became obvious that hard money creates sytemic collapse just as effectively.  Which is why I am amused by all the time and effort expended keeping an unsustainable system going.  Where are the alternatives to the monetary system?

The problem is Bernard, there is way to control were the inflation manifests itself in the form of higher prices, and when higher prices eventuate theres no easy way to constrain them when they take off.
Inflation benefits those closest to the issuance of that new money (weighted towards the nonproductive, ie governments, politicians, bankers in particular) and hurts those furtherest away from the new money (more of, salary wage earners, savers and those without assets).



I have been thinking on that concept, and it seems to me that inflation actually benefits the first spenders of money, not the closest to the issuance of "new" money.  Hence if I bought a house in 1975 for $4k, I would be a bigger beneficiary then someone recieving new money to buy my house.  Most people are stuffed, and IMO this is just the begining.

Bang on skudiv...always be first to buy with the toilet paper notes before the sellers wake up.
Long term I expect every person allowed to leave school !...will be saddled with a state debt based on the calculated cost of their 'education'....which they will be required to finance on a weekly basis...a sort of 'special tax' go with gst and paye  and their student loan if they take one out to qualify as fruit pickers.
A special branch of the IRD will be tasked to determine each 'state debt'....
This will be followed up with American style financial witch hunts to grab any wealth any Kiwi has overseas...departing Kiwi will be taxed many thousands if they wish to escape to aus. 

BH if alchemy were true and you had the formula to turn lead to gold, then give it to me, and I will promise not to use it 'too much' (or at least not too much to begin with...) so as to drop the price of gold for everyone else - errr I mean money... really I promise... AND it will be good for the economy as my increased spending will trickle down to the poorer people I will employ which will increase GDP... Ya! - of course with paper money alchemy is true - the conversion being at no cost. Then of course there will be others who say that all it will do in the end is increase the price of lead and decrease the price of gold, but that depends on the utilisation in the economy of course... blah blah blah...
As for the FED - well its always decided to back the banking system at all costs (of course - as it's run by the bankers themselves)... it will, of course keep, acting the same way, and it will continue to monetise the government deficits... how rosy... Can't see why you are surprised at this?

Ha ha ha.. what an idiot.... he would have been better off starting a political party, taking over a government somewhere and declaring his faeces to be 'legal tender'... wonder what the exchange rate to the USD would be though? At least fertiliser has some intrinsic value...

Brazilians buying up Florida
NEW YORK (CNNMoney) -- Brazil's central bank fired the next shot in what is shaping up to be an international currency war with a sharper-than-expected interest rate cut late Wednesday that pushed down the value of its currency, the real.
It's yet another bullet that Brazil is using to fight the rapid inflation of its currency and jumpstart its sputtering economy, which expanded at a 2.7% rate in 2011 versus 7.5% in 2010.

#3 Yes Sarah Bloom Raskin is essentially a sycophant appointed to the board.
Her argument essentially amounts to 'we believe there is a free lunch'.

"Europe has ring-fenced Greece's debt crisis for now but its escalating recourse to legal legerdemain has shattered the trust of global bond markets and may ultimately expose Portugal, Spain, and Italy to greater danger."

Wolly, some commenters on that article give an insight to the way people are thinking

5 hours ago


"The ECB holds €220bn (£185bn) of Greek, Portuguese, Irish, Spanish, and 
Italian bonds."
With plenty more to come.
The mark to market value of this debt represents a write-down of the ECB's balance sheet of over 100 billion euros. No wonder the Germans insisted on private haircuts.
Still it will all be in vain - the cancer of insolvency will ensure that the growing tumour of bad sovereign debt kills the patient.
I wonder how private Greek pensioners are feeling this morning?
17 minutes ago
 No.  It was governments endlessly spending beyond their means while they destroyed the productive private sector, which actually creates the wealth upon which everything depends, that got us into this mess.
Since governments have done nothing to alter those practices, indeed they continue to increasingly suppress the productive private sector, deterioration of the global economic and social situation continues and will accelerate.
The financial sector, which once provided a service to the rest of the private sector, has latterly developed in ways that facilitated these destructive policies of governments, essentially channeling people's savings into government consumption instead of productive investment and the financial sector has been coddled by government precisely because it provides that service to government.
The financial sector and the governing class are now symbiotic in their parasitism on the rest of society.
18 minutes ago
Once you publicly destroy the rule of law in the interests of the powerful, no one can be expected to comply with the law except through threat.
That ultimately requires increasing force exercised by the state, in a discretionary and lawless way, that visibly pits the rulers against the ruled.
This is the path upon which the political class in most western countries has embarked.  The EUcrats and EZcrats are just running down that path a little faster than those in the UK and US.


Nothing about a monetary system, that will always forever lead us to exactly this point, unsurprising.

#7  Now I'm sure there is pleanty more dirt to uncover, but there is pleanty of dirt already out there.  From Goldman Sachs's sh##y deals, AIG's massive bonuses, JPM commodities manipulation.  It's all well documented, Wikkileaks, Annonymous hacks. 
We are a generation of apathetic and complacent wage slaves, who have become desensitised to the abhorrent acts of pure unadulterated selfish greed.  There are thousands of Ida Tarbell's out there.  News Flash noone cares.  It's impossible to have a scandal if people have lost the ability to be scandalised.
“Man, I see in fight club the strongest and smartest men who’ve ever lived. I see all this potential, and I see squandering. God damn it, an entire generation pumping gas, waiting tables; slaves with white collars. Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don’t need. We’re the middle children of history, man. No purpose or place. We have no Great War. No Great Depression. Our Great War’s a spiritual war… our Great Depression is our lives. We’ve all been raised on television to believe that one day we’d all be millionaires, and movie gods, and rock stars. But we won’t. And we’re slowly learning that fact. And we’re very, very pissed off.”----Tyler Durden

re: #4
note that the possible 5% drop in house prices is predicated on a soft landing - essentially what is considered most likely
With a medium landing - they predict 10% drops 
Even if house prices fall back 5%, you'll see the Aussies shutting their wallets even more, means less tourists to NZ etc etc   

The problem with debt, is that it only matters untill the next central bank intervention.  Central Bankers and govts have gone down the same road as Pavlov (we are the dogs).  Currency is not real, nor a reflection of anything.  As such it has no rules or limitations other then those we infer upon it.  400% debt/GDP is only outside our current realm of experience, there is no impossible with money, who is to say we can't have 4000% debt/GDP with interest at 0.00001%.  Central banks set the rules, and will do whatever suits their purpose, people will continue to work for an unreal currency because they have faith in it, and a vested interest in it (falsly believing they too will somehow oneday be rich, rich, rich). 
Currency collapse will only come when people stop believing, then it will be total, Global and irreversable.  Until then, society is in debt to a currency that they can never repay, and a system determined to push up the price of everything so that everyone is in debt.

Yeah lately I've been wondering how long the global ponzi can keep going and who will be the first to blink.

They are all the same player, Govt, big 4 banks (why is there a big 4 in every country?) and central banks.  A circular reference ponzi, money keeps comming in without limit (because it's created from thin air) dividends and bonus's are paid, more money comes in, rinse and repeat.  The real economy (people feeding, clothing and houseing theselves) is just a small footnote on the balance sheet.  There is no incentive to end this game.

Well I don't know what you think the Greeks are doing there Bleep but I 'd say their eyes are going like a hi speed camera shutter.....
Think of the IMF's involvement as ensuring an orderly  Global meltdown rather than preventing one.
 The Greeks for me should have defaulted in an ordered fashion .... but they have been bullied for the greater good of Global order.....while meltdown is in progress.

Skudiv, 'Currency collapse will only come when people stop believing'
As 2 out of every 3 USD are held by those outside the US, currency collapse will come when they decide that the USD will no longer be the reserve currency of the world and dump them... then other paper currencies will go haywire and will eventually follow... the effect will make the GFC to date look like a kindy pinic.... unless they anchor to something real... (currently the IMF bans member countries from attaching their currency to gold btw)...

The fed has a mandate to be the buyer of last resort, and is and will continue to buy them. 
Largest holders of US debt, no suprise who is number 1.
As US Debt To GDP Passes 101%, The Global Debt Ponzi Enters Its Final Stages
So somehow the world's two most indebted countries (recall that Japan is about to in total pass 1 quadrillion debt) are out there and buying up the biggest amount of US debt (after the Fed of course)? Sorry, but while we are amusing by this attempt by the global ponzi regime to keep itself alive (even as Russia and China prudently step aside from the mauling that is sure to follow), whereby the most indebted nations keep buying each other's debt in the most transparent and potentially deadly shell game in history, we are also confident this is unsustainable. Which means the Fed will have no choice but to step in. And since when it comes to the capital markets, the ride up is over since we have now crossed the point where incremental profits are drowned by incremental input costs (thank you $106 WTI), the Fed now has just one mandate: to keep the US fiscal machine well-greased by buying up US debt at zero (and beginning in May negative) rates, through wanton monetization. 2012 may prove to be quite eventful after all.

Actually to be more precise to my above comment.... more than half the 1 trillion reflected in recent M1 is physically outside the USA in 'dollarized' countries and elsewhere. As reported by the Fed in its third- quarter 2011 flow-of-funds analysis, foreign holders of US assets have something in excess of $12 trillion in liquid, dollar denominated assets that could be dumped at will into the global and US markets. In perspective, US M3 is somewhat above $14 trillion. (I was being conservative above at 2/3 outside the US). Thus a rejection of USD as reserve currency will trigger a US hyperinflation, as the Fed would need to monetise the US treasury debt market - being the buyer of last resort (really to protect the multi, multi trillion interest derivative bets the big Wall Street banks have taken) - further inflaming and multipling many times over domestic money supply... Unlike Zimbabwe - who didn't have dollars like these outside the country and who had a working black market in USD... the US has no such alternative to turn to... so much for deflation...
2012 is election year  they will do their best to keep it going smoothly (my opinion), and there is not yet a credible alternative to the USD on the scene as yet (gold is too cheap)... 2013 and 2014 will prove more eventful... as eventually they will loose control... who knows exactly when, they don't even know that....

The Great Repression.  Please, there has only been a brief lull from financial repression during the 80's-90's, now its back on.  From Wikipedia.
Financial repression is a term used to describe several measures that governments employ to channel funds to themselves, that, in a deregulated market, would go elsewhere. Financial repression can be particularly effective at liquidating debt.
The term financial repression was first introduced in 1973 by Stanford economists Edward S. Shaw and Ronald I. McKinnon.[1][2] It was used to describe emerging market financial systems in the 1960s-80s. However, the same techniques were also used extensively in developed economies, particularly after World War II and up through the 1980s, when such direct government intervention in markets fell out of favour.
An admission from a fedspeaker may be news, but the actions are far from new.  Try google

We could use a bit more financial repression I think. Its good for the rest of the economy (and the democracy) to have the financial system on a leash.

Thanks Iain, I will read it as thoroughly as time allows.
I personally think however that the main driver is the idea suggested by economics that global utility is the same as local utility. Each individual acting in their own interest leads to the best possible utility over all. Its appealing, and thats why it sells, but of course anybody who tried to claim that in philosophy or mathematics would be laughed out of the school.
I doubt my mind will be changed on that.

Skudiv, the Great Repression will not work as the US government cash deficit (10%) is increasing far faster than the repression effects (in effect negative real interest rates) can write it off. If you use the actual deficit - including the acrual of future liabilities the real deficit is between 4-5 trillion p.a.... that means for repression to make any headway then real interest rates will have to be over negative 30% p.a. and if that happened no one would save anything at all of course (at least not in USD), so it wouldn't work... in effect its only just another option to kick the can a bit further down the road... although the road is getting shorter or the can heavier and heavier...

Soon we will all learn the difference between GAAP and cash based accounting. SGS has inflation around 10%.  Will repression work, I don't even understand what it means if it works,, less debt?  It's all just some kind of game played by TPTB, do they care about the average wage earner?  Can govt debt go over 200%?  300%, 1000%?  What are the actual limits?  Interest rates can go infinitly lower, currently at 0.25% the new normal could be 0.0025% which in interest cover ratio terms is a massive increase in borrowing power.  The Fed is the main holder of US bonds, with infinite purchasing capacity.
I used to believe there were limits to debt, and hard and fast laws of economics, now not so much.
"The only way to win, is to not play the game"---War Games

If you mean by 'soon' as in the next few years then yes I agree, the baby boomers are about to retire this decade (not great news for any government finances), these things tend to always play out longer than you think... I mean I would have thought the gold suppression cartel would have been broken by now but they are still going strong manipulating 24/7 (also more formally known as the Presidents Working Group on Financial Markets, created by executive order 12631 by Ronald Regan)... the only thing keeping the USD up is the lack of viable alternatives...(fortunate for them) so the world will continue I suspect to play the game for a while yet - the end of the game is still sure though....(yes the BRIC countries are starting their own game I know - but to trade with each other they will ultimately want something that's universally accepted...)
I think economics is about peoples choices at the end of the day, economics can be helpful in that it can help people understand the consequences of their choices but isn't very good at predicting the choices themselves, so to a large degree I agree...
Yes, I try not to play the game and have moved assets and savings outside the banking system...

wrong spot

We should look to our own bodies for clues for how to govern our country, NZ (IMO)
Re regulation vs no regulation
Normal cells in our body are closely regulated. If we are healthy, we will be about the same size/weight at age 80 as we were at age 18. If we gained 5% body weight every year after 18, we would have trouble reaching our 40th birthday- we would die. It is best to grow to adult size and then maintain that size.
Our body is a community of cells that work together. There are many built in redundancies- ie, two lungs, two kidneys, two eyes, two ears. Our body is designed to be resilient rather than totally efficient.
Here is a video of cancer cells "growing" vs normal cells growing.
It amazes me that we are all so conscious of the horrors of cancerous growth in our physical bodies but celebrate cancerous growth in our economy????

Before the Rockerfellers bought the education system, Logic, Nature, and History were the core subjects.  They changed it to the ridiculously named 3 R's, Reading, Writing and Arithmatic. 
You are right of course, and life seems to be full of examples where the lessons of nature are ignored, logic is discredited and history is forgotten.

Thanks Skudiv. I didn't know about the change in the education system and who was behind it! It makes so much sense. The loss of logic, nature and history as core subjects would have set the stage for the acquistion of the media and political system?  YOu have given me much to ponder!!!

Sorry I got that wrong, classical education was Grammer, Logic and Rhetoric, I looked at it a while ago, but it's baisically homeschool stuff, and I am not disciplined enough to commit to that.  When I looked at it, the reading was divided into nature and history.
The Rockerfellers did make a massive "donation" to education, and the way I see it they have achieved their goal.

Governments printing their own money makes more sense then borrowing from banks, then at least people can see how totaly despised money is by govts, it has no value to them.  The monetary system needs inflation, otherwise heaven forbid people would actually be tempted to save not borrow, which would crush the entire system, with or without debt.  All it is useful for, is making people get a job, inflation encourages a wasteful consumption based society.  Hard money brings about a deflationary collapse of the current system faster then you can blink. 
Good to see we agree that creating more money is inflationary.
I don't agree that a new version of the monetary system is going to change the existing power structure, the inequality, the waste or the exploitation.  The whole system is based on measuring success by how much you earn.

No, I don't agree that creating money in itself  is inflationary.  That depends on how much is printed.  If you print X amount and lend that instead of borrowing X amount off shore then the printing to lend is no more inflationary than the borrowing off shore.

Its also non-inflationary to have more money, if turn over picks up, or the velocity decreases at the same time and it needs to be spent, if the bank just creates more bank reserves which are not borrowed (and don't constraign bank lending anyway) then it can hardly have an effect, as correctly pointed out by Patricia.
Notice Milton Friedmans ridiculus helicopter analogy for what QE is and does bares not resembelence to what actually happened when Ben Bernanke bailed out the banks. Its good to hear that some ideas coming from economists are considered crazy by people in economics.

Just for the record, in your view what causes inflation?  Competition, technology, efficiency, and economies of scale, are some pretty major factors that in a hard money system would be pushing prices lower.

Read the linked article, it explains inflation pretty well. The effects of a hard money system including stability and inflation would depend on the nature of the system.

P has to be the initiating factor.  Inflation has no cause other then someone raising their price, waste of time inflation taregeting then isn't it?  Rising prices are caused by....... rising prices.  Awesome.

Absolutely, P can be an initiating cause. In fact I think its been more of a cause than Fed QE has been recently. Of course there is only so far you can raise prices, before it becomes self defeating and you lose more customers than the profit gained. In think this part of the economy is reasonably stable in normal circumstances however.
Clearly the highest inflation for the 25-30 years leading up to 2008 has been the 6% annual house price increases. Thats more to do with the increasing debt-gdp ratio in the mortgage market (something which has now reversed). If you look at Steve Keen's site he regularly shows strong statistical correlations which indicate this expanding debt drives employment and non-housing spending, as well as house prices.
You should not think there is exactly one cause of inflation, the article points out several possible causes, that can occur in different economic states.
Of course M, V and y could all be initiating causes as well in certain circumstances.

Well I was asking what in your view causes inflation, M, V, y or P I assume.  The author explicitly states that it can only be P "The key here, however, is that P CAN be the initiating factor–in fact, it has to be, since M can’t."  The author wastes 75% of the article debunking any factor influencing inflation except for rising prices.  And concludes by answering the question "what came first, the chicken or the chicken?"  I enjoyed the circular logic, that rising prices, cause rising prices, which leads to rising prices, therefore the money supply must be expanding because of the rising prices, because expanding M cannot effect prices, rising prices are caused by rising prices. 
Currently expansion of the money supply is leading to higher prices in commodities, which flows through into the whole rising prices, causing rising prices theme.  Sort of trickle down inflation. 
The inflation in house prices, as I understand it was a direct result of increasing the potential size of the money supply.  When mortgages mostly came from current saved capital, from solicitors, and deposits were 30%.  The change to fractional bank lending and deposits lowered to 5% a new way of increasing the money supply was created and the limit was raised.  The rise in house prices is a direct result of increasing the amount of leverage available.  Increasing M1 also increases the amount of leverage available.
With inflation being defined as rising prices, there are many reasons individual prices rise, but in total increasing the amount of money per capita increases prices.

My answer is any of M, V, y or P in different circumstances. Thats what causes inflation and deflation. The author determines that first he needs to spend 75% of the article debunking the majority view, which is why he takes such pains to do so.
I suggest you didn't read the article very well if you still think that expansion of the money supply is responsible for all inflation. The reason being most of the money created has not been borrowed or spent, so until I see money falling from the sky I will not have any inflationary expectations based on an increase of M.
You are correct, expansion of mortgage credit (which is effectively a monetary expansion) has caused inflation both in house prices and in fact to some extent in other prices as well. This is clear because its not only real estate agents who have had rising unemployment.
Many people believe that the central bank is entirely able to control this credit expansion, but I can't understand why this argument is made, because its clearly hocum. Its pretty clear that credit lending expands at what ever rate the commercial banks want it to, and this has always been the case. The fractional reserve system doesn't constraign bank lending effectively, this is very clear. Its also clear that central banks don't have sufficient tools to manipulate the total size of the money supply, they tried it before and could not even forecast it, thats not the way the world happens to work.
There is an argument in economics that credit expansion is not important, which is why many economists ignore this. The argument goes that debt represents a transfer of spending power from debtor to creditor, so apparantly could not change aggregate spending power. Its rubbish however because bank credit expansion creates new spending power, it should be clear usually somebody doesn't go without spending when credit it expanded. The argument is not correct.

Money is always spent, it doesn't exist without being spent.  QE is the fed spending money, bonds go up in price.  Maybe the velocity is down, and that is as unknowable as M, so we can only watch prices.  Not all inflation is M, but an increase in M is inflation, because you can't increase M without spending.

"QE is the fed spending money", I must have slept in on the day the helicopter passed over.
No, to be fair you did mention that QE bailouts are not spending. You do need the government to run a deficit and the central bank to buy the bonds.
Just remember most governments are trying to cut their deficits (which is a reduction in spending), and central banks are not regularly funding them at present either.

QE = LSAP via POMO (Large scale asset PURCHASES during permanent open market operations). I disagree that i called QE a bailout, and claimed they are not spending, either way clearly it's not true.  TARP was a bailout.
Deficits are another way of adding money to the money supply, it creates new deposits.

You need to rephrase that, because when you say "no more inflationary" then both forms are inflationary. 

Iain, 'Non interest bearing public money issued within natural boundaries' Nice. I like it...
Who controls the issuance and how do they define 'natural boundaries' and how do you eliminate the irresistable temptation to 'issue just a little more' (for the benefit of us all mind you) to which every fiat paper money has done in history then?

Quite right, mist, now all we need to find is a way (and a purpose?) of creating money without spending it.

"Quick Notes About the Unemployment Rate(us)

•In the last year, the civilian population rose by 3,584,000. Yet the labor force only rose by 1,569,000. Those not in the labor force rose by 2,014,000.
  •In February, the Civilian Labor Force rose by 476,000.
  •In February, those "Not in Labor Force" decreased by 310,000. If you are not in the labor force, you are not counted as unemployed.
   •Participation Rate rose .2 to 63.9%
   •Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%.
Over the past several years people have dropped out of the labor force at an astounding, almost unbelievable rate, holding the unemployment rate artificially low. Some of this was due to major revisions last month on account of the 2010 census finally factored in. However, most of it is simply economic weakness."

i know it's off current topics but i've been looking for a rental in christchurch and been shocked at the prices that are being asked. i'd estimate that there has been a 25% increase in rents.
last july landlords were complaining that there were too many empty rentals with over 1400 available on trademe in chch and 50 in the waimak area - now thats dropped to 600 in chch and 11 in waimak.
had a viewing across the road for a rental and over 40 cars showed up - when you see that it really dampens your spirit when looking.
just another symptom of the earthqukes and not much we can do about it but some lower income families are really going to struggle to stay in christchurch at these levels, and this should last for several years as the rebuild kicks in and continues in the suburbs.
now this article on stuff this morning

And yet if you can beg borrow or steal a 12k deposit, you can buy a 225k home (and there are many) for a meagre $280 pw.  Go figure.  With our generous RBNZ and it's financial repression keeping rates lower for longer, now is the time to take a "big risk", and save hundreds per week in rental.

Apple Vows To End Unsafe Labor Practices

  • Employees to be given 15-minute breaks to talk about how great the company is with their coworkers.
  • All electrical outlets must be raised to at least two inches above standing water on factory floor.
  • Employees will be allowed to choose the color of their own dormitory walls from a list of four pre-approved grays.
  • One suggestion box per square mile of factory floor.
  • Laborers immobilized by repetitive stress injuries now humanely put down by Apple’s Mercy Squads.
  • Suicidal employees given Tony Robbins–filled iPod Shuffle.
  • iPhone users to roam factory floor playing Angry Birds, helping hard-working employees feel more connected to final product.
  • Ten percent employee discount on AppleCare.

Skudiv, absolute rubbish...a chinese worker in an "apple factory" is actually pretty well off compared to outside.....outside you are left to starve to death and your body rots in the gutter....
Apple has two goals, ever increased quality of product is one of dont get that by treating ppl like sh*te....

"At long last the ISDA has agreed that Greece in in default, and that default constitutes a "credit event". "
Forget Greece....take a long hard look at Portugal Spain and Italy....
"Major haircuts are coming."
Now once the haircuts get going...the price of govt bonds will go where? much did you say the NZ govt is borrowing?

You cannot force anyone to sell a Treasury Bill in exchange for new cash; you cannot force a private bank to accept a loan from the Fed; and private banks cannot force their customers to accept loans. Supplying money is like supplying haircuts: you can’t do it unless a corresponding demand exists.
Such is the wisdom of esteemed economists the world over, in the tradition of "I am the only one who is right"

Our public debt is minor........its our private debt that is the worry.....and whats worry those abroad....
Not sure when AB's living wills comes in, (Sept?) when it does expect another downgrade for our banks, I just hope it makes it before the real meltdown starts.

NZ's public debt is not to be sneezed at Steven.  How does NZ expect to pay their public debt back with one of the biggest current account deficits on NZ record?
Why do you think the government continue to borrow 300+ million a week? It's not to fund the private debts of it's citizens is it? But instead is to fund the publics expectations 
 When NZ's borrowing ability comes to a complete halt very soon with another credit downgrade then the government will have but ONE choice......'austerity' 
Austerity placed on people with MASSIVE private debts is not a pretty picture for any economy. 

Its not a minor thing, but our public debt is a fraction of private debt......and not a huge worry at the moment........
Average borrowing is $100million...
"So despite needing to borrow, on average, about NZ$100 million per week over the next few years in order to pay for government's spending committments (and you can see those in our Budget 2011 section here),"
"complete halt very soon" Sorry that's complete rubbish IMHO, again I dont see why....our public debt is about 21%, but our total debt is around 85(?)% so about 75% of our total debt is held and taken on by private individuals and companies...thats the huge worry.  It simply wont come to a complete could well get a bit more expensive, maybe....we dont go from AA ish to D overnight.....
"Public expectations" these are things like education, health and WINZ....take health, as a % of GDP its about OK lets say the Govn says no more public health service, the impact of private health costs on GDP is going to be in the order of 18%....assuming the US model....
Lets say it isnt that insane....I looked at private care myself some years back, it was $180 a month just for me, so for my family today $400? $500? and that doesnt allow for inflation or to cover all aspects of healthcare...what does that do to my spending? it wipes me out..........forget retail spending, xmas and holidays etc....
Private education is again around $12k per year per child v $6.5k on the public system....simple my children would stop going to school, luckily my wife is a qualified teacher so she would be either working in the private education system or home schooling them latter very probably....think of the austerity impact of that NZ wide.
WINZ, well it pays pensions....OK let the OAPs starve....oh dear....I cant see that flying..
Long term the Govn has four options,  borrow, print (QE), cut or increase tax....its going to be a mixture of the last three, sure. Whatever happens its going to be the last nail for a devastated economy....That devastation will be PRIVATE debt triggered wide....Greece looks to default, CDSs trigger......
The walking dead,
CDS's triggering,
The "yes" vote by the International Swaps and Derivatives Association triggers roughly $3.2 billion in CDS, which are insurance policies that pay out if a bond issuer defaults.
Wierd its so small.....anyway......
Lets say NZ can no longer extreme event....OK so at that point we "simply" default....along with most other Nations....those that didnt go bye bye before us....
I wonder what happens with will be worthless, a game of musical chairs.....Massive debt is what ppl took on......and what good was produced? not much as a you know its our fault....pity we didnt have a CGT and LVR law...this wouldnt have been as bad.

I wonder if he has any more evidence for his ideas, than the woo peddlers who infest the comments?

I dont eat processed foods keep away from sugars eat lots of veg and protien. Works for me, but

Be careful. People like to be told what they already know. Remember that. They get uncomfortable when you tell them new things. New things…well, new things aren’t what they expect. They like to know that, say, a dog will bite a man. That is what dogs do. They don’t want to know that man bites a dog, because the world is not supposed to happen like that. In short, what people think they want is news, but what they really crave is olds…Not news but olds, telling people that what they think they already know is true.”
Terry Pratchett through the character Lord Vetinari from his novel, “The Truth: a novel of Discworld
Fantastic, too bad I already "know it" and it just confirms what I think I already know is true.  I can't find any relevant criticisim though, suffice to say "social sciences" are a very vauge and generalised discipline, and suffer a lot from "world view" bias.  The author has obviously found as much supporting evidence as possible, and ignored any contrary data.

Without the benefits of " confirmation bias " this site would cease to be ......
...... the Hickeyphiles tune in to hear wot they want , from the High Priest of Gloomsterising ...
Forget the reality ,  which is that the world  (- admittedly with a few challenges in front of it -)  is still a damn fine place to be .....
...... and if one studies a little history , has it ever been different from this ?

skudiv, was it you tha recommended Insanity fair, by Douglas Reed?
 Anyway try this guy

Thats a good easy read.  Found an article that confirms my bias that scientific development is a better foundation for society then the western model ;D
 Singapore has a degree of "people's democracy", but it is best described as an authoritarian country run collectively by elite academics, many of whom have scientific backgrounds, it is a modern take on the traditional "scholar bureaucrat" model. Also following the Confucian model, government in Singapore has unrivalled authority over both society and the economy, and is deeply paternalistic. The government exercises control over the press, and government-linked corporations produce a significant proportion of the country's GDP. At the same time Singapore is consistently rated one of the least corrupt countries in the world, and has a highly developed market economy with income tax peaking at just 20%. Singapore has a population of 5 million, 20% of whom are non-resident. Despite her wealth, fourth highest GDP per capita by PPP in the world, Singapore achieved the highest rate of growth in the world in the first half of 2010, 17.9%. According to the Economist Intelligent Unit, Singapore also enjoys the highest quality of life in Asia, and the eleventh highest in the world.
Famous acts of social engineering in Singapore include: creating the best school system in the world in terms of academic achievement in science, creating by far the most cost effective and enviable health care system in the world, creating the best government housing program in the world, also probably the best social security model in the world, forcing government schools to teach all lessons in English, killing native languages (such as Hokkien), banning chewing gum, forcing hippies to have hair cuts, promoting eugenics, occasionally imprisoning or exiling political activists without trial. Westerns find some of these policies laudable, others outrageous. This essay sets out to explain the philosophy behind such policy decisions.

AJ -nup, t'was me. One of my bibles.

Then PDK you really do need to read   'diary of a man in despair'

It's p'ing down here, again. We need some more sun to ripen-off just about everything. Got any spare sun? Wanna swap?

No luck, quash are the size of tennis balls and the grapes look like a write off. All remember the 2012 vintage is the worst in history. I hear of blocks of reds still green when they normaly go red in early feb. Feeling sorry for lot of growers who will struggle to recover, I here its country wide. I bet there is going to be some big sugar orders.

Oh, should I have said that, some of you may have shares in the Apple or Grape industry (apple have no colour). In my opinion this year will be nightmare for the wine industry unless the sun comes up tomorrow and stays up for a month. However Onion crops are at records.
 Worst year in living memory.

The pain in Spain.....Greece was a sideshow!
"Making far matters worse, the balance sheet problems of Spanish banks and debt problems in Spanish regional governments are both dramatically understated. There is no way Spain can meet the EU demanded 4.4% deficit target, or even Rajoy’s higher target of 5.8%."(sic)

No worries, fudge the books some more, and soon they will get a sweet deal like Greece.



It's funny money time....
"Wall Street, the White House, the Berlin FinMin and Wolfgang Strangelove know........ But ordinary Europeans and Americans don’t, and that’s the problem. Under the calling of a default caused by not paying the full amount to the Greek bondholders and applying coercion, these additional liabilities become immediately due and payable at their principal amount together with accrued interest. What they all have in common is a frightening number of noughts following the bottom line numbers."
All fools wanting Bollard to play the QE game, line up here please....

re #6
What are the birth rate statistics by income bracket?


There Will Be Contagion

John Mauldin