Here's my Top 10 links from around the Internet at 3.30 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.
My must listen today is #1. A debt jubilee is radical, but is appearing more inevitable the longer this grinding deleverating goes on.
It's well worth a listen in full.
Keen, who I've often linked to from these Top 10s, proposed an interesting idea for a Debt jubilee. He starts talking about it around 19 minutes in.
He says the government should print money to pay (say) $100,000 to borrowers as long as they use it to repay debt. Savers would receive the $100,000 to compensate for any restructure.
He also has an interesting idea for 'poison pill' Jubilee shares that can only be traded 7 times before they are stuck with the last owner and then are abolished after 50 years. He discusses this from 34 minutes on.
I'll go into more detail on this in a separate later report, when I get some time. Keen's ideas are deeply radical to the existing orthodoxy on our current banking system and our banking system.
2. The pain in Spain - Ambrose Evans Pritchard points out the pain inside Spain's property market, banking system and economy is very, very painful.
The Centre for European Policy Studies (CEPS) thinks Spanish banks will need to write off €270bn, implying “Irish” damage to Spain’s debt trajectory. If CEPS is right, public debt could jump towards 110pc in short-order.
For now the ECB is holding the line with its three-year lending blitz. Spanish banks have taken up €316bn, allowing them to avert disaster as their debts comes due. But there are toxic side-effects. Banks must provide collateral at a steep haircut, “subordinating” other creditors - that Ebola virus infecting EU rescue schemes.
Spanish banks are parking the ECB money in Spanish bonds for the time being, a costly form of patriotism. The latest spike in yields has devalued their holdings, leaving them nursing a big loss.
There is another insidious effect. As the banks buy the bonds, foreigners sell. External holdings of Spanish debt fell from 50pc to 37pc between December and March. This does at least mean that much of the rising cost of debt payment is recycled within the Spanish economy, limiting the macro-damage. But it also makes it easier for Spain to leave the euro. Investors have noticed this, too. The eurozone is disintegrating.
And this factoid is extraordinary.
Valencia is 765 days late on bills, mostly to pharmaceutical companies and healthcare services. The debt of the regions has reached €135bn, or 12.6pc of GDP, chiefly because they look after the elderly and bear the brunt of Spain’s demographic burden. Catalan chief Artur Mas tossed nitroglycerine into the mix last week by warning that his fiefdom would run out of money by the end of the month.
3. Yay for monopolies - Hamish Rutherford at Stuff reports that Meridian Energy is thought to have squeezed up South Island power prices to double those of North Island levels, triggering an investigation.
Good thing it's in public hands.
No, wait...
4. An unsympathetic IMF - Christine Lagarde, the head of the IMF, let slip over the weekend in a Guardian interview she didn't have a lot of sympathy for tax-dodging Greeks.
Greece, which has seen its economy shrink by a fifth since the recession began, has been told to cut wages, pensions and public spending in return for financial help from the IMF, the European Union and the European Central Bank.
Asked whether she is able to block out of her mind the mothers unable to get access to midwives or patients unable to obtain life-saving drugs, Lagarde replies: "I think more of the little kids from a school in a little village in Niger who get teaching two hours a day, sharing one chair for three of them, and who are very keen to get an education. I have them in my mind all the time. Because I think they need even more help than the people in Athens."
Lagarde, predicting that the debt crisis has yet to run its course, adds: "Do you know what? As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax." She says she thinks "equally" about Greeks deprived of public services and Greek citizens not paying their tax.
"I think they should also help themselves collectively." Asked how, she replies: "By all paying their tax."
5. NZ a money laundering paradise - Naked Capitalism's Richard Smith has another go at New Zealand's lax Companies Office, which is rightly being exposed by some good reporting by Michael Field at Fairfax.
The MED, the Companies Office and Craig Foss need to kick some serious bureaucratic butt. Gareth Vaughan reported last month Foss still thinks we have a 'world leading' company registration system and a 'programme of work' was cleaning out the register. Some one needs to get that programme of work going.
Here's Smith:
Assume we agree with the premise of the Stuff story (Russian mafia). Assume also, reasonably, that if one connected company is dodgy, it means all of them are at least worth a quick look. On that basis, we have a whole bunch of active companies worth a quick look, as follows:
35 active New Zealand companies, some with possible Russian Mafia links, at 17 Georgia Terrace, Albany.
594 active New Zealand companies, many with possible Russian Mafia links (run inter alia, by Vanagels, Bilder and miscellaneous residents of Cyprus), at Level 4, 44 Khyber Pass Road. …and… another 730 defunct New Zealand companies at 17 Georgia Terrace, Albany, many with possible Russian Mafia links, that may still, in the worst case, have active overseas bank accounts.
1766 defunct New Zealand companies at 69, Ridge Road, Albany, many with possible Russian Mafia links, that may still, in the worst case, have active overseas bank accounts.
That’s 3,000 companies that are worth some level of closer scrutiny: or at least, the (large) subset of that 3,000 that has overseas directors.
6. Swiss capital controls - Reuters reports Switzerland is drawing up plans for capital controls in the event of a Euro zone collapse.
The central bank governor wrote a thesis in 1994 predicting the collapse of the euro...
"We must be prepared just in case the currency union collapses, although I don't expect that," Swiss National Bank President Thomas Jordan, who predicted the euro zone crisis in his 1994 doctoral thesis, told the SonntagsZeitung newspaper.
Jordan said a group set up by the Swiss government to consider possible scenarios in the case of a euro break-up was focusing on instruments to fight the strength of the safe haven franc which has soared during the euro zone crisis.
"One measure would be capital controls, in other words measures which directly influence the flow of capital into Switzerland," he said, but declined to give further details.
7. Nervous Chinese government - Reuters reports a communist party official has been arrested on suspicion of rape after a chorus of debate on microblogs suggesting a coverup.
The case has been widely discussed on China's wildly popular Twitter-like microblogging site Weibo, after reports about the rapes naming him as the perpetrator began circulating online over the past week.
"Officials these days are all like this. It's really terrible," wrote one Weibo user. "These dog officials are everywhere. Only execution will sate the public's anger," wrote another.
8. Greece's death spiral - Forbes reports on a collapse in the Greek economy in May. The details are worrying.
Tourism revenue declined by 15% YoY in 1Q12 – and that was before things really started unraveling during 2Q12. In the ten days after the May elections, 50’000 bookings were canceled. There is now a clear chance that 2Q12 tourism revenue is going to drop by more than 20% YoY. And Greece is among the most tourism-dependent economies in Europe – it makes up 16% of GDP.
The second shocker of the week was the pace of tax revenue decline- suddenly dropping by -10% in May. The proportion of small and medium-sized companies losing money is in the process of vaulting from 20% in 2011 to 60% 2012.
9. Inflation targets + exchange rate targets - Two IMF economists argue here at VoxEU that emerging market central banks should target both price stability and exchange rate levels.
Before the global crisis, central banks could reply ‘inflation targeting’ to virtually any question about their policymaking and the ‘Great Moderation’ seemed to back them up. The crisis has put a stop to this smugness. Central banks are now engaged in emergency evasive manoeuvres and are scrambling for new intellectual anchors. This column argues that emerging market central banks should view both price and exchange-rate stability as 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. To be sure, excessive policy activism has its costs (and those lessons should not be forgotten), but the crisis suggests that leaving available policy instruments on the table is not the right answer either.
10. Totally Jon Stewart on lobbyists, cockroaches, vermin and Frankenstein
86 Comments
#1 - you lost me at "print"
Another word for "Jubilee" is "default", and any government is free to do it any day they like.
Steve Keen's nut-bar ideas are so bizarre , that Gareth Morgan's " big kahunas " looks positively workable , by way of comparison ......
First they ignore you, then they mock you, then they fight you, then you win. Gandi?
Is Gummy is at stage 2?
Keen is a nutter Kiwi, Gummy is correct.
What do you think will happen to property prices (and most other things) if you give everyone a $100,000 whether they pay off debt or not? It will just end up as another scam for a massive real wealth transfer via inflating debts away... another subsidy for those who have all their wealth in hard assets... uh like property for example...
Keen's whole point is that speculative bubbles are bad, why would he recreate a system that enabled another bubble?
Why call someone a nutter? Whats wrong with just debating ideas?
Play the ball and not the person.
Okay, Kiwi, fair point, let's play the ball, only let's play it in the real world, because thats where all the people I know happen to live, (not the economic theory one that models, or trys to model at least, the real one).
Now then, the paper boy down the road, who saves his hard earned money for a new bike, does he get the 100,000 as a saver or not??? (of course the government has just put up his effective tax rate in the last budget). Yes or no....? What say you?
So this real world, is it now, where fiat rules and money is created out of thin air and Banks practice a reverse Robin Hood lifestyle, where money is transferred from savers to TBTF banks. Is this a fair world? or would you rather it was changed.
If you don't think its a fair world, how do you think it should be changed.
If the current system is too far gone and it needs a reset, what is the fairest way of resetting it?
The paper boy question is just a question of fairness when systems are reset. Its impossible to create absolute fairness when systems gets reset.
Yep thats true. At least Keen attempts to create some fairness though. It still will not work.
As to fiat - thats the system we do have at present. No one has manged to make fiat work long term though, and thats whats happening now, its breaking down. Yes its not going to be fair. Unfortunately thats life to a large degree. There will always be those who see it coming and move out the way, hopefully they can warn others and stand up for what is right. All you can really do though is prepare for the coming storm, I don't think it can be avoided.
In the end the world will return to the gold standard in some form. Central banks aren't buying gold to make money or invest, they are buying insurance against what is becoming increasingly obvious, the current system is heading for the dust bin.
I've written previously on a fairer world - one without fiat currency.
[Money is not actually created out of thin air, its leveraged off assets that are real].
Okay next question... the couple who work hard and start a business - the business takes out a loan to expand and hire more staff. The couple have no debt but their business has a loan. Does the business get $100,000 reduction in its debt or not? Or is it just people, and if just people what is the age cut off or is it for all NZ citizens yound and old? And how exactly do you define who is a saver?
Any scheme to print more money and bail out whoever is just advocating for theft. Fiat money systems make this theft possible. And how would you stop just the same thing happening again and again though time? Keen offers no practical way to stop this as laws can be changed again and again (and are).The way our current monetary system works, the careful savings of a lifetime - including your pension - can be wiped out in an eyeblink. The historical record shows only too clearly that when politicians and central bankers are in charge of the integrity of fiat money, they have 'never been able to resist the temptation to manipulate the fiat money for their own benefit. They have always driven its value to its cost of production - which is near zero'. Keen is just trying to give a more 'equitable version of QE', but as it will greatly push up prices the unintended consequences which always appear will start to kick in, workers will demand large pay rises as company profits swell from the extra spending and inflation roars up, greatly reducing peoples real incomes.... more inflation, greater uncertainty and less real investment... and so on and so on.... yep thats what we need alright.... In Zimbabwe the government decided to give all veterans $50,000. Oh what a great idea that was...
Is deflation "theft"? Is the creation of credit money out of nothing by commercial banks "theft"? The government is not the only one that can impose involuntary shifts of wealth through the manipulation of fiat money. This is pivotal to Keen's theory, go look up endogenous money or his debate with Krugman some time ago.
A "modern debt jubilee" is uncharted territory but it should be compared to the alternative realities. Japan "recovered" from its asset bubble over 20 years of fiscal stimulus, where the government spent and allowed underwater companies to rebuild their balance sheets by taking on loads of public debt. Western governments clearly have no propensity for that kind of policy. So what we're looking at here is decades of depressed economic activity and high unemploment while households continue to pay down debt, reducing the money supply.
Keen's idea is to short circuit that process. I don't know if it will work, but desperate times calls for desperate measures.
Also, I am rather frustrated that people are brushing him off as a "nutter" without understanding his analysis. Read this: http://www.debtdeflation.com/blogs/2012/05/22/predicting-the-global-financial-crisis-post-keynesian-macroeconomics-2/
This is exactly the kind of new economic model we need; modelling the economy as a dynamic complex system with empirically based behavioral functions, rather than the standard equilibrium, short run, supply and demand models that can't predict anything.
Well said, I wanted to make exactly this point when I saw Mr Economists post. Steve Keen said quite clearly during his Kim Hill radio interview that the financial crisis was caused by a fundamental imbalance, too much credit money and not enough government money. He also described the process of a debt jubilee as giving the government a chance to catch up. When the economy was functioning well, in the 50s and 60s, then the ratio of credit to government money was around 2:1 and immediately before the financial crisis it reached over 35:1.
yep....
but then lots of ppl live off the interest and profits of others....mostly the so called 'rich" seem to be in this category....so of course they dont like him....
I would suggest you dont get to focused on any one model, none are perfect, even von mises and hayek are things to read if only for what not to do , ;] ....so all useful. Models are there to help only as the unknowns and significant and while you cannot see them you can see the effects.....so find the model that matches the effect and work with it.
regards
Fiat money systems make this theft possible
So if your not in favour of fiat systems, how would you change it into something fairer.
Or do we not worry about trying to fix the system, wait for economic collapse and head for the hills, with our gun and stash of silver and Gold.
never been able to resist the temptation to manipulate the fiat money for their own benefit.
Steve's analysis is that economists are to blame for the current fiasco. All the intellectual heavy lifting was done by the economists, the politicians in many Countries just went with the flow.
The conclusion that Governments are to blame are just neoclassical talking points.
The real problem for many Countries is private sector debt, which is often much greater than public sector debt.
Neoclassical's didn't see this as a problem because debt does not play a part in their models.
Steve says basically they ignore the role of Banks.
The neoclassical belief system is stranger than fiction.
Governments are supposed to be the regulators. They are the ones supposed to look out for the peoples interests. They are just as much to blame as anyone, if not more so. It is too simplistic just to blame a group of neo economists. For example, Glass-Steagall in the US was removed because special interests wanted it removed, despite it being put into place in part to prevent another great depression, thus enabling big banks to conduct unregulated derivative trading, or gambling to put it another way. Thats why the partial audit of the FED under the Dodd Frank bill revealved 16 trillion in loans from the FED (more than the entire US mortgage market).... its not about saving mum and dad investor... its about keeping control of a system that empowers a select few...
The system will eventually do what all fiat systems have done in the past, collapse... its very rare, practically unknown for a people to change the system to prevent a collapse... When it does we don't 'head for the hills' but we will have a chance at least, of putting a better system in place. That system is going to be gold standard in some way shape of form. At the end of the day, its about human freedom, not just economics. Andrew Jackson was elected president in the US because he campaigned against the central bank, people understood what that meant back then and what the issues really were, they understood that banks pose a greater risk to peoples freedom than standing armies, they don't understand that today.
The problem for many countries is public sector debt - and an approaching demographic time bomb - were their liabilities are going to explode... we have known about it for a long time and done nothing... so governments will keep borrowing more and more (Im not saying they should, just thats what they will do). The private sector is servicing its debt by in large, governments are having to borrow just to pay the interest. John Key has stated when he meet wth Obama and Tim and Ben and their official none of them believed the US government will ever be able to stop borrowing...
The private sector is servicing its debt by in large, governments are having to borrow just to pay the interest.
Just to refresh your memory, the private sector had a massive financial crisis. It could not function with the debt is had accumulated and defaulted. At this point the government stepped in and gifted it out of default with several bank bailouts, even in the US, the FED is a government institution. That actually happened, thats what actually happened in the real world.
actually not in NZ it never did... private debt is (present tense) being serviced just fine thanks... mortgage sales never got anything like serious... people are buying homes... many rental properties are turning cash positive in fact... (I know mine is)... there was no huge default in NZ, no huge write off and no huge government bail out of our banks or any major industry... ah but you are not in NZ, so I guess you just didn't get informed about that... as for our private indebtedness much of it is in the property sector attached to what is becoming increasingly positive cash flow assets.... yeh... oh yeh then there is the shortage of good no leaky property developing... while I don't expect rents to increase as much as Olly I think in greater AKL 10-20% over the next 3 years isn't by any means unrealistic - esp as some have increased by that already this year...
You don't remember all the finance company bailouts then? You don't remember the government deposit guarantee scheme? Maybe you should see a doctor about your short term memory loss.
Of course it is correct to point out that,
a) sans this intervention it absolutely could have been worse in NZ.
b) NZ has not yet seen the rest of its housing market deflation. But feel free to bet against that, and to worship Ollie as the new economic Messiah all you want to. I have yet to see him provide a concrete basis for anything he says, and at times it looks to me like he is betting both ways with his analysis as well. I think he may well be the Nostradamus of the NZ property market.
Finance companies in NZ Nic were not bailed out as you suggest, most of them went broke and were allowed to do so....(and so they should have) but here you go making stuff up yet again....you must get a buz out of it... all the finance companies put together (incl SFC) wouldn't be the margin of error in NZ accounts.... the government guarantee was not a bail out of any company... but I can't expect you to tell the difference, you need to understand what a 'deposit guarantee scheme' actually is... and it seems you have a problem telling the difference between a depositor and a shareholder... Im sure wiki or any banking text book will help you... housing affordability is in an acceptable range in NZ (check out the website interest.co.nz if you can find it they have graphs for this sort of thing...) housing even in AKL is about the same cost as renting, give or take, in many cases...but you need to use a calculator if you can't do the sums in your head.... yep there are places that I think are overvalued and risky when compared to the rental/income risk/return (queenstown etc)... but that's not uncommon historically in NZ....
I don't agree wholly with Olly like you do Keen, (and if you read my post in regards to what I said about Olly you would actually see that, but then you have to be able to read actual english language to catch the meaning) they both over sensationalise, but it grabs the headlines.... back onto your meds Nic, it shows when you are off them, and it downgrades the conversations on this site...
Ohh, most of them. I can see why you completely think in didn't happen then. Lets see about stuff then...
http://www.stuff.co.nz/business/4859373/A-history-of-bailouts
In fact you should just take your medicine now. Its far too early to re-write history on 2008 just yet. Learn from Mr Paul, give it 150-1000 years then try re-writing history to suite some fable of your choosing,
http://www.huffingtonpost.com/2012/04/30/paul-krugman-ron-paul_n_1465870.html
It behaves like every other government central bank, its a government institution, regardless of its history. You can't have savings in US$ without the FED to create the US$ so what private funds? The fact that private funds are loaned to the US government is part of the workings of the monetary system, but these savings in US$ obviously don't exist without a monetary system.
I think its a case of not collapsing the system and not "keeping control of a system that empowers a select few".......they just happen to be the lucky ones.....
regards
He is an Australian or at least he sounds like he is.
Debtsor losses are being inflated away- just not ours- but those of banks.
The current situation is a massive scam
His understanding of how things work is probably much better than nearly everything else that is out there.
Nt sure why people are knocking him- watch him on BBC Hardtalk- he comes across very well- he did spoy it all publicly very early on.
Right you are Gummy.
What do you mean, Gareth Morgan has got 'big Kahunas'?
hardly surprisimg....he does economics, you do voodoo.
regards
Bernard, thanks for having the kahunas to air the views of Steve Keen. With the budget and the balls up that is TAF and DIRA with Fonterra, I thought it was more of the same old same old, but refreshing to see alternatives proposed to status quo, even if there is no apparent need, and everything is humming along just fine. Steve Keen was such a nutbar he predicted the meltdown in 2008, just a shame he didn't let Greenspan and co in on it. Ideas on broadcast on RadioNZ last year also had an illuminating interview with him, Ha-Joon Chang and Robert Wade. http://www.radionz.co.nz/national/programmes/sunday/audio/2491623/ideas-for-19-june-2011-a-new-economics
Currently reading Ha-Joon Chang's " 23 Things ... " book .. . It's alotta fun .
The good grace you do all who read interest.co GBH, you deserve a good read.
I don't know if his "quantitative easing for the public" plan will work but as a student of economics and engineering, I do know his criticism of the economics taught in schools and universities are absolutely spot on. By assuming equilibrium, rational agents, perfect information etc, economists trivialize the analysis of a complex system such as the economy. It is evident from his work that Steve is well acquainted with all schools of economics, economic history and applied maths. If you approach his ideas with the false premises of neoclassical economics in mind, I can understand that his ideas will seem "nutty".
I think he is spot on with his work on debt dynamics. The ideas to do with jubliee are not that crazy. Jubilees have happened throughout history, so how is it a 'nutbar' idea?
Once upon a time kings just gave away land. How bizarre is that?
His ideas regarding share trading etc is interesting because the way its going if a HFT firm holds shares for 50ns, how does that benefit anyone other than the HFT firm that is able to milk the market for fractions of pennies.
Actually Banks are bailed out almost every day now, its called QE
When people are bailed out its called a jubilee
Why, when when the Banks are bailed out through QE, aren't the mortgages they are holding reduced accordingly. Then everybody would win.
Because banks make loans by leveraging their deposits. Mortgages or loans they are holding (or derivative investments for the Big US banks after Glass-Steagall was repealed) are written down, that is were their looses come from.... I'd hardly call that 'everybody wins' though.
The banks in NZ don't need QE unless they can't raise the funds to roll over their debt, which to date (apart from the 2008 brief period) doesn't seem to have been too big a problem.
I think Patricia was making a suggestion, not a statement of fact. In fact it sounds a bit like a modern debt jubilee to me.
Argentina and Iceland doing much better than Greece after default.
At some point debts are simply too high and have to be restructured/defaulted on.
cheers
Bernard
It seems like a surprisingly quick way to get back on track. There are also very few historical examples of a nation that has _not_ defaulted on a large sovereign debt.
Re. 3rd world sovereign debt default/jubilees. It's a complicated issue when the debt was incurred by a leader who embezzeled it. Defaulting on that kind of debt seems to be a pragmatic way out, and will discourage lending to despots.
Greece is only the third worst serial defaulter in the world . Honduras & Equador have slightly worse records there . But Greece has defaulted on its debts 5 times since its independence in 1829 , and spent a combined 50 years & 6 months in default or debt rescheduling ...... which is a full quarter of its modern history ......
...... a minority of countries have never defaulted on their sovereign debts ...... New Zealand amongst them ..
Yay !
#5 A regular guest at our B&B 15 years ago told me in detail how the Russian mafia had begun to use NZ as a base for operations. His wife was Russian.
Any more detail on how the Russian mafia used NZ, apart from just the companies office?
cheers
Bernard
Hi Bernard,
funnily enough I thought someone would ask this question! It's a long time ago but I do remember being told it was for both money laundering and a hide out from trouble back home. Our guest told me that they were at that time using Taranaki as a bolt hole. Being somewhat naive and rather unworldly on these issues at the time I didn't press for details but he raised this matter over a number of visits and showed a genuine concern. That's all I can remember but the details you posted today should be galvanising the govt into action. NZers generally are a trusting lot and we are being used.
Cheers
OMG
It was called New Zealand Dairies and they sent a tonne of money threw that joint. Nice and clean with a Singapore office and product to launder in Malaysia.
Excellent corroboration. Our guest was anxious and somewhat fearful talking about these crooks - at the time he lived in New Plymouth. Mine was an accomodating if somewhat incredulous ear.
How can that be: Russian is almost the unofficial second language of London's commercial court.
http://www.converge.org.nz/watchdog/20/07.htm
http://www.nbr.co.nz/article/russians-freeze-nz-dairies-expansion-plans…
http://dairyman.realviewtechnologies.com/?iid=62297&startpage=page00000…
http://rumafia.com/news.php?id=75
One of the largest manufacturers of baby Food of the Company “Nutritek" suffers big problems. The company turned out to be on the verge of bankruptcy: the accounts have been arrested, it has is no money for the development, as well as the foreign shareholders have openly accused Nutritek in financial reporting fraud and abetting embezzlement. According to the newspaper Kommersant, the main shareholder of Nutritek (approximately 39%) is Konstantin Malofeev, the founder of the Marshall Capital Partners Fund.
http://www.linz.govt.nz/overseas-investment/decisions/decision-summarie…
http://www.bakutoday.net/vtb-does-not-trust-the-russian-judicial-system…
http://lands-sale.com/real_estate/Marshall_Capital_will_exchange_749_of…
http://www.globallegalpost.com/commentary/the-russians-are-coming/
The claimant (VTB) claimed that it had been induced into entering a loan agreement, as lender, with a Russian company, RAP, by fraudulent misrepresentations made by Nutritek for which the other defendants were jointly liable. The purpose of the loan was to fund the acquisition of various dairy businesses.
The two alleged misrepresentations were: (1) that RAP and Nutritek were not under common control; and (2) that the value of the target dairy businesses was much greater than they were in fact worth.
http://www.clydeco.us/insight/updates/case-update-vtb-capital-plc-v-mar…
Nutritek's founder, Sazhinov, is said to own 40 per cent of Nutritek, while Malofeev, through his investment fund, Marshall Capital, owns 35 per cent.
http://www.foodworks.co.nz/3-1-1370/news/Chinese-interest-in-Russian-ow…
Diving into the OIO note at the time:
http://www.linz.govt.nz/overseas-investment/decisions/decision-summarie…
"Background:
Nutritek Overseas Pte. Ltd (the Applicant) is a wholly-owned subsidiary of Nutritek International Corp (a British Virgin Islands incorporated company) which is in turn wholly-owned by Nutrinvestholdings (Holdings). Holdings is listed on the Russian Trading System (Russia's equivalent of the New Zealand Stock Exchange)."
"Rationale for the proposed investment:
Holdings' strategy is to expand into China and South East Asia. It has agreed to purchase substantial volumes of milk powder from NZDL to use in joint ventures that it has established in China. A large portion of the Applicant's purchases from NZDL will be infant formula, which is of higher value than other milk powders."
NZDL just does milk powder, the infant plant was never built- see post above.
Bernard, if you are up, this may be a Russian case study for you - with twist of OIO, and big plans that never quite .....
NZ Dairies Ltd. The Receivers have put a cash sale date of before the end of next week.... and it looks like the farmer suppliers owed the $30m odd are facing an uncertain payment future.
Many unsecured credits are coming out of the woodwork, word is that whatever the factory is sold for all the $ will go to the Russian bank, and there may not be enough to repay farmers milk supply and others....
Not sure if the farm suppliers supply contract have any credit enhancements or provide a claim against milk that has been processed, for otherwise they are unsecured creditors.
Possibly you could get the receivers side of things... see if you find
How farm suppliers are placed compared to the secured Russian bank
If Fonterra are owed anything for DIRA milk.
Whats the degree of employee entitlements funded/unfunded.
Any comment on the OIO review of these characters prior.
There's something for you to do Bernard.
According to Field's article in Stuff, that NZ registered company made a cool $150 million profit in a single transaction buying and selling an oil rig.
How much of that stuck to nz's coffers? Did they pay any tax in New Zealand?
Ask the Tax Commissioner or the MP responsible for the IRD portfolio.
My guess would be that Ird got about as much as ATO got from the Myer float. Zip nothing
#1 I thought Steve Keen comment that he got rid of debt when he "terminated" his marriage was an interesting turn of phrase.
Did Iceland default? I thought they let their banks go rather than bail them out and then refused to pay back the UK among others when foreign Governments made the icelandic bank depositors in their own countries whole after the collapse.
Argentina has its own currency. Greece does not.
Argentina has its own currency. Greece does not.
... yet.
All the talk of the pain and civil unrest in store for Greece if it leaves the Euro - er, hello? Life's going to be grim in the short term, no matter what.
The proper counterfactual/factual would look 5-10 years from now at Greece staying in the Euro cf Greece leaving the Euro. I'd put more money on them being better off in the medium term if they were able to clear their debts and devalue their currency.
As it's the day for radical ideas....
No one in NZ to be PAID more than x (say 200,000)... Come on... can you really be worth it? [you can still build your OWN business up and earn more.. which breeds Entrepreneurs] No one can have more than x in the bank doing nothing (say 200,000).... This way it HAS to be spent (be it in Real estate or Businesses creating jobs - Thx Rod Drury et. al.). And ... yet again.... no one can have a mortgage over 3 times the MAIN salary earner: Mom can stay home with the kids if she chooses and A cooler on property prices (which have no real benefit to the country) NOTE: If you want a big house SAVE as its only the mortgage that is capped! I like the idea in #1; forces the value of the NZ$ down too.Interesting that Steve Keen had got this thread going, but that he has only expressed a biblical idea.
The year of Jubilee was something different - it was a forgiveness and release of debts.... what Keen is suggesting is a massive debasement of the money in order to bail out the banks (and actually if you trace it back further the big international banks who created leverage on leverage)... its not actually the same thing...
Ahh but does he know that?
"in order to bail out the banks"
Actually I thought the jubilee was designed to bail out people. At the end of the day the Banks income stream would dramtically shrink as most of their loans would be paid off and they wouldn't have much of an interest income stream anymore.
In part yes, it was designed in the Old Testiment to bail out the people from debt, and more specifically it was a foreshaddow of the coming of the Messiah (as all the OT laws were) when He would remove the debt of sin owing to God. Luke 4v17-20. But we don't have the same asset based monetary system Israel had back then.
At the end of the day, as under our current 'fiat fractional reserve debt based system' (all money is debt), to wipe out all debt is to wipe out all money = system collapses (well goes back to barter - I mean there will always be some system of exchange somehow).
Therefore all debt can not be repaid (or forgiven) in our current system usury - and thats what our current system is. (I'm not saying this is a good system, just the contrary). The political will is not there at present to change it.... like it or not change is coming... but the GFC is only beginning...
I will have to take a deeper look at this one, but what seems interesting is the priciple that underlies the debt forgiveness, that being that unserviceable debts will occur. Forgiveness becomes a moderator because it ensures caution on behalf of the lender. As you point out with out debt based money the opposite is occurring and bailing out the lenders is creating a moral hazard, quite the opposite effect of the biblical principle.
Interesting thing is that hyperinflation is predicted in Revelation 6:6, which is essentially saying a day wages for a loaf of bread.
The old meaning was yes ppl as they would be put in debtors prisons....bansk used to simply close....
and yes that would be right, banks and vampire squids wouldnt have an income.....then of course we would be stupid enough to repeat the cycle....
Hence why I think Steve Keen is wrong, the only way to correct "inbuilt misbehavior / moral hazard is though misery IHMO....
regards
There are plenty of miserable bastards around here that are getting in plenty of practice :-P
In reply to ECONOMIST: Ok a reductio ad absurdam argument. In practice it would probably be over 18s only...but yes, some would be lucky. Keen's point in the interview was along the lines of yes it's extreme but the situation is extreme: he intimates that the alternative is revolution (probably right-wing). In NZ the revolution would definitely be right-wing, if it comes. Hopefully it won't but Keen's analysis suggests that what has happened in Iceland, Greece, Ireland, USA will come here eventually. Interestingly he said in the interview that the next domino is "England". Let's see if he's right...
If we are going to do that to bail out those who over leveraged (or more to the point bail out those who leant them the money in the first place) why don't we just print money to build new hospitals that would save actual lives?
Yes Keens point is in the extreme..., a further transfer of wealth to the right (which is the unintended consequence of what would actually happen if Keen's suggestion is followed) would not actually prevent a revolution (if one was coming).... if anything it would speed it up.
I think you will find Iceland has been much better off just defaulting. Hundreds of governments have gone broke before, it's not the end of the world, birds did not drop out of the sky, gravity will not cease its attraction, things can and do restart - just like Iceland.... its the nations that try and borrow their way out of debt, like Greece, that will end up a lot worst than Iceland for sure.... the Greek bailouts have nothing to do with helping Greece and co but bailing out the big banks behind the loans in the first place and transferring that liability onto taxpayers... and because of the multi-trillions in derivativative bets on interest rates, currency swaps, CDS etc... etc... these big banks have taken it pushes the ECB and co into a corner where they have to bail them out...
The question you should be asking, and Keens doesn't address it, is why do we even have a system that is subject to systematic risk in the first place? Out of the 3800 or so fiat currencies that have gone into the rubbish bin of history none have survived long term. Why do we keep subjecting ourselves to this?
England is the global financial hub so of course it has more debt ... esp the City of London.... which survives off the global banking industry.
"The question you should be asking, and Keens doesn't address it, is why do we even have a system that is subject to systematic risk in the first place?"
............................... That's the one central thing he does address, more so than most other economists. See: http://www.youtube.com/watch?v=js9WBi_ztvg
The idea is definitely not to bail out those who lent the money in the first place: if every debtor had to pay back the bank with the Jubilee money then the banks would have their assets massively reduced (your debt is a bank's asset). That is why his idea is almost the opposite of QE, which is what bails out the banks.
So I don't agree that it is a massive transfer of wealth to the right. Again, Keen would say that QE as we have already experienced it, is the massive transfer of wealth to the right (or rich and powerful, if you prefer).
Yes I agree Iceland is better off than Ireland, say, because it defaulted, but the jubilee is designed to tackle private debt before it gets passed on to a sovereign entity, by which time it is too late because the banks have been bailed out already.
"why do we even have a system that is subject to systemic risk in the first place?"
Well Keen is quite explicit in saying that capitalism is always in disequilibrium and he is trying to save capitalism. Capitalism before fiat currencies was in disequilibrium too, of course. You will have heard of the catastrophic inflation of silver at the end of the Spanish empire, for example, one of the periodic disasters of finance in the history of capitalism (the current situation being another historic shift, I suspect).
Building hospitals might be laudable but it just doesn't tackle the real problem (private debt). This Keynesian approach of increasing public debt only works in a common recession. We are now at the end of a debt cycle, not just a business cycle, so adding public debt doesn't solve the private debt. You can't stimulate growth (in demand) when there isn't any growth (in demand) to start with.
a further transfer of wealth to the right (which is the unintended consequence of what would actually happen if Keen's suggestion is followed) would not actually prevent a revolution (if one was coming).... if anything it would speed it up.
One has to realise at this point that you are talking out of your oraphus. If it is so obvious to you that a debt jubilee would be a massive transfer of wealth to the right, then it is so obvious also to the people who run the country. So you have to ask, what is preventing it from happening? Its clearly not that it would be an unpopular policy, democratically.
In fact exactly as Steve Keen concludes such a policy would massively shrink financial profits drastically reducing banks income stream by reducing the level of private debt. Obviously this would represent a massive transfer of profits away from the financial system, and so its considered 'politically impossible'. The people who run the country are more than creative enough to come up with this kind of thing for themselves, the reason it is not on the table is exactly the same as the reason any of Paul Krugman's suggestions are not on the table, and its not on the table because it doesn't represent a massive transfer of wealth to the right.
Oh great then, I guess my family who own a dozen or so homes in Auckland will all be sad then (not). Actually nothing would please me more than getting a $100,000 debt reduction per person, that would be great! The poor people with no money skills and no ability to protect themselves from the surge in demand and house prices that will follow will just fritter it away on services I and the companies I own shares in, will provide for them... printing money enriches those with real wealth assets such as land... etc..., so yes lets give everyone 100,000 and in 10 years later on we will see who has benefited the most from that policy then... I bet it will be those that are wealthiest now though.... OR we could just let those who have overleveraged themselves fail, we have a generous social safety net in NZ, it will not kill them... or did you not understand it is largely the right (as you put it) who have those big loans, who would most benefit... I mean the poor don't generally have mortgages Nic.... they can't get the finance or the deposit.. or they are pushed into 90% + home loans... but you don't really care about those people Nic, your are more interested in saving the system for the banks... 'massively shrink bank profits' actually banks can then just put up the interest rate then... I guess the Keen cult doesn't see that...
What a terrible argument. You have to be a real stateist to believe that the state should choose economic policy because some people will choose to 'fritter it away on services'. I mean who cares, that is their choice. I still have enough faith in human nature to believe this is simply untrue anyway.
But its obvious you just want to hide in completely a-factual essoteric arguments about logical fairness, because the statistics and facts do not back your narrative at all. Despite a shrinking percentage in owner occupiers the NZ property market is extremely democratic as most people prefer to own a home than to invest their money. You are talking about a vast section of NZ, not something you can pigeon hole into one group or another.
Looking at some facts you have completely backwards, banks have already 'put up the interest rate'. Bank interest rate margins were lower before the onset of the financial crisis, significantly so. Central bank margins are very low, but as can be easily observed the banks have been passing less onto their customers, though this can't fully compensate for the fall in volume of course.
Obviously your counter is ridiculus, you say the poor don't have debt/mortgages and then claim that they will get the least benefit from a debt jubilee. You seem to have some rather foolish idea that being poor and being rich has some significant meaning beyond the amount of wealth people have accumulated. It doesn't, there are pleanty of poor people who behave and are as capable as rich people and pleanty of rich people who behave and are as capable as poor people.
Frankly I find it a bit offensive to be accused of 'saving the system for the banks' by somebody who ascribes themselves to the Austrian school of economics. Such hypocracy, its obvious how detatched your comments are from anybody who actually struggles for a living.
but deflation increases the real debt burden?
No, you have it backwards. Deflation is the end result of debt burden shrinking,
http://www.rbnz.govt.nz/keygraphs/Fig5.html
No he is correct as ppls income can shrink faster, so its relatively worse. This is what makes deflation so dangerious its self-reinforcing because of this...
regards
Its a feedback loop, as is inflationary credit, but the fall in economic activity starts if off. Thats exactly the same as inflation when somebody goes into a bank and takes out a loan, then the money is created, spent and you see an increase in economic activity and eventually some inflation.
yes
Strange, my prediction is that as socialist parties take power, they will go deeper into la la land and make spending promises they can't really keep (ah wait they are doing that), no one in their right mind will lend them any money from the private sector (ah wait that is already happening), so they will print it and lend it to themselves (create more debt), much as the US is doing, and print their currencies eventually into oblivion. QE3, QE4, QE5, QE6, QE7... So yeh their debt will be wiped alright, or practically useless, same thing really....
I think there are degrees of socialism....NZ is a moderate socialist state...the Q will be to what level or how extreme a voted in Government will be.
So I think you are wrong because your scenario is too extreme at this time. What you envision is really the mana party or alliance gaining power IMHO which is un-realistic at least in this decade. You are right I think on the outcome if that were to occur, this was tried in the 70s and severe inflation was the result....
Now when peak oil bites then yes crazy things could indeed happen but before that we will have seen a deflationary collapse, then a mana like party is possible. You only have to look at the likes of the 1930s and the rise of the nazi party to see this extremism could re-occur.
Private sector lending will cease I think....tafter that next stage will be Govn's hijacking the money.......hence putting money into kiwisaver is a duh moment especially if you have debt.
regards
Hi steven, I think the mana or alliance party has about as much chance as being the government as giving every one who has no debt $100,000 in NZ (and there are hundreds of thousands of them) and saying there will be no inflation (or drop of the dollar) has of being correct. Personally I will be spending mine on the first day, as if I wait till the end of the week stores will be empty or prices will be multiples of what they were at the start of the week....
My scenario is what is happening in Europe and the US already. In both cases governments have deficits they can neither grow out of nor fix by spending cuts and remain in power, so the only alternative they have is to borrow the money into being (or print it). The private markets will not want the government debt and who can blame them? I wouldn't either. As for NZ - it may end up a safe haven relatively speaking as our government at least has a chance of balancing its books and our exports by in large tend to hold up okay when compared to others (food), not that we will get an easy ride, just better than most.
If you look at Greece you can see the extreme parties of left an right gaining traction...cant that happen here? I hope not.
The 100k would have to go on housing debt and yes as Steve keen commented there would have to be checks put in place to make sure the "silliness" didnt continue....but again yes I dont think it will happen...
I think we are possibly arguing different arguments....I dont think socialists as such will take power, simply whomever is in will do QE.......Natioanlists etc....blaming it on socialism is un-realistic/unfair.
QEx will fail, the black hole of non-spending and the walls of refinancing of debt is too great IMHO so a depression will result....now if the Govns "printed" straight into ppls bank accounts and not to banks expecting them to lend and they are not because they have the debt....well OK....but thats a stupid version of steve keen's idea...oh wait its been done before.....
regards
Yep, but not especially socialist, nationalist even...simply whomever can win 51% of the seats....that could even be centralist. the thing is debt only survives while there is a global economy on the sclae we have it and its worthwhile staying in it....Example, Argentia is doing fine....that I think will become common and within a few years, LOL maybe even a few months.....you can only recover from a nation what is outside that nation ie via a court, unless you command warships.
regards
Article on Keen's jubilee idea and public credit last month
http://www.scoop.co.nz/stories/HL1204/S00101/debt-jubilee-for-new-zealand-the-great-reset.htm
His jubilee concept is the only way to get around the moral hazard by giving everyone the same amount of money with the proviso those with any kind of debt be it mortgage, student, consumer apply their sum to their debt first. If young people could wipe their student debt wouldn't that encourage them to stay? People would be free to start their own small businesses.
Secondly he says that the amount of credit available to the economy is reduced by an amount equal to the money created. The pay down of debt would be deflationary - the surplus money would be inflationary but have no additional net effect. The banks wouldn't be bankrupted, just have their future ability to create loans and the income from interest curtailed. The financial sector in NZ would shrink dramatically.
Thirdly the banks and the credit system would be reregulated to prevent another credit bubble. The idea is to reset the system under new rules, not to go back to the behaviour that got us in the mess in the first place. Changes to LVR's and the tax system would prevent a lot of the money being releveraged into property and sharemarket speculation. The idea is to replace the staus quo with a next to clean slate.
Lagarde is part of the French elite along with their banks that will have their heads handed to them if Greece defaults. I'm sure the French elite are no better at paying their share than their Greek mates.
for QE to happen the FED has to buy something (they can't just create money from nothing), the debt slaves by in large have nothing for the FED to buy (of course one could argue that so do the banks if they mark to market, but thats not how the game of central banking is played) so the Fed (or ECB) buys whatever the banks can put up as assets (toxic or not) - so its not really 'giving' them money outright thats not really true as such - its just turning assets off their balance sheet into cash (the FED being the buyer of last resort), cash they can then speculate with ... no, I mean lead out.... nope, I mean buy US treasuries with... sneaky... very sneaky... so the politicians don't complain... so the debt masters remain firmly in control... infact their control grows as they become the holder of more and more government debt.... until the government no longer represents the people - who are their to be governed... now they represent their creditors... yes very sneaky indeed... and even cunning... so its a heads I win, tails you loose game for them...
To do a covered bond it will be the opposite....:P
but the factors ahead suggest 60% losses are quite possible indeed an undershoot could mean 75% losses...
By even 25% drop however banks will be insolvent I suspect and close their doors......
wont that be fun....
got a fire proof cash box?
regards
"This is a nightmare, which will pass away with the morning. For the resources of nature and men's devices are just as fertile and productive as they were. The rate of our progress towards solving the material problems of life is not less rapid. We are as capable as before of affording for everyone a high standard of life ... and will soon learn to afford a standard higher still. We were not previously deceived. But to-day we have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand. The result is that our possibilities of wealth may run to waste for a time — perhaps for a long time."
“The Great Slump of 1930” (1930), Keynes.
Note - For the resources of nature ............ are just as fertile and productive as they were.
Interesting.....I wonder what he would write today.....
oh god we are f*cked!
;]
regards
Not even hundreds, (and i doubt there are many, probably more like 10 or 20) just 1 or 2 extra.....in fact when you are PAYE you have an alternative income stream unlike say a PI....I would think you are a juicy target to extract $s from....
As the saying goes, owe the bank $100 you have a problem, owe the bank $1000000 and they have a problem.....
Thing about deflation is the relative size of the debt to your income stream....OK prices drop say 10% per annum, but wages can do likewise and since businesses will close the newly un-employed will find even bigger wage drops if they get a new job....the debt then becomes unmanagable....There is a very good reason my grand-parents used to say never be a debtor, they lived through the Great Depression.....
These days of course its not just houses, large car debts as well....so once petrol gets too expensive you will own 2 tonnes of junk that is worthless, next target to get the money back is your house....
Might even see debtor prisons making a come back....
and sk / big daddy etc think rents will go up a lot.....ho hum....
regards
#1. Let the house of cards fall over. Maybe it's time to reset the value of everything.
I wonder that myself....better to get it delt with its going to happen....
regards
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