Wednesday's Top 10 with NZ Mint: Money-printing Japan now targeting higher Nikkei too; Italy gets a good Grillo; A managed default for Japan?; How meritocracies become plutocracies; Dilbert

Here's my Top 10 links from around the Internet at 8 am in association with NZ Mint.

As always, we welcome your additions in the comments below or via email to

See all previous Top 10s here.

My must read today is #8 from the Economist on the way meritocracies turn into plutocracies and what to do it about it.

1. Nikkei targeting central bank - We've had strict inflation targeting.

We've had flexible inflation targeting.

We've talked about targeting nominal GDP.

The Federal Reserve is targeting the unemployment rate at 6.5%.

Now we have Japan's Economy Minister Governor, Akira Amari, talking openly about where he thinks the Japanese stock market's Nikkei index should be.

The Nikkei is rising as we speak as investors tired of 'fighting the Fed' and losing, move into the line.

Here's Felix Salmon from Reuters with a discussion. He's in favour. I'm not so sure. This is a classic attempt to get an economy going through trickle down economics where the richest and most leveraged make a killing before anything else moves. Here's Felix:

I like this move: it shows imagination, and the upside is much bigger than the downside. The worst that can happen is that it doesn’t work, and the stock market ends up doing what the stock market would have done anyway; the best that can happen is that it helps accelerate the broad recovery that everybody in Japan is hoping for this year.

What’s more, Amari is not the first policymaker to talk about targeting asset prices. Minneapolis Fed president Narayana Kocherlakota, for instance, said quite clearly in 2011 that stock prices “are really going to be a central ingredient in the recovery process”

2. Relax! You'll be more productive - Economists may not like this idea, but here's the New York Times with a growing body of evidence that workers overwhelmed by email, back-to-back meetings and longer work hours need to work less to produce more.

More and more of us find ourselves unable to juggle overwhelming demands and maintain a seemingly unsustainable pace. Paradoxically, the best way to get more done may be to spend more time doing less. A new and growing body of multidisciplinary research shows that strategic renewal — including daytime workouts, short afternoon naps, longer sleep hours, more time away from the office and longer, more frequent vacations — boosts productivity, job performance and, of course, health.

“More, bigger, faster.” This, the ethos of the market economies since the Industrial Revolution, is grounded in a mythical and misguided assumption — that our resources are infinite.

3. Watch Italy get a good Grillo - I pointed to the amazing rise of comedian-politician Beppe Grillo and his Five Star movement in Italy last year. He wants to renegotiate (ie write off) Italy's debts and pull Italy out of the Euro.

Bloomberg reports his support is still strong ahead of elections later this month. Keep an eye on the elections on February 25/26. If Grillo gets a big chunk of power, expect a financial markets reaction...

“The debt must be renegotiated and the interest on the debt must be renegotiated,” Grillo said yesterday in a Bloomberg Television interview in Trento. “We won’t have growth in this country for 10 years if the climate stays as it is.”

Grillo, a self-described populist, has rallied to nearly 20 percent in some polls with a call to reconsider euro membership and to drive established politicians from parliament. The 64- year-old former stand-up comic and yogurt pitchman is travelling the country doing two rallies a day before the Feb. 24-25 general election. He spoke to 2,000 people in the mountain town of Bolzano on Feb. 10 before a rally in Trento.

“The debt is growing, the only thing that’s growing,” Grillo said. “It’s darkness, a darkness that has oppressed and is oppressing ordinary people.”

4. A managed default for Japan? - The Guardian writes about Japan's attempts to break out of its deflationary trap and how it is considering a managed default on its government debt. It's hard to believe Japan is actually discussing this, but if it's true it's explosive. HT John via twitter.

Japan is engaging in investment and innovation across the board and on a scale Britain can only dream of.

Time after time, as I questioned company leaders about their capacity to do this, I was referred to Japan's "public interest" or "stakeholder" capitalism – committed long-term ownership, partnership with the state to drive research forward and corporate leaderships keen to find commercial responses to the giant economic and social problems of our time. It is a world foreign to our own of shareholder value maximisation and gigantic personal bonuses, where interest in social problems is seen as "anti-business".

This dynamism refuses to be submerged by debt deflation; Yonekura pointed out that, while New York had built 20 skyscrapers in the last decade, Tokyo had built 50. But to unleash this dynamism, Japan has had to break out of its monetary and financial trap. The newly elected government has gone some of the way, proposing a huge Keynesian stimulus and lifting the inflation target to 2%.

But, as Turner argued, Japan's stock of public debt is now even more suffocating than private debt. Japan must go further: turn it from onerous debt into free cash by in effect printing money. Done right, this would not create inflation but steady the economy. There is an intense private battle raging between the Ministry of Finance and the Bank of Japan. Either the bank starts monetising public debt, as Turner argues, or the Ministry of Finance will launch another unthinkable, unilateral reduction of Japan's public debt burden by demanding borrowers accept worse repayment terms. Plans are being laid for a managed default unless the Bank of Japan prints money.

This is what happens when societies face impossible demands. To sustain the social fabric, investment and innovation, governments have to do non-conservative things – reframe their capitalism and break conservative financial rules. Japan is now ready to do this, the Liberal Democrat party feeling that too much is at stake not to act.

5. The rise and rise of inequality - The Guardian reports on a Resolution Foundation report showing the top 1% in Britain now take home 10% of the income (up from 7% in the 1990s), while the bottom half earn 18%.

Even Tory buffoon (and London Mayor) Boris Johnson is in favour of increasing the minimum wage.

Tackling the gap between rich and poor is a growing political issue. The Labour leader, Ed Miliband, has called for a policy of "pre-distribution" to try to narrow the gap between the best and worst paid, while politicians from across the spectrum, including the mayor of London, Boris Johnson, have praised the idea of employers promising to pay the Living Wage, currently £8.55 an hour in London, and £7.45 elsewhere. The deputy prime minister, Nick Clegg, last week revived the idea of a "mansion tax" on homes worth more than £2m, or higher council tax bills for the costliest properties.

6. Just what Europe needs (not) - More budget cuts. BBC reports on plans to cut European Union spending by 3%. What are they thinking? Europe is in perma-recession with a massive demand shortage. Cutting spending by the one section of the economy still able to spend is just ludicrous.

7. Amazon unpacked - reports from a massive new Amazon warehouse built in a depressed former coal-mining village in the North of England.

Despite the extra jobs, not everyone is happy. Amazon employs a lot of contractors and treats its workers like the robots.

If anyone should still be a cheerleader for Amazon, which has created hundreds of jobs in the past 18 months in a community that sorely needs them, it is Glenn Watson, manager of economic development at the district council. But he is dismayed. “They’re not seen as a good employer. It’s not helpful to our economy; it’s not helpful to the individuals,” he says. Britain’s economic transformation is playing out in miniature in this smoky little town. It hasn’t been a smooth ride.

8. The problem with meritocracies - The Economist has a thoughtful piece on the problems of social mobility in an era where meritocracies seem to have turned into plutocracies.

It is, of course, good that money flows to talent rather than connections, and that people invest in their children’s education. But the clever rich are turning themselves into an entrenched elite. This phenomenon—call it the paradox of virtuous meritocracy—undermines equality of opportunity.

This is happening throughout the rich world, where elites have proved remarkably adept at passing on privilege down the generations (see article). But it is most acute in America. Back in its Horatio Alger days, America was more fluid than Europe. Now it is not. Using one-generation measures of social mobility—how much a father’s relative income influences that of his adult son—America does half as well as Nordic countries, and about the same as Britain and Italy, Europe’s least-mobile places.

America is particularly exposed to the virtuous-meritocracy paradox because its poor are getting married in ever smaller numbers, leaving more children with single mothers short of time and money. One study suggests that the gap in test scores between the children of America’s richest 10% and its poorest has risen by 30-40% over the past 25 years.

9. Maybe older workers should be paid less - News reports the Netherlands is having a debate at the moment about whether older workers, who can be less productive, should be paid less.

A FRENCH multinational's suggestion in the Netherlands to ask older workers to accept pay cuts as a cost-cutting measure has touched a raw nerve as the Dutch economy faces a slowdown and rising unemployment. Unions see the idea doing away with the principle of paying older workers more for their experience as an attack on a fundamental right, while employers see it as a solution to avoid layoffs in a crisis-hit economy.

The debate has raged in the Netherlands since French IT giant Capgemini's Dutch general manager, Jeroen Versteeg, said he was looking at "calibrating" 5,000 Dutch-based employees to see if salaries matched current market value and productivity.

10. Totally Jon Stewart on who could replace the Pope. Could Mitt the Mormon do it?

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Hi Hugh, on that 'why Californian's leave and home price' chart has someone does this for NZ? Be interesting if someone could, you or Interest team. If you can't afford a house, basic need, then off you go soemone else. Seems pretty basic and clear. I'm not sure that relationship is clear here; and it should be clear in everyone's mind - if that's happening.
Thanks very much for the excellent info you keep providing.

Hi Hugh
The why leave California article is a cracker.

Or you could read it and decide its dodgy and written to give the political outcome desired...

#7 and #9 - China will be worried - it is fast losing the competitive edge in terms of ability to exploit its working class. 

I'm older (said, coyly) and am currently on the same salary as I was in - yup - 1999.   Conscious trade-off - several firms in between 1999 and now, and I'm not the only one in this game.  Still well above NZ average.  No union (there are nada unions in IT - funny innit) to gum fings up.  Don't mind one bit.  Frictionless capitalism, one could say.

Re:#6  And the source of their spending wealth was/is?

While I tend to ignore the site....
The New “Water Barons”: Wall Street Mega-Banks and the Tycoons Are Buying up Water at Unprecedented Pace
"Allianz Group: Water Is Underpriced and Undervalued"

Chevron is buying all the Rice farms around here, they come with large water takes. Chevron is going to be the States biggest rice grower

Or use the water for something else.  Fracking? growing bio-fuel crops? etc etc
Actually is there any fracking potential around you?  not knowing just where you are.  Has chevron bought fracking rights and now needs huge quantities of water? ie what else have they bought fairly close by?

Something has to be done about this bloody exchange rate .
At the end of last year , if I sold goods for $100,000 Australalian FOB Auckland I got NZ$127,000  .
Today you  get NZ $121,000  which is NZ $6,000 less on a single small consigment, and if you do that every month it equals the wages of 2 New Zealand workers over the year.
Thats not factroing in that you are often competing with Indonesian , Thai,  Malaysian and  Chinese  products in the Aussie markets and those Asian producers now have an even bigger price competitive advantage .
This is going to knock New Zealand out of business by mid 2013

I dont know why you suggest such a date, but I agree on the trend...and that we need to do something.
Great real world examples by the way, really drives home just how bad the impact is....and the costs of raw materials has done what?
Meanwhile the banks pontificate on we all must do something....easy drop OCR to 1.5% and lets start with the banks profits dropping as a result.
Asian, well personally I buy NZ first and OZ second and never buy USA.  I think we should have more policy/drives on buying NZ first myself and that manufacturers and vendors should be advertising where its made to boot, pushing it hard, the USA does.

re: 6
the administration (read: bureaucracy) component of the budget actually went up. How dumb is that!!!!

100 more jobs to go at contact...well the NZ powerhouse economy is in full flight, looks like the economists predictions of 6% unemployment by end of year really do look accurate...yeah right:

FYI from a commenter via email:
Dear Bernard (Hickey),

I regularly listen to you on radio and TV and I am starting to wonder if you
have caught the Reserve Bank malady - which is to blame property investors
for all the countries problems.

People invest in property not because they "Love" it, but because they see
it as the most reliable and controllable form of investment they can make.

Only this week we read of Allied farmers being again in the crap over their
Hanover dealings.  And almost every week we read or hear of some other
lunatic activity in the NZ business scene.

I recall when Lidell was in charge of CHH. His was regularly regaled as one
of our great business leaders. Like hell he was. While he was in charge of
CHH the share price didn't rise. It mostly went down. He re-organised the
outfit into 13 or 15 divisions so that it would operate better. What
It only did about 4 or 5 major activities.
One of the new people he put on was strange. He didn't have a desk in his
office - he reckoned he was too busy to sit down! (more like ready to run as
soon as he was found out.). He decided that he would corner the pine log
market and make millions. But he didn't know that pine logs had a life of 6
months. He was still adding to his great pile of logs down near Tokoroa
somewhere when International Paper execs thought something was wrong and
decided to visit NZ.   Wonder boy knew by now that he was on the wrong track

so what did he do?  He had the lot buried!!   At least $35million worth of
logs (some rumours said $65million)

Its this sort of lunacy that drives people away from the NZX.  A few years
ago I did an exercise as a result of discussions with the reserve bank.   I

took the top 20 (I think) and went back as far as I could to get their
historical share price (with accurate split information). I could go back 15
years. If Id bought 1 share in each of them the cost was $39.  15 years
later the were worth $35. And these wre the biggest and brightest on the NZX

Then only this morning we hear of Raekon messing up - and the commentator on
the radio said it -(not me) - theyre suffering from inferior management !!!!

What you and the Reserve Bank should be doing is putting effort into
improving the standard of company management. Instead of blaming the
investor for trying to guard their money - you should be pointing out that
the reason people buy property is because they don't trust the NZX.  And
almost every day you could give an example of the low standard of management
our companies have.

You should be pushing for more rigorous preparation for company managers -
and to increase the consequences for crazy behaviour - such as the Air NZ
purchase of Ansett. If ever directors should have gone to jail - it should
have been those who voted to purchase the airline.
Stop blaming the prudent investor - lay the blame where it belongs - at the
feet of company management.


Many thanks for your comments.
There's plenty of blame to go around.
I agree the NZX has been a volatile. Stock markets often are. However,
the NZX 50 is up 30% in the last year. Some have made money out of it.
I understand why property investors invest in property. There are all
sorts of incentives and tax breaks.
It's just not healthy for the economy in the long run for all our
equity and debt to be invested in houses.
They don't employ nearly enough people on nearly enough wages to grow
this economy quickly enough.


Hence some farmer share holder(50% of shareholders) sceptcism on the widsom of TAF and DIRA. The cooperative model is accussed of having lazy capital and poor 'corporate discipline amongst other things (not withstanding unsustainable levels of debt taken on by farmers partly as a result of DIRA and anti cooperative fair value share), but time and again we have seen and reaped the results of woeful corporate performance.