Thursday's Top 10 at 10:'We are inside China, but China is not inside us'; How QE is not working; A rare coin collapse in Western Australia; Should NZ become goat central; The debt canary in Australia's coal mine; Dilbert

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Here's my Top 10 links from around the Internet at 10 am today.

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 #2 from John Kay on how effective QE has been at boosting the broad economy (not very), as opposed to the wealth of property, bond and stock owners (very).

1. 'We are inside China, but China is not inside us' - Martin Wolf at writes about a new book on globalisation and China from Cambridge University academic Peter Nolan that says we have little reason to fear China buying up the rest of the world.

Nolan's argument is that China is still dependent on large multi-national and integrated companies. 

China has yet to build its own global corporate behemoths. Although I'd note there are a few contenders, including Huawei.

Nolan makes some interesting points about the way many global supply chains are now dominated by two or three companies that are 'integrators'.

Fonterra is the closest thing New Zealand has to one of these companies. It's not quite there yet.

It's got the ingredients, but not the consumer brands, although it's working on that.

Here's Wolf:

What does this analysis suggest? The most important implication is that China has barely developed any globally significant companies. Moreover, such is the lead of the advanced countries’ incumbents that it is going to find it extremely hard to do so. From the Chinese perspective, therefore, the striking feature of their economy remains its dependence on the knowhow of others. This explains China’s desperate efforts to obtain that knowledge. A further implication is that China is very far indeed from “buying up the world”. The paranoia about its impact is unwarranted.

A deeper question is whether, in a world of ever more global companies, it makes sense to worry that companies are not “yours”. I suspect the answer is: yes. China is right to worry about this. Companies still have national attachments that shape how they behave and, in particular, their role in developing a particular country’s competences. But, for a nation as vast as China, this may matter less than for most others. In the end, almost all global companies are likely to find themselves enveloped by China: it will be too central to their activities for them to escape its demands.

2. Is QE really working? - FT commentator John Kay chews this over in this comment piece on his website, in which he ultimately concludes there has been little real analysis of the effects of the particular type of quantitative easing (QE) being used in the US, the UK and Japan.  It is however something the financial sector likes.

Kay makes some excellent points about the liabilities of public pension funds and the lack of public infrastructure investment.

In the modern financial economy, the main effect of QE is to boost asset prices, as market gyrations of recent weeks have clearly illustrated. But is the pursuit of higher asset prices an effective or desirable means of promoting economic growth? The distributional impact of the policy demands attention; the one certain consequence of boosting asset prices is that those with assets benefit relative to those without. Many people own houses – but, although in the UK, for example, we need more houses, we do not need another housing boom. The public also holds financial assets indirectly, largely through pension funds. But here there has been a paradoxical effect: because of the way pension funds are valued, QE has generally increased pension funds’ liabilities more than their assets.

A few technical papers from central banks try to estimate the overall macroeconomic effects of post-2008 monetary policies. But there is almost no direct evidence; these studies focus on the predicted effects of lower long-term interest rates within a particular economic model. The one policy certainty is that countries that claimed an early commitment to fiscal rectitude would encourage growth have not come through the crisis as well as those readier to adopt fiscal stimulus.

This relationship of monetary and fiscal policy reveals another paradox. Most opportunities for long-term investment are found in infrastructure, either in the public sector, or associated with or financed by the public sector. Yet far from treating the depressed state of western economies as an opportunity to make such investment, and taking advantage of opportunities to raise long-term finance at interest rates that are negative in real terms, austerity-minded governments have been cutting capital expenditure and their central banks have been aggressively buying long-term debt back from its private holders.

Why has so much attention been given to these monetary policies with no clear explanation of how they might be expected to work and little evidence of effectiveness? The very phrase “quantitative easing” seems designed to discourage non-technical discussion. But the real answer, I fear, is all too familiar: these policies may not benefit the non-financial economy much, but they are helpful to the financial services sector and those who work in it.

3. China's slowdown starts to show - Reuters reports Chinese trade figures out last night show how quickly China's economy is slowing, how relaxed the leadership appear to be, and how the 7.5% GDP growth target is likely to be missed.

China's reform-minded new leaders, including Premier Li Keqiang, have shown a tolerance for slower growth, while pressing ahead with efforts to revamp the economy for the longer term, but any continued slide in economic performance could test their resolve.

The customs data showed that exports fell 3.1 percent in June against forecasts for a rise of 4 percent, casting a shadow over second-quarter GDP figures due on Monday that are already expected to show growth slowed down to 7.5 percent as weak demand dented factory output and the pace of investment.

"Next week will be a testing time for the government in revealing just how much of a growth slowdown it is willing to tolerate," Zhiwei Zhang, China chief economist at Nomura in Hong Kong, said in a client note. The fall in exports was the first since January 2012. Imports fell 0.7 percent versus expectations for an 8 percent rise.

4. European strains - BBC reports S&P downgraded Italy's credit rating to BBB (two notches above junk) last night because its economy is expected to contract by 1.6% this year. Europe is far, far from fixed.

5. A very rare coin company - This has snuck under the radar in Western Australia. The West Australian reports the collapse of the Albany-based Rare Coin Company is causing many Australian savers to worry about whether they'll get back the A$240 million of coins in their vaults. The liquidators say they will eventually, but it's one to watch. Any New Zealanders caught up in this?

6. A homeless man and his Blackberry - This is a useful on-the-ground insight from Time into what homelessness and poverty looks like in the modern America. It's different here, right?

Bert said his phone connects him to less tangible, but still important, resources. He knows people can reach him, no matter where he sleeps at night. He gets daily e-mails from an online ministry, with inspirational messages and passages from the Bible. Those keep up his spirit and faith and keep him going. He can read news on the browser, too. Ironically, his biggest criticism of BlackBerry is the browser: it’s slow and outdated and most websites won’t load on it anymore. He only gets a certain amount of time on the computer at the public library, so he often begins researching jobs and housing on his phone and makes a list of websites he wants to visit when he gets on a computer with a faster connection.

The phone also, in part, structures his day in an often chaotic life. He has an exhaustive list of places to charge his phone, and he makes sure to hit them at some point during the day. He’s careful about his power and data usage and carries his charger at all times, in one of the capacious pockets of his army jacket. “When I see a free outlet somewhere, I have to say, it feels like Christmas,” he said. Free Wi-Fi inspires the same feeling; he can save up his valuable data usage.

7. What about goat meat? - Foodbeast points out goat meat is the world's biggest source of red meat, thanks to its popularity in the Middle East, Africa and South Asia. Surely New Zealand could become a great source of goat protein?

8. A fantastic charting tool - This chart tool from gedviz allows you create a chart showing trade, migration and bank claims between countries. Here's one I built showing China, Australia and New Zealand. Click through to play with it. 

9. A canary in the coal mine - This piece from Adele Ferguson in the SMH suggests this week's very poor business confidence figures in Australia are indicating some ugly smells may start brewing inside that economy.

A briefing paper to Victorian Treasurer Michael O'Brien last week is understood to show that the downturn is widespread, with the billable hours of the state's top law firms and accountancy firms down 25 per cent year on year.

Debt collection agency Prushka has been monitoring the trends for the past 12 months and likens the rapid deterioration in debt collection to the ''canary in the coalmine''.

According to Prushka's Roger Mendelson, the figures from the group's debt collection agency and legal arm show that of all the statutory demands served on behalf of Prushka over the past 12 months, 47 per cent across the country resulted in no payment. It says the amount recovered equated to 2.9 per cent of the total amount claimed.

10. Totally Stephen Colbert on 'Where in the world is Edward Snowdiego?'



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#7 a wave of conversions from deer to goat? They already have the fences to keep the little buggers in.

chasing rainbows about the place has been a painfull experience for farmers over the years.
  However with our local rates going up %11 , I may have to look at other options, including selling up.

I  am impressed at how little money CHBDC waste on their website. Anyhow...from the actual Annual Plan document:

The average rate increase across the district is 3.9%.The Waipukurau and Waipawa waste water treatment plant upgrades are the major contributors to this increase. These projects were brought forward to be completed in 2013/14, rather than 2014/15 as in the LTP. This is to ensure that the requirements in the new resource consent for discharge into the Waipawa and Tukituki Rivers are met by September 2014.



Gotta love journalists who cherry-pick their facts. So, big increases if you live in Waipukurau or Waipawa otherwise not so much. But look at the driver of rates increases: Hawkes Bay Regional Council. Wouldn't let CHBDC carry on as they were.

The Regional Council talked the locals into investing a lot of money into a hill block behind me. They then planted it in Eucalypts to act as a soak for waste discharge.
 It was a failure and will never be used ,now we get to pay out for plan two which is expensive and still has some risk. Our local towns are very quiet and subdued, rents are falling and everything fells like we have run out of money, except for a few million the Regional Council put into our Hall with a new stage etc ,nothing much has happened over the past few years.   Very few jobs about the place, Islanders do all the orchard work and Filipinos run the dairy farms

I did note the revaluation figures and they make for very sobering reading. It is rare to find a council so receptive as CHBDC obviously are to shared services or amalgamation. It sounds pretty desparate.
It is easy to forget in the debate over how to cram another 100k population into Auckland that places like Central Hawkes Bay, Ruapehu, all of Southland are struggling with "managing down".

I have a mate who lives in a small house in Waipawa, its Gv must be around 150K. His rates are over $2000. 
 I would love to compare that to a similar house in AKL.
 I just got milage tax for my ute and Reg. Over $1000 later ,Im thinking, shit for 10,000k a year thats expensive motoring. Rural NZ is carring far too much of the tax burden.
Lots of empty house in town

re #2 As I've mentioned here before I think if you really wanted to do QE surely you'd be better off printing the money and spending it on something productive like ufb, roads and bridges. Of course some of it would end up as pork for construction co's but it'd be a damn site more useful to a country than just giving it to banksters.

#1; Are these "Global Integrators" really a good thing? It is easy to understand how they got there and what they are doing, but at the end of the day there is no national interest or loyalty. They only seek to get products from the cheapest source and sell them elswhere for the highest return. A lot of them if not all will structure themselves so that they pay little or no taxes anywhere. The net result, driving wages down as manufacturers struggle to create a product at a price that will be purchased, no society benefiting from the taxes they ought to pay, or from the taxes from the wages their (effective) employees should be earning. Really it is a lot like the banks, get too big to fail, too powerful for politicians to force into paying taxes. In other words they become leaches on our society for the benefit of a few (relatively) shareholders.