Here's my Top 10 links from around the Internet at 1 pm today.
As always, we welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.
See all previous Top 10s here.
My must watch today is #10 from Clarke and Dawe. They explain Ben Bernanke and tapering. I laughed.
1. Where's the mobility - One response to economic stress is to move. New Zealanders are expert at moving to find jobs, which often means moving to Australia.
The Americans were also excellent movers. Before the mid-1980s they would up sticks and move their families to the south and the west to find jobs, which helped drive America's economic dynamism.
But that mobility is dropping.
Matt Yglesias has a look at this trend at Slate.
The percentage of Americans moving to find work has dropped from 29% to 12% since 1985.
It seems less educated people are less likely to move.
Michael Strain of the American Enterprise Institute suggests giving vouchers to the long-term unemployed to help cover the expense of relocating to a healthier job market.
Ideas of this kind are no substitute for stimulative fiscal and monetary policies to promote broad employment growth, but they’re a perfectly sound complement. Historically, America’s large size and mobile population have made the country robust against shocks. Immigrants and college graduates are still quite mobile, but the country’s native-born, working-class majority is staying put, and it’s hurting them and the whole country.
2. It's not all about productivity - Samuel Brittan writes in this FT opinion piece that there is nothing wrong with the US economy that a bout of redistribution could not put right.
3. 20% too high? - Nadine Chalmers-Ross, who is trying to buy her first home, writes at TVNZ.co.nz that the 20% deposit rule being used by the Reserve Bank in its speed limit is too high.
It wouldn't be if house prices fell the 20% that the Reserve Bank calculates is the current level of over-valuation.
But here's the argument:
These rules are designed, the Reserve Bank says, to rein in the credit growth in the hope of avoiding another bubble.
But could the Reserve Bank be adddressing a problem that doesn't yet exist? The amount of money banks have been lending has picked up - it rose 5.4% in the year to June, but that's nowhere near the circa 15% annual growth from 2003-2007.
The changes may help keep interest rates lower for longer, which I'm sure will be welcomed by exporters and existing homeowners, but they will enjoy at most a few more months of rates at current levels. That comes at a large cost to others.
Long-term, sea level rise could be 5 to 10 meters. Journalists are already citing the draft report's prediction that by the year 2100, we could see as much as three feet of sea level rise. But there is also a more long-range sea level scenario alluded to in the draft report, and it's far more dramatic and alarming.
Taking a look at the planet's distant past, the document ascribes "very high confidence" to the idea that sea levels were "at least 5 [meters] higher" during the last interglacial period, some 129,000 to 116,000 years ago. It also adds that sea level during this period probably did not exceed 10 meters higher than present levels. Finally, the draft report says, with "medium confidence," that temperatures at that time weren't more than 2 degrees Celsius warmer than "pre-industrial" levels.
5. Show us the price cut - James Suroweicki writes at The New Yorker about the strange reason why sharply lower wholesale lobster prices in America haven't flowed through into cheaper lobster meals in restaurants.
Even as the wholesale price of lobster has collapsed, restaurant prices for lobster tails and that hipster favorite the high-end lobster roll have stayed buoyant. There’s more lobster out there right now than anyone knows what to do with, but we’re still paying for it as if it were a rare delicacy.
Keeping prices high obviously lets restaurants earn more on each dish. But it may also mean that they get less business. So why aren’t we seeing markdowns? Some of the reasons are straightforward, like the inherent uncertainty of prices from year to year: if a bad harvest next summer sent prices soaring, restaurants might find it hard to sell expensive lobster to customers who’d got used to cheap lobster. But the deeper reason is that, economically speaking, lobster is less like a commodity than like a luxury good, which means that its price involves a host of odd psychological factors.
Studies have shown that people prefer inexpensive wines in blind taste tests, but that they actually get more pleasure from drinking wine they are told is expensive. If lobster were priced like chicken, we might enjoy it less. Restaurants also worry about the message that discounting sends. Studies dating back to the nineteen-forties show that when people can’t objectively evaluate a product before they buy it (as is the case with a meal) they often assume a correlation between price and quality.
6. Spurious diatribe from an institutionalised interventionist? - Stephen Toplis from the BNZ has fired another broadside at the Reserve Bank over how it's communicating its high LVRs speed limit. Here's David Hargreaves' article on it on our site.
The words "spurious analysis" and "diatribe" are used in the critque of the central bank.
Yikes. The Reserve Bank Christmas Card list might just have gotten a bit shorter. Although to be fair to the bank, I'm still on the list. ;) Probably an oversight.
Toplis really goes for the doctor in the piece, accusing the good Governor of being "institutionalised" and "interventionist." I'm on Wheeler's side on this and the more I look at what he's done the more I think good on him for giving the finger to the banks.
Toplis goes on to restate the orthodoxy on monetary policy and belief that New Zealand is different when it comes to house price valuations and price falls. Toplis is an orthodox exceptionalist to Wheeler's institutionalised interventionist.
Here's Toplis:
What continues to worry us is the Reserve Bank’s reluctance to utilise orthodox monetary policy to cure the “problems” that the economy faces. If the Bank really does believe that house price inflation is getting out of control the accepted wisdom is that rising interest rates will be most effective at limiting it.
We remain bothered that the Reserve Bank continues to promulgate the view that New Zealand is vulnerable to a housing correction based on what happened in such places as the United States, the UK, Ireland and Spain. One would have to first correct for such things as the prevalence of low-doc loans to predominantly low-income people, the impact of adjustable rate mortgages, the fact that LVR’s in some cases were well above 100%, the excessive growth of finance sectors, different refinancing obligations and, most importantly, the role of excess supply of housing before making such comparison.
You would be hard pressed to conclude that New Zealand house prices were currently under threat from excess supply. The Reserve Bank suggests that it is able to measure the supply/demand balance as it says that “LVR restrictions would be temporary and would be removed when the housing market had returned to a better balance of supply and demand”. So maybe there is some argument to be less perturbed about house price inflation while there are supply constraints?
7. The difference between confidence and competence - Tomas Chamorro-Premuzic writes at Harvard Business Review about why so many incompetent men become leaders.
In my view, the main reason for the uneven management sex ratio is our inability to discern between confidence and competence. That is, because we (people in general) commonly misinterpret displays of confidence as a sign of competence, we are fooled into believing that men are better leaders than women. In other words, when it comes to leadership, the only advantage that men have over women (e.g., from Argentina to Norway and the USA to Japan) is the fact that manifestations of hubris — often masked as charisma or charm — are commonly mistaken forleadership potential, and that these occur much more frequently in men than in women.
This is consistent with the finding that leaderless groups have a natural tendency to elect self-centered, overconfident and narcissistic individuals as leaders, and that these personality characteristics are not equally common in men and women.
8. Just what the world needs - Businessweek reports on the latest invention: Caffeine spray. Something to use after your third flat white of the day and the three cans of red bull.
9. Totally all in one place - Three things I like: Steve Martin, Kermit the Frog and banjos.
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