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 read is #2 on China and its low interest rate subsidy.
1. The Nokia of New Zealand - A long time ago (2005) I wrote a column in The Independent bemoaning the fact New Zealand didn't have its own version of Nokia and wondering if it should be Fonterra. Between 1998 and 2007 Nokia generated a quarter of Finland's GDP growth.
Nokia's market share peaked at almost 50% in 2007 and then Apple launched the iPhone.
The rest is history. Nokia's share of the handset market is now closer to 3.5%.
Overnight Nokia waved the white flag and agreed to sell out to Microsoft, which itself is on the losing side of an epic shift in technology to smart phones from PCs.
It's worth noting how far Nokia has fallen and how much Finland relies on Nokia. Maybe we should steer away from having our own Nokia, particularly given the botulism scare in recent weeks...
Here's Megan McArdle at Bloomberg talking about where Nokia goes, Finland goes (or should that be went):
Even if Microsoft does manage to make things work as an integrated manufacturer of devices and software (something it has done very well with the Xbox), that doesn’t necessarily mean that Finland will prosper. R&D often shifts around inside large, multinational corporations that don’t feel the same kind of loyalty that a homegrown firm does. Over the years, I’d expect to see Nokia’s center of gravity shift toward the U.S. -- which for Finland means fewer high-paying, satisfying jobs in R&D, or global strategy.
Of course, those jobs were always relatively few -- but a global company run out of a small country can offer disproportionately rewarding jobs when times are good. The corollary is that when times aren’t good, the whole local economy gets pretty bumpy. You don’t need to go to Finland to see what this looks like; just take a peek at “company towns” like Detroit and Rochester, New York (Kodak and Xerox).
2. China's biggest subsidy - It has a few. Coal, aluminium, power, solar panels, cars et al are all subsidised in China. But the biggest is the subsidy state owned enterprises get through the regulation of low term deposit rates and the relative absence of choice for China's mad-keen saving consumers. Financial repression is an ugly thing.
Here's Michael Pettis at FT with an excellent piece explaining the subsidy and what should happen next.
Years of artificially low interest rates have been key both to China’s rapid growth and to its notorious domestic imbalances. The role of financial repression – manipulating the financial system to divert money from savers to producers – in the Chinese growth model is widely recognised. But the improvement in the country’s interest rate structure is not.
As a rule when nominal lending rates are broadly in line with nominal gross domestic product growth rates, the rewards of expansion are efficiently distributed between savers and users of capital. When they are substantially lower, however, as they have been in China for the past 30 years, net lenders – mainly household depositors – in effect pay a hidden subsidy to net borrowers. In China these include state entities, manufacturers, state-owned enterprises and real estate developers.
4. Here comes the protectionism - The world managed to mostly avoid trade protectionism in the immediate aftermath of the 2008 crisis, but it's now kicking in and it's being led by the emerging economies. Luckily for us, China is not as bad as it once was and 'our' emerging economies are better than some others such as Indonesia, Brazil and South Africa.
Here's Ambrose at the Telegraph on the EU's warnings about protectionism. The EU has some cheek accusing people of protectionism, but still...
6. Supermarket wars - Labour leadership contender Shane Jones seems to have suggested some sort of government intervention in the supermarket business. Here's a useful piece from Terry McCrann over in Australia about the price wars happening over there and who are the winners and losers.
7. Bring out your gold - Speaking of capital controls and trade protectionism, Reuters reports India is preparing to 'buy' gold from its citizens to solve its Rupee crisis.
8. Big data and lollies - Google likes to use big data and its algorythmists to solve all sorts of problems, including how to stop its workers from eating too many M&Ms, WaPo reports. Another way might be to stop calling its mobile operating systems after sweets...
9. Android KitKat - Seriously. BBC reports the good folks at Google have decided to 'brand' their new version of Android as 'KitKat'. The people at Nestle are thrilled. I'm campaigning now for the 'P' version of Android in a few years time to be called "Pineapple Lumps."
10. Totally Jon Stewart with a variety of props. Can't wait for him to get back properly.
28 Comments
On 5 and capital controls, it has seemed blindingly obvious for some time how damaging they have been to NZ, as witnessed by the current account and our proportionate loss of wealth and trading ability. Mr Bollard, on leaving his post for example bemoaned how damaging they were.
Even without capital controls in NZ, it has been doubly frustrating to stand by and watch the National government encouraging and doubling down on the most damaging flows by borrowing significantly offshore, and even worse, selling prime assets offshore. The way the flows work these become a free gift to foreign trading companies, at the expense of our own, exacerbated by the loss of the assets themselves.
As it happens I have no commercial difficulty with selling these particular companies. TV1 and TV2 would need some Murdoch free or Rineheart free type editorial conditions to ensure we didn't end up with Fox News or extreme right wing (or left wing come to that) self interested media in what are still relatively dominant channels.And I don't think such conditions can be drafted, so we will continue to own them as a country.
It is selling the power companies, and clueless ignorance of the capital flow effects (as now highlighted by the Eonomist) of selling them to foreigners that annoys me most.
Bernard,
On Shane Jones and the "supermarket wars", both your links point to the same story, and neither of them point to anything Shane Jones said. If he really is looking to regulate supermarket pricing, I suspect he is barking up the wrong tree, and sadly would be indicating he is out of his depth. Saying that though is without knowing what he said.
Here, if the link works, is Woolworths FY June 2013 results; showing reasonable detail on their NZ Countdown branded business.
He said little other than to note the duoploy situation and relate that to pricing. I certainly hope he also considers the squeeze on suppliers - as that affects our local grower/manufacturer economy so severely. And then there is the small speciality retailers also being squeezed out by the discounted petrol offers, in store specials etc. These duopoly players are ruthless as the linked Aus article points out - and their price cutting wars have served to improve their bottom lines, so no harm to them, that's for sure. What is needed is viable competition, which clearly we do not have - and neither does Australia. I wonder when NZ will become a net food importer?
Not owning our own food supply is serious and it could well happen before we are even aware of it.
Stephen L
Here's where Shane Jones talked about supermarkets on TVNZ's Q+A programme on Sunday
http://tvnz.co.nz/q-and-a-news/labour-leadership-debate-5551817
SHANE Number one, I will not write one single cheque the Labour Party cannot cash. Get that right from me. Secondly, there are some bastions that need to be overcome. The brown shirts of the food industry are the supermarkets. Under my leadership, they will be reviewed, and if it’s necessary to regulate them to bring the cost of food down, take my word, we will do it.
cheers
Bernard
Bernard,
Thanks, The "brown shirts" language is unhelpful, especially without any evidence that food prices are excessive, or that the supermarkets are over profiteering. The Woolworths annual statement I linked to (I suspect the login firewall blocks it, apologies) suggests no super profits, and food price inflation in NZ in the last year of 0.2%.
Where they probably are tough is in pretty robust dealings with suppliers; and I understand Kate's thoughts there. It's a minefield to regulate though, even if you wanted to, without actually causing prices to go up, and not down.
I assume Shane Jones is in reality likely to get the bronze medal in any leadership vote, so it doesn't matter too much. Labour will need to decide whether it wishes to go back to old fashioned adversarial "workers vs the bosses" politics; or a more intellectually robust and modern support for capitalism but with all stakeholders- workers, shareholders, managers, customers, the environment and so on looked after; as well as a macroeconomic platform to help all of that. Jones would seem to be the former; okay to have him on the team, but not driving the ship.
.. if Labour cannot reduce supermarket prices by regulation , they'll just resort to type , and nationalise them ....
And can't we all envisage the rows of empty shelves and the Russian style queues for the daily bread ....
.. but will they remove the 15 % GST off food ? ...... dream on !
Labour remains hopelessly divided and couldnt run a bath, let alone the country - - this leadership nonsense is costing the taxpayer a fortune. They are paid to be in Parliament not grandstanding around the country like buffoons promising to spend everyone elses money !
.. the leadership has thrown up some interesting results : The Labour caucus love Cunliffe , but don't care much for Jones ...
The public are happier with Jones , but still don't like Cunliffe ....
.. no one cares two hootons about Robertson ....
Expect Cunliffe to win , and alike his mentor Helen Clark , he thinks he knows better than you do how your money should be spent !
Gummy,
Expect Cunliffe to win , and alike his mentor Helen Clark , he thinks he knows better than you do how your money should be spent !
All governments it seems do this- comes with the territory I guess. National spending on South Canterbury Finance; Tiwai Point (which by the by, I supported on here); Goldman Sachs and friends on asset sales; supporting Chorus; Education payment systems; numerous IT cock ups; GCSB spying; possible DotCom legal liability of 100s of millions- along with ignoring plenty of laws along the way. As well as old fashioned and now out of date macro economic management. Christchurch earthquake management best practice?
No-one asked my permission; nor have they yet to make a complete and robust case for any of it. Key barely bothers these days. 30 second soundbites to satisfy the breakfast tv crowd. That's it.
Cunliffe at least has the intellectual capacity to make a case that is understandable; just as Helen Clark did. Let's see how it pans out.
That's precisely why Jones would be a better pick , and would have more appeal to voters , he's not an intellectual .... Clark & Cunliffe are .... John Key isn't ...
... why is Key popular ? .... people can relate to him ... he has humour , commonsense , real world experience , an ability to learn from mistakes ...
Shane Jones would be the best opponent Labour could throw up against him ....
Gummy,
For sure 95% of people are too busy with their lives to bother to understand in detail why governments do what they do. It nevertheless seems imperative to me anyway that the lead figures in government do have the intellectual capacity to argue a relatively complex situation to the 5% who do pay attention. Over time the 95% will listen to the 5%. I will credit Key with the intellect, but suspect his motives, and find it frustrating to have politics then reduced to lowest common denominator arguments. Jones hasn't actually shown he can get his head around complex stuff; maybe he can, maybe he can't. I accept you are just being mischievous and hoping Labour would pick someone that Key could easily roll. Doubt they will though. I also accept Cunliffe will need to communicate in a way that the 95% can relate to most of the time.
Investment decisions that make you go hmmm . . .
http://www.stuff.co.nz/business/opinion-analysis/9123549/Investment-decisions-that-make-you-go-hmmm
Well , of course , Finland has it all ... their mountains so lofty , their tree tops so tall ... and you can eat your snack-lunch in the hall ..
Truth be told , I'm more of a classical music fan , especially so when the great Wilhelm Shatnerovich is the lead vocalist ...
http://www.youtube.com/watch?v=_0hTtsqiFCc
.. he belts out the numbers with such a clarity & purity of voice , that sometimes the huskies of Minsk get nose-bleeds ..
He's doing more in the way of Prog Rock these days
http://www.rte.ie/ten/news/2013/0902/471724-star-trek-icon-william-shat…
perfect & dh too...
you (and the 300 up Mt Hutt) watch out where the huskies go...
Dreamed I was an Eskimo
Frozen wind began to blow
http://www.youtube.com/watch?v=n0Qw3Foa_XE
lets be Frank...
The world economic forum of economic competitiveness ( www.weforum.org ) has raised NZ to 18'th most competitive internationally ( out of 142 countries ) , for 2012/13 ...
... for the first time in their history , we're above Australia , who've slipped to # 21 ...
The usual suspects , Switzerland ( Walter Kunz !!! ) at # 1 , and Finland , the UK , USA , HK , Germany & Singapore dominate the top 10 ...
... ummmm , sorry guys , I interuptured you ... please , carry on talking about houses & " The Block " .... forgive me !
Gummy,
The report is good to note; and to the extent the government is responsible, (reasonably enough I concede) well done to them.
My one main grouch remains the macro economic management of the country; especially around capital flows and their effect on the exchange rate. The report is not crystal clear on what it includes in macroeconomic management, but it scores NZ a relatively low 43rd. Notably Switzerland, who come top again, have very significantly interfered in their own capital flows to ensure the competitiveness of their currency.
That is just blooody hilarious...! the IMF really...? the Capital control freak stickybeaks of developing economies has now decided to be a little less laissez faire in their control obsessive behaviour ...
or is it just a bad headline....?ha ha well it made me laugh anyhoo.....
Dear Christine......as we are in the process of decommissioning the free money faucet, might I suggest you review your neutral policy on Capital controls....you know , just in case
Love Ben XX
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