Here's our summary of key economic events overnight that affect New Zealand, with news global investment sentiment is weakening as the Americans look ready to score an own goal.
The US debt negotiations are getting sillier. But at least they are still talking. While the White House is offering a spending pause, congressional Republicans are hardening their demand for deep cuts - but just not in spending that will affect their favoured programs or districts. It looks increasingly likely there will be a government shutdown in early June. They have had them before under Clinton and Obama, but never against Republican presidents. (The largest increase in US government debt occurred under Trump.)
Unnoticed at this time is that the US regional banking crisis seems to be over.
But US mortgage applications fell yet again last week and benchmark rates rose by more than +10 bps to almost 6.7% plus points. None of this suggests the American housing market is out of its now long-running funk. Apart from a brief pandemic uptick, you have to go back to the Obama years to find a period of steadily rising mortgage demand.
The release of the May FOMC minutes showed Fed officials uncertain about how much more policy tightening may be still be required and many focused on the need to retain their options for changed in policy direction. Some members saw the need for more rate hikes while others anticipated that deceleration in growth would eliminate the requirement for further tightening. This collective uncertainty just added to the Congressional debt limit uncertainties.
Risk premiums for American funding are rising on the Congressional inaction, raising the cost of money worldwide.
Across the Pacific, Japan's real wage growth is expected to return to positive territory this year as prices stabilise and the largest pay hikes in three decades boost consumer purchasing power
And after four months of negative sentiment, Japanese manufacturers are feeling positive again with a sharp mood change. Ditto in South Korea.
But German investor sentiment is going backwards now after a period of seven rising months. And to be fair the May retreat is only back to where it was a year ago, so not net change over that period. However the mood of their investors is still a long way lower than pre-pandemic.
The EU is set to toughen up how the financial industry charge their clients. They now plan to ban them paying commission on sales of their products to brokers who gave no advice to customers. This is the latest attempt by regulators to address the hopelessly conflicted relationships between brokers and the financial industry where brokers get paid by these industries to pedal their products and still claim they work in their clients best interests. It's a fiction. But brokers world-wide have proven adept at sidestepping any meaningful reforms.
British inflation is still very high and starting to rise again. In April it rose at an annualised rate from March that exceeded 14%. From a year ago it was running at 8.7% which is a fall from the same year-on-year level from March, but their core inflation rate rose on the same basis. It is the recent pickup that will concern them. Accelerating food costs are their biggest challenge. It is very noticeable how much higher British inflation is over that in the EU. The removal of competition from EU firms has allowed local firms room to raise prices sharply in their home market, perhaps to subsidise tougher competitive positions outside the country.
The UST 10yr yield starts today at 3.73% and up +3 bps from yesterday. Their key 2-10 yield curve is still inverted at -63 bps. Their 1-5 curve is at -137 bps and also little-changed. And their 3 mth-10yr curve is marginally more inverted at -200 bps. The Australian 10 year bond yield is now at 3.64% and down -2 bps from yesterday. The China 10 year bond rate is unchanged at 2.72%. And the NZ Government 10 year bond rate is at 4.40% and down -2 bps bp from yesterday, not much reaction at the long end of the curve.
Yesterday's RBNZ Monetary Policy decisions saw local swap rate fall back sharply, but interestingly only to where they were a week ago, or a month ago. The corrections were no more than that.
Wall Street has opened its Wednesday session soft with the S&P500 down -0.5%. That is now a -1.5% fall from where we opened this week. Overnight, European markets all closed lower by a consistent -1.8%. Yesterday Tokyo closed its Wednesday session down -0.9%. And Hong Kong was down -1.6% continuing is volatile run. Shanghai ended down -1.3% and a continuation of unusually large falls for them. The ASX200 ended its Wednesday session down -0.6% while the NZX50 found things much more to their liking, rising +0.2% against the international trend.
The price of gold will start today at US$1962/oz and down -US$14 from yesterday.
But oil prices are another +50 USc firmer from yesterday to be just over US$73.50/bbl in the US. The international Brent price is now just over US$77.50/bbl.
The Kiwi dollar is a lot softer against the USD from yesterday, down -1½c and now just on 61 USc. Against the Aussie we are down more than -1c at just on 93.3 AUc. Against the euro we are down more than -1c also to 56.7 euro cents. That means the TWI-5 is has fallen -130 bps to 69.9, evaporating all of the May gains and putting us back to where we were in the first week of May.
The bitcoin price is -3.3% weaker today, now at US$26,287. Volatility over the past 24 hours has been moderate at just on +/- 2.2%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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During Donald Trump’s whole presidency, the U.S. national debt increased by $8.18 trillion, a percentage increase of 40.43%. This is less than Barack Obama (69.98%) and George W. Bush (105.8%). However, Donald Trump was in office for only 4 years compared to 8 years for both Barack Obama and George W. Bush.
It is a well guarded secret by the MSM that under Trumps "Tax Cuts" US Tax Revenue increased. The Corporate Tax Rate went down and Collections went up.
Plus a $Trillion was moved by the Fortune 500 Corporations from overseas holdings back to domestic banks. No only that but look it up and last year there was an increase of $800 billion in Income Tax that the Biden Administration couldn't account for. Best of all the high income households lost their Tax Exemption for Mortgage Interest & Property Tax deductions and that alone caused $60 Billion in new revenue for the Treasury which Democratic House members bemoan. Middle Class households under $100,000 got a tax break with more support for children. No the problem isn't Tax Collections going down--it is simply Spending rising. Hundreds of Billions alone for support to the millions crossing the Southern Border. New York City alone is estimating over $3 Billion in spending to house and feed them this year. Unbridled Spending is the issue.
''It is a well guarded secret by the MSM that under Trumps "Tax Cuts" US Tax Revenue increased.''
Such a well guarded secret that it never actually happened.
Tax revenue (in billions) from corporate tax pre Trump (2016) $311. Trump then tax cuts and take collapses - to $230 in 2017, $224 in 2018 and $210 in 2019. So that's a cool $250 Billion lost in tax take in 3 years!!! Its only recently that the corporate tax take has now recovered to previous pre-Trump levels:
https://fred.stlouisfed.org/series/FCTAX
Unless you can show us some other data.........
Any massive tax change affecting Corporations takes time to bed in. Here is the proof of what lowering the tax rates did for collections: As a share of GDP, total federal tax collections hit 17.8 percent this year, which is higher than almost any year (2015 is the exception) since the Bush tax cuts in 2001, and substantially higher than the 16.3 percent of GDP that was collected on average between the passage of the Bush tax cuts in 2001 and the TCJA in 2017.Corporate Tax Revenue Hit an All-Time High in 2021 | Tax Foundation
So the US lost $250 billion in tax receipts in the period 2017-2019 only now to get back to the same annual corporate tax take in 2022 that they had in 2016? (which accounting for inflation in the period 2016-2022 is actually a significant net loss)
https://fred.stlouisfed.org/series/FCTAX
Can't argue with that graph.
Hundreds of Billions alone for support to the millions crossing the Southern Border.
Overlooking that most of these people end up fully employed in low paid jobs - US would be stuffed without them and they know it - hence the half hearted efforts to stop it.
When you break from China, as the US is trying to do, you need these folk and Mexico ready to fill the gap.
An election was fought on this issue and 70 million voted to close the Southern Border. What needs to happen is worker pay is forced up so that the Hollywood types pay more for their maid, pool boy, and lawn care, as do the Hospitality Industry (maids) and Food Industry from Producers to Processing plants to food service. On 1 July any employer in Florida with over 25 employees will need to use E-Verify to insure that they are only hiring legal American citizens or those on Green Cards So even a state with a huge Hispanic Population is ready to stop this tide. Based on the amount of Government aid that the illegal migrants gain by staying in the US it far exceeds the amount of Federal & State aid dispensed to service that population of tens of millions. Here is the evidence that illegal immigration hurts the native born poor American:
What Happened When Immigration Fell?
Less skilled Americans got a raise.
By Steven A. Camarota on May 16, 2023
We are often told that America must have very high levels of immigration — otherwise, businesses will be deprived of the labor needed to expand. CEOs from retail to technology have recently made this case, as have allied politicians from both sides of the aisle.
But is it really true?
The period between 2016 and 2019 represents a good test of this argument because both legal and illegal immigration fell substantially. If immigration enthusiasts were right, the economy should have sputtered, but that’s not what happened. In fact, GDP grew, inflation remained low, and — perhaps most significantly — wages for less educated American workers not only grew but grew at a faster rate than for high-skill workers. .https://cis.org/Camarota/What-Happened-When-Immigration-Fell
Of course it was ...and his tax cuts. never let a good crises go to waste (War on Terror, Chch rebuild, covid, etc) National are about to walk smack into the latest infrastructure spend up and their fiscal responsibility rhetoric will evaporate overnight. Roads, Bridges, more roads ...and tax cuts.
Probably more about most Government employees being democrats. So democrats don't want to cut them off but republicans don't have Government employees' votes so happy to stick it to them with a shut down while still earning brownie points with their tax base (e.g. cut that bloated government so we can cut taxes) .
"UK trade figures show UK exports reaching £815.2b in 2022 — up 25%.
That represents the highest export number ever recorded in UK history; some 17 per cent higher than the pre-Covid peak in 2019 and some 43 per cent above 2016 levels."
https://www.gov.uk/government/statistics/uk-trade-in-numbers/uk-trade-i…
Yes European's have net zero policies.
We're going to start finding that unless we also start walking the talk and reducing per capita emissions (we have absolutely not been) then we will start finding it harder to trade as corporations and governments put in rules/legislate to prevent them from trading with countries that do not tackle emissions.
And isn't that yoy increase because they were just coming off the back of a massive covid wave last year? https://www.worldometers.info/coronavirus/country/uk/
"Unnoticed at this time is that the US regional banking crisis seems to be over." Really? Or has it just been overshadowed by other crisis's? I find it hard to believe that bankers have suddenly changed their behaviours, attitudes towards risk and that they fully understand that they can be allowed to fail? Looks more likely that they are just lost in more noise from elsewhere. And the link provided supports that view, as people buy bank shares again. Ignoring the risks associated.
My son has been a Commercial Property Manager in the US Midwest for 20 years. Last week they handed the keys back to their lender on a building in the CBC they purchased for $26 million in 2018. Now at 60% occupancy and ground floor rent for bars and restaurants dropping due to fact suburban people don't go downtown at night due to crime their building is worth less than $18 million. When mortgage rates doubled this year that was it--all done. This situation is playing out across the US massively over the next 12 months. Regional Banks will take massive hits.
Covid and nighttime safety are probably related. What makes city centres safe is lots of people. Covid kept people out (residents and visitors) and it will take a while for them to come back. Same thing happened with many US city centres when the first suburban explosion occured with the widespread adoption of the motor vehicle and there was white flight to the "safety" of the suburbs. It will likely reverse over the next few years but tough times as it does.
No, the crime over there is massively out of control. The police dont even bother with shop lifting under $1000, so people just walk out with stuff left, right and center.
All of the big stores are leaving the large democrat run cities, and the perfect case of irony is the stores the BLM protestors burnt down on their crusade, sure are not being rebuilt in those areas.
Brain dead.
Another month, another grim set of UK inflation figures. The latest numbers show how difficult it is to bring inflation back down once it has been allowed to run out of control. The fall in the headline rate in April, from 10.1pc to 8.7pc... was entirely due to the smaller increases in electricity and gas prices this year than last, which we already knew about.(Telegraph)
And what the RBNZ did (or rather, didn't do) yesterday similarly risks us letting the CPI run out of control. 0.6098, and looking mighty fragile to me.
Some fairly big Brexit chickens coming home to roost in the UK that is playing some role in the inflation figures. The biggest act of self harm any nation has ever done to itself, and it's the gift that just keeps on giving. I see they now have record levels of immigration as well now - Brexit didn't even lead to them 'controlling their borders', chuckle.
EU are working hard to make Brexit seem like an astute policy decision by the Brits and not a political brain fart. You see this recently?
https://technomancers.ai/eu-ai-act-to-target-us-open-source-software/#m…
> In a bold stroke, the EU’s amended AI Act would ban American companies such as OpenAI, Amazon, Google, and IBM from providing API access to generative AI models. The amended act, voted out of committee on Thursday, would sanction American open-source developers and software distributors, such as GitHub, if unlicensed generative models became available in Europe. While the act includes open source exceptions for traditional machine learning models, it expressly forbids safe-harbor provisions for open source generative systems.
> Any model made available in the EU, without first passing extensive, and expensive, licensing, would subject companies to massive fines of the greater of €20,000,000 or 4% of worldwide revenue. Opensource developers, and hosting services such as GitHub – as importers – would be liable for making unlicensed models available. The EU is, essentially, ordering large American tech companies to put American small businesses out of business – and threatening to sanction important parts of the American tech ecosystem.
> If enacted, enforcement would be out of the hands of EU member states. Under the AI Act, third parties could sue national governments to compel fines. The act has extraterritorial jurisdiction. A European government could be compelled by third parties to seek conflict with American developers and businesses.
If the EU bans AI in Europe (or cripple it to the point which would effectively be the same thing if this act passes) while it remains available in the UK it would retroactively justify Brexit and then some. Utter craziness from the EU. Be like banning the steam engine back in the day.
Chris Luxie says he is "ruthlessly possessed" about building more houses. I wonder what exactly he means by that and how far he plans to take it. He said opening greenfield areas but more details would be good
If he has actually backtracked on intensification that's pretty weird. Councils would rightly have steam out their ears hearing that.
Its who is telling him what to do... lobbyists, elite, big business.
The rich folk with villas in the city dont want high rise neighbours. So they have told their lad to sort it out.
What we need is the man with a vision for the country and a whole and the character to push it through...
If he has an alternate plan he needs to explain how it will work with public transport, cars, climate change, NZ economy the whole picture...
The property Ponzi and duopolists are clearly spending up large on party donations with so much to lose from the current lot being in power. National and ACT are miles ahead of others.
Obsession with cars, lobbyists and political donors calling the shots and turning more partisan as a people. We're looking more like the US obviously without the high wages and economic opportunities.
Auckland faced growth problems in the 60's and opened up Manukau to development of single family homes and extension of Motorway to service the Baby boomer growth. In terms of close in green fields you could build hundreds of thousands of single family houses between Helensville and Orewa- load of Life Style Blocks that could be converted with a zoning change north of Albany. (this is not high value horticultural land -unlike south of the city). Then service it with west to east Light Rail Line that connects to Northern Busway, and bingo job done and comutters getting into the CBD the modern way--totally different than 1960's style development designed around car mobility. This is the only way to create affordable sections to build houses on anywhere within 50k of the CBD.
It is incredibly hard to service single family housing (using the current development controls) with public transport. It is much more effective to focus on developing exisiting RTN corridors. The barrier is that the RTN corridors need to actually designed to be RTN corridors and car parking needs to go and car traffic massively reduced.
So you want rate payers and tax payers to pony up the cash to pay for heaps more roads, sewage, water, electricity and now light rail so a few thousand can live in single family homes on large sections. You mean like we did in the 60s? ;-) You mean like all those massive, mostly untidy 60s type houses and sections in south Auckland? House so remote that cars are needed to get anywhere?
Terribly funny how you point to a 60s solution that failed and then suggest we should do it again.
Think a US based development structure would work best. It lays the cost of development and infrastructure on the new communities by assessing each new title with a portion of the costs. The council takes out a 25 year Bond to cover the costs and then assesses each property their share on an annual basis (plus their interest share). Municipal Bonds like this have worked in the US for 100 years. Best of all the money wouldn't come from Aussie Banks or overseas funds.
Because their is no Tax payable on interest for Municipal Bonds upper income earners buy and hold them. Most expanding cities get all the aid they need for infrastructure using Municipal Bonds and the costs fall on those reaping the benefit--not the general rate payer.
Then service it with west to east Light Rail Line
Lmao as if they will ever spend any money out west. Stuff needs to be built where we already have the infrastructure in place, not out in empty fields that have zero infrastructure. They'll end up building the houses and then run out of money to build the much-needed transport links.
He is in bed with large build to rent operators who plan to build 59k units... they will have interest deductability and offer long rental tenancies.... everyone supports the 3 houses per 800m rules just not next to them... IMHO if this occurs it will reduce the land values making all of AKL a bit cheaper but providing a lot of professionally managed accomodation. that is a good thing. Good landlords will be ok, bad ones will not be needed or end up with the absolute crap tennants
I read it in an article a bit back, I cannot remember where, It was all around attracting institutional money into long term build to rent developements that offered long tenancies and ability to move inside the complex as needs changed etc, it made a lot on sense, they could not be sold off so always in rental pool, professional managed, decent neighbours as not run by KO...
To me the implications are that National does not think small landlords are providing enough or quality or well serviced rentals. I think its a game changer if reasonable well done (Think Singapore)
The deal is they would get guranteed interest deductions and possible tax benefits.... think NZ Super and NZ kiwisaver if the funding was via covered bond etc... they could well be build 2-300 units per developement... numbers will be easier then you think if institutioinal get involved and fletchers etc
New Zealander's will rise up in anger at the loss of a single car park or any attempt to mildy inconvenience drivers.
Singapore decide what transport system the people would use and forced it on them. New Zealander's could not handle this, they like having tantrums at any sign of change.
Build to rent would be nothing more than an attempt to keep houses prices up and enslave people to govt..
Why do you think the govt can afford something when people can't?
The people fund govt. The people should own their homes, not govt.
If you wreck your home, your problem. Look after it - your gain.
Auckland planning is an absolute disgrace. I grew up out west and now I see the insane amount of development out there whilst the central leafy suburbs with great transport links remain untouched. Imagine if London or New York had the same restrictions placed on them when they were growing, it would of killed their economies like it's killing ours. Such an absolute waste of resources and effort.
Family in UK gt back from Amsterdam from a weekend. Describing city centre where one sits in a cafe and its dead quiet - relaxed people and crowds commuting on bike and foot. Not a sound or a sight of a car to be seen.
Other has just got back to Chch after a weekend in Auck. Couldn't believe what a gridlocked f-up the place is.
In considering yesterday's decision by the RBNZ' to cap the OCR at 5.5% - their hand may have been forced somewhat for a couple of reasons.
1. Modelling by the RBNZ would have indicated that 7.0% would have been the stress test level banks in 2020 and 2021 used- 1yr and 2yr interest rates are now at that level. Whilst there would be a reasonable expectation that interest rates should continue to rise - the reality is once interest rates exceed that stress test it raises the risk of a disorderly collapse in the housing market (similar to the US in the GFC) because families no longer have the income to service their loans - a disorderly collapse of the housing market would create chaos for banks, depositors and the economy as a whole.
2. With the debt ceiling issue yet to be resolved in the US- the RBNZ needs to keep their powder dry and ensure that should things go pear shape and the US are unable to reach a deal or the deal is not sufficient and markets tanked, the the RBNZ needs to ensure they haven't overcooked the OCR.
They will then need to cut interest rates but may not want to slash them such as in 2008 and 2020 - due to the risk of overstimulating the housing market again and being right back in the same position as now in 3-4 years time.
Assuming Scenario 2 doesn't come to fruition , then the RBNZ will likely hold for 6-12 months to see if those who took out mortgages in 2020/21 receive income increases that will give them a further buffer ( ie they would pass a 8% or 9% stress test ) if inflation doesn't come under control and interest rates need to rise again.
I thought they would go higher but it is a tough call. Lots of early indicators the current rises may have had the desired effect, they are just not conclusive.
They can always raise again after the election if National get in and try to kick start the housing Ponzi again. A vote for National is a vote for higher interest rates.
All boomers should read this article https://www.nzherald.co.nz/kahu/peak-ocr-pain-auckland-couple-working-f…
The average monthly mortgage repayment in Auckland is about $4425.
Wellington and Auckland had the biggest gains so were always going to have the biggest drops. Covid also changed everything with more people than ever working from home now because driving to an office to sit at a computer is totally pointless, you can do that from home now. Main centres will drop bigtime, the desirable regions will hold their value. Auckland has turned into a hell hole, the exodus will continue and Wellington needs just one earthquake and its all over.
“If the OCR comes back to between 3 and 4 per cent, it will still be manageable for us, we would not have to take on five jobs altogether.”
Most of the couple’s income goes towards the mortgage after buying their house for $805,000 three months ago.
Surprised they got a loan.
I'm a boomer and have an IT degree, and so what? Boomers didn't create this mess. The politicians did. There are as many Boomers caught in this trap as there are others. Your comment suggests you are not very capable of independent thought. Didn't your IT training teach you that you cannot make assumptions? You have to have a full understanding to write program code. Try applying that to the real world?
Yes there is always buggy code. But that is usually for just a couple of reasons. Sometimes we are not aware we are making an assumption and any code will show that up real quick. Other reasons, often linked to assumptions, are just linked to poorly written code. But assumptions is a significant contributor to code fails. But well constructed algorithms should identify and help avoid those traps, and then just writing good code is left, but even that is no small task.
Unfortunatelty the boomer generation is going to be blamed for a lot of this. Climate, economy etc etc
Whilst obviously not 'everyone' in that generation is to blame as things worsen from the debt, climate effect and social inequality.... people will look to those who were there and let it happen.
Not to say we are much better now.. butbfor me the complaining from the older gen - when the new generation protest and disrupt their lifestyle (eg climate protests) is really frustrating.
I reckon if we saw more 'boomers' giving back and showing the kids how to protest etc..rather than the impression they are just enjoying the proceeds of the damage they caused... it would help.
Care to remind me who voted for Muldoon so he could scrap the National Superannuation scheme that would otherwise have seen NZ a far wealthier country than we are now?
The biggest swing voting block in NZ are a) older and b) wealthier - the vast majority of these are boomers. (Because you only need to swing 3% - 4.5% of voters to become the government.) And surprise, surprise they are also the group that actually get out and vote!
discl: I'm a boomers.
None of my family, and I was too young to vote. But look at the times and what information was available to people and the choices they had. It was Muldoon who sold them the BS line, and few if any had any ability to question it, and certainly the opposition of time didn't effectively challenge the line he sold to the country. Again it was the politicians not the voters. We did then, as we should do now, expect better of our politicians. Sadly they always fall short.
Loan amount 600,000
6 Months Fixed from 7.54% p.a.
Monthly payments - $4,450
DO THE MATH easy for current FHBers is it average? I doubt it
But if you have 600-700k debt this is reality
Apparently average loan value in NZ is
$362,414,
so average repayments if the loan was taken out today would be $2,200 - $4,000 (depending on the loan term). if we assume 50% of those are still at lower rates it would be well sub $2k/month for most people. Def not $4,450.
Added to that is that only about 30% of primary residence homes actually have mortgages. And then that only 60% of hosueholds own a home. The % of households that actually have a $4k+/monthly mortgage will be really small.
This average is a nonsense figure.
It is made further a nonsense if anyone assumes it sits on a nice symmetrical normal distribution curve (aka bell curve).
It is also nonsense to assume all such mortgages have the same term and/or are at the same time point in their term (i.e. most will be table mortgages and the interest is huge in the first few years while the capital repayments are huge in the last years).
ITG, OSE - your arguments are nonsense.
Sunny is a senior client lead at Spark during the day, and by night he’s an Uber driver. [...] “It does not make any sense to me that we have to pay 33 per cent tax on the second income,” Sunny said.
Unless a "Senior Client Lead" at Spark earns about half as much as I would have thought, he's probably paying 33% on the first income as well. What a strange article.
Also talks about how expensive nappies and [unspecified] "other stuff" are... doesn't seem particularly bright or financially literate.
You can buy 3 decent reusable cloth nappies (fancy ones with inserts, not the oldschool ones we still have that we use as change mats) for the price of a single pack of nappies (and support the local mums who import them).
Disposables are more convenient for new-borns and overnight though.
And I doubt the Uber job is paying for itself, after secondary tax and additional costs.
If they really bought 3 months ago - was this a resolution of a build long-planned, or was there say, some massaging of data given to the bank?
"after secondary tax" - you mean at his marginal tax rate, right?
"And I doubt the Uber job is paying for itself, after ... additional costs." ... If he needs cashflow - which he obviously does - he can ignore (for now) many of these additional costs as they have little cash flow effects.
He's doing the right thing with the Uber job. But I can't help wondering if you couldn't have made more with another part time job and/or overtime in another role.
The Reserve Bank (RBNZ) raised the OCR by 25 basis points to 5.5 per cent yesterday – and in a surprising move, said this was the OCR’s peak and anticipated cuts from late next year.
This is being parroted all over the media this morning. It's amazing how quickly fallacies take hold and spread like wildfire.
I hope people aren't making important financial decisions based on what they read in the news...
Yes the debt ceiling talks are getting sillier. It seems the reality of an own goal is playing out in front of our eyes. Denmark has a debt ceiling but we've not seen the Danes go down the road of tearing down their own economy. It's not a practice sane Danes would entertain I postulate.
Chip wars with China risk ‘enormous damage’ to US tech, says Nvidia chief
Speaking to the Financial Times, Jensen Huang said US export controls introduced by the Biden administration to slow Chinese semiconductor manufacturing had left the Silicon Valley group with “our hands tied behind our back” and unable to sell advanced chips in one of the company’s biggest markets. At the same time, he added, Chinese companies were starting to build their own chips to rival Nvidia’s market-leading processors for gaming, graphics and artificial intelligence. “If [China] can’t buy from . . . the United States, they’ll just build it themselves,” he said. “So the US has to be careful. China is a very important market for the technology industry.”
Bear in mind that these businessmen will do or say anything to get the technology export ban on China lifted.
That being said, China produces 2.5x the number of engineers, scientists and mathematicians at advanced levels than the US does, even when you include foreign students/workers. Won't take too long for the Chinese to catch up while the Americans are busy fighting among themselves on their political affiliations and gender pronouns.
That has nothing to do with the point I was trying to make. Granted China has an oversupply of skilled labour, but on the brighter side for the country, their research bodies and companies are very much spoilt for choice.
In the same manner, the Chinese aren't losing sleep over too many dairy cows polluting our waterways as long as they get enough milk and cheese to stock up their fridges.
They have the technically "qualified" people, but they don't have the visionary/creative ones.i.e. They manufacture well, but they don't design.
Most of their experts are still reliant on stealing/copying ideas developed overseas.
I wouldn't be worried until they will start ratifying and enforcing the various global Copyright/patent/TM agreements.
Just because you have a degree (or even training) as an engineer, scientist, mathematician does not mean you will be very good at it or very impactful. Science and technology isn't as simple as throwing bodies at a problem, it is often a relative handful of people who end up pushing things forward at the technological frontier and those people are very scarce. It does bode well for China's continuing ability to build large amounts of infrastructure etc quickly but whether or not it will allow them to catch up with leading edge chip design in USA/Europe/Japan/Korea is not at all clear because those countries aren't standing still and the conditions in democracies tend to be far more favourable for pushing the cutting edge than in authoritarian countries like China.
Science and technology isn't as simple as throwing bodies at a problem
I guess you're right. I worked in control systems design for a while and China does alright in that space, maybe not cutting edge tech so much due to the "centrally planned" approach on innovation.
That's an interesting statement - in my experience it depends on what you mean by "engineer, scientist, mathematician". All of these are highly sought after, because they are few and far between..
I've yet to meet any of these who were not far above average, at a population level.
OTOH, 90% of the students in my CS classes (I spent 13 years in academia) shouldn't have been there - they had no aptitude for the subject, but given most courses in the field are prescriptive, were still able to pass. But it's big money for the universities, and there's demand in the workforce. I'd rather take a chinese-trained programmer with ESOL over most of the ones pushed out by NZ universities any day.
"China produces 2.5x the number of engineers, scientists and mathematicians at advanced levels than the US does, even when you include foreign students/workers."
An oft quoted bit of deductive logic which is actually quite wrong. Why? The US owns so many high-tech companies all over the world that you need to sum all the "engineers, scientists and mathematicians " at these companies to get a true figure. (The companies own the IP.) This has been done a few times over the years and the US comes out ahead by a long, long way from whomever is judged to be in second place.
Anybody catch the live Q&A with RBNZ? Good to see them getting repeatedly grilled over their failure in predictions, and why the public should have any confidence in what they predict going forwards. Shame they keep dodging the questions and continually repeating the word "confidence" while holding a strong physical stance at the table.
No concrete examples given to restore faith in them, just them saying "wait and see, these things take time".
Put to A. Orr Q: "Have you failed your mandate having inflation being outside the band for 2 years now, and predicted to continue to be for another year at least?"
A.Orr: "No we have not failed our mandate"
Pure comedy at it's best
It’s not the RBNZs job to keep the economy smooth sailing for everyone.
Should we start blaming coastguard for all boating mishaps too?…..surely they control the ocean, they are in charge and we need to blame someone.
The economy is a wild ocean. Calm for long periods and then wild storms.Some people forget and will drown.
If you truly believe that, GNX, try and answer these two questions.
Economics questions (chocolate fish if you get it right) ...
No doubt most of you are familiar with the supply and demand curves. (I say familiar - as they're actually extremely complex but that's another story).
Now lets say that the supply and demand curves cross at a happy place which means there is no inflationary effect on the price of the goods. I.e. the Goldilock's zone, just enough supply for just what the consumers will pay.
Now along comes a number of events that seriously constricts supply ...
Question 1: What happens?
a) Nothing
b) Consumers won't pay any more so find substitutes (also affected by the supply disruptions)
c) Consumers bid up the price of the scarce supply
Question 2: What should the RBNZ do?
a) Nothing
b) Drop interest rates to near zero so people can borrow more to bid more
c) Raise interest rates to control the near certain inflationary effects
So why am I asking such a questions? Mainly because it serves extremely well to highlight just how bad the RBNZ actions have been when the major supply disruptions started at the outset of COVID ... Late 2019 and early 2020. Irrespective of what the RBNZ does today - they are hopelessly out of their depth.
The RBNZ is like the Coastguard? The NZ economy is like an Ocean?
Really? Politicians do this a lot! It fools many and many nod their heads in agreement. It is in fact and example of a fallacy. In this case an Argument from Analogy fallacy. You'll hear mums and dads make this sort of argument to defend the behavior of their kids. Golly. You're not Orr's mum are you? ;-)
We also put all our money in housing, which means business capital also has to be imported from overseas.
So we import the capital to run businesses that import goods and services to supply to a consumer base that is also largely imported.
All this means we're not coming out of our current account hole without a sharp drop in purchasing power that reduces our import bill (think Greece, Spain).
Successful investors would be wise to look at the historical trends, current & best guess future macro & micro economic & demographic conditions: these are heavily dependent on the political context.
Generally robust debate leads to higher quality solutions & consensus. Over recent years I've been quite impressed that Interest.cohorts have been more often right than MSM commentators (despite or perhaps because of the healthy mix of their representative political persuasions).
"CDS on treasuries is at a height we've never seen before, while Nasdaq calls are the highest in 8 years. What happens to the liquidity in risk assets when you suddenly take the fear out of safe assets by passing the debt ceiling?"
https://pbs.twimg.com/media/Fw2-bsSXoAEs2GR?format=jpg&name=medium
"Real M2 Money Supply is now below the 10 year trend with no signs of slowing. Soon people will be begging the Fed to save the economy from the crisis they created... again"
https://pbs.twimg.com/media/Fw26sLfWwAEkHfq?format=jpg&name=large
"The quickest decline in M2 Money Supply in history and the most negative YoY change since the Great Depression"
https://pbs.twimg.com/media/Fw2hdjUXoAYNrGn?format=jpg&name=medium
Back to 2017 house prices?
5 Alba Road, Epsom. Passed in today for $1.7m (1 bid). Last sold Feb 2017 for $1.76m (propertyvalue.co.nz). Loss $60k.
Is a land banker or developer is going to take a hit?
6 Atarangi Road, Greenlane (910sqm) Passed in. Highest bid $2.3m or $2.53k/sqm (2+ bidders). Last sold Dec 0221 $3.4m or $3.74k/sqm. Tidy, 1920 house in a great location and THaB zone.
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