Here's our summary of key economic events overnight that affect New Zealand with news analysts are now starting to estimate the costs to the US economy of their upcoming tariff policies.
But first, the S&P Global American services PMI rose in December to its strongest expansion since March 2022. But their manufacturing downturn deepened with manufacturers reporting falling output and higher prices. New factory orders fell sharply, extending the decline to a sixth consecutive month. The divergence makes the services sector jump look like a sugar-rush, one that could come with a hangover.
The December factory survey in the New York region reflects the factory pullback - although that is from an unusually strong November.
A New York Fed study of whether large tariff hikes protect US firms has found the opposite in a detailed survey. This is no surprise to economists, and they suggest that the next round is also likely to hurt American firms further. Further own-goals for American manufacturing are on their way. Others say it will shrink US GDP by -1%. That would be a US$300 bln hit.
North of the border, Canadian housing starts came in particularly strong in November, and surprisingly so.
And Canadian house prices are on an extended uptrend, boosted by more sales activity as interest rates come down there.
But in a surprise political move in Canada, their Finance Minister has suddenly resigned, "throwing its economic agenda into a tailspin". Disagreement on how to frame Canada's policies when Trump comes to power in the US seems to be at the heart of the matter.
Across the Pacific in Japan, their November PMIs revealed that their factory sector is now barely contracting (an improvement from October), and their services sector is now expanding faster. They had their strongest rise in private sector activity in the past three months. So perhaps it is no surprise to know that machinery orders are on the rise, after a lean period.
China’s new house prices in 70 cities shrank by -5.7% year-on-year in November, following the steepest decline in over nine years of 5.9% in the previous month. This marked the 17th consecutive month of decreases, suggesting that Beijing’s extended attempts to mitigate the prolonged downturn in the property sector, such as reducing mortgage rates and slashing home buying costs, have yet to have the effect they are looking for. Prices for second-hand houses were even weaker.
China’s industrial production rose +5.4% in November from the same month a year ago, mildly exceeding market estimates and October's growth rate of +5.3%. The expansion was due to a good +6.0% rise in manufacturing. At the same time electricity production only rose +0.9% in the same basis, so that does undermine somewhat the validity of the industrial gains. And that low gain does match the 'headwinds' narrative they have been talking about. Their industrial production data seems to ignore that, and their weak PMIs. Something's not quite right.
China's retail sales rose by +3.0% year-on-year in November, slowing from a +4.8% growth in the previous month and below market expectations of a +4.6% gain. This marked the weakest growth in retail activity since August. But compared with many other countries, this 'weak' expansion is better than inflation.
The Indian PMI for December recorded an improving factory sector, and a services sector that is still expanding fast.
India exports in November however fell to their lowest level since October 2022, down -5.2% from the same month a year ago. India is not much of a trading nation relative to the size of their economy, so the rise in economic activity is all about internal demand. However, imports surged +28% on that same year-on-year basis, and to an all-time record high.
It might seem a tad ironic for a major oil producer, but Iran is proposing sweeping closures of public facilities, a move officials attribute to icy winter temperatures and the need for energy management while the country suffers massive shortages due to infrastructure failures. “Iran is on the brink of a 40% blackout in just 18 days,” said one local analyst.
In Europe, Moody’s unexpectedly downgraded France’s credit rating from Aa2 to Aa3, citing concerns over deteriorating public finances amid political instability. For reference, Moody's rates New Zealand and Australia, each separately Aaa (although perhaps they will review ours after Thursday's GDP result).
In Australia, financial system regulator ASIC is suing HSBC Australia alleging failures to adequately protect customers from scams.
And AML regulator AUSTRAC is taking Entain to court over "serious" money laundering compliance breaches in its gambling/betting operations. Entain operates the TAB in New Zealand.
The UST 10yr yield is now at just on 4.40%, little-changed from this time yesterday. The key 2-10 yield curve is positive, still by +16 bps. Their 1-5 curve inversion +1 bp positive. And their 3 mth-10yr curve is still positive at +9 bps. The Australian 10 year bond yield starts today at 4.37% and up +6 bps. The China 10 year bond rate is now at 1.72% and down -6 bps from yesterday. The NZ Government 10 year bond rate is now at 4.55% and up +3 bps.
Wall Street has opened itw week with a +0.5% rise on the S&P500. Overnight European markets were all down about -0.5%. Yesterday, Tokyo closed little-changed. Hong Kong closed down -0.9%. Shanghai closed down -0.2%. Singapore was up +0.3%. The ASX200 ended its Monday session down -0.6%, but the NZX50 ended with a +0.3% gain.
The price of gold will start today at US$2651/oz and up +US$4 from yesterday.
Oil prices are down -50 USc to be just on US$70.50/bbl in the US while the international Brent price is down almost -US$1 to be just over US$73.50.
The Kiwi dollar starts today just on 57.8 USc and up +20 bps from yesterday. Against the Aussie we are up +10 bps at 90.7 AUc. Against the euro we are also up +10 bps to 55 euro cents. That all means our TWI-5 starts today at just on 67.8 to be up +20 bps from yesterday at this time.
The bitcoin price starts today at US$106,866 and up +3.7% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.2%.
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89 Comments
Are you inferring that Bitcoin is about to explode in a way that is going to blow people’s minds? I don’t think so. Sure, I've been wrong about Bitcoin going to zero for 15 years, and sure it turned out to be the best performing asset in history, and yes it's at all-time highs consolidating above $100k and being adopted by the world’s largest financial institutions, and they’re now recommending even a traditional 60/40 portfolio have a 1-3% allocation, and I know the Bitcoin ETFs have been the largest and fastest inflows the ETF sector has ever seen, and you never hear any of the bs FUD about power usage anymore, and the next President of the United States is publicly talking about a strategic reserve, which would set off massive nation state adoption, and all of his administration picks understand bitcoin and they are going to turn the US into the most crypto friendly jurisdiction in the world. But trust me guys, it's not backed by anything and it’s all going to collapse any day now!
/s
Its too big to fail now. But it is problematic that you can make money off something that produces nothing and has no real value, to the point where it could be the end of the entire global financial system. If we can all make a fortune by buying bitcoin, why work or produce anything? Are any economists actually questioning this?
That would be fine if people were using it for that purpose. But almost everyone is speculating, wanting to make a profit, not maintain value. In most cases you would be stupid to invest in something that just maintains its value, there are many better investments that increase in value.
I think you are missing my point. My point is not about whether it is a good investment, its about what will happen if it is a good investment. Can you explain what a world where Bitcoin keeps doubling every year would look like? Would anyone work? Would anyone buy anything other than Bitcoin?
I am reasonably convinced that either Bitcoin needs to fail (and pretty soon), or the entire world financial system will fail. And the risk of it being the latter is growing by the year. And no economists seem worried by this...
> Would anyone work? Would anyone buy anything other than Bitcoin?
Yes, people would work. But no, no one will be buying Bitcoin. By that point the main way people will acquire Bitcoin is by earning it through work. It will be one of the most widely accepted and valued forms of money existing.
> I am reasonably convinced that either Bitcoin needs to fail (and pretty soon), or the entire world financial system will fail.
You're getting causation around the wrong way. The entire world financial system is failing, which is why Bitcoin is succeeding. Or more precisely, the fiat currencies are failing.
That sounds like hyperbole but it isn't. Look at any countries inflation statistics from the 70s. >1000% and that is not including asset price inflation. Throw in that and inflation is far higher. And a huge amount of this occurred before 2009 AKA pre-Bitcoin.
Bitcoin is just a mirror being held up to the funhouse fiat currencies. Once you start reasoning from a position of "Crypto/Bitcoin is better money than fiat" suddenly it all makes sense.
EDIT: Not to say Bitcoin or crypto doesn't have weaknesses. A technical failure of the Bitcoin blockchain could be catastrophic for the value of Bitcoin. There are paths to failure for any individual crypto (even Bitcoin) but in the medium-long term, crypto WILL succeed. It is better money.
1 Bitcoin is technically 100,000,000 (one hundred million) Satoshis. So things will be priced in Satoshi's, not fiat. (at least plausibly).
Asking how Bitcoin will be measured is the same question as how is the NZD measured. The NZD/BTC are the measuring tools, the units of account.
> who administers bitcoin and where is its realm and resources?
How does Bitcoin work? - Bitcoin
Some of those answers can be found here. But this is not a simple topic so will require sustained and open-minded effort on your part if you want a deeper understanding.
Like today's financial system, >95% of the people who use it won't have a good idea of how it functions.
I find the BTC case interesting. It was essentially formed as an alternative to FIAT money I think out of frustration with how governments and politics impact on FIAT. But when the big players start to get in on the train then politics has to start playing on BTC too.
A part of what PDK preaches is correct. A contributor to the drop in value of FIAT is due to diminishing resources. The problem though is other bigger (I suggest) contributor is the effect of politics. The US$ remains high because of politics, it is the world reserve currency. Just a thought - what would the value of the US$ be if bitcoin became the reserve currency? Now that is an interesting question is it not? Could the UN create a digital reserve currency with a commonly agreed value?
Whatever...yes play the man that's always a good start...
I've done my research but the ignorance of some of the commentators here is a sight to behold.
Anyway I think I'm done..penning my resignation letter as we speak...Merry Xmas and a happy and bright New year.
Keynesian economists are a large part of the reason the world and our money is a total mess. There is no point listening to what they have to say on this, because it’s fundamentally opposed to what they believe. Whereas the Austrian school of economic thought very much supports the theory of bitcoin as hard money, and all the positives that it would bring.
What are the positives? If it maintained its value that may be useful, but the problem is it keeps increasing in value, it is massively deflationary. A deflationary currency will stop people spending or investing - why would you when your money will be worth double next year? What happens when the entire world stops spending and investing?
My theory is that the people who do keep participating in the real economy will prosper while the people who stash away Bitcoin will eventually be wiped out. But if that theory is true, there would be a massive increase in inequality. And if I am wrong and Bitcoin does succeed, again there would be a massive increase in inequality to those that were first to invest in Bitcoin. Either way we are screwed unless it fails soon.
You're asking good questions and I understand why. Clearly neither bitcoin, fiat, or any school of economics is the easiest to explain, or understand in a sound bite. Heres one that's fairly layman you might appreciate though.
https://medium.com/the-bitcoin-times/bitcoin-makes-austrian-economics-possible-46aa5167afea
You would have to be a layman: "It seems evident that a functional society would have a Money that keeps accurate scores and that nobody can manipulate in order to gain an unfair advantage.".
The value of a Bitcoin is based around how many users it has. There is no way you can say that any having a fixed supply means it has a fixed value. So it doesn't keep accurate scores at all.
Having recently jumped on the crypto train I definitely have the rose tinted glasses on. Easiest money I’ve made in my life. It has a feeling of “if somethings too good to be true it probably is” but for now I’ll take the gains. The mind boggles at the returns those with a substantial portfolio will be making, especially those that got in early.
Not a single person in 15 years has ever lost (fiat) money buying and holding bitcoin to this point.
There are only three ways you could have come to a sticky end.
1: Using leverage unwisely and getting liquidated.
2: Not understanding what you have brought, getting scared, and selling at a loss instead of a huge profit.
3: Losing your keys or getting scammed.
> But it is problematic that you can make money off something that produces nothing and has no real value
What does the NZD produce? What is the "real value" of the NZD?
Crypto is a type of money. Why would the expectation be that this form of money "produce something" when no other type of money does?
People aren't "making money" off crypto. The market is working out what the exchange rate should be between different types of money. Crypto is the better money, hence the continuously improving exchange rates for it.
That's right. All assets will continue to drop in value against bitcoin. Forever. If there are other use cases for the asset apart from retaining wealth against a depreciating dollar (e.g you get enjoyment from classic cars, or art, or wine) then people will still buy them.
It's increase in "value" is only a price. It's price is measured in FIAT which has devalued in purchasing power and "value", because????.... we've chased money in asset inflation, we've created structural bottlenecks, because of our belief and value systems, preventing money from flowing through the economy.
We need to print more debt/money via private bank lending, central bank QE and govt. deficits, which are tapped out and not sustainable, to offset the money being stored in "assets". None of it's doing anything productive.
Chasing the returns, paying the usury, repaying larger debt, leveraging more debt, simply sucks more money out of the economy. It leads to the need for higher wages (especially for the bottom half), higher profits, higher yields, and more resource extraction, increasing the price and cost of everything. It's unsustainable. It has more adverse effects on the economy, society and the environment, both natural and constructed.
Frothing over BTC being the highest performing asset class implies it's not money or currency. It's only value is it's scarcity. We appear to value scarcity more than abundance, or abundance for a few and not the many.
It leads to the need for higher wages (especially for the bottom half),
Disagree here. More accurately, Ponzinomics is reliant on 'cheap labor' where the serfs may earn higher nominal hourly units, but where the value is not going anywhere.
Aussie and Aotearoa are shining examples. Actually, as are all countries in the Anglosphere.
But the serfs do need higher wages to buy the basics that are increasing in price, to have discretionary spending not just disposable, and to have savings.
There's obviously a higher income point that covers all this yet is also being eroded, increasing the need for more.
There's increasing prices, with no added value, and increasing costs that cannot be measured by money.
But the serfs do need higher wages
I pointed out that wages are higher 'nominally'. But you're missing my point -- Ponzinomics artificially increases the 'costs of doing business'. That is why Aotearoa is reliant on cheap labor from South Asia, while trying to maintain higher paid roles in a range of other roles where people aren't actually producing much of value.
Yes. To me this is the big issue. There is little productive in crypto. The only thing I can really think of that positively benefits the real economy is ripple (XRP), which is decreasing the cost, and increasing the speed, at which international bank payments can be made.
Everything else is pure speculation on whether or not the latest coin will inexplicably increase by 1000% because reasons.
Every dollar placed here is a dollar not being put to a productive use in the real economy, fuelling economic growth and raising living standards in aggregate.
The worst part is that with mainstream adoption this will just get worse. There's nothing worse for ensuring people put off investment and spending decisions than deflationary currency, which is why reserve banks specifically aim for low and stable inflation.
Having said that, I hodl because to not do so when everyone else is in on the ponzi scheme would be foolish...
The December issue of Lynn Aldens strategic investment newsletter is now available:
https://www.lynalden.com/december-2024-newsletter/
This newsletter covers:
-A revisit of bitcoin now that it crossed $100k
-The structural trends behind bitcoin and stablecoins
-Why bitcoin is not as easy to copy as critics think
-How to manage risk when investing in bitcoin
I could go on about all sorts of points, but it's basically is as simple as this. Lots of things have massive power usage, and no one is concerned about them, because they think the use case is legitmate for whatever reason (It's nice to see twinkling lights at Christmas time). If you are someone like yourself who thinks bitcoin has no use case, then you might be concerned about it's power usage. That's it.
Most of the argument above come from not projecting forward into the future enough. Everyone said bitcoin would never reach 100k and here we are. Now when we hit 1,000,000 per coin (and yes this is inevitable when the denominator is ever increasing from money printer go brrr) what will that look like? The volatility will be significantly less, but also the OPPORTUNITY COST of holding it is decreased. To get a 10x it needs to go from a market cap of 21T to 210T. So now it makes sense to spend it and there will be businesses and other invesent opportunities out there that will out pace the return rate of bitcoin in dollars, so they will produce a bitcoin yield (like MSTR does).
Bitcoin is not going away. It will surpass golds market cap but most of all it is an ego test. You have only yourself to blame for not doing the work. And we are still so early. We have just hit the early majority part of the adoption curve.
Peace ✌️
Perhaps Interest.co could do a piece examining austerity?
Simeon Brown - ideological cranial limitations aside - is reacting to a lowering, indeed reversal, of growth-rates. That is reflecting in both LG rates increases, and in reducing government services. That has to exacerbate a downward spiral - which suggests someone looks ahead and asks where to? And what then?
The ideology was based on continued growth - austerity will inure, relatively, an elite cohort, but it won't solve the problem of permanent degrowth, coupled with entropy.
He's pushing an elephant uphill using a piece of limp spaghetti and we should be discussing the why?
Tilting at windmills.
"China's coal output rose to a record daily high in November, data from the statistics bureau showed on Monday, setting the world's largest coal industry on track for another record year.
China mined 427.98 million metric tons last month, according to the National Bureau of Statistics.
Average daily production in November was 14.27 million tons, the highest level on record. By comparison, average daily output was 13.28 million tons in October and 13.82 million the month before that."
https://www.reuters.com/world/china/chinas-coal-output-hits-record-dail…
Record production + record imports = declining consumption?
https://www.hellenicshippingnews.com/chinas-nov-coal-imports-rise-26-se…
A New York Fed study of whether large tariff hikes protect US firms has found the opposite in a detailed survey. This is no surprise to economists, and they suggest that the next round is also likely to hurt American firms further.
This narrative is all wrong. It's really got little to do protecting US firms.
Back to base principles ....
The tariffs will ultimately be paid by US consumers. Ergo, this is simply a form of additional taxation on the American spending public.
But using the word 'tariff' sounds so much more patriotic and the voting public were conned.
It will increase what local manufacturers can charge, thereby enriching the top 5%. Meanwhile, the other 95% get to pay the taxes, and - until they figure out they've been conned - will think it's all hunky-dory.
And just to be clear - this is not 'Trump bashing'. The Republicans started this in 2016, sure. But the Democrats continued with it in 2020. And now the Republicans intend to further it again. The reality is the billionaires control the policy of both the Democrats and the Republicans and the ordinary 'Merican have little say in the matter.
And Canadian house prices are on an extended uptrend, boosted by more sales activity as interest rates come down there.
If memory serves - the Bank Of Canada (their version of our RBNZ) doesn't have DTIs.
China’s new house prices in 70 cities shrank by -5.7% year-on-year in November, following the steepest decline in over nine years of 5.9% in the previous month. This marked the 17th consecutive month of decreases, suggesting that Beijing’s extended attempts to mitigate the prolonged downturn in the property sector, such as reducing mortgage rates and slashing home buying costs, have yet to have the effect they are looking for. Prices for second-hand houses were even weaker.
Wouldn't it be wonderful if NZ had the same 'problem'? i.e. falling house prices and low interest rates enabling more people to buy their own homes, pay off the mortgage faster and emerge after far fewer years with lots more disposable incomes.
"Fewer than half of the 100,000 families promised a childcare subsidy boost by the Government have claimed and received payments"
https://www.1news.co.nz/2024/12/16/fewer-than-half-of-families-eligible…
That is because it is a stupidly designed policy, making intentionally hard for parents to claim. They should be ashamed
You've often read me being critical of MSM and how it so frequently 'protects' the rich.
Well. Here is a classic example ...
Are groceries cheaper in Australia? Kiwi man moved to tears after family supermarket shop
Never once does it mention GST.
Nor the fact that many grocery items in Australia are either GST exempt or at lower GST rates.
So how does not mentioning GST 'protect' the rich?
GST is a regressive tax that sees those on lower incomes paying proportionally more of that tax than those on higher incomes.
The following are some examples of foods and beverages that are GST-free [in Australia]:
- bread and bread rolls without a filling or a sweet coating (such as icing). A glaze is not considered a sweet coating.
- cooking ingredients, such as flour, sugar, pre-mixes and cake mixes
- fats and oils for cooking
- unflavoured milk, cream, cheese and eggs
- spices, sauces and condiments
- bottled natural water with no additives
- fruit or vegetable juice (of at least 90% by volume of juice of fruit or vegetables)
- tea and coffee (unless sold ready-to-drink)
- infant formula (for children under 12 months of age)
- all meats for human consumption (except prepared meals or savoury snacks)
- fruit, vegetables, fish and soup (fresh, frozen, dried, canned or packaged)
- spreads for bread (such as honey, jam and peanut butter)
For more information, use the Detailed food list to check if a food or beverage is taxable or GST-free.
Using that list - our household would pay almost no GST on food in Australia.
Or put another way - if your weekly shop cost $200 - it'd cost $26.09 less each week in Australia.
An annual saving of $1,356.68 of after-tax income per year.
I'm not sure the GST is the difference alone. At the risk of cherry-picking (but actually off the top of my head):
I have 3 growing boys. We purchase 20L of milk a week. The same branded product (Woolworths milk) today is 2.06/L NZ vs 1.50/L AU. I notice this in particular because it's a significant percentage of our food.
We've gone from a $400/wk NZ budget to $250/wk AU. But also from a single fridge to double-door, and cabinet pantry to walk-in, and have no problem filling them.
BUT we buy very little junk food here - the prices on chips/biscuits/chocolate/processed are ridiculous vs whole foods.
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