Here's our summary of key economic events overnight that affect New Zealand with news of more moves to screw the scrum in favour of billionaires.
The US shutdown circus is nearing the end; the Federal Government technically runs out of funding at midnight Friday US time. The debate is exposing deep fissures in the Republican camp. But there is still a chance it could get resolved but a few Republican holdouts plus Democrat votes. Who knows? But we all will in about 10 hours.
(And just how broken the US leadership has become, billionaire power-broker Elon Musk has just endorsed the far-right AfD political party in Germany. “Only the AfD can save Germany,” Musk wrote. And apparently he will be bankrolling Nigel Farage in the UK. Musk is a key figure in the Trump transition, and a key figure pushing for a US shutdown.)
Meanwhile, the widely-watched US PCE measure of inflation came in at 2.4% in November, up a tick and its highest since July. Core PCE inflation stayed even higher at 2.8%. But these results were actually a tick less than expected. The 2.8% inflation level is what the University of Michigan consumer survey also reported.
American personal disposable income rose +2.6% from a year ago, a slight undershoot. But personal spending remained strong, up +2.9% and similar to the gains over the past six months. Personal saving as a percent of disposable income rose marginally to 4.4% from the prior month and ending the longish decline from the start of the year when it ran at 5.5% of personal disposable income. The 4.4% level is where it ran for most of 2023.
Across the Pacific, Taiwanese export orders stayed elevated, up +3.3% from the same month a year ago which itself was elevated.
China reviewed its loan prime rates yesterday and kept them unchanged - at record lows.
In China, there have been recent reports of officials calling in bond traders to lecture them about 'responsible trading' - and the consequences for not. Chinese bond yields had fallen to record lows, as readers here who tracked our monitoring of the Chinese 10yr yield below will know. But today, the fear of losing money won out over the fear of officialdom's wrath.
China’s one-year bond yields broke below levels last seen in the GFC to the lowest since 2003, driven by bets on aggressive policy easing and demand for haven assets. The yield on one-year government debt plunged 17 bps yesterday to just 0.85%. The ten year is down to 1.72%. While it might be too harsh to call it 'panic mode' there is certainly a hard edge here in fear of where the Chinese economy is headed.
Japan reported November CPI inflation, and that rose again, now at 2.9%, with the widely-watched core inflation rate at 2.8%.
Japan also said its population fell to just under 124 mln, a fall of -325,000 in a year, and -3.1 mln in a decade. Now 29.3% of that population is 65 year and older, with only 11.1% under 15 years. In China, which is also thought of as having a similar demographic problem, those spread details are 14.3% over 65 years and 16.8% under 15 years.
Following the recent +200 bps out-of-cycle interest rate rise in Russia and the central bank guidance then, they were expected to raise their policy rate by another +200 bps again overnight to 23%. But they didn't. Apparently the Kremlin isn't keen on the independence of the Russian central bank governor any more.
The UST 10yr yield is now at just on 4.51%, and down -8 bps from this time yesterday but that is a net +18 bps rise for the week. The key 2-10 yield curve is less positive, now by +21 bps. Their 1-5 curve inversion is +8 bps positive. And their 3 mth-10yr curve is less positive at +18 bps. The Australian 10 year bond yield starts today at 4.47% and down -2 bps. The China 10 year bond rate is now at 1.72% and down -4 bps from yesterday to a new all-time low. The NZ Government 10 year bond rate is now at 4.65% and up another +7 bps.
Wall Street has opened its Friday session with a +1.4% rise on the S&P500. If it stays like that, it will have fallen -1.9% for the week. Overnight European markets were all down about -0.3%. Yesterday, Tokyo also closed down -0.3% for a weekly -2.2% fall. Hong Kong closed down -0.2%, down -1.1% for the week. Shanghai was down -0.1% and down -0.7% for the week. Singapore fell -1.1%. The ASX200 ended its Friday session down another large -1.2% to be -2.8% lower than a week ago. But the NZX50 ended with a +1.2% jump which allowed it to also close up +1.2% for the week.
The Fear & Greed Index ends the week still in the 'fear' zone but near the 'extreme' end, a big shift from 'neutral' last week.
The price of gold will start today at US$2625/oz and up +US$33 from yesterday. But that is down -US$33 from this time last week.
Oil prices are unchanged at just on US$69.50/bbl in the US while the international Brent price is still just under US$73. A week ago these prices were US$71 and US$74.50 respectively.
The Kiwi dollar starts today just on 56.7 USc and up +20 bps from yesterday. But that is down almost -1c from a week ago (57.6c USc). Against the Aussie we are up +10 bps to 90.4 AUc. Against the euro we are down -20 bps to 54.3 euro cents. That all means our TWI-5 starts today at just on 67.1 to be little-changed from yesterday at this time but down -50 bps from a week ago.
The bitcoin price starts today at US$97,137 and down another -3.8% from this time yesterday. A week ago it was at US$101,536, so down -4.3% from then. Volatility over the past 24 hours has remained high at +/- 3.8%.
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54 Comments
It was always about screwing the scrum - in a time of permanent depletion what else did you expect?
Their problem is that their wealth/status, relies on the existing accounting system staying intact - without which they are merely bags of flesh containing few useful skills. And that system requires endless growth - so is, by definition, stuffed. Temporary. And it's been on life-support since 2007/8.
They have run out of things to monetize - stuff which was 'commons'; stuff we did and enjoyed for free. There isn't much left, and it's all being depleted/degraded. So no more real underwrite. So no more real growth. So an increasing Ponzi-overhang.
The question now, is whether the system freezes up and implodes, or whether we adopt a permanent demurrage arrangement. I suspect the former....
Actually, I don't. Hence why I asked. In many extremist theories "they" is used, but seldom defined. That's one of the ways extremism takes root. Or, alternatively, if "they" becomes "just about everyone", well, let's say 'raving at the moon' can become equally productive. If a problem is due to "just about everyone" then railing from a mountaintop about how bad "they" are seldom works and alternative, more targeted, solutions, of which there are many, must be defined and marketed.
No. you don't.
And shooting the messenger, doesn't obliviate.
The comment was about the extreme winners, who currently are the cohort at the top of the global corporates - who have superseded elected governments. DC called them billionaires - but that falls for the nonsense that measures by money. It's the power they wield to alter human resource-extraction, not their 'worth', which is the problem. But the power will likely vanish if they accounting system does - hence the desperate efforts to extend and pretend.
But it also includes the next echelons down - you are part of one - who also 'value' things in a keystroke-issued debt-token. In other words, improperly.
So rising inflation in the number 1 & 3 largest economics alongside FED rate cuts and no movement from the BoJ. Russian inflation high but no rising interest rates for political purposes.
Trump having difficulty getting a debt limit removal, but of course the real ticking Timebomb are entitlements being offered to the elderly. Every major economy on earth basically knows they can't be paid but we are all acting like they can be. And when you point this the answer of "responsible" economists is more or less "hey, we can always print the money".
The financial system is insolvent, some group or combinations of groups is going to lose their shirt. Will it be the elderly? Lot of votes there, so will be tough. Demographics mean there is a limit to how much workers can be taxed beyond what they are, we also risk lowering the living standards of younger people which can have very negative political consequence. Asset holders seem another obvious choice but attempts to take more of that money via capital/land taxes will drive down silly valuations and could worsen the govt financial situation not to mention the catastrophe it will be for the banks.
Look at the numbers and realise the inflation has already happened. Been going on for decades in our rubbish currencies hence why everyone throws all the money they have into housing/stocks/etc for a long time now.
Prepare for more inflation. No politician wants to be the one holding the bag (and electoral career consequences) for decades of currency debasement. So they will pump more money into the system. Same thing has happened time and again with fiat, when you build on a rubbish foundation it becomes the last ditch effort to stave off the inevitable before the currency gets rejected.
Or apparently everyone's pension is gold-plated, everyone's house is worth a million bucks, everyone's stock portfolio can get 15% gains a year, wages will rise for everyone, government debt levels don't matter.....I know which answer Occam's razor makes me think is more plausible.
JJ would be better going back to first principles and applying non-assumptive thought. Same with another upthread.
Who said GDP was a/the valid measure?
It isn't. Relating debt to the remaining planet, is the only valid ratio in town.
Why the fierce need to default to a garbage measure?
An across-the-board, no-exceptions CGT would be a positive for the country/government, I believe. What is your evidence to back the claim that it would be a negative for the governments financial position, when surely it would generate vast amounts of revenue?
It should be in place for all sales, no matter how long you have held the property, or when you bought it. The gain should be assessed as the gain on the land valuation, after inflation adjustment.
It would allow a rebalancing of the tax system, with less of the burden having to be shouldered by the productive workers of the economy. And guess what, they are the ones that spend most of their earnings. There would be a bit of a reduction in discretionary spend from the rentier class, but hey, I am sick of having an economy that relies on creating/selling more and more gadgets and unnecessary services to the wealthy.
Claiming that the 'only' answer here is to inflate away the debt is rewriting the narrative to suit the asset holders and will only impoverish the majority further. This may not be your intention, but that is the result of the narrative
Fair point and I agree with a land tax in NZ's context. Think there is a very strong moral and economic case for doing so. I have some concerns about the balance between private property right and political liberty but there are other forms of private property that are strongly custodial that can help fill this role.
My understanding, which may be incorrect on this point, is that one of the reasons that a CGT tax is assumed to be so lucrative is due to the massive capital gains on property that have occurred in the last 30+ years. But those capital gains and the prospect of them is a major reason people have been willing to leverage themselves to the eyeballs to get into the housing market. If that changes, which it should, I expect it would mean severe downward pressure on the housing market which in the short term would have cascading negative impacts on government finances (not to mention the banks balance sheets but I'm not going to weep crocodile tears over the banks).
In the medium-long term, a land tax would be a great thing and be a much fairer and stronger foundation for rebuilding the economy as would a return to harder forms of money.
All that being said, I do not believe when you look at the situation globally this is a solution. Most countries have a CGT/Land/combination of the two and are facing very similar issues. The root cause is that fiat currency is bad money and money is one of humanity's most important social technologies to allow for effective cooperation and economic coordination. Until we fix the money, we are just painting over cracks.
Inflating away the debt isn't the only solution but I strongly believe based on historical evidence of similar situations that is the path this will all go down. Countless governments throughout history have followed that exact method time and time again and I don't expect that because this time the fiat experiment is global it will be any different.
P.S. I think the arguments for taxing capital are much weaker than the arguments for taxing land. The traditional economic models split the economic factors of production into Labour/Capital/Land before Capital/Land were combined under "Capital" and I think separating them out and focusing on them individually would lead to much better economic governance.
"Most countries have a CGT/Land/combination of the two and are facing very similar issues."
In almost all overseas tax jurisdictions the rates of these taxes are set ridiculously low. They were implemented in times when capital gains were low and haven't been adjusted to recognise just how much more income is being derived from CG. The other reason is that rich pretty much control government policy and the majority simply don't understand how hugely the rich benefit from these low tax rates - probably because the majority simply don't own enough to experience a CGT at any significant level.
Ergo - Other countries "are facing very similar issues" because the tax rates of these taxes are unrealistically low - and not, as you imply, because they don't work.
Edit: Those railing against the ever increasing money supply (which seems very fashionable at present) should be 100% behind capital gains taxes. i.e. If the benefits of low CG tax rates are removed, not only will governments struggle less to balance their books while creating new money to make up the difference, banks will think twice about creating new money where it is secured over an asset that the the government has first dibs on when it is sold for a CG.
> They were implemented in times when capital gains were low and haven't been adjusted to recognise just how much more income is being derived from CG.
And why did this change? Why has asset price growth far outstripped wage growth?
Address root causes first. The fiat money is the problem.
Complete non-sequiter and very shallow thinking, frankly. The continual debasement of the unit of account can't be effectively patched over via legislation.
In no other area of life do we do this. We don't change what a kilogram means every year with a 2% target, we don't change what a centimetre is, we don't change what a Volt/amp are, we don't change a litre, we don't change what a degree Celcius is, we don't change a second/minute, we don't change a calorie/kilojoules.
But I'm supposed to believe the brilliant minds of the central bank constantly changing the meaning on a unit of currency is fixable by govt? Pure inanity and I won't entertain it. If you want that argument, go find a dimwit and enjoy.
ThoughtsAndTorts | 21st Dec 24, 1:00pm 1734739216
The continual debasement of the unit of account can't be effectively patched over via legislation.
In no other area of life do we do this. We don't change what a kilogram means every year with a 2% target, we don't change what a centimetre is, we don't change what a Volt/amp are, we don't change a litre, we don't change what a degree Celcius is, we don't change a second/minute, we don't change a calorie/kilojoules.
But I'm supposed to believe the brilliant minds of the central bank constantly changing the meaning on a unit of currency is fixable by govt? Pure inanity and I won't entertain it. If you want that argument, go find a dimwit and enjoy.
This drivel is so just so amazing it needs to be kept for reference. Staggering stuff.
"Edit: Those railing against the ever increasing money supply (which seems very fashionable at present) should be 100% behind capital gains taxes. i.e. If the benefits of low CG tax rates are removed, not only will governments struggle less to balance their books while creating new money to make up the difference, banks will think twice about creating new money where it is secured over an asset that the the government has first dibs on when it is sold for a CG"
It is the destination/use of the ever increasing money supply that is the issue and I expect that CGT are largely ineffective for a couple of reasons...firstly they tend to provide opportunity to be avoided (no surprise when those with the gold make the rules) and disposing of assets is contrary to the overall mode of operation of the wealthy...asset accumulation being the goal. As always the devil of any form of taxation on accumulated wealth would have to be judged on its detail and importantly, its enforcement....history indicates both are likely to be found wanting.
I''m very much not aligned with most of Elon's current positions. But to be honest I don't consider, or look into the personal views of the CEO on any product I want. Especially when it's the best in it's class. Those who do on both ends of the political spectrum, really have too much time on their hands. You're only hurting yourself.
Are Teslas still the best in their respective classes? The field is way wider now.
And thanks to existing and planned tariffs in the US, the US market on price/performance basis (however you want to define 'performance') is going to be quite different to ours, and that of many other countries.
...this can’t be true. IIRC around a decade ago the EMAs CEO was forced to resign for even suggesting it.
“The hidden costs of periods could be more than $4 billion a year…work efficiency”
What seems odd to me is that there has been little MSM detail/discussion on what a US government shut down looks like - and they're less than hours away. But here's a taste of it;
https://nz.finance.yahoo.com/news/the-us-government-could-be-headed-for…
And what I find the most ironic is that the planning/execution for the inauguration ceremony (and subsequent transition) could become chaos - yippie :-). A great lesson in how the back room of government (the non-essential workers who don't have to turn up for unpaid work by law) is actually where all the work gets done.
All sound & fury now over. Again. Till the next time.
https://www.bbc.com/news/articles/cqjzwq7pg0go
https://x.com/elonmusk/status/1869865296376303763
Basically Dr. Evil.
"Who is Germany's far-right AfD leader Alice Weidel?
...Weidel lives in a civil partnership with a woman who originally comes from Sri Lanka. Together, they have two adopted children.
The 45-year-old Weidel has a doctorate in economics. In the late 2000s, she worked at the Bank of China and lived in China for six years where she learned to speak Mandarin. She would later write her doctoral thesis on the future of the Chinese pension system.
Weidel is an admirer of Margaret Thatcher, Britain's prime minister from 1979 to 1990. Speaking of Thatcher in an interview with the tabloid Bild newspaper, she said: "I'm impressed by her biography, her swimming against the tide even when things get unpleasant."
https://www.dw.com/en/who-is-germanys-afd-leader-alice-weidel/a-70436714
This sad event won’t hinder AfD’s chances:
https://www.stuff.co.nz/world-news/360531537/car-has-driven-group-peopl…
Speaking of Germany and China linkages, this is quite fascinating: https://unherd.com/2024/12/how-china-burned-german-industry/
Who was Merkel working for all those years?
"Merkel joins Castro, Nixon in ranks of China’s ‘old friends’
Xi Jinping praises the German chancellor in a farewell call."
https://www.politico.eu/article/chancellor-angela-merkel-china-presiden…
One of the unsaid things about the US government not increasing the debt ceiling is there are two ways to deal with a cap. We only hear about 'slashing' government services. The other - unspoken - option is to raise taxes. (Or a combination of the two.)
It won't happen - but what a great time to raise taxes on the mega-wealthy whose tax bills have been slashed disproportionally since Reagan sold the big con about 'trickle down economics' back in the 70s.
Donald Trump's second term won't be much different to his first. The media will shame him, he'll do and say some weird stuff, he won't achieve anything substantial while he's in office, and then he'll leave and those who oppose him will be relieved he can't seek a third term. The End.
Yes.
He's one of the few who now drive what used to be government(s)-driven. Global corporates now dominate - but they were an end-game product of exponential growth on a finite planet. That was temporary, meaning now they're trying to hold on not only to their status, but the doomed system which gives them it.
In that, Gates is Zuckerberg is Musk is whatever. They all have to conform to physics (no rocket will ever be battery-launched) and so are all in trouble at this point.
FARTS POWER HIS ROCKET AND WE HAVE COWS!!!!
SpaceX rockets use a variety of engines and propellants, including:
-
Raptor engines
These reusable methane-oxygen engines power the Starship system. The Raptor engine has twice the thrust of the Falcon 9 Merlin engine. The Starship will have three Raptor engines, and the Super Heavy will have 33 Raptor engines.
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Merlin engines
These engines use rocket grade kerosene (RP-1) and liquid oxygen as propellants. They are used on the Falcon 1, Falcon 9, and Falcon Heavy launch vehicles.
-
Raptor Vacuum (RVac) engines
These engines are similar to the Raptor engine, but have a larger exhaust section and expansion nozzle to maximize efficiency in space. The Starship will have three RVac engines.
I guess if you hire a 'journey manager' then they'll have to find something to do in order to justify their existence:
NZTA closes passing lanes to help holiday traffic flow
To help traffic flows, NZTA Waikato journey manager Andrew Brosnan said it would be closing some passing lanes.
"Queues might be a little longer when the passing lanes are closed, but there will be minimal impact on your journey time. A slightly slower speed doesn't make for a longer journey, overall, as traffic moves more steadily," said Brosnan.
So we're closing lanes, to help traffic flows, which in turn will have no impact on journey times. Perhaps if Andrew deploys enough traffic cones it will bump GDP enough to pull NZ out of recession.
It seems unfair to remove the only place slow drivers with a queue behind them feel confident enough to speed up!
It makes traffic go faster.
There are lots of things about traffic that do not conform to people's common sense reckons.
For example, on saturated motorways you get more efficient traffic throughput at lower speeds. It doesn't seem to make common sense but that's because most people are not experts and have never studied these things.
Removing the overtaking lanes helps traffic flow. Nothing to do with conspiracy theories about forcing lower speeds.
When you state, "It makes traffic go faster.", does that mean you disagree with Andrew's "there will be minimal impact on your journey time" statement?
There are lots of things about traffic that do not conform to people's common sense reckons.
Am I one of those people? If so, what common sense reckon did I make which you regard as false?
For example, on saturated motorways you get more efficient traffic throughput at lower speeds. It doesn't seem to make common sense but that's because most people are not experts and have never studied these things.
Is it the lower speed or the avoiding grid lock with onramp rush hour light restrictions that enable more efficient traffic throughput? If it's the lower speed, then why not set all our speed limits to 10kph? But really, we're off on a tangent since the article is about open road highways with passing lanes.
Removing the overtaking lanes helps traffic flow.
Great, so why is helping traffic flow a desirable outcome? Does it result in shorter/longer/about the same journey times? Are journey times even relevant (Andrew seems to think so)?
Nothing to do with conspiracy theories about forcing lower speeds.
I'm questioning the reason given for an action that is being taken which costs money. I'd like to know why it's worth lifting a finger (or road cone). You've said it makes traffic go faster (which would imply shorter journey times), which is in direct contradiction to Andrew in the article who hints at little to no change. If there is no change then why bother spending the effort removing the overtaking lanes?
[hint] Perhaps there is another reason (nothing to do with faster or slower traffic) not stated by Andrew that might justify removing passing lanes?
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