Here's our summary of key economic events overnight that affect New Zealand with news China's financial markets are flashing some unwelcome signals.
But first up today, there were a range of services PMIs for December released overnight. And the most interesting one (for us) is the Aussie one. Their service sector expanded in the month, with new business growth accelerating, inflation rising, and business confidence at its highest level in 2½ years. This got the attention of financial markets who promptly downgraded the chance of ab RBA rate cut when they next meet on February 18. Australian benchmark Government bond yields rose sharply across the board with their 10 year up an outsized +14 bps.
In China, you may recall we reported that their official services PMI jumped from a no-change growth position in November to an outsized positive 52.2 expansion in December - and we counselled to wait for confirmation by the private Caixin services PMI. Well, that Caixin services report is in and it also recorded a 52.2 expansion, an improvement although not as sharp as the official version reported. So we can be confident the Chinese services sector is expanding now at a good pace. And it does seem to confirm that the Beijing stimulus measures are having a positive impact.
In Japan, their December services PMI improved to a better expansion, although to be fair it was only a marginal gain.
In India, they also reported an uptick with faster growth and softer inflationary pressures. They still have a very strong expansion, although the December gain wasn't quite as strong as analysts had expected.
In Canada they slipped from a November expansion to a December contraction in their services sector. (And we should probably note, unrelated to that, Justin Trudeau has resigned as prime minister today, ending a long political career. He has been their prime minister since 2015. They alternate the role between Conservatives and Liberals and their successful leaders seem to remain in office for about nine years each.)
In the US, their S&P/Markit services PMI rose in December to a good expansion, although not quite as strong as was expected. Their widely-watched local ISM services PMI is due out tomorrow and is also expected to report a modest improvement.
Meanwhile, US factory orders slipped marginally in November from October to be only a marginal +0.1% higher than the same month in 2023.
The US Treasury had a well-supported three year bond auction earlier today. That came in with a median yield of 4.29%, substantially higher than to the 4.07% yield at the prior equivalent event a month ago.
In the EU, their service sector expanded in December after being neutral in November. But it may not last because the gains did not include rising new orders.
And in Germany, there was a bit of a surprise overnight when they reported 2.6% CPI inflation (2.9% EU harmonised). Both levels were unexpectedly higher. Excluding food and energy it came in at 3.1%, and driven by higher services costs. They still have work to do to get inflation's impulse down to the target 2% level.
Back in China, yesterday we noted the bond bubble they are having as sentiment about their economic policies takes a hit in financial markets. All eyes will be on these markets today, but the official pressure is being ramped up to quell the "wrong moves" by bond traders. Local media is saying "the worst of the derating is over" - although local media just parrot official narratives.
The UST 10yr yield is now at just on 4.63%, and up +3 bps from yesterday. The key 2-10 yield curve is more positive, now by +35 bps. Their 1-5 curve inversion is a bit more positive too, now by +26 bps. And their 3 mth-10yr curve is little-changed at +30 bps. The Australian 10 year bond yield starts today at 4.53% and up a sharp +14 bps. The China 10 year bond rate is now just under 1.60% and down another -1 bp to a new record low. The NZ Government 10 year bond rate is now at 4.56% and up +4 bps.
Wall Street has opened its week up +0.9% on the S&P500. Overnight, European markets closed their Monday trade all higher. London was up +0.3%, Frankfurt was up +1.5% and Paris was up +2.3%. However, Tokyo fell -1.5% yesterday, Hong Kong was down -0.4% and Shanghai slipped -0.1%. Singapore rose +0.5%. The ASX200 closed its Monday trade up a minor +0.1% while the NZX50 was virtually unchanged.
The price of gold will start today at US$2639/oz and little-changed from this time yesterday.
Oil prices are also little-changed from this time yesterday at just on US$74/bbl in the US while the international Brent price is still just on US$76.50.
The Kiwi dollar starts today just on 56.5 USc and up +40 bps from this time yesterday. Against the Aussie we are up +10 bps to 90.3 AUc. Against the euro we are down -10 bps at 54.3 euro cents. That all means our TWI-5 starts today at just on 67 and up +20 bps from this time yesterday.
The bitcoin price starts today at US$102,103 and up +4.1% from this time on yesterday. Volatility over the past 24 hours has been moderate at +/- 2.5%.
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115 Comments
In Puckoon, Milligan describes a priest with arthritis. He'd tried burning a candle on the altar, but found it brought more relief if placed under his feet on cool evenings...
Reminds me of the physics-blindness so endemic in our 'economic' thinking (if the latter word is appropriate). The Woodford thread yesterday was a classic - Haber Bosch the pivotal kicker in that case. We need to move on - this is the best discussion site in the country - but it isn't there yet. Between yesterday and today, the world burned its way through 100 million barrels of oil, and a BOE equivalent in coal and gas. Could those have an influence on 'inflation'? (Asking for a friend).
On a housekeeping note, I paid my $100 a few months back - but the ads have re-appeared. That wasn't my reason (I was supporting the best discussion site in the country) but it is a pain. Seems to happen when asked to sign back in, which seems to happen regularly?
As well, as far as burning resources, the train even ran out of coal. Necessitating a visit to the nearby widow and payment as due. Spotty arse and all.
ps. Suggest logging out and then log back in under pay pal. That usually works as far as the ads. And happy New Year.
Malthus said we were all biology-blind too. How'd that work out?
Years of fossil fuel reserves left, 1980
Look at this site. In 1980 we only had 30 years of oil left, the best and brightest doomers informed us.
And everyone can, of course, remember how we ran out of oil in 2010 and industrial society collapsed.
And yet that same site is saying as of 2020 we now have 50 years of oil left...It's almost as if you are full of shit, PDK. Keep clucking that chicken little tune there are always going to be a small portion of scared chooks to cluck along with you. While reality keeps getting in the way.
Any cleanup that lets a clown like PDK keep spamming doomer nonsense that is:
- Economically illiterate
- Doesn't grapple with real world data around resources like prices
- Historically ignorant of past similar doomerism and its outcome
Is not a cleanup worth having.
Up to Interest.co.nz to decide what type of site they want to be, if that is what they choose then it'll be a sayonara and good riddance from me.
You don't think its possible for humans to find a better way to extract energy from the sun and store it than fossil fuel?
NZ could significantly reduce fossil fuel usage today with investment in EVs, electric rail, electricity production, electricity storage, electric boilers, etc. The reason we don't is because we don't think fossil fuel is disappearing any time soon. And because in another 20 years there will be technology that is a lot better.
Yes but storage/energy density is a big reason why fossil fuel is so important.
Hydrogen may mean that we don't need the energy source to be anywhere near the user. Maybe a load of nukes in the middle of nowhere with the resulting hydrogen shipped around the world like we do with oil. Not saying that will be the outcome, it is just one of many possible future outcomes.
Rather than postulating without knowledge - try getting informed.
Download it, read it, understand it. That would save you a load of keyboard-bashing wasted-time.
From PDK's (very cool) link below -
We need to focus on solutions that use less energy, not “solutions” that use more! I know of no form of land transport whose energy
consumption is worse than this hydrogen car. (The only transport methods I know that are worse are jet-skis – using about 500 kWh per 100 km – and
the Earthrace biodiesel-powered speed-boat, absurdly called an eco-boat, which uses 800 kWh per 100 p-km.)
"He is definitely right, the only question is timeframe'
The most logical comment in this thread....if you accept that fossil fuels (chiefly crude oil) are limited and you accept that the entire production system relies upon its availability then you have to accept that he is correct....as to timing there are well established indicators, the main questions are future consumption in relation to production.
How many years before demand exceeds production? 5, 10, 20?....and then?
What impact will we see on demand from collapsing birthrates in the anglosphere and lowering population levels (removing immigration from the equation for simplicity)? What impact will this have on oil demand? Or will we see ever more creations using more of it? So many interesting questions.
> And there is a reasonable possibility he is right
What has he been right about? Name a single thing. Any criticism of his hypothesis is completely ignored in particular when asked for actual real world examples of vanishing resources.
If you have a shred of evidence to support the assertion that PDK has a "reasonable possibility" of being right I would love to see it. Even better if King Doomer himself would deign to actually provide. Instead across economies and across the world we see INCREASES in real consumption with the only exceptions being where things have collapsed for reasons unrelated to lack of resources. The only examples I've ever even seen attempt to be provided are where some Western nations have had declining meat consumption from an extraordinarily high and unhealthy level to just extremely high and still unhealthy. And most Westerners still eat huge amounts of meat and the rest of the world is increasing consumption simultaneously.
The irony is that I can point to far more examples in the world today where TOO MANY resources is what led to the collapse via bad governance incentives etc. See Venezuela as a prime example. Most oil reserves in the world, outstripping even Saudi Arabia, but a complete basket case because of bad governance.
I can't be sure and it is highly likely we can't. But that should make you agnostic not "PDK is probably right". The evidence we have thus far is that PDK is resoundingly wrong. We aren't near the limits of growth, we aren't near the limits of resources, and things are getting better for the vast majority of people with much room for this trend to continue.
PDK's claim is a very strong one, not that "we will run out in the distant future at an unknown time" but that this is already happening in real terms. And there is simply no evidence for that at all. Hence why he is a doomer. His is an emotional position, not an empirical one.
You should be equally skeptical of PDK as my position as PDK's has a much trickier time handling the actual real world and the evidence it provides.
I'll take boring over spreading falsehoods any day of the week. Many people actually believe the dreck PDK pushes and it leads to problems and worse outcomes in dealing with real issues.
You might find a thread of people arguing whether the earth revolves around the sun or vice versa "less boring", I find it tragic.
That growth can't continue forever with fossil fuels is true and banal. The real question is one of timeframe. We have (at a minimum) hundreds of years worth of fossil fuels available by all serious estimates and that is before engaging with the link I provided showing that we have consistently INCREASED our estimated reserves while consumption has simultaneously increased.
That is what makes PDK a doomer shill, the imminent collapse he is not just predicting but claiming is already here despite all evidence pointing to the contrary.
Not sure why you are bending over backwards to defend this. It is clearly nonsense. By PDK logic or the logic you've given here, we should never have industrialised in the first place because eventually we will run out of X. Clearly a dumb position when looking outwards into a universe of empty lifeless planets.
This entire comment is an assertion without any evidence, any sound economic reasoning, or any historical justification. Can you name another time where price increased "exponentionally" for a commodity? Why would things suddenly go from "fine" to complete vanishing of relevant resource?
Even taking for granted that by "exponentionally" you mean "really quickly" this type of comment is no better than the unfounded drivel PDK puts out. Do the work! This type of lazy thinking is far too common in a world where many of the answers are at your literal fingertips with a bit of googling and critical thinking.
Isn't it basic economics? If supply decreases, price will increase. Sure it may not be "exponentionaly", but I am sure you got what I meant. Things wont suddenly go from "fine" to complete vanishing of relevant resource, that is my point, it will happen over time, and as there is less supply, the price will increase. What that timespan is I don't know, and I doubt google will give you a very good answer either.
Do you honestly think its impossible for the supply/demand equalibrium of a finite resource to ever change? Personally I think it will go the other way, we will hit peak demand before peak supply, but as I said I can't rule out PDK's view either.
You say "hundreds of years worth of fossil", lets say 300 years worth. If demand stays consistent, the price won't stay the same for that 300 years, the last barrel of fuel will not sell for $73
Can you name another time where price increased "exponentionally" for a commodity?
I give you C02 2020-2021 when production was scarce due to marsden shutting down and another outfit needing to shut for maintenance thus sending prices skywards, and beer demand was on the up and up as the economy was getting juiced. Breweries were unable to use all their tanks as the return on the cost of C02 wasn't there to justify them producing to their full capacity and hence they cut production. Prices went up as a result to recoup some of the loss in profit. real world application, scarce resource (albeit temporary, it makes the point)
It has also been observed that the planet is significantly 'greener' than two decades ago, which can plausibly be attributed, at least in part, to CO2 emissions. (NB. Nasa attributes this effect to tree planting in China and India, which intuitively I doubt is correct.)
T & T - totally silly logic. Well, illogic.
I repeat, every 24 hours, the planet burns 100 million barrels of oil. From a finite resource. That isd temporary, the more so because it was ramped-up exponentially.
You mistake growth of extraction, with growth of a stock. They are not interchangeable, not the same thing. Prime cranial mistake.
Meat is eaten in the West, because the West is hogging the energy, and therefore can afford to be sub-efficient with solar-energy capture (losses via eating the results of photosynthesis).
You need to read more. Try: The Secret History of the Americal Empire (from John Perkins, his Confessions of an Economic Hit Man should be essential reading also) and: Dismantling the Empire; America's Last Hope (Chalmers Johnson). Then see if you think of Venezuela that way. But you won't, and therefore you won't. Idealogues are like that. The US has been the major hegemony this last 7 decades, and has repressed all others, rhetoric aside. That dominance is disintegrating now - Trump being a symptom, not a cause. The military-industrial complex and the corporatocracy will probably commandeer him and his, and re-dominate.
Ooh big number, 100 million very scary.
Now what's the denominator? And how has that denominator changed overtime?
Same old chicken little nonsense. Got some bad news for you PDK, the world and industrial society isn't ending anytime soon and you'll be long gone when it does. I'd prepare yourself for a world of increasing wealth and prosperity as hard as it may be to believe.
You won't respond to the question of course, you are an emotionally driven doomer. Doom needs to be the outcome so all evidence can be safely ignored if it doesn't lead to doom.
The demoninator is the Joule - but it's a bit small, so I'm happy with BTOE, OR BOE (billion tons of oil equivalent, or barrels of oil equivalent). I work with either.
Your problem is that you appear to think linearly, rather than exponentially. Also, you seem to start with a self-justifying narrative, then back-cast to support it. That is the predominant approach - but it's wrong, in spades. From your Plunket Book, you'd be as high as the Eiffel Tower by now. You aren't. That growth-rate stopped, because it was unsupportable (evolution/reproduction requires a pairing to be not too far apart, sex is like that. And if they had to eat enough solar energy-originated food to support Eiffel-Tower sized beings, that'd take too many acres each; they'd be too far apart. We have temporarily added food energy from fossilised acres - the fossil fuels.
Ask the question - how many people can the planet feed, ex fossil energy? Nothing to do with emotions - your doomer comment is a put-down, a shoot the messenger rather than address the message. Just pragmatic questions, and seeking the truth(s), is the best approach. Try it.
> The demoninator is the Joule - but it's a bit small, so I'm happy with BTOE, OR BOE (billion tons of oil equivalent, or barrels of oil equivalent). I work with either.
Nah, enough weasel talk. The actual denominator.
So we use 100 million barrels of oil a day out of a total supply of reserves of how many barrels? It's a simple question and the silence on it is deafening.
I keep referencing the "Doomers" because this ideology is a religion, not an empirical set of views. Doomers always need to avoid dealing with the hard numbers for the simple reason they don't support their quasi-religious belief in the imminent doom that faces us.
Prove me wrong PDK. You know how much oil we burn a day, so surely you can find out the oil reserves too? It's a google search away.
EDIT: It occurs to me now that I am arguing with millenarist religious people about their religion. This is a waste of my time and I'll leave it here. From the wikipedia, interesting how this applies to doomer thinking:
Many if not most millenarian groups claim that the current society and its rulers are corrupt, unjust, or otherwise wrong, and that they will soon be destroyed by a powerful force.
First google result is much worse than I expected:
https://www.livescience.com/planet-earth/how-much-oil-is-left-and-will-…
"Globally, around 1.6 trillion barrels of recoverable oil remain, according to a 2023 survey by Rystad Energy"
16,000 days worth, 43 years worth.
Make sure to read the full article next time:
> As the world moves away from oil as an energy source, thanks to the shift to electric vehicles, according to BP's 2023 Energy Outlook Report, demand will likely plateau. In October 2023, for instance, the International Energy Agency said it expects oil use to have peaked by 2030, declining after that.
> That means we could have enough oil for far longer than the longstanding 50-year projection.
If you have a shred of evidence to support the assertion that PDK has a "reasonable possibility" of being right I would love to see it.
Evidence: The timeframe it takes to naturally produce crude oil in the earths substrate vs the extraordinary rate at which we extract and burn it. Seems relatively simple to me. Doesn't matter if we discover all the oil in the world, and it stays cheap for another 100 years, it is finite and will eventually become too expensive to extract vs the return it gets from sale.
But surely you accept that at some stage technology will fix the problem for us, or at least significantly reduce our demand for fossil fuel. As I said, timing is everything. If we only have enough fossil fuel to match current demand for 50 years we are in serious trouble, if it is 100 years maybe not.
Look at transport for example. 100 odd years ago we used to turn coal into steam, 100 years before that we turned grass into horsepower. 100 years is a long time for technology.
That is up to humanity to provide a solution, and one that is broadly adopted. Just as many other engine types have been created long ago but shut down legally and illegally by the oil industry, the key will be if it is able to be adopted and integrated into society both practically and culturally. One also has to wonder if there's a limit to Moore's Law given we are at nanotransistors currently. Will we be able to go smaller and continue to double the number in each chip every 4 years? Then there's the realisation that we are where we are based on the wests parasitic history of sucking resources from less developed countries (e.g the rise of the british empire, tea and silver bullion etc etc).
The sheriff cleans up the town on 1 March 2025, I believe. At the time of the new comment policy being published there was quite some backlash from some regulars on here. But the reasons for the change had become obvious and remain so. Not to say that all the ranting, political partisanship and personal vitriol will disappear completely but there should be quite a reduction in having to accommodate it which I suggest will likely be greater than pro rata.
Wrong or just a timing issue?
The commentary pdk provides is based on knowns at this point in time. Perhaps some new tech might spring up, but based on todays knowledge and trajectory he's way more on target than the selective nonsense spouted -particularly in todays commentary.
Lol and there it is. The rallying cry of the limits to growth doomer circus everywhere: we're not wrong, we're just early.
- Consumption of oil goes way up and oil reserves continue to rise.......just wait you'll see.
- Price declines for oil which is the exact opposite economic signal you'd expect if things were running out...... just wait you'll see.
- Far more nations succumbing to poverty due to TOO many resources (AKA the resource curse) and not a single one returning to poverty due to loss of resources....just wait you'll see.
It must get tiring having to constantly deny the evidence right in front of your eyes. But that's why its a circus, doomerism is just a weird form of entertainment for a certain type of clown lover.
T&T, how about you use the search function on this site and search for 'Murray Grimwood'. Read the articles. Then read the links contained within. Read it all, whether you agree or not. Then make your comments based on what was posited and what you know and your sources - up to date sources mind you. It should take you about a week. When you have done that get back to us with a reasoned set of statements. If that's beyond you try Facebook.
I have read a bunch of them. And like I have said, same old bs.
People here are acting like this type of doomerism around resources is a new thing. It isn't. You can go back and read similar screds from the 1800s, 1900s, etc and they keep being wrong and we are far enough away to see why.
I see no reason to find the latest batch unique especially when their numbers don't add up and the ignore the empirical measured realities of the world around us.
People study wayyyy too little history is my honest take. It allows them to be led around the nose by charlatans not realising they are falling for the same nonsense as many others before them.
I think that is the point. We may have enough fossil fuel to last us another century or two at current demand, who knows. And if we don't, we will just find alternatives.
I still think price is the best indicator. I am not saying the market is perfect, but if you had oil and you knew there wasn't much left, would you sell it for $73 a barrel?
It won't just run out one day without notice. There will be a very long period of price increases beforehand. Some oil producers will run out before others. If we were anywhere near close to this happening, the price would already be increasing.
But I do think it would be very sensible for NZ to do everything possible to reduce our oil dependence.
Pierre Trudeau has resigned as prime minister today, ending a long political career
I think you'll find his son Justin resigned today. Pierre shuffled off this mortal coil long ago. Although he too resigned in 1984.
There's a theory that inflation converges on the interest rate in the long run. Makes some sense given the importance of the price of money as an input to pricing strategies, and the need for wages to keep pace with mortgages costs. Oh, and oil is threatening a bit too.
Before you say 'but prices can't go up if we don't have any money', remember that total NZ household bank account deposits have been increasing by around 6% per year for the last few years - comfortably ahead of inflation now.
The price of money is increasingly not the driver (hence my candle analogy).
The energy price of energy, and the energy price of delivering goods and services, is the base-line 'price'. Entropy is the 'fudge'; some of the lauded- 'services' will be traceable to increasing maintenance demands. That isn't a growth, it's a maintaineth.
How can something keystroke-issued, levered bet-on-bet, value that which it calls externalities? It can't (although it does a good job of reinforcing our western narrative - that if they only adopted democracy and let us have their resources, the others could be like us).
Lots of commentators in the US have suggested that increasing the price of money can push on inflation - it's basic cost-push theory. JP Morgan made this point, other commentators too. It is also intuitively obvious. NZ added $10bn (2% - 3% of GDP) to business credit costs through 2022 and 2023. Who paid the bill? Businesses absorbed some of the losses, true, you can see that in the liquidations and bank account reductions, but the rest were passed on to consumers.
Exactly - and when we were dropping interest rates we wondered why there was no inflation (at least that which is measured in the CPI). Instead we had high inflation in debt and asset prices (oddly not considered a significant issue by the central banks that they should keep contained like they do for consumer inflation). That cycle in my opinion has now changed - see the US 10 year bond yield. It has broken out of a 4 decade downtrend. Lower rates that were aiding low CPI readings may no longer be an input (ie debt servicing costs that flow through to product/service pricing in the goods we use/consume).
LOL, from the same JP guy in the same interview:
“You’re not going to see meaningful downward pressure on shelter costs until the Fed lowers interest rates, mortgages come down to a more reasonable level, and supply comes back on line, because people are willing to step into that market,” Manley said.
He's just bullshitting for his employer. Of course interest rates and inflation are linked but it's not even close to that simple.
My point, often made to be fair, is exactly that - it is not that simple. Changing interest rates has a range of impacts across the economy - pushing on prices, suppressing demand, making some people poorer, others richer etc. For example, would NZ wages have gone up as much if interest rates had not been hiked as much? NZ wages tracked household living costs (and CPI + interest costs) incredibly closely over the last two years.
You, in the OP suggested it was that simple... just this morning. Using evidence from a Bank PR guy and a "Associate Professor in International Relations and Political Economy" (less credibility than an anon).
Trashing our exchange rate and relatively increasing broad money will lead to even more actual inflation that would require even hasher short term corrections to "fix". Don't pretend nothing else changes in the counter factual were we never increased rates. (Big banks will "punish" Reserve Banks from getting out of step with them.)
Oh dear. Here's the sentence from the OP.
There's a theory that inflation converges on the interest rate in the long run. Makes some sense given the importance of the price of money as an input to pricing strategies, and the need for wages to keep pace with mortgages costs.
Now, how's your comprehension? And don't even get me started on your broad money blah.
You bring up a theory ("inflation converges on the interest rate...") with no obvious extra context, you say it makes (some) sense and then provide no further reading.
So, the reader meant to reject this theory or assume there's much more to it and also assume you don't endorse it or agree with it.
How can this not be characterized as suggesting the reader consider it correct?
Don't let me stop you from broad money but OK.
I have to fix our mortgage this month. You guys are not making it easy, you are almost convincing me to go longer.
I still think interest rates in NZ will fall from here, but there is some nagging doubt... And if they don't fall by much, the lower longer rates will work out cheaper.
With the NZ OCR heading down, but with the UST10yr heading up, my thinking is that the longer NZ mortgage fixes (2yr+) aren't going to be much lower than they are now, but we might see some sub 5% for shorter term rates. I also have to refix soon and I am in two minds about what to do, but leaning towards fixing for 2-3yrs rather than 6mth-1yr
I'm not convinced that the interest rate track will be down, down, down this year, with all that's going on internationally, given half of our inflation is imported (deflation or inflation). The 5-year rates are lower than the historical average interest rate since 1998, so I'm thinking a 5-year fix for half the mortgage might be a useful hedge.
Yes agree a split mortgage would be a good hedge. In fact its probably the best option at all times if you don't want your mortgage repayments to jump around all the time. Splitting into 3 parts and ensuring none of those parts come up for renewal in the same year would probably give you a relatively static cost over the longer term. Maybe one of the challenger banks could offer a special product to make that simple.
Its simple if thats what you did when taking out the mortgage. Not sure how easy once you have the bulk tied up at one rate but I would have thought doable. I have mine in 4 tranches (including $180k offset) so the interest rate shock has not been acute. I just came off my last low interest rate tranche (3.49% last week) and refixed at 6 months for 5.99%.
Agree it is kind of simple for those that know about it, but it could be a lot easier and mainstream.
Banks could probably reduce their test rates too with such a product as there is much less chance of an interest rate spike. They could advertise the product at FHBs as being the safest option.
The Australian situation shows just how precariously balanced inflation is. The RBA has been reluctant to raise interest rates as much as other central banks largely because their property sector is so pumped up (more so than ours) and very vulnerable to higher rates. But the corollary is that inflation has not dropped as much. They are between the proverbial rock and a hard place.
It's also generally true that the more leveraged the economy the greater the effect of a little tightening will be overall. But their service sector performance is starting to make it look like the tightening hasn't been quite enough. Plus, their banks appear to be doing much to prevent widespread defaults, giving widespread temporary relief instead (interest only etc); this is reducing the effect of their tightening.
The prevalence of floating-rate home lending in Australia meant that they could get the desired effect a lot quicker without having to keep cranking the interest rate up. The RBNZ was like a kid with OCD. They kept going back to the tap and turning it back to make sure it was off. Now, it's so tight that they need to find a lever to turn the flow back on.
The Australian situation shows just how precariously balanced inflation is. The RBA has been reluctant to raise interest rates as much as other central banks largely because their property sector is so pumped up (more so than ours) and very vulnerable to higher rates.
This is why the media is able to trigger the punters with stories about $12 coffees.
If you're going to preserve the Ponzi at any cost, you have to accept the trade-offs.
https://www.news.com.au/lifestyle/food/drink/coffee-prices-expected-to-…
Justin Trudeau has resigned as prime minister today, ending a long political career.
And in other news, 51% of Canadian restaurants operating at a loss or barely breaking even, compared to just 12% pre-pandemic, even though the food service industry is thriving.
Justin won't feel the pain and will move to an overpaid post-political grift.
https://finance.yahoo.com/news/not-good-enough-canada-restaurant-215100…
“And finally, we are calling on the Government to implement a pilot for a dedicated immigration stream for the hospitality industry.”
The Canadian ruling elite are already pulling the pin on the immigration scam. Mind you, Aotearoa and Aussie are far worse than in terms of popn growth driven by migration since 2005. What bothers me in particular is that the ruling elite and bureaucrats don't really give a rats about the migrants. Whether they sink or swim is not their responsibility. And with little investment in infrastructure, qlty of life remains constrained and / or deteriorates for both migrants and non-migrants.
"Canadians won't be taking any condescending economics lessons from the leader of the opposition after he proposed that a good way of avoiding inflation was to buy crypto."
"If they had followed it they would've lost almost half of their life savings."
Justin Trudeau
OK. Trudeau is not particularly educated on 'crypto' and probably doesn't understand the difference between BTC and altcoins. You don't have to be particularly clever to understand that BTC has proven itself as an inflation hedge.
No idea what Ardern would have said about inflation.
OK. So you say there's an inverse relationship between inflation and BTC. Gotcha.
In this current phase of the crypto currency capital markets, Bitcoin represents a high-powered coincident (and sometimes leading indicator) of global USD liquidity conditions. To summarize this:
To sum it up in very basic terms, USD liquidity increases and decreases under the following circumstances:
USD Liquidity — Bitcoin Number Go Up:
Fed Balance Sheet — Increases
RRP Balances (size or Reverse Repo held at NY Fed) — Decreases
TGA (US Treasury’s checking account) — Decreases
USD Liquidity — Bitcoin Number Go Down:
Fed Balance Sheet — Decreases
RRP Balances — Increases
TGA — Increases
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