Here's our summary of key economic events overnight that affect New Zealand, with news official rescue efforts haven't allayed deep fears about the immediate economic situation.
Friday's +9% equity market bounce on Wall Street has been undone today - revealed for what it was, wishful thinking - with the S&P500 currently down -9% so far today, and falling. Update: The S&P500 ended trading in New York down -12%. The US Fed's rescue package, one called for and applauded by the US Administration, has had the opposite effect of shoring up confidence - it in fact undermined investor confidence. Markets are watching the cumulative impact of consumer and business decisions, none of which are positive as fear pervades all decisions.
A remarkable thing about the weekend US Fed move is that they fired as many bullets in one weekend day as they did over the whole of 2008. With sudden financial largesse like this, there are sure to be huge and unexpected distortions flowing around the world. We are in a monetary policy black hole.
Wall Street is following Europe and adding to the decline. European markets were down about -5% overnight. Yesterday, key Asian markets were down about -3%.
In the US, we are seeing the first of the regional factory surveys diving. The New York survey reported sharply lower levels similar to those last seen in the GFC. The collapse in new orders is a big worry.
Getting goods to market is now going to become a major problem for firms that have orders. The unprecedented shrinkage of passenger travel by air has removed vast amounts of air cargo capacity. Approaching 200,000 flights have been cancelled in the past six weeks and the remaining capacity is focused on urgent medical supplies. Given there are about 100,000 flights per day globally, and that the reduction has been sudden and concentrated in the past two weeks - and is growing - the situation will be very tough very quickly.
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Will the rest of the world be 'saved' by China's re-emergence of the other side of the virus emergency? It will have some impact, but nowhere near enough to 'save' the US, or Europe. But it might be an ameliorating factor for Japan, and important for New Zealand.
China's February industrial production was down -13.5% year-on-year compared to the usual rise of more than +6% pa. China's retail sales were down -20.5% on the same basis, a shift from +8% rises. These are enormous changes striking at the heart of the Chinese economy. It is unlikely that this data will be any better in March. But as big as these falls are, they still have their economy ticking over - things did not come to a complete stop. And we are seeing returning export activity from New Zealand to China.
But in February, Chinese home price growth stalled, and 19 major cities had zero new home transactions in February. None.
The thing about these sharp drops; these are the sorts of changes the rest of the world is looking at in March and April. It is going to get much more ugly than most in the West are assuming. Monetary policy can't save us from that.
The latest compilation of Covid-19 data is here. The global tally is now 175,300 of officially confirmed cases, up +54% in a week. There are now 94,240 cases outside China, a rise of nearly +20,000 in one day as the numbers keep on jumping. The new hotspots are Spain (up 8x in a week), Germany (up 5x in a week) and the USA (up 6x in a week). In the rest of the world, the number of reported cases has quadrupled in a week. Globally reported deaths are now approaching 7000.
The UST 10yr yield is falling today, down almost -20 bps from yesterday and resuming its downward track. It is now at 0.72%. Rate curves are still sharply positive as short pricing dives. But their 2-10 curve is a little less positive at +45 bps. Their 1-5 curve has also turned much less positive at +24 bps. while their 3m-10yr curve is still out at +59 bps. The Aussie Govt 10yr yield is down -7 bps now at 1.02%. The China Govt 10yr is up +3 bps at 2.74%. The NZ Govt 10 yr yield is also very sharply lower, now at 1.01% and down -19 bps.
Gold keep falling. It is down -US$27/oz today to US$1,503/oz. It no longer operates as a price hedge against uncertainty.
US oil prices have dropped sharply today, down another US$3/bbl to just under US$29/bbl with the Brent benchmark just under US$30. Vanishing demand is accentuating the Saudi/Russia fight and they seem to have lost control of it.
The Kiwi dollar starting today with a bounce higher. It is now 61 USc. On the cross rates however we are have leapt against the Aussie dollar which is still getting marked down. We are now at 99.4 AUc, a rise of almost +1c in a day and at that level we are just a whisker off its all time modern high and very near parity. For Kiwi sellers of AUD, we are well past parity. Against the euro we are little-changed at 54.7 euro cents. That means our TWI-5 is now at 67.2 winding back some of the 2020 overall devaluation.
Bitcoin, like gold, is also lower, down to US$5,014, a fall of -5.3% since this time yesterday. The bitcoin rate is charted in the exchange rate set below.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
185 Comments
Someone mentioned starting this again i think its a great idea :P
https://www.interest.co.nz/news/recession-job-loss-tally
Looking at that. AirNZ only cut about 300 jobs, they are talking 11x that already.
Better dust of those gardening skills, and dig over the back corner of the section (if you have one).
Also with China, who's to say that they don't have a second wave of infections once they relax the lock downs. That much humanity living that close together ( not that you mentioned China, I just thought I'd put all my thoughts in one post - in these times you have to make savings where you can)
Why you must act now!
a lesson possibly too late for This Government but it makes a very good read:
https://medium.com/@tomaspueyo/coronavirus-act-today-or-people-will-die…
Don't worry, guys.
Ashley Church says there is no need to worry.
https://www.oneroof.co.nz/news/37695
He may believe that the government and central should step in and have the current and future taxpayers prevent any loss to property. Or feel entitled to this happening.
Much like the ironically named Taxpayer's Union has come out yesterday basically suggesting that taxpayers should buy shareholders' shares at the current price then sell them off later so folk can buy in again, essentially asking to be insulated from the risk of their own investment decisions. They don't actually appear too representative of taxpayers on the whole.
Church is a buffoon. I love that when talking about the impacts he thinks it will be about "less people attending open homes". We are about to receive a global economic shock (possibly on par with 1929) and he thinks it will only impact NZ if we get widespread infections here? Wake up, the economic impacts will be felt by every country irrespective of the localized virus spread.
Mr Church really only does have one mode. If prospective home buyers are taking his advice it may well turn out to be very very irresponsible of him. We only need to look to what is happening in other countries with suspension of events and schools including Australia that we are heading for an inevitable lock down.
Now this is the fear I am talking about. Currently there is no evidence that "half the world" will not be working for months. It is possibly true that this will eventuate but is not guaranteed - if enough people believe this then it could be a self for-filling prophecy.
"Currently there is no evidence that "half the world" will not be working for months."
I would argue two things that would suggest otherwise
1. The closure of schools will force many parents to stop working. UK has just closed schools for 12 weeks. That is over 7 millions kids who now need to be looked after. Assuming 1 parent per 2.5 kids. The workforce has just dropped 3.5 million workers.
2. The closure of all workplaces. Look at Italy, Norway, Spain, and France. USA and Canada likely to follow shortly.
Granted some can work from home, but reality is that is not the majority.
3. Trade slow down. Even if you are not on lock down, orders, supply chain drying up.
And that is the forst round before mutated virus returns as per the Spanish Flu.
I'm guessing over half of the developed world not working for at least a month. Remember the late 1980's crash and trying to buy a part and you had to order it. Very little in the way of stock on the shelves and that slowed progress up massively.
I think it is very safe to say months. Most places around the world appear to be shutting down for 8-12 weeks. That is 2-3 months. Not to mention the time it will take to get fully back up and running.
Fear is very much useful today. It is what leads us to prepare.
Do you really want to be solely reliant on the NZ Govt to cover your A$$ in a crisis?
So in other words you are making an assumption that the world will shut down for 2-3 months. While some stores (and countries) are closing for several weeks at present - it doesn't mean that that will extend to several months. The UK seems to have abandoned even attempting to control the problem - which is a problem in itself and will most likely mean the country will be isolated by the rest of the world as a precaution (fortunately it is an island).
Prepare or go headless chicken (toilet paper comes to mind...) - there is a difference. The thing is you are still relying on the government to a certain extent - to maintain law and order etc unless you intend to head for the hills.
The reason why some countries aren't closing schools is that grandparents would be more likely to end up looking after the kids. Which risks the kids spreading it to their more vulnerable grandparents. Closing schools could be a very dangerous vector for spread, without even considering the economic impact, or that medical staff can't stop working but would end up with kids at home not being looked after (not entirely unusual when I was a kid).
Look at the falls in economic activity in China when they went into lockdown. Now look at the number of countries where the spread of the virus will necessitate a similar lockdown.
When 20 countries see this kind of fall in economic activity at the same time it will have a cascading impact across other economies.
Whats the difference a reset is a reset regardless of the cause. Really all that anyone is interested in at this point are the impacts not the name you try to pin on it like the WHO. Im focused on the timeline and what events trigger the next phase. Its the uncertainty thats leading to fear and thats very unpredictable.
Nice basic lesson about debt. Debt is forever regardless of asset values.
https://www.zerohedge.com/markets/covid-19-dominoes-fall-world-insolvent
As net worth crashes below zero, debts remain.
Anyone expecting the financial markets to magically return to January 2020 levels once the pandemic dies down is delusional. All the dominoes of crashing market valuations, crashing incomes, crashing profits and soaring defaults will take down all the fantasy-based valuations of assets: stocks, bonds, real estate, you name it.
The global financial system has already lost $100 trillion in market value, and therefore it's already insolvent. The only question remaining is: How insolvent?
Here's a hint: companies whose shares were recently worth $500 or $300 will be worth $10 or $20 when this is over. Bonds that were supposedly "safe" will lose 50% of their market value. Real estate will be lucky to retain 40% of its current value. And so on.
Where is the bottom? There is no bottom, but nobody dares say this. Companies with negative profits have no value other than the cash on hand and the near-zero auction value of other assets. Subtract their immense debts and they have a negative net worth, and therefore the market value of their stock is zero.
'@MarcGrbesa
Futures are down because non bank market makers are insolvent this evening and the Fed's action didn't help them as they run complex portfolios but with tons of leverage ie 7-20x so it doesn't take much to wipe them out. Now its all about cleaning up ie selling assets globally.'
I like zerohedge, he does some good statistical analysis but is a bit alarmist.
I find it sad that if there is a serious recession, the media, history books, politicians, the financial elite will attribute it to the covid-19 pandemic. I do not believe this is true. I believe it’s been a long time coming and a result of the debt bubble, which has created bubbles in assets, in the stock market in all sorts of weird and wonderful financial systems.
This pandemic would only have been the trigger for an unstable system resulting from the low interest world we live in. The mismanagement of central banks in continuing to lower interest rates is akin to throwing gasoline on a fire, even if they manage to extinguish it this time, it’s going to flare up again and be even more aggressive.
Good question. I think there is a generation that has never see really tough times, and there are the narcissist sociopaths to in their own delusion just think is all pink fluffy unicorns in their own debt stacking greatness. Debt leverage is fantastic on the way up, but it is absolutely heartless on the way down. Now its global roller coaster time.
"Why is this so hard to understand for people?"
Their key underlying belief is that property prices do not go down by much. This belief has led to a willingness to take on high levels of debt.
These are some reasons given in the mainstream media, property market commentators, property market promoters, bank lending promoters masking as bank economists, real estate agents, property market mentors & other sources as to why property prices in Auckland will not fall by much and that there is a low probability that property prices will fall dramatically:
1) during the GFC, house prices in Auckland fell only 7-10%
2) over the past 50 years, house prices in Auckland have averaged 7.2% per annum (or commonly referred to as house prices doubling every 10 years). This trend can be expected to continue into the future - https://youtu.be/Agp9xFWoBX4?t=172
3) there is a shortage of underlying housing in Auckland, so property prices won't fall by much - https://www.interest.co.nz/property/97513/auckland-councils-chief-econom...
4) there is a growing population which means that there will be more demand for houses - https://www.stuff.co.nz/business/106883553/house-prices-have-fallen-but-...
5) we have inward immigration which means more demand for houses
6) Auckland is an attractive city with an attractive lifestyle - that makes it desirable and attracts foreigners to move to Auckland and hence raise the demand for houses
7) lower interest rates are supportive of rising house prices
8) lower interest rates make debt servicing easier for borrowers
9) Low interest rates were also forcing retirees and those nearing retirement to look for investments that would produce income, such as rental property. "Plans of the baby boomers to retire and live off a conservative yet well-yielding portfolio have evaporated with low interest rates," he said. "[They] are seeking assets and buying investment properties. They are also seeking assets they can hold and live off of for three decades in retirement rather than just 15 years given advances in health and medicines." - https://www.stuff.co.nz/business/84322204/all-predictions-of-an-auckland...
10) we mustn't forget either the vested interests in ongoing stability. No government, central bank or trading bank with mortgage exposure wants materially lower house prices. Nor does an incumbent Beehive want falling house prices going into an election campaign https://www.stuff.co.nz/business/110499233/think-house-prices-are-going-...
11) the economy is doing well, with low unemployment - https://www.stuff.co.nz/business/110499233/think-house-prices-are-going-...
12) there has been insufficient construction of new builds to meet the housing shortage - https://www.stuff.co.nz/business/106883553/house-prices-have-fallen-but-...
13) there are high construction costs to building a house. House prices cannot fall below their construction cost. - https://www.stuff.co.nz/business/106883553/house-prices-have-fallen-but-...
14) people don't sell their houses at a loss - https://www.stuff.co.nz/business/106883553/house-prices-have-fallen-but-...
15) continued inflation means that house prices will continue to rise in the future
16) The fact is, debt levels have barely changed from the beginning to the end of those 10 years, compared to GDP levels, compared to household assets, compared to household disposable incomes. And much more importantly, debt servicing is very much easier now, an item that is almost universally overlooked. We are not pushing out to unsustainable levels now, and even if they creep up a little, we are far from that point. https://www.interest.co.nz/opinion/95894/if-you-think-new-zealands-house...
17) in aggregate household debt servicing is low in New Zealand - currently at just under 8% of disposable income of households - https://www.rbnz.govt.nz/statistics/key-graphs/key-graph-household-debt
18) property market participants & commentators who have been correct in their predictions about recent property price trends have more credibility and hence their predictions of upward prices are believed by a wider audience (such as Ashley Church, Tony Alexander, Ron Hoy Fong, Matthew Gilligan, etc). - https://www.stuff.co.nz/business/84322204/all-predictions-of-an-auckland...
19) previous warnings about a house price crash have been wrong - property prices have continued rising upward significantly since these warnings were given, so there is little reason to believe these warnings.(such as Bernard Hickey) - https://www.stuff.co.nz/business/84322204/all-predictions-of-an-auckland...
20) its unlikely Auckland prices collapse. I think the main two reasons though are:a) Affordability has been this bad, and worse, in the past and it only resulted in about a 10% drop. b) The number of homes built over the last decade has been too low and will take some time to recover - https://www.interest.co.nz/property/100670/housing-market-continues-hibe...
"Then the speculative asset bubbles re-inflate, and the household takes on more debt in the euphoric expansion of confidence to buy a larger house, expand the family business and enjoy life more."
Remember those deposit recycling / equity release techniques used to finance additional purchases of investment property?
The driving forces that drove the GFC are different to the driving forces emerging with the Covid-19 Pandemic
In 2008 the behaviour of the Merchant Banks and the bailouts by Central Banks, produced outcomes and actions that still overhang today
In 2020 it's the behaviour of the masses
The intellectuals are dishing out the same medicine. TARP. QE. Interest Rate cuts. Didnt work 2008. Will they work this time?
And meanwhile, back in the real world... you know, the one where we have to blast rocks hundreds of metres below ground to get oil,..where plastics are replacing fish...where topsoils are depleted,...where drought and bushfires persist,........ where the rivers are filthy,...
Ask yourself, where does turning on the debt spigots take us to?
https://medium.com/@moritzlaw/work-resumption-plan-cancelled-in-hubei-e…
Work Resumption Plan Cancelled in Hubei, Epidemic is Not Under Control in China
China have screwed the world with the scale and depth of the misinformation they have been publishing about Wuflu - meant that world didn't take it seriously enough. First case now known to be Nov17. Typical 2 week 10x seen elsewhere means there were 10000 infected before Wuhan was locked down - not 200 claimed, but likely a lot more. Probably a million or more infected in China during peak - and it's everywhere there now waiting to pop its ugly head up again should everything reopen. Chinese no longer trust what their govt says given obvious lies, so are (where possible) still staying home.
This logic makes no sense - there are too many variables to just compare populations to predict number of infected people. I have no idea if the China data is accurate, but the recent evidence suggests they're doing a pretty good job of getting on top of things. We'll see if Europe and the US does as well in the next few weeks.
flu from different perspective
https://www.youtube.com/watch?v=yn074EB5NNY&feature=youtu.be
Agreed, having set a frame to reduce transmission, the crisis management part that examines data sees and incorporates feedback is important.
A poor out come today would be a "set and forget" response. This was the concern regarding the CT view of time to politically change society.
Putin smashes the global order
https://www.zerohedge.com/geopolitical/putin-unleashes-strategic-hell-us
Hard to shout USA USA when you have no job and under military lock down. I don't think The States is going to come out of this well.
China and Russia are going to put the boot in and let it all fall apart. Leys face it Socially and economicly The States has been falling apart for a long time now.
On the other hand, they have banded together well in wars. If they succeed in creating a "them" to be "us" against, they may well be able to band together as a country. The one thing they have in spades (in addition to weapons) is patriotic fervor.
But it'll depend in part on whether the Republicans can afford (personally) to turn against Russia.
interesting perscpective on the 1957 Asian flu pandemic. "Worldwide, this flu strain killed somewhere between 1 and 2 million people. More than 100,000 died in the U.S. alone. And yet, to the best of my knowledge, governors did not call out the National Guard, and political panic-mongers did not blame it all on President Eisenhower. College sports events were not cancelled, planes and trains continued to run, and Americans did not regard one another with fear and suspicion, touching elbows instead of hands."
https://www.city-journal.org/1957-asian-flu-pandemic
Trump doing the same thing he tried on Friday, speaking before close to try and buy some PR with a late-day rally. It's not working.
The Fed, BOJ, RBNZ...all intervened yesterday. And the net effect was nil. The market is back where it was in 2016, having compacted all that delicious cheap central bank money since into nothingness. The taxpayers still have the liability on the national balance sheet. But the thing we bought with it is gone.
If you don't mind a bit of profanity ...
Read this from CACTUS CATE
https://asianinvasion2019.blogspot.com/2020/03/a-socialists-wet-dream.h…
Sums it up nicely - a bit incoherent in places where she gets excited
A lot of people in NZ have made a lot of money off selling houses in the past 3 years. This has been at the expense of FHBs dipping deeeeep into their pockets, or holding out for a rainy day such as today to begin to lower prices again. Time will tell whether holding or going all in was the better strategy in this economic poker.
Well said mate. People should purchase a home when they are the appropriate stage of their life. They have job stability and are settled in an area and have a sufficient deposit. But due to stupid asset inflation it became a game of "rush in before you are ready, or miss out".
Unfortunately, a lot of those people are about to find out they weren't ready.
This is why, at times, I have had a short temper with the landlord class. Many have good intentions, but when they own multiple properties, they have been pushing up prices and making life very difficult for young families who simply want to buy a home for stability and raise a family. They don't want that asset to be a speculative gamble - which is what the greed of many has turned our housing market into.
In my opinion its next to fall - and I've been saying on here for years now that I think it could fall 50% - just didn't know when/or what would be the trigger. This could be it.
Well, this requires good quality thinking and morals in society and governance, prepared to manage housing as part of society as had been done in the post-war generations in NZ. When housing was part of the foundations of society and access to affordable housing was seen as a good that would enable families to then focus on being productive.
Not as a speculative investment vehicle for a few generations at the expense of Kiwis before and after.
The US Fed's rescue package, one called for and applauded by the US Administration, has had the opposite effect of shoring up confidence -latest Fed TOMO/POMO graphic evidence.
Emergency Fed Repo Fiasco: Funding Markets Remain Frozen After Dealers Balk At $500BN Operation
Inert reserves locked on the Fed's balance sheet are no substitute for actual reserves in the real world.
I have been aware this meltdown has been coming for well over 3 years , and said as much , and acted accordingly by exiting the NZX and ASX , .
Recently I was thinking I did this maybe too soon .
I expected nothing more than a huge correction in asset prices, but the size and depth of this fall has even surprised and shocked me .
This rout has gone way too far , and it does not look like its going to stop anytime soon .
theres a real gap in peoples understanding about how its all or nothing for the economy
its doesn't shrink (for long) without imploding
theres a reason central banks have been throwing EVERYTHING at deflation
capitalism requires growth in consumption & resource use
otherwise it doesn't function
take this....
https://www.stuff.co.nz/national/health/coronavirus/120302507/coronavir…
"It would appear that the agricultural sector will get through this relatively unscathed. Farmers are basically self-isolated all year round anyway.
From an economic perspective, the world still needs to eat and it looks as if China's demand will come to the rescue of our agri sector once again."
No mention of how they would pay ...
it just might take some time, the US hamburger market could stall if people stop going to Macas, In & out etc.
https://www.beefcentral.com/trade/export/covid-19-extended-blank-sailin…
In the meantime it is so dry here, the 1ml today isn't going to make a difference the damage from this drought will be with us for the rest of the year.
Ok, he said beef has flown off shelves box prices are up but futures have been hammered, so basically they are all in wait and see mode, and worried about next season.
https://www.finviz.com/futures_charts.ashx?p=d1&t=LC
Container shortage
https://www.beefcentral.com/trade/export/covid-19-extended-blank-sailin…
I thumbs upped the comment but it’s not capitalism that requires perpetual growth and resource use:
Capitalism - an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.
The required perpetual growth is from our monetary system and inflation targeting. The inflation Targeting has increased asset prices by more than they are worth making them susceptible to “value” drops should our financial system have a shock like we are. It’s the funny money that’s is and has been the issue since the 70’s and 80’s.
positive return on capital is whats required
cant have capitalism without profits
which requires an increase in energy surplus (to underwrite profit)…
When we hit soft limits in energy surplus (70s), we added leverage and fake funny money growth to keep the show on the road…
Now a collapse in debt quickly becomes a collapse in supply chains
Why does profit require an increase energy surplus? That would be required for a perpetual growth scenario (like we have) but isn’t intrinsically linked to capitalism in itself. Again, it’s our monetary system that relies on an ever increasing money supply, not capitalism.
without the increased energy surplus, you get inflation only (devaluation of existing money claims)
ie profit is an increase of (monetary) claims over what (physical) goods the market can deliver in the future...
If there isn't an increase in the physical goods available, all monetary claims eventually devalue
I disagree with your definition of profit but I can see how you say what you say if you assume your definition. Same issue with your definition of capitalism, you’ve added an assumption that both require perpetual growth which again, isn’t inherently part of either.
Profit - a financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something.
There are two systems at play here, capitalism (not that what we have is actual capitalism) and our monetary system. The monetary system is the driver of perpetual growth whereas capitalism is the distribution and control of profits.
“ With sudden financial largesse like this, there are sure to be huge and unexpected distortions flowing around the world. We are in a monetary policy black hole.”
There are already huge distortions with our previous financial largesse. This is just par for the course but over a shorter timeframe.
Shipping freight is out of kilter as well.
According to my source, there is a shortage of containers in Europe because they are still all parked on the wharf in China and other ports.
Plus what containers they do have are now hard to move because the ships are also all parked in China and are not going to come back empty just to pick up from Europe, or at least not at someone paying the extra cost.
How are people's "Growth" or "Aggressive" KiwiSaver funds doing? What kinds of percentage losses are you looking at (on paper)?
Do the (highly paid) managers of these funds mitigate losses by cashing out, or do they tend to ride the falls all the way to the bottom?
I would think that most largely have their hands tied by the funds they have defined. A growth fund is XXX equities, YYY debt, etc, and not to be changed because the manager gets cold feet.
Members can change, though, e.g. swap from growth to conservative. In fact our plan sent out a memo last week trying to discourage people from doing this...
I'm in an aggressive fund, had just over $40k in my kiwisaver two weeks ago, now I have $32k. I understand it's not constantly updated with the fund unit values so it could be even worse than that, but thats a ~20% drop. I'd say they are riding this one all the way to the bottom.
Ray Dalio’s thoughts on events - based on what he/his researchers are looking at, things could be worse than what I was previously thinking:
https://www.linkedin.com/pulse/implications-hitting-hard-0-interest-rat…
I would recommend a thorough read of Michael Reddell's two March 16 articles.
In the latest one, he lays out an approach - radical, in his own words - to coping with the crisis, with four main aims (his numbering goes awry - ignore it):
What it is designed to do is (a) share the inescapable) losses fairly, if inevitably a bit crudely, without removing all risk from individuals or firms (b) support the existing level of credit and a secure basis on which existing banks could lend to cover shortfalls, (d) dramatically cut servicing burdens (and returns to depositors) as is normal in a deep recession ,and e) support/create confidence in an absolute commitment to keep medium-term inflation up at around 2 per cent, avoiding seeing real interest rates rising into a savagely. deep and at least somewhat prolonged recession and deflationary shock.
In the earlier one, he lambasts Orr for his lack of depth and general (as he sees it) unfitness for office, and the MPC for the yes-man approach to NZ monetary policy.
Interesting times indeed....
if they bail risk takers out, they will just take bigger risks knowing govt has their back. I don't think they can do much with demand collapsing, it just is what it is, just get economy up and running asap. Distorting markets is always a bad idea.
China's economy is built around exports, they must be terrified.
I think that it is absolutely essential for government to step in to help people who have lost their jobs, and not the shareholders and executives (at end of the day, the justification for shareholders percentage of profit is that they are taking the risk!).
I think charging interest on owner-occupied properties of those who have lost their jobs must stop, and their repayment delayed for a year. Government can step in to fill the gap for liquidity of the banks if necessary (i.e. the government can repay the principal portion of the loan to the bank, and you will own the government the money).
There must be an equivalent for renters (but as I do not intend this to turn into a subsidy for the landlords, i am not sure how best this can be implemented. Maybe if landlords share a reasonable portion of the loss, via something like reducing the rent plus postponing the repayment of a portion of the rent to future as an interest free loan, government then can pay the remainder of the rent at present and recovering it from the renters when they find a stable job in future).
I think if housing costs and housing related bankruptcies are taken care off, there is a good chance that NZ can recover from the current situation within a reasonable time frame.
Kodus to Idria Elba.
Shares testing positive.
And Asymptomatic spreading.
And while all our attention is focused on the virus, the oil companies are shamelessly screwing us. At the present oil price and exchange rate the price of petrol should be less than $1.57 to $1.62 per litre. The cheapest that I can find locally is $1.87.
The totally useless government continues to stand round doing nothing. They are not even engaging in their typical vapid rhetoric. The Oil companies must be just laughing at them.
If it were me the officials of the Commerce Commission accompanied by the police would be raiding the oil company offices and taking possession of all their records and computer files then going through them like a dose of salts.
If we were paying a fair price for our fuel then this would probably make a bigger contribution to our economy than anything that the government is likely to announce this afternoon.
No it is more than that. The GST goes onto the whole pre GST price not just the taxes as you have calculated. At a retail price of 1.87 the GST component is over 24 cents so the combination of tax plus GST is over 98 cents. I don't care how much the government taxes. It does that for good reasons and if we were not paying our tax in this form we would be paying it elsewhere. It is the obscene profit that the oil companies that concerns me plus the implied collusion and monopolistic behaviour. Profit margins of this order are not consistent with honest competition.
Chris-M, and download the slides
https://youtu.be/GHmKIVIgyjM
Macrovoices
S&P 500 Plunged Most Since 1987, Gave Up in 18 Days the 42% Gains of Past 3 Years. Boeing Shares Collapsed
https://wolfstreet.com/2020/03/16/sp-500-soared-42-in-3-years-lost-all-…
But don’t cry for Boeing shareholders: Boeing blew, wasted, and incinerated $43 billion on buying back its own shares to “unlock shareholder value” and “return value to shareholders,” or whatever Wall Street BS-nomenclature might have been used, starting in 2013, which is when the above chart begins. So you can see the effect of share buybacks, and what happened afterwards. And now, in its effort to survive this crisis, Boeing could use every penny of that $43 billion wasted on share buybacks. But it’s gone.
I think if you research the speed of the initial decline - it has surpassed any time in US history
Buybacks are not 'gone'.. it was just transferred to the bonus checks of CEO's whose performance was tied to stock prices and also to investors/ traders who rode the wave of buybacks and cashed out
Why is nobody talking about the fact that the fed just removed the major banks reserve ratios?? i.e. trying to delay a bear sterns type event?
Reserve ratios are there to ensure banks have capital cushions so now the fed is meddling with the definition of solvent as well?...
If the banks now have no capital requirements and fed interest rates are basically zero everywhere this can only end badly unless govt and central banks provide direct targeted support to consumers,
Already businesses are retrenching and going full ham re corona virus precautions including working from home, and 'social distancing' etc including cancelling travel and public gatherings is only going to erode demand in businesses further which is only going to weaken the economy faster
Its all fuelling fear and emotion based decisions which are seldom good ones
The note is directly on the feds own website here....
https://www.federalreserve.gov/monetarypolicy/reservereq.htm#:~:text=Re….
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