Here's my Top 10 links from around the Internet at 5 pm in association with NZ Mint.
I'll pop the extras into the comment stream. See all previous Top 10s here.
I welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.
It's all Greek to me today...
1. Which banks are drunk on ouzo debt - The Guardian has done a nice job pulling together an article and a great graphic showing which European banks are most exposed to a Greek default.
The Greek banks are stuffed.
Germany's Commerz bank and Postbank also have exposures of about a quarter of their equity.
Belgium's Dexia has exposures of up to 39% of equity.
France's BNP and SocGen also have exposures of 8% and 6% of equity respectively.
I couldn't find any Australasian banks in the list.
2. Ready for the Greek vote? - Tonight's vote of confidence in the Greek parliament tonight is shaping up to be interesting for markets.
The Economist nicely summarises the Euro-dithering.
After seven gruelling hours in Luxembourg, which included a video conference with colleagues from G7 countries, the finance ministers of the 17 countries of the euro zonedecided to delay until July the disbursement of €12 billion ($17 billion) in loans from the European Union and the IMF.
By then, they said, two issues would have become clearer. Firstly, the finance ministers say they want to know how far Greece’s private creditors are willing to help “voluntarily” by rolling over Greek debt when current bonds mature. This has become vital for German domestic opinion to sweeten the bitterness of having to support a second bail-out for Greece.
Secondly, the euro zone wants to know whether the reshuffled government of George Papandreou, the embattled Greek prime minister, will secure a vote of confidence in the Greek parliament, which is expected to come on Tuesday. Greek MPs are also due to approve, by the end of June, the next round of austerity measures and structural reforms—including a wholesale privatisation of state companies and lands.
3. Beijing by the beach - NZHerald reports Coromandel and Northland beachfront property developer Hopper Developments wants the government grant a special type of visa for Chinese property investors so they can buy boltholes by the beaches at Pauanui and Marsden Cove.
Is this what we have come to?
Selling off the beachfront to support beachfront property prices and our currently unsustainable lifestyle.
We can't just keep borrowing from the Chinese and selling assets to them to keep spending more than we earn. Down that path poverty lies.
The company is targeting China and is working with the Government to introduce new visa arrangements to facilitate investment, which will not only benefit areas like the Coromandel Peninsula and Northland but New Zealand as a whole, he said. China is being targeted because of the interest there in investing in overseas property.
"It's the fastest growing economy in the world and it's highly productive. Millionaires are popping up every day," MD Leigh Hopper said.
And as land can only be leased in China, people with money are keen to invest in Western freehold property. It's a way of spreading their risk and they don't necessarily expect to make a return, he said.
Chinese investors will be invited to buy property and build, with the aim of attracting them to visit regularly and rent out their houses when they're absent. Options for investment in commercial property, tourism activities and infrastructure are also being explored. The company wants the Government to introduce a renewable, two-year, multi-entry visa for investors who would be sponsored by Hoppers.
"We need flexible visa arrangements so they can come and visit, other than through the [existing] short-term visa."
4. Succession planning? - One sign of succes for any CEO and board is a succession plan and low turnover of the most senior staff. Paul McBeth reports at BusinessDesk that NZX's Head of Strategy Fiona MacKenzie is leaving after just a year in her current role to join the NZ Super Fund.
5. The game has changed - PIMCO's Scott Maher makes some good points in his latest missive about how the outlook for sovereign debt has deteriorated in a structural way and that savers are being punished with financial repression by policymakers trying to avoid debt crises.
Over the next three to five years, we argue that market behavior may be vastly different than what typical cyclical models would predict. Sovereign debt, which is at the core of our global financial system, is undergoing a seismic shift. Governments practicing financial repression may be transferring wealth from creditors (citizens) to debtors (governments) to the detriment of creditors, fixed income investors and savers.
6. The problem with America - Reuters' Felix Salmon point out how America's structural unemployment problem has worsened much more than others'.
I find these numbers quite shocking: after all, it’s hardly as though countries like the UK and Portugal have emerged from the recession unscathed. But the US increase in unemployment over the course of the recession was more than double the increase anywhere else.
That said, the US has historically has a much lower rate of structural unemployment than most of these other countries: the level of unemployment which is baked in to economic reality, before cyclical factors move it temporarily up and down. And what I fear is that the Great Recession has moved the US towards European levels of structural employment, without any kind of Euro-style social safety net.
7. IMF warning - Just in case you (Gummy Bear I'm looking at you) think I'm being a bit excitable about what the Greek crisis means, here's what the IMF says via The Guardian:
The International Monetary Fund warned European leaders that their hesitant response to Greece's debt crisis risked triggering the world's second global financial meltdown in three years.
As EU finance ministers scrambled to build a second bailout of Greece in the space of a year, but delayed throwing Athens a €12bn lifeline until next month, the IMF delivered its bluntest public criticism to date of the way EU leaders have handled the crisis.
"Policymakers are yet again facing uncomfortable dilemmas, raising uncertainty about the final outcome," the fund said in its annual assessment of the eurozone. "With deeply intertwined fiscal and financial problems, failure to undertake decisive action could rapidly spread the tensions to the core of the euro area and result in large global spillovers … a disorderly outcome cannot be excluded."
8. It pays to default - The Economist points out that Greece may be better of by defaulting, going from the past history of other defaulters that have actually grown more after defaulting than before.
While countries that default do find themselves locked out of markets for some time, any growth penalty from a default tends to be short-lived. Argentina saw its GDP decline by 10.9% in the year after its December 2001 default.
But its economy bounced back smartly in the years that followed. Uruguay, Russia and Indonesia also did quite well after their respective defaults.
9. China's 5 year plan - Here's the Brookings Institute with its analysis of China's latest 5 year plan, which seems focused on sustainable growth and reducing inflation, rather than going for growth for the sake of it. The analysis has a great collection of charts summarising China's progress and issues, including the one below on inflation.
This plan could herald a turning point in China's economic development as it represents a marked shift in emphasis from high growth to the quality, balance and sustainability of that growth.
Premier Wen Jiabao's report to the National People’s Congress, which should be read in conjunction with the other plan documents, strikes an interesting balance between self-congratulation for China's economic performance over the last five years, including the economy's resilience during the global financial crisis, and a sober evaluation of the immense development challenges that lie ahead.
The plan document is comprehensive and lists a large number of reform priorities. The emphasis on controlling prices through various policies clearly indicates that the major short-term priority for the government is to manage inflationary pressures.
10. Totally Stephen Colbert video - Colbert says "Sesame Street" brainwashes kids by teaching them the importance of saving and self-control.
Muppets feature, which is a good thing. Marshmellows are eaten for a good cause.
He makes some very deep satirical points about America's consumerist culture...I think...
40 Comments
Anyone with an interest in the UK economy, or indeed in any economies which are in danger of a debt trap should read this:
http://www.tullettprebon.com/announcements/strategyinsights/notes/2010/…
The folk who wrote it are no mugs.
Good piece....reading things like that and Im left wondering just how high the NZD can go.....not because we are that great but because so many other places are totally buggered......so for us it all hangs on the property market not imploding......which means OZ and China cant faulter.....fat chance......gee so many variables...
regards
Britain is now planning for a Greek default and won't contribute to second bailout.
http://www.telegraph.co.uk/news/politics/8588047/Treasury-plans-for-Greece-to-go-bust.html
In an emergency debate, senior MPs from all parties demanded that Britain stand aside from a new rescue package for Greece and push for the country to leave the euro.
Mark Hoban, a Treasury minister, admitted that “many scenarios were being considered”. He said it would “not be appropriate” to discuss the detail, but added he would be “guilty of not stepping up to the responsibilities of his office” if plans had not been made to cope with a default.
I find the IMF position on Greece to be akin to blackmail. This country broke the EU charter, has not and cannot repay it's debt and shows no sign of the moral fortitude required to do so in the future.
But others must pay their debts because the finance system built by the IMF and others is so poorly designed one failure would destroy us all.
It would be bad. But it is possible the short term pain, however bad would be better than the moral quicksand that no one need pay their debts anymore. The end of the IMF road is far from clear.
#3. Beijing by the beach.
Why not say it as it really is - Overt Lobbying by named lobbyists in their own interests. NZ seems to have a VERY blind spot when it comes to lobbying - and Interest.co.nz is not backward in coming forward in its passive acceptance and resultant silence.
I would like to see Hoppers use some of the $ squillions they've made out of Pauanui to go down to CHCH and apply their construction and development expertise there instead of seeking Government patronage and privilege to support there flagging Pauanui developments.
The squeeze is going on Aussie household finances. No wonder Gillard is in the dumps. And brace for more falls in house prices and some grumpy Australian bank head offices...
The financial position of Australian households has deteriorated to their worst level in at least a decade, a survey that measures savings shows.
The Melbourne Institute household financial conditions index fell to 25.2 points in June, its lowest level since the start of the survey in March 2001. The March 2011 survey recorded an index of 33.3 points.
Belt-tightening is becoming the norm for many as a series of price increases erode many families' budgets. Water, power and gas prices are going up in most states, while the summer's floods restricted supplies of many fruit and vegetables with lingering effects for many produce costs.
http://www.stuff.co.nz/business/world/5173163/Aussie-household-finances-dive
Last paragraph from that story: "Repaying debt and paying bills was the third most popular reason for saving"
...huh? Are they saving for future bills? That's pretty prudent.
Anyhew, Oz is facing some headwinds for sure, but don't forget the RBA has 225bp of cash rate cuts before they are equal to us.
Only in the US.... a ballot for a bailout:
As demand is expected to exceed the amount of funding available, qualifying homeowners will be chosen at random to complete the application process.
Bernard, Its we the people who should be upset with the banks. They created and lent into a property bubble with the consent of the government at the time and the RB. Its going to end with bankrupt banks and a lot of people who will find their lives shattered. All to transfer wealth into the banks coffers and to bloat the bank balances of a few at the top.
Watch Belgium it has high govenment debt and may be the next domino to go.
iconoclast - good idea. Better off still for a win-win situation we could just sell our Christchurch homes to the Chinese - if they're really that keen to invest in Western property there's a shitload down here, we could take the money and run, and there's even a couple of nice sandy/silty beaches to boot!
#3. Beijing by the beach.
New Zeland property interests have been interest in rich millionares want to come here on holiday for a long while now. The trouble is the rich millionare arn't as interested as we are. It is a long way to come, maybe to dump the wife and kids for school- but that will not work in the Coromadel, Northland. What we do not realise is the sense of distance that others have. For us a long haul flights are just something we do. For most of the world it is a once in a lifetime trip- almost. Or if they are really rich, they simply can't be bothered. It takles too long , we are so far away.
I taught a large number of adult Asian migrants English for a period of 20 years ( in a state school I might add ) and virtually all of them have left to either go back home or to Australia. They didn't like the weather or NZ taxes. They mostly had no clue how to look after property and they were bored out of their brains. To think we will be swamped with people keen to buy a beach property so they can await the next tsunami is in my opinion completely daft.
I agree. More an idea for Greece - it's the No. 1 holiday destination for the Chinese.
I love the Coromandel but the ideal of an NZ batch is just that - an ideal for NZers. On the world stage we're just too remote for ownership to be attractive to great numbers from offshore. That said though, I really don't see any harm in trying - if the Chinese want to come down and take the capital losses which we will continue to see in these types of locations - great. We get the employment in the meantime in terms of building the dwellings and they might even splash out for a locally built yacht.
I'd far rather they bought this land already in private ownership than our infrastructure currently in public ownership.
Part 2 of the Housing bubble must start to look at how the bubble has broughht massive inflation. The interesting thing is how little people in NZ seem to have noticed that massive inflation in their own country. They keep on looking at the increase in the value of there home and never the loss of value of the dollar in their pocket. The Reserve Bank and filled with people who are really really silly. They could not connect the dots. House prices increases in NZ were a factor mainly of a massive increase in the money supply chasing fewer valuable resources. The inflation they were measuring was the price of imported flat screen TVs. and wage suppression in lots of the local economy via competition from imports. Meanwhile the Aussie banks were flooding the place with money via debt on homes and farms. So we end up with a low inflation rate but actually very high inflation. The purchasing power of the NZ dollare has halved in the past few years- 2001- 2008 (actual dates give or take a year or two).
Part 2 (continued) .... from Andy's post at the top.
"Unsecured (credit) lending has already turned negative, and is likely to remain so unless consumers are sucked into using credit to pay for necessities (rather than for discretionary purchases) as real incomes decline. That this may well occur is implied by the past rate at which the cost of necessities (such as utility bills and fuel) has consistently out-paced earnings"If National alter immigration visa policy to assist a private company to pork coastal property prices...it will be time to vote Labour....yes I say vote Labour......Key has to be confronted in public with this matter and soon. Such a move would be as bad as Cullen and Clark blocking the AIA sale.
"Hopper Developments wants the government grant a special type of visa for Chinese property investors"
John Key.....your head will be on the bloody block if you do this.
If only there was some form of protection for the Foreshore and Seabed.
Wouldn't it be great if a political leader stepped up and declared that our beaches belong to all New Zealanders?
But, alas, no...developers and their politician friends are carving up New Zealand's beaches for exclusive developments, off-limits to the hoi polloi.
There is a difference between foreshore and seabed (which is covered always or regularly by the sea) and beaches. The bits that get wet we do have full access to.
The bits above high water are either private or public land. We only have public access to the public owned bit of this.
So what you are really advocating is that some politician nationalises the privately owned land adjoining the sea.
"Past experiences show that restructuring the debt of a country, whose creditworthiness is rated at CCC like Greece is currently, tend not to be voluntary and investors must sustain losses," Moritz Kraemer told Die Welt in an article due to be published on Tuesday"
http://globaleconomicanalysis.blogspot.com/2011/06/s-reconfirms-greek-debt-restructuring.html
Got that!......Greece is going to default but the pollies and bankers will lie like buggery and say it isn't a default...What do you think about buying any other piigs debt?....I wouldn't invest a zloty in any of them.....and this is how every other sod will react...so when next a piigs fiasco tries to refi some shite bonds...you know what will happen don't you......
And no doubt the Iwi will be expecting a cut, now that the F&SA is toast.
Oh, that's right...Cuzzie Key wasn't seriously planning to let brown people actually share any of the coastline, rivers and lake frontages.
Those are reserved exclusively for developers and their politician friends.
Bernard & Co,
Thought you guys might like this story from State side:
Imagine living here in the US, no money, no job and a few years from SS. You've got no medical insurance or anything....... so what do you do?
Rob a bank for ONE USD? hoping to get jail healthcare instead until you can claim SS?
Yes! and this guy did it, and won't be the last I suspect:
Courtesy of Huff Po:
http://www.huffingtonpost.com/2011/06/20/james-verone-robs-bank_n_88066…
Bernard , Bernard , Bernard ........ you under-estimate the Gummster ! ....... A Greek default ?.. Bring it on , I say .
........ the EU is an idiotic concept , run for the benefit of alotta meat-headed incompetent bureaucrats in Brussels .
A dis-united Europe will not bring back wars , not now , but it will retrieve fiscal responsibility of sovereign governments & their central bankers . And it will provide many more currencies to trade , as alternatives to Bernanke's lettuce-salad notes .
.... why , throughout the GFC , have bond-holders been such a protected species ? Why have governments ( including NZ ) gone deeply into debt , putting their tax-payers on the hook , to bail out bond-holders . ....... Sharemarket investors cop it tough , as they should . But bond holders are so precious ....... why are they deemed to be immune to market-place risk ?
Re#1 .... a bank doesn't need to be exposed to Greek debt to be at risk. It only needs to be exposed to a bank that is exposed (and so on and so on). This means that if any remotely large entity is in danger of default then the whole world (except North Korea) is threatened with systemic risk.
Still claims of impending armageddon are always overdone, and usually being used to get something for nothing (i.e "you better give me what I want or I'll blow this whole place to pieces!")
Btw. That Colbert was awesome. More please.
#3 Stories like this underscore the deep racism in New Zealand. It is repugnant for white New Zealand to accept that Maori have foreshore rights reflected in title ownership (unless they are willing to mount an expensive court process to secure it). National has ring-fenced the seabed to sell off drilling rights to foreign interests. The mess created by the current foreshore legislation has created a wonderful opportunity for our developers to do the same for New Zealand beachfront.
You confuse racisim with a serious dislike for govt immigration policy being warped and twisted to favour one group of potential migrants so that friends of the govt in NZ can benefit from a flood of wealth...namely the RE hoard and the coastal property developers and owners.
If Hoppers lobby pressure leads to a Key policy change in their favour then you can expect Labour to point to National govt precedent when Labour open the immigration gates to a swarm of low income poorly educated unskilled extended families.....
Apart from that objection to the Hopper policy change....there is the Canadian experience where one city has been mobbed by the wealthy and property prices have been driven into the utterly bloody stupid heights that exist today.
If Key and Co do not stamp on this Hopper demand and do so without delay..it will be seen as a clear signal that National consider it to be an OK thing to do post the election. That would see a flood of money into that one sub sector of NZ property and the distortions would bugger the market for young Kiwi families. Hopper or whatever they are called don't give a bloody shite about low income Kiwi families and would probably love to see many thousands more bugger off to Aus..to be replaced by wealthy Chinese wanting to escape a sick govt at home with their loot.
Got to love the chinese for finding ways to uh "profit"
http://www.stuff.co.nz/business/5174619/Fonterra-forced-to-supply-China…
regards
Yeah I saw that and thought....hmmm what are the rules, is it worth setting up a shell company to get some milk and on sell to some other processor???
also noted in teh article....
The Government is currently reviewing what dairy companies should be eligible to be supplied Fonterra regulated milk following increasing resistance from Fonterra
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