Today's Top 10 is a guest post from Shamubeel Eaqub who is Principal Economist at NZIER, occasional blogger at TVHE, author and advisory board member for Aotearoa Development Cooperative and NZ Asian Leaders.
As always, we welcome your additions in the comments below or via email to david.chaston@interest.co.nz. And if you're interested in contributing the occasional Top 10 yourself, contact gareth.vaughan@interest.co.nz.
See all previous Top 10s here.
1. US rate hikes not that close?
Latest minutes of the Federal Reserve meeting a shows a committee:
divided as to exactly when to begin raising interest rates. Many officials said they feared a “premature” rise in rates could damp the apparently solid economic growth and labour market recovery.
Indecision on tighter monetary policy in the USA is a good thing. Uncertainty on global growth has increased and deflation (falling prices) or disinflation (low inflation) is likely to plague the global economy through 2015. As the de facto central banker to the world, a premature increase in US interest rates could risk derailing a fragile global economic recovery.
Read more on the FT (behind paywall): http://on.ft.com/1G5kmvn
2. Oiled up supply
Despite falling prices, oil production continues to increase. MarketWatch reports:
U.S. crude-oil supplies as of the week ended Feb. 13 saw a whopping 14.3 million-barrel jump from a week earlier, the trade group reported, according to news reports and various sources.
Analysts polled by Platts forecast an increase of just 3.1 million barrels for the week.
There is fierce debate on whether lower oil prices are a result of slowing demand versus increasing supply. The reality is likely to be both – with continued evidence of increasing supply, outstripping moderate demand growth.
Source: DataStream, NZIER
3. Germany cannot allow Grexit
Ambrose Evans-Pritchard’s thoughtful commentary on the risk of a Greek default in The Telegraph is well worth a read:
A Greek default - unavoidable in a Grexit scenario - would crystallize these losses…
Events would confirm what citizens already suspect, that they have been lied to by their political class about the true implications of ECB support for southern Europe, and they would strongly suspect that Greece is not the end of it.
"It has become an ideological battle over austerity. Conservative governments want to ram though their retrenchment policies whatever the cost," says Sven Giegold, a German Green MEP.
... my view is that Chancellor Merkel will ultimately overrule the debt collectors and will yield in order to save Germany's 60-year investment in the diplomatic order of post-war Europe.
Ultimately, Greece cannot endure more economic pain without breaking all the promises made by the newly elected government. An exit would mean ugly financial and political repercussions. Europe seems to stitch together a last minute deal at each crisis. Grexit is a crisis, but don’t bet on the political will to keep the European project alive. A day after much posturing, the ECB agreed a €3.3bn additional emergency funds.
4. Are we all turning Japanese?
John Mauldin, at Mauldin Economics, writes lengthy newsletters on many economic and financial issues. This newsletter on Japan was pretty interesting and the intro sets up the many successes and contradictions:
Japan is an interesting case study. It’s a highly developed nation with a very sophisticated culture, increasingly productive in dollar terms … and carrying an unbelievable 250% debt-to-GDP burden, but with a 10-year bond rate of 0.22%... Japan has an aging population and a savings rate that has plunged in recent years. The country has been saddled with either low inflation or deflation for most of the past 25 years. At the same time, it is an export power, with some of the world’s most competitive companies ...
Mauldin goes on to describe and explain the very different going ons in Japan. Particularly the way the bond market works. It is not a like for like comparison with the rest of the world. There may be some similarities with deflation and demographics, but Japan’s economy is very different.
5. Regulatory failure at genesis of GFC
A friend sent me this article and wrote:
To me this story suggests how Basel 1 may well have been one of the world’s largest regulatory failures in history (culminating in 08 and its aftermath). I’d been struggling with the big worldwide cause of the loosening up of cash for bricks and mortar. I must have read past this a million times.
The article in The Economist newspaper explains that:
…the traditional view that banks primarily lend to businesses is out of date. In 1900 only 30% of bank lending was to buy residential property; now that figure is around 60%...
Far from channelling money to companies, modern banks resemble “real-estate funds”, the authors claim, in which long-term mortgage lending is funded by short-term borrowing from the public.
This skew towards mortgages was embedded in regulation:
…changes to international regulations on bank capital since the 1970s have also increased the supply of mortgages. Under the Basel I rules, which were first adopted in 1988, mortgages were deemed to be half as risky as corporate loans; some national regulators adopted even more skewed risk-weightings.
The regulatory skew hurts entrepreneurship and the economy
…regulations that encourage mortgage lending, in short, have the unintended consequence of stemming the flow of capital to small firms, thereby holding back the economy as a whole.
New Zealand is no different. 52% of lending by banks is for mortgages, according to RBNZ data. We should not be surprised to see more and more credit chasing mortgages, rather than businesses, when the incentives are written in regulation.
6. Disinflation vs deflation
Consumer price inflation is at a historic low. The UK offers a convenient mirror to what we are experiencing in New Zealand. In a blog in The Guardian, Larry Elliott explains that low inflation is a good thing:
Inflation is the lowest it has been in modern times. The cost of food and fuel is bearing down on the cost of living. Those on the lowest incomes are the biggest beneficiaries as stocking the fridge and heating the home gets cheaper. What’s not to like? Nothing at all.
Deflation can be very bad news. Where disinflation tends to affect only some sectors of the economy, deflation is a fall in prices across the board. Where disinflation is temporary, deflation is permanent. Consumers and businesses put off spending decisions because they know prices will be lower in the future than they are today.
Low inflation, or disinflation is nice. But if it spill over to wage and other price setting behaviour, it could turn nasty:
one big proviso to this benign outlook [that disinflation is good]. That is that the fall in inflation does not lead to lower wage settlements. Were that to happen, deflation would become a real and present danger. Which is why the earnings data needs watching closely over the months to come.
7. Measuring progress in Canterbury
Matthew Brockett and Tracy Withers at Bloomberg look at where Canterbury is after the quakes. The cricket was focussed on the oval, but there is much to do:
When the first ball of the Cricket World Cup was bowled in Christchurch this month, television viewers around the world saw the New Zealand city’s pristine new oval framed by picturesque hills.
What they didn’t see was the dusty wasteland of empty blocks and construction sites in the city centre, still disfigured and largely deserted four years after an earthquake struck, killing 185 people. In the suburbs, property prices and rents have soared amid a housing shortage caused by the destruction of 12,000 homes, and road closures to repair the damaged sewerage system continue to create traffic chaos.
... 22,000 homeowners in the city still haven’t settled with the government or insurers over their quake-damaged properties, Earthquake Commission and Insurance Council data show.
The government’s rebuild plan shows most of the city’s new infrastructure should be finished by 2017.
My old hometown doesn’t look much like when I lived there. Hopefully the jobs lost outside of construction will eventually return.
8. Too much of a good thing
Wall Street has done better than Main Street. But it may not be a good thing. In a recent paper by the BIS, but more elegantly summarised by The Economist, explains that when too much talent goes to finance, other sectors miss out:
... the finance sector lures away high-skilled workers from other industries. The finance sector then lends the money to businesses, but tends to favour those firms that have collateral they can pledge against the loan. This usually means builders and property developers. Businessmen are lured into this sector rather than into riskier projects that require high R&D spending and have less collateral to pledge.
The article ends with a quote from Churchill: “I would rather see finance less proud and industry more content”.
New Zealand is no different. We need to rethink the role of finance and banking. Without industry that creates jobs, not just intermediation through finance, there cannot be sustainable economic progress.
9. Wi-fi and resisting change
Exorbitantly priced wi-fi in hotels is a pet peeve. It is an annoyance and the charges most hotels charge is completely out of step with how much it costs them. In some cases, the daily charge in a hotel can be $20 or $30 – on a work trip this can add up to how much my unlimited plan costs per month! The Economist writes:
A study by Resonance, a tourism consulting firm, found that travellers worth more than $1m say that free Wi-Fi is the amenity they value most when choosing a destination—more so even than privacy
A report by the European Travel Commission found that about a quarter of leisure travellers turn to social media to check out hotels before booking.
Hence, no matter how much revenue hotels are earning by squeezing guests, the opportunity cost of making access to the internet expensive is huge…If customers are not sharing thoughts about hotels during their stay because they do not want to pay for Wi-Fi, firms such as Hilton are chopping their marketing off at the knees. Even more shortsightedly, they are left hoping that those guests who do begrudgingly stump up $19 for 24 hours’ Wi-Fi access are still going to write something nice about their room while waiting in the bar for their equally expensive Coco Locos to arrive.
Well put.
10. Revitalising cities?
I am really looking forward to watching this documentary: TOWN with Nicholas Crane. A friend alerted me to it and is apparently on SKY History channel (I am too cheap to get SKY). I am particularly interested in the episode about Totnes and the BBC describes:
We live in one of the most urbanised countries on earth. By 2030 a staggering 92 per cent of us will be living the urban life. Congested cities sprawl across our map, but they are not the only way to live. Smaller than a city, more intimate, more surprising: this series celebrates the forgotten world of the town.
A Saxon river town in South Devon, Totnes is one of the UK's oldest towns. It has seen tough times through its long history, but adversity has taught it to innovate. Geographer and adventurer Nicholas Crane visits the home of one of the greatest social experiments of the 20th century, and uncovers the test bed for an ambitious new idea that aims to change our urban life forever.
I am interested to see what the experiment is. Provincial centres are hollowing out in New Zealand too, as I described in Growing Apart.
69 Comments
Climate change denier 'scientist' caught with hand in cooky jar:
http://www.nytimes.com/2015/02/22/us/ties-to-corporate-cash-for-climate…
http://www.theguardian.com/environment/2015/feb/21/climate-change-denie…
''A prominent academic and climate change denier’s work was funded almost entirely by the energy industry, receiving more than $1.2m from companies, lobby groups and oil billionaires over more than a decade, newly released documents show.''
The fossil fuel companies are following the play book of the tobacco industry from 30 years ago. Meanwhile the financial costs of trying to deal with the consequences of climate change will continue to soar as inaction predominates......
So on the one hand we have bribes and othe other,
"The real goal is to stoke the angry fires of talk radio, cable news, the blogosphere and the like, all of which feed off of contrarian story lines and seldom make the time to assess facts and weigh evidence. Civility, honesty, fact and perspective are irrelevant."
even threats.
no science, no math.
http://www.nature.com/nature/journal/v464/n7286/full/464141a.html
however it all isnt bad,
"Researchers should not despair. For all the public's confusion about climate science, polls consistently show that people trust scientists more than almost anybody else to give honest advice."
I think we are seeing the end of the end game for the deniers.
The sixth extinction is well documented, the decline in marine life is well documented, CO2 pollution is well documented, the deforestation of the Amazon is well documented. Are you suggesting these things are constructive to the biosphere or what is your point other then "I am smarter then you?" Do you have evidence to say these trends are reversing? Don't be coy cowboy.
Overfishing sure, deforestation maybe, global warming no way. The models haven't been accurate, predictions aren't coming to fruition, the data is cooked. If one scientist is pillared for taking oil company money, what of the billions in Gov money feeding the other side? Agenda's all-round and a gross perversion of science, typical when politics and money are involved. It’s human nature to take everything easy the planet has to offer us and when we run out, we will surely find something else. It has to run its natural course..
Well you could do a bit of research and find out if CO2 does or does not cause a greenhouse effect. Or you could just call all the Chemistry Phd's a bunch of liars and con-men, because they have been saying it for years. You also have to call the paleoecologists a bunch of money hungry scumbags, for pointing out what the earth looked like the last time CO2 levels were this high. You have to descredit years of CO2 atmospheric and oceanic measurments, and the chemical equation of burning FF. You have to find another reason for glaciers melting, arctic sea ice loss and global temperature rise. Basically you have to discredit chemistry, paleology and observed data from all over the globe. It's all one big conspiracy (nobody can know about) but you figured it all out. Well done.
You also seem to doubt Amazon deforestation, just another conspiracy eh?
Where is the warming, warmer? You can have all the theory you like but until you prove them, they are just that (hence the reason for temperature record ‘adjustment’). The Earth has been cooler and warmer without trace co2 being the driver. The science is driven by money and the politics has an agenda. None of either will solve the perceived problem and only serve to create more bureaucracy and inefficiency. You can do your part though, make a stand.. (btw, the same rational would include NZ not trying to be a hero).
I don't "trust" either side of this, prefering to evaluate the published message and motives of any for myself before forming my own opinion. The screeching senationalists predicting global destruction and calamity are not the angels here.
The political capital of vote gaining leverage from their outwardly alturistic presentations is securing their income.
So choose your poison, do you want science from commerce or science from politicans.
The truth lies between, bring your own magnifying glass to view the niche in this Earths timeline where we humans have made our mark. Things will change and we will adapt, non humans will suffer as they do not.
The test is how we respond, continued foolish disregard in pursuit of personal or species gain or thoughtful management in the best interests of all creatures.
Thats the problem with the portrayal of this issue. Its been put across via media elements as some kind of equal debate or point to be argued or used by politicians. The reality is that 97% of the scientific reports on the subject support the position that climate change is is caused by humans.
The remaining 3% seem to be people like the above. Its certianly not science from politicians. Its science from the overwhelming majority of scientists in the field.
Something i still have to check out.
When i was on dial up i could plug into anyones phone line and use the internet without costing others money.
I now need to find out - If i take my modem (or a spare) with me and plug it into someone elses phone line are there other charges or does it just use my account.
Disinflation vs deflation. The distinction seems to be whether wages are reduced because of lower costs. For a range of reasons I personally expect a generational divide, similar to Japan, where new entrants in to the workforce enter at lower wages certainly than the generation that has gone before, and more importantly, the wages of those new entrants are likely to plateau much earlier in their careers.
Eventually the macro effects of those lower real wages impact on consumption, and on ability to pay and to service debt.
As with Japan, eventually that feeds into asset prices and many other things.
Be careful what you wish for in terms of short term deflation, therefore. The RBNZ would be better to err on the side of getting inflation back into positive much sooner than later. Preferably with moves that give a lower exchange rate to boost trading industries.
Or is it just no growth. Inflation is tied to growth, stop the growth and we get deflation. Inflation is growth in the money supply.
We are getting growth in vineyards, almonds, apples, dairy,house prices, farm prices and on and on, as cheap money chases yield. The overproduction will drive deflation and cause many job losses and much missery as production comes in line with demand.
Low interest rates will destroy capital.
http://www.businessspectator.com.au/news/2015/2/23/china/chinas-manufac…
The Year of the Goat isn’t working out well for Pi Hui’s cows.
http://www.businessspectator.com.au/news/2015/2/23/china/chinese-dump-m…but the growth in money is shrinking fast, the days of %15+ growth under the Clark/Cullen administration are fading in the rear view mirror.
http://www.johnpemberton.co.nz/html/money_supply.html#M3toDC
Stephen L - Workers will allways loose out.
As you say with deflation you start with lower wages but with inflation you are allways struggling to keep up with rising costs - both ways you loose.
I am in favour of deflation and much tighter bank capital requirement controlls.
You should very carefully study bitcoin. When you have you will see why it increases in value. Deflation makes money similar to bitcoin in that it increases in value.
When money increases in value then there is no need to charge interest rates because when a debt is repaid it is worth more.
The biggest loosers in deflation are the banks.
OnwardsUpwards - when you have lots of businesses all competing with each other that keeps prices down. When we have the likes of the technology sector dramatically improving products while reducing prices. Thats the kind of economy i like. Look at the overproduction of oil and the falling oil prices. Pity you do not like these falling prices. Perhaps everytime you buy something you should give the business a donation.
I take it you prefare inflation which helps the rich and makes things worse for the poor. And as we can all see this type of wealth creation creates nothing.
The real problem of course is the money supply and the massive debt. Thats what we should all worry about and control.
"I take it you prefare inflation which helps the rich and makes things worse for the poor. And as we can all see this type of wealth creation creates nothing"
I was going to explain why deflation is, paradoxically, disastrous for the poor. "Poor" defined as you and me - the 99%. However I sense that the "Austrian" in you is very strong. So instead here is a good video I found for you.
https://www.youtube.com/watch?v=LH7cFQrgxpk
Please watch it. Please.
"The real problem of course is the money supply and the massive debt. Thats what we should all worry about and control."
Debt is NOT the problem. The money supply is NOT the problem. Low wages are the problem.
economies of scale in NZ? Plus I doubt such economies are that tangible at times, past a certian point.
For an economy to work there also needs to be a worthwhile surplus/profit for a business, I think that is in the order of 15~20%NET.
Innovation works well in some areas, but eg making a coffee takes a certian amount of materials, energy and human input, plus overheads, as does say producing say milk. Now writing software can be done anywhere and via a broadband link so that shoud save a lot of $s.
OnwardsUpwards - I have watched the video.
Point 1 - We put off spending - see my other comments on this page
Point 2 - He is suggesting that we should not pay any interest on borrowed money. As he says 2% deflation at 0% interest means it costs 2% - So what if you pay 2% on a loan?
Point 3 - The debt burden - yes, initially those with high debt levels will suffer but that is no excuse to keep inflation going
While dis-inflation isnt bad in small doses, deflation as is defined is across the board and means serious loss of jobs time for workers. Really its better to have some inflation and a job at least you can still buy things, with no job you can buy zilch.
Oil and its falling price shows a classic mis-understanding on your part and a "dangerous" one. To bring new oil fields on line now costs around $85 a barrel and generally takes 5~8 years. Ergo the lack of investment for the next 2 years will a) see us reach totals peak and decline steeply before 2017 and because no one is investing today it will be quite steep, deflationary type steep, becareful what you wish for.
The debt you mention remains, yet there is less ability to service it as wages drop or jobs are lost. The rich by and large only hold assets/wealth because enough voters thinks its to their own advantage. When lots of voters are losing everthing, so will the rich. As Kunstler says, hanging from a lampost or taken for a drag behind their limo, ai really dont think we want to go there.
Steven - you are not going to stop spending money just because of deflation.
Perhaps we can put spending into 3 catagories
1) necessaties like food - cannot stop spending
2) essentials like washing mashines, cars, fridges and so on. If we put off buying these things we will make life more difficult for ourselves, so that is a cost to consider.
3) the heaps of garbage that people buy and end on the rubbish in days or weeks = we can do without these things.
If we cut down our spending we can also cut down on our work hours, say a 30 hour week. Its all proportional.
"The biggest loosers in deflation are the banks"
and how does this work?
have not NZ banks been clocking high or record profits in NZ?
Banks are middle men, when they go bankrupt due to loss of asset value and are then insolvent it is the small ppl who are invested in them via shares, deposits and pensions are the ones who pay, you and I.
Sure money increases in value, in a deflationary envuronment however no employer will borrow $s if they cant make a reasonable profit as no one has the money (or waits) to purchase. Those same employers then lay workers off and even close which means loss of availability as well.
bitcoin increases in value because of speculation, not because of real value. So we seem to have quite a number of libertarians gambling it will be worth more every day, funny that they expect a profit for no work/production of a good. think tulips.
I agree on tighter bank regulation. The evidence is overwelming for me that after the Great Depreession controls were put in to prevent a re-occurance and Bushie etc did away with those and now we are in one huge mess, surprise, surprise.
I guess we cant learn.
#7 is an Interesting read, if only for the completely typical heading, repeating the 'quake-ravaged' meme which is only 5% true (see my figures, below).
In the to-be-written economic analysis of the Canterbury quake series, there will be wonderful case studies for Public Policy, Management, and Engineering students, for decades to come.
Some streams/anecdotes to tease y'all with:
- Most business that survived carried on. There were no overall shortages of fuel, gas, food, power or FMCG beyond the first week: the old adage of 'keep a week's canned food' was in practice fulfilled by barbecuing the contents of powered-off freezers. There were certainly localised pinch-points. But everything, basically, just carried right on.
- CBD businesses were decimated: not because of the quakes, but the lockout that followed. A few wise ones signed up as demolition workers, got their stock and records, then resigned. Lawyers hired crane firms to swing them into their maroooned high-rise offices and retrieve case and client files. But small busnesses either relocated and bought new plant and inventory if they could, or simply folded. A good research project here.
- A Baron Haussmann frenzy then ensued: the infamous 'Share-an-Idea' kept the masses happy typing ludicrously inept ideas about Grand Green New City, while the Planning Mandarins in CERA and CCDU hatched the equally shambolic idea of Precincts (entire city blocks) on the notion that this would encourage design elegance, uniformity, and high standards. What they got, of course, was acres of car-park, a four-year wait with commercial construction inflation rollicking along at 12-15% per annum, endless '100-day' promises, no commercial takers and hence complete stasis on the ground. The only tenants with deep enough pockets for all of this Poo-bah shtick are the Gubmint agencies, funded by, quelle surprise, you, me and Swiss Re. Hence the Justice and Health precincts will survive. The rest haven't.
- My own estimation of city-wide damage (my architectural eye-o-meter) is 85% just fine albeit with some ripples in the Gib, 5% totalled (say, 8,000 of the 160,000 rateable properties city-wide), and 10% somewhere in between. This accords neatly with the business survival, which was instant (if possible at all) and which has been inestimably aided by the vast stupidity of the CCC relative to its country cousins. Selwyn DC and IZone have, simply put, eaten CCC's lunch, as a glance at Rolleston will confirm.
- CERA has been rolled into DPMC, which assures it of micro-management and equally of doing nothing startling. It has acted well over red-zone residential clearance, appallingly over CBD lock-down, and in the true spirit of unfettered bureaucracy grew to around 500 warm if doubtfully useful bodies or so at its peak. Not counting consultants, PR, IT and other outsourced stuff. My overall impression is that it was not bad at tactics, clueless about strategy. But then politics (DPMC, remember) largely dictates all this.
- CCC is fixated on CBD-corpse-CPR. All its traffic, planning and other energy has been poured into this (Bloomberg's words) quake-ravaged wasteland. But the joke (and it's a bad one) is that no-one cares about the Old CBD: they have a New CBD distributed across points west (West of Avon to Bealey Ave, Riccarton, Addington, Middleton, Hornby, Airport, Rolleston, West Melton). There's nothing to go there for except Ballantynes (an institution like K&S in Wellington, S&C in Awkland), it's painful in terms if memories, and the roads are dreadful, slow and have lost all their landmarks. Yet CCC keeps right on pumping the chest. In doing so, it has neglected the suburbs, their facilities, their population, and has alienated itself from them as a direct result. Good luck with extracting swingeing rates increases from them in future....Sir Bob the Jones wrote an early article stating baldly that the CBD could not be rebuilt. He was right.
As I said, great case-study material lies here. People are fine or at least making do. Their instiitutions, not so fine....it takes a generation or two to unremember all those mis-steps.
And, just in case yez feel in need of an alternative POV, try this: it dovetails neatly, methinks.
92% of people living in cities by 2030? Forget about the small towns, what are all those people in the cities going to do? Wash each others cars and cut each others hair? The small towns will be humming along producing all the raw materials that cities turn into landfill. Living in quality affordable housing, loving the cheap interest rates caused by overpriced and overcrowded housing in the cities. If kiwis would rather live in cities, then work in rural NZ there are plenty of filipinos eager to come over here do the work and enjoy the good life. The only real issue is the corporatisation of land, which actually kills rural diversity and innovation.
For the past 3 or 4 years, to my knowlodge, people commenting on this site have been saying that interest rates and growth will remain low - and they have been proven right.
It is enonamists and the like who have been refusing to believe what was happening. Allthough i think some of them were deliberately trying to talk up the economy (lying to us).
#6
Where disinflation is temporary, deflation is permanent. Consumers and businesses put off spending decisions because they know prices will be lower in the future than they are today.
People have been saying this for years but it has not stopped people buying TV's and computers. I remember back in the 1980's an Apple 11E cost $5,000 and could barely print a short letter. And look at the price of TV's.
The most likely reason for putting off buying a computer is when you know better technology is just around the corner (you wait for the new one to come out).
Like waiting to buy a Beta or VHS recorder - seeing which way the market will go. Or buying a smart TV - waiting for them to sort out their different operating systems and waiting for them to stop spying on you. And so on.
If in an extreme case we had 5% Deflation, and you wanted to buy something for $1,000 would anyone actually wait one year so they could buy it for $950? LOL
More realisticaly I think the only reason Consumers put off a purchase is because they can't afford it. I don't think they go to the supermarket and not buy butter because the price of WMP is falling, or not put petrol in the car because the price of WTI is falling. Or a business, does the builder say he isn't buying timber because the price of lumber is falling?
Is this the kind of thing experts think happen in the real world? Priceless really :)
Canterbury should be called "Canterbury State" because the government controlls it.
ECAN - government controlled.
Christchurch rebuild - government controlled
And while at it
Look at this government
Super city Aucklsand
Super city Wellington
A super ministry run by S Joyce
PPP's
Fibre broadband
This goverment has its finger in every pie.
Talk about China - we have the same bureaucracy building up here. - Thanks JK
#5 Are business loans less risky then mortgages? If so then interest rates should definitly reflect that, I know I was paying an extra 1.5% over floating mortgage rates, even though I had 50% equity and solid cashflow. The banker chuckled when I asked for a rate closer to home loan rates.
Whats a business loan and whats a mortgage. Any stats are likely to be unreliable. When I used to do that for the business the bank wanted to secure it as a mortgage against my house. The boot was on their foot then and that's exactly how it was done.
In recent years whenever I have done some financing, loans have been against property. And the bank would have not a clue where the funds ended up. So much for stats. And no business pricing on the rate either.
/then/than/s
yes they are. The banker would have a hard time selling your business at scrap value or repackaging it into a property bundle for reselling. Yet it would be very easy to recover outstanding debt if it were a housing loan.
That you are making solid money in your business also means the banker can risk a higher rate AT you, because you are making money therefore he can probably (a risk) get more cash from your business, and that you should if your business is working well be able to afford the higher rate. he has the power, you have the money - in those circumstances only one thing occurs....
Why are so many people ignoring the social costs.
Arguing that with deflation we will stop buying.
Are you going to disrupt your lifestyle because prices are falling?
If you believe this to be true the give me some specifices like
People will put off buying xxxx that because prices are falling
And people will put off buying This xxxx because prices are falling
So we can see if you are right or wrong
When I see something cheap I buy moar. Especially if it is something I can stockpile, and know I am going to use. I have no problem with buying a years worth of stuff if it is cheap and I can store it. Even from the supermarket I'll stock up on canned tomatoes and frozen foods during summer when its cheap. So you could say I put off buying fresh tomatoes in winter because I know they will be 70% cheaper (or more) in summer.
Hands up all those people who are going to deprive themseves in order to save $5, or maybe $10, or even $100 on a large item
People are allways prepared to pay extra.
Look at when you buy on hire purchase all the extra costs - booking fee, insurance and so on.
But when it comes to paying a bit extra so you can "enjoy it now" you tell us they wont do it.
I say Bull***t
me if it makes sense, I wait for a sale.
I also monitor importing, so the NZ is too low against the USD so I'll wait until it improves.
So no ppl are not always prepared to pay extra. On top of that some ppl are unable to pay extra.
I will tell you I will not do it now to "enjoy it, there you go, simple.
Steven
One day the economists tell us "Deflation is bad, we stop spending and we have unemployment"
In other words we are tight ar**s and carefull with our money
The next day they tell us "Debt for consumption is out of control"
In other words people cant wait and are prepared to get into debt "To have it now At all costs"
Wow - what a contradition
If you still believe the deflation propaganda after everythin i have said on this page then good luck to you.
OK you may say but the interest charges you pay are recovered when you buy it today before inflation pushes up the price. It still comes down to the fact "I cant wait. I have to have it now" and that attitude will prevail in either inflation or deflation.
No its not a contradiction its the two sides to the same coin.
Deflation, not one day but for at least 80 years (since Keynes and the Great Depression at least) economists have been telling us deflation is bad.
Yes, debt for consumption is probably out of control, see roots of the Great Depression for that one.
a) These are not contradictions but observations of actual events.
b) You take the two points to extremes to draw your conclusion its a contradiction when it is not.
So, ppl have grown/expanded the economy "a boom" using debt which is a call on future spending. So the economy has expanded greater than it should have or would have without debt. When the debt has to be repaid then that extractive force causes a recession/depression as spending declines.
You have not said a thing that makes any sense, or indeed much of anything, just you think deflation is good. At least thats what I think you are saying, Im not even 100% sure on that.
"good luck" frankly were are screwed but anyway try this,
https://www.youtube.com/watch?v=Qi7rSNdHDUY
hey Mike,
I think deflation can be both good and bad. Good when its the result of improvements in the efficiency of production methods and distribution. Bad when its due to the lack of demand.. I think today's deflation is due to a bit of both. Consumable goods have massively fallen in scale due to the economies of scale achieved by the incredible industrial capacity of China and the containerization of world shipping which has allowed them to export their goods to the rest of the world.
Not so good is when the Fed puts the breaks on a speculative bubble it positively encouraged the private banks to facilitate.
Congress to hold hearings on NASA climate change data adjustments.....opps!
"Climate change scientists who adhere to the theory of global warming have been strident in their insistence that the Earth is warming and that humans are causing it is “settled science.” However, after revelations have come to light that NASA had been “adjusting” the raw data from ground-based temperature stations to suggest more warming than the data indicate, the veracity of global warming has been placed in doubt."
"The issue of global warming, or as some prefer to call it, climate change has generated more political heat that scientific light in recent years. Adherents of the theory have often behaved more as political partisans, labeling skeptics of global warming “deniers” in an attempt to associate them with Holocaust and moon landing deniers."
http://www.examiner.com/article/congress-to-hold-hearings-on-nasa-clima…
All I'm saying is that there seems to be some confusion over the science and it could pay to keep an open mind before we spend lots of taxpayer money on trying to fix the wrong thing. Is that not reasonable and responsible?
So the hard core GOP deniers in congress hold yet more committee meetings, denying teh science, oh wooppee dee doo doo.
You are saying there is some confusion, when catually there is not. This is long proven with great enough certianty to act by un-confused people. Now there may well be confused people, obviously they need a higher dose of their meds.
No it isnt reasonable or responsible. Its quite simple as a business process you can take the available information even if in-complete (which it isnt on climate change) and do a risk/impact analysis and determine a course of best action.
"labeling skeptics of global warming “deniers” in an attempt to associate them with Holocaust and moon landing deniers.""
Actually now you mention it there is indeed a considerable degree of the tin foil hat aspect brigade, a total denial of science, data and evidence what else can you conclude.
Oh and the earth is indeed warming.
Nasa adjusting data, well this one keeps coming out and keeps being proven as un-substantiated. On top of that there are a handful of organisations all doing the same thing by different methods all arriving at the same conclusion, we are warming and it is CO2 and that is being released by man.
Smothing data is pretty reasonable and accepted in all fields that use a large amount of data, specifically when trying to filter out the noise from the signal. Moving averages are a pretty common example of smothing data. Anyone with an education in statistics could explain to the GOP, instead we have another dog and pony show.
At least now that we have had a new record high year people can give the tired old meme of 'cooling for the last 10 years' or whatever it was.
"It's hard to get a man to understand something when his lifestyle depends on his not understanding it"
bear in mind you are dealing with,
a) those who will deny to their last breadth.
b) most lack a reasonable level of education.
These ppl are however outliers, fanatics if you will and you cannot reason with them. What you can do however is place a public counter argument to their mis-information and let the innocent reader evaluate the points by themselves.
All of my ten tallest years have occured since 1998 but I am not in a panic.
Since 1998 we have 25% of the post industrial CO2 emitted but the rate of warming since then is a 1/4 of what it was 1910-1940 and 1/5 iof what was predicted by the chicken little IPCC.
"Simulations conducted in advance of the 2013–14 assessment from the Intergovernmental Panel on Climate Change (IPCC) suggest that the warming should have continued at an average rate of 0.21 °C per decade from 1998 to 2012. Instead, the observed warming during that period was just 0.04 °C per decade, as measured by the UK Met Office in Exeter and the Climatic Research Unit at the University of East Anglia in Norwich, UK."
"Do you agree that according to the global temperature record used by the IPCC, the rates of global warming from 1860-1880, 1910-1940 and 1975-1998 were identical?
...As for the two periods 1910-40 and 1975-1998 the warming rates are not statistically significantly different.
I have also included the trend over the period 1975 to 2009, which has a very similar trend to the period 1975-1998.
So, in answer to the question, the warming rates for all 4 periods are similar and not statistically significantly different from each other."
If you are genuinely interested in climate science, there is a good article today on the impact of the Pacific Decadal Oscillation on the rate of global warming. http://www.wunderground.com/blog/JeffMasters/comment.html?entrynum=2923
Let the cherry picking continue. So now we have moved from "its cooling" despite that 1998 was an anomaly which any reasonable person would see as an explainable outlier and ignore, to its flat.
You do not take trends for a decade, you take the trend for a long enough period to look for a trend, that is pretty basic math.
However, if you want to continue cherry picking data so can I,
"The warming trend of the 15-year period up to 2006 was almost twice as fast as expected (0.3°C per decade)"
http://climatecrocks.com/2015/02/05/what-the-climate-models-have-taught…
However this isnt what a sensible and educated person/scientist would do, you look longer.
Nice try Steven. Who are you quoting from with "its cooling"? You state 1998 is an anomaly then include that year in your 15 year quote from your climate doom site. Why quote from an alarmist site and ignore the more recent 14 year UK Met Service data? I'll go with the UK Met service and the head of theUEA climate research unit over climatecrocks quotes any day.
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