Links September 7th

Global Macro:

  • Sweden cuts rates to 1.25% Reuters chart ZIRP world it is
  • The ketchup problem with government deficits The Economist
  • and why not to expect a global economy recovery anytime soon The Economist

United States:

  • Bubba still has it and gives it up to the Democrats FT (login req’d)
  • ADP delivers 201k for August. Calculated Risk

Europe:

  • UK house prices going nowhere BBC good news in long run, bad in short run
  • French unemployment at 13 year high Reuters life is merde…let us have a cigarette and drink
  • Bank of England holds rates at super low 0.5% BBC  and maintains bond buying program Bloomberg 
  • Euro economy contracts in Q1 as deflation sets in but ECB leaves rates on hold Bloomberg
  • Draghi warms up the printing presses Reuters Unlimited bond buying, the Bundesbank not happy Mario
  • The rally monkey is here! FT Alphaville Stocks rally – S&P500 at 4-year high, Euro stocks up 3.3% everything is fine

Asia:

  • Australia is not ready for Asia The Age Sell them dirt!
  • Mongolia musters to avoid commodities curse AFR They’ve got dirt!

Local:

  • Now with AUD falling, online shopping to get slugged with GST AFR
  • The approaching income problem. AFR Geoff Carmody follows up on H&H’s recent piece.
  • Fortescue unravels. AFR Hope you have a Macro Investor sub.
  • Restricting foreign land purchases would see land values drop The Cupboard (locked) This is a bad thing? Cough..CAD…cough
  • Costly coal to get the chop. AFR

Other:

  • Ice cream company sues porn industry Bloomberg a sticky situation…
  • The new normal for investing – buy bonds for the price, stocks for the yield? ZH
  • Aust Army gets the Mercedes Benz G-Wagen Drive want!

Comments

  1. “I know”, said Mario, “Let’s keep the strong productive economies of Europe, strong, by preserving the Euro, and reduce the borrowing costs of the weaker member, so they can keep buying goods from the strong. You now; what got us into this mess in the first place” Lunacy. I think Gina would make a better ECB president. At least she believes that facing a problem, hard work and lower wages will actually do something.

    • The problem is, that had the Tories cut some other programne, reduced PS wages, or any other curtailment,in order to give the disabled more money, or cut less(?), they’d have been booed and pilloried. None of us are willing to give up anything even for giving more money to people who richly deserve it.

      This ‘disaabled’ system is badly rorted here in Australia so I’d guess it must have been atrocious in the UK.

      Just thinking out loud it relates to the problem I’ve tried to outline below. As a society we seem to have lost our moral compass. It’s regarded, basically, as clever to rort the welfare system. We don’t care that genuine people are hurt by the actions of those rorting the system. It’s all ‘social good’.

  2. “and why not to expect a global economy recovery anytime soon The Economist”

    The problem seems to me to be not the debt of itself. The debt is both the cause and the result (feed-back loop), a symptom maybe, of a misallocation and waste of the physical resources available. So the problem is to reallocate your resources to get production while controlling consumption.

    This is why all the proposals for debt jubilees, free credit via negative RAT rates etc won’t work. They make no fundamental change to the allocation of the physical resources. In fact they reinforce and extend the misallocation.

    In these terms, in the case of the current crisis, or crises, the problem looks intractable in most countries without REAL hardship. By that I mean not just a bit of inconvenience of not being able to have a new house, car or TV.
    The problem has been allowed to develop over multi-decade time frames. So it is not only our means of production that is mis-allocated. Our whole social, education and belief systems are distorted. Even further we now have a whole brain-washing process that goes on all day and night telling people that they are entitled to luxury no matter what they have top do to have it.
    We cannot tolerate anyone who even suggests that our sense of entitlement, our excesses, should be curtailed even by the tiniest smidgeon.

    We’re totally screwed!

    • Our whole social, education and belief systems are distorted. Even further we now have a whole brain-washing process that goes on all day and night telling people that they are entitled to luxury no matter what they have top do to have it.
      We cannot tolerate anyone who even suggests that our sense of entitlement, our excesses, should be curtailed even by the tiniest smidgeon.

      What luxuries, entitlements and excesses are you thinking of ?

  3. “French unemployment at 13 year high Reuters life is merde…let us have a cigarette and drink”

    Yep! France is next for the cliff in Europe. What the heck happens when it is apparent that France has to be ‘rescued’
    I can’t figure out why nobody seems to be able to see the obvious in regard to France.

  4. Mods please edit if I am breaking some rules!

    Restricting foreign land purchases would see land values drop The Cupboard (locked) This is a bad thing? Cough..CAD…cough

    “He hoped to see a better appreciation of the positive benefits that foreign investment could bring to rural Australia, such as on-farm skills training, agricultural innovation and investment in research and development”.

    Positive benefits?????
    Why do these clowns portray our farmers as some technologically backwards bunch of hick ignoramuses. Has he not been near a farm in the last 40 years? Does he know a single Aussie farmer?
    What the hell are the Chinese going to teach us about farming in arid and semi-arid Australia?

    That having been said…why is it so terrible to sell off farms but it is OK to sell all the mines and factories as fast as we can to fund consumption.

    • “What the hell are the Chinese going to teach us about farming in arid and semi-arid Australia?”

      NOT to farm cotton, the most water demanding crop.

      it should be illegal to cultivate cotton here.totally stupid.

      • dam…it’s a market. I’ve watched Govt jackboots tramp all over farmers. Police show up to visit farm families armed with a boot full of shotguns and truncheons.
        Set the pricing (cost) of things correctly and leave the ‘illegal’ notions.

      • I used to think it was stupid to grow cotton in western Queensland – a thirsty crop on the fringe of the desert. But then I spent some time in the State government providing economic reviews of water planning options.

        It turns out that thirsty annual crops are what you need. The basic pattern is dry for a few years, then soaking wet for one or two. You plant next to nothing in dry years, but in flood years you collect a lot of water. And since the water doesn’t store well (evaporation is 4m+ per year), you need to use it all in one or two seasons.

        This is Cubbie station’s recipe.

        You could grow a less thirsty crop, but there is no major incentive to conserve water in those wet years – since it is simply evaporating in storage anyway.

      • Water in most cotton growing areas is subject to volume licences. I.e. if you have a 15,000Mg allocation, you will use the same amount of water if you grow (say) 1500Ha of cotton or 3000Ha of corn or 5000Ha of wheat. The market price of each commodity sets the crop plan for the season… Introducing disincentives to grow cotton wont save water (although it may reduce the price of water licences in some areas!).

        • Exactly. The water allocations are there. Farmers choose to use the water available in the most profitable way. And if you banned cotton, they would use the water for something else, but be forced to make less money.

          And to The Patrician – a few/ten etc. Yep. It depends on your allocation. The owners of water allocations typically have a pretty good idea of the probabilities of getting water.

    • It is potentially good for the 100-200 tenants but bad for the 1 landlord so it must be dreadfully wrong.

        • But surely the landlord is the epitome of productivity, employing bucketloads of people as he holds property and leases it out. Oh wait…

  5. Mad Adam’s thoughts on the employment numbers…

    Many Australian economists instead suggest you should dismiss the strong broad-based economic growth that has been evident in the national accounts and other indicators for years now and, by pure coincidence the very low unemployment rate over that period.

    Instead you should accept that the economy is actually weak and their forecasts that it will deteriorate further – just because. They argue that “it’s hard to believe” strong growth and a low unemployment rate indicate a strong economy. The problem with that naturally is the incredibly poor forecasting track record of these economists. These forecasters have been wildly inaccurate for over 4 years.

    So there you go. Adam has been right for 4 years, and all you doomsayers have been wrong. Reminds me of the Nasdaq during the late 90s. The bulls were right for a very long time, and then they were very, very wrong, very quickly.

  6. Ketchup link:
    Deutsche looks at 16 countries and finds that only two – America and Australia – have total debt-to-GDP ratios that are lower than they were in 2007. At 345%, America’s ratio is down from the peak of 366%, but barely below 2007’s 348%.

    Any chance you guys can get the note from DB and let us know the figures for Australia?

    • Haven’t got teh numbers as I’m busy searching the fridge for wine…but…the main reasons Aus debt would be down is that we have managed to flog off a lot of assets.
      I’m having a bit of trouble reasoning why US debt would be lower. Does it take account of the Fed’s Balance Sheet?