Hard News: Death Spiral!
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WH,
I/S, I'd have to accept that the yen and $US are falling, but wouldn't that be a consequence of the relative yields from those currencies?
I'd be happy to be corrected on this point, but wouldn't the $NZ be rising less against those currencies if it was not for the interest rate differential? Surely the price of the $NZ reflects both the buying pressure on the Kiwi and the selling pressure on the other two?
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I/S, sure the USD is doing poorly - but you can't ignore that the NZD has appreciated against all currencies. Most would agree it was way undervalued at US 40c.
If you take the rough appreciation of NZD vs EUR or GBP (using the RBNZ figures or your graph) - let's pick say 20-23% - and remove that from all of today's rates then you have NZD at around US 60 - 63c. That's a lot more realistic than where it is now.
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Judge Andrew Becroft told a parliamentary committee yesterday that NZ First MP Ron Mark's Young Offenders (Serious Crimes) Bill would abolish the Youth Court and end family group conferences.
Yeah, but didn't the Police Association also tell us prior to the Anti-Smacking Bill that their hands would be tied and by law they would have investigate every reported case of smacking? But once legislation was passed it wasn't all so grim afterall was it?
I'm all in favour of those at the coalface (in this case the judiciary who will have to action this proposed law change) having an input but surely it is up to the Govt to set the law? That said, I'm also not in favour of bad law ...
</having a bob each way> -
James: You've got it backwards. The ~20% appreciation against the AU / Euro / Pound is the baseline due to high interest rates. But that's only a quarter of the increase in the US$ and Yen; the other three quarters is due to the depreciation of those currencies and completely beyond our control.
Like I said, farmers better get used to it. Because no matter what the Reserve Bank does, they're going to have to deal with a high exchange rate due to a weak US$ and Yen.
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You've got it backwards. The ~20% appreciation against the AU / Euro / Pound is the baseline due to high interest rates. But that's only a quarter of the increase in the US$ and Yen;
And that's exactly my point. Remove the "Interest rate" inflation of the NZD and you have it at ~60c US. Correct. Probably where it should be.
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Bad choice of words. Better 'appreciation' where I used 'inflation'.
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Here's a question: where's the American anguish about their plummeting exchange rate?
The Americans are amazingly insular in their view of the world. As far as they are concerned they're a Global Superpower and world's economy revolves around their dollar. And it's unlikely they'll wake up to reality any time soon ie not until after the 2008 election. There has been some small disquiet about the fall in the US currency within US business media, but they are more focussed on how great the US stock market is doing (even tho' it isn't really). Like 'general' news, business reporting has been dumbed down. It's easier to report 'good news' (with a few villians thrown in - ie Conrad Black, & Enron) than provide real information.
They most they'll report on at the moment is speculation the US housing/mortgage market is/isn't collapsing. To go into the bigger picture of the US economy and it's currency would be considered 'unpatriotic'. Of course, once Bush is out of office all bets are off and the bad news will be reported ~ and no doubt the Democrats will be blamed! -
In a massively importing economy, shouldn't households be feeling the squeeze? Yet I can't recall reading any commentary of that nature.
have you heard of the sub-prime mortgage fiasco?
and keep an eye on the US retail sales stats, especially the "excluding gasoline" figure.
oh, and personal bankruptcies, credit card payments in arrears, etc. -
"Where is the statistical evidence to suggest offending by 10 to 13-year-olds is spiralling out of control?"
I didn't think that the bill was designed to counter a (non-existent?) increase in crime rate by that demographic. My impression was that it was about more severely punishing the offenders we are already dealing with.
It all seemed to hark back to the whole "Kids get away with murder and get nothing more than a slap on the wrist" argument that gets trotted out whenever a Bailey Kuariki crops up on the judicial radar.
Judge Becroft's argument makes the assumption that the Youth Justice System is working OK currently, and why would you want to chuck it out? Ron Mark is coming at it from another direction i.e. It is broken and we need to "get tough". (Death Penalty, anyone?)
As always, the truth may be somewhere in between (but I'm not clever enough to know where that truth is. Sorry)
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There's one thing that I've never understood about inflation: whenever a Nat is asked what they'll do about interest rates, exchange rates and inflation, they say that they'll cut (sorry, increase more slowly) government spending. But how come a dollar spent by government is "inflationary", while a dollar spent by an individual or company isn't?
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so I/S's thesis is that only 20% of the appreciation of the nz$ is due to high interest rates? and the rest of the appreciation is due to...falling US$ and JPY, which we have no control over.
no, sorry, can't accept that. nz has one of the highest current account deficits in the developed world as a percentage of GDP. kind of on par with the US. Japan has one of the highest current account surpluses. the yen is being held artificially low against other currencies, especially the US$ and NZ$, for political reasons and by the yen carry trade. when the yen carry trade reverses, due to some sort of financial crisis, the impact on the NZ dollar will be massive. as in, loud sucking sound as all the hot money escapes.
oh, and another point about what Russell asked: the yen and yuan are effectively pegged tot he US dollar, so asian import prices are not rising in the US. Only euro-based prices.
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Here's a question: where's the American anguish about their plummeting exchange rate?
In a massively importing economy, shouldn't households be feeling the squeeze? Yet I can't recall reading any commentary of that nature.
With the source of many of their imports rapidly shifting to China which has a peg (albeit slowly crawling) against the US Dollar, they are resonably insulated, the thing that must continue to hurt is rising oil prices and when ever they step out side the US,
I am waiting for the howls to come from those that go across the border to Canada, in the past shops would accept US currency at reduced rate or if they were in a hurry at Par.
I am expecting to hear of Shops asking for more $US than their Canadian listed prices soon, and asking for Loonies rather than greenbacks,
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Judge Becroft's argument makes the assumption that the Youth Justice System is working OK currently, and why would you want to chuck it out? Ron Mark is coming at it from another direction i.e. It is broken and we need to "get tough". (Death Penalty, anyone?)
As always, the truth may be somewhere in between (but I'm not clever enough to know where that truth is. Sorry)
IMO the truth is certainly somewhere in between, but much closer to Becroft's position than to Mark's. The basics of the system (rehabilitation instead of punitive treatment for most offenders) is spot on and in accordance with the overwhelming majority of research into what works to reduce rates of recidivism in young offenders. The changes that need to be made are more tweaking of the current provisions in the CYFP Act (e.g. lengthening of youth justice orders, ability to sentence to longer treatment programmes etc.) Mark's approach, however, throws the baby out with the bathwater and would see us go down the path of the US. And believe me, we don't want hundreds of kids being sent to juvey where they learn how to be better criminals.
A little disclaimer: I work in the youth mental health / justice sector as a policy consultant (although only for a week and a half longer :) ) and wrote a submission against the Bill last year on behalf of my (then) organisation. Feel free to have a read of it here if you're interested. It covers the major bases (physical and psychological maturation, competency, punitive vs rehabilitation etc.) quite well if I do say so myself! :)
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I'm all in favour of those at the coalface (in this case the judiciary who will have to action this proposed law change) having an input but surely it is up to the Govt to set the law?
It wasn't a government bill. It was a NZ First bill supported by the government as far as select committee as part of the coalition agreement.
I guess you have to feel some sympathy for them drafting a bill like this without the expert advice that the government gets (I assume) but for Becroft and Kiro to slate it in the terms they did, it must be quite a shambles.
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The real elephant in the room is neither the Jap or US currencies. It is the Chinese. If that is ever floated everything we have ever though we knew about monetarism is going out the window in minutes.
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From this time last year - and now more relevant than ever:
http://www.newleftreview.org/?page=article&view=2625 -
just to clarify the link posted by Joe above:
Discussions of the sustainability of the US current-account deficit—trending upward from $800bn—rarely plumb the long-term motives of its creditors. Taggart Murphy analyses the historical roots of Tokyo’s post-1868 geofinancial support for the ruling superpower, London or Washington, and the implications of China’s rise for Japanese strategy."
i started reading this very long article last year but unfortunately got sidetracked and never got back to it. well worth a read, though.
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I guess you have to feel some sympathy for them drafting a bill like this without the expert advice that the government gets (I assume) but for Becroft and Kiro to slate it in the terms they did, it must be quite a shambles.
In a word: balls. I'm not sure what assistance is available for private Members Bills but any number of agenies out there (including Kiro's office) would have been more than happy to help.
The problem, as Judge Becroft noted, lies in the definition of "serious offence" - anything punishable by "not less than 3 months" imprisonment or a fine of "not less than $2000". So it isn't a matter of what's included under this definition is a question of what's not included . The answer it seems is very little - stone throwing any one? Breach of a liquor ban (max $20,000 fine) would be included for example, as would just about every other common (and not so common) criminal offence. The effect of this, under the Bill as drafted, would be that the Youth Court's jurisdiction would be removed and the charges heard in the District Court along with adult offenders. No closed court with the public excluded, no warm fuzzies, just an adult approach to adult crimes - according to Ron Mark.
The Bill also allows for young people to be sentenced to imprisonment (currently restricted to those 17 or over except for the most serious crimes). Whether a Judge would want to sentence young Johnnie to hard time is obviously another question altogether.
Here's the real kicker. The Bill also lowers the age of criminal responsibility for "serious crimes" (with the same definition as before) to 10 years old. So this means that, were the Bill enacted (God help us all) we would see 10 year olds standing on stools so that they could be seen over the top of the dock in the number one courtroom at Auckland District Court. Did anyone actually bother to check this thing before hitting send?
So I think it's fair to say IMHO that Mark's Bill doesn't really have all that much going for it in the sympathy stakes when you take a good look at it. Whoever came up with the definition of "serious offence" must have been having the great granddaddy of all bad days. I'm trying to be fair to Mark - it may not be his fault - but any lawmaker who thinks 10 year olds should be in the dock in adult court - let alone in jail - for petty theft should go find some tin pot nation to become dictator of and save us from themselves.
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I'm in the US at the moment. As other commenters have noticed, the bulk of US imports come from China which has the RMB pegged against the USD. This situation isn't likely to change because China has so much of the US debt--devaluing the USD against the RMB devalues the treasury bills that China bought. This article explores what might happen if that day ever comes.
The trouble for the US came when the world began abandoning the USD as the benchmark currency. The first sign of trouble I remember seeing was a report that drug dealers were starting to demand Euros instead of USD. Now everyone's doing it--latest is Iran telling Japan to pay for oil in Yen and not USD.
The housing market here in the US is in deep shit thanks to the sub-prime mortgage fiasco. In a few places there's still more demand than supply (e.g., San Francisco). But here in the heartland, Fort Collins CO, there's a huge glut of USD$300k-ish priced houses. This is, uncoincidentally, the range my house fell in when we moved back in late 2005. We took a serious loss just to get out of the collapsing market.
As mortgages become harder to get (in theory--I still hear "refinance for low low rates, and we've talked our lenders into relaxing their credit requirements!" in ads on the radio), the builders who had built a few houses to sell suddenly have inventory and no buyers. The foreclosures here also drive house prices down--for every two existing homes sold in the Denver metro area during the first half of the year, another went into foreclosure. Excess of supply, shortage of demand.
I could see this coming, I just couldn't get my family back soon enough. See the great roller-coaster video for a visceral demonstration of just how unrealistic US house prices have become.
Cost of household supplies here is still low. The only exception is meat--the Americans feed corn to their cattle and the corn supply is being pressured by a growing ethanol industry. End result is higher prices for steak. And don't get jubilant thinking this is an opportunity for Kiwi beef--the corn feeding process results in meat that's way more marbled (fatty) than NZ's grass feed produces and the difference is easy to taste. I know that returning to NZ, I found it hard to appreciate the taste of NZ steak at first.
Food's astonishing. Today I'll head to the supermarket and get you some prices of some typical consumer goods so you can compare. Despite the plummeting USD, it's still cheaper to eat here than it is to eat in NZ. I'm astonished, in fact, at how painfully high the cost of living is in laidback old NZ compared to here. We moved partially because we couldn't afford to live here, but it's become clear that housing was the reason we couldn't afford this lifestyle. The other stuff we consume is still cheaper in the US than in NZ.
Even petrol is cheap here. Americans whine about their $3.20 petrol, but that's USD$3.20/gallon. That works out to USD$0.85/litre, or NZD$1.07/litre. According to Pricewatch the NZ price is about NZD$1.60/litre. This goes some way to explaining why I still see SUVs all over the roads. In our small sampling of liberal-leaning eco-aware ostensibly-green friends, SUVs and minivans still greatly outnumber plain old cars.
So Americans just aren't feeling the hurt at home. As someone pointed out, travelling makes the pitiful USD painfully transparent. I remember visiting London two years ago, changing money at the airport, and thinking I was being shortchanged because of how few bills I got for my USD$100. Then again, that's London--it also has insane house market and sky-high cost of living. Brits can move to NZ and still giggle at the house and food prices.
The flipside is that America might be able to benefit from its low dollar in tourism. Only, of course, the Transportation Safety Authority makes that impossible. The visitors they don't fist on entry are fingerprinted, searched, made to stand in interminable lines, forced to discard their contact lens solution and shaving foam, and generally get the whole Disneyland Bergen-Belsen experience. Ah, Department of Homeland Security: bringing the luxuriousness of interrogation in the Former Soviet Union to the everyday modern traveller. Needless to say, foreigners aren't falling over themselves to visit.
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you haven't been reading cryptogon have you Nat?
Prices in NZ for most things are outrageous. Especially eating out and admission prices for attractions. It makes Japan look cheap.
The only thing I thought was a good deal were the B&Bs. Butter, cream and soda water were cheap in Pak'n'Save. The Chinese vege shop next door to Pak'n'Save Royal Oak was cheap too. Everything else just about was a rip.
I seriously cannot understand how people on ordinary wages afford to live.
I cannot imagine what is going to happen to prices when the NZ$ becomes toast. $5/litre petrol anyone?
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Prices in NZ for most things are outrageous.
I guess it's always bad to generalise from your own experience, but when I lived in the UK my salary in pounds was exactly the same number that I now get in dollars. I think my standard of living is similar if not better here. I've got a house with a garden within a short drive of my office - in London you'd need to be a multi-millionaire to have that. There are some areas where I've downsized - my car is a lot older, I don't buy much Paul Smith - but then nobody else does.
Groceries are expensive and poor quality here - I think that's because Tesco and Sainsburys nail their suppliers to the wall on price and quality - bad for farmers, good for consumers. Maybe UK fsrmers don't get ten votes each like NZ ones do :-)
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(Brief reprise) Re interest rates: of course they are a big part of the picture. But what's at least as important as how high ours are, is how low- quite unnaturally artificially low- both US and Japanese rates have been and continue to be. The idea internally has been to push money into productive investment, and to keep economies that had slowed to a trickle- Japan in the 90s, the US in 2000- growing.
But those remarkably low rates haven't been possible internally (who would save their money to get 1 or 2% returns?). They've only been possible because other countries (and here Japan and the US cases start to diverge) have been willing to "buy in" to that economy and currency. So, eg US consumers are using very cheap credit from, eg China (tho the Saudis and others are also buying in) to spend it up on relatively cheap Chinese and Saudi products- it's almost like a huge lend-lease or hire purchase agreement.
Everyone knows this can't go on forever. Noone knows how or when it'll end- but it's unlikely to be a soft, sweet landing. (I'm fairly sure most non-wingnut republicans are hoping for a Democrat to win in '08. There are so many responsibilities to off-load!)
We're a small figure on the sidelines. But our interest-rates look spectular in comparison, and while our economy has a similar imbalance to the US, there's been the feeling that NZ (via the interest rate at least) is doing something to correct the trade deficit (albeit, something that looks increasingly like it'll lead to a hard landing).
That's why Cullen is making noises about intervention: he doesn't want the market to keep assuming we'll keep on being the rational players in a global economy tilted well off-balance. The question is- how far will he take the bluff? Is he capable of acting with even calculated irrationality? I think he might be. -
I would like to interject briefly, and note that I have carefully read every single post in this thread. Some of them more than once. I also have several degrees and diplomas from recognised tertiary institutions, so according to certain societal measures I am not a complete imbecile. Yet I am still so thoroughly confused by global markets, 'pegging' to the US dollar, and what our interest rates actually mean that my head is swimming. How do you people *understand* all this stuff?
However, the one thing I think I have gathered is that we're all doomed. DOOOOOOMED. Awesome.
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Here's the real kicker. The Bill also lowers the age of criminal responsibility for "serious crimes" (with the same definition as before) to 10 years old. So this means that, were the Bill enacted (God help us all) we would see 10 year olds standing on stools so that they could be seen over the top of the dock in the number one courtroom at Auckland District Court. Did anyone actually bother to check this thing before hitting send?
I have a simple solution: We link Kedgley's desire for a review of the voting age to Marks' bill. You can vote at whatever age adult criminal responsibilty begins. Problem solved!
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Just read some of your select committee submission James.
Will finish the rest after i write this post.
I was interested in the link between the age of somebody (adolescence) and deliquency and that it "normative".
Do you have any references regarding why 'teenagers' exist in our society (and not in others)? Also if deliquency is normal for a teenager (for the reasons you have outlined) what happened in our society before this demographic existed? (and in other societies where it does not exist).
Do you think the widening gap between sexual/physical and mental maturity is having an impact on these things too?
I am genuinely interested in any references you can give me.. i am currently looking at risk-taking behaviour in teenagers with regards to alcohol in particular. If the references you cite in the report cover this as well, all good. I am going to try to get these from Uni library.
And i agree - you have written the submission well - very clear
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