Here’s my Top 10 items from around the Internet over the last week or so. As always, we welcome your additions in the comments below or via email to firstname.lastname@example.org.
My must read is #1. I live in Wellington and occasionally succumb to the pleasures of schadenfreude.
1. Heard of the Cascadia Subduction Zone? – No? Neither had I.
Until I read this startling piece in the New Yorker on the fault line that could destroy the Pacific North West of America, which includes Seattle, Portland and Vancouver.
I wonder if anyone is telling the real estate agents to disclose this to all the foreign buyers…
One fact stood out. 15% of Seattle is built on land that will liquefy when a quake hits. And that’s before the 30m high tsunami hits…
Here’s the gory details:
When the next very big earthquake hits, the northwest edge of the continent, from California to Canada and the continental shelf to the Cascades, will drop by as much as six feet and rebound thirty to a hundred feet to the west—losing, within minutes, all the elevation and compression it has gained over centuries. Some of that shift will take place beneath the ocean, displacing a colossal quantity of seawater.
The water will surge upward into a huge hill, then promptly collapse. One side will rush west, toward Japan. The other side will rush east, in a seven-hundred-mile liquid wall that will reach the Northwest coast, on average, fifteen minutes after the earthquake begins. By the time the shaking has ceased and the tsunami has receded, the region will be unrecognizable.
We now know that the odds of the big Cascadia earthquake happening in the next fifty years are roughly one in three. The odds of the very big one are roughly one in ten.
2. Germany ‘wins’ – The latest Greek ‘deal’ debacle simply reinforces for everyone not yet convinced that currency zones that span multiple fiscal and political zones not only can’t work, but will result in the strong creditor nations eventually conquering the debtor nations in the zone without having to invade.
That’s the only conclusion to be reached by what happend over the last week or so. It’s hard not to think the Germans are achieving the sort of hegemony over Europe now that other less peaceful German leaders might have wanted in the past.
Here’s Ambrose first:
The cruel capitulation forced upon Greece after 31 hours on the diplomatic rack offers no conceivable way out the country’s perpetual crisis. The terms are harsher by a full order of magnitude than those rejected by Greek voters in a landslide referendum a week ago, and therefore can never command democratic assent.
They must be carried through by a Greek parliament still dominated by MPs from Left and Right who loathe every line of the summit statement, the infamous SN 4070/15, and have only agreed – if they have agreed – with a knife to their throats.
EMU inspectors can veto legislation. The emasculation of the Greek parliament has been slipped into the text. All that is missing is a unit of EMU gendarmes.
Capital controls have led to an economic stand-still. Almost nothing is coming into the country. Firms are running down their last stocks of raw materials and vital imports. Hundreds of factories, mills, and processing plants have already cut shifts and are preparing to shut down operations as soon as this week.
Late tourist bookings have crashed by 30pc. Syriza faced a serious risk that the country would run out of imported food stocks by end of this month, with calamitous consequences at the peak of the tourist season. So yes, faced with the full horror of what is happening, they recoiled.
4. There is another way – We’re beginning to care a lot more about insulation and heating of New Zealand’s housing stock.
Now there’s research from Auckland University showing that heat absorbing wallboard, rather than the usual plasterboard, could significantly improve the heat efficiency of a home.
Lining your house’s walls with heat-absorbing materials rather than just regular plasterboard could save over 60 per cent on energy costs per day, according to a new study by New Zealand researchers. The study compared two huts – one lined with regular plasterboard and the other with heat-retaining board containing ‘phase changing material’ – and found that the temperature of the second hut took between three and five hours longer to drop down to 17 degrees Celsius at night, because its boards were slowly releasing the heat they’d absorbed earlier earlier in the day.
5. Belief in the confidence fairy – Keynesians haven’t been popular for a long while now, but Paul Krugman is making some very good points about how closely related the recent tightenings and loosenings of fiscal policy in Europe have been to economic growth.
He also points to the disastrous belief in Europe that all that’s needed for growth is structural reform and ‘confidence.’
Actually, one major reason for the initial signs of growth in the GIIPS (Greece, Ireland, Italy, Portugal and Spain) countries last year was a pause in austerity, as the IMF chart below shows the move back towards budget balance pausing over 2014.
Krugman is scathing of the German approach and impending appointment (again) of a Government of ‘technocrats’ in Greece:
What Europe calls technocrats aren’t people who know how the world works; they’re people who subscribe to the approved fantasies, and never change their minds no matter how badly wrong things go. Despite the overwhelming evidence that austerity has exactly the dire effects basic textbook macro says it will, they cling to belief in the confidence fairy.
Despite a striking lack of evidence that “structural reform” delivers much of a growth boost, especially in an economy suffering from a huge output gap, they continue to present structural reform — mainly in the form of disempowering workers — as a sovereign remedy for all ills. Despite a clear record of past failure, they continue to push for asset sales as a supposed answer to debt overhang.
6. German power – John Cassidy at The New Yorker captures the meaning of the Greek ‘deal’ best:
In forcing Alexis Tsipras’s government into abject surrender—over the entreaties of some of its neighbors, France in particular—Germany has, for perhaps the first time since reunification, in 1990, blatantly exerted its power on the European stage.
The Greeks were subjected to a harrowing lesson in the workings of a currency zone that, for many European countries, has turned into a straightjacket, with Germany holding the keys to the padlocks that secure the straps. In the combative style for which he has become famous, Yanis Varoufakis, the former Greek finance minister, described the agreement as a “a new Versailles Treaty” and likened it to a “coup d’état.”
But if what happened over the weekend doesn’t quite amount to a coup, it has nevertheless been a ruthless display of power politics on Germany’s part and a chilling reminder of the remorseless logic of a monetary union dominated by creditors and pre-Keynesian economics. In the words of Paul De Grauwe, a well-known Belgian economist who teaches at London School of Economics, a “template of future governance” of the eurozone was written over the weekend: “Submit to German rule or leave.” In the years and decades ahead, Germany may discover that many Europeans would prefer the second option.
7. How to get the money out – This week’s debate about non-residents in China buying New Zealand houses raises some interesting questions about how people get the money out of China, given the official rule is that no one can take out more than US$50,000.
Here’s Newsweek with some more information:
Wealthy and even upper-middle-class Chinese have ways to ship money out of the country. There are middlemen, for example, who demand hefty fees—up to 20 percent—to help Chinese savers move money abroad.
Increasingly, people are willing to pay. Before the rout in the stock market began, China saw a slump in the domestic real estate market—by far the most favored investment for middle- and upper-class Chinese. Property and stocks are the most common ways Chinese tend to save, given that banks offer interest rates on savings that continue to linger around the inflation rate. Over a year ago, the government started to support the Shanghai and Shenzhen stock markets—by allowing more trading on margin, among other things.
But Chinese investors have also been looking to foreign property markets to stash their money, and the current market turmoil at home will only intensify that interest. According to the National Association of Realtors in the United States, the Chinese just became the largest foreign purchasers of residential property in the United States, accounting for 16 percent of all foreign purchases in the quarter ending March 31, compared with 14 percent purchased by Canadians, traditionally the top foreign investor in U.S. residential property.
8. The probity question – This John Garnaut piece in the Sydney Morning Herald about foreign buying in the Sydney market is well worth a re-read. It focuses on money laundering. Garnaut was a reporter in China for years and knows of what he is talking about. He wrote this piece after controversy over the sale of one mansion known as Villa del Mare.
The harder questions we should be asking include how do we know who, exactly, is investing from a country where transparency is minimal and patronage relationships can rule supreme.
And how do we know how money has been generated in a mainland Chinese system that has no rule-of-law?
How are millions of dollars taken out of a country that imposes a US$50,000 limit?
Much of the money has been legitimately generated overseas, such as the property developers like the previous owner of Villa Del Mare, who listed his real estate company in Hong Kong.
But there are too many well-sourced anecdotes of inflated invoices, opaque casino dealings and private jets arriving with suitcases stuffed with cash for the probity question to be ignored.