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 #2 from Ambrose Evans-Pritchard on Greece. He always tells a ripping good/bad yarn. And I’m pleased as punch that I have invented a new word — Epochacropalypse (small pleasures are the best).
1. Cold and damp and mouldy – An HRV State of Home survey in May of 752 people found more than a quarter of New Zealanders had moved out of a home because it was damp, cold or mouldy.
Why is it our Government is willing to spend bilions on motorways and broadband and all sorts of very useful infrastructure, but the most basic infrastructure for life and a clear cause of massive health and social costs is all but ignored?
I know hundreds of millions was spent on subsidies for insulation, but most of that went into owner-occupied villas. Much of the private rental stock remains uninsulated.
The Government is looking at a rental WOF of some sort, although the current indications are it is unlikely to have a ‘warm and dry’ guarantee because of the likely expense for private landlords.
One way to encourage private sector landlords would be to specify that accommodation supplements only be paid to landlords of warm and dry homes. That’s a NZ$1 billion subsidy that could be put to good use.
2. The Greek debacle – Things are far from cold and damp in Athens. They have other problems. Ambrose Evans Pritchard has an excellent report today on the causes and what’s at stake. The chart below showing how private banks offloaded their Greek debt in the first bailouts a few years ago shows the hypocrisy of the Germans.
The details are worrying:
Events are now spinning out of control. The banks remain shut. The ECB has maintained its liquidity freeze, and through its inaction is asphyxiating the banking system.
Factories are shutting down across the country as stocks of raw materials run out and containers full of vitally-needed imports clog up Greek ports. Companies cannot pay their suppliers because external transfers are blocked. Private scrip currencies are starting to appear as firms retreat to semi-barter outside the banking system.
3. Austerity has failed – This ‘Open Letter from Thomas Piketty to Angela Merkel’ is also a clarifying look at the topic.
Together we urge Chancellor Merkel and the Troika to consider a course correction, to avoid further disaster and enable Greece to remain in the eurozone. Right now, the Greek government is being asked to put a gun to its head and pull the trigger. Sadly, the bullet will not only kill off Greece’s future in Europe. The collateral damage will kill the Eurozone as a beacon of hope, democracy and prosperity, and could lead to far-reaching economic consequences across the world.
In the 1950s, Europe was founded on the forgiveness of past debts, notably Germany’s, which generated a massive contribution to post-war economic growth and peace. Today we need to restructure and reduce Greek debt, give the economy breathing room to recover, and allow Greece to pay off a reduced burden of debt over a long period of time. Now is the time for a humane rethink of the punitive and failed program of austerity of recent years and to agree to a major reduction of Greece’s debts in conjunction with much needed reforms in Greece.
4. Really? – New Zealand’s Government promoted its Paris Climate Change offer yesterday as an ‘ambitious’ plan to reduce emissions by 11% by 2030 from 1990 levels.
The experts as cited in this Science Media Centre are not so enthusiastic:
Prof James Renwick, School of Geography, Environment and Earth Sciences, Victoria University of Wellington, comments:
“This target (30% reduction in gross emissions compared to 2005 levels, by 2030) translates to about an 11% reduction compared to 1990. This is in line with the previous target of 5% by 2020, and 50% by 2050, so there is no “strengthening” of New Zealand’s position. This new target is as weak as previously-announced ones and does not come close to what is required, if New Zealand is serious about keeping warming to less than 2 degrees (as the Government have said we are).
“The science says, compared to 1990, we need about a 40% reduction by 2030, 90% by 2050, and 100% by 2060 – and then negative emissions (removal of CO2 from the atmosphere) for the rest of the century. New Zealand is one of the highest emitters in the world on a per-capita basis. Our dependence on agriculture and already high fraction of renewable electricity are not valid excuses for taking serious action. If all countries followed New Zealand’s lead, we would be in for very significant climate change impacts and catastrophic damage to the New Zealand and global economy.“
5. ‘Laudato Si’ – I was brought up a Catholic and have since lost the faith, but I’m quite a fan of the sorts of things the new Pope Francis is saying.
To avoid a catastrophic collision of the world economy and environment, humanity urgently needs to change the trajectory and functioning of the world economy. Yet the world economic system is a juggernaut nearly impervious to coordinated changes at the global scale. “Laudato Si’” opens the path to a veritable revolution of ideas to bring about the needed changes.
As Pope Francis eloquently and accurately describes, the economic juggernaut is destroying biodiversity, dangerously altering the climate and undermining the life-support systems of the planet for humanity and millions of other species. On all of this, Pope Francis offers a compelling summary of the scientific evidence, presented with clarity and precision. His concision and precision on these matters exemplifies the church’s profound commitment to the marriage of faith and reason, with its abiding commitment to science.
6. There’s volatile and then there’s China Volatile – The NYT’s Upshot section does a good job of explaining the madness that is the Chinese stock market right now.
A couple of figures stand out for me. 85% of the volume on the market comes from retail investors and 17% of the market capitalisation is backed by margin loans….
Here’s the NYT and the chart below tells the story:
Why so much volatility? The Chinese stock market is less well developed than those in countries with more advanced financial markets. Many of the strongest Chinese companies list their shares in Hong Kong or New York, with those listing within China more likely to have questionable business models, accounting and corporate governance.
That has helped fuel wild swings between great optimism and great pessimism for Chinese stocks. That is no salve for the pain of individual investors who have lost their savings in the recent market drop, but it does support the idea that they had reason to know the kind of risk they were taking on.
7. Who are these investors? – The NYT has a good colour piece on who these ‘Mum and Dad’ investors are in China, focusing on a 65 year old shipyard worker, Gong Yifeng:
Mr. Gong, who never attended college, made less than $150 a month in the shipyards. In the mid-1990s, he started playing the stocks, after realizing that his job as a state worker was not going to make him rich. He retired in 2005, and has since built up a $100,000 portfolio.
“I didn’t really have a good income,” he said. “But now, I’m doing better than some people I know who are just living on their pension.”
About three times a week, Mr. Gong visits one of his favorite brokerage houses to meet friends, swap tips and watch the markets gyrate. He was there on Monday, off a narrow street in the city’s riverfront district, in front of an enormous screen arrayed with stock prices, ticker symbols and trading volumes. Scores of people, mostly retirees, watched the screens, jumped out of their seats to trade stocks, and argued about the market’s movements. Many had packed a lunch and spent the day reading the electronic stock boards.
8. US$21 trillion in deposits – Before we get too worried about Chinese investors running out of money, we shouldn’t forget that there is US$21 trillion sitting in Chinese bank term deposit accounts.
One of the reasons why there have been such booms in property and stock prices is that people in China save enormous amounts of their incomes to cope if they get sick or to pay for education and retirement, given the lack of a state safety net or well funded state-run health and education systems. Interest rates in these deposits are repressed so people are desperate to invest in higher returning assets.
At some point some of those savings will start spreading around the world. Lucky for us, eh?
Few events will be as significant for the world in the next 15 years as China opening its capital borders, a shift that economists and regulators across the world are now starting to grapple with.
With China’s leadership aiming to scale back the role of investment in the domestic economy, the nation’s surfeit of savings — deposits currently stand at $21 trillion — will increasingly need to be deployed overseas. That’s also becoming easier, as Premier Li Keqiang relaxes capital-flow regulations.
The consequences ultimately could rival the transformation wrought by the Communist nation’s fusion with the global trading system, capped by its 2001 World Trade Organization entry.
Some changes are easy to envision: watch out for Mao Zedong’s visage on banknotes as the yuan makes its way into more corners of the globe. China’s giant banks will increasingly dot New York, London and Tokyo skylines, joining U.S., European and Japanese names. Property prices from California to Sydney to Southeast Asia already have seen the influence of Chinese buying.
Other shifts are tougher to gauge. International investors including pension funds, which have had limited entry to China to date, will pour in, clouding how big a net money exporter China will be. Deutsche Bank AG is among those foreseeing mass net outflows, which could go to fund large-scale infrastructure, or stoke asset prices by depressing long-term borrowing costs.
This quote stood out for me:
“I don’t think you can find any significant economic system where deposits in the banking system are twice GDP,” said Nicholas Lardy, who has studied China for more than three decades and is a senior fellow at the Peterson Institute for International Economics. “That’s the potential.”
10. Totally Clarke and Dawe – Here’s their 2010 classic on the European debt crisis. Still utterly on the mark.
11. Bonus Clarke and Dawe – On how well the Australians are doing at Wimbledon…