Bernard's Top 10: Jeremy Corbyn's idea of a 'People's Quantitative Easing'; Could TPP cut dairy access?; John Oliver on our flag debate

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 bernard.hickey@interest.co.nz

See all previous Top 10s here.

My must reads are #1 on China’s economy and #4 on money printing.

1. Just how much trouble is there behind the wall of opaqueness clouding China’s economy? – This New York Times piece has a good look in the wake of last week’s surprise devaluation/depreciation.

The anecdotes at least are slightly alarming.

The gravity of the situation can at least be hinted at by the actions taken last week. Remember, just a few months ago, China’s economy minister Li Keiqiang was telling the FT in April that China would not devalue.

It’s worth repeating his quote from Mr Li just to show how much of change there was between then and now:

“We don’t want to see further devaluation of the Chinese currency because we can’t rely on devaluing our currency to boost exports,” he says.

“We don’t want to see a scenario in which major economies trip over each other to devalue their currencies. That would lead to a currency war. And if China feels compelled to devalue the renminbi in this process we don’t think this will be something good for the international financial system.”

2. Detail on the ground – Keith Bradsher and Michael Forsythe have good detail from inside China. They’re only anecdotes, but they don’t paint as rosy a picture as the official figures.

Zhang Wei, a carpenter at a construction materials market in Guangzhou, says customers’ orders are plunging. Hu Sheng, a seller of metal siding, had to cut prices to the bone, and even then his sales dropped by a third.

At a covered market in Guangzhou, Zhang Xiaojun sat dejectedly behind a counter where half a dozen gutted, plucked chicken carcasses lay.

“I was selling 30 to 40 chickens a day last year,” he said. “Now at best I sell only 10 chickens in a day, and I can’t make a living.”

3. Reduced dairy access? – The fallout from the failed TPP negotiations in Hawaii is starting to flutter down to New Zealand and I can see why New Zealand didn’t sign it.

Tim Groser lets slip in this Nikkei interview that New Zealand was offered a reduction (yes a reduction) in access for dairy in the offers on the table in Hawaii. It seems Japanese politicians have been saying that New Zealand scuppered the negotiations. The bolding is mine.

The reality is that we were never given even minimal offers on things that are of interest to New Zealand that we could accept. We have compromised enormously from the idea of eliminating all tariffs, in the case not just of Japan but of the U.S. and Canada.

     The relationships I have with all the key ministers are extremely positive, including with Amari. But let me assure you that the numbers that are being put on the table in certain key areas of trade do not even come up to our current levels of exports.

  Dairy is to New Zealand what automotive products are for Japan. Japan would never conclude a deal that did not take account of its major exports in autos. And for New Zealand, with one-third of our exports being in dairy, we are in exactly the same situation. So, these statements the Japanese people are being told are not truthful. They are vastly exaggerated.

4. Money printing for the people – Paul Mason over at the Guardian has put last week’s Chinese devaluation/depreciation in the context of the calls from British Labour Party leadership candidate Jeremy Corbyn’s call for a ‘people’s quantitative easing’ proposal.

Corbyn has, of course, been accused of being a ‘funny money nutter’, as Russel Norman. But I’m sorry, that argument just has no power any more after what the US Federal Reserve, Bank of Japan and Bank of England did to rescue banks and stock markets.

Mason points also to the inevitable conclusion. The only losers are the ones who don’t print.

The question Corbyn raised by proposing “people’s QE” is legitimate – whether you agree with the answer or not. It is, in essence, “what do you do if QE stops being effective?” It is the same question that haunted former US treasury secretary Larry Summers when he warned in 2013 of “secular stagnation” – arising from the fact that QE can’t respond to a new crisis as effectively as the old, traditional methods of interest rate cuts can.

Done traditionally – by buying government bonds on the secondary market – QE is slow and “sticky”. It works by forcing investors to move their money to riskier areas – construction, the stock market, property – and revives growth through first reviving the net worth of people who own wealth. If it ceases to function – because somewhere else in the world one of your trade partners is doing their utmost to steal your growth – then you have to start thinking unconventionally. You could, as Corbyn suggests, print money and use it to finance infrastructure spending; you could – as former Federal Reserve chairman Ben Bernanke once suggested – drop it from a helicopter for people to spend. Or you could use the printed money to write off existing government debt.

It is all possible (so long as you have your own currency) – but once you do it, you have obliterated the carefully crafted boundaries between monetary and fiscal policy; and you are engaged in an overt currency policy.

5. Cult or company? – The New York Times Exposay of Amazon’s work culture has been the talk of the Internet this week. It documented the bullying, backstabbing and general sociopathic behaviour of America’s technology work culture. 

Jeff Bezos’ response in a memo to staff was to ask for workers to dobb in the bullies. He said he had zero tolerance for a lack of empathy. Hmmm. Someone demonstrates their empathy by saying they have zero tolerance…

The first response was for some workers to leak the email…

I hope Bezos can cope with Jeremy Clarkson. And vice versa.

6. I’m cheering them on – This Bloomberg profile of Mondo CEO Tom Blomfield, 29, is an interesting look at the future of banking. He’s trying to set up a mobile phone bank.

It seems to me there is a massive opportunity to compete away super profits, at least in Britain. Our banks are more efficient and customer service oriented, but there’s still room for those big margins to be competed down.

Blomfield wants to make Mondo the Google or Facebook of banking with accounts that are as easy to use as e-mail. “We are targeting a demographic that values being able to do everything over a mobile phone in five seconds,” he says.

If Blomfield and Kingsmill get their way, Mondo won’t be just another snazzy app using the license of an existing bank. That’s been done in the U.S. by Simple.com, which piggybacks onto Bancorp Bank, and in Germany by Number26, which is bolted to Wirecard Bank. Unlike most other startups, Mondo has built proprietary software.

If Mondo gets a license from the BOE’s Prudential Regulation Authority, it could—as early as next year—begin taking deposits and lending money.

7. What a weak Renminbi might mean for us – This detail in the New York Times piece on the yuan devaluation struck me as important for New Zealand’s tourism and education exporters.

The commerce ministry has long lobbied for a weak renminbi to help the country’s exporters. But Mr. Zhou can’t let the currency drop too much, lest he antagonize the Chinese companies investing abroad and the Chinese families sending students overseas.

“You see it as more than 100 million Chinese travel abroad, and there are more than 800,000 Chinese students studying overseas,” said Yu Yongding, a former member of the central bank’s monetary policy committee. “They want a strong renminbi.”

8. All about sodium cyanide – This Quartz piece explaining the qualities of sodium cyanide is an eye opener. Over 700 tonnes were discovered at the Tianjin warehouse that blew up this week. No wonder the Chinese authorities have been shutting down websites all over China to contain the…er…fallout.

The term cyanide is clearly understood in the public consciousness to be almost synonymous with poison itself. This is largely because of its use as lethal suicide pill (L-pill) in World War 2, most notably with the suicide of Nazi army officer Erwin Rommel. The cyanide used in the L-pill was potassium cyanide but the properties of sodium cyanide are nearly identical.

An inorganic and very innocent looking white solid with deadly properties, sodium cyanide (NaCN) can be fatal at amounts as little as5% of a teaspoon. It is produced from the equally dangerous gas hydrogen cyanide (HCN) in a simple process with sodium hydroxide.

9. John Oliver on New Zealand’s flag debate.  – This is fun. For the record my favourite is “Fire the Lazar!” and mostly because of the description by its creator James Gray.

The laser beam projects a powerful image of New Zealand. I believe my design is so powerful it does not need to be discussed.

And here’s Oliver’s longer piece on American televangelists. Hilarious. And enraging.

10. Totally Clarke and Dawe understanding Grexit. It’s all clear to us now…