Is our economy killing the planet?

I’ve recently been browsing old magazines and my attention was grabbed by a feature in the October 18 edition of NewScientist. In it they collate a series of articles under the heading ‘Why the economy is killing the planet and what we can do about it’. At first I was disappointed that a publication puporting to be scientific in nature was resorting to scare journalism and economics bashing; however, there are a number of interesting ideas in the articles that bear discussion. Read more

No need for fiscal stimulus – monetary policy is coming

Or so says John Key. Very interesting.

Ok, as Prime Minister, John Key needs to stop talking about monetary policy!!! Luckily Kiwiblog has already covered this – so you won’t get another rant from me ;)

I am not sure whether he is speculating, or whether he’s been briefed and then wandered off and spilled the beans. All I know is that he pushed up the price of the “over 100” contract on iPredict.

All I know is that my pick of 75 is looking increasingly unlikely – Australia’s decision tonight will make everything a lot clearer ;) . However, I am glad to see that he agrees with the idea that we don’t need to be introducing a fiscal stimulus.

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Tax cuts, the minimum wage, and incidence

The Standard has been stating that tax cuts should be “fairer”. Now in principle I have no problem with things being “fairer” – however, defining what is fair very is subjective, and what the Standard sees as fair and what I see as fair might be different.

Still, both the Standard and No Right Turn go on to quantify what they feel is an injustice – the fact that a greater proportion of the tax cut will go to the wealthy. However, for what they are saying to be true, the wage everyone is paid following a tax cut must not change (or must change by the same lump sum) regardless of their current income – yet this is not the case.

Many moons ago we discussed tax incidence – I think it is time to run with this again, taking for granted some of the assumptions about the labour market that the Standard has provided us with over time.

Read more

Analytical bias and “recession fatigue”

Everywhere I look I am being told that the RBNZ must slash rates into heavily stimulatory territory.  There are calls for tax cuts, infrastructure spending, further unemployment relief.  There are calls that commodity prices will collapse – but the price we pay for things won’t.  Pretty much anything that could be wrong, we’re are being told is wrong.

It is easy to get caught up in this.  All the negative news and statements that the Bank MUST cut between 150-200 basis points makes me feel like “maybe they should”.  Ultimately, you start to feel that they know things you don’t.  This type of analyst is a “fast follower”.

Now pulling back from all this talk, as an analyst I may try to be “objective”.  I may try to forget about these things, and take special notice of the “good things.  Wholesale funding pressures are falling, petrol prices have collapsed, income growth is still strong, and the labour market is still in tight territory.  A little bit of a slowdown is not a bad thing if it helps to clean up the economy.  However, this view is just as wrapped up in subjective feelings – in this case I have heavily devalued the actual evidence of difficulties in the economy, and the fact that a drastic slowdown is never completely in the data till well after the event.  Analysts that suffer in this way are facing “recession fatigue”.

Analysts must try to remember that this inherent biases exist – as by doing so they can help themselves make more objective, and more useful, statements about what is going on in the economy.  Noticing your ideological blindspot will help you to be a better analyst – so don’t hide from it, face it!  If only I knew how :P

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James Bond: anti-trust crusader!?

I saw the new Bond flick, ‘Quantum of Solace’, over the weekend and I was amazed at how progressive it is. No longer does our alpha-male hero wreak destruction upon villains with moon bases, bent on world domination. His latest homicidal rampage is to prevent a new terror: oligopoly pricing. Read more

Buy low, sell high

With the official cash rate set to fall even further later this week, shares become relatively appealing when compared with other financial instruments, such as bonds and term deposits.

The old adage of ‘buy low, sell high’ seems fitting, given the battering shares the world over have taken in the past while. The NZX and Dow Jones industrial averages, for example, are both down around a quarter from their respective values six months ago.

But just when is the market ‘low’?

I don’t know! If I did, I’m sure I’d be a lot wealthier than I am. However, I thought it would be useful to write a blog entry to stimulate discussion and debate on what TVHE readers are picking for the sharemarket:

  1. Is now a good time to buy?
  2. What industries/companies would you consider investing it?
  3. What factors are influencing your decisions to invest, or not?

I look forward to hearing our readers’ views on the current state of the sharemarket.

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