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  1. #461
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    Not really about inflation or deflation but a side effect of central banks quest for inflation.
    https://www.nzherald.co.nz/business/...ectid=12286416
    Probably not that relevant for NZ as boomers have largely invested in their own homes and rentals with the next generation funding national superannuation (as they did for the generation before them) they probably are not too worried.
    Last edited by Aaron; 20-11-2019 at 10:45 AM. Reason: to sound less divisive

  2. #462
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    Quote Originally Posted by Aaron View Post
    Not really about inflation or deflation but a side effect of central banks quest for inflation.
    https://www.nzherald.co.nz/business/...ectid=12286416
    Probably not that relevant for NZ as boomers have largely invested in their own homes and rentals with the next generation funding national superannuation they probably are not too worried.
    Behind a paywall so I havn't read the article. But it's not news that many salary/wage-related pension funds are massively underfunded around the world. Has been a major concern for many years with several US municipal funds, for example, having to already reduce the benefits originally promised.

  3. #463
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    Sorry about that macduffy. The article mostly talks about the Netherlands, possibly because this is where negative rate stupidity is at its most extreme. (currently).

    It is good that people start to see there are some negative effects to more and more credit and lower and lower interest rates. The US pension funds are probably a bit like NZ Super promising a lot but not asking for enough money from the beneficiaries to cover the promises. Low interest rates only exacerbate an already existing problem.

    Maybe it will force funds to look at the third world and invest where there is need for investment rather than paying higher and higher prices for assets that are already well established, although I guess that is a push further along the risk curve, not what you want for your retirement savings if your about to retire.
    Last edited by Aaron; 20-11-2019 at 11:52 AM.

  4. #464
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    Yes, there's plenty of good reasons why "low and lower" interest rates have their negative effects. Benefit promise funds are funded on sets of assumptions which include expected returns, salary/wage rate increases, life expectancy, etc. When interest rates drop substantially, let alone go negative, funding rates have to compensate, initially by increasing the employer's rate of contribution - which many can't afford, and may go out of business. A vicious circle of cost and failure follows. Self funded retirees have a similar problem, a lower income to spend, retailers feel the pinch, reduce staff...……..

  5. #465
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    Quote Originally Posted by macduffy View Post
    Yes, there's plenty of good reasons why "low and lower" interest rates have their negative effects. Benefit promise funds are funded on sets of assumptions which include expected returns, salary/wage rate increases, life expectancy, etc. When interest rates drop substantially, let alone go negative, funding rates have to compensate, initially by increasing the employer's rate of contribution - which many can't afford, and may go out of business. A vicious circle of cost and failure follows. Self funded retirees have a similar problem, a lower income to spend, retailers feel the pinch, reduce staff...……..
    Raising interest rates and/or reducing debt will supposedly cause a self reinforcing deflationary spiral (and the end of the world if economists are to be believed) but more debt and lower interest rates have been the long term solution and unfortunately there is no way back so I guess we will eventually find out where this leads. My parents and grandparents were scared of debt sadly they instilled this in me as well but we might come back round to a time where debt is treated more carefully and investment is made based on cashflow rather than capital gain and inflation taking care of the debt. If they destroy the value of a dollar through inflation savers are losers and borrowers winners on a large scale.
    Last edited by Aaron; 21-11-2019 at 08:51 AM.

  6. #466
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    Does this eventually foment discontent among the renting class.

    https://www.stuff.co.nz/business/117...ost-of-housing

    The only way to justify buying a rental at a 3-4% yield is if you bump the rent up as quickly as possible.

    No inflation in NZ per our central bank. I guess the lack of wage inflation and cheaper electronics offsets the rental increases.

  7. #467
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    Quote Originally Posted by Aaron View Post
    Raising interest rates and/or reducing debt will supposedly cause a self reinforcing deflationary spiral (and the end of the world if economists are to be believed) but more debt and lower interest rates have been the long term solution and unfortunately there is no way back so I guess we will eventually find out where this leads. My parents and grandparents were scared of debt sadly they instilled this in me as well but we might come back round to a time where debt is treated more carefully and investment is made based on cashflow rather than capital gain and inflation taking care of the debt. If they destroy the value of a dollar through inflation savers are losers and borrowers winners on a large scale.

    What I'm finding with Bank lending Vs the past is the fact that Banks had no issues lending me 700k+ when rates were 7-8% but now with rates half that and my asset base 3x higher the banks still don't want to lend me much more than 600k !! (I guess having kids and getting older must count against me..)

    Now put this into the picture my NZD purchasing power ..the bank is actually giving me like 50%+ less lending power than 10yrs ago !!
    (If say we price in NZ property values)
    Last edited by JBmurc; 22-11-2019 at 09:49 PM.
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  8. #468
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    Quote Originally Posted by JBmurc View Post
    What I'm finding with Bank lending Vs the past is the fact that Banks had no issues lending me 700k+ when rates were 7-8% but now with rates half that and my asset base 3x higher the banks still don't want to lend me much more than 600k !! (I guess having kids and getting older must count against me..)

    Now put this into the picture my NZD purchasing power ..the bank is actually giving me like 50%+ less lending power than 10yrs ago !!
    (If say we price in NZ property values)
    Maybe the reserve bank capital requirements are kicking in. Certainly banks seem a bit more conservative which probably isn't a bad thing in my opinion.

    What happens if debt gets repaid?
    https://www.rbnz.govt.nz/statistics/...household-debt
    Looks like as a percentage of "nominal disposable income" (whatever that is?) household debt increased from 100% to 150% between 2000 and 2008 dropped a bit after the crisis but continues on up with debt servicing dropping due to interest rate cuts. Surely all things being equal debt as a percentage of income would fluctuate but stay within a reasonable range. It would be interesting if the graphs went back further, it would be interesting to see what happened in the 70s and 80s when interest rates peaked.

    Also interesting to see business and govt debt levels over time.
    Last edited by Aaron; 25-11-2019 at 05:02 PM.

  9. #469
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    Admittedly the US and not NZ but interesting none the less. I am assuming the information is not just made up.
    https://www.zerohedge.com/economics/...anana-republic
    The first chart shows assets and I wouldn't mind betting NZ might look similar from the 1980s onwards.
    Current monetary policy looks a lot like trickle down(up) economics.
    Michael Bloomberg is running for the Democratic presidential nomination. I can't imagine what policies he would provide to reverse the trend but I suspect he is there to counter Sanders and Warren as Joe Biden doesn't seem to have the support for keeping the status quo.
    I would look at Bloombergs success in the democratic race as proof that money and financial success is the only things that matter in the US. If you are poor you are lazy and stupid (true in my case but I suspect not true for many people) But you don't have to think too much if you have the worlds largest armed forces that is probably why neither left nor right will look at peace as a solution.
    It used to be Ron Paul for the right and now Tulsi Gabbard for the left suggesting peace as an option. No chance of getting votes in the US of A with thoughts like that.

    https://www.zerohedge.com/economics/...poor-have-debt

    p.s. to keep with the inflation deflation thread theme, if we get the inflation central banks are after at least the poor will have nothing once their debts are deflated away rather than less than nothing. Although that said with negative interest rates those debts may turn into assets. Interest rates on credit cards and consumer finance appear to have a lot further to fall than other forms of debt. Hard to feel sorry for someone dumb enough to rack up debt on a credit card and through consumer finance. Easy to do but not a good choice.
    Last edited by Aaron; 26-11-2019 at 10:36 AM. Reason: less insulting to amercians

  10. #470
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    Aaron ..you might enjoy this

    America’s drift towards feudalism

    https://americanaffairsjournal.org/2...ard-feudalism/
    “Just consider that maybe the probability of you being wrong is higher than you think.”

  11. #471
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    Quote Originally Posted by winner69 View Post
    Aaron ..you might enjoy this

    America’s drift towards feudalism

    https://americanaffairsjournal.org/2...ard-feudalism/
    Cheers Winner, peoples prognostications are interesting. Not that I care that much about America it is just that with the internet we are pretty much swamped by American writings. My concern is NZ is heading down a similar path. With death and estate taxes gone, no capital gains tax and a reserve bank joining the international bunch of retards pushing up asset prices exacerbating wealth inequality and shutting out the next generations from home ownership.
    It used to be NZers had an equality of opportunity but that is slowly being eroded as it must if fewer and fewer people have a larger and larger share of assets and income. Obviously we are a long way off a feudal society but policy seems to be taking us towards it rather than away to where every kid born in NZ has an equal chance to make a life for themselves through work and or ingenuity.

    Central bank policy basically is a downward spiral, I can't see how they can reverse course, with debt increasing it is hard to see this changing or what an alternative might be.

    Mostly I am gloomy because I am on the wrong side of the trade. Don't fight the central banks is good advice.

    I am voting for whatever party promises to get rid of inflation targeting or setting the target at 0%.

    I need to stop reading this gloomy stuff as I have a lot to be thankful for.

  12. #472
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    This caught my eye due to my need for confirmation bias when reading news. Are assets inflating or is the value of a currency unit deflating? Both correct just looking at the same thing from a different angle. If central banks are never going to raise interest rates then holding currency waiting for a crash is dumb. Currently I am a dummy but still hoping for a significant correction to the debt/asset price inflation/deflation.

    https://edition.cnn.com/2020/01/13/e...ord/index.html

    I post here as NZ is mentioned for it's growing household debt. I wonder if this could be part of our housing affordability crisis?? hmm. ( I use the word "crisis" facetiously as any national party voter knows there is no "crisis") As Brian Rudman explains it is a housing gravy train. (apologies if his article is behind the pay wall)

    https://www.nzherald.co.nz/business/...ectid=12300114

    Also 120 MPs own 307 houses (that they admit to, does this include houses in Trust?) so not a lot of motivation to get to the source of the problem also we can't do much as the world is in a currency war and any rise in interest rates kills our exporters and any restriction in debt ends the ponzi.

    What could end the ponzi scheme? Usually it runs out of mugs to join in but that could be generations away.

    I see Arthur Grimes mentioned in the article discussing how to bring house prices down. Perhaps the father of targeted inflation could suggest getting rid of inflation targeting as it implies a minimum 1-3% rise each year.
    Last edited by Aaron; 15-01-2020 at 09:36 AM.

  13. #473
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    Just wanted to note a small win for deflation.

    A long time coming, sadly it is a pandemic that kicked it off but ultimately a system that requires more and more debt is eventually not sustainable unfortunately deflation will be associated with the misery caused by the virus.

    Possibly savers will be better off in a crisis than borrowers but I suspect bail-ins will happen before borrowers have to sell their security. Also not a problem if the govt pays the mortgage or brings in negative interest rates making savings worthless.
    Last edited by Aaron; 12-03-2020 at 08:30 AM. Reason: deleted link as I read it and it was a but much

  14. #474
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    NZ Reserve bank going full retard. .25 OCR I was concerned the drop in the NZ$ would make Aussie companies less affordable. If I read it right as of 1 second ago you could get $1.02 $NZ for $1.00 AUD.
    Still not happy central banks prefer a currency crisis to people paying back their borrowings as this seems morally wrong to me.

  15. #475
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    Not sure which thread to put this on so I use one only I am reading. I like the conclusion at the end of the article. It reminds me also of the $500mill capital return by AIA not so long ago. Through revaluing the property and borrowing $500mill to provide a return of capital to shareholders. Not quite the same but it does seem odd when the runway is falling to pieces. The CEOs are a breed apart based on their remuneration but a crisis exposes them as regular individuals on a good ride.

    https://www.zerohedge.com/markets/bo...t-term-bailout

  16. #476
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    Not sure what Bill English meant in the herald this morning.

    "Former Prime Minister Sir Bill English appeared to deliver a warning to financial markets: if the stockmarket doesn't fall further the public will realise something is amiss and wealth or capital gains taxes could follow."

    Something amiss? central bank financialization propping up financial markets and house prices? Who could possibly be against that.

    This guy maybe.

    https://www.zerohedge.com/markets/wa...ausage-factory

    or this guy might be onto something. If you can keep the businesses but get rid of reckless overpaid management and shareholders, it might be a positive thing longer term.

    https://www.zerohedge.com/markets/le...ail-out-people

  17. #477
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    Interesting links thanks. Capital gains taxes coming in, of course! Never waste a crisis.

  18. #478
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    Quote Originally Posted by Aaron View Post
    Not sure what Bill English meant in the herald this morning.

    "Former Prime Minister Sir Bill English appeared to deliver a warning to financial markets: if the stockmarket doesn't fall further the public will realise something is amiss and wealth or capital gains taxes could follow."

    Something amiss? central bank financialization propping up financial markets and house prices? Who could possibly be against that.

    This guy maybe.

    https://www.zerohedge.com/markets/wa...ausage-factory

    or this guy might be onto something. If you can keep the businesses but get rid of reckless overpaid management and shareholders, it might be a positive thing longer term.

    https://www.zerohedge.com/markets/le...ail-out-people

    Shareholders are an easy target in NZ. National Party policies have helped channel NZ money into real estate. I imagine Bill English would be happy if farms and residential property kept their value. Is it just shares he has a problem with. They have already lost about 20% of their value plus many dividends have been cancelled - how far have house prices fallen and by how much have rents been cut?
    Last edited by Bjauck; 11-04-2020 at 04:35 PM.

  19. #479
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    Quote Originally Posted by Bjauck View Post
    Shareholders are an easy target in NZ. National Party policies have helped channel NZ money into real estate. I imagine Bill English would be happy if farms and residential property kept their value. Is it just shares he has a problem with. They have already lost about 20% of their value plus many dividends have been cancelled - how far have house prices fallen and by how much have rents been cut?
    It is common sense that sees bricks, mortar and land as the best investment - not govt. policy. Any fool can understand a building, be it a warehouse, office building, shop or even a dumb house - but it takes some sort of expert to understand a business or company; particularly a listed company.

  20. #480
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    Quote Originally Posted by fungus pudding View Post
    It is common sense that sees bricks, mortar and land as the best investment - not govt. policy. Any fool can understand a building, be it a warehouse, office building, shop or even a dumb house - but it takes some sort of expert to understand a business or company; particularly a listed company.
    I totally disagree.It is no surprise that NZ has such expensive real estate for our level of incomes. You need quite a good head for figures to work out cash flow and rental returns and the impact of mortgages? Of course the ability to reduce net income to leverage tax-free capital gains is the icing on the cake. Any fool can see property can be geared to maximising capital gains, which have been substantial and which had been determinedly kept tax-free by governments as to do otherwise would spell electoral disaster.

    And of course the owner-occupied house is the best tax-sheltered investment scheme, if you can afford the deposit to get on the ladder.
    Last edited by Bjauck; 11-04-2020 at 08:24 PM.

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