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Old 18th July 2022, 20:26     #1
ZeroBC
Quaking Legend
 
Resource Based Economy

This concept was brought about in the doco Zeitgeist and seems more and more prevalent. If anything is going to get us out of the living crisis then surely we should be able to see that New Zealand is an abundant country. Starting with food. If the farmers were subsidized for food destined for New Zealanders and welfare people given food tokens for New Zealand made produce then the system would surely be alleviated.
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Old 19th July 2022, 16:55     #2
DrTiTus
HENCE WHY FOREVER ALONE
 
A good book to read is Hazlitt's Economics in One Lesson.

Quote:
There is a second main factor that spawns new economic fallacies every day. This is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences.

In this lies almost the whole difference between good economics and bad. The bad economist sees only what immediately strikes the eye; the good economist also looks beyond. The bad economist sees only the direct consequences of a proposed course; the good economist looks also at the longer and indirect consequences. The bad economist sees only what the effect of a given policy has been or will be on one particular group; the good economist inquires also what the effect of the policy will be on all groups.

The book is easy to read (it's not full of jargon, and uses examples heavily), and I think it should be required reading for every citizen.

A resource based economy is socialism with a catchy name. It's a centrally planned economy. This relies on a small group of people having infinite wisdom, which they don't. Both socialism and capitalism are flawed due to corruption and are never implemented in their ideal form. What we have today is capitalism in name only - it's perhaps more accurately called "crony capitalism". The US controls the money supply (with the Federal Reserve and their "infinite wisdom"), acquires seemingly infinite debt, and never repays it. They have lobbying which is just legalized bribery, and free market concepts are out the window. In reality, they are bankrupt/insolvent. But they spend all their funny money on the military to make sure no one can force them to repay their debts or change the rules of the game. Anyone who tries, gets a good dose of CIA-induced coup and assassination. Yes, it's shit. But other countries are beginning to stand up to the US (specifically, BRICS), and the uni-polar world will collapse which will be painful for those who currently enjoy the benefits, but better for those who don't.

Greed and corruption ruin everything, and going back to your post about mental health, a relevant point from Buddhism [?] is that anxiety stems from refusing to accept "what is" and striving for "what is not".

You're better to worry about things you can control (your own situation, and self development), rather than attempting to control the entire world. If everyone looks after themselves, or voluntarily helps others in need (the old "moral imperative"), then everything's just fine. Don't compare yourself to others - don't worry about who has more than you - just make sure you have enough.

Consider that your quality of life in NZ -regardless of how much better people on TV have it - is probably more comfortable than 80% of the world's population who enjoy far less in wages, luxuries, safety nets, and freedoms.

We are not used to having any struggles whatsoever. We expect that life should be easy, abundant, and perfect. We have never had to fetch dirty water from a well, or cope with a handful of rice per day. Why are we so special? Why do we deserve to live without struggle? If you think times are tough now, you better get ready for what's coming next.
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Old 20th July 2022, 11:34     #3
DrTiTus
HENCE WHY FOREVER ALONE
 
Observations of trends

These are just my independent observations, so it's neither fake news nor Russian Propaganda... it's just data I've looked at because I was curious.

M2 Money Supply vs Inflation



In the past, high levels of inflation have lagged increases in money supply by about 4 years. In the past, these huge peaks were met with inflation at a rate comparable to the increase in M2. If we assume this could be the case, since our peak of currency creation was 2021, around 2025 would roughly be our peak of inflation. We're just getting started. But...

This is not a hard and fast rule - the inflation rate is not a simple time shift of the M2 rate. We had "local maximums" in 2001 and 2009 recessions. Creating currency to boost a failing economy doesn't always lead to price inflation, but in the 2000s it did lead to asset price inflation. In those years we lowered interest rates to provide the cheap money as we needed it to stimulate the economy. But as a result, we've got a lagging inflation rate as those prices (the cost of living) seep into the rest of the economy, not just housing.

So will this time be comparable to 1975/1980 recessions, or will this be another 2001/2009 recession? What was different?

In my opinion, we're more likely to have a 1975/1980 type recession - in 2001/2009 we were lowering interest rates to "print money" as inflation was coming down. This time, we've got asset price inflation and a lag in inflation, from "artificially low" interest rates. The only "cure" for out of control inflation is interest rate rises.

Historic Interest Rates



Interest rates in the past (eg the 80s) had to rise higher than inflation to tame it.

If we've got the most currency creation we've ever seen (more than First and Second World Wars) at a peak of 27%, and a lagging inflation, we could possibly see the highest inflation we've ever seen (27%?), and therefore the highest interest rates we've ever seen (27%?). Asset prices (specifically homes) are roughly twice as expensive as an inflation adjusted median. These need to come down for stability.

So we really need house prices to cut in half, interest rates to go through the roof, and high inflation to soak up the excess money supply. 1975 and 1980 were periods of stagflation - high inflation with high unemployment and high interest rates. 2001/2009 were low inflation, low interest rates and high unemployment.

I would say the order is: higher prices, higher interest rates, higher unemployment, war.

Note that 1975 and 1980 were "twin peaks"... whatever they did in 1975 didn't work, and inflation (and money printing) returned again with a bit of a vengeance - because they didn't raise interest rates high enough (?). What are we doing at the moment? We're beginning to raise interest rates, but we're scared - the US has 30 trillion in debt. Interest rates force their demise. Therefore war - more money printing, more inflation, but we can literally destroy assets to solve the problem. Nothing like a rebuild to boost productivity. We could "Build Back Better" :P

Take your pick, you decide. I'm not telling you how it will be - this is a graph, not a crystal ball - I'm just showing you how it has been in the past. History doesn't repeat, but it rhymes. This will be an interesting decade.
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Last edited by DrTiTus : 20th July 2022 at 11:39.
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Old 26th July 2022, 11:15     #4
DrTiTus
HENCE WHY FOREVER ALONE
 
Lightbulb

A bit of credibility to my non-economist observations...


Source: Mises Institute - Interest rate tightening will cause even more economic destruction

Note our production capacity is reduced from labour shortages (COVID) and supply shortages (Ukraine + COVID + climate targets), so we are unlikely to produce our way out of inflation. Further price increases are likely.
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Old 28th July 2022, 19:49     #5
DrTiTus
HENCE WHY FOREVER ALONE
 
Greens, Nationa, ACT, Former Reserve Bank chairman calls for major COVID 19 inquiry

This is not a lockdown/health response inquiry, but an inflation inquiry.

House prices went up by "nearly 30%" in 2021. Interesting figure.
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Old 28th July 2022, 20:04     #6
Ab
A mariachi ogre snorkel
 
Read an interesting article the other day from economist Peter Zeihan whose pitch was that we don't have a resource-based economy, we have a global population-based economy. His thesis was that it takes people to make stuff and people to buy stuff, and if your population declines your economy does even faster.

blah blah blah lots of stuff, then he got to the good bit of: all this stuff about a Chinese century is bullshit. He said China's over by 2050. Their population is almost entirely middle-aged, the one-child family policy was a disaster in two ways - it destroyed population growth and it gave China a sex imbalance thanks to female infanticide - and the biggest segment of their population is going to be dead by 2050. He predicted the China's population will drop by half by the second half of the century. Which would be a trip.
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Old 5th September 2022, 11:14     #7
Ab
A mariachi ogre snorkel
 
^^^
saw this online this morning:



China's over.
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Old 5th December 2022, 23:12     #8
DrTiTus
HENCE WHY FOREVER ALONE
 
BNZ lifts home loan interest rates to more than 7.7%

o/~ Just warmin up a little bit, zoom a zoom~

Quote:
At a rate of 7.74%, a $500,000 mortgage would cost $1741 a fortnight, compared to $1094 on a rate of 3%.
An extra ~$300/week, every week. GL.
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Old 6th December 2022, 06:51     #9
wazza
*flex*
 
guy at work, is 28, has a 1.25million dollar mortgage
interesting times for him
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Old 6th December 2022, 10:09     #10
Ab
A mariachi ogre snorkel
 
Jesus. I think rates got up to 9% soon after I bought my first, but I sure as hell didn’t owe 1.25m. Ouch.
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Old 6th December 2022, 10:16     #11
xor
 
Fuck. That.
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Old 6th December 2022, 18:02     #12
Ab
A mariachi ogre snorkel
 
Oz just had a rate hike, up 0.25% to.... 3.1%.
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Old 6th December 2022, 19:41     #13
DrTiTus
HENCE WHY FOREVER ALONE
 
That's the OCR... NZ's is 4.25% if we're comparing apples to apples.

Aussie floating mortgage rates are around 4.6% from ANZ Australia.

I guess that means NZ sux more.
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Old 10th March 2023, 14:11     #14
DrTiTus
HENCE WHY FOREVER ALONE
 
Depression Warning?

As a follow up to the M2 data...


M2 money supply is currently contracting, which has in the past correlated with economic depressions/high unemployment.

Interest rates are expected to continue to rise through 2023 (at least another 1.5%?) - unemployment is expected to increase (some companies have already started the layoffs) and 59% of NZ mortgage debt is rolling over to the new rates within the next 12 months (according to RBNZ, as of 31 January 2023).
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Old 17th March 2023, 15:44     #15
Deff
I felt shocked
 
Looking great for my ramraid business model!
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Old 17th March 2023, 16:39     #16
Ab
A mariachi ogre snorkel
 
Quote:
Originally Posted by DrTiTus
As a follow up to the M2 data...


M2 money supply is currently contracting, which has in the past correlated with economic depressions/high unemployment.

Interest rates are expected to continue to rise through 2023 (at least another 1.5%?) - unemployment is expected to increase (some companies have already started the layoffs) and 59% of NZ mortgage debt is rolling over to the new rates within the next 12 months (according to RBNZ, as of 31 January 2023).
NZ/us/globally?
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Old 17th March 2023, 17:20     #17
blynk
 
I guess I look at that right now and it looks like a bit of a correction to 26%, which was caused by covid.

But I guess it can still cause panic.
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Old 4th May 2023, 01:14     #18
DrTiTus
HENCE WHY FOREVER ALONE
 


In the last financial crisis, large banks went first, followed by many smaller banks. The exact times are misrepresented a little by the nature of the plot, but you get the idea. This suggests we are either just getting started, or "this time it's different". You get to choose what you think is going to happen.

Source: https://observablehq.com/@mbostock/bank-failures
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Old 4th May 2023, 11:51     #19
xor
 
Sorry cannae hear yee over the sound of the money machine going brrrrrr
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Old 4th May 2023, 16:06     #20
DrTiTus
HENCE WHY FOREVER ALONE
 
More random data, but more relevant to our local economies - currently NZ has a totally inverted yield curve: the 2 year interest rate is higher than the 10 year interest rate. (Investors believe that the interest rates will come down). This is usually a good indicator/predictor of a recession.

Australia's is partially inverted at the moment (5Y vs 2Y and 2Y vs 1Y), so if we only looked at that one single indicator it puts Australia in a slightly stronger position. If anyone needed convincing.


For anyone with a mortgage who's thinking about how long to fix for, the "rule of thumb" for interest rates is to look at the bond yield and add 2% or so (depending on the bank). In NZ, to me it looks like a 3 year fix is the sensible decision if you're not much of a risk taker - those are the best rates also. You could do a 2Y fix if you think interest rates will come down significantly, but if we assume interest rates need to be higher than inflation to be sensible, I'm not sure this is likely. That would require inflation to get back to ~2% in 2 years and/or interest rates back to weird again. If we're serious about getting housing affordable (the most significant source of inflation that we gloss over while talking about eggs and cauliflower going up a few dollars), it'll be a slow grind down to avoid chaos.

But I'm not a financial adviser, and this is not investment or financial advice, it's just what I'll be suggesting my sister does. Whether she listens or not is up to her.
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