Matt Nolan

Weak Warehouse result, disappointing Christmas retail?

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That is what is implied by this article in the Herald.

The Warehouse is a huge retailer in New Zealand, and with their Christmas retail sales disappointing this is bound to cause some concern.  However, this does not necessarily imply that the New Zealand retail sector struggled during Christmas.

Why?  Well, many people believe (rightly or wrongly) that the Warehouse generally sells a set of “inferior goods“.  Given this perception, if household experience an increase in their expected lifetime income they may well switch from buying things from the Warehouse and buy things from other places instead.

Even so, there are other indicators that suggest that December was weak.  Everyone could see the strong sales that were occurring before Christmas Day, and in many places there was the feeling that the crowds were a touch on the low side.  We will have a better idea on the 15th, when Stats NZ releases the Electronic Card data for December.

Matt Nolan

Are excess reserves driving a “currency misalignment”

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One of my favourite excuses for the “high” NZ dollar is currency reserves being built up overseas (in order to “keep their currency low” they need to buy up foreign dosh, building up currency reserves you see).  It is an argument the US likes to make without actually doing any analysis as well.

However, work has been done … a while back.

The linked to paper found that reserves were not excessive anywhere, expect China.  A good point to keep in mind no doubt.

Matt Nolan

September quarter NZ GDP

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What happened!  It will be here.

I’m not around (I am currently visiting our lucky neighbour in Australia).  I bet that we had a negative quarter didn’t we.  That would be a pretty negative shock for people, given that some OK growth was expected.

If we did have negative growth does that mean we are back in recession?  Having one positive quarter doesn’t seem like enough to rule a recession out (that is if June wasn’t revised down to be honest).

My pick for what just happened?  I think June has been revised negative and September is a small positive.

Matt Nolan

Monetary policy discussion in the US

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Sounds like what we’ve been saying here.  From over there:

  1. The Fed should have a single nominal target.
  2. The Fed needs to be transparent and have specific and well-defined monetary policy goals.
  3. The Fed should focus only on monetary policy, and regulation of the large banks.

From over here:

  • At its heart, the consensus between the two main parties was to do with the target of monetary policy – monetary policy must be implemented by an independent Reserve Bank to ensure that inflation remains within a low and narrow band.
  • Giving the Bank multiple instruments to simultaneously achieve multiple targets would be a recipe for confusion, and would ultimately damage its ability to achieve any of its targets
  • Warping the Reserve Bank Act to focus on a multitude of different goals will not solve these underlying issues; it will just cloak the symptoms by damaging other sections of the economy
Matt Nolan

More reasons to legalise drugs?

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When this article appeared in Stuff it seemed to want to give the impression that drugs = bad.  That is good for it.  However, when I read it it simply made me think that we should legalise said drugs.  Here is why.

Ecstasy users are unwittingly taking other potentially more dangerous substances including P, as drug dealers become more reckless, officials warn.

And this is happening because of the large number of drug raids, restricting the supply of Ecstasy right.  So legalisation would improve quality and safety.  Also.

When it burst on to the scene in the 1970s it was pure MDMA and its reputation as an uncomplicated party drug exploded. However, once MDMA was made illegal in the late 1970s, ecstasy’s make-up changed.  The legend of the “round shiny tablet with a logo on it” had grown out of proportion.

So making it illegal lead to a degradation of the quality of the product, which made it more dangerous.

So lets legalise these things and regulate the industries, no?

Matt Nolan

Film incentives are trade protectionism

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If we follow Australia down the road of trade protectionism for movies, then we all lose out.  What do I mean?

Well the incentives for trade protectionism is a prisoner’s dilemma.

As Peter Jackson says, if Australia starts subsidising movies we need to do the same or we will miss out on productions – as a result our best response to their protectionism is more protectionism.  Furthermore, if we start subsidising and Australia doesn’t then we get a relatively larger share of the movie industry – assume that this occurs to the point where the tax revenue from the movies exceeds the cost of the subsidies.  In this case our best response is to ALWAYS subsidise.

However, there are two issues.  Firstly it is in Australia’s interest to subsidise (it is also their “dominant strategy”).  And secondly, the decision to subsidise pays off because it hurts Australia.  In the end both countries end up subsidising movies, and both sets of taxpayers end up worse off than in the case when neither country subsidises.

This is the issue, not only with the subsidies on movies, but on all trade protectionism.  That is why we need international co-operation to avoid this type of beggar thy neighbour behaviour.