Matt Nolan

When times are tough, mess around

/3 Comments/in /by

That is the Greek attitude it seems.

They need to default, leave the Euro zone so that they can have their own currency (and the huge corresponding real wage cut).  Surely it is obvious that the politicians, and the people, don’t have the will to actually sort out their problems.

I want to know what the protesters want.  How do the tax collectors think that not collecting tax is going to help Greece pay its bills?  With the level of corruption and tax evasion in Greece prior to the crisis, it appears that their “social contract” was never really adhered too.

I will give them one point though – they may think the distribution of the burden is “not fair”.  However, not collecting tax on current policies (not the new austerity ones) appears to be an overstep – and a signal that people are just generally unwilling to pay their bills.  Pro-tip:  If you elect a government who is going to spend lots of money, its your money they’re spending – you will have to pay for it at some point.  Contrary to popular belief government doesn’t pull goods and services out of thin air.

Matt Nolan

Greek fact of the day

/10 Comments/in /by

Via my boss:

If Greece had a dollar for each time they were blamed for the global financial crisis, they’d be able to pay their bills

I think this is worth keeping in mind.  Although, if they could pay their bills there wouldn’t be a crisis.  Then they wouldn’t be blamed for it.  Then they wouldn’t be able to pay their bills.  So I’m not sure we really have a stable equilibrium here.

Note: Another work colleague notes that if they were blamed enough to pay down the stock of debt, then we have a stable outcome.  My presumption was that we were saying they received enough to just pay back interest, not principal.  As a result, the total flow of funds from people willing to give Greece a dollar is very important here.

Now markets are hellishly volatile at the moment.  I think that this is due to the world waiting on an announcement from Europe which will tell us exactly who is going to lose out from the ultimate Greek default.  However, it probably also has something to do with Dan Carter getting injured – damn.

Matt Nolan

Perverse incentives

/in /by

I’m a touch busy trying to keep up with Europe, given how things seem to be a little bit on the unpleasant side.  As a result, here is a cartoon from XKCD.

Source (XKCD)

Matt Nolan

Why economists are so popular

/1 Comment/in /by

(Via SMBC)

Come on, revealed preferences are all you need.  There is no way we’re going to make our own explicit value judgments!

Matt Nolan

Missing the point on value

/in /by

Wow, sorry milk manufacturers but these comments make you sound insane:

Milk product manufacturer Goodman Fielder’s head of dairy, Peter Reidie, said yesterday that the debate around the price of milk had created a false perception about the value of milk.

Goodman Fielder took 210 million litres of the 600 million that Fonterra was required to make available to competitors, and sold to supermarkets.

A 2-litre bottle of branded milk for $4.80 “is outstanding value, and we are talking the New Zealand consumer in to saying that it isn’t“, Reidie said.

“So they are buying Coca-Cola or V or something else instead, and that is not good messaging.”

Ok.  Consumers know what milk is.  They know what coke is.  They can see the price of both in front of them.  They choose coke because the relative price of milk is too high … implying that the value they receive from it is too low.  The consumer says this.

Instead of accepting that, the milk manufacturer is saying “you should be willing to pay more for milk”.  That is his entire comment.

This has nothing to do with the “debate around milk” and it has everything to do with the relative price of milk being higher than other substitute goods.  Given that this high price represents the scarcity of milk, that is fine.  Given that consumers are substituting away given these prices this is fine.  However, there is no merit to the idea that “consumers aren’t buying milk because they don’t realise how good it is” – that sounds like the comment of a desperate sales person.

Matt Nolan

NZ downgrade on high debt, foreign incompetence

/1 Comment/in /by

That is the story for this, that and the fact that our stock of debt is still elevated.

My view of where we are heading has been heavily downgraded over the past week.  NZ policy makers have done a great job, the government and the RBNZ have been sensible.  NZ households have worked with what they’ve been given, and our businesses have responded to changing external conditions.

But Europe, and to a lesser extent the US, are mammothly incompetent.  We’ve now reached a point where it looks like these nations are pushing the world into a crisis – a slow moving train wreck type of crisis.  Hopefully, someone wakes up and taps the brakes soon.

On the note of the downgrade Fitch said:

New Zealand’s high level of net external debt is an outlier among rated peers – a key vulnerability that is likely to persist as the current account deficit is projected to widen again, reflecting a structural savings/investment imbalance.

This is a structural issue we should indeed chat about more at a later date.

Update:  List of feedback on Rates Blog.

Update 2:  Off goes S&P.