David Fuller and Eoin Treacy's Comment of the Day
Category - General

    From Global Heroes to Rates Near Zero, Rock-Star Economies Flop

    This article by Michael Heath for Bloomberg may be of interest to subscribers. Here is a section:

    Australia and New Zealand now find themselves with just 1 percentage point of conventional monetary policy remaining. That’s around the same level the Federal Reserve and Bank of England had when they turned to quantitative easing to support moribund demand following the 2008 financial crisis.

    New Zealand’s 50 basis point interest-rate cut Wednesday and Australia’s back-to-back easing in June and July suggest both have joined the global race to the bottom. Policy makers across the world are looking for every bit of stimulus available and currency depreciation is an obvious one.

    The kiwi dropped more than a U.S. cent after the RBNZ decision. RBA chief Philip Lowe would have enjoyed the spillover that sent his currency to the lowest level since 2009.

    Lowe has noted the trouble with a global easing cycle is that the very nature of exchange rates means not everyone can enjoy the currency benefit usually associated with lower interest rates.

    There seems little doubt that Australia and New Zealand’s ascendancy is over and both are now right back in the global policy pack. It’s a far cry from five years ago, when HSBC Plc’s chief economist for Australia Paul Bloxham described New Zealand as a “rock-star economy” and his country’s currency was still near parity with the U.S. dollar.

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    As Shale Drillers Stumble, Big Oil Says It Can Do Permian Better

    This article by Rachel Adams-Heard for Bloomberg may be of interest to subscribers. Here is a section:

    Concho Resources Inc., long considered one of the Permian’s premier operators, was forced to scale back activity after drilling almost two dozen wells too closely together. That move by the Midland, Texas-based producer spooked investors across the industry, with Evercore ISI predicting the “carnage” would have a lasting impact.

    Concho’s problem with well spacing highlights the challenges of fracking so-called child wells: Too close to the “parent,” and output is less prolific; too far apart, and companies risk leaving oil in the ground.

    Exxon and Chevron say they aren’t as exposed to those problems. Because of their size relative to smaller independent producers, the oil giants are able to lock up acreage, giving them room to be more conservative in their well spacing.

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    Email of the day on the history of export growth

    I note a few points. 

    First, China was actually there on the list of top exporters in 1961. Then it disappeared and did not reappear until 35 years later. 

    Second, at no time did Japan ever exceed Germany as an exporter but not once was there any paranoia in the US about Germans taking over the US economy?

    Third, the UK was falling down the ranks of exporters until the pound sterling collapse in 1992 and the devaluation actually helped them recover along with the Maastricht Treaty in 1993 - giving them the access to EU export market without the monetary shackles of the Euro. And Brexiters still think Britain is better off??? 

    Fourth, the gap between Germany and Japan was almost narrowing to zero until 1993, then Germany pulled away resolutely - and today exports twice as much as Japan. 

    So, Germany will always stand by the Eurozone - nobody has benefitted like they have.

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    Central Bank Hunger for Gold Lifts Demand to Three-Year Hig

    This article by Rupert Rowling for Bloomberg may be of interest to subscribers. Here is a section:

    Nations added 374.1 tons in the first six months as Russia and China kept building reserves and Poland made a massive purchase. The trend is expected to continue, with a recent survey of central banks showing 54% of respondents expect global holdings to climb in the next 12 months.

    Central banks around the world have added to reserves as economic growth slows, trade and geopolitical tensions rise, and authorities seek to diversify away from the dollar. Gold rallied to a six-year high in July, as expectations for lower U.S. interest rates and concerns about the economy boosted bullion’s appeal.

    Spot gold edged lower Thursday, falling for a second day after the Federal Reserve signaled it probably won’t embark on a lengthy easing cycle. The metal declined 0.5% to $1,407.04 an ounce, paring this year’s gains to 9.7%.

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    Tesla's big battery in South Australia is a "complete waste of resources," claims Nissan

    This article by Simon Alvarez for Teslarati.com may be of interest to subscribers. Here is a section:

    Thomas’ statement comes as he was discussing the new Leaf’s vehicle-to-grid/vehicle-to-home (V2G/V2H) system, which will allow the all-electric car to serve as a home battery unit. With the system in place, the Leaf will not only store energy by plugging into a home or business; the vehicle could also serve the energy back when needed. V2H is already in use in countries such as Japan, and a release in Australia is expected within six months. 

    The Nissan executive noted that the Leaf’s V2G system has the potential to help homeowners save money, especially if the vehicle charges through a rooftop solar system during the day, and uses its stored energy to power appliances and lights at night. 

    “The way we distribute and consume energy is fundamentally inefficient … what we need is flexibility in the system. It’s great that we’ve invested all this money in renewable energy, but fundamentally we’re wasting most of that energy because it’s all being generated in the middle of the day when we don’t really need it,” he said. 

    Tim Washington, CEO of charging solutions provider Jetcharge, noted that Nissan V2H technology has a lot of potential, considering that vehicles spend much of their time just parked, or in the case of electric cars, plugged in. 

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