Tuesday, September 16, 2014

Quote of the day:

“The hardest thing to explain is the glaringly
evident which everybody had decided not to see.”

-- Ayn Rand, The Fountainhead

[Hat tip Dr Michael Hurd]


“The Moment of Truth”: Too many agendas

“A proper government is the agent of its citizens, not the master. In its role
as the agent, the default should be openness, not secrecy;  in very few
contexts is it appropriate for the government to operate in secrecy. Only
when the government can convince its citizens that secrecy is necessary
for protecting their rights is it acceptable. With respect to the NSA [and
and SIS] surveillance programs, that burden has not been met.”

IT HAD BEEN BILLED by Kim DotCon as “The Moment of Truth” – "a political bomb" – THE moment when he would prove beyond a shadow of a doubt that John Key knew about DotCon before the raid on his house, and by implication that Key had conspired to get him into the country so as to get him into American hands.

It wasn’t that moment. The shred of evidence DotCon floated earlier yesterday had already been shot down as fraudulent, and nothing more on that score made any appearance at all.

It was billed by Laila Harre as being “framed” by Hager’s #DirtyPolitics, hyped by DotCon’s lawyer as being “Watergate on emails.”

It wasn’t that either (and really never was).

And it was promoted by the likes of Martin/Martyn Bradbury as something that would make your head blow off.

It may well have done that for him (but how would the rest of us ever know the difference.)

There was a wrestle of agendas going on among an ill-sorted collection of folk: a copyright thief keen to make it about him; a political party leader and activists running an election rally; a public launch of the fat German’s “communications suite”; the fat German’s lawyer launching anti-corporate barbs and trying to turn it into an anti-TPPA rally…

Take away the puffery of these poseurs, and the rambling irrelevance of Julian Assange, and in the end what you had was a story presented by Glenn Greenwald and Edward Snowden that needs sober consideration -- but will hardly get them given the context in which they were put, and the company in which these two global figures allowed themselves to appear.

And there was still a glaring absence of smoking guns.

Snowden claimed NZ’s GCSB as part of Five Eyes has been ramping up towards a system of mass state surveillance which, if true, is worrying. But what was his evidence?

He said the American National Security Agency (NSA) has a base in Auckland “and in the north of the country.” Sounds ominous, but Paul Buchanan suggested this morning the Auckland connection is probably no more than an NSA agent at the American Consulate in Auckland, who may have the services of a satellite dish. The facility up north one assumes is the Warkworth satellite station, which he suggests by implication is subject to monitoring. This deserves further investigation.

Snowden claimed that when working for the NSA in Hawaii he routinely handled metadata from NZ’s GCSB, and could easily drill down into the metadata to investigate content. But he had no specifics, no documentary evidence, just a discussion (on which he had expanded in his Intercept article earlier yesterday) about a checkbox on the XKEYSCORE system used to compile and analyse data.

That solitary checkbox, the Five Eyes Defeat … is what separates our most sacred rights from the graveyard of lost liberty.

Snowden has always appeared genuine, and unlike others at this event appears to understand the importance and basis of “our most sacred rights” – not a gift from government, he said last night, but part of our nature as human beings.

When these things are collected, by any arm of government, without an individualised, particularised suspicion of wrongdoing, on the individual level, that is a violation ... of human rights -- that are not given to us by government,but are inherent to our nature.

He’s right, you know. But unless I missed it somewhere, he’s offered no direct evidence for his claims about mass surveillance in NZ than his testimony last night, his earlier documents about XKEYSCORE, and the reluctance of PMs, leaders of opposition, and former and present heads of GCSB to discuss XKEYSCORE.

He took a swing at the Prime Minister for his public claim that “there is not and there never has been any mass surveillance.” This is false, says Snowden, and only defended now by a Prime Minister “throwing classified documents in the air like Julian Assange.”

Clearly, Snowden sees himself as more careful with classified documents than Julian Assange, and the PM, but he still brought nothing more to back his claims but his cogent discussion and believable demeanour.

If there was a smoking gun last night, it was brought by Glenn Greenwald. While John Key was throwing classified documents in the air defending the non-commissioning of something called CORTEX, Greenwald was documenting a programme called SPEARGUN.

According to Greenwald, [and I’m relying for this summary on Keith Ng’s report] this project involved the "covert installation of 'cable access' equipment" on the Southern Cross cable (i.e. Tapping into New Zealand's traffic with the rest of the world). The existence of this capability cannot be denied.
    In response to the Southern Cross cable's operators saying that such a thing was impossible, Snowden (who videoconferenced into the event) asked (I'm paraphrasing): What makes the Southern Cross cable so special that it cannot be accessed undetected by the NSA, when everyone else around the world can be?
    The new documents show that the GCSB had a cable access project underway, followed by another document that Phase 1 was "achieved". More crucially, he has a message showing:

        (TS//SI//NF) New Zealand: GCSB's cable access program SPEARGUN Phase 1; awaiting new GCSB
    Act expected July 2013; first metadata probe mid 2013.

This shows that they had to wait for the GCSB Act to be passed before SPEARGUN could be used. i.e. The new GCSB Act - the one that supposedly wouldn't expand GCSB powers - expanded GCSB powers to allow them operate a metadata probe on the this cable which they'd tapped.

If there was a case to answer that was presented last night, then that was it.

THE BIGGER PICTURE TO all this is realising that the time-honoured protections against state intrusion into our lives has been breaking down philosophically, legally and politically, just at a  time when new technology makes the possibilities of this intrusion so much more widespread.

“We want to bring down Five Eyes,” said the fat German trying to get a chant going. Well, no “we” don’t. In a world with many threats, intelligence gathering is essential.

The reason we have state security is to protect our most sacred liberties – to protect them against the slings and arrows of war and outrageous criminality. That’s government’s job. But to protect our liberties against those agencies themselves, especially as the power of surveillance and analysis increases, we need more than just checkboxes. 

It is not a matter of left or right. Yes, the centre-right here are defending the GCSB’s alleged excesses and the left are running the argument against the abuse of power, but reverse political power and the positions would be reversed. The left are always against the abuse of power until they have it themselves. And remember too that this process started here under Helen Clark’s Labour, and has been carried out in US under the Democrats’s Obama.

The issue is not party political. It is protection against the state.

In “the old days” the need to obtain a search warrant was your protection against every state agency except the IRD. But we are now in a new age.

In this new age when searches of your data so much more easy than rummaging through your rubbish bins (as easy as tapping a cable, it seems), and analysis of data is as easy as writing a good data mining algorithm (still not that easy, to be fair) what separates our most sacred rights from the graveyard of lost liberty seems to be only the scruples of security agents themselves – and in New Zealand, so the claim goes, those scruples are being sacrificed for the excitement of being part of a world intelligence network in which New Zealand can be a player just as long as it supplies the (meta)data that keeps it in the big tent.

It is really a time for a new consideration of the checks and balances that tie up the agencies who act purportedly in our defence – and those who think it’s all okay now because a nice man is overseeing date collection might like to contemplate how they might feel if it were all overseen by the former PM, or her successor.

But that sober and serious job needs better “framing” than it did with all the agendas on display last night.

PS: I’ll be updating this post over the day as new info and analysis comes to light.



TWITTER, AS IT HAPPENED (oldest to newest)…

















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Monday, September 15, 2014

Bonus quote of the day:

“If only 1984 and Animal Farm
were required reading by Year 8.”

- Michelle Ray, TWITTER

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Don Brash: “There is a huge bidding campaign going on, with virtually no party putting forward policies which would actually deal with some of the fundamental issues facing the country”

With everything else gong on in this Reality TV election campaign, what Don Brash finds most depressing is that the man named after a concrete block will almost certainly end up holding the balance of power – with the baubles waved under the concrete block’s nose likely to be the deciding factor in which way he swings.

Yes, I find this perhaps the most depressing aspect of the campaign. Winston, the man whose policy promises are so outrageously expensive that NZ First policies are the only ones which Dr Michael Dunn (on behalf of the Taxpayers’ Union, and for 12 years the man responsible within the IRD for costing political promises) can’t put a price tag on.
    He was the man, you’ll recall, who held up a big sign saying “NO” when he should have said “yes”, he had received funding from Owen Glenn.
    He’s the man who campaigns about the need to change the Reserve Bank Act, as he did in the 1996 election campaign – and nobody asks him why, when he was Deputy Prime Minister and Treasurer in 1997 and 1998 (and therefore the minister responsible for the Reserve Bank Act) he made not the slightest attempt to change that Act.
    On balance, I think he is more likely to go with National than Labour because (a) he would not enjoy playing third fiddle to the Greens in a Labour-led government, and (b) he went with Labour in 2005, and won’t want to be seen as locked in to Labour. But at the end of the day, he will also be influenced by what is in it for Winston, as he was in 2005.

That’s a revealing answer about Peters and I think it’s also revealing about yourself. It’s a bitter reply.

imageYes, as some of your readers will know from the last chapter of my book, I’m quite deeply pessimistic about the future of democracy, and this election campaign illustrates my concerns rather well. There is a huge bidding campaign going on, with virtually no party putting forward policies which would actually deal with some of the fundamental issues facing the country. Some parties are being more responsible than others, but almost all are offering extremely expensive policies that the economy has little ability to pay for…

On his Facebook page he lashes the media circus:

I’ve always been reluctant to believe in media conspiracies, but having watched the way in which Radio New Zealand and TVNZ have been covering this election campaign I have to conclude that those driving the election coverage on those channels are either wildly Left-wing or plain ignorant, and I’m genuinely not sure which explanation is the more plausible.
    The media have almost entirely ignored what ACT has been saying, even when Jamie Whyte drives a horse and cart through the economic policies of other parties. They give only minimal coverage to what the Taxpayers’ Union is saying about the cost of the political promises made by most parties, even though those comments are based on the research of an economist who did the costing of election promises for the Inland Revenue Department for a number of years.
image    The media give extensive coverage to the comments of Winston Peters, even though his promises are so outrageous that the policies of New Zealand First are the only ones which the Taxpayers’ Union has been unable to put a dollar cost on – they are extremely vague and very expensive….
    Yesterday, Radio New Zealand’s coverage of some of Labour’s promises took the cake for me. Every time I turned on the radio to hear the news, the bulletin seemed to be led by the story that Labour would introduce a “Kiwi Share” to prevent future governments from ever selling government-owned businesses.
    Apart from being a seriously stupid policy even if it could be implemented, a future Labour-led Government could not actually stop future governments from doing anything!
    What Parliament can do, a future Parliament can as easily undo. But nowhere did I hear a voice of scepticism expressed – Mr Cunliffe’s “promise” to stop future asset sales for all time was breathlessly reported as if it had some relevance.
    I’m pretty critical of the John Key Government, as anybody who has read my book Incredible Luck will know. But with a few ACT MPs to help drag them back to the values set out so clearly in the National Party’s own constitution, a John Key-led Government is vastly to be preferred to a Labour-Greens-New Zealand First-Internet Mana combination, and it angers the hell out of me that even the media funded by me and other taxpayers makes not the slightest attempt to cover the election campaign with even a modicum of detachment and objectivity.

The ghost at the ACT party proposal [updated]

Dairy owner Virender Singh was stabbed as he fought back against intruders into his shop, only to have to fight back against police who charged him for having the temerity to defend himself.

Greg Carvell defended himself and the occupants of his family’s gun shop, and was arrested and charged for it when the police arrived twenty minutes after the fact.

Michael Vaimauga was arrested for assault after he stopped a burglar breaking into a shop.

As an Avondale dairy owner said when a colleague was stabbed in the neck and back by a robber, “When we protect ourselves, we get charged - and if we don’t, we get stabbed. What do we do?”

These people were the lucky ones.

Manurewa shop owner Navtej Singh was shot  and killed by thieving scum as he stood unarmed and defenceless behind the counter of his family's store – following the advice of police who tell shop owners what they should do is to simply follow instructions and hope armed intruders go away.   Mr Singh followed instructions,  and was then shot and killed.

The manner of his death hung briefly over the election last week when ACT’s Jamie Whyte quite properly suggested dairy owners right to defend themselves should be recognised and upheld.  John Key and his cheerleaders disgracefully and intentionally mis-translated the proposal to mean that every shopkeeper would  have a loaded shotgun under the counter.  Unable to defend his own overlooked right to life, the death of Mr Singh went unmentioned.

His ghost should have haunted the short debate, as his death should haunt everyone opposed to the very simple right to defend one’s life against one’s attackers.

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Don’t shoot the messenger

Centuries ago when bad news had to be delivered to the king, the worst job to have was messenger.

Armenian king Tigranes the Great was said to have executed the first messenger that gavr notice of Roman invasion – “and with no man daring to bring further information, without any intelligence at all, Tigranes sat while war was already blazing around him, giving ear only to those who flattered him..." It didn’t stop the invasion.

Cleopatra threatened to treat a messenger's eyes as balls for telling her that Marc Antony had married another. “I bring the news,” said the messenger, “I do not make the match.”

Glenn Greenwald brings uncomfortable news about things the New Zealand security services talked about doing, and possibly did do. He says they were talking about doing this, and possibly getting on with doing it, at the exact point in time the Prime Minister was saying there was nothing doing, and passing laws .

We certainly do need a security service that protects New Zealander’s rights against electronic invasion – the so-called “fifth domain of war” -- the proximate reason Key reckons GCSB wanted to ramp up the collection, distribution and analysis of metadata. But we do not need, and should work while it’s still possible to actively avoid a state that routinely and across the board collects, distributes and analyses the messages, communications and correspondence of all New Zealanders – which is what Greenwald alleges has been going on.

This is not a trivial issue. Historian Scott Powell studies the history of freedom. “Freedom of speech is the key issue in protecting a free society,” he says.

Once we cannot communicate freely, the game is up. Since the Internet is near to being transformed from a mechanism of freedom into the ultimate weapon for control, a turn-key totalitarian state is almost available…”

This is too important to let hatred of one fat German cloud our judgement. Henchman he might be, but If Greenwald has the evidence that Edward Snowden “personally worked with large amounts of metadata on New Zealanders provided to XKeyScore by GCSB,” then there are no two ways about it: The GCSB and the SIS have been lying to us.

And John Key? I say Key wasn’t lying to John Campbell when he said it was "totally incorrect" that laws passed by the Key Government means "the Government effectively through GCSB will be able to wholesale spy on New Zealanders.” He wasn’t lying. He just had no clue he was totally wrong.

Here’s Paul Kelly:

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Quote of the day: On lawyers

"Justifications for the bar examination are invariably predicated
on paternalistic assumptions about the ability of ordinary people
to choose qualified lawyers; such arguments ignore the number
of ordinary people who, today, cannot afford qualified lawyers
at all under the current anticompetitive system."
- Alan Mendenhall, ‘The Lawyers Guild

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Sunday, September 14, 2014

Sunday Sayings



Friday, September 12, 2014

Friday Afternoon Ramble

Cartoon by Nick Kim

The joy of MMP, Case #567: Did you know that a National win in Epsom could elect a Labour government?
Read This One Post To Understand MMP Better Than A Political Science Professor – Peter McCaffrey, KIWIBLOG

Long overdue.
Whyte says shopkeepers should be free to arm themselves – HERALD
Shop killers – NOT PC
Shop owner cleared . . . but to police he’s still a criminal – NOT PC

“Metiria and Green co-leader Russel Norman will illogically spend $400 million on paying the In-Work child credit for children born of parent(s) not ‘in work.’ Logically this can only result in babies that … will automatically fall into that statistical category of children living in poverty.”
Using the Tax State as a Weapon against Our Humanity.Mark Hubbard, LIFE BEHIND THE IRON DRAPE

Much-needed fact checking.
Election choices: A brief examination of child poverty claims – LINDSAY MITCHELL

More much-needed fact checking:
Internet Mana's job creation figures don't add up – LIBERTY SCOTT

And yet more…
Conservative's Fact Check – ACT.ORG.NZ

There’s a phrase I never thought I’d read from Eric:
English Gets It – Eric Crampton, OFFSETTING BEHAVIOUR

Nor this from Scott:

Is it really too hard for people to bother to feed their kids? – Eugene Rush, WHALE OIL

Cartoon by Nick Kim

A young man discovers he needs new friends.
Rich People: Fuck 'em? – Rory Sweeney, SOLO

Do we really and truly need one new law every 7.7 hours!?
Some parliamentary stats – KIWIBLOG

The Greens released their energy policy yesterday. Less a policy, than a detail-lite fantasy.
Green Party launches plan for cleaner, cheaper energy – SCOOP
Smart green failure – NOT PC

image“At this point in technological and economic history, wind and solar are ‘alternatives’ to coal, oil, natural gas and hydro in the way that wood is an ‘alternative’ to steel and cups attached to strings are ‘alternatives’ to iPhones.”
Real Alternative Energy – Alex Epstein, CENTER FOR INDUSTRIAL PROGRESS

I’m inclined to think no-one should.
The left should not support prison slave labour – Idiot/Savant, NO RIGHT TURN

Guess how Muslims around the world reacted to the September 11 atrocity? “The politically correct version of the September 11 attacks holds that the Muslim world rejected such violence as un-Islamic and condemned the attacks.  This is not true….”
Muslims Celebrated the Sep 11 Attacks – BLACKFIVE

And so did Internet Mana’s Annette Sykes …
Conversation at Greens's blog – FROG BLOG

So if China has also been overpaying for NZ farms, will our xenophobes still damn them for it?
China estimate of the day – MARGINAL REVOLUTION

“So the latest chatter on the NZ right is that strategic voting for the Conservatives is a great idea. I'm going to disagree.”
Strategic voting on the right – Eric Crampton, OFFSETTING BEHAVIOUR

“Asking liberals where wages and prices come from
is like asking six-year-olds where babies come from.”
- Thomas Sowell

Not everyone deserves free re-entry.
Five Reasons Why We Should Not Welcome British Jihadists Home – James Brandon, BREITBART UK

“But when we look around in Europe today, we see that not only is Europe not whole and free, we see the ghosts from the painful 20th century returning to our midst. Ghosts that we thought we’d never see again, that we had buried deep in history’s trashbin.”
25 Years After, Europe Still Not Whole or Free – Estonian President Toomas Hendrik Ilves, THE INTERPRETER

“Large government projects often double in cost between when they are first considered and when they are finally completed. This pattern—call it “Edwards’ Law”—is revealed in story after story…”
Edwards’ Law of Cost Doubling – Chris Edwards, CATO AT LIBERTY


“The excellent chart above is “Climate Science Explained In One Simple Graph” from Steve Goddard’s Real Science blog, and helps to graphically illustrate some key points Matt Ridley makes in his WSJ op-ed today “Whatever Happened to Global Warming?

But I was told more warmening meens more droughts! 
New paper shows the Holocene Climate Optimum ~6000 years ago was much wetter and warmer – THE HOCKEY SCHTICK

Q: When will we ever stop running out of resources? A: …
Limits to Growth is a pile of steaming doggy-doo based on total cobblers – Tim Worstall, THE REGISTER

“In theory, the Federal Reserve was created to reduce volatility in the economy.  In fact, the
Federal Reserve reduces volatility in the short term, but increases volatility in the long term…
    “When the Federal Reserve steps in and uses monetary policy to stop the downside correction
process, all it achieves is to defer problems to the future and make them worse.  Its action
delays and distorts the natural market correction process, thereby reducing the long-term
productivity of the economic system by encouraging a misuse of capital and labour.”
- John Allison, The Financial Crisis and the Free Market Cure

“…a nifty interactive chart of real (i.e., inflation-adjusted) interest rates since the 1960s that explains a lot about today’s world.”
Real Interest Rates and Future Chaos – John Rubino, DOLLAR COLLAPSE.COM

“Social scientists sometimes have an irritating habit of devoting a lot of resources and time to the rediscovery of the blindingly obvious… Cass Sunstein’s latest combines banal insight with pernicious intent.
    “There is something quasi-religious about the use of behavioural economics to indict people for failing to make the kind of choices approved by the author and his expert colleagues. ‘Behavioural economists have shown’ is one of Sunstein’s favourite phrases – it’s the functional equivalent of the biblical expression ‘The Lord said’.”
Nudge: A War on Moral Judgement – reviewed by Frank Furedi, SPIKED ONLINE

“Today I talked to Deirdre McCloskey, the author, most recently, of The Bourgeois Virtues and Bourgeois Dignity, about how the West got rich, and why the traditional explanations don’t work. Very interesting and important stuff.”
How Did the West Grow Rich? – TOM WOODS SHOW

What is the best starter explanation of "negative numbers"?


Turns out good magic is based on good human psychology. “The smaller, quieter half of the magician duo Penn & Teller writes about how magicians manipulate the human mind.”
Teller Reveals His Secrets – SMITHSONIAN.COM

Just what it says.
The Lazy Person's Guide to a Happy Home: More Sneaky Cleaning Tips for People Who Hate to Clean – APARTMENT THERAPY

“More than 6000 were made, but fewer than 3500 were launched and around 2000 hit their targets. The sad irony, says Neufeld, is that as many as 12,000 prisoners in concentration camps may have died making the V-2 compared with the 5500 or so who died in the direct hits.”
Myths and reality of the Nazi space rocket – NEW SCIENTIST


“In a big step toward driverless automobiles, General Motors has announced that it will introduce a new Cadillac model in 2017 that features hands-free driving.”
Hands-Free Driving By 2017, Says GM – Ronald Bailey, HIT AND RUN

“Adam Smith understood the appeal and obsession we have with the Apple Watch…”
How Adam Smith Can Change Your Life: An Unexpected Guide to Human Nature and Happiness – Russ Roberts, AMAZON

“This one is so simple it is stupid, yet you hardly ever hear it.  If anything it is mocked, but I will go on record…”
A simple rule for making every restaurant meal better – Tyler Cowen, MARGINAL REVOLUTION

[Hat tips Geek Press, Leighton Smith, Cafe Hayek, Watts Up With That, Scott Powell, Montessori Homeschol. Kevin Whipp , Russell Roberts, Famous-Quote.net, A Man out of time, Eric Crampton, Samizdata]

Thanks for reading,
Have a great weekend!

PS: Tuatara O’Clock is never a bad time



Fuelling the Flame Within: Montessori Education and the Development of the Self

Steven Hughes is a paediatric neuropsychologist who was so impressed at what he saw in his daughter’s Montessori school – so intrigued at how beautifully the Montessori system reinforces a child’s growth and natural brain development – that he joined the company: lending his considerable ability to the Association Montessori International Global Research Committee and travelling the world to talk about their work.

Last night he spoke to an Auckland audience of 300 about the way Montessori education “fuels the flame” of each child's unique identity, and how mainstream education helps snuff it out:

Beginning as a tiny spark, the light that shines within a child will, over time, grow to become a steady, strong flame if he or she experiences an environment that recognizes, respects, and fuels it. What are the requisite features of such an environment? What makes Montessori education so effective in "fuelling the flame" of each child's unique identity? 
    Part of Dr. Montessori's genius was her understanding that human development requires different experiences at different stages of development. In this lecture, Dr. Steve Hughes will explore how the environments provided at each plane of Montessori education support the formation of essential aspects of cognitive capabilities known as "executive functions." These capabilities are necessary for the creation of curious, creative, moral, inspired, and inspiring adults—people in whom the light of identity burns bright and warm.

This is a shorter version of the magical talk we heard last night. I highly recommend it.

And if you’re inspired to think about becoming a Montessori teacher—of if you know someone who would be -- you’re in luck: there’s an AMI diploma course kicking off in Auckland this summer …

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Thursday, September 11, 2014

Niall Toibin: The Builders

Talking to a colleague earlier today, I was reminded of the great Niall Toibin on builders’ quotes …

* Pron: NEEal Tow-BEEN

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“The left has already won this election”

She’s right, you know. 

Josie Pagani, that is, saying National is coasting on its rival's policy:

The left has already won this election.
    John Key's National Party is still high in the polls, not because the values of the right are popular, but because National's pitch is essentially, "Trust us to implement Labour policy. We'll spend a bit less than them doing it, and if you're lucky we'll give you a tax cut from the savings -- maybe."
    The left won the contest of ideas a long time ago, and National has completely capitulated… promising only to administer the policy wins of the left.

On that, she’s absolutely right. On the battle of ideas, the left has already won this election. It’s so patently obvious it need hardly be debated.

Where she’s wrong is assuming that’s a good thing.

She says it’s a good thing for example that

_Quote_IdiotNational has rolled over and accepted the left's analysis that … the market can't fix everything. [That] National held its nose and intervened to rebuild Christchurch and fix the failing housing market.

Yet, when was the market given an opportunity to rebuild Christchurch? It worked very well until 4 hours after the earthquake when the government took over and closed the city down.

And, when has the market been given a chance to fix the failing housing market? It had been working moderately well for umpty-tum years until increasing council costs (brought on by Sandra Lee’s 2001 Local Government Act intervention) and the increasing planning stranglehold on land (brought on largely by National’s 1993 Resource Management Act) began sending housing costs through the roof – and even while supply went through the floor demand has been kept high by newly issued debt courtesy of the Reserve Bank.

Being at the intersection of the three of the most heavily regulated and interventionist “markets” in the land – building, planning and money creation – all areas that have been reformed from the “leftist” menu -- it’s no surprise that what the housing “market” has managed to deliver has been large gains for some at the expense of misery for many.

Such is the pattern of heavily regulated and interventionist “markets” everywhere.

And it’s no surprise to discover that the leftist-inspired top-down solutions in Christchurch have failed to set anything alight apart from anger and resentment and very little rebuilding that really deserves the name.

Such is the general pattern when governments attempt to direct markets in direction people don’t wish to go.

Such would be the tragedy repeated in every other area should the Nats’ ideological capitulation be given voice in the other areas Josie would have them further gum up: in “actively managing the economy in favour of exporters and producers” (and so lowering the dollar that it would reduce real wages for everyone); in further raising minimum wages (and so locking out teenagers and the  low-waged from ever rising up the employment ladder); in regulating the prices of energy companies (guaranteeing both shortages and falling energy investment); and in tying up “the supermarket duopoly” (all but guaranteeing either shortages or rising prices).

Josie’s right that for years the Nats have capitulated in every ideological battle they have encountered – bringing always and in every policy debate just a pop gun to the left’s ideological nuclear weapons.  As Lindsay Perigo and myself and undoubtedly many others have and will have pointed out, this is the real reason, if there is one, for what the left have called “dirty politics.” 

But where Josie is very wrong is in assuming the Nats’ “management” of their capitulation has made anyone outside the immediate political arena better off.


Australia’s bubble banks [+ update 3]

Bank leverage

Estimates suggest the Australian housing market has nearly $3 trillion of bubble value waiting to burst, while the capital base of Australasia’s banks is well under $200 billion. 

This excessive leverage is not a healthy sign – especially when those Australian banks are also our banks …

ONE of the top global regulators during the global financial crisis has lent support to David Murray’s suggestion of tougher capital requirements for Australia’s big four banks, arguing they are excessively leveraged and their preferred ‘risk-weighted’ capitalisation measures are misleading.
    Sheila Bair, appointed by President George Bush to chair the US Federal Deposit Insurance Corporation between 2006 and 2011, said permitting Australia’s big four banks to be leveraged more than 20 times was unwise…
    “Capital levels around 5 per cent of liabilities [equivalent to leverage of around 20 times] certainly doesn’t leave a huge cushion of equity if asset prices decline,” she told The Australian, wryly observing the “very healthy amount of debt” of Australia’s big four banks…
    With $3.164 trillion in assets and $147 billion in ‘tier 1’ equity the majors together are leveraged more than 20 times.

As Ludwig Von Mises pointed out over a hundred years ago, this of course is part of the inherent fragility of modern fractional reserve banking, in which debt is organised into currency and the banks who issue that debt are inherently bankrupt, backstopped only by the power of central banks to print new money. and taxpayers to bail them out.

For the naive mind [said Von Mises] there is something miraculous in the issuance of fiat money. A magic word spoken by the government creates out of nothing a thing which can be exchanged against any merchandise a man would like to get. How pale is the art of sorcerers, witches, and conjurors when compared with that of the government's Treasury Department!

In the end, all that backs this excessive leverage is that naivety, and the power to tax and bail out.

The big four banks are united in opposition to a suggestion in the July interim report of the Financial System Inquiry, chaired by Daivd Murray, that they might need higher capital levels to curb the prospect of taxpayer funded bailouts, proffering PwC analysis showing the majors were “at or above the 75th percentile of bank capital” compared to relevant global peers.
    Commonwealth Bank, ANZ, National Australia Bank and Westpac combined have a ‘risk-weighted’ capital ratio of 8.6 per cent, according to June APRA data, above APRA’s minimum of 8 per cent to apply from 2016.
    But Macquarie Group analyst Michael Wiblin said ANZ, NAB, CBA and Westpac were, among the 175 banks the brokerage tracks, in the top third ranked by leverage — a simple measure comparing bank debt to equity. “Their risk-weighted capital ratios look good because they have large home loan portfolios, which have a lower risk weighting,” he said.

That “lower risk weighting” is one reason banks like lending on housing – it allows them to create more debt than they otherwise would. It’s also another reason housing sits in a bubble.

Indeed, as Hugh Pavletich points out,

imagethe Australian housing market is grossly over-inflated, house prices being in excess of 5.5 times household incomes for its metropolitan areas (the major markets are much worse), while for normal markets it should not exceed 3.0 times … refer this year’s Demographia International Housing Affordability Survey.
    As a check measure, the Total Housing Stock Value to Gross Domestic  / State / Metropolitan Product should not ideally exceed about 1.2 times … tops 1.5 times … as I explained within a Fairfax Australia article early 2011: 
    The mid 2013 figures (from James Gruber / Forbes)  show the ratios were the United States 1.15 times; Canada 1.78; United Kingdom 2.82; New Zealand 3.18 and Australia a frightening 3.26 times.
    The Australian situation has worsened since mid-2013,
leaving New Zealand’s bubble economy severely vulnerable
    Just recently,Paul Marin of Melbourne’s Age newspaper argued
(Australian) house prices are inflated and a fall seems certain - the only question is when. And Eryk Bagshaw of the Sydney Morning Herald spotted more evidence of the same bubble, with home buyers lining up for three days to buy property.

Australia now has a housing market in excess of $A5.0 trillion, which therefore has at least $A2.5 trillion of bubble value incorporating about $A625 billion of bubble mortgages.

As reported in The Australian above, the major Bank’s capital base  is just $A147 billion.

This does not even consider risks within the mining sector, with their dramatic fall in commodity prices, nor the many risks within the agricultural sector.
     When the Irish housing bubble burst in 2007 –8, its metro Median Multiples were 4.7 (refer 2008
Demographia Survey) and by 2013 had fallen to 2.8 Median Multiples.*
     About a quarter trillion euros of bubble value was wiped out of the Irish housing market when its bubble burst.
     The housing Median Multiple Stretch is currently far more extended in Australia and New Zealand at about 5.5 times.
    What was the capital ratio of the Irish Banks at the time of the housing bubble crash ?
    Why hasn’t the train of events of the Irish housing bubble collapse not been discussed in the public and political arenas in Australia and New Zealand ?
    In using the Irish housing bubble as a guide, how would the Australian banks cope if $A2.5 trillion of bubble value was wiped out of the Australian housing market ?

These are the sort of questions good journalists should be asking.

These are the sort of risks that should further encourage good politicians to realise fixing the housing market is a matter of the utmost urgency.

And these are the sort of facts that should cause good economists to question their addiction to the inherent risks of fractional reserve banking.

* The Schedule of the 10 Annual Demographia International Housing Affordability Surveys is accessible via PERFORMANCE URBAN PLANNING: http://www.performanceurbanplanning.org/.
    Within an article I wrote back in early 2009, HOUSING BUBBLES & MARKET SENSE, an extract from an article written by Michael Lewis for Portfolio.com is incorporated, dealing with the significance of the Median Multiple measure for housing …

UPDATE 1: Sheila Blair’s warning is being discussed at Macrobusiness.Com.Au…

UPDATE 2:  Familiar with housing busts and bubbles themselves, Australia’s not ‘the lucky country’ anymore say Irish commentators.

Two months ago, I warned that Australia’s status as 'the Lucky Country' was doomed and that an economic crash was imminent.
    Then, many Australians derided the prognosis, but now the penny has finally dropped as optimistic press splashes are replaced by mounting fear.
    'Clear and present danger' screams the Sydney Morning Herald while the Australian warns 'Economy faces a difficult ride' and the Australian Financial Review doesn’t hold back either, with 'Economy enters danger zone'. Bloomberg is even more pessimistic:
'Australia gives up on Australia as investment dwindles.'
The headlines indicate that something has changed Down Under this antipodean spring, as smart locals have realized what serious analysts have known for a long time and was predicted here – Australia is poised for a Greece-style financial meltdown.
    The cause is a dramatic freeze in Chinese construction, which feeds on Australian iron ore …
    Screeching halts are a wonderful thing for runaway trains but tend to cause havoc in frothy markets and, as previously outlined, the sudsy Australian housing casino is as precarious as a plane where the passenger is trying to switch off the engines…
    “All the official evidence is that Australia’s economy and banking system could handle a property crash – the banks and regulators say they have stress tested the impacts of a severe downturn and the banks are big and strong enough to weather a sharp correction,” [says Jonathan Shapiro, a journalist at the Australian Financial Review]. “I have my doubts.
    The balance sheets of two of Australia's four pillar-banks have cash-to-asset ratios that are lower than what Lehman Brothers held in the US 15 months before its collapse. Worse again, the asset sheets of each of the 'big four' financial institutions represent close to half of Australia's total GDP – Lehman's was just 5 percent of the American total. That seems to question whether the regulators are living in the real world and Shapiro’s doubts are well-founded.

UPDATE 3: “Australia’s major banks could be hit with a ratings downgrade and find it more expensive to borrow money in overseas markets if their bond-holders are forced to incur losses in the event of bank failures, according to Fabienne Michaux, head of Standard & Poor’s Ratings Services Australia and New Zealand.”

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The Ant and the Grasshopper–NZ, 2014

The ant and the grasshopper have been around for a while.  But now, Grasshopper is eligible to vote …


Traditional Version:

Ant works hard all summer long in the withering heat and rain, building his house and laying in supplies for the winter. Grasshopper thinks Ant is a fool and laughs and dances and plays the summer away.
Come winter, Ant is warm and well fed.

Grasshopper has no food or shelter, so he dies out in the cold.

Work hard, think ahead, and be responsible for yourself!

The 2014 NZ Election Version:

Ant works hard all summer long in the withering heat and rain, building his house and laying in supplies for the winter. Grasshopper thinks Ant is a fool and laughs and dances and plays the summer away.

Come winter, shivering Grasshopper calls a press conference and demands to know why Ant should be allowed to be warm and well fed while he is cold and starving.
TV1, 2 & 3 News, and Campbell Live show up to provide pictures of the shivering grasshopper next to a video of Ant in his comfortable home with a table filled with food,

The country is stunned by the sharp contrast. Simon Collins looks for other grasshoppers and writes a dreary series of Herald articles on the explosion of grasshopper poverty, Major Campbell Roberts is quoted on the increase in food parcels going to grasshoppers, and Hone Harawira declares it appalling that young grasshoppers are going to school without breakfast.

How can this be, they ask, that in a country of such wealth, poor grasshoppers are allowed to suffer so?

Sue Bradford appears on Campbell Live with Grasshopper and everybody cries. The Green Party stages a demonstration in front of Ant's house where the news stations film the group singing, 'We shall overcome.'
Green Party Leader Metiria Turei condemns Ant and blames John Key, Rob Muldoon, Jamie Whyte, capitalism, global warming and the ant class for the grasshopper's plight. And John Minto shows up with a rent-a-crowd chanting that Ant has got rich off the back of Grasshopper, and calling for an immediate tax hike on all ants to make them pay their fair share.

Finally, in pursuit of votes, John Key drafts and passes under urgency the Economic Equity & Grasshopper Preference Act, retroactive to the beginning of the summer, and takes Grasshopper north on a trip to Waitangi.

After a hearing in which Grasshopper reads his Statement of Exploitation to a packed and emotional courtroom, Ant is fined for failing to consider how his hard work and preparation has affected Grasshopper’s mana and, having nothing left to pay his retroactive taxes, his home is confiscated under the Government Land Reappropriation Act and given to Grasshopper.

The story ends as we see Grasshopper and his free-loading friends finishing up the last bits of Ant's food while the government-confiscated house he is in (which, as you recall, just happens to be Ant’s old house) crumbles around them because Grasshopper doesn't maintain it.

Ant has now disappeared to Australia, never to be seen again.
Grasshopper is found dead in a drugs-related incident.
The mother’s of grasshopper’s children sue the builder of Ant’s house for its deterioration.
And the house itself, now abandoned, is taken over by a gang of Homeboy spiders who terrorise the once prosperous and peaceful neighbourhood while lodging grant applications to NZ on Air for their gangster rap posse.

Be careful what you vote for.


Media letting politicians off the hook for housing issues

Hugh Pavletich recommends what he calls “an excellent interview of National’s finance spokesman Bill English by Bernard Hickey of Interest Co.NZ.”

Hugh highlights however that whatever you might think about English’s talk of “stability,” Bill’s Blue Team has totally dropped the ball on housing, highlighted perhaps by yet another major review on housing underway by the Productivity Commission. Because the problem with housing is not any lack of reports …

Within the above interview [says Hugh] Bernard Hickey let Mr English “off the hook” regarding the National Party initiated Commerce Committee Housing Inquiry of 2007 / 08 (chaired by none other than Hon Gerry Brownlee), assisting them to win the 2008 election (which this writer applauded them at the time), but alas very little was done over the following 3 and 4 years -- as was explained late 2012.
    … Mr Hickey and other media people should be reminding politicians of the long history of the housing issue, and press them harder on their lapses along the way -- including National’s failure to follow up their few fine words, and Labour’s major lapse 2002 through 2008 which 
first allowed the unnecessary housing bubble to erupt.

And now, twelve years on, after both parties did their best to make the housing and construction market not work, doesn’t it make your teeth grind to hear them talk about market failure needing correction by their further intervention!  (Not to mention the RMA itself, brought in by National over twenty years ago, giving councils’ the power to constrain land supply they’ve been exercising so lavishly.)

Something of the same was going on in this thee-way interview in which Sean Plunket failed to properly hold to account either the evasive Phil Twyford or the odious Nick Smith,the only real sense coming from the NZ Initiative’s Oliver Hartwich…

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Wednesday, September 10, 2014

This is not satire

No, honest, this really and truly is true. See, no joke, from the Herald:


$9 million of your money to develop a game development fund. To give to game developers.

Plus another $3 million over three years for something called a “government chief technology advisor.”

If this were truly satire, I’d be stuck coming up with a worthwhile punchline…

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Welfare family to have second

Britons are outraged that a Kensington couple who rely on welfare to get by are now having their second child, just a year after their first.

“I don’t want to sound harsh, but shouldn’t they be thinking about how they’re going to pay for the first one, before popping out another?” said one furious London resident.
    This is just another example of benefit cheats taking us for a ride. I’m sorry, having kids is lovely, but don’t expect us taxpayers to fork out to pay for them,” said another.
    Further investigations have revealed that the father comes from a family where welfare dependence is engrained. Social worker Jenny Bridgeworth said she had discovered a pattern of taxpayer reliance in the family stretching back generations. “I feel sorry for them. You see this a lot. He’s grown up knowing no other way.”

The father, grandson of a German tourist and a Greek boyfriend who have both been beneficiaries all their lives, was unrepentant, but available for comment.

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New InternetMana billboards

A series of billboards saying things about which politicians have never resiled would be an excellent resource for this election.

ALCP’s Richard Goode has started the ball rolling with this one above, from trendsetter and DotCon icon Laila Harre, uttered in the Evening Post in 1987 apropos of not much at all.

For young trendsetters who might not get the reference, the Evening Post was a late, unlamented newspaper. 

And Stalin was a late, unlamented genocidal murderer.

Coming up next, Annette Sykes laughing and applauding at the September 11 atrocity – “I was laughing, I was so happy.”

Other suggestions welcome…


Restoring Wright Buildings with 3d printing [updated]

Frank Lloyd Wright’s Millard House or “La Miniatura”

While everyone has been talking about trying to 3d print houses, Frank Lloyd Wright’s ‘textile block’ buildings are being restored for pennies in the pound with 3d printed textured blocks.

His Annie Pfeiffer Chapel at Florida Southern College—part of a composition of twelve buildings at the South Florida campus designed as a “harmonious whole expressing the spirit of the college free from grandomania:--has had is having a makeover with the help of 3d-printed textile blocks replacing weathered and aged blocks.

The cost to recast Wright’s blocks by hand proved prohibitively expensive in the past…until the arrival of the affordable 3D printer.
    Thanks to a $50,000 grant from the Florida Division of Historical Resources and the emergence of affordable 3D printing technology, the Annie Pfeiffer Chapel was
recently restored in exacting architectural detail.
    Architect Jeff Baker of
Mesick Cohen Wilson Baker Architects oversaw the 12-month grant project, turning to the aid of 3D printers to replicate and replace what was once a tedious manual process. 3D printing significantly reduced both cost and effort to complete the architectural restoration, allowing Baker’s team to integrate 2,000 distinctive coloured glass tiles into Wright’s original design textile blocks, recreating the jewelled box effect envisioned by the architect.
    “The success found on this project is a milestone not only in the restoration of Frank Lloyd Wright buildings on the FSC campus but also for similar textile block projects designed by Wright and other architects throughout the nation,” enthused Baker.

This opens up possibilities not just for restoration, but for new textile block buildings as well.

And not just new and inexpensive textile buildings – new and economical methods of applied ornament as well. Just imagine what Wright’s master Louis Sullivan could have done with a few industrial 3d printers instead of being restricted to hand-crafted forms for cast iron, plaster and terracotta!

Coping of Louis Sullivan’s Wainwright Building


[Pics from http://prairieschoolarchitecture.tumblr.com/, Florida Rambler, Design Milk, When the Sidewalk Ends and 3dprint]

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