Tuesday, 7 September 2010

‘Woman with a Parasol’ – aka ‘Madame Monet and Her Son,’ by Claude Monet


The subject appears to be Claude Monet’s wife and sun.  The real subject is wind, and movement—expressed in colour and texture.

Earthquake Engineering of the Day: The K-Braced Frame

New Zealand engineers are among the world’s leaders when it comes to earthquake engineering—everyone in Christchurch right now might like to pause at some stage and say a silent “Thank you” to the men and women who designed the structural systems that kept them safe through an earthquake of the same strength that killed hundreds of thousands of poor souls in Haiti last January.

So I thought over the next few days, by way of thank you, I’d start showing you just a few of the ingenious creations of seismic engineers that help keep people safe, beginning by re-posting a system I talked about a few months ago, the “K-braced frame.”

There are people who say engineers aren’t creative. Not true. Just look at this cunning rearrangement of traditional structural elements that makes tall buildings less expensive to build for earthquakes, safer in an earthquake, and more likely to be useable afterwards.

auckland-hospitalYou might have seen ‘K-braced frames’ on the outside of buildings all over the world, and you’ll certainly have spotted them if you’ve ever taken a decent look at Auckland Hospital (right), which is a variant on the theme.

And it’s a pretty good theme. You see, the main aim in earthquake design is to make sure people can get out safely – which means to avoid the building collapsing.  The K-brace (and its cousins the V-brace and the D-brace) do that and much more: they also make it easy to repair the building after an earthquake so that it can get straight back into action – which is pretty important for a major hospital.


The two key elements of these bracing beauties are, 1) the “triangulation” of the structural members, and 2) that little piece labelled ‘e’ on the drawings above. ‘e’ is actually called a “link”—a “sacrificial link.”

The seismic engineer uses the nature of both geometry and earthquakes to make your tall building safer. And how he does it is so elegantly simple it’s almost laughable. He does it by making that little link act like the fuse in your fusebox.

SacrificingTheLinkYou see, earthquakes tend to shake buildings from side to side, the result of which which you can see happening in that diagram on the right.  And since triangulated structures tend to be rigid, when the building moves a little to one side the geometry of the K-brace means that the link moves a lot.

So as the building moves from side to side in a quake (and some quakes can go for a minute or more, meaning lots of shimmying) that link is working up and down and up and down so many times it eventually turns the heavy section steel into chewing gum. Into plastic. And and in the process of being deformed, it’s absorbing much of the earthquake’s energy that would otherwise have gone into destroying the parts of the building that hold it up.

But as long as our sacrificial link is turning to plastic, then our beams and columns aren’t. That’s the beauty of the system. Let the link die, and use it to absorb and save the building and its occupants—and afterwards, by way of repair, all that’s often needed is to take out the deformed links and replace them with new ones.

Now how’s that for ingenious.  Taking the same materials normally used in a building frame, and placing them in an arrangement designed to better combat earthquakes. And since creativity consists of “the power to rearrange the combinations of natural elements” then this sort of ingenuity is the very acme of creativity, and much more interesting than most of the stuff that flies under that flag.

Good post-earthquake commentary

Some good post-earthquake comments and science around the traps.

And I enjoyed this comment by Owen McShane over at Frog Blog’s earthquake thread:

_Quote The BIG story is that this massive earthquake in a major city has resulted in zero deaths. The timing had much to do with it of course because most people were safe at home in their lightweight timber framed suburban beds.
    Had they been in offices many would have been turned into hamburger my moving filing cabinets etc.
    The low damage level is a tribute to our engineers scientists and our building codes.
    Hopefully more people will be aware that “solid brick” is not your best friend in an earthquake.
    Of course we know that Christchurch is subject to earthquakes. That is why there has been a major programme for strengthening older buildings. Every part of NZ is at risk of earthquake. It’s just some are more at risk than others.
    The light timber frame is the ideal construction. I remember a seminar on earthquake design from an expert who had just returned from the great Alaskan earthquake. I house, which could have passed for any bungalow in Auckland, rolled down a steep hill during the earthquake. The window panes remained intact.
    Remember, an earthquake of this magnitude killed 230,000 people in Haiti. Mud bricks may be romantic but they kill you in an earthquake.
    Also those people who have to leave their homes do not have to worry about squatters. They have secure title to return to.
    It is also amazing how quickly services etc are being restored. There is little one can do to prevent underground effects such as broken pipes and gas lines.
    The response time is remarkably good.

If you see other good commentary around the traps, leave a links in the comments and I’ll post them here on the front page.

  • Spotted by Mark Hubbard: a very good article by Frederic Sautet at his 'Coordination Problem' blog, comparing Chch and Haiti earthquakes:  Earthquakes as Economic Phenomena.

    _QuoteThose who live in Christchurch were saved by capitalism and the accumulation of capital it has enabled over the years. Natural disasters are economic phenomena. Governments, including in the West, often ignore this truth to the detriment of the victims who suffer twice—once from the earthquake itself, and a second time from the consequences of poor government policies.

Monday, 6 September 2010

‘Flaming June’ – Frederic Lord Leighton, 1895

FlamingJune (1) Frederick Lord Leighton, Flaming June, Oil on canvas, 47” x 47’

No, it’s not June, it’s September.  But it’s Spring here in NZ, and life (and summer) is ready to awaken. And I think we need some beauty to remind us why life is worth living. 

“I love the sound of breaking windows” [update 10]

I'm sure the thoughts of all my readers are with the people in Christchurch, and have been since they first heard of the disaster.

That it is a disaster instead of a tragedy is almost a miracle.

That no-one was killed may be attributed to the earthquake striking when everyone was abed, instead of out in the streets; that our structural engineers have the knowledge to allow structures to safely resist a 7.1 shake and 93 aftershocks (and counting); and because New Zealand is still wealthy enough to build what they recommend.

Thank goodness for NZ's structural engineers, who in the field of seismic design are recognised world leaders.

Thank goodness too for the civilised way in which most Christchurch folk pulled together to help each other through the calamity, and will no doubt continue to. With the exception of a few vandals taking the opportunity to loot other people's property, these are the sort of people whose city one would like to share—one of the few blessings of a catastrophe like this lies in discovering (if you didn't already know them) the good people who live just over your fence.

One of the alleged silver linings that is talked about, however, is very much NOT a blessing.

There is a lot of work to do now just to get the city back into the shape it once was, and this going to take an awful lot of resources and cost somebody an awful lot of money.  Around 500 damaged buildings, several damaged bridges and many damaged roads, broken sewerage and failed water reticulation systems … all up everyone in the city now faces a bill of around $2 billion in repair costs to get things back to how they were, not to mention all the time and opportunities lost while those repairs are being done.

Early Saturday morning I wondered aloud on Twitter who would be the first moron to start talking about the blessings of all that destruction.  We didn't have long to wait for that moron.  9:20 the very next morning, the Prime Minister was front and centre on TVNZ’s Q&A programme saying (with a smile) “every cloud has a silver lining, there’ll be tremendous stimulus.” [Watch the moron here, at 11:30min in.  Hat tip Paul B for spotting it.] In subsequent interviews elsewhere, Smile and Wave talk more about the “stimulus” effect of the destruction, with the government (he says) picking up most of the tab for the repairs. And he’s been joined in this chorus by other morons like the head of the Contractor’s Federation, Ollie Turner, who talked about this as “a much needed [economic] upturn”—especially for his members.

These are people who love the sound of breaking windows—or at least the fallacy thereof—and who wish to compound the unavoidable natural disaster with an entirely avoidable economic one.

Since he’s only thinking about his members, the head of the Contractor’s Federation could at least be forgiven for violating the very first rule of economics, stated so well by Henry Hazlitt:

_Quote The whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy: it consists in tracing the consequences of that policy not merely for one group but for all groups.

Hazlitt wrote a whole book expressing the lessons embodied in that one principle.  The very first application of the lesson is, of course, our old friend the broken window fallacy. Allow me to just slightly rewrite Hazlitt’s illustration of it for today’s readers, to demonstrate how morons can turn a $2 billion disaster into one costing everyone $4 billion:

_QuoteLet us begin with the most topical illustration possible: let us choose all the broken buildings and shattered panes of glass now littering Christchurch’s streets.
    A crowd gathers, both in Christchurch and on televisions around the world, staring with quiet horror at the gaping holes in the buildings and the rubble and shattered glass over the streets and businesses of the city. After a while the crowd feels the need for philosophic reflection. And several of its members are almost certain to remind each other or the business owners that, after all, the misfortune has its bright side.
    A Smiling and Waving Man smiles and waves about the work this will give to unemployed tradesmen. And the head of the local Contractor’s Federation smiles that it will make business for many glaziers and the members of the local Contractor’s Federation.
    As they begin to think of this they elaborate upon it. How much is the whole repair bill? Two billion dollars? That’s quite a sum. After all, if earthquakes didn’t happen in a recession, what would happen to the glass business and the businesses of all those builders? Then, of course, the thing is endless. The builders will have $2 billion more to spend with other merchants, and these in turn will have $2 billion more to spend with still other merchants, and so ad infinitum. The rubble and smashed windows and  will go on providing money and employment in ever-widening circles.
     The logical conclusion from all this would be, if the crowd drew it, that, far from being a public menace, the earthquake was a public benefactor.

    Now let us take another look. The crowd is at least right in its first conclusion. This major act of destruction will in the first instance mean more business for glaziers and contractors. They will be no more unhappy to learn of the incident than an undertaker to learn of a death. But the ratepayers, taxpayers, business owners and their insurers will be out $2 billion that they were planning to spend for new suits, new factory equipment, new computers, new buildings, new investments and new business opportunities.
    Because, instead, they are first going to have to put things back the way they were, they will have to go without the suits, factory equipment, computers, buildings, investments and business opportunities (or some equivalent needs or luxuries). Instead of having a functioning city and $2 billion we now (after some time) have merely a functioning city. Or, as all these plans were already in the making before the earthquake hit, instead of having both a functioning city and new suits, new factory equipment, new computers, new buildings, new investments and new business opportunities we must be content instead with just the reconstructed city.
    The net result of the “silver lining” is that the community has lost all the new suits, new factory equipment, new computers, new buildings, new investments and new business opportunities that might otherwise have come into being, and is just that much poorer for the loss.
    The gain in business for the glaziers and contractors making repairs, in short, is merely the loss of business for the tailors, retailers and entrepreneurs, and for the builders and designers who erect new buildings. No new "employment" has been added. Smile and Wave and the people in the crowd were thinking only of two parties to the transaction, the owners of the bent buildings and the repairers. They had forgotten all the potential third parties involved, those who missed out on their business because they had to pay for the buildings to be un-bent. They forgot about them precisely because they will not now ever enter the scene.
    They will see the new windows and repaired buildings in the next few weeks and months—along with all the strutting politicians who will say that it was they who made the repairs possible. They will never see the extra suits, computers, buildings and business opportunities precisely because they will never be made. The morons see only what is immediately visible to the eye, and nothing or no-one else beyond it.

So far as I know, Smile and Wave and the head of the Contractor’s Federation are the only morons so far to use words like “stimulus” “earthquake” and “silver lining” in the same sentence.  But please do send in any other sighting you see—I’d love to start cataloguing them here.

And feel free too to send the sightings to the US blog that catalogues sightings “Broken Window” stupidity.  Here it is: Broken Window Watch.

And here’s Nick Lowe, with what could be their theme song.

UPDATE 1: More sightings of the Broken Window Fallacy sent in by readers:

  • _QuoteDon Brash, on Q+A on muttered that the quake would have economic benefits because of the work required to rebuild the city. Don should know better.  (Sometime back North Shore mayor Williams said that the leaky homes saga would be good for economic growth for the same misguided reason. [Sent in by Don W.]

Keep ‘em coming.

UPDATE 2: Kudos to writer Zetetic at The Standard who correctly identifies Key’s blather as an example of the Broken Window Fallacy.  But I’ll take a point off because he/she can’t tell the difference between a Broken Window and “real stimulus.”

UPDATE 3: Stephen Toplis, head of research at Bank of New Zealand. Cameron Bagrie, chief economist at ANZ. Hamish Rutherford, Business Day journalist.  Abject fucking morons, the lot of them.

_QuoteBut as Christchurch Central MP Brendon Burns described it, these losses may be offset by a “silver lining.” The rebuilding programme will kickstart the construction industry in the region and probably require tradespeople from other centres. Gross domestic product figures will improve in the aftermath and so will the employment rate…

UPDATE 6:  NZ Herald business editor Liam Dann confirms his credentials as a stimulunatic.

_QuoteIn Italy at the weekend, the world's smartest economists gathered to discuss weighty issues, such as whether governments should pump more stimulus into their ailing economies.
    At the same time in New Zealand, a massive earthquake was making that decision for us…. nature has unleashed the biggest job creation scheme this country has seen…. we are going to see billions of Government dollars injected into the southern economy.
    With any luck, that may kick-start strong economic growth for the whole nation.

Fortunately, several of Dann’s readers demonstrate in the comments below his moronic Pollyanna-ism that they’ve got more smarts than he has, one of them pointing out, correctly, “If earthquakes are a source of prosperity then there is no need to wait or them to come along - just start tearing down buildings and enjoy the prosperity.”

UPDATE 7:  ASB chief economist Nick Tuffley joins his colleagues from the other major banks in talking complete and utter bollocks:

_QuoteOver a longer period, the impact on GDP is likely to be positive [said the moron in an article penned by Brian Fallow], on the grounds that $2 billion, say, of damage represents close to $2 billion of additional demand, in rebuilding, repairing and replacing what was damaged.

I swear, if you didn’t read these comments for yourself, you’d think I was just making them up.

UPDATE 8: Hallelujah!  Despite the welter of alleged economists talking up the benefits of destruction, Westpac’s Brendan O’Donovan says we’re worse off for the earthquake, not better. GDP is not a good measure, he told Radio New Zealand this morning, because it doesn’t measure the capital destruction. If natural disasters were really a boost to the economy then we should just go around smashing our windows every week. “If it is a $2 billion cost then wealth has taken a $2 billion hit.”  Listen in to this rare piece of good sense out in public.  The conversation starts about 1:30 minutes in.  Listen to it at least twice,

UPDATE 10:  Good sense is finally starting to outdo non-sense.  This just in from Stuff’s Business Editor Patrick Smellie:

_QuoteLet’s get one thing straight. Earthquakes are not good for the economy.
    There’s been some feverish talk about the damage to Christchurch being some kind of god-send for the construction industry, especially after last week’s prediction of a collapse in activity in that sector, with 20,000 to 30,000 jobs at risk.
    But try painting the destruction as good news for someone whose house is threatened with collapse on the next big after-shock. Don’t expect a sympathetic reaction.
    Yes, it’s true that there’s suddenly a lot of work in Christchurch for anyone skilled in wielding first a sledgehammer and then a normal hammer.
    But an earthquake is only good for the economy in the same way that wars are: once everything’s been wrecked, it needs to be rebuilt.
    But what do you have once you’ve rebuilt? You have what you had before, only newer.
    Admittedly, there will be an opportunity to throw some Batts in the ceilings of elderly homes that are temporarily unroofed, and some property owners will take the opportunity to renovate earlier than they might have. Nationally, retailers of baked beans, torch batteries and big bottles of water will probably report a stronger month than usual.
    But there is still virtually no productivity gain, no new long-term economic activity generated, and no addition to the national balance sheet from reconstruction in the aftermath of a disaster.

Well said, sir. The point about renovation is worth chewing over a bit more.  The third chapter of Hazlitt’s seminal Economics in One Lesson, written immediately after the war when so many alleged economists were talking about “The Blessings of Destruction,” contains this observation on the improvements the destruction makes possible [starting on page 13]:

_QuoteIt is sometimes said that the Germans or the Japanese had a postwar advantage
over the Americans because their old plants, having been destroyed completely by
bombs during the war, they could replace them with the most modern plants and
equipment and thus produce more efficiently and at lower costs than the Americans
with their older and half-obsolete plants and equipment. But if this were
really a clear net advantage, Americans could easily offset it by immediately
wrecking their old plants, junking all the old equipment. In fact, all manufacturers
in all countries could scrap all their old plants and equipment every year and erect
new plants and install new equipment.
    The simple truth is that there is an optimum rate of replacement, a best time for
replacement. It would be an advantage for a manufacturer to have his factory and
equipment destroyed by bombs only if the time had arrived when, through deterioration
and obsolescence, his plant and equipment had already acquired a null or a
negative value and the bombs fell just when he should have called in a wrecking
crew or ordered new equipment anyway.
    It is true that previous depreciation and obsolescence, if not adequately reflected in
his books, may make the destruction of his property less of a disaster, on net balance,
than it seems. It is also true that the existence of new plants and equipment
speeds up the obsolescence of older plants and equipment. If the owners of the
older plant and equipment try to keep using it longer than the period for which it
would maximize their profit, then the manufacturers whose plants and equipment
were destroyed (if we assume that they had both the will and capital to replace
them with new plants and equipment) will reap a comparative advantage or, to
speak more accurately, will reduce their comparative loss.
    We are brought, in brief, to the conclusion that it is never an advantage to have
one’s plants destroyed by shells or bombs unless those plants have already become
valueless or acquired a negative value by depreciation and obsolescence.
    In all this discussion, moreover, we have so far omitted a central consideration.
Plants and equipment cannot be replaced by an individual (or a socialist government)
unless he or it has acquired or can acquire the savings, the capital accumulation,
to make the replacement….

Which is precisely Brendan O’Donovan’s point above.  If the earthquake imposes a $2 billion cost, then capital has taken a $2 billion hit.

Saturday, 4 September 2010

The Christchurch earthquake is being Twittered

Search on Twitter using the #eqnz hashtag for the latest on the Christchurch earthquake. It’s way ahead of old media.

Friday, 3 September 2010


It’s the week that bailouts came to New Zealand, a week when taxpayers lost out three times over—one when our money was spent on stuff that’s worth less than what we paid; once when our payout ensured that the stuff would never fall to its real value; and once again because its apparent that neither politicians nor media have yet got their heads around the Broken Window Fallacy. It’s not like it’s complicated.


Because as Henry Hazlitt used to say, “the art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”  Sadly, it’s an art that is all but dead.

So as a homework exercise, work out what our economy will be now be short of because of that $1.7 billion given to people who haven’t earned it. When you do, you’ll be brighter than all those know-nothings writing about that payout as a “stimulus.”

And once you’ve done that. here’s your Friday morning roundup all ready for some good weekend reading. 

But first, Neil Miller has a suggestion: “The Pakistani Ambassador who claims the cricketers were 'set up' might be an ideal candidate for the Investor Relations Manager role which was advertised on the South Canterbury Finance website.” And, for similar reasons, maybe Bernie Madoff really does need to be appointed to the Fed.

Okay, on with the show!

  • Entitleitis is alive and well at TVNZ
    TVNZ's culture of extravagance – KEEPING STOCK
  • “No self-respecting NGO and campaign group would be seen these days without a Twitter account to spread the word (Greenpeace, Friends of the Earth and WWF have over 200,000 followers between them for example). But last week's day of mass action by British “Climate Camp” protesters showed just how badly Twitter can backfire.”
    Twitter backfires for Climate Camp – GUARDIAN
  • Maurice Williamson announces the bleeding obvious.  “Opposition to foreign investment is more about racism than overseas ownership, the minister charged with deciding whether a Chinese company can buy a large chunk of New Zealand dairy farms says.”
    Minister accuses Kiwis of racism - STUFF
    In response, Greens fail to see past the end of their nose.
    Williamson and English running racial interference on foreign investment - FROG BLOG
  • Since it’s the season to talk constitutions again in Wellington, allow me to re-post the contributions of myself and my colleagues to constitutional conventions past—including explanations for why a proper constitution is so important, and what one should look like. Why is it so important?  If I may quote myself: ”Government in essence is like a guard dog: it is there to protect us from being done over by others. However, if that dog is badly trained and it gets off the chain, we can be badly savaged -- more than we would have been without the dog. A constitution is our means of chaining up the government and training it to act only in our protection… As history demonstrates however… a bad constitution poorly written can give the erstwhile guard dog control of the back yard and the house, and rather than protecting us it then has no impediment to doing us over. Liberty, as Thomas Jefferson suggested, requires eternal vigilance.”
    Cue Card Libertarianism: Constitution – NOT PC
    A Constitution for New Freeland – LIBERTARIANZ
  • Best quip after the enviro-kook taking Discovery Channel staff hostage is shot: “Thank Gaia, they got him.”
    Objective Standard - FACEBOOK
  • “Toronto this week became the first city in the world to formally endorse the Vienna Declaration that states that war-on-drugs-style prohibitions are a costly failure…”
    The rising trend against the war on drugs - Canada – Blair Anderson, CANVASSING FOR OPINION
  • How do officials from the ruling Palestinian political party react to the murder of four Israeli civilians?  Why, they celebrate and hand out candy, of course.
    Gaza Celebrates Jewish Deaths with Candy – ARUTZ SHEVA NEWS
  • Why are so many Palestinians still locked up in squalid refugee camps? Simple: The Arab world doesn’t give a shit about them, except as cannon fodder in their anti-Israali jihad. [Hat tip Thinking man's guide to the world]
    Why Are The Palestinians Still Refugees? – Gina Bublil Waldman, THE PROPAGANDIST
  • The only lower price than today’s closing price on a ton of carbon at the Chicago Climate Exchange is ZERO. Which means the scam artists hoping to set that up and get rich have been discovered for what they are and the investors are fleeing. [Hat tip reader Keith P.]
    Chicago Climate Exchange still flatlining – employee cutsWATTS UP WITH THAT
    Carbon Dioxide Riches Disappear – CANADA FREE PRESS
  • “There is no place for God in theories on the creation of the Universe, Professor Stephen Hawking concludes in a new book.” [Hat tip Per-Olof Samuelsson]
    Creation was Godless says Hawking – BBC
  • There’s no need for the God hypothesis in biology. Nor is there any need for it in physics.
    Hawking: God did not create Universe – RICHARD DAWKINS.NET
  • The Times pits Richard Dawkins against their religion editors in arguing the implications of Hawking’s statement.
    Transcript from The God Debate – Richard Dawkins, TIMES ONLINE
  • Naturally, however…
    Hawking can't possibly be right until his results have been confirmed in an online poll - PHARNGULA
  • Why is anyone still listening to this guy:

  • Sadly, despite his manifest failure, Ben Bernanke is cranking up for Quantitative Easing II (QEII)—it’s inflation like you’ve never seen it before.
    Will the Fed Save the Day? – SEEKING ALPHA
    Former Fed Vice Chairman vs. Mish: Is the Fed Out of Ammo? – MISH’S ECONOMIC ANALYSIS
    The Fed Can't Solve Our Economic Woes – Gerald O’Driscoll, WALL STREET JOURNAL
    Quantitative Easing Ahoy! – Axel Merk, EURO PACIFIC
    Bernanke Out of Bullets, But Not Bombs – Michael Pento, EURO PACIFIC
  • And Ben knows he can always rely on Paul Krugman to sell his schtick.  And all Paul needs is a little sleight of hand with a graph…
    Proof" that the "Stimulus" Worked? – William L. Anderson, KRUGMAN IN WONDERLAND "Spending" versus Consumption: Does Economic Theory Actually Assume People are Human? – William L. Anderson, KRUGMAN IN WONDERLAND
  • Summer of recovery?  No, it’s the …
    Summer of Economic Discontent – WALL STREET JOURNAL
  • “It should be obvious by now that these economists only have the capacity to describe where the economy is moving in the short-term...they have no ability to explain the reasons behind the macro trends or make predictions that go beyond the next data release….
    ”The major mental block is that most economists believe that an economy grows as a result of spending. Any policy that encourages spending and discourages savings and investment is considered beneficial. Unfortunately, these policies, which only succeed in growing debt and government, act more as an economic sedative than a stimulant.”
    Flying Blind – PETER SCHIFF
  • Reader Daniel A. recommends this 46-minute doco narrated by Johan Norberg. “In times of crisis people seek strong leaders and simple solutions. But what if their solutions are identical to the mistakes that caused the very crisis? This is the story of the greatest economic crisis of our age, the one that awaits us.”
    Overdose: A Film about the Next Financial Crisis – CATO
  • Just when you thought it was safe to go back in the water. [Hat tip Terry V.]

 T_Quotehe moral contradiction between the biblical mandate of
self-sacrifice and the factual need for human beings to pursue and
protect their life-serving values is destroying the Republican party. Republicans face a decision. They may conclude that they have
failed their faith and that they must seek redemption by injecting
religion more deeply into politics. Or they may realize that their faith has failed
them and that they must abandon the crusade, commit themselves to
individual rights, and set forth to defend freedom, limited
government, and capitalism.
    - John Lewis, “Reason or Faith: The Republican Alternative

  • And God, this symphony’s good.  Just listen to how the cellos and basses start going wild about seven minutes through this last movement.  It sounds like John Cale is back there!

That’s all for today.
Have a great weekend!

PS: It’s the first week of finals footy in the AFL this weekend—with Geelong lining up against St Kilda tonight in the first Qualifying Final.  Go the Cats!

De Rugy v Romer, Knockout in Round 1

Christina Romer Gives Talk American Recovery VUOuAStMjX1lGuest Post by Jeff Perren

The goddess Veronique de Rugy has an absolutely delicious smackdown of the totally clueless Christine Romer, soon-to-be ex-Obama voodoo priestess.

 _Quote And not only did her own reports to Congress confirm these predictions [about the the success of stimulus “relative to what would otherwise have occurred”], but the CBO agreed as well, and apparently, so did “respected private-sector analysts” (meaning Mark Zandy).
I know, you’ve heard me say it before, but I’ll say it again: A prediction only becomes true when it actually materializes. For instance, if you predict that 3.5 million jobs will be created, it only becomes true once the 3.5 million jobs are created.
You can’t claim victory if you haven’t gone back and checked that these jobs exist. Nor can you claim victory if the only evidence that these jobs exist comes from models that say that these jobs exist — especially when they are models that have the assumption that the Recovery Act creates jobs built into them....
She did mention using it to pay down the deficit, but when asked specifically about the deficit, she basically said we should spend more today and take care of the deficit tomorrow. In other words, more of the “eat your dessert now and your spinach later” mentality that got us into this mess in the first place. It’s never worked with my kids, and I am pretty sure it’s not the way to restore fiscal responsibility in Washington.

When Washington starts listening to individuals like Ms. de Rugy and not smiley-faced fascists like Christine Romer, we'll see some genuine fiscal progress there.

‘Red Vineyards’ - Vincent Van Gogh


I confess, I haven’t always been an admirer of Van Gogh, but the more I see now the more I see to enjoy. Not so much what he chooses to paint—which is little more than another peasant scene in the manner of Millet—as the depth he achieves with some few very coarse brush strokes.

He’s a painter in three dimensions, experimenting with what paint can do to make two dimensional paint give a bold three-dimensional image.

I love the sweep of the trees away from that golden orb hanging ominously above the ensemble; the slight changes in hue of the coarse pant stroke that effortlessly delineate the depth of field; the people who quietly emerge to (eventually) dominate the scene; the feeling that one can sense the earth’s curvature going on beyond the horizon; the reflections on the pathway leading to … somewhere; the house (the abode of man) that quietly competes with that golden orb to dominate the composition.

The Ultra Orange blog recommends you sit in front of this painting for six minutes to discover how it affects you. Worry not—they also have some suitable music to play while you gaze.

Thursday, 2 September 2010

SCF’s Deposit Guarantee: Not just a moral hazard problem [updated]

Turns out that Michael Cullen's Deposit Guarantee Scheme--the one agreed to by John Key before the election, and rolled over by Bill English in April--is implicated in at least two ways over in the collapse of South Canterbury Finance (SCF): causing both risky investments and, at the same time, encouraging major investors to withdraw their money.

We talked yesterday about reason number one: the moral hazard created by the scheme— —that it simply encouraged the finance company to take more risks to make the high interest payouts needed to encourage more “investors”—something confirmed by South Canterbury Finance CEO Sandy Maier, who said Tuesday that “South Canterbury Finance ramped up its risky real estate loans after it signed up to the Government's scheme that protected its investors' money.

_Quote It might have been cynical, it might have been merely incompetent ... it probably violated a lot of prudent lending criteria…

Reason number two to implicate Bill & Michael’s scheme was reported this morning on Radio NZ: that just as South Canterbury Finance was looking for more investment, many major investors were taking money out  to ensure that the only money they were “risking” was the $250,000 guaranteed by the scheme—which is to say that for the last few fragile months the only money many invested in SCF was money for which you and I were taking the risk.

Drinking at the Hitler Bar - NOT PC, 2006So it seems it’s time, once again, for the Law of Unintended Consequences to take a bow.

UPDATE: I’m sure you, like me, will enjoy the irony that some of the money frittered away in loans by South Canterbury Finance after the taxpayers’ involuntary guarantee was rolled over went to a bar in the Auckland Viaduct revelling in the name of ‘Lenin.’

[A place we’ve mentioned here before.]

“Turning back to God,” through art [update 2]

Glenn Beck says America should “try the old turning back to God thing.”  So I thought I’d try the old turning back to a time when the western world was all overrun by folk who were all over God—and for some reason (God knows why) it was a time (around twelve centuries of time) when those God-bothers were bothering any poor sap who didn’t worship their God the same way they did.

God, it was a great time to be alive.  If you could manage it…crusades

It was a time of enormous ingenuity…


And great humanity…inquisition_torture (1)  Ah yes, those were the days…

Here’s some artistic depictions of the “glorious” days gone by of a whole theology based on torture. 

Torture_Chamber_of_the_Inquisition_v2 An artist's depiction of a Torture chamber of the Inquisition, ca. 1736.360px-Berruguete,_Pedro_-_Burning_of_the_Heretics_(Auto-da-fé)_-_c._1500 Burning of the Heretics (Auto-da-fé) - Pedro Berruguetegiordano_bruno Burning of Giordano Bruno – Andre Durand303224 The Supplication of the Heretics in 1210 - Jean FouquetScene_from_an_Inquisition_by_Goya Scene From an Inquisition – Francisco GoyaPillar1-Foundations-galileo-Inquisition Galileo facing the Roman Inquisition - Cristiano Banti, 1857

Yep.  These sure are the sort of grand old times we’d all like to see again.  What could possibly be wrong in turning back to religious zealotry?  Hell, it worked so well the first time.

UPDATE 1:  It’s always strikes me as bizarre that Christians can make themselves feel better about the barbaric past of the faith they worship by pointing to the equally barbaric crimes of Hitler, Mao and Pol Pot—as if this somehow excuses their own faith of culpability for two millennia of bloodshed and butchery.

First, the crimes of of Hitler, Mao, Stalin and Pol Pot in the twentieth century in no way wipe out the barbarities of the christian church in centuries past—which was as bad, if not worse, than the barbarities of Islamists today. Own up to your history, religionists.

Second, the crimes of of Hitler, Mao and Pol Pot are a testament not to the evil of atheism (which says only what one does not believe in) but to the evil of the ideas these bastards did hold: i.e., the collectivist wet dream of making out of humanity one neck for one noose.  Their evils, and the fact they took so many along with them in support, is a testament to the power of ideas to move the world for good or ill—they’re a warning that we must understand the misbegotten notions that lead to totalitarianism,and not to let these bad ideas grow. 

Third, the crimes of those bloodstained collectivists were carried out on the ethical principle of sacrifice—the sacrifice of individuals to the collective—an ethic, you might recall, that was brought into the world and championed by the founders of the christian church—an ethic that still urgently needs to be wiped out. (Not, I hasten to add, with an ethic that requires the sacrifice of the collective to the individual, but one that requires no sacrifices whatsoever!)

Fourth, religionists appear blithely unaware of the religious histories of those they decry as atheists. 

Stalin attended an Orthodox seminary in Georgia before seeing his opportunity for greater victories with the Bolsheviks. And Hitler was a Catholic who was “convinced the people need and require this [Catholic] faith. We have therefore undertaken the fight against the atheistic movement.”  Who as Paul points out, believed he was “acting in accordance with the will of the Almighty Creator: by defending myself against the Jew, I am fighting for the work of the Lord [emphasis in the original]"— And why wouldn’t he believe that, since the Christian church itself had a two-millennia history of attacking Jews as Christ-killers.

And Karl Marx, who inspired the murders of Lenin, Stalin, Mao and Pol Pot, was the son of a rabbinical line and a follower of the philosopher Hegel. Hegel talked about a “World Spirit” who moved history; Marx talked about religion as being “the sigh of the oppressed creature, the heart of a heartless world…the vale of woe, the halo of which is religion.” Rather than denying religious belief, he understood it and brought it down to earth—observing that the “mystics of spirit” offer a reward that never arrives called heaven, an ill-defined realm existing (somewhere) beyond this dimension and to which all today’s sacrifices are offered); he offered instead an equally illusory realm that will never arrive called “the future,” a realm of ill-defined communist nirvana towards which all of his followers’ blood sacrifices were offered, a never-arriving “somewhen” that denies the present and exists only as the goal of some never-to-be achieved struggle.

Fifth, faith and force are not opposites: they are ineluctable bedfellows.  The Bible itself is a blueprint of barbarity; the method by which one is supposed to “know” the Bible’s revelations is the very means by which knowledge is rendered impossible, honest disagreement is rendered impossible, and human bloodshed is the inevitable result.  When one holds reason as the standard by which knowledge is acquired and held, then rational persuasion is the coin of the realm for disagreement; but if one’s ideas are held by reason’s opposite, i.e., by“Faith,” i.e., by “blind acceptance of a certain ideational content, acceptance induced by feeling in the absence of evidence or proof,” then there is no peaceful way to resolve these conflicts. Sam Harris explains the virus:

_Quote The danger of religious faith is that it allows otherwise normal human beings to reap the fruits of madness and consider them holy. Because each new generation of children is taught that religious propositions need not be justified in the way that all others must, civilization is still besieged by the armies of the preposterous. We are, even now, killing ourselves over ancient literature. Who would have thought something so tragically absurd could be possible.

Faith and force are the destroyers of the modern world—just as they were of the pre-modern.  And the greatest destroyer of these two …. is faith, because it makes the other necessary.

UPDATE 2: Paul Hsieh at Noodle Food asks “Which is the Greater Danger: Islamic or Christian Dictatorship?”:

_QuoteIf dictatorship ever comes to America, it won't be an Islamist one. Instead, it will more likely be a Christian one, but one which would arise as a direct result of our current weak approach to the real and immediate Islamist threats. Furthermore, such a Christianist regime could gain traction here in a way that an Islamist regime never could because the Christianist regime would have a superficially "pro-American" veneer.


Wednesday, 1 September 2010

Procrastination: The problem … and a solution!

I recently linked to a neat cartoon about how easy it is to do less important stuff when you've got important stuff to do.  You know what I mean, like when you should be studying for an exam or meeting that deadline, and you suddenly discover the windows need washing—or the spices need filing…

If, like everyone you’ve ever met, you’ve experienced this common problem, then psychologist Jean Moroney has a neat solution.  It involves more than just wishful thinking, but it only takes three minutes…

Corporate welfare is not dead

There’s a lot of people to thank, this morning.  So let’s get started.

We wake up this morning to discover that we are each unwilling investors in a failed finance company. That we have each sent a welfare cheque of around $405 to pay debenture holders in South Canterbury Finance.

Thank you Michael for creating the Deposit Guarantee Scheme. Thanks you John for conniving with him to put it in place before the election. And thank you Bill, for rolling it over in April, just when this shit was heading towards the fan.

We need to put the money in ourselves because South Canterbury Finance couldn’t find anyone else to stump up the cash to fix their cash flow problem.  And why would anyone want to, when the Serious Fraud Office has made a highly public and entirely unspecified raid  on the company’s chairman and related companies.

Thank you Serious Fraud Office.

We said that when the govt’s Retail Deposit Guarantee Scheme was announced that it created a problem of moral hazard—that it would simply encourage finance company to take more risks to make their high interest payouts, and encourage more “investors” to seek out these higher interest rates knowing you and I would bail them out when there was a problem. And so it came to pass. “South Canterbury Finance ramped up its risky real estate loans after it signed up to the Government's scheme that protected its investors' money, the company's chief executive Sandy Maier said last night.

So thank you again, Michael and Bill. And thank you Sandy Maier for placing us on your hook.

We’ve seen that the property bubble was inflated by oceans of counterfeit capital, credit created out of thin air inflating prices, and making everyone think they were rich.

So thank you, Reserve Bank, for underpinning this massive expansion of counterfeit capital.

We’ve seen that at least some of the problem with South Canterbury Finance is problems within the dairy industry. We’ve seen that dairying too was part of a bubble inflated by a $28 billion pyramid of debt – a pyramid propped up by the very assets being inflated by all that debt. That many dairy farmers have been riding the bubble -- "farming for asset gains" instead of for income. About the about the “delusion of credit” that caused it, and the idea that the panacea for debt is credit.”

So thank you, economists, for putting in place the fractional reserve banking system that sees prosperity as a product of credit, whereas from the beginning of economic thought it had been supposed that prosperity was from the increase and exchange of wealth.

We’ve discovered that many of these over-valued farms (valued at far more than their capitalised income) have nonetheless attracted interest from foreign buyers, who wish to inject real resources to make them work—but have been told by xenophobes both within and without government that they can go take a hike.

So thank you, xenophobes, for being so dumb you think far land can be shipped offshore—and having the political power to tell would-be investors to bugger off.

We’ve said that the business model so many finance companies adopted of expecting new investors to backstop the positions of past loans (necessary when your borrowers are developers, whose payments are a long way off) is not a sustainable position.

So thank you, Alan Hubbard and Lachie McCloud, for not sticking to your knitting.

We’ve said that in times of financial collapse, we need to stop worrying and learn to love bankruptcies. “Bankruptcy is a normal part of economic life, covered by laws that guarantee stockholders will be compensated as much as possible. More efficient firms move in to take over what is left of bankrupt firms, buying what can be put to productive use. There is no crime in bankruptcy and, if handled quickly, little economic harm. The present financial problems would disappear quickly if the government let the markets operate and let inefficient firms go bankrupt.”

So thanks, govt spruikers, for keeping bad positions alive, like zombies, to keep dragging us back.

We’ve said the result of the financial crash is that there’s now less demand and less money to go around, and that two of the seven ways to ensure the depression continues is to “Prevent or delay liquidation by propping up shaky businesses and shaky credit positions,” and to “Keep prices up.” stop prices  falling to reflect this new reality.

So thank you, Bill English, for helping to keep values at their unrealistic levels down south, and doing exactly what the doctor ordered to keep things depressed.

And now that it’s backstopped this failed finance company, allowing its bad positions to go on indefinitely rather than be liquidated to find their true value, what’s the principle that will discourage the govt using our money to bailout out the next needy corporate casualty. “A bailout [sets] a precedent for a government helping a private company."

So thank you, one and all.

Time to end the deposit guarantee scheme. To get back to producing things instead of trying to get rich on the back of bubbles and because of inflated asset values.  And to end the fractional reserve banking system that makes bubbles out of what were once good businesses.