Friday, 3 August 2012

FRIDAY MORNING RAMBLE: The ‘we’ve struck gold’ edition


Sorry readers, it’s been a flu-ridden week for your humble writer this week: enlivened only by Olympics medal celebrations.  But here’s a few things that caught your writer’s eye around the net…

Don't come to London for the Olympics, they said. It it will be too busy, they said. They listened, and they didn't—so it's not. Not busy at all, that is; the economic malaise of hosting the Olympics.
Don't come to London - it will be too busy: They didn't, so it isn't – LIBERTY SCOTT

The Wall Street Journal explains ‘ badminton-gate’ with puppets. Yes, really.
Homemade Highlights: Olympic Badminton Scandal – LIVE WSJ

The Olympics have gone smoothly despite -- gasp! -- America's team wearing clothing made in China at the opening ceremony. "I'm so upset," said Senate Majority Leader Harry Reid. "Take all the uniforms, put them in a big pile, and burn them. ... We have people in the textile industry who are desperate for jobs." Here, Reid demonstrates economic cluelessness…
Myths We Live By – John Stossel, TOWN HALL

Thank goodness for The Onion. “Members of the U.S. men's gymnastics team have continued to apologize for their fifth-place finish in Monday’s team finals, mistakenly convinced that they dashed the entire nation's dreams of Olympic glory.”
U.S. Men's Gymnastics Team Thinks It Has Let Entire Nation Down – THE ONION

”Michael Phelps, the American who won his record-breaking nineteenth Olympic medal – his fifteenth gold – in the pool on Tuesday evening is unquestionably the greatest Olympic swimmer of all time. For some of us, however, that should automatically disqualify him from the contest to be named the Greatest Olympian…”
Why Phelps should be disqualified from any ‘Greatest Olympian’ contest – Mick Hume, SPIKED

American gold-medal winners will be shaken down by the Inland Revenue Service on their arrival back home. Because in the now-classic phrase of their president: that gold medal, you didn’t win that.
Go for the Gold! (Pay the IRS.) – WEEKLY STANDARD
Obama 'Invests' in People to Own Them – OBJECTIVIST INDIVIDUALIST

The politics of “You didn’t build that.”
Four Little Words: Why the Obama campaign is suddenly so worried. 
– Kimberly Strassel, WALL STREET JOURNAL
The intellectual roots of “You didn’t build that.”
The Shoulders of Giants: Obama didn't build "You didn't build that." 

Eric Crampton reckons Christchurch’s covered-stadium plan is a poison pill the government is trying to offload on the council.

“Fair tax”? What the hell does “fairness” have to do with tax?
Taxing Language: A Question for the Politicians - Fair: What Do You Mean? – Mark Hubbard, LIFE BEHIND THE IRON DRAPE

Louisa Wall’s bill to legalise gay marriage has whipped up opposition from those arguing the law should recognise the Biblical view of marriage. Be careful what you wish for.
A Biblical View of Marriage – AMERICAN ATHEISTS

And, since you asked for his opinion…
Gay Marriage Is for Suckers – Lindsay Perig0, SOLO

The right to agree with others is not a problem in
any society; it is the right to disagree that is crucial.

            - Ayn Rand

Len Brown has worked out the ideal way to kill Auckland’s inner city: by driving a train set right through the middle of it.
Irresponsible inner city behaviour – Phil McDermott, CITIES MATTER
Tunnel Vision: thin edge of the rail wedge – Phil McDermott, CITIES MATTER

Call the diplomatic “thaw” on Fiji what it is: a long-overdue backdown.”
Backdown on Fiji called a “thaw” – STEPHEN FRANKS

If cronyism didn’t exist, you’d get the sense that John Key would have had to invent it. No, cronyism isn’t the greatest threat to freedom. But it is a threat.  You want to get rid of it, you have to get rid of the mixed economy that is its perfect host.
Cronyism Is Not Today’s Biggest Problem – Don Watkins, LAISSEZ FAIRE
The Economics & History of Cronyism – David R. Henderson, MERCATUS

The insufferably pompous Gore Vidal is dead.
Here’s the late Hitchens on the now-late Vidal. And enjoy a classic piece of gladiatorial television, Norman Mailer versus Vidal and everyone else on the Dick Cavett Show a few years ago.
Vidal Loco – Christopher Hitchens, VANITY FAIR

Just to remind you where Gaza’s ruling Hamas is on history … “Gaza's ruling Hamas has criticized a Palestinian official for visiting a memorial at the Nazi death camp of Auschwitz and paying respects to its 1.5 million victims there, most of them Jews.”
Hamas blasts Palestinian official's Auschwitz trip – Jonathan So, HISTORY NEWS NETWORK

And where’s the coverage? Surely the role of Palestinian Authority President Mahmoud Abbas in the coldblooded slaughter of Israeli athletes at the 1972 Munich Olympics has not been forgotten ?
Where's the Coverage? PA President Mahmoud Abbas' Role in the Munich Massacre – SNAPSHOT

Come on, you knew this already, surely.
As A Teen, Obama Deeply Influenced By Communist Mentor – INVESTORS BUSINESS DAILY

Here’s a really scary thought: New York Times’s Paul Krugman Wants To Be The Next Federal Reserve Chairman…
Paul Krugman Wants to Replace Ben Bernanke as Federal Reserve Chairman – NEWSBUSTERS

Those who have zero respect for Intellectual Property either have zero
intellectual property, or zero respect for what little they do have.

            - Bosch Fawstin

What’s wrong with plastic bags anyway? The latest war on these incredibly useful bags is fuelled by nothing more than greens’ loathing of modern consumption habits.
Why plastic bags should be free – Tom Bailey, SPIKED

A clarifying breakdown on the core issues surrounding the global warming debate.
How to detect pseudo-science: The case of Bill McKibben and catastrophic global warming – Alex Epstein, CENTER FOR INDUSTRIAL PROGRESS
Ronald Bailey on the Freak Out Over Two New Climate Studies – HIT AND RUN
Spinning more bad news to pretend it answers skeptics. When 400 “equals” zero – JO NOVA

Climate scientist John Christy tells US Senators why carbon dioxide is not a pollutant—and is not the cause of extreme weather.
John Christy’s stellar testimony today – ‘The recent anomalous weather can’t be blamed on carbon dioxide.’ – WATTS UP WITH THAT

Many classic English phrases can be heard only in India…
India: What are some English phrases and terms commonly heard in India but rarely used elsewhere? – QUORA

The belief teacher training takes a year, not a whole career, hurts pupils. It's time to rethink how we teach teachers.
Training does not make the best teachers – SPECTATOR

This is cool: a website to help you teach kids about business.

It’s astonishing, but in today’s modern world otherwise intelligent people still people in goblins and demons. No, seriously.
Demonic activity and exorcism – Lucia Maria, NZ CONSERVATIVE

Yaron Brook calls it “one of the stupidest, most immoral ideas ever.”
The Case for Lying to Yourself – WALL STREET JOURNAL

Sixty minutes on “Mistakes Couples Make about Sex,” starting now…
Mistakes Couples Make about Sex – PHILOSOPHY IN ACTION [podcast]

More classic television, the recording of which was thought to have been lost:
Ayn Rand on Johnny Carson – Diana Hsieh, NOODLE FOOD

Oh, and CNBC marks the Library of Congress’s naming of Atlas Shrugged  as one of the 88 most influential books in America by saying “Read this book”!
Santelli Says Everyone Should Read This Book! – CNBC VIDEO

If Peter Jackson is having title trouble, he might check out other famous trilogies.
The 33 Greatest Movie Trilogies  - EMPIRE

And finally, yes, Alfred Hitchock’s Vertigo starring Jimmy Stewart & Kim Novak (below) was a great film, but is it really good enough to have knocked off Citizen Kane as “best picture of all time”? Crikey, it wasn’t even Hitchcock’s best (surely that was North by Northwest, right?) And just where the hell is The Third Man?
The Top 50 Greatest Films of All Time – BRITISH FILM INSTITUTE


[Hat tip Mark Hubbard, Small Dead Animals, Don Watkins, Geek Press, Oliver Cooper, David Enrich, YALiberty, Craig Ranapia, John Stossel Updates, Ari Armstrong, Martin Kramer, Onion Sports Network]

Thursday, 2 August 2012

Deflation? Don't Count On It...

GUEST POST from Jeff Clark from the Casey Daily Dispatch 

Deflationists and inflationists have been arguing since the crisis hit and stimulus began which outcome will prevail. Each side has data to back up its claims, and the public doesn't see a clear winner. One of those data points is what historically occurs when an overburden of debt finally blows up, an event that's almost certainly dead ahead for us. Deflationists will point to periods in history where deflation resulted. But there's more to the argument, says Jim Puplava of Financial Sense. He emphatically states, "The outcome depends on whether or not the economy is operating under a fiat currency system, because there's never been a deflationary depression when one's been in place."

When I saw this claim, I wanted to hear more, because deflationary forces seem strong at the moment. And which way this goes has direct and significant implications for investments, including gold. Here's my interview with Jim.

Jeff Clark: For those who don't know you, Jim, tell us what you do.

Jim Puplava: Basically I head up three companies. We have our own independent broker-dealer; we have a money management firm; and we have a media company which produces the Financial Sense News Hour online. I head up those three companies and am the CEO.

Jeff: It's been four years since the financial crisis, and we're still debating inflation vs. deflation. I found your claim quite compelling, so tell us what you found in your research.

Jim: Well, why don't we begin with the financial crisis that transpired between 2007 and 2009, something every investor remembers? Now the deflationists would argue that in a crisis as big as that, the resulting downturn in the economy is always deflationary. But if we look at that period, the money supply continued to expand. In my opinion, inflation is associated with monetary policy.

Jeff: We should probably define the terms we're using.

Jim: This is one of the problems we have when talking about deflation. You will often hear, for example, that "housing prices fell by 30%" or the "stock market fell by 40%," supposedly meaning it was deflationary. But that is a specious argument at best, because if we call the crash in real estate and the stock market deflation, then what would the deflationists argue now that housing is starting to turn around? What would they call the S&P going from 666 to 1,373? It's up over 100%... is that deflation?

Let's take the popular definition of inflation - rising prices, which is really a symptom of inflation. During the financial crisis, there were only three months where the CPI was negative. Prior to 2008, the last time you saw a negative CPI was in 1954, when Eisenhower was president! So despite all the claims about deflation, all you would have to do is look at a graph of M1 and M2 and see that the money supply actually expanded during this period.

Investors may not recall that in the middle of the 2007-2009 crisis, Bloomberg sued through the Freedom of Information Act and got access to the Fed's records of exactly what they did. We found out that they either guaranteed, expanded, or backstopped somewhere around $8 to $9 trillion. That can only be done in a fiat money system - something you can't do with a gold-backed system.

Jeff: Like during the Great Depression.

Jim: Even before that. Step back to 1920-1921... If you look at the statistics during that period of time when we were on an actual gold standard, you saw a huge contraction of GDP and in the price of goods. Here are the actual numbers: between the summer of 1920 and 1921, nominal GDP fell by 23.9%; wholesale prices as measured by the PPI dropped by 40.8%; and the CPI fell by 8.3%. It lasted for roughly two years.

I have yet to see anything like this in Japan. I have yet to see anything like this in the United States - despite the credit crisis and all the fallout we've had.

Furthermore, even in the gold standard we had during the '20s and '30s, we had inflation. President Roosevelt devalued the dollar by 60% in March of 1933, and when he re-priced gold from $20 to $35, he stopped deflation dead in its tracks. By the end of the month we were experiencing inflation. We were running single-digit inflation rates the very month he did that in 1933, all the way up to 1937, when FDR and the Federal Reserve reversed course. So as a result of the devaluation we got large doses of inflation.

Jeff: So your point is that even though we had a gold standard during the Great Depression, the government found a way to cause currency dilution, AKA inflation.

Jim: That's right.

Jeff: You brought up Japan; I assume you're using it as an example instead of the smaller countries because it's a major economy?

Jim: Yes, exactly. Even though the US dollar is the world's reserve currency, we have three major currencies where most trade is conducted - the dollar, euro, and Japanese yen. Argentina's economy is insignificant in terms of global GDP, for example, and they're constantly printing money, so a lot of people don't like to refer to small countries like these.

I'd like to address Japan, though, because of its unique situation. And I think a graph will best make the point. The following is Japan's CPI, year over year, going back to 1982. There were brief periods of deflation, about 1% or 2%, and you can see that most of this occurred between 2000 and 2004 and in the credit crisis following 2009 to 2010.

In that period of falling prices, the CPI was only down 1-2%. If we take a look at Japan's monetary base, however, there was only one period where it actually contracted, and that was between 2005 and 2010. But the period that the deflationists like to talk about - 1989 going forward - Japan's monetary base expanded every year. Government spending expanded viscerally.

Jeff: And now their debt is among the highest in the world.

Jim: Japanese debt today is roughly 208% of GDP, one of the highest debt ratios in the developed world. But there's something else that makes Japan unique...

If a government expands its spending in order to rectify weakness in the economy, there are couple ways governments can finance that. They can print money - which is what the Fed has been doing - or they can finance it through the bond market with existing savings. One of the very measures that allows Japan to escape a rather severe deflation compared to what we experienced in the early 1920s following World War I or in the '30s during the Great Depression was the Japanese savings rate. Going back to when the crisis began in Japan, the savings rate was 18%. In other words, Japan has been able to finance its deficits internally. Ninety percent of their debt has been financed and held by domestic savings. If the Fed or US politicians financed government spending with existing savings - in other words, took the savings of Americans and financed the deficit - that would not be inflationary. Inflation comes when we get debt monetization, and fortunately for Japan, they were able t o finance 90% of their debt expansion internally through domestic savings.

The second factor that contributes to what happened to Japan was the carry trade. As a leading export nation, Japan exported a lot of its money to the rest of the world, and it gave rise to the carry trade, in which we were able to borrow in Japan at some of the lowest interest rates in the world. So if Japan instituted capital controls, where the excess reserves of the monetary base were not allowed to leave the country, that money would have been confined within Japan itself, and then you would have had more money chasing fewer goods and services.

Jeff: What about Japan's demographics?

Jim: Yes, this is going to play very heavily on Japan. As their population has aged, the savings rate has declined from 18% to roughly 2%. If we look at total Japanese debt, 67% of that debt is rolling over in the next five years. More alarming is the fact that they have 900 trillion yen in sovereign debt outstanding, and the bulk of that is set to mature in the next two and a half years. And more importantly, the majority of this debt is now starting to be sold. A large percentage of this sovereign debt, as I've pointed out, is owned by Japan's own citizens, and for the first time in nine years, Japan's Government Pension Investment Fund, which is the world's largest pension fund, sold 443.2-billion of Japanese government bonds in its fiscal 2009-2010 year, as rising benefit payouts to pension reserves required a liquidation of debt. This is a major concern in our opinion for Japan, because as the Japan Investment Fund owns 12% of the country's outstanding domestic bonds, they are going to be selling an additional couple of hundred billion over the next two years.

So as Japan goes forward, there are only two things they can do to finance that debt. One, they could go into the world bond market, though they could be subject to bond vigilantes where the interest rate spread could be high; or two, monetize it. Because their debt to GDP ratio is 208% and still rising, the only way they're going to be able to keep interest rates down in that country is to monetize that debt in the same way our Fed is doing it through its monetary base and Operation Twist.

My point here, Jeff, is that the same demographics that will force inflation on Japan are the same demographics that are going to force inflation in the United States.

Jeff: Especially when you look at our unfunded liabilities...

Jim: Precisely. Lawrence Kotlikoff, author of The Clash of Generations and former senior economist on President Bush's Council of Economic Advisors, has a new book out, and he says US government liabilities are growing close to $11 trillion a year. At the end of last year, it stood at $222 trillion. And by the way, these numbers come from the Treasury and CBO [Congressional Budget Office]. These aren't numbers I'm making up, so I rest my case with the deflationists. History has shown deflation can end overnight.

Jeff: So you're saying history shows that when debt blows up in a fiat currency system, inflation has always been the result.

Jim: Exactly. That's the case even in severe downturns. Look at what occurred in Japan between 1989 and 1991... their stock market lost 70% of its value and real estate prices fell 40-50%. Yet you would be hard pressed to find deflation of more than 1% or 2% for brief periods of time.

Jeff: Let me challenge you on a couple points. Some will point to the "lost decade" in Japan as deflationary and say that the government's stimulus efforts didn't work.

Jim: During the Lost Decade of 1990-1999, inflation rates in Japan were 3% to 4%. One of the few times where they allowed the monetary base to shrink significantly was the period between 2005 and 2009, and the result was 1% to 2% deflation.

Jeff: I can hear some deflationists say, "Gee, if the CPI only goes up 3% when debt blows up, I'll take that."

Jim: They'll take that, but if you look at the dire warnings deflationists give, we have seen nothing of that sort in any major economy. Even in our economy, if we look at the credit crisis of 2007-2009, which had its origination here in the US, the monetary base didn't contract - it expanded. What people have to understand is that when money is created, central banks can't control it. And what happens with that money is that it finds an outlet. It has to go somewhere - it can go into housing, it can go into commodities, it can go into stocks. The big warning the deflationists will give is that the world is going to collapse and that we're going to see a repeat of the Great Depression. I would challenge them to prove that, because if we're on a fiat currency, inflation has always been the result.

Jeff: Another challenge: we're in deflation now because the economy is going nowhere, stocks are going nowhere, even commodities are going nowhere...

Jim: This is one chapter in a long book that has to play out. What we've got right now is the private sector deleveraging and the public sector leveraging up, and these two forces are fighting against each other and the result right now is stagflation.

Jeff: How long does this stagflation continue?

Jim: I think this stagflationary economy continues for the next couple years. Martin Armstrong, former head of Princeton Economics, also believes that will be the critical period when the fertilizer hits the fan. Of course a lot can change and accelerate that - the outcome of the November US elections, for example. I've taken a look at the president's budget... According to the CBO, he will expand spending by $700 billion over the next four years, assuming he is re-elected, and that's assuming his economic assumptions are correct. In other words, we can raise taxes by half a trillion dollars and it doesn't impact the economy, even though the CBO and the Fed acknowledge this would subtract 4% from GDP. So there are some wild cards out there that are unpredictable. The results of the November election could favor a postponement, or we could get an acceleration of that time frame.

And let me make a prediction: Right now the world is focused on Europe, and we're seeing all the fallout from that. I think the next crisis jumps from Europe to Japan, and then eventually from Japan to the United States. Right now the US has the "best-looking house in a bad neighborhood." A lot of gold investors have been disappointed with the price of gold or gold stocks, but they have no further to look than what's happened to the dollar. The US has been a big beneficiary of the flight of capital escaping Europe, so we've seen commodity prices go down. This fall in commodity prices has led to a lower CPI, and as a result we're also experiencing lower import prices, so the United States continues to be the beneficiary of the crisis. We will continue to be a beneficiary of this, however, only as long as we maintain some form of credibility in the bond market, the idea being that the US will eventually get its own financial house in order and will bring its deficits under manageable conditions.

Jeff: Are you saying we won't have a negative CPI again?

Jim: I'm saying that if we did, it won't stay there long because we're operating under a fiat currency, giving the government essentially free rein to print as much money as it wants.

Jeff: If you're right, then when the crisis moves to Japan, gold and commodities could still be weak because investors would still go to Treasuries.

Jim: We're in a period of a rising dollar, and that dollar is competing directly against gold. I also think it will depend on whether or not the US gets hit with the fiscal cliff in January and the economy weakens. If that happens, I think the Fed could embark on another massive round of quantitative easing, which would change the picture for the gold market. Right now, though, the Fed doesn't have to do anything.

One of the reasons I think gold investors got disappointed last fall is that the Fed didn't embark on quantitative easing. Instead it announced Operation Twist, which was really not expanding the monetary base, and the result was interest rates came down from 2.5% to 1.5%. So it wasn't necessary for the Fed to do QE. The market was doing the Fed's job for it.

Jeff: Is it your premise that this money finds its way into the economy and leads to inflation, meaning higher prices?

Jim: Absolutely. Our unfunded liabilities are simply too big. I had to laugh when the president gave a speech last week talking about this tax on the wealthy, which was going to generate, according to the CBO, $65 billion in tax revenue. The government is spending $10.4 billion per day, so that revenue would basically run the government for a little over a week.

Jeff: The extent of our unfunded liabilities would imply much higher price inflation, which in turn would lead to much higher gold prices.

Jim: Absolutely. I'm very bullish on gold. I think we're just going through a long consolidation period. Right now gold is competing with falling commodity prices and a rising dollar…

Jeff:  Thanks for sharing your insights.

Jim: You're welcome, Jeff. Thanks for having me.

Jeff Clark is is the editor of BIG GOLD, a Casey Research publication that pinpoints the safest ways to capitalize on the gold bull market.

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Wednesday, 1 August 2012

GUEST POST: Who pays for the Christchurch grandomania?

The release of the government’s CGI-powered plan for the ruined centre of Christchurch has got many people talking excitedly about living in a CGI city, but (apart from this story, for which kudos to the John Campbell Show) little attention to the 840 property owners who are to have their land taken for the forthcoming fantasy land.

I asked a thoughtful Christchurch friend to respond….

As a loyal Christchurch resident for most of my life, here’s my view on what was presented the other day.

The plan is misguided. Not just misguided, but expensive and well beyond our means.  Not just expensive and well beyond our means, this “plan” is economically suicidal.

Where do they think the money will come from in a ruined city to pay the bill for the grandomania? How on earth could it ever be repaid. Is Christchurch to be on welfare for life?

This “plan” will be devastating to ratepayers in Christchurch, and to taxpayers nationwide. In short, it is a disaster.

But it gets worse.

What about those unnoticed and unrepresented souls who have been and will be paying the greatest price for this “plan”?  I mean those land and building owners whose property will be taken from them to pay for a dream conceived in a bureaucrat’s office. Land and building owners, in many cases, who will now have done to them by government and council what the earthquake couldn’t manage: enforced confiscation, with the value of their “compensation” to be determined by the Gauleiters carrying out The Plan.

What does this do to the property rights land owners thought they once enjoyed? They’ve gone. Completely and utterly.

And what does the dismissive attitude by so many people to the wholesale destruction of property rights say about who we have become? I’ll leave that for you to answer.

Because rather than respecting property rights as one of the single biggest achievements of civil society, in this plan and the talk around it, property rights are treated as just a minor inconvenience for those in power to trample on. This is just the culmination of virtually every stage in the recovery process which have deteriorated the institutional integrity of the country.

Where is the outcry?

There is a word for a system of government that rides roughshod over property owners in the name of the greater good.  It was a system great men went to war to destroy. Now, it’s accepted for the price of a new stadium and a few trees.

That public sentiment accepts this—is unconcerned that this blatant fascism is now the new normal—is scary. It’s frightening. People casually look at the plan and debate whether they like it or not. Whether the “frame” should be one block further north or south; whether there should be more cycle paths or trams. What the public discourse totally ignores is the owners of the land on which these pretty pictures are based—and what it totally avoids is that this is going to be the biggest forced confiscation of private property* since the Maori Wars.

Have we learned nothing?

I never thought my fellow citizens would embrace outright fascism, but they have willingly done so on every occasion since the earthquake. This casual embrace of fascism is frightening. Anyone that is against their idealistic plan for a new order is just “not getting behind recovery.”  They’re not a good Cantab. They’re not working towards the “greater good.”

This is sick.

And take a look at who gets to define this “greater good”? They are far from uninterested outsiders. Two of the biggest players in the  plan, with their mugs all over the report, are Ngai Tahu and the Christchurch City Council. These  are not passive players in the game. They are very the two biggest landowners in the city, with significant pull already in setting the rules of the game.  Forget Graham Henry’s theories about Wayne Barnes, this is a fixed match. And on the losing team will be 840 private property owners and the long-suffering taxpayer.

And how ironic that Ngai Tahu, whose current fortune was built on restitution for alleged confiscations of the past, are now up to their meres in having carried out for their benefit a broad-based confiscation of the present.

Pastor Niemoller’s warning has never sounded so ominous in New Zealand:

First they came for the Socialists, and I did not speak out--
Because I was not a Socialist.

Then they came for the Trade Unionists, and I did not speak out--
Because I was not a Trade Unionist.

Then they came for the Jews, and I did not speak out--
Because I was not a Jew.

Then they came for me--and there was no one left to speak.


* Under the guise of ‘negotiation,' but confiscation no less—at prices determined by the confiscator.

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Tuesday, 31 July 2012

Privatise rail

I see complaints from the chattering classes that plans to sell TranzScenic or to partner with another company “would be privatisation by stealth.”

Who are they kidding?

The true value of KiwiFail has already been found on the open market: zero.  Even the Finance Minister knows this. It is a company that absorbs more value than it produces, generating insufficient business even to pay for its capital; a “business” only able to survive by sucking off the state tit.

That said, there are around seven lines in the KiwiRail portfolio that could turn a profit, according to Liberty Scott, lines with real value that could be sold off.

Let’s hope they will be.  Soon.

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Is there a Darryl Kerrigan in Christchurch? [updated]

After the release yesterday of the government’s CGI fantasy for Christchurch, comes the plan to acquire the land on which the governments’ slick CGI creations are planned. Because virtually all of that land is privately owned, you know. (Something planners always overlook.)

So Gerry Brownlee is now getting out the big stick:

Earthquake Recovery Minister Gerry Brownlee expects most of the land needed for rebuilding central Christchurch will be obtained by negotiation, but some could be compulsorily acquired.

A “negotiation” with a big stick at the door.  The sort of “negotiation” that Al Capone used to undertake with his “clients.”  A negotiation not with one hand tied behind your back, but with it twisted up your back until it hurts.

The sort of compulsory acquisition that Daryl Kerrigan from the hilarious film The Castle would understand.

Naturally, in such a forced negotiation—especially if the land is simply taken—the big, big question is: what are land owners going to be paid for their land.   Brownlee again:

Most of the land in the affected area has very low value and it won't have any value until there is a plan to put things back into that part of Christchurch that creates that value.

So that answers that. “It’s

So much for property rights.

Time for a screening of The Castle in Hagley Park.

UPDATE:  Bill English has revealed this morning he intends to “help pay for the rebuild” by buying land cheap from property owners (“most of the land in the affected area has very low value”) and selling dear later on.

“It’s worked for us with Red Zone land,” says English, unconcerned with how it’s worked for Red Zone property owners.

Government buying land cheap and selling dear to finance their double dealings has a long history in New Zealand. You might recall it was the foundation of Wakefield’s original plan to colonise the place—a setup at a stroke fleecing both iwi and colonists, one quickly enshrined in the second half of the Treaty of Waitangi’s Second Clause banning land being bought and sold by anyone but the government.

A colony built on a government land shark. And we know how well that worked.

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No customers please, we’re Telecom

Telecom were once the country’s largest company. They’ve been nobbled several times by big government, but their slow slide has also been due to manifest incompetence.

Take the way they’ve chosen to end their CDMA Network—a directive to 600,000 subscribers that as of tomorrow their expensive phones will no longer work, so get on and sign up for a new plan on their XT network.

Why would you stick with a company that treated you like that?

It’s not the first time. They’ve done it before. It’s an exact parallel to their decision a decade ago to end their 025 network—handled exactly the same, and then as now a direct invitation for all those customers to stampede (as I did) towards Telecom’s competitors. 

Who, naturally, are waiting with open arms.

Sometimes, you have to wonder whether there’s a brain upstairs at Telecom at all.  Or any interest in looking after their customers.


Monday, 30 July 2012

Is it any wonder investment is leaving Christchurch? [updated]

A new "plan" for the rebuilding of central Christchurch is to be announced at 6pm today.

This will be (hold on, let me count) the sixth different plan for rebuilding the central city to be announced by govt or local govt since the first earthquake.

No wonder property owners haven't got on and started rebuilding themselves.

First, they were barred from their own property. Then, with the release of each plan, they've been told their property will be confiscated if the planners deem it necessary.

The radio story announcing the new plan was accompanied by the hand wringing of Mayor Parker, bewailing the flight of investment capital out of Christchurch. Is it any wonder?

It’s still not too late to turn Christchurch into an Enterprise Zone. It could be done overnight.

No, we won’t know how Christchurch would look if that were to happen. There’d be no grand plan about which to trumpet—no great monuments for politicians to unveil; but there’d be rebuilding, you can be sure of that; the rebuilding would start, carried out by people using their own property, their own money, and expecting to turn a profit on it.

In other words: rebuilding the way this city and every great city* was built in the first place.

A simple fact forgotten by those who harbour a fetish for grand plans and a wish to keep Christchurch on welfare.

UPDATE: The citizens of Christchurch deserve more respect than to have  inflicted on them more infantile boosterism, says Hugh Pavletich, Coordinator of Cantabrians Unite.

Later today an announcement will be made on the proposed central public projects. All these proposed projects will likely be loss makers, requiring on going ratepayer / taxpayer subsidies.
National and international research also illustrates the wider economic and social benefits are minimal ...- at best. Indeed - comprehensive and robust research often illustrates there are wide economic and social costs.
The focus should be on how best to provide these loss making services in whole or in part, at the lowest possible ongoing cost to ratepayers and taxpayers.
It is to be hoped the media makes a point of communicating with people both nationally and internationally, with credibility and expertise in these public projects.
In very general terms, if at the outset the development cost estimates are in the order of $800 million and because these projects appear to be rushed, it will be likely there will be substantial costs blowouts. The promoters need to be asked ( based on reputable international evidence and research ) what provision at this stage have they made for likely cost blowouts.
By rushing in to these projects, the promoters will be forced to pay excessive land costs. Going forward, central area land values are expected to fall dramatically. The public deserves to be fully informed of the additional land costs involved with these proposed rushed projects.
Even based on the initial costs estimates of around $800 million, when the ongoing costs of capital and operating losses (including insurances, maintenance, depreciation, staffing etc. etc.) are factored in, it seems likely these could be in the order of at least some 10% or $80 million a year of ongoing losses.
With a little over 150,000 households, this is in the order of $533 per household - more if there are cost blowouts.
While of course the commercial / industrial sector pay a substantial proportion of the Local Authority rates - the losses are still a cost to us all as citizens. The commercial / industrial sector will simply pass on these increased rates costs in the prices they charge for the goods and services they provide. Business is simply an intermediary.
And in the broader sense - have we got our priorities right - with people first - housing second - and business third.
Quality decisions can only be made if the citizens of Christchurch are provided with honest and credible information.
The citizens of Christchurch most certainly deserve to be treated with respect. They deserve much better than to be inflicted with infantile boosterism.

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An affordable Auckland even further away

Aucklanders were sold the Super-Sized City on the basis of promised "efficiencies" and putative cost savings. With the arrival in their letter boxes this week of their rates bills, Aucklanders will for the first time see for themselves how effective these "cost savings" have been.

Fact is, there have been no savings. The costs have all been the other way.

For some Aucklanders, their rates increase will be more than ten percent—and with the promises doled out in the Super-Sized Council's super-sized Ten Year Plan, it's clear this will be a year-on-year increase.

Ten percent this year.

Ten percent next year.

Ten percent the year after, and every year thereafter for the foreseeable future...

For this disaster, there are several people to thank:

  • Mayor Brown for having an ego the size of the super-sized city, with plans to match.
  • Rodney Hide, for pushing through the farce.
  • John Key, for making him.

Aucklanders should vent their rage in whatever way they can.

If Auckland is ever to be an affordable city, one place to start is with the size of their rates bill. A simple fact of which those responsible for this super-sized debacle are still wholly ignorant.

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