Tuesday, 13 November 2012

Happy birthday Auguste Rodin


Today would have been Auguste Rodin’s birthday. He would have been 172.

Burghers of Calais Auguste Rodin

He had the almost unique ability to breathe life into mere stone—to grant a life force to inanimate objects.  He could do with a pair of hands what other sculptors could never manage even with whole constellations of subject matter.

Hands Cathedral Auguste Rodin

After him, sculpture was truly never the same again. 


IMAGES from top to bottom: ‘The Kiss’ aka ‘Francesca da Rimini’; ‘ Cathedral’; Pierre di Wissant from the ‘Burghers of Calais’; ‘The Eternal Idol’ at The Musee Rodin in Paris.

Challenging Bill McKibben and the Green Establishment: The Environmental Case for Fossil Fuels

Last week Alex Epstein from the Center for Industrial Progress got to debate the head of warmist activist organisation350.org, environmentalist Bill McKibben, who’s been called “the world's most powerful opponent of fossil fuels.”

The debate was on fossil fuels.

Given that McKibben is on an anti-fossil-fuel rampage as I write this (see http://math.350.org), and he other environmentalist leaders are using Hurricane Sandy as a pretext for policies that would cause far more permanent blackouts, there’s never been a better time to challenge their fundamentals.

Check out these 2-3 minute clips from debate wherein Epstein does just that:

Prohibition kills

Cannabis campaigner Stephen McIntyre, above, died earlier this year. He killed himself.
Evidence seems to be emerging that Stephen, a good  man, a sensitive soul, was driven to kill himself by police harassment.
You might discount the source, but on a matter this serious I suggest you visit Martyn Bradbury’s blog for the story as it emerges of the death of his friend:
In April last year Stephen talked to Lindsay Perigo about his campaigning. Now, it seems, he died of it.

GUEST POST: Are These the End Times?

Guest post by Jeffrey Tucker of Laissez Faire Books 

    The U.S. election results seem to have sent many people into fits of depression, hysteria, and rage. Commentators on the right are proclaiming that the last days are here. The hordes of welfare dependents are taking over. The wealthy will be looted. Business will be destroyed. Demographics and demagoguery have at last come together to create the perfect storm for America. Socialism has at last arrived.
    Well, let's all just settle down a bit.
    What was the alternative to Obama? [A symbol?] The truth is that Romney inspired a very low level of passion among voters. No one knew for sure what he stood for. Not even his tax message was clear. He seemed to call for lower rates, but also promised to "broaden the base," which sounds like raising taxes through the back door. His foreign policy program of protectionism against China and war with Iran actually made Obama's stealthy warmongering seem less dangerous by comparison. All the rest was a muddle.
    So in retrospect, there should be no great surprise at the outcome. The betting market called Intrade.com featured election markets that had been correct for the entire political season...
    There is no more reason to be morose and maudlin about the next four years than the last four years. The last four years featured some of the worst government policy since the 1930s, most of it coming from the Federal Reserve and the Treasury Department. These policies have broken the banking system, entrenched unemployment, and stagnated middle-class incomes. That would have stayed the same regardless of who was elected.
    Yet despite these policies, the market forged ahead. These last four years have seen some of the biggest advances in technology in history, including the app economy, the radical democratization of all media, and 3-D printing.
    The world is connected by market networks as never before. Food is more prevalent. Housing is cheaper [at least in the U.S.]. The much-feared hyperinflation never arrived.   Having long experience with dealing with stupid government policies, entrepreneurs and capitalists still somehow managed to keep the engines of progress rolling forward. The markets have shown themselves to be resilient beyond what most people imagined.
    People in democracies tend to exaggerate the influence and effect of particular presidents. They have some power to steer policy, but nowhere near what people imagine. Most of their talk about their "visions" for bringing a new future is puffery and nonsense. The bureaucracies that make and implement the rules by which we are forced to live pay very little attention to the comings and goings of the political class. Most of what they do was not discussed in the election at all. And presidents have very little practical, day-to-day influence over their behavior.
    The state that is the menace to society is not somehow recreated every four years. It is 100 years old and lives off its own momentum. It is intrusive, debilitating, invasive, and evil, but it is not sent into upheaval upon elections. Its grip grows tighter, but not mainly because of electoral politics. It runs off its own energy and tends to be impervious to political attempts to shift its direction.
    That said, sometimes U.S. presidents end up making some degree of difference. But it is by no means a foregone conclusion that a second Obama term is going to be worse than a Romney term might have been. Again, Romney made some very scary noises about shutting down trade with China [and the rest of the world], raising taxes through deduction repeals, and starting [poorly planned] wars with Iran and who knows what other countries. Based on his rhetoric alone, it's hard to say that Obama is going to be worse.
    More significantly, the biggest, for better and worse, political moves of the last half-century were made by presidents who were expected to do something completely different. No one expected, for example, that Nixon would be the man who would go off the gold standard, put in wage and price controls, and establish the EPA.
    At the same time, the best thing he did in office, namely make peace with China and open trade, was the last thing anyone expected from this old-line anti-communist. And that is precisely why he was able to get away with it. It is through confounding expectations that political change happens.
    We saw this with Jimmy Carter too. Here was a man everyone thought was dedicated to government control of everything. Yet he worked with Ted Kennedy in the Senate to accomplish the great deregulations of the late 1970s that changed life completely and continue to benefit everyone. He deregulated trucking, airlines, and energy. Those were surprising and amazing moves -- accomplished entirely by what we now call the political left. These three moves astonished the world.
    Moving forward, Reagan ran as the most libertarian-sounding president in a century, but he proceeded to balloon the budget as never before and even raise the payroll tax in a way that broke all records. On the other hand, the best thing he did in his two terms shocked the world. He sat down with the Soviet leader and agreed to the hope of eliminating all nuclear weapons. It didn't happen, but the friendship between Reagan and Gorbachev led to an astonishing thaw that encouraged dissidents all over the communist bloc. The world that the Cold War kept alive melted with the advent of the most peculiar and implausible friendship in the history of politics. [Ed: Speaking softly while carrying a big stick also helped. A lot.]
    No one thought Clinton would reform welfare, but he did it. And no one thought he would work to repeal one of the crippling legacies of the 1970s: the 55 mph speed limit as set by the federal government. Clinton did this with very little attention given to the event. But it was a huge boon to the private sector.
    The same was true of George W. Bush. He ran as a peace candidate and gave us war.
    The message here is that you rarely get what you expect from politicians. Sometimes -- very rarely, but sometimes -- they do the right thing despite every expectation to the contrary. So yes, Obama might be a socialist, but he is also a politician, and surprises can happen. And regardless of what happens, protecting your rights and liberties is ultimately up to you.
    There are huge looming issues in the second term of Obama.
    The Keynesian path has not fixed the economy, exactly as Hayek predicted in A Tiger by the Tail.
    The spending boom has not stimulated anything, exactly as Henry Hazlitt said it would not, confirming the whole theory behind Economics in One Lesson.
    The monetary stimulus has been an incredible flop, precisely as Ron Paul said it would be in The Case for Gold.
    The whole claim that the government would save us has turned out to be an aspect of what Hans-Hermann Hoppe calls The Great Fiction.
      This is the end of the road for the planners. The American people are extremely resistant to tax increases. Even on health care, some pullback would not be unexpected: the Obama administration does not want to be the trigger that causes more unemployment stemming from higher costs on small and medium-sized businesses.
    The other legislative monster of the president's first term was the Dodd-Frank financial overhaul, which inspired a constant battle cry for repeal from Republicans during the primary season. But while this regulatory dog may end up biting, for now only a third of the act's required 398 rules have been finalized. The courts have struck down a few of legislation's new provisions, and more legal challenges will follow.
    The Fed is mostly out of options. The central bank can only keep doing the same old QE thing over and over. But while the Fed makes itself bigger, as Steve Hanke pointed out in an LFB interview, the biggest engine of money creation is the commercial banking system, and the banks are not creating money by lending. Dodd-Frank uncertainty and tough bank examiners are making bankers shy to lend. This has grounded, for the moment anyway, Ben Bernanke's inflation helicopter.
    The fiscal crisis cannot be solved through mere reform, but reform would help. War with anyone would break the bank completely, and the military knows this. No one is even talking about gun control anymore, thank goodness. And there is extreme grass-roots pressure for letting up on the war on drugs.
    This isn't the end of the road for the state, but it is getting close. Politicians are usually liars and thieves, but they are not entirely impractical men and women. They will try the wrong thing a thousand times before they finally relent to the obvious. But eventually, they can relent. If the economy double dips in a serious way, that could prompt a complete rethinking of the path of the last for four years of folly.
The bigger point is that the really big changes happening to the world today are taking place outside politics. Russ Roberts puts it best:

Remember that politics is not where life happens. Policies affect our lives, but we have much to do outside that world. Yesterday, I helped my youngest son learn Python, learned some Talmud, played with my photographs on Lightroom, had dinner with my wife, and went shopping with my oldest son for his first nice blazer. Lots of satisfactions there. Nothing to do with politics.
Put Tuesday night behind you for a while. Remember what matters. Take a walk. Read to your kids. Go out for dinner with your spouse. Read more Adam Smith and less of the Drudge Report. And smile at your neighbor. That's always a good idea. But there's a bonus -- it might help your neighbor imagine that someone who believes in leaving things alone when it comes to the coercive power of government might actually be a decent person after all. And then maybe he'll be a little more open to those crazy ideas you talked about at that dinner party.

Especially considering the holidays coming up, a time when the beautiful aspects of private life are on display as never before, he is precisely right.

Jeffrey Tucker

Does immigration threaten local culture?

Amit Ghate addresses in Forbes magazine the oft-heard argument that foreign immigrants will threaten or even overwhelm our culture—or American culture—or European culture—that the combined forces of demographics mean open, or even increased, immigration should be abandoned everywhere.

This argument has a fundamental flaw however:

Consider, to begin, the definition of culture, viz.: “the ideas, customs, skills, arts, etc. of a people or group, that are transferred, communicated, or passed along, as in or to succeeding generations.” Observe that our culture rests on the ideas that we adopt, as these determine the other values, skills and customs we uphold.
Yet not a single one of us inherits our ideas…

That simple point explodes the whole case.

But what about the empirical evidence? Well, which country more than any other was built on  immigration other than America herself:

It’s no accident that—while she retained her intellectual self-confidence—America was the land of the immigrant. And what dividends that policy paid! Economically America prospered due to the increase in producers and the inherent benefits of specialization and trade. Intellectually she blossomed thanks to the abundance of new ideas and views which could be carefully weighed and winnowed.
    Yet culturally she was never threatened. America was understood to be, and lauded for being, the land of freedom and opportunity, both by those already here, and those arriving. As a result, 19th century America was perhaps the most intellectually active and economically dynamic culture the world has ever seen.

Yes, immigration in a culture of intellectual self-confidence works.

But guess what: “When a nation is no longer willing or capable of defending its culture as morally desirable,” “it works the other way too.”

 See what other great points Ghate makes.

[Hat tip Thrutch]

GUEST POST: U.S. Gone to Pot, but Not Completely

imageGuest post by Mark Thornton from the Mises Institute 

The only good thing about the 2012 US election campaign—other than its being over — is that much progress was made on marijuana policy. Marijuana was legalized in two states, Colorado and Washington. Medical-marijuana legislation passed in Massachusetts. Marijuana was decriminalized is several major cities in Michigan and Burlington, Vermont, passed a resolution that marijuana should be legalized. The only defeats were that legalization failed to pass in Oregon and medical marijuana was defeated in Arkansas.

This is a stunning turnaround from the 2010 campaign when Prop 19 in California failed to pass despite high expectations. I explained in detail why Prop 19 failed here. It was an unfortunately common story of Baptists, i.e., people who oppose it, and bootleggers, i.e., people who profit from black-market sales, who stopped the legalization effort.

With regards to the legalization victories in Colorado and Washington, Tom Angell, Director ofLEAP (Law Enforcement Against Prohibition) called the election a "historic night for drug-law reformers." Paul Armentano, the deputy director of NORML (National Organization for the Reform of Marijuana Laws), called the Colorado and Washington victories "game changers," noting that "both measures provide adult cannabis consumers with unprecedented legal protections." He noted that "until now, no state in modern history has classified cannabis itself as a legal product that may be lawfully possessed and consumed by adults." Writing for the Marijuana Policy Project, Robert Capecchi called Colorado and Washington "historic victories," saying that they "represent the first bricks to be knocked out of the marijuana prohibition wall."

Following is a list of all marijuana measures on the 2012 ballot as provided by LEAP:

Colorado                   Marijuana legalization                                                                       Passed
Washington              Marijuana legalization                                                                       Passed
Oregon                        Marijuana legalization                                                                      Failed
Massachusetts         Medical marijuana                                                                              Passed
Arkansas                    Medical marijuana                                                                              Failed
Detroit, MI                Decriminalization of adult marijuana possession                  Passed
Flint, MI                     Decriminalization of adult marijuana possession                  Passed
Ypsilanti, MI            Marijuana to be lowest law enforcement priority                 Passed
Grand Rapids, MI   Decriminalization of adult marijuana possession                  Passed
Kalamazoo, MI        Three medical-marijuana dispensaries permitted in city  Passed
Burlington, VT         Recommendation that marijuana should be legalized        Passed
Montana                     Referendum restricting medical marijuana                             Likely to pass

Some readers might not be fired up at the prospects of legalization, decriminalization, and medical marijuana, but the benefits are higher than you might think. First of all, the economic crisis is a great opportunity to get this type of reform passed. There are several economic dimensions at work here. The most obvious thing that comes to mind is that legalized marijuana might be a source of tax revenues and possibly excise taxes and license fees. It would also be a source of jobs, although the net gain in jobs and incomes is probably initially small.

A major benefit would be a reduction in the size of government. Marijuana prohibition results in hundreds of thousands of people being arrested, tying up police, jails, courts, and prisons. When the city of Philadelphia decided to make marijuana prohibition a low priority and treat it like public intoxication ($200 fine), they ended up saving $2 million in the first year.

One of the most important benefits of these measures is that they make for a more liberal society in the Misesian sense. Marijuana prohibition is public violence, prejudice, and partiality. Legalization and liberalism is private property and public tolerance. As Ludwig von Mises wrote,

The essential teaching of liberalism is that social cooperation and the division of labor can be achieved only in a system of private ownership of the means of production, i.e., within a market society, or capitalism. All the other principles of liberalism democracy, personal freedom of the individual, freedom of speech and of the press, religious tolerance, peace among the nations are consequences of this basic postulate. They can be realized only within a society based on private property. (Omnipotent Government, p. 48)

The key thing, economically speaking, is that more liberalism is good for business, jobs, and prosperity. Legalizing marijuana, along with things like same-sex-marriage laws, may be appalling to some people, but when companies are looking to get started or establishing new operations, those are some of the things that are looked at, just like taxes, schools, crime, etc. States that are competing for the best companies that offer the highest paying jobs are the same states that are liberalizing their policies.

Therefore, it should come to no surprise that a state like Washington legalized marijuana even though it does not have a history of marijuana-reform activism. Washington needs to compete with other states for computer programmers, engineers, and technicians for Washington-based firms like Boeing and Microsoft. Do not be surprised if what happened in Colorado and Washington spreads to other states in coming elections.

The most important aspect of the victories in Colorado and Washington is that the people of those states stood up and voiced their opposition to the federal government and its policy of marijuana prohibition. They are directing their state governments to no longer cooperate with the federal government. You can bet that federal officials will seek to intimidate local officials and businesses as they have done in California. They seek to use fear and violence to maintain their power.

Thornton, MarkHowever, demographically and ideologically, they are fighting a losing battle. Supporters of legalization are younger, smarter, better educated, and have above-average incomes. The leaders of the reform movement do not seem to view their efforts as "pro-marijuana," but rather as anti-prohibition, and they realize that the benefits are in terms of health, public safety, and prosperity.

When my book The Economics of Prohibition was published 20 years ago, I was often asked my opinion if marijuana should be or would be legalized. My stock answer was that medical marijuana would start to be legalized in 10 years and that marijuana would start to be legalized in 20 years, probably during an economic crisis. My only prediction in print was that the reform process would begin around the turn of the century. The first reform was actually a medical-marijuana law passed in California in 1996.

* * * * *

Mark Thornton is a senior resident fellow at the Ludwig von Mises Institute in Auburn, Alabama, and is the book review editor for the Quarterly Journal of Austrian Economics. He is the author of The Economics of Prohibition, coauthor of Tariffs, Blockades, and Inflation: The Economics of the Civil War, and the editor of The Quotable Mises, The Bastiat Collection, and An Essay on Economic Theory. Send him mail. See Mark Thornton's “Mises Daily” article archives.

Monday, 12 November 2012

Interviewing Libz leader Dr Richard McGrath [updated]

I’ve just heard that Libz leader Dr Richard McGrath is interviewed tonight on The Beat Goes On TV show about the uniting, or not, of parties at the freedom end of the spectrum.

Watch it tonight at 9:30pm on CueTV (Channel 110 on Sky or Channel 23 on Freeview), or tomorrow night at 10pm on Heartland TV (Channel 17 n Sky).

UPDATE: Or you can watch it right here on the comfort of your own computer:

How to start a myth: the housing market edition

Had you noticed that Bill English has successfully initiated the myth that the fault of failing to supply affordable housing is not the government’s for anti-development planning rules and gold-plated building regulations—not councils’ for their development levies and interminably delayed consent processing—not planners for ring-fencing cities and imposing their own values on home-owners—not the Reserve Bank’s for pumping out all the counterfeit capital that spills over into the housing market because of their rules favouring mortgage lending over business lending—the failure, says the myth, is a failure of the market.

A “market failure” that only government intervention can fix.

So goes the myth.

I heard it again this morning on State Radio: New Zealand needs 10,000 houses per year said the commentator, and the market only builds 4,000. This is market failure, he said—failing to praise the market for managing to produce anything at all in the face of all the hurdles in front of them.

So is this really a market failure?

YEs, it’s s failure. But no, it’s not a market failure.

If it is, it’s a “market failure” only in the sense indicated by this cartoon:


UPDATE: A friend has given the cartoon the local context (thanks Paul):


Subsidising smelters?


Invercargill Mayor Tim Shadbolt, right, reckons the government, i.e., taxpayers, should subsidise electricity prices enjoyed by Rio Tinto, the owners of the Tiwai Point aluminium smelter in Tim’s “electorate.”

The smelter company wants to negotiate a new power contract for its Tiwai Point smelter near Bluff in the face of plummeting world aluminium prices.
    But with no resolution after three months of talks, Mr Shadbolt says Prime Minister John Key must intervene.
    "I mean, they own the electricity company that's sitting around the table and they've got a vested interest in making sure our export industries and manufacturing in this county are supported."

“Supported” as used here being code for “bailing out.” Basically, the arse has fallen out of the world aluminium market, and Mayor Tim reckons Tiwai Point should keep exporting and producing at a loss, with us picking up the tab to make up the difference.

Does this make any sense? Do taxpayers, via the government, have “a vested interest” in making sure export industries are “supported”? And if so, at what cost?

The Bluff smelter was built partly to create a market for the huge hydro-electric output of the Manapouri scheme, now owned and operated by Meridian. The terms of the power supply contract were renegotiated in 2007 with the new supply agreement set to begin in January next year.
    The smelter, operated by New Zealand Aluminium Smelters (NZAS), is Meridian's biggest single customer and the contract due to kick in from January 1 is for 18 years. The smelter consumes about one-seventh of New Zealand's electricity and the price has never been disclosed…
    The negotiations come as Rio Tinto looks to sell the Tiwai Point smelter along with 12 other aluminium producing assets in Australia. Japan's Sumitomo owns about 21 per cent of the Bluff smelter.

The aluminium smelter at Bluff was always more about politics than economics.  Aluminium is made by adding electricity to bauxite.   But NZ produces no bauxite—the only reason the smelter is there is because politicians in the 1960 Labour Government agreed to build the ginormous hydro scheme at Manapouri* to make electricity for Comalco’s new smelter (built for them by the government), exporting aluminium made from imported bauxite and subsidised local electricity from a taxpayer-funded plant.  This smelter, now owned by Rio Tinto, uses one-seventh of all electricity produced in NZ to produce around one billion dollars in export revenues at a large yet undisclosed subsidy.

“If New Zealand is to experience an export-lead economic recovery,” says Mayor Tim, “then we need to retain businesses like the Tiwai Point Aluminium Smelter.”  But should they be retained if the only means they can be made economic is by you and I paying subsidies to those exporters?

After all, a subsidy to an exporter amounts to little more than a subsidy to overseas buyers. Should we really be taking money out of our own pockets to put into the pockets of customers in Japan, China, America and Europe?

And if it’s agreed we should subsidise this exporter by means of cheap electricity, by what means could the pleas of any other exporter be denied? Should we simply and without question adopt the ruinous policy amounting to buying dearly in New Zealand to sell cheaply abroad?

After all, it’s not like there aren’t other things NZers could be doing with that money themselves, or all that electricity.

I suggest Mayor Tim pick up a copy of Frederic Bastiat’s Economic Sophisms and study particularly his article on “Robbery by Subsidy,” which is what Mayor Tim is advocating. In fact, to make it easier, let me contextualise the relevant passage for him:

It is true that robbery by subsidy also lends itself to infinite subdivision of the proceeds, and in this respect is no less effective than highway robbery; but, on the other hand, it often leads to such bizarre and absurd consequences that the natives of New Zealand might well regard it as ridiculous. What the victim of a highway robbery loses, the robber gains. The stolen object at least remains in the country. But, under the system of robbery by subsidy, what the tax takes away from NZers is often conferred upon the Chinese, the Japanese, the Europeans, or the Americans. This is how it works:
    Suppose an ingot of aluminium is worth a hundred dollars to the producers at Bluff. It is impossible to sell it for less without a loss, and it is impossible to sell it for more, because competition among sellers on the world market prevents the price from rising any higher. Under these circumstances, if anyone wants to buy this ingot, he will have to pay a hundred dollars or do without it. But if it is an Englishman, say, who wants to buy the ingot, then the government intervenes and tells the producer: "Sell your ingot; I shall make the taxpayers give you twenty dollars by way of cheaper electricity." The merchant, who neither demands nor can get more than a hundred dollars for his ingot, sells it to the Englishman for eighty dollars. This sum added to the twenty francs which robbery by subsidy has extorted makes his account exactly even. The result is, therefore, precisely the same as if the taxpayers had given twenty dollars to the Englishman on condition that he buy NZ-produced  ingots at a twenty-dollar discount, at twenty dollars below the cost of production, at twenty dollars below what it would cost us ourselves. Thus, robbery by subsidy has this peculiarity, that its victims live in the country that tolerates it, while the robbers are scattered over the face of the earth.
    It is really astonishing that people still persist in considering it as an established truth that everything that the individual steals from the common fund represents a general gain. Perpetual motion, the philosopher's stone, the squaring of the circle, have long since ceased to occupy men's minds; but the theory of progress through robbery is still held in esteem. Yet a priori one might have thought that of all puerilities this was the least likely to survive.

Instead, it is alive and well and flourishing in Invercargill.

* * * * *

* I yield to no-one in my admiration for the enormous engineering achievement this scheme represents. But when thinking about it I also can’t avoid recalling Bolshevik leader Vladimir Lenin’s description of Soviet Communism as “socialism plus electricity.” I’ll leave it to you, gentle reader, to draw the connection yourself.

Saturday, 10 November 2012

#RoadTrip : So where is the gay car now? [updated]


Friday, 9 November 2012

#RoadTrip : So, where am I this time?

This might confuse some of you...


NOT PJ: Dunedin Born and Brewed

This week, Bernard Darnton is drinking locally, and thinking globally.

Dunedin Born and Brewed

Emerson’s Brewery, a Dunedin icon, was sold to Lion on Tuesday and so is now part of Kirin Holdings, the Japanese brewer. (Kirin, in turn, is part of the Mitsubishi keiretsu, making it a sort of drinking-and-driving conglomerate.)

I drove down to Dunedin the day after the announcement to check that the beer was still OK. It was.

The brewery itself is still in a crappy little industrial building in North Dunedin. You can still take in your empty plastic Coke bottle and get the receptionist to fill it with Bookbinder or London Porter while you peer into the factory floor where the alcoholic alchemy takes place.

I was worried that international conglomeracy might have change the place but I didn’t see any MBAs, PowerPoint presentations, or anyone realigning the supply chain strategy going forward. Just a few people milling around while the malt and hops turned into bloody good beer.

So, is it bad that Emerson’s has been sold? Presumably Richard Emerson doesn’t think so, or he wouldn’t have done it. I can still get great beer at a mildly exorbitant price, so I’m happy too.

But economically? Every recession we’re urged to export our way back to wealth. If it’s good to export beer, surely it’s even better to export a beer-making company and get all the cash in at once.

“But all the profits will go overseas,” cry the opponents of foreign investments. Economists will come in here and compare the sale price to the net present value of the stream of future profits. But I have just one word: Crafar. If you think that the flow of profits overseas is what economic nationalists object to, then the kerfuffle over the bankrupt Crafar Farms is baffling. The objectors should have been overjoyed that some foreign mug was foolish enough to buy that dog. Think of all those lovely losses flowing in from Shanghai!

The first comment I heard about Emerson’s after it was sold was, “There goes that,” as if being part of a big corporate would somehow taint the beer. If they’re not insane, Lion will leave Emerson’s alone to do its thing. The reason corporate brewers want into the craft beer market is because rich, sophisticated drinkers like me refuse to drink the piss-weak lolly water that’s marketed at teenage boys. Why would I drink Tui “pale ale” when I could drink Emerson’s 1812?

A huge part of the purchase price for a respected brand is “goodwill”. They’re certainly not paying for the physical plant, which is not much more than an overgrown home-brew kit. When I see a beer bottle with the Emerson’s logo on it, I think happy thoughts. That’s gold. To imagine that the new owners will blandify the beer for the mass market is to imagine that big corporates know nothing about market segmentation and that they hate profits.

For many entrepreneurs, the thing they do well isn’t making products, it’s making companies. If New Zealand can get rich by making and selling butter, we can get doubly rich by making and selling companies.

The end result is that Richard Emerson has the capital to expand, Dunedin still has it’s brewery, and I still have my beer. I’ll drink to that.

Thursday, 8 November 2012

‘Maxfield’s Star,’ by David Knowles

image‘Maxfield’s Star’ by David Knowles, 40” x 40” (Buy it here)

David Knowles is a leading Contemporary Romantic Realist Artist who paints the bright, intense light of New Zealand.

When this delightful piece was chosen for the Inspirationz catalogue, it was rechristened “Imagination.” It’s that I can see here, a child finding that spark, that idea that, will challenge them and set their course for a lifetime.

No wonder it can make even hardened pedagogues cry.

Our twilight?

“No society ever thrived because it had a large and
growing class of parasites living off those who produce.”
- Thomas Sowell

American commentators have been talking all morning about the reasons for Obama’s electoral success. It all comes down, most say, to his amazing ability to attract African-American voters, Asian-American voters, Latino voters …. In other words, it’s all about race.

This is nauseating. 

Allow me to quote further from Michael Hurd, from whom I quoted yesterday:

The primary issue is not race. It’s outlook. You have basically two types of people, when considered in the context of electoral politics. One wants to do, and wants to be left alone to do it. The other wants to get, not in the traditional American sense of pursuing happiness...but to have goodies to which one is entitled, and provided for by others.
    Since the welfare/entitlement state began in earnest, back in the 1930s, the trend has been consistent and steady… Before Obama [however], presidential elections were [still] usually decided by the state of the economy. This is because most people, before Obama, wanted a thriving economy above all else.
    Things have changed.
    The fact that Obama—an open redistributer of wealth—won the first time was an indication that perhaps something had changed in American society…
    The electorate of America now cares more about being cared for than about having the freedom to care for themselves.
    This is so not the America of 1776. There are still good and great people to be found in this society, and some of them will perhaps still manage to flourish, unless liberty perishes altogether and some kind of a dictatorship takes hold in coming decades. (It certainly can, on our current course, especially with continued debt, deficits and economic decline.)
    One thing is for sure. Those of us who yearn to think, live self-responsibly and independently must share a society with a plurality of people who would rather force others to take care of them…
    It’s not an “economic system” that most Americans feel is stacked against them. It’s reality. They want a shield from reality, and they think that politicians can provide it for them…
    I often wonder what's next for this country. Now we know. Half the country is in some form committed to freedom and individual rights, and half committed to the "freedom" to have what they want, actually or potentially provided by others. It seems to me like this is a recipe if not for a civil war, for a steady disintegration of the society and political system we have up until now taken for granted. How much longer can we take it all for granted?
    Obama has won, and it's twilight in America.
    It's not twilight in America because Obama won. Obama won because it was, sadly, already twilight in America.

I read that again this morning and began to wonder: when did it become twilight here in NZ?

New Zealand never had the heroes of freedom America had. New Zealand was never the America of 1776, or anything anywhere like that. But values like independence, self-reliance, productivity have always been prized. Mooching, especially in small-town NZ, was sternly discouraged.

Until recently.

Mooching is now a local pastime.  A valid lifestyle choice. Nothing to be embarrassed about.

When did that change?

If the 2012 US election was the time when the American twilight became most obvious, then perhaps here at home it was the 2005 ‘lolly-scramble’ election, when Michael Cullen and Helen Clark offered the middle class the opportunity—via Working for Families and Interest-Free Student Loans—which at the time John Key referred to as “socialism by stealth”—to become welfare beneficiaries.

This was an out-and-out election bribe, the election when the bung was taken well-and-truly out of the pork barrel, and the middle class all but took their arm off. So much so, it’s now apparently electorally unacceptable to get rid of either.  Three-quarters of New Zealand families are now on the mooch,and they’ll never be voting again to become self-responsible.

It seems to me now in retrospect that was the milestone election here in NZ; our twilight.

Your thoughts?

Wednesday, 7 November 2012


“It's not twilight in America because Obama won. Obama
won because it was, sadly, already twilight in America… The
electorate of America now cares more about being cared for
than about having the freedom to care for themselves.”

            - Michael Hurd, “It's Twilight in America

UPDATE: Dians Hsieh posts the contrarian view:

“Don’t despair that so many Americans voted for Obama. Many of them voted for him because of the issues on which he’s right (or better), such as abortion rights, gay marriage, and immigration. So how about insisting on changes for the better in the GOP, rather than cursing people for not wanting to live in an insular, homophobic, repressive theocracy?”

What do people do all day?

A fascinating interactive graphic gives us a sort of glimpse into what people do all day?  And by “people,” I mean a representative sample of Americans who were phoned up in 2008 and asked what they did the previous day—and by “all day” I mean typical, run-of-the-mill common garden days.

Not, in other words, election days like this one.

Nonetheless, here’s a screen shot of the much, much better interactive graphic over at the New York Times.


Go have a play.

[Hat tip Stats Chat]

Interesting ‘Stuff’ front page


The headline and portrait accompanies a bizarre hit piece on Rand by Jennifer Burns, who claims Rand’s work “occupies a vaunted position in modern Republican thought”—and today's US election therefore “should go down as a referendum on the long conservative fascination with Ayn Rand.”

I can only say, “I wish!”

Jennifer Burns wrote a biography of Rand that eloquently demonstrates Oscar Wilde’s dictum for such things: “Formerly we used to canonise our heroes. The modern method is to vulgarise them.”

Her hit piece amounts to much the same.

[Hat tip Ashley C.]

This US election “is about the clash of symbols”

Harry Binswanger reckons this US election is the most important since the Goldwater-Johnson election of 1964, which, “had Goldwater won, the entire course of world history would have been different… no War on Poverty, no Johnson-era expansion of government intervention, no Vietnam War, and, perhaps, no New Left.”

Not because the two candidates are as wildly different as Johnson and Goldwater were--“the candidates, as men, are ciphers,” reckons Binswanger. “The election is about the clash of symbols.”

Obama symbolizes collectivism, and its psychological corollary and breeding ground: second-handerism. Romney doesn't symbolize much of anything, except that he's the non-Obama. This mean he symbolizes non-collectivism and pre-post-modern America. To his definite credit, Romney has said several times that he will not apologize for his success (at Bain Capital).
    I continue to predict a Romney victory, in fact a solid one. But I have to admit that I'm scared. Can it be that all the polls are so wrong? It can be—but that doesn't mean they are. Still, I have made my bets, based on factors I've discussed here before: Obama has only lost supporters since 2008, and the failure of his policies is pretty easy to discern. In 2008, Obama was the One, the Messiah, our Deliverer. Now he's just that grim graying dude who scolds us and blames everybody else.
    By this time tomorrow night we should know if the American sense of life still exists. If it does, You didn't build that and We're all in it together will have been slapped down. If it does not, we'll survive for many years as a nation, but not as America.

Tuesday, 6 November 2012

Debate: Fossil Fuels - Good Or Bad? [updated]


Tune in live today at 1pm NZ time (that’s 4pm Pacific Time) to watch leading environmentalist Bill McKibben (left, above) debate Center for Industrial Progress founder Alex Epstein:


[UPDATE: Here’s the YouTube recording of the event below, which unfortunately is missing the first two minutes of Alex’s opening. Broadcast-quality version “is in production.”]

This is “the ultimate environmental debate.” Environmentalist icon Bill McKibben is, concedes Epstein, “the world's most powerful opponent of fossil fuels.”

Environmentalist icon Bill McKibben is organizing a movement to demonize and dismantle the fossil fuel industry--the industry that produces over 85% of the cheap, plentiful, reliable energy that makes modern life possible. McKibben believes that "we need to cut our fossil fuel use by a factor of twenty over the next few decades."
    In the most influential energy article of the year, “Global Warming’s Terrifying New Math,” McKibben called the fossil fuel industry “Public Enemy Number One.”
    Bill McKibben has been called “the nation’s most important environmentalist” for a reason. He is revered by liberal intellectuals and he is a master activist; in 2009, he organized 5200 simultaneous anti-fossil fuel protests--"the largest global coordinated rally of any kind."

Epstein challenged McKibben to debate to help promote the real truth about fossil fuels and our environment.

If McKibben’s new movement to turn the American public against fossil fuels is successful [says Epstein], it would be a death-blow to our already-teetering economy, and to environmental health around the world.
McKibben is dead wrong about fossil fuels and our environment. If we take an objective, scientific look at how fossil fuels have impacted the human environment, including our climate, the overall result is amazing--we live in the greatest environment in human history. The countries with the worst environments--with the most filth, disease, crop failures, low life expectancies--are the ones that use the least fossil fuels.
    That’s why I challenged Bill McKibben to a public debate when no one else would--and that’s why we should all be so excited that he accepted. On November 5, at Duke University, McKibben will be arguing the widespread fallacy that “fossil fuels are a risk to the planet.” I will be arguing the truth--that “fossil fuels improve the planet.”
This debate is a game-changing challenge to the environmental establishment…
    This is the first debate ever where a world-class environmentalist will be challenged by the powerful environmental case for fossil fuels.

The Fossil Fuel Debate is on! Watch live at 1 o’clock!

Here’s Alex warming up:

And here’s a preview of his case:  Challenging Bill McKibben and the Green Establishment: The Environmental Case for Fossil Fuels

99.9% of discussion of fossil fuels and our environment ignores the single most important fact about fossil fuels and our environment:fossil fuels have made our environment amazingly good.
        The difference between a healthy environment and an unhealthy environment can be summed up in one word, and it’s not “CO2” or “climate” or “temperature.” It’s “development” …
    Consider  Bill McKibben, “the nation’s leading environmentalist” according to The Boston Globe, who blames certain increases in malaria, dengue fever, cholera, and salmonella on “CO2-induced climate change.”
    What about a lack of development, of proper sanitation, and, above all, of the wonderful synthetic malaria-killer that is DDT? More broadly, what about a lack of the cheap, reliable fossil fuel energy that has underlain all of Western industrial and technological development?
    It doesn’t even get a mention–let alone the starring role it deserves in any discussion of improving our environment…

“Was It Global Warming When Stronger Hurricanes Hit the East Coast in the 1950s?” [updated]

imageThe facts are clear: The 1950s had “a road map of destruction up the East Coast.” “This map speaks for itself.”

Chief Meteorologist for Weatherbell Analytics Joe Bastardi is sick of ill-informed commentary linking weather, SuperStorm Sandy, with climate.

Was It Global Warming When Stronger Hurricanes Hit the East Coast in the 1950s?,” he asks.

It is frustrating to be out in front of the hurricane threat on the U.S. Coast, and then have people who either have not looked, or have, and are simply ignoring the facts, come in after the fact and make their claims. I have referred to these people as weather "voyeurs." They only look when it suits their purpose. In the private sector, our fight is every day, and the knowledge of the past and the reasons for the weather and climate are the foundations for any success in the future. A good meteorologist has to know his weather and climate history or he will fall prey to the whims of the computer models. Perhaps you saw some of that with Hurricane Sandy. Until the middle of the week before the storm, the U.S. generated model was taking the storm out to sea and there was denial in some circles that Sandy was going to come back and hit the coast.
Of course, the usual suspects piled on the disaster train once it became obvious, to push their AGW agenda. They are nowhere to be found before the fact, but certainly come out of the woodwork after. I leave the reader to judge the tree by the fruit on it.

Yes, please do.

Here are a few reminders that will assure you that a storm like Sandy is well within the realm of what nature can, and in reality, should do, especially given the cycle we are in, which is very similar to the 1950s (cooling Pacific, with a still warm Atlantic)…

image    You will have seen the chart above many times, but it does not get old, nor does the fact change that the earth is no longer warming, but CO2 is still going up. That chart should be enough to debunk the AGW idea on hurricanes since if the earth is not warming, it can't be warming that is causing more hurricane hits.
    The other problem is that there are not more hurricane hits -- the total global tropical activity is down! The Global ACE index (accumulated cyclonic energy) which gives us an objective way at looking at total global tropical cyclone activity, has tailed off to
record low levels.
So we have two objective measurements saying that:

            a.) The earth is no longer warming.
            b.) Tropical activity is not getting worse.

Interestingly enough, as if to teach a lesson to the Nobel Committee, the tropical activity started tailing off most strongly after Al Gore was awarded a Nobel prize for his movie An Inconvenient Truth. The actual Truth however is the opposite (which is inconvenient, though apparently largely ignored by Al Gore).
    But the irony grows even richer when one considers the fact that hurricane hits on the U.S. Coast were greatest
when there was less CO2!
image    In the end, blaming Sandy on Global Warming or "Climate Change" is … shockingly ignorant or shockingly deceptive. The facts are clear on this and not hard to see, if one simply looks!

He’s right, you know.

KRIS SAYCE: Bad News from the “Asian Century”

_Kris_SayceGuest post by Kris Sayce from Money Morning Australia 

Part 1: Bad News from the “Asian Century”

Writing in Melbourne’s Age newspaper, Climate change adviser Ross Garnaut

has lambasted Australian executives for destroying shareholder funds in the blind belief China’s demand for Australia’s big three mining exports would continue to climb.’ 

Perhaps Mr Garnaut should ask why company executives are blowing up shareholder funds.

Maybe it’s because for 30 years, Australian governments have spouted off about the Asian economic boom.

And now the Aussie government has just released the Asian Century white paper. The gist of the white paper is that Asia will undergo an economic boom for another 100 years.

But before you trust everything the government says, just remember that they can’t even correctly forecast their budgets six months in advance. So we find it hard to take a 100-year forecast with anything more than a pinch of salt.

Our advice? Ignore the long-range forecast and look at history instead. That’s because history tends to offer useful lessons for the future…including a lesson Australia could learn from previous Asian booms and busts…

Take this report from the New York Times in 1996:

‘Are East Asia’s fiercely competitive tiger economies starting to lose their fangs?

‘Things probably have not gotten quite that bad. But if the teeth are still intact, they have lost some of their sharpness of late. Export growth for many countries in the region – including the original “Four Tigers” of Singapore, Taiwan, Hong Kong and South Korea, as well as a half-dozen other countries that are following the same fast-growth path – has slowed sharply this year. And China’s exports have actually declined.

‘The deceleration in part reflects a healthy cooling off of economies that were running the risk of overheating. But it also raises questions about the staying power of East Asia’s export-driven economic boom. In particular, it translates into a deterioration of the region’s trade balance.’

One year later, the Asian Economic Crisis was in full flow. The Asian Tiger economies collapsed and their currencies were devalued. To rub the salt in, the International Monetary Fund (IMF) handed out bailout money.

In simple terms, the cause of the Asian Economic Crisis was over-investment, over-borrowing, and over-enthusiasm…

Asian Tiger Slaughtered

It was a classic bubble. An investment or economy begins growing on its own fundamentals. This attracts attention. So more people invest. Things get even better…imagine if growth continued at this rate.

Then the snake-oil salesmen arrive. In this case they called it the ‘Asian Tiger’. Businesses expanded and new businesses appeared. But because they hadn’t saved enough, they had to borrow money.

The banks cautiously loaned money at first. But when they started seeing the returns, they imagined what they could have made if they had loaned twice or three-times as much.

You get the picture. In the end, like every investment bubble in the history of mankind, the world runs out of fools who are prepared to buy into the bubble.

The euphoria that sucked everyone in disappears. Replacing it is fright as everyone rushes for the exit.

They sell the investment at a loss. Businesses can’t sell enough goods to repay the loans. That means loans go unpaid. The currency falls as investors abandon it for safe haven currencies…and finally, the whole economy collapses in a heap.

That’s the (abridged) story of the Asian Financial Crisis. And it’s the story of every other asset or economic bubble…and it’s the story of the Chinese economic bubble.

‘Oh, but Kris, China is different, it doesn’t have a bunch of external debt. It owns other nations’ debts, so it will be fine.’

We often hear that excuse.

But, it’s worth paying attention to an article in Forbes earlier this year:

‘Here’s some terrific news about China’s economy: at the end of last year, the debt-to-GDP ratio of the Chinese government, the key measure of its fiscal sustainability, stood at 16.3%. That’s an improvement from the already impressive 17% at year-end 2010.

‘Based in large part on Beijing’s low debt load, the Economist’s “wiggle-room index,” which ranks economies on their ability to afford stimulative measures, assigns a great rating to China. Of 27 emerging nations, only petroleum-blessed Saudi Arabia and Indonesia look stronger…

‘All this sounds wonderful, but none of it correlates with the facts. The 16.3% calculation excludes Beijing’s “hidden liabilities.” Once you add them in, China’s debt-to-GDP ratio increases to somewhere between 90% and 160%. And if you believe Beijing has been overstating its GDP recently – it has, at least starting from the last quarter of last year – China’s ratio approximates Greece’s 164%.’

Greece is Nothing Compared to China

Wow! The European Union is on the verge of collapse, and asset markets have crashed due to Greece’s debt problems. Given the relative size of the Greek economy to the Chinese economy

Click to enlarge

…can you imagine what will happen to asset prices when the Chinese economy implodes? It almost doesn’t bear thinking about. Only you have to think about it because the Australian economy is handcuffed to the Chinese economy.

Now, we’re not saying that China won’t be an economic force…to a large degree it already is. But what we are saying is something we’ve said for the past couple of years.

That is, regardless of a country’s strength, economic growth doesn’t go up non-stop forever. Booming economies will always have periods of bust.

If an economy sees excessive credit growth and an economic boom, as sure as night follows day, that economy will see credit contraction and an economic bust.

Bottom line: 100 years is a long time, and anything can happen. But don’t fall for the spin that Australia’s future wealth is safe.

The Chinese economy is following the same path as every other economic boom…and it will soon follow the same path as every other economic bust.

History will show that the Asian Financial Crisis was nothing compared to the coming fallout from the Chinese Financial Crisis.

Part II: Is the “Asian Century” Already Kaput?

It’s getting tasty in China.

Yesterday, the Financial Times noted:

‘Chinese listed companies have reported a sharp rise in unpaid bills during the third quarter, in one of the clearest signs yet of the toll that China’s economic slowdown is taking on corporate balance sheets.’

We wonder how that will fit in with the government’s plans for the so-called ‘Asian Century.’ Not very well we’ll wager…

Last weekend, Australian Prime Minister Julia Gillard released the long-awaited Australia in the Asian Century white paper.

The paper notes:

‘The Asian century is an Australian opportunity. As the global centre of gravity shifts to our region, the tyranny of distance is being replaced by the prospects of proximity. Australia is located in the right place at the right time – in the Asian region in the Asian century.

‘For several decades, Australian businesses, exporters and the community have grown their footprint across the region. Today, for Australia, the minerals and energy boom is the most visible, but not the only, aspect of Asia’s rise. As the century unfolds, the growth in our region will impact on almost all of our economy and society.’

It sounds impressive, right?

The argument is that Asia will become the global economic powerhouse. Therefore, because Australia is on Asia’s doorstep the Australian economy will benefit.

As impressive as it sounds, it’s also completely misguided, and we’re sorry to say, woefully wrong.

But we look at it like this: it’s like a fat man thinking he’ll lose weight if he stands next to a skinny man!

But we’re not the only one to criticise the white paper. Michael Pascoe wrote in Melbourne’s Age that ‘the PM has offered a statement of the obvious.’

While Clinton Dines, formerly of BHP China, told the Age, ‘With a slowdown and budget deficit looming, one suspects that Ken Henry’s efforts are doomed to go the way of his tax reforms.’

We’re happy when the mainstream criticizes government policy. Only this time, the mainstream is wrong too…

The “Asian Century” is Already History

The reality is when we look back at today from the future, the Asian century (in the way the government envisions it) will prove to be nothing more than an Asian decade…or two decades at the most.

If the government, businesses and investors have pinned their hopes on the Chinese Dragon and Asian Tiger, they’ll be sorely disappointed.

By attaching their hopes to Asia, they’re in danger of missing out on the real story of the next 100 years. It’s what we call the ‘Wired Century.’  (This is a theme we wrote about in the latest issue of Australian Small-Cap Investigator.)

The fact is, in some ways the era of backing one geographic location over another are over. So are the days of benefiting from being close to a booming nation.

Let’s be honest, Australia’s closeness to China hasn’t been as important to the Australian economy as most think. What’s more important is that Australia has the natural resources that China needs – copper, iron ore, and coal.

But Brazil has a bunch of this stuff too. So does Canada, Chile and Africa. And the last time we checked, Brazil is three times as far from China as Western Australia is from China…and that’s as the crow flies. In nautical miles the distance is even greater.

And if we’re not mistaken, the US has relied on Middle Eastern oil for years. You could hardly call them neighbours.

Distance doesn’t matter compared to having a resource in demand. The fact that Australia has a bunch of resources and is close to China is just a bonus.

In short, anyone hoping that Australia will cash in on the supposed ‘Asian Century’ is kidding themselves.

Australia Needs to Exploit the Wired Century

Yes, there are benefits of being close, but there’s something much more import. And that’s technological innovation and global trade.

This is the real benefit for Australia.

So if you’re after a clue about the future, we suggest you take in the two following excerpts. First this from the Age:

‘The rise of the internet has killed the newspaper business model, but demand for television remains enormous.

‘According to The Cross Platform Report by researcher Nielsen, United States viewers still spend around four hours a day watching TV, barely down from record highs.

‘Does this make the battered shares of Seven, Nine and Ten cheap buying for potentially-rich stocks? No.

‘Australian television broadcasters are at the very same tipping point newspapers reached a few years ago, just before their problems became near-terminal.’

And this from the London Times:

‘The world is “drowning in data” and computing companies are running out of space to store it, one of the technology sector’s best-known – and most controversial – figures has warned.

‘Mark Hurd, the president of Oracle, said that the amount of data being produced by the nine billion devices connected to the internet had grown eightfold over the past seven years, putting incredible strain on the companies that need to process and store it all.’

New technology, new business practices, and new consumer behaviour is having a big impact on the local and world economy. And that impact will only grow.

As we wrote in the latest issue of Australian Small-Cap Investigator, 16 years ago the Sayce household only had one device connected to the internet (a desktop computer).

Today, between  this writer, the missus and two kids, we have 12 internet-enabled devices. And as far as we’re concerned, the world is barely 5% of the way through the technological revolution.

The Most Important Skills You Can Learn

Bottom line: forget the Asian century. Forget the nonsense about forcing kids to learn Mandarin, Japanese, Hindi and Indonesian.

Sure, those skills will be handy. But on the importance scale, they are far, far behind the most important skills any kid (or adult) could learn today. We’re talking about encouraging kids to learn more technological and web skills.

If Australia (or anywhere) has any chance of building a successful economy over the next hundred years it won’t be through foreign languages or as the mainstream economists seem to think, by building more houses, it will be by embracing and exploiting the Wired Century.

That’s the future for Australasia. But only if governments stops butting in and let schools and businesses get on with building those skills.


Kris Sayce is an Investment Director for Port Phillip Publishing and an editor for Money Morning Australia.