Save the Humans

Sub-prime Banking Explained

Here is it, for those of you who still don't have the picture.

President Obama Loves Debt

If the USA's government spending (which was bad under Bush and seems simply frightening just six months later) is getting you down, try this video. And if driving so fast bothers you because of the carbon emissions, think of it as public transport instead.

Send your Kids to an Independent School

The Telegraph has an article buried away on page 12.

Private school students earn a third more than state pupils

That is a very large amount. I hope that the difference isn't so great in New Zealand. But it helps to explain why so many people effectively pay twice for their childrens' education. Things are particularly grim in the UK where private education is at least twice as expensive as New Zealand, and there is no state subsidy. Some mothers (or fathers) take up work solely to pay for fees.

About one-in-12 British children (eight per cent) are educated privately at independent schools.

The popularity has increased in recent years, perhaps because some of the worse state schools have finally been opened to the scorn they deserve, but partly because too many children have been watching the Harry Potter movies. More recently, the recession has had the opposite effect. At least in the UK a number of independent schools have closed or applied to join the state system. The socialists must be smiling.

"Our findings suggest that rather than family background
being the predominant factor, private school education seems to offer
something else to the equation."

What a shock that must be. Something else? Could it be the private schools themselves? How awful?

The teaching unions have always claimed that private schools are a waste of time and money. A concerted campaign against independent schools has been going on for decades. Selective schools (called grammar schools in the UK) were mostly closed in the 60s. Around where we live there are still a few and they are as popular as vice. Tony Blair was hammered within the party just for sending his son to a C of E school (a state school, but a nice one). He rightly put his son's education before left wing politics.

"Even after adjustments for qualifications gained and family background,
those in the top 10 per cent of earners who had attended independent
schools earned on average 20 per cent more than state school pupils in
the same salary band."

Perhaps it is time to hand over management of state schools to those who actually know what they are doing. Perhaps that is a bit harsh. But it is surely madness to allow the state to continue its near-monopoly of the school system. The monopoly is doing what any monopoly does: stifling innovation, creating division, wasting money and now, reducing future earnings.

What a shame.

What Killed General Motors?

Timid management and coddled workers, according to this great article in the WSJ. If you are interested in this topic, read the whole thing!

The union was defending production
quotas that workers could fill in five or six hours, after which they
would get overtime pay or just, you know, go home.

But the company signed generous labor deals during the 1970s,
including the right to retire after 30 years with full pension and
benefits, partly because it believed the contracts would cripple its
smaller competitors, Ford and Chrysler. Then along came Honda, Nissan
and Toyota, which didn't have to deal with labor contracts at all. That
was the beginning of the agonizing decline.

I am sad to see Pontiac go - I owed a great car call a Grand Prix in the 1990s. It's going to be interesting to see if GM can recover from this. For Chrysler, it must be very embarassing for ex-ecutives on the Grand Blanc golf course admitting they were bought for a song by a bunch of Italians...

Healthy Homes for You Dear Kiwis

Thanks to Whaleoil I found this site:

More than a million New Zealand homes are not properly insulated. Almost half a million homes – a quarter of all houses in our country – could be making their occupants sick.

Lack of insulation by itself doesn't cause any problems. We lived in an old house with no insulation for 8 years - just had to turn up the heating a bit. Plenty of ventilation. In fact some people complain that new houses are more dangerous since they don't allow any airflow.

Why? Because they don’t have adequate insulation which means they are cold, damp, mouldy and drafty.

This can change. A comprehensive nationwide retrofitting scheme would make houses warmer, save on power bills, take pressure off our health system, cut absenteeism at work and schools, and create real jobs.

Whaleoil is worried that we taxpayers are funding it yet it is basically a Labour party ad. That may be, but I am much more worried that anyone might thing that having their logo on this website is a good idea. If this is Labour then no wonder they lost.

As an environmentalist initiative it is unbelievably lame. Now I don't use that word very often, but it is the correct word for this web site. This from a party which sat for 10 years while we didn't build a new power station, banned new coal generation and which put us through two power crises.

Please go and have a good look. It will only take a minutes and you will get a really good laugh out of it. Do the survey, read about Simon and Jane, healthy kiwis and see why it is all the government's problem.

I spent 4 days last week staying in a centrally-heated concrete pad in Hannover. After about 30 minutes I felt worse than I ever felt in my un-insulated villa. The place had brilliant central heating - in fact a window was permanently open - but it was a tiny, soulless, soviet-inspired, high density block of concrete. Only the wonderful host made it bearable.

If lack of insulation is all we have to worry about, then I say build a few more power stations, get the price of electricity back down to 10 cents a KWhr and we'll all be happy. At least we've got space.

And to finish, how naff is this. 'Healthy kiwis', oh dear, do they mean the animals or the humans?

We the undersigned call upon the New Zealand Government to implement a comprehensive programme of home-insulation retrofitting in the interest of warmer houses, job creation and healthy kiwis.

UPDATE: I have only just got around to uploading this post, and I note that Kiwiblog thinks it is a great site! Either we are talking about a different site, or one of us needs to lay off the turps. Still at least Halfdone agrees with me.

John Key Versus the Recessionists

I may have complained about John Key's willingness to invest what are essentially pension funds into New Zealand infrastructure. I was not alone in complaining. But maybe that is not the end of the story.

Kiwiblog picked up on John Key's Wall Street Journal interview yesterday, and the UK's Adam Smith Institute blog mentions it also, with a headline 'New Zealand: A beacon of hope'. Neither publication is known for its socialist or interventionist leanings.

What is notable is Mr Key's terse but user-friendly way of expressing himself. It is unusual in a politician and refreshing. It reminds me of the way commentators comb through any words uttered by the US president (any US president) to look for intentions and meanings.

But there is also some clear thinking. For what little it is worth, his interview has earned a lot of Brownie points with The Optimist.

I found this passage particularly enightening:

The Key government also is wary of climate change orthodoxy. "Half of all of our emissions come from agriculture," he says, meaning cows "burping and farting." "We don't have an answer to that. . . . So at the moment, we either become more expensive or we cut production. And neither of those options are terribly attractive." Mr. Key is reviewing the economic impact of the previous government's cap-and-trade plan. "New Zealand needs to balance its environmental responsibilities with its economic opportunities, because the risk is that if you don't do that -- and you want to lead the world -- then you might end up getting unintended consequences."

Environmentalists would argue that when there are no answers, we must stop the activity. This is why they are often accused of wanting us to go back to living in tents next to the Nile. Mr Key comes from the angle that agriculture is happening, and rather than shut it down and do something else we should wait for answers. 'We don't have an answer to that' is the end of the story, for the moment.

Some would call this 'If in doubt, leave it out'.

There is a terrible risk with a crisis that the hand-wringers take over. Do something! Do anything! If what we do is a disaster, we can fix it up later, perhaps after our economy has been savaged by shutting down agriculture.

But there needs to be a strong strand in public policy of what might be called 'existing use rights' in environmentalist language. It seems to me that Mr Key has some respect for the status quo and is wary of tipping out the baby with the bathwater. This is of great comfort.

The parallels between environmentalists and what we might call 'recessionists' are strong. Both point to unique and new problems never before seen. Both declare that if we do nothing the world will end. Both demand urgent new action involving massive spending and new regulation.

At the moment, those who worry that the UK, USA and Australia will savaged by public sector debt, or environmentalism, have little comfort to keep them warm at night. Here in New Zealand the chill is still present, but Mr Key is keeping the fire on.

Have We Forgotten Half of Capitalism?

Anti-dismal argues that companies such as GM which are in trouble should be allowed to fail.

What is it about auto makers that makes them
think that taxpayers, worldwide, want to pay them to produce stuff no
one wants? The whole point about falls in profits is that it signals
that companies should change what they are doing and how they are doing
it, or cut back on production or exit the industry or some combination
of these things. Government handouts just delay this necessary
adjustment.

This is basic economics but also common sense. Taken to an extreme, imagine that GH (General Horses) still breeds horses for urban transport and a young and vibrant GM is trying to make cars. Should the US government pay GH to keep breeding horses that no one wants? At what point does a government say that 'enough is enough' and companies should exist to make useful products and profits, not just to soak up huge numbers of staff? How many people want to work for a company which limps from one crisis to another anyway?

Removing this market discipline is just bad economics and
bailouts by the government gives businesses a reprieve that the market
wouldn't give them. Within free markets a firm has to be able to pay
the ultimate price for bad decisions or products. But when the
government interferes, that discipline is removed. At least it appears
that the Swedish government has acted (more) correctly.

All of this is very relevant to another Anti-dismal post about the important of educating the population in basic economics. Perhaps all this talk of bailing out private companies (as distinct from lending banks which have their own special function in capitalism) would fall on deaf ears if people had a bit for respect for the creative destruction of a free economy.

[long aside: The fact is that capitalism works by allocating capital (people, effort, focus, etc.) to the right areas. By 'right' I mean the ones that we want it to. How do companies tell what we want? By our willingness to pay, by the price they can obtain. General Motors is well aware of this: witness the great run they had with SUVs when they were popular. Did GM refuse to produce them and continue with its all-car (and truck) line? No, it listened to the market, and made a lot of people very happy, and a lot of money for itself. Well some, anyway.

But what about when the market simply says 'less vehicles', and you are a vehicle company? Well, the same applies but on a whole-economy scale. GM does not need to continue in existence at the same level as currently. If people want less cars, GM must close factories and retrench. In the limit if people decide that GM cars suck and refuse to buy them at all, then GM must fold. The decision is ultimately down to the shareholders of GM.

Those staff and shareholders funds (as are left) will then find their way into other endeavours, perhaps in luxury vehicles, perhaps in farm machinery, perhaps in nano-technology. Whatever people want.

If you think about an economy where all the companies are producing products that no one wants, you can imagine our wealth slowly slipping year after year, as the new companies (which should be formed, funded and staffed) are starved of capital and people which are needed to keep the old 'subsidised' sector going.

The only remaining argument for bailing out GM is for short term reasons, perhaps because people cannot quickly find jobs. Not even that holds water in my view as it just makes the adjustment more painful. But I'm certainly not close enough to it to know.

Our short-term society gets alarmed with the weather is unusually cold one year, when a housing bubble collapses, when our supermarket runs out of a particular brand of bread. 'Why?'' we ask. 'What is going on?' We expect consistency and continuation. But capitalism has to balance this with the next big thing. It is constantly searching for new promising areas which people might want next week, next year, next decade.

A dangerous trap that some people fall into is to try to get the government to pick what people will want next. This often appears to work for a few years, but actually governments don't have the incentives (reward and pain) that are needed to really get to what the market wants. Also governments often try to make people change their wants (witness recycling and public transport). end of long aside]

Just like the demolition of a building to make way for a new one, we need to understand the importance of the demolition of a company, or a whole sector. It is sad when old buildings go. But without the destruction, creation is severely curtailed.

Footsie Stomps Through the Floor

Today's graph is not pretty:

It can only be days before the environmentalists start dancing and firing automatic weapons in the streets. (Lead free bullets of course!). CO2 emissions are collapsing worldwide. Public transport is surging.

About the only bad news for environmentalists is that McDonalds is going great guns:

McDonald's has announced a sizzling set of trade figures and plans to open 1,000 stores worldwide as cash-strapped consumers continue to show an appetite for fast food.

Well, us humans have to have some good news in our lives!

World Economic Outlook

Here is a very interesting article on the prospects for the world economy this year and next. It is blunt and to the point. But first a word of warning: ensure you have sufficient prozac in the bloodstream.

1) The world is heading into a severe slump, with declining output in the near term and no clear turnaround in sight. We forecast a contraction of minus 1 percent in the world economy in 2009 (on a Q4-to-Q4 basis), making this by far the worst year for the global economy since the Great Depression. We further project no recovery on the horizon, so worldwide 2010 will be “flat” relative to 2009.

and then:

10) The most likely outcome is not a V-shaped recovery (which is the current official consensus) or a U-shaped recovery (which is closer to the private sector consensus), but rather an L, in which there is a steep fall and then a struggle to recover. A “lost decade” for the world economy is quite possible. There will be some episodes of incipient recovery, as there were in Japan during the 1990s, but this will prove very hard to sustain.

Go here to read the whole thing.

Environmentalist Taxes or Income Taxes?

Antidismal reports on Gregory Mankiw's suggestion of higher petrol taxes in exchange for lower income taxes. After driving to work in his Lincoln towncar, he says:

I would institute an immediate and permanent reduction in the
payroll tax, financed by a gradual, permanent, and substantial increase
in the gasoline tax. I would make the two tax changes equal in present
value, so while the package results in a short-run budget deficit,
there is no long-term budget impact.

There are several problems with this:

• Firstly no one believes the government when it says that it will reduce taxes in one area forever. In a few years, income tax will be back where it was, and we will still have the petrol taxes. In short, governments can't be trusted. For this reason, punters will quite rationally take any tax reduction offered, and oppose any tax increase
• Second, no one has shown that CO2 has anything to do with anything other than plant growth. Global warming is a scam
• Third, electric cars will erode this tax (admittedly only in the longer term)
• Fourth, people in the sticks who drive more miles are penalised. Those who live in cities and take the electric train will be subsidised even more by the poor country fold
• Fifth, it is a slippery slope from this to raising taxes on fatty food, airline travel, gas braziers, school trips and skiing. Or did I mention this already?

But wait. Mr Makiw says:

Call it the create-jobs, save-the-environment, reduce-traffic-congestion, budget-neutral tax shift.

This is also garbage. Recycled but still garbage. Mr Mankiw is just trying to sound cool and new-age by adding a bit of greenwash to his silly idea.

In the UK they have massive petrol taxes, such that even now it costs around $2.50 a litre for the stuff. The Economist claimed a few years ago that such taxes were twice what they should be for any reasonable value of 'economic externalities'. Yet there they are.

They don't even spend it on roads. But arguably the UK has the worst congestion, the crappiest living environment, a terrible job market and collapsing tax revenue. This is in addition to a one-eyed Scottish git for a PM, or whatever Jeremy Clarkson said.

Antidismal then says:

This last paragraph is important. Fiscal
stimulus will not fix what is wrong with the economy. It may help with
some of the symptoms but much greater reform is needed if we are to
deal with the actual causes of the current crisis.

One might argue that environmental regulations are a big brake on economic growth. One could suggest that skyrocketing land prices caused by green belt restrictions have created instability and speculation. One might even suggest that spending billions on global warming has sucked talent from real science in favour of the voodoo variety.

Reform is certainly needed. But while we have brilliant and highly respected economists proposing CO2 taxes, we in the human race deserve every crisis coming to us.

Wal-Mart Flogs Their Low Paid Minions to Death...or not

Anti-dismal has a post about how Wal-Mart is actually a pretty decent place to work, albeit with low pay.

The job was as dull as I expected, but I was stunned to discover how
benign the workplace turned out to be. My supervisor was friendly,
decent, and treated me as an equal. Wal-Mart allowed a liberal dress
code. The company explained precisely what it expected from its
employees, and adhered to this policy in every detail. I was
unfailingly reminded to take paid rest breaks, and was also encouraged
to take fully paid time, whenever I felt like it, to study topics...

etc. etc.

What is interesting is that he then talks disparagingly about the mom-and-pop stores that everyone is supposed to love. Good to get some balance on this issue. Having had a few arguments about refunds in these shops (but never a one at Wal-Mart) I have to agree.

In fact my favourite story about Wal-Mart is when we went to buy a lawn mower there. There were two old guys pushing 90 running the section and the till. They have a young thing 1/4 their age who was 10x faster on the till but knew nothing about lawn mowers. These two knew everything, and between them all they made a great (if hillarious) team. But anyway...a customer came in wheeling a lawnmower that he had bought some weeks prior and mowed his lawn with a few times. He decided he didn't want it anymore. They sent him to the refund desk, trailing grass all the way. As we left he was cheerfully getting a full refund. They would refund ANYTHING. In fact I'm sure most of it just went in the landfill out the back.

Liberals (in the US sense) love to look down on people who work at Wal-Mart and McDonalds. The use these workers for their minimum wage battles. They bash the companies as part of their war on the faceless multinational. They would never shop there themselves.

But this is the problem. By not shopping there, working there, owning shares, etc, by not being part of the Wal-Mart 'community' (I yes I hate that word too) they have no right to pass any information or comment on it. Nor do they have any sensible insights. And that's why they get it wrong.

Luckily for them, their readers agree with them, and don't work or shop there either. So everyone is happy, and no one gets found out. Until people like that above come along...

Instructions on how to say Wal-Mart for those who need them: Waaaarrrrrlllll-Marrrrrrt

Christchurch Ratepayers the Losers

I just noticed this post from a blog called Against the Current suggesting that the reversal of Christchurch City Council's rate rise on its social housing is a 'great victory for Christchurch'.

I'm not sure how. A small number of people benefit from lower rents as their flats slowly descend to slum status. A large number of ratepayers are left footing the bill, and worrying about what is to come.

Social housing is not the preserve of local councils. Local democracy is far too shallow, too cosy and (dare I say it?) corrupt to be left with this sort of thing. I suppose it is a tribute to the councilors that they voted for the rent rise, twice.

Obviously, social housing is too much of a risk for ratepayers. Once social housing takes hold, even in the tiny amount that exists in Christchurch, all the poverty action socialist types sink their fangs in and milk it for all it is worth.

I should also point out that 'Sideshow Bob' is a silly name for Mayor Bob Parker. The mayor's name on The Simpsons is Mayor Quimby. Sideshow Bob is a different (and very minor) character.

Bollard is as Bollard does

Is it too soon to declare that Alan Bollard has sung his last? Maybe - here is an except from his last speech:

Some examples: we would hope that the electricity industry does not take
advantage of its market position and keep increasing rates, that local
authorities realise they need to set rates increases below inflation for a
change, that the construction materials industry respond to much weaker demand,
that the food industry react to lower international commodity prices with price
cuts, that petrol companies keep cutting forecourt prices, that the transport
industry pass on fuel price cuts, and that the banks pass on interest rate cuts.
Only then will all these firms be playing their proper role in New
Zealand’s recovery.

On that logic, all we need to do is give everything away free and we will all be rich! Does Mr Bollard understand, for example, what sets petrol prices? Does he really think that oil companies will start selling at a loss just because the governor of the reserve banks wants lower prices?

Well he is right about rates, but who expects the councils to listen?

This is a remarkable speech from a central banker. It goes almost as far as blaming inflation on a rapacious and greedy private sector. Mr Bollard should look a little closer to home: his employer. and himself.

I am reminded of the Blackadder quote:

I care not a jot that you are the son of a certified sauerkraut-snacking loon. It minds not me that you dress like a mad parrot and talk like a plate of beans negotiating its way out of a cow's digestive system. It is no skin off my rosy nose that there are bits of lemon peel floating down the Thames that would make a better Regent than you.

So take a careful look at the picture above, and the one below, and let me know who you think would make a better central banker?

Where Our Tax Dollars Land

If ever your thought that the government lacked imagination in its spending, here is proof that you are wrong:

A Christchurch firm's efforts to develop a personal flying machine
received a boost of nearly $1 million from the Foundation for Research,
Science and Technology.

Making a total of about $1.5m to date.

Venture capitalist Jenny Morel's No 8 Ventures company had also
invested significantly in the project in recent years, an indication of
its commercial potential.

But presumably not enough commercial potential to actually get No 8 Ventures to front up with the million.

In approving the application, the foundation noted several
firm orders had been received for the jetpack, and expressions of
interest for many more following its US debut.

This is an excellent start, but one wonders why with all the publicity in the US, it was not possible to obtain funding. Do the venture capitalists know something that FRST doesn't? Or is FRST so brilliant that they can see potential where legions of VCs can't?

Looking at the video, it looks more than $1m away from completion to me. It is too large, and far too noisy. It seems to need two people walking along holding it to keep it safe. Still, if there are orders, it must be good enough.

Good luck to them - let's hope the 25 cents each means we all get a free ride when it is ready. I suppose taxpayers will find out in a few years whether it was all worthwhile.

Coal Lunatics Again

At least this environmentalist was already wearing a white coat. Just needed a quick trip to the lunatic asylum.

State-owned coal miner Solid Energy held an annual meeting for the first time today...protesters stormed the stage.

"They tried to chuck a great big cream pie in my face from point blank range and didn't succeed," said chief executive Don Elder.

The protesters said the company planned to turn the pristine wilderness of Happy Valley on the South Island's West Coast into an open cast coal mine, killing endangered species.

If only. Actually I think Solid Energy is trying to grow the snail population. Their coal mining ability is still in dispute.

As I may have mentioned before:

• Stockton is like a 700 hectare farm, except it makes $500m each year. Try that from dairy.
• Snails and mining don't mix. Drop the snails and get back to your mining, guys
• We have 2000 years of coal in the ground. We are not about to run out. Anything you might have heard about 'peak coal' is just environmentalists dribbling on their bibs

So, here is a challenge for Solid Energy. Get a grip on yourselves, and beef up your mining. You need to work out a plan to open 10 new mines, and attract some foreign capital to pay for it. Get that coal out of the ground as quickly as you can, because soon no one will want the stuff and it will be worthless.

Our economy depends on the hopeless snail-worshippers on the staff taking a long walk on a short plank. Turn off the snail fridges and buy some more mining equipment.

Mine that coal! For the good of New Zealand, mine that coal!

Economy Key

Anti-dismal posted a few weeks ago about comments that John Key will be the most economically literate PM for a good while, but then pointed out that some of the economic policies signalled in the election are poor. Now that he is PM it is time to review these in the light of the Act agreement.

His list is:

• Transition relief package - this is pure politics. There is no mention of this in the agreement itself, and it is still in the post-election plan, so it stays. But it is short term, so any damage is minimal. I don't see it as a moral hazzard.
• Requiring the Cullen fund to invest 40% in New Zealand - I complained about this earlier. No mention of it in the agreement. Anti-dismal is surely right. Key concerns are political interference, crowding out of private investment, and lower returns from the fund (the latter being a bit of a joke at this point, admittedly)
• Fibre internet - well who knows. Again no mention the in agreement. I can't understand why the government needs to get involved, and (now living rurally) I would settle for ADSL. But certainly our Internet is seriously sub-standard and it is a major opportunity for improvement. I hope and trust that National does not intend to nationalise anything in this area (see another Anti-dismal post on this), and that they would limit themselves to subsidising private sector infrastructure builds. Even this is fraught with difficulty. It is certainly a can of worms.
• No SOE sales - re-iterated in the agreement. This is seriously stupid, as there are assets which are just aching to be sold and we could do with the money. Still, I see it as a political calculation. There are other priorities which can easily keep the government legislatively busy for the first term. If the citizens come around to the idea then they can fire up the trademe site later. It is probably also worth mentioning that at least most of the SOEs make money. In 1984 the problem was that government departments like NZ Post and Railways were not only useless but they also lost money, meaning that we were better off not having them at all. OK, railways is not going to be a good bet, but most of the other others are ok. The need to privatise is not hugely urgent in terms of a growth inhibitor, I would think.

I would add to the list the goal of catching up to Australia by 2025, stated in the agreement. That is a long time away. It is either a measure of how unambitious National really is, or a measure of how far away we really are, perhaps even both. But it is a sobering thought. In my view, a resource boom has to figure in this catch-up - we have plenty of coal, probably lots of oil, and wood is not a problem. We need to ditch the environmentalists and move forward on all of these.

In National's defence, I would also point out these policies from the agreement. While not strickly economic, I believe they have significant short-term economic potential:

1. RMA - reforming this could provide a huge boom in infrastructure projects, assuming the financial markets recover and can provide the funding. Who would even think about a new power station, or a hydro scheme with the RMA as it is now?
2. Regulation - no one even knows what excess regulation costs us. It is a lot. I'd like to see a full report on this, trying to estimate the cost of particular regulations throughout the economy.
3. Tax - I promise to get out of bed every morning when the top tax rate is abolished. I'm not the only one.
4. Climate Change - introduces significant business uncertainty in some areas, so signalling a more cautious approach here has to be worth another 0.5% on GDP

So my view is not as dismal as Anti-dismal, and altogether anti-dismal in some areas which Act brings to the table! It will be interesting to see how it pans out.

UPDATE: Kiwiblog's take on the agreement is here.

Slowly or Quickly Better?

New Zealand needs some serious changes to increase its productivity growth, which is hopeless. Some of the things I can see are:

• Reducing government expenditure (since the state is not the best in terms of productivity)
• Removing road blocks caused by RMA, health and safety and council policies
• Looking at economic dis-incentives like working for families and welfare dependency
• Improving communications infrastructure (I am not sure about the benefit here, but it can't be bad and everyone is talking about it)
• A general review of the law books, which seem to be stuffed with unnecessary regulations
• Building more roads and upgrading those which are close to capacity
• Building more power stations and a concerted effort to reduce the cost of electricity (by more supply) and the certainty of future electricity
• Turning New Zealand around sideways so it can encompass more time zones

More particularly it is clear that we could have a massive minerals boom here in oil and coal, and we should get into this as soon as possible.

But my real question is this, taken from Antidismal quoting from Forbes.com:

Key's hope is that building good relations now with the Maori Party will pay dividends in later elections where the Maori Party may well play kingmaker. Key may also be hoping that moving slowly with a broader coalition is a better recipe for longer-lasting economic reform than moving quickly with fewer allies. Our hope is that he remembers to move at all.

In my limited experience of reform in New Zealand, the fast approach seems to have worked best. Roger Douglas transformed a number of parts of the economy overnight. When car duty was abolished slowly, at the rate of 5% a year for 5 years (from memory), the industry asked that the duty be abolished immediately, as they could not sell any cars.

While it is nice to think that you can signal a change and then slowly move there, the result is often more uncertainty, less business investment and more consumer pain than if you move quickly. Perhaps the short term pain in this regard is unemployment, which has a bit of a lag. But New Zealand's labour market is significantly more flexible than it was in 1984.

If John Key has a prescription for improving New Zealand's productivity, and I hope he has, then he needs to move on this quickly. He should announce major measures before Christmas to give people time to think over the holidays. He should legislate early and often.

By April next year, we should all feel as if we have been punched in the stomach, and moving forward in some new direction. It would not be good if by then we were vaguely aware of a slight twinge in the lower abdomen, and unsure whether it will develop into a healthy appetite or appendicitis.

People say business craves certainty. It is true that businesses can't / won't invest when they can't form a reasonable view of what is going to happen in the future. National needs to create that certainty, but on its new track.

Is Telecom is a Bunch of Bunnies?

The author of this video seems to think so:

Environmentalists Hate Grass

Who would do this?

Before: (some wag has put flip flops on the roof)

After: (environmentalists have tidied up the yard)

The environmentalists say:

As the sun rose over sleepy Helensville, we unfurled a truckload of
Ready-Lawn around the outside of National Party leader John Key’s
electorate office. Then came some pine trees, some one-dimensional cows
and a smattering of stumps. Finally a billboard went up saying: “Would
John solve this climate crime?”

(Translation: a climate crime is where you convert some land from forestry to dairy - i.e. chop down the pine trees and sow grass. It isn't a crime at all - in fact it is a pretty good idea with milk prices so high)

What is better: carving up some innocent grass and putting it over asphalt to wither and die, or cutting down some trees and growing grass for animals?

Do these environmentalists hate grass? If so, they should tell their friends soon.

Grass - The Climate Crime of the Century

The environmentalists are excited about this 'climate crime'. What is a climate crime? Well from what I can tell, it is:

intensive dairy in light of the worsening global climate crisis

This is quite simply just crackpot stuff. Greenpeace has long since lost its reputation for sensible protests and seems to have been hijacked by the lunatics. Who would bother to write this message in grass? It's a Wednesday - don't they have jobs to go to?

What on earth is a worsening global climate crisis? The global temperature, so far as we can tell, is falling. The link between CO2 and temperature (at least in a forward direction) is pretty much discredited. Environmentalists have resorted to name calling and demonising those who disagree with them in a desperate attempt to keep the lid on the global warming scam.

Perhaps if the government wanted more trees it might have thought a bit harder before moving to nationalise the carbon credits that rightfully belonged to private land owners.

Perhaps if dairy is so bad, the government could ban it. After all the environmentalists are working on banning just about everything else in our lives.

Or perhaps, just perhaps, the environmentalists could get out of the way so the rest of us, who actually care about this country and want it to succeed, can get on with the business of creating the businesses, paying the wages and ensuring a future for our little south pacific backwater?

How about it guys?

Coal Mining: You Know You Want To

We make $500m out of a 700 hectare 'coal farm' on the West Coast. For our economic health we need to repeat this elsewhere in the country. We have 2000 years of coal in the ground that is popular now, but soon (as energy technology improves) no one is going to want it.

Mine that coal!

World About to End (again)

The environmentalists are excited that New Scientist has put a load of their propaganda in their magazine, and talks about the limits to growth. I picked it up the other day but decided not to buy it based on this 'graph'.

You can tell the graph was done by an environmentalist because the Y axis has no scale. No species went extinct before 1900 simply because we didn't know about many of them. The temperature line finishes in 2000 which is good because after that the world has cooled. Also the scale for the temperature is about half a degree for the whole graph. Population growth has stalled and it is expected that population will peak in the next few decades and then fall. CO2 concentration quite likely has nothing to do with us, and rising concentrations are probably a good thing (for food production) anyway. Rainforest depletion is made considerably worse by the biofuel debacle.

All in all the graph is a silly marketing exercise which is trying to connect human population and economic growth (i.e. our lives becoming slightly less miserable) with the end of the planet. No change there, then.

The idea that economic growth is passée appeals nicely to those who are so rich that they really don't need another Porsche. The starving in Africa or the unemployed in Shenzhen have somewhat different views. To the extent that environmentalists are able to limit growth, they will make us all poorer, but their policies are particularly harsh on the poor.

Living in a western democracy at the movement sometimes feels like you are in a totalitarian society, where your every move is attacked for destroying the planet. No doubt the current economic woes in the world will push environmentalists' pet scams into the background, and not before time.

I look forward one day to being able to visit the supermarket without being told over the PA how they are 'doing their bit to save the planet'.

If politicians dare not say that growth is bad, as the environmentalists assert, I can't say I have noticed. And if low growth is how the planet is to be saved, then New Zealand over the past 10 years has been the trendiest place around. Maybe we should get an environmental prize for our hopeless productivity results.

[updated to correct grammar and improve sentence construction]

Conservation is the New Generation

Garth George writes:

But these days the state tries to tailor the need to the supply. It is constantly endeavouring to alter people's habits, behaviour and activities to avoid having to supply the needs.

Instead of building new hospitals to meet the health needs of the populace, we spend millions on "preventive" measures and trying to change people's habits.

Instead of building new power stations, the state tries to lower demand, all the while creaming off exorbitant profits.

Instead of building more roads, the state insists on wasting untold millions on promoting and subsidising public transport, building cycleways and suchlike.

This is true enough. Power is a particularly obvious example, with blocks on new generation, the price going through the roof, and the government claiming that conservation is the new generation.

This approach can only lead to tears. In fact it has already. Our roads are inadequate and we need more power stations. Therefore we waste loads of time getting from A to B and pay a lot more than we should (perhaps double) for our power.

This will require a change in attitude in the government. It certainly won't come from the bureaucrats.

Key or Keynes?

Antidismal is not happy with John Key's plan to require 40% of the State Pension Fund to be invested in New Zealand.

To this you can add the idea that this extra government investment
could just crowd out private investment, both from within New Zealand
and from overseas. So the total amount of investment in New Zealand may
not change much at all. And then there is the issue of what happens if
politicians start to take an even more hands on approach to the fund.
The last thing we need is for investment decisions to be made, not for
good economic reasons, but purely for party political reasons.

It does smart to see all that money leaving New Zealand when it could be invested here. But is money leaving New Zealand. I thought we had a current account deficit?



That means that people are lending us money, and that money is coming here, not flowing out, right? At 8% of GDP we are talking large numbers too, perhaps $14bn each year. A few hundred million more isn't going to be noticed probably, and the possible political interference is downright dangerous. My Key can hardly be thinking that the world is about to close its capital borders, given all the talk of international rescue. Opening the paper these days I expect to see 'Thunderbirds Are Go' written on the front page.

Perhaps Mr Key genuinely thinks that we will spend more money on these projects if it comes from the pension fund as well as other sources. This must surely mean that the fund would set a lower bar for investment than would currently be there. Does this mean dodgier projects? Does it mean that he wants the government to borrow from the fund at attractive rates, or do some sort of fiddle on this? Can't imagine it.

Does that mean Mr Key's plan is just politics? If so, we can hardly complain. The sorts of comments that come out of Mr Cullens lips suggest that this is the only way to get your message across in New Zealand. But sad to see that both major parties trade on our economic illiteracy.

I am all for big infrastructure projects. We desperately need more roads, power stations, and our Internet certainly is pretty crap. But perhaps Mr Key should look first at all the money wasted by the government on projects that not even the most compromised pension fund would invest in.

Market Security

The clear advice is to lose your money with an enormous firm. Lehman Brothers wasn't quite big enough, but AIG was. This cartoon is a bit on the nose, but the fact that it is amusing rather than ridiculous says a lot.