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Top 10 at 10: Chinese trade tensions; US real median incomes fell in last decade; Polish bond failure; Dilbert
Here are my Top 10 links from around the Internet at 10am (My apologies for lateness. Cleaning up after yesterday's MPS excitement). I welcome your additions and comments in the comments section below or please send suggestions for Monday's Top 10 at 10 to bernard.hickey@interest.co.nz Interest .co.nz is a pigeon free zone.
1. This will be interesting to see how the markets cope . The United States has signalled it wants to start unwinding its bank support programmes. Treasury Secretary Tim Geithner said it was time to move from 'crisis response to recovery', the FT reported. Hallelujah. We'll see if the US financial system can cope with some sort of normality and even the remotest sniff of moral hazard.
Pointing to evidence of a healing in financial markets, which only a few months ago had been paralysed by a retreat from risk and banks' reluctance to lend to each other, Mr Geithner said the US would allow its guarantee for the $2,500bn money market mutual fund industry to expire on schedule later this month.
He also backed a review by the Federal Deposit Insurance Corporation that is likely to lead to funding guarantees for banks either ending completely or being restricted to emergency cases.
"As we enter this new phase we must begin winding down some of the extraordinary support we put in place for the financial system," said Mr Geithner, who said the improvement in markets was in large part due to the actions taken by the Obama administration.
But...let's not too excited
The Treasury secretary made no mention of an "exit strategy" from fiscal and monetary stimulus. Instead, he said "we must continue reinforcing recovery until it is self-sustaining and led by private demand" and vowed not to "put on the brakes too early".
2. Yves Smith at Naked Capitalism has a useful roundup of the various trade tensions involving China, including news that America is considering banning Chinese made tires. HT Troy Barsten via email.
When trade volumes tanked in the later part of 2008, quite a few observers expected a rise in protectionism. We haven't seen a Smoot-Hawley analogue, a wide ranging measure that elicits retaliation. But that does not prevent policy makers from more targeted forms of gamesmanship.
Trade has retreated from front-burner coverage due to the modest recovery in activity. However, what is noteworthy is that most other surplus countries have seen a much greater fall in their surpluses than China. Moreover, some argue that the stabilization and improvement in trade activity is due to government stimulus, and as those programs tail off (and some are even now), trade volumes could give up their recent improvement.
So the situation is more fraught than it might appear. It should therefore not be a surprise that there is a fair bit of jousting on the trade front. One is a proposal is a de facto ban on Chinese tires. I would be surprised if this gets done, but then again, the Bush administration backed steel quotas. From ChinaDaily
3. US mortgage foreclosures are still growing fast and are now not expected to peak until late next year, Reuters reported Realtytrac as saying I just don't buy the US recovery story. If housing is still collapsing, unemployment is still rising and consumer spending is still falling, how can there be any sort of sustainable recovery? HT Eugene via email
"The pipeline of early stage foreclosures and delinquent loans is still probably going to overwhelm the system's ability to quickly modify" terms so struggling homeowners can make their monthly mortgage payments, said Rick Sharga, senior vice president at Realtytrac said.
"We had been thinking that this year would be the peak, but at the rate things are going right now, it's appearing more likely that late 2010 might be the peak year before things start to moderate," Sharga said.
Foreclosures that were delayed by various state and federal moratoria that mostly ended in March have been pushing through the system in the summer.
4. This a very old link I've stumbled across thanks to Felix Salmon. It was written in late 2002 by Paul Krugman for the New York Times and writes about the death of the American middle class. It strikes a few chords and explains, I think, why such a big swathe of Americans went on such a debt-driven real estate frenzy from 2002 to 2007. They were trying to recover that middle class dream of a house in the suburbs even if it meant going into debt. Krugman was writing in the immediate wake of Enron and talking about the rise of the imperial CEO and the extreme bonuses on Wall St. This inequality only got worse after that.
We are now living in a new Gilded Age, as extravagant as the original. Mansions have made a comeback. Back in 1999 this magazine profiled Thierry Despont, the ''eminence of excess,'' an architect who specializes in designing houses for the superrich. His creations typically range from 20,000 to 60,000 square feet; houses at the upper end of his range are not much smaller than the White House. Needless to say, the armies of servants are back, too. So are the yachts. Still, even J.P. Morgan didn't have a Gulfstream.
As the story about Despont suggests, it's not fair to say that the fact of widening inequality in America has gone unreported. Yet glimpses of the lifestyles of the rich and tasteless don't necessarily add up in people's minds to a clear picture of the tectonic shifts that have taken place in the distribution of income and wealth in this country. My sense is that few people are aware of just how much the gap between the very rich and the rest has widened over a relatively short period of time.
5. Along the same lines, Felix Salmon at Reuters covers the latest US census data showing real median incomes fell and poverty rose massively. Real median US incomes actually fell over the decade from 1998 to 2008, the first time ever. What happened to all that real GDP growth between 1998 and 2008? The top 5%, including a bunch of banksters and CEOs, took it. When is there going to be a revolution in the United States?
Real median household income fell 3.6% between 2007 and 2008, from $52,163 to $50,303. That's a drop of over $1,800: real money. Naturally, the pain was concentrated in the poorer parts of the US: incomes in the South fell by 4.9% to $45,590, while incomes in the Northeast were unchanged at $54,346.
Oh, and the number of people in poverty increased by a whopping 2.5 million, to 39.8 million: 13.2% of the population, the highest poverty rate in over a decade.
6. Former IMF chief economist Simon Johnson at BaselineScenario can't see any meaningful reform of global financial systems to come out of recent talkfests by the G20 and others.
There will be some minor changes, and these will be much trumpeted. But what will really change in or around the power structure of global finance "“ as it plays out in the United States, Western Europe, or anywhere else?
Nothing "“ and you know this because otherwise the CEOs of all our top financial institutions would be mounting massive PR campaigns against the proposals, with op eds, Internet ads, innumerable cable appearances, and a virtually constant presence at Treasury. Just think back to how active they were earlier this year, when FDIC-type resolution for big banks was on the table.
Unless and until our biggest financial players are brought to heel, we are destined to repeat versions of the same boom-bust-bailout cycle. If you find a government willing to state this problem clearly and really take action to confront the relevant powerful people, let me know.
7. Following on from Geithner's comments above, Chris Martenson explains why unwinding the bank supports will be very difficult, if not impossible.
The lessons here are clear:
- At every step of the way, bankers are going to resist the loss of their free money.
- The bankers tactics will be to toss out dire warnings of "roiled markets" and "destabilizing the system" and other such veiled threats that translate into, "When our industry is unhappy, you're unhappy."
- The removal of stimulus, when it does begin, will be exceedingly gradual and delicate.
For my part, I have serious doubts that all of the "assets" purchased by the Fed can ever be completely unwound. Either the counterparties no longer exist, or if they do, some will decline (read: refuse) to buy the assets back, because doing so would bankrupt them (due to the fact that the assets are worth a lot less than the price the Fed bought them for).
Adding to this story are the immense borrowing needs of the federal government over the next year. How can the government possibly find enough cash to borrow if the Fed is busy withdrawing cash from the markets?
No, it would seem that the Fed's thin-air money program (called "quantitative easing" in fancy parlance) is going to be with us for a while. Unwinding is not going to be easy.
8. We like to keep an eye on Eastern Europe, which is shaping up as the next source of financial market grief. ZeroHedge points out a failed bond auction in Poland.
In its first bond auction since announcing its budget deficit was set to double in 2010 (talking a massive $20 billion here, nothing as puny as $9 trillion over the next 10 years), the Polish government sold only half of the PLN2 billion of the 5.75% bonds due 2011 it was hoping to offload to investors to plug the hole. It appears, unlike Tim Geithner, Polish Finance Minister Jacek Rostowski does not have Wen Jiabao on speed dial. Then again, after they have taken over America, who knows where Chinese interests will look next: that Bison grass vodka sure is a strategic asset.
Subsequent to the auction, BNP had some less than encouraging words for holders of Polish bonds:
"This is a direct consequence of a very dangerous fiscal outlook presented in the 2010 budget draft. We recommend selling Polish bonds across the curve."
This merely reinforces Zero Hedge's view of the U.S. exemption from economic reality: after all, like any aggressive distressed bondholder, China is merely preparing for the inevitable debt-for-equity swap. If there are no other bidders (aside from the debtor itself of course), so much the better.
Unfortunately for Poland, it does not have a comparable exemption.
9. Here's a Cole Porter song about debt reduction. "We're delinquent, we're defaulting, we're deleveraging..."
10. Here's a barber shop quartet pleading for Ben Bernanke to 'send them some green.'
@Item #4 Bernard, During that
@Item #4
Bernard,
During that time many people were trying to say that it wasn't debt driven but that the middle class was actually getting wealthier. Both John Stossel and Drew Carey, yes that Drew Carry, over at Reason TV did specials arguing that the middle class was not disappearing but becoming more wealth then previous generations of middle class. I'm a big fan of both John and Drew but they were dead wrong on this one. We now know that is a silly argument. The middle class was burning itself out trying to furiously keep up with a standard of living that was both unattainable and unsustainable. The truth was all that new wealth was backed by fictitious paper.
I saw this mad money spending first hand. I made over six figures a year in southern California and I couldn't even dream of keeping up with my neighbors spending habits. It was a real problem watching my friends spending habits when I knew they couldn't afford the toys (RV's, dune buggies, motorcycles, jet skies, boats, etc) they were buying. Even with a six figure income living in SoCal was very expensive. My net income was less the 40% after all the taxes. I could only afford one car! How can my friend and neighbor that I know for a fact makes half as much as me be able to afford all this stuff? This wasn't jealousy"¦it was math! The math never added up.
Not so many years ago
Not so many years ago , we had a supervisor at the old press building , who was an ace shot . He took with glee , the opportunity to rid the firm of flocks of pigeons , who were defiling the walls and ledges . From the 3'rd floor cafe balcony he'd pop them off , by the dozen . This practice ended a year or so later , when the authorities , who man a sentry box in Cathedral Square , queried our management . It seemed that tourists to the cathedral were bemused and distressed by dead pigeons falling onto the footpaths around them . ...... . The legend lives on !
Yeah ! and I remember
Yeah ! and I remember reading somewhere in the Herals a couple of year ago about a report by some economic think tank (if there is such a thing other than it's name) that
"New Zealanders are getting richer even as they are getting more into debt"
because "their assets are rising faster than their debt"...YEAH RIGHT !!!
Ever since the 50's the
Ever since the 50's the middle class everywhere have been running faster and faster to keep up. First stage was put the wife out to work. When that wasn't enough it was everybody work longer hours. When that wasn't enough, borrow more. Fourth stage?
It wasn't just the middle
It wasn't just the middle classes living it up with debt.
"I drive through West Philadelphia every day. The neighborhoods are decrepit, with boarded up houses, trash strewn vacant lots, grade schools that resemble prisons, and a substantial number of unemployed folks shuffling about from morning to night. These neighborhoods appear to have five times as many BMWs and Mercedes as my suburban upper middle class neighborhood. "
http://www.marketoracle.co.uk/Article13294.html
Who thinks US banks and economy are recovering?
@Neville US recovery = return
@Neville
US recovery = return to status quo
Return to status quo ≠realty
Therfore: US recovery ≠realty
QED
Number 6...disturbingly similar to..."Unless and
Number 6...disturbingly similar to..."Unless and until New Zealanders are brought to heel, we are destined to repeat versions of the same boom-bust-property cycle. If you find a government willing to state this problem clearly and really take action to confront the relevant powerful people, let me know"...don't you think?
#4 - watch an episode
#4 - watch an episode of extreme makeover or whatever it's called and be amazed at what American's are set to aspire to in terms of what a home should be like. I caught a couple of minutes of it recently, one bedroom had a volcano feature in it. What's that all about?
This "middle getting poorer but
This "middle getting poorer but spending like crazy to keep up" syndrome was of course also prevalent in NZ.
Ultra right-wingers in NZ, such as Bernard's friend Roger Kerr of the Business Roundtable (as opposed to the other Roger Kerr, the rational one) were claiming 3-4 years ago that this group was actually saving well & getting richer. So there was no need for a nasty socialist compulsory savings scheme like KiwiSaver.
They were of course counting the house-of-cards wealth that was being generated by the rapidly inflating housing bubble.
They were totally ignoring the fact that when you are running 7 to 9% current account deficits, but your govt & businesses weren't taking on more debt, then obviously your households are getting into debt & getting poorer in toto. Effectively getting poorer, not richer, tho superfically it might appear so because their housing assets etc had higher valuations.
So lots of people have had a vested interest in pretending that people have been getting better off - the govt (it got more tax on the consumption), the banks (snouts in the trough), politicians (happy spenders = happy voters), big business (people spending busily), & of course the suckers, sorry the "responsible citizens" themselves.
The rest of us have considered wailing Cassandras, bleating away while NZ consumed itself to the poorhouse.
@Philly: I dont think many
@Philly: I dont think many ppl take R. Kerr (of round table infame) seriously....he's a fringe loon....only listened to by other, similar fringe loons...he should join ACT...ummm, assuming they want someone that far right.
Of course that lot have a vested interest....the right wing politics that only benefit 5% rely on the other 95% supporting them to the level they would like...the only way to do that is debt..
regards
@ Steve K - Oh
@ Steve K - Oh my God, you're so right! When you put it that simply the pattern is so obvious to see, but I'd never thought about it like that before. It makes us sound like selfish, greedy pigs doesn't it? And why do we (society) do this? To get "more stuff" - a bigger house, a bigger flat screen TV, a 6 hob gas stove (um, who, apart from a chef or a die-hard cook, cooks on 6 hobs simultaneously?) a side by side spanky stainless steel fridge/freezer with an ice dispenser, a sports car, a jet ski, a boat, a 4WD, private school for the kids, a few overseas trips a year to the coolest places, DUH - of course we need to put the wife out to work, work longer hours, take on more debt, and what comes next again???
@steve K, veedub, who is
@steve K, veedub, who is pleased by this? Who does it serve? What don't we have time for now? What don't we think about? What and who is worshipped? What has that replaced?
Who is pleased by this?
Steven: re Roger Kerr &
Steven: re Roger Kerr & the BRT "fringe loon". Unfortunately, this is the group that makes the biggest campaign donations & who have the ear of the pollies. They have unfortunately had a lot of influence at times & done absolutely immeasurable damage to the NZ economy. Partly thru rank incompetence, & partly thru successful political pressure.
As the ever-excellent Brian Gaynor pointed out recently on the post-1987 crash,
"One of the aims of these recommendations was to re-establish the trust between issuers and investors. But the Business Roundtable was at the zenith of its power and was strongly promoting the idea that there was a small group of businesspeople who created most of the economic wealth of the country and ordinary investors were free-riding on their expertise. The proposed Takeovers Code was the symbolic battleground for this issue with the Roundtable arguing that minority shareholders should not be automatically entitled to receive the same price in a takeover because they were little more than freeloaders.
The Roundtable received strong support from two powerful government ministers, Ruth Richardson and Bill Birch. Virtually none of the post-1987 crash proposals were introduced, including the Takeovers Code, and the trust between issuers and investors was not repaired. The assertion that individual investors were free-riders reflected the attitude that the top end of town had towards retail investors. The 1990s was a lost decade as far as New Zealand's capital markets were concerned with individuals effectively deserting these markets for residential property. The Stock Exchange, which was a strong supporter of the Business Roundtable's point of view, was particularly inept and made no attempt to re-establish trust with the investing public."
Read ye and weep
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1059...
I offer you good folks
I offer you good folks the following as an example of just how much the banking fraternity don't want what is discussed on this site on regular basis to become common knowledge among wider society. They hope like hell they can damp the flames until the irreversable damage is good and done before the next election.The following is the findings of a complaint made by a long, long, longtime credit reformer to the Broadcasting Standards Authority re a misrepresentation of modern banking on tv1 news, the reasons given and methods used to turn down his claims will stand out as an obvious joke to the more financially literate that frequent this site:
"Broadcaster's Response to the Complainant
[9] TVNZ disagreed with the complainant that the item contained any deliberate "misinformation" in breach of Standard 5. It said that it had been back to the source of the information to verify the accuracy of comments made in the item. Ms Lorimer confirmed that her comments were accurate and explained that the widely held understanding is that today's banks must account for their liabilities, that is, the money lent to them by depositors. She said banks must also account for their assets, in the form of money owed to them, that is, by home loan borrowers. Banks therefore seek to make a profit on the margin between those two totals...........
[25] Looking at Mr Rawson's second point, and referring to section three of "The Reserve Bank: Private sector banks and the creation of money and credit",2 the analyst said that banks can and do lend out money deposited with them. That section described how banks effectively create money, he said, by lending on a portion of the funds deposited with them."
http://www.bsa.govt.nz/decisions/2009/2009-004.htm
For all you tribal National voters out there that dont believe that your Party Executive have not contracted the running of this country out to the very people who trained Douglas and Richardson, I offer you this:
"The recent decision in New Zealand to use purchase advisers to impose budget cuts should come as no surprise. Neither should anyone be surprised at the identity of some of those purchase advisers "“ they are reviving an extreme system that, as Treasury advisers, they introduced more than 20 years ago when Roger Douglas was Minister of Finance. It is a system of "virtual government" that operates under the motto of "privatise, contract and negotiate" and is designed to reduce the Government's role to that of a contractor - a purchaser "“ of public services from private organisations."
http://www.converge.org.nz/watchdog/21/05.htm
for those that need more proof:
"If you study close enough the taskforce's formed by the recently elected National Party Executive to look into capital market integrity, tax etc, and the people appointed to them, it is alarming to note the number of Roger Douglas/Ruth Richardson deciples or advisors that were heavily involved in the 1980s receivership at the hands of foreign bankers and the selling off of much of this nations strategic assets to foreign interests at firesale prices. Assets which were in short time resold on the open worldwide exchange for companies for many times what the nation had sold them for, netting the middlemen some very nice profits.
What is just as alarming is that many of these people were also backroom advisors to the recently deposed Labour Government of nine years. Thus, this nations social and economic policy has been influenced by these people from behind the diplomatic curtain under Labour and now under National we have them back in the drivers seat."
http://publiccreditorbust.blog.com/2009/06/19/john-key-brings-back-roger...
Just a reminder of Dodgy Rodgers filthy tactics, heres the principles he operates under:
Second Principle:
"Implement reform in quantum leaps, using large packages. Do not try to advance one step at a time. Define your objectives clearly and move towards them by quantum leaps. Otherwise the interest groups will have time to mobilise and drag you down."
Third principle:
"Speed is essential "“ it is impossible to go too fast."
Fourth principle:
"Once you start the momentum, never let it stop rolling."
Fifth principle:
"Consistency + credibility = economic confidence."
http://www.thestandard.org.nz/rodneytactics-rogernomics-and-dog-whistle-...
No argument Iain but as
No argument Iain but as you have no doubt realised, convincing the peasants to revolt against the system depends on getting them to 'understand', when most of them cannot do simple sums and the average reading age is 12 years. You are a butterfly in a typhoon! Maybe it's better to look for a safe place to avoid the approaching destruction. The bubble in lending puts the banks at risk and so the whole economy at risk and only the BS and spin are holding the confidence game going. Our so called commodity export pillar of support, is as tenuous as the life of the butterfly.
One day the peasants will
One day the peasants will be revolting........but right now , some of them seem to be nice chaps........oooh , sweetie !
"tribal National voters" ....ummm these
"tribal National voters" ....ummm these are the ppl "winning" the work....of course they vote for it....
IMHO, If you went back 20 years and especially longer, the majority of voters for National or Labour were I believe "tribal"....talking to ppl older than myself, it is/was quite clear a lot dont/didnt need to attend every 3~5 years to cast their vote...it was the same party for thei entire voting lives....with a smaller swing vote in the middle....and I would have said that swing vote as more centralist-right. These days that swing vote is far larger but sill central-right, but "Labour" have moved to them, and now National....I suspect that swing vote has grown as the more centralist and thinking voters from both parties left them, the result is both parties but especially National have become even more right wing. The end result is which ever of the two get in I think dont truely represent most voters these days....
Anyone read Mr Kim one
Anyone read Mr Kim one for Mondays 10@10
http://seekingalpha.com/article/160619-the-coming-consequences-of-bankin...
Iain Parker You have changed
Iain Parker
You have changed the way I look at the world forever. From Mr Kim,
It is ironic that it is the same group of people that so readily accepts the Western media's correct analysis of China's stock market as a huge bubble through the lens of Austrian economic principles that simultaneously rejects any similar notion as applicable to US or UK stock markets, and instead, readily embraces heavily flawed and unsound Keynesian economic principles when evaluating Western stock markets. It is ironic that the same group of people that foolishly equates being "American" with blind support of the US stock market (i.e. "being bearish on the US market is un-American!") is also completely ignorant of both the massive fraud that is perpetrated in US stock markets as well as the tenets of the US Constitution that sound great objections and warnings to the ruinous and foolish monetary policies that are implemented by bankers as their "solution" to our current economic crisis. And finally, the greatest irony of all is that the anger that brews inside those that have been tragically hurt by this crisis can coexist with the failure to recognize that it matters not in America if the President has the last name Clinton, Bush or Obama "“ that monetary and fiscal agenda inside the US for the last 17 years has not wavered nor changed one iota during this period of time because it was not these men that have been in charge of the economy but the men that manufactured these men's rise to power and that control the US Federal Reserve and the world's Central Banks, and thus the global monetary policy.
If one can not see the connection between Presidents, Prime Ministers and the banking families that rule Central Banks, one merely needs to open up a newspaper and follow their lives after they leave government office. It is not just a coincidence that ex-British Prime Minister Tony Blair, after leaving office, took a part-time consulting job with JP Morgan's Jamie Dimon that reportedly pays him $5 million per year as well as another well-paid consulting position with Zurich Financial Services. In office, Mr. Blair was a consultant to the banking oligarchs in secret; out of office, he is free to be a consultant publicly. And one can be certain that current UK Prime Minister Gordon Brown and US President Barack Obama will be offered very considerable salaries and fees by the world's top financial oligarchs as thanks for their current and past service to them once they leave office as well (especially Gordon Brown, for selling out his countrymen and selling more than half of England's bank reserves to ensure that the financial oligarchs could maintain the US dollar as the de-facto international currency for 10 additional more years than it deserved to hold this status).
Think about Krugman's comments from
Think about Krugman's comments from 2002 in relation to our leaky building crisis. As Bernard says, "It strikes a few chords and explains, I think, why such a big swathe of Americans went on such a debt-driven real estate frenzy from 2002 to 2007. They were trying to recover that middle class dream of a house in the suburbs even if it meant going into debt. "
Our real estate frenzy has been ongoing for 3 decades or so. The death of the baby-boomers' middle classes has been mirrored by the destruction of wealth and opportunity for the generations following them. The news today that they expect us to pay $6 billion for the leaky building problem makes me angry. I feel sorry for the leaky home owners but feel that they have let everyone involved pass the buck for yonks and also feel that most of them have sorted the problems to an extent. The South Island homes are now going to be the problem. Either way - it isn't anyone under age 37's fault.
I think that the home owners have still made a lot of money from owning their leaky homes because the property prices have gone up so much in the last 15 years and this is not taken into account. The land the leaky homes sit on is probably worth about the full purchase price of the land and house 15 years ago. Kiwis under the age of 37 have nothing to do with this problem but are being charged for it through rates (mainly rent in the case of Gen X&Y) and taxes and face huge obstacles to owning houses themselves.
15 - 20 years ago those in government and the building industry allowed leaky homes to be constructed. Organisations like BRANZ and the Building Industry Authority failed to protect consumers and approved the use of materials and designs that were sub-standard. How many of the importers and manufacturers of the building materials who applied for consent to offer their products for sale knew that these products were sub-standard? What has changed? Did anyone lose their jobs? Why aren't the companies involved paying? Can't Fletchers afford it? I remember when kiln-dried timber came out it was marketed as being "Machine Stress Graded" by Baigent Forest Industries. An ad ran in the July 1992 issue of NZ Draughtsman magazine (among others). Someone like BRANZ had to approve the product at the time. The ad is headed up "Would you risk using inferior-quality timber for your next framing job?" They then went on to explain how they "look inside the wood structure and detect any interior weakness not seen by visual grading". They then mentioned that the timber is "kiln-dried and conditioned with steam, ensuring maximum stability for interior linings". A decade later they discovered that kiln-dried timber was prone to rottng. The architects and building inspectors were also part of the problem rather than the solution in many cases as well.
The Hunn Report into the problem was almost like a truth and reconciliation exercise where no-one was held to account for the issue. It stopped the problem from recurring too much but the word whitewash springs to mind. http://www.consumerbuild.org.nz/publish/leaky/leaky-background.php
"In 2002 the Building Industry Authority (now the Department of Building and Housing) appointed a Weathertightness Overview Group to investigate the weathertightness of buildings in New Zealand. The group visited a number of affected buildings and met with many representatives from different sectors of the building industry. In its final report, (commonly known as the "˜Hunn Report') it identified the causes of leaky buildings and made many recommendations.
Unfortunately those recommendations didn't include holding anyone to account for the problem. The Building Industry Authority always felt to me like it had been captured by private industry and they basically never saw the problem coming. They were disestablished in 2004 and wrapped into the Department of Building & Housing. The executives and workers at the building industry organisations in the 90's had their hearts in the right place but let us down hugely. It was a bit like an episode of Gliding On. Also, the number of employees in the building industry went through the roof in the 90's on the back of increased immigration and therefore the skill level dropped which may not have helped.
On 18 November 2002, following reference from the Cabinet Policy Committee, Cabinet noted that the Weathertightness Expert Panel estimated the cost of running the proposed Weathertight Homes Resolution Service for the 26 months to 31 December 2004 at $27 million excluding GST, based on a "most likely demand" scenario, with a range from $15 million to $50 million excluding GST respectively in situations of "low" and "high" demand. How did that figure rise to the $11.5 billion announced today?
The baby boomer generation have lived in a property boom their entire lives. What is the value of these "leaky homes" now? The value of the land that they are sitting on is now about ten times higher than it was back then. It seems to me that many of these "victims" have made money on the property that they own regardless of their homes' leakiness.
The baby boomers have made dozens of billions on the back of the property boom. If they make any losses they charge everyone else through LAQC's anyway "“ to the tune of $2.5 billion a year. Now they want the generations below them to stump up half of another $11.5 billion to fix the houses that their generation is solely responsible for building. At the same time they have made home ownership virtually impossible for most of those younger than them.
Give the $6 billion towards housing for young people. Or even better give young people $6 billion for business start-ups. Let the building industry players responsible pay for the problem rather than just laying it all at the door of rate and tax payers. Dump LAQC's and institute a capital gains tax. Make it impossible for shonky developers to hide behind shell companies and improve training standards so that this can't happen to us again. It seems unfair to lump this problem on "everyone" while the property owners, building companies and industry professionals continue to rake in the profits.
A great rant Andre. Not
A great rant Andre. Not only will YOU be paying for the fiasco but toss in the higher taxes to cover the 40 billion dollar fiscal hole. All the reason why it might be better to take Bernard's advice about emigratring seriously! Truth is the country is stuffed which ever way you look at it, thanks to greed and several decades of just plain dreadful government. It will not change.
I know we're stuffed, Wally.
I know we're stuffed, Wally. But I don't think there is a better place to be stuffed in.
I'm a patriot. I love
I'm a patriot. I love New Zealand and am a 5th generation kiwi. These problems aren't insurmountable as long as they are recognised. I've travelled extensively and never found a place I'd rather live. There's nothing better than bumping into another kiwi that you get on with overseas. I'd rather be here but worry a lot about our 22 year-old university graduates exiting a system that has been so harsh and uncaring compared to the NZ that our forefathers envisaged and delivered. I've worked as an entrepreneur since age 17 either working on straight commission or owning companies but I feel very sorry for young people without that option. I hate the fact that we lump kids with immediate debt. This is servitude. Modern-day slavery. We'll educate you then make you pay it off over your working-life and some of you may always be in debt to us and your children will therefore be born into this debt. We need a Wilberforce when it comes to our treatment of teenagers most of whom are fantastic and are working very hard to make their way as good New Zealanders.
Andre; You know what the
Andre; You know what the problem is; so do I; so does Wally and Mark Hubbard and Ian Parker and Bernard Hickey and....
We all see it, and the soution, differently, but all suffer the implications of it.
The structure of our very society seems to mean that the is no one-size-fits-all solution, and absent a Lee Kwan Yu , and certainly not with a John Key, are we going to be able to do anything about it for ouselves. I hence understand your exasperation.
@Harriet & @Wally: thank you
@Harriet & @Wally: thank you for your support. Lee Kwan Yu was of course an almost fascist dictator and he jails his opposition on a regular basis so I hope we don't get delivered one of him. His nanny-state is bigger than ours BTW. No chewing-gum for example? As you say, we all see the solution differently.
Andre, the thing to do
Andre, the thing to do is laugh and advise the young to leave if they can find a better living elsewhere.
That would seem to be
That would seem to be ripping off my ancestors who contributed so much to our infrastructure. I could have left when they sold rail - generations of both sides of my family helped build the tracks and helped run the system. They did so partly as a public service. I'm glad Helen bought it back but puke thinking about Fay Richwhite earning more than the entire century's worth of my family's efforts (well 1000 times probably) in exchange for selling it off for less than it was worth on our behalf.
I just wouldn't make the same effort in any other country and would always feel an outsider. So since I'm staying here I may as well speak my mind. There is nothing that you cannot change if you put your mind to it and in twenty years those kids are going to have more of a say. Let's just hope that some of the older generation leave them some assets instead of debt.
And Krugman was just making excuses for a system that's wrong. "Let's blame the middle classes." Thanks so much... insert swear word here...
Andre....South Island homes are now
Andre....South Island homes are now the problem...Why?
Sad isn't it Andre. How
Sad isn't it Andre. How so much, contributed by so many over such a long time,has been stolen and lost by so few.
South Island homes are only
South Island homes are only just now getting leaky building problems.
http://tvnz.co.nz/national-news/leaky-homes-in-south-2497483
@steven It sounds like the situation in the States where nothing ever changes...
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