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Friday's Top 10 with NZ Mint: China squashes Bo Xilai's 'sing red and smash black' movement; Fallout rains down on Goldman after Greg Smith's epic 'Muppets' rant; Clarke and Dawe

Friday's Top 10 with NZ Mint: China squashes Bo Xilai's 'sing red and smash black' movement; Fallout rains down on Goldman after Greg Smith's epic 'Muppets' rant; Clarke and Dawe

Here's my Top 10 links from around the Internet at 8 pm in association with NZ Mint.

I welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.

I'll pop the extras into the comment stream. See all previous Top 10s here.

My must read today is #2. It's often hard to see behind the veil in China. The Bo Xilai sacking is big, big news. The FT nails it. Sorry I missed Thursday. I was traveling to Whangarei.

1. What Chinese people are saying about Bo Xilai's sacking - The biggest political event in the world in the last week was the sacking of Chinese 'princeling' (child of one of Mao Zedong's main men) Bo Xilai.

Bo was in line to joing the top 9-person politburo at the head of China's government, which is undergoing a once in a decade changing of the guard. This is more important to New Zealand than the increasingly silly US Presidential race being breathlessly reported by our media at the moment.

Bo had created a real stir as the Mayor of China's massive western city Chongqing, where he cracked down on property developers and other mobsters.

He invoked Mao's memory often and seemed to be a bit of a leftie, which is saying something in China's Communist Party.

He was a populist who seemed to be more about helping the little guy than the property moguls and party big wigs. Now he has been squashed.

Some may recall he fell out with his main henchman Wang Lijun, who then tried to do a runner to the US embassy. He was handed back to the Chinese authorites, who then gave him some 'vacation style treatment.' Yesterday Bo was sacked as Mayor of Chongqing. Everyone in China is talking about this. It would be like John Key sacking Stephen Joyce after a huge row in cabinet.

Here's what people are saying inside China's now very active Internet (1.2 million tweets and counting):

Many netizens have rushed to defend Bo for his governing record. As @雪佳-要改变 wrote, “If you are not a true Chongqing’er, you have no way to understand Bo’s status in Chongqing citizens’ hearts. Outsiders only know about ‘singing red’ and Mao poetry readings, but Bo Xilai oversaw the fastest development in Chongqing over the last few years.”

Some netizens wondered whether organized crime will make a comeback since Bo is known for his law and order campaigns. As @余丰慧 wrote, “Bo is out, and the happiest are the mobsters; they will be drinking and partying all night in celebration!”

Indeed, many online comments evince an “us versus them” mentality, which may help explain why Bo was viewed as such a divisive figure which China’s central leadership ultimately chose to boot out. @最初的Triangle wrote, “I like you!” and @zht828 defended him, writing, “At least Bo Xilai was a clear-cut character, one who dared to speak and dared to do things, one who dared to undertake [responsibility].”

2. Here's what Bo Xilai was about - The FT has done an excellent job reporting on what Bo was up to.

Bo had a slogan called 'sing red and smash black'.

The FT reported on March 4 on how one developer got on the wrong side of Bo. It's not pretty.

On his and Mr Wang’s orders, the police and military targeted tens of thousands of wealthy businessmen accused of involvement in “organised crime”, extracting confessions that led to hefty prison terms and death sentences for more than a dozen “masterminds”. The anti-mafia campaign, which mostly targeted the wealthy elite, was hugely popular among ordinary people.

Today, both the model and Mr Bo’s chances of making it to the pinnacle of power are in doubt as the party and the public start to question exactly what this experiment entailed.

From an undisclosed location outside China, Li Jun is more direct: “The Chongqing model is nothing but a new red terror in which Bo Xilai and Wang Lijun trampled on the law and human rights, attacked their political enemies and took whatever they wanted in order to enhance their power.”

3. Not so lucky - Leith van Onselen picks up at Macrobusiness on Reserve Bank of Australia figures showing Australian household wealth is now back at 2006 levels.

4.We're on the right end of this chart - I used to work at Fairfax in New Zealand on the executive team trying to work out how to deal with this historic shift in readers and advertisers from print to online.

In the end I decided I would be better off working in an online-only shop like Interest.co.nz that kept its operating costs low and focused 24 hours a day on doing the best we can be online.

Here's why. This chart shows which are the fastest growing (in employment terms) and fastest shrinking industries in America. Newspapers are falling fastest. Internet and online publishers are growing fastest.

Phew.

Here's the Atlantic on this shift.

The most important story in this graph isn't the trajectory of the bubbles, but their relative size, which represents the number of jobs in each industry. The industries that added the most jobs, according to the analysis, were "internet, hospitals & healthcare, health, wellness & fitness, and oil & energy." The housing bubble industries -- notably, banking and construction -- and demand-sensitive sectors like retail, warehousing, and restaurants, had the worst losses.

5. The fallout goes on - Greg Smith's epic and very public rant against his (soon to be ex) colleagues and bosses at Goldman Sachs is now the stuff of legend.

It is now known as the 'Muppets' rant because he describes how colleagues called clients 'Muppets' that were there to be ripped off.

Here's another former Goldman Managing Director (although Managing Directors seem quite common in investment banks) Nomi Prins talking about Goldman and Smith's rant: HT Zerohedge

I applaud Smith's decision to bring the nature of Goldman's profit-making strategies to the forefront of the global population's discourse, as so many others have been doing through books, investigative journalism, and the Occupy movements over the past decade since my book, Other People's Money, was written after I resigned from Goldman. It would be great if Smith's illuminations would serve as the turning point around which serious examination and re-regulation of the banking system framework would transpire.

The inherent conflict of interest that firms such as Goldman possess through enjoying the multiple roles of 'market-maker,' 'securities creator' and 'client-advisor' foster an environment rife with systemic risk. The trading revenue portion of Goldman's profits, as well as its derivatives vs. assets ratio, is the highest amongst the American bank holding companies. And yet, in the fall of 2008, the Federal Reserve approved Goldman Sachs (along with Morgan Stanley) to alter its moniker from investment bank to bank holding company, thereby allowing it to gain access to federal subsidies and potential ongoing support.

6. Even Henry Goldman III agreed - The grandson of Marcus Goldman, the founder of Goldman Sachs, even agreed with Smith in this BusinessInsider piece.

"I thought it was spot on," Goldman told Business Insider in an exclusive interview. 

Now a semi-retired financial professional currently residing in Colorado Springs, Goldman said the culture had changed "for the worse" since the days when his family maintained direct control over the company. On the 'predatory' behavior of Wall Street, Goldman added: "It's certainly something friends of mine have discussed ad infinitum."

7 But they're all the same - Ben Walsh, a Reuters journalist who once worked at Goldman Sachs as an analyst, points out in this piece that Smith should have known Goldman Sachs was just another money-grubbing bank and shouldn't have believed its hype.

Smith never seems to have understood that the very powerful and very wealthy people he counted as colleagues might be less than what they said they were. Now, 12 years, three promotions, two recessions and one financial crisis later, Smith is devastated when he realizes that the place he used to work is nothing like what the “Human Capital Management” manual said it would be. It’s only now that he realizes that the three ways to become a leader at Goldman Sachs revolve around making money? That is not a tough conclusion to come to. And certainly not one that takes 12 years.

Not only did Greg Smith take every banality Goldman Sachs offered him at face value for far longer than he should be willing to admit but he also seems to believe that there actually is such a thing as a virtuous past lodged inside the history of banking. When were these good times Smith wishes would return? Who were the gentlemen partners running investment banks by strictly adhering to the Latin mottos on their family crests? They never existed. Overly self-interested behavior by banks at the expense of their clients is as old as modern banking itself.

To believe that the culture of Goldman Sachs, or any other bank, is about “so much more” than making money misses a point that’s right in front of you. It’s not about more than making money. It’s about making money, full stop.

The rhetoric about teamwork, integrity, humility and client focus? Those are the gauzy drapes that conceal and decorate the view.

8. Vampire squid revisited - I highlighted this now seminal piece of financial journalism back when it was published in April 2010.

Matt Taibbi blew open the story about Goldman Sachs in his piece about 'The Great American Bubble Machine' in Rolling Stone.

This opening paragraph is an epic of its kind:

The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who's Who of Goldman Sachs graduates.

9. Bank of America -- Too Crooked to Fail - And Here's Taibbi's latest missive in Rolling Stone about Bank of America. I'm saving it up to read over the weekend.
 
10. Totally Clarke and Dawe taking the proverbial out of breathless journos on the satellite from London....
 

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53 Comments

This is good too.

Why I'm leaving the empire, by Darth Vader

http://www.thedailymash.co.uk/index.php?option=com_content&task=view&id…

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"Something About the Economy Doesn't Add Up"

http://globaleconomicanalysis.blogspot.co.nz/2012/03/california-tax-revenues-plunge.html

 

Awful...simply awful...can't the fools in CA get with the game and tell lies like Washinton...and hey...........................have you noticed the fall in tax revenue in NZ lately...!.

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Goldman Sachs is right though, it's clients are Muppets.  The fact that they have so many clients, and are one of the biggest and the most powerful bank in the world, is all the proof I need.

 

I'm not sure if we currently have any government sachs employees in parliment, but it's even odds that we will as head of the RBNZ very soon.

 

Only a Muppet would buy any of the shares in the SOE IPO's that the squid is selling.

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Have you noticed the influx, over the past year or so, of "Goldman Sachs economists" quoted in NZ newspapers, cited as the expert view on current economic events here? The vampire squid is in the neighborhood. Personally I think NZ is being fattened up for the kill, around about 2014. It is still feasting on Greece and Europe, but will be ready to bleed NZ dry when it needs a new source of revenue. In the meantime, lets keep pushing those house prices up with 95% loans so that NZ is totally indebted and has no claim to sovereignty...all part of the strategy. Why change the game plan when it works every time?

Nothing is ever given away for free...If you are getting something for free, then you are the product for sale.

When the time comes, will NZ man up and follow Iceland or follow Ireland's example and go meek as a mouse?

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J.P. Morgan Chase's Ugly Family Secrets Revealed

 

http://www.rollingstone.com/politics/blogs/taibblog/j-p-morgan-chases-u…

 

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no need to Worry Hugh, NZ property is invincible and bust-proof!!!!!

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Hugh

I read a good article in today's "The Australian" by the excellent Bernard Salt about how Melbourne's population is catching Sydney's, quite quickly.

The reason? Much more land release on the fringes of Melbourne. You can get starter housing on the fringes of Melbourne for about 300K, similar housing in similar location in Sydney is about 400K by comparison. Sydney has just become a rich mans paradise, or hell for anyone on anything less than upper-middle incomes (sounds like how Auckland is becoming)

Just think, Christchurch could be the Melbourne of NZ compared to Auckland as the Sydney of NZ

If the great southern city got its act together, it could be the engine room of Nz over coming years, flourishing whilst Auckland stagnates

 

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NZ house prices unlikely to fall. Building materials still expensive. Compliance costs rising. Land price ti

static. Desirable areas have no many listings. Low interest rates.

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Yes , we have attained a " new normal " ....... nothing can possibly go wrong from here .......

 

........ this time  is different !

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Spain about to implode

"If we just take the newest figures for Spain, which were released this morning, we find an admitted sovereign debt of $732Bn and a touted debt to GDP ratio of 68.5% which is up 10.7% from last year.
 
In a report issued on 2/29/12 and apparently ignored by everyone including the ratings agencies, Eurostat reports that Spain has total sovereign guarantees of “other debt” which is 7.5% of their total GDP which would total around another $72.2 billion in uncounted debt. Then if we consider [all] the “known” debt we find:
 
•Admitted Sovereign Debt ................. $732 Billion
 •Admitted Regional Debt ................... $183 Billion
 •Admitted Bank Guaranteed Debt ..... $103 Billion
 •Admitted Other Guaranteed Debt .... $72 Billion
 •Total Admitted Debt ......................... $1.09 Trillion
 •A More Accurate Debt to GDP Ratio ....... 113.2%
 
In the same Eurostat report, by the way, of 2/29/12 we also find that Belgium’s sovereign guarantee of “other debt” is 21.3% of their GDP, for Italy it is 3.6% of their GDP and for Portugal the number is 7.7% of their GDP. This does not include any guarantees of bank debt which would also have to be added in to the totals to reflect some sort of accurate fiscal picture. Consequently, as investors, we are not in some murky place but smack dab in a carefully engineered plan of outright Fraud where we are given manipulated and inaccurate numbers in the hopes that we will fund based upon them."

 

http://globaleconomicanalysis.blogspot.co.nz/2012/03/spanish-banks-account-for-47-of-ecb.html

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""My logic is that it is hard to see how house prices could drop significantly and that Government and councils can really do little to encourage this.

"House prices are determined by supply and demand and the cost of new housing. If you accept that New Zealand's population will keep growing, then house prices in main centres will be mainly influenced by the replacement cost of an existing house or the total cost of a new house," says Seel, who lived in London, New York and Moscow where he worked in finance."If you look at the cost components of a new house, you see that it is largely made up of land prices, materials, labour, compliance and profit.

The materials are essentially commodities driven by worldwide prices such as steel, timber and concrete and those can't be easily influenced - a little like milk, the international market sets the price."

http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=107…

 

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The logic is a little deficient on the factors that could negatively affect housing, but thats alright don't take those rose tinted glasses off.

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Forget Last week's message from (some) banks.  Don't fix after all. http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=107…

 

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Visited new house yesterday. Plain & simple 4 bedroom. Build cost 348,000. Section 190,000. Sold.  Not much to shave off -  land value would be the only component which could drop in the future.  Labour & materials won't be dropping.

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How big was the house? And the section? 

If we started building 3 bedroom cottage type houses (say 100 sq. m in floor area - thats an easily liveable size for most 3-4 person families: the old state houses were about 90 sq m ) on 300 square metre houses then we could be getting new houses to market in Auckland for 300 - 400K. Just like adelaide is doing 

It's not rocket science at all 

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225m including integral double garage. Section around 650m. So very much in the middle of market. There's really not a lot of "budget" housing going on, as if you're going to build then it's not much extra to build to a good size.  Plus most new sexctions have covenants from the developer to the building co to prevent small builds.   You can really only have freedom to build what you want on a 'in-fill' section with no covenant restriction. 

Why do we need to build houses for our cars?!    Agree, a 120m house without garage is probably all we 'need'.   Needs & wants are interesting words. 

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But HP you have to accept that Kiwi are looking at the promised land..a lifetime of servitude to the credit creators who are no doubt very happy that the build costs are jacked to the ceiling plus gst...they want them higher...

It can be done for under $1000.... but not by most...The 5 doing 100 plus a year are creaming it with their copies...they tie down the sub contractors and material suppliers to pull apart the margin and the sucker Kiwi thinks its a fair price.

Sadly the material suppliers and sub contractors are too silly to recognise there is nothing but effort stopping them from taking most of that margin.

Show me a home designed, engineered and built by a nationwide building supplies merchant!

Staggering to think 5 can corner the market....

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far too big

need will overide want if all people can afford is their need

councils should require 15% of housing to be affordable

 

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Hugh 

I was sceptical about such systems too, but I think the Adelaide approach works quite well. As you will know there are a range of permutations to these sorts of approaches,. Research in the USA shows some of these schemes work quite well, others can be a disaster.    

Why do I think the Adelaide approach works?

Because the planning policy is flexible enough. For example, in areas where minimum allotment sizes are usually say 400 sq m , the planning policy allows flexibility to reduce the allotment sizes to 250 square metres for the "affordable" housing.

This means that you will see subdivisions where the standard land and home package is say $360K, but the affordable options are about $280K. Mainly due to the smaller allotment sizes (the developer may also build a slightly more "basic" house too) 

I think the problem with this sort of policy is when the planning policy is not flexible. For example, the council says all allotments, including the affordable allotments, have to be 400 sqaure metres. Then the developer ends up taking a hit, because they have no other option than "subsidising" the affordable units, and as we all know development becomes a less profitable and therefore appealing option, and overall supply gets hindered.

From developers I've spoken to here, they are OK with the policy, in fact its often a positive for them because there is plenty of demand for the $280K housing product, and they shift this product quite quickly

 

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There's always scope for improvement, Hugh. And the building industry of course are vocal in Aus in their criticism of planners. Sometimes fairly, sometimes unfairly. Of course, as an industry group they have vested interests so their views aren't always totally balanced.....

Regarding median mulitples in Adelaide, I think a key difference here to Auckland is that despite the high median multiple - which is indicative of an affordability problem across the Adelaide market as a whole - starter housing IS available at roughly 4 times the median housheold income. Sure it's not your beloved 3x - but 4x isn't too bad. Given the large amount of existing housing, it would take a hugh volume of new housing at 3-4x median household income to start bringing the overall median multiple down to below even 6. If Adelaide keeps up its good progress with affordable starter housing, things will improve in terms of the median multiple for the whole market. House prices seem to be dropping too, with the average number of days to sell now at about 130!!!!!  

My understanding is that about the "best" one can get for new build starter housing in Auckland is about 6X the median household income (ie. new homes for about early $400Ks) - ridiculous really

So really, Australia has nowhere near the same extent of problem as NZ, relatively speaking.

 

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everyone - except for speculative investors - suffer when house prices go mad

excessive mortgages must place a lot of pressure on many relationships

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Actually, many times it's the female spouse just had to have the third bathroom.

 

I have no sympathy. Caveat empty.

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How many people were on the planet at the time? How many using what oil from how close at what EROEI?

 

Oh, no, it's nothing to do with that, eh. We can just go back there, forever. Not only that, but we refuse to investigate anything which might tell us that this time it's different.

 

We live in dIfferent worlds. I suspect the difference is, that I live in this one.

 

NOT ON TOPIC

 

 

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Mortgage Belt - we rattle around in 135. Could easily live in 90. Car-based suburban sprawl is the second most worrying style, given what is ahead of us. Inner-city is worse.

 

You're right about the covenants - so much for the 'free market' eh? All those wide-eyed worriers about their re-sale value. Ten years from now, their 'retirement investments' will have been reverse-annuitied (mostly on food and energy) and the relative 'value' of property will be the least of their worries.

 

As for the build - I could still build the way we did for $500/sqm skimping, and $600 easy. That says we could build  our 135 for 68-81,000, about right compared to the 2005/50,000 it cost. One of the mose energy-efficient in the country, maintenance so far nil, leaking nil, all services available for - wait for it - service (not hidden behind stopped/painted cardboard).

 

But still they build with Pinus 4x2's. Makes you wonder....

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Hey don't bag those 4x2's PDK, I used them to span 7.2m in my half round design. Mind you 2/3rds of my timber cost was plywood. I did 147m for $45K in 99:) Pine is dodgy though.

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You couldn't lay up a sandwich panel on a curved buck? ie Male mould?

 

I thought of doing that - a panel nissen hut - it would be incredibly strong. Quick, too. Might be some creasing issues witht he T&G edges, but I'm sure there would be a way around that. If your ethics are too puritan for styrene, you could always peel off spiral shavings from your 4X2 and do the '60's door thing. Perhaps you could do better, spot-glue them so the concertina out like a Xmas deco / beeswax kinda pattern.

 

By the way, just  till DavidB settles down, I think we better end each post with

 

NOT ON TOPIC

 

Interesting to speculate why him, and why now......

 

go well

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It was actually faceted PDK, and the initial build had solid poly between the framing (90mm) and was overlayed with a bitumen cocoction of my own design. The bitumen could have worked but the price of a machine to do it right was the same cost as the rolled iron. To do it with sandwich panel would require a portal frame, the horozontal joins would require some thought. If done in its current format then a jig could be utilised to fabricate 2.4m sections and the roof laid up in a day. The ply finish inside is very pleasant and even more so with the play of light a vault provides and the high ceiling in the centre.

 

Not sure what is going on with DavidB, perhaps he didn't get any in the weekend?

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Always figured you for a multi-faceted fellow      :)

 

Curved panel would work very well with ply as the inside skin. If I was building a house-truck/camper, I'd do a conestoga wagon shape, in monococque panel. No eaves, no stress-concentration points.

 

You might be onto it: HE/SHE MIGHT NOT HAVE BEEN ON TOPIC

 

:)

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Don't worry my head is swimming with different construction options. How to use rolls of flat steel to make your own sandwich, rather than the corrugated stuff would make for a cheap option. Of course what I now know about designing the space for people introduces a lot more complexity into how you design. Construction method sometimes follows the design, although other times you design to the materials at hand.

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yes private covenants are a big problem with regard to housing affordability

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#4 Good to see Renewables and Enviroment are growing orders of magnitude faster then anything else.  It's the best type of growth, too bad they couldn't mention it in the article.  50% growth in these areas surely indicates an awareness of the challenges we face in the future. 

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Least costly accommodation....Nelson area in the bush...find your limestone cave and move on in. Bit like Cobber Pedy

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Slow weekend in Chch, hughey?

 

I gave you some learning to look at last time - Prof Tom Murphy's blog, Do the Math.

 

Let me guess, you didn't look at it?

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Slow weekend in Chch, hughey?

 

NOT ON TOPIC

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That's a libertarian think-tank, isn't it?  A vested-interest lobby-group, in other words. Me, I prefer truths.

 

Spin 101 says you throw what you're guilty of, at the other fellow, hoping it will stick.

 

So not surprising that it's someone else's fault, that the end of growth, indeed overshoot, are upon us and not being addressed. It's the folk who want the 'productivity gains' are shoving it up the working-class, something I'm not interested in - it's a scrap over deckchairs on a sinking ship. I monitor the sinking.

 

Happy dreaming.

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That's a libertarian think-tank, isn't it?  A vested-interest lobby-group, in other words. Me, I prefer truths.

 

NOT ON TOPIC

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Yes, well, I did make representations to the Council. For six years. Reported so far in the Otago Daily Times?

Diddly squat.

 

Old boy networks making sure they're alright, is what I think.

 

We've been hoodwinked, lied to, and the latest comes under the heading of 'blackmailed'.

 

Still and all, I guess it's theoretically possible that rates will squeeze a person like me dry, but given my mortgage/debt-free ststus, the fact that 50% of our food comes off the property and that we have no power bill. by the time it gets to us, 99.9% of the populace have taken up their pitchforks, and the torches are already spluttering.

 

You didn't look at that site, did you?  Says a lot, Hughey. I look at all the stuff referenced here, even if I don't end up agreeing with it. Give us a yodel anythime you want cheap housing.

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Nothing personal, Hughey, but that sounds like an excuse for continued ignorance. You simply abandon the right to state what is, or isn't, when you stop investigating. A few ex-senior journo's have the same failing....

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Nothing personal, Hughey, but that sounds like an excuse for continued ignorance.

 

NOT ON TOPIC

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Was it the " old boys network " in Otago who pushed for the extravagence of the new sports stadium .... or the shiney bums in the Dunedin city council chambers ?

 

....... methinks the " old money " families of Otago have remained  wealthy over many generations because they aren't frivilous & stupid with money ........

 

NOT ON TOPIC

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It was the old-boy network. They had enough shiny-bums onside to push it through.

Two got the chop last election, there are a few will who  go next time.

Too late, though.

Two days before close of elections, the ODT published an ad which was essentially a good-news rant from City Holdings. It didn't mention the name of the well-known Councillor associated with Holdings, who just scraped back. I'd love to know who/what was behind the decision to publish that, then.

NOT ON TOPIC EITHER

this is fun          :)

 

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Yes, well, I did make representations to the Council. For six years. Reported so far in the Otago Daily Times?

 

NOT ON TOPIC

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What up, DavidB - the edict go out? Yes boss, at once boss, whatever you say boss?

 

I suggest you take up your 'off topic' grudge with the fellow who raised both issues. Just because you see red rags, doesn't give you reason to deliver bull.

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What up, DavidB - the edict go out? Yes boss, at once boss, whatever you say boss?

NOT ON TOPIC

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You were told, clearly, that someone else raised both, and to take the matter up with him.

 

Kindly do so.

 

:)

 

 

 

 

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You were told, clearly, that someone else raised both, and to take the matter up with him.

 

NOT ON TOPIC

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PDK  can you please back off  Hugh Pavletich  . you seem to be showing a rather Narcist

trait . Hugh seems a lot more practical than you , If you dont like the world around you and the people in it get out.

                                                        Baz

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Baz - thanks for your kind thoughts, but I've noticed your contributions are a tad on the lightweight side, and I tend to react to advice from what I regard as 'thinkers'.

 

All the best

 

NOT ON TOPIC

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Of course we have lots of land (I pondered as I drove over the Canterbury Plain) and we could put the world population on surface area of Lake Taupo  (according to the late Owen McShane). Man is a tiny ant on the face of the earth.

However there is something suspect with that picture...?

 "Only four years after his first annual Demographia survey many of the basic premises have now become an accepted part of the lexicon used by political leaders, property players and researchers."

NBR

===========================================

The Geographic Determinants of Housing Supply
Albert Saiz∗
(Forthcoming: Quarterly Journal of Economics)
January 5, 2010
 

/*-->*/

I process satellite-generated data on terrain elevation and presence of water bodies
to precisely estimate the amount of developable land in US metro areas. The data shows
that residential development is effectively curtailed by the presence of steep-sloped
terrain. I also find that most areas in which housing supply is regarded as inelastic are
severely land-constrained by their geography.
Econometrically, supply elasticities can
be well-characterized as functions of both physical and regulatory constraints, which
in turn are endogenous to prices and demographic growth. Geography is a key factor
in the contemporaneous urban development of the United States.

///

Empirically, most areas that are widely regarded as supply-inelastic were found, in fact,
to be severely land-constrained by their geography. Deploying a new comprehensive survey
on residential land use regulations, I found that highly-regulated areas tend to also be geo-
graphically constrained. More generally, I found recent housing price and population growth
to be predictive of more restrictive residential land regulations. The results point to the
endogeneity of land use controls with respect to the housing market equilibrium.
Hence I next estimated a model where regulations are both causes and consequencesof housing supply inelasticity. Housing demand, construction, and regulations are all de-
termined endogenously. Housing supply elasticities were found to be well-characterized as functions of both physical and regulatory land constraints, which in turn are endogenous to prices and past growth.
Geography was shown to be one of the most important determinants of housing supply inelasticity: directly, via reductions in the amount of land availability, and indirectly, via increased land values and higher incentives for anti-growth regulations. The results in the paper demonstrate that geography is a key factor in the contemporaneous urban development of the United States, and help us understand why robust national demographic growth and increased urbanization has translated mostly into higher housing prices in San Diego, NewYork, Boston, and LA, but into rapidly growing populations in Atlanta, Phoenix, Houston, and Charlotte.

 

http://real.wharton.upenn.edu/~saiz/GEOGRAPHIC%20DETERMINANTS.pdf

 

Comment on the Saiz paper (Geographic Determinants of Housing Supply) from the Federal Reserve of Atlanta:

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"An exciting new paper by Albert Saiz of the University of Pennsylvania's Wharton School makes a significant advance in this area by using detailed geographic data to show how both space limitations and local development policies affect housing prices. This paper will be a big help to those who study the geographic pattern of urban development in the United States. It will also be widely cited in future studies of local development policy. But, as we argue below, one must be careful when using the Saiz results to infer anything about the rise-and-fall in housing prices during the recent housing bubble."

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“The Saiz paper is forthcoming in a top economics journal, and its results are already being used by housing economists. We draw from it ourselves in a paper that investigates why so many economists missed the housing bubble.4 But we caution that one should not push the Saiz results too far. The Saiz paper concerns the slopes of housing supply curves in different cities. As a result, it says nothing about shifts in housing demand that might have occurred during the housing boom. For example, the Saiz results would predict that, during the housing boom, prices in high-supply-elasticity cities like Wichita would rise less than prices in low-elasticity cities like Boston. Sure enough, this is what we find in the data. However, this finding does not prove that the boom was caused by some uniform, nationwide increase in housing demand (arising, for example, from easier subprime lending, or from lower interest rates). It is true we would expect a uniform demand increase to have a small effect on Wichita’s prices and a big effect on Boston’s prices. But because Wichita has a flat supply curve, its house prices will be stable no matter what happens to demand there. To determine whether Wichita and Boston saw similar increases in demand, one would have to look not only at prices but also at quantities (that is, new construction). Researchers should therefore be careful when using the Saiz results to study the housing boom—a point we hope to revisit in future posts.
http://realestateresearch.frbatlanta.org/rer/2010/06/explaining-local-supply-elasticities-quantifying-the-importance-of-space-limitations-in-housing-pric.html

The above study is criticised by Wendell Cox.

www.econjwatch.org/file_download/472/CoxJanuary2011.pdf

 

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#1.

Of course Bo had to go. He got in the way of vested interests (in  the same way Peters has to go)*

 

*ref David Farrar Kiwiblog (always taking pot shots and missing)

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PDK    Well if  I am a lightweight  you must be a Featherweight

                                                                                                    Baz

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#2

Press Release – North and South magazine
In the December issue of North & South magazine, Wellington writer Peter Dyer uncovers information on a major asset sale that has never before been revealed.

In the mid-to-late 1980s, many Railways tenants were forced to leave their houses. But one community in Ngaio managed to successfully challenge the Rogernomics juggernaut.

As privatisation returns to the public discourse – think water supplies in Auckland and Canterbury – the story of how more than a thousand Railway houses were sold to one man should serve as a warning to us all.

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