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Friday's Top 10 with NZ Mint: US financial transactions tax?; Fears of a 1914-style march to war between China and Japan; Greek coup talk; Libor love emails; Clarke and Dawe; Dilbert

Posted in Opinion

Here's my Top 10 links from around the Internet at 9 am in association with NZ Mint.

As always, we welcome your additions in the comments below or via email to

See all previous Top 10s here.

My must read today is #3 on the prospects for war between Japan, the US and China. Everyone thinks it's impossible that such rational powers could stumble into such a thing. Just as no one thought the great European powers could be so stupid as to stumble into war in mid 1914...

1. US financial transaction tax? - Now that Germany and France are bringing in a financial transaction tax, people are looking around for the next domino to fall.

No one thought America would be next.

But there are murmurings inside the Congress.

The politics of a tax on Wall St players is easy.

The budgetary drivers are pretty attractive too.

Of course, the lobbyists crawling all over the Republican-controlled house of Representatives aren't keen.

Here's Jesse Eisinger at Pro Publica on the prospects:

On this side of the Atlantic, there is a ghostly silence on a transaction tax in respectable political quarters. But that might change. This month, Sen. Tom Harkin, Democrat of Iowa, and Rep. Peter DeFazio, Democrat of Oregon, plan to reintroduce their bill calling for just such a tax.

A transaction tax could raise a huge amount of money and cause less pain than many alternatives. It could offset the need for cuts to the social safety net or tax increases that damage consumer demand. How huge a sum? Harkin and DeFazio got an estimate from the bipartisan Joint Committee on Taxation, which scores tax plans. It's a hearty one: $352 billion over 10 years.

The money would come from a tiny levy. The bill calls for a three-basis-point charge on most trades. A basis point is one-hundredth of a percentage point. So it amounts to 3 cents on every $100 traded.

And the bill contains some exemptions intended to make the tax more politically palatable. The first sales of stocks (initial public offerings) and bonds are exempted, so that the markets' capital-raising function isn't harmed. Initial investments and withdrawals from tax-protected accounts, like retirement or education funds, also have a measure of protection.

2. Not so fast - Tim Harford has an entertaining discussion about the pros and cons of a financial transaction tax in this piece here. He concludes other taxes on bankers may be better. HT Matt Nolan.

Surely you’re not saying we shouldn’t tax banks and bankers?

Of course we should. I’m with the IMF on this: the FTT is feasible but we have better options, including value added tax on financial services or taxing balance-sheet debt to reduce leverage. To invert an old saying, the FTT is the best possible tax on banks – apart from all the other ones that have been tried.

3. China vs Japan - The FT's Gideon Rachman makes the comparison between the tensions now over the Senkakus/Diaoyus and the seemingly inevitable march to war through the Balkans in August 1914. War was thought impossible in early 1914.

The idea that the great powers of today could never again stumble into a war, as they did in 1914, is far too complacent. The rising tensions between China, Japan and the US have echoes of the terrible conflict that broke out almost a century ago.

The most obvious potential spark is the unresolved territorial dispute between China and Japan over the islands known as the Diaoyu to the Chinese and the Senkaku to the Japanese. In recent months, the two countries’ aircraft and ships have shadowboxed near the islands.

Alarmed, the US dispatched a top-level mission to Beijing and Tokyo in late October, made up of four senior members of the US foreign policy establishment: including Stephen Hadley, who ran the National Security Council for George W. Bush, and James Steinberg, who served as Hillary Clinton’s number two at the State Department.

This bipartisan US delegation made clear that a Chinese attack on the islands would trigger the security guarantees that America has made to Japan. The obvious danger is that, as in 1914, a small incident could invoke alliance commitments that lead to a wider war.

4. Time for coup? - Greek society is under enormous pressure, writes HuffPo's Bill Frezza.

Former Greek deputy Finance Minister Petros Doukas has suggested that the jobless be put to work on a voluntary basis without payment. One can only wonder how this is being received by the horde of former public employees long accustomed to getting paid without working.

A series of small-scale bombings and arson attacks have rattled Athens. Roving bands of club-wielding thugs have targeted immigrants and minorities in vicious drive-by beatings. Gunshots have flown through the windows of politicians who have fallen out of popular favor. An urban guerrilla group whose name translates to the "Circle of Outlaws/Nucleus of Lovers of Lawlessness-Militant Minority" is claiming responsibility for attacking journalists for the crime of defending government policy. Arrests for any of these crimes are rare. How long before someone gets the clever idea to stage a Reichstag fire?

When the anarchist/communists explode and the fascist/nationalists fight back, will we see a repeat of a civil war that claimed more Greek lives than World War II? How long before a frightened and suffering middle throws its weight behind a junta promising security? Someone will have to restore order when the German money runs out, because it sure won't be German soldiers that are sent to keep the peace.

5. The mood is turning again on Europe - Citigroup's Chief Economist Willem Buiter points out the stock market rallies in Europe and the United States in recent months are based on not much at all.

We recognise that, in a decentralised market economy where expectations of the future, moods, hopes and fears drive private (and sometimes also government) behaviour directly and through their effect on the prices of real and financial assets, today’s subjective expectations and other psychological characteristics in part determine what tomorrow’s fundamentals will be.

Irreversible or costly-to-reverse decisions like capital expenditure, human capital formation, resource extraction etc, are driven by subjective expectations and moods, making the distinction between a fundamentally warranted asset boom and a bubble slightly fuzzy at the edges. this indeterminacy, bootstrapping, self-validating characteristic of complex dynamic economic systems inhabited by partially forward-looking households, firms and policy makers – called reflexivity by George Soros – can be taken too far.

Mere optimism and confidence will not permit the authors of this note to bootstrap themselves into winning the men’s doubles at Wimbledon.

6. Why do people put these things in emails? - Felix Salmon writes at Reuters' Counterparties about the emails found in the bowels of the computer systems of Royal Bank of Scotland and others when the investigators looked at their LIBOR rigging.

There’s a certain inevitability to RBS’s $612 million Libor-rigging settlement and the Justice Department’s civil charges against S&P for faulty ratings. Like at Barclays, Goldman Sachs, Standard Chartered, and UBS, RBS and S&P’s scandals come complete with how-could-they-put-that-in-writing electronic communications. RBS’s contributions to this now-venerable tradition come courtesy of the CFTC and FSA, and are wrapped up nicely by Dealbook and FT Alphaville.

One trader asked that the rate set be at a certain level by writing to the submitter that “if u did that i would come over there and make love to you”. Another said “its just amazing how libor fixing can make you that much money”. Believing that the US dollar Libor was being watched by the Fed, a Yen trader said “dun think anyone cares the JPY Libor”. Scattered throughout is the requisite amount of trading floor profanity, along with a decent number of emoticons.

7. Boom and bust - Jeremy Grantham from Hedge Fund GMO writes with some pungency about the US Federal Reserve's artificially low interest rates.

The artificially low T-Bill rates first work their way slowly up the curve. Next, the most obviously competitive type of equities – high yield stocks – begin to be bid up ahead of the rest of the market, as has happened. “I’ve just got to squeeze out some higher rates somewhere, anywhere,” is the pension fund plea.

Then, this low rate competition begins to filter into other securities, historically sought after for their higher yields: higher-grade real estate, where the “cap rates” slowly fall; and, unfortunately, also forestry and farmland, mainly of the larger and more standard varieties that appeal to institutions, which show declines in their required yields, i.e., their prices rise. The longer the engineered rates stay below true market rates, the higher asset prices become until, yes, you’ve got it, corporate assets begin to sell way over replacement cost.

Then, if the heart of capitalism is still beating at all, a long period of over-investment begins and returns are bid down and everything moves into balance, often helped along if asset prices get too high, as in 2000 and 2007, by a good healthy market crunch.

(This strategy will be seen in future years as archetypical of the Greenspan-Bernanke era: badger and bully investors into taking more risk and eventually pushing assets – houses or stocks or both – far over replacement value, followed eventually, at long and hard-to- predict intervals, by exciting crashes. No way to run a ship, but it does produce an environment that contrarians like us, who can take a few licks, can thrive in.)

8. It's a bubble - GMO's Edward Chancellor and Mike Monnelly write about the risks and pressures building up inside China's financial systems.

Not only does financial fragility look to be on the rise, Beijing seems to be on the verge of losing control over the credit system. Savings are migrating from deposits in the state-owned banking system to higher-yielding nonbank credit instruments. Furthermore, rich Chinese are increasingly willing to evade capital controls and take their money out of the country. As a result of these developments, deposits in the banking system are becoming less stable.

“Red Capitalism,” namely the ability of the Chinese authorities to direct the country’s enormous savings for their own ends, faces an existential threat. A Credit Bubble Economists have woken up to the fact that periods of rapid credit growth generally end badly. As one recent paper puts it, “credit [growth] matters, and it matters more than broad money, as a useful predictor of financial crisis.”2 China today seems to be in a similar predicament to several of the developed economies prior to 2008. Too much credit has been created too quickly.

Too much money has been poured into investments that are unlikely to generate sufficient cash flows to pay off the debt. Last year, for instance, new credit extended to the non-financial sector amounted to RMB 15.5 trillion.  That’s equivalent to 33% of 2011 GDP, although as Fitch Ratings notes, overall credit formation is running at an even faster rate when items missing from the official data are added in.

9. Other ways to devalue internally - Bloomberg profiles Harvard Economics Professor Gita Gopinath and her ideas for country's to use fiscal policy to devalue their way back to competitiveness, instead of using their currencies.

This is particuarly topical for those countries in the Euro zone who can't devalue their way back to growth. Instead, at the moment, they are being forced to cut wages to become competitive.

Here's Gopinath's idea, as told by Bloomberg:

The paper examines a “remarkably simple alternative” that doesn’t require countries to abandon the euro and devalue their currencies, Gopinath said. By increasing value-added taxes while cutting payroll taxes, a government can create very similar effects on gross domestic product, consumption, employment and inflation.

The higher VAT raises the price of imported goods as foreign companies pay the levy. The lower payroll tax helps offset the extra sales tax for domestic companies, reducing the need for them to raise prices. Since exports are VAT exempt, the payroll-cost saving allows producers to sell goods cheaper overseas, simulating the effect of a weaker currency, according to the paper.

The policy also can help on the fiscal front, as increased competitiveness can lead to higher tax revenue, Gopinath said.

10. Totally Clarke and Dawe on the new formats in current affairs television. Tremendously topical.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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How could I have doubted you

How could I have doubted you , oh great Dark Helmet , the schwartz is still with you !
.... indeed , that is a Top 10 full of fear and woe , laden with " yikes " , galore with gore and gloom ...
Pity for you that none of it will ever actually eventuate .... ah well , life is still good , and getting gooder every day ...

Just bide your time

Just bide your time Luke...
The force will get you in the end...

GBH…Henceforth the old

GBH…Henceforth the old glumster is going to place Ray Charles singing “Oh…its crying time again” at the front end of his sorrowful Top 10’s …
I find I’m a sobbing wreck by the time I get through the glumsters Top 10. Its good they have Chaste – on there to relieve the pain occasionally.
Hugh Pavletich

The China Credit Bubble

The China Credit Bubble :
could it be the next trigger for GFC 3 ?? When all eyes are onto EU especially with Spain and Italy now wild cards, not to mention US oncoming "sequestration" political play, the China Credit Bubble (especially the non-bank Trust and Wealth Management Product ) may be the first to implode.
The latest has CITIC refusing to honour any payment for two WMP that has been defaulted as compared to last month's Huaxia Trust Loan payout from their own  internal resources.
The outward statement was to highlight investors to the real risk of WMP/Trust, but unfortunately this has the effect of frightening chinese investors to withdraw fundings from such product in a soon to be market panic. Internally it is said that collateral pledged for the WMP/Trust is insufficient to cover the principal value or that the valueation is dubious.
Watch this space........

And then after the

And then after the pollies calculated the revenue stream resulting from their new fandangled Tobin Tax...they spent more and worried less about the debts they and the idiots before them had created. None of the fools bothered to figure out the unintended consequences...doh
The FTT may become law in some countries...and then those countries will witness a decline in activity in their financial markets...leading to a drop in taxes stolen from the long gone players...and then the FTT farce will be quietly disposed of....Meanwhile, them what said "stuff the Tobin Tax", will have seen a vast expansion in their financial markets with more employment and an increase in taxes stolen by govt.

Well Wolly.  Maybe the point

Well Wolly.  Maybe the point of a Tobin tax is actually to send the traders elsewhere.  Which is a good thing.  And the proposers don't actually think it will raise revenue of any great amount.  A Tobin tax, if it got rid of the speculators and traders, would allow markets to set value on fundamentals.  eg.  Fonterra doing currency trades because it is selling milk products offshore, would not have to manage so much of the fuzz caused by the fast money movers.

I have no doubts the trade

I have no doubts the trade activity and spinoff business will depart for places where thieving govt fingers do not go.

#9 does have some legs on the

#9 does have some legs on the surface, but the existing distribution of VAT rates in the Eurozone does not favour practical implementation quite as much:
Member States Code Super-Reduced-Rate Reduced-Rate Standard Rate Parking Rate
Belgium BE - 6 / 12 21 12
Bulgaria BG 9 20 -
Czech Republic CZ - 15 21 -
Denmark DK - - 25 -
Germany DE - 7 19 -
Estonia EE - 9 20 -
Greece EL - 6,5 / 13 23 -
Spain ES 4 10 21 -
France FR 2,1 5,5 / 7 19,6 -
Ireland IE 4,8 9 / 13,5 23 13,5
Italy IT 4 10 21 -
Cyprus CY - 5 / 8 18 -
Latvia LV - 12 21 -
Lithuania LT - 5 / 9 21 -
Luxembourg LU 3 6 / 12 15 12
Hungary HU - 5 / 18 27 -
Malta MT - 5 / 7 18 -
Netherlands NL - 6 21 -
Austria AT - 10 20 12
Poland PL 5 / 8 23 -
Portugal PT - 6 / 13 23 13
Romania RO 5 / 9 24 -
Slovenia SI - 8,5 20 -
Slovakia SK - 10 20 -
Finland FI - 10 / 14 24 -
Sweden SE - 6 / 12 25 -
United Kingdom UK - 5 20 -
As can be seen, the PIrItGS standard rates are 23/23/21/23/21 whereas the range is 15 to 27.  So the room to move without triggering countervailing movements in neighbours is quite limited.  Might work for FR at 19.6% or DE at 19% - more headroom.  But you'd haveta stack these up against payroll tax effective rates to see just how this could all play out.
Devil, Details......

Good points: I suspect the

Good points: I suspect the professor has a US bias, where they have a huge domestic market, and it is not easy or common for consumers to cross borders to arbitrage any differences.
Even then, am not sure I follow the process. Increased VAT would hurt both domestic producers and importers in the domestic market, so I don't see the benefit to the domestic producers.
Payroll tax reductions could arguably mean lower wages (and so more competitive industry), although contract stickiness would make that a slowish process to work through, and the negotiations would not be easy, as any workers would want the extra payroll to pay for the extra VAT. So if overall payroll does not come down, there is no advantage to exporters or import substituters.
The tourism market would be negatively affected, you would think.
Suspect I'm missing something, as she is a Harvard professor, and its been a long week.

On the face of it Gopinath #9

On the face of it Gopinath #9 would seem to be on to something which could perhaps be utilized by our brain dead Central Bankers / Political time servers to better manage the ludicrous sitution with our currency - Any supporters /nay sayers wish to expand or expound ???? 

  Posted at … Cantabrians

Posted at … Cantabrians UNITE facebook
·       ODT editorial today … The Quarter Acre Dream
·       Truly remarkable  photography
·       Demographia Survey no “sales aid” for overpriced new housing
·       74% of Australian cities more affordable than Christchurch and Auckland
·       Has the above "registered" with Mayors Len Brown and Bon Parker? And what the consequences are?
Hugh Pavletich

WIth regard to the ODT

WIth regard to the ODT article:
Labour's bold KiwiBuild housing policy is a 10-year programme to build 100,000 affordable, ''entry level'' houses for $300,000 each - a mixture of compact, good-quality and energy-efficient stand-alone dwellings and apartments for first-home buyers who have saved their own deposit. Labour leader David Shearer announced the $1.5 billion policy in November last year, but was forced to concede last week the figure was a national average and freestanding family homes were more likely to cost up to $550,000 in Auckland. There are also questions about whether such comprehensive building projects are even possible given the construction resources going into the Christchurch rebuild which will start in earnest this year.
So don't build freestanding homes on large sections!
Adelaide has a great model in terms of allowing 3 bedroom, circa 120 sq m single level homes (cottages) on 250 sq m sections. These properties can be delivered to the market in lower / mid value locations for around 350K. Accounting for Auckland's higher construction costs, such properties should be able to be delivered in lowr / mid value Auckland  locations for late 300s.
It's not complex at all boys and girls, despite what these govt mugs would lead us to believe  

Matt in Auck ... those

Matt in Auck ... those numbers are a million miles off "affordable". refer the Definition of an Affordable Housing Market at .
Following WW11,the Levitts, the creators of the housing production industry, got the stuff in for $US100 per square metre ALL UP ( $US8,000 for 80 square metre units on about 700 square metre lots).
Today the ALL UP costs for starter stock on the fringes of the affordable US market is in the order of $US600 through $US700 per square metre ALL UP (serviced lot and house construction).
Christchurch we are currently $NZ2,500 per square metre and beyond - Auckland $NZ3,500 per square metre and beyond.
The Aussie pricing / performance has also been severely degraded over past decades as well. thanks to the political and bureaucratic bludgeoning of the industry.
The affordable housing markets of North America are where we should be looking for true market pricing of residential development and construction.
There have ONLY been 9 Annual Demographia Surveys ( ) illustrating clearly that North America is where to look for guidance on these issues.
The amusing thing is that NZ Treasury is now just starting in to reading the 2005 1st Edition of the Demographia Survey.
Talk about political / bureaucratic inertia .....phew !!!
Hugh Pavletich

China/Japan Spat could blow

China/Japan Spat could blow into something serious if they loose their tempers.  It looks like Japan has a more solid claim to them
China holds a lot of American and Japanese Debt, but how wise would they be to play that card? How well would China get along if Japan, the USA and their freinds cut off all trade?
It will be interesting to see how far the Chineese will go with their checky brinkmanship and how much the west is prepared to resist them.

I think its just sabre

I think its just sabre rattling games, ala North Korea.
Both sides stand to lose too much from war, and it's abit disingenious to compare to 1914 - international diplomacy, the presenc eof the UN, the much greater interconnectedness of economies etc means things are very different

Hi Chris-M My belief is that

Hi Chris-M
My belief is that the Chinees feel they are now able to stand up to the Americans military so won' back down.
They have said all along that Tiawan is theirs and they intend taking it back. They are expanding their influence in the South China Sea in preparation to take back Tiawan.
If America and others try trade bans it will back fire as China will move swiftly in the area.
The islands dispute with Japan, while important economically, is to put pressure on America and test America. Bit like the Cuban missile crisis.
The final outcome will be that China will end up taking Tiawan but agreeing to negotiate with Japan over the disputed islands. China will then put the islands dispute on the shelf for a few more years.
That is how i see it

I hope this brightens up all

I hope this brightens up all the journalists out there.
Profits at the New York Times have tripled, as a surge in online subscriptions more than offset weak demand for advertising space.

The US newspaper, which introduced a paywall on its website almost two years ago, said online subscribers rose 13% over the last three months.

Subscriptions beat advertising revenues for the first time in its history.



Violence in Athens: "Roving

Violence in Athens: "Roving bands of club-wielding thugs have targeted immigrants and minorities in vicious drive-by beatings."
Would never happen in Auckland or other New Zealand cities would it, I mean we are such stable multicultural society that we are above all that.

The following may have been a

The following may have been a contender for the top 10:
The new Guvnor, ex a very orthodox Canada:
In his first public appearance in the UK, Mark Carney, the current Governor of the Bank of Canada, said Britain might benefit from a commitment to keep interest rates low for a fixed period as well as a more “flexible” inflation targeting regime that tolerated inflation remaining higher for longer.
Among the more “unconventional” policies he said the Bank should consider was a more “flexible” 2pc inflation target that allowed prices to stay high for as long as three years, compared with current policy of bringing it back to target within two years. The arrangement would allow rates to remain low for longer or permit more stimulus, such as quantitative easing (QE).
Mr Carney also raised the prospect of guaranteeing that rates would be fixed for a set period, or until unemployment or growth hit a certain target – as in the US . “In the UK today, there is a valid discussion to be had about the potential use of this tool,” he said, saying there was “merit” in the US strategy.
So, no real change from Mervyn King; although more transparent in the approach.
Still, they must both be wrong, as Mr Key, English and Wheeler say it's all bunkum or impossible.

A good piece thank you AJ. I

A good piece thank you AJ. I think that Mr Fekete doesn't fully understand the nature of, and destructive effects of, interest but by and large I suspect he is on the mark.

  Posted on  Cantabrians

Posted on  Cantabrians UNITE facebook ( significant aggregated recent information / reporting on the British housing shambles) ... 
Becky Barrow of the UK Daily Mail reports … UNITED KINGDOM: HOME OWNERSHIP COLLAPSES …
Hugh Pavletich

Posted on Cantabrians UNITE

Posted on Cantabrians UNITE facebook
Beck Eleven opines in this mornings The Press … HUMANITY KEY TO SOLVING HOUSING CRISIS …
“”It shouldn’t be a question of politics because it is a question of basic humanity. It is not good enough. Nowhere near. Not by anybody’s book.”
Hugh Pavletich

Hugh   I think the following

I think the following article from the Press is more interesting.
Green Party MP Eugenie Sage said [true sustainability is about much more global changes like achieving the right urban form - doing general things like avoiding the carbon inefficiencies of suburban sprawl, enforcing strong building standards and getting the transport system sorted.
Sage says Christchurch has a proud history of being forward looking in exactly this way. For a decade, it has been working towards an Urban Development Strategy (UDS) that enshrines sustainability principles. Even Auckland is just getting started on its equivalent.
Yet now we hear Prime Minister John Key telling councils they should ditch urban limits to make housing more affordable, says Sage.
"Relaxing the city limits here would just mean further sprawl potentially all the way to Rolleston. The suburbs might be cheaper to build because the land's cheaper, but they would be more expensive to live in because of the transport and infrastructure costs." ]
While Christchurch mayor Bob Parker [credits Cera with sticking by most of the broad strategic policies that Christchurch City Council had in place. The UDS, for example, is not being scrapped. Instead it has proven its value because the right places for future suburbs had already been earmarked.
"The reality is that 95 per cent of the land that has been accelerated in terms of putting it on the market, was already designated through that strategy."]
So the Left and the Councils are not going to roll over and let Central government increase the supply of affordable land by reforming Local government without a fight.
When do we see National's big guns? What is the saying "don't bring a knife to a gun fight"? Is Key packing a knife or a gun? Does he know how to use it? It is going to be a tough and nasty fight. 
We know that the UDS has failed even in its own terms, more houses are being built in satellite towns and life style blocks than in Christchurch. So the sprawl is already happening. See last Mondays Top 10 (no.2 Rapid response?) . Christchurch is not going to be a compact green city and it is not Nationals or CERA's fault but the result of wishful greenie urban planning that has never bothered to assess whether what they have done is working. The only thing these wishful thinking plans have achieved is an unnecessary doubling of house prices, with the obvious poverty consequences
Hugh Pavletich who lives in Christchurch has 9 international surveys proving these sorts of restrictions cause unaffordable housing but still the establishment do not want to know.
This is not the first time the Christchurch establishment has closed ranks in response to clear evidence of wrong doing. We all know in Canterbury Peter Ellis is innocent of the Christchurch Civic Creche child abuse case. Even in prison they knew, unlike other child abusers he was free to mingle with other prisoners. Yet unlike Bain he has never been acquitted. Lynley Hood like Hugh Pavletich did exhaustive enquiries and wrote a book 'A City Possessed'. But too many important people's reputations would suffer if Peter Ellis was officially acknowledged to have been a victim of a witch hunt.
Clearly proving your argument is not enough and I suspect we all know that city limits cause house prices to rise unnecessarily.
What we need is some big guns to take the fight to the establishment.
So again the question is 'does National have big guns and do they know how to use them?'

Brendon …. I dealt with John

Brendon …. I dealt with John McCrone of The Press reporting on the architect the late Peter Beavens musings about 2 ½ years ago, with  Houston, we have a (housing affordability) problem |
…and out of the 4,500 Protest 1 February last year came this letter from the Protest Committee to the Government … Christchurch Protest Committee letter to Hon Dr Nick Smith | Scoop News
…which mid-year was followed up with … Christchurch: The Way Forward
The kindest thing that can be said about this latest McCrone effort, is that it is nothing more than vacuous green eyewash – completely divorced from reality.
Christchurch citizens – and the majority of the so called establishment - are currently learning the hard way, that the Parker / Sage “recipe for recovery” is the biggest disaster – bigger than the earthquakes themselves.
If Parkers Council has more of its functions stripped from it, it will be left issuing dog licences. He and it are a sideshow.
Hugh Pavletich

great article Hugh,yet some

great article Hugh,yet some here seem to think Key and co are doing just fine...

Matt in Auck … Politics is

Matt in Auck … Politics is local (to quote Tip O’Neill) and cross border understanding is generally very shallow. We know as much about Aussie politics as they know about ours.
I covered PM Key early December within an article  Housing: Mr Key – Get on the Programme
Deputy Prime Minister Bill English was invited to contribute the Introduction to this years 9th Annual Demographia Housing Survey ( ) because of his significant contributions to these issues throughout 2012. Incidentally, every word is his own. It was incorporated without any suggestions from me.
English, Smith, Joyce and others are determined to deal effectively with these issues … something that needs to be more widely understood.
In short – this Government knows full well it must deal effectively with these issues this year – or come election time late 2014, it is toast.
Affordable housing must be viewed by the public in positive terms by this time next year, in the lead up to the election. The pressure to perform is massive.
Hugh Pavletich

Matt in Auck - it is well

Matt in Auck - it is well past time more women spoke puiblicly on this current housing fiasco.
After all, they are the ones who really bear the brunt of it, with the unnecessary "mortgage slavery" imposed on them - when mortgage loads should be at or below 2.5 times annual household income.
So I was particularly pleased to see Beck Eleven of The Press giving it to them full on. Hugely heartening to see this.
We need to see a lot more of this.
Hugh Pavletich

Listen to the chatter   John

Listen to the chatter
John Key meets with Julia Gillard
Not being discussed are Kiwi reciprocal entitlements to welfare in AU
John Key will seek to cement his legacy of improving CER
Julia Gillard will demonstrate what a soft touch New Zealand is
People smuggling and assylum seekers are costing Australia $1 billion per annum
Assylum seekers are held either on Manus Island, Nuie Island, or onshore in the community
All refugees and assylum seekers, wherever located, receive full welfare immediately
Julia to John
Hey John, we would like you to do the humanitarian thing and take some of our assylum seekers.
John to Julia
Ok Julia .. no problem
John - thought bubble
Legacy, nice guy, good guy, doing something, knighthood here we come
Julia - thought bubble
chuckle, chuckle, whew
another $50 million (plus) per annum in welfare unloaded - sucker

At the margin it helps to

At the margin it helps to reduce labour costs on our way to serfdom - Key is oblivious to the future funding needs of the Government Superannuation Fund and many other taken for granted tax payer funded services.

"Australian Prime Minister

"Australian Prime Minister Julia Gillard has insisted that New Zealand's decision to take 150 refugees annually from Australia will not send any message of encouragement to boat people".....RUBBISH

Dontchya love it. The Kiwi

Dontchya love it. The Kiwi Way.
1. Runaway bankrupt but mum on cash. A temporary resident (definitely) planning a long term (permanent) overseas trip in 3 years time. Can't depart NZ for 3 years while Official Assignee has his passport. Assuming he only has one passport. Get real.
2. Driver charged after passenger fatally impaled. Justice of the peace David Grove issued an order for Fausia not use his passport. What? no surrendering of his passport? He'll be gone in a flash.

"Even Labour admits it is out

"Even Labour admits it is out of control."
A bit like the landlord benefit here in Noddyland....

hehehe good find Wolly   Of

good find Wolly
Of interest was the point
At £23billion the housing benefit bill is already nearly three times bigger than the amount central government pays for the police

Oodles of aggregated stuff

Oodles of aggregated stuff guys up om the Cantabrians Unite facebook regarding the British housing circus...

A simple cure for the housing

A simple cure for the housing shortage in NZ would be a roof tax ....
... levy an annual tax on all residential dwellings based on their area of roofing ...
 This would result in more narrow buildings , and multi-level constructions , and even quite a few spires instead of ridged roof tops ...... altogether a much more efficient use of the available land ....
...... either / or , it's a win/win for us all , and I think , worth a number of votes at next year's election ...

S-L I can recommend a read of

S-L I can recommend a read of this chap's latest speech 

He is an why hire

He is an why hire one!

There's no doubt about it ,

There's no doubt about it , Bernanke is the world's greatest central banker , perhaps even greater than Greenspan himself ....
...... I do wonder if the newly appointed asset bubble popper is going to turn his immediate gaze towards the US bond market ..... hmmmmmm !

It's too incestuous. Keeping

It's too incestuous. Keeping the bloodlines clean and pure. The rule of the brotherhood continues.
They need new blood. Someone like Dr Running-Bear, or Dr Whitefeather, or Dr Minnehaha.
But Reisen-Stein. Appointed by Benyamin Shalom Bernanke. Keeping it in-house. A recipe for steady-as-she-goes. Don't rock the boat. Hold-the-line. Do as you are told. Ignore that ponzi-hunter guy with the funny Greek name. The one who is down in nz talking to bernard hickey.

Doesn't Bernard write for the

Doesn't Bernard write for the NZ Herald anymore ? .... I used to enjoy a Sunday morning  read of the Herald bloggers kicking the spit out of his arguments ...
.... they're a tougher audience than us over here at the home of Hickey !

Those on the NBR blog seem to

Those on the NBR blog seem to be having a fielday re Hooton's article about the late Mr Holmes and Waitangi.  I suspect Mr Hickey would require medical attention for a dislocated finger, from repeatedly hitting the Delete button, should similar comments appear here.
That's what i call a tough audience!

Great news for chch

Great news for chch residents...not.
"Although winter is still months away, Environment Canterbury is reminding residents with older wood burners to invest in a cleaner form of heating before the cold weather arrives. 
According to the Christchurch Air Plan, non-compliant wood burners 15 years and older cannot be used in winter.
Environment Canterbury's air portfolio director Katherine Trought says the requirement is one of the rules designed to help the city's air become less polluted and therefore healthier for residents.
Clean heat options include a new approved wood burner, pellet fire, flued gas fire or heat pump"
The main cause of woodburner pollution is wood that is not dry.
E Cant might do better to leave off with the threats and think about improving the supply of dry firewood....and it would be helpful if they started planting more greenbelt zones..and did something to make bike riding in a chch winter less murderous.

What's the story about not

What's the story about not being able to use wood-burners 15 years old or older in ChCh?
Is it about greenhouse gases and Co2? Air Pollution?
What a joke. Over in Tasmania and Victoria they have hundreds of thousands of hectares of forest and grasslands being destroyed by wild-fires, going up in smoke, releasing BILLIONS of tonnes of carbon dioxide. Guess where it goes. Guess who tail end charlie is. Guess who cops it.
The output goes in one direction. Straight out over the Tasman, over New Zealand and down into the Antarctic. John Key should be asking Julia Gillard for $ multi-billion annual disposal fees.
Have you been having strange weather lately?

  Hon Dr Nick

Hon Dr Nick Smith
Minister of Housing
Hon Chris Tremain
Minister for Local Government

10 February  2012

      Media Statement       

Development contributions review in response to housing cost concerns 

The Government is looking at  changes to the way Councils charge for new sections and other developments by today releasing a discussion paper as part of its work on housing affordability and local government reform.
“Section prices have more than doubled in the past decade. A significant factor has been the sharp rise in the development contributions charged by councils.  The average charge nationally has increased from $3,000 per section to $14,000 per section over the past decade, an increase of 360%, and can be as high as $64,000 per section. These costs need to be contained if more kiwi families are going to be able to afford their own home,” says Dr Smith.
“Development contributions are needed to enable Councils to provide the necessary infrastructure to support new developments, but we also need to ensure the costs are fair and well justified. There are pockets of excellence in local government in the way infrastructure is financed and we want to build on this to achieve greater consistency and certainty. The current system has been in place since 2002 and this review, as part of the Better Local Government programme, is timely and needed," Mr Tremain says.
The Development Contributions Review Discussion Paper includes options for reform of the Local Government Act 2002 to cap the charges, tighten the criteria, reinstate appeals, provide discounts for types of housing, change the timing of charging, enable alternate provision of infrastructure and abolish the charges. The paper builds on the recommendations of the Productivity Commission inquiry into Housing Affordability and of the Urban Design Technical Advisory Group that raised concerns about the way the system of development contributions has been working.
“We welcome feedback on these proposals from builders, councils, developers and the wider community.  Our reform objective is a fairer system that will support development and growth, and make home ownership more affordable while supporting Councils efforts to improve New Zealand’s infrastructure,” the Ministers concluded.
Submissions are due with the Department of Internal Affairs by 15 March. A copy of the Development Contributions Review Discussion Paper can be viewed at$file/Development_Contributions_Discussion_Paper_Jan2013.pdf

Seems like the Department of Internal Affairs hacks have irresponsibly skirted over the Texas Municipal Utility District Bond financing Model …which is generally regarded as the most superior …
An outline of the solutions is set out within Section 4 of Christchurch: The Way Forward
The late Sir Wilson Whineray, former All Black captain and highly respected businessman, when asked what the essential ingredients for performance and success are stated “the capacity to simplify things – and do the simple things well.
We need to see the “whineray thinking” embedded in the political and public service arenas.
One does tire of the “loser confuser” bureaucratic and academic cut and paste stuff.
Hugh Pavletich


It has been pointed out to me

It has been pointed out to me that the Texas MUDs model has been incorporated as Option 14 on Page 42.
The discussion on them could however not be described as adequate or comprehensive. It was April last year when the final Productivity Commission Report was released.
The DIA hacks and their equally lacklustre counterparts at Treasury have had more than enough time to get a solid grasp of the Texas MUD model.\
The Muni Bond Market in the United States is considerably more extensive than Texas. My understanding (I think David Chaston noted this some time ago) is that the US Muni Bond Market is about $3.5 trillion. Whatever it is, iy os huge.
Other States I understand employ variants of the "MUD model" (at least Georgia and Florida ... likely many more) for subdivisions, but the general view is that the Texas model created by Houston lawyer Joe Allen of Allen Boone Humphries Robinson, Attorneys, Houston, is the superior one with its structure, disciplines and checks and balances.
The major points are that the entities owning the infrastructure should be responsible for the financing and charge rates / levies for the services provided - for elementary economic efficiency and intergenerational equity reasons.
Developers are the intermediaries in the development process, who simply pass on the costs (with subdivider and builder margins) to the new house purchaser.  A hugely inefficient and inequitable way of doing it. The new house purchaser in turn finances these excessive costs with excessive mortgages. In short ...gifting the capital costs (with margins and excessive interest costs) to the owner of the assets.
Talk about dumb. But New Zealand Local Government know plenty about that.
It is generally in the interests of the home owner to have a mortgage for as shorter time as possible. But the infrastructure should properly be debt financed for a much longer term ...reducing through its life (as maintenance costs increase), which could for some of it be 100 years or more.
So all industry, professional and other interested submitters need to study the Texas MUD Model very closely.
It cannot be emphasised enough that we will not START getting acceptable performance out of Local Government in New Zealand until there are major systemic and structural changes made.
Throwing more Central Government money at them is the worst thing we could do. It would be like giving an alcoholic more booze to cure his addiction.
People like Mayor Glenn Leach at Corromandel Tasman (featured on ) and Adam Feeley at the Queenstown Lakes District are good guys dealing effectively with bloated costs.
Others need to learn from these guys. we need to see more people standing for Local Government this year, committed to getting their Councils costs under control.
The housing problem at its core is a Local Government costs out of control problem.
Hugh Pavletich

Cleaning out Local Authority

Cleaning out Local Authority bureaucratic bloat …
Thames Coromandel Mayor Glenn Leach ….
Cost-cutting major slashes away at rates - National - NZ Herald News
…and …
A mayor intent on giving power back to the people |
The housing affordability problem is at its core a Local Government costs out of control problem.
Generally, the larger they are …the worse the problem… as they become buggered with bureaucratic bloat ( Parkinsons Law )

Adam Feeley the new CEO of the Queenstown Lakes District is doing a very good job too I understand.
With the looming Local Government elections, it is hugely important quality people get elected throughout the country, committed to cleaning out the bureaucratic bloat.
Hugh Pavletich

Absolute rubbish.... regards

Absolute rubbish....

"The average charge

"The average charge nationally has increased from $3,000 per section to $14,000 per section over the past decade, an increase of 360%, and can be as high as $64,000 per section. These costs need to be contained if more kiwi families are going to be able to afford their own home,” says Dr Smith."
It isn't about Kiwi families it is about subsidising developers.
80% of our population growth in the last couple of decades has been the net inflow of non NZ citizens .

jh ...with all due respect,

jh ...with all due respect, that is eyewash.
As I hopefully make clear within one of the postings above, the subdivider and builder are simply the intermediary.
They dont "pay" - the end purchaser does.
And of course with the current loony infrastructure financing and land strangulation - whole lower priced bands of the new housing market are completely wiped out.
So it is the working people who pay an even higher price - completely shut out of home ownership altogether.
Years ago the NZ Labour Party use to represent these people - but sadly today have degenerated in to being parrots for the Public Service Unions. It seems clear to me the latter wrote the formers idiotic Housing Policy ....the Labour Party and Fletchers holding hands one (TV One News a week or so ago).
The numbers were a million miles off the "affordable" mark of course.
Hugh Pavletich

"When you buy a municipal

"When you buy a municipal bond, you extend a loan to a state, county or city, to one of its agencies or, in some cases, to a corporation with special borrowing privileges. With the U.S. unemployment rate at 9% and home values down sharply, these borrowers are having a tough time raising revenues."
Worries about the health of municipal finances spiked when Meredith Whitney, a well-known analyst, predicted a collapse of the muni market when she appeared on a December 19 segment of CBS's 60 Minutes. Said Whitney: "You could see 50 sizable defaults. Fifty to 100 sizable defaults. More. This will amount to hundreds of billions of dollars' worth of defaults." A month later, the New York Times published a front-page story that said, "Policymakers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts."
There's a reason interest rates on munis are so tempting: As concerns about the finances of states have risen, so have muni yields. The yield on the Bond Buyer 20 index was just 3.8% in mid October.
Worries about the health of municipal finances spiked when Meredith Whitney, a well-known analyst, predicted a collapse of the muni market when she appeared on a December 19 segment of CBS's 60 Minutes. Said Whitney: "You could see 50 sizable defaults. Fifty to 100 sizable defaults. More. This will amount to hundreds of billions of dollars' worth of defaults." A month later, the New York Times published a front-page story that said, "Policymakers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts."
"There's a reason interest rates on munis are so tempting: As concerns about the finances of states have risen, so have muni yields. The yield on the Bond Buyer 20 index was just 3.8% in mid October."

Read more at"


Proceed with caution before you buy munis with references to "structured," or "appropriation," along with any bonds issued by states in fiscal trouble like Illinois or California.
"If the issue is not backed by the full faith and credit of a sound issuer or a substantial revenue source, there is a risk that the bond may not be paid off at its due date," the Richelsons warn.



So there is still the problem of income of house purchaser who ultimately pays the infrastructure provider  and if things go belly up the taxpayer steps in?

Jh …as a matter of interest

Jh …as a matter of interest …where does housing “happen” to be most affordable ?
You might like to read closely this years 9th ….yes the 9th Annual (for the slow learners out there) Demographia International Housing Affordability Survey …

And by the way ...the US Muni market has been a paragon of virtue in comparison with New Zealand finance companies ...
Hugh Pavletich

Another stream of

Another stream of over-my-shoulder nonsense from Hugh, and his backer.
Neither Hugh P, not 'Brendan', have investigated what underwrites incomes. Incomes are exactly half of what Hugh asserts.
Go figure - because they aren't.

Oh I think its figured, just

Oh I think its figured, just consider how parasites and demagogues act....
"Demagogues were a new kind of leader who emerged from the lower classes. Demagogues relentlessly advocated action, usually violent immediately and without deliberation. Demagogues appealed directly to the emotions of the poor and uninformed, pursuing power, telling lies to stir up hysteria, exploiting crises to intensify popular support for their calls to immediate action and increased authority, and accusing moderate opponents of weakness or disloyalty to the nation. All politicians in a democracy must make occasional small sacrifices of truth, subtlety, long-term concerns, or other matters that don't have immediate popular impact or else they will lose the popular support which is the base of their political power. Demagogues do these things relentlessly and without self-restraint"
I cant think of a better description of Hugh P.

The thing is though Hugh,

The thing is though Hugh, unless there is a wealthy workforce buying into muni financed subdivisions the bond issuers wont be able to raise the money or there will be a risk of default (and need for taxpayer bail out)?
Your model assumes land prices will fall once there are no urban limits set by town planners whereas councils are saying they keep the limits to contain spending on infrastructure. You would claim that council services are inefficient whereas private enterprise can offer "enormous savings" (or similar hyperbole). Isn't it possible that the real cost  of resources is showing up in the deliverance of infrastructure?

"whereas councils are saying

"whereas councils are saying they keep the limits to contain spending on infrastructure"
or in short make houses far more self-contained....hence limits dont matter so much.  Of course just what you do about transport energy costs is another matter.
PDK and I have tried to discuss the "real cost  of resources" and Hugh doesnt want to listen calling us luddities.  Which given is lacking of engineering especially compared ot ours is laughable.