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Friday's Top 10 with NZ Mint: How a banking regulator becomes captured; Hail Mary or Hail Vladimir?; Britain hopes for salvation in a new housing boom; Clarke and Dawe; Dilbert

Posted in Opinion

Here's my Top 10 links from around the Internet at 11 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 #5 on an alternative debt restructure plan for Cyprus. Thinking about the details of sovereign debt restructures makes you realise they are possible and not the end of the world.

1. Captured regulators - The New York Times' Dealbook reports on how big US banks give sweetheart deals to executives departing to work in government departments and central banks.

Revolving doors are dangerous things when it comes to regulators and banks.

The fact that no banker has been sent to jail in the US after multiple criminal acts is itself criminal.

The number of huge settlements has created the impression that these banks are Too Big To Fail and their managers are Too Big To Jail.

They are more likely to be Too Well Connected To Jail.

Here's the New York Times:

Banks, including JPMorgan ChaseGoldman Sachs andMorgan Stanley, all have provisions that allow acceleration of payments owed to senior executives if they take government jobs, a new study finds.

Such a benefit was highlighted recently during the confirmation hearing for Jacob J. Lew as Treasury secretary. His previous employer, Citigroup, had guaranteed him preferential financial treatment if he were to leave to take a job in the government. When Mr. Lew left Citigroup he held stock that he could not immediately cash worth as much as $500,000, according to a government filing.

“These companies seem to be giving a special deal to executives who become government officials,” says the study, to be released Thursday by the Project on Government Oversight. “In exchange, the companies may end up with friends in high places who understand their business, sympathize with it, and can craft policies in its favor.”

2. The other point of view -  I have argued for Deposit Guarantee schemes to make the implicit guarantees for banks into explicit guarantees.

The Economist's Buttonwood column has another point of view, which is that deposit insurance scheme makes collapses more likely:

Let us assume that a EU-wide deposit insurance scheme was in place. The price would be greater bank regulation; it would certainly include greater controls on the ability to open a bank account and, perhaps, limits on savings rates. After all, if all banks had equal legal protection, investors would scour the continent in search of an extra few basis points; the flows could be destabilising. As the IMF paper concluded:

"Unless a country has strong banking regulation, a strict failed bank resolution regime, carefully designed deposit insurance with safeguards against risk, healthy private monitoring, and, most of all, strong institutions, explicit deposit insurance will only be a recipe for future bank crises."

That may be true, but there is always a risk of bank failure. New Zealand's banking system is just too concentrated not to have one. The only other alternative is to break up the banks into chunks that were small enough to fail... I don't see anyone suggesting that.

3. 'All we need is another housing boom' - Oh dear. Britain is so desperate to get its economy going again that its government is proposing easy loans for home buyers to try to pump up the housing market again.


Rinse and repeat.

Here's the Telegraph with the new grand plan:

The multi-billion-pound schemes to kick-start the housing market were the centrepiece of a Budget in which the Chancellor admitted that Britain would take at least a decade to recover from the financial crisis.

In an overtly political move with an eye fixed firmly on the 2015 general election, Mr Osborne announced that the Government would offer five-year interest-free loans worth up to 20 per cent of the value of new-build homes costing less than £600,000.

From January, another scheme will see taxpayers underwrite mortgages to those with small deposits, including more than a million people trapped with so-called “zombie” loans, where the fall in the value of their homes has left them unable to move.

4. Why China is not too big to fail - Zhang Monan from the China Information Centre writes here at Project Syndicate about the debt risks in China. The assumption by many is that China has plenty of reserves to fall back on. But that's a complacent assumption.

China faces additional debt risks from contingent liabilities and inter-departmental risk conversion, especially in the form of implicit guarantees on debts incurred by local governments and state-owned enterprises. Indeed, such guarantees constitute the most significant medium- and long-term financial risks to China.

In recent months, there has been a surge in LGIV bond issuance, aimed at supporting local governments’ efforts to stabilize economic growth through stimulus-style investment projects. But the implicit guarantees on these bonds – as well as on existing bank loans – amount to hidden extra-budgetary liabilities for the central government.  Local governments have also accumulated massive amounts of non-explicit debt through arrears, credits, and guarantees. Once this debt’s cumulative risk exceeds a local government’s financial capacity, the central government is forced to assume responsibility for servicing it, directly endangering its own financial capacity. 

At the same time, China’s corporate sector relies excessively on debt financing, rather than equity. China’s non-financial corporate debt accounts for roughly 62% of total debt – 30-40% higher than in other countries. According to GK Dragonomics, China’s total corporate debt amounted to 108% of GDP in 2011, and reached a 15-year high of 122% of GDP in 2012.

Many of these heavily indebted enterprises are state-owned, and have borrowed from state-controlled banks. The implicit guarantees on this debt, too, suggest that the government’s liabilities are much higher than its balance sheet indicates. China is not too big to fail. In a fragile economic environment, policymakers cannot afford to allow the size of China’s balance sheet to distract them from the underlying structural risks and contingent liabilities that threaten its financial stability.

5. There is another plan - And it's not a 'Hail Vladimir'. Here's Felix Salmon talking about one way for Cyprus to extricate itself, as suggested by the godfather of sovereign debt restructures, Lee Bucheit.

First, leave all deposits under €100,000 untouched. Hitting those deposits was by far the biggest mistake of the Cyprus plan as originally envisaged, and everybody would be extremely happy if guaranteed depositors could be kept whole.

Second, term out everybody else by five years, or ten if they prefer.

That’s it! That’s the whole plan, and it’s kinda genius. If you have bank deposits of more than €100,000, they will be converted into bank CDs, with a maturity of either five years or 10 years — your choice. If you pick the longer maturity, then your CD will be secured by future Cypriot gas revenues, which could amount to hundreds of billions of dollars. And if you have sovereign bonds, they too will be termed out by five years, giving Cyprus a bit of breathing room to get its act together.

6. Just what we need - Russia is understandably worried about what happens to all its dodgy money if the tax haven of Cyprus dissolves. It has a plan. Invent new tax havens.

Seriously. This is what Prime Minister Dmitry Medvedev is suggesting.

Sigh. Here's the Guardian's report.

Medvedev also sought to find more unorthodox benefits for Russia in Cyprus's crisis. The Kremlin should develop islands, including the Kurils and Sakhalin, off the country's far east Pacific coast as alternative offshore banking destinations, Medvedev said.

Russian sovereignty of the Kuril Islands is disputed by Japan, while Sakhalin is the site of a former Tsarist penal colony.

The implementation of such a plan would have "ruinous consequences for Russia's financial system," former finance minister Aleksei Kudrin wrote on Twitter.

7. Damn right you're dispensable - Federal Reserve Chairman Ben Bernanke pointed out in his news conference this week that he was dispensable, suggesting he was unlikely to ask for another term when it expires in January.

That raises the issue for financial markets: what would a successor do? Would they keep printing or exit early? This has the potential to unsettle markets, although there are plenty of money printers in and around the Fed.

Here's Bloomberg:

“I don’t think that I’m the only person in the world who can manage the exit,” Bernanke said when asked at a news conference in Washington if he’s discussed his plans with President Barack Obama. His term expires at the end of January.

Bernanke’s comments yesterday meshed with the views of some of Obama’s economic and political advisers who said Bernanke, 59, after spending most of his seven years on the job battling a financial crisis and its aftermath, is exhausted and wants to return to private life. The current and former administration officials asked to not be identified to describe the private conversations.

8. Pour encourager les autres - MaxedOutMama has interesting line on the Cyprus disaster. The EU/ECB were trying to encourage the Italians to toe the line and stop talking about Euro exit and default. HT Waymad.

This is a direct attempt to put pressure on them to join with Bersani's bloc and walk the Monti line, to keep the lie going for a few more crucial years. Instead, what was happening was that Bersani's bloc was wandering over to walk the Grillini line. There is nothing that can effectively be used to exert pressure on the recalcitrant populace like a threat to seize their money. The ECB, after refusing to say what its Italian bond  holdings were for years, had suddenly disclosed them before the election. That gentle hint that the ECB could destroy Italy's finances any time it wished by simply selling those bonds was drowned out by the Grillinis and domestic suffering, so now the ECB has joined the internal domestic political affray by nailing the bleeding carcasses of a bunch of entirely innocent Cypriots to some stakes in public squares in Rome. It's the Nero solution to public disorder. 

The strangest part about this is that the Grillinis actually have some ideas that could work. For example, a dual currency system would effectively allow internal devaluation without crushing the economy, thus boosting exports. Of course Italy must default on some of its debt, but it is not yet a basket case. Under the gentle, benevolent hand of the EU it would get there, and for some reason, the Italians, who in effect invented modern banking, seem disinclined to hold an auto da fe and fling half the country into the flames.

Here we must grimly contemplate the terrifying reality that Europe is now a House of Destruction, a Temple of Wrath, in which the babes and the Roma must be sacrificed to Baal.

9. Let's buy Detroit - The South China Morning Post reports on how Chinese property investors think there might be a few bargains to snap up in Detroit....

Two days after a Chinese real estate agency, whose location was not disclosed, advertised an investors' tour in Detroit, thousands of people have expressed interest, according to a report in the People's Daily.

The same agency is advertising a tour to the US east coast in April, which costs 25,000 yuan and will take investors to Washington DC, Boston and New York City.

10. Totally Clarke and Dawe on the remarkable Bob Carr. Anyone who has heard Carr talk will end up rolling on the floor. I did.

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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On #6. The idea of forming

On #6. The idea of forming regions with special / stimulating tax regimes is not new and certainly not as silly as you make it sound, particularly in such a vast country as Russia. Perhaps this could be an efficient tool to encourage business and population growth in places other than Auckland in this country too...

You reckon Auckland has

You reckon Auckland has business? Heck one could be mistaken for thinking that Auckland was simply a housing market.

Along with local and state

Along with local and state government spending.

#4 Why China is not too big

#4 Why China is not too big to fail
In global terms New Zealand is a very small economy. We had massive finance company failures wiping out billions of dollars of peoples savings. That, while bad, did not destroy our economy. Extrapolate that to China and what do we get?

Wow, I can't see how wiping

Wow, I can't see how wiping $3billion off our savings did not destroy our economy. We were dead in the water for 5 years. A whole bunch of assets have passed to foreign hands and we owe more money than we have ever owed. All this unneccessary pain caused by aggresive interest rate rises by a couple of nut case Reserve Bank Governors.

#1. Is this why the RBNZ now

#1. Is this why the RBNZ now is talking about OBR suddenly ?? Maybe Wheeler has a job ready and waiting for him if he ever has to retire early ??
#4 China is beginning to see the issue of over leverage in its business at last. Their latest act of allowing Suntech Power to default with liabilities of over USD1 billion seems to signal that nothing is too big to fail. Previous difficulities has always been covered up by extendiing loan to roll over and kick the can, but this time is it different ??

Probably because $640million

Probably because $640million was investments in phantom companies. I can't see any chinese minister or anyone in their right minds would throw good money bailing out a company that invested so heavily in a phantom investment on recommendation of a friend. I would not read too much in not bailing out this particular company. He is not going to have to many friends in the ruling party for such foolish investments.

"You've got the

"You've got the superannuation fund, KiwiSaver or a number of avenues or options you could exercise." Peters in the herald
Did he mention plain and simple thieving from taxpayers?

#2 - "The only other

#2 - "The only other alternative is to break up the banks into chunks that were small enough to fail... I don't see anyone suggesting that."
That problem is easily solved, I suggest that the banks are broken up into chunks that were small enough to fail.

Same old , same old .....

Same old , same old ..... headlines of panic , woe , gloom & despair .....
...... and the good folks of planet earth , all 7 000 000 000 of them , continue to potter on as if everything Bernard Hickey says is of no consequence ....
Tch tch !!! ....... mad impulsive fools .......

Ah, gummy - some good news -

Ah, gummy - some good news - the grape harvest is looking very good this year.  :-)

Good in quality or quantity ?

Good in quality or quantity ? ...... there's some who reckon wine should be judged on quality ! ...... but those self same people gobble down buckets of snails , frogs legs , and BBQ the pony .......
..... so what do they know !

Only time will tell the

Only time will tell the quality - but it is looking good :-)

Posted on … Cantabrians UNITE

Posted on … Cantabrians UNITE facebook
Within a National Business Review article in this week’s edition “Central struck in bureaucratic morass of delays” (NBR Property Page 22) , Chris Hutching, the South Island correspondent, reports on the frustration of many in the business community about the excessive delays.
It would appear there was a meeting last Monday at legal firm Wynn Williams, where there was heated discussion between the CERA / Central Development Unit people and business operators … with the media excluded.
To date, there has only been scant reporting and investigative work on these issues by The Press.
It is to be hoped The Press makes real efforts to “dig” in to what’s really going on in the Central Area, because the people of Christchurch have a right to know the extent of the problems.
Remarkably too … to date, The Press does not appear to have shown any real concern about the persistent stonewalling by Treasury and CERA on the Central Blueprint costings, feasibility studies and social and economic impact reports of the Central Blueprint.
Again … the Christchurch public should be provided with this information.
As an experienced commercial property developer, I have long been of the view the Central Blueprint is an “unworkable disaster”, severely stalling the recovery … along with the inaction over the provision of affordable housing.
My sense too, is that The Press is deliberately “masking” the Christchurch problems, by constantly reporting issues in terms of Canterbury.
There is a massive difference in performance between the adjoining Counties of Waimakariri and Selwyn on the one hand … and Christchurch on the other.
When Andrew Holden was editor ( now editor of the Melbourne Age), The Press seemed to be prepared to engage in investigative work. Since Joanna Norris has come on the scene, we appear to be getting a constant diet of soft reporting and analysis.
Note Ms Norris’s recent Opinion further through the Cantabrians Unite facebook page with comments.
The Press appears to have reverted back to the “rubbish rag” it was pre September 2010 earthquakes, when, with the Chamber of Horrors / Commerce, they were nothing more than parrots and props for the seriously dysfunctional Christchurch City Council.
The reality is that we have a seriously stalled recovery in Christchurch.
The issues and problems require thorough public discussion in the lead up to the Local Government elections later in the year.
The quality of a democracy is only as good as the information the public gets, coupled with a robust public conversation of the issues.
Hugh Pavletich
Cantabrians Unite

Christchurch has been

Christchurch has been referred to often "as the People's Republic of Christchurch" because the council is such a large business player in the city and people here seem comfortable with
However, is the rest of NZ content to live with a chch council company become involved in the commercial activity elsewhere in NZ...are the fools in the Beehive happy to let it happen....or are Key and English et al awake to this!
Time for legislation to make council owned business it not?

  Wolly … good points …   As

Wolly … good points …
As I see it, it is far better to focus on the key issues of affordable housing supply and Council structure (move from the centralized to the “One City – Many Communities” model) … as outlined within Cantabrians Unite CHRISTCHURCH: THE WAY FORWARD …
We will in my view not start seeing elementary disciplines installed in to these larger metros until Central Government requires them to ALLOW affordable housing to be built with appropriate infrastructure financing (along the lines of the Texas MUDs model).
This “focus” is critically important.
Hugh Pavletich

Asked earlier but you might

Asked earlier but you might have missed it, Hugh - what is your thought on all these restrictive covenants put on most of our large greenfield subdivisions?  Like the Ngai Tahu one on the old Wigram airbase down your way. They require minimum house sizes based on section size (145m2 for the smallest section - going up to over 200m2 for the full quarter acre ones)? 
Do you see these restrictive covenants as an impediment to affordable housing?

Kate ...good point ... and

Kate ...good point ... and thank you...
My primary interest is to see things changed along the lines as set out within Section 4 of Christchurch: the Way Forward above.
In essense ... get rid of those inter zonal artificial scarcity values (both internally and externally) and get proper infrastructure financing in place. This will assist enormously ALL forms of development - whether fringe, suburban or higher density central.
It is a complete mystery to me, for example, why researchers have failed to date in "spelling out" exactly what the fringe artificial scarcity values are throughout our New Zealand metros. Unbelievable.
They are about an unnecessary $400,000 per hectare on the fringes of Rolleston: a million on the fringes of Christchurch and near $2 million on the fringes of Auckland. There is no way these artificial bubble values can be justified ... something that clearly Auckland Mayor Len Brown needs spelt out to him.
As the fringes are opennede up, you will find that competition will force the subdividers to ease up on the restrictions.
The amusing thing is though (something I learnt when in Houston in 2008 from subdividers there), that as the new home owners take control, these restrictions are often "stiffened up"! The great thing about the Texas MUDs model is that it is in essense "embryonic Local Government" ... as the subdividers are required by law to "exit" as soon as possible, allowing the local residents to take control. People planning if you like ...not top down professional planning.
Hugh Pavletich

As the fringes are opennede

As the fringes are opennede up, you will find that competition will force the subdividers to ease up on the restrictions.
Thanks. So why do you think the restrictions are used presently?  Is it more to keep the land prices high (i.e. raise the overall tone/wealth of the new neighbourhoods) - or is it because New Zealanders desire to live with these restrictions (as you have suggested many of the Texan communities do)?

Covenants maintain a certain

Covenants maintain a certain quality to the neigbourhood. You would not want a massive 200sqm house surrounded by neighbours with a small tin shed and pot smoking skin heads next door. It ruins the neighbourhood and prices.

It's the "and prices" that

It's the "and prices" that Hugh has not yet admitted to.  If they are used to inflate land prices - then opening up fringe land isn't going to solve that unless we also restrict the use of covenants.  And the only way to do that is to make no covenants a condition of resource consent for the sub-division.
My point is - do we really want AFFORDABLE land and housing - or just unrestricted development which forces borrowers to borrow beyond what their needs require.

More to the point - a 100m2

More to the point - a 100m2 house is not a small tin shed - it's a 100m2 house. The examples you use are extremes.
The question is - what's wrong with a 100m2 house sitting beside a 200m2 house. How does that lower the 'tone' of the neighbourhood?  Makes utterly no sense to me.

He is answering like a

He is answering like a politician, anything but your question addressed.

Yes, I thought so too.

Yes, I thought so too. Disappointing - as I'm sure he has the knowledge. So we'll give him another chance!

Andrew R and Kate

Andrew R and Kate ...."answering like a politician" ....what a terrible thing to say !!!
Please tell me exactly what I have "omitted" responding to.
It will be later in the day before I respond. Another beautiful day here in Christchurch.
Hugh Pavletich

Kate asked a question timed

Kate asked a question timed at 1.28 pm. Your reply was everything but answering that question, hence politician reply.

Kate ... all the lower bands

Kate ... all the lower bands of the new housing market here in New Zealand have been wiped out of course.
We dont have new factory / manufactured house and land packages for $72m000 or 235 square metre starter homes for $140,000 on the fringes of our metros - as they do in Texas. I explainedf all this within HOUSTON: WE HAVE A HOUSING AFFORDABILITY PROBLEM a number of years ago.
So the first home buyer market is not being catered for here in NZ with respect to new housing. Its generally exising property owners leveraging their way in to new housing with the artificial bubble equity they have.
So understandably this "top end' new housing is demanding stiffer restrictions - and the local subdividers are simply just responding to this.
Check out Andrew Atlkins THE REAL DEAL poster on Cantabrians Unite facebbok.
Our fringe sections are more expensive than the TOTAL new house and land packages sold on the fringes of the affordable US housing markets.
Hugh Pavletich

Well I agree that the first

Well I agree that the first home buyer market is not catered for - but alot of that has to do with the fact that they are restrcited from building a modest first home house!
You can still buy a Keith Hay home these days, can't you?  They weren't wiped out, were they?  The point is, if there are less of these pre-fab franchise builders these days - it's likely because none of the new greenfields developments allow for affordable house builds.
Plenty of FHBs would likely be happy to pay the $250-300K for the land if they could build a $100K modern, insulated pre-fab house on it.  Still not as affordable as you might think we could be, but it would be a start if folks had the freedom to build what they liked in these new subdivisions.

Kate ...Kimy is right ... its

Kate ...Kimy is right ... its simply about maintaining standards appropriate to the market price bands.
There has to be a balance ... so that it is not under restricted or over restricted for specific price bands.

But Hugh - it is the market

But Hugh - it is the market price of the sections that we want to bring down! 
Are the covenants a means to keep the market price of land higher?
That's the simple question I'd like answered.

Kate .... No.   I trust with

Kate .... No.
I trust with the greatest respect,  the above answer is succint and clear enough for your liking !
Do not mess around with Kate boys. You have been warned !
Hugh Pavletich

Do not mess around with Kate

Do not mess around with Kate boys. You have been warned !
Whoa - back up boy. I thought rednecks had been consigned to history - but not in your neigbourhood Hugh?

Stephen ...lighten up...

Stephen ...lighten up...

Is " Kate " an abbreviation

Is " Kate " an abbreviation for " Killed another troll , easily  " .........
....... watch what hugh say , Kate's a bigger bloke than you can possibly imagine !

No worries, I hound .. it's

No worries, I hound .. it's what advocates do :-). 
And I am a committed advocate of affordable housing - as I assume Hugh is too .. he's devoted more time to it than me!
These mandated large homes, I assume, contribute significantly to the current account deficit - they cannot continue to be the only options available. Not only a problem for young families, but for soon-to-be retirees who want to downsize.

Kate & Wolly ... the trend is

Kate & Wolly ... the trend is our friend both here in NZ and Australia.
I trust my narrative on this posted on this thread, Cantabrians Unite facebook and the MacroBusiness Au van Onselen article on Auckland comments thread, illustrates clearly why this is happening.
8+ years and 20,000 hours of going on about this stuff, is more than enough Kate !
It sure is heartening to see the political progress being made now on both sides of the Tasman.
Hugh Pavletich

Yes, thanks, your opinion is

Yes, thanks, your opinion is clear.  The reason I ask is that it was an issue mentioned in the PC report as a way to maximise the value of the subdivision - which effectively means the land subdivided - and I was quite taken aback by the one study quoted (see page 117);
Some of these [restrictions] are imposed by councils, but others by developers to maximise the value of the subdivision. Inquiry participants referred to a case study which examined the impacts of covenants on a housing development in Rolleston, Canterbury (David Hattam, sub. 11; Evan Keating, sub. DR115). Findings included:
 75% of sites had a covenant requiring a house of at least 160m2 (some of at least 200m2).
 Of the remaining 25%, the majority required approval of plans by the developer, with a minimum house size a criterion.
 Some of the sites without covenants were built directly by the developers with large houses.
While it focuses on one case study it clearly shows that the move toward larger homes is not always market driven and such covenants effectively mitigate against higher (or medium) density development and can operate as a planning policy without public input or scrutiny… The commission should give consideration to the options for regulation of such covenants. (Evan Keating, sub. DR115, p. 3)
And as you can see they recommended the commission should give consideration to the regulation of such covenants.  I don't know why this matter seems to have been lost in the subsequent public discourse. 
I'd have thought it would be an issue Nick Smith would be all over.. if affordability is the real issue, that is.

Kate ... thank you for

Kate ... thank you for drawing this excerpt from the PC report to our attention.
The most important point to recognise I think, is that our housing markets are severely unaffordable ... and therefore by definitio abnormal.
As the Andrew Atkins poster THE REAL DEAL on ...
Cantabrians UNITE facebook

...clearly illustrates, our ALL UP development costs for fringe starter stock are all to hell currently. 
I dont know how I could make it clearer on with a simple and clear Definition of an Affordable Housing Market either.
Chris Hutchings superb article Friday in the NBR on the Christchurch Central Blueprint fiasco, has just been posted on Cantabrians Unite facebook as well.
Hugh Pavletich

Yes, but I believe many other

Yes, but I believe many other commentators have suggested that your factor for house build price as a component of the 'all up' cost to get us to the desired median multiple is optimistic (i.e. too low). 
Unless smaller, simpler in design homes are allowed in large numbers - no matter what the land price, the median multiple objective will be difficult to achieve.

Kate ... The "many other

Kate ... The "many other commentators" have not bothered to research the affordable North American housing markets ... of course !
As I keep reminding them - for heavens sake dont believe a word I say ... just check the numbers (facts) to see what they say.
What these guys consistently overlook, is the reality that our development / construction sector is severely degraded right through the food chain.
As the saying goes "If you get the land wrong - everything else is wrong".
As land supply is openned up and infrastructure is financed properly going forward, these same guys will learn the hard way, that if  they lack the ability to supply affordable stock - others will and they will be out of business.
These same guys will need to "retrain" as vegetable pickers or cow milkers I suppose.
They have had more than enough time to learn.
Hugh Pavletich

Government or council needs

Government or council needs to specify and design the type of low cost housing required. I have been involved in planning for low cost housing overseas and the developer would plan for a mix of high value properties and low value to satisfy government criteria but inevitably the developer passes on the cost to the rest of the development. Someone still pays for it. There is no free lunch.

  Housing Affordability - The

Housing Affordability - The big shift in public opinion has occurred in New Zealand and Australia
Posted on Comments Thread of The war over Auckland land supply hots up | | MacroBusiness … (in moderation) …
… and … Cantabrians UNITE facebook
The big shift in public opinion on housing affordability has occurred …
As the bubble pricing of housing has pretty much plateaued generally on the Median Multiple measure, or gone in to the stratosphere, such as in Auckland, more and more people are becoming aware of the costs to themselves and their families in social and economic terms.
There have now been 9 Annual Demographia International Housing Affordability Surveys as well ( ) . These Surveys released early each year, have played a significant role in stimulating public discussion year after year on the housing affordability issue… since early 2005.
There is now a greater recognition that normal housing markets do not exceed 3.0 times annual household incomes, requiring initial mortgage loads of about 2.5 times annual incomes.
As these high bubble prices have persisted and the attraction of further inflation has faded, more of the older cohort are getting hammered by their kids for financial support, whacking the formers retirement savings.
High multiple borrowing is not the fun it once was - without further inflation ( illusory wealth) on the horizon.
So there are many factors at play here (the above just being some of them), that have shifted public opinion.
Little wonder then, that in an important New Zealand Television One Colmar Brunton Poll 3 December 2012, found that 62% of all and a massive 75% of young New Zealanders are demanding the Government lower house prices and allow affordable housing to be built … GOVT SHOULD ACT TO LOWER HOUSE PRICES – POLL …
Indeed NZ Deputy Prime Minister Bill English noted this in a Video presentation soon after he announced the Governments policy late October (refer to access).
Mr English contributed the Introduction to this year’s Demographia Survey as well (following considerable internal deliberation), which has been followed soon after, with a raft of further announcements by the NZ Government.
Both of New Zealand’s major political Parties are committed to supplying affordable housing – understandably - the current Government with the more market approach – the centre left Labour Opposition with a more State led approach.
The current New Zealand Government is acutely aware that if it doesn’t deliver this year, it is toast come the next election at the end of 2014. The Labour Opposition will crucify them in the lead up to the election on this issue, should the current Government fail.
One can be certain the New South Wales Government did its own polling too, as part of the process of developing its recently announced policies on these issues. This likely pretty much mirror the 3 December New Zealand TV One Colmar Brunton Poll.
Other AustralianState Governments are likely doing the same thing.
It would be politically naïve to think the NSW Government came out so strongly on this issue, without strong polling support.
Politicians can be accused of many things … bravery not being one of them. Public opinion and polling results are a politicians “currency".
The big shift in public opinion has occurred  - and politicians, interested in survival, are simply responding.
Hugh Pavletich

... Some interesting comment

... Some interesting comment from the UK on the British housing fiasco, following the Osborne Budget ... they sure are idiots ...
Interesting to read that the concept of the standard multiplier is getting through in New Zealand: a big step on the road to sanity.
A lot better that George Osborne's fuelling of the housing madness again by offering government help to fund deposits for overpriced property. A failure of courage by him in his budged with an eye on the next election and unfavourable tidings for his Party. Rather than letting the market reach its proper level so that property becomes sensibly affordable ( 3 times household income!) he has likely undermined the recent moves in the right direction. There will be a price to pay....
I was talking ………., about this and he said that at St. Paul's where Osborne was a classmate, he was a chap who had no opinions of his own but always tried to follow the current trend. He has, no doubt, listened to his banker chums urging for someone else - ie the government - to take the risks while they hoard the cash for their bonuses.

Hugh Pavletich

It is the US gold reserves

It is the US gold reserves that allow the USD to continue to be the currency of choice. However with trillions of dollars of bonds owned by the Chinese government, the US is no longer calling the tune. It is clear there is a big push by the Chinese central government to balance the risk of a US default by buying up assets all over the world. Detroit was once a proud city but is now decimated by unemployment in the motor industry. It is cheap realestate and would provide an excellent cheap access into the US and for the chinese to transplant its citizens and manufacturing into a dying city whilst balancing its currency risk on the trillions of USD bonds it holds. Buy US assets cheap.

DeGaulle called Nixon out on

DeGaulle called Nixon out on gold reserves back in '73 (I think), so Kissinger was depatched to Saudi/OPEC for a deal that stands to this day; Price your oil in USD, roll your profits back into US treasuries, and we will protect you, no matter what. Everybody needs oil, so if you print the currency required to purchase it, then you are like the casino, everybody else the players with your chips. Arguably a negligible need for gold reserves then, and also the reason why Saddam, who wanted to destroy this by charging for his oil in euro's, had to be taken out, in the most humiliating way as message to other OPEC's.
At least that's what I have been able to determine as reason for much of GW's madness.
Having spent much time in Detroit, I like it there for the opportunity to buy cheap. Not sure at this point the Chinese are active, but do see possibility that China and USA will swap places as the future unfolds, to allow all these trade imbalances to unwind. By swap places, I mean  the Chinese will become inflated and lazier (relatively speaking), while USA will perhaps increase manufactured exports, via rust-belt, to China.

Lots of older 130sqm homes

Lots of older 130sqm homes around $350k still available in suburbs like Otara, Kelston or Otahuhu. This is a great start for a young family. The problem is they all want to live in Epsom, Remuera and therefore the issue of affordability arises.
If there is a problem of safety and education then this is where the problem lies. We need more police patrols in these streets rather than lined up on the motorway issueing speeding tickets. Teachers need to be better trained.