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Monday's Top 10: Larry Summers challenges Asiaphoria; youth unemployment; another GFC movie; better KiwiSaver returns; intended consequences; Dilbert, and more

Monday's Top 10: Larry Summers challenges Asiaphoria; youth unemployment; another GFC movie; better KiwiSaver returns; intended consequences; Dilbert, and more

Here's my edition of Top 10 links from around the Internet at 10:00 am today. We now have a Monday-Wednesday-Friday schedule for Top 10.

Bernard will be back with his version this Wednesday. We will have another guest posting on Friday.

As always, we welcome your additions in the comments below or via email to david.chaston@interest.co.nz.

See all previous Top 10s here.

1. Will Asiaphoria end with a bump?
With the top leaders of China’s Communist Party having released their economic strategy for the coming decade, they would do well to consider the warning of former US Treasury Secretary Lawrence Summers: Don’t count on fast growth to continue, and don’t get seduced by what he and fellow economist Lant Pritchett dub “Asiaphoria.”

The two economists don’t claim to have found specific roadblocks that will halt either country’s progress. Rather, they argue that the growth patterns of wealthy and developing countries over the last century or so suggest that “episodes of super-rapid growth tend to be of short duration and end in decelerations back to the world average growth rate.” Since China and India are already on extended rolls – though India’s has slowed recently – that would put them in danger of a bad fall.

They presented a semi-geeky paper at a San Francisco Fed conference about a week ago, and it's worth a full read:

India and even more so China are into essentially historically unprecedented episodes of growth. China’s super-rapid growth has already lasted three times longer than a typical episode and is the longest ever. The ends of episodes tend to see full regression to the mean, abruptly.

It is impossible to argue that either China or India have the kinds of “quality institutions” that have been associated with the steady dynamic of growth in the currently high productivity countries. The risks of “sudden stops” are much higher with weak institutions and organizations for policy implementation. China and India have very different modalities of this risk, but both have tricky paths to continued prosperity.

2. A problem but 'not a crisis'
There is world-wide angst about youth unemployment levels. Those rates fall very quickly when the 'youth' become 'young adults'. The elimination of youth minimum wage rates will have a lot to do with this, and because we are now going through a five year transition since 2008 and the biting of the GFC, we will soon get a good picture of what really is happening.

In addition, Zachary Karabell, a Bloomberg columnist, has another perspective. It is one that may help explain a lot about one important part of this problem:

The larger point is that many college-educated young people are choosing not to take low-paying service-level jobs if they don’t absolutely have to. Because they can live with their parents (and as many as 45 percent of recent grads do) and because they rarely have much in the way of fixed costs such as homes and children, they can hold out for a job that matches their ambitions. They can also retool their skills as they discover that their college degree in marketing and communications may not leave them in the best position to get the type of job that they want.

This type of unemployment is one of choice - rational, legitimate choice - not of systemic failure. It is a challenge to find a meaningful job, but that hasn’t stopped people from trying. A youth cohort determined to create meaningful work should not be seen as lazy, lost or in dire straits. Instead it could be exactly the type who might actually lead the transition of our economy away from the making-stuff economy of the 20th century to an ideas economy of the 21st.

The employment picture for young people without a college degree is different. They’re being left further behind. According to the BLS, more than 30 percent of recent high school graduates who aren’t in college are unemployed, and the number is worse for those who dropped out of high school. African-Americans without a college degree, especially under the age of 20, have an unemployment rate that approaches 40 percent. African-Americans also have higher incarceration rates, especially males, and most states and companies enact punitive regulations that make employment for those with a prison record extremely challenging.

The Hispanic population faces similar, albeit slightly less acute, stats. But these are not indications of a breakdown of labor markets. They’re proof that social policies and a shift in labor markets towards rewarding different and newer skills sets are hitting these populations, especially young men without college degrees, extremely hard.

In the United States, youth unemployment is not quite what it seems. It is not a simple sign of how bad the economy is. Youth unemployment is actually a sign of ambition and expectation. Young people aren’t part of a generation of despair, but rather a generation determined not to settle. That may not always be realistic, but it is a vital fuel to propel our society forward.

3. 'The Fed's the problem'
The debate about the underlying causes of the GFC and the stagnation that followed is not only the stuff of online news services like ours, blogs, and book authors. Filmmakers have also pitched in with some fine contributions. A new one is out focused on the US Fed. Here is what Kirk Kardashian at the New Yorker says, and the movie trailer.

The news about Yellen comes as a well-timed film about the Fed has been making the rounds. “Money For Nothing: Inside the Federal Reserve,” a documentary written, directed, and produced by Jim Bruce, examines the Fed since its creation in 1913 through interviews with financial historians, economists, investors, and current and former Fed personnel, and largely blames the Fed for the 2008 financial crisis.

Bruce, thirty-nine years old, is an L.A.-based filmmaker who played professional hockey in Europe. During the tech bubble of the late nineties, he invested his savings, about ten thousand dollars, in stocks; the value rose five-fold, then the bubble burst, and he walked away with barely more than his initial investment. When the next bull market came around, in 2007, he shorted stocks of firms in the banking and real-estate industries. The profits he made from those investments covered most of the budget for “Money For Nothing.”

“My motivation for making the film is that I felt the Fed did not learn the correct lessons from the 2008 financial crisis,” Bruce said. “I think they thought too much about the crisis being the problem. A different way of thinking about it is all the behaviors leading up to the crisis were the problems.”

Indeed, the film blames the Fed not only for ineffectively responding to crises but for helping to cause some of them in the first place.

 

4. Growth resumes
Readers of this website will know that median priced homes are far cheaper in the US than here. The New Zealand median is NZ$407,825 whereas the previously-owned US median is NZ$240,000 and the median new-build home is NZ$406,000. What doesn't usually show up in the discussion is how large US median homes are. And they are getting bigger. Before they started shrinking after the GFC we called them McMansions - now they are even bigger, we will need a new name. Any suggestions?

Yet the economy remains weak. How can Americans keep buying bigger and more expensive homes? It turns out, of course, that not everyone can.

“It’s all about access to credit,” said Rose Quint, an economist at the National Association of Home Builders. “People who are less affluent and have less robust employment histories have been shut out of the new home market. As a result, the characteristics of new homes are being skewed to people who can obtain credit and put down large down payments, typically wealthier buyers.”

It’s another sign that in today’s economy, prosperity is not universally shared.

5. Stellar returns
It's been a very good quarter for KiwiSavers. Not only have contributions grown strongly, up $1.362 billion in the three months to September 30 from June 30 ( and embellished in this quarter because the Government paid in its $490 million Member Tax Credit), but also because fund managers have picked up their performance.

They earned a record after-tax, after fees $483 million in just 90 days. (We worked this out by deducting the RBNZ September valuations from the IRD's disclosure of the contributions they paid to fund managers.)

That's more than 11% pa. and a real win for KiwiSavers (although not quite up to NZ Super Fund's ~19% pa over the same period).

We have given this industry some stick over what were some pretty average performances in the past - and so whatever the reason, it is great to see these outcomes. Let's hope they continue.

6. How the Simpsons have secretly been teaching you maths
I love The Simpsons although to be frank, I can't really tell you why. It seems savvy comedy to me. But maybe there is a secret allure - as this MotherJones story explains:

So what draws math geeks to the seemingly frivolous world of TV comedic writing in the first place? Singh argues that the, er, correlation between The Simpsons and math is no accident. Rather, it's a harmonious and natural relationship in many ways.

For one thing, animation these days requires fairly advanced programming skills, with knowledge of trigonometry, geometry, and calculus. "There is indeed a lot of mathematics behind the scenes," opined Pixar computer scientist Tony DeRose in a recent talk at the Mathematical Association of America. So it makes sense for today's hi-tech animators to have degrees in physics, computer science and math. But what about comedy writers?

Singh reports that one of the mathematicians on the Simpsons writing team, J. Stewart Burns, draws a parallel between puzzles, which represent the very essence of math, and jokes. "Both have carefully constructed setups, both rely on a surprise twist, and both effectively have punch lines. Indeed, the best puzzles and jokes make you think and smile at the moment of realization," Singh writes.

And there's another reason, Singh speculates, behind the preponderance of mathematicians on the writing team of The Simpsons (compared with other successful sitcoms like 30 Rock or Modern Family). Unlike scientists who might be more comfortable with uncertainty and the messiness inherent in experimentation, Singh notes that mathematicians prefer to be in complete control. He quotes Al Jean, another Simpsons writer with a BS in math from Harvard: "Live-action TV is like experimental science, because actors do it the way they want to do it and you have to stick within those takes. By contrast, animation is more like pure mathematics, because you have real control over exactly the nuance of the line, how the lines are delivered and so on…animation is a mathematician's universe."

7. A century in the slammer
A milestone went unnoticed this past week with the sentencing of David Ross to 10 year and 10 months jail.

By our count, that makes the total jail time handed out by the courts for finance industry failures from our Deep Freeze list companies now exceeds 100 years. Plus there is Home Detention (another 16 years), Community Service (minor) and Reparations (very minor). You can see all of the details in our Porridge List.

Total jail time ... 100 years & 11 months
Total home detention ... 16 years & 0 months
Total community service time ... 166.9 days (0.46 years)
Total $ reparation and fines ... $3.3 million

8. 'It's not unintended'
An assistant governor or the RBA spelled it out this week. The point of central bank intervention in banking markets is to raise the costs for banks. That is, higher costs are intended. It is up to the banks to decide whether to pass these on to customers. This is what Guy Debelle said: (my emphasis)

A number of the regulatory changes in financial markets have increased the price of financial intermediation and the provision of financial services generally. This has very much been the intent, and not, to re-use one of the most overused expressions around at the moment, an unintended consequence.

The price of intermediation was too low before the crisis; now it is higher. It was too low in the sense that risks were underpriced. These risks include liquidity risk and counterparty risk. Reforms such as the Basel III liquidity reforms or the OTC reforms are aimed at ensuring these risks are more appropriately priced. As financial institutions are adapting to these reforms, they are repricing many of the services they are providing to take fuller account of these risks. This repricing is gradually occurring only now in many cases and there is more to come. Hence end users of these services are only now starting to see the impact of these reforms in the form of higher prices.

As in many markets, when a price goes up, the quantity tends to go down. Again, this is to be expected, and desired. It is not unintended.

9. Getting dry - again
Enjoy the beautiful weather this weekend? Hope it doesn't continue. This year, our rural soils have less moisture in them than at the same time last year, and we know how that turned out. Soil moisture is way less than 'normal'. We will be watching these NIWA indicators closely.

10. Today's quote
"It frees you from doing things you dislike. Since I dislike doing nearly everything, money is handy." - Groucho Marx

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23 Comments

#4: McMansions circa 2013 - try - Humvees or Homvees or Hummers or Hommers

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Some reasons why house size maybe bigger or smaller over time and between countries.

Affordability, eg the more affordable a house is the more you can afford to buy a bigger house. Or conversely the less affordable a house is the more some families will pool resources to buy a bigger house to house them all. This pooling of resources is seen as with aged family members moving in with children, or as children spend more time in tertiary education and therefore do not enter the work force until later than in past generations, they stay at home longer. Also the increased ability to work from home has also increased the floor area.

Historically, houses had more out buildings; garages were separate from the house etc. These separate outbuildings were never counted under the m2 area of a house, but as soon as they started to become attached to the house they are included. Even now carports or the basement car parks of an apartment are not usually included in the m2.

Further if a smaller house is lacking amenity space then this lack is normally picked up elsewhere, eg English corner pub is the communal family room, children can hang out at the local playground, and if your apartment does not have a kitchen as many apartments don’t in Singapore, then you can eat out at one of the many restaurants’ on the ground floor of your apartment block.

Culture/geography also has an impact eg when a Kiwi’s house gets to a certain size then they will start to put just as much if not more into the outdoor living (which is not included in m2).

Architectural lead design is normally less efficient of space than more practical draughtsmen lead design.

Marketers look to include any space they can (maybe the covered porch etc.) so to reduce the $m2 rate so they can say our housing is cheaper, more afford etc.

There is continual feedback from form follows function and function follows form which makes it difficult for too much of a generalisation to be made about why a house is the size it is without first understanding why it may be so.

To come up with a new (derogatory) name, as suggested, to describe a bigger house than you (we) live in adds nothing to the debate.

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Yes - it certainly is hard to generalise about why a house is the size it is without first understanding why it's the size it is.

 

"Architectural lead design is normally less efficient of space than more practical draughtsmen lead design." Claiming that draughtspersons are better designers than architectural designers (which are draughtspersons - presumably you actually mean "architect led") is certainly a novel reason to give for house sizes changing. I can't even begin to see the relationship?  Don't see the slightest shred of evidence for such an absurd generalisation?

 

 

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The people that are more likely to be able to afford to engage architects are also more likely to want just as much art as arch ie saving space is not top of the brief.

The look, the grand entrance, oversized bathrooms etc. There is plenty of evidence if you know where to look.

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Your argument is that house sizes are increasing because architects do less efficient space planning. So if house sizes are increasing then more housing must be getting designed by architects 'cos they aren't as good at efficent space planing - what complete rubbish.

 

Please explain why successful developers (who are only interested in developing the cheapest, most efficient hosing stock to maximise their profits) will pay a premium to use architects? Unlike freestanding houses they don't need to use a LBP to lodge for a building consent. 

 

Explain what the difference is between an architect and a draughtsperson.

 

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Bob – you are obviously an angry man. The whole tenant of this article was big houses are bad – ie McMansions. I have pointed out a number of reasons why house sizes vary, and that by definition, that does not also make smaller houses better. But the real point is that is not for me or you to decide, but the person who is buying the house.

Yes, of course developers use architects for which their brief would include as a priority to make the small space look as big as possible, but efficient use of space is not the client’s first concern when commissioning an architecturally designed home. The house may look better for that, than one designed by a draughtsman, but as we have been talking about size of a house, it is less efficient.

And you don’t need to ask me what the difference between an architect and draughtsman is when we can use their own words.

Here is a following of how they describe themselves:

'NZIA council may admit as an Architect Member, on application of that person in the prescribed manner, any person who is a New Zealand or Australian Registered Architect, any NZ degree qualified architect who holds registration overseas and is
working overseas or any Architect who is registered in an overseas jurisdiction and is working in an NZIA Practice.'

'Architectural Designers and not Architects. What's the difference?'

'Traditionally Draughtsmen were the behind the scenes work horses helping develop the architects ideas. These days the roles have blurred somewhat with Draughtsmen setting up businesses of their own, hence the birth of the Architectural Designer.

Architectural Designers are able to do everything an Architect can. Architectural Designers can produce Consent Drawings, submit plans to council for consent and create imaginative, practical and attractive designs.

So who should I choose for my project? If you're building a sports stadium, office block, or a very special one in a million residential house an architect should be considered; otherwise a good Architectural Designer is more than capable, and usually more affordable than an Architect.'

'ADNZ, Architectural Designers New Zealand Incorporated, is a professional body of Architectural Designers and Architects that have had their skills rigorously assessed.
ADNZ members are specialists in building design and construction, undertaking residential and commercial projects at all stages of the construction process. To be eligible for membership ADNZ members must hold recognised professional qualifications or relevant experience, undertake compulsory professional development and have professional indemnity insurance.
All members of ADNZ have met the stringent ADNZ competency standards and ethics. The members are experienced professionals whose integrity and accountability show in every aspect of their work whether it is domestic, commercial, large or small.
In selecting a professional member of ADNZ, you can be confident that you are engaging an architectural designer who can work closely with you through every step of your project ensuring everything goes smoothly from concept to certification.'

So what we can surmise from this is some draughtsmen are architectural designers, and some architects’ and architectural designers, who have had their skills rigorously assessed can belong to a professional body of architectural designers called the ADNZ. And all registered architects, even those that have not had their skills rigorously tested or would fail such a test by the ADNZ, may apply to be admitted to the NZIA.

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No. Completely wrong. No wonder I'm angry. NZIA and ADNZ are voluntary professional bodies - nothing to do with the difference between and draughter and an architect.

 

The name Architect is protected by Act of Parliment and can only be used by people who are registered as architects by the NZ Registered Architects Board. They may or may not be members of the NZIA.

 

Anyone can call themselves a draughtsperson or an architectural designer (even Waymad below). They may or may not be members of ADNZ. The term Architectural Designer was coined as it doesn't run foul of the Architects Act, but is close enough to the word 'architect' to confuse the ignorant.

 

To lodge certain building types (including houses) for Consent you must be a Licensed Building Practitioner (LBP). All architects are by default LBP's. Draughtspersons/architectural designers etc. may or may not be LBP's.

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You still haven't begun to defend your proposition that buildings designed by Architects are not as efficiently planned as those designed by Draughtspersons.

 

You haven't explained yet why developers whose profit is maximised through efficient planning chose to pay higher design fees to have their buildings designed by architects. They obviously know something you don't. 

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EVEN WAYMAD – no surely you jest. Although I’m not sure the Draughtsmen would be happy to know that. Even Waymad, well, well ,well.

So anyone can call themselves a Draughtsman. Just because anyone can call themselves something, you would expect that those that do, do know more than those that don’t call themselves that. This of course would be the wrong assumption in some cases.

Just like it would be wrong to think that all registered architects know more than those that are not called that. Hence another body like the ADNZ being formed to distinguish themselves as being better than both, perhaps?

Yes, having been, and worked for developers for nearly 30 years we do know something you don’t, which I have already said.

I’ll have to excuse myself for now, I’m just going to step outside and run down the street shouting I’M A DRAUGHTSMAN, I’M A DRAUGHTSMAN. At least I’m in good company with Waymad.

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You are joking? claiming that it's more arduous to join ADNZ than to become a registered Architect? thinking that registered architects might join ADNZ because it's recognised as a higher qualification?

 

You can run around claiming to be whatever you want - but not a doctor, lawyer, architect and a few other things that the law sets standards for.

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Some advice - whether using an architect or draughtsperson never choose a consultant on the lowest fee. This is the NZ way but stupid. Design fees are a small component of a project but design has a huge impact on overall project cost. From planning efficiency through to quality of documentation (leaving you open to variation claims) choosing a cheap designer can cost you tens of times the fees saved.

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Oh, Bob, follow the - er - bobs. 

Incentives Always Matter.

  • A draughtsman typically works for a set fee.
  • An architect works for a percentage of total build cost

Follow the munny....

My first house, 1976, around 90 squares, was drawn up (by me) on two A3 sheets of tracing paper.  That, and a good local craftsman builder, and the building inspector living right next door, was all ya needed then......how times have changed.

 

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Complete nonsense. 

 

Do you even know the difference between an architect and a draughtsman?

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waymad: an architect only gets a percentage of the total cost if the engagement is for design and supervise through to completion. A design only job, can and may be done for a set fee or an hourly rate.

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Both architects and draughtspeople work for percentages, fixed fees or hourly rates depending on what their fee agreement is.

 

 

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#2.  Youth unemployment.   This is a send up.  Right

example.   " The Hispanic population faces similar, albeit slightly less acute, stats. But these are not indications of a breakdown of labor markets. They’re proof that social policies and a shift in labor markets towards rewarding different and newer skills sets are hitting these populations, especially young men without college degrees, extremely hard."

So, he is saying savage unemployment is not hitting people hard.  It's just hitting people hard..     ?? !!   Doh 

 

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I think its short from for,  "let them eat cake"

Its real la la land stuff IMHO.

regards

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#1  India and China will be the worlds two great nuclear adversaries in the next World Order.  One day the Chinese Army will rush into the Caucasus down the Old Silk Road.

#11  Zero loses $17m in six months - plans to lose more. Building teams, strategies and turnover: sounds like a Government dept! 

Ergophobia

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Many people will remember the famous Lee Kuan Yew interview with Ian Frazer. At the time it was if we had nothing to learn from Singapore and for 30 years we have studiously avoided learning anything. Focusing on the one party aspect ignoring our two party, identical policies option. We simply do not get what makes the place work on an island the size of Lake Taupo.

http://www.economist.com/news/finance-and-economics/21590562-chinas-rul…

Meanwhile the Chinese looked and learned.

 

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Be wary of trying to ape Singapore. The unhappiest country in the world and, although the taxes may be light, one of the most intrusive governments on the planet. Libertarian paradise it is not.

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The research was from the UN. They had Singapore at #30 and us Kiwis at lucky 13. So, OK Sing. is not the worst in the world but is near the bottom for OECD countries. They also ranked at #53 for personnel freedom - perhaps that is related. Not everything has a dollar tag ZZ.

http://unsdsn.org/files/2013/09/WorldHappinessReport2013_online.pdf

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We would probably get Robert Mugabe instead of Lee Kuan Yew.

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#9 Local sea temperature historical average c11.8C. This year c15C. Interesting times and good swimming.

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