Here's my Top 10 items from around the Internet over the last week or so. As always, we welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.
See all previous Top 10s here.
My must read today is #1 from Paul Krugman on the TPP. #9 is also a great backgrounder on the shadow banks in China.
1. The pointless TPP - The debate around the Trans Pacific Partnership has heated up in New Zealand in recent months as the consensus around its inevitability and value has broken down across the political spectrum in New Zealand.
There's a good few people in business who actively oppose the TPP, particularly in the software and Internet industries. Sceptics at Fair Deal include Trade Me, TUANZ, Internet NZ and the Institute of IT Professionsals.
Unions and the Green Party oppose the deal, as does a good chunk of the left of Labour, for the usual reasons that any acceleration of globalisation may cost workers jobs and press down on wages. They're also rightly sceptical about the role of the US drug, food and movie lobbies, who are crawling all over the text.
David Cunliffe's rearguard action to fend off the sceptics within Labour while also keeping a good deal if it can be done has captured the attention of Wellington's beltway in recent months. Along with many TPP opponents, Cunliffe has called for the details of the deal to be made public before it is signed.
TPP opponents have taken heart in recent weeks from an upswell of opposition within the US Congress from both the left and the right. The decision by Democratic Senator Harry Reid to block US President Barack Obama's request for fast track approval appears to have stopped the TPP in its tracks, at least until after the mid-term Congressional elections in November. Even Trade Minister Tim Groser has conceded that a deal is unlikely this year.
So the latest piece in the New York Times from Nobel Prize winning economist and Obama-backer Paul Krugman is interesting. He won his Nobel for his analysis of trade patterns so has a little expertise in the area.
He says the TPP is no big deal and wouldn't be a great loss if it never happened. He's talking both about the benefits for the United States and the world as a whole. He says there isn't a compelling case for the deal.
What the T.P.P. would do, however, is increase the ability of certain corporations to assert control over intellectual property. Again, think drug patents and movie rights.
Is this a good thing from a global point of view? Doubtful. The kind of property rights we’re talking about here can alternatively be described as legal monopolies. True, temporary monopolies are, in fact, how we reward new ideas; but arguing that we need even more monopolization is very dubious — and has nothing at all to do with classical arguments for free trade.
2. So why are the Americans chasing the TPP? - Here's Shawn Donnan at the FT saying Krugman is missing the point: the deal is about containing China, not about trade.
It begs the question: Why would New Zealand encourage a deal designed to work against the interests of its largest trading partner -- China?
Here's Donnan:
Krugman seems to be missing one of the big motivations for US trade policy these days. Both the TPP, which groups 12 Pacific Rim countries including Japan, and the Trans-Atlantic Trade and Investment Partnership, the EU-US negotiations launched in July, are really big strategic, rather than economic, projects.
They are about responding to the changing shape of the global economy and the rise of China and other emerging economies and trying to reinforce the US (and to a lesser extent, the EU’s) position at the centre of it. They are, particularly in the case of the TPP, about security policy as much as economic policy. If, as the FT’s Geoff Dyer puts it in his new book, the “contest of the century” is the one between the US and China, then trade deals (as they often have in history) have a whole other purpose.
3. 'Economists institutionalise inequality' - The Editor of the Lancet, Richard Horton, recently unleashed a series of tweets criticising economists and how their thinking was infecting policymaking about health.
It sparked an interesting debate via Pieria. Here's Horton's view:
The tenets of economics—the centrality of the market, the importance of competition—have begun to influence, distort, and damage the values on which universal health systems were originally built. Economic instrumentalism, the notion that unless we can prove the economic value of an idea or an intervention it is socially worthless, is now dominant in much of government. We see institutions supposedly dedicated to health now incorporate wealth into their mission statements. The health community has too often colluded with politicians to appease economists who measure value with a financial metric only. It's surely time to challenge economists, their discipline and their arguments, and counter with an alternative philosophy that puts lives ahead of margins and wellbeing before returns on investment.
And the ensuing response:
More than 40 years ago, an essay by Alan Williams to defend economic evaluation admitted its imperfections, but concluded with Maurice Chevalier's view on old age: “Well, there is quite a lot I don't like about it, but it's not so bad when you consider the alternative!”[18] Economics, like medicine, is imperfect. The challenge for practitioners of each is to ensure that the perfect does not drive out the good.
4. The return of Marxism - Daniel Drezner writes at Foreign Policy about the return of Marxism to the debate about global economics. He got some stuff right and some stuff really wrong.
Marx's made a couple of significant contributions to political economy, and the post-2008 world puts a lot of them on display. Following Smith and Ricardo, he was really one of the first to think about capitalism as a global rather than a national phenomenon.
Going beyond Smith and Ricardo, Marx stressed two important facets of the market that they did not. First, he stressed that crisis was endogenous to global capitalism. Marx acknowledged and admired the productive machine that was the capitalist system, but he also stressed that periodic busts were baked into the system. This is a point that spread into some corners of mainstream economics -- see Hyman Minsky, Charles Kindleberger or even Reinhart and Rogoff -- but could do with a little more emphasis in the old grad school syllabus.
The second dimension Marx stressed was power -- which is why he's still appreciated among those who study global political economy. A riff through The Communist Manifesto or the highly underrated Wage Labor and Capital shows the ways in which Marx appreciated how capitalism led to a redistribution and concentration of economic power over time. It's not that hard to find recent empirical work that bolsters a Marxist analysis of economic power.
That said -- and you knew there was a "that said" coming -- the current moment also highlights some Very Big Things that Marx got wrong -- badly, world-historically wrong. First, as an economic determinist, Marx was convinced that class triumphed over all other political cleavages -- including nationalism. That's.... really untrue -- and the lack of truth about it affects any decent analysis of the global political economy.
5. The Chinese angle - The dramas in Ukraine and the Crimea are rightly the focus of world attention at the moment. But what does it all mean for China? This is the prism we should use to look at this sort of geopolitical issue these days.
Conservative European MP Charles Tannock lets rip at Putin in this Project Syndicate piece. He also points out the implications for China.
Obama should emphasize to the Chinese their stake in Eurasian stability. Putin may regard the Soviet Union’s disintegration as a tragedy, but for China it was the greatest geostrategic gift imaginable. At a stroke, the empire that stole millions of hectares of Chinese territory over the centuries, and that threatened the People’s Republic with nuclear annihilation, simply vanished.
Since then, Central Asia’s independent states, and even Ukraine, have become important trading partners for China. Russia’s conquests in Georgia greatly displeased China, as was seen at the post-war summit of the Shanghai Cooperation Organization (a regional grouping that includes ex-Soviet countries that share borders with China and Russia). Russia pushed the SCO to recognize the independence of Abkhazia and South Ossetia. But the SCO balked. The group’s Central Asian members – Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan – would not have stood up to the Kremlin without China’s support.
6. How economists failed - In this video below Institute for New Economic Thinking Director and former US Senate Chief Economist Robert Johnson explains how he thinks the economics profession failed the world before, during and after the Global Financial Crisis.
"I think the economics profession was making tremendous money in consulting for the financial sector. Many of the theories were not investigational illumination how financial markets worked. They were portraits painted like a marketing document. They did a great disservice to mankind and we're cleaning up after that right now."
"When the people become anxious they want the expert to tell them what's going to happen. And they feel good when their anxiety is relieved because they think they understand the future. But if the expert instead of telling the truth is telling snake oil, a false story, when that is unmasked the expert becomes the scapegoat."
Ökonomie neu denken - Jenseits der Finanzkrise (V) from Stifterverband on Vimeo.
7. 'A nation of rent-seekers' - The Sydney Morning Herald's Ross Gittins is a veteran of the economic commentating trade in Australia. Here he makes some tough points about Australia's love of rental property and the power of industry lobbies. Ditto for New Zealand.
What gets me is how blatantly self-seeking our lobby groups have become. It is as if the era of economic rationalism - with its belief that the economy is driven by self-interest - has sanctified selfishness and refusal to co-operate for the common good.
Another explanation may be the growth of a lucrative rent-seeking industry. These days far more people make their living lobbying for interest groups than did so in the 1980s.
When your livelihood depends on convincing your clients their money is well spent, it is hardly surprising these ever-multiplying industry groups, corporate ''government relations managers'' and freelance lobbying firms make so much noise and are so untiring in their efforts to extract concessions from government.
8. The problem with bitcoin - Robert Shiller has written an excellent piece in the New York Times on how Bitcoin is a bubble, but also how some good might come out of it. He poses some deep questions about how we use money, and touches on the issue of rent-seeking.
Bitcoin has been focused on the wrong classical functions of money, as a medium of exchange and a store of value. Bitcoin offers a way of “mining” electronic coins that can replace our dollar bills and bank accounts. Yet there is no fundamental need for this. Money, as we’ve known it for decades, works quite well in these respects. It would be much better to focus on another classical function: money as a unit of account — that is, as a basic standard of economic measurement. Scientists spend a lot of time thinking about ways to improve systems of measurement. Business people should, too.
This has already begun to happen. History shows that this unit-of-account function of money has been separated from the other two, and to good purpose. For example, since 1967 in Chile, an inflation-indexed unit of account called the unidad de fomento (U.F.), meaning unit of development, has been widely used. Financial exchanges are made in pesos, according to a U.F.-peso rate posted on the website valoruf.cl. One multiplies the U.F. price by the exchange rate to arrive at the amount owed today in pesos. In this way, it is natural and easy to set inflation-indexed prices, and Chile is much more effectively inflation-indexed than other countries are.
Consider rents. Increases may seem unfair to tenants, yet they may be needed to offset inflation. In Chile, a landlord can easily set the monthly rent for the tenant in U.F.s and then never have to change it, reducing the potential for errors, delays and misunderstandings. The name “U.F.” reframes people’s thinking so that keeping real economic values stable is natural and easy.
9. 'Too connected to fail' - Bloomberg has a useful piece here explaining the linkages between China's banks and its shadow financing sector. It's an excellent backgrounder.
As China’s top legislators start their annual meeting in Beijing tomorrow to set economic targets, efforts by policy makers to crack down on unregulated lending threaten to undermine financial stability.
“The failure of one product could lead to defaults of many others in a chain reaction,” said Christine Kuo, a Hong Kong-based analyst at Moody’s Investors Service. “The fall of shadow banking, starting with trusts, will spill over to the whole financial system, trapping banks and other stakeholders. That’s why the government is extremely cautious for fear that any misstep may trigger a systemic crisis.”
At stake is what the China Trustee Association, an industry trade group, estimates are $1.8 trillion of products developed by trust companies. Lenders also created $1.6 trillion of high-yield wealth-management investments, up 40 percent in the nine months through Sept. 30, according to JPMorgan.
It turns out all these shadow institutions are very connected to banks and SOEs.
Credit-underwriting criteria for such loans, with most going to industries such as mining, property development and local-government borrowing arms, are often more lax than those applied by banks or debt capital markets, making them vulnerable in an economic slowdown, according a November report by McKinsey & Co. and China Ping An Trust Co. Trusts are arguably the second-most risky financing channel for companies, after underground financing, Zhang Zhiwei, an economist for Nomura International Hong Kong Ltd., wrote in a Jan. 28 note.
Fewer than 10 percent of trust firms are formed by the private sector, with the rest owned by large state-owned enterprises, financial conglomerates and local governments, the McKinsey and Ping An Trust report said. The state-owned companies often own each other’s shares, and the government is involved in appointing the heads of these firms.
10. Totally the trailer for The Lego Movie. If only because my daughter is mad about lego and, apparently, it's a subversive commentary on modern capitalism. Although it is a movie that appears a lot like an ad for very expensive toy system...
48 Comments
Point #5
One senior Obama administration official called Vladimir Putin's actions in Ukraine outrageous. A second described them as an outlaw act. A third said the brazen use of military force harked back to a past century.
"What we see here are distinctly 19th and 20th century decisions made by President Putin," the official said. "But what he needs to understand is that in terms of his economy, he lives in the 21st century world, an interdependent world."
James Jeffrey, a retired US diplomat, said that taking such views of Putin's mindset cripples the US response to the Russian leader. The issue is not that Putin fails to grasp the promise of Western-style democratic capitalism. It is that he and other American rivals flatly reject it..Read more: http://www.smh.com.au/world/putins-crimea-move-could-give-china-ideas-20140304-hvfyl.html#ixzz2v2O6kLI3
For another point of view it may be wise to listen to the interview with Dr Paul Craig Roberts on King World News.
http://kingworldnews.com/kingworldnews/Broadcast/Entries/2014/3/1_Dr._Paul_Craig_Roberts.html
Dr. Paul Craig Roberts credentials are as good as one can get as you can read at the bottom of the page.
It shows a very different angle to the situation than is portrayed in the main stream media.
(first minute is a commercial, just grin and bear it)
#3 - The argument about the role of economics in healthcare is secondary to the bigger problem which is that there is no health system that can affordably do everything for everybody.
The central concepts of need and demand - borrowed from economics 101 - helps frame this discussion, because the tools to do so are not available from within healthcare.
The same should be said about operations management, supply chain management, queueing theory, constraints theory, or any other discipline not directly part of the patient-clinician interaction. They are all useful tools to get the most patients, most able to benefit, in front of the right health clinician, at the right time.
The issue is not the tools, but that the general capability of those that want to use them is exra-ordinarily low, and the audience is extra-ordinarily well trained, well organised and pursuing their ownt interests (fiscally, intellectually and in every other way possible).
There are surgeons in New Zealand making in excess of $1million a year using their hands on people who are sick in some way. The argument abut some external agency corrupting healthcare using economics, and in a way that undermines the patient's interest are disingenuous.
Respectfully
Dr ^#%#%@^
MBBCH, FRACP, FCICM, FRACMA, MBA
Well a medical doctor isnt a Phd as a rule, so its an honary title? (so I understand) ie as a consideration that a doctor owes a special duty to a "customer" beyond a normal professional such as a mechanic.
You are reading it the wrong way, the opposite IMHO, ie yes I dont agree with the free ticket, but really thats how it is in NZ. Not unique of course, farmers are a good example, they say they love the land, yet seem hell bent on exploiting it just in one generation.....
regards
I think those who hold this title: http://en.wikipedia.org/wiki/Doctor_of_Medicine may be a little put out to find it is only "honary"
Most are not technically doctors at all (and certainly not honary), only the ones who have done the research thesis/ higher level equivalent of a PhD are called MD's.
"Therefore graduates from the MBBS or MBChB degrees do not hold doctorates; however, physicians holding these degrees are referred to as 'Doctor' as they are fully licensed as medical practitioners. In some commonwealth nations these interns are designated as House Officers."
Dunno, the mechanic working on my vehicles and the other mechanics working on all those other vehicles on the road better do a damn good job _every_ time else it going get messy.
Likewise, all the rules taht are coming in for farming, ensuring food is perfectly safe...do we get to get the profits that md's can charge
People who don't want trade agreements need to be very clear what their preferred alternative is. If your complaint is that trade agreements allow large economies to impose their will on smaller economies, do you think an absence of such agreements will prevent them from doing that, or better enable smaller economies to defend their own interests?
The fact is that, by entering into trade agreements, large economies voluntarily constrain their own ability to use their greater economic muscle to impose their will on others. Just as the main beneficiaries of the rule of law are the weak and powerless who would not be able to defend themselves in anarchy, the main beneficiaries of international trade rules are those who don't have the economic muscle to defend their own interests through trade measures. Like New Zealand.
But what about "trade agreements" like our "FTA" with China, where China has, for every year it's been in operation, elected to pick it's emergency option to use tariffs against NZ goods, and at the maximum rate. Why have an agreement if it's not going to be legitimated followed....
Or the TerriblePickofthePacificArrangement (aka TPPA) where trade is sort but a bunch of surrender of soveriegn rights are expected to be surrender plus a bunch of activitiy which is not trade but violates laws/rights/freedoms in one country (DCMA vs NZ copyright statutes).
Trade is good, but the fine print is seldom good.
Again - What has the trade agreement allowed China to do, which it could not have done without the agreement?
Yes, agreements constrain the freedom of action of partners to the agreement. That is what an agerement is - an undertaking, by both sides, that they will do x, and will not do y. Thus, each side gives up its freedom not to do x, and its freedom to do y.
Neither side can expect to get nothing but benefits - things have to be given in order for things to be received.
As does New Zealand.
Certainly, there is scope for China to do more in terms of enabling access for New Zealand goods and services to the Chinese market. (That would actually be to their own benefit as well as to ours.) I completely agree that a fuller trade agreement with stronger market-opening undertakings more faithfully adhered to would be better. But that's not the alternative that is available to New Zealand. The alternative is no trade agreement, with each side thus free to impose whatever market barriers and other trade sanctions it felt like. Which partner do you think would have more to lose from such a relationship?
Well, you may recall that, in the vein of 'useful to the country', I had suggested factory employment for a number of professions.
In the TLA sphere, f'rinstance, all the urban 'planners', anyone connected even vaguely to the administration of the DC and associated rorts, and anyone with the words 'social', 'cultural', 'facilitator' or 'development' in their job title, should be rounded up and put to work in factories producing cheap, QC'ed, affordable homes.
But in the wicked way of the world, there wouldn't be as many factory jobs as there were internees. After all, such factories would be subject to the old joke: a person and a dog are all that's needed to run them. The person's there to feed the dog, the dog's there to keep the person from foobarring the machines.
What to do, what to do?
Warren Buffet thanks all those chicken littles out there.
"I love apocalyptic predictions" on climate change, Buffett told CNBC on Monday, because they probably do affect rates.
"The public has the impression that because there's been so much talk about climate that events of the last 10 years from an insured standpoint and climate have been unusual," he continued. "The answer is they haven't."
"Our biggest single cat risk would be earthquakes in New Zealand."
Other than the fact that Buffer (as are you) is talking cr+p.
''In the 1980’s, the average number of natural catastrophes globally was 400 events per year. In recent years, the average is 1000. Munich Re’s analysis suggests the increase is driven almost entirely by weather-related events. North America has seen a fivefold increase in the number of such events since 1980. In comparison, Europe has seen a twofold increase.''
http://climatecrocks.com/2013/07/24/insurance-industry-sees-risk-of-cli…
Feast your eyes on any of the graphs in that article - they all show big increases in weather related events. All the data is from the insurance companies.
Note the first graph provided, and squirm like a squirmy thing. As is mentioned in the caption:
This graph from Munich Re compares storm, wind and flood events against geophysical events like volcanoes and earthquakes. If the “bigger populations” canard that climate deniers use to explain increased damages were valid, the geophysical component would track along with storms. It does not.
Der Spiegel on Munich Re.
http://www.spiegel.de/international/world/scientists-denounce-dubious-c…
This is actually a really good effort from Profile, the link is both accurate and relevant. I agree that the Munich Re analysis of loss over time should not be used because you have to control for the amount that was insured and the amount of damagable things that was actually there when the event hit. I was actually doing some work in this area a week or so ago and you have to keep in mind that the value of property loss is determined by what value of property was in the area of destruction.
that said, Profiles link was a response to a pretty minor point in the preceding article, the change in the ratio of geological to meteorological events is the really useful data because that is simply counting events.
- In a few years time I am picking we will likely see interest free loans for building strengthening. It can be a massive one off expense, but over time managable, especially if by doing the strengthening your insurance premiums (aka payments to buffett) go down and rents/leases/occupancy go up.
- Councils rubber stamped every earthquake prone building at time of construction, they need to bare some costs, and will do so by providing interest free loans (i.e make a lose in real terms as the loan gets paid back).
- Creating these loans creates an 'asset' on the govt./council balance sheet, and a liability on the building owners balance sheet, so is neutral as far as effect on govt./councils books.
Yea the limitation act means they will never be legally obligated to do so.
The decision is likely to be in the best interest of the town/city, not one thats forced on them. Accept councils are mostly broke these days, so probably more likely central govt. funded.
I don't think you can call it a mistake. Councils use the best info available to them at the time. New info on what makes a building perform well/poorly in an earthquake, or where faults line, mean some buildings are now deemed earthquake prone, when at time of construction they thought they were ok.
Ironically, wellington buildings, even older ones post 1960, are safer than most of the same era around the rest of the country, as everyone was well aware of earthquake risks in wellington. Assumptions on things like the natural period of RC buildings were too conservative, and so older buildings of 1960 era were built over strength sometimes by factors of 1.5-2. So long as no critical structural weaknesses exist these buildings will stand up very well in an earthquake. A building in wellington buillt since early 1900s was required to be considerably stronger than the same building built in auckland.
The real worry is for smaller towns that dont have massive land values in the CBD to justify spending a lot of money on strengthening. Once all council data on earthquake prone buildings gets back, it will be smaller towns that will find many buildings needing repairs that cost more than the buildings worth.
Neville Brown mentioned interest free loans at a meeting last year, not as a definate plan but something they were working on. Thats what im basing my prediction on. I agree it wont be easy to implement or necessarily have wide spread support.
That's the biggest failure point of Local and Central Government right there : "I don't think you can call it a mistake. Councils use the best info available to them at the time"
Where does the buck stop? with the ratepayer who has NO say in the decision.
When a business owner makes a bad call there's no refunds or mulligans becuase "you were operating on the best info ""at the time"" ".
It is the business owners job to foresee the unforeseeable and be responsible for whatever unexpected happenings occur. It is not delegatable, and the only place it can be passed to are customers and staff, which always materially detriments the business owners business.
So it is a mistake and it is THEIR MISTAKE.
This started with Hugh calling for de-risking of cities. This is, of course, a huge issue and a very expensive one. Some cities are simply built in the wrong place. But this thread is confusing two specific issues: where we build houses and how we build them. And if there are historical mistakes who bears the liability.
Starting with construction the law is simple: government makes the building rules not certifiers (i.e. councils) and, under the Building Act, certifiers only carry a ten year liabilitty from the time they issue a Certificate of Code Completion. Councils have an obligation to act if they think safety is a problem - also if buildings are unsanitary etc. They can prevent occupation and require demolition of a structure if they think the next shake will bring it down anyway. But there is a huge empty space between certifying a structure as complying to the standards of the day and requiring demolition. In that space is re-assessing buildings against revised codes and trying to get retrospective upgrades done. A council would be mad to take that on without some kind of central government involvement. Currently councils have limited legal and no moral obligations for construction why would they take them on voluntarily?
Where we build is a different story. Because councils insist on over-planning they also take on implicit moral obligations. The simple example is the Bexley subdivision in CHC. CCC planners OK-ed that even though the council's own engineers had already identified the risks associated with earthquakes in Eastern CHC. If a council makes someone jump through hoops and attaches all sorts of conditions to subdivision consents then they also implicitly guarantee the safety of the site.
Old story: The Queen thinks the world smells like fresh paint.
back when the council inspectors used to rate buildings, and on very bad buildings the form would go to different departments, one which was responsible for repainting, the other for inspecting the building.. Thus through careful coordination the councils used to insure that the painting team was completed before the demolishing team was allowed on site - otherwise the painters wouldn't be able to complete the job.
8 then 6 months later the same road just came up on some resurfacing schedule, go and resurface the road again. Real life example, my parents in law street was extended to a bunch of new sections. Then about 6 months later, the original/existing road came up for resurfacing, but the extra few hundred metres of extended new road (same street name) was resurfaced at the same time. Depressing to see.
People seem to be missing that he was answering questions about if his manner of calculating insurance risk has changed in the past few years, which is a really short timeframe for climate- he was not talking about if global warming causes problems or even if he changes his calculations in the medium term:
"I calculate the probabilities in terms of catastrophes no differently than a few years ago," Buffett replied. Though as co-host Joe Kernan was speaking over him, he added this qualifier: "That may change in 10 years."
Now, regarding this bit:
"The answer is they haven't. You read about these events, but you were reading about events 30 or 40 or 50 years ago. We've been remarkably free of hurricanes in the United States in the last five years."
Looking at the North Atlantic Tropical Cyclone Count
http://www.ncdc.noaa.gov/sotc/tropical-cyclones/2013/13
There is no remarkable freedom there, so I suspect he knows there has been no particular reduction in hurricanes recently, just that they haven't hit anywhere valuable in the U.S. in the last few years (note the words "in the United States" up there).
None of this is inconsistent with Buffett's actual position that global warming is a serious problem: "doubling the carbon dioxide we belch into the atmosphere may far more than double the subsequent problems for society. Realizing this, the world properly worries about greenhouse emissions."
I guess if their single biggest cat risk is NZ earthquakes, they are not exposed to the Japanese market much- Christchurch was estimated to have cost insurance companies 12 billion, but the Japanese earthquake/ tsunami is estimated at 35 billion.
Actually wrong....
Try looking at what the Insurance industry has been saying, because they dont see it Buffets way.
"June 24 – Financial Times (Alistair Gray and Pilita Clark): “Insurers have issued a rare warning that the speed at which the oceans are warming is threatening their ability to sell affordable policies in a growing number of places around the world. Parts of the UK and the US state of Florida were already facing ‘a risk environment that is uninsurable’, said the global insurance industry trade body, the Geneva Association"
http://www.prudentbear.com/2013/06/uninsurable-risks.html#.UxaSAPF1OOL
"In spite of the losses from Sandy and a spate of natural catastrophes the previous year, overall global property insurance premiums have remained broadly stable outside loss-hit areas. However, insurers warn premiums have been kept artificially depressed in the short term because capital has flocked to the sector in the face of historic low interest rates.”
..........
Basically, writing flood insurance during a drought provided extraordinary “return” opportunities. A speculative Bubble developed in the marketplace, whereby thinly capitalized speculators came to dominate the market for cheap insurance."
Read Warren Buffet I suppose...
(edit) actually at the end it looks like he's saying he isnt writing policies its too cheap for him.
regards
While Buffet doesnt think so, some other companies are filing climate change as a risk to thier business.
and of course these are real businesses producing a real good, unlike financial gurus...
http://thinkprogress.org/climate/2014/03/05/3363931/why-chipotle-guacam…
"Chipotle and Lutz’ assessments are correct — a public company listing risks in its annual SEC report is not only routine, it is legally required."
“Business understands the concept of dealing with risk, and climate change is the mother of all risks that we’ll face this century,” PricewaterhouseCoopers, the global business consulting and accounting firm, has said. “For business it is not about arguing with scientific consensus; it is about understanding the scale of the risk. This is about simple business risk and planning: where can you invest, how can you protect your infrastructure, where can you source supplies; what is the cost of commodities, what’s your plan B?”
So what should NZ businesses and investors be doing?
your "advice" is simply to ignore it?
My advice as always check out any risk and make a consious decision on what action or not to take.
regards
Warren buffet's ability to assess risks?
"Buffett admitted this week that “it’s more dangerous to move certain types of crude, certainly, than we thought previously,”
bit slow, isnt he...
http://grist.org/news/you-can-blame-warren-buffett-for-many-of-those-ex…
Which means premiums for NZ insurance can be cranked up and will probably be very profitable for re-insurers and buffett.
The fact remains, the risk of an earthquake has not changed, just peoples perception of that risk has changed = buffett makes more money being rational in an irrational market, as per his last 50+ years.
I have always quite liked the way our neighbours put the per square price on their house and land packages.
http://www.realestate.com.au/property-house-qld-mount+low-116303867
It is very common in Australia to divide the total value of land, buildings and all other costs by the land m2 to give an overall m2 price.
There's a lot more competition from competing developers in various subdivisions and that's why the m2 price of the total package is advertised. it avoids any price fixing that can easily happen as everyone has to sharpen their pencils.
You drive along most routes and you will see large billboards with fixed prices everywhere and the m2 price. Obviously gated communities etc will attract a higher premium etc.
The unit of development or unidad de fomento (U.F.), has been widely used. Financial exchanges are made in pesos, according to a U.F.-peso rate posted on the official website uf-hoy.com. One multiplies the U.F. price by the exchange rate to arrive at the amount owed today in pesos. In this way, it is natural and easy to set inflation-indexed prices, and Chile is much more effectively inflation-indexed than other sudamerican countries are.
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