90 seconds at 9 am with BNZ: Failure to agree on Eurozone bonds disappoints; Stock markets flat to weak; NZ$ firm near 84 USc; Dunlop plant to close

It is a really good piece AndrewJ......but once again without a Woodward and Bernstien...leaves you feeling more suspicious ...frustrated.....angry.

It's funny how little changes despite the sophistication of a society...we still want the heads on a stick........we still get the sacrificial lambs...(The Madoff's...the Martha Stewart's...etc)

I wonder if that explains my increase in 'communications' from MAF explaining how well they are doing. The disasters roll on with the most visible response being an increase in the quantity of spin.

Hi Andrewj I am  involved in kiwifruit and its horrific to see the industry slowly being destroyed. Most growers are in a state of shock and the ones that have been wiped out are left with nothing with their income and capital value of their land gone. We are waiting for the bug to hit our blocks and then its goodnight nurse for our enterprise. but it also looks like the high exchange rate will double wammy us as well in the next couple of years. 

Most people think that it was dodgy pollen imports that brought the bug in but with MAF doing the investigations, they aren’t going to blame themselves for allowing this plant material in are they...

A 1.3 billion export earning industry going by the wayside and the govt does not seem to care. My sister who is in Oz says that if that happened over there would be all sorts of hue an cry and MAF would be under the searchlight , ministers resigning etc. here it is "move along sir nothing to see"

Thanks AJ, a wonderful article, should be compulsory reading for all. It could well end up as a standard text for future historians. Ambrose is all over this euro story, a great series of articles which each contain something new even for the interested reader.

After a trip to Germany early last year I warned here on interest.co that there was a nasty nationalistic/racist component to this euro situation, which was evolving even then.

In the second half of the year I travelled with a group of Germans in Namibia. The picture was the same.

Even the educated and well-travelled German does not really want to discuss these matters. They have a sort of mantra about the med countries 'We work a lot harder than them so we deserve a lot more.' Never mind whether it's really true.

To try and get someone to see that maybe German-enforced low euro interest rates may have contributed to the proprty bubble in, say, Spain, is difficult if not impossible. If the Spanish had a property bubble, that's their fault, end of story.

Germany is a great and beautiful country, full of lovely people, but for whatever reasons, it is sowing seeds which we may all have to grimly reap.

If Angela Merkel, who surely must get all this, is going to do something, she is leaving it awfully late. The clown Sarkozy don't impress me much, although Ambrose has suggested a role for him which would be perfect.

So come on Walter..tell us where your bed was made?

Kunst , good comment. Bernard Hickey  should start banging the drum louder and more about the gutting of NZ's productive capacity due to the strong Dollar .

We live in exceptional times which call for exceptional measures , and while I have the utmost respect for Dr Bollard , he is too straghtjacketed in his approach following economic textbook theory too rigidly .

Its time NZ's  self interest got brough to the fore, and we need to look after our own , like the Swiss and the Japanese . 

PDK, has alot to do with corporatising farming. I think in HB there are 4 independent apple growers,  the rest are corporate or lease their orchard to a corporate. I hear on the Grape vine that Mr Fay wants to buy Crafars.  I was right about Kiwi fruit the market appears to have tipped over, never mind some big corporate will move in and buy the farms off the bankers.

I seem to recall saying the land was buggered and the plan to throw money at holes was a stupid idea..way back after the first quake!.

But watch this space because the question not answered is....what happens to the land once the houses are gone.....anyone for a payoff!

Will they become parks or will they become industrial sites and rubbish dumps?

I guess the banks will extend their red zone specials on home loans and savings rates to the red zoned folk in Kaiapoi and Pines Beach...

FYI from Chris J via email:

Bernard, I haven't seen an article on the 860 homes declared in the red zone today. See - www.cera.govt.nz

The total value of those properties would be $250-300m, much of which won't be insured as the damage to homes in some of those areas is not as extensive as you would imagine (generally only suffered damage in September).  Many homes will be considered repairable by insurers as they only need repiling or new foundations, undoubtedly some will be totally undamaged.

Land values in the area average $140-150,000.  So in broad terms $125m will be roughly the cost for the Govt for the land and say $150m for the improvements.  EQC insurance should cover most of the land cost (certainly at least $100m anyway), EQC on buildings will cover $100m, private insurance will cover the remaining $50m if the buildings are irreparably damaged but as that is probably less than half, and maybe only a third then the cost to Govt could be $35m plus any additional cost above EQC payouts for the land say maybe $15m.

So perhaps total costs are $50m to Government.  Then they also actually save $30 to 40m in not having to rebuild services and roads.  So it doesn't seem too bad.

Now also consider that by not having to provide new land, they are getting the land at very low prices, sometimes 30% below market value, they are also winning by having anyone buying a new section also paying (in the new section price) a development contribution of perhaps $20,000.  So if everyone actually repurchased a section the net cost to Central and Local Government is actually negligible (or in fact abandoning the land may have actually been profitable).

Add on top of that the Govt will have the salvage value of the undamaged properties, which if considered as relocatables could be worth $30m plus.  Easily covering any cost associated with clearing the land.

Now if you actually look at individual properties in the area, you will see that in some (certainly not all) but in some case GVs are well below market value and in many cases land values are well below what market value would have been.

So it seems rather unfair to be paying these arbitrary GVs and penalising insured victims of a disaster by paying them less than it would cost to replace their property or indeed less than what the market value would have been.  For instance (in some cases) sections in North Kaiapoi have GVs around $120k for 800m2.  Market value for that size of section is perhaps $170-190,000.

The Government's taking the easy approach here which may certainly see some who have undamaged homes and others who have low land values disadvantaged.

Given the complexity of the issues and the fact that every privately insured property will have a market valuation done anyway, it seems bizarre not to have agreed to pay at least the market value in all of the red zones, especially since the cost would be minor and declaring these red zones may actually work out to be profitable for the Govt when all things are considered.

I know a lot of people are at their wits end, so will jump at these red zone offers even if it is less than what they believe is fair because they just want to move on (in many cases - out of ChCh and surrounds), it would have been nice if the Government actually at least guaranteed market value rather than just trying to keep it simple.

Feel free to use the numbers I mention above to do your own calculations as to cost, but also consider that if the Government picks up full replacement value on properties that people have just opted to take the Government deal on, then the whole red zone deal may actually (rather perversely) turn out to be a profitable exercise.

Regards

chrisj

Totally agree....both systems rely on the assumption of never ending growth.....therefore both will fail......

regards

Thanks a good link.

regards