Here's my Top 10 links from around the Internet at 10 am in association with NZ Mint.
I welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.
I'll pop the extras into the comment stream. See all previous Top 10s here.
Clarke and Dawe are here for their regular Friday thing. We can all laugh at a Kiwi making fun of Australians in Australia.
1. 'Public-private pillaging' - Two Californian academics have written a book about how lobbyists and corporates have used public private partnerships to ruin San Diego.
A cautionary tale for those looking to introduce such things in New Zealand.
Even the conservatives in Britain are disillusioned with these things and the Australians aren't happy either.
And don't get me started on sports stadiums and arts centres for games and festivals.
Is there some rugby on at the moment?
Here's the San Diego story via the San Diego Reader (HT Troy via email):
The hucksters have an alliterative name for San Diego’s corporate welfare: “public-private partnerships.” The authors show why the name should be “public-private pillaging.”
For example, Centre City Development Corporation (CCDC) is “a shadow government with little direct contact with the voters,” says Erie. The system is rigged so that redevelopment money goes into a downtown that is not blighted while neighborhoods get crumbs, even though they are blighted. In San Diego, “As long as the sun rises, people aren’t watching what happens. This gives leaders considerable leeway to craft these public-private partnerships that benefit the private partners without close public scrutiny or criticism.”
One way this is achieved is through “stacked deck committees,” Erie explains. A task force or committee will be appointed to study a particular issue, such as a massive subsidy to a sports team. But the committee members will have a personal stake in downtown interests. “You know what the report will be before it comes out.”
2. The thing about the Renminbi - Arthur Kroeber writes this must-read analysis of Chinese exchange rate policy at Foreign Policy. He says it's a mistake for America to fear the Chinese currency because it is very unlikely to become a reserve currency.
I found this insight into the difference between the US and Chinese approaches to managing their currencies interesting:
The international conversation over the RMB remains perennially vexed because China and its trade partners have fundamentally divergent ideas on the function of exchange rates. The United States and other major developed economies, as well as the IMF, view an exchange rate simply as a price. Consistent intervention by China to keep its exchange rate substantially below the level the market would set is, in this view, a distortion that prevents international markets from functioning as well as they could. This price distortion also affects China's own economy by encouraging large-scale investment in export manufacturing, and discouraging investment in the domestic consumer market. Thus it is in the interest of both China itself and the international economy as a whole for China to allow its exchange rate to rise more rapidly.
Chinese officials take a very different view. They see the exchange rate -- and prices and market mechanisms in general -- as tools in a broader development strategy. The goal of this development strategy is not to create a market economy, but to make China a rich and powerful modern country. Market mechanisms are simply means, not ends in themselves. Chinese leaders observe that all countries that have raised themselves from poverty to wealth in the industrial era, without exception, have done so through export-led growth. Thus they manage the exchange rate to broadly favor exports, just as they manage other markets and prices in the domestic economy to meet development objectives such as the creation of basic industries and infrastructure.
These policies do not differ materially from those pursued by Japan, South Korea, and Taiwan since World War II, or by Britain, the United States, and Germany in the 19th century. Because the Chinese leaders perceive that an export-led strategy is the only proven route to rich-country status, they view with profound suspicion arguments that rapid currency appreciation and markedly slower export growth are "in China's interest." And because China -- unlike Japan in the 1970s and 1980s -- is an independent geopolitical power, it is fully able to resist international pressure to change its exchange-rate policy.
3. Only half way there - WSJ columnist David Wessel has written an excellent piece on how long the US household leveraging will go on for.
It is the driving force holding back the world's largest economy at the moment.
Wessel says households are perhaps only half way through their deleveraging and points out the government hasn't even started.
"Unlike banks," says David Scharfstein, a Harvard University economist, "households can't raise equity capital to pay down debt. So the only way to get deleveraging is house-price appreciation (which hasn't happened), debt writedowns/modifications (some), or foreclosures/short sales (some)."
He points to the mortgage-debt burden—and winces. Until the late 1990s, the sum of all American mortgages was about 40% of the value of the underlying homes. Americans borrowed heavily against their houses and then house prices fell. By this metric, the debt burden rose to about 62%—and hasn't yet come down. (This is an average, of course. Some people have no mortgage debt. About one in five homeowners with a mortgage owes more than 100% of the current value of the house.) While banks and consumers have been deleveraging, the government has been doing the opposite.
Measured against the size of the economy, federal debt is at highs not seen since World War II. In part, that's by design: The plan was for the government to borrow more for a time to cushion the effects on the economy of bank and household deleveraging. For government deleveraging, it's still the first quarter.Add it up: U.S. bank deleveraging is in the fourth quarter, but European banks are in the first. Overall U.S. consumer deleveraging is at halftime with housing still in the first quarter. Government deleveraging has barely begun. This will hold back economic growth for a long time.
I'll include the charts again. Used them yesterday. The second and fourth charts are particularly worrying. They suggests an enormous amount of work needs to be done.
4. Trickle down theory - China's direction seems not that different from the American one...
The latest Hurun rich list is out.
The Hurun rich list, which has been tracking China's tycoons since 1999, on Wednesday said it had counted 271 dollar billionaires in China last year, up from 130 in 2009.
China now has the second most billionaires in the world, after the United States with more than 400.
Huang Weiping, an economist at Renmin university in Beijing said the proliferation of billionaires was "no surprise". He said: "This phenomenon is occurring all over the world. And as China becomes more advanced, and improves its industries, it is only natural that a large share of the wealth will end up with the people at the top of the value chain."
5. Do these guys have any shame - The Telegraph reports Amazon doesn't pay any corporate tax in Britain despite having 2,000 staff...
When are governments going to stop these multi-nationals gaming the global tax system to enrich shareholders? The mood is building.
The last time Amazon.com appeared to write a cheque for corporation tax was in 2007 when it handed over the less than princely sum of £19,367 to the Inland Revenue. The retailer does of course pay National Insurance, business rates and VAT in the UK.
So how does the internet giant do it? Well, while Amazon may package and send the vast majority of its UK orders from its giant distribution centre in Milton Keynes – where it employs more than 2,000 people – Amazon.co.uk is a "service company" rather than a retailer, providing fulfilment, marketing and support services to a Luxembourg-based parent.
That means that while it may be Amazon.co.uk that sends UK customers that discounted copy of How to Win Friends and Influence People it will be Luxembourg-based Amazon Eu Sarl that collects the £6.19.
It's a structure that (presumably) means Amazon books its profits in Luxembourg, which has a lower corporation tax rate than the UK, although it is impossible to know for sure. It is not just tax rates that are lower in Luxembourg – so are levels of disclosure. There is no requirement for Amazon Eu Sarl to publish annual accounts, unlike Amazon.co.uk.
6. Even Gen Y are abandoning the stock market - Here's Investmentnews pointing to a survey showing how even young investors are wary of the stock market
According to the results of a survey of members of Generation Y (age 18 to 30), younger Americans lean towards a conservative approach when investing their money. The survey of nearly 1,000 Gen Y investors with more than $100,000 worth of investible assets —conducted by MFS Investment Management Inc. — found that 40% of the respondents agreed with the statement: “I will never feel comfortable investing in the stock market.”
Indeed, Gen Y'ers, who have between 35 and 47 years before reaching retirement age, have allocated more money to cash (30%) than any other age group. Ironically, such conservative views are in line with their parents and grandparents, many of whom grew up in the wake of the Great Depression.
“Many Gen Y's reached investing age during the dot-com bust, lived through 2008's Great Recession and continue to experience significant economic uncertainly and market volatility today,” said William Finnegan, senior managing director of U.S. retail marketing for MFS.
7. Financial nihilism - Satyajit Das is always worth watching. He is a whistleblower from inside the arcane world of options trading. In this Q&A below he nails the blinkered thinking of the 'frat boys' who run financial markets. HT Naked Capitalism
PP: There’s something so enclosed, so incestuous with those involved in the financial markets. In your book you document how the hedge fund industry in particular displayed this insularity to a rather remarkable degree. Some of your anecdotes remind me of a group of late-adolescent males preparing for a drinking trip or a football match. You worked in and around this industry, what do you make of this dynamic? What effects does it have on the way these people make decisions?
Satyajit Das: Fraternities; ‘frat boys’ (and they are mainly boys) as the Americans would say. It’s a monoculture. They generally go to the same schools, the same universities; they have similar backgrounds and spend time with each other reinforcing their narrow worldview. Even the few outsiders who make it in – usually by dint of sheer desire and skill, usually in making money – seek to be ‘insiders’. It means that they can only see the world through the same lenses and perspectives. They can’t think outside the consensus – whatever it is at a given time. They can’t see that things could be different to what they perceive it to be.
They also see themselves as superior beings – ‘God but with a better suit’. The reason for their superiority is that they make more money than anyone else which in my view is purely accidental. But in their minds they see money and brilliance as synonymous. David Hare captured this neatly in his play ‘The Power of One’. He has a character, who looks remarkably like Gillian Tett from the Financial Times, say: “These people genuinely believe they’re masters of the universe. And why are they masters of the universe? Because they’re paid fifty times as much as anyone else. So they must be cleverer than anyone else.” Unfortunately, as subsequent events demonstrated, they weren’t that clever; they were just in the right place at the right time, at least for a while.
This culture creates a kind of ‘financial nihilism’ – those on the inside can’t see the consequences of their actions on other people at all. That’s because other people are inferior – outside the bubble. Justin Cartwright in his novel ‘Other People’s Money’ has one of his characters describe how financiers see ordinary people: “The rest of us are just the extras, without speaking parts, just fill in the blank spaces in the frame.” I think that’s accurate – these people really have a weird sense of being always right, not to mention generally superior. They can’t see what damage they have caused. They still think that they were right. The fascinating thing is that ordinary people and even powerful people like politicians actually believed that they were really special. Maybe, they still do.
8. Interconnectedness - Here's Barry Ritholz from The Big Picture on PBS Newshour on the European problem.
Watch the full episode. See more PBS NewsHour.
9. Just do it - Bank of America should file for bankruptcy protection says Chris Whalen
Bank of America has over $100 billion in mortgage liabilities, says Chris Whalen Co-founder of Institutional Risk Analytics. On a web broadcast published on KingWorldNews, he advocates "the classical American way of dealing with this problem"-- complete and total restructuring through Chapter 11. Before its too late. He says, "The only sane way of fixing this and I mean fix it so that Bank of America comes out of the process restructured, ready to support growth, support leverage, is a classic chapter 11..."
His point: Countrywide's bond trusts are worthless, were never properly constructed, and don't protect investors at all. Bank of America is on the hook for all of that, and while its subsidiaries are well capitalized, the parent company is bust. The only thing to do to fix this problem is to unmake $100s of billions worth of bond contracts.
10. Totally Clarke and Dawe - Wayne Swan is determined to break a business model. It might work.
"Your mob couldn't sell lamb to a Kiwi."
59 Comments
Re the story about Gen Y buying Bonds. In understand the preference for holding cash as a vanilla investment , but I wonder who is adivisng them to buy Bonds .
The Bond Market is a dangerous place to be if you dont understand the dynamic of the relationship between interest rates and the face rate of the Bond.
I am sure that the Sovereign Bond ( Read debt) market is likely to be more than just volatile over the next few years.
Bond holders in Europe are widely expected to take haircuts sometime soon .
and housing isnt? LOL....look at the losses in US homes so far, and it isnt over yet...
In a depression cash is king....so cash and short term Govn bonds is the way to go, maybe gen Y's eyes are more open than the older Gens....
regards
Gen Y are falling into the same mistake that Mummy & Pappy Gummy did . Having lived through the Great Depression ( the real one , not Bernard's hyped up little credit bubble implosion , which we're currently working through ) ..... they were spooked from ever going within a country mile of the stockmarket ...........
....... consequently , they missed out on some incredible returns over their lifetimes ..
From its high of 380 points in 1929 , the Dow Jones Index collapsed to 43 in 1932 . But it currently stands at 11296 points ...... so even if your timing was dreadful , and you bought at the top in 1929 , you now have a 30 fold gain since then . Near a 300 fold gain if you'd jumped in the market at the bottom , in 1932 .
...... and those remarkable gains do not account for dividends received , either . A full accumulation index would exhibit far greater gains than those of the DJI .
Well that's a bit odd. Did those remarkable gains take into account the fact that Mummy & Pappy Gummy are likely not alive to enjoy them? Or at least were't old enough to be taking advantage of them?
Crikey - go back to 1700 and there might even be a 100 fold gain. What about Inflation? What about the fact that most companies that were in the index in 1929 are no longer there?
The index hasn't moved higher in 10 years, so by my reckoning Gen Y might be onto something...
Pappy Gummy was a 19 y.o. at the Dow's 1932 low , and he lived for 76 years after that juncture . ..... . Mummy Gummy is still going strong .
From the beginning of 1901 , when the Dow stood at 47 points , it rose 215 fold to reach 10128 at the start of 2001 ....... A 215 fold increase in a century .
....... sure beats the living daylights out of houses , gold , bonds , telecom cards ...you name it , the long term gains to owning a diversified portfolio of common stocks smashes the returns from any other investment class .
And , here's the sweetener , those stockmarket gains totally ignore the extra benefit of dividends . Add those in too , and the compounded returns become stratospheric .
In 1929 a new car cost $200, try and by a new car for the price of the index today Gummy. Should have bought a new car back then and kept it, would have been a better investment.
The biggest gains are getting out into cash and buying back in somewhere near the bottom....the US share market could easily lose 50% of its value in a matter of days and hit 10% of its value we see today....if its a repeat of the GD..........personally I think anyone who stays is nuts.....
regards
Or if you had invested in bonds at 4.5% you would have over $12855 by now, and not loose any sleep over it.
I wonder who is advising people to invest in things that are in unlimited quantity, ie money and stocks. Both are created out of thin air and have no limits on supply. Investing in items that have a use, even depreciating items makes more sense. Take the Mcintosh MC900 my old boss brought in 2001 it cost 22k, it has fed 1000 cows for 10 years and now that it is time to upgrade it, he can trade it in for 18k. If he had not used it, and kept it in new condition, today a new wagon is worth 50k.
Now a 22k bond bought in 2001 paying 4.5% for 10years would be worth 32.7k. but that is all the work it would have done. The same amount invested in the DJIA would be worth nearly 30k today.
Govt and bankers and traders want your money to use, and they will say this is helping you. I say the best use for money is to spend it. Create a business, trade goods, build something, grow something, clean something, there are so many better uses for money then giving it to someone esle to make a profit with.
We need more small business in NZ!
#2 - "Thus they manage the exchange rate to broadly favor exports, just as they manage other markets and prices in the domestic economy to meet development objectives such as the creation of basic industries and infrastructure."
What does NZ do?
Chant the mantra and blindly have faith in an ideology long past it's sell by date.
Dismal.
Cheers, Les.
Les - how did the NZMEA get on with the protest in front of the Beehive ?
Re household's can't raise equity, point 3. If divorced people got remarried and then lived in the same house, assuming they both have some assets it should raise household equity. Maybe we need to promote marriage to get the economy going,.
In Honour of Wolly (when men were men) Wolly goes to the dentist The other day,Wolly went to the Dentist's office to have a tooth pulled. The Dentist pulls out a freezing needle to give him a shot. "No way"! No needles! "I hate needles",Wolly said. The Dentist starts to hook up the laughing gas and Wolly immediately objected. "I can't do the gas thing either; the thought of having the gas mask on is suffocating me"! The Dentist then asks Wolly if he has any objection to taking a pill. "No objection", Wolly said. "I'm fine with pills". The Dentist then returns and says, "Here's a Viagra tablet". Wolly, totally at a loss for words, said in amazement, "WOW"! "I didn't know Viagra worked as a pain killer"! "It doesn't", said the Dentist, "but it will give you something to hold on to when I pull your tooth" I'm off to the Footie......go the AB's....may your weekend be filled with smiles..!
Walter has tipped the AB's to beat Tonga by 32 - 4 ..... Gummy's tip is that Kunzie needs to get up to date with the Rugby Union scoring system .
I'm a simple soul and more of a soccer fan, because counting is much easier.
Go the NZWarriors ! Good, at least someone spotted that - a friend told me earlier 7 :32 then.
I give yu a tick for that - well spotted Roger.
On another subject: Where are the people - countryside empty ?
Just read of the train woes last night in Auckland, have to say not surprised and as a kiwi rather embarrassed, pretty pathetic really
Matt, that's my opinion why :
10.9.11 12:58pm
http://www.interest.co.nz/news/55306/election-2011-party-policies-economy-youth
That's a hard one to follow Christov but try telling the wife this one:
"Why do women have smaller feet than men dear?......................
It's an evolutionary thing dear...all that standing close to the sink and the stove!"
Lemme know what happens!
So about every 3 months Obama has to go cap in hand to the GOP lunatics.....nice.....not.
regards
Hmmmm...think the supernova was intended to be a black hole!
Michael Hudson interview, well worth listening to especially from 15 mins on
http://rt.com/programs/spotlight/financial-woes-economic-forum/
Thanks for the Hudson link Neco, well worth a lsten to as usual, don't know where they found the interviewer though.
We need to get Hudson down here ASAP to explain a few home truths to our IMF/Big Banks/Big Business obsessed leadership.
Definitely worth watching, thanks.
Great interview, especially the last 5 mins. Hopefully a number of our ministers are listening too, especially Joyce, Hide, Brownlee and Parata.
Governments, which let down the manufacturing sector, do not understand economics and how to make societies prosper – and digging and drilling, creating another economic mess – HA – wake up people !
...and of course the PM should listen too. He was also not in the business of manufacturing adding value to the NZeconomy/ NZsociety - hmm - no wonder !
I wonder how much everyones personal income tax contribution to our collective wellbeing could be reduced if all the international corporates of the world (vodafone, Amazon.....and yes you too U2 ) paid tax at a fair rate rather than shifting costs and headquarters to "take advantage" of favourable conditions.
Further I wonder how many local companies would be much more competitve/profitable if they were not competing with the international companies operating highly productive tax structures. Image having a 25% head start on costs vs you competitor ebfore you even ship in your wiggit!
Do we count our current PM in that 'frat boy' category?
Not only that but a tax holiday is in the offing....so here comes the US IRS chasing individuals for fairly small chips, but the US corporations can legally tash huge sums abroad and not pay tax.....and in the not to distant future they will be allowed to bring money into the US tax free.....crazy....absolutely crazy....
regards
Obama's latest plan $447 Billion stimulus package #n.
The big bank economists reckon it will add 1.3% to 2% of GDP next year. That's only about $225 Billion, not a great return - spend $1 for a 50cent return. What am I missing here?
http://www.stuff.co.nz/business/industries/5598136/German-investment-fu…
So remind me again why we should be so smug about our agriculture sector when slowly but surely it's being sold to overseas interests who then export the profits?
It is all OK, the farms are being sold to German 'Mums and Dads', boy I was worried for a minute!
Anyone else had trouble making sense of this?
HUBBARD DEALINGS BAFFLE ACCOUNTANTS
About $70 million owed to taxpayers through South Canterbury Finance appears stuck in legal limbo related to the statutory management of the late Allan Hubbard's affairs.
The money is owed by South Island Farm Holdings, a company set up by Hubbard in 2009, but its recovery has been hampered by some labyrinthine arrangements around the debt.
The deal had its origins in October 2008 when Hubbard acquired $89.6m of non-performing property loans from South Canterbury Finance.
The loans were bought at face value, which had the effect of shoring up South Canterbury's balance sheet by swapping bad assets for good.
In partial exchange for the loans, in May 2009, South Canterbury received preference shares issued by Hubbard's company South Island Farm Holdings supposedly worth $67.2m.
The finance company's prospectus documents described South Island Farm Holdings as owning shareholdings in about 20 dairy and other farms in the South Island. The $67.2m value was arrived at after a "sample review of the underlying farming assets of SIFHL".
But it wasn't really that simple.
Property records show South Island Farm Holdings has never owned any land, and Companies Office records show it has never owned any shares.
So if it owned nothing directly, what were its assets?
There are indications Hubbard, who is registered as owner of more than 90 properties, may have placed some of his farm assets in trust, with South Island Farm Holdings as the beneficiary. If so, the farm assets of South Island Farm Holdings would have remained under the personal control of Hubbard as trustee, or, since June last year, the statutory managers of his affairs.
After the initial transaction with South Canterbury, South Island Farm Holdings issued 30 million new ordinary shares, with 23.2 million being taken by Hubbard and the rest by South Canterbury.
Then in December 2009, the ground shifted when South Island Farm Holdings borrowed $67m from South Canterbury and used it to redeem the preference shares. In effect, the preference shares were replaced with a direct loan to South Island Farm Holdings carrying interest of 9 per cent, a rate considered by the company as below market.
Companies Office documents show all South Island Farm Holding's assets were pledged as collateral to South Canterbury two weeks later.
However, the indirect nature of its farm ownership would have seriously curtailed South Canterbury's ability to enforce its security.
At this point, South Island Farm Holdings still had 30 million ordinary shares held by two owners – Hubbard with 77 per cent and South Canterbury Finance with 23 per cent.
But on July 29 last year, after Hubbard was placed in statutory management but before the finance company collapsed, ownership of all those shares was transferred to two Canterbury farmers, Andrew Morris and Eugene Casey.
We don't know what Hubbard received for his shares, but South Canterbury's last prospectus says it received $6.8m for its stake from "an independent third party".
Casey appears in a biography of Hubbard by Virginia Green as the beneficiary of some typical Hubbard support when he received backing arranged by the Timaru millionaire to build up his farming business near Temuka.
Morris is a shareholder in several farming companies, and also in South Canterbury's parent company Southbury Group. In June this year Morris took 100 per cent ownership of South Island Farm Holdings.
Morris declined to talk to BusinessDay and referred inquiries to his lawyer.
It is unclear why Hubbard's interests in South Island Farm Holdings were transferred while he was in statutory management, nor is it clear what the company's assets really are.
South Canterbury receivers Kerryn Downey and William Black did not return calls seeking comment. Statutory managers Richard Simpson and Trevor Thornton could not be reached for comment.
Adding to the confusion, a report from Hubbard adviser Tur Borren published late last month describes the South Island Farm Holdings affair completely differently.
There were 21 dairy farms "indirectly" owned by Hubbard sold into South Canterbury, said Borren, and then sold back to him "for reasons I do not fully understand", with the finance company retaining a mortgage on the properties. "The validity of these transactions is under dispute," said Borren, and the dispute "is of such magnitude that it has a critical impact on the outcome of the statutory management."
Matters have not been made easier by Hubbard's death in a car crash a week ago.
- BusinessDay.co.nz
http://www.stuff.co.nz/business/money/5598137/60m-mistake-in-Hubbard-ca…
I'll take a guess. These "securities" are made up of a number of the "no interest loans" referred to by some of the people recently reported in the media who were paying tribute to Alan Hubbard's generousity with local young/starting out farmers. It's possible SIFHs held some kind of peppercorn type of legal "ownership" (not title or a mortgage security over the title ... more an IOU type contract) for these no-interest capital injections and on completion of a valuation of the "securities" - the IOUs - were transferred into a trust so that proper records of these unconventional instruments was less transparent. Then when the SHTF at SC - Hubbard did a "good assets for bad" swap, but indeed the "good" weren't material/enforceable securities or assets at all.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=107…
Complete nonsense from Damien in the NZHerald. The PR Campaign against The Big Kahuna is well underway. the inherited non earned wealth a small number of influential New Zealanders must be protected. Notice how people who work , who create and transform never seem to mind so much about tax, they know that they will earn more and more as the years go by. Rather most moaning comes indirectly from those who have inherited wealth who have nothing to offer themselves except that they want to hold onto as much unearned wealth as they can, They are the ones who talk aboyt Mums and Dads a lot. People who sit on property waiting for it to magically go up in value through no effort of themselves, then demand that people who do work have to pay more and more for it. The parasites who infect New Zealand politics who would rather be the top worm on a dung heap than let anyone else have an even chance of siccess.
New Zealand continues to look for the discredited answers from Britain rather than casting our eyes a little further north to Scandinavia where people pay tax, but are rich. It is so hard for us to get our head around, it is worth a visit, talk to people. It does work.
If the right did not believe that hand outs worked , why do they abolish inheritence tax, so they can pass on money to the next generation. They know that a good start is essential. Only they are deluded into thinking that a good start for thier family has to come at the cost of a bad start for other families. It does not have to be that way. That is how England has done it for 100 years, It does not have to be our way.
Socialist drivel planB....
Pop off to live in Cuba..try telling them socialism will make them wealthy...hah.
Funny
It is closer to the opposite. I am opposed for Socialism for the rich that is all.
Wally you mention Cuba again, have you been there, do you know many people from there?
Wolly, I suggest some great pieces on youtube on cuba.....how they delt with their peak oil.....this will be NZ inside 2 decades.....you (and I) maybe dead before that but my children will be living through it....
Funny thing but they are still functioning, and its interesting because "wealth" consists of living off un-sustainable processes. Most of it seems to be take a non-renewable process and sell it....what do you do when its output declines and eventually runs out?
and it will.
regards
I have always being amazed at the arrogance of the statement inherited non-earned wealth. The assumption there is that all inherited wealth is somehow non-earned. But how could you possibly know that? How do you know that the person who has inherited wealth wasn’t also intimately involved in its creation, its maintenance or its growth, and the pay off was going to be that one day, they would inherit the family business? That’s how intergenerational family businesses operate, right? The kids start working in it from the day they leave school or Uni and then eventually they inherit it, and the cycle is repeated with their kids. To imply, as the socialists with a chip on each shoulder do, that inherited wealth is not earn and its beneficaries had nothing to do with it is just such self-serving sweeping arrogance.
It is the arrogance of envy David....easiest counter is to ask PlanB to share 'his' wealth with all those poor Somalians....fat chance...hah
In that vein, Wolly, and in light of Kate's comments below, she falls into much the same position of being a do as I say, not as I do hypocrite. Kate strikes me as the sort of women who is well and truly separated from the masses perched high up in her ivory tower surveying the ants from a very safe distance, and where she can immerse herself in the cosy comfort of books on social theory, read papers that tut-tut over the ‘failed experiment’ of the ‘neoliberal model’ and engage in long discourses with concerned colleagues on achieving theoretical equality for New Zealanders - just so long as she doesn’t actually have to step down and wade her way through the filth of ordinary people's lives. That sort of rude awakening she will defend against at all costs.
As she is American, I don’t know really why she wants to live in New Zealand with its welfare state. I can only surmise that it is due to the treatment she receives from her fellow countrymen for her radical and perverse left-wing views – but of course, just so long as she doesn’t actually have to live like that. That wouldn’t then be all cosy and theoretical would it?
I'm sure Americans come over here to escape the hypocracy that runs deep within America...they no doubt contribute annually to support the indigenous Amercian court claims for land and mineral resources stolen by the thieving American govts and grubby corporates, post the start of the great usa. Chaplin was right to give the place the big finger.
Hey guys I came over here in 1978 at 21 years of age (fresh out of uni) as I got married to a NZer.
He came to the US for the wedding and tripped around for a month or so before it to meet all the rellies (US and Canada). We hadn't yet decided where we would live once married - as I'd been to NZ, but this was his first trip to the US. Following this good look around the place - he said he thought all the family lovely, and it was a nice country as well... but nowhere could he find a decent meat pie.
So, NZ it had to be.
DB, I think you'll find I'm very unlike the imagined stereotype you have of academia. Sure I read alot of academic papers but the real reason I support the Big Kahuna is because I know NZ's poverty trap and widening disparity very well from a first hand perspective - given we have lots of friends and acquaintences, young and old, some working poor/some non-working poor that have found themselves in it. And the fact of the matter - they are all really good people - no more, no less intelligent than me.
Oh, and ps - I grew up in a very poor household in the US (single income solo Mum, as my Dad was ill throughout most of my youth). So, I can proudly say I've been there as well. Can recall Mom saying she had only 10 cents in the check account once while waiting for the next paycheck.
David B why is it that you play the person not the idea?
By the way the neo-liberal experiment IS a totally failed experiment -- one of the conclusions one must draw from the continuing global financial crisis surely.
If you are about the centre of politics, yes (neo-liberal experiment IS a totally failed) however the neo-liberals/neo-cons are just like the "socialists" in the UK in the 60s and 70s the reason solcialism failed was because we were "not socialist enough"...same thing today with the rabid right.
Kind of wierd (both camps) from my perspective.......but then if you sit back and consider them an extremist few then its makes sense...(to them)...
However from what I can see we have seen how the "socialist" experiment failed with the USSR and it looks like we will get to see how the USA will fail with libertarianism.....based on they will go as far as they can or did go as far as they could....
regards
What are you actually on about. Why not try and answer the question. How do we pay for, maintain and grow the commonwealth of New Zealand? That is what this is about. The currecnt model does not work. You know it doesn't but are too afraid to change maybe? I do not know. New Zealand was the first country in the world to give women the vote. Are we still that sort of country , a country that can go first and do the right thing or do we have to always wait for someone else to tell us what to do?
Taxation as we practice it does not work. You know that.
Window taxes were a wealth tax, they worked.
Many people have been opposed to Income tax for a long time now. I am opposed to high rates of income tax and consumption tax because they reduce the incentive to create, build and transact.
Wealth Taxes are needed to allow a big reduction in Income and Transaction taxes. Even if you want to reduce all taxation becase you think that the state is evil, the way we tax would still need to be rebalanced away from taxing doing stuff and move to taxing not doing.
You can know that in the UK when wealth is passed down generation after generation. I went to a mates house the other day. Has been in the family for 800 years. They own the village and the farm all around them. He is a great bloke but, 800 years! The whole taxation system in the UK is designed to keep him on top now is that good or bad- well it is good for him and I think he is doing a good job. . In effect he does not really own it because he really could not sell, but he does get the benifit of it all and all without being taxed.
So his place is worth £20 Million. Now to earn £20 million would be pretty hard. A lifes work.
Sure intergeneration companies have been shown to work. You could look at VW for that. But if you look a bit depper you can see that the sate owns 20% and that the reason it exists at all is down to British Officer after WW2 who got the place back up and running. Why did he do it- he got no benifit. Funny how the Family crawled back and took charge again though isn't it.
My problem is not actually with intergeneration wealth transfers . My problem is that the rich think that they are a good idea for them but that the poor should stand on their own two feet. Of course they would never do that to their own children. So they pay the school fees and the Varsity fees, but the poor should pay thier own fees.
"How do you know that the person who has inherited wealth wasn’t also intimately involved in its creation, its maintenance or its growth"
By the same token how do the rabid right "know" ppl on welfare are dole bludgers and dont want to work?
Or that all rich ppl are hard workers?
"it is just such self-serving sweeping arrogance."
exactly....
regards
If you download the Freakonomics podcast, a few weeks ago they did an episode on the subject of inheritance of family businesses, and how it can often take a family firm into disaster, because business competence isn't hereditary, and the designated heir is no more likely to have the skill to run the thing any more than some random person off the street, and that education and training can only go so far to counteract that.
Went on to say that in Japan the system of inheritance works better because they often tackle it in the other direction - pick an heir based on merit and competence, then adopt them into the family.
Anything from Freakonomics has to be taken with a great deal of skepticism, but it was definitely thought-provoking.
Interesting Herald article - and interesting to read thru the comments. Maybe I'm biased - but it seems the Big Kahuna supporters play the ball and the opposers play the man - as per our two friends above! :-)
Says alot.
In your dreams, sweetheart!
Exactly my point!
:-)
Plan B : Let me get this straight , because Damien Grant has studied Gareth Morgan's " Big Kahuna " plan , and has found faults within it ...... you label Grant as apart of a PR campaign against the plan ? ...... So , what you're saying is that no one can criticise Morgan's revolutionary idea ! .... We'll just accept it as gospel , and begin to pass it into law !!!
3 quotes from Damien Grant : -
.. " The first part of the book , " The Big Kahuna " , is an excellent and well researched summary of how we found ourselves with the current mosaic of conflicting , confusing and mostly ineffective social welfare policies . "
.. " ...a progressive tax system hurts the most productive members of the community .... they take their skills off-shore . Talentless poets would remain . Radiologists would depart ."
.. " This is not to defend the current scheme . Morgan is right , it is beyond repair . We need a radical solution , but the answer to a broken social welfare state is not to make everyone a beneficiary . "
Dear Mr B.
You give me too much credit.
The idea that I am part of a PR campaign to protect the inherited wealth of others is fanciful. Do you really think there is some evil cabal that meets every second Thursday at the offices of Michelle Boag to arrange this sort of stuff?
I think it was clear I enjoyed The Big Kahuna. The fact that people will disagree with the author’s conclusion is to be expected. I assume Morgan did not want his book to be ignored.
The book was impressive and it deserved to be critiqued. It is perhaps a shame that others with greater credibility than I have not taken up the challenge to engage with Morgan and his ideas.
The issues are important and should be debated.
Damien
Thank you for your comments. I do think that the Right really do actively promote their ideas. The comment that did really annoy me is this one.
but the answer to a broken social welfare state is not to make everyone a beneficiary
You know that the Big Kahuna does not really do that - so why say it?
The idea that most taxation has to come from Income Tax and transaction taxes is fatally flawed.
1. The rich can hide their income from income tax.
2. The poor are not being paid enough anymore to contribute much.
Something has to give.
New Zealand used to lead, can you imagine us leading now?
Which country was the first to give Women the vote? Could that country actually do something sensible about taxation?
Not if we drop stupid comments like make everyone a beneficiary into articles.
Pah ! .. You who smell egregiously of elderberries , you cannot hinder our quest for total berry domination ..... .
.. .. the Gummy Bear army is at the forefront of Swedish loganberry harvesting technology , we cannot be stopped ..... first the Euroberryzone , and then the Worldberry .. aha ha ha de haaaaaaaa !
The Big Kahuna
Money generated with new NZtaxes should not be primarily invested into the welfare system, but in creating skilful, decent jobs, sustainable manufacturing, into the real economy. Of course this needs a major reform of our economy and a change in our culture, especially among authorities/ politicians.
Only then we have a chance of a decent standard of living in the wider NZpopulation, a good working welfare system and a better prospect to prosper.
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