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A distorted economy

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Two graphs that summarise where we are economically as a nation, and without even looking at the tourism numbers, which are bad enough on their own.

First up, real estate prices for residential properties.

Those increases, in one year, are staggering. In dollar terms they exceed any “help” that any government, even one as spendthrift as Labour, can give to young, first-time home owners.

The price to income multiplier increased during the “nine long years of neglect” of National from 5.05 to 6.08. Under Labours stewardship it’s now at 8.61.

It’s been common wisdom for twenty years now that Aucklanders were cashing up and heading to the Waikato and Bay of Plenty. But since when are retired Aucklanders or Wellingtonians cashing up their houses and moving to Gisborne (almost 50% increase) or for that matter the West Coast (33.6% increase). There will be specific reasons for this inflation but they all boil down to factors driving the basic economic law of demand exceeding supply.

In Auckland those factors have been population growth increasing faster than homes can be built – which in turn is based on government immigration decisions on the demand side vs. building regulations and costs, and even more so the land-banking of city planning causing huge lifts in the cost of land, far beyond the increase in house value itself.

But can those factors be driving demand exceeding supply across the whole nation this time? Immigration has been basically zero for the last year and while land-banking and city planning are a nation-wide supply restricting problem there have not been dramatic changes in those factors in the last year, and some areas have always been more relaxed than others. So what’s driving this recent nationwide inflation?

  • Government changes on investment deductibility and the increased time over which the bright-line test can be applied (basically a Capital Gains Tax) mean that investors are deciding now it’s not a great time to sell, reducing the number of listings (supply)
  • Sensitive people are feeling the breeze of general inflation and take positions to protect their own capital base by lifting those sales from the market, further tightening supply. Better to sit on the potential capital gains, increase the mortgage and use that money to buy a new boat. Notice the increase in prices for second-hand boats, caravans and motor homes.
  • Interest rates pushed down in 2020 as the classic mode of Keynesian response to a potential recession. That increases demand, at least for a while.

The government must be hoping that this is just a one-off and that once the housing market has adjusted to a post-Covid world, things will settle down. We should all hope for that but I see merely the results of a “critical mass” of factors that have finally come together at one point in time rather than individually affecting the market at different times. Even if this spike cools down, the ongoing house price increases will still be greater than we can cope with.

Then there’s this:

That’s Fonterra’s share price in the last three months. An awful drop from $5 per share to $2.82 that exceeds the percentage drop in 2018. That last was caused by financial problems at the company. Problems that, like the housing situation, had been bubbling away for years, but which hit critical mass that year.

Fonterra has since cleaned up many of those problems and was looking pretty healthy internally, with a good payout. So what’s happened?

Professor Keith Woodford is on the case as usual with two articles in May that discussed what might be coming.

You can read the details in those two articles . The summary comes to five points, the first two being around proposals only.

  1. Reduce farmer requirements to own shares, with them needing to hold one share for every four kg of Milksolids supplied, compared to the current one share for every kg of supply. That last is a hangover from Co-op days when the shares were a nominal $1 that never changed as farmers joined and exited co-ops.
  2. Shut down or cap one arm of its two-armed share investors world, the Shareholders Fund. This Fund and the related Trading Among Farmers (TAF) scheme allowed a two-way flow of “units” and shares between the Fund and the Farmer share trades, which kept the price of shares and units within a cent or two of each other and supplied vital pricing information to both farmer investors and external investors.
  3. The Fund allows non-farmers to buy shares and get a dividend but with no shareholder voting. While there was talk about enabling the company to raise capital this way without trying to get cash from cooperative members, the real reason was to remove the redemption risk as farmers exited the company. Under the old co-op model they would not have had the cash to pay them out. The Fund and TAF would shift the risk.
  4. The flaw was that the only way TAF could remove the redemption risk should Fonterra lose a major number of suppliers was by taking on a new risk of losing control of the company to non-farmer investors.
  5. The risk now is not from exiting farmers but from a substantial and ongoing reduction in production, perhaps in the order of 10% to 20%, primarily driven by future environmental regulations around herd sizes. That’s one rock. The other is that farmers still want to control the company.

While only proposals, they did suspend trading before the announcement and they have cut the link between farmer share trading and the external fund, showing the future to investors.

Those investors, the market, have reacted badly to all of this and although it would be easy to say that this is just frippery that ignores the now “healthy” internals of Fonterra, the fact is that share prices tell us what the market thinks of any company’s future.

Clearly Fonterra’s and perhaps the rest of the dairy industry’s future in NZ is not good. What that means exactly for the wider NZ economy is another question, but clearly for some environmental and economic extremists like No Right Turn the message is the same as for the Huntly power station and the fishing industry: Let It Die.

Written by Tom Hunter

June 19, 2021 at 12:24 pm

Random Fun III

Another collection of things that don’t justify a post in themselves.

First up, what is it with Senators from Arizona? In this case Democrat Kyrsten Sinema, who has loud clothing choices and is wearing a ring labeled “Fuck Off”.

It’s not entirely a joke either considering that is exactly what’s she’s said (in more polite terms of course) to various Big Ideas from her own party, like a $15/hour minimum wage, votes for some Trump cabinet members, and ending the Senate filibuster on all legislation.

I know there’s stuff she supports that I don’t but I’m beginning to warm to Maverick II.

Second is one of those Big Ideas. There’s a Democrat party activist group that has decided to learn from history and try and avoid another Supreme Court pothole such as the one that happened with Justice Ginsburg hanging on grimly, only to die while a Republican was President.

The “Demand Justice” group has therefore decided to focus on the next oldest Democrat Justice – Stephen Breyer – and as you can see from the van driving around D.C. they’re very blunt about what they want.

Third is an interesting screen capture of some chatroom involving folk from the Middle East discussing the best ways to escape from where they are to head for Germany. You can see the recommended routes marked out, but what amused me was the nations the group thought should be avoided on the trip North, although I’m a little surprised that they think Greece is one path, since none other than the EU Commission President called it “our European shield”.

Fourth is a juicy item for all those folk who can’t argue a point and use links to “Fact Check” sites, like that of Politico’s “Truth-O-Meter”.

On its website, PolitiFact splits its Biden verdicts into “Facts Checks Of Biden” and “Fact Checks About Biden.” Our review of the first 100 days shows 13 fact checks “of Biden,” and 106 fact checks “about Biden.” That’s an eight-to-one disparity.

In other words, they’re much more sensitive about someone “lying” about Biden than they are about Biden lying. 

That’s hardly a surprise. As people’s trust in journalism has declined over the last twenty years, the same journalists started to form “Fact Check” groups where they could write the same stuff and exhibit the same bias that had caused the loss of trust in the first place.

It’s a scam that should have ended long ago, especially when you dig into their “Fact Checks” and find that most are simply arguing a different opinion, not a fact. The reason it has not ended is that Lefty politicians, activists and supporters love the sort of cheap, one-URL-link, argumentum ad verecundiam, gaslighting they get from the likes of Politico.

Following on from the post about New Zealand’s woeful productivity the other day I was reminded of this classic Dilbert question.

Of course there is the situation known as No Money – and irony too.

Written by Tom Hunter

May 19, 2021 at 9:27 am

The North Face: an outstanding company

I don’t think I own any North Face gear, or ever have, though I do think their line of outdoor clothing is stylish.

Apparently the company likes stylish things across the board, especially those which let its customers know that it cares about more than just profits, but the Earth itself:

Innovex is based in Houston and has nearly 100 workers in the Permian Basin.

Each year, the company gets a Christmas gift for its employees. This year, it was supposed to be a North Face jacket with an Innovex logo, a company Innovex has ordered gear from in the past.

The company providing the jackets said The North Face doesn’t want to support the oil and gas industry in the same way they’d reject the porn industry or tobacco industry.

“They told us we did not meet their brand standards,” Innovex CEO Anderson said. “We were separately informed that what that really meant is was that we were an oil and gas company.”

[North Face said that it] “thoroughly investigates product requests to ensure they align closely with our goals and commitments surrounding sustainability and environmental protection.”

Take that you disgusting, Global Warming, despoilers of Gaia! Begone from our customer’s ranks! No more will our skiers have to be ashamed at wearing the same clothes as some deplorable oil driller. Virtue and purity hath returned to our world.

Unfortunately for North Face their management turned out to be pretty ignorant about their own products and it didn’t take long for somebody in the fossil fuel industry to strike back – but in an unexpected way:

The Colorado Oil and Gas Association has bestowed its first-ever “Extraordinary Customer Award” on The North Face, saying it appreciates the company for its abundant use of oil and gas.

“To have such a large percent of what they make, probably three-quarters of the mass they ship is actually our product. So, it’s hard to top the all-in nature of The North Face as a consumer of our product,” said Chris Wright, CEO of Liberty Oilfield Services.

Fantastic stuff and now a US state government, Louisiana, has made it official with a resolution passed last week, that recognized The North Face as an “extraordinary customer” of “the Louisiana oil and gas petrochemical industries.”

The resolution highlights the “symbiotic relationship between the Louisiana oil and gas and petrochemical industry and The North Face,” commending the clothing company for “utilizing vital oil and gas resources so important to our state.”

“The North Face continues to offer a comprehensive collection of high-performance outerwear, skiwear, backpacks, duffels, and footwear made with nylon, polyester, and polyurethane, all of which come from petroleum products,” the resolution reads.

Congratulations to The North Face for these well-deserved awards.

In fact I’m so pleased about this that I think I shall go and buy a new ski jacket, and while looking at the products in the store I shall certainly offer voluble and effusive commentary in commending them on their wonderfully high use of fossil fuels.

I’m sure their sales people and customers will also be pleased with my visit.

Written by Tom Hunter

May 14, 2021 at 11:05 am

The spoon is long enough

In the spirit of blogs supporting one another I urge readers to read this rather long article, Economic Coercion, over at the Croaking Cassandra blog site run by economist Michael Riddell.

The article deals with the question of whether New Zealand can afford to confront China over its actions in recent years, specifically in the South China Sea and with its Uighur minority.

Most articles have focused on the geo-political and human rights aspects of these actions, of which this article over at the Kiwipolitico blogsite, by foreign policy analyst Paul Buchanan, Facing Facts, is a good example. I recommend you read it also. Buchanan argues that the 5-eyes partnership is not going away and is not going to be materially affected by any frictions that may arise between the partners in dealing with China. He also points out that China has nothing like the 5-eyes network but is instead reliant on old-fashioned human intelligence. But he also includes this piece regarding our economic relationship:

New Zealand is now essentially trade dependent on the PRC. Approximately 30 percent of NZ’s trade is with China, with the value and percentage of trade between the two countries more than tripling since the signing of the bilateral Free Trade Agreement in 2008. In some export industries like logging and crayfish fisheries, more than 75 percent of all exports go to the PRC, while in others (dairy) the figure hovers around 40 percent.

The top four types of export from NZ to the PRC are dairy, wood and meat products (primary goods), followed by travel services. To that can be added the international education industry (considered part of the export sector), where Chinese students represent 47 percent of total enrollees (and who are a suspected source of human intelligence gathering along with some PRC business visa holders).

Buchanan argues that this is why, in her recent “Taniwha and Dragon” speech, our Minister of Foreign Affairs was subtly saying that New Zealand needed to diversify away from China, without actually sticking it to them in a way that would get their backs up. I’m not sure I would read that much into such “subtlety” as it appeared to be one small sentence rather than a sustained argument and as such it amounted to the bleeding obvious.

Riddell’s expertise is economics and his article tackles this assumption, quoting National’s Gerry Brownley for a start:

“But you have got to bear in mind that there are hundreds of thousands of New Zealanders at work today largely because of our trade with China. It is not a simple matter, it is not a straightforward matter, it is one the Government should definitely have a position on.”

But as Riddell points out, statistics like “30 percent of NZ’s trade” can be deceptive:

And, yes the PRC recently moved a bit ahead of Australia as the country where the most two-way trade is done with, but – as people have noted for decades – one notable thing about New Zealand is that our trade isn’t very concentrated with any single other country/region (much less so than is the case for Australia). Total New Zealand exports to China, pre-Covid, were about 5 per cent of GDP.

Moreover, he points out that coping with economic blows from general things like recessions in the USA, or China, is what we try to do all the time, and what our systems are set up for:

A severe and sustained recession in China would represent a significant (but cyclical) blow to the world economy, and to New Zealand – and would do so whether or not New Zealand firms traded much directly with PRC counterparts. That is also true – as we saw in 2008/09 – of severe US recessions. That sort of shock – and others like them, at home or abroad – is why we have a floating exchange rate and discretionary monetary and fiscal policy.

And this is before we consider the rather strange fact that…

… contrary to the rhetoric about being a “small highly open economy”, actually the share of our economy accounted for by foreign trade (exports and imports) is (a) much less than one would normally expect for a country our size, and (b) has been shrinking. 

Like Buchanan he lists the areas of exposure as export education, tourism, and our commodity exports of dairy, forestry, meat, and seafood, and then looks at those specifically, noting in particular that the first two would be the ones most exposed to China, but which have already been dealt a huge blow by Covid-19 anyway so at present they’re not a factor when thinking about Chinese retaliation.

Riddell acknowledges the obvious, which is that specific businesses could get hurt, but there are some general economic aspects that apply.

The world price for commodity products is determined by world demand and supply conditions, a point given far too little attention in the timid New Zealand discussion of PRC issues.

To a very large extent, countries (all of them) make their own prosperity (or lack of it).

China didn’t make us rich or poor. It made China first (last century) poor, and eventually middle-income.

In other words, the argument that our FTA with China “saved” us after the 2008/9 recession, is a myth in the face of the fact that our total trade share of GDP was falling not rising over this period, that New Zealand’s productivity performance over this period was woeful, and that it took 10 years for our unemployment rate to get back to pre-recession levels.

By the same token, China is not actually in a position to “punish” us if we speak out against some of the things they’re doing. Riddell takes the specific example of Australia, much in the news recently as having been given some of that punishment. Again, there are specific businesses that have been hurt. However:

What we don’t see is any sign of severe economywide consequences: there is no mention of the issue (or risks) in the Reserve Bank of Australia’s latest (lengthy) minutes (by contrast, changes in New Zealand population growth actually get a mention). It seems to a third-order issue at a macroeconomic level – and the overall economy is what governments should be thinking about when they consider economic risks and consequences.

Of course, people will point out that China has not yet tried sanctions on Australian iron ore (but they did with coal, only to run into problems, because they still needed coal).

Australia, has 30 per cent of the world’s iron ore reserves (and a larger share of production) and China currently consumes a very large share of world iron ore production, so how badly are the Chinese willing to hurt themselves? The classic problem for people who want to use trade as a weapon is that you end up punishing yourself. Admittedly that may worry the CCP less than it would a democratically elected government, but even the CCP treads carefully when it comes to economically screwing over its people. Riddell makes that point in looking at the specifics of some of the other countries that China has targeted and notes the gap between China’s demand for dairy products and their local production.

He also makes the point that while these firms might have warranted sympathy a few years ago when these issues were not present and coercive tactics were not known, they are now trading with their eyes wide open to the risks and if they continue to do so that is no reason for a New Zealand government to cover for them.

He sums it up:

… we have macroeconomic policy for, fiscal and monetary, to help smooth the economy in the face of disruptions, whether Covid, coercion, or whatever.

Whatever the potential disruptions for individual firms – and they are real (for them) – it simply is not credible – given the (smallish) size of our total exports, the commodity nature of most, the share of trade with China – that any sort of conceivable economic coercion would represent a serious sustained threat to the New Zealand economy.

It’s worth that cost to confront the PRC about the stunts they’re pulling, and if they want to punish us then we’d be better off reducing our exposure with them anyway.

For the last twenty years I’d hoped that trading with China might soften the CCP’s approach to things: not that I expected them to become a democracy, but that they’d go easy on Hong Kong (as they did for twenty years) and Taiwan. And for a while – especially with term limits applied to their Communist party General Secretaries, which while not exactly democracy, at least had the same effect of preventing the rise of the usual Communist cult-of-personality – it seemed to be okay, as former Australian PM, Tony Abbot pointed out in recent article in The Australian. He had the same hopes most of us had.

But the rise of Xi Jinping has changed all that. The trade approach hasn’t worked. Worse than that, rather than us exporting our values to China they’re exporting theirs to us, primarily the choice to throw our morals and ethics to the floor for the sake of money. It worked with the Chinese people after Tiananmen Square and the CCP leaders are betting it will work with us too.

So far they’re right.

Written by Tom Hunter

May 2, 2021 at 6:00 am

The Power and The Glory

I don’t like linking to MSM sources, especially the $1 item known as Newsweek, but if they’re willing to publish an article by J.D.Vance then I figure it’s worth it.

Vance is the author of the massive best-selling book, Hillbilly Elegy, published in 2016 and foreshadowing the rise of populism within the Republican Party, epitomised by the political success of Trump that year in winning the GOP Presidential primary and then the 2016 election:

Vance describes his upbringing and family background while growing up in the city of Middletown, Ohio, the third largest city in the Cincinnati metropolitan area. He writes about a family history of poverty and low-paying, physical jobs that have since disappeared or worsened in their guarantees, and compares this life with his perspective after leaving it.

But in the Newsweek article Vance describes the new world he has been increasingly encountering as he begins to move through “elite” circles, courtesy of the success of his book (recently made into a film by Ron Howard). It’s a bit of shock to say the least:

One of the things I had no idea about, coming from a working-class background, is that America’s ruling class loves to celebrate how much power and money it has. I call these “masters of the universe” events, and they’re held all over the country in fancy hotels, ski lodges and beach resorts. On this particular evening, my wife and I found ourselves at a roundtable with the CEO of a large hotel chain on our left, and a large communications conglomerate on our right.

The Republicans, we’re often told, are the party of the rich and famous. Yet nearly everyone assembled at this dinner simply loathed Donald Trump. He was the focus of nearly every conversation.

Nothing unusual about that but then my background is not as harsh as Vance’s; I’ve always been aware of how many rich people are left-wing.

Well, “left-wing” about certain subjects, but not others, those closest to their moneymaking hearts:

And then the hotel CEO announced, “Trump has no idea how much his policies are hurting business. I mean, we can’t keep people for $18 an hour in our hotels. If we’re not paying $20, we’re understaffed. And it’s all because of Donald Trump’s immigration policies.”

There are those in the Free Trade/Free Market world who treat immigration as simply one facet of that, which it is. The likes of Peter Creswell are especially vociferous about having completely open borders: Open Borders Are A Trillion Dollar Idea.

But as Vance puts it from his perspective:

Let’s pause for a second to appreciate one of the wealthiest men in the world complaining about paying hard-working staff $20 an hour. The only thing he was missing was the Monopoly Man hat and cane.

And I’ll bet he voted for Joe Biden and probably every Democrat down the line, on that issue alone. Increased tax rates he can ignore.

His argument, while vile, was at least intellectually honest:

“Normally, if we can’t find workers at a given wage, we just get a bunch of immigrants to do the job. It’s easy. But there are so few people coming in across the border, so we just have to pay the people here more.” 

Something which showed up clearly in the income stats for 2018-2019, with the lowest income levels making the biggest gains in more than twenty years, not to mention the positive impact on Black and Hispanic rates of employment. Vance nails the central point:

It’s about money. Nearly every major business and financial leader in this country is a supporter of the Democratic Party. They love illegal immigration for the simple reason that their livelihoods are subsidized by illegal immigration—while illegal aliens themselves are subsidized by the taxpayer. It’s a redistribution scheme from the poor to the rich. More immigration means lower wages for their workers and easier access to servants for their decadent personal lives.

Yeah, those lawns aren’t going to mow themselves, and this redistribution scheme is protected by that magical word, “racism”.

Written by Tom Hunter

April 6, 2021 at 10:55 am

172

Hours that is. One hundred and seventy two hours is what shows up in my last fortnightly pay slip for the agricultural contractor I work for.

I finally have a Sunday off. A beautiful, lovely, empty Sunday after twenty consecutive days of 5am wake ups and 11pm bedtimes.

Others have more hours and I’m informed by those who’ve worked here for several years that two hundred plus hours per fortnight is a more normal harvesting season. We assume that it’s because we’ve had a long stretch of fine weather and started a little earlier than usual, so the load has been more spread out than in the past. The boys – and most of them are boys – are not happy about this since such incredible hours are a bonus on top of their other income earned on random jobs during the rest of the year. Without such work, times would be tough.

I’d probably be working longer hours were I on the chopper crews (maize chopping) that use tractors and trailers. Suitable only for short road runs from chop site to stack site, those drivers work deep into the night to get the job done.

By contrast my crews are all trucks because we’re serving customers located fifty kms or more away from the chop sites. The hours are limited by truck driving regulations: a thirty minute break after five-and-a-half hours driving; a ten hour break after thirteen hour driving; a twenty four hour rest break after seventy hours. The thirteen hour daily limit means that they have to be off the road by 7 or 8pm, having started at 6 or 7am – and “off the road” counts even when they’re being driven home by someone else.

Of course my specific work, and those of other members of the crews, like the chopper and stack tractor drivers, means that I’m still left with a one-two hour pack up and commute routine, but at least I’m getting home before midnight.

An alternative title for this post would be: “Rabid capitalist discovers the joy of government regulations” ! I doubt we’ll ever see a union though.

The technology may have changed but harvest has always been intense. I recommend a relatively unknown New Zealand book called Nearly Out Of Heart and Hope”, by the New Zealand historian Miles Fairburn.

It’s based on the 800,000 word diary crafted by one James Cox, an itinerant labourer who came to New Zealand in 1880 and died in 1925. The title of the book is one of the phrases he occasionally used when things were dark. Here’s a short sample of the dairy itself, which he wrote every night for thirty seven years, crafted by candlelight with pencil on little strips of paper (not being able to buy sheets) which he then folded up into tiny booklets:

“my shoes are got very bad… I have only one shirt I can wear, nearly worn out so I am in an evil case and cannot get either money or goods from the firm. Most of the fellows… are getting doubtful if they will get their wages at all. The firm appears to be nearly bankrupt.” 

After an even lower period of poverty in 1892/93, during which he took to the roads as a “swagger”, he found new work:

Things improved a little in 1894 when he found work with a Carterton agricultural contractor. He worked on traction engines harvesting grain until 1902. This was a harsh and unreliable form of work which was anything but romantic.

That sentence barely covers the raw detail provided by Cox himself and the more concise descriptions of such work by Fairburn: unrelenting days of tough physical effort in the heat and dust of Wairarapa summers with no showers at the end and just a shared tent with the other unwashed men. I get to return to a solid home and a hot shower and food, such are the wonders of the modern world. By comparison to that man I’m just slumming it.

James Cox

The book quotes only those portions of the diary that Fairburn can use to make his points, like any good historian. He struggles most of all with why this well-educated, sober and hard-working man never advanced his life beyond such toil. He was probably more suited to clerical work but he could have been in charge of the crews, indeed he was offered such work by his employer, yet for some unknown reason he did it only reluctantly and occasionally. He didn’t like it.

I think the reason Fairburn struggles is that he is trying to imposing rationality on yet another irrational human being (rational humans are the basis of economics and much other social science). When he turns to examining the ideology of the times and how it may have worked in the mind of Cox he fares little better. Niether does the sympathetic reviewer:

His account of the way in which the potent and pervasive Victorian ideology of self-help shut off opportunity for Cox is the best piece so far written in New Zealand on the way in which ideas influenced individual behaviour. Cox never realized that hard work and self-discipline were insufficient means of climbing out of the poverty trap.

Once he recognized that failure was probably a permanent state from about 1893, he maintained the code as a way of ordering his life and reinforcing his sense of superiority over ‘rough’ workmen. It seems that ideology not only justified the success of winners in the social laboratory: it also shaped the actions of losers.

I agree that hard work and self-discipline are not enough on their own. But the unspoken assumption of that reviewer is that they’re not really necessary either if those implied other factors exist: presumably things like unionised wage rates, unemployment benefits, free healthcare and other social welfare assistance (housing!).

In fact without self-discipline and the ability to work hard all those other things will also be found to be “insufficient” for lifting up the James Cox’s of the world. I think we’re seeing that around us every day.

No, in Cox’s case, despite all his admirable qualities, there was a strange seed in his mind that prevented him from rising and doing better in the world. Nothing that any government could have done would have changed that.

… labour reforms which also helped earn New Zealand the title of a ‘social laboratory’ apparently did not reach much beyond city limits and brought little help to Cox. Fairburn wonders if Cox was unusual but the reader is left with the feeling that many New Zealanders on low wages have long struggled to do little more than survive, and ended their days without savings or assets.

The sad and terrible truth I see every day is that this is still the case almost a century after James Cox departed this world.

This is his grave in the Greytown Cemetery and it was unmarked until 2013 when a Wairarapa historian, Adele Pentony-Graham, paid to have his headstone installed, “I felt it was the least I could do for him,” she said.

So say we all.

Written by Tom Hunter

March 28, 2021 at 9:30 pm

Bad Timing for Big Tech to pick a fight with the State

Google has threatened to pull its entire search engine capability from Australia.

This was made quite clear by their Australia-NZ Managing Director, Mel Silva, in his opening statement to the Australian Senate’s Economics Committee Inquiry:

“If this version of the Code were to become law, it would give us no real choice but to stop making Google Search available in Australia. That would be a bad outcome not just for us, but for the Australian people, media diversity and small businesses who use Google Search.”

Given that Google dominates the online search engine market, with an incredible 88.14 percent market share (Oct ’20), that’s a substantial threat to those small businesses – and all of Australia.

Over the past few years there has been sporadic discussion in various nations about forcing the likes of Google to pay for the content of the news media that they link with. Naturally this has been proposed by the Legacy MSM, as they’ve watched their subscriptions nosedive and advertising revenue vanish into places like EBay, Craigs List and TradeMe since the early 2000’s. But Google is there as well, since it gets a small slice of the money when somebody finds a service or product they want to buy via the Google search engine.

But after all the talk, little has been done, even in Europe, until now.

The proposed Australian law would force digital platforms to enter into negotiations with news media companies to pay for content. If the tech companies and media companies fail to reach an agreement, the law would empower an arbiter to determine the payments. Google is obviously not happy about this, hence the threat.

Google’s larger problem is that in the wake of the things done by Big Tech in the recent US election, even Right-Wing political leaders who could normally be expected to defend business, aren’t quite that keen to do so any longer, as PM Scott Morrison made clear in response to a question at his latest press conference:

Let me be clear. Australia makes our rules for things you can do in Australia. That’s done in our Parliament. It’s done by our government and that’s how things work here in Australia and people who want to work with that in Australia, you’re very welcome. But we don’t respond to threats.

Morrison is not the only leader that’s starting to push back against Big Tech. The nations of the European Union have long had the reputation of sticking it to America’s tech titans, as witnessed years ago when they levied a $US 794 million fine against Microsoft for its monopolistic practices against non-MS software products that needed to operate on MS Windows if they were to have a business.

HAHAHAHAHAHAHAHAHAHH..(cough)

Google and Amazon make Microsoft look like pikers in the monopoly department, no more so than when they effectively destroyed a Facebook competitor, Parler, by denying to sell its online app (Google and Apple) and then denying it the servers it needed as a platform (Amazon).

That’s just the usual area of anti-trust and anti-monopoly law. But all this has happened in the wake of Facebook and Twitter banning the accounts of President Trump and thousands of Right-Wing online voices. The Euro’s, even hating Trump as they do, were not impressed:

“The fact that a CEO can pull the plug on POTUS’s loudspeaker without any checks and balances is perplexing,” wrote Thierry Breton, the European Union’s commissioner for the internal market on Politico. “It is not only confirmation of the power of these platforms, but it also displays deep weaknesses in the way our society is organized in the digital space.”

Merkel’s chief spokesperson Steffen Seibert said, “The right to freedom of opinion is of fundamental importance. “Given that, the chancellor considers it problematic that the president’s accounts have been permanently suspended.” He said that they didn’t have issue flagging a post. if it was ‘inaccurate, but that they should not be banning speech.

U.K Health Secretary Matt Hancock also blasted Big Tech for what they had done, for making “editorial decisions” which then raised a “very big question” about how social media is regulated. “That’s clear because they’re choosing who should and shouldn’t have a voice on their platform,” Hancock said.

And their had been earlier warnings, such as one from psychologist Robert Epstein (who voted for Hillary Clinton in 2016):

“We’re finding very substantial pro-liberal bias in all ten or at least nine out of ten search results on the first page of Google search results… not on Bing or Yahoo though,” Epstein reported. “And we’re seeing that bias in every single demographic group. In fact, in one report we generated recently, we saw more liberal bias in Google content going to conservatives than going to liberals.”

It’s hardly a surprise that the California-based giants swing Democrat hard in their political donations. It literally goes with the territory.

A 2018 survey found that conservative employees in Silicon Valley tech companies live in fear that their political beliefs will be found out. James Damore said conservatives at Google are “in the closet” and that Google executives are digging through a secret email list in order to out them.

It’s never a good idea for any business, no matter how large, to pick political fights, because you can never guarantee that the side you pick will always be in power.

European politicians have a different motivation; they guard the power of the state much more closely and jealously than their counterparts in the USA, which has a history of not trusting government and supporting the private sector against governments. In the USA there are still Republicans who will defend the likes of Facebook and Google against the regulatory efforts of the EU and Australia, but after the stunts that Big Tech pulled before and after the US election against GOP voices, the ranks of those GOP defenders must be dwindling.

Ultimately it will be a combination of private and public sector efforts that are going to whittle away at the likes of Google, as happened with previous IT monsters like IBM and Microsoft.

And those efforts might be led by another super-rich person – actually the richest man on the planet at present – as shown by his re-Tweet of a Babylon Bee satirical article.

Elon Musk has long made known his displeasure about the likes of Facebook, on more than one occasion leading chants of “Fuck Zuck. Fuck Zuck“, as he did just the other day when he playfully discussed buying Facebook:

“You know, when I told some close confidantes about this idea of mine, they all wanted to know what I’d do with Facebook,” Musk explained. “And as much as I know people like to use it as the Internet’s premier ex-girlfriend or boyfriend stalking platform, I think I have much better solution, and I mean better for the species, if not our entire planet.”

Musk showed the investors in the room an animated video that detailed his plans for Facebook. The video shows a SpaceX Falcon rocket blasting off into the sky. At one point the two solid boosters fall off and glide on a precise path down to the landing pad. Both rockets land perfectly square, and one ends up resting gently on a big red button labeled “DELETE.”

“And you can see that the second side booster would end up pressing the delete button,” Musk said. “Which would send a proton torpedo down the exhaust port of Facebook’s headquarters, triggering a chain reaction that should destroy the platform.”

He’s got my support. Google and their ilk need to wake up to the fact that they’re making a lot of political and business enemies very quickly.

Written by Tom Hunter

January 23, 2021 at 8:29 am

Not literary folk

I don’t think the people at Twitter and the rest of the Silicon Fascist crowd, as well as most of the MSM, know much about history, or irony.

On the Right there’s been a running joke for years now about how for the Left the book Nineteen Eighty Four is not a warning but an instruction manual.

A joke no longer. This is not photoshopped but an actual chyron from CNN.

More such evidence.

Reportedly, even some European leaders, starting with Herr Merkel, have uttered concerns about Twitter and company banning President Trump from their forums. But don’t imagine that this is really about their defence of free speech; this is Europe after all, and what they’re really concerned about is a private sector company getting in on their government action. Censorship is only supposed to go one way in Europe and that’s at the discretion of the state, which is a power that Merkel and company jealously guard. Their concern is also around the possibility that they might be next in the gunsights of Silicon Fascism.

Meanwhile, one government, Uganda’s, did decide to threaten to block Twitter and Facebook out of the nation because of concerns that they might also choose political sides in their upcoming election.

That in turn led to the following response from Twitter.

So we can add to their historical and literary ignorance the facet of a complete lack of self-awareness.

Given these circumstances the following news, which would normally make me optimistic about people learning,…

… has instead led me to conclude that more people are simply obtaining these as “How To” instruction manuals.

Written by Tom Hunter

January 16, 2021 at 10:29 am

Let them eat $600

There is no doubt that the recent ructions in Washington D.C. from the crowds of Deplorables was driven partly by anger about the Presidential election.

But I think it overlooks another factor, which is the incredible degree of economic punishment that ordinary people have suffered in 2020 thanks to the lockdowns by various state governments. Millions of people have lost their jobs, businesses and incomes.

Moreover they’ve seen that the technocrat class has done well out of the Chinese Lung Rot lockdowns. People who can work from home and government workers have not missed a single paycheck, and IT billionaires have made out like bandits, with the likes of Bezos (Amazon), Zuckerberg (Facebook) and others seeing their wealth increase by tens of billions as their online companies became even more vital for delivering goods and services.

As a result the recent budget passed by the US Federal government, at 5000 pages plus, was an appalling slap in the face and an insult to tens of millions of ordinary Americans. The resulting anger may be more slow-burning than for political causes like Trump, but it’s there.

Yes. Yes it is, in addition to the messages about how some riots – the ones that screw you up – are acceptable, while others – the ones that might harm the precious hides of your rulers – are unacceptable.

Members of Congress are still mystified to find that in repeated opinon polls over the last couple of decades the American public rates them lower than prostitutes and used car dealers.

Written by Tom Hunter

January 14, 2021 at 11:15 am

A good news story

The only downside being that it’s a rather old one, although I like to think that things like this can still happen in America.

The story concerns one Richard Montañez, who grew up in Cucamonga Valley, California, sharing a one-room cinderblock hut with 14 family members.

He dreaded school. Barely able to speak English, he’d cry to his mother as she was getting him ready for class.

In those classes, when asked, all the other students would eagerly shout out their dream job: Astronaut, Doctor, Racecar driver. Richard had nothing to say: “There was no dream where I came from.” Not surprisingly he dropped out of school in 4th grade and took odd jobs at farms and factories to help make ends meet.

Some years later, in 1976, a neighbor let him know of a job opening for a factory janitor at the Frito-Lay plant down the road. The $4/hour pay was more than he’d ever made.

As he was getting ready for his first day of work, his grandfather pulled him aside and said: “Make sure that floor shines. And let them know that a Montañez mopped it.” Richard made it his mission to be the best janitor Frito-Lay had ever seen, but he spent his off-time learning about the company’s products, manufacturing, marketing and more. He even asked salesmen if he could tag along and watch them sell Frito-Lay products to supermarkets and other retail outlets

By the mid-1980s Frito-Lay was starting to struggle. The CEO announced a new initiative to all 300,000 employees: “Act like an owner”. It sounds like the usual corporate bullshit in which workers are supposedly empowered to work more creatively and efficiently, but in this case it seems that the CEO and his lower-level executives meant what they said.

Montañez was one who did not cynically dismiss the idea. He listened. Then he called the CEO, and the conversation with the CEO’s assistant went something like this:

Assistant: “Mr. Enrico’s office. Who is this?”
Montañez: “Richard Montañez, in California”
Assistant:“You’re the VP overseeing CA?”
Montañez: “No, I work at the Rancho Cucamonga plant.”
Assistant:“Oh, so you’re the VP of Ops?”
Montañez:
“No, I work inside the plant.”
Assistant: “You’re the manager?”
Montañez:
“No. I’m the janitor.”

You would think the conversation would have ended at that point but as an example of the managment meaning what they said about “Act like an owner”, the CEO got on the line with Montañez, who presented a broad outline of his idea. The CEO thought it sounded good but warned Montañez that he would have to make a presentation to the senior management team, and set a meeting in two weeks time.

Stunned by the response, Richard went to a library and picked up a book on marketing strategies. Then, he started prepping, and two weeks later, he entered that boardroom. After taking a moment to catch his breath, he started telling them what he’d learned about Frito-Lay and the idea he’d been working on:

  • “I saw there was no product catering to Latinos.”
  • On the sales trips he shadowed he saw that in Latino neighborhoods Lays, Fritos, Ruffles, and Cheetos, were stocked right next to a shelf of Mexican spices. Frito-Lay had nothing spicy or hot.
  • The Latino market was ready to explode, Monteñez explained.
  • Inspired by elote – a Mexican street corn covered in spices – Richard had created his own snack.
  • He pulled out 100 plastic baggies and passed them around the boardroom. Each one contained Cheetos he’d taken from the factory and coated in his own mix of spices.
  • He’d even sealed the bags with a clothing iron, and had hand-drawn a logo on each one.

At this point the room went silent and then the CEO spoke up:

“Put that mop away, you’re coming with us”.

The end-result was Flamin’ Hot Cheetos, and it became one of the most successful launches in Frito-Lay history. They went on to become a viral, pop-culture sensation.

Richard became a VP and amassed a $20M fortune.

Not bad for a boy from Cucamonga. He is the subject of a planned biopic, Flamin’ Hot, directed by Eva Longoria.

Written by Tom Hunter

December 29, 2020 at 10:32 am