No Minister

Archive for the ‘Economics & Economy’ Category

Ideas out of the Past

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Over on Britain the Tory Prime Minister, Boris Johnson, has had yet another brilliant idea for dealing with the fundamental problem of real estate prices getting away from working people, preventing them from buying housing.

Putting on my Class Warfare hat I have to say that this idea is entirely appropriate for a Tory:

Wait a moment, I think I’ve heard of this idea before. From history…

Debt bondage, also known as debt slaverybonded labour, or peonage, is the pledge of a person’s services as security for the repayment for a debt or other obligation.

I can see Boris as a feudal lord: he’s picture perfect to play the Sheriff of Nottingham in some new version of Robin Hood.

Of course it’s not just Britain. Here’s a story from 2014 in the USA:

A few weeks ago, with no notice, the U.S. government intercepted Mary Grice’s tax refunds from both the IRS and the state of Maryland. Grice had no idea that Uncle Sam had seized her money until some days later, when she got a letter saying that her refund had gone to satisfy an old debt to the government—a very old debt.

When Grice was 4, back in 1960, her father died, leaving her mother with five children to raise. Until the kids turned 18, Sadie Grice got survivor benefits from Social Security to help feed and clothe them.

Now, Social Security claims it overpaid someone in the Grice family—it’s not sure who—in 1977. After 37 years of silence, four years after Sadie Grice died, the government is coming after her daughter.

But there are many forms of intergenerational debt and the major one leaves Boris’s idea (and feudal practices) far behind. The following educational video was made a decade ago in the wake of the GFC, back when US Federal debt was a mere $14 trillion toddler, compared to the moody $30 trillion teenager it is now.

Written by Tom Hunter

July 6, 2022 at 11:04 am

Lessons for National from the Australian Power Crisis

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There are three key points to take away from the recent power debacle in Australia.

First, take a look at this graph of indexed electricity prices in Aussie from 1955 to 2017. After decades of steady reduction the rise in price has been steep and unrelenting since the start of the age of unreliable power in the mid-2000’s.

Remember this every time some Green tells you that Wind and Solar are cheaper than traditional base load, utility-scale power sources; “cost” is about more than just the Capex of the equipment. It’s about the cost of power shortages, limited growth, potential grid collapses, shorter plant lifetimes (25 years), and the cost of maintaining reliable backup power sources.

Second, note that the Liberal-National’s have been in government during much of this time, including the last nine years just ended. So when Labor and the Left hold them responsible for much of this nonsense they will be correct.

Third, hidden by such truth is the fact that Labor and the Greens wanted to go harder and faster on all this, which may have been a better idea since the crash would have come harder and faster, with appropriate lessons learned.

Best of all it should be noted that this is all a complete waste of time and money.

The primary lesson for National here in NZ on renewable unreliable power and climate change is this: Labour and the Left want you in on this so that when the hungry, cold crowds with the pitchforks and burning torches turn up they can point fingers at you and say:

“But they did it too”

And they’ll be right.

P.S. For those National supporters frightened of the power of Climate Change as an issue, “especially with the youth”, here’s something to stiffen your spines.

Written by Tom Hunter

June 20, 2022 at 12:00 pm

Burn. More. Coal?

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In the classic comic/horror movie Return of the Living Dead, there’s a scene where the zombies eat the brains of the police trying to stop them and one of the zombies uses a cop car radio to call, “Send more cops”.

I thought of this the other day while reading about the new Australian Labor government, returned from the dead after more than a decade, led by an opponent of the Hawke-Keating Labor Party economic reforms of the 1980’s, and a man whose brain not even a hungry zombie would touch.

They’ve arrived just in time to confront a crisis in the Australian electricity system caused by the shrinking gap between power supply and demand, courtesy of the “success” of successive Labor and Liberal-National governments in squeezing out fossil-fueled power stations with wind and solar by making the former unprofitable.

So when a cold snap hit Australia recently – the Coldest Start of Winter for Over a Century in fact – the following things happened:

  • The grid operator tried to force thermal generators on at a power price less than their fuel costs, so the generators took their units off the market.
  • Thus there are power cuts in Oz and power prices have gone through the roof.
  • The authorities finally suspended the market and ordered operators to bring plants on line, for which they will be “compensated”. No doubt this will be taken by the Left as yet another example of how markets fail.

In the darkest of ironies the government was forced to grovel as well as enforce:

Labor has begged industry bosses to fire up all their coal-fuelled power stations at full capacity to ease the national energy crisis in a dramatic policy u-turn.

Just days after promising ‘real action on climate change‘, Labor today demanded the nation’s coal power stations are all brought back into service as soon as possible.

It’s not just the power plants that have been shut down but coal units that have broken down as they haven’t been maintained because they haven’t been generating income. And all the parties (except maybe the Australian National party) will talk only about how quickly they need to be shut down.

Green political hostility towards coal and gas development created Australia’s energy shortage problem, by discouraging investment in affordable energy resources, and choking off the supply of bank finance for building and maintenance of coal plants.

This is called karma. The poster child of renewable power, South Australia, actually had to burn diesel again.

I’d like to think that Aussie voters will learn something from this but they’ve just managed to escape disaster – this time – so will likely need a longer, colder power crisis. Next time the gap will be bigger, as will be the case in the USA:

Unfortunately, the reliability of the electric grid could get worse in the coming years as more reliable power plants are retired. MISO’s capacity shortfall is projected to grow to 2,600 MW by 2023, enough to power virtually every home in Minnesota on an average hour, and capacity deficits are projected to widen in subsequent years.

The graph below shows the capacity shortfall growing from 2,600 MW next year to 10,900 MW by 2027 as the green bars sink lower toward the x-axis. For context, 10,900 MW is more than the amount needed to generate Minnesota’s annual electricity on an average hourly basis. Of course, some hours will have much higher demand, and some hours demand will be lower, but the trend is troubling regardless.

That’s from a report issued by the Midcontinent Independent Systems Operator powerline outfit, which details a high risk of blackouts this Northern summer resulting from the current gap of 1,230 MW shortfall in power plant capacity to meet its peak demand and reserve margin.

This gap has arisen after 3,200 megawatts (MW) of reliable power plants, mostly coal and nuclear, were retired last year:

“Green” energy liberals have demanded, successfully, that reliable coal and nuclear plants be closed so they can be replaced by wind farms and solar installations. But those unreliable, intermittent sources can never replace power plants that actually work 24/7. Hence the blackouts that are now beginning, and will become more and more widespread if we continue to rely increasingly on undependable sources of power.

President Obama was the last Lefty politician to display some honesty about the true cost of renewable energy:“Electricity prices will skyrocket”:

You’d therefore think that the Democrats would be overjoyed at the massive increases in energy costs, and of course they secretly are, except for one thing crucial to a politician:

Elections have consequences, someone once said, and now the consequences of all of those elections in which Californians put leftist Democrats in office are hitting them in the wallet. They asked for it, they got it, and now they don’t like it.

The same thing – massive increases in power prices plus unreliable power plus fossil fuel plants that cannot be scrapped – has happened in Germany in particular and Europe in general, and all for poor results in GHG emissions reductions (France excepted because …. nuclear).

But never fear, the Greens have a solution:

Already, liberals are talking about a future in which you don’t control your use of electricity. Rather, a utility does. Thus, when “renewable” energy sources don’t produce enough to meet demand, the response will be “demand management.” That may mean, among other things, that you won’t be able to turn on your own air conditioning. Rather, the utility will control the temperature of your home for you.

Classic: via political control the Left create a problem and then solve it with more control. The thing is that in the USA I’m not so sure that will work given how much Americans hate being controlled. Some years ago my friend Cathy, living in San Francisco, talked to all her equally Liberal, tree-hugging friends about a great idea she’d grown up with in New Zealand – “Ripple Control” – which many of you may remember from the 1970’s and 1980’s. In the wee small hours the Department of Electricity would signal water heaters to shut down, starting them up again about 5am or so. Naturally Kiwis took it up the ass, even as they blamed Muldoon.

Her neighbours and friends completely rejected the idea and – as she sheepishly admitted – did so with some heat.

See also:

Powerless Europe (plus dirty Germany)
Energy Charades (Coal expansion in China, India, SE Asia vs. Germany)
Energy Realities (US GHG emissions reduction success vs China coal plus wind fail)

Written by Tom Hunter

June 20, 2022 at 6:00 am

ANOTHER DAY OF CARNAGE ON THE SHAREMARKET

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With the NZX50 dropping 1.25%. A lot of people with be looking at their KiwiSaver accounts wondering just what the hell is happening.

Reminds me a tad of Herbert Hoover at the time of the Wall Street crash assuring the nation that the fundamentals underpinning the US economy were all looking good. And on Wednesday we heard ‘Robo’ say exactly the same thing following the news of negative GDP growth in the March quarter.

That gives me a lot of confidence … not.

Written by The Veteran

June 17, 2022 at 4:51 pm

A run on Chinese Banks

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My co-blogger Nick K had already flagged one of the first signals of a China bubble bursting when he wrote about the problems of one of their giant property developers, China Evergrande, in September of last year, all $US 300 billion worth of it.

Where’s there’s one there’s bound to be more if the underlying problem is not fixed, and so…:

Multiple sources contacted by Asia Markets, have confirmed deposits at the following six banks have been frozen since mid-April.

  • Yuzhou Xinminsheng Village Bank (located in Xuchang City, Henan Province)
  • Zhecheng Huanghuai Bank (City of Shangqui, Henan Province)
  • Shangcai Huimin Rural Bank (Zhumadian City, Henan Province)
  • New Oriental Village Bank (City of Kaifeng, Henan Province)
  • Huaihe River Village Bank (Bengbu City, Anhui Province)
  • Yixian County Village Bank (Huangshan City, Anhui Province)

It’s understood the banks with branches across the Henan and Anhui Provinces successively issued announcements in April, stating they would suspend online banking and mobile banking services due to a system upgrade.

At the same time, clients reported their electronic deposits in online accounts, mobile apps and third-party platforms could not be withdrawn.

This led to depositors rushing to local bank branches, only to be told they were unable to withdraw funds.

The report includes various videos of long lines at banks and protests so it appears to be a real thing and not just a rumour. The real question is whether the authorities can stop it, and that comes down to two questions to be answered: the degree of authority that can be exerted and the trust people have in the system. Nobody should doubt the power of the central Chinese State but when a people’s faith in institutions begins to waver there’s no force that can impose it:

Some depositors such as Xu have already lost trust in the system. The 39-year-old said he had withdrawn all of his deposits from 10 other small banks that had promised him an annualised yield of more than 4 per cent.

The Chinese Communist Party probably does not accept that last point, as can be seen in this sad article, The Dismantling of Hong Kong, by one Karen Cheung, who is approaching the tipping point of escape:

After the national security law passed in June 2020, friends began leaving Hong Kong every few weeks. One by one, they disappeared from the camera reel on my phone, leaving me with things they couldn’t take with them: an oven, a Sodastream, a sous-vide machine, a stone diffuser, and five bottles of ground cinnamon. From 2020 through 2021, it was reported that 116,000 residents had left, often departing for countries like Britain and Canada…

This has been coming for a long time; certainly since the first mass protests in 2014 but only really since the Great Chinese Sinus AIDS Pandemic hit:

Under the guise of pandemic social-distancing, public gatherings were banned, and protests disappeared from the streets. Later in 2020, a teacher had his license revoked after showing his class a documentary featuring a pro-independence activist; in the years since, prominent commentators, including Apple Daily writer Fung Wai-kong and academic Hui Po Keung, have been arrested at the airport while attempting to leave the city. New election rules implemented in 2021 now dictate that only “patriots” can administer Hong Kong. By early 2022, at least 50 civil organizations have disbanded in the ongoing crackdown, including a pro-democracy trade-union coalition and an activist group that commemorates the Tiananmen massacre.

My, how convenient is the claim of Public Health for tinpot dictators to exert minute control over the lives of their subjects. And as she outlines, the end result was a massive increase in cases and deaths anyway, plus the usual scenes of empty supermarket shelves and a failing public health care system:

Health officers would sometimes appear on your doorstep to inform you that your building had been locked down for mandatory testing; should you test positive, you would have to undergo quarantine at an isolation facility, which Hong Kong residents have described as a “madhouse.” A Hong Kong woman told a local news outlet that despite two negative rapid tests, she was not told when she could leave; some in quarantine attempted suicide inside the facilities, according to local media reports. The uncertainty and severity of the measures made me feel like the city was collectively being punished.

I’m absolutely sure it was. In that world it’s hard to tell the difference between political prisoners arrested for leading protests or writing articles and people who failed the dreaded C-19 test, since there seems little difference in treatment between the two.

I last visited Hong Kong in 1990 and it was great: a vast, teaming, lively city with beautiful views, whether from the waterfront or The Peak. But when the British handed back control to China in 1997 I knew the place was doomed, even if it might take years to show it. The CCP and their One Country: Two Systems always smelled like propaganda to me, but I relied on the CCP’s self-interest in hanging on to a rich crown jewel, especially as Communism became more honoured in the breach in China itself, hence more than two decades of peace, relative freedoms and prosperity. But I always knew that if a clash between the “Two Systems” ever occurred then the system of Chinese Communism would prevail and be imposed, whatever the cost.

Between the rise of Xi Jinping and the return of his cult of personality as well as the re-empowering of the Central State, the myriad little Cultural Revolution touches appearing again, the Hong Kong protests and finally the C-19 disease, it’s obvious that Hong Kong will soon be no more than another grim Chinese metropolis.

Something was fundamentally broken: If Hong Kong could botch the handling of a pandemic outbreak it had two years to prepare for, what does that say about future governance? Hong Kong used to be a city that understood its capitalism depended upon appearances; ever since the national security law was enacted, however, it no longer cared about the mask slipping.

Survivors guilt and all, it is time for Ms Cheung to get the hell out – and time for us to cut as many cords with China as we can afford.

Written by Tom Hunter

June 16, 2022 at 4:14 pm

GOT THAT WRONG DIDN’T HE

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I wonder how that nice Mr Orr of Reserve Bank fame is feeling right now with the news that little ole NZL’s GDP fell 0.2% in the March quarter against ‘his’ prediction of a 0.7% increase when the bank released its latest monetary policy statement back in May. Sorta calls into question all those forecasts in Mr Roberson’s budget.

Stats NZ senior manager Ruvani Ratnayake said a drop in the output of primary industries – mostly accounted for by farming and forestry – drove the decline. But goods-producing industries also experienced a slight decline, with their output falling 0.1%, with lower outputs in the food, beverage, and tobacco manufacturing sub-industry; and the agriculture, forestry, and fishing industry.

Clearly the country is on the cusp of going into rescission which is defined technically as two consecutive negative quarters of falling GDP.

The response from Labour’s economic guru … don’t worry, be happy … ”Unemployment is at a record low and we are in a strong fiscal position. The easing of border restrictions and opening up to skilled workers and tourists will help business and the economy rebuild.” It’s a worry that he might actually believe that rather than acknowledging his/their policy settings might just be the driver for all of this.

I’m well positioned to ride out the coming storm … many others will not be so fortunate.

Footnote … Across the ditch their GDP increased by 0.8% in the corresponding quarter.

Further Footnote … I see the Federal Reserve has just announced an increase of 75 basis points in their benchmark interest rate. The largest hike in 28 years … hmmmmmmmm.

Written by The Veteran

June 16, 2022 at 2:47 pm

GOP Tsunamis and Democrat Islands

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It’s taken longer than I expected but the reality of President Biden’s uselessness is finally catching up with him.

The only surprise I have is that so many Democrats are surprised by this.

For almost a year now, every poll has seen increasingly worse numbers for Biden. The trigger was the Afghanistan debacle, no matter how the MSM and his many sycophants around the world tried to spin it.

Since then nothing has gone right for him. But saying that makes it sound simply like a hapless, hopeless President has been overwhelmed by events beyond his control, and while it’s true that this low-IQ, senile, husk of a human being is incapable of dealing with problems that land on his desk, many of those problems stem directly from the idiocies of “his” policies. Actually they’re the policies of the Nancy Pelosi Democrat Party and his Obama-retread staff, policies that he regularly fumbles while reading off a large-print teleprompter in the fake Oval Office set created for him. (BTW, for a laugh, check out Reuters early 2021″fact check” of why there is no fake Oval Office).

He’s underwater on almost all issues.

He’s underwater in almost all states:

There are only three states where Biden’s approval is above water:

* Hawaii: 50 percent approval, 40 percent disapproval
* Massachusetts: 45 percent approval, 42 percent disapproval
* Vermont: 46 percent approval, 38 percent disapproval

His “base” is abandoning him:

In new polling provided exclusively to Secrets, he is losing support among younger voters, suburbanites, women, minorities (especially Hispanics), and union members.

To be fair he never really had a “base” as someone like Trump or Bernie Sanders does, and that showed in two successive failures in Presidential runs in 1988 and 2008, with the same pattern in 2020 until James Clyburn rescued him in the South Carolina primary. His “base” was simply people who hated Trump: they had no loyalty to Biden,.

Inflation via gas and food prices is bad enough, but when you see particular food items like infant formula you understand how all the spin in the world cannot counter people’s direct experience. This is not “inflation” in the monetary sense but supply chain problems, ones that Biden and his staff missed for months. It didn’t help when his staff did a video-op of Biden with CEO’s of companies making infant formula where they bluntly said that they’d known about the approaching crisis for months – followed by this from Biden:

This sort of cluelessness is dragging down the entire Democrat Party heading into the Mid-Terms, where a large loss is already baked into the cake, and it could get worse. As a result Democrat insiders are getting frustrated with Biden:

“It’s really simple: ‘Be the f—ing president!,” said one Democratic strategist frustrated by the administration. “I realize it’s tough and you’re drinking out of a fire hose every single day, but there are things you can do to control the public perception and they haven’t done any of that.”…

Here’s a hint pal, it’s because they’re utterly incompetent in everything they do and also because spin can only go so far in twisting reality. The frustration has turned into finger-pointing inside the White House with the Pre-criminations beginning:

Faced with a worsening political predicament, President Joe Biden is pressing aides for a more compelling message and a sharper strategy while bristling at how they’ve tried to stifle the plain-speaking persona that has long been one of his most potent assets.

Biden is rattled by his sinking approval ratings and is looking to regain voters’ confidence that he can provide the sure-handed leadership he promised during the campaign, people close to the president say.

Amid a rolling series of calamities, Biden’s feeling lately is that he just can’t catch a break. “Biden is frustrated. If it’s not one thing, it’s another,” said a person close to the president.

It’s called being the President, idiot! That link is to one of his MSM tongue-bathers, NBC, which alone tells you how bad this is. Even so their ingrained Democrat/Left bias produces comedy gold

An assumption baked into Biden’s candidacy was that he would preside over a smoothly running administration by dint of his decades of experience in public office.

Yet there are signs of managerial breakdowns that have angered both him and his party.

😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂

A lot of us didn’t assume that! The people who did were the increasingly poorly-specified Smartest Guys in Any Room.

“He’s now lower than Trump, and he’s really twisted about it,” another person close to the White House said.

😂😂😂😂😂😂😂😂😂😂😂😂

He’s said that “I don’t look at the polls — no joke”, which turns out to be more BS. I won’t say “lie” because you need an active brain to know you’re lying. He believes everything he says in the moment and is thus angry at staff who correct him.

Beyond policy, Biden is unhappy about a pattern that has developed inside the West Wing. He makes a clear and succinct statement — only to have aides rush to explain that he actually meant something else. The so-called clean-up campaign, he has told advisers, undermines him and smothers the authenticity that fueled his rise. Worse, it feeds a Republican talking point that he’s not fully in command.

Ah yes, the ever-present “Republican Talking Point”, otherwise known as the “Republicans Pounce” meme.

LOL. That bit almost makes it look like he’s just a feeble puppet and that policy decisions are being made behind the scenes by staff that no one voted for, and when this senile figurehead breaks with their bureaucratic consensus, they veto him.

Asked about the staff’s practice of clarifying Biden’s remarks, the official said: “We don’t say anything that the president doesn’t want us to say.”

“We never overrule the President”

At the White House Easter Egg Roll the Easter Bunny begged to differ!

Standard practice actually. After Biden announced that Putin must not be allowed to remain power, Jen Psaki and others rushed out to reassure the Washington Blob that Biden hadn’t meant that. But then Biden went out to the microphones again to say he wasn’t walking anything back, and had in fact meant the thing he’d first said. I’m surprised he didn’t push the Easter Bunny over so he could keep talking, but that would have upset the children.

What all this actually means is that the Cottonhead Puppet’s handlers are directing things from behind the scenes – except the puppet occasionally manages to put his pudding aside and stand in front of TV cameras to announce some dramatic shifts in US policy because he thinks that sounding like a tough guy will juice his polling.

It’s no surprise to find out that Biden staffers are leaving in droves, with special emphasis on the comms staff, another indication that these people think that this is all a messaging problem.

In the wake of that NBC piece a Biden staffer attacked NBC “News” as actually a right-wing operation doing a hit on Biden. Yes! Really! His proof was that their official denial, claiming that the staff never issues statements without Biden’s approval, only ran in paragraph 28 – while the stuff that was said off-the-record about Biden being Spongebrain Angry Pants was featured much more prominently.

That staffer will find it much harder to tag the NYT as such, with their “Democratic whispers” story

In interviews, dozens of frustrated Democratic officials, members of Congress and voters expressed doubts about the president’s ability to rescue his reeling party and take the fight to Republicans.

Doubts? No! Really?

Written by Tom Hunter

June 15, 2022 at 6:00 am

The Pentagram Loop of Economic Doom

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What’s in everybody’s face, especially in America, is inflation, but there’s far more than that going on in their economy, and basically the global economy.

And none of it’s good.

But let’s look at inflation first, in particular the stuff that chews into your wallet every day rather than the somewhat tame measure of CPI.

Gasoline for cars is, for Americans, the most in-your-face aspect of this; for historical and psychological reasons it seems to grind them more than food prices. Of course the joke is that in 2008 Democrat suckhole media like the LA Times was boasting about “The joy of $8 gas.

You’d think the Democrats would therefore be happier right now.

Companies are trying to trick people as they did back in the 1970’s by shrinking the size of the products they sell “for the same price”. I don’t think it works.

The official CPI for May surged to 8.6%, but if it was being calculated as it was in 1980 it would be 17% (see the graph above). Moreover the month-on-month inflation is not stopping but itself increasing; in other words inflation is not going away any time soon. Good to see that one of Biden’s numerous idiot hires, Treasury Secretary Yanet Yellen, is now publicly regretting saying that inflation in 2021 was “transitory”. Of course she’s not alone as the US MSM have desperately tried to prop up Biden and the Democrats on this issue for a year now.

On top of all this is the fact that wage growth is rapidly slowing, which means that wages are actually going backwards, the highest negative since 2006 actually.

Add in the problems of the stock market – which is also shrinking American’s wealth, starting with pension funds, plus a possible crash in the housing market – and you’re looking at big economic problems across the board. This has business people starting to also get on edge:

Why is there so much doom and gloom though? Recessions happen regularly and we’ve seen inflation and even stagflation before and survived them. There are two answers to this question.

First, what’s different this time is the number of major factors coming together, each of which has caused recessions in the past on their own:

  1. The business cycle.
  2. High energy prices.
  3. Inflationary pressures other than energy (supply chain problems plus $6 trillion of unneeded US government spending in the last two years)
  4. Excessive debt-funded speculation.
  5. Secular shifts in the economy.

That last one needs explanation:

Examples include: new global competition (1970s); currency devaluations; costs of cleaning up decades of pollution (1970s); financialization (1980s to the present), geopolitical shifts in alliances, social disorder, demographics (aging of the workforce, mass retirement) and sea changes in the distribution of income and power to labor and capital.

It’s a perfect storm and it’s built on the back of two decades of poor economic policies.

Second, the normal paths of getting out of factors 1 and 3 – high interest rates to crush inflation and massive Keynesian-style state spending – are now hemmed in by the massive amounts of debt the US has created in the last twenty years, both public and private. In fact it’s increasingly hard to tell the difference between the two, so dependent upon cheap created credit from the Federal Reserve have the markets – especially Wall Street and the housing market – become.

The higher interest rates will slow the economy and cause unemployment. It will also swallow up tax revenue as the government has to pay interest on its massive debt. But more critically, it will increase the rate of default on home mortgages. Those defaults will make mortgage-backed securities less valuable and more unpredictable. That’s how the 2008 housing market seized up. 

In 2008 the US housing crisis was solved by having the Federal Government and the Federal Reserve buy trillions of dollars of mortgages and Mortgage Backed Securities that had become nearly worthless. But having re-created that situation what are they going to do now (factor 4)?

The energy crisis is also not going away because high fossil fuel prices are seen as the way to “transition” the economy to the world of renewable energy. If that’s your goal then it’s a logical play – but it will kill consumers (in some cases literally), kill the politicians intent on crashing through the wall of such massive energy change – and that’s assuming it’s even possible, which it isn’t (42 Inconvenient Truths on the “New Energy Economy”) and possibly kill the economy.

Two years ago I playfully predicted The Great Crash of 2034, but allowed that it might come later – or sooner.

Brace for impact.

Written by Tom Hunter

June 13, 2022 at 7:41 pm

Failing to Scale

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It took only a few years for me to learn that in corporate environments a lot of things just don’t scale up, despite the fact that such corporations were scaled up versions of the small businesses they had once started out as, even if a hundred years ago prior to endless takeovers, buyouts and so forth.

Centralised accounting certainly scales, as does marketing, IT and a handful of other core functions. But even then there are limits, what test pilots refer to as “the envelope”, outside of which things start breaking down. Even those centralised things are built upon smaller clones of themselves in the corporation. And corporations often stagnate precisely because the small, inventive, creative parts of themselves get stifled or outright killed off.

In fact, one of the secrets to the creation of Silicon Valley and its fantastic wealth, lay in the fact that people inside existing corporations who had ideas that got flattened or ignored, were actually encouraged internally to leave and set up their own companies to develop their ideas, and where they weren’t encouraged they did so anyway as venture capitalism also grew to supply such start-ups with seed money. This “culture” took off, with one company after another spawning new companies:

With the backing of Fairchild Camera and Instrument in Long Island, NY, eight engineers from Shockley’s lab resigned, including Gordon Moore and Robert Noyce, to form Fairchild Semiconductor in 1957. Led by Noyce, Fairchild would eventually grow into the most important company in the history of the Santa Clara Valley after Noyce independently invented the Integrated Circuit along with Texas Instrument’s Jack Kilby in 1958.

And when I say I “learned” that’s only in terms of learning what specific things did not scale in corporations: even by my early 20’s I’d seen enough of life, let alone business case-studies and history, to understand the principle that big is usually not better, and often worse.

To that end, with Three Waters specifically in mind here in NZ, but also with the gigantic beast in the US known as the Federal government, I appreciated this brief “rant” in Ace of Spades, which I’ll re-produce here in full:

An oft-heard theme from preschool classrooms to corporate meeting rooms is that one should not be afraid of failure. Failure sucks and is a miserable experience – failure hurts – but it’s also the mechanism through which one learns. Failure is a great teacher, and makes you less likely to fail next time because you’ve learned from the experience. This is true, but there are limits to the concept. Sometimes failure is catastrophic.

The higher you are, the riskier failure becomes. If you’re running a small team in a corner of a large company to try to make something new and you fail, the results are unlikely to be disastrous. You might get fired and your staff might get fired, too, but the scale of the potential damage is fairly small. If you’re a senior executive who bets the business on something and that something doesn’t pan out, the entire enterprise can fail and everyone ends up fired with the owners holding worthless paper that used to be shares.

So it is with government and its failures and boy do we have a lot of government failures to consider. Fiscal policy has failed. Monetary policy has failed. Energy policy has failed. Medical policy has failed. War policy has failed. Border policy has failed. Drug policy has failed. Environmental policy has failed. Law enforcement has failed. Intelligence has failed (in every possible interpretation). Both domestic and foreign policy, writ large and in totality, has failed. Its failure across the board and at all levels.

Sure, some of it was probably not failure but rather was deliberate destruction, but that distinction is more important in the final reckoning than it is in the day-to-day reality. Malice or incompetence (or malicious incompetence, which I think is closer to the mark) is less important than the results. The results are similar regardless of the motivator. Poor is poor, sick is sick, dead is dead.

And those failures are increasingly catastrophic as more decision-making occurs in Washington D.C.. This isn’t just because of corruption, dishonesty, malevolence and incompetence, but because of scale. We have forgotten the valuable lesson of subsidiarity. Decisions should be made at the smallest workable scale, not the largest possible scale. A town imposing some insane and destructive policy destroys only the town. When Washington imposes some insane and destructive policy, it can destroy the entire country. Subsidiarity isn’t maximally efficient, but it is highly reliable. It’s expensive but robust. Its opposite – what we have today and will have more of tomorrow – is tremendously fragile. It isn’t even efficient because the government is populated with thieves, liars and fools (and often in combination).

Totalitarianism doesn’t and can’t work for this reason. Even assuming the starry-eyed sincerity of the totalitarians (a situation we most decidedly do not have), mistakes have perfect coverage and no one is immune from the totalitarians’ decisions. Failure not only stops being a good thing from which you learn, it becomes a constant threat and source of terror. This is compounded and made infinitely worse when the totalitarians are dishonest, lying, stupid psychopaths.

Centralization and incompetence, centralization and malice, and centralization and malicious incompetence are poisonous combinations.

Written by Tom Hunter

June 9, 2022 at 2:58 pm

The Plastic Plinth of Capitalism

with 12 comments

It has taken a year but I finally completed building a new fence around the farm house after changing the layout of the track leading to it. It was only while sorting photos in the online library that I discovered how much time had passed during the Winter, Spring, Summer, Fall, and Winter of Chinese Lung Rot.

However, I only lost time whereas other people lost jobs, businesses, and in some cases their homes and pretty much everything.

There are of course some businesses that thrive in good times and bad, courtesy of the fact they’re a monopoly.

Thus I introduce to you to Chorus.

Well, one of their objects anyway. That plastic plinth contains the old copper lines for the phone/internet connection. When it was put in I have no idea, but I replaced the old fence with a new one in 2001 without changing the fence line, so it could date back to the 1970’s, although I suspect it’s something that arrived with de-regulation in the late 1980’s when the local phone systems were upgraded with the arrival of Telecom NZ.

In a history of the district published a decade ago I was amused to read a chapter specifically about the phone system here over the years, starting with local farmers doing some of the work themselves, including cementing a beer bottle to the top of one large rock as an insulator to allow the line to run across a deep gorge. Who actually climbed said rock (it’s over 100 feet high), what climbing equipment and rock climbing experience they had, is not recorded. It was also interesting to read of the endless applications to government for the NZ Post Office to improve the system, something that reached high levels of frustration in the 1970’s/80’s with fuzzy, buzzy connections, hours-long drop-outs and so forth. The system just wasn’t improving, not even at the glacial pace of the past. We still had a party line in 1989 – two long tones for us, a long and short for “Y”, three shorts for “X”…. and that occasional “click” on the line that told you that someone had been listening to your conversation.

All that miraculously changed with de-regulation; no more years-long pleading with the bloody government. In the late 80’s the system was upgraded in just a couple of years in almost all ways and it would not be until the demands of the Internet arrived in the late 90’s/2000’s – meaning the actual use of farming apps and farm supplier websites – that the system began to show its age again, although I have no complaints about streaming speeds and the like now.

With the old fence and fence line now gone it was time to move the plinth so the lawn can be extended and to avoid having to mow around it. I just wanted to move this thing about 3m closer to the house, so a few weeks ago I applied to Chorus to get that done. I received their reply a couple of days ago:

Four thousand seven hundred and fifty five dollars?

AYFKM?

A.Y.F.K.M?

And twenty five cents – just to rub it in.

Even better are the list of “work” things that this cost covers:

God, I can just imagine the fees being internally charged for all the record searching and the intense design work, plus the fees charged by external agents for the “build works” paperwork.

Naturally I won’t be picking up this fabulous opportunity to enrich Chorus. What I do now is either try to move it myself (ummmmm..), put a giant pot plant over it, plant a native tree right beside it, or would there be ex-Chorus/Telecom people who would know how to do the job – for much less money?

But that’s where the monopoly status of Chorus comes into play. They own this equipment so you likely are not allowed to bugger around with it yourself or via some hired gun.

No wonder people are moving to all-cell technology or a combined model with cell tech to a local box that then mimics a landline inside the house. I know of a number of these and they work well: in all cases the telecomms company simply said it was cheaper than re-routing an old copper line or extending off an existing one to a new house – or fixing the old one. I’m guessing that those are not options for me because the line was torn up by a digger last year and was fixed in place by Chorus with no suggestion of setting up a new cell-box system.

Perhaps the same thinking applies here but in terms of just not wanting to do the job and putting a cost on it that the customer will refuse?

Still, it’s a good example of the challenges faced by businesses in this nation when even a simple job like this is converted into such an expensive “project”. One could argue that it’s just capitalism at work, in that it forces you to explore alternatives like cell-tech. But I can’t help thinking that this is just another of those false choices forced on a marketplace; if there were a plethora of Chorus competitors and rules around buggering with the cables – you assuming the risk in other words – would we see excessive cost bullshit like this?

Written by Tom Hunter

June 6, 2022 at 1:22 pm