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Archive for the ‘Climate Change’ Category

Wellington is not moving.

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I’m a firm believer in blogs like this connecting to other blogs rather than the MSM (breaking news aside) because blogs often provide a level of expert analysis and detail of subjects that the MSM does not.

In this case I’ll link to two blogs, Not PC and Liberty Scott on the matter of transport and do so in two separate posts. But they should be read together.

First up is Not PC, run by Peter Cresswell, an architect who has spent decades writing and thinking about urban planning. This particular article is a guest post by The Uncivil Servant, and focuses on transport in just one place, Wellington, and one group there planning it:

A RUNNING JOKE AROUND Wellington is the organisation for activist bureaucrats Let’s Get Wellington Moving (LGWM). A running joke, because it is a symbol for how bureaucracy barely lets anything move at all.

The last National Government foolishly set it up to try to get agreement with local government on fixing transport problems in Wellington. Labour however has since changed its objectives, and painted a wide band of Green all over it. So now it isn’t really much about transport at all.

You could say the same about MBIE, set up at the behest of ACT. When are our “Right-wing” parties going to realise that setting up new bureaucracies to get things done simply results in these scenarios? All that happens is that the lovers of the State, the Left, have a new home to burrow into. In this case the writer details how the organisation’s primary objectives have been changed:

The upshot of this capitulation to blancmange is that LGWM is now less about transport and more about enabling intensification for housing development, and reducing carbon emissions. In fact, almost all about carbon emissions. Note: not noxious emissions like particulates…

The autistic focus gets worse than that:

It is also single-mindedly focused on reducing emissions solely by mode shift. Not by travelling less, not by moving to electric or hybrid vehicles, or by reducing traffic congestion to waste less fuel. LGWM is instead now almost solely focussed on enabling more housing (on one corridor), and on making peasants like you drive less by using public transport more.

They already have the statistics in front of them that show that their approach is not going to work, even on their own terms of reducing CO2 emissions. One third of traffic enters Wellington only to get to other places, and the primary reason for the congestion is that there is no bypass:

The problem is easy to identify: Wellington’s urban motorway ends abruptly at Te Aro at one end, and at the other end, SH1 from the airport stalls at the bottleneck of Mt Victoria Tunnel, with one lane in each direction. This causes congestion all day long and on weekends as well. Plus between 15-40% of traffic along Wellington’s waterfront is travelling to avoid that congestion, according to LGWM, that’s traffic that helps separate Wellington city from its harbour.

But LGWM is just not interested in solving that problem. Although the author does not say so I reckon that they’re actually happy with the congestion, thinking it will force drivers on to their trains, trams and buses, much as the Greens are happy about the Covid-19 lockdown destruction of our tourist industry, since it means fewer CO2 emitting planes ferrying people to and from our shores.

One of LGWM’s primary proposals is some sort of tram system that will cost $2.2 billion. That’s their estimate: public transport systems around the world regularly blow out such forecasts, often by multiples of two, three or more. Auckland’s ring train being merely the latest local example. The LGWM idea won’t do a damned thing for CO2 emissions either. In fact it has a different objective:

This policy of LGWM is straight out of the North American urbanist planner playbook, which calls for more “PT” (public transport) to induce more high-density housing. A policy that  has had the same success in addressing housing shortages and traffic issues there (i.e., virtually  none) as it would in Wellington. 

The other idea is fiddling around with the Mt Victoria road tunnels; building one for walkers and cyclists only and the other for buses only. Seriously, do these people even live in the city? I’ve walked and cycled around the place and on the rare nice day of sun and little wind it’s great, but there is no way I’d do it most of the time, especially during Winter and Autumn (Spring is not great either). There is already a dedicated bus tunnel of one lane only: why not just enlarge it? Probably for the following reason:

So all of the proposals essentially keep the current road capacity and do nothing at all about the bottleneck. This is straight out of the Green Party “building new road capacity is bad” school of thinking, on the basis people might have the audacity to drive (even with an electric car). One has to suspect the proposals are designed to just be dumped for being uneconomic, because they won’t encourage housing, won’t reduce emissions, nor encourage people to shift modes.

There’s nothing for the rest of Wellington either, even for other places with bottlenecks and congestion, like Karori. What a future National/ACT government should do about this is pretty simple:

If we want to ever get Wellington moving, a first step must be to remove Let’s Get Wellington Moving. It must be stopped.

Thereafter, [NZ Transport Agency] should be directed to finish SH1 in Wellington with a second Terrace Tunnel and Mt Victoria Tunnel; to trench the highway under Te Aro; and to grade separate at the Basin Reserve. Wellington City Council should put in place bus-priority measures at strategic points across the network.

On the other hand perhaps we just let Wellington drown in its own juices? Despite countless fuckups I see the locals regularly voting in very Lefty and Green councillors so Mencken’s rule of democracy should perhaps apply.

The only problem with that approach is that the rest of us, via central government, would end up paying to dig them out of their crap sooner or later. Better to stop them now before they hurt themselves.

Written by Tom Hunter

October 26, 2021 at 9:41 am

“Unforeseen” Consequences

The foremost concern of environmentalists is, of course, the health and well being of the environment.

It’s in their name and all.

So it’s always funny and sad when environmentalists do stuff that blows up in their faces. There are countless examples but in terms of large scale screwups Germany’s decision to shut down its nuclear power stations while also trying to switch the system to wind power is probably the winner. Some €500 million over less than twenty years and all they got was an unreliable network, power prices that have more than tripled, a lot of coal still being burned, plus constantly falling short of their GHG reduction targets. On that last it should be noted that the 2020 Chinese Xi Snot lockdowns and restrictions were a huge help, but that’s not going to be true of 2021 and beyond.

That chart is from 2017 but it’s 2020 forecast of 45 cents per kilowatt hour is not far off where it is right now.

But the latest news from another group of wind farm fanatics, California, is what is really delicious.

As more renewable power has crowded the state’s power grid with traditional power sources switched off, the grid has become more unstable and also unable to meet electrical demand even when its up and running. This has resulted in increasingly frequent summertime calls for people to lay off using power in the crucial 4-9pm slot.

Faced with this, companies and even individuals have begun to turn to, of all things, diesel generators. In fact the state itself has 2,773 stationary and mobile generators in its inventory. Now you would think that the uncompromising Eco-Stasi authorities would crack down on that quick smart. But of course they know if they forced people into that corner even the Liberal Luvvies would revolt. So instead, they’re allowing this to expand and continue. In fact, they’re even helping all this fossil fuel burning along, California wants air pollution rules suspended:

The state’s main grid operator wants the U.S. Department of Energy to suspend air-pollution rules for some natural gas-burning power plants in case their output is needed “to meet demand in the face of extremely challenging conditions including extreme heat waves, multiple fires, high winds, and various grid issues,” according to a filing. The last time California received a waiver of such length and breadth was 21 years ago during the Western Energy Crisis.

Genius. And here you were thinking that the following was just a joke.

Written by Tom Hunter

September 16, 2021 at 6:00 am

California Screaming – Recall Newsom

In the post, Flyover State, I pointed to the increasing problems that Governor Newsom is facing in his recall election.

For Newsom the election has gone from being something that can be dismissed – including legal efforts to stop the recall petition that started the whole thing – to being a real possibility that he could be booted from office on September 14.

He’s got a ton of money, vastly more than anybody else and in terms of powering the political machines to get the vote out, it might yet save him.

However, in addition to falling polls Gavin appears to have been abandoned by at least some Democrats in the state, including those opposed to his “equity” plan for Covid-19 vaccinations. However, in true tribal fashion most have not.

The election has even been nationalised to a certain extent, as the NYT expresses its fears that a Republican governor could replace California Senator Dianne Feinstein – who is yet another frail, old (88), dementia-ridden Democrat – with a Republican, breaking the 50:50 tie in the Federal Senate. Panic stations for the Left!

Now he’s facing more bad news, although it’s a regular feature of California at this time of year. Fire.

The thing is that for once Newsom does not bear responsibility, at least not solely As detailed in this post, responsibility for these environmental problems goes back decades and lies at the feet of both Californian and Federal Democrat policies. Newsom has begrudgingly, and only by implication, admitted the policies are wrong by directing the state to start clearing underbrush and such, with fire if needed: but that will take years to have any positive effect.

In any case his own party is filled with activists who are more than happy to take advantage of the fires and drought to push their efforts and ideas in fighting against AGW.

As a result, Gavin can’t point to these charts, even if he wanted to.

It’s a case of being trapped by their own rhetoric. If you scream about such things as a way of getting votes, like droughts and heat waves, then sooner or later voters will start asking why you’ve not done anything about it, like building more reservoirs. As with the fires, such politicians cannot then turn to charts like the following since they already dismissed them.

Written by Tom Hunter

September 6, 2021 at 7:34 am

Your Graphics friend who’s fun to be with.

I know that broadcast TV has been falling away as its Boomer audience ages and dies but it’s not until you see a fact like this that you can grasp the scale of it:

Fifty million Americans tuned in to Johnny Carson’s last appearance on The Tonight Show. Today, his Tonight Show successor, along with the egregious Stephen Colbert on The Late Show on CBS, barely have 2 million viewers on a good night…

Carson’s farewell was in 1992. The following is always the sign of a maturing industry, and often a dying one.

Of course there are still growth industries (graphic courtesy of The Times). The last US flight out of Kabul departed a few hours ago.

So I guess it’s back to focusing on Chinese Lung Rot, with a seeming increase in social and media pressure to vaccinate kids now.

I wonder what we’re doing to the usual building of immune systems in children?

Written by Tom Hunter

August 31, 2021 at 9:30 am

NZ Power Blows

After the recent power blackout, which did not affect me, I took a look at Peter Creswell’s long-time blog, Not PC, for his take on the situation.

It turned out that he had nothing new to add to warnings he’d made years, even decades, ago:

if I may continue a well-worn theme of previous posts over several years (No PowerNo power, againStill No Power‘More power!’ says India. ‘No power,’ says NZPower outrage ) and remind you of several famous power outages (such as Auckland 1998, 2006, 2009 … ) this news and that conclusion above simply confirms what should have been obvious years ago: in this country the lifeblood of production, energy, is running out. Not because New Zealand is short of resources with which to produce energy. But because politicians and earth-first worshippers have declared we are not allowed to use them.

That’s from 2012, although he did include this recent comment from one Hamish Rutherford.

“Between the decision to rip up the rules on the gas market, to the difficulty consenting renewables projects, to the threat to build hydro storage at Lake Onslow, the market is simply responding to the signals that the Government is sending it.”

Running through his old posts the most detailed was Meet the Enfeebled, which had lots of graphs on power production, like this one:

... over the years from from 1980 to 1998, the growth in New Zealand’s generating capacity matched the growth in demand, growing at an averaged rate of about 150MW per year.  Despite this, regular power shortages such as the famous outages of 1992 showed that even at this time capacity was near its limits — partly because of the lack of backup generation for the occasionally fickle hydro generators.

The basic thrust of the article was that since the turn of the Millennium (up to 2008 when the post was written) production growth had not matched consumption growth. You can read the detail of power stations built and closed:

TOTAL NEW CAPACITY 1993 – 2008:   1850.5 MW .

TOTAL DECOMISSIONED 1990-2008:       1333 MW

TOTAL NETT NEW CAPACITY SINCE 1990: 949.5 MW

This while consumption grew by 2700MW. The margin was growing thin. But what’s happened since the mid-2000’s? This from the MBIE:

Luckily the consumption has also plateaued at tje same time to roughly the same level: 42,000GWh vs 44,000GWh production.

That is likely due to the steady conversion to energy saving devices such as LED bulbs and heat pumps, as well as the steady increase in insulated houses. But there will come a point where even slow economic growth of 2-3% per year will eventually outpace the improvements in energy efficiency.

But the greatest increase will come with the flip side of the renewable energy push: the electrification of everything. of everything. Below are the NZ consumption figures for 2018 in Petajoules (source MBIE report. pdf pages 14-15):

The supply figures are a little different, since we have to import most of our oil while we produce more than we consume for coal (38 vs. 25) and gas (172 vs. 74).

Current total electricity production from all sources in NZ is about 160PJ. So we’re talking about more than doubling our electrical production, and some 84% of it already comes from renewable sources. Geothermal has grown tremendously since 2005 but there are limits being approached quickly. Hydro reached its limits years ago; there have been more cancelled hydro projects to add to Not PC’s 2008 list – and most of those have been due to the Resource Management Act and the Environment Court

So that leaves Wind and Solar, which means an even greater increase needed from that slim red line below.

Basically from 8Pj to more than 300Pj – an increase of 3,750%.

I’m being generous in allowing that the remaining 82PJ might come from a mix of new hydro and geothermal, with a slight assist from residential PV (solar panels).

Moreover that’s just to replace current fossil fuel energy consumption.

Finally it must be noted that since Wind (and solar) are unreliable, tanking to zero on a regular basis, they will need backup generating capacity – 300Pj of it. Where will that come from? A doubling of hydro/geothermal power? In the case of Hydro it has problems itself, though nowhere near as bad as Wind, but Huntly was built to back them up in drought years.

To paraphrase Sir Humphrey, these are heroic assumptions.

There is one other possibility that should not be dismissed, even as crazy as it may sound. I’m not talking about Thorium Molten Salt Reactors, Fusion reactors or nuclear power in general on the supply side.

No, I’m talking about crushing the demand side. A policy of Zero Economic Growth, or even negative economic as all that fossil fuel energy is shut down to enable a Zero Carbon nation. Look how happy many Greens are with what Covid-19 has delivered to Fortress NZ: the huge reduction in airline flights to and from the nation and the subsequent massive drop in tourism and internal travel in general.

After all, as Robert Bidinotto explains:

Typically, the person who calls himself an “environmentalist” is really just a nature-loving “conservationist.” Appreciating the earth’s natural beauty and bounty, he is understandably concerned about trash, noise, pollution, and poisons. Still, he sees the earth and its bounty as resources–resources for intelligent human use, development, and enjoyment. At root, then, his concern for the earth is human-centered: he believes that this is our environment, to be used by people to enhance their lives, well-being, and happiness.

But the leaders of the organized environmentalist movement have a very different attitude and agenda.

Their basic premise is that human activities to develop natural resources constitute a desecration of nature–that, in fact, nature exists for its own sake, not for human use and enjoyment. By their theory of ecology, they see man not as the crowning glory of nature, nor even as just another part of “the web of life”–but rather as a blight upon the earth, as the enemy of the natural world. And they see man’s works as a growing menace to all that exists.

Written by Tom Hunter

August 19, 2021 at 11:00 am

Energy Charades

A previous post, Energy Realities, showed in clear, graphical detail, the status of energy production and consumption, both globally and for two key nations; the USA and China.

In this post I’ll link to a number of detailed reports, all published recently, that provide more context to the graphs presented in that previous post.

But first there are a number of points about the current energy situation that can be taken from those graphs and their data:

  • As of 2019, almost thirty years after the Kyoto Treaty was signed, the world still overwhelmingly relies on fossil fuels for its energy needs, from electricity production to transport, to the tune of 87%.
  • Renewable energy forms a small percentage of global energy, and the majority of that is traditional biomass and hydro.
  • Nuclear power forms an even smaller fraction.
  • In the USA, fossil fuel dominance is at 80%, even as coal has fallen to about 11% of total energy production.
  • Despite this, the USA’s CO2 emissions per person is 18% less than it was in 1949 and 50% less than the peak in 1973.
  • China’s coal production has exploded in the last twenty years by a factor of almost 400%.
  • The efficiency of wind power is very low, with actual output being a small fraction of installed capacity, and often falling to zero. The same is true of solar power.

So let’s look at some of the reports from just this year alone that explain those graphs, noting that fossil fuels already generate 86% of China’s primary energy consumption.

China’s 2020 coal output rises to highest since 2015:

The world’s biggest coal miner and consumer produced 3.84 billion tonnes of coal in 2020, data from the National Bureau of Statistics showed on Monday.

China’s new coal power plant capacity in 2020:

China put 38.4 gigawatts (GW) of new coal-fired power capacity into operation in 2020, according to new international research, more than three times the amount built elsewhere around the world

Including decommissions, China’s coal-fired fleet capacity rose by a net 29.8 GW in 2020

There’s more to come:

China will invest more in coal to power its economy over the next five years, according to a government plan released Friday that only modestly increased renewable ambitions.

Two specific reports on that.

China’s Economy Is Based on Fossil Fuels:

China plans to build 250 gigawatts of coal-fired generating capacity to add to its current coal-fired fleet of over 1,000 gigawatts—more coal-fired capacity than the entire U.S. generating fleet. Last year, China opened the $30 billion Haoji Railway line, a 2,000-kilometer (1,243-mile) conduit to haul 200 million tons of coal a year directly from central coal mining basins to regions in the southeast.

The Chinese gap between Green and coal:

China approved the construction of a further 36.9 GW of coal-fired capacity last year, three times more than a year earlier, bringing the total under construction to 88.1 GW. It now has 247 GW of coal power under development, enough to supply the whole of Germany.

It’s sad to see in that last article, the claim being made that China is still holding to its commitment for reaching peak CO2 emissions by 2030 and the claim that these coal plants will become stranded assets, even as those actual figures are shown. Nobody, not even in infrastructure investment-mad China, would be stupid enough to build assets costing tens or even hundreds of billions of dollars that will be “stranded” within a decade. These things are built for thirty to forty years of life.

And it’s not just China.

Asia snubs IEA’s call to stop new fossil fuel investments:

Asian energy officials on Wednesday disputed the International Energy Agency’s (IEA) call for no new oil, natural gas and coal investments for the world to be able to reach net-zero carbon emissions by 2050, viewing that approach as too narrow.

Europe turns to coal-fired generation as gas prices rise:

Europe is so short of natural gas that the continent — usually seen as the poster child for the global fight against emissions — is turning to coal to meet electricity demand that is now back to pre-pandemic levels.

Coal usage in the continent jumped 10% to 15% this year after a colder- and longer-than-usual winter left gas storage sites depleted

The return of coal is a setback for Europe ahead of the climate talks in Glasgow later this year. Leaders of the world’s biggest economies failed to set a firm date to end coal burning at the meeting of the Group of Seven at the weekend in Cornwall, U.K.

I assume this means the EU will be giving Poland less shit about its refusal to trash 65% of its energy supply as they attempt to recover from four decades of Communism and reach the wealth levels of the Western EU nations.

INDIA – Coal projected to be its largest source of power in 2040.

Coal is projected to remain the largest single source of electricity in India in 2040, according to Michelle Manook, Chief Executive, World Coal Association.

You would expect such a person to make such a claim, but their energy minister sounds like he’s backing it up, according to the BBC:

India lambasted the richer world’s carbon cutting plans, calling long term net zero targets, “pie in the sky.” Their energy minister said poor nations want to continue using fossil fuels and the rich countries “can’t stop it”.

As a result the following analysis is probably right on the money:

The world’s coal producers are currently planning as many as 432 new mine projects with 2.28 billion tonnes of annual output capacity, research published on Thursday showed, putting targets for slowing global climate change at risk.

China, Australia, India and Russia account for more than three quarters of the new projects, according to a study by U.S. think-tank Global Energy Monitor. China alone is now building another 452 million tonnes of annual production capacity, it said.

More stranded assets I guess!

You need to understand that the developing world is not simply being obstructive in all this. It’s not just that they need to develop their economies fast and that fossil fuels will power the way forward just as it did the West, it’s also the simple fact that renewable energy cannot do the job because of its inefficiency and base load instability, both a result of laws of physics that cannot be avoided, no matter how low the cost of wind turbines and solar panels fall.

Moreover, these nations are beginning to notice some of the problems arising in Western nations and regions that have pushed hard into renewable energy. Some more headlines:

GERMANY – Chipmakers lament high taxes and levies on electricity:

“The high electricity price makes the location unattractive,” Christoph von Plotho, head of chip supplier Siltronic, told Handelsblatt. Another main reason were high personnel costs in Germany. At the same time, a spokesperson of Germany’s largest semiconductor producer Infineon told Handelsblatt that a secure power supply without fluctuations was also a major factor in keeping production in Germany and Europe.

That comes after Germany has spent twenty years and some 500 million Euros in its Energiewende program to build a wind and solar power system. This has resulted in a huge amount of installed capacity that just does not produce and actually requires the old power system to continue beside it:

In 2000, Germany had an installed capacity of 121 gigawatts and it generated 577 terawatt-hours… In 2019, the country produced just 5 percent more (607 TWh), but its installed capacity was 80 percent higher (218.1 GW)

The new system, using intermittent power from wind and solar, accounted for 110 GW, nearly 50 percent of all installed capacity in 2019, but operated with a capacity factor of just 20 percent. (That included a mere 10 percent for solar, which is hardly surprising, given that large parts of the country are as cloudy as Seattle.)

The old system stood alongside it, almost intact, retaining nearly 85 percent of net generating capacity in 2019. Germany needs to keep the old system in order to meet demand on cloudy and calm days and to produce nearly half of total demand. In consequence, the capacity factor of this sector is also low.

The average cost of electricity for German households has doubled since 2000.

All this has not been helped by their insane decision to shut down nuclear plants. The result is that coal still generates some 37% of electricity and Germany has missed its CO2 emission reduction targets. This won’t get better either:

Germany’s solar farms will have to be rebuilt every 15-25 years. The wind farms will need to be rebuilt every 20-25 years.

Higher investment costs, higher running costs, both short and long-term, resulting in more expensive electricity – and all to deliver poorer CO2 reductions than the USA, which has done nothing nationwide like the acclaimed Energiewende.

But while the USA has largely relied on switching from coal to gas for generating electricity (thanks frackers) , California has been another of these “Green Energy leaders” – and the results are the same, Blackouts Loom in California as Electricity Prices Are ‘Absolutely Exploding:

Two inexorable energy trends are underway in California: soaring electricity prices and ever-worsening reliability—and both trends bode ill for the state’s low- and middle-income consumers.

Texas is not as well known for pushing wind power but it has, and the results – blackouts – were already seen during the February cold snap, and could be seen again with this summer’s heat.

New York is also not well known for Green Energy, but they’re trying. On April 30 it closed the Indian Point nuclear power plant, which reliably produced 1,036 MW of electricity.

And so just the other day…

There is no way that China and India or the rest of the developing world are going to accept the same results.

Written by Tom Hunter

July 4, 2021 at 7:08 am

Energy Realities

There have been some terrific graphs published recently that tell us much more about both the global energy situation and efforts to reduce AGW than any number of lengthy articles.

All these graphs but one are historical, showing how energy use has changed over time since the start of the Industrial Revolution.

First, some history of our reliance on different types of energy over the last two hundred years. Note that coal usage peaked around one hundred years ago and oil in the 1970’s. But note also how important they remain.

The reason for those changes can be seen in the next graph, which effectively demonstrates the energy content of the different types. It’s interesting to see that Biomass is churning out slightly more energy than ever, but as energy demands have risen it and other renewable energy sources have simply been left behind. Those fuels with higher energy density have taken over by massive margins.

The only exception to this is nuclear, which is still a pitifully small contributor despite having the highest energy density of all.

Those global figures have been driven by two nations in particular, the USA and China.

Here’s the US. Coal’s contribution has dropped by a huge margin in the last twenty years. The reason for that can be seen in the mirror-image increase in natural gas, which has steadily replaced coal for burning to generate electricity. That in turn has been driven by fracking and horizontal drilling that has unlocked huge reserves of gas on the continental USA, greatly reduced the long-term cost of gas, and thus caused power companies to shift over to using more gas, a process that will continue.

The result of all that has been the steady reduction of CO2 emissions per person in the USA over the last fifty years.

All without signing up to, and even rejecting, the Kyoto Treaty and Paris Climate Accord. So much for government “action”.

Unfortunately all this good work by the USA’s capitalist economy, with its relentless focus on increased productivity that demands getting more production with less energy, is being undone by China.

Not that you can blame them. They have 1.4 billion people that need to have their lives lifted to something approaching that of the West, and they are therefore following a similar path of energy production that the West has undertaken over the last two hundred years. It’s the only way for people to become more prosperous and comfortable in all aspects of life, especially food, housing, health, work.

Note how even the impact of a government lockdown of the economy had no effect on the burning of coal in China in 2020.

India’s 1.2 billion people are following China as fast as they can, as well as the rest of Asia and Africa.

If you want one graph to explain why renewable energy forms such a tiny part of all this, even after hundreds of billions of dollars and Euros of investment over the last thirty years, then the following graph is as good as any.

You just can’t beat physics.

Written by Tom Hunter

July 2, 2021 at 7:00 am

Survival in changing times

The predecessor of this blog was named after the famous comedy character from the Yes Minister and Yes Prime Minister TV series of the 1980’s, Sir Humphrey Appleby.

I was reminded of yet another aspect of him the other day when reading one of Chris Trotter’s latest missives, They Say We Want A Revolution – But Do We?.

The article is about both the proposals from the Climate Change Commission and the He Puapua report, but it was this part that caught my eye:

As a “free-marketeer” of no mean ability (the man has a PhD from the prestigious Wharton School of Business) Rod Carr could contemplate the installation of cash registers in public hospitals without flinching. 

I’d forgotten about that long-lost tidbit from Rod Carr, back when he looked like this:

Yep. Every inch the 1980’s/90’s Rogernome businessman on the make, expensive business suit and cool tie with the suitably modish beard – and free market ideology at the forefront of thinking.

Nowadays however it’s Climate Change at the forefront, likely combined with a bit of He Puapua and so…

From 1980’s business suit and tie to being a bearded git who resembles nothing so much as an Amish elder, but with a huge chunk of pounamu around his neck for added Aotearoan authenticity, Carr is testimony to Sir Humphrey’s philosophy:

“Bernard, I have served eleven governments in the past thirty years. If I had believed in all their policies, I would have been passionately committed to keeping out of the Common Market, and passionately committed to going into it. I would have been utterly convinced of the rightness of nationalising steel. And of de-nationalising it and re-nationalising it. On capital punishment, I’d have been a fervent retentionist and an ardent abolitionist. I would’ve been a Keynesian and a Friedmanite, a grammar school preserver and destroyer, a nationalisation freak and a privatisation maniac; but above all, I would have been a stark, staring, raving schizophrenic.”.

At least Sir Humphrey never grew a beard.

Written by Tom Hunter

June 28, 2021 at 9:35 am

A distorted economy

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.

It’s That Damned Global Warming Again!

A polar blast is heading across NSW and Victoria. Picture: BOM/Sky
 News Weather

Inland temperatures have been 10C to 12C colder than average on Thursday morning, while coastal parts of the state have shivered through a morning 5C to 7C below average.

Written by adolffinkensen

June 10, 2021 at 11:48 am