Heh. Couldn't have put this better meself. There are two mass delusion abroad IMHO: AGW being one (natch) and the notion that financial Ponzi schemes will not cause pain, the other. Sigh. As Dylan sings (Things have Changed):
People are crazy and times are strange
I'm locked in tight, I'm out of range
I used to care, but things have changed
Showing posts with label stupidity. Show all posts
Showing posts with label stupidity. Show all posts
Sunday, July 06, 2008
Monday, April 28, 2008
Tribalism and Treaty
Bruce Sheppard, the quinessential provocateur, has wondered publicly about the relevance of Te Tiriti in 2008. I've added a little comment, but Bruce has touched on the edge of an issue that's interested me for quite some time.
Is the political support currently behind the re-tribalisation of Maori, a Good Thang?
If you look at Ngai Tahu, who want to be capitalists, why yes. Probably.
If you look at Tuhoe Nation, who want to ride their horses back into a Glorious Misty-Mountain Past and get a little cash from training camps on the side, why no. Probably.
What do finer minds than mine say?
There's the Latin American notion of "let us have our Middle Ages in peace" (from The General and his Labyrinth - Marquez). This simply draws a comparison with the long, bloody and traumatic transformations in our English Middle Ages:
- the Reformation (c 1520),
- the dissolution of the monasteries (c 1538),
- the re-Catholicisation of Bloody Mary (c 1553),
- the Shakespearian age of Elizabeth I (c1599) (Shakespeare, a secret Catholic, hankered after the old days: 'bare ruined choirs where late the sweet birds sang', referred to the monasteries),
- the chaos of the Cavaliers vs Roundheads in the English Civil War (c 1642)
- the Glorious Revolution (1688) which finally settled the principle of Parliamentary control
This 200-year saga, in retrospect, was needed to make the decisive break from a 'world lit only by fire', innocent of the germ theory of disease, and in thrall to a corrupt but totalitarian Catholic Church, to the Age of Reason.
Why, in this reading, should Maori and their (and it was ours, too) default setting of small, non-urban tribes, need any shorter time? Because one of the lessons of history is that humans need to be severely jolted to move even one millimetre away from 'traditional ways', however they are defined.
The contrary view: that tribalism is a pernicious cul-de-sac, would have it that, as the Greeks figured out early on, an essential feature of society is the deliberate lack of political power able to be held by groupings such as clans, tribes, mafias, and other self-defining sub-sets. A good read here is Roger Sandall (Culture Cult): the quote which got my attention is
"The dynastic feuding of ‘tyrants’ had brought Athens to the point of ruin. It had to be stopped. Cleisthenes’ solution was to firmly suppress a citizen’s political identification with family and neighborhood, with mafia bosses and clan chiefs. He sliced the country into 150 electoral districts called ‘demes’, and it was from these—and no longer from clans and families—that the citizens of Athenian democracy were obliged in future to take their second names. This applied to the haughtiest aristocrat and the humblest plowman alike.
OTOH, the mental or spritual aspects of our modern life are, shall we say, somewhat arid. Part of the collateral damage of the Age of Reason was that the notion of Gods or other spiritual manifestations was comprehensively demolished.
Yet the human mind seems to have evolved to require something larger than itself to look up to. Gaia doesn't quite fit the bill, the Christian God is fairly much dead if not buried, Mohammed is a violent, woman-fearing hick - Deliverance in the Desert, so to speak - and Buddha has been killed by someone he met on the road.
So perhaps this spiritual void is a place to start from.
But not as tribes, as individuals.
Is the political support currently behind the re-tribalisation of Maori, a Good Thang?
If you look at Ngai Tahu, who want to be capitalists, why yes. Probably.
If you look at Tuhoe Nation, who want to ride their horses back into a Glorious Misty-Mountain Past and get a little cash from training camps on the side, why no. Probably.
What do finer minds than mine say?
There's the Latin American notion of "let us have our Middle Ages in peace" (from The General and his Labyrinth - Marquez). This simply draws a comparison with the long, bloody and traumatic transformations in our English Middle Ages:
- the Reformation (c 1520),
- the dissolution of the monasteries (c 1538),
- the re-Catholicisation of Bloody Mary (c 1553),
- the Shakespearian age of Elizabeth I (c1599) (Shakespeare, a secret Catholic, hankered after the old days: 'bare ruined choirs where late the sweet birds sang', referred to the monasteries),
- the chaos of the Cavaliers vs Roundheads in the English Civil War (c 1642)
- the Glorious Revolution (1688) which finally settled the principle of Parliamentary control
This 200-year saga, in retrospect, was needed to make the decisive break from a 'world lit only by fire', innocent of the germ theory of disease, and in thrall to a corrupt but totalitarian Catholic Church, to the Age of Reason.
Why, in this reading, should Maori and their (and it was ours, too) default setting of small, non-urban tribes, need any shorter time? Because one of the lessons of history is that humans need to be severely jolted to move even one millimetre away from 'traditional ways', however they are defined.
The contrary view: that tribalism is a pernicious cul-de-sac, would have it that, as the Greeks figured out early on, an essential feature of society is the deliberate lack of political power able to be held by groupings such as clans, tribes, mafias, and other self-defining sub-sets. A good read here is Roger Sandall (Culture Cult): the quote which got my attention is
"The dynastic feuding of ‘tyrants’ had brought Athens to the point of ruin. It had to be stopped. Cleisthenes’ solution was to firmly suppress a citizen’s political identification with family and neighborhood, with mafia bosses and clan chiefs. He sliced the country into 150 electoral districts called ‘demes’, and it was from these—and no longer from clans and families—that the citizens of Athenian democracy were obliged in future to take their second names. This applied to the haughtiest aristocrat and the humblest plowman alike.
... a number of historical parallels between the ancient and modern worlds and the continuing clash of East and West. But nothing is more revealing than the determination of Cleisthenes to stamp out despots and despotism by severing the connection between clan power and political representation. This was in 507 BC. Today, 2,500 years later, throughout most of the Middle East and conspicuously so in Iraq, they still haven’t got the point."
And neither, in this view, have the neo-tribalists.
Which brings us back to the muddled present. It is quite clear that Maori lore and tradition (the bits that would widely be classed as Baby, not Bathwater, at any rate) is quite inadequate to assist in most of the physical features of our modern life. Maori were non -urbanised, and this fact alone means that there is nothing that Tradition can say about the daily lives of 95% of us.OTOH, the mental or spritual aspects of our modern life are, shall we say, somewhat arid. Part of the collateral damage of the Age of Reason was that the notion of Gods or other spiritual manifestations was comprehensively demolished.
Yet the human mind seems to have evolved to require something larger than itself to look up to. Gaia doesn't quite fit the bill, the Christian God is fairly much dead if not buried, Mohammed is a violent, woman-fearing hick - Deliverance in the Desert, so to speak - and Buddha has been killed by someone he met on the road.
So perhaps this spiritual void is a place to start from.
But not as tribes, as individuals.
Saturday, March 29, 2008
Heat pumps (Shock, Horror) use Electricity!
This just has to be a No Shit, Sherlock moment for the hapless central planners of our funny little economy.
For the otherwise unenlightened, the backstory is that, due to Clean Air fixations, wherein chimneys emitting smoke are deemed to be a Bad Thang, there is a movement afoot to replace open fires and old wood fires, with 'clean' heat sources. And to encourage the masses, there are Gummint Subsidies to make a switch. (Bad puns, I've told you before. Sorry, Ed)
Heat pumps are a huge beneficiary of this move.
Oh dear, they cause a switch from sustainable, carbon based fuels (trees, unnerstan?) to electricity. Where peak load is generated from gas and coal. Nasty, dirty stuff, accordin' to some.
Which (spare generating capacity) NZ is rather short of at the minute. Double oh dear.
And heat pumps, particularly those of the reverse cycle persuasion, can also Cool. Cool pumps use power too! Damn, that wasn't in the Planners Plans! Folks were just meant to Heat with the things...And they Cool things in Summer, when electricity generation raw materials were traditionally stockpiled for Winter. Triple oh dear.
Funny, whodathunkit, them Central Planners never saw any o'this a'comin'.....
And you'd have to prise the remote controls for all them Heat Pumps from consumers' cold dead hands.....
For the otherwise unenlightened, the backstory is that, due to Clean Air fixations, wherein chimneys emitting smoke are deemed to be a Bad Thang, there is a movement afoot to replace open fires and old wood fires, with 'clean' heat sources. And to encourage the masses, there are Gummint Subsidies to make a switch. (Bad puns, I've told you before. Sorry, Ed)
Heat pumps are a huge beneficiary of this move.
Oh dear, they cause a switch from sustainable, carbon based fuels (trees, unnerstan?) to electricity. Where peak load is generated from gas and coal. Nasty, dirty stuff, accordin' to some.
Which (spare generating capacity) NZ is rather short of at the minute. Double oh dear.
And heat pumps, particularly those of the reverse cycle persuasion, can also Cool. Cool pumps use power too! Damn, that wasn't in the Planners Plans! Folks were just meant to Heat with the things...And they Cool things in Summer, when electricity generation raw materials were traditionally stockpiled for Winter. Triple oh dear.
Funny, whodathunkit, them Central Planners never saw any o'this a'comin'.....
And you'd have to prise the remote controls for all them Heat Pumps from consumers' cold dead hands.....
Friday, March 28, 2008
Earth Hour = Soft fascism
Couldn't agree more with This (ht Tim Blair). While I'm wholly in favour of reducing consumption (and am well ahead of the curve, in that I have LED lights drawing 1-3 watts each as downlight replacements), I abhor the collectivist pressure inherent in EH.
And there's a less-well-publicised aspect to dimly lit precincts and premises that you won't hear about anytime soon from the promoters: they are, quite simply, crime magnets.
Earth Hour = A'robbin' we will go!
And there's a less-well-publicised aspect to dimly lit precincts and premises that you won't hear about anytime soon from the promoters: they are, quite simply, crime magnets.
Earth Hour = A'robbin' we will go!
Wednesday, March 26, 2008
Little Boxes
The proposal to streamline the building industry consents etc process is gathering steam. Not PC has easily the best summary of my views - planners, who needs 'em? They don't have anything to say about boats or cars. So why houses?
Tuesday, March 18, 2008
Bearing up
Great thread here, where the comments throw up all the usual suspects. And the lead paragraph is just it: what Were they thinking? Scapegoat time, methinks....
My own take on things is that of a Bear of Very Little Brain:
Sadly for conspiracy theorists, the US debacle is much simpler, much more widespread, and much more worrying. There are four underlying causes:
1 - the US has for many years spent rather more than it has earned, hence a continuing and chronic deficit which must be funded with Other Peoples Money.
2 - the Greenspan years encouraged cheap credit, with a built-in 'buy now, pay later' incentive, which has become entrenched in consumers' minds, especially as they figured out that there was an ATM bolted to their house value, and kept going and punching its buttons. And cheap credit = price bubbles.
3 - financial institutions have re-discovered leverage (but in a new way, because it's Different this time), and have used it to unprecedented heights (or widths, or depths, pick your metaphor). Bear's book assets supported a 32x multiple of business...and the variety of option and Adjustable Rate mortgage products was all too tempting.
4 - accounting leniency (especially the Qualifying Special Purpose Entities - QSPE's) allowed most or all of this financial wizardry to exist outside conventional balance sheets, reporting requirements and other regulatory safeguards. The mess was out of sight, out of mind.
So this Ponzi (meaning, dependent on new suckers coming in and paying cash) edifice is what's coming apart before our eyes. There are a lot of 'unknown unknowns':
- because of the opacity of the QSPE's, and of how to value the cross-linking chains of financial instruments, no-one has any real grasp of where the financial bodies are buried, or how many there are. And most everyone has a cellar. Thus when another cellar is excavated and another crop of recently deceased is uncovered, the vital element of mutual trust is further eroded. 'Who's next?' is the whisper.
- the Fed is out of ammo: it's treating this whole thing as a liquidity issue, and pumping in money. That merely fuels inflation, while leaving untouched the real issue: solvency. The off-balance-sheet junk is coming back On.
- real assets such as houses, which have become well overpriced in traditional household-income-to-phouse-price multiples, are returning to the safe zone of 2.5-3.5. Rather suddenly.
- there is a flight to 'safe' havens such as Treasuries and commodities. Unfortunately, as money floods in to commodities such as wheat, gold and oil, which are all highly supply-inelastic, the old rule of supply and demand kicks in and prices rise. And as oil and wheat etc are our grocery bills in raw form, guess what's happening to them...
If you can recognise li'l ol' NZ in some of these conditions (the chronic deficit BH rightly fingers above) then, yes, we should be worried, too. But we are a commodities maker (food, gold and to some extent oil and gas) so may be well placed to take advantage. And we have some of the best accounting reporting in the world (yes, don't laugh). So we can probably say that our cellars are relatively safe. Maybe a mummified rat or hedgehog. Nothing real bad. Pity 'bout those houses, but.
There has to be a marketing slogan in here, surely?
"NZ - Home of the Lowest Level 3 Asset ratio in the World!"
My own take on things is that of a Bear of Very Little Brain:
Sadly for conspiracy theorists, the US debacle is much simpler, much more widespread, and much more worrying. There are four underlying causes:
1 - the US has for many years spent rather more than it has earned, hence a continuing and chronic deficit which must be funded with Other Peoples Money.
2 - the Greenspan years encouraged cheap credit, with a built-in 'buy now, pay later' incentive, which has become entrenched in consumers' minds, especially as they figured out that there was an ATM bolted to their house value, and kept going and punching its buttons. And cheap credit = price bubbles.
3 - financial institutions have re-discovered leverage (but in a new way, because it's Different this time), and have used it to unprecedented heights (or widths, or depths, pick your metaphor). Bear's book assets supported a 32x multiple of business...and the variety of option and Adjustable Rate mortgage products was all too tempting.
4 - accounting leniency (especially the Qualifying Special Purpose Entities - QSPE's) allowed most or all of this financial wizardry to exist outside conventional balance sheets, reporting requirements and other regulatory safeguards. The mess was out of sight, out of mind.
So this Ponzi (meaning, dependent on new suckers coming in and paying cash) edifice is what's coming apart before our eyes. There are a lot of 'unknown unknowns':
- because of the opacity of the QSPE's, and of how to value the cross-linking chains of financial instruments, no-one has any real grasp of where the financial bodies are buried, or how many there are. And most everyone has a cellar. Thus when another cellar is excavated and another crop of recently deceased is uncovered, the vital element of mutual trust is further eroded. 'Who's next?' is the whisper.
- the Fed is out of ammo: it's treating this whole thing as a liquidity issue, and pumping in money. That merely fuels inflation, while leaving untouched the real issue: solvency. The off-balance-sheet junk is coming back On.
- real assets such as houses, which have become well overpriced in traditional household-income-to-phouse-price multiples, are returning to the safe zone of 2.5-3.5. Rather suddenly.
- there is a flight to 'safe' havens such as Treasuries and commodities. Unfortunately, as money floods in to commodities such as wheat, gold and oil, which are all highly supply-inelastic, the old rule of supply and demand kicks in and prices rise. And as oil and wheat etc are our grocery bills in raw form, guess what's happening to them...
If you can recognise li'l ol' NZ in some of these conditions (the chronic deficit BH rightly fingers above) then, yes, we should be worried, too. But we are a commodities maker (food, gold and to some extent oil and gas) so may be well placed to take advantage. And we have some of the best accounting reporting in the world (yes, don't laugh). So we can probably say that our cellars are relatively safe. Maybe a mummified rat or hedgehog. Nothing real bad. Pity 'bout those houses, but.
There has to be a marketing slogan in here, surely?
"NZ - Home of the Lowest Level 3 Asset ratio in the World!"
Tuesday, February 26, 2008
Black-Scholes = Black Hole
My math is far too weak to follow Black-Scholes, but it's been the standard paradigm for pricing of exotic financial instruments for a quarter of a century.
No longer.
Ever since I read Nassim Nicholas Taleb's 'Black Swan', and bought/read his 'Fooled by Randomness' I've had this intuition that there was a big soft spot right underneath the main pillar of the financial establishment. The article notes that, in supplying a plausible mechanism for pricing exotica, Black-Scholes also prompted a massive surge in their supply. Now, we know it was all based on a mirage.....
The fool's bandag-ed finger goes wabbling back to the fire.
No longer.
Ever since I read Nassim Nicholas Taleb's 'Black Swan', and bought/read his 'Fooled by Randomness' I've had this intuition that there was a big soft spot right underneath the main pillar of the financial establishment. The article notes that, in supplying a plausible mechanism for pricing exotica, Black-Scholes also prompted a massive surge in their supply. Now, we know it was all based on a mirage.....
The fool's bandag-ed finger goes wabbling back to the fire.
Tuesday, September 25, 2007
Drugs - to ban or not - Lee Harris expostulates
This article is the best I have ever seen on the topic. It reviews Theodore Dalrymple's book 'Romancing Opiates: Pharmacological Lies and the Addiction Bureaucracy', and Richard DeGrandpre's alternative approach in 'The Cult of Pharmacology: How America Became the World’s Most Troubled Drug Culture'. Who says history is bunk, after reading Harris' skilful interlacing of the Greeks, John Stuart Mill, and the content of these two books? I must confess that Theodore Dalrymple (a pen name, real name Anthony Daniels) is a personal favourite, yet Harris gently steers away from some of TD's more uncompromising positions. A great article, by a great author.
Thursday, July 05, 2007
Climate Change runs out of gas
This piece of actual science shows the value of actually doing the sums. Essentially, there jest ain't enough recoverable hydrocarbons in the entire world, to support assumptions made in the IPCC's climate model. Like, IPCC assume 11-15 trillion barrel-of-oil-equivalent (TBoe) is going to go up in smoke.
Bzzt...wrong. There's only 2.7-3.5 TBoe left in the whole freakin' world, according to this. That's (counts on fingers) only 38% (3.5/11 - the best case) of the IPCC assumption.
It's really embarrassing, if you are of the Chicken Little persuasion, or (needless to say) a UN bureaucrat or activist scientist on the Gerbil Worming Gravy Train, to trip over such a basic misapprehension about our world.
But wait, there's more.....
And, of course, the real story is well away from the neg-heads, over here. Solar (particluarly thin-film solar) is going to power us in a generation or so.
Bzzt...wrong. There's only 2.7-3.5 TBoe left in the whole freakin' world, according to this. That's (counts on fingers) only 38% (3.5/11 - the best case) of the IPCC assumption.
It's really embarrassing, if you are of the Chicken Little persuasion, or (needless to say) a UN bureaucrat or activist scientist on the Gerbil Worming Gravy Train, to trip over such a basic misapprehension about our world.
But wait, there's more.....
And, of course, the real story is well away from the neg-heads, over here. Solar (particluarly thin-film solar) is going to power us in a generation or so.
Thursday, May 24, 2007
Agriculture in NZ - the no-subsidies version
This international article is a good summary of the last 20 years' experience of unsubsidised farming in our fair land. The Social Laboratory Syndrome strikes again!
I do remember a leetle anecdote about those last glorious days of Supplementary Minimum Prices in the late '70's, way down South in a tiny self-governed town called Otautau.
Y'see, SMP's were counted on certain days. And the basis for Price Support (gawd, what a totalitarian title That was...) was per live stock unit. $/sheep: nice and simple. Oh, and some more for the wool.
Only problem was that 3 days before Count Day, a major (150 year return period - we had 3 of those in 18 months...) flood went down the Aparima, and a lot of the SMP'able stock drowned. Or so you would have thought, seeing them in fences, under willows, and in the middle of paddocks, on their backs with their legs in the air, bloated like Michael Moore.
But by strange circumstance, as far as the SMP count went, the very same stock units had held their breath underwater for 3 days, and survived just long enough to pass Go and collect their $200.
They breed 'em tough in Southland.
Whoever said economic incentives don't work?
I do remember a leetle anecdote about those last glorious days of Supplementary Minimum Prices in the late '70's, way down South in a tiny self-governed town called Otautau.
Y'see, SMP's were counted on certain days. And the basis for Price Support (gawd, what a totalitarian title That was...) was per live stock unit. $/sheep: nice and simple. Oh, and some more for the wool.
Only problem was that 3 days before Count Day, a major (150 year return period - we had 3 of those in 18 months...) flood went down the Aparima, and a lot of the SMP'able stock drowned. Or so you would have thought, seeing them in fences, under willows, and in the middle of paddocks, on their backs with their legs in the air, bloated like Michael Moore.
But by strange circumstance, as far as the SMP count went, the very same stock units had held their breath underwater for 3 days, and survived just long enough to pass Go and collect their $200.
They breed 'em tough in Southland.
Whoever said economic incentives don't work?
Thursday, May 17, 2007
Housing Bubble
A useful post here from another bubbular location: Southern California (SoCal, for short).
What can happen there can happen here, too. The post is quite good on the accelerated effects of information flow about housing, and the relationship between credit card debt and higher mortgage payments as fixed-rate or sweetheart deals reset to mrket levels.
In the '80's, Muldoon borrowed and hoped. We have lived through what it took to get us out of that hole: the best part of 20 years of work and better productivity.
And now, two aspects of the zeitgeist are putting us back in a similar hole:
1 - a Gummint hell-bent on buying enough votes for the next election, via various income redistribution schemes. Personal Tax cuts? Nah, Nanny knows best, you lot will simply add demand to the economy if we let you actually keep your own money. Speak for yourself, Michael bloody Cullen: I would pay down what minor debt I may have, and put the rest into Aussie shares and another super fund.
H L Mencken had it right in the '20's: an election is 'an advanced auction of stolen goods'.
And we are about to find out the hard way, yet again, that you cannot redistribute yourself rich.
2 - There is undoubtedly a local housing bubble. When it corrects, from a point where house price to income levels are around 5-7 i.e. unsustainable, to a level of say 4, look out below. 4/5 is $100,000 on a $500,000 home: a $100K loss. But 4/7 is $300,000 on a $700,000 home, and there's plenty of those just along my own street. So if you are one of the Feckless Many who have ratcheted up their debt anywhere north of 75% of current house valuation, you're gonna be hurting soon.
In effect, in the '80's, Muldoon borrowed and hoped at a public-sector level.
But in the aughties, borrowing and hoping is a private-sector pursuit.
And as the poster points out, in an environment where news and sentiment get around at the speed of light, that 'when', as in when the correction happens, might be a lot sooner than you would like.
SoCal catches the flu, we all cough.
What can happen there can happen here, too. The post is quite good on the accelerated effects of information flow about housing, and the relationship between credit card debt and higher mortgage payments as fixed-rate or sweetheart deals reset to mrket levels.
In the '80's, Muldoon borrowed and hoped. We have lived through what it took to get us out of that hole: the best part of 20 years of work and better productivity.
And now, two aspects of the zeitgeist are putting us back in a similar hole:
1 - a Gummint hell-bent on buying enough votes for the next election, via various income redistribution schemes. Personal Tax cuts? Nah, Nanny knows best, you lot will simply add demand to the economy if we let you actually keep your own money. Speak for yourself, Michael bloody Cullen: I would pay down what minor debt I may have, and put the rest into Aussie shares and another super fund.
H L Mencken had it right in the '20's: an election is 'an advanced auction of stolen goods'.
And we are about to find out the hard way, yet again, that you cannot redistribute yourself rich.
2 - There is undoubtedly a local housing bubble. When it corrects, from a point where house price to income levels are around 5-7 i.e. unsustainable, to a level of say 4, look out below. 4/5 is $100,000 on a $500,000 home: a $100K loss. But 4/7 is $300,000 on a $700,000 home, and there's plenty of those just along my own street. So if you are one of the Feckless Many who have ratcheted up their debt anywhere north of 75% of current house valuation, you're gonna be hurting soon.
In effect, in the '80's, Muldoon borrowed and hoped at a public-sector level.
But in the aughties, borrowing and hoping is a private-sector pursuit.
And as the poster points out, in an environment where news and sentiment get around at the speed of light, that 'when', as in when the correction happens, might be a lot sooner than you would like.
SoCal catches the flu, we all cough.
Lileks Local News
As anyone with a passing acquaintanceship with the blogosphere knows, James Lileks has been bumped off the Strib's columnist list, and assigned to local news stories.
But I would bet that the dopey exec's who handed out this demotion, aren't prepared for this sort of reporting of their hallowed local events....
But I would bet that the dopey exec's who handed out this demotion, aren't prepared for this sort of reporting of their hallowed local events....
Tuesday, April 24, 2007
Housing woes - oh, and they're in the UK
Dear old William Rees-Mogg has a typically pithy article in the Times. Change the context to NZ, and his comments are still apropos. Especially the ones about the four conditions for a cartel. From the article (my numbering added):
"1. license housebuilding, so that no one could build a new house without a licence, or even rebuild an old house or a redundant barn.
2. encourage developers to maintain large land banks in order to benefit from rising prices.
3. leak out new permissions only after long periods of delay.
4. combine this with an unlimited flow of mortgage credit and relatively low rates of interest.
If you restrict supply below the market clearing level and increase funding, you will inevitably create a bubble and you will lock people out of the market."
The wisdom of the old geezer: two of my go-back-to books by this guy are the rather apocalyptic "The Great Reckoning", published in 1992, which foresaw in rather exquisite detail the rise of terrorism among other things; and "The Sovereign Individual", published 1997, which foresaw the break-up of the world's larger and more unwieldy entities, and the privatisation of states, armies and other traditional nation-state apparatus, on smaller scales. Blackwater, anyone?
Prophetic stuff.
And wonderfully different to the asswipe smush (one square only, though) served up in the name of analysis in our own little deranged dominion.
"1. license housebuilding, so that no one could build a new house without a licence, or even rebuild an old house or a redundant barn.
2. encourage developers to maintain large land banks in order to benefit from rising prices.
3. leak out new permissions only after long periods of delay.
4. combine this with an unlimited flow of mortgage credit and relatively low rates of interest.
If you restrict supply below the market clearing level and increase funding, you will inevitably create a bubble and you will lock people out of the market."
The wisdom of the old geezer: two of my go-back-to books by this guy are the rather apocalyptic "The Great Reckoning", published in 1992, which foresaw in rather exquisite detail the rise of terrorism among other things; and "The Sovereign Individual", published 1997, which foresaw the break-up of the world's larger and more unwieldy entities, and the privatisation of states, armies and other traditional nation-state apparatus, on smaller scales. Blackwater, anyone?
Prophetic stuff.
And wonderfully different to the asswipe smush (one square only, though) served up in the name of analysis in our own little deranged dominion.
Monday, April 23, 2007
We'll have to coin a new shorthand for this
Darwin is hard at work again, here.
Used to be 'Fish, Barrel, Shoot' as a shorthand for, well, shooting fish in a barrel.
Taunting a number of crocodiles then suffering the consequences (both kids and crocs) has that air of inevitability about it all, n'est ce pas?
So perhaps 'Croc, Taunt, Lunch, Shoot' is it......
Used to be 'Fish, Barrel, Shoot' as a shorthand for, well, shooting fish in a barrel.
Taunting a number of crocodiles then suffering the consequences (both kids and crocs) has that air of inevitability about it all, n'est ce pas?
So perhaps 'Croc, Taunt, Lunch, Shoot' is it......
Tuesday, March 20, 2007
Those darned House Prices
This analysis (which, funnily enough, blames investors, and this rather better one, which blames the stoopid Gummint, are both about the same research, by Dominick Stephens, of Westpac. Apart from the headline bias, the reserach confirms my own view of the casuses of the growing house price-to-earnings ratio (currently sitting at the 'severely unaffordable' in major NZ cities: at or over 6).
The article nails changes in top personal tax rates, versus company rates, as a key driver. This was pure politics-of-envy stuff, back in 2000. Westpac's analysis thinks this alone accounts for 17% of observed house price increases since 2000.
I can think of five major contributors to increases, apart from this:
1 - the dopey Govt efforts to get first-home buyers into the market, by guaranteeing the first $100k of mortgage irrespective of the purchaser's ability to pay. This had the instant effect, right here in l'il ol' Christchurch, of making every house price start at $100K, practically overnight. Properties, just before this fabulously ill-considered action, could be had in the poorer 'burbs for under $50K. After that action, prices went rapidly north of $120K, for the very same house. So much for the poor buyer.
2 - the creeping effects of regulation in building itself.
- Having every electrical tool certified, every year
- Fencing of sites
- Scaffolding erection, certifying, take-down, where in the past a long ladder used to do.
- certification of all trades
The aggregate effect is around 5-10% of pure build costs.
3 - Greedy councils and their contributions to infrastructure and reserves. The apartment saga in Auckland is indicative: up from $3-6K to $40K. Go figure.
4 - The extended consenting and RMA processes, add pure time (and as we all should know, Time=Money) to a development. This 'carry' (as the jargon has it) is probably around 5-10% of outright total costs, and in a protracted case, could easily be triple that.
5 - Good ol' supply and demand. Section prices alone in many areas are what a house price would have been in 2000. Add the build cost, at a conservative $2000/sq m, and the total starts to resemble that 6+ times multiplier. A constrained supply of land may not be by itself a major factor. But it may be the straw that breaks the camel's bank.
So there we have it. And notice the common factor.
It's not greedy developers, banks, or investors.
It's Gummint being its normal, stoopid self.
The article nails changes in top personal tax rates, versus company rates, as a key driver. This was pure politics-of-envy stuff, back in 2000. Westpac's analysis thinks this alone accounts for 17% of observed house price increases since 2000.
I can think of five major contributors to increases, apart from this:
1 - the dopey Govt efforts to get first-home buyers into the market, by guaranteeing the first $100k of mortgage irrespective of the purchaser's ability to pay. This had the instant effect, right here in l'il ol' Christchurch, of making every house price start at $100K, practically overnight. Properties, just before this fabulously ill-considered action, could be had in the poorer 'burbs for under $50K. After that action, prices went rapidly north of $120K, for the very same house. So much for the poor buyer.
2 - the creeping effects of regulation in building itself.
- Having every electrical tool certified, every year
- Fencing of sites
- Scaffolding erection, certifying, take-down, where in the past a long ladder used to do.
- certification of all trades
The aggregate effect is around 5-10% of pure build costs.
3 - Greedy councils and their contributions to infrastructure and reserves. The apartment saga in Auckland is indicative: up from $3-6K to $40K. Go figure.
4 - The extended consenting and RMA processes, add pure time (and as we all should know, Time=Money) to a development. This 'carry' (as the jargon has it) is probably around 5-10% of outright total costs, and in a protracted case, could easily be triple that.
5 - Good ol' supply and demand. Section prices alone in many areas are what a house price would have been in 2000. Add the build cost, at a conservative $2000/sq m, and the total starts to resemble that 6+ times multiplier. A constrained supply of land may not be by itself a major factor. But it may be the straw that breaks the camel's bank.
So there we have it. And notice the common factor.
It's not greedy developers, banks, or investors.
It's Gummint being its normal, stoopid self.
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