Councils and Cluelessness

The issue with Councils (I used to be a Treasurer of one back in the day - the title says it all) is quite simple to state, and very hard to fix. They now have power over so much of the regulatory aspects of housing and building (a partial list: - land prices (via zoning) - land developmnent (via consents and taxes) - housing design (via consents, design rules) - housing build (via inspections, requirements) - continuing use of house plus land (via Plans, consents and permitted uses) that their ordinary operations, in puddling through all of the above, have a major economic impact on the lives, businesses and prospects of anyone enmeshed in their gears. And yet, at the very same time, Councils are economically clueless. - they have no idea of, let alone penalty for causing monetary loss because of, the time value of money - they have no idea of the principles of monopoly (who else runs the sewers, roads, stormwater?) and take no precautions against the ancient abuses arising from this - they employ staff on salaries, who are completely disconnected from quantum or quality of output, and who thus experience precisely zip/zilch/nada of the consequences which would follow in the business world (termination, bankruptcy, or at the least, serious loss) - they are able to compulsorily demand fees for services (or no consent, buddy), rates (or we'll sell the place from under you), and levies (or no subdivision, you 'orrible greedy developer). Thus they wander serenely about the landscape, causing economic havoc in their wake, and congratulating themselves on a job well done, because they Do carefully count the awards made by juries of their peers... But how to change this horrific combination of power and incompetence - aye, well there's the rub....

LTP season is upon us again!

I occasionally take an interest in the Long Term Plan of of the local Council. It's my money they're spending, and they are obliged to Consult aboot it all.

I generally ask some pointed question: like:

•I see you have budgetted for X million pesos revenue, from Development Contributions. Please set out the average revenue per section expected, segmented into residential, commercial, industrial and Gummint.
•Please provide some economic commentary about these figures, given that they are significant inputs into section prices, and coming as they do early in the development cycle, attract significant developer financing cost additions prior to section sale, and are ultimately paid for by the incurrence of household, public and business debt.
•Please provide commentary about the revenue risk implicit in these averages, focussing on the most likely such risks: development flight to cheaper jurisdictions, housing inflation, buyer resistance, disadvantagement of low-income new-house purchasers.
•Please provide a table showing comparative Development Contributions for adjacent jurisdictions, for equivalently sized Councils across New Zealand, and against a New Zealnd average.

Y'see? A statement (on public record, no less), an education for Councillors who are often shocked! Shocked! to understand just what their faceless bureaucrats are inflicting on anyone enmeshed in their processes, and (best of all) a chance to stand up in front of the Council and tell these hapless fools just exactly what a dire effect they are having upon their local economy, residents and businesses.

Now, the Open Season for the LTP's is again upon us. Happy Hunting!

Licensed Building Practitioners

This will quite simply cause a polarisation in the market. Most repair/maintenance can be made to look as though it's always been there. So goodbye LBP's, consents, the swinging fees and official scrutiny for this type of work. Who could ever tell that it had happened at all? I recall saying something to this effect years ago....

There simply won't be any point in the middle-level type of extensions, alterations etc. By the time you've stumped up for the engineer, the LBP'ed foundation guy, the LBP'ed structural builder, the LBP'ed interior carpenter, the LBP'ed roofie, the LBP'ed exterior plasterer, the LBP'ed brickie or blockie, the LBP'ed Site Manager, the building consent fee, the inspections fees (one per trade needed!), not to mention the materials (remember them?), the supervisions, the architect if'n yer really stupid, and the resource consent if yer neighbours get a fit of the Nimby's, why, it will be much simpler to give the old dump the flick and buy something closer to what you actually want.

I think this is called 'Unintended Consequences'.

Councils and Time Value of Money

The issue with Councils and bureaucrats in general can be traced to three interlocking aspects, which together have over the years created the leisurely, process-and-rule bound, risk-averse culture we are now seeing.

1 - no revenue reponsibility. Council rates, fees and levies are non-contestable. They can be pencilled in at budget time and arrive on schedule. Guaranteed revenues mean that all Council staff have quite literally no connection with their financing. It is simply taken for granted, like the sunrise.

2 - no concept of time=money. Councils can inject time into processes without paying any monetary penalty. Their hapless customers still have to pay their mortgages, working capital overdrafts, consultants fees and staff. So every day that a Council injects into a process - has a direct and proportionate cost to the affected customer. Heck, Councils even 'stop the clock' when counting days elapsed for a consent. But the customers' Bankers don't.

3 - Council staff are answerable only to the CEO, and the CEO is a Council's (in the elected sense of members around the table) only employee. So there is no direct connection between anything which Councillors might think, want, or do, and the effect on staff. For all practical purposes staff are completely immune to Councillor influence.

So if the staff continue to with-hold, delay, defer, ignore or otherwise foobar the rebuild, just exactly what can be done about it, given all of the above?

Housing yet again

Housing affordability has five components:

1 - cost of land.

2 - cost of building - and as NZ is well under scale, and hence has hopelessly overpriced materials: it's still worth going to the States and filling a 40' container and paying GST plus duty on the contents: most materials are around 20% of the NZ converted cost.

3 - time taken - as time=money - the 'carry' can be significant even for a single build.

4 - credit availability and terms.

5 - Household income levels

The stoopid Councils contribute directly to #1 and #3, the craft nature of building in NZ and the lack of scale accounts for #2, and Gummint policy affects #4 and #5.

In 2001, in Christchurch, it was possible to buy a doer-upper for well south of $50K, in the non-leafy suburbs. By 2003, the same house was x3. What changed?

In 2002 the Labour Gummint, trying to be nice to the hopeless, introduced a guaranteed $100K credit line. Qualification for this was simple: 'can you fog a mirror?'.

Instant result in Chch - every single price in shall we say the structurally challenged house class went up overnight by, spookily enough, that same amount.

So there's the Gummint's little push to unaffordability. #4 shows that easing credit adds to prices. Whodathunk?

And finally #5: the rise of credentialism, soft degrees like media, art and music, and the constant repetition of the mantra 'education gets you up in the world', have all lead to a situation of inflated expectations, but same old employment choices. And now the GFC has commenced a winnowing of the crop: only the truly useful souls can look forward to even a moderate income: the hopeless are condemned to menial jobs or the dole, and as has been the case throughout human history, the well-off are quite capable of looking after themselves. Average incomes are static in nominal terms, and falling in real. As Glenn Reynolds notes:



"The government decides to try to increase the middle class by subsidizing things that middle class people have: If middle class people go to college and own homes, then surely if more people go to college and own homes, we’ll have more middle class people. But homeownership and college aren’t causes of middle-class status, they’re markers for possessing the kinds of traits — self-discipline, the ability to defer gratification, etc. — that let you enter, and stay in, the middle class. Subsidizing the markers doesn’t produce the traits; if anything, it undermines them. One might as well try to promote basketball skills by distributing expensive sneakers."



Oh, and there is no political way out of this, because there are more Tax Consumers than Tax Producers, and the Consumers can, have and will outvote the Producers when push comes to shove. The middle class vote has been purchased by WFF, and despite their occasional unease, they'll stay bought.

So there in a nutshell is the bind we're in. And as any solution involves a choice between the hard way out, and the really hard way out, I don't see much will move until it has to. As the saying goes: what cannot go on forever, won't.

Urban Land prices in GodZone

A word about Development Contributions.

I'm an old grizzled ex-County Treasurer who actually used to administer these babies in the good old days before the dopey Sandra Lee LG Act 2002 injected 'Social and Cultural Wellbeings' into Councils spending arena.

DC's were really about public open space: land, reserves and the like. A simple cash amount, which was held in trust and applied only to reserves, was the norm, and/or a parcel or three of land set aside.

Nowadays, DC's have an incredibly complex calculation: Household Unit Equivalents (bit like the the Twenty' Equivalent Unit (TEU) measure for shipping container space) for almost everything a Council could conceivably dream up cost requirements for.

Recall that every legal human activity can fit within 'Social and Cultural Wellbeing', so naturally, there are Community Development Organisers, Events Planners, Reserves Consultators and dont even get me started on spatial planners, zonerators and other failed architects - all to be fed, housed, and their reports to each other and to the Council to be read and discussed with a straight face. All to be 'contributed' to....and then there are 'hard' spends like roading/water/sewer/drainage incremental impacts to be funded

The net impact of DC's (e.g. for an upcoming major Chch subdivision) is huge - $70K/section. And this impact is upfront - pay now, and this adds at the earliest stage, almost, to the hapless developer's carrying costs ('the carry').

At a commercial credit line rate (making the maths easy) of 10%pa, and a conception-to-first-sale time of 7 years, the rule-of-72 says that that $70K is now $140K. Yup, it has doubled.

See now why land prices in urban subdivisions are sky-high? Add everything together, recalling that those costs earliest on the list generate the highest carrying costs:

- land purchase
- 'carry' on land purchase cost
- survey and consents
- 'carry' on survey/consenting costs
- DC
- 'carry' on DC
- physical land development - civil works
- 'carry' on civil works
- sales and marketing costs
- developer margin
- and I've probably left a few cost items out....

and then ask:

1 - why anyone would be in this game?
2 - And for those brave enough to be there, why section prices are where they are?

The answer to 2 is - because of zoning (original purchase price inflated), the Social and Cultural well-beings (DC's inflated) , and the fact that Council staff have no concept of time=money ('carry' inflated)

After all, the Council staff don't have to carry the 'carry'.....so why not let that consent dawdle in the in-box for another month or six?

Now if the Wellbeings were deep-sixed, yer jest might have yerself a whole new ball game....keep watching!

Christchurch - Strangled by CCC staff

The old, traditional delivery areas of Local Government - roads, bridges, hard services such as drainage, sewers, water - are doing just fine.

But the regulatory areas such as planning and consents are simply getting in the way of everything. Spatial Planning is a failed concept - the RMA was meant to gauge proposals by reference to their effects, not their zoning. But it was captured early on by the zonerators and old-school town planners, and has never recovered.

Arguably, this crew have, by strangling land supply and imposing lengthy, adversarial processes on developers, designers and builders, added multiple layers of cost to homes, businesses and the local economy.

And the tightening of residential construction certification (DBH's Licensed Building Practitioner scheme) is another well intentioned but costly exercise: consider that of the 90% of Chch houses which are fine to carry on living in, fully 2/3 were put up by (shock, horror) completely uncertified people! Gadzooks! How can they now live with themselves?

Against this background of staff who blindly pursue failed techniques, causing cost wherever they cast their gaze, impervious to the time value of money, secure in their little fiefdoms, and protected by layers of certification, professional guilds and stroppy unions, how is a call to 'unity' amongst Councillors going to make the slightest scrap of difference?

We're living 'Yes, Minister' - and compulsorily paying through the nose to fund this incredible debacle.

And folk wonder why the pedestrian option - vote with yer feet and escape the CCC and its parasitic staff - is increasingly attractive?

Spengler hits another one out of the park

The best quote:

"the transformation of universities into Maoist re-education camps with beer kegs"

I'm struggling thorough Goldman's 'It's not the end of the world, it's just the end of You' and finding it a little too theistic but the learning, the breadth and the one-liners are amazing to behold.

Arab hunger

Spengler, once again, nails the essence of what is really going on in MENA. Implosion, in a word. These countries will simply become flyover territories. But short-term, they're gonna generate a world of refugee pain for the Eurozone and any other country unlucky enough to border them.....

Mushy Peas

Read the comments thread - LOL.

Disclaimer: I did not have English Peas for my evening meal.

Has Bin

'Spengler' pulls another superb grain of wheat from the mass of chaff being talked about OBL's demise. To precis: the poor old chap was thrown under the bus - a victim of the various Arab upheavals which have yet to run their course.

AQ had been more use to the Iranian cause of late, and the Saudis took a dim view of That, as the Yemeni buffer zone to their south is visibly disintegrating by the day. And as the Saudis both spawned and bankrolled OBL, they were certainly in a position to decide when the thread holding the sword over his head, should be snipped.

Yer won't hear much of this in the MSM of course. They're still veering between horror and delight. And there's no body, so the conspiracy theories are already running hot. Panem et circenses....

Reynold's Law and Christchurch

Reynold's law (bolded in the quote below) is one of those delightful discoveries that one stumbles across. Reynolds argued that societies often fail to understand the drivers of success and conflate its accidents with its essence. So when they want more of the essence they invest in more of the accidents.

The government decides to try to increase the middle class by subsidizing things that middle class people have: If middle-class people go to college and own homes, then surely if more people go to college and own homes, we’ll have more middle-class people. But homeownership and college aren’t causes of middle-class status, they’re markers for possessing the kinds of traits — self-discipline, the ability to defer gratification, etc. — that let you enter, and stay, in the middle class. Subsidizing the markers doesn’t produce the traits; if anything, it undermines them.

One hopes against hope that, in rebuilding Christchurch, Reynold's Law is duly observed. After all, it's not hard to guess that, in order to rebuild in the first place, the efforts of builders, quarrymen, drivers, surveyors, engineers, geologists, welders, foundrymen, miners and roofers, are going to count just a tad more than those of aromatherapists, journalists, garage bands, kapa haka morris dancers, or barista.

But a glance at what's being churned out of our Places of Higher Learning, at great unit cost and a swingeing student loan burden to add to the frisson, and one must temper one's hopes with reality. As another of Reynolds' pithy references has it, the Higher Education Bubble is in full swing.

"...setting aside the technical professions (medicine, engineering, etc.) the cost of a bachelor’s degree is exploding just as its value in the marketplace is declining"

And a more sobering appraisal here...

Because, talking of subsidizing markers rather than building traits, our glorious Christchurch City Council has had an excellent track record of subsidizing stadia, community development advisers, flower festivals, and assorted other accidents.

One hopes aginst hope that Learning will Occur.

But the CCC tends to an Absence of Essence.

Artists as canaries in the coal mine

This was one of Kurt Vonnegut's phrases from his later years. But I've realised that it has a major flaw: 'artist' is a much misused word.



My own favourite artists in music are Tom Waits (check this clip for a wonderful mixture of vid and aud), Bob Dylan, Chris Rea.

If you look at Dylan's 'World Gone Wrong' cover notes from 1993, my take is that he spotted the coming shitstorm and nailed it in a few characteristically obtuse phrases, ostensibly about the music. Same with Tom Waits - Bone Machine and The Black Rider, also from the same period. Chris Rea - Road to hell or Expresso Logic.

All these guys sensed something in the atmosphere, and reacted in their own ways. Not necessarily in a form that could be consumed instantly, or even comprehended at all. But in the 20/20 basilisk stare of hindsight, man, did they all make sense.

Sitrep from Chch's Untouched North-east corner

Sitrep from the absolutely untouched north-east of Chch at Waimairi Beach: 100% habitable, no liquefaction, no problems, power, water on (we're 300m away from a coastal bore), Sewer/stormwater pipes have stayed in place, no chimneys to collapse, everyone going about their business. Also true of Forest Park and most of Parklands plus most of Tumara Park. That's over 4000 households total.

Key factors in success of this area:

* underlying strata not liquefaction risks
* recent (last 15 years) build to decent EQ codes
* easternmost part = furtherest away from the quake epicentre

So, chaps and chapesses, don't believe the MSM one-disaster-affects-everyone coverage.

The effects of the quake are in fact extremely variable. The known areas for liquefaction - around the rivers and Estuary, the peaty soils round St Albans and Papanui, and some sandy lenses over old swamp - are the ones affected. And the infrastructure damage to sewer and stormwater (pipes have literally been floated up through the road above) is a function of water table, soil types and amount of shaking. Interesting to drive through Tumara Park (between Burwood Hospital and Parklands) and see that a radius around the Travis Swamp has suffered pipe float and surface cracking, but the rest is quite simply intact.

The estimate of 20% is simply crap in terms of habitability. Chch has 160K households, so 20% is (counts on fingers) 32K dwellings. Yet only 200 people (at 2 per household, that's 100 households worth) overnighted at welfare centres. So there's an indication of the disconnect.

20% with Gib-board crack plastering needed, yeah, probably.

And the damage that Is there elsewhere is from the usual suspects: unreinforced masonry, lime-mortared bricks, untied veneer walls, and foundations that in the old days were just bricks tossed into a ring in a shallow trench and mortared over. No surprises.

The silver lining is that we won't have to worry aboot the predicted recession in the commercial construction industry, and the 20K job losses. There's a Lot of infrastructure to repair, and that will take months.

(Another decent jolt as I type, but blogging as I am in front of the log fire, with a cuppa joe at my side, and power, water on since 11 am yesterday and the camping loo deployed to ensure we don't add to the infrastructure loading, why worry?).

And a very high percentage of Chch households will be doing exactly the same thing.

Rock and Roll by the sea

Yup, the Big One (well, 7.1, anyways) has hit.

Total damage at the WayMad household: one preserving jar on the pantry floor, and (boo hoo) a snowboard fell across the bumper of the Big SUV. A Paint Scratch! I'm devastated.

But to judge from the breathless nature of much of the news coverage, you'd believe the whole of Christchurch is sleeping under the stars tonight. As looters carry away all the Good Stuff from trashed stores. And sniffer dogs look for Survivors under the wreckage of collapsed CBD verandahs (I swear I've seen the same dog's-bum clip at least thirty times today on TV One).

Not so.

The quake Has caused destruction in the areas long labelled as most susceptible: near the Estuary, around the river, on sandy soils, and towards the west of the city. Plus, old masonry, well below earthquake code, has oh so predictably suffered.

But the effect is extremely localised: suburb to suburb, Your Mileage May Vary.

And if, as we are, you're set up for camping, you roll out the chemical loo, get the torches and gas lights, light the log fire, and carry on with life.

Having an earthquake-code-compliant house, in a suburb with very low ground liqefaction possibilities, was a wise move.....

Housing and the New Normal

A good site for US housing bubbular info is Dr Housing Bubble. A few of the noobs here could do with a click over there, methinks.

And yes, LTV's of 110% were creeping in here - I do recall a Westpac marketing pamphlet for 'professionals' which offered just that.

But y'all are missing an important aspect of the whole puzzle.

You Cannot expect useful, current or relevant info from the MSM or indeed any organ which depends on ad revenues or continued access to the Corridors of Power, wherever they may be, in a time of transition.

Put simply, they are all too invested in the status quo to be trusted. Hence the predominance of what in t'old days were called 'puff pieces', RE types talking their book, and 'analysis' by reporters which Whaleoil correctly labels 'repeaters'. Nobody there is about to pull the house down on their own heads, so the happy-clappy talk continues.

What we Do have is a transition to the New Normal - consumption around 10-15% less permanently (about the extent to which it was debt-funded), the air going out of bubbles, and reversion to the age-old means of house prices 2.8-3.2 times household incomes, PE ratios in low-mid teens, and savings rates north of 10%.

All this was predicted by numerous authors around the 1990-1993 mark, sensed by artists - try reading the cover notes for Dylan's 'World Gone Wrong' (1993) and say it ain't so, and it is a tribute indeed to the capacity for human self-delusion that so many bubbles have been inflated to keep the Good Times Rollin' since then. Which is precisely the theme of Matt Taibbi's GS piece.

Events in funky li'l NZ are skewed by three factors which y'all can assess fer yerselves:

1 - NZ is a 'haven' destination, and this gives a Lot of insulation, as haven seekers arrive and bring their loot with them. This is an obvious factor in house prices, if little recognised.

2 - NZ can feed itself many times over, and has a wealth of mineral and fuel riches. There won't be the Peak Oil stuff here - the transition can be considerably smoothed thereby, and we won't starve either. Ye cannae say that aboot, e.g. Britain.

3 - There is a strong conversative/conservation streak in NZ (same root, differing implications) which, despite the usual underclass provocations, will see us through in relatively harmonious shape. Ye cannae say that aboot most of Europe.

The glass is, in fact, half full.....

Innovation in EV's - a Cambrian Explosion

Motoczysz has won the Isle of Man TT, just short of the magic 100mph lap speed, on an all-electric motorbike.

Wheee! As the Mogambo Guru likes to say.

Oil, Gaia's abiotic fruit, yer days are numbered.

Especially as the alternatives to batteries themselves are under development, as this little piece of good news shows.

Just as the early iron ships, steel bridges, internal combustion engines, and other technonological innovations went through a necessary stage of a 'Cambrian Explosion' - types, technologies, shapes etc. A Darwinian process then followed, winnowing the variety into a much, much smaller number of types, which we take for granted.

This motorcycle is part of EV's Cambrian Explosion.

Peak Oil?

A leetle rant about those who insist that PO is here! In NZ! I told yer so!

Variations on 'I told you so' are a good substitute for thinking?

NZ is nowhere near PO: the CSG prospecting undertaken by L&M, the Southland lignite fields, and the highly prospective offshore oiliferous zones are all local mitigators. The undoubted impact in a wider sense is of the toxic combination of locally selective PO (e.g. Europe), and BHO's latest excursion into the international version of Chicago Machine Politics which won't end well.

What is needed is a cool, realistic view of how best to use our certain and extensive resources well: so as to make a transition which:

- preserves living standards for working people at or somewhere near current levels. (The rich always have multiple options, ignore them, and it might be as well to state out loud what Won't be possible, in terms of aforesaid living standards' contents). And condemning folk to live in the late 17th century won't cut it, either.

- does not involve more than a reasonable extension of current technological trends. F'rinstance, positing mass use of personal EV's is perfectly OK. Proposing maglev rail everywhere isn't. No unicorn milk and pixie dust, please.

- takes into account the dark view exemplified by fiction such as Danny Suarez' 'Daemon', informed though such as John Robb's Global Guerillas (much mischief for very little input because of systempunkts spread liberally through our infrastuctures), and the genetic fact that we're highly evolved monkeys with an immense capacity for self-delusion and mayhem.

I could go on, but you get the idea. Maybe.

Could be termed 'sustainability' but that phrase is soooo devalued.

New renewable energy source

In a discussion about the EPA's approval to 'regulate' carbon doixide (that gas we all breathe out all the time), I came upon this priceless comment...

..harnessing the rotational energy of Grave-Spinning-Founding-Fathers.

Mind you, this can only last the term of the current Prez.

Dylan - Neighborhood Bully

Hadn't caught up with the lyrics till now - but my, don't they sound current? From 'Infidels'. Partial quote only.

"The neighborhood bully been driven out of every land,
He’s wandered the earth an exiled man.
Seen his family scattered, his people hounded and torn,
He’s always on trial for just being born.
He’s the neighborhood bully.

Well, he knocked out a lynch mob, he was criticized,
Old women condemned him, said he should apologize.
Then he destroyed a bomb factory, nobody was glad.
The bombs were meant for him. He was supposed to feel bad.
He’s the neighborhood bully.

Well, the chances are against it and the odds are slim
That he’ll live by the rules that the world makes for him,
‘Cause there’s a noose at his neck and a gun at his back
And a license to kill him is given out to every maniac.
He’s the neighborhood bully.

He got no allies to really speak of.
What he gets he must pay for, he don’t get it out of love.
He buys obsolete weapons and he won’t be denied
But no one sends flesh and blood to fight by his side.
He’s the neighborhood bully.

Well, he’s surrounded by pacifists who all want peace,
They pray for it nightly that the bloodshed must cease.
Now, they wouldn’t hurt a fly. To hurt one they would weep.
They lay and they wait for this bully to fall asleep.
He’s the neighborhood bully."

Why I quote Kipling

That article is, simply, what I believe. Takers in NZ outnumber and can thus outvote Makers, and this will not end well.

Because Makers are free to go Make someplace else; to Make less (just sufficient for their own sustenance - income equals expenses); or to stop Making altogether. In all three cases, tax revenues collapse, suddenly.

And, you cannot Make (coerce) the Maker to Make stuff. At least not in a country I'd want to live in.

Whereas Takers have irreducible, and often extensive, Needs.

Printing houses

Now this is what 3D printing is really about: spraying construction material at 25dpi and making buildings (or parts thereof - it's limited to a 6m cube enclosure at present).

Faster, please.

This Mess We're In (with apologies to Polly Jean)

This (Gummint discovers that taxing property won't raise the dosh needed for tax cuts) all neatly illustrates the unfortunate corner that most western democracies have knowingly painted themselves into.

In handing out entitlements, perqs and goodies, in an implicit intent to buy their recipients’ votes, they have triggered the ‘endowment effect’.

Simply put, this means that you may not miss something you never had, but you’ll fight tooth and nail to preserve something you Do have, no matter how dodgy or corrupt the process of acquiring it was.

This ‘ratchet’ has now jacked most people’s hopes of continued income up, way, way past the point of sustainability. That is, we’re running out of Other People’s Money (the taxes paid by actual tax-producing enterprises and people).

I frankly don’t see any easy way out of this sort of boondoggle. The political way is blocked by the ‘entitled’, who will simply vote for the More Goodies Party if given the chance – what Mancur Olson calls ‘distributional coalitions’.

We see this oh so clearly by the Grey Mob’s fury over a few trips to Waiheke. ‘How Dare They!’ is the cry.

Bill E’s sober estimate of less-than-sufficient tax revenues is also no doubt an outcome of a ‘John Galt’ effect: you cannot force people who can control their net income, and therefore their tax liability, to Produce and be Taxed if they don’t agree with the uses to which said Tax is being put.

They will quietly arrange their production to suit their own need for income.

E.g. in most farming situations, the distinction between living expenses and small luxuries is quite invisible, and you can go fishing on the King Quad.

They will minimise the net income externally reported.

E.g. by a doctor not doing those few extra surgeries, or a consultant deciding that 24 billed hours/week @ $150 is enough, ta very much, and going golfing the other two days.

And of course in all these scenarios the tax liability (and national tax revenue) falls sharply.

Or, being smart, ambitious and mobile, they simply up stakes and leave.

I reckon that the Greek outcome is the most likely: as internal economic arrangements are so incestuous – a Gordian Knot, indeed – only the cold eye of external parties – bondholders spring to mind – has any power to force the needed changes.

Which changes are of course bleedingly obvious:

- arrange tax matters to minimise tax arbitrage
- remove welfare traps such as WFF and roll these into a finer-grained tax structure
- means-test universal benefits
- work for dole
- less Gumnut overhead

Then, and only then, does John Galt shuffle back to the pages of badly written if expository novels, because it would only then be clear to all Producers that their hard-earned Tax is not being misapplied to produce more underclass infestations, unintended outcomes, and perverse incentives.

The depressing if logical outcome of my estimate of the situation (and I see Mark H’s comment as a John Galt moment, too), is this:

There is no political way out of this. Because the distributional coalitions and the voices of the ‘entitled!’ are, taken together, a massive majority. And because (as I recall an ex Nat pollie telling us at an MBA briefing a decade and a half ago) MMP is a recipe for stasis – nothing much will change, because nothing much Can change.

So, chaps and chapesses (BH, you owe me a royalty for that term, BTW), don’t be going looking to Politicians of any stripe, to solve the pressing issues of our quirky little Isle.

And the follow-up, from comments which suggest marvellous ways to restructure tax:

JK and crew are castigated for an incremental/pragmatic approach, but political realities and the structures of MMP rule out anything else.

The change process, crudely put, is Unfreeze Existing/Change/Refreeze New.

Your proposals are for the middle bit.

Hitting a wall of some kind (bond-buyer revolt, sovereign debt default, Repo Man, bankruptcy) would seem now to be our best hope for getting the Unfreeze. After that, Change can happen.

But wishing this in public on all of us is, shall we say, Not a Good Look.

So we carry on, just kicking the can down the road. And, some of us, quietly preparing for a harsher, colder world.

AGW as a belief system

Comment over on WUWT thread about AGW and its current, shall we say, terminal thrashing about.

The middle of the road stance is, surely, adaptation. And there are some unlikely allies in this: read Stewart Brand's latest 'Whole Earth Discipline', and it is clear that there is a splintering of the entire movement from within.

Brand advocates moving to cities (concentrate service delivery, allow opportunity, release women from rural idiocy, and generate real wealth), nuclear power (deal with concentrated waste instead of millions of smokestacks) and generally drives a Sherman tank through a whole bunch of environmental shibboleths.

Add to this the 'Resilient Community' effort from John Robb and crew, and we have a large part of the adaptation recipe right there before us.

The analogy here should be to the Reformation, which blew apart a corrupt and arrogant medaeival Catholic Church for ever. Climategate is about 1517 on that scale: the nailing up of Luther's theses. There's a bit of water to go under the bridge until we get to the 1520's, when Henry VIII figured out that he could get a twofer: his old marriage declared null, and (by declaring himself head of the Church in England), he could clip the ticket on the Church's takings. Which he finally got, 100%, by the dissolution of the monasteries, in 1536-8.

The AGW frenzy is fed by funding, just as was the Catholic Church. It's fun and cathartic to do the iconoclastic stuff - tear down the brazen images, paint over the elaborate frescoes, and generally try to eradicate the outward vestiges of the belief system.

But it's a better ploy, after that emotion subsides, to go after the AGW funding. Cut off the oxygen. The neat thing is, it makes better economic sense, too. Instead of wasting a lot of scarce dollars on researching 'the effects of climate change on the mating habits of the Greater Nebraskan Loon', it would be better use of that dosh to get one of Henry VIII's twofers: say, accelerate production of electric cars/build many small-scale nuclear plants And stop giving petrodollars to unfriendly regimes.

Oh wait. 'Accelerate'. My bad. Work on the braking software, too.

Accounting for Temperatures

I’ve had a good deal of experience with accounting systems, and it has just struck me that the whole global temperature database should be constructed in a transactional fashion.

To wit:

Each station in the record has an ‘account’ – a GUID if you will, and all temperature values and adjustments for a given station are recorded as transactions for that account, assigned to a date (and even time), and classified as some Type of transaction.

Types of transactions (trx) could usefully be globally codified: as it’s clear that a potent source of confusion is just what value adjustment happened to what data, when. The analogy here is to Generally Accepted Accounting Principles (GAAP) which rules the accounting world. Sorely needed in the world's temperature records....

Accounting systems which use the ’single-table’ approach and are in essence just a big bucket of transactions thereby, could in fact be adapted for this sort of recording. I've worked with SunSystems, Coda and Kypera - all are of this type. There are probably many others.

Trx types would obviously include:

- RAW measurement
- UHI adjustment
- EQP equipment change/calibration etc
- LOC location change adjustment

and so on.

Then, every Step in any process which causes value adjustments to be made to any data point (account/station, day) could be traced, and most importantly, added as a new trx, thus leaving the raw data strictly alone.

Auditors love this sort of approach, and the SQL database engines which store and handle the data, make short work of the heavy lifting in terms of summing trx, adding trx, and consolidating data. Of course the database itself is typically chock full of compliance features (thanks to SarbOx).

As a final aid to traceability, each trx can be stamped with the process name that put it there, and even a description. And who…..

And the beauty of this is that the existing data-generation routines can still operate, but instead of altering arrays of values, they would be adding trx per single data point.

As the start of a Global Temperature Dataset, a transactional accounting-style structure would begin to address the ‘amateur hour’ data storage and versioning techniques we see in so much of the CRU dataset, thanks to Harry.

Harry Read Me - ClimateGate

An entertaining read. Harry has grave qualms about the data, the methods, and his own abilities, all written up in the ReadMe text file in unflinching fashion.

A lovely quote:

So, once again I don't understand statistics. Quel surprise, given that I haven't had any training in stats in my entire life, unless you count A-level maths.

An honest man in a den of vipers - I've just finished Wolf Hall, and the similarity between the climate crew and the post-Luther Catholic church is striking.

Climate crew:
- suspect data,
- data munges up the wazoo,
- academic echo chamber,
- currently facing funding cuts and fraud scrutiny,
- lashing out at critics (how Dare they - they aren't even Peer-Reviewed!).

Catholic Church:
- failing belief in the basic propositions by population,
- emergence of fanatical fringes of existing belief system,
- closed system of ecclesiastical courts (a state within a state)
- facing funding cuts as Henry VIII realises that if he can be Head of the Church and thus secure a ruling on his first 'marriage', he can also obtain the keys to the church's extensive coffers,
- burns critics at the stake after trials conducted by....priests!

I know analogies by example aren't scientific, but hey, it worked for carbon dioxide and AGW, d'innit?

Climategate - a few links

The 'Hardly Screwed' epithet which envious types used to throw at the University of east Anglia's Climate Research Unit is spookily accurate, possums....

Chiefio - who has discovered the 'snowbird' tendency of global thermometering - is my favourite link, because he took the time to actually build a test Linux box, work through the GisTemp code and station data, and think about the results. An engineer after me own heart. The results, for those lazy sods who don't click links is threefold:

1 - fewer thermometers in the world over time
2 - survivors tend to be at the coast or at low altitude
3 - history data, being from high altitudes as well, plus inland, is inherently different and colder, so the 'snowbird' thermometers (coastal or low altitude) with which this history is being compared show Warming! Quelle surprise....

Iowahawk has given us a short lesson on the climatologist ecology. Read it and laugh. Or have a replacement keyboard handy if you are consuming liquid refreshment.

Smoking gun or AGW Mushroom Cloud? I favour the latter, but the deaths will take years, and will be by radiation poisoning - the slow cutting off of grants funding....

VDH - the Reckoning

Another classic article from the classicist and agricultural toiler, Victor Davis Hanson.

Government Motors

Hat tip to MaxedOutMama. Health warning: please DO NOT read this with a cup of hot liquid near your mouth or over the keyboard. You have been warned.....

Lights just went out in....

This Spengler piece neatly sums up the feeling I've had all year: that parts of the world are simply going to 'go dark' - lapse into internal disorder, become flyover country, off the map, fenced off from the remainder.

See 'em while you can (and, of course if there's anything to actually go for). Art and Architecture are my choices. That rules out a good deal of the globe, anyways.

As Kipling notes in the 'Copybook Headings' pome

'We moved as the Spirit listed. They never altered their pace,
Being neither cloud nor wind-borne like the Gods of the Market-Place.
But they always caught up with our progress, and presently word would come
That a tribe had been wiped off its icefield, or the lights had gone out in Rome'

Power, power everywhere

This little gem from the ever-watchful Torygraph, shows just how much power is literally under our noses. I've always known that, given the right incentives (which generally means a crisis of some sort), that is to say, a large dose of Necessity, humans can pull yet another wabbit out of Gaia's capacious hat. Oops, I mean, exploit more sustainably our Ecological Niche.

Whether it be current-generated power (and the original clue was thunk up, oh, 500 years ago by one L. da Vinci), thin-film solar (leading contender here), bacteria engineered to produce whatever takes your fancy (hydrocarbon chains, plastics precursors, or just plain ol' hydrogen), the answer is very clear.

Absent a major cataclysm, (and the current financial storm in a tea cup doesn't even rate on this score: it's simply returning Fings to their Natural Order: P/E ratios in the low teens, yields in the centuries old 6-8% range, house prices to 2.8-3.2 times household earnings), the histories are going to record that, just as the Stone Age didn't end because we ran out of rocks, and the Steam age didn't end because we ran out of water and coal, the Oil age didn't end because we ran out of Oil.

As anyone who's actually read Matt Simmonds knows, the Original Oil in Place can only be tapped to the tune of 10-30%. Geology and economics interesect on any given site to set that upper limit.

The forerunners of the new bio-solar age are just starting to ramp up commercially now. By the time the world really does see major disruptions in oil supply chains (think oil nationalism, piracy, pricing as well as field depletion), the alternatives will be there. Just in Time, natcherally.

Oh, and let's not forget conservation of energy. Just last week, I ordered a bunch of LED lights as replacements for those godawful pigtail (and mercury-laden) CFL's that the eco-agencies are pushing us all into. Well, a CFL to get a decent light output will draw 20-23 watts. The equivalent LED will draw 3-4 watts. From here.

Yup, folks, that power consumption is less than 20% of that of the State-Selected Winner. Another triumph of central planning.

And they are standard fittings too: E27 for the downlights, GU-10 for the fancy lights. Who needs State dinosaur selectors when little, nimble, furry competitors abound?

And, clever inventors....another step towards the Resilient Community.

AGW as Mass Delusion

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

More books

Thanks to the wunners of globbelisation, I have three hot new books to devour. That's right: ordered 11 June on Amazon, delivered 25 June to my very doorstep.

Brave New War - John Robb. John's website (Global Guerillas) is compulsory reading for those who are trying to make sense of the increasing disorder that seems to surround us. I long ago read (in Rees-Mogg and Davidson's 'The Great Reckoning') that the mediaeval city-state would re-appear in our futures, as the best configuration within which to conduct business, defend oneself and generally get on with life. JR's latest book will be about Resilient Communities, which doesn't sound a long ways away from those city-states....

Reinventing Collapse - Dmitry Orlov. Another riff about the immediate future of the US of A. Still, as Britain has found, it's a long and quite comfortable drift downwards. I keep an eye on the Housing debacle there (Doctor Housing Bubble and others) and it's quite apparent that in terms of the five stages of Grief (Denial, Anger, Bargaining, Grief, Acceptance), they're veering between Denial and Anger right now. Still plenty of time on the hour-glass...

In Praise of Prejudice - Theodore Dalrymple/Anthony Daniels. I just like this guy's world-view and his spare, elegant but powerful way of writing. Oh, blimey, I'm gushing already and I've only looked at the cover. It joins another TD/AD book on the shelf, so it was a safe choice. Call me a convert.

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.

... 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.

Tibet - the ultimate theme park

Spengler has, as always, a pithy comment - turn the whole show into a Theme Park.

The money quote (soon, to be tariff-free, even, thanks to the FTA):

“The monks do not practice a religion so much as a sort of folkloric animism that is out of place in the modern world. That is what makes them appear so charming to the spiritual tourists of the West. Attractions of this sort aren’t rational, and there is no point arguing about it. Give the tourists and the monks what they want, and promote the exchange of currency for a spiritual frisson.”

Having spent a glorious six days sloshing around Venice (motto: 'Nothing preserves like neglect!") , I can quite appreciate Spengler's POV. Monuments to faded glory do appeal to the Western fin-di-siecle zeitgeist, and fit the Japanese notion of shibui.

And Venice (not so true off-season, so guess when we went...) certainly has the cash-for-contemplation gig sussed.

So, there's a Template fer the Temples of Tibet.

But, ain't it simply delicious, to have Keith Locke, of all people, trumpeting the Rights of Tibet to Self-Determination. Keef has been known to cheer for the Other side, too. Oh well, age does funny stuff to memory. And logic.

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.....

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!

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?

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!"

Really Bad Rhymes

I seem to have been infected by a Rhyming Bug, and to exorcise it, have commented all over a bunch of otherwise blameless victims.

To hell with posterity, here they are, each with their context:


Cullen and tax cuts:

There was an old teacher named Michael
who chortled at down trending cycle
They'll have to vote we back
Instead of that Key hack
Let's nationalise Fisher and Paykel!

Damn Furreners and their money:

A Fly on the wall of Floor 9
Eavesdropped on the Grand New Design
"To hell with the voters -
those ungrateful floaters -
we’ll foobar it all then resign!"

Politicos in general:

A caution for pollies who thirst
for power, and getting in first
for what you intend
may turn out in the end
to obliterate you in one burst

The poor old OBEGAL - Clementine occurred to me almost immediately and I just had to update it:


To the tune of ‘Clementine’. Y’all enjoy, now.

1. In an office, at the Treas’ry
hoping not to hit the wall
Lived a muller, Mickey Culler
and his offspring OBEGAL

(Refrain)
Oh my darling, oh my darling,
Oh my darling OBEGAL
You are lost and gone forever,
Dreadful sorry, OBEGAL.

2. Light she was, her numbers leery,
And ninth floor did twist them all,
Ten wine boxes without topses,
scandals were for OBEGAL

3. Drove her voters ‘cross the water
As her taxes made them gall,
Hit her lowest polling ever,
Fell into internal brawl.

4. Roug’ed lips above the water,
Blowing bubbles through her shawl,
But alas, Mike was no swimmer,
Neither was my OBEGAL

5. In a graveyard near the Treas’ry,
Where the ngaios often fall,
There grow rosies and some posies,
Fertilized by OBEGAL

6. Listen fellers, heed the warning
Of this tragic load of bawl,
Lower taxes, better praxis
Could have saved my OBEGAL

But, y'all be pleased to hear, I'm better now.

Another climactic known is revealed to be unknown

This leetle bombshell affects, oh, around half the marine organisms in the world. In essence, by omitting the 'assumed in the current paradigm' step of releasing oxygen while consuming carbon dioxide, these organisms have never done a darn thing in the carbon cycle.

That sound you may hear if you listen closely is a whole bunch of Gerbil Worming gravy train riders saying 'bugger' and re-calibrating their GCM's to show that We're All Freaking Doomed, still. Gotta keep them grant shekels flowing.

The shekel quote:

Wolf Frommer, director of the Carnegie Institution's Department of Plant Biology, agrees about the discovery's ground-breaking importance. "If we thought we have understood photosynthesis, this study proves that there is much to be learned about these basic physiological processes."

Overwhelmed by a Gust from Gaia

ht: smalldeadanimals

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.

Pre-emption: that's the ticket!

The always indispensable Spengler has done it again, with a piece about the wisdom of getting in your retaliation early. And of course the appeasement rhetoric of the ArchBish gets yet another hammering.

As Warren Buffet has siad, it's not until the tide goes out that you can tell who's swimming naked. And with a harder, colder, wind blowing through the world, Spengler's piece is a reminder that there are only bad and worse choices in foreign policy: no good ones. Europe and the UK have a very bleak demographic future, as Mark Steyn and others have repeatedly pointed out, and one has to be pessimistic about their ability to rouse the will to pre-empt anything.

Interesting times...see these places while you can.

Solar is subject to Moore's Law

This piece (ht: Instapundit) is a useful reminder that the good ol' entrepreneurial business is the way forward. Earnest Gummint committess won't cut it. Bit like the UN in Darfur - no skin in the game, so no real incentive to step in and help.

Moore's law: explanation here - capability rises/price halves roughly every 18-24 months. Works for me.

The money quote:

"You may not like their politics, or their attitude, or their style. But if we really do have an energy revolution in this country and free ourselves from our addiction to fossil fuels, it will be because of hard-charging, take-no-prisoners entrepreneurs like T.J. Rodgers — not UN committees, environmental groups, or government officials."

I plan to fully solarise my house in 2-5 years time. Like, net grid-producer, not consumer. Bye-bye to power bills, and much more resilience. There is a host of up-and-coming firms making thin-film solar, and the grid-tie plus feed-in-tarriff contractual stuff is starting to get worked on by the more aware power companies.

I thus don't fret too much about the lakes, the need for more power stations burning whatever - plutonium, coal, natural gas - or the State of Fear pronouncements about pylons, wind power or draining Gaia of all her internal heat via geothermal take.

The Sun will do it for me. Oh wait. It seems to be cooling. Toyota!

If daisies are your favourite flower

The dear sainted Archbishop of Canterbury does seem to have gottem his fluffy self into a spot of bother with his all-too-public musings on sharia law and its applicability to England. Having been to High Wycombe for a radio station client, I had actually rather thought it (sharia) was there in all but name, but no matter.

Anyhoo, this little gem of an extended Burma Shave sign did flash past a couple of days ago. Burma Shave is one of my very fave Tom Waits tracks, a Desert Island Disc, in fact, and the original Burma Shave signs were pure poetry and humour.

It does occur to me that one of BS's original verses can probably be updated for the Bish:

If daisies are
your favourite flower
just keep suggesting
burqa power

Weather cooling?

I follow Anthony Watts, and he's come across this, from the wonderfully named Joe Bastardi. JB sees a re-run of the early-50's pattern of a La Nina which stopped the global warming (which had peaked in the '30's) in its tracks.

Yup, we need to be more worried about cooling than warming. As someone who actually farms for a living notes, one nights cooling can kill your crop. One night's warming never can.

And as NOAA has just noted, this January of 2008 has been 0.35 F cooler than the 20th century average.

Hmm. Add a quiet sun (check the sunspot count and then go figure the Chilling Stars theory) - quiet sun, cool Earth.

Oh, and coolist or warmist, don't forget to Be afraid, be very afraid. After all, a State of Fear is the default setting for the zeitgeist, no?

By the Shadow of our Hand

A chilling but essential read for all who harbour Pollyanna thoughts about the Long War. Belmont Club has always turned out excellent analysis, and the comments thread is simply breathtaking. Especially Zenster. Plus there's a link to dear Steven Den Beste, on Triage.

Compare this thread with the pathetic namecalling on, say, DPF's comments threads. Pick almost any one. Sigh.

Some GDP perspective

I've always been a sucker for maps, and this one (ht: Gods of Copybook Headings) is a bewdy. Yup, we're about the size of the US of A's District of Columbia. Oz, OTOH, is Ohio.

The VooDoo Bucket - Level 3 assets under FAS-157

It all sounds very technical, but it is quite important.

Find out (if you're a shareholder in a bank, financial instituion or even a pension fund of any description, and with KiwiSaver, that's most of us) what value of institutions' assets are in the Voodoo bucket.

There's a most useful primer here, and a bearish article from Asia Times online here.

Because until we know (a) where the financial bodies are buried and (b) that they're really dead, and cannot rise up and, like zombies, cause further mayhem (recall that all these toxic products are highly leveraged, so the risk of chain or domino effects is very real), the uncertainty and the negative sentiments will persist.

Capitalism is nothing if not sentimental, y'know.

That good old stuff

Stewart Brand should need no introduction: Whole Earth Catalog, and a personal favourite: How Buildings Learn.

Edge mag invited a whole bunch of folks to say what they changed their mind about in 2007. Guess what our Stewart came out with? Good Old Stuff Sucks. The obligatory quote:

"The Precautionary Principle tells me I should worry about everything new because it might have hidden dangers. The handwringers should worry more about the old stuff. It's mostly crap."

Do not go Gently into that Zero-Sum Night

Something I'd read ages ago, updated here by the always-estimable Martin Wolf of the FT, and commented by Naked Capitalism.

If there is a crunch or three coming along (energy use, global cooling cos' of Chilling Stars, various tragedies of the commons), we humans won't react all that well. Fights. Wars. The line which best sums it all up:

"People fight to keep what they have more fiercely than to obtain what they do not have. This is the “endowment effect”.

Hmm....

The Food Channel strikes again

This little anecdote has to be one of this season's LOL hits....

How's about:

a huhu grub inside a
rifleman inside a
tui inside a
pigeon inside a
blue duck inside a
little bush moa inside a
New Zealand eagle

I'd just be exerting my customary/culinary/cultural rights.

Oh dear. Some of these here boids seem to have been extincificated.

Culinary rights clearly have a Lot to Answer For.

No, wait. Some of 'em went west during the Little Ice Age. So we'll blame a lack of Globble Warmening.

No, wait...

Woo-Hoo. No Really. Solar panels at $USD0.30/watt

This is just the best news. Big award, for a deserving company.

With current solar at around$USD3-5/watt, buying say 2 or 3 kw of panels is economic madness, particularly when you do the conversion to the Kiwi Peso. Best price I've seen for silicon is around $NZD9/watt. Times that by, what the hell, 3000, and that's a lot of pesos.

No more.

Nanosolar (hmm, I seem to have figured this out early this year) is just, according to the money quote from the PopSci award linked above, "putting down factories instead of blathering to the press and doing endless experiments. These guys are getting on with it, and that is impressive."

And at say $NZD 50c/watt (once supply gets here, say 2009 - Nanosolar have a lot of pre-committed sales), why, that 2-3kw of solid generation you need, looks suddenly quite affordable. $NZD 1,500 for thin-film, versus $NZD 27,000 for silicon - well, I think dat's what dey call a no-brainer.

To be sure, there will be conversion efficiency differences, and other factors which will make the thin-film look less rosy. But there's a lot of wiggle room in that price diferential, to soak up these factors. Even if the thing ends up just being one-quarter of the silicon price, instead of well under one-tenth, the outlay is not too much of a stretch for households.

And that's the secret. really. Widespread adoption. Bring it on.

Abiotic Oil - Gaia's fruit after all?

This is the latest (and, to my mind, clearest) statement about the origin of Oil - it ain't a 'fossil' fuel at all, according to those contararian Ruskies. It's a natural product, created deep within the Earth and slow-erupted up into the crust. Where it can be found by following geological signs, but just not the ones the Western scientific world tends to use.

All this rather does blow a big hole in Peak Oil theories, and indeed in any theory which treats oil as a finite resource. According to the Asia Times article (and I guess, to the book behind it) by F. William Engdahl, the Russians have followed an abiotic-origin theory since Wegener's time - the 1930's. They find oil where Western geological wisdom says there shouldn't be any.

So cars, SUV's and other devil-spawn are going to have four energy sources in future:

1 - oil, the natural, Gaia-created product of the deep
2 - hydrogen - and note the recent breakthrough in making this directly from plant starch
3 - electricity - I'll have a Wrightspeed, please
4 - Liquid fuels with similar energy density to petrol, from biomass

Who says that science isn't fun? Or that it can't save us (yet again - remember that hysterical old ninny Paul Erlich, anyone? "The edge of the crisis - we describe our first encounters with the age of scarcity and outline the greatest threat in the immediate future: the food crunch" - chapter One heading from "The End of Affluence", 1974).

I'll take Science over State of Fear, any day.

Columbia to Ahmadinejad - you exhibit all the signs of a petty and cruel dictator.

At last, a univeristy type with a backbone. This is Columbia President Lee C. Bollinger's address to the hapless Iranian. Mr President, I'll second that.

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.

Standard and Poor's Moment of Truth

The headline really says it all, no? And, dear reader, it's not from a lone blooger in his attic. It's from Dow Jones.

All of us who have wondered, for three years now, just how it is that credit can be freely given for crap furniture ("Buy now! No repayments until your 3-year-old kid graduates Medicine school!"), let alone actual Houses, are receiving an answer from the financial universe.

It's all Smoke and Mirrors. It is financial junk. And it is tanking. Sinking, Flushed, Round der Bend.

Already there is a domino effect in the US:

- Home Depot (fond memories: I bought two Bostitch nail guns there for amazing low prices, and despite some TSA headscratching, got them back to NZ in checked baggage) has announced an earnings downgrade

- Builder D R Horton has orders down 40% and inventory piling up. (Although just how new houses can 'pile up' does make one stop and think. Maybe they just stack them with big forklifts, like containers?)

- Re-rating of sub-prime debt instruments (the now infamous CDO's) is rampant, and guess what they will find - more junk and crap, everywhere they look. As Dr Housing Bubble notes, there's over a trillion US in mortgage re-sets a-comin round the bend.

So the question for NZ is - how soon before the US mortgage train wreck grows wings and flies the Pacific to land here? Oh wait, Bridgecorp was evidently into non-prime-mortgages too. As I seem to have voiced before, it would be schadenfreude if it weren't My country, too.

If I was working for one of the crop of recently opened appliance stores, I'd be polishing my CV. Because it's just amazing what you can do without when you put your mind to it. And vanity spending is the first to, er, vanish.

Boy, am I glad I downsized mid last year.

Update: 20 Jul 2007.

A good summary of the mechanisms behind CDO's and the other financial instruments which are presently in trouble. The obligatory quote:

'Bundling mortgages into asset-backed bonds and then agglutinating those bonds into collateralized debt obligations sliced into different flavors of risk always smacked of a sophisticated pyramid scheme.'

That's right folks - a pyramid scheme.....

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.

The Key to All Mythologies

This article (ht: Gods of the Copybook Headings) sums up my own attitude to The Gerbil Worming debate. A teaser quote:

"it speaks in the doom-laden accents of pure certitude of what will happen in 50 or 75 or a hundred years from now - and, with the same ferocious certitude, demands decisions of immense consequence be made now to forestall its bleak and definitive projections."

Right on, bro'.

So That's the problem

Here's a neat piss-take on the Scary (well, scarily bad) Science behind the Beeb's recent trip to the thinner atmospheres of unreason, re WiFi radiation in the home.

Sort of reminds you of all the other Chicken Little fads that we, as dumb humans, seem to need to work through every once in a while:

'A Blueprint for Survival' - I still have a yellowing copy (you'd think they'd have printed the damn thing on Sustainable Paper, no?). Hmm - Amazon have it for $USD78.71...Cash registers signs go up in the eyes. Well, after all, the Sunday Times did say 'nightmarishly convincing - after reading it nothing seems quite the same anymore'. Funny - I had that same reaction about 'America Alone'.

'The Population Bomb' - count the kids in Your household and tell me this one didn't seize hold. Pity they never told those Others...

'The Coming Ice Age' - a perennial favourite.

Why, there's a pattern there!

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?

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.

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....

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.

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......

Solar independence

Th is is good news. There are several companies very active in the CIGS field now (Nanosolar, Miasole, Konarka, Heliovolt) and there is a very useful directory here.

The premise is simple: thin film solar generates DC current in useful amounts, and the films themselves are produced via a printing process akin to newspapaer printing. That is: by the hectare. The films can be molded in any shape, stuck to existing e.g. roofs, and costs are predicted to ba around $USD0.50/watt within 5 years.

So instead of building centralised power stations, this holds out the prospect of completely self-powered houses. Nice thought, huh?

Updated:

Another good directory here. Once this stuff gets commercialised with distributors, franchisees, integrators and tradespeople on tap, it will be gangbusters. Or even, Dambusters. Just think of what evacuated-tube solar hot water is doing right now. The same, squared, will apply to residential solar. And the nicest aspect (no URL, found the info while wwilf'ing) is that the power is clean: no more spikes or ripples caused by neighbours welding, nearby industries, or incompetent power suppliers.

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.

Crikey!

The funniest Aussie in Iraq strikes a pose.