Angelo M Codevilla on the new American Revolution

Two articles, both by Angelo M. Codevilla, both in a distinctly elegiac tone regarding the fate of the USA. His core theory is that a revolutionary threshhold has been crossed, and that what happens next is uncertain in the extreme. The links are in date order, and need to be read in sequence in order to make much sense.

• Short Bio
• After the Republic
• Our Revolution's Logic

Tertiary Funding

In answer to a question about why SIT needs an Auckland branch...

The zero fees model (I was there at the inception) depended on the original bums-on-seats EFTS funding: mo' Bums, Mo' Munny. It's easy to see that, with the injection of an initial capital sum to enable the show to get through the first year or three, the EFTS funding would let it wash its face thereafter provided sufficient bums - er - students - were garnered. The funding came from the community (Mayor Tim had a hand in that), the students came - good advertising, tight cost control and well-delivered courses, and the rest is history. The students, needless to say, came at the expense of competing institutions. And the Auckland branch? It's the same reason as banks used to get robbed - it;s where the Munny (students, carting student per-EFTS funding like little dollar balloons over their heads) is/are.

Of course, it was a classic first-mover-advantage - er - Move. It could not easily be replicated, not least because there were no other tightly knit communities like Southland, prepared to stump up the millions needed to get over that initial hill.

But that explains the Auckland branch.

Oh, and the Management. Well, SIT never got itself embroiled in the wilder reaches of Credential Mania. Unlike, say, Aoraki, which at one point had a Diploma in Aromatherapy on the course list....... never lasted (the course or the institution).....pity the suckers students who Believed....and then Enrolled. Because if yer didn't, ye'd be Larfing yer head off....

A Fly on the Wall of the 9th floor...

An imagined Fly-on-the-wall conversation:  The PM and the FM.

PM:  Granters, I've just come back from talking to those Teachers.  Can't we shake that Money Tree you have, and give them a few raises?  I mean, who's gonna edumicate little Neve if the teachers cannot afford houses in Auckland?  And I'm sure as heck not gonna Buy in Wellers....

FM:  Jace, Jace, Jace.  I'm none too sure it was a brilliant move to munge your schedule and go talk to them in the first place.  Neve, teaching, you've been reading those Signs, haven't you.  You know a good chunk of them were painted by Children at Art period - I've already had Ian LG chewing my ear about Child Labour.  And as for schoolkids being paraded about the streets with signs - I know it is supported by a few Parents but the optics - oh, dear, it really does seem like Child Abuse...You of all people have gotta parrot the Party Line - we cannot fix Nine Long Years of Neglect in a single term oops I mean year.  And I've just had to spend a quarter of a billion on more freakin' Trees, to keep He Who Must Not Be Named away from our throats (golly, that man makes me Quake).

PM:  But Granty-poo, if there's that much in kitty that we can shell out scads of it out to Vol - I mean, you know who - then everyone in the queue - Teachers, Tertiary, Police, Defence, and I'm told MBIE and IRD although I must confess not to have noticed - they went Out too, or something? - where was I, oh yes, everyone in the queue, which seems to be growing daily, can See the dosh getting spread around and I sense that they are getting that FOMO thing - they are worried that the cupboard might be bare soon, and so they wanna get in Now, and with Big Percentages.  Oh, Grant, what are we gonna do?

FM:  Well, we have got the Cullen Tax Grab - I mean, the TWG - working away in the background, and perhaps we could advance the pace a little there.  Don't let this get outside the room, but the TWG is basically a Rich Prick's Squeeze, and all he, I mean They - haveta do is to get the definition of the RP's down low enough that we'll have a few more tens of billions.  Let me have a quiet word.  But please, for Financial Prudence' sake, don't go addressing howling mobs of tax-funded employees.  That's what Unions are for....

Gubmint tax-funded balm tor spiritual cancer

Contra to Jason's article wherein a weary acceptance of MMP is argued for,  it needs to be recalled that Godzone has no Constitution (unlike the US and Britain), no Upper House to allow measured reflection on legislation, and a tendency (shown all too clearly in the case of the Taranaki Hari-kiri re Oil/Gas) to sweeping, precipitate and (so it seems) completely reflexive action.  This is to be sure, occasional.  But it is nonetheless extremely unsettling, especially for the targeted groups.  This sort of action is fairly much what is behind the continued slide in business confidence:  the question that all think but few say out loud is simply 'what will these clowns do next?'.

It can fairly be advanced that the sort of populism we see now in NZ is an attempt to substitute State action of one sort or another for a fractured sense of national culture and the sacred.  Feelz, the faith-based Green initiatives, the raw narcissim of the Winstone Ganders of our Parliament, the inchoate visions of Maori resurgence, the general retreat into solipsism have become the standard fare, and a thin gruel it is.

The results:  a plethora of mindless acts (especially by youth, who feel all this anomie most intensely), suicides and self-harm, a deep series of fractures and the start of the demonisations we though were behind us - boomers vs Millenials, rural vs urban, Greens vs our present level of comfort, renters vs landlords, Awkland vs the rest of the country, cities vs provinces, makers vs takers, vegans vs omnivores, and on and on ad infinitum.  There is nothing here to unite us if these chasms widen.  And attempts by Gubmints to rub Statist balm, using our own extorted money,  into these essentially spiritual communal wounds, miss the mark so completely as to be farcical.

David Goldman argues that a sense of the sacred is needed to give purpose to life:

These all are manifestations of what is commonly called the identity crisis of the West, but might better be termed the West’s struggle with the sacred. By “sacred”, I mean that which endures beyond our lifetime and beyond the lifetime of our children, the enduring characteristics that make us unique and will continue to distinguish us from the other peoples of the world, and which cannot be violated without destroying our sense of who we are. The sacred is what a country’s soldiers are willing to die to protect; unless there is something for which we are willing to die, we will find nothing for which we are willing to live.
Tradition surely is part of this, but not every part of our tradition is sacred to us: we find within tradition elements that have prevailed through the ages and which we expect to prevail, if our present existence is to have a purpose, beyond our lifetimes. These elements of tradition cannot exist except through a nation: contrary to Hillary Clinton, it takes not a village but a nation to embody the language, customs and ethos that found our identity. The invariant feature of the various expressions of nationalism on both sides of the Atlantic is an attempt to recapture the past in order to envision a future. “Identity” as a concept is meaningless, except as it is rooted in the past and pointed toward the future. Who we are at the moment depends on where we came from and where we expect to go. Our present, as Augustine argued in Confessions XI, is a composite of memory and anticipation.
Augustine (in City of God XXIV) famously took issue with Cicero’s definition of a res publica as an association founded on common interest, arguing instead that it was founded on a common love. It might be more accurate to say that it is founded on a common sense of the sacred, for the sacred embodies not only love but also awe and fear, specifically the fear that by violating the elements of tradition that define us we will lose ourselves.

"..by violating the elements of tradition that define us we will lose ourselves" - but what, any more, Defines Us in the here and now?

Politicians, whatever their personal characteristics, do reflect something of the zeitgeist.  And it is not a pretty image that we see in that dim mirror.  After all, just ponder the various comment threads here on Interest, for confirmation......

Coos, Culls, and the effect on NZ Inc

Michael Reddell has a good point to make, although the phrase 'gifting' could also be applied to beneficiaries, pensioners, Waiheke ferry off-peak users and other non-productive attachments to the ever-generous Gubmint Munny Teat.

Despite announcing yesterday a plan that aims to eradicate mycoplasma bovis from New Zealand, there was no sign of the pro-active release of any background papers or analysis. We don’t have copies of the relevant Cabinet papers, or the relevant advice from The Treasury or MPI. Not that long ago, the incoming government talked of its commitment to open government, and now it plans to spend hundreds of millions of dollars of taxpayers’ money – without, it appears, any additional legislation – without giving us, up front, any of the relevant papers.

One of the more obvious consequences of the cull is that real, productive units - 400KgMS per unit per season - are being turned into burgers and pet food with a much lower unit price. This is like replacing factories with coffee shacks, although, come to think about it, That's already happened: the foundry and machine shop I worked at in Invergiggle as holiday employment for a mechanical engineering degree (unfinished, y'all are quite safe) is now a bowling alley.

Another consequence is that, while entire farm herds are being culled and earnings fall, the debt load does not. Cue Boomer's Story.

We worked through Spring and Winter,
through Summer and through Fall
But the mortgage worked the hardest and the steadiest of us all
It worked on nights and Sundays,
it worked each holiday
It settled down among us and it never went away

So lenders will be anxiously poring through their dairy client's contracts, and trying to estimate what effect the cull will have on everything from provisions for defaults, to downstream effects on contractors, equipment sales and repair outfits (dependent on financing for sales) and the wider rural communities. For a marked-to-market loan on (say) a typical dairy farm in MPI's cross-hairs, this has gotta be a substantial write-down. Enough of these on the loans ledger, and the banks themselves are vulnerable to a credit downgrade. And we can guess what that will do to both the cost and availability of credit for - well, almost anything, as DC notes in the article.

The final (and there are more, as common taters may care to append) aspect is that there will be reduced economic activity as between farms: transport, sales, calf-rearing, the casual neighbourly offer of excess milk to next-door's calves, the annual Calf Day at rural schools, breeding herds, and the list can be extended far and wide. Reduced activity means less transactions, less tax, more calls on benefits and other support schemes, and everyone entering hunker-down-and-sit-it-out mode. This could easily last 3-5 years.

So Michael R's question about the basis upon which this whole scheme has been entered into, by the Good Intentions Paving Company (2017) Limited, is a very valid one. Transparency is sorely needed, not hand-waving.

Government cluelessness about the Time Value of Money

The issue with Gubmint large-scale anything which has to be built physically (as opposed to redistributed with a hefty ticket-clip) is that the entire public service has not Clue One about the Time Value of Munny.

Propose a project for $100m in Year 1, with an initial cost outlay (say, for Land) of $30m, Years 2-4 at $20m each nominal, and Year 5 at $10m, a WACC of 6%, a construction cost inflation rate of 9%, and a five-year schedule. The Gubmint wallahs then gape in wonderment as the thing (without contract variations) ends up costing $143.7m. Cumulative interest carry is $20.4m, construction inflated by CCI (which to be kind is limited to years 2-5 only) is $23.3m. So 100+ 20.4 + 23.3 = 143.7. The time value of munny....

This sort of non-thinking is absolutely rife through all levels of government. They never have to sell enough on Friday to make payroll on Wednesday following, never have to chase debts, never have to juggle cash flows to make the 20th of the month payments to creditors. Their world is literally cossetted: salaries arrive with the regularity of a sunrise, revenue falls into their ledgers like Sky Food off the edge of the bench for a dog, cash-flow is non-existent, and the only exception to this happy existence is IRD, who certainly know the Time Value of Munny if that's unpaid taxes....

Imagine, (strike up the John Lennon chorus about now) that Local Gubmint had to pay consent applicants the IRD UOMI rate on project value for every day they dragged the chain on the consent. Imagine... but enough already. T'will nevah happen.

Christchurch CBD - lack of development therein

.. a lot of people financially lost businesses as business interruptions claims often are not successful.

Therein lies a tale. Folks who are Shocked, Shocked (Captain Renault?) about the state of the Old CBD are missing the local knowledge and the history of the quake sequences. A by no means complete list:

1. Businesses were locked out of the Old CBD for months, and as Speckles quite rightly notes, this led, quelle surprise, to a chain of failures as owners were unable to retrieve inventory, records, plant or equipment. It would have been possible to 'mine into' dodgy buildings to do this, had authorities been less stupid, and some smart guys immediately signed themselves onto demolition crews with precisely that retrieval in mind. But most owners did or could not.
2. The 'Precincts' idea - block-size spatial areas devoted to one purpose - Health, Justice, Innovation, yada yada, has proved a massive failure for three reasons:
   • It's hard enough to build and lease a single building on a modest plot. Trying to do that on massive floor plates on huge land areas is nigh-on impossible.
   • It took so long to aggregate titles to produce the Precincts that some - Health, Innovation - just went elsewhere. Health is now centred around Bealey Ave, Innovation is a fizzer, and the only successful Precinct in its original conception is Justice, which of course is funded by the person you can spot in any mirror.
   • Ground conditions are patchy but uniformly shocking. Justice building cost Fletchers a cool $100 milly in over-runs, and the engineering plus remediation required for foundations alone is so expensive just to get a stable platform, that rents, always subject to ECON101, have to be way higher than suburban or other centre averages, to afford to start digging.
3. Other TLA's have proven themselves far more adept at soaking up the residential and commercial munny that flowed from insurance coffers. IZone at Rolleston (Selwyn DC), a plethora of residential subdivisions in outlying but perfectly commutable areas, and the business opportunities that come with greenfield development, have, quite simply, eaten Christchurch City's lunch.
4. The immediate answer for businesses that wished to survive was to relocate. This coincided with a wave of land developments due not to quakes but to reconsideration of space requirements (e.g. Riccarton Raceway). This provided business parks and high-end plots, all outside the Old CBD. None of the new office tenants is in any hurry to relocate back into the Old CBD, because most have found that the 'doughnut city' - a ring of businesses around the Old CBD - actually suits themselves, their customers, and their staff extremely well. So the Old CBD is gonna struggle to attract anything but hospo, high-end retail, and consultancies firmly attached to the Gubmint Teat.
5. The earthquake sequence was handled so badly in business survival terms by authorities that there is considerable animus out there, about exposing businesses again to either the Old CBD, the City Council, or in general, to any development which appears to have the cold dead hands of Gubmint anywhere near it. This animus will take a generation to diffuse.