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Does this man never learn?!

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Frank Macskasy Blog Frankly Speaking

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On 22 November 2008, Prime Minister-elect, John Key, presented a speech to an APEC meeting where he told a gathering of some 500 business leaders from 21 countries,  that financial regulation was urgently needed to pull the world out of the global financial crisis.

Key said, in part,

“... It is no news to anyone that the global economic outlook for 2009 is weak.

Not since the Great Depression has the world experienced such a significant financial crisis as we have seen in recent months. We have seen an expansion of credit and leverage at levels that were so unprecedented and arguably so uncontrolled that they now threaten the very stability of the world’s banking system…

… To understand the potential scope of the changes that may be required is to understand the changes in the global economy over the past 10 to 15 years.

Over the past decade or so the global economy was fuelled by a private sector credit boom made possible by a combination of large macroeconomic imbalances with and between economies, relatively low global inflation, new waves of financial innovation, and huge amounts of leveraging by hedge-funds and other financial institutions.

These forces were, in turn, fuelled by excessive optimism in asset markets, and a more relaxed, and in many cases, recklessly complacent attitude to risk…

… Our banks have, in large part, escaped significant exposure to the destructive products such as the sub-prime market that has wreaked havoc in other jurisdictions…

… Beyond our ability to trade and interact with each other, the second and most obvious effect of the financial changes of the past 10 to 15 years has been a large increase in asset prices, greatly increased demand and, most crucially, a huge expansion in credit.

This in itself isn’t new. The difference is in the magnitude and scale relative to the real economy and the inability to quantify the risk due to a lack of transparency.

This has led to two new challenges. First, relating to the effectiveness of monetary policy in dealing with asset cycles and price bubbles in particular, and second, relating to the adequacy of regulation of financial institutions... “

It is abundantly obvious that Key was well aware of the part played by hedge funds and other financial institutions in the mess that was the Global Financial Crisis (GFC). That crisis led to massive taxpayer-funded bailouts of corporations deemed TBTF – To Big To Fail.

The ‘side effects’ were millions losing their jobs; their homes; and governments cutting back on expenditure and state services.  Many likened the 2008 Great Recession to the Depression of the 1920s/30s.  Only because 21st century Western nations have a well-developed social welfare system did we not have a repeat of the soup-kitchen lines; entire homeless families living in the streets; and shanty towns springing up to offer some semblance of shelter.

In Europe, the effects of the Crisis continues to worsen, and we are seeing another dangerous sign that social stresses are beginning to impact; the rise of neo-nazi political organisations.

The greed of Wall Street, and the unfettered power of  neo-liberal Globalist-Corporatism  is dragging the world to the precipice. It is a precipice that even  distance will not protect us, here in New Zealand.

Just as we were not exempt from the Great Depression in the 1920s/1930s; the rise of fascism; and it’s awful consequence; World War Two.

Key continued,

In recent months the world has focused on the spectacular collapses of companies like Lehman Brothers and my old firm, Merrill Lynch.

What is now apparent is that as the pressure to boost profits grew, Wall Street assumed more and more risk. The quantity, and also the complexity, of this risk saw investment banks evolve into pseudo hedge funds with balance-sheets and risk exposures well beyond what anyone would have previously deemed acceptable.

But leverage wasn’t, and hasn’t been, the sole preserve of the banks.

The hedge-fund community has mushroomed in size and significance. Gone for the most part is the traditional macro hedge fund, where risk was based on the views of an individual trader who undertook conviction trades that bore some sense of balance when compared to the overall size and structure of the market.

Today, hedge-fund leverage is for the most part unregulated, opaque and, arguably, globally unmanageable. The regulation that does occur is for the most part focused on the fitness of the manager to report to their investor.

All of these factors have helped contribute to the explosion in credit, completely out of proportion to the real economy, with cheap equity leveraged to the hilt.

So now the party is over and the taxpayers of the world are left to underwrite – in one form or another – the liabilities and obligations of banks and, by extension, their hedge-fund clientele.

We can no longer afford to ignore the fact that the amount of risk that hedge funds are able to take through the leverage of their funds is arguably completely disproportionate to the real economy.

These realities and the associated bailout of financial institutions are expected to prompt a widespread review of financial regulation. This is entirely appropriate.

I emphasise, however, that this will require a change of mindset and a global approach – especially as the home of many financial institutions, including hedge funds, is no longer the traditional economies.

We must proceed with caution.”

Indeed: “We must proceed with caution.

Which is why it totally beggars belief that Key was planning to invite those very same Global Corporatists to New Zealand  to set up some kind of  “zero tax rated financial services hub”. The proposal was led by banker, Craig Stobo, who  told National’s 2009 Jobs Summit that “an economic boost would result if the Government created a zero tax rating for foreign investors who invested in international funds” in New Zealand.

The then-Economic Development Minister Gerry Brownlee, appointed Stobo as chairman of an advisory group the following year to determine what incentives would draw  financial corporates  to New Zealand to participate in the proposed “financial hub” proposal.    Brownlee paid  Stobo’s group  fees ranging up to $655 a day, on top of an up-front allocation of $500,000.

(Maybe that’s why prescription charges are going up from $3 to $5 each?  Advisors don’t come cheap.)

As this media report further outlined,

Stobo’s appointment came after the Government’s Capital Markets Taskforce expanded the initial zero-tax idea into an ambitious plan to compete directly with tax havens Luxembourg, the Cayman Islands and Ireland to host international funds investing in the Asia-Pacific region.

However, Treasury comment on a draft version of Stobo’s report in July 2010 said it did “not present a convincing case that the funds domicile industry could be effectively developed in New Zealand and that it would provide net economic benefits to New Zealand”.

Confidential research by Oliver Wynam, conducted for the Capital Markets Taskforce which was charged with reviving New Zealand’s capital markets after the finance company crash and recession, were withheld from the Sunday Star-Times.

However, summaries of the research seen by this paper estimate New Zealand could secure 17 per cent of the Asia-Pacific market for fund domiciles, generating annual revenues of $1 billion by 2015 and providing up to 5000 high-quality jobs.

Official advice later poured cold water on these numbers. A February 2010 Treasury report noted: “The benefits appear overstated, including the estimate of the number of sustainable jobs.”

But the Wyman report went global, and plans were drawn up for Key to discuss the proposal with senior international bankers when he visited New York in September 2009.

That was the trip when the prime minister made headlines with a turn on The Late Show with David Letterman, but Treasury documents show during this visit he was briefed for proposed meetings with the chief executives of Goldman Sachs and Citibank where the hub was to be discussed.

In December 2010 Key said that a major international bank offered to shift business to New Zealand if tax policy changes were forthcoming. ” –  Key backs off ‘hub’, 13 May 2012

Note the last paragraph; “…Key said that a major international bank offered to shift business to New Zealand if tax policy changes were forthcoming“.

Oh indeed?! And where have we heard that before? Changing legislation to encourage a business to invest here?  Warner Bros? Sky City?

It apprears that Dear Leader has been making rather a habit of selling our  legislation for deals!

Key’s meeting with Goldman Sachs is also disturbing.

Goldman Sachs has been implicated in dubious dealings on Wall St, and benefitted from selling many of the dodgy “products” that led to the GlobalFinancial Crisis in 2008,

As  Allan Sloan, a senior editor for ‘Fortune’  magazine, said on 15 October 2007,

So let’s reduce this macro story to human scale. Meet GSAMP Trust 2006-S3, a $494 million drop in the junk-mortgage bucket, part of the more than half-a-trillion dollars of mortgage-backed securities issued last year. We found this issue by asking mortgage mavens to pick the worst deal they knew of that had been floated by a top-tier firm – and this one’s pretty bad.

It was sold by Goldman Sachs – GSAMP originally stood for Goldman Sachs Alternative Mortgage Products but now has become a name itself, like AT&T and 3M.

This issue, which is backed by ultra-risky second-mortgage loans, contains all the elements that facilitated the housing bubble and bust. It’s got speculators searching for quick gains in hot housing markets; it’s got loans that seem to have been made with little or no serious analysis by lenders; and finally, it’s got Wall Street, which churned out mortgage “product” because buyers wanted it. As they say on the Street, “When the ducks quack, feed them”. ” –  Source

In 2010,  Goldman Sachs faced legal action from the US Federal financial watchdog,

On April 16, 2010, the Securities and Exchange Commission (SEC) announced that it was suing Goldman Sachs and one of its employees, Fabrice Tourre. The SEC alleged that Goldman materially misstated and omitted facts in disclosure documents for a synthetic CDO product it originated called Abacus 2007-AC1. Goldman was paid a fee of approximately $15 million for its work in the deal.

The allegation is that Goldman misrepresented to investors that an independent selection agent, ACA, had reviewed the mortgage package underlying the credit default obligations, and that Goldman failed to disclose to ACA that a hedge fund, Paulson & Co., that sought to short the package, had helped select underlying mortgages for the package against which it planned to bet.

The SEC further alleged that “Tourre also misled ACA into believing that Paulson invested approximately $200 million in the equity of ABACUS 2007-ACI (a long position) and, accordingly, that Paulson’s interests in the collateral section [sic] process were aligned with ACA’s when in reality Paulson’s interests were sharply conflicting.”  Goldman Sachs stated that the firm never represented to ACA that Paulson was to be a long investor, and that as normal business practice, market makers do not disclose the identities of a buyer to a seller and vice versa.

The complaint states that Paulson made a $1 billion profit from the short investments, while purchasers of the materials lost the same amount. The two main investors who lost money were ABN Amro and IKB Deutsche Industriebank.IKB lost $150,000,000 within months on the purchase.ABN Amro lost $840,909,090. ” – Source

Barely three months later, Gioldman Sachs settled out of Court. Three months!?!?

For the American judicial system, where cases like this can take years, or even decades – this is the legal system’s version of travelling in a spaceship at the speed of light,

”  Goldman Sachs has agreed to pay $550 million to the Securities and Exchange Commission, one of the largest penalties ever paid by a Wall Street firm, to settle charges of securities fraud linked to mortgage investments.

The S.E.C. filed a lawsuit against Goldman in April, accusing the bank of securities fraud. The settlement came just days before Goldman is scheduled to report its second-quarter earnings.

Under the terms of the deal, Goldman will pay $300 million in fines to the Treasury Department, with the rest serving as restitution to investors in the mortgage-linked security. Goldman will not admit wrongdoing, though it will admit that its marketing materials for the investment “contained incomplete information”. ” – Source

John Key was to meet this man, Goldman Sachs CEO Lloyd Blankfein, in New York,

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Frank Macskasy Blog Frankly Speaking

CANCELLED: John Key was to meet Goldman Sachs CEO Lloyd Blankfein in New York.

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The proposed meeting with Blankfein was to take place during the same visit to New York when Key appeared  on ‘Letterman’, in September 2009, for that cringeworthy appearance, “Top Ten Reasons to visit New Zealand“.

Treasury analysis of  Stobo’s report in July 2010 stated,

[It did] not present a convincing case that the funds domicile industry could be effectively developed in New Zealand and that it would provide net economic benefits to New Zealand” . – Source

Treasury warned that the proposal could risk,

“… a wealth transfer from New Zealand taxpayers to overseas financial institutions.

Treasury also noted that the OECD was “cracking down” on tax havens in Europe (Luxembourg, Ireland, etc) so it remains to be seen why New Zealand would put itself in a similar position.

This blogger considers Key’s plans for a “tax haven” and his plans to draw Goldman Sachs into the equation as apalling bad judgement on his part.

Considering that Goldman Sachs was one of the financial corporations that Key had railed against in November 2008,

“We must proceed with caution.

What is even more mind-boggling and incredible is that Key himself advocated for reforms at that same APEC meeting, when he stated,

”  What we all know, however, is that transparency is possible and must be demanded…

… My Government is firmly committed to working with other governments and businesses like yours to not only grapple with the immediate pressures on our economy but to, in turn, address the underlying issues that led to today’s financial crisis. ” – Source

Turning New Zealand into a tax haven for companies to hide their fortunes, and shield them from legitamate taxes, and dealing with one of the prime movers in the Global Financial Crisis, which had been sued by a US Government financial watchdog – is not “addressing  the underlying issues that led to the global financial crisis”.

Thankfully, this harebrained scheme went nowhere. When the  ‘Sunday Star-Times‘  approached Key on this issue, evidently he “distanced the government from the controversial aspects of the plan“. (In plain english: he ducked for cover.)

But it should serve as ample warning that the man who is our Prime Minister deserves the hard scrutiny that the media have been according him.

Thankfully, we still have a reasonably critical and independent media in this country.

And thankfully, they can keep an eye on John Key.

God knows someone needs to.

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Postscript:

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Frank Macskasy Blog Frankly Speaking

Full Story

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Acknowledgement

Dominion Post/Sunday Star Times

Additional

Junk mortgages under the microscope

Goldman Sachs  SEC  Fraud Civil Lawsuit

Goldman Settles With S.E.C. for $550 Million

Key blames ‘reckless’ money men for crisis

Address to the CEO Summit, APEC Business Advisory Council (ABAC)

Key backs off ‘hub’

JPMorgan CEO offers blunt apology

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National signals epic fail – and waves flag of surrender (Part #Rua)

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When National took office in November, 2008, unemployment was on the way up. From a record low of 3.4% in December 2007, it stood at 4.8% a year later.

By December 2009, the Quarter Household Labourforce Survey unemployment rate had risen  to 7.3%,

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Source

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The unemployment rate has since dropped back to 6.3%, for the December 2011 quarter. The slow drop from 7.3% to 6.3% has taken two years to achieve – and even the cause of that outcome is debateable, as New Zealand  “baby boomers”  start retiring and others  escape our stagnating economy to Australia.

I will make one thing clear; I do not lay blame nor responsibility for the doubling of our unemployment at the feet at National. The 2008  global banking crisis, ongoing recession, and massive debt-problems were issues beyond any political Party in any country. National inherited an international situation not of it’s direct making. (Though National does espouse a neo-liberal ideology which most certainly contributed to the crisis in capitalism.)

As an interesting aside; National and it’s groupies  (quite rightly) blame the 2008 recession for our high unemployment rate. However, they conveniently ignore the 2008 recession when engaging in beneficiary-bashing – then the issue of  increased unemployment is a “lifestyle choice”.

However, this blogger maintains that whilst the rise in unemployment was not National’s fault – that National has been derelict in it’s duty to address the crisis in joblessness. Bashing beneficiaries and painting them as lazy layabouts indulging in a “lifestyle choice” will not create one single job.

Blaming beneficiaries for a global situation they had no hand in making is an abrogation of responsibility by National.

I think we all know by now that National hasn’t a clue when it comes to job creation. They have no policies to generate jobs, and what what they have been doing has been tragically counter-productive,

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This blogger is aware of one solo-mum who used the TIA to go through University; upskill; find a well-paid job;   move of welfare; and is now a tax-paying member of society. But I guess that is not the meme that National wants  entering the public consciousness. Their agenda is better served by scapegoating solo-mothers. (But never solo-dads.)

See:   Once upon a time there was a solo-mum

Paula Bennett  used the TIA to put herself through University; upskill; and then move on to a more well-paid benefit; she became Minister of Welfare.

See: Hypocrisy – thy name be National

Bennett’s axing of the TIA and other cutbacks in training and upskilling is what is colloquially known as a false economy.  It may save a few million bucks now – but will only delay the Day of Reckoning when we end up with an untrained, low-skilled society.

Even John Key made this a theme of his speech four years ago,

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The National Party has an economic plan that will build the foundations for a better future.

  • We will focus on lifting medium-term economic performance and managing taxpayers’ money effectively.
  • We will be unrelenting in our quest to lift our economic growth rate and raise wage rates.
  • We will cut taxes, not just in election year, but in a regular programme of ongoing tax cuts.
  • We will invest in the infrastructure this country needs for productivity growth.
  • We will be more careful with how we spend the cash in the public purse, monitoring not just the quantity but also the quality of government spending.
  • We will concentrate on equipping young New Zealanders with the education they need for a 21st century global economy.
  • We will reduce the burden of compliance and bureaucracy, and we will say goodbye to the blind ideology that locks the private sector out of too many parts of our economy.
  • And we will do all of this while improving the public services that Kiwis have a right to expect.  

Because the hard truth is that Labour’s economic underperformance hasn’t delivered the social dividend they promised us.  

So, make no mistake: this election won’t be fought only on Labour’s economic legacy.  National will be asking Labour to front up on their social legacy, too. Many of the social problems the Government said it would solve have only got worse.

This time a year ago, I talked about the underclass that has been allowed to develop in New Zealand. Labour said the problem didn’t exist.  They said there was no underclass in New Zealand.

But who now could deny it?  2007 showed us its bitter fruits. The dramatic drive-by shooting of two-year-old Jhia Te Tua, caught in a battle between two gangs in Wanganui. The incidence of typhoid, a Third World disease, reaching a 20-year high. The horrific torture and eventual death of three-year-old Nia Glassie. The staggering discovery of a lost tribe of 6,000 children who are not enrolled at any school.” – John Key, “State of the Nation Speech”,  29 January 2008

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John Key finished of that speech  by saying,

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We will not sweep problems under the carpet.  We will not meet the country’s challenges by quietly lowering our expectations.”

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So how has National performed?

Not so good, I’m afraid. (But that’s hardly surprising.)

Aside from cutting back on training, National seems to be engaged in a clandestine programme to actually keep wages depressed. Bill English admitted as much last year, on TVNZ’s Q+A when he let slip that New Zealands lower wages were a competitive advantage to Australia,

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“”Well, it’s a way of competing, isn’t it? I mean, if we want to grow this economy, we need the capital – more capital per worker – and we’re competing for people as well…

“… we need to get on with competing with Australia. So if you take an area like tourism, we are competing with Australia. We’re trying to get Australians here instead of spending their tourist dollar in Australia.” – Bill English, 10 April 2011

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Despite a low-wage economy being counter-intuitive for a multitude of common-sense reasons, it appears that – with National’s coded  assent – some local industries are attempting to drive down wages and develop a low-wage economy.

The current industrial disputes with AFFCO and Ports of Auckland Ltd are based purely around driving down wages  by cutting conditions; casualisation; and crushing unions in the workplace.

In October last year, the Seafood Industry Council (SeaFIC) told a ministerial inquiry into Foreign Charter Vessels that their industry needed more cheap foreign labour,

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SeaFIC says FCVs hiring Asian crews was no different to companies going to low wage countries.

“Many New Zealand businesses have exported jobs previously done in New Zealand to other countries with wage rates considerably less than minimum wage rates in New Zealand.” ” – Source

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See: Is this where New Zealand is heading?

See: Foreign fishing boats, Hobbits, and the National Guvmint

The prospect of slave crews on foreign fishing vessels in our territorial waters was a step too far, even for right-wing blogger and National Party cadre, David Farrar. He seemed horrified at what a ministerial inquiry and US journalist had uncovered. (Or perhaps it was faux-disgust, to try to distance National from slavery on New Zealand’s high seas. Who can tell.)

See: A Slave By Any Other Name

However, it was not a good look for one of our industries to be lobbying National to permit more cheap labour into New Zealand. Even if it was to be far out at sea, out-of-sight-out-of-mind, our US-based clients were not too happy when they found out what was going on under our noses, and from which we were seen to be profitting,

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Now, National’s inaction on job creation, training, and upskilling is beginning to bite. Reliance on the free market has not achieved any desirable, measurable goals. In fact, business is still luke-warm at hiring and training new staff.

Global finance and accounting firm Robert Half’s director director, Andrew Brushfield, expressed surprise at  the “cautious hiring predictions among New Zealand CFOs”. Really? No sh*t, Sherlock.

So where does that leave us;

  • A National government that is cutting training allowances
  • No government employment-creation programme to speak of
  • No state apprenticeship programme
  • Leaving job creation and training to the ‘market’
  • The ‘market’ being reluctant to generate employment

No wonder unemployment is still at 150,000.

And little wonder that, with 150,000 jobless, and no jobs training, the Christchurch re-build is now hampered by a shortage of skilled tradespeople,

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To illustrate how short-sighted National (and it’s right wing hangers-on and sycophantic businesspeople),  Weltec offers seventeen week (full time) courses in the painting trade,

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Source

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If has been fourteen months since the tragic, devasting quake of 22 February 2011. We could have had a small army of in-training workforce ready to go by now.

FBG Developments managing director, Fletcher Glass,  could have his 50 painters – and more – instead of complaining bittlerly,

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You can’t train skilled tradespeople in two years, and even if you could train 24,000 tradespeople, you would over-saturate the market after the rebuild.  If you get tradespeople from other parts of the country, you will deplete those places of tradespeople, and that will drive rates up. That will make house prices go up, so buying a house would be even less achievable.’

Hiring overseas workers would prevent Christchurch from turning its problem into a nationwide problem. If you need 6000 painters at the peak of the rebuild, that’s every painter in Dunedin and Wellington.” – Ibid

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What absolute rubbish.

I have a sneaking suspicion that Mr Glass , like SeaFIC, is seeking  painters from Southeast Asia because they will accept minimum wage.

So we can add the following to the above list, as to why we have a shortage of trained tradespeople to take part in Christchurch’s re-build,

  • Employer self-interest

As a point of interest, the above media article also conducted a poll. It asked a simple question,

Should New Zealand fast track visas for overseas tradesmen?

Yes, we need more workers urgently
85 votes, 20.4%

No, we should train more NZers
332 votes, 79.6%

Nearly 80% of New Zealanders have enough common sense to realise what we should be doing. Obviously, none of those 80% are represented by any of National’s current  59 members of Parliament.

In case anyone is foolish enough to accuse this blogger of being fiscally naive, I refer to a BERL report, last year,

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Industry training has billions in benefits – study

A new study suggests the country could lose between $7.2 and $15.1 billion dollars annually if the Government withdrew its investment in industry training.

The study by the Business and Economic Research Limited (BERL) sets out to quantify the costs and benefits of industry training both to businesses and to the country.

According to one model, it found a cut in all public funding towards industry training would result in a loss in gross domestic product of 0.6 to 1.8 percent by 2014, and between 2.9 and 6 percent by 2021.

That equated to a loss of between $1.2 and $3.7 billion annually in the short-term and between $7.2 and $15.1 billion in the long term.

BERL said under such a scenario, the loss of skilled labour would have a detrimental effect on the export sector, crimping its capacity and reducing its competitiveness as industries competed for a smaller pool of talent.

The report, commissioned by the Industry Training Federation, said the results underlined how the country’s skill levels could ”positively impact on the quality and value of the goods and services produced, and the standard of living in New Zealand”.

However, it also noted the economy was complex and warned that ”any attempts to prioritise or isolate particular industries, sectors, occupations or skills as being more or less important are economically unsound  “.  – Source

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Training up unemployed New Zealanders who’ve lost their jobs over the last four years of recession; it’s not just a good idea or a “nice to have” – it’s bloody well obvious!

National’s faith in free market forces is admirable. But the rest of us gave up believing in Father Christmas, Easter Bunny, and Superman as we grew up. (Though having Superman around might be useful.)  It is high time that John Key and his Merry Band gave up their quasi-religious belief in the Invisible Hand of The Free Market.

Ideology will not re-build Christchurch. We need many hands – trained up and paid well – to do the work. 150,000 pair of hands!

I leave (almost) the last word to  Dear Leader,

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We know this isn’t as good as it gets.  We know Kiwis deserve better than they are getting.  We are focused on the issues that matter and we have the ideas and the ability to bring this country forward. 

National is ambitious for New Zealand and we want New Zealanders to be ambitious for themselves. ” – John Key, “State of the Nation Speech”,  29 January 2008

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Wouldn’t that be a fine thing?

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How Can A Minister of Finance Get It So Wrong???

28 February 2012 4 comments

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Five days ago, Finance Minister Bill English released a statement on the part-privatisation of several State Owned Enterprises. It is worthwhile re-printing his statement in full, and responding to it, point-by-point,

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Running up $5-$7b more debt not the answer

by Hon Bill English, Finance
23 February 2012

Opponents of the Government’s mixed ownership programme need to explain to New Zealanders why it would be better to borrow an extra $5 billion to $7 billion from overseas lenders, Finance Minister Bill English says.

Speaking to an Auckland Chamber of Commerce and Massey University business lunch today, he said the challenge was how the Government pays for forecast growth in taxpayers’ assets over the next few years.

“Taxpayers own $245 billion of assets, and this is forecast to grow to $267 billion over the next four years. So we are not reducing our assets. Our challenge is how we pay for their growth, while getting on top of our debt.”

The rationale for offering New Zealanders minority stakes in four energy companies and Air New Zealand is quite simple, Mr English says.

“First, the Government gets to free up $5 billion to $7 billion – less than 3 per cent of its total assets – to invest in other public assets like modern schools and hospitals, without having to borrow in volatile overseas markets.

“Our political opponents need to honestly explain to New Zealanders why it would be better to borrow this $5 billion to $7 billion from overseas lenders at a time when the world is awash with debt and consequent risks.

“We would rather pay dividends to New Zealanders on shares they own in the energy companies than pay interest to overseas lenders on more borrowing.

“The fact is, the Government is spending and borrowing more than it can afford into the future. So it makes sense to reorganise the Government’s assets and redeploy capital to priority areas without having to borrow more.

“Most nights on television, we see the consequences of countries in Europe and elsewhere borrowing too much. We don’t want that for New Zealand.”

Secondly, under the mixed ownership programme New Zealanders will get an opportunity to invest in big Kiwi companies so they can diversify their growing savings away from property and finance companies.

“Counting the Government’s controlling shareholding, we’re confident 85-90 per cent of these companies will be owned by New Zealanders, who will be at the front of the queue for shares.”

Thirdly, mixed ownership will be good for the companies themselves, Mr English says.

“Greater transparency and oversight from being listed on the stock exchange will improve their performance and the companies won’t have to depend entirely on a cash-strapped government for new capital to grow.

“We already have a living, breathing and successful example of mixed ownership in Air New Zealand, which is 75 per cent owned by the Government and 25 per cent by private shareholders.”

In his speech, Mr English reiterated the Government’s economic programme this term would focus on rebuilding and strengthening the economy.
It’s main priorities are:

  •     Responsibly managing the Government’s finances.
  •     Building a more productive and competitive economy.
  •     Delivering better public services within tight financial constraints.
  •     Rebuilding Christchurch.

“So there will be no big surprises from this Government,” Mr English says. “We have laid out our economic plan and Budget 2012 will focus on implementing that plan.”

Source

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Firstly, let’s call a spade, a spade here. Whilst National ministers use the euphemistic term, “mixed ownership model”, the issue here is partial-privatisation of state owned enterprises.  National’s spin-doctors may have advised all ministers and John Key to always use the phrase “mixed ownership model” – but the public are not fooled.

To begin, I take great exception to English’s opening statement,

Opponents of the Government’s mixed ownership programme need to explain to New Zealanders why it would be better to borrow an extra $5 billion to $7 billion from overseas lenders…”

Opponants of National’s part-privatisation do not “need to explain” anything. It is up to National to explain why it feels the need to part-privatise tax-payer owned corporations that are efficient and give a good return to the State.

Demanding that the  opponents of the Government’s mixed ownership programme need to explain” their opposition is the height of arrogance.  Governments in western-style democracies are accountable to the public – not the other way around.

English then goes on to say,

Taxpayers own $245 billion of assets, and this is forecast to grow to $267 billion over the next four years. So we are not reducing our assets. Our challenge is how we pay for their growth, while getting on top of our debt.”

Pardon?

“…we are not reducing our assets” ?!?!

Selling 49% of Genesis, Meridian, Solid Energy, Might River Power, Air New Zealand (from 75% to 51%) down to a 51% holding is “not reducing our assets” ?!?!

Bill English’s command of his namesake language is strange at best. I believe this is what George Orwell wrote about in his dystopian novel, “1984“, when he described “doublethink“,

To know and not to know, to be conscious of complete truthfulness while telling carefully constructed lies, to hold simultaneously two opinions which cancelled out, knowing them to be contradictory and believing in both of them…”

English laments that “our challenge is how we pay for their growth, while getting on top of our debt”.

This involves two distinct issues;

Paying for the growth of state assets.

Genesis, Meridian, Solid Energy, Might River Power,  and Air New Zealand are all profitable enterprises in their own right. In the 2010 financial year, these  assets made a combined profit of $581 million dollarsNone of these five SOEs are loss-makers.

They can each pay for whatever growth programme they require, using their profits.

Where National interfered in SOE operations, the results were highly distorted,

Genesis paid out no dividend and had a zero yield on its operating profit of $293 million.

It had a 30.5% shareholder return on total assets.

Meridian had a dividend yield of 10.4%, achieved by paying out 428.8% of its profit. The increase came from the $300 million special dividend it received during the sale of Tekapo A and Tekapo B stations to Genesis, which was forced by the Government to borrow to pay for the purchase.” – Source

The reason that there is a  “challenge [in] how we pay for their growth”  is simple: National demands high dividends from these  SOEs (often by forcing them to borrow) leaving little for the companies to reinvest in their own growth.

Under-funding is a problem only because National has created the problem.

Getting on top of debt.

Linking  New Zealand’s $18-plus billion dollar debt to funding the growth of SOEs is  deliberate sophistry (ie; a deliberate deception).

The reason we have out-of-control debt is because,

As a society and as an economy, we had no control over the first two crises to hit us.

But we sure had control over our taxation policy, and doling out generous tax cuts to millionaires and wealthy businesspeople was a luxury we could not afford. (Many maintain that National was “rewarding” certain affluent socio-economic groups for electoral support at the ballot box.)

Next. English states,

First, the Government gets to free up $5 billion to $7 billion – less than 3 per cent of its total assets – to invest in other public assets like modern schools and hospitals, without having to borrow in volatile overseas markets.

???

National appears confused (as with most of its ad hoc policies) as to the proceeds it may gain from the partial sales. Only a year ago, Key stated authoritatively,

“If we could do that with those five entities … if we can make some savings in terms of what were looking at in the budget and maybe a little on the upside you’re talking about somewhere in the order of $7 to $10 billion less borrowing that the Government could undertake.” – John Key, 26 January 2011

Then again, as recently as eleven days ago, English let slip that,

I just want to emphasise that it is not our best guess; it’s just a guess. It’s just to put some numbers in that look like they might be roughly right for forecasting purposes.  That’s an honest answer.” – Bill English, 17 February 2012

The best description of Key and English on asset part-sales: clueless.

It is also worrying that National is selling state assets to pay for  “other public assets like modern schools and hospitals, without having to borrow in volatile overseas markets“.

Every householder will tell you that if  you have to sell of your furniture; whiteware; tv, family car, to pay to maintain your home – then you are in deep financial trouble.

What National is doing is “selling the household furniture to pay for painting the house”.  Selling off assets to pay for maintenance is not sustainable – eventually you run out of stuff to sell. It is a really dumb idea.

But more than that, it indicates that National is not “earning” enough, by way of taxation revenue to pay for it’s house-keeping. If we have to borrow or sell assets to do simple things like paint schools or properly resource hospitals – then it is a fairly clear indication that taxation revenue is insufficient for day-to-day operations of public services.

It also indicates that we are paying for the 2009 and 2010 tax cuts by selling state assets.

This is not “fiscal prudence” – this is foolish profligacy.

Bill English again demands, in his speech,

Our political opponents need to honestly explain to New Zealanders why it would be better to borrow this $5 billion to $7 billion from overseas lenders at a time when the world is awash with debt and consequent risks.”

No,  Mr English. Perhaps you should “honestly explain to New Zealanders” why you believe it makes greater commerciall sense to part-sell  profitable assets that are returning a higher yield on investment, than what the government pays to borrow?


The Government is estimating a $6 billion reduction in net debt after the sale of the state-owned enterprises – but concedes the savings on finance costs will be less than what it would have booked from dividends and retained earnings if it kept them.

Treasury  forecasts released today in the Government’s budget policy statement outline the forecast fiscal impact of selling up to 49 per cent in each of the four State-owned power companies – Mighty River Power, Meridian, Genesis Energy and Solid Energy – and by reducing the Crown’s current shareholding in Air New Zealand.

They assume a price of $6 billion – the midpoint in previous estimates of a $5 billion to $7 billion sale price – and a corresponding drop in finance costs of about $266 million by 2016.

But the trade-off is the loss of an estimated $200 million in dividends by 2016 and the loss of  $360 million in forecast foregone profits in the same year.

Documents supplied today state that the overall fiscal impact of selling a partial stake in the SOEs is a reduction in net debt, but the Government’s operating balance will also be smaller, because foregone profits would reduce the surplus.” – Source


Yet, only a year ago, Bill English was forced to concede that state owned power companies were indeed, highly profitable. In fact, he was complaining bitterly about State-owned generators  “earning excessive returns”,

Generally the SOE model has been quite successful in that respect. But if you look at those returns being generated particularly out of the electricity market, the Government has taken the view that that market is not as competitive as it should be.” – Source

The State will be losing money on the deal; earning less dividends from the SOEs than the cost of borrowing. The sums simply don’t add up.

There also seems to be some confusion (no longer a surprise) as to what National intends to do with sale proceeds.

On the one hand Bill English sez he wants to reduce debt,

We are firmly focused on keeping the Government’s overall debt as low as possible and that is the most important consideration over the next few years.” – 16 February 2012

And a week later, English is spending it,

First, the Government gets to free up $5 billion to $7 billion…  to invest in other public assets like modern schools and hospitals…”  – 23 February 2012

I guess Mr English is hoping that no one is paying attention?

Further in his speech, English makes this rather candid admission,

The fact is, the Government is spending and borrowing more than it can afford into the future. So it makes sense to reorganise the Government’s assets and redeploy capital to priority areas without having to borrow more.”

And there we have it, folks: the clearest statement yet from our Minister of Finance that the partial-sale of our state assets has little to do with giving “mum and dad” investors a share in our power companies; or making them more efficient; or paying down any of our $18+ billion debt; or putting a new coat of paint on your local school – the government is desperate to raise cash because it  “is spending and borrowing more than it can afford “.

The tax cuts of 2009 and 2010 were never “fiscally neutral” as National kept insisting.

The “tax switch”  left a $1.4 billion “hole” in the government’s revenue and this is how they are attempting to “plug that hole”.

We have been conned.

The tax cuts will be funded by the sale of state assets that we, as citizens of this country, already own. And because the bulk of tax cuts benefitted the highest income earners/wealthy – who are also in a better position to acquire shares in Genesis, Meridian, Solid Energy, Might River Power,  and Air New Zealand – the transfer of wealth from low and middle income earners will be two-fold.

The legacy of John Key’s government will be to make the rich richer, and for the rest of us, we can look forward to,

  • more expensive power
  • losing half ownership of our taxpayer-created state assets
  • and the top 10% to increase their wealth even more

But, to be generous, I will leave the last word to the Hon. Bill English,

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"Would you be willing to increase the mortgage on your house to go and borrow the money to buy shares on mighty river power?" Bill English, 16 February 2012

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Reactionary thug filmed assaulting Dunedin Occupation protestor

2 November 2011 2 comments

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49 year old man arrested after head-butting protestor.

Full Story

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TV3 caught a violent assault in Dunedin’s Octagon, as a reactionary thug head-butted one of the Occupation protestors.

Perhaps that thug should be directing his anger at the corporate greed and corruption that resulted in a global banking meltdown; recession; and loss of millions of jobs worlwide.  Why blame the victims here in New Zealand (and elsewhere) for events so far removed from our country  that we have little  control over what happens in the Boardrooms of Wall St, USA.

Perhaps those protestors would have jobs had the recession not doubled NZ’s unemployement rate from 3.8% in 2007 to around 6.5% currently. And those protestors might have jobs had our current government not wasted three years tinkering with the welfare system, rather than implementing job-creation policies.

Even Business NZ has voiced it’s public frustration at National’s lack of economic plan,

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Full Story

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Anyway, “thanks” to ACT, if convicted, that ignorant fool will have Strike One on his police record.

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Bread & Circuses, Penguins & Rugby.

28 September 2011 4 comments

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Our entire mass media seems to be fixated on RWC, or Rugby, or any other sport, social event, or person(s) vaguely related to balls.  If “Happy Feet” had played rugby on Peka Peka beach, our media moguls would have died happy in their beds…
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Case in point how the RWC has supplanted normal, every-day, news events.  On 25 September,  TVNZ7 News-at-8 consisted of the following:

8.00 – 8.07: The Warriors’ win

8.08 – 815: Rugby. RWC. People with a rugby ball. Sick Jonah Lomu (ex rugby player). More rugby.

8.15: Christchurch earthquake. Meningitis case in Wellington.

8.16: Crime story in Dunedin.

8.18: Plane crash in Nepal/Mt Everest

8.19: Libyan civil war

8.21: Civil unrest in Yemen. Fire and fatalities in London.

8.23: Politics in Russia. Putin standing for President again. (Aside; will he campaign bare-chested?)

8.25: Campaign against bull fighting in Spain. (True! No bull!) Crazy US stuntman in China. Followed by Weather today. Followed by International Weather. (Raining in Botswana, I see – fishing trip cancelled tomorrow.) Then TVNZ7 station break.

8.28: Global financial crisis

8.33: UBS Bank Fraud – CEO quits. I shed at tear. (No, not really.) ASB computer glitch. (Some IT geek too busy watching internet porn?) ACT announces policy to decriminalises cannabis. (Good policy – except pot heads will have forgotten by tomorrow morning.)

8.38: Kiwi chick #1,000 born. (Lack of suitable penguin story?)

8.39: “Coming Up Soon” announcement.

8.40: TVNZ7 station break.

8.41: Sport. Rugby. (At this point I switch off. Consider phoning ASB IT geek to obtain his favourite porn website.)

There we have it, folks: fifteen minutes of rugby leading a supposedly “serious” TVNZ7 news hours – with another 15 to 20 minutes of same,  at 8.40.

By comparison, the global financial crisis – which threatens the entire planet with another Depression and collapse of entire governments – lasted five minutes.

Though this information was collated from TVNZ7, the other two television news serices, TV1 and TV3, have been likewise guilty of trivialising news reporting. Theresult is that we, as a society, are less well informed as to what is happening in our own country, and indeed the world.

This is perhaps a matter made even more critical as we have a general election looming and the global economic crisis seems to be gathering an evil head of steam. We also have a piece of legislation called the Police Surveillance Bill currently before the House – a proposed law that could make New Zealand one of the most surveilled country in the Western world.

Big Brother has taken a step nearer.

All this is practically “invisible”. The news media has practicalled muzzled itself, as it chases the Rugby World Cup, and cute animal stories.

Now I’m as happy as the next bloke or blokette to have TV news cover the RWC. No, honestly, I am! But not at the expense of general news; politics; the economy; community; and international affairs. There is a time and place for everything and the News media have a responsibility to inform New Zealanders what is happening in their own country. There is more to our lives than  a 15 minute story on the All Blacks thrashing [insert other rugby team here], and then a human-angle story on one of the All Blacks’ mum and dad.

Otherwise, this isn’t just “dumbing down”, this is a pre-frontal lobotomy of the electronic media with an ECG charge of 5,000 volts to the temples, for good measure.

Welcome to Bread and Circuses, 21st Century style – instead of  Christians and Lions, we have penguins and rugby.

Question – without using Google, do you know the answers to the following:

  1. What date will the coming General Election will be held on?
  2. Which party proposed a Capital Gains Tax?
  3. There are NZ military staff in which country: Iraq, Libya, Fiji?

If you don’t know the answers, but do know who will be playing the next match, then ask yourself why?

And who knew that this was going on:

Occupy wall street movement begins to gain critical mass

Keith Olbermann calls out Media Blackout on ‘Occupy Wall Street’ Protest

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Great Myths Of The 21st Century (#1)

16 August 2011 7 comments

Perhaps the greatest urban-myth, perpetrated and perpetuated by those whose interests it serves, is that the unemployed are there-by-choice, and unwilling to work.

Of course, this is absurd and an outright falsehood.

Fact 1:  The New Zealand December 2007 Quarter Household Labourforce Survey unemployment stood  at 3.4% . This was prior to the global recession hitting NZ.

Fact 2:  By the end of 2008, the New Zealand December Quarter Household Labourforce Survey unemployed rose to 4.6%.

Fact 3:  The New Zealand December 2010 Quarter Household Labourforce Survey unemployed rate increased to 6.8% .

Fact  4: In three years, the Household Labourforce Survey unemployed doubled from 3.4% to 6.8%

Fact  5: In other countries such as the US, unemployment went from 4.8%  in the fourth quarter of 2007 to stand at 9.1%  by July of this year.

Whether the largest economy on Earth, or one of the smallest, the impact of the global banking crisis and following recession caused companies to collapse; down-size; and “rationalise” (reduce) staff. This caused unemployment to skyrocket.

Events in Wall St, USA, had an impact on Main Sts, New Zealand;

“Jobs to go at textile factories”

“Headlines do not reveal true picture of job losses”

“‘Another kick in the guts for rural NZ'”

“Job losses to hit military next week”

“Lower Hutt jobs to go as shops shut”

“Hellaby’s closes: 18 jobs go”

“Australasian Colorado shops closing”

“Grim day of redundancies”

“Jobs to go at troubled baker Yarrows”

“KiwiRail plans to lay off Dunedin staff”

“Thirty-five jobs may go at Niwa”

“Ovation confirms 304 job losses “

“Dunne defends Greymouth IRD job cuts announcement”

“NZ Post shutting stores, axing jobs”

“Ballantynes faces post-quake job cuts”

“Lane Walker Rudkin 470 Redundancies A Tragedy”

And many more here .

As unemployment increased, the number of job-seekers increased. Even the Prime Minister, John Key, has remarked,

“We’re part of a global environment so we can’t control all of the factors that affect New Zealand, but all the indications we have is that 2011 will be a better year.”

Dozens, and often hundreds of unemployed job-seekers would turn up at businesses, that were hiring staff;

It is apparent that the global recession has caused the demise of some businesses, and forced others to greatly reduce staffing numbers. This is beyond the control of any individual in this country.

So why is there a perception amongst some individuals and groups that the jobless have chosen their unemployment as some kind of “lifestyle choice”? Especially when is it clear that WINZ unemployment benefits are nowhere as generous as some might believe.

Trying to apportion responsibility for people losing their jobs is victim-blaming  and is utterly  repugnant. Such victim-blaming is an unwelcome aspect of the human capacity for bigotry.

Why do people do it?

* The Opportunists.

It serves the purpose of some political parties such as National and ACT to blame unemployed for their predicament.

It allows National the opportunity to escape any possibility of responsibility at addressing this critical economic and social problem. And it’s a vote-winner with the next group,

* The Greedy.

For many neo-liberals who cherish the ideology of the free-market and minimalist-government, any form of taxation by the State is “theft”. And when the State hands over some of that tax-money to the Unemployed so that they can survive – they resent it. And do they complain bitterly!

These neo-liberal free-marketeers resent having to contribute their fair share to the society they live in. (Though they think nothing of driving on tax-payer funded roads; being cared for in tax-payer funded A&E Hospital Wards; protected by tax-payer funded Police; educated in tax-payer funded schools, etc.)

Greed – it does funny things to peoples’ humanity.

* The Perpetually Angry.

The uninformed, perpetually angry, people who obtain their information through TV news and/or Talkback radio. They have friends,, who know someone who has heard of a person, who apparently lives in luxury on the dole

These are people who have very little experience of the society they live in and generally have a circle of friends who validate their misconceptions.  For them, everyone is a dole-bludger; the recession happened to Someone, Somewhere Else; and everyone should be living comfortably, regardless of circumstances. Their worldview generally doesn’t extend much past their front door.

Anger – it stops people thinking clearly.

Unfortunately, The Greedy and The Perpetually Angry have no constructive solutions to offer us.

One hopes that  the National government will reconsider their decision to  cut almost $146 million from skills training.

Nor does it help when we export jobs overseas,

“Army shifts $2m contract to China”

“Chinese firm beats Hillside to KiwiRail contract”

So not only are New Zealanders losing their jobs because of corporate greed and mis-management in Wall St, USA – but our current policies actually encourage contracts to be awarded to other countries,  in effect “exporting” jobs.

Is this making sense to anyone?

Is it little wonder we have high unemployment, who need the dole to simply survive?

Because demonising a vulnerable group in our society will not achieve a single damn thing; create a single damn job; nor give us the Decent Society that we once enjoyed living in.

So far, my fellow New Zealanders,  there is precious little decency going on here.