They say 'crime doesn't pay'

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The adage that 'crime doesn't pay' is a popular one for movie sets; but what if 'crime is the only thing that pays' for a person living in a country with no opportunities. What if the country is NZ - a western country with no growth prospects - at least not until someone reforms autocratic government or discovers oil.

Consider the fate of Michael Thomas Feeney, of Waverley, New Zealand. I don't know Michael; I do not know the full context of his life, nor even a lot of it. But living in small-town Waverley strikes me as the best place to be if you want to position yourself for political reform or the discovery of oil (with existing oil & gas fields) up the road. 

Michael escaped a gaol sentence for break & enter. The judge said of him that, despite his 85-odd convictions over his life, that he had a good work ethic. That is important. But more important is to ask whether he had any prospects for anything else under this political system. A political system which:

1. Spurns investment by placing high costs upon business and undermines investment.

2. Spurns population growth because it does not want to redefine the nation's values; which are changing anyway because the government cannot stop the brain drain. 

3. Has allowed extortion to dominate economic activity because when there is no growth, pretty soon people  start eating the carcasses of their neighbours. Not exactly what Jesus meant by 'Love Thy Neighbour', but hell, Jesus got a lot of things wrong, so lets not speak of him any more. 

4. Facilitates and legitimatises taxation or the theft of wealth, for its political masters and aligned interests. Is not this government (along with its 'counterparts', who are fully complicit in sanctioning such slavery, except the ACT Party)....are they not a bad role model?

Did Michael take an easy path? I think so...if stealing wealth is 'easy'. But since when is hardship a value. This is of course a Christian 'virtue', i.e. That notion that there is nobility or heroism in sacrifice. I don't think so. Life is supposed to be easy; and the challenge for any life is to make it easy in the long run. I use my education to make more money than you can, faster than you can. I've made 3200% in 3 years on one stock; almost made 6800% in 3 months on another stock (if the company disclosed properly). The paradigm of struggling for wealth is a paradigm borne out of British subjugation. Life should be easy, and its only hard because of the extortionists in power who make it hard. Our zero growth will not sustain lives, so in a system that systematically mistreats people and perverts people, I expect people to struggle. I do not expect heroism from Michael, because I think the conditions of his life have not allowed him to be anything more than he is. I do not expect him to succeed because the conditions for life need to be conducive for survival, and in high-cost NZ, they are scarcely that. 

I am pleased that Judge David Cameron in the Wanganui District Court gave him the empathetic sentence that he did. Unfortunately, unless such judges are willing to challenge the system, then we are not going to see any change. We need judges to challenge the system, then not fall on their sword. i.e. Judge David Harvey recently stepped down from his role as a judge after making accusations against the United States government. Apparently there is implied bias in having a certain view about the USA. This is silly! Silly that he was sanctioned by some, silly if he chose to step down, or was asked to. The judiciary should be about evidence, and not appearances. Most people would accept that the USA does inappropriate things. Why should a judge reproach himself from making judgements; as that is what judges are deemed specialists at doing. I personally would like to see judges more critical of governments....and I think we are starting to see that. 

Unless judges or others are prepared to, or able to intellectually engage with these people, then there is no hope of anyone changing, Michael included. Perhaps Michael might apply his mind more if he lived in a social  system with actually validated intellectual discourse. Read the comments on Wanganui Chronicle, and you will find intellectual capacity sadly scarce. Why? Well, that is a reflection of the education system. From the National Party and ACT, we are likely to see a charter school system. The problem is that its a recipe for a change in ownership with no expectation of greater intellectual standards. The focus is on ownership or 'opportunity', not upon the mind. The notion that opportunity springs eternal from privatisation strikes me as 'causeless' or 'baseless' hoping. Even if private enterprise gets it 'right', that will only mean that its better than the public school system. It does not need to be so good as to be exceptional; just better than a bad system. i.e. Economic relativism; a close cousin of moral relativism, except prices are equated at the margin. These private schools don't even have to be good, they will create jobs and profits just by creating the illusion of better education. i.e. Employers will employ you because you went to a private school; because they are impressed by your grander sporting facilities. All the time, forgetting the mind. Why? Because the other 96% of schools certainly don't celebrate intellectual capacity. 

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NZ Property Guide Philippine Real Estate Guide Japan Foreclosed Guide

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

What NZ needs to do to become viable

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NZ is currently in pretty poor financial straits, however it has a great future. The nature of its mismanagement is similar to other countries, though its solution ought to be a little different. The principle problem in NZ is:

1. Low savings - The solution would be to make the 'economic surplus' discretionary is employers can reduce pay in tough times; whilst increasing savings by getting NZ'ers spending less. The amazing thing is that we are all worried about 'the levels of consumption' and greenhouse, yet a pure capitalist economy would resolve these issues, and create jobs at the same time. i.e. The 'mixed economy' is bad for the environment.

2. Low value work - By giving companies the discretion to lower wages, i.e. to offer surplus as a bonus, like in Japan, companies have an incentive to absorb the surplus labour which would about buoy wage levels, as well as attract new investment. NZ has to be competitive to overcome its disadvantages.

3. Inefficient and corrupt/extortionate market structures - There are two many extortionate market regimes in NZ. The worst is the building trade, where tradesmen are able to recoup the savings for materials purchased for the benefit of clients, then mark those products up to the client. They then work 3 days a week. The lack of competition in the building industry is part of the problem.

4. Extortion from government, i.e. Taxation is coercion. In this area, the NZ is no worse, and a little bit better than most governments. It has punitive fine policies, but not as aggressive as the USA or Australia. Local government has a strong welfare element.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

New Zealanders getting rich from business

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Michael Hill has some important advice for New Zealanders....if you want to be successful...as I guess he thinks you ought to be, then you need to 'get out of your comfort zone'.

This is undoubtedly a problem in NZ. The country is inherently less aspirational than places like the USA, southern Britain or Australia. I do feel these places are 'the land of the free', and NZ has the sense of a retirement 'backwater'. The reality however is that NZ is among the freest countries politically in the world. Sadly this is a relativist view, and statism is a sorry legacy in all countries.

The problem for NZ is that with little population growth and the entrenched government controls means the country cannot depend on population and debt stimulus that other countries do. So either the government has to resort to winding back government or stimulating population growth. I hope the former.

What I find particularly interesting about Michael Hill is that he really only made his break from the age of 40yo. This means there is still hope for me. :) Actually, his perspective is much the same as mine, but for different reasons. According to the NZ Herald, he lost all his possessions in a fire. In my case, I had a life-changing girl friend. She was kind of the first positive person in my life. A best friend....but a kindred spirit in the sense that we were both out to make a difference. I truly believe I am on the path to success now, whereas before I was just a lot of great ideas with no execution. She most importantly changed my view of people. Before I just did not see potential in people. One of the great aspects about the internet is the ability to meet people who think as you do.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

One of the best NZ advertisements

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One aspect of NZ business that impresses me in NZ is the quality of the TV advertising. There is broadly a very high standard for advertising. I am reminded of a radio advertisement from my first visit to NZ. The byline was 'come and get'm before the Aussies do'. Perhaps my favourite advertisement which comes to mind is the following for NZ Post. You have to love the self-deprecating humour.

The features of this advertisement which impresses me is that I can imagine that NZ is generally a place with a lot of 'tough love', and broken relationships resonate with a lot of people. It appeals to the personal touch in writing a letter, and it highlights the fact that, in a world of emails, there is still a place for the handwritten world. Go to You Tube and see how many people this advertisement has impressed.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

The prospects for a competitive telecom market in NZ

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You might ask - what would a free marketer like myself expect from a NZ broadband network. We all have long come to understand that free markets don't always deliver desirable outcomes. There are reasons for this:

1. Cross-market subsidisation - profits extorted through market power in some market can be used to finance new investment in others. We thus want to ensure in a global world that companies are able to finance improvements to services, but that any surplus profits are invested in the local business.

2. Market collusion - profits are not able to be excessive because two market competitors are able to extort excessive prices from the consumers who have no 'effective' choice. It matters little if there are just two players pretending to compete or 10 who have a formalised price-following or price-targeting strategy. i.e. You might find that the CEOs of these companies get together and they decide that in 2011 Telco A will be the price leader, in 2012 Telco B will lead any price changes. It goes without saying that those pricing changes will be favourable.

3. Transfer pricing - They all establish enterprises abroad, say in Ireland (with a lower tax rate), which purchases the hardware, and they pass on the costs to the NZ operating entity, so they look competitive, and profit margins look thinner.

4. Accounting tricks - Maybe they will use creative accounting to understate profits, such as making provisions for the acquisition of future capital, or the depreciation of old plant, which help to understate costs. These provisions don't even have to be real; they are just planning, so those profits can be released at any convenient time.

The question then becomes as to how does one achieve a truly competitive market? Or how does one ensure that business earns a reasonable profit, business has an incentive to cut costs, but at the same time provide an efficient service; and how does one get business to accurately and honest report its performance such that the market achieves an optimal outcome. We might also ask:

1. What constitutes fairness? Who gets the market surplus created in these transactions - the consumer or the business operator? Who created the surplus? Business.

2. What right does the consumer (or the government) have to ensure surpluses are not invested abroad in new or more competitive markets?

These are the intellectual questions that never seem to get answered. They are not new questions. They were asked and answered by people like David Ricardo and Karl Marx; not always with desirable interpretations. Far from wanting revolution, I would like to see an efficient market. Perhaps the strongest prospect for competition comes from a change in the way we structure society. This is an intellectual debate we do not have because our political system is so impervious to ideas. People are so concrete-bound. They are reluctant to engage with ideas, because the legislature does not place a value on ideas. It values perceptions because that is what the majority of voters respond to. They response to the 'concrete' because they have no effiective power, they have little specialised interest in all-manner of issues. So they are passive, only responsive to subtle messages.

I am not going to answer this question here. The greater issue is our political system.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Investment in NZ farming assets

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There was an article in the NZ Herald today highlighting the appeal of NZ farming properties as an investment opportunity. The author questioned why NZ'ers, instead even foreigners, are so interested in NZ rural property when the income is so bad. I makes the case that:

1. Rural properties are capital gains tax free

2. Rural properties have offered an average capital appreciation of 10.5%

There are another two further reasons to think there is even more upside in property:

1. Hedge: Property offers some appeal as protection from currency debasement. Commodities are priced in USDs. Thus if the NZD was debased because of poor government policy, there is a hedge in the sense that your US-denominated income will cover your capital loss.

2. Market access: There is scope for the USA-Japan-EU to eventually drop their agricultural tariffs and subsidies which have penalised NZ, as well as the third world. There is of course a trend towards free trade/trade liberalisation. The question is - how long will this take to occur?

3. Demand: There is a shift in Asian developing countries to meat-rich diets, so that demands more meat and dairy imports from places like NZ. Chinese, Filipinos, Koreans, Japanese, etc want bigger breasts, and to get those they need to drink milk. Of course they are also eating more protein like McDonalds, etc.

4. Investment: There is the opportunity to subdivide rural properties into lifestyle blocks.

A lot of property is no longer appealing for wool growing. There is some interest in these properties for timber-based industries, which are of course low-maintenance industries, and easily contracted out to third parties. There is even the prospect of tax, carbon credits and ancillary opportunities like using the waste products for renewable power generation.

Read more in this article or check out our NZ Property Guide. NZ has the obvious advantage over Australia in several respects:

1. Rainfall in NZ is more reliable

2. The currency is more directly tightened to the agricultural commodities, as opposed to metals and energy. This will not change for the next 10-15 years. NZ will eventually discover oil/gas I suspect.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

The future of the NZ Pike River mine

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During the Pike River mine disaster I have raised some questions for journalists to ask, and raised some suspicions. As news becomes available, it is apparent that the mining company has done a good job in undertaking the rescue. The latest reports are available here. The next step will be to restore ventilation to the mine in order that the bodies may be recovered. It also seems likely that the mine will be sealed up and become their tomb. The reality is that this decision may depend upon a decision to re-open the mine.

I have previously argued that the mine should not be reopened without coal methane extraction. These coal seams need to be degassed. The reason is not simply that the coal is gassy, but that I suggest its because the coal is relatively deformed, resulting in strong hydrostatic pressures within the rocks. I would not be surprised if the mine was subject to sudden inflows of water and release of methane inside the mine.

It would be an expensive effort to extract the gas from the development headings. It would be even harder since you would have to get access to existing development headings. Any efforts to re-open the mine will be opposed by 'greenies' because it is a fairly pristine mountain forest environment. I really think it was poor judgement which allowed this mine to proceed. It is superior quality coal. It is the premium 'metallurgical' coal. The seams are not great, the port facilities pretty poor, the distance to market is not appealing, but the coal prices are high, and are likely to stay high. The commercial aspects tend to support mining, however I am inclined to say that its too hard. It would be far more constructive for NZ Oil & Gas to invest in offshore oil & gas exploration. Oil & gas has far more upside, NZ has considerable potential, and probably at far less environmental cost (depending on location & recovery practices) than coal mining. Coal mining is not the future of Greymouth, its the past. The town without this resource probably only had 10 years of resources left. There are far more readily available and appealing coal resources in Australia, Russia and China.

On this one, I agree with the greenies. Really the future of NZ likes in high values services, niche exports, oil & gas, farm products and tourism. Yes, coal will remain a niche export. It just didn't make sense at Pike River. Solid Energy is developing a very appealing and large lignite coal resource in Southland which will have a 100+ year life span. It will convert low grade, hydrated lignite into high energy briquettes made by compression I believe. That resource will make Southland's Gore the coal mining capital of NZ. Greymouth will lose its title in the next 10 years.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Making NZ competitive

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Why is there this obsession in NZ to compare their economic performance with Australia? Why is the standard of the good? As an Australian in NZ, it strikes me as pathetic on so many levels. That is not to say that Australia cannot be beaten, but such a comparison kind of suggests you are 'equal bed fellows'. We are not. We are very different.

For starters. Australia has immense mineral and energy wealth. NZ has relatively little, and what exists tends to be tied up in national parks, and not open to development.

The next point is - Australia has a rapidly growing population of 21 million, and NZ has just 4.3 million people, awkwardly split between two islands, and its stagnating. Why? Because every time that NZ seems to start growing, a group of Kiwis seems to leave the country. Usually in recessions when there is no jobs, but even retirees are inclined to leave for sunnier Queensland. Even the immigrants 'freshly acclimatised' in NZ, move to Australia when they get their citizenship. Why? Because NZ business will not recognise their MBA or PhD qualification, so they were only ever able to aspire to a store manager position at Pizza Hut.

The reality is that PM's do not like to tell their electorate how it is. The reality is that NZ ought not be comparing themselves with a stallion like Australia, but a 'cross-bred' like South Australia. South Australia has a similar population to NZ, and its fairly isolated. At this point it has about as much mineral production capacity as NZ, but I actually expect that to change in generations to come. No one wants to live in Sth Australia too, but that also will change. South Australia will be the next WA boom! So where does that leave NZ? Probably comparing itself to Tasmania, which only has 300,000 people. :)

The reality is NZ has huge culturally entrenched attitudes to work which need to change. It has some huge disadvantages to fight, and it really is not doing enough. The problem for the government is that they are just happy to be in power. Why make changes which will get you tossed out of office. The country clearly needs to break into technological niches, but how do you attract investment. NZ at this point is a bloated welfare state. I see no great desire to change that. The leaders here are 'nice', but they don't inspire confidence in their ability to make changes. Helen Clark had bigger gonads than these two leaders. One of them was even challenged by a 'homo in a tizzy' last week. :) Stereotypes aside. NZ has never had a good leader, so it doesn't know what its missing. None of them convey a positive message.

So what needs to be done. Well if we acknowledge that NZ cannot compete with Australia on low value minerals, we have to acknowledge that NZ can compete on competitively priced, increasingly skilled and productive labour. It is a small market, so NZ has to focus on developing niche-technologies like IT, medical devices, biotechnology, etc. There is also great appeal for NZ in other areas like arts and literature, as certain regions like Wanganui could foster services for these people to attract residents, and flow-on business.

There is a need to attract capital, so it would be desirable to reduce decrease consumption taxes and income taxes, and increase 'dead' capital taxes, principally land taxes. This would result in better utilisation of the land, as well as avoiding tax evasion. The welfare state has to be curtailed, local government needs to be curtailed, as its very inefficient, with majors who don't know what they are doing. There is a need for training, but its to no end unless you have the right corporate incentives to attract business. Actually, NZ is in a very competititive wage gap, i.e. It has English skills so it competes with Australia above (30%+ wages) and countries like Malaysia, Philippines, Thailand and India, with their obvious skill and language difficulties. They need to recruit from these areas, but they need to avoid marginalising these immigrants and nurturing their skills. Not alienating them, and forcing them into Pizza Hut jobs.

There is potential for New Zealanders as well. However they have a skills-experience disadvantage. These foreign immigrants have a culture-leadership-confidence weakness. A lot of these Asian migrants are very skilled. We must remember that many of them have been able to leave the country because they are wealthy, skilled, educated and successful. This is NZ's opportunity to grab them. They are keen to work.

The opportunity really falls upon NZ business to identify and make use of these skills. My partner is an example. She has an Psych degree and MBA from the Philippines. She managed 50 call centre staff in the Philippines, she has vast expertise in online marketing and search engine optimisation. She is not a strong leader, so she needs people to tell her 'conceptually' what to do. But she is incredible at execution, multi-tasking. Great work ethic. Very few people in NZ can do what she can do, and she can also offer a competitive edge because she has former contacts and employees offering outsourcing opportunities in Asia, to further increase productivity.

There are opportunities there if NZ wants to take them. Where are the leaders? Managers? Both in business and unfortunately government because it retains such a tight grasp over the economy.

Not all immigrants come from Asia of course. There are a lot of Europeans and Americans coming to NZ, but I would suggest they are mostly coming to retire. If NZ wants to go that way, and stay a retirement village, then I guess high consumption tax is the way to go.

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Author: Andrew Sheldon

Resource Rent Tax Applied Critical Thinking |

www.SheldonThinks.com