Future energy policy for NZ

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NZ has in recent years experienced some significant increases in electricity prices. These rises can be attributed to several factors:

1. Latent inflation in exceedingly low capital and operating costs in an era of low interest rates. This is destined at some point to change; whence-forth, we can expect a rise in energy prices.

2. Capital cost structure or framework for distribution and transmission cost pass-thru

3. The high marginal cost of new generating capacity - High because anyone attempting to build a new generating unit has to recover costs without knowing when competitors are commissioning their capacity 

4. The need for all energy businesses to focus on yields rather than profits in a growth restricted market. If you can't cut costs or increase sales, then you are compelled to raise prices in order to achieve the profit growth that shareholder want to see;  but  more importantly the growth executives want  to see so their option incentives deliver the gains that will put them on par with foreign enterprises and other sectors which are able to deliver those gains. 

5. The high cost of natural gas. NZ has small resources of gas and those resources are concentrated in the Taranaki area. Eventually the nation will develop more competitive supplies from other fields, and this will mean cheaper fuel. The benefits may flow through to electricity prices. This assumes however that new supplies are competitive and in a state of oversupply; and that  their geographic location will allow for interconnection through the NZ grid. There is good reason to expect that a new gas resource will be off-grid or too small in size for the resource to make a competitive  difference. If it is so large to support export sales, then the imperative to offer cheap gas is undermined by export prices. This of course will not preclude lower long term contract prices to win an energy supply agreement.

What does this mean for NZ energy policy? Well it probably supports:

1. Energy market reform to encourage more privately owned electricity generation to supply local communities;  which store surplus capacity for timely sale into the grid or captive consumption. This will make more sense as battery prices fall, whether they support wind, wood or solar capacity. Reform of the Resource Management Act (RMA) and council management and land use facilitation will also be important. 

2. The reform of the distribution and transmission pricing so that it does not result in over-investment in said infrastructure.  Observe that under govt patronage NZ capital spending has gone from under-investment to over-investment. From crippling black-outs to pillaging of customer savings. What can we say of NZ energy sector management? We can say that political intrusion has been a huge mistake.

The only political party in NZ which has an energy policy consistent with lower energy prices in the short term is the ACT Party. In the long run, one would expect National policy to increase gas exploration to eventually increase competition, but that could be decades.  Private syndicate investment in generation offers the greatest scope for cheaper NZ energy supplies.  The impact of such an energy policy would:

1. Increase competition in the power market;  resulting in more money in the consumer's pocket. The gains would not however be equal. The disparity can be expected to impact residency decisions. Even in a town or city, you might welcome living in a community with captive power generation and supply arrangements. 

2. Increased energy generation at point of use; reducing transmission demand. Sadly this will have meant prior capacity development was wasteful and that consumers reliant on said supplies will have to pay more.

The prospect of higher costs for some is not a justification for an aversion strategy by government, simply because government just adds to the distortion.

There is an opportunity for governments to optimize this investment however by easing the RMA rules. Ie. If community development was easier,  more people would be living in optimized villages. Why? The reasons for living in communities with identity and connectivity has never been stronger. We don't have the regulatory setting to achieve that. We have dogmatic proscriptions understand which Gibraltar proscribe what is a healthy lifestyle. The practical outcome has been the exact opposite. The justification for adopting private planning is not the fact that the private sector always makes better decisions; it's that the private sector pays the costs of its mistakes - not you the consumer.

Another element of energy policy concerns the locating of generating plants and power lines. Said infrastructure raises two issues:

1. Property ownership - People have a right to compensation for disturbance of person or property.  i.e. Build a generating facility in proximity to a house and people should expect compensation. I would however argue that there should be no compensation for land beyond disruption from use. I would argue that people own the property improvement,  not the land. There is a tendency to consider property rights as intrinsically good; therein failing to ask why they are valued, and therein what actually constitutes property. 

2. Property values - Any investment in property is for the sake of certain values or enjoyment. We might properly ask whether latter parties have the right to undermine the enjoyment of smothers property. In the same way that a person cannot undermine your right to live, they cannot undermine your ability to be productive or to enjoy one's labour. Again, there is a tendency to see property boundaries as intrinsically the basis of property disputes. The shortcomings of this regime have contributed to the collectivisation of property rights such that they have come to be defined as social mores. This development occurred because libertarians failed to provide an adequate solution to contemporary land use conflicts over previous  centuries. Practically they folded and allowed the stat is talk to rule. This was understandable because if the mystic Christian roots for socio-economic values even dating back well before classic economics even developed.

It can only be hoped that sufficient numbers of libertarians will be able to politically advance a common law style of property rights rooted in rationality. To do that libertarians will need to differentiate themselves from 'small government' conservatives who have merely failed to identify the nature of the contradiction that has prompted their political brethren to sell out.

From Xero to mining investing - a leap of faith?

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In 2010, I recommended a stock listed on the NZ Stock Exchange called Xero Ltd (NZE:XRO). The NZX is a very small market so I'm not inclined to trade it. I do however like to assist people to trade markets. I wish I could say that I have a wide following of people for these recommendations, but sadly I think that's unlikely. There are two reasons:
1. Its a small market
2. People are cynical about anyone making claims
3. People are cynical about any 'conflict of interest', whether actual or implied.

For the record - I do have a conflict of interest. I am asking for a payment of $70 for a book on 'Global Mining Investing', which was in its first edition about 460 pages long. Its an eBook I am currently updating. Normally, I don't trade stocks like Xero, however it was a 'stand-out' buy at the time, and whilst I was not willing to set up an account, I obviously stand by the recommendation. I would however note that, the stock is now a technical sell. Being still a growth company, it probably has more upside, but I would argue that it also has a lot of downside in the short term. We originally recommended the stock around $1.60 (see Google Finance in 2010), and its now $28.61, at this date.

It is going to be rare that any person investing in a company like Xero will get a chance. Any IT company like Xero in future seeking to raise money will be compared to Xero, so professional insiders will get the opportunity, so they will not be listed until those 'insiders' want to take their profits from an illiquid market. Expect the founder of Xero to be backing these new market entrant companies. Investors like to go to executive billionaires like him because they want the 'investor profile' that these people bring. Its a sad reality of the capitalist system. Success sells to success and the little guy becomes cynical and marginalised. This not need be the case. The mining industry is a great industry for making money, and they need the money. There are plenty of small companies, and metal prices are volatile. We don't just tell you which stocks to buy, we help you identify them. We can hold your hand through your investment journey on Facebook and my personal page (because I love what I do - as a mining analyst), and we'll even appraise the companies readers like so that ever 'learned' investor improves their skills. Learning how to make money builds commercial acumen, and that means NZ has more business-savvy people to advance this country.

Global Mining Investing - table of contents

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

Finally media awareness of Auckland volcanic threat

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This is the third time we have written about the threat posed by a volcanic eruption in the Auckland Volcanic Field, that underpins much of Auckland City, New Zealand. We first wrote about it in March 2013, then again in April 2013, and again in this article. Finally, today, the NZ Herald has decided to write about the issue, which is critical, not just to alert people, but for government to actually take steps to avert castastrophe. What people need to consider is:
1. There is no reason not to expect another eruption. They have been so periodic that it gives high causal justification to expect another at some point.
2. Volcanic eruptions when they underlie or adjoin a city pose a huge disruptive force; far more catastrophic than earthquakes.

The reason why this is so is because:
1. The sonic blast from the volcano is going to shower the city, or parts of the city with rock debris, killing people, destroying a lot of popular. The impact would be akin to an earthquake. Less damage to the structural integrity of buildings, but more damage to their cladding/facade.
2. The volcaniclastic material and dust will blanket the city. The implication is that it will be a huge disruption to the city. Compared to an earthquake, where the people can get on with their lives within a week, i.e. Businesses can keep going, if they are psychologically prepared, and where there is relatively less disruption to transport, and only 'certain zones' are affected. Widespread dust will stop everything. Its akin to a snow storm; and even if you move the dust, it will wash back with rain. It will be redistributed by train. In contrast, an earthquake spreads no debris, aside from liquefaction (sand) along fault lines, and often it does not even rupture land/highways, so its simply undermining buildings/foundations in certain zones. It was rather unlucky that the central CBD of Christchurch was even hit. The other issue was the 'shallowness' and 'intensity' of the quake, and the fact that Christchurch was not designed for such events. i.e. It had many relict 'brittle' structures. In contrast, Japanese earthquakes are 80-100km deep, the earth 'rolls' and buildings sway accordingly.

Now, the good news is that it might not be central to Auckland, but rather on the fringes, so having less effect, and possibly not blocking major transport corridors. It might be a relatively small eruption with insubstantial dust. The win has a good chance of carrying the dust out to see, and strong wins will serve to disperse the dust further afield...though for a major eruption, that could actually be a problem. A greater problem is perhaps that there is no precedent for this event. It has no modern comparison. It will be not as severe as the Pompeii (Italy 11th Century?) or the Mt Pinotubo eruption in 1984 (with its 11 feet of ash). These are different styles of eruption. So, we are really in the dark as to the precise nature, however much can be garnered from exposed ash deposits. After all, that's how they are able to calculate the historical significance of these fields. NZ is one of the few countries to build a city on a volcanic field. I'm not aware of any other, aside from Iceland, where the entire island is a volcano. Even then, its not so much an explosive style of eruptive volcano, but generally a non-viscosity, fission-style type of eruption.

Now, in commercial terms, you generally build infrastructure with a 20-40 year life. So it might make sense to build a city on a volcanic field. Sadly, that concession only works if the eruption is after your 40 year project life. You might otherwise feel a bit jaded if you did not take a threat to your property seriously if you'd just made improvements to your property and then an eruption occurred weeks or a year later...even 5 years. The reality however that, its not so much a problem of infrastructure loss as:
1. Looting and vandalism in the wake of it, as you flee for safety
2. Destruction of gardens, external façade, windows
3. Damage to internal windows. Recognise that there will probably not be materials to board up your house windows, if that will even make a difference. It will depend on the size of the blast and your proximity to an unknown centre within the field, or close to it.

It becomes apparent that Auckland will be disrupted for several months. Food will need to be flown in until arteries are cleared. Rain will play havoc with that. It will be a different, even unique type of emergency.

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

Just one of the many great companies I have identified over the years - Xero Ltd (NZE:XRO)

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In Jan 2010 I recommended a NZ stock called Xero. Based on the Google Finance chart it was $1.64. Anyway, 3.5 years later its $17.64 and worth $2 billion dollars, and its NZ's largest listed company apparently...that's hard to believe. Normally its hard to find such stocks in a small market like NZ.
Anyway I wanted to convey the appeal of managing your own money, and dumping the 'dumbed down' investor belief that you should passively outsource your money to some fund manager who takes you for a commission. Here is the recommendation. There are few sectors which offer that scale of profits. Mining is one of them; online services is another, but that is generally a sector that does not need money. Mining needs money, and it pays nicely. Now is good timing for gold, and a good time to prepare for industrial minerals. Companies like MLX are good examples of the types of company, but you wait for the right time for these companies. Let me explain how to do it - start with Global Mining Investing.
At the time I was less than enthusiastic about NZ Windfarms (NZE:NWF), but thought that they might be worth a punt at 22c. Today they are 7.5c, though if I invested, I am sure I would have long abandoned that one. The reasons it was not a good option:
1. It was investing - always a less scalable option given the high capital cost
2. It had a major strategic partner who as a controlling shareholder could probably care less about capital optimisation
3. It was competing with China
4. Lack of local subsidies for wind
5. The problem with Resource Management Consent - I believe matters are improving in this respect
6. Not much growth in electricity demand - but then incremental capacity additions are well-suited to wind
7. The fact that grid stabilisation is currently not well-suited to a strong reliance on wind, particularly with the under-capitalised NZ grid, though I suspect that problem has since tipped in the other direction.

The reasons to like it were:
1. Prospects for technological innovation
2. Strong local support for wind
3. Appealing local market conditions for wind
4. The possibility of new wind subsidies

I note that Oceana Gold might be a stock to look at because its high cost, so has leverage to gold price incease, but I doubt it has a good resource base to interest me..so I'll steer away from it. I'll stick to the deeper 'Australian' fish bowl.

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Profit from mining with Global Mining Investing eBook

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

New Economics Party - a new hope for NZ?

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New Zealand has the makings of a new political party. Well, its early days for this one because it seems to have no substantive backers. Its called the 'New Economics Party' but my evaluation will demonstrate that its not 'new' just 'ignorance of economics', and that's far from new. The problem with any new political party, or  group with such ambitions is that they inevitably convey a lack of understanding of economics and psychology.
Their idea is to tax 'resources' rather than 'production'. This is a rather silly idea because any tax on resources is passed through to work, so is there any distinction? A resource is nothing without preparation or reticulation/distribution, so its a moot point. Someone has to pay, and its not the resource. So 'resource rent' is not a magical escape from the cost of supporting a welfare state, if that is implied.

There is actually some value in this thinking, though I cannot sanction a collectivist notion like 'the Earth (or resources) are for sharing'. This is not substantive enough as an intellectual foundation, however I would argue or support the notion that people did not 'make' or create' resources. They were already there. So what are we to make of resources which are there, but someone makes them marketable. There is some value in their 'potential' value. The question is:
1. Should private persons be allowed to develop them at zero cost. This is not reasonable because resource assessment and exploitation entails impositions on competing land uses. Do people have a right to expect no impedence from competing land users. i.e. Does your lifestyle property have a right not to expect explosive vibration from a nearby development, even if its not on your land? Clearly, resource development is inextricably linked to other issues.
2. Should private persons be able to develop them after related costs. This makes the most sense simply because it recognises the value created by individuals who didn't create the value, say gold mineral, but they did identify it, spend money appraising it, carrying the risk of plant, capital and labour in order to extract it. The argument is that they are making 'super profits', but those profits arose only because of the boom-bust economy created by governments. A private 'unfettered' market would be more predictable, and more boring. Spculators love contemporary market uncertainty because they manage it full time. Fund managers love uncertainty too because they get to manage the funds of apprehensive salarymen. They get to buy out cheap those small resource companies small investors are scared to invest in.
3. Should a 'middle-man' government to able to act as a custodian and tax those resources or any resulting income for the benefit of others. The implication is that these resources are a 'public good' and that the government can impose high royalties upon these resources so that the miner only extracts a 'nominal' return. The implication of this would be that the governments of the world would effectively be planning resource development and production, and inevitably prices. Might the world benefit from resource planning? No question. Its in fact already there, though it could be argued that the information distribution is less than 'fair'. That is another question, insofar as markets need to appraise market information. What is the public's right to know? What is the implication of not knowing. Risk = ignorance. The implication of not knowing is higher cost of capital. This is not good for resource developers, and thus the justification why resource developers have a vested 'common' interest in disclosure. The flipside is that they might perceive themselves to have a vested interest in misleading information, i.e. Not disclosing or minimalising information about a project. This however does require an act of faith by the investor, and this should not be accepted even if corporate custodians are considered 'trustees', their interests are split between corporation and shareholders. Remember that they are employed by the corporation, which is considered a 'separate entity'. Individual shareholders are therefore collectivised in their interests. You might wonder about how to balance new versus existing shareholders.

The rationale for this 'new economics' is the cliche of resource overuse, resource depletion and climate change. This is reactionary populism. i.e. Politics chasing 'pseudo-science'. Resource depletion is nonsense; long ago discounted. There is no shortage of resources; their presence is essentially infinite. The rhetoric is that there is a fixed quantity of metal in the universe. The stupidity of this argument is that:
1. There is not a fixed number of humans
2. Its an incredibly large universe
3. Our per capita resource use is actually falling in the West whilst rates are still high in the third world, and their population growth rates are rapidly falling. The concerns of today will be the opposite in 30 years time. Then we will be complaining about lack of consumption. i.e. We might be compelled to stimulate people to consume. In fact I doubt this will be the case because I think we will have shifted to a new philosophical system.

This party suggests we need multiple currencies; but in fact this is precisely what we have. There is nothing wrong with that; the problem is that they are supported by the arbitrary power of the government to tax.

"Equality, according to research, makes everyone happier"

This is absolute nonsense for two reasons. The concept of happiness is a rather 'arbitrary' measure of well-being simply because it relies on people's honesty in being able to appraise their happiness. I'd argue that people are surprisingly successful in their capacity to delude themselves into thinking they are happy. I would challenge you to ask people 'who say they are happy' to actually tell you why. I think you might find it enlightening. Its often a wish rather than the true state of their apprehensions about their lives, and their suspicions and disdain of others. The other problem is the contemporary measure of 'equality'. This conception is very often a false dichotomy.

Inequality is actually a non-issue. People don't need to be concerned about 'inequality'; they need to be concerned about 'rights', and basic needs. The richest people are found in 'prosperous' societies; so what threat do they pose. They don't unless given an extortionary sanction by governments. So government is the threat. Money can be used for good or bad; its government which has a monopoly over the legitimatised use of force. The other issue is sustainability living to avoid destitution, and that generally requires some survival strategy and provisions for mishap. It does not require a great deal of wealth, simply a house and farm plot and a basic insurance scheme. We live in a world where people's living standards depend on other's capacity to avoid extortive taxation. This can only justify spurning civil society. They have been disincentivised to produce.

The notion of a state state economy is a nonsensical conception for a number of reasons:
1. There is no justification for renouncing success or security
2. Provisions for security are founded on 'forward-looking' provisions, not avoidance strategies
3.

This political party posits as some defence against 'dog-eat-dog' capitalism, but is precisely the implication of its incoherent values. It simply assumes too much.

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

NZ Greens Party and Labour Party discover an 'over the horizon' election losing strategy

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Wow!!!! This is huge news. Labour and Greens together have raised minority party extortion to a new level. As far as I'm concerned, its great news because it highlights the nature of our useless 'representative' democracy. At stake is the spectre of a non-governing party threatening to subvert the existing government.
The Labour Party and Greens are saying in the midst of a power privatisation that they are going to change the rules of the game. An 'asset' is a capitalised stream of earnings. If you change the government, change the rules, you are going to change the expected earnings, or investors sense of vulnerability. The market is already uncertain about 'drought' (least of their worries), the closure of the Rio Tinto smelter, and now Labour and Greens are saying they will thwart the sale - in effect!
This effective curtails any hope of investment in the country (in anything substantive) as well as any hope of getting a sale of assets. Its the cheapest form of populism. Worse that 'minimum wages' and capital gains taxes by a country mile. Mind you, the policy was unpopular for National, and they were too arrogant to even deal with the broad-based apprehensions. This is of course just another reason for spurning 'representative' democracy. see and like us at www.meritocracy.org.nz. Join our mailing list.

This is actually worse that Julia Gillard's Mineral Resource Rent Tax (MRRT) because:
1. NZ needs the jobs and industry
2. Australia is a strategic and prized supplier of minerals
3. People kind of expect minerals to incur some rent
4. The mining industry was always very powerful, and thus a backflip was to be expected
5. The Australian Labor Party is just about to be dropped
The twisted aspect of this is that Labour and Greens just placed themselves in the wilderness....and ACT are looking more credible than ever. We have the socialists to thank for it....they really showed their true colours. Giving people sugar does not always work; most particularly when the market/media show you the implication of your decision-making. Shearer just retired permanently.
I guess we have to respect the 'honesty' (if not blatant stupidity) of the NZ Labour Party and the Greens Party. I guess they have locked in the support of the party faithful. But they might have just jettisoned any member or supporter with any sympathy or brain stem. To those people, I say welcome to ACT Party. John Banks, its leader is probably the only person with half a brain stem, and its a semi-impervious connection to God. So we live in hope. But you know; that's the price you pay for moral relativism. Get rid of representative democracy! Its not really 'democracy' in any meaningful sense. It does not give you 'real representative'. It takes from you power of attorney, vested in a person you will probably never meet or really know, who runs agendas you will scarcely understand because he is thinking full-time about thwarting your better judgement, and you are scarcely 'participating' to bearer scratch together a few brain cells. We need a meritocracy with a rational framework for political discourse. This is the only way that anyone can participate in a legislature. Visit us at www.meritocracy.org.nz. You want respect for your legitimate interests and rights - become a libertarian - we are not all Christians.


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

Auckland - living on the edge of a volcano - they didn't see it coming

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On the 17th March 2013 I wrote about the risks posed by a volcanic eruption in the Auckland Volcanic Field. I posed a number of questions as much as anything, since as a geologist, I go on evidence, and frankly, I was at a loss to find any. I don’t live in Auckland, so I don’t have any particular interest beyond an odd-hours research, but since writing this story, I’ve seen an escalation in interest in the issue. Might it be that there is more evidence than originally reported? Well there is a follow-up story in the NZ Herald today which raises several more issues which I want to address:
1. Focus of activity – The story probably creates unnecessary fear because it suggests that each of the old active volcanic craters in the Auckland Volcanic Field is active. This is unlikely. More probably an eruption is going to be in the Rangitoto Island area, if not the existing cone.
2. Eruption history – It suggests that Rangitoto has a sporadic eruption history of up to 1000 years. This is less important than the nature of the eruption. Really the threat posed is from an early blast rather than a later flows of liquid, highly fluid magma. Since the eruption is probably going to be offshore, I suggest the greater threat is a mini-tsunami in the bay, as well as a volcanoclastic surge blasting your windows to smithereens. You might want to rethink that bay-side waterfront apartment acquisition; if only for the high rents and the surge risk.
3. Eruption activity – The evidence suggests that volcanic activity has increased in intensity, i.e. the latest eruption some 500 years ago from Rangitoto Island was the most activity in terms of lava flow and ash.  Where does that leave us? Maybe more explosive coming? Maybe simmer or subside.

It goes without saying that Auckland is unique in the world. It is not unknown for cities to be built adjoining volcanoes. The problem for Auckland is that it is probably the only place that I know which is actually built on top of a volcanic field. Having said that; the next eruption is probably going to be offshore. Let’s not forget how ‘recent’ human arrival was; and I’m including the Maoris.

Does it make sense to rethink the focal of NZ development? Does it make sense to keep developing Auckland? Well, given the characteristic of these types of volcanoes, I think it does make sense to keep developing Auckland. Does it make sense to retain it as the centre or focal point for NZ development? Perhaps not; but then expensive housing prices are probably destined to drive people out. Who wants a bird’s eye view of a volcaniclastic surge? Not me.

The reality is that there is a great deal to question about the nature of this volcanic phenomenon. Does one lead one’s future in the hands of academic volcanologists with a limited understanding of geological events? Such volcanologists are really learning as they go, largely on the basis of empirical evidence. They have not even observed an eruption from any field with this style of eruption; let alone from this volcanic field. Reason for caution? Not really perhaps until the evidence trail grows.

Associate Professor Phil Shane said: “Future planning would have to consider living with active volcanism for a long period of time….It is not as bizarre as it sounds, if you think about Iceland and Hawaii - societies have gotten used to living with volcanic activity for generations”.

I have a problem with this statement insofar as Hawaii and Iceland are a completely different type of eruption centre; both in terms of style and character. I doubt there is even the evidence to suggest that Auckland is even a ‘hot spot’ in the conventional sense. Certainly not like Hawaii with its flood basalts, or Iceland for that matter. I suspect its origins are more tectonic than is appreciated, with activity arising from a fractures opening up offshore of Auckland. The evidence is simply not there. There is a major kink in the tectonic plate at Wellington, and you can bet no work has been done interpreting earthquake activity offshore from Auckland.
The problem too often with ‘empirically-driven’ scientists is that they only start questioning convention when some event jumps up in front of them to tell them how little they know about the world (having an incomplete geological account due to erosion and limited observation) and not a great deal of knowledge about the cause of the Auckland Volcanic Field. In this last respect, these empiricists are largely ‘talking blind’. There are not too many geologists around who say ‘I don’t know’. Neither are there many people who define themselves as ‘critical geologists’. Everyone wants to fall back on convention to convey how much they know. The flipside is that unpopular academics seems to be a contradiction in terms, hence you cannot always expect volcanologists (indeed any scientist with unconventional ideas to get taken seriously). Can you imagine how safe one must get with life-time tenure? Can you imagine how annoying a person could become if you worked opposite a professor you did not like for a lifetime? My sense is that they grow to get along; much like the Japanese, defined by their own sense of safety.


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

Focus NZ Party: A struggle for identity

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The prospect of yet another libertarian party in NZ. I don't know whether to laugh or cry? I do know that I'm leaving the country, so what's the difference. Well, its nice to think that there is some hope of a libertarian sovereign state somewhere; but given the values conveyed by these 'hicks', I do believe I will be crying. So what's up with them. Well, here is the problem as I see it....the list is a little long.


1. The prospect of a a new (Focus NZ) party is probably only going to increase the chance of a Labor-Green victory because it will mean no list seats for a libertarian party. This will of course spell the death of all libertarian parties. 'Divide and rule'....that depends on how you divide. Three libertarian parties is ridiculously too many, particularly since you make no point of differentiation. If they merge with Daniel Craig's Conservative Party (yeh that was a joke) or ACT, that would be better.
2. The other big problem is that they have pursued the wrong approach to credibility. ACT's strategy of digging up former National Party leaders is ridiculous for a party that should be trying to differentiate themselves. Find credibility within the business community and appeal to high profile people across the country to back you, not just business people....otherwise you look like a pack of hicks or vested interests. But don't just create the perception of being broad-based, actually change your mind-set from concrete 'vested interest' 'exporter of the year' myopia, to all issues. Not just fiscal, monetary and industry policy, but welfare, treaty, energy policies and besides.
2. Another big problem for libertarian parties is that they have no clear identity. This is perhaps the hardest pill to swallow, but 'libertarianism' as a concept is rife with problems. You have to pick a winner. If you accept to 'pick the package' then you diminish your credibility. You are positing yourself as the 'honest party', but you can't be if you are contemporary libertarian, which means, only caring about advancing 'small government' agendas, but being indifferent to the divided philosophical values that divide people. This 'packaged' attempt to be all things to all people works for the 2 major parties; but it won't work for ACT or Focus NZ. The reason is clear I hope - the 2 major parties are 'extortion' based parties - both peddling fear. Labour is peddling concessions based on extorting wealth from the rich; and Conservative-Centre National Party, is peddling a defensive 'we'll protect you strategy', or 'we'll allow you to grow' on a good day. They are entrenched in this extortion-based two-party model. Trying to be the balance of power is not going to work given that the Maori Party is already doing that. This means the libertarians need to differentiate themselves, and that means 'growing market share', and that means being something the other parties are not. But since its different, you need to convey integrity. It does not matter if you have to divide your market share; at least you will convey a coherent system of values the people can trust.
3. Identity - The problem with 3 parties is that there is no point of difference. Libertarianism is a political philosophy that advances 'small government'. Your problem is that people support small government for basically 3 different reasons (i) Indulgent, reactionary, subjective anarchistic reasons, (ii) intellectual Randian objective 'natural law' type reasons, (iii) intellectual utilitarian reasons, (iv) divine/Conservative party reasons.
The implication is that its very hard to integrate that set and preserve integrity because at the end of the day, the Labor Party, and National Party and even Greens, have a fair claim on these people.
4. Broad based policy is needed. Just looking at your website, and that's where journalists will look, one observes the following errors, aside from the pitiful website....
(a) Right wing is not a good term to adopt...its meaningless...better individualism, prosperity,
(b) Focus on 'producers and exporters' - its a mistake. You may as well call yourself an irrelevant farmers party. Farmers are the 'backbone of the country''. Perhaps, but the problem is they are 3% and you have not found a way to teach sheep to vote. Labour has. 

(c) Talk of 'foreign exchange rate' controls is the wrong way to go about policy for a party that purports to be 'free market'. You need to ask yourself why the currency is high and deal with the problem from that respect. All commodity currencies are high...to give you a hint.
5. Criticising the outsourcing of jobs. There is already a 'nationalist party', why are you going that path. That's not 'broad-based', that's just idiotic. Winston Peters already panders to the ignorant. Jobs are going offshore because its cheap to make things in China. If you increase the costs of living in NZ, then you have inflation. You will diminish jobs in NZ...the exact opposite of your intention. The cost of living will rise. It is true that there is a false economy in outsourcing jobs which will come back in 20 years, but the solution is not simply protectionism. The solution is not to identify the problem and not have a solution either.

The policy position of Focus NZ is actually not bad, at least from their opening page; the issue is more on the strategic positioning of the party. Of course there will be a need to see the detail. The problem with such small parties is that they tend to lack the lack of analytical skills to make a credible effort, and then they tend to fail on public presentation, which the major parties handle convincingly. Most voters are not analytical; but journalists will be voracious, so party speakers need to be. Going after list seats makes sense as a policy strategy until they identify credible public speakers.

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

John Key on asset sales: Three Strikes And Your Out!!

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In both October 2011 and January 2012 ( a year ago) I alluded to the threat of a closure of the Rio Tinto alumina smelter, and the prospect of the smelter closure impacting on the electricity market, and the forthcoming power industry privatisation. It loomed at as a compelling reason for the NZ government not selling the power assets - probably the only reason. But given the market outlook its a big one. On the 23rd March 2013, I gave John Key a third warning. Now, I know this guy reads my blog posts because he seems to respond to everything I say. On this occasion however he showed utter contempt for my advice. So what's the problem? Aside from the adage "Three strikes and your out", the problem is that:

The spectre of the Rio Tinto aluminium smelter closing means that 11% of the nation's electricity consumption is handing over the market. That is a big problem for several reasons:
1. The nation's population growth is flat
2. We are in the midst of a recession

The fundamentals for asset sale otherwise look pretty good; but this disposition will remain the case for the foreseeable future. In fact, there is good reason for expecting a future government to increase immigration, and to perhaps expect more Kiwis to return home. There is also the prospect in 5-10 years to expect some offshore resource development, with all the onshore developments that are associated with energy processing. But that's a long way off. In the near-term, we are looking at 10 years of subdued energy demand. More worrisome for Key is the push for reform of the Resource Management Act, which would reduce the cost of installing new generating capacity. This is less of a concern for large capacity additions; but there might be perceived to be a 'pent-up demand' for mini-generators like private wind farms, solar concentrators, mini- and run-of-river hydro schemes. The wind farms are particularly appealing in NZ, given the falling costs of installation, and growing acceptance.

The implication is that Rio Tinto is effectively using the power privatisation issue to "extort" a concession. The deal looks like this:
1. The government subsidies Rio Tinto in the long term to stay
2. The government takes a hit on the asset sale price

Ultimately, it might not even be the government who pays. The government might be setting up a lot of voters for failure; or will it be its reputation. I suspect the pain will be less if it just accepted the lower return because at least it can say, Kiwis had the opportunity to buy the asset. He can also argue that 'they got the price it was worth'. Well, true 'today'. But who knows what a bit of policy could do in the future?

Notwithstanding the benefits of selling the asset, it makes more sense to retain it for the time being. It would not do Key's reputation any arm by delaying the sale for 5 years. Interest rates will stay low, so whilst the government is getting a 10-12% return on investment, they are only paying 4-5% interest on the public sector debt. In the meantime, they might be able to raise economic activity. In fact, the global economy should start looking a lot more positive by that time.

John, you need to listen more. If I've told you once, I've told you three time. False pride go'eth before a fall. Your prospects for a third term looks pretty bad. Thanks for the legacy! Defer the privatisation. Great ideas have their time. Your timing is wrong.

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

What NZ should do with its privatisation proceeds

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It seems inevitable that National Party is going to sell off some more power company assets - the prestigious hydro assets. Probably not the best timing since we are currently in a drought. Buyers will be thinking; oh dear, we better mark down the price for potential adverse climate change response. Maybe NZ is going to be a drier place? This on top of the possibility of Rio Tinto closing its Aluminium smelter.

The NZ government government is saying its going to pay down the state's debt. This makes a lot of sense for several reasons:
1. The debt levels of NZ are rather high
2. The terms of trade of NZ are rather favourable; and they can be expected to deteriorate as more food is grown offshore
3. Its actually a reasonably good time to sell off assets - particularly if the process can be used to encourage NZ savings. This is good because there are too few opportunities for NZ'ers to invest, and these are high-yielding assets.

NZ needs to take a look at Norway's approach to prosperity. It does not perform all the exploration work, and then give it away to the private sector. It places some value on its national assets; giving its people a 'windfall' and not the private, commercially-motivated operator who has the capacity to delimit its risk. The NZ has have to set the right 'terms and incentives', as otherwise no one will want to perform any work, and you don't want to be expropriating profits or changing terms down the track; that's just not fair to them.

The focus seems to be upon conventional oil & gas development in NZ - whether onshore or offshore. The much under-appreciated asset is methane hydrates - that sit on the seabed. Japan has been developing the engineering to extract these resources around Japan, and NZ could take a leap from its book in terms of developing an offshore gas hydrates market. There are several compelling reasons:
1. They are lucrative resources - large in size
2. Its easy extraction - a glorified form of dredging
3. The gas can be channelled into NZ's gas pipe infrastructure
4. NZ has a shortage of gas - which is contributing to the very high prices of it. More gas means the country can decommission its high cost Huntley coal-fired power station.
5. It can potentially displace a large import bill for petroleum into NZ

There is actually no better time to develop such energy resources because:
1. Interest rates are very low and set to stay low; so if you can make lucrative returns; this is a good time in use debt
2. The emerging markets are energy-poor in Asia so there is a great opportunity for those countries who get their political terms (i.e. sovereign rating) right; and keep them consistent.

There is a particular shortage of expertise and capital accumulation in small, consumption-driven countries like NZ. This can make the country vulnerable. This is not a deficiency in capitalism; its actually caused by socialism driving the value of emerging market labour down because of the distortive impacts of surplus Asian labour suddenly released onto global markets. This means governments are destined to need to finance  efforts at the margin to keep the economy secure. I don't like it; but its better to protect your labour than sabotage their preparedness to live; because ultimately dogmatic retention of ideas is a betrayal of those ideas because principles need to be held in context. Capitalism did not create the problem; and it will inevitably solve the problem quickest; but it requires the discretion and empathy of capitalists to 'cover' the threat posed by distortions to our values. This support will be required for at most 20 years; and if we upskill our labour, for much less time. This is why many of these European nations like Germany and Switzerland, Holland etc have been able to sustain their economic strength despite their high cost of living. They upskilled everyone rather than simply laying them off in the United States. In the US, you have this bitter intractable debate about who is responsible for the 'poor & destitute'. There is no discussion about what's causing it. One side says 'not my problem, work harder, get a job, get skilled' and the other side says 'can't live, can't get a job, need your money'. Its a false dichotomy because two parties - Conservatives and Democrats, and even some anti-intellectual libertarians, which is not going to be resolved unless these people learn some epistemology (a branch of philosophy). The problem is causeless assertions, i.e. Having unreasonable expectations, whether its the cause of other people's malaise, or a question of empathy (conceptual value judgement). Either way, it sux when these people drive the political debate.

Of course its the same issue in NZ - except there is less money; more reliance on foreign investment. This is why energy is critical, or why business and labour need to develop a greater respect and understanding for each other's position. Wealth holders deserve rights and recognition for their interests; and without the 'discretion' to retain it, to do as they please with it, there is not going to be a solution to this intractable problem. It starts with principles people - and it starts with your constitution - its starts with not having one...because they are a piece of dogma destined to undermine principled, contextual understanding of ideas.  Simple prescriptions don't work; they are too easily misappropriated by vested interests. That means no arbitrary 'representative democracy' because its not a rational process.

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

NZ Constitutional Consultancy a charade

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Anyone who takes the time to participate in political discourse will realise that the process is designed to defeat change - whether the exponents or stewards of such 'purported change' realise it or not. There are a number of reasons why its a charade:
1. The representatives appointed to the panels which preside over the issues in these affairs are selected by the government. i.e. The government is destined to select an appropriate number, ratio and spread of people to make the process look 'broad based', but at the same time, it is destined to avoid giving any consideration to people who are destined to radicalise the agenda by offering ideas too controversial to entertain. In the case of the Constitution Reform issue, you can see that this panel is stacked with liberals, lawyers and Maoris. No one who will make a difference.
2. The terms of reference is the outline establishing what a 'so-called' independent commission or inquiry is supposed to cover in its inquiry. The problem is that such terms are destined to curtail or delimit the scope of the program or inquiry, to the extent of actually directing its outcomes. For instance, this is the terms of reference for an inquiry into Constitutional issues in NZ. It purports to offer direction, but the Terms of Reference are so explicit that they prevent any consideration of political reform. This panel is all about getting a few Maori to sanction the process and the outcome; irrespective of how 'staged' the result. In effect, these people are being paid to give a good show.
3. The person to head the inquiry is very important. In this case the head is a government minister; and that's about as safe as you can go. Sometimes a government will want to appear more detached from the process. When the Australian PM Kevin Rudd pursued an inquiry into human rights; he got a Church clergy to head it. This was another political process. The inquiry went nowhere. It was simply forgotten.
4.  The findings will be confidential or only advice to the government. There will be no requirement for the government to act on the advice; in fact it by shear incompetence in their selection process, that some radical agenda was offered, they could easily bury or publicly castigate the panelists, and never employ them again for such duties. In the case of this NZ Constitutional Inquiry, its clear who is controlling the process - a Catholic Deputy PM Bill English:

"The Deputy Prime Minister and the Minister of Māori Affairs will jointly lead a Consideration of Constitutional Issues. They will consult with a Cross-party Reference Group of Members of Parliament on major findings and reports before reports are made to Cabinet".

Even a hundred years ago there was less government control over the process. In this case, the government cites the fact that it will 'consult widely', however it is far from the most accessible process, and the process by which the report will be tabled is just as flawed. This is a process merely intended to give the greatest reformers 'hope' or 'faith' in a better life. They are dreaming. This is governance which is intended to keep people in their place. It is not about intellectually engaging with people. Its rhetoric which says people are important but fails to treat them as human beings. Consider that even the framework describes its over-arching philosophy, which is to subjugate:

One need only consider how this constitutional issue arose in the first place:

The Relationship and Confidence and Supply Agreement between the National Party and the Māori Party (16 November 2008) agreed to establish a group to consider constitutional issues, including Māori representation.

The National Party had no interest in constitutional reform. It is merely going through the issue because membership of the National Coalition would mean Labour would be forced to give greater consideration to Maoris, and not take them for granted. i.e. Labour had to learn respect because Maori hold a very powerful role - the balance of power - in our extortion based system of representative government. It is this very reason for the Western world to drop the facade and lambast this hopeless system of tyranny for the inefficient and deceptive piece of nonsense it is. This process is not a source of hope; its a deceptive effort to have representatives of Maori sanction the process and to keep the general Maori population waiting....losing faith, until they are so disenfranchised they just die. The government is trying to outlast Maori.
I hope that Pakehe don't view the process this way because white Europeans have more to gain from the process than Maori - precisely because they have less. By way of their good fortune, Pakehe have long believed they already had political rights. Its only when viewed alongside the token respect for Maori sovereignty that you realise how little regard politicians have for 'white fellows'. Pakehe have no voodoo. They are downtrodden after centuries of Western subjugation. Maoris are in contrast empowered by:
1. A sense of pride in their culture and sovereignty
2. A sense of victimisation
3. Liberal sympathies
4. Formal recognition of sovereign claims

Paheke have none of that because they were born subjugated by parents, an education system, a parliament. Look back long enough, they were subjugated by monarchs as well. People are accustomed to thinking so little of themselves, that they just obey and accept the law, irrespective of how irrational or immoral it is. It does not have to be internally consistent, i.e. You can have one standard for politicians, one for others. You can treat low-life one way, business leaders another. You can have statutory laws which breach common law. This is the politicians discretion to keep you in your place. Oh well, when will it end. It won't end with this process. Will it take a new type of leader? This process seems to be above any particular leader? Does it lie in the party machine? This process is intended to keep people subjugated to the entrenched party interests, and that means the people who have fought to get to the top, and who want to preserve the motivation that made the fight worth having, and the legacy, so there is no question of them deserving the spoils of high office.
You want to learn more about this constitutional process - see their website or download this booklet.

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

Auckland - live in fear - Rangitoto volcanic eruption

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Popular wisdom is that the two recent volcanic eruptions that struck Auckland, NZ's largest city are nothing to fear. I would care to differ for two reasons:
1. You cannot trust governments to tell you anything or to identify and act on any substantive evidence. Recent examples include the Christchurch earthquake, where a city engineer who warned about the risks of an earthquake was ignored.
2. The other example being the Tohoku tsunami where the people were lied to about the details of the risks posed by nuclear meltdown.

There are some 49 volcanic centres in close proximity to Greater Auckland City. If you want to get a sense of just how close those volcanoes are - you need only look at the maps in the following city report. Remember however subsequent eruptions will unlikely be associated with prior structures. They do however occur in clusters, and Greater Auckland City is a 'cluster'.

The fact that there were two earthquakes in Auckland is not important. They were closely related spatially and chronologically, so they could be considered as giving stress relief to different parts of the lithologic units. What is important is the shallow depth; the lack of alternate explanation, and the nature of Auckland's style of volcanism. By no means is Auckland's style of volcanism particularly severe, but consider that:
1. Volcanism is a threat under-estimated by people. Even a small eruption in the vicinity of a major city is going to be very serious. Far more serious than the Christchurch earthquake.
2. This style of volcanism occurs without warning - hourse compared to months for a volcanic arc eruption

Maori folk stories spoke of historic volcanic eruptions. The difference is that Maoris had no infrastructure to be destroyed, nor did they themselves have much exposure to these events, as they themselves have been in NZ for just a short time, so the land was relatively unpopulated. So what do we need to know about this form of volcanism:
1. Earthquakes can result from tensional release, i.e. Redistribution of lateral stresses
2. Inflation of volcanic plume or their deflation, i.e. Vertical stresses
3. Hydrostatic loading or unloading, i.e. The filling of a dam or its water loss in drought

Auckland is not on a major global fault. It is possible that residual stresses from movements on those faults is causing secondary earthquakes around local volcanies. There is the possibility that the drought has reduced vertical hydrostatic loading around Auckland, and this has caused earthquakes. My personal opinion is that this is not likely the case because there don't appear to be any large water storages around Auckland. I went looking but the information is not readily available.

This style of volcanism is well-documented for Auckland by GNS (Geological NZ Survey). These eruptions start with melting in the upper crust as a result of hot spot magma intrusion. Partial melting in the upper crust will result in the creation of a plume at depths. The heat from the plume will effectively drill its way through the crust until such a time as the plume is able to take advantage of its inherent force, i.e. when the magmatic pressure equals the load pressure. i.e. The plume will reach a level in the crust where it will be able to intrude a long structural weaknesses. GNS says that once a line of weakness is developed, these fluid magmas can rise at a rate of 5kms per hour. This seems hard to believe (even for me), but don't under-estimate the explosivity of these eruptions. The other problem is just how undocumented these eruptions are. You might expect some type of sonic blast when they occur, and the formation of a crater. As the blast pressure wave reaches the surface there will be a lateral blast as the force blows out material. This is because from about 300-500 metres depth the confining pressure will drop off immensely, so any near-surface planes of weakness will be exploited. This makes the earthquake more dangerous to you. This is particular so if you live in a house with a lot of glass windows. Expect them to be shattered.

What are the risks according to the government?

They list them as "ash falls, ballistic rock falls, cone-sector collapse, pyroclastic flows and surges, debris flows, lava flows and domes, lahars, volcanic gases, volcanic earthquakes, tsunami and seiches, hydrothermal blasts, and atmospheric effects. Many of these phenomena will only affect an area on the volcano or a few kilometres from the volcano. However, volcanic ash fall can be deposited hundreds to thousands of kilometres from its source, making it the product most likely to affect the largest area and greatest number of people. Volcanic ash can seriously affect aircraft that may fly unintentionally through the ash cloud, often many kilometres from the volcano".

The good news is that these earthquakes might not be signalling an eruption. i.e. The earthquakes might in fact be signalling a deflation of the volcanic hot spot. There is however no reason to expect this, and more reason to expect any waning of activity to be associated with stress release. Where was that release? Only unloading from surface reservoirs. This seems unlikely. Another big issue for Auckland is the location of these earthquakes. The last recorded earthquake in NZ was 600 years ago. This centre actually erupted twice - its on Rangitoto Island, offshore from Auckland City. That is scary because it establishes a geospatial link to past volcanism. If you look at the ages of volcanic activity on Figure 2 its apparent that these earthquakes are associated with the general area of the last eruption. We need to consider that Waitemata Harbour might be concealing a history of volcanism that we don't know about. Importantly, the proximity of the harbour poses the risk of a mini-tsunami for Auckland's North Shore and city coastline.

I went looking for heat flow data which might suggest that there is no 'immediate' heat event. But actually there is compelling evidence that the intensity of volcanic activity is increasing - read the quote below. This might relate to the fact that volcanism is offshore, in the process resulting in sub-surface mixing of seawater and magma, resulting in greater eruption explosivity.

"The area covered by each volcanic centre is generally localised (less than a kilometre across) and the total volume of erupted material is small. However, five of the volcanoes (Mt Mangere, One Tree Hill, Three Kings, Mt Eden and Mt Wellington) are of medium size. The largest, Rangitoto, is an exceptionally large volcano for the field, representing 59% of the total volume of erupted material. It is significant that the five medium-sized eruptions occurred between 20,000 to 10,000 years ago and that the largest eruption was only about 600 years ago". 

So the latest recorded volcanic eruption from NZ was the most explosive. I suggest because it was offshore, but it might also point to an escalation of heat. This is not to say that the eruption is imminent but that it is probably a risky decision to live in Auckland; most particularly the North Shore and Waitamata Harbour side. A cluster of volcanic earthquakes is clearly a sign of greater volcanic intensity given the relatively active nature of the Auckland field. I say people - be careful. Governments will minimalise the risk because they will want to preserve economic activity. They will not want to displace a million people. Personally, I'd be crying out for heat flow data which I can't find online, and I'd be really keen to watch future earthquake activity around Auckland City...particularly I'd be interested in the location of that activity, whether it was around Rangitoto Island, or whether its associated with faults in that area. The drought might actually be accentuating  the risk by 'unloading' confining pressure, but I'm inclined to think not given the high rainfall of Auckland, the small size of the city, and the fact that I can not locate the reservoirs. Surface storages and even the confining pressure of the crust are relatively weak counterforces in geology. I remind you to not under-estimate the force of the earth's mantle. The thickness of the crust is just 30km; the interior is 6400 kms in radius. That thin crust gets a bit precarious when molten magma 1300 deg C has already reached 5km depth and is seeking structural weaknesses to make its way to the surface.

There might be a reason there is no 'oral record' left by Maori. It might be because they were all killed by these eruptions. No written records is another explanation, and possibly the low population of the region. In any respect, you have the good fortune of more forewarning....but I caution you...more information is required on heat flow...and if you don't have the discretion to leave Auckland, then you might want more seismic/earthquake evidence. Read the following report to better understand what you are dealing with. Don't trust your government!! Well, you might watch to see if your local MP is spending less time in your (Auckland) electorate. Actually, no, just don't trust their faith. Follow the evidence...like the people of Christchurch didn't. Remember volcanoes can be more dangerous in many respects than earthquakes. They are different. Read this report to better understand the nature of what you are dealing with. Australia just started looking a little better. Here is a little history on Rangitoto Island - but no heat flow data!!!!!! Here is another warning from 'volcano watchers':

"Future vent forming eruptions will very likely occur within the city limits or its outskirts, allowing few mitigation or preparation options. Scientists agreed that residents of Auckland may get only a day or two warning of a volcanic eruption and will only know hours before where it will explode on the surface".

Was yesterday's earthquake a warning? Yes and no. We are looking for a pattern of earthquake activity. We already have a geospatial point of correlation. The question is what is the cause? Inflation or deflation. Heat flow will tell us. Is government keeping this information from us? Interestingly, if you look at this map of NZ, it is evident that NZ has a 'dog leg' in its stress relief. This is an interesting issue which might foretell future tectonism. Tension 'gashes' or faults might be opening up which are facilitating the higher degree of volcanism we are seeing. Remember that the subduction to the east is already creating an area of high heat flow (resulting from deep-seated melting) and lithospheric bending (brittle fracture) along this purple line of weakness. Is there going to be a change in regional tectonism. These developments will take millions of years. But the opening up of tectonic 'gashes' might well be imminent.

Here is a very realistic description of the threat posed by a volcano eruption in Auckland. It gives you a clue as to what you can do in the case of an earthquake. The threat is broadly greater if you are detached from your kids because they are subject to others guardianship at school. Yes, bureaucrats who need to follow government rules. So what do you do:
1. Get to a concrete building (preferably having already identified a 'sponsor' or a few in case of non-availability). Avoid any room where there is windows as there is going to be a 'sonic' or basal blast of volcaniclastic material.
2. Avoid near-shore environments. If near Waitamata Harbour, a likely epicentre, ensure you rise to a 3-4th floor in the concrete apartment so that you will not be swamped in any mini-tsunami.
You will want these places to be within a few blocks of your home. Identify them at home and at work. Toilets are great because they are small rooms with small windows. If in glazed rooms, you will need to wrap yourself in towels, or hang towels over the window might help.
How will you know to do this? Personally; I have no idea. Good to do around the time of an earthquake, but you might not even feel it. Worst still you might not see anything (at night) until the incident has passed. You are most likely going to be killed by the basal surge shattering all the glass windows in your building. You might want to pre-order your glazing and store the glass in the basement. There might be a supply shortage in future. The other problem is food & water, but these are lesser problems because the dust is readily cleared and the infrastructure is hardly going to be damaged. Its a risk of people losing lots of blood from being punctuated by a lot of glass.

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

Financial plan for the homeless

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NZ is the arse-end of the world; neverthless within this stagnant economy there are cities which are doing relatively well, such as Hamilton, Auckland, Palmerston North, Christchurch (belatedly). But within those cities, as well as elsewhere, there are people who are struggling to make ends meet. We might well consider this to be the 'doughnut effect'.
From Hamilton, NZ comes this interesting story of a homeless man living on government job benefits but otherwise with $70K in savings. This is an interesting issue both from a personal finance perspective, as well as from a public policy perspective. In this post I want to consider 4 issues:
1. How this man is impacted by National Party policy
2. How he would be effected by Labour Party policy
3. How he would be affected by ACT Party policy
4. My public policy advice to these parties
5. My financial planning advice for this man - even though he is not asking


National Party policy impact
What I like about this guy is that he breaks the stereotype of what we have come to expect of homeless people. Anyone who has been to Japan realises how proud the Japanese homeless people are. Its as if the origin of their pride was their mistreatment by the Japanese government. Yes, another success for representative democracy. Hoorah!

The National Party is the current party and they are paying this guy $180 less $12 per week for the interest earned on his $70K savings. Firstly, the guy should be applauded for saving money, and working prior to his last decade of joblessness. It is not easy to work in a country when you are relatively unskilled, surrounded by more able-bodied persons, and amidst a labour oversupply. Its not all bad. He has a proven track record of working. 

What is shameless about the conduct of this administration, and indeed, all governments is their blatant ignorance and incompetence. Some voice should be shouting inside of them saying that "This guy is a value; not to me, but to someone. His life is not worth zero". Now you might say that the government gives him $168 per week, so they are not treating him as zero. Not right. Governments don't have money. You the taxpayer are financing this man to aimlessly drift around Hamilton in the vain hope of his getting a job. The sad issue is that he is just going to get more mentally ill, he is going to get beat up, so he will no longer be employable, or even 'useful'. Post-traumatic stress will probably ensue. So then we have a 'disability pension', with all the rights and 'obligations' upon you, the taxpayer that that entails. What is apparent is just how detached governments are for the money. If this was your money, you would have some discretion to withhold it if you did not like what the guy was doing with it. Maybe you wouldn't give it to him anyway, because 'it's not your problem'. The thing is - it is. The government is taking $168/week for this guy alone, from you & a great deal of other people. It's your problem! You don't take issue with it because you feel disempowered. It's not kindness. You're indifferent to this guy's existence; and you'd not allow yourself to consider his plight, because it's out of your control. The problem is too big! It's your problem. You have a government responsible for such things. Problem solved! 

I guess the National Party are hoping that this guy should hang on until the job market recovers. The problem is - he is 60yo - and there is going to be an excess of labour for the next 2 decades because of the liberalisation of global labour markets after collectivist (socialist) governments collapsed, and purportedly saw the error of their ways. It will take 20 years for capitalism to solve the problem caused by collectivism over centuries. It's a big backlog. So basically, the National Party is offering voters no respite. They are indifferent to this guy's happiness. It might be argued that it's his decision to stay on the street; but ultimately it's you - the taxpayer - who will pay when he gets beaten up. So there will be a hospital bill and invalid pension. The good news for indifferent taxpayers is that this guy will immobilised, and will probably die early of diabetes. Unless there is more costly intervention.

So, to you this guy is not looking good at a $168/week investment. He's what you might call a drag on the economy. He is right to feel like he deserves his money. He's playing by the rules, he's paid taxes, and so he has a sense of entitlement. Interestingly, in Australia, he could not get a jobless allowance if he had more than $10,000 in the bank or investments. But is that the issue? I know because I claimed for a time between jobs when I was young. It pissed me off too because, like him, I argued, why can't I get the 'dole' when I pay taxes. There are people with $500,000 houses who can get it because they manage to have less than $10,000 in cash. The implication for NZ is that welfare is a form of income insurance, whereas in Australia, it functions more as a form of nominal insolvency insurance. i.e. You get it if you lose your capacity to service costs of living. If you have cash, you can still service your costs. 

My interest here however is not the equity or inequity of welfare, but the waste. This guy could be doing something useful. He is not worth anything in this economy....and that ought not sit with people so well. He could function as a child carer's assistant, a trainee, carer for elderly, cleaning the streets. There are any number of things he could be doing, even if they entailed no sense of efficacy. What a waste when there are things needing consideration. Instead the government says, take the day off....just fill in these forms to say you are looking for a job, you have no chance in hell of getting for the next 2 decades - when he will be 80yo. By the way, I see no reason why he cannot be working until he is 90yo. Old people regret giving up meaningful activity.  

I'd not be surprised to see National take the Australian approach in future. This would in a way be worse because it would give him greater financial apprehension because he's dwindling away his savings, and he might be more frugal with it, to the point of diminishing his diet, resulting in the decline of his health. It would incentivise him to find work if he was capable of competing; but realistically he is not. He has not worked in a decade. 

Labour Party policy impact

Now, looking at the NZ Labour Party. They have always advocated minimum wages. That will only make him less employable...even if he had a running chance. At 60yo, he doesn't in the contemporary labour over-supply. In fact higher minimum wages will add to the unemployment queues. I suspect Labour would increase benefits to people like him, but really no substantive change, to this guy's life, since he is saving for the future. 

ACT Party policy impact

Now, one might expect the ACT Party to be the 'economic rationalists'. I would expect however their position to have the most beneficial impact on joblessness, which would ensure a great many youths would get a job, i.e. they would lower/scrap minimum wage, they would cut regulation. The problem I have with ACT, is that whilst they hold the upper leg, they fail to consider: 

1. The impact of market distortion - stripping away some distortions creates other distortions

2. The legacy of market distortion - stripping away distortions creates other distortions

My policy suggestion

The value of this guy is not zero. The value of the taxpayer is not negative $168 per week. These people are important, if only to themselves. These people have hopes and aspirations. These people have real grievances; and most of them arise systematically, and as some horrid legacy of government intervention, often stretching back 100s of years. It will not be cured overnight, it will probably take a generation....but we are not solving the problem. These people are useful. You cannot rely on the market to solve the problem if you distort the market; if you market says they are worth 'zero' or 'negative' value, when by any objective standard, we know there are valuable things which they could be doing, but don't because centralised governments can't get around to organising solutions. Why is John Key so busy? Well, he's focused on changing the term of parliament. You have got to be joking? The problem is not his job term; the problem is the decision-making process which means he is ineffectual for the first and last years; not to mention the fact that it's an unaccountable, majoritive, extortion-based system. What does his priorities tell you? It's all vanity. He wants the job because it serves his vanity. He cannot honestly say he is doing a good job, so he blames the system (which is bad), but he has no solution. 

'
Now, I have a resolution for this problem, but it's another topic. I am concerned with this guy. The 'unemployable' worker who is useful. Offer people 'conditional support'. You can't help them get jobs in the current market if the market values them at zero, so:

1. Create opportunities for them to work 'staying alive', i.e. Growing food to live. NZ is currently importing foods from abroad, supermarkets are adopting huge mark-ups for these vegetables, and so people can grow here for own stake, or for sale, and live on the proceeds. 

2. People with sufficient resources like this guy can do it themselves. They have the time if they are spared the burden of 'useless job searching'. They will never get a job in market economy that is distorted. Pay them to produce food, i.e. If they have $70K plus, they can self-sponsor. If they don't, have a government sponsored scheme using contractors who tender for these programs. These people might need basic services upfront; but they will act if they are able because its meaningful work. People coming out of prison could go straight into these programs. Once taught some of these people could use their savings to build their own 'food production' scheme.

The world is currently reliant on foreign food increasingly because of low-cost emerging market labour. What is not appreciated is that, when in 20-30 years time, those country's surplus labour is fully absorbed by global markets, then their labour rates will match ours, and food production will make more sense locally. These are valuable skills we are loosing. These people could be the foundation for a budding industry; but more importantly - they are useful! And their utility to themselves and others is being wasted.

Want to rebuild NZ? Start with people left behind. Reduce the cost of looking after them; then you'd be surprised at how well the economy can run without useless government programs, without useless govt regulation. You'd be surprised how many problems like mental illness, joblessness will disappear!

My financial planning advice for this homeless guy

This guy has $70K of cash and a benefit. My advice to him is to buy a house in a depopulating place like Wanganui. The nice thing about this solution is that you have an asset, a place to retain possessions (which if you are poor, might include things other people don't want). The bad news is that you have an expense - your rates. Given the waste of money on rates, you should question the value of government. Most of you clearly don't. $1800 per year in NZ; I pay just $300 per annum in Japan for a 18-year old house. This guy could be eating salmon & rice bento box in Japan at Hokka Hokka Tai for Y420 ($NZ5.50). Back to expensive, over-serviced NZ. I would suggest he pays $65K for a house - yes they exist. If he contracted with a tenant, he might be able to secure one ahead of time. Here is how I would do it. Probably settlement takes time, so whilst being on the street for 3 months, I would try to meet someone in a similar position. It might be easier in Auckland city. I would say to them: "Look mate...we could be dead on the streets if we stay here. I have money saved for a house. If you pay me $60/week, I can give you a home, or $80 with minimal services, leaving his friend with $100/week for other costs. That gets him and a friend off the street, gives them spare money, and if gives them land to grow vegetables. The house might not appreciate, but it gives him more cashflow than the bank. Now he is discouraged from doing that because the government will say he has rental income, so his benefit will be reduced. For this reason, he will probably not declare that income, and will instead receive cash.

Perhaps the government could save money by offering financial advice because according to this guy's plan, he is living on the streets to get cash, placing his life/health in jeopardy, and his prospects for an early death from diabetes are enhanced. Good job gov!

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John Key The Moderate - what does it mean?

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John Key clearly considers himself a moderate. What does that mean?

Prime Minister John Key addressed the issue of the Waitangi Treaty at his annual Waitangi Day address, as is customary. Just as customary is to say nothing substantive, and to engage in rhetoric which contributes nothing to the issue. Now, the prospects of a settlement of Waitangi issues, some settlement of grievances, is considered extreme by Key. He sees himself in the ‘moderate’ of course, and anyone seeking resolution as ‘extreme’. After all, John Key is hardly moving the debate towards anything. I’m an Aussie…I have nothing to gain from this issue. Do I want to see Maori recognised as ‘first occupants’ and worthy of sovereignty? No, that ship has sailed. Perhaps its easier for Key to dismiss the issue if he can erect a ‘straw argument’ like that and dismiss all people who feel a sense of dismay at where the Waitangi settlement is ‘not’ going.
Key speaks of ‘public goodwill’ as if that is a meaningful conception in the context. Either a resolution achieves one of two things:
1. It achieves the interpreted objectives of the Waitangi Treaty
2. It achieves something better
I would argue that the framework and values of the Waitangi Treaty are illegitimate and irrelevant; not because the treaty was not signed by most of the tribes, nor by the British Crown, but because its values are not fixing with justice. This is an opportunity to achieve something more than the treaty sought. At the time of the Treaty, the British people were subjugated to the collective notion of ‘empire’, and that concept ought to be equally as abhorrent to Pakehe as Maori.
Key is making the same old tired claims of old, hoping that the issue will die. It will die by this method; but is that a desirable outcome. Key would sooner quash the aspirations of people, rather than contend with them.

‘People are not reasonable’ he might argue; or that ‘you will never please everyone’. 

But I see no great effort by any government since the Treaty was raised to address the issues. Instead, governments are only too pleased to outsource the task to the courts.
He talks of participation but offers no avenue for achieving it. No government does. It is a common attribute of all representative democracies to malign minorities. For his government that is an easier task than most considering:
1. He confronts a useless opposition
2. He need only offer token concessions to vote as a ‘extortion bloc’
3. He faces no Senate
4. The two major parties developed a Bill of Rights to create the illusion of protection; despite it making little meaningful difference to the nation’s people. Ask yourself – did it make a difference to your life? Did it address issues raised by the Treaty of Waitangi? No, it was not designed to solve problems. It was framed to avoid them. This was actually the original motive of the Treaty of Waitangi in the first place. The British government wanted to avoid conflict. It used the idea of a treaty to invoke a sense of purpose and goodwill with Maori. The Maori simply assumed it existed by matter of intent. They did not know that an unsigned document is useless. Of course, given that the British drafted it, it carries some significance….at least it terms of terms of reference.
John Key asserted that “the Treaty settlements process had given iwi the resources needed to run their own affairs, create jobs and care for their people”.
Really; was the treaty just about money and subsidised jobs? Well, it might well be about that for people who see no other motivation in life but to provide for family and do something constructive. But why can’t it be about more than that? Why can’t it be about things not even raised by the original agreement? For instance:
1. Why can’t it be about the inappropriateness of tribal leaders committing their people to a contract, regardless of whether it was in their interests or not
2. Why can’t it be about the illegitimacy of a contract with a party who does not have the legal efficacy to appreciate the merits of the contract
3. Why can’t it be a question of whether the state has the capacity to impose its will on anyone

All these value judgements are assumed. None of these moral imperatives have been proven. They are accepted because they serve the status quo, and keep people working towards goals subscribed by others. So what does that mean:
1. Working for the government – retaining only a minority stake in one’s efforts
2. Losing choices – because any other ‘non-conformist’ route is punished by lack of tax concessions, damaging your credit ranking, diminishing your right to travel to foreign countries, being denied access to certain services.

John Keys says “settlements largely relied on public good will and acknowledgement that the grievances were genuine”.

Unfortunately they are not so important to be a matter of priority after 140 years.
He argues that the “actions of "permanently aggrieved" protestors, including those at Waitangi, would endanger the public consensus there was over the issue of settling legitimate grievances”.
What a farcically meaningless comment to make. The entire purpose of a parliament is to countenance points of conflict. No, sorry, modern democracy or at least ‘conservatism’ entails avoiding those morally questionable issues that you cannot resolve. It therefore has to be about concrete, self-event things like money. Well, they are not self-evident, but both sides of government seem able to handle those. You might wonder how without conceptual frame of reference. But in their case, it’s all about extortion or ‘political pull’, and their capacity to make it happen.

“Public good will should not be taken for granted. It needs to be treated with respect. It is short-sighted and counter-productive of activists to use tactics and language which have the effect of eroding public support for initiatives aimed at turning around the very situation that the activists are complaining about”.

If you think about it…that is actually a nice, drawn-out way of saying, as Hitler did:

“You are nothing, your nation is everything”.

Hitler had no time to waste on fluff. The modern political party lives on fluff. Whilst they fluff around, they must be making money. Why would you want to preside over government without making money? Where is the sense of pride in being ineffectual? There must be something in it…certainly no self-respect. These issues have been kicking around for 140 years. We are about to have a court case – waste of money – as Maori question whether they have a legal claim to the water in the Mighty River Corporation privatisation. It’s a joke. Is it extreme to raise that as an issue. Well, the Supreme Court did not seem to dismiss the issue out of hand. If one wants to examine the track record of John Key, the National Party, Labour Party or indeed the entire parliament, ask yourself what effort their government took to seek peace in countries taking protection of rights…and yet in the name of liberty or democracy, they are entering Iraq. It must surely be about money/oil? Why nothing about:
1. East Timor
2. PNG
3. Solomon Islands
4. Fiji
5. Muslims of Mindanao
6. Australian aborigines

Even in this last case, long considered ‘extremists’, the Moros of Mindanao in the Philippines are finally getting some justice. No thanks to Western adherents to high standards of conduct. This is despite NZ having very little trade with the Philippines.
I’m no ‘wet-nosed’ liberal. I just think governments ought to be motivated by something more than rhetoric to keep their jobs, to lock in some mindless state of subservient harmony. I think Western governments are transfixed on Japan as a model of how to achieve a ‘compliant society’. In Japan, people don’t question government. The two major parties do as they please. Celebrities tie themselves to governments, and in the end they are seduced by it.

“Turning around the current waste of human potential would do more for Maori and for New Zealand than probably any other single change”.

This is undoubtedly the case; but first John Key has to identify the nature of the ‘waste’…why the human potential of Maori has been diminished. I can identify several reasons:
1. Catch-up: Maoris started behind – they were handicapped from a time going back 130 years.
2. Legacy: They were left with an entrenched legacy of ‘Maoridom’ which rested on the premise that they were disempowered, marginalised victims, that any rhetoric of justice was not real; it was just for show. They were not given or confronted with the values which made Pakehe successful and Maori unsuccessful. Those issues were avoided because they feel compelled to leave in place the notion of a collective Maori identity, which has greatly diminished the lives of all indigenous persons around the world. It was about ‘achieving compliance’ in the short term. The implication however has meant 140 years of unresolved contention. This government, like the others, will not resolve it.

“He spoke approvingly of a United Maori Mission boarding hostel for 50 boys within the Auckland Grammar zone, saying it gave those boys a chance for a good education”.

This is not a basis for prosperity among Maori; its an elitist argument which says:
1. These Pakehe wannabes are your custodians because they are educated and think like us ‘white folk’
2. These people are successful because they are very smart, and probably wealthier, and from a good family, so there is no reason you can’t succeed like them.

“It is one of the reasons why we have a positive and forward-looking relationship between iwi and Crown. I have no doubt that we New Zealanders are better off because of it”.

No John, you don’t have a relationship with Maori. You have a relationship with the only people your governments sanction to represent Maori. You decided by forming a coalition with the Maori Party that these people are worthy of being in a coalition. You went out of your way to strike that deal, as king maker, because it suits your agenda. Most Maori don’t subscribe to your distorted world view because you have popularised these people. No doubt your ‘Auckland Grammar boarders’ will be targeted by your party as you attempt to brand your party as the part for the people. You are only so long as you dumb people down and remain dumbfounded by execution paralysis.

Quotes from NZ Herald, 6th Feb 2013.

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