Trotter's Windmill

Some time ago, I promised I would read Gordon Dryden's Out of the Red, after Chris Trotter waved it about as an example of the lost art of journalism. I've only read about a third of it so far. For example, I haven't yet got to the part where my old man tells Norm Kirk to lose five stone weight in order to improve Labour's chances of winning the election.

However, Trotter is still harping on about the Greens dropping Quantitative Easing as we type. In the hope of getting him to stop plucking at this particular spent thread, here's what Gordon Dryden had to say about printing money (pg. 80):

"In our post-election interview almost a year earlier Mr Muldoon had listed West German Chancellor Helmut Schmidt as the world leader he most admired. Schmidt's well up on my list too. And the German leader had said just a few weeks earlier that the major cause of inflation in the world was the overwhelming majority of countries printing extra money that was unmatched by increases in goods and services."

Trotter's tilting at windmills if he thinks there's a snowball's chance to resurrect any lift for QE.That dirigible has crashed. Any chance Sancho Bradbury can pull the Don from that wreckage?

The Shining City

Two facts are immutable in human behaviour; money corrupts and power corrupts. Balzac nailed it when he wrote "behind each great personal fortune lies a crime."

Polite society passes over their kin's amorality in favour of lordly titles or other absurdly over-priced pissing competitions between suitable peers, while the rule of law is purely for show trials with proles.

Take, for example, Matt Taibbi's latest scathing piece of financial journalism in Rolling Stone. Too Big to Jail expands on his already caustic look late last year at HSBC, and ties it into the LIBOR scam. All told, some hundreds of trillions of US dollars has been skimmed by bankers, and no-one has to do an hour of jail to pay for it.

It all makes our royal toady John Key look bent on a nano scale. The deputy Auditor General has found no evidence of foul play in the Sky City Conference Wining & Dining dodgy tender.

John Key sez "Vindicated!", bringing the Obama Doctrine Dictionary into play by bending words into opposites. i.e. imminent meaning in the fullness of time. Or as Dexter, the fun-lovin' homicidal TV character might say, there's no crime without evidence.

The White Elephant has the Green Light. The Black Box wins again.

Putting the NZ in Ponzi

 Forbes reckons NZ is the best place to do business:

New Zealand came first for a lack of corruption, a low level of red tape, a high level of personal freedom and strong investor protection. 

NZ is also a great place for naive greedy investors to get ripped off. Ross Asset Management has been raided by the FMA earlier this month, finding little of the $449 million in deposits:

Clients of Mr Ross have spoken about how they were introduced to the firm by friends or advisers, because of its exceptional financial returns, often of more than 30 per cent a year.

Interest.co.nz have added Ross Asset Management to their Deep Freeze List. This brings the estimated total to date of financial destruction of NZ investor funds since 2006 to $9,290,400,000.

How soon before NZ hits $10 billion in bad gambles, and where is this "strong investor protection" that Forbes is talking about?

Truthiness and Consequences

BOSNYWASH is still reeling from Orbital Sandy. One of many large grinders I suspect that have visited North America often enough in the past to largely render the continent uninhabitable in the long run. The Spanish conquistadors murdered a lot more Mayans, Aztecs and others in South America compared with the Puritan genocide of North American Indians. Nature's angle grinders might explain the variation in indigenous populations (the relatively recent growth in the Caribbean population due to slavery and its discontents would account for why these nice islands had been uninhabited for so long before then as well. Too much weathering).

Cam Slater finally gets a legitimate job as captain of the Bounty editor of Truth. This gives me new found confidence that after almost ten years of blogging, I might also get a temp job out of all this two fingered typing like Whale did. Then again, Whale is networked into the grid a lot better than this anti-social hack.

The Fabian schooner arrives in Poneke this Sunday, with a briny line-up of speakers. While the Greens and Labour continue their monetary policy goonery, might I humbly offer my little grenade to the Fabian armory. Tighten monetary policy and get the banks back to basics by rewinding credit cards back to debit cards and charge cards only. That'll scare the bankers.

Economic Indicators

I've spent the weekend working on a new quantitative framework to more accurately describe the economic forecasts for the next ten to twenty years. Here's the spectrum I've worked out so far, from best case scenario on down the line:

Bad
Worse
Shitty
Terrible
Shit Creek
Clusterfuck (ranging in size from UAV to B52)
Shit Supernova
The Big Enchilada

National has resorted to desperate measures to keep what remains of their economic credibility intact and keep the official unemployment rate under seven percent. It has worked so far, but they're running out of ways to juke the stats:



The immediate forecast is Terrible, with occasional patches of Shit Creek.

Would anyone care for some toast?

Seasonal fruit and vege aside, I don't generally let the calendar dictate what I eat. Lucky atheist cook that I am, every day is a possible French Toast Day. Others aren't so lucky. For example, the ritual of Pancake Day aka Shrove Tuesday was only brought to my attention by a Wellingtonista review of Cafe Panama's fried bread delights.

At least some good has come out of this strange land of Lent. The Economist has a PPP chart of pancake ingredients in selected countries:

You can see the effect of price subsidies in certain countries; Italy, Ireland, Germany, US. Eggs seem freakishly expensive in the cold countries of Norway and Switzerland. While Singapore has amazingly cheap eggs, possibly a side product of its staple diet of chicken and rice.

Any chance some econowonk could insert NZ into the mix?

147 Too Big To Fail Corporations on the Wall

Further to yesterday's look at the doomed round of G-20 talks, New Scientist points to research on the interconnectedness of international business. The capitalist network is made primarily of 1318 corporations, of which 147 companies are superconnected. The Top 50 list of these hubs is almost exclusively money movers and includes Lehman Brothers, due to when the data was collected.

Terranomics

David Rothkopf over at Foreign Policy has a good list of 20 Things the G-20 could focus on achieving. Here's a taste from the introduction:

But the new reality for the United States is it can't bully anyone into action or make problems go away with a sweep of its check-writing pen. Nor, for that matter, can the Chinese, despite the size of their reserves. The Europeans will have to play a central role, and the rest of the world's leading countries will have to collaborate. Indeed, a central irony to this entire crisis is that though it looks like a debate about how tightly linked European countries wish to be, it is actually a demonstration that virtually all the world's countries are already linked far more tightly than any electorate would willingly approve in a national referendum. The markets have engineered the integration without benefit of public consultation, and it is now up to people everywhere to pay into this system of someone else's devising -- one which serves the interests of global bankers rather better than it seems to those of average citizens, lofty rhetoric about rising tides aside. (While rising tides may lift all boats, those without boats are left to sink or swim.) 

Several heresies are mentioned, including a global central bank and a Tobin tax. In related news, Bill Gates is the latest sleb to support a Robin Hood/ Tobin tax.

Calling All Nations

I'd give it about a week before the glow of the Heineken Mastercard Rugby World Cup starts to wear off, because shit just got real.

When Don Brash flies off overseas for emergency world finance talks when he's supposed to be fronting Act's election campaign, it really clarifies the priorities. I don't think this is a stunt, but a sign of how serious things are getting on the world scene. All opinions are being sought.

Interest.co.nz's Top 10 on Friday listed the dimensions of this year's black swan in the room which is causing all the worry; it's a Eurotrash Junk Bond Black Swan, and boy is it high maintenance.

Dagg help us. The Fred one, not the rugby one. Rugby Dagg's no use to us now, if he ever was. Rugby might have started at a public school, but the alumni aren't as interested in rugger so much as the football, cricket or motor sports these days. Or the financial crisis. Witness the home page for the home of public school City Folk, the UK's Telegraph:

Number Four, comme toujours.

Americans aren't revolting

Matt Taibbi said yesterday that he'd been too busy to blog but there'd be something to show for the absence today. He's not wrong. A taste of money:

On October 1st of that year, the mystery was solved: Dick Walker was named general counsel of Deutsche. Less than 10 weeks after the SEC shut down its investigation of the bank, the agency's director of enforcement was handed a cushy, high-priced job at Deutsche.

Why aren't the American public revolting? And I don't mean those Koch-sucking teabaggers at the Bachmann Palin Underpass. Taibbi's old bro's at eXiled have been uncovering the Koch Brothers' astroturf for some time.

At moments like these you need Chinese

If the US dollar does turn to custard, NZ is somewhat sheltered if the markets freeze up like they did before last election during the GFC. That may be thanks to the $NZ 5 billion swap fund set up between the NZ Reserve Bank and the People’s Bank of China earlier this year. That's a $5 billion cushion if we really need to (at least temporarily) decouple from the greenback.

Touche on the douches

KAL's cartoon at The Economist most accurately describes my feelings as Saturday afternoon rolls over and there's still no sign of a compromise from that teabagging creche of idiots.

Printing Warrior, Smiling Chamberlain

"A loaf of bread, please." Weimar Germany in the 1920's.

It's the eve of Ben Bernanke's QE III, the Yanks are running a teabagger's bible breadth from default, and the Euro crisis keeps grinding away as we wonder how long it'll take for that continental shelf to snap. NZ is running its own proud train wreck with a record high dollar, near record unemployment and 5.3 percent inflation.

Thank Dagg for Private Schulz, an old BBC comedy drama based of real Nazi events. Fantastic cast led by Michael Elphick with Ian Richardson in many roles. Take it away, Schulz:

Browne: "Do you know what a monstrous crime it is to forge somebody's currency?"
Schulz: "Yes sir."
Browne: "Have you ever thought what harm it could do to the savings of widows and orphans? How it can destroy the value of  hard earned pensions? Don't you think that's a horrible thing to do?"
Schulz: "Oh yes, sir."
Browne: "Do you know that the deliberate forging of an enemy currency might be considered a war crime?"
Schulz: "Like the forging of clothing coupons and ration books, sir?"
Browne: "No, no. Not at all like the forging of clothing coupons and ration books. The two things are entirely different. The forging of German clothing coupons was just a joke, really. A bit of fun. Good god, haven't you Germans any sense of humour?"
Schulz: "Not a lot, sir."
Browne: "Well the forging of an enemy currency is a criminal act of wanton recklessness. It has no regards for the rules of war or the ordinary decency. You can't fight a war like that."
Schulz: "Why not, sir?"
Browne: Well, for one thing nobody would know who was paying for it. It would destroy the whole purpose of war. The loser might end up better off than the winner. You couldn't have that."

The plot of Private Schulz involves forging millions of British Five Pound notes, each the rough equivalent of about a British 200 Pound note today, according this calculator:

Strangely, it isn't a war crime to inflict printed paper on one's own economy.  No-one hassles Mugabe about the lightspeed inflation of the Zim Dollar. That is one bloody obvious reason no-one sane uses the Zim Dollar to trade. The US dollar is supposed to mean something entirely more stable. It wouldn't be so bad if the Greenback wasn't relied on by America's alleged allies as the world standard, but it is. And that Greenback is turning to slime.

With this and, as I said at the start, the record high Kiwi to the Greenback in mind, I understand that John Key has a few blind spots in his head. He can't remember what he was doing during the '81 Springbok Tour. The Bolger years are another blank. John Key was overseas trading widgets for fidgets, so his ignorance has an alibi at least. So I'll cut him some slack that he is likewise ignorant of the Battle of Manners Street.

It's quite important because Audrey Young has announced that Key has invited US marines into the country. The last thing you should be doing when sacking hundreds of our own military is invite those pricks in. When the US military goes in, the mercenaries can't be too far behind. There's frankly no good reason for Key to plant US soldiers on NZ soil without a better reason than a photo op.

Key must be channelling Rob Muldoon. It was Muldoon's gambit to flag up public opinion by getting a US ship to visit. Sure enough, Johnny's asked for a ride with the US Coastguard. There's another photo op with absolutely no downside. Coast Guard ships are smaller than the USS Buchanan, right?

Disaster area

As at today, the Otautahi earthquake has still cost taxpayers less than South Canterbury Finance. Act of god: Just over a billion dollars. Act of Hubbard: $1.2 billion and counting.

The poor don't have these problems

The poor little stress-puppets of plutocracy:

One respondent, the heir to an enormous fortune, says that what matters most to him is his Christianity, and that his greatest aspiration is “to love the Lord, my family, and my friends.” He also reports that he wouldn’t feel financially secure until he had $1 billion in the bank.

Painful confetti

Nicked from here

Whoever won the UK election was always going to be facing seven shades of shit on their plate. If you want to see Rogernomics writ quite large in a modern font, go to old Blighty these days. Meantime the US teeters along on another round of artificial stimulus, putting off for one more day the sad fact that the junkie is broke. Whenever that taco breaks, it'll make the collapse of the USSR look like sanity.

Crisis, the musical

HBO is making a TV movie based on Alan Sorkin's book Too Big To Fail. William Hurt, Billy Crudup and Ed Asner will play Henry Paulson, Timothy Geithner and Warren Buffett respectively. Hot on the heels of NZ Reserve Bank Governor Alan Bollard's book Crisis, how long before NZ on Air funds our own version of the meltdown? Karl Urban would be a shoo-in to play Bollard.

Letter to Bernard

Some smart dead Greek guy once observed that you can never step in the same river twice. The good keen trampers of NZ don't need to be told the truth of that. Even the best of plans, through the entropy of time, erode downstream. Chaos theory is based on the concept of System Dependent on Initial Conditions. Due to measurement rounding and time, what started out as predictability is rendered to white noise.

So I've always treated economics with as much respect as religious tomes; spiked with historical observations and occasional pearls of wisdom, but still requiring too large a leap of faith to base an entire philosophy upon. Sacred texts of rationality and ineffable logic, all of them. But there's everything else as well.

It's also why I get so annoyed with the USA. The founding fathers were wise enough to realise that their sentiments would fall into disarray over time without the strong voice of its people to guide and reinvigorate their government. Now it's all professional lobbyists from K Rd riddling Washington DC, nutjob teabaggers swamping the forecourts of mainstream media and mid-term elections. Where are all the smart Americans? Offshore or working for a hedge fund?

I haven't been shackled to neo-liberal orthodoxy the way Bernard Hickey has. I'll defend what the Fourth Labour government did, but I never liked Thatcher or Reagan. Economics is only a tool, an abstract one at that. The larger task at hand for any government is the long term well-being and prosperity of its citizens.

Most of Bernard's wrath is aimed at the Global Financial Crisis. Sure, we had to deal with the ripples to our shores, as detailed in Bollard's book. The crisis, in part, can be blamed on the loosening of rules around investment banks under Clinton, as well as a heap of bad lending and mutton sold as lamb. Reagan's wholesale slaughter of regulation was also a big factor (Reagan's crimes go on, from corrupting the Supreme Court and regulatory bodies to the unresolved Iran Contra scandal, but that's another post).

The wild currency swings that the NZ dollar faces on the open seas has made it hard going for exporters. Not only do they need to be good at manufacturing and selling, they have to become experts in hedging the dollar as well. Wrong bets can and have killed businesses. It has been this way since the NZ dollar was floated in 1985.

Now don't go blaming Rogernomics for the floating dollar. The pegged dollar had been dead for some time, just stuffed with borrowed overseas cash and Muldoon's cackling ventriloquism. It died the day of the Nixon Shock, itself wedged between two other catastrophic effects on NZ exports of the era; falling wool prices in the late sixties and the UK joining the EEC in the early seventies.

The end of the Bretton Woods Agreement marked the end of the era of American Empire, just as Britain abandoning the gold standard had relinquished its empire decades earlier. The USA has limped along since then, relying on increased government borrowing for the last thirty years to keep up appearances of normality.

The absence of an international trading standard allowed the foreign exchange traders into the pond. These were amongst the scavengers feeding off the pegged NZ dollar before devaluation in 1984. George Soros did a similar thing to England on Black Wednesday. It is scenes such as these that makes me very wary of returning to a fixed peg currency.

There is talk of a new international currency, IMF Special Drawing Rights. Until something like that happens, there's no way a minnow like NZ can outbid the big fish in the international waters.

And as for tariffs, the big problem with tariffs is how to remove them when they're no longer warranted and the money could be more productively spent elsewhere. We went through all this with SMPs and farmers in the '80s. America has distorted its farm subsidies beyond belief. As the documentary Food Inc demonstrated so well, the price is much higher than that advertised. The US will one day have to face a balancing of the books. It will not be pretty. Do we really want to go back to that trap?

Unorthodox traditions

Excellent long form journalism by Michael Lewis in Vanity Fair, looking at the teetering pile of crockery known as Greece. HT from the Greek Chorus of Felix Salmon, The Economist, Tyler Cowen, Andrew Sullivan, Dim Post, Quote Unquote and Bernard Hickey.

The ferry trip to the dark heart of Orthodoxy, where allegedly ascetic priests have used guilt to leverage land deals in order to renovate their holy sites, reminds me of 1990's Russia. Huge sums were spent there retrieving religious idols and doing up the orthodox spires while the masses starved. Quote Unquote shows how little has changed, linking to a story on how to buy lightbulbs in Russia.

Arts & Letters Daily links to two parts of Robert Fisk's inquiry into honour killings. The third part, looking at Egypt's murders dressed as suicides, shows it is not just a barbarism practised by Muslims. Even the Coptic Christians in Egypt are not above a bit of incest and slaughter.

And lest NZ gets too smug about our enlightened way of life, Hone Harawira points to our own skewed justice system, where jail sentences for Pineapple Lump theft are meted out, whilst multi-million dollar inbred transactions by South Canterbury Finance doesn't so much as get a slap on the wrist. HT Simon Pound.

Today is Monday

# Interesting chart o' the day:

From the Welfare Working Group Report. Pity the Super figures aren't included. That would have made a more accurate picture of the welfare sandwich.

# Interesting prophesy of the day:

Worst of all, some analysts warn that the failure to rein in Wall Street makes another meltdown a near-certainty. "Oh, sure, within a decade," said Johnson, the MIT economist. "The question: Is it three years or seven years?"

Johnson was part of a panel sponsored by the nonpartisan Roosevelt Institute – including Nobel Prize-winning economist Joseph Stiglitz and bailout watchdog Elizabeth Warren – that concluded back in March that the reform bill wouldn't do anything to stop a "doomsday cycle."

From Rolling Stone's Matt Taibbi.

# Cthonic Comment of the Day:

As I journeyed ever deeper into those underground passages, the strong the often-remarked scent of despair and madness that clings to Parliament became gradually stronger. I was on the point of turning back, overwhelmed by the stench, when I heard movement in front of me, and saw light.

From Scoop's Lyndon Hood.

# Creative Accounting Corner. It's a bit old but still a good read; how Harry Potter actually ended up as a $167 million loss for the studio: