|Last Updated: Mar 25th, 2013 - 16:46:15
Thought for the Day
The budget has been read and the pundits have seen and digested. It seems clear that the design is to maximise Labour's chance of re-election rather than to find ways to grow the economy. What a pity.
We are losing a city sized chunk of the population to Australia every year. This outflow is not likely to slow as a result of this budget. There is hope in the inflow from the Pacific Islands and from Asia. Most immigrants are honest and hard working people determined to "make a go of it" in their new country. We have yet to see any statistics about how many of these move on to the big OZ but rumours are that it is not insignificant. Never mind.
Last night, as well as watching the budget on TV, I saw the Al Gore film, An Inconvenient Truth. What a wonderful piece of self agrandisement it is. Big Al missed out on the number one prize - President of the United States - due to some probable chicanery in Florida but, being the man that he is, he shrugged his broad shoulders and got on with life. If he couldn't save the world "a la George Dubbya" he would save it on his own in his own way. Global Warming was obviously a threat to civilisation and must be stopped at all costs. What a wonderful example of political propaganda this film was. So much so that the British Television 4 put out a similar film with counter-examples to illustrate the point and the British judiciary has stated that it is not fit for consumption in schools.
What did it for me was at the end of the session on melting ice and the thought that the oceans may rise enough to submerge San Fransisco he said, "and the Pacific Islanders are now leaving their islands and going to live in Noo Zealand." Silly me. I thought they were chasing a better standard of living. Just like Kiwis shifting to Oz.
May 23, 2008, 10:46
The Global Warming Debate
"There is however a serious problem. In the mistaken idea that something needs to be done, policies are arising that have the potential of distorting energy policies, severely damaging national economies, make us poorer, and hurting standards of living. Such a misdirection of resources will adversely affect human health and welfare in industrialized nations - and even more so in developing nations. It can lead to social tensions within nations and to conflict between nations."
"If it were not for this potential of inflicting serious economic damage, one might consider the present concern about climate change nothing more than just another fad or human aberration. But once it affects energy policy, it becomes essential to understand the issue to avoid inflicting any severe harm."
So says Dr.Singer.
In 1984 Muldoon left the New Zealand economy on its knees. David Lange rescued it. Will Helen Clark put our economy flat on its back? Will John Key rescue it?
The very least we should do is appoint a royal commission to sort our the truth about how climate changes and determine the logical conclusions we can deduce from the scientific facts.
Currently we risk much on the basis of hysterical dogma. "Are you a climate change believer or a denier?" Instead of making a religion out of ideology we must determine the scientific facts.
Australia is looking better all the time!
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May 23, 2008, 23:48
The "Chicago Boy".
A story about Jose Pinera as Chile’s Labour Minister.
“I was one of the ‘Chicago Boys.’ That is, I studied under the great economists at the University of Chicago...and then I got my Ph.D. in economics at Harvard, which added a little bit of humanism to the hard-edged teaching in Chicago. So, they called me a ‘Chicago Boy’ and a ‘Harvard Man,’ which is the way I like to think of myself.
“Things fell apart in Chile during the Allende years. We had to rebuild the country afterwards. So, I went on TV and I said what I thought...about how to reform the pension system...or what you call Social Security.
“A little background. You see, almost all the world’s pension systems came from the same source – Otto von Bismarck. He set up the first one in Prussia and it was later taken up in almost all the developed countries. We set it up in Chile in 1925. It wasn’t set up in America until ten years later.
“Bismarck was very clever. He offered people a pension on what is called here in France a ‘repartition basis.’ That is, all the money goes into a pot...and you get from the pot whatever the politicians decide you can have. Bismarck offered people who retired at 65 a nice pension, for the time. Bismarck knew that the average life expectancy in Prussia at the time – this was the middle of the 19th century – was only 45 years old. So he knew he couldn’t have to pay out many pension claims. But the average person didn’t know how long he would live, so he could imagine himself living to a ripe old age and taking advantage of the public pension system.
“Bismarck also knew why he was doing it. He said he aimed to make the population ‘docile’ so they would ‘serve the state,’ more easily.
“Well, now, everyone is living much longer...and the politicians aren’t as smart as Bismarck. They’ve promised greater and greater benefits, and even lowered the age when you can get them...so the pension systems are going broke. They’re all going broke – you can count on it.
“Now, I’m going all over the world explaining this to governments and urging them to put my system in place...to make a radical change in the way public pensions are financed. Recently, I was in China, for example. You want to see a pension problem...look there. That policy of one family, one child is a catastrophe from a pension financing point of view. They’re going to have hundreds of millions of old people, and very few young people to support them.
“Anyway, back in the ’80s, I went on TV in Chile, with ideas about how to reform the pension system. I was just a young economist...only 29 years old. But the president of the country saw me on television and he said he wanted to talk to me. He called me in. I said I would be happy to explain to his people how to reform the pension system. But he said that if you were really going to reform it, you had to start at the top. So, he appointed me Minister of Labor.
“Then, I had to explain to the people what was wrong...and had to explain to them how to fix it. So, the first thing I needed to do was to win their confidence.
“I went on TV again. This time I took my mother’s egg timer and I held it up and I said, ‘I’m only going to talk for three minutes. Give me three minutes and I’ll explain what’s wrong with the pension system and what we’re going to do with it.’ And I told the cameraman to just cut me off after three minutes.
“This worked beautifully, because it made me look humble...I wasn’t going to waste the people’s time with a long, windy speech like Castro...I was just going to tell them something simple, fast.
“Of course, I couldn’t explain everything in 3 minutes. But I told them that I had good news and bad news. The bad news was that the public pension system was broke. We had no money. But the good news was that I had an even better system.
“They called me the Minister of the Egg Timer...but they began to trust me. And then, I went back on TV...over and over...each time for only 3 minutes...and each time with my egg timer to keep me honest...and I laid out everything...why the system went broke...and what I was proposing to put in its place – a different system in which, instead of dumping all the money into a big pot that the government could do with as it pleased, each worker had his own personal pension account. It took some explaining. But I kept going...each time explaining more and more. I had to explain, for example, that the idea of the ‘employer contribution’ is a myth. The employer just looks at it as part of his labor cost. But once you call it an ‘employer contribution,’ the employee gets the idea that it’s not really his money that finances the system and he feels he has no control over what he gets out of it anyway.
“My system is very simple. The worker makes exactly the same contribution as he did before. But it’s his own money and he knows it. And he has some control over how it’s invested. And if he dies, it goes to his family. He’s an owner of it, not just a recipient of government handouts.
“So, when I had finished laying all of this out, over a 9-month period, I then admitted that I could be wrong. ‘Maybe this won’t work as well as I think it will,’ I said. And I said I didn’t want to force anyone to go with my system. So, we decided that anyone who wanted to stick with the old system – which is the system you still have in France...and America – could do so. Or, they had the option of getting into the new system with individual retirement accounts than they could manage themselves. Now, guess how many people went with the new system? We thought 51% would be a victory. Instead, 95% signed up for private retirement accounts.
“And here’s something interesting. About a third of the population of Chile are leftists...socialists, communists, or Hillary Clinton liberals. Even these people – when it came to their own money – preferred to have it in their own retirement accounts, invested in stocks and bonds, rather than in some black hole in the government accounts.
“And the best thing about this is that it turns the whole country into capitalists. Even the leftists think twice before they vote for higher business taxes or more regulations. They worry how their retirement account will be affected. And that’s why Chile is now the richest country in Latin America.”
A companion noticed the problem right away:
“That must be why the left fights so hard to resist this kind of reform,” he said.
“Yes...but it will come. You just have to wait until your current system goes bankrupt. And it will, sooner or later.”
Chile is now the richest country in Latin America. What a shock it will be to the gringos when it is the richest country in all the Americas!
May 23, 2008, 18:18
Will The Dollar Disappear?
Here is a very interesting speech which sums up a lot of what we have been discussing here over the last year or so. Fiat currencies have an inherent problem. They are not stable and they are not natural stores of value. They are also politically run because politicians gain tremendous advantages out of being in charge of the money in a country. So the politicians and the bankers are in cahoots to gain maximum advantage for themselves with paper money.
We have also noted the rise of an alternative which is to use gold as money as in days of yore. However it is difficult to imagine the bankers and the politicians giving up such power that they have voluntarily.
A new type of bank is starting up. These banks store your money for you as gold money. If you send them $1000 in fiat money they will buy gold (or silver) on the spot market at the daily price and store your $1000 of gold in their vault for a small annual charge. Your cash savings are then safely kept as gold and cannot be inflated away. The ability is then available for people to use this gold money to buy and sell to each other. The Gold Bank just keeps the gold in storage and debits one account while crediting the other. REAL money cards could then be used around the world as the final form of REAL money between individuals without any need for politicians and national fiat currencies at all. Hooray!
To see where the world might go have a look at http://www.goldmoney.com
I came to this reasoning starting from the Austrian View of economics as espoused by Ludwig von Mises while Dr. Steil has approached this view from his observations of the workings of fiat currencies in the modern world.
Very much food for thought! Read Dr. Steil's speech here:
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May 22, 2008, 11:35
Yeah, Right! Moody's Blames Computer Error For "A" Ratings On Junk
So the Financial Times has been reading Tui ads. Nice to have a bit of humour in such a dour subject.
I have this theory that the mathematics underlying economic models (whether in a computer or not) is suspect. The theory goes to the very heart of economics and looks for the justification for performing Calculus on curves that are not derived from scientific experiment. A bit esoteric perhaps but the evidence of model malfunction continues to mount. This explains why economists make such lousy predictions about the future!
May 22, 2008, 10:35