Hard News by Russell Brown

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Hard News: Unwarranted risk

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  • Rich of Observationz,

    the deferral of a major wind farm because demand was not there.

    There's demand. There's 40TWh a year of demand.

    The reason the wind farm isn't being built is that it's "cheaper" to dig coal out of the ground and burn it, polluting the world with CO2.

    Back in Wellington • Since Nov 2006 • 4218 posts Report Reply

  • James Butler, in reply to insider,

    NZ is many things and we can debate what it is but the “set of people living in New Zealand” seems not only limited but gramatically poor. Ben seems to think it’s some form of collective that has dibs on my property and is devalued by me selling it, because that’s giving it away, whatever ‘it’ is.

    I don't want to put words into Ben's mouth, but I don't think he's saying anything of the sort. I think he's saying that property is "New Zealand owned" by definition of the owner being a New Zealander. It's so simple it's almost tautological.

    Well the set of people living in New Zealand have no rights to my business.

    Except you, who own the business; and you are a member of that set if you live in New Zealand, and not if you don't. There lies the difference.

    Auckland • Since Jan 2009 • 790 posts Report Reply

  • Matthew Poole, in reply to Graham Dunster,

    It’s also very interesting to see how many are also against keeping the POAL facility in Auckland, rather suggesting it is moved out of the central city.

    My immediate question is: move it where? As crap as they are, the only rail links worth the name on the Waitemata Harbour are in the CBD. Onehunga is out because of the Manukau Bar, and once they depart the City the other rail lines don't go anywhere near anything vaguely resembling a port.
    Northland is out unless the rail link gets some hefty upgrading, including a third track duplicating the Western Line (at a price tag, I'm sure, north of a billion dollars once property acquisition is taken into account).

    If they think we can move all the freight by road, the price tag for route upgrades will be several billions and it'll be happening right at a time when oil is getting dramatically more expensive and we should be looking to reduce our dependence on it as a transportation energy source.

    The pit from whence crawl… • Since Mar 2007 • 3733 posts Report Reply

  • merc, in reply to insider,

    PS Post Bank was privatised way before KB came into existence.

    Yes, didn't KB use their existing buildings (Post Offices) as co-tenants?
    And thank you for the figures.

    Since Dec 2006 • 2468 posts Report Reply

  • Chris Bowden,

    I think that the need for cleaner energy could be resolved by the public sector, provided that the incentives are in place by government to encourage it (tax breaks, subsidies etc). As has been demonstrated above, the ownership of energy companies by the public sector has exactly encouraged renewables.

    Ben, I am confused by your concept of 'demand'. While I understand your reservations regarding the orthodox economic supply and demand equilibrium, demand has to be a related to price to some extent. I would happily 'demand' a lot more power if it was free (or half/quarter the price), running my heating/air conditioning 24hrs a day and buying a plasma TV, as would a lot ofpeople. However, such demand would be extremely inefficient, and someone would end up paying for it (in the case of public provision of electricity, it would mean diversion of funds from other services). How do you define demand? Is it the demand for electricity at a 'reasonable' price and if so, what price is 'readonable'?

    I have done a bit of looking around, and the profits of electrictity generators does seem high on a numbers basis, but I can't work out whether it is an exceptional profit given the high asset base and capital investment required. Can anyone shed light on this?

    Auckland • Since Apr 2011 • 26 posts Report Reply

  • Rich of Observationz, in reply to Matthew Poole,

    Why do we need freight - all those containers are so 20th century. Now that we live in the future, can't we just download everything?

    Back in Wellington • Since Nov 2006 • 4218 posts Report Reply

  • merc, in reply to Russell Brown,

    If only a past government had established a compulsory superannuation scheme in, say, the 1970s ...

    Arggghhh trigger trigger arghhhhhhh

    Since Dec 2006 • 2468 posts Report Reply

  • Sacha, in reply to insider,

    Well the set of people living in New Zealand have no rights to my business.

    Any business activities are subject to NZ laws that restrict some property rights, and involve trade-offs with other protections by virtue of citizenship (being eroded admittedly by trade deals). If you don't want folk to think you're a neolib fanboi then stop arguing like one.

    Ak • Since May 2008 • 15741 posts Report Reply

  • Sacha, in reply to Rich of Observationz,

    can't we just download everything?

    Soon - and the distributed personal manufacturing and communications networks involved will depend on large-scale reliable energy most of all. Hence the lunacy of hocking it off now.

    Ak • Since May 2008 • 15741 posts Report Reply

  • James Butler, in reply to Rich of Observationz,

    Why do we need freight – all those containers are so 20th century. Now that we live in the future, can’t we just download everything?

    I would download a car!

    Auckland • Since Jan 2009 • 790 posts Report Reply

  • Sacha, in reply to Matthew Poole,

    the other rail lines don't go anywhere near anything vaguely resembling a port

    I believe somewhere near Clevedon was mentioned a while back, with only a short new track needed to connect to the main trunk line south of Manukau.

    Ak • Since May 2008 • 15741 posts Report Reply

  • Sacha, in reply to James Butler,

    I'd download gold.

    Ak • Since May 2008 • 15741 posts Report Reply

  • BenWilson, in reply to insider,

    Ben seems to think it's some form of collective that has dibs on my property and is devalued by me selling it, because that's giving it away, whatever 'it' is.

    Nope, I don't think that. I only said that by selling it you lose ownership of it, which is actually true by definition of the word "selling", but it makes it slightly plainer what that means. If you are a NZer, and you do that, and the person or entity you sell to is not in NZ, then NZ is losing that property, because you are a part of NZ.

    Well the set of people living in New Zealand have no rights to my business.

    That is beside the point. If you are in NZ, you will spend some of the profits from your business in NZ. This means that NZ profits from your business, under James' definition of NZ.

    So it's all a bit more complex than the slogans being chucked around IMO.

    We were actually talking about things that belong to the NZ Government before you tried to muddy the waters by talking about your own business. But I'm happy to also answer your questions about the effect of you selling your business to foreign interests - depending what you then do with the money, you've expatriated a little bit of the control of this country. The employees of your business are now answering to people in another country, and the profits are leaving the country. This isn't always bad - you could be a horrible manager and they could be wonderful.

    Auckland • Since Nov 2006 • 8027 posts Report Reply

  • James Butler, in reply to Sacha,

    I’d download gold.

    Why bother? Gold has no intrinsic use, and if you could download everything else then I can’t see the need to use it for trade.

    ETA Unless you have a secret craving for bling that I hadn’t previously noticed, Sacha (:

    Auckland • Since Jan 2009 • 790 posts Report Reply

  • Gareth Ward, in reply to BenWilson,

    If you are a NZer and you sell your business to someone outside of NZ, who is not a NZer, then the ownership has moved outside of NZ

    Of course, you now have NZ ownership over the big chunk of cash that was given to you for your business. So the business may not be NZ owned but the equivalent cash asset it was swapped for now is, and the profitable returns from that accrue to you/"NZ".


    I think to try and understand the Nat's reasoning for these asset sales, you have to realise that all financials being equal (interest payment reductions roughly equal to cash dividends otherwise received; realised value of debt reduction roughly equal to book value of asset...) they just don't see the point in the state owning something (and indeed, the risks to the state balance sheet of owning make it overall unattractive). It's horribly simplistic and misses all the more nuanced arguments against but I suspect that's how simply they see the economics of it.

    Auckland, NZ • Since Mar 2007 • 1712 posts Report Reply

  • James Butler, in reply to Gareth Ward,

    I think to try and understand the Nat’s reasoning for these asset sales, you have to realise that all financials being equal (interest payment reductions roughly equal to cash dividends otherwise received; realised value of debt reduction roughly equal to book value of asset…) they just don’t see the point in the state owning something (and indeed, the risks to the state balance sheet of owning make it overall unattractive). It’s horribly simplistic and misses all the more nuanced arguments against but I suspect that’s how simply they see the economics of it.

    I would like to think that; but it ignores the fact that selling such a large swathe of assets, in this market, is never going to realize the best cash return. So even in pure bottom-line terms it doesn't make sense. Like so many other decisions this government makes, mere incompetence fails to explain it, making it hard not to invoke malice.

    Auckland • Since Jan 2009 • 790 posts Report Reply

  • insider, in reply to Sacha,

    Well that's just wrong Sacha. Business ownership and responsibilities are totally separate from citizenship rights. That's how foreign ownership is able to occur and still be subject to NZ law...

    Wellington • Since Sep 2011 • 29 posts Report Reply

  • Sacha, in reply to James Butler,

    OK, I'd download music then. :)

    Ak • Since May 2008 • 15741 posts Report Reply

  • Gareth Ward, in reply to James Butler,

    selling such a large swathe of assets, in this market, is never going to realize the best cash return.

    I still think they're looking at it even more simply than that.
    "If the state's finance's are roughly equivalent whether they own it or not, we shouldn't" plus "our time in Govt is limited" = sell them now. In that simple model they don't have the time to wait for theoretically ideal market conditions to sell.

    Screwing us in the name of base ideology either way...

    Auckland, NZ • Since Mar 2007 • 1712 posts Report Reply

  • Richard Stewart, in reply to James Butler,

    Why bother? Gold has no intrinsic use,

    The best metal in terms of conductivity and corrosion resistance

    Pt Chev • Since Feb 2012 • 49 posts Report Reply

  • Steve Barnes, in reply to insider,

    PS I’ve never read Rand. Everything the Libz say about her makes her sound bathit crazy.

    With respect, I have read everything you have written on this forum and had previously concluded that you were a classic Randian, having read Rand’s “masterpeice” and concluded that she was a bitter and twisted woman with few clues about the nature of humanity. Your concept of ownership is identical to hers and like her you miss the subtle fact that all knowledge is built upon previous knowledge, ipso facto intellectual copyright is, in itself, theft. As Newton said “If I have seen farther it is by standing on the shoulders of giants.” but then I suspect you would dismiss Sir Isaac as a damnable commie whose ideas should be ignored.
    In the modern world power is as valuable as water, which, paradoxically is cheaper than diamonds, the cost of power is directly related to the cost of production, take profit from power and you are taking profit from the entire production of a country. The production of power is a public good and as such should not be held ransom by a profit making enterprise. Don’t get me started about water.

    The wireless north ;-) • Since Dec 2006 • 4453 posts Report Reply

  • insider, in reply to BenWilson,

    @ Ben

    "We were actually talking about things that belong to the NZ Government before you tried to muddy the waters by talking about your own business."

    Thanks. It wasn't the intention to muddy the waters. I didn't think you were just talking about NZ Govt assets alone because you talked about the risk of deterring investment in general and that not all overseas investment being a benefit. I disagree that there is some form of national loss, be it ownership or whatever, because, as Gareth says, you get a whole wad of cash in return to do with as you want; you can invest in NZ in some way or invest on Sydney hookers, as one 'owner' of NZ business recently did.

    It seems a huge selective morality is at play around the sale of a business to foreigners. No-one would give a stuff if I were cashed up and sold that NZ money in return for Ferraris. But sell a business to the Germans and I'm suddenly handing over a piece of the country. I can't see a huge difference in the two events in terms of their impact on NZ.

    Wellington • Since Sep 2011 • 29 posts Report Reply

  • James Butler, in reply to Richard Stewart,

    The best metal in terms of conductivity and corrosion resistance

    This is true, and it's a PITA that hoarding for investment purposes makes it too expensive for switch contacts.

    Auckland • Since Jan 2009 • 790 posts Report Reply

  • Ross Mason,

    Insider:

    No-one would give a stuff if I were cashed up and sold that NZ money in return for Ferraris. But sell a business to the Germans and I'm suddenly handing over a piece of the country.

    Given the number of repossessions that occur in this country, I suspect that most Ferraris are "bought" on higher purchase.

    You are right. Noone would give a stuff. But if you had bought something more useful like a Suzuki Swift, the change from the transaction could be used to invest here in NZ.

    And that is where we are failing. We are quite happy to sell out to overseas interests but it means we have less chance of improving our future.

    Upper Hutt • Since Jun 2007 • 1459 posts Report Reply

  • BenWilson, in reply to Gareth Ward,

    Of course, you now have NZ ownership over the big chunk of cash that was given to you for your business.

    Yes, and it is possible to reinvest that cash, either building a new NZ business, or overseas, thus bringing back the lost profits from the business sold. Or you could just spend all your money, flowing it through other NZ hands.

    I'm not inherently against any of this, whatever insider seems to think, with the exception of government assets, which are a much, much more complicated matter - they set the backdrop and infrastructure for our whole society, they have huge impacts on the entire nature of our economy. They can and should undertake the huge infrastructure projects which project the nation in whole new directions, or invigorate languishing sectors.

    Most of these projects are natural monopolies which should not end up in private hands. If they do, all we have is trickle down, which is an apt term for being pissed on from on high. If those private hands are not even in the country, then we don't even get the trickle down. A great many of these will make losses in perpetuity, because the purpose of them is not direct profit at all - hospitals and education are good examples - the whole of society is improved by them. I think basic utilities are the same, society functions best if these natural monopolies are supplied by the government at cost, or cost + reinvestment sufficient to sustain growth in supply at a rate roughly equal to general economic growth.

    If any business can compete with this, then they should be welcome to try. But I do not rate their chances unless they come with enormous capital and something genuinely new to supply, or they are prepared to take huge risks. All of these things are what capitalist business is meant to be about - not being handed an already existing natural monopoly with proven earnings and massive capital assets. The proof that our government telco is less efficient than private enterprise should be only by a private enterprise setting up a business that outcompetes the government one. Same goes for power companies. If someone out there is prepared to actually set one up that outcompetes our state owned ones, then have at it.

    Auckland • Since Nov 2006 • 8027 posts Report Reply

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