Monday, October 27, 2008

It's time to return home . . . or is it?

The telephone rang yesterday morning, while I was still in bed.

"We think it's time you came back home," I heard my 91-year-old mother say. She and my 96-year-old father live in Stow-on-the-Wold in the Cotswolds, a picturesque part of southern England.

She went on to explain that she was thinking only about the future of our 38-year-old daughter, our only child. "When you go, she won't have anybody," my mother explained.

In reply, I pointed out to her that the value of the New Zealand dollar had fallen by about 20 percent, vis-a-vis the United States dollar, in the past few months, and that its fall against the British pound had almost certainly been similar. (I don't track the Kiwi dollar's value in relation to the pound, for the simple reason that I never do business in pounds. But a quick check a few minutes ago revealed that it has, indeed, declined in value this year, and that it today bought only 36p.)

What this means is that, if we:

1. Sold our house in New Zealand on a depressed real estate market,

2. Converted our depreciated New Zealand dollars into pounds,

3. Disposed of all our furniture, etc., which couldn't be economically shipped to England, and

4. Paid for travel to England, and for temporary accommodation at both ends of our journey,

we would be virtually wiped out. In fact, we would arrive in England like refugees. Besides, I left England in February 1960, when I was only 19. The country is hardly "home" to me now, as I approach 70. And I couldn't count on relatives, many of whom I hardly know, to provide any kind of support to our daughter in the distant future.

Why do parents make such unrealistic suggestions?

Friday, October 24, 2008

The failure to govern

The following passage, from an article entitled Predatory Scapegoating by Patricia J. Williams (The Nation, October 23, 2008) puts the credit crisis/economic meltdown into perspective: is not merely a failure to regulate Wall Street; it's a failure to govern at all. The FDA is packed with industry insiders who seem content with the gross understaffing of inspections bureaus. Animal feed laced with melamine was imported from China, consumed here and has now entered the human food chain. Nontherapeutic experimentation with pesticides on humans has been given the nod. Pharmaceutical companies have gotten approval for drugs like Vioxx and Fen-Phen that should never have been put on the market. Efforts by farmers to do voluntary testing for mad cow disease have been blocked by the Agriculture Department. The Justice Department's civil rights division has been gutted. The FCC has hacked away at public access to the airways and OK'd obscene concentrations of media power. The Transportation Department is underfunded beyond all conscience, and the toll has been tragic: collapsed bridges, breached levees up and down the Mississippi and nearly unnavigable railroad tracks. And FEMA... well, we all remember FEMA.

In this country (New Zealand), I don't think there are many people who appreciate the full extent of the disaster in the US. There seems to be an assumption that the $700 billion bailout of the US financial system* has solved, or will soon solve, the problem, and that everything will soon settle down again.

*The Emergency Economic Stabilization Act of 2008, enacted on October 3, 2008.

Sunday, October 19, 2008

Current crisis was predicted in 1997

I was interested to read at today that Brooksley Born, head of the Commodity Futures Trading Commission, warned in congressional testimony in 1997 that unregulated trading in derivatives could "threaten our regulated markets or, indeed, our economy without any federal agency knowing about it".

Her concern was met with scorn and condescension from former Federal Reserve Chairman Alan Greenspan, former Treasury Secretary Robert Rubin and his deputy Lawrence Summers - "three marketeers" who continued to peddle the complex financial instruments at the heart of the current crisis.

Click here for the Alternet article.

Wednesday, October 15, 2008

The crisis: how it all happened

Financial Meltdown 101 is good explanation by Arun Gupta of how we got into the current financial mess. It's from Indypendent, and was posted on October 13.

Monday, October 13, 2008

Falling dollar to make Christmas expensive

I got up early on Sunday morning, and called my 96-year-old father in England. "Have you lost any money in the economic meltdown?" I asked.

"No," he replied. "It's all in bank deposits and government bonds."

I assured him that we, too, had not suffered in any way - yet.

Then, this afternoon, I found the catalogue of Christmas gifts from Egertons, an English company, waiting for me in my PO box. And as I opened it, to see what I could order for my parents before December, I was struck by the realization that I will have to spend a lot more than I did last year.

For a start, the prices have gone up. They always do. But this year, for the first time in several years, the kiwi dollar has gone down - precipitously. Earlier this year, it was around US80c; today it was at US59.80c at 5pm, down from US60.19c at 8am. Last Monday morning, it was buying US66c.

So as soon as I start buying overseas, as I must before long, I will begin to feel the consequences of the current economic turmoil.

Saturday, October 11, 2008

The writing was on the wall in 1991

With the effective destruction of the union movement by the Employment Contracts Act of 1991, the fate of the employee was sealed. At the time, we all knew that, as the workforce was fragmented (in the name of "freedom of choice", of course), we would, little by little, lose all the gains made by the labour movement during the previous 100 years or so. We would, again, become mere minions - ciphers to be underpaid, pushed around, and dismissed at will/whim by the employer.

In the newspaper industry, the seemingly endless waves of restructurings and redundancies began in 1997. More than 10 years later, one can discern a sort of pattern in the successive upheavals. It is a pattern that sees each cutback establish a new "norm", which then becomes the basis, or starting point, for a new round of cuts.

Today, it was the turn of the staff of Dunedin's free weekly newspaper, D-Scene, to suffer. Only a month after Australian-based media company Fairfax bought the paper, the company confirmed, through Southland Times general manager Gareth Codd, that eight employees have been made redundant. They are the paper's news editor, three layout sub-editors and four administration staff.

An NZPA report quotes Mr Codd as saying production will be centralised at the Southland Times' Invercargill operation.

One staff member has reportedly since been re-employed in the Southland Times' Queenstown office, while three others have applied for positions at Fairfax's sub-editing "hubs" in Wellington and Christchurch.

Let's go back and look at those two innocuous-sounding clauses in the Employment Contracts Act that ended compulsory unionism, and radically shifted the balance of power in favour of the employer. Here they are:

(a) Employees have the freedom to choose whether or not to associate with other employees for the purpose of advancing the employees' collective employment interests:

(b) No person may, in relation to employment issues, apply any undue influence, directly or indirectly, on any other person by reason of that other person's association, or lack of association, with employees.

Friday, October 10, 2008

And still the borrowing continues...

I am exceptional, I think, even for a member of my generation. I have never been in debt. No, I haven't even had a mortgage. When, at the age of 24, I decided I wanted a house, I worked every day for two years at The Japan Times, my principal place of employment, and also took on a few part-time teaching jobs. (Every English-speaking person in Japan teaches the language.) After two years, I had my house.

It wasn't much of a house. It was what I used to call a "matchbox house", because it was tiny, made of wood (lauan timber from the Philippines), and a little flimsy. After several earthquakes has loosened things up, so to speak, I would sometimes see a flash of daylight through a tiny crack that had opened up in a join in one of the exterior walls. But when I sold it, in 1972, I made more than the $NZ14,000 I needed to buy a house in Palmerston North.

When we settled here, we didn't have anything except the house, and a few items of essential furniture - a kitchen table and chairs, a double bed and two single beds. But we didn't borrow to buy the other things we wanted. We saved, and bought them one by one as we could afford them. Within five years or so, we had virtually everything. And because we had always paid cash, we had paid less than we would have paid if we had taken out loans. This meant that, as time passed, we were able to enlarge our house, make a few overseas trips, and save more than $NZ400,000 (at the time of writing) for our retirement.

The superiority of this procedure is so obvious, I can't understand why more people don't adopt it. Yet even today, as the world sinks deeper and deeper in the credit crisis, the thinking of the average person seems to be that, if you want something, you should have it right away, and that the best way to get it is to borrow, borrow, borrow - even if the interest rate is close to 20 percent.

Hence today's finding of a Consumer Credit Expectations Survey, conducted by credit reporting agency Dun & Bradstreet, that one in four Kiwis expect to use their credit card to cover purchases they otherwise could not afford in the next three months.

That figure jumped to 31 percent, up from 22 percent in the last quarter, for those aged 18 to 49 and for those earning between $30,000 and $49,999.

The survey also found that 19 percent of 18- to 49-year-olds expected to apply for a new credit facility in the coming three months, as did 17 percent of middle- and high-income earners.

Sunday, October 5, 2008

The tragedy of industrial civilization

I wasn't surprised by the 2008 Lowy Institute Poll, which revealed that Australians want action on climate change, but not if it costs jobs or hits them in the pocket.

I'm sure a poll in New Zealand - or anywhere else, for that matter - would come up with exactly the same result. Those who are prepared to make "sacrifices" for the sake of the environment are almost always those who are in a financial position to withstand a little "pain". They also tend to live in towns and cities, and to view the countryside as a place of recreation.

People who actually live in the countryside, and earn their living from the land, often have a radically different view of it. Try talking to a logger, for instance, about the need to preserve native bush, or to a farmer about the need to preserve wetlands. Such people are unlikely to look far beyond the next pay packet.

So in the end, only minor, token adjustments will be made in humanity's "flight path" - enough to convince people that "something is being done", but not enough to prevent us from hitting the mountain ahead. This is the tragedy of our industrial civilization.

For the record, the Lowy telephone poll of 1001 people, conducted between July 12 and 28, found that 21 percent of respondents were not prepared to pay anything extra on their electricity bill to help solve climate change.

Another 32 percent favoured paying only A$10 (NZ$12.26) per month extra on their electricity bill to help solve climate change.

Wednesday, October 1, 2008

We can weather the storm, say Kiwis

Today's poll, which asks the question: "Do you think NZ is well placed to cope with the current global credit crisis?", has found (at 9.30pm) that more than 60 percent of New Zealanders think it is.

Those who answered "Yes" totalled 406, or 63.5 percent of respondents, while those who answered "No" totalled 233, or 36.5 percent of respondents.

No doubt they were influenced by the benchmark NZX 50, which rose 97.745 points, or 3.07 percent, to 3187.961 today.

Meanwhile, Reserve Bank Governor Alan Bollard said: "The New Zealand banking system is sound... We don't think there are hidden nasties there at all."