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A Fair Deal for Christchurch

Written By: - Date published: 4:51 pm, March 1st, 2015 - 92 comments
Categories: Economy - Tags:

The Christchurch earthquake was a catastrophe that was national in its impact and significance but that required the people of Christchurch to pay its terrible price. In the four years that have since elapsed, they have had to shoulder the burden of rebuilding shattered lives and a devastated environment.

There has been no shortage of sympathy and encouragement from the rest of the country, and the government has played its part in financing the restoration of essential infrastructure. But the government’s help – provided to Christchurch on behalf of all the people of New Zealand – has been limited by a hard-headed and largely artificial distinction between what is seen as properly the responsibility of central government and what falls to be dealt with by Christchurch itself.

We now see the impact of that distinction. It means that the people of Christchurch must face a substantial financial burden on their own, in addition to the other losses they have suffered. They are to face substantial rate increases over the next three years and their city’s finances will suffer from a further loss of income as a result of the forced sale of up to $750 million worth of city assets – assets built up over many years.

They are faced with the need to shoulder these burdens because the law, as presently defined, takes no account of their special circumstances and requires them, come what may, to balance their books. The people of New Zealand, through their government, may in other words offer sympathy, but when it comes to costs, Christchurch must – from this point on – take responsibility for re-building the city on its own.

The government’s position on this issue is hard to fathom. No one doubts that the national economy has benefited greatly from the investment that has been made and will be made in re-building the city. Our GDP growth, and the level of economic activity, have been stimulated by the increase in public funding; the earthquake forced the government’s hand to increase public spending that they would, for ideological reasons, not otherwise have undertaken.

The re-building of Christchurch, however funded, will continue to provide great benefits to the national economy in terms of employment and output. But the priority given by the government to the short-term problem of reducing its own deficit means that it is unwilling to invest in gaining the further benefits potentially available to the national economy from not leaving the people of Christchurch to find the money on their own.

There must be the suspicion that the government is not unhappy at the prospect of asset sales and the opportunity thereby offered to private investors to make a profit. But, setting aside issues of fairness and national solidarity, the government’s stance is in any case hard to justify in purely economic terms.

We can see this clearly when we examine the responses of governments around the world to crises of various sorts. In the aftermath of the Global Financial Crisis, and the threat then posed to the stability of the banking system, governments like those in the US and UK had no hesitation in creating new money to bail out the banks and to get the economy moving again.

The US Federal Reserve has created no less than $3.7 trillion of new money – so-called “quantitative easing” – and the Bank of England has done likewise to the tune of £350 billion.

The Bank of Japan, at the behest of the Japanese government, has created huge quantities of credit directed to productive investment and even the European Central Bank – so long demanding austerity and reduced government deficits – has changed course dramatically.

In New Zealand, we saw our own smaller version of the willingness to bail out financial institutions in the $1.6 billion help provided to South Canterbury Finance. If it can be done to help the banks and finance companies, why can’t it be done to help the people of Christchurch – especially when that investment would provide such a good return to the economy as a whole and wouldn’t just disappear into the balance sheets of financial institutions?

There is, after all, a powerful economic pedigree for such an approach. John Maynard Keynes famously articulated two great insights. First, he said, while there are obviously intrinsic reasons for a scarcity of land, there is no intrinsic reason – in a country that is sovereign in respect of the creation of money – for a scarcity of capital. And secondly, he observed, the creation of credit for productive purposes will not be inflationary if the increased production it is designed to bring about actually materialises.

And, for those who are still nervous about the government stepping in to help in this way, consider this. If we don’t object to the huge volumes of new credit for housing purchase created for their own purposes by the banks, why should we be so reluctant to see the government act on a much smaller scale in the public interest to help the economy as a whole and the people of Christchurch?

That would be the proper response on a national scale to what is a national and not just a Christchurch issue.

Bryan Gould

1 March 2015

 

 

92 comments on “A Fair Deal for Christchurch ”

  1. ghostwhowalksnz 1

    The taxpayers money provided to Christchurch is quite low in compared to the overall costs.
    First the EQC reserves and reinsurance money was not drawn directly from the accounts of the state as English and Key repeatedly say

    That amounted to about $8.5 bill before the earthquakes

    As well the Crown has been taking a $10 mill per year underwriting fee for the possibility they would have to pay for any amount above the funds EQC has.

    So they has come to pass and the crown has paid out ( having taken the money for nearly 30 years for such an eventuality). So how much is that?

    EQC in their 2014 report say its only $1.1bill of ‘unfunded liabilities’ .

    Firstly the reinsurance recoveries has come to $4.3 bill rather than the $2.5bill estimated before the earthquakes began ( EQC 2009)

    So the goverments ‘real money’ contribution for EQC directly is just over $1 billion.

    I understand there has been a crown contribution the Christchurch citys unfunded reconstruction costs.

    As well there is the buying up of central city real estate, which was done to maintain property values, but the crown holds an asset in this case.

    So the “real” payments of the crown could be not more than $2.5 billion.

    or another way to look at it around $600 mill per year for the last 4 years.

    Im not sure why Labour hasnt used the paltry payments as a club to hit English and Key with. Is there no one in Christchurch keeping tab on these numbers ( I have only done 10 min lookup)

    • Sacha 1.1

      I’ve seen similar discussion in comments here – but not once from any of our political opposition. And we wonder why the public swallow the govt lines they’re fed?

      • Kenya 1.1.1

        The Greens tried a policy of printing money. It was widely ridiculed. For Labour to do so in the current environment would relegate them to opposition for another two terms.

        • Sacha 1.1.1.1

          You’re right. How do we change that equation?

          • Kenya 1.1.1.1.1

            Get into government and use the apparatus of the state – the bully pulpit if you will – to change public perceptions. You can’t do it from opposition when you’re already not seen as economically credible, in an age when people are seeking economic security. All this talk of changing the debate is great if you’re a) an academic, or b) in government. In opposition in New Zealand in 2015 it’s romantic nonsense.

    • Lanthanide 1.2

      “First the EQC reserves and reinsurance money was not drawn directly from the accounts of the state as English and Key repeatedly say”

      The EQC reserves were. They were on the government books as an asset. Now they have been used up and the asset is no longer there.

      It doesn’t matter what computer the digits are stored on – those digits were a state asset, which has been spent and consumed, therefore the state’s accounts have been depleted.

      • DH 1.2.1

        Lanthanide. I’d be surprised if the EQC reserves were on the Crown accounts as an asset, and if they were they shouldn’t have been. ACCs cash reserves aren’t on the Crown accounts as an asset, they’re cancelled out by future claims liabilities.

        Cash reserves in an insurance company, and that’s what EQC is, are usually applied to funded liabilities. It would only be a Crown asset if reserves exceeded the estimated cost of future claims.

        • Lanthanide 1.2.1.1

          “ACCs cash reserves aren’t on the Crown accounts as an asset, they’re cancelled out by future claims liabilities.”

          ACC reserves are counted when the “net debt” of the government is considered. Same as the superannuation (Cullen) fund, and I presume EQC.

          Labour almost got us down to 0% net debt, but gross debt was still about 8%.

          • DH 1.2.1.1.1

            No they’re not. ACC is a standalone entity, it’s only ACCs balance sheet that goes on the Crown accounts and until ACC is fully funded it’s a negative balance. Presently ACC is a $2.2 billion liability to the Crown.

            Labour never got us down to 0% debt, they paid down bugger all real debt they only got it down as a percentage of GDP by not borrowing much more while GDP increased.

  2. Stuart Munro 2

    Unhappily, printing a little money for Christchurch would be a good thing. Key’s dark lord and master, Asmodeus, would scarcely approve. Instead Christchurch can expect a rousing sermon on personal responsibility.

    • Colonial Rawshark 2.1

      Gould thankfully points out the obvious – there is no shortage of money other than an artificial one, because unlike freshwater or crude oil, money can easily be created ‘out of thin air’ if there are things which are necessary to be done and paid for.

      You point out something which is less obvious – that there is a strict hierarchy in this world of banking money creation and we do not have the will or inclination to try and smooth things over with the central banking titans of the world should we go ahead.

      I would suggest a very simple and limited money creation scheme: funds created per year will not exceed 0.1% of the NZ GDP and will be limited to a 5 year period of Christchurch rebuilding: that $200M pa will go a long way to remaking Christchurch as a world class city.

  3. Once was Tim 3

    I posted a question on another thread, and I still haven’t had an adequate answer.
    WHY, in many many cases did the cost of land get figured into the equation?
    WHY was there not a simple exchange of govt/council owned land for those areas where government agencies deemed land unsuitable for structures (with insurance companies/EQC just picking up the tab for rebuilds or relocation of existing structures.
    We know (and have done for some time) that there are red zones, and other areas not suitable for sustaining housing. That’s not to say they aren’t suitable for other purposes – parks, reserves, farms even.
    From what I can see, this is an example of how NOT TO DO things. Its probably one of the biggest insurance buggerisations I’ve ever seen built on Gerry Brownlee’s ‘scorched earth’ policy that he declared early on.
    THe East is fucked ….. OK, there is land that’s relatively OK elsewhere. FFS -SWAP it.
    In Queensland, there’s an entire town that’s been relocated after the flood. Why not the Eastern suburbs of ChCh?
    Is there a genuine reason why this can’t have been achieved after four years – I’m genuinely wanting to know. I’ll be happy if someone can give me a good answer as to WHY NOT

  4. vto 4

    There are a lot of grumpy Christchurch ratepayers at how this particular shortfall is being attended to.

    The government has nothing but a financial win out of the Christchurch earthquakes and subsequent rebuild…. so this leaves a bad smell…

    along with the bad smell of Bob Parker and his pal Paddlefoot, I mean Tony Maryatt. The pair of goofballs had us underinsured by hundreds of millions of dollars – for stuff like roads and drains and sewers ffs… all the basics. They were fail fail fail. Bloody useless was the Bob and Tony Show. From before the earthquakes until well after.

  5. adam 5

    Austerity

    Christchurch will embrace the full face of this economic voodoo so our government can stay economically, and more importantly – ideologically pure.

    Can we call what is happening to Christchurch what it is. A nightmare of ideological proportions – perpetrated by the disciples of the one true religion. Liberal economics.

    • Colonial Rawshark 5.1

      You have to make 99% of society suffer in order to balance spreadsheets and ledgers. Some may say that is utterly inhuman and inverted, but that’s the system we have allowed to be built around us for very many years now.

  6. philj 6

    And the lesson for the rest of the country in the eventuality of a future catastrophe happening to them ? Good luck mate, your on your own! Auckland, Wellington, Hamilton, Dunedin, look out. If something major happens….. get away quick smart if you can. Otherwise, your stuffed. Christchurch has been hung out to dry by this ‘government’. Kia Kaha Christchurch.

    • Pat 6.1

      That is the truth and good advice..”Christchurch has been hung out to dry by this government”…but you forgot to add…’with the silent assistance of the opposition parties’.

  7. Steve Withers 7

    Looking at the 2014 election results, it looks like people in Christchurch were happy to vote for Labour in the local seats….but a lot of those people gave their party votes to National.

    Which makes little sense, really…..as National is the party forcing them to sell their civic assets and pushing their rates up ….and reducing local democracy in Christchurch…and right across the country.

    But people vote for that. Aucklanders are the same. National creates a mess…then blames the Labour party guy who people elected to prevent the asset sales that Auckland’s amalgamation was supposed to enable. So Aucklanders vote left locally and for National nationally….and don’t appear to see any problems or inconsistency.

    I can’t explain it. “Stupid” comes to mind….but so many??

    • George Hendry 7.1

      Electoral fraud by government. They lie about so much – why not this, the most important of all?

      http://www.scoop.co.nz/stories/HL0307/S00078.htm

    • exStatic 7.2

      The option of raising rates by 50% or selling assets has not come from the government – it is to fund the extravagant City Council’s “wish list” for things like stadiums, conference centres, performance facilities etc.
      Add to that the council’s total incompetence in getting 90% of it’s entitled insurance payout.

  8. johnm 8

    If we could bail out the speculators of South Canterbury Finance for over a billion dollars it seems shameful to me that the Government acting on behalf of all kiwis couldn’t have gifted a billion to CHCH saving them from selling their assets, this ruthless government’s aim in part. How about a little extra tax on the rest of earning new zealand to pay for this? Unbelievable our second city hung out to dry by the winds of the tender market forces!

  9. Ad 9

    On my alternative world, government would take as long as it takes to rebuild the whole of Christchurch – as a society.

    The Minister in charge of the rebuild would have half their salary on performance pay for success. The Minister would – unusually – have executive and cheque-writing responsibility to focus their minds upon their public accountability.

    The Council and the government would form a common rebuilding and housing development entity, whose purpose was to maximize public investment, and to build lots of affordable housing.

    There would be an agreed rent control on all Council and state housing – and they would seek to act as one market entity that aggregated supply and demand. ‘

    There would be a single economic development plan between central and local government, which included Nga Tahu Holdings.

    There would be a free bicycle scheme, with a regional fuel tax that went into public transport programs.

    The original vision for Christchurch’s rebuild that was mandated by the population would be funded and built, rather than castrated by central government whim.

    And, of course, there would be a Labour government and Labour Council that stayed around for a while to bed this all in.

    Sadly all we have is Gerry Brownlee and the CERA omnishambles instead. With mediocre results, predictable housing shortages, wasted lives, and a ready will to withdraw from the central-local government partnership.

  10. Ad 10

    The illustrating picture is of the Christchurch Catholic basilica – one of 19th century New Zealand’s greatest works of art.

    Could our newly appointed Catholic Cardinal do us a favour and get the Pope to rebuild it please.

    • ghostwhowalksnz 10.1

      How come the Catholic Church ( or Anglicans for that matter with their edifice) arent being asked to ‘sell assets to pay for rebuild’

  11. Brendon Harre 11

    Another ‘variant of government-by-decree’ is John Key’s government’s use of common law ‘third source of power’ to acquire red zone land in Christchurch post earthquakes.

    Maybe John and Tony talk about these sort of abuses when thy meet?

    Check this link http://www.stuff.co.nz/the-press/news/christchurch-earthquake-2011/10322646/Red-zone-policy-never-explained

    or consult with young lawyer Natalie Jones who wrote the chapter “The Quake outcasts and the third source of government power” for the book “Once in a Lifetime: City-building after disaster in Christchurch”

    In response to http://bowalleyroad.blogspot.co.nz/2015/02/whats-good-for-them-tony-abbott-and.html

  12. fisiani 12

    If there was a prize for the most ridiculous post this would take the prize.
    It reads like the government has not treated the people of Christchurch well.
    To provide some balance for those who want balance try reading the truth.
    https://www.national.org.nz/docs/default-source/PDF/2014/policy/canterbury-earthquake-recovery-policy.pdf

  13. Lanthanide 13

    Given Labour had already written budgets out till 2020 at the 2014 election, and those plans didn’t include any additional money for Christchurch, I have to think that National has already won the argument.

    • One Anonymous Bloke 13.1

      That’s on the planet where Labour would have governed alone.

      On Earth, “the law, as presently defined, takes no account of their special circumstances and requires them, come what may, to balance their books.”

      So no extra money was needed, eh. Just a relaxation of the rules.

      • Lanthanide 13.1.1

        So, if they don’t balance the books, where is the money to make up the deficit coming from? ‘Cause it wouldn’t have been Labour.

        • One Anonymous Bloke 13.1.1.1

          How about they get a longer timeframe to pay it off?

          Or, if you really want to put a smile on my face…

          Sky City openly offers bribes in exchange for regulatory easements: seize their assets and give them to Christchurch.

          Ditto HSBC.

          Ditto the Whitechapel and Aldgate Trusts.

          • Lanthanide 13.1.1.1.1

            “How about they get a longer timeframe to pay it off?”

            Well that’s up to the individual creditors to re-negotiate the terms of any loans, isn’t it?

            I guess the government can always come in and force the creditors to re-negotiate, but that seems a bit heavy-handed.

            It’s fine for the government to *allow* a deficit, but the creditors might have a different opinion.

            • One Anonymous Bloke 13.1.1.1.1.1

              Or, like Solid Energy, simply make a bank wear it: they’ll just print more.

              • Colonial Rawshark

                Lanth’s point was that Labour had not put aside any new money for helping Christchurch. Flexing the rules to allow Christchurch to go further into debt isn’t really a serious level of help.

    • Colonial Rawshark 13.2

      Good point. Labour can’t find any significant extra money to spend because Labour is stuck in the same financial and economic orthodoxy that National is.

      • Kenya 13.2.1

        Good idea. Let’s put out a policy to print money and just wait for those votes to roll in.

        • Colonial Rawshark 13.2.1.1

          You prefer to borrow the NZ dollars from foreigners and pay interest to China, rather than issue the money at no cost? Are you an idiot?

        • ghostwhowalksnz 13.2.1.2

          You would be surprised by how many countries are doing it.

          China
          Japan
          US
          UK
          Europe-EU

          They would be ‘very interested’ in your views that its crazy money scheme

          of course Bill English’s approach of borrowing more than all previous finance ministers and with no plan to pay it off is so much better isnt it.

      • One Anonymous Bloke 13.2.2

        Nah, it doesn’t need any massive paradigm shift to allow CCC to miss budget targets while they get the city back on its feet.

        After all, the National Party has missed every target it’s ever aimed at, apart from fostering hatred and sadism.

        • Colonial Rawshark 13.2.2.1

          So how do you expect the CCC to fund their deficit? By borrowing from the big banks?

          • One Anonymous Bloke 13.2.2.1.1

            Don’t their assets return any income? Perhaps I have the wrong end of the stick:

            They are faced with the need to shoulder these burdens because the law, as presently defined, takes no account of their special circumstances and requires them, come what may, to balance their books.

            Surely easing that requirement would give them some breathing space. I presume that’s why Mr. Gould mentioned it.

            • Lanthanide 13.2.2.1.1.1

              When a creditor comes and says “pay me money” and you say “tomorrow”, there’s only so many times you can say “tomorrow” until they get angry.

              That’s what a deficit is.

              Realistically, every local council in NZ is insolvent and the debt will never be paid back. Christchurch was the only one that wasn’t; but as we now discover that was helped along by the fact that they were woefully uninsured for all of their public assets.

              • One Anonymous Bloke

                Helped in turn by right wing rhetoric around rates increases and essential services.

                Making regular payments is a way to placate angry creditors. The National Party’s plan to balance the government’s books is asset sales. It hasn’t worked. The National Party’s plan for Christchurch is asset sales…

              • vto

                If debt is never going to be repaid then there will always be money paid to lenders.

                Kind of like a rentier society.

                Sounds lovely

              • Colonial Rawshark

                When a creditor comes and says “pay me money” and you say “tomorrow”, there’s only so many times you can say “tomorrow” until they get angry.

                In financial terms, if the payment is due today, and you don’t pay it until next week, you are in default. Entities which are not sovereigns over their own currency entering into default (whether it be Greece or the CCC) can have their lines of credit immediately severed without notice.

                Won’t be much economic recovery happening if that is the case.

            • Jan Rivers 13.2.2.1.1.2

              From my understanding the assets returned a profit of around $60M in the last annual report which is about the same as the cost of debt servicing $57M in the current annual plan.

              The bigger problem though is in out years when the debt level is forecast to increase quite significantly if there is no further money.

              The options include a successful popular campaign for more government money, selling some of the productive assets and / or withdrawing from some of the high profile joint projects like the convention centre that are currently planned jointly with government.

              • One Anonymous Bloke

                Yep, cancel all the National Party friends and relatives benefit gigs that they’ve foisted on the city, by lunchtime.

              • Lanthanide

                “and / or withdrawing from some of the high profile joint projects like the convention centre that are currently planned jointly with government.”

                Hahaha, “joint”.

                You make it sound like the CCC had a choice in whether to be involved in these projects.

  14. Stuart Munro 14

    They need to get Christchurch sorted quickly – Wellington is going to happen one of these days – it’d be smart to have a system in place. Smart goes over this government’s head of course, but still.

    • Jan Rivers 14.1

      The idea that ‘our hands were tied’ in making money available for the rebuild by the government rings somewhat false doesn’t it. The government says it is about reducing government debt but I think there is a real excitement in the government about providing services for less, using transactional ‘customer’ models and delivery by private companies and charities with the intention, as reported by the ODT before the election, of reducing government spend to 26% of GDP

      I can see a benefit in QE/printing money and the purpose to which it is put seems to be all important. I recall that Russel Norman has spoken about 5 or 6 models (including a Jubilee model that would help poor individuals get out out of debt). I remember feeling very sad that the Greens idea of a one-off tax to raise money for the rebuild was ignored leaving those outside Christchurch with no opportunity to take part in a New Zealand where, according to the Prime Minister, we are all our brother’s keeper.

      In a book (Reconstructing Kobe: The Geography of Crisis and Opportunity
      By David W. Edgington) covering the 1995 Kobe earthquake there was 10 years of rebuild before the city returned to its original productivity with some industries not recovering. However central government money rebuilt the port to a higher standard, including to meet future resilience needs within 18 months. In Japan the national government’s expenditure also included ensuring a city rebuild to a better quality, supporting rather than disempowering local government and the creation and support of special economic zones. This despite land in the city being lowered more than three metres by the quake.

      Interestingly Kobe City produced a giant volume of “lessons learned” from the earthquake which was published in 2010 (and so available to the NZ government). http://www.city.kobe.lg.jp/safety/hanshinawaji/revival/promote/img/English.pdf
      Of particular note in this is the way that community and representative organisations were supported, and empowered in new broad-based inclusive and representative democratic structures put in place to support the renewal. I haven’t read it all by any means but the humanity and responsiveness of Japan’s national government that is evident is, I would think, be an interesting contrast to the ‘market will provide’ model of the Christchurch experience.

    • Lanthanide 14.2

      The smart thing to do would be to move government from Wellington to Auckland. Take 30 years to do it and start now.

      Because after the Wellington earthquake, that’s certainly where government is going to end up.

      But much like Climate Change, it’s much more palatable to stick your head in the ground and pretend there’s no problem, so you can carry on as BaU. Upsetting and disrupting everyone’s lives now, voluntarily, is somehow seen as worse than pro-actively avoiding the much worse outcomes that will result if we do nothing and wait for calamity to hit.

      Actually Tauranga or Hamilton might be better choices, given Auckland’s lack of land.

      • te reo putake 14.2.1

        Dunno about Auckland city, lanth. How about the Auckland Islands instead? A communication system based on trained penguins and and a supply ship every six months would test the resolve and commitment of our politicians in a way not seen in Bellamy’s and the various Koru lounges they currently inhabit.

        Sure, it’s a radical proposal, but in the interests of good government, I think we should give it a try.

      • Colonial Rawshark 14.2.2

        Lanth – after Parliament moves up to Auckland, the rest of the country south of the Bombay Hills can put up a big tall wall and they can stay up there while we run our own affairs.

        Seriously – why blow up the Auckland bubble even bigger? Why gut Wellington and leave it as just another struggling provincial town?

        • Lanthanide 14.2.2.1

          “Seriously – why blow up the Auckland bubble even bigger?”

          Hence suggesting other cities than Auckland.

          “Why gut Wellington and leave it as just another struggling provincial town?”

          Because it will be after the quake, but in a much less controlled manner, and with greater loss of life and equity than if we manage it ourselves.

          • Colonial Rawshark 14.2.2.1.1

            Well, I think what you are suggesting is in fact a strategic downscaling of Wellington. Although I think your proposal has merits the politics and economics would be a nightmare to navigate. Unfortunately NZ society can’t seem to plan further in front than its nose nowadays.

      • adam 14.2.3

        Every heard of a place called Palmerston North.

        Go have a look around at all the empty buildings. They are there for a reason.

      • lprent 14.2.4

        Urrgh. Please no.

        Why would we in Auckland want them? They’d get in the way of doing anything constructive and compete with the productive parts of the economy.

        Christchurch should be safe for another hundred plus years, they can concentrate on making it safe…

      • Stuart Munro 14.2.5

        If the earth were to open and swallow this government that would on the whole be a good thing. The collateral damage might be a bit much though. White island would be a good place for them to shift to – though the gannets might find the reek of corruption a bit gamey.

  15. Lloyd 15

    Remember “Aspirations”?
    We should be aspiring to live in a country where, if you get hit by a natural disaster and you need a helping hand to get up and contribute to the country again, then the rest of the country pitches in and gives you that helping hand, If it requires a few billion to be created by an act of parliament then that’s just what needs to be done.
    Anything else is crap government

    • Colonial Rawshark 15.1

      No Act of Parliament is required. The Reserve Bank would simply make an additional annual deposit to the government’s operating accounts at Westpac, using monies that it generated via the number pad on a keyboard.

  16. vto 16

    “If we don’t object to the huge volumes of new credit for housing purchase created for their own purposes by the banks, why should we be so reluctant to see the government act on a much smaller scale in the public interest to help the economy as a whole and the people of Christchurch?”

    Man, the public don’t even know that banks print money every time they make a loan. The public don’t know this. You try telling them that truth – they look at you completely bewildered and just cannot fathom how a bank can print money out of thin air.

    You see it when national party supporters and other ignoramuses laugh at the Greens for their own alternate money ideas. The Neanderthals are clearly oblivious to their own fucking money printing. Dumbos.

    This is the starting point – educate the masses as to the fractional reserve banking system we operate.

    ………..

    At the top of this post ghostie makes a calculation of the true amount of money spent by this government in the Chch rebuild, $2.5 billion.

    Now calculate GST payable to the government on the total rebuild of $35 billion…… circa $4.5 billion.

    So this government spends $2.5billion and receives $4.5 billion. Not a bad scheme is it.

    • Colonial Rawshark 16.1

      You hit the mark here over and over again mate.

      Only thing you are slightly off with is the concept that NZ runs a fractional reserve banking system. It does not. The reason being is that NZ banks can borrow (from local depositers, from overseas, or from the Reserve Bank in an emergency) any amount of reserves that they need to cover the loans and credit that they have extended on a given day. So lack of reserves is not the real constraint to lending behaviour at all.

      BTW even this NZRB publication talks about the creation of money by the Reserve Bank and by private banks

      http://www.rbnz.govt.nz/research_and_publications/reserve_bank_bulletin/2008/2008mar71_1lawrence.pdf

      • vto 16.1.1

        oh …. best educate my own masses of brain cells a bit more then … though that is not what the wiki says http://en.wikipedia.org/wiki/Reserve_Bank_of_New_Zealand

        Maybe its a matter of definition only, while the effect is the same – the ability to print money off a keyboard

        • Colonial Rawshark 16.1.1.1

          If you look at the M1 and M2 metrics released by the Reserve Bank you see it is damn obvious that over the last one or two decades, absolutely massive amounts of NZD have been created out of nowhere.

          The private banking crowd are very scared that a sovereign government might use that power and provide sufficient money to ordinary people to live.

          • dv 16.1.1.1.1

            world debt $61,149,932,797,583
            Which is 61 trillion (I think)
            Interest is about 1 million per min

            NZ debt is 85 billion
            Interest 4 billion per year

            Where does all this money come from— not from saving.
            And who gets all the interest?

            It seem much smarter for the govt to issue/print money for major works and then cancel that ‘debt’ as the major works pays its way

            • Colonial Rawshark 16.1.1.1.1.1

              Yep – the answers are staring us right in the face. Holding back Kiwis, their lives and their skill, vision, ingenuity and kindness because we “don’t have the money” (an outright lie) is criminal.

              • Brigid

                Yes but what are we going to do about it? There’s no political party in government with the guts or philosophical intent to change the system.

                • Colonial Rawshark

                  Everyone appears hyper-scared of pissing off international capital and international financiers. Those guys aren’t afraid of trying to sink a country like Russia or Argentina. What hope does little ol’ NZ have? I think that’s the idea a lot of politicians have. If they even think outside the square, of non-orthodox approaches to begin with.

                  Personally I think there’s ways of working the system and keeping (virtually) everyone on side…

  17. vto 17

    Not only did EQC not have a plan to deal with an earthquake shattering a large NZ city…

    And not only did EQC lie and cheat its way through countless “assessments” employing bullies and liars..

    Now EQC has been revealed for carrying out shoddy repairs. Like nobody would have guessed – sarc./ http://www.stuff.co.nz/the-press/news/66816055/shoddy-quake-repairs-revealed

    This is the next leaky home crisis. Not only shoddy crap repairs, but loads and loads of “as-is” homes which have been bought cheap and done up even cheaper. Pre-earthquake homes will be dogs in the future. It will bite and keep biting as the wounds fester and rot and get infected. … . . of this there is no doubt .. . .. . buyer beware

  18. vto 18

    The rest of NZ should really wake up. I am betting the alpine fault will go within this generation (all evidence points to this). I am betting on this by preparing and expecting it and having a plan when all across the south island and the lowest north island all bridges, roads, power, water and supermarket supplies fail, which they will. Slips in all mountains will cause all rivers to flood, bust banks and flash flood. The only way to get around will be on foot (human or horse) or by air and boat. The country will be overwhelmed and require heavy assistance from Australia.

    Has EQC and the government got a plan for this? Who has seen it? Don’t rely on it.

    here endeth the morning’s doom and gloom

    • Barfly 18.1

      I’ll likely be dead by the time it goes

      /shrug

      • Colonial Rawshark 18.1.1

        you gotta wonder what kind of society we’ve built where we simply shrug and say – it’s my grand kids problem.

    • Colonial Rawshark 18.2

      yeah agree with you that this is a non-zero risk within the next 10 years. Personally, I think that a lot of dairy cows are going to end up as steak.

    • greywarshark 18.3

      I looked at last year’s Press which gave the revised flooding areas of Christchurch in the case of a tsunami and they were extensive. Knowing that Christchurch is flat doesn’t prevent surprise from seeing how far into the burbs, to Avonside, the water could travel. How would we cope with this and its aftermath? And what if there was a huge storm teeming rain at the time with water flowing down meeting water coming up? It’s possible but we would be unlucky for that occurrence. Our leaders would say with irritation let’s concentrate on present problems, count on being lucky and not pay serious attention to possibilities.

      The difficulty is thinking seriously about planning and acting to achieve a good society for all is old-fashioned. In this circumstance The Standard is old fashioned curating a rare philosophy and should be prized and nurtured to continue the thinking and concern and exploration of method. The fine craftsmanship of good, wise and pragmatic thought of leaders and elders of society should be practised and taught and those skills passed to many apprentices who, like volunteer firefighters,will bring skills and dedication to others’ wellbeing to the fore at times of stress and need.

      Our society and its culture can study the stars, as have other older societies that have been eclipsed or died out, but we can’t solve the problems of managing our own existence on earth.
      Just bringing our own intelligence on the most efficacious things to do for ourselves is nearly beyond us all, when that thinking is essential for each other and our petri dish, the earth.

      Now the wealthy, who are often the movers and shakers are booking onto trips to see the planet before it fades or disappears. The wealthy’s idea of adventure tourism is now to pay for seats in spaceships to look at our home from afar, and journey to even rarer experiences in far-flung expensive communes that exist on the outer edges of our human supply chain in deathly space.
      edited

  19. Tom Gould 19

    The underlying premise of this post is flawed because there is no real shortage of cash to rebuild Christchurch, just a reluctance by the private sector insurers to pay customers what they owe them. The taxpayer has been very generous, including through EQC, and continues to be so.

    • ghostwhowalksnz 19.1

      The taxpayers arent generous through EQC.

      The EQC has money set aside as an insurance company for such an eventuality, and the government took money every year as a sort of reinsurance.

      Get it right. Homeowners have paid premiums for any payouts. No one suggests if you collect a life insurance policy its because the shareholders are being ‘generous’

      • Tom Gould 19.1.1

        EQC reinsurance was nowhere near enough, nor was the natural disaster fund.

    • Unicus 19.2

      Absolutely true – however according to the copious volumes of information now available on the very public modus operandi of corporations profiting from natural catastrophe – Naomi Klein et al . Private capital only invests in opportunities of greatest gain after a disaster – those opportunity’s have probably come to an end in Christchurch now that its architectural heritage has been atomized and cashed up – the rest is peanuts

      Check out

      wwwkickstarter.com
      thedailyblog.co.nz2014/03/19 disaster capitalism in Christchurch

  20. vto 20

    It is an incredible sign of the times that what gets done and not done today turns on the finer details and structure of an ailing financial system, rather than more important matters like the wellbeing of the community, or the availability of people to do the work, or what will make for a brilliant city in the future….

    all hail the mighty bankers ……

    the world cannot operate without bankers …..

    (its a canary in the mine for those more observant imo)

    • Colonial Rawshark 20.1

      Correct. Our decision makers now care more about getting the virtual accounting world of spreadsheets and ledgers looking right, rather than creating value and benefits for the community and for people.

      We are a civilisation on the rapid slide downhill.

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