Worthless asset - Part 1 - Why is it worthless?

A "investment" huh? Kiwirail is virtually worthless reports Bill English in the NZ Herald.

So what DID Labour and the Greens say about the renationalisation of the railway business? How did it come to this?

Well it started when it was privately owned and Tranzrail. Michael Beard was brought on board to be CEO because the share price of the railway had been in decline for several years. In essence, the railway had been run in the 1990s by railway enthusiasts who treated it as a network business, and expanded services. Beard found that it was not that much of a network business, but a business based on commodities. In essence about transporting:
- Containers long distances between ports, or between ports and major centres (Main trunk line Auckland-Invercargill, and Hamilton-Tauranga);
- Coal from the West Coast to Lyttelton, with minor coal business from Huntly to Glenbrook and Southland to South Canterbury;
- Logs and timber products in the Bay of Plenty to pulp and paper mills, and the Port of Tauranga;
- Milk from southern Hawke's Bay to Manawatu, and within Taranaki.

There is also a handful of other bulk commodity businesses, like LPG from Kapuni, and fertiliser to Gisborne, but that is basically it. Passenger services in the South Island are also profitable (urban passenger rail is subsidised like many bus services).

Michael Beard told the government that unless it subsidised the business, he would close unprofitable lines, and was seeking rail customers to invest in rolling stock to manage the capital risk. For example, log wagons gets damaged regularly in that traffic and have a long life. He was concerned that customers would seek short term contracts that could mean the wagons are useless to TranzRail if it loses the contract to road freight. On top of that, he also recognised that if TranzRail bought new wagons, its customers knew it had little option but to discount heavily to get business from them - because unlike trucks, which have more flexibility, if a major rail freight customers gives up rail for road, the wagons are useless. A big capital risk in a small country.

So Labour panicked and started on a path of rail policy. One of the first steps was to rescue Auckland ratepayers from Auckland councils' own insanity, and stop them buying the Auckland rail network from TranzRail. The Auckland councils were willing to spend over $120 million buying the network. Dr Cullen decided to override them and spend $81 million instead. The Treasury valuation at the time was that it was really worth no more than $20 million. From then we have the story of pouring money into Auckland's commuter rail network, but the bigger story was also bubbling along.

At the time TranzRail was seeking to bail out of the business, so after some extensive discussion, Toll Holdings was interested in buying the company. So a Heads of Agreement was signed with Toll that it would buy TranzRail (a private transaction), the government would buy the whole rail network for $1 and spend $200 million upgrading the track. Toll would have to pay track access charges to run trains on the line, and if it failed to keep up minimum levels of service, others could provide services. Toll promised to invest $100 million on new rolling stock.

The Greens fully supported this policy

In essence, Dr Cullen relieved Toll of the risk of the infrastructure, subsidised an upgrade of it, in exchange for Toll paying to use the network to cover ongoing maintenance. The only problem was that Toll didn't keep its end of the bargain.

Toll said it couldn't afford the track access charges required by OnTrack - the Crown company that took over the tracks. The Greens said the government should offer discounts (subsidies) on condition Toll carry more freight. So Toll kept paying less than the full amount, and ran trains, until ultimately it became clear it wanted out, and we all know what happened next.

Dr Cullen bought the lot - and bought it well above market price, when it really is worth very little. The claims that it was an "investment" are fatuous.

Kiwirail's locomotive fleet is aging and many will need replacing in the next few years if services are to continue. Much of the track is also facing renewal, as are some bridges. As rail is a long term investment (locomotives and wagons last a long time), it is only worth doing this if there is enough traffic to cover not only operating costs, but renewals and a return on capital. Otherwise, it is destroying wealth.

Indeed, when the railway was still state owned it used to run lines into the ground too. The Tapanui branch in Southland carried logs reasonably efficiently, but only barely covered operating costs. When a flood knocked out part of the track, it wasn't worth replacing it as there wouldn't be enough revenue to cover the cost - so it was closed.

The rail network is worthless if the view is taken that it all needs to be replaced in the next few years. I don't believe it would remain worthless if a business like approach were taken, like Michael Beard had suggested (although he wasn't entirely correct).

NEXT - What to do with rail?

Tax slavery instead of wage slavery?

Frankly what's the difference? The difference is so called wage slavery is working for money for yourself. Tax slavery is working for money for other people.

Around a week ago Idiot Savant posted on how he thought people couldn't truly be free if they had to work to pay the rent, pay for food etc. They could only truly be "free" if they could decide for themselves how to spend their time, essentially, if they didn’t need to work to have enough money to live.

He believes that employment is “wage slavery” and that the government should provide a guaranteed minimum income that would allow everyone to be housed, clothed, fed and essentially maintain some sort of basic existence (which in many developing countries would be called rich). Only then, does he believe, will people be truly free because they could do what they want with their own time. You could spend your whole life in leisure, start up business, be an artist or whatsoever. Freedom?

Well he neglects to note the obvious point that the “government” does not create money out of thin air (or rather when it does it is called inflation), and has to take the money for such an income from everyone else. The person bludging (which IS what it is) on the guaranteed minimum income may be “free”, but it enslaves everyone who DOES work for an income, or earns income by any means. What happens if half the working age population decides to take a break? Those who don’t must work and pay tax sufficient for themselves, their families and those of the “free”. That is tax slavery. By what moral measure should the existence of others force you to sustain them – and Idiot Savant wants you to do so unconditionally. Because someone having to do something for a living is slavery.

It’s not. It’s reality. If everyone sat back wanting their guaranteed minimum income, everyone would starve. Short of having been gifted (such as through inheritance) or winning a substantial sum, people have to sell their services – as a combination of mind and body – for others to exchange it for money, or goods and services. It is reality. The same reality states that if a house isn't maintained, the roof may leak, or it may catch fire, or the piles may collapse. It is not "slavery" that you need to maintain assets like this to avoid certain risks.

It is reality.

Leisure is a luxury, the wealthier and more productive people have become, the more leisure they have. The answer to more leisure is not to pay people to be unproductive, but to set people free to be as innovative and productive as they wish, within the bounds of individual rights.

That, you see, is what Idiot Savant and Chris Trotter do not understand. They are stuck in the Marxist mindset that employers have their boots at employees' necks. Perhaps when either of them have established businesses, mortgaged homes, worked extensive hours for nothing to make a business work, and then hire people, can they truly judge what it is to be an employer - and stop thinking they all look and act like Montgomery Burns.

You're buying some trains!

Yes according to the Dominion Post, NZ$115 million, partly made up of new locomotives, from the centre of excellence - China. Partly 17 "new" (secondhand ex. British) carriages to replace the ones for the long distance passenger services.

No you wont get a free ride on the trains, because although you own it, the vagaries of "public" ownership of the means of distribution means you have none of the benefits of private property ownership, and all of the costs of it. Now the carriages were already committed by Dr. Cullen, and to be fair if you split out the long distance passenger business, the TranzAlpine express is a profitable service that returns enough to pay for new trains. The TranzCoastal (Picton-Christchurch is more marginal), and the Overlander (Wellington-Auckland) we all know is probably at best breaking even on operating costs (with the drop in tourism hurting it).

This isn't helped by Green MPs virtually never using the services for travelling around the country.

Of course it also means that Kiwirail's competitors are not only subsidising the infrastructure, but now the motive power behind the trains. Think truck tractor units will be subsidised? Of course not.

What I found disturbing was that a new Treasury run infrastructure unit would "develop a 20year plan ranking projects according to their economic benefit". Given the first thing that has been approved are a bunch of locomotives, I wouldn't be trusting the evaluation of economic benefit for one moment.

If this unit approves electrification of Auckland's commuter rail network then it will be transparently clear that the appraisal methodology is nonsensical.

If this unit IS going to do good, perhaps it should also appraise based on "will the government spend this money better than the taxpayer" and "does this spending crowd out the private sector in the same sector". Then the unit will spend little time saying "no" and "yes" at least 90% of the time.

Bill, it's simple. The railway should borrow money itself to invest in capital that will generate a return on investment. OnTrack should develop an open access regime so that others can operate on the railway. The roads should be commercialised, and the power companies should raise capital privately. Give Telecom back its private property rights and amend your RMA reform to focus on private property rights. There is nothing else the government can do to assist in the development of infrastructure beyond getting the hell out of the way. Cutting company tax to 20% would be a good first step

Stuff the Times?

Hmm. Stuff now looks a bit like the Guardian website, or the Times website, or the Independent website. Well the headline fonts anyway.

What's that about? And will the Fairfax newspapers in New Zealand start collectively having content that even approaches the Times? (even the Guardian, commie rag as it is, has more quality content - and at least everyone KNOWS it is a leftwing paper, it doesn't pretend to be otherwise).

When the Church endorses grand theft

As one of my eccentric interests, I like to read about the peculiarities of dictatorships around the world. They are a great lesson in what to watch out for, and how not to run countries, and the stories that come from the excesses are often too ridiculous for fiction.

The two common themes of most dictatorships are theft and murder. Most combine both, it is merely a matter of scale. Some do more murder than theft, Pol Pot and Hitler being good examples of that. However some do more theft than murder.

Dictators take money from citizens through taxation, through appropriation of land, appropriation of businesses, granting privileges and monopolies to their own businesses and raiding aid budgets, as well as sly deals with foreign companies as pay offs to trade with nationalised industries. What they do with that money can defy the imagination.

So what has that got to do with the Vatican? Well the picture above is of the Basilica of Our Lady of Peace of Yamoussoukro, Côte d'Ivoire, with it standing out clearly on Google Earth. It is listed as the largest church in the world by the Guinness Book of Records. It could merely have been a monument to the more thieving and relatively less murdering autocrat Félix Houphouët-Boigny, President of Côte d'Ivoire from 1960 to 1993 when he died, with an estimated personal wealth of over US$7 billion.

The Basilica reflected his mad project in 1983 in shifting the capital from Abidjan to Yamoussoukro. It was a small agricultural town until he had built a series of large buildings and a airport capable of handling Concorde charters. The Basilica cost US$300 million in 1985 values, and took four years to build. Interesting for a country with a per capita GDP (PPP)of US$1,736 per annum, a literacy rate of just over 50%, and the 19th highest infant mortality rate in the world according to the CIA World Factbook. The Basilica is built of imported marble, and sits essentially in the middle of a jungle.

So what, an African dictator wasted money.

Well the Vatican didn't need to consecrate it (French - translated here). To give him his due, Pope John Paul II required that the government promise to build a hospital nearby before he would consecrate it. He laid the founding stone, which lays to this day as all that has been built of the hospital. Not that this would have made it ok - it is grand larceny. This behemoth of a building, is a grotesque palace paid for by thieving the wealth of the country, of people with an average life expectancy of 49 years. For the Vatican to essentially brush that to one side, and claim to be the bastion of morality for the globe is so ludicrously amusing if it weren't ignoring the tragic consequences. Even had the hospital been built, it wouldn't excuse this grand waste.

The Pope's dedication clearly endorses it:

" Par le Chef de l’Etat, cette basilique a été édifiée en hommage à Notre-Dame, en hommage au Christ rédempteur qui appelle tous les hommes à se rassembler dans l’unité de son Corps"

Treating it as if Houphouët-Boigny built it, then says by HIS generosity the social centre is being built next to it:

Et aussi, grâce à la générosité de Monsieur Félix Houphouët-Boigny, un centre social, la Fondation internationale Notre-Dame de la Paix

This is a church that according to Wikipedia:

"the president commissioned a stained glass window of his image to be placed beside a gallery of stained glass of Jesus and the apostles. This image of Félix Houphouët-Boigny depicts him as one of the three Biblical Magi, kneeling as he offers a gift to Jesus"

Imagine what a boost Houphouët-Boigny got by having essentially Vatican endorsement, not only for building the church, but also being a generous guy, with a quasi-religious Biblical significance!

No doubt the Vatican believed the thieving demagogue President when he said it would be a bullwark against Islam and animist religions. After all, that's what's important in the world isn't it? When Time magazine asked the Vatican about the money it said it was the President's money and land and "The size and expense of the building in such a poor country make it a delicate matter. But it is a project close to the President's heart, and he sees it as an experience of faith. We want to respect that."

Now you see what the Roman Catholic Church respects - the thieving of a poor nation by its faithful autocratic Catholic President, and the building of a monument to him with such money. Shame the Pope couldn't have simply consecrated some small modest building instead, as an act of defiance and protest, and asked for the people of Yamoussoukro to get a reticulated clean water supply and sewage system instead. That would only save lives not souls though.

Cromwell Crown Hotel London? Don't even think about it

Look it up on Google you'll see the website, you'll see numerous sites with the description of it being innocuous.

No.

This is a shithole, probably the dirtiest hotel in Britain according to the Sunday Times AND Trip Advisor. Surely the highlights of that review are:

"Most impressive is the smell. I’ve never come across anything quite like it — a swirling, gag-inducing mix of sweat and industrial-strength disinfectant, with elusive top notes of spice and decay"

"The mattress was a step into another, stomach-churning world: the eventful history of its long, long life was catalogued in a Jackson Pollock of bodily fluids. Among many other things, it looked as if someone had opened a vein in that bed. I wouldn’t have blamed them. "

"I decided to watch TV until unconsciousness arrived. The ancient set didn’t seem to work, though, so I felt back along the wire to make sure it was plugged in properly. Bad move. As I groped under the chipped MDF dressing table, I touched the plug — and the back cover promptly fell off, leaving the live wires exposed to my wandering fingers. There’s nothing like a 240-volt shock to put things in perspective."

"The phone by my elbow — yes, there is a phone — is encrusted with muck, as if a succession of people have jabbered into it while eating peanuts."

Now I might say anyone expecting much for £55 a night in London is having a laugh, but while you can expect small and basic, you should expect clean and safe. The Cromwell Crown is, quite possibly, the worst hotel in London. You cannot get a good deal to stay here.

Time to set students free

Clint Heine blogs about the next attempt to free membership of student unions from the absurd half-arsed legislation at the moment, whereby the majority of those who vote to compel all others to join a student union, regardless of whether or not that association represents their values.

It is a very simple issue, one that so clearly out the "we know what's best for you" authoritarian bullying of so many on the left. It is violence of a quite sinister kind to say you can't buy education from a university, without joining an organisation that does nothing that interests you and which represents the opposite of your views. However, I guess given that student unions have so often been the training grounds for Labour and Green party MPs, kind of makes it ok to force everyone to belong right?

Those that proclaim freedom of association suddenly go "oh um student unions are different". They argue "student unions provide lots of services for students", which of course you could say about ALL unions, or indeed most voluntary associations. The student union could simply exclude participation from those who aren't members, it's not that hard, and hardly an excuse to force people to belong to something they don't want to join. They argue "students advocate for students", which surely should be up to students. I could argue Libertarianz advocates for all individuals. Communist parties claim to represent all workers. The Maori Party no doubt claims to look after the interests of Maori.

Student unions could be organisations that provide facilities for students and advocate for them at the university, and make life at university more interesting. Most do some of that, but they also become rallying points for left wing activists. I was sick of student unions claiming to represent my views when they never did - they got 10% of students voting, and were chronic mismanagers of other people's money.

However, none of that actually matters. What matters is that you are not forced to join an association if you don't want to. Student unions should have to convince people to join them, not force them.

If you can't understand why force is wrong, then maybe I should take some money off you once a year, and tell you that you've joined an organisation you didn't want to join, and that it now represents you.

ACT'S Voluntary Student Membership Bill should be supported as government policy.

I did ask a while ago that all National candidates should be asked whether or not they support voluntary membership of university student unions.

ACT's bill will be a perfect way to out those National MPs who are lily livered wimps, that don't believe in freedom of association. Which is why John Key should declare it is party policy - let those who don't support it show themselves. Let's hope I am wrong, and none exist, after all, what better way to undermine one of the best force funded training schools of the Labour Party than to stop making students pay for them if they don't want to.

Ryugyong hotel being completed?

Not PC describes it as the worst building in the world. Wikipedia tells about its abortive history. The building that looks like a shard of glass has fallen from the sky or shot itself out of the ground.

However, someone has decided to upgrade it. Egyptian company Orascom is refurbishing it to make it a tower for cellular phone service. Quite how many customers it expects for the phones or the hotels is a mystery especially since most citizens are not permitted a private phone (for obvious reasons), and tourism is rather low. So now we have pictures of it being clad in glass (right).

Scaffolding at the top presumably to allow telecommunications equipment to be installed. Although the rusty crane that has been at the top for around 20 years appears to be there (imagine the worker who was in there - and had to get down).

It has been described as the worst property investment ever by the Times. It apparently will be finished by 2012, which tells me either Orascom knows something nobody else does, or it has far too much money.

Jobs summit outcomes?

I agree with most of what Not PC has already suggested here, here and here, as an alternative view to the Jobs Summit. These are:
- Government should get out of the way;
- Government should resist pressures for protectionism (one positive thing it COULD do is lobby hard internationally to reboot the Doha Round to make the biggest push for free trade since the 1950s);
- Production drives the economy, not consumption. Precious little government does encourages production. As Government spending takes money out of the hands of the productive, there should be further tax cuts. I'd suggest simply dropping company tax to 20%. What better signal to the world to locate to NZ?
- Abandon the minimum wage;
- Cut government salaries;
- Allow malinvestments to be liquidated;
- Restrict the Reserve Bank's ability to inflate the currency;
and so on.

However, in one respect I DO digress from PC, I do NOT believe all government spending is consumption. It is possible for government to spend money and generate more wealth than it spent. However, this really only happens in two areas:

1. Spending money on capitalising SOEs to expand. A very risky endeavour indeed. Singapore does it well, but you'd question whether NZ governments ever can do it well. Air NZ and Kiwirail being Labour's greatest dud investments.

2. Spending money collected from consumers of a government service to benefit those consumers beyond the cost of the spending. I mean roads. The private sector is almost entirely shut out of providing roads, so government taxes road users and can spend that money on improving roads to reduce delays, wasted fuel, accidents etc. For example, the widening of the highway through Paremata-Plimmerton north of Wellington generated savings in travel time, fuel etc of around $5 for every $1 spent on it. The dangerous side to this is politicians get excited about roads too much, and want to spend money on the ones that DON'T do that. Transmission Gully and the Helen Clark Memorial tunnel (aka Waterview Connection) are examples of this. Japan is littered with such bridges of the sort Henry Hazlitt referred to.

In short, if anyone is advocating spend up on projects, they need a seriously rigorous piece of economic analysis. Will the project really generate wealth based on proven demand, what is the risk contingency on this. If there is a reasonable risk it wont generate at least $2 for each $1 spent over a 20 year period then it isn't worth doing. Sadly the ideas that have come out include the insane idea for a cycleway (although if the government was rational about Kiwirail it mind find it has plenty of corridors for one) and the Green Party's rather predictable favourites.

However, regardless of the economic efficiency of government spending it does not justify it morally. Theft is still theft. I undoubtedly think I can spend your money better than you can, but it hardly justifies me doing so does it?

Finally, it is tragically notable that the leftwing commentary on the Jobs Summit has been virtually nothing about substance or policy (with the exception of the Greens. The Greens played the identity politics card and then ideas), but about identity politics. The Standard showed pictures of men, said everyone has an ideology (true), damns the cycleway (but forgets that Labour started pouring money into cycleways itself) and makes a few comments about what was said. However no new ideas. Idiot Savant goes on about men, and then damns the cycleway (yet this is Green Party policy), and goes on about identity politics again. Hand Mirror thinks it shows John Key does not value women. Apparently women can't be represented by organisations that are open to them and include them.

Not enough women, not enough people of different races. Apparently if you have a vagina or differently coloured skin it means you have different ideas. Those don't come from a brain. If you don't feel represented there, then say so - it isn't because there aren't enough women, Maori, Koreans, blondes, cross-dressers, asthmatics, pianists, vegetarians, balloon fetishists, dancers, nudists or twins - it is about ideas. The truth is that if the summit was full of leftwing women, which would surely cheer many on, the ideas are unlikely to be about getting government out of the way of the productive.

Most of those at the summit were there because it showed they were wanting to work with the government, and because they wanted some booty from the rest of you.

Like I said before, the Fourth Labour Government had an economic summit conference shortly after it was elected, and promptly ignored most of what came out of it. That seems the appropriate precedent.

UPDATE: I see the whingy 23yo unemployed woman who thought the world owed her a living at the Lange Economic Summit Conference, Jane Stevens, retains her Marxist view of the world in the Herald. Given she works for an organisation partly supported by taxpayers and ratepayers, I'm hardly surprised. Shame her passion and commitment didn't teach her that the government produces nothing, and that the free market generates wealth.

Sending freedom messages to North Korea

A Japanese organisation advocating for victims of abduction by North Korea is calling for people to send spam faxes to North Korean fax numbers, in order to facilitate change and revolution.

The blog post above includes the fax numbers, suggests you send a message in Korean only with a photo of Kim Jong Il - because it is illegal to throw away images of the General Secretary. The message should not be confrontational, but be about sending factual information, making the recipient think, and it is important the faxes be individualised.

It IS an innovative approach. Takes a bit of effort to get some Korean written by those who do not know the language, and it isn't cheap. North Korea charges a lot of money to terminate any fax calls in its country (after all that's foreign currency it can earn from overseas telcos).

Imagine if you were in a totalitarian state, knew little better and received a fax from overseas that told you that some of the things your government told you were a lie. Would you tell anyone else? Would you keep it secretly? Would you send a response?

Obama's deficit, spend and tax budget

So President Obama has released his budget. If you believe the hype it would be different, well I guess it is:

- US$1.75 trillion deficit. You just can't begin to imagine how big that is. 12.3% of GDP. He's going to reduce it to US$533 billion by 2013. Wont hear him talking about mortgaging children though;
- He wants to spend US$3.6 trillion, around US$25,000 per taxpayer. However he says he doesn't believe in big government;
- He wants to spend US$634 billion on a health care reserve fund, to introduce socialised health care, though you might wonder whether if every taxpayer spent that around US$2000 a head on health insurance they would be more than covered;
- He wants to increase taxes on the rich (spit on them all of course) those earning over US$250,000 to around 40%;
- He wants to cut military spending, largely as a result of withdrawal from Iraq and Afghanistan;
- He wants to create a cap and trade programme for CO2 emissions that the Federal government will profit from.

Change you can believe in? Or is it just change people are left with when they and their children face this monumental debt to repay? He says he doesn't believe in big government. Who is he kidding?

£15 London-New York return plus taxes

Yep, that's where airfares have gone. Virgin Atlantic announced today it was selling seats in riff raff class at the lowest marginal price in ages. £15 is barely enough to cover the cost of loading an additional meal.

Now to be fair, another £50.30 comprise taxes and levies from the US side, and £55.30 comprises taxes and levies in the UK, plus £106 Fuel surcharge (which goes to Virgin Atlantic).

So it's really £121 fare plus taxes. Still this is a fare to simply recover costs, and let's be clear airlines don't make money on the Atlantic in economy class. A full economy class section loses money for Virgin Atlantic if it carries nearly no one in premium economy class and upper class.

So it's not just the drop in bankers flying the Atlantic.

and don't forget, landing slots at Heathrow are allocated somewhat on a "use it or lose it" provision, so Virgin has to fly the flights to hold onto the slots - which of course are worth a fortune when there isn't a recession!

Jobs Summit?

I largely loathe meetings, unless it is an occasion to tell people what I think and what to do. If I want to know what others think, I'd rather read or hear about it one on one. The bigger the meeting, the less productive it is, because the intelligent people have their time curtailed by the fools.

Having a talkshop about how to create jobs is like having any sort of meeting.

Meetings are where people talk about doing something, not actually doing it.

Imagine a reproduction summit interested in boosting the number of babies. Think how much more productive people would be simply going out and doing it.

So ask yourself this. Are the people at the Jobs Summit (and those complaining they haven't been invited) people who ever create jobs anyway? Of those handful who do (business), wouldn't they be better off being entrepreneurial, or do they see this as a nice taxpayer subsidised excuse to network with others?

I remember the fourth Labour Government, which had Summit Conferences on the economy, Maori and even railways. None of which did ANY good, except make the unproductive feel warm and fuzzy. You see after all that, David Lange, Roger Douglas and co did what was best for the economy, ignoring most of the views expressed at the Economic Summit Conference.

John Key and Bill English could do worse than just sit down with Roger Douglas and listen. They might learn something.

Dr Cullen and Air NZ

Well it is worthwhile noting both Air NZ's drop in profit and the pending retirement of Dr Cullen. Especially given it is entirely because of Dr. Cullen that you all have a share in Air NZ's future, a piece of history the left conveniently whitewashes over. You see what happened back when Air NZ was in crisis is something that SHOULD have brought Labour down in the 2002 election, but Bill English was too inept, and the mainstream media lacked sufficient journalistic talent and nouse to research it properly. Fortunately, almost all of the relevant papers are now on the Treasury website.

The pro-Labour history around this is simple:
- Air NZ made a bad investment in Ansett Australia;
- Air NZ needed a capital injection to save Ansett and expand its business;
- Two airlines offered this, Singapore Airlines and Qantas;
- As the government was considering both deals, the airline went into crisis;
- This was exacerbated by 9/11 and the global drop in air travel;
- Had Labour let things go, Air NZ would have gone into receivership, damaging tourism and resulting in the end of long haul flights with a NZ brand on them, hurting tourism further. There wouldn't have been flights to many centres in NZ;
- Dr Cullen bravely saved the airline, but required it dump the Australian liability Ansett;
- Then Dr Cullen wisely sought an international partner for the airline in the form of Qantas, because it "makes sense" to have a single South Pacific dominant carrier against the "world".

In other words, the private sector cocked up, and while the government was considering bids for investing in the airline, it was going to fold, and Dr Cullen saved the day. Much of that is nonsense.

That version of history misses out a few facts, facts that demonstrate that the whole situation came about because first the Australian then the New Zealand government stuffed up:

- Air NZ invested in Ansett Australia because the Australian government reneged on a deal for an "open skies agreement" between Australia and NZ. Air NZ originally wanted to set up its own Australian domestic operation in competition with Ansett and the then Australian Airlines. The Australian government reneged on the deal (the famous fax from Laurie Brereton to Maurice Williamson) because it feared it would reduce the price it would get for selling Qantas (which was subsequently to merge with Australian Airlines);

- The Australian government made it clear that it would far prefer Air NZ invest in an established airline - but it was not allowed to invest in Qantas. So Air NZ bought 50% of Ansett in 1996, but was not permitted managerial control at that level of investment and Ansett was required to provide various "social services" (unprofitable routes);

- Increasing frustration with the management of Ansett saw Air NZ finally decide to buy the whole thing out. However it paid too much, it outbid Singapore Airlines as it had aspirations to grow to the size of Qantas. What it found with Ansett was an airline in desperate need of restructuring and new capital;

- Singapore Airlines, which already owned 25% of Air NZ sought to increase its investment to 49% of the airline group, as a capital injection in June 2001. This was unanimously supported by the Air NZ board, but needed support from the Kiwi shareholder - the Crown. Official advice was that issues from such foreign ownership were manageable and that it appeared this was the best option, but the government needed to act promptly.

- Qantas lobbied the New Zealand and Australian governments to oppose Singapore Airlines increasing its investment in Air NZ. Obvious of course that it was seeking to kneecap its biggest competitor. Official advice in June 2001 was against the proposal on competition grounds. The Air NZ board rejected the proposal and Singapore Airlines refused to sell its shareholding, effectively making the proposal academic. Qantas continued to lobby for it;

- In July Cabinet REJECTED the option preferred by Air NZ and officials, preferring either a part state/part Singapore Airlines shareholding or a Qantas takeover;

- Air NZ wrote to Dr Cullen saying that "it would seem that the Government has embarked on a high risk and speculative course that has the danger of putting the Air New Zealand group at risk". The then Acting Chairman warned of the "grave financial risk faced by Air New Zealand Ltd as a result of the current uncertainties;

- Dr Cullen tried to pursue a half and half option allowing some Singapore Airlines investment along with some Crown investment, which was bypassed as the Crown bought out the airline.

Oh and as a side note, the economic geniuses at the Greens believed Air NZ was NOT in a dire financial straight and opposed any new foreign investment, but promoted taxpayer shareholding.

Dr Cullen helped bankrupt Air NZ, because of his peculiar pursuit of the Qantas deal, and the delays in approving the Singapore Airlines investment proposal. You might ask yourself why Dr Cullen didn't like money from Singapore, but liked it from Australia. Not xenophobia surely?

While it is all a bit more complicated than that, the truth is that the slow progress of Dr Cullen and the interference of Qantas has cost the NZ taxpayer dearly, as well as Air NZ. The Greens didn't help either. Air NZ warned that the government's approach created grave risks, and it was right.

So when Dr Cullen steps down, it is worth remembering part of his legacy - the legacy of the lecturer who couldn't make a critical business decision, and surrendered a major strategic opportunity for Air NZ to be a significant airline.

and of course don't forget the Kiwirail deal of the century!

Obama slippery when cliched

So President Obama has done another apparently "inspiring speech". Count the cliches:

- We will rebuild, we will recover;
- What is required now is for this country to pull together, confront boldly the challenges we face, and take responsibility for our future once more;
- Well that day of reckoning has arrived, and the time to take charge of our future is here;
- Now is the time to act boldly and wisely – to not only revive this economy, but to build a new foundation for lasting prosperity;
- But while the cost of action will be great, I can assure you that the cost of inaction will be far greater;
- History reminds us that at every moment of economic upheaval and transformation, this nation has responded with bold action and big ideas;
- For we know that America cannot meet the threats of this century alone, but the world cannot meet them without America.;
- For in our hands lies the ability to shape our world for good or for ill;
- Their resolve must be our inspiration. Their concerns must be our cause.

Blah blah. What REALLY is he doing? Propping up state education, subsidising the alternative energy sector and "reforming" health care. THAT's his plan. He shows NO understanding of why the economic crisis has occurred, making it an excuse to pursue his statist plans for energy, education and health.

He talks drivel about how the economic crisis occurred. "We have known for decades that our survival depends on finding new sources of energy. Yet we import more oil today than ever before". So what? That didn't create the recession, the price of oil is right down again.

"The cost of health care eats up more and more of our savings each year, yet we keep delaying reform" It is also some of the best health care in the world, people don't languish on waiting lists and while it needs reform, he remains empty on what that means. It isn't going to be free for free.

"Our children will compete for jobs in a global economy that too many of our schools do not prepare them for" Indeed, but he opposes competition in the education sector.

"we still managed to spend more money and pile up more debt, both as individuals and through our government, than ever before" yes and you've cut spending and Federal debt, hang on... oh and yes all individuals are to blame aren't they, justifies anything you do.

"we have lived through an era where too often, short-term gains were prized over long-term prosperity; where we failed to look beyond the next payment, the next quarter, or the next election" You mean like when you spend a fortune of future taxpayers' money to bail out businesses and "invest" in subsidies? What's this "we"?

"Regulations were gutted for the sake of a quick profit at the expense of a healthy market" such as? Nice leftwing rhetoric and that's it.

"People bought homes they knew they couldn’t afford from banks and lenders who pushed those bad loans anyway" However you want to bail them all out from their stupidity yet you talk responsibility??

"I asked this Congress to send me a recovery plan by President’s Day that would put people back to work and put money in their pockets. Not because I believe in bigger government – I don’t" However I don't mind it at all, and don't have any other solutions.

"I called for action because the failure to do so would have cost more jobs and caused more hardships" and will do so more in the future. You're guessing.

"More than 90% of these jobs will be in the private sector – jobs rebuilding our roads and bridges; constructing wind turbines and solar panels; laying broadband and expanding mass transit" Generating what economic benefits? Yep you don't know do you?

"I have appointed a proven and aggressive Inspector General to ferret out any and all cases of waste and fraud. And we have created a new website called recovery.gov so that every American can find out how and where their money is being spent." That website is so shallow it isn't funny.

" the budget I submit will invest in the three areas that are absolutely critical to our economic future: energy, health care, and education" Unlike property rights, law and order, roads, services, manufacturing and primary production. Why these three? Nothing.

"Well I do not accept a future where the jobs and industries of tomorrow take root beyond our borders" Code for "I'm an economic nationalist who believes in picking winners with subsidies".

" I ask this Congress to send me legislation that places a market-based cap on carbon pollution and drives the production of more renewable energy in America." China's laughing, Al Gore is wetting himself in onanistic frenzy in his mansion.

" I believe the nation that invented the automobile cannot walk away from it. None of this will come without cost, nor will it be easy. But this is America. We don’t do what’s easy. We do what is necessary to move this country forward." Easy to spend other people's money to prop up a failed sunset industry AND claim to be an environmentalist doing it.

"an American who has never stopped asking what he can do for his country – Senator Edward Kennedy" I believe the phrase "his country" would be more accurate if "his" was replaced with "young" and country had only one syllable.

"In order to save our children from a future of debt, we will also end the tax breaks for the wealthiest 2% of Americans" Note the term "break". As if they get out paying less than everyone else, when they pay much much more. The use of "children" to tug at heart strings.

He promises to cut spending, yet spends more. He talks of warning of protectionism, but has been caught out promoting it, and as a Senator positively voted for it. He talks about recovery, but is seeking to support the unionised federal education system, and fails to understand that government hinders growth and investment.

It's slippery, devious and it isn't change - it is a born again Carteresque socialism that believes in spending your way out of disaster, and talks about debt, without doing anything about it. He talks about avoiding earmarks, but so much of his recovery package was about propping up many Democrat cause celebres.

Obama can make a speech sound good, can plaster it with cliches that inspire the shallow personality cult followers, but behind it all should scare people. Scare them that the President thinks the crisis is about renewable energy, upgrading government schools and healthcare reform. He's so far off the mark it isn't funny, and his collectivist rhetoric should send chills down the spines of those who DON'T believe they borrowed too much, DON'T want to commit to another year of education and DON'T believe they owe anyone anything because of their existence.

UPDATE: Mark V. rightly points out in the comments that Obama's statement implying the USA invented the automobile is false, as it was invented in Germany and credited to Karl Benz. Will the left damn Obama for being ignorant and non-worldly for this mistake, as they would have thrown at Bush, or will they forgive the messiah, like he was forgiven for referring to 57 states? Of course, it will be forgotten and anyone reminding you of it in around 3.5 year's time will be treated as racist.

The filthy war on drugs

Will de Cleene blogs on the case of a 92 year old woman killed by the Atlanta Police during a botched drugs raid. So what happened?

- An officer got a "no knock" warrant to enter this woman's house, in other words smash in to the house, based on evidence that he falsified, following a fake tipoff;
- The officers smashed their way into the house, the elderly woman shot her own gun off as a warning shot, because she thought she was suffering a home invasion;
- They then sprayed her with bullets, and left her to die;
- Marijuana was then planted in her basement, to cover up what they did.

Another victim of the war on drugs, a victim of the maniacal attempts at performance quotas for Police to catch "criminals".

However, I guess it's ok to most people, as long as she isn't your mother, grandmother, wife, sister or friend.

Hell in Swat - the Taliban's province in Pakistan

I wrote a week ago about the appeasement of the Taliban in Pakistan. Now David Khattakis of the Sunday Times is the first British journalist to enter the Taliban controlled zone, and he calls it a wasteland of blood and fear. Read his article, some of what he describes are:

- one can still see the remnants of the Pakistan Tourism Development Corporation’s flagship hotel. The building was blown up by the Taliban because it was being used for “un-Islamic activities”;
- The women’s clothes markets are either closed or show banners proclaiming: “Women are banned from entering this market.”;
- Barbers have pasted hand-written posters to their shop fronts saying: “Shaving a beard is unIslamic. We have stopped shaving beards. Please don’t visit the shop for a shave";
- all girls over the age of eight are banned from lessons and, in a symbol of the Taliban’s hatred of learning, the public library in Mingora has been wrecked;
- Snooker clubs and video game arcades have also been banned.

It banned English films on the privately owned cable TV network, then music channels, then any content with music, then content in local languages before finally shutting it down.

The appeasement of the Taliban in Pakistan is deeply disturbing, for it is unlikely to stop there. The vision of a Taliban ruled Pakistan may sound far fetched to some, but so was an Islamist Iran 40 years ago. I dearly hope the Pakistan government is simply preparing itself for a solid invasion and to recapture this territory - and it would be nice if there was broad Western support for this. The Taliban is a despicably evil organisation with stone age philosophy, it's about time that all friends of a liberal modern civilisation declared unerring support for its destruction.

David Walliams finds cure for depression

His 18 year old girlfriend reports the Daily Mail.

Her name is Lauren Budd, she's a model, they've been going out for a few months, and well, he's happy. No doubt most men will think good on him, lots of women will hate him, but he's having fun, she's having fun. For a man who is clearly troubled, but is funny and is rather well off, who can be too surprised?

I happened to see him in a corner shop in Belsize Park, London a couple of years ago, although was rather furtive. Unsurprising given the stalker he had at the time!

Britain's Islamist underworld

Idiot Savant rightly praises the release of Binyam Mohamed who was allegedly tortured in Pakistan and Morocco before being sent to Guantanamo Bay. David Aaronovitch of the Times agrees with the release given the maltreatment of Mohamed, though he is sceptical about what Mohamed was doing, and is more concerned about appeasement of Islamists by the UK.

He quotes a former MI6 agent, Alastair Crooke:

Crooke's point seemed to be that we in the West could learn a lot from Islamism, since it was, in some ways, morally superior to our fly-blown, materialist, individualist societies. Islamism, as practised by Hezbollah, Hamas and President Ahmadinejad, was saying something profound “about the essence of man”. He went on: “It is not just about violence or a whimsical reaction to modernity, it is a new way of seeing our existence...” Islamists wanted “a society based on compassion and justice”.

As Aaronovitch says "Then a piece of apologia that would have impressed any old Communist: “There are many mistakes... the Iranians would admit this isn't the finished article.”"

Meanwhile, former Islamist Ed Husain is concerned that mosques in the UK are run by first generation migrants:

Britain's mosques are run by men who are physically in Britain, but psychologically in Pakistan. They retain their village rituals and sectarianism, and prevent the growth of an indigenous British Islam. And for as long as young Muslims are confused about whether they belong in Britain or elsewhere, we risk handing them over to preying extremists in our midst.

Meanwhile those training to be imams and elders are overwhelmingly in seminaries that are Islamist in outlook:

Of the 27 or so Muslim seminaries or dar ul uloom in Britain, 25 come from the austere, Deobandi tradition - the preferred school of the Taleban. So while British soldiers risk their lives in Afghanistan, in British Muslim seminaries we allow the teaching of intolerance, unequal treatment of women, religious rigidity, the banning of music and theatre, and an end to free mixing of the sexes.

So how less than dominant is moderate Islam then? Husain is concerned that UK mosques and government ignorance about them is providing an environment to foster Islamist bigotry.

The Daily Telegraph reported in the weekend that some Muslim schools in the UK teach kids to never befriend Christians and Jews, and ban music, chess and cricket.

Check out this school:

Al-Mu'min Primary School in Bradford is linked to the al-Mu'min journal, which carries material from schoolchildren. Its website teaches that Western culture is "evil", photographs are "an evil practice of the unbelievers", and that "the person who plays chess is like one who dips his hand in the blood of a swine".

But here's a sample of the Ofsted report: "Al-Mumin Primary School provides a good education for its pupils and ensures that they have good attitudes and a very good work ethic... The provision made for the spiritual, moral, social and cultural development of pupils is outstanding."

According to the local Telegraph and Argus paper in Bradford, the links have been taken down, but the school did not respond to queries. The al-Mu'min website is also down.

Of course, I firmly believe private schools can do as they wish, as long as they receive no funding or privileges from the state, but if they are fomenting treason, and promoting bigotry, shouldn't it be transparent? Shouldn't they be subject to scrutiny? After all, if the BNP wanted to set up schools that taught not to associate with non-whites, and promoted an ideology of cultural superiority (and denigration of others), you think that would be tolerated for one moment?

Let's call it a debt

So those who committed these crimes, have to pay it off. In full. As a charge upon their earnings.

For one step that could be constructively taken against criminals is suing them for compensation, and if they do not have enough assets to pay, then make it a debt upon their earnings until it is paid. This is called internalising the externalities of crime.

Imagine if the useless shits who went on their vandalism spree of NZ$30,000, split five ways, had to pay NZ$6,000 each. If they couldn't make it within 12 months they'd be charged 15% interest p.a. on whatever they paid afterwards. Up to half of their income, including benefits could be required to pay for this.