The High Court case against the Christchurch City Council’s massive twenty-four percent increase in council rents was heard today.

The complaint was lodged by the Council of Social Services. It says that the council has breached the Local Government Act.

The case is being heard after figures were released last week that showed that council tenants are living their homes in droves.

Council figures show that 110 tenancies ended in July and August compared with 65 in the same two months last year, a rise of 70 per cent.

The city council, again displaying the arrogance that has become all too characteristic of the Mayor Parker regime, has claimed that no one has left because of the rent rise.

However as the chief executive of Age Concern Canterbury has said the increase cannot be seen isolation. Andrew Dickerson has pointed that the rent increase has come at a time when power and food prices have also skyrocketed.

Dickerson said six Age Concern clients had moved out because of the increased rents and another 50 were considering leaving.

"We need to remember this is people's homes and they are an extremely vulnerable group. The council need to monitor the impact of their decisions. It's very disturbing."


And it just gets worse for George Bush’s ‘democratic capitalism’, the political and economic system that he last week described as the ‘best system’ the world had ever seen.

Today the US House rejected Treasury Secretary Paulson's $700 billion Emergency Economic Stabilization Act of 2008. Paulson claimed he had the votes but he’s been clearly making it up as he goes along. The House rejected Paulson's claim that buying up the bad assets from America’s banks would be enough to save the financial system from meltdown.

And just to make matters worse for ‘democratic capitalism’, the conflagration has now spread to Europe. Its political leaders had assumed they could manage the Wall Street mess, but the situation has worsened. Over the weekend three more struggling European banks were bailed out by their governments.

Paulson’s bill is seriously flawed. As Mike Whitney of Counterpunch writes:

'Paulson's bill was designed to avert a system-wide crash by clearing the banks' balance sheets so they could resume extending credit to consumers and businesses. The hope was that massive infusion of capital would "turn back the clock" to the happy days of low interest speculation and bubble economics. Paulson is a "one trick pony" who firmly adheres to the belief that wealth creation depends on maximum leverage and an ever-weakening currency. But that world view is no longer applicable after reaching Peak Credit, where consumers are no longer able to make the interest payments on their loans and businesses and financial institutions are forced to curb their spending and dump their toxic assets at firesale prices. The system is deleveraging and nothing can stop it. Paulson has yet to accept the new reality.'

Whitney also points out that there is no guarantee that Wall Street will use the money the way Paulsen hopes. The probability is that Wall Street will simply use the money to prop up share prices so that it can manage the damage while they offload the shares. The broader American economy and working class Americans paying for all this will get nothing.

Indeed the evidence is that the Paulsen scheme won’t work – and it is simply a way for Paulsen’s Wall Street cronies to extricate themselves from the mess they created in the first place.

While the American economy is clearly heading into a serious recession – and watch it impact on the New Zealand economy, folks – there is no certainty that a far bleaker future is not on the horizon.

Privately, leading Republicans within the Bush Administration are telling journalists that the economy is in meltdown and falls as high as 4000 points could be seen on the Dow Jones. This is a capitalist meltdown of epic proportions.

The public backlash against the Paulson bill continues to grow which has added to the panic in Congress – especially with an election looming.

The Democratic senator Dennis Kucinich gave voice to that anger when he said:

"The $700 bailout bill is being driven by fear not fact. This is too much money, in too short of time, going to too few people, while too many questions remain unanswered. Why aren't we having hearings…Why aren't we considering any other alternatives other than giving $700 billion to Wall Street? Why aren't we passing new laws to stop the speculation which triggered this? Why aren't we putting up new regulatory structures to protect the investors? Why aren't we directly helping homeowners with their debt burdens? Why aren't we helping American families faced with bankruptcy? Isn't time for fundamental change to our debt-based monetary system so we can free ourselves from the manipulation of the Federal Reserve and the banks? Is this the US Congress or the Board of Directors of Goldman Sachs?"

It’s a pity that Barack Obama isn’t voicing similar sentiments. Despite the rhetoric, Obama is following a similar pro-Wall Street line as his Republican counterparts.

Indeed the Democrats and the Republicans, despite massive public opposition, are still protecting Wall Street while pretending it is in the ‘national interest’. Of course these Wall Street bankers and speculators are the very same people who have donated millions to the Obama and McCain election campaigns.


In a miserable display of political cowardice, TV3 have cravenly bowed to pressure from Labour and National.

With Helen Clark and John Key refusing to participate in any television debate involving the minor parties, TV3 have scrapped their debate altogether - thus denying the minor parties airtime.

TV3, whether by accident or design, is now in collusion with Labour and National to present this general election as a two party race.

A quick scan of the pro-Labour and pro-National blogs reveals a deafening silence on this issue. Yet these are very same bloggers who are often banging on about political rights, choice, etc.

It's a stitch up!


I see that the Green Party co-leader Russel Norman has also started to refer to Labour and National as the 'Coke' and 'Pepsi' parties.

The problem for Norman is that the Green's having been drinking Coke Labour for many years now and it's no good - six weeks before an election - for Norman to start pretending otherwise.

Former socialist Norman and the Green's think that they can use 'the undoubted power of the market'(Norman's words) to address environmental concerns. Eco-socialism is something of a rare commodity in the Green Party, except among those small number of Green Party members disgruntled with the rightward direction that the party has been taken in.

While the other co-leader. Jeanette Fitzsimons, claims the party does not believe in 'old fashioned' labels like 'right wing' and 'left wing' the Green hierarchy have it made it clear that they are open to making electoral deals with either of those two old fashioned right wing parties, Labour and National.

But Norman is trying to downplay this. He wants us to believe that we're getting something different from the Green's when it's just more pro-market policies with a mild green flavor. It's no good for the Green's to complain about the 'two party club' when the Green's have been helping to prop it up - and look like they will continue to do so.

It's just a case whether the Green's will be going for Coke or Pepsi after the election results have rolled in.


Labour and National have more in common than they have differences, so it comes as no surprise that Helen Clark and John Key have stiched up a cosy wee deal not to appear on TVNZ or TV3 with all the other party leaders.

Although Clark and Key will meet each other in some face to face debates, both party leaders have decided they can't be be bothered participating in the MMP debate.

'The Prime Minister wil either be me or the Leader of the Opposition,' was Clark's dismissive answer to TV3's Duncan Garner, consigning the minor parties to the position of 'also-rans'.

The deal was apparently proposed by Clark's office although Key refused to confirm this. In fact, Key gave the impression that he didn't think the issue was of any importance.

Labour and National, in tandem, are attempting to define the boundaries of the election debate. But what have they to fear from the minor parliamentary parties anyway? All of them are offering market-driven policies. There is no real alternative on show.

Yes folks, this is 'democracy' in action. It's Coca-Cola Labour versus Pepsi National. It's Labour's free market policies or National's free market policies. It's no choice at all.


What a remarkable speech that was from President George Bush – remarkably bad that is.

Speaking to the American people on prime time television last night, the first time in over a year, Bush portrayed the massive economic crisis confronting the United States – and the world – almost as if it was a natural phenomenon like Hurricane Katrina.

‘We are in the midst of a national economic crisis’ warned Bush, as if ‘the economic crisis’ had just arrived from the Gulf of Mexico. I was half expecting him to tell the American people to stock up on canned food and make sure they had enough batteries for they’re transistor radios.

Bush then went on to tell us about the effects of the economic storm ravaging the country. It all boiled down to the simple reality that the United States economy is being buried under a avalanche of debt, sweeping finance companies, banks, mortgage companies and ordinary families down into the economic abyss

But who’s responsible for the mess? Could it have anything to do with the Bush administration's free market policies?

Bush, of course, didn’t own up. No surprises there from the President who insisted that Iraq had ‘weapons of mass destruction’.

But nor did he point the finger of responsibility at any of the other obvious culprits like the Wall Street speculators who have been getting fat on increasingly speculative mortgage-backed securities.

Bush made it sound like the economic crisis was an act of fate, a natural phenomena that no one or no organization was responsible for. Indeed, investment companies had merely 'found' themselves ‘saddled with debt’ while banks had somehow ended up with an awful lot of bad loans on the books. It just happened – just like that. Bush, when it comes down the nitty-gritty, always backs his corporate mates.

Yes, no one is to blame was Bush’s message and he still insisted that ‘democratic capitalism’ is the best economic and political system the world had ever seen.

But Bush still wants $750 billion to prop up the all-conquering ‘democratic capitalism’ and he resorted to scare mongering to whip up fear about the consequences of Wall Street not getting the money.

He said that more banks could fail, the stock market could plummet and erase retirement accounts, and businesses could find it hard to get credit and be forced to close, wiping out jobs for millions of Americans.

Indeed, said Bush, America could be caught in a ‘widespread financial panic’. Presumably its presently a 'limited financial panic'.

But Bush has no idea whether such a massive bailout of corporate America will even work – but he’s still prepared to plunder the pockets of ordinary Americans in order to find out.

He’s hoping like hell that the proposed bailout will stop the meltdown but it could already be too late.


Christchurch Mayor Sideshow Bob Parker has been mayor almost a year now (only a year, jeez), and Bob's been in a reflective mood.

In his latest funny column on the mayoral website Bob's been looking back on his first year - a year which has seen Bob annoy and upset most of Christchurch.

As you would expect though, the column is devoted to what Sideshow Bob does best -promoting himself - so there is no mention at all of bailing out failed property developer and Zenith Applied Philosophy loony Dave Henderson. Nor is there any mention of putting up council rents by a massive twenty four percent.

Nor is there any mention of the costs escalating for the new council offices.

Yes, life's a rose garden, according to the Audi-driving Bob. In fact, Bob says he loves his job! Who knew that making life miserable for some of Chrstchurch's most vulnerable people could be so much fun!

But Sideshow Bob knows that he and most of his council are deeply unpopular with the good people of Christchurch. So someone within the council bureaucracy (perhaps his press officer, Diane Keenan) has decided it would be a good idea if Sideshow got out there to 'meet and greet' the people.

Yes, dear Christchrch ratepayers, Sideshow Bob is coming to your neighbourhood soon! Apparently, he wants to listen to your concerns! Well, he might listen but he and his council will go ahead and do what they want anyway.

The Sidehow Bob Travellin' Roadshow is just a big PR stunt from a mayor who heads a deeply undemocratic and unpopular council.


There is life beyond the dreary free market Labour-National axis. Click on the image to see the full poster.


Despite the efforts of some in the media, like Sunrise's James Coleman and Radio Live's Michael Laws, to blame Folole Muliaga for her own demise, the coroner's report has today confirmed what was obvious from day one - there wasa direct link between her death and Mercury Energy's cutting off of her power.

Muliaga died soon after a Mercury Energy contractor cut off the power to the family home because of an outstanding bill for just over $168.

The 44-year-old was dependent upon an oxygen machine in her home.

The Coroner is critical of Mercury Energy, finding it did not follow the electricity guidelines and had it done so, Fofole Muliaga's death may have been prevented.

At the time Sunrise co-host James Coleman, then a talkback host on Radio Live, speculated on where 'all' the Muliaga family's money was going and even suggested that Mrs Muliaga was spending it on 'smokes' (she didn't smoke).

Fellow Radio Live host Michael Laws said it was own fault because she shouldn't have been so overweight.

While putting the boot into the unfortunate Mrs Muliaga, neither Coleman or Laws had anything critical to say about Mercury Energy.

Both right wing hosts have condemned themselves with their own words.


And the financial and property collapse continues.

The collapse of the $450 million Kensington Park housing project at Orewa, Auckland will see a whole load of investors lose most of their money. Also it is likely that the collapse will take many other businesses with it.

One man who might be a little uncomfortable about Kensington Park falling over is NewstalkZB's Leighton Smith. Smith, a staunch supporter of the 'free market' and climate change denier, was paid to promote the housing project on-air.

Bt if he is feeling uncomfortable Smith isn't showing it. In fact he's been claiming on his show that Kensington Park was still a good investment! Work that one out...

On the subject of housing projects falling over, keep an eye on the Pegasus Town project, presently under construction north of Christchurch...


Last Saturday the Alliance Party released its 2008 manifesto. Unlike Labour and National, which are both drip-feeding policy, the Alliance has released its full manifesto for people to read and comment on.

Okay, I’m biased.- I like the Alliance’s manifesto. I like it because it is offering an alternative to the market driven policies of the parliamentary parties (and I include the pro-business Green’s here as well),

But, regardless of my bias, the Alliance has produced a comprehensive and thoughful manifesto, which has clearly had a lot of work put into it. And this is all unpaid work. Unlike the parliamentary parties, the Alliance doesn’t have the luxury of calling on the services of a well-resourced research team.

But where is the discussion on the Alliance manifesto in the media? Where are the political columns discussing the finer points of the Alliance manifesto? How come no one from the Alliance has been interviewed on Close Up or Campbell about its policies? It’s even been ignored by TV1’s Agenda, scheduled somewhere in the weekend wilderness.

Why are talkback hosts not bringing it up as a topic of discussion? Why isn’t Paul Holmes seeking opinion on the 35 hour week with no loss in pay? Perhaps Willie Jackson has a view on the Alliance’s tax policy? What does Michael Laws think of establishing a non-commercial Television One?

And even Radio New Zealand, the public broadcaster that likes to think its fair and balanced, has not given the Alliance the time of day.

Ah, there will be discussing it in blogland, you say. Wrong. Apparently the adventures of Winston Peters are of much more importance. Despite the veneer of independence, the majority of blogs are still trapped in that dreary Labour-National continuum. Martyn 'Bomber' Bradbury for example, who once wanted to be New Zealand's answer to Michael Moore, has turned into an apologist for Labour.

In one-party dictatorships, organisations with unpopular views find themselves being censored. Newspapers are closed. Websites are pulled down. Activists are arrested.

Here in the 'democratic' West, it’s a more subtle business. It’s censorship by omission.

I’ve seen this happen time and time again. In a kind of symbiotic empathy the parliamentary parties and the media establish a framework of political and ‘intellectual’ (I use the term loosely) debate that is closed to anyone or any ideas that don’t adhere to the ‘rules’.

In this election year, anyone or any party that wants to promote views that challenge the prevailing free market orthodoxy will find they won’t be getting much, if any, media time. Instead it’ll be more of National and Labour pretending they are different from each other, with the minor parliamentary parties watching from the sideline.

And so the Alliance and its challenging and progressive manifesto gets excluded from the news reports, the commentaries and the opinion pieces.

It’s censorship by omission.


A few days ago the Canterbury District Health Board announced it was increasing the cost of its meals from $3.80 to $5.20 – to cover steeply rising fuel and food prices. The price rise will happen on November 1.

It is the first increase since 2000. This isn’t about ‘profit margins’. It’s basically to ensure that the service remains viable: without the increase the service was looking at a $200,000 loss this financial year.

I know something about the Meals on Wheels – my mother receives they're meals three times a week. Every lunchtime on Monday, Tuesday and Friday, without fail, a volunteer will deliver the meal to my mother’s door.

For many elderly folk their only substantial meals come from the Meals on Wheels service.

Some of the elderly who receive meals are also dealing with increased rents – thanks to the massive 24 percent increase imposed on them by the truly abysmal Christchurch City Council.

Christchurch City Missioner Michael Gorman says many will not be able to afford the increase but will not say anything. He says a lot of the elderly are on fixed incomes or benefits and will be stretched to meet costs.

It’s an invaluable social service yet it has received no additional government funding.

Of course, one would of thought that the Christchurch City Council could have also helped out – after all, it found $17 million for a failed property developer.


Christchurch City Council beneficiary Dave Henderson got more, but not unexpected, bad news today.

The receivers say that his Five Mile Holdings owe creditors $79.6 million. $73.6 million of that is owed to Hanover Finance and financier NZ Castle. Hanover Finance is itself in financial trouble having frozen over $500 million of investors funds.(Yesterday Hanover's principals, Eric Watson and Mark Hotchin, said they would contribute $96 million in cash and property to ease Hanover's plight - this restructuring proposal has to be approved by Hanover's investors.)

But wait - there's more. Much more. Dominion Finance, which has gone into receivership, has yet to advise how much it is owed by Five Mile. In addition, claims had not been received from all parties with security interests registered against Henderson's company.

And another unsecured creditor is owed over $3 million by Five Mile Holdings.

Smith Crane and Construction lodged an application for liquidation of Five Mile in August and that application has been adjourned by the High Court until early next month.


Failed property developer and urban 'visionary' Dave Henderson oftens parades his South of Lichfield drinking hole as an excellent example of a 'exciting' and 'cosmopolitan' central Chrostchurch.

Other people are less convinced - like noted architect Peter Beaven for example.

Also not convinced are the local businesses around SOL who have to deal with its 'exciting' and 'cosmopolitan' drunken patrons.

One such local business is the Honeypot Cafe. It has been at its present Lichfield Street location some twenty years or so.

Owner Del Carrodus and his staff don't regard SOL as 'exciting' or 'cosmopolitan' - not when SOL patrons are trying to urinate in the cafe doorway when its still open.

Carrodus told The Press that he spends many mornings cleaning up vomit and other nasty stuff in the alleyway behind the Honeypot.

He says the behavious at SOL has gradually got worse over the past year - and the police agree. It says that every bar in SOL has caused it problems.

No less than five SOL bars were recently convicted of selling alcohol to underage teenagers.

Ex-mayor Garry Moore seems to like SOL though. He can often be seen there - 'walking around as if he owns the place', one Lichfield Street worker told me.


Now that the US government is bailing out the finance industry, taxpayers should be in the driver's seat -- not politicians beholden to Wall Street, writes Amy Goodman.

The financial crisis gripping the U.S. has the largest banks and insurance companies begging for massive government bailouts. The banking, investment, finance and insurance industries, long the foes of taxation, now need money from working-class taxpayers to stay alive. Taxpayers should be in the driver's seat now. Instead, decisions that will cost people for decades are being made behind closed doors, by the wealthy, by the regulators and by those they have failed to regulate.

Tuesday, the Federal Reserve and the U.S. Treasury Department agreed to a massive, $85-billion bailout of AIG, the insurance giant. This follows the abrupt bankruptcy of Lehman Brothers, the 158-year-old investment bank; the distressed sale of Merrill Lynch to Bank of America; the bailout of both Fannie Mae and Freddie Mac; the collapse of retail bank IndyMac; and the federally guaranteed buyout of Bear Stearns by JPMorgan Chase. AIG was deemed "too big to fail," with 103,000 employees and more than $1 trillion in assets. According to regulators, an unruly collapse could cause global financial turmoil. U.S. taxpayers now own close to 80 percent of AIG, so the orderly sale of AIG will allow the taxpayers to recoup their money, the theory goes.

It's not so easy.

The financial crisis will most likely deepen. More banks and giant financial institutions could collapse. Millions of people bought houses with shady subprime mortgages and have already lost or will soon lose their homes. The financiers packaged these mortgages into complex "mortgage-backed securities" and other derivative investment schemes. Investors went hog-wild, buying these derivatives with more and more borrowed money.

Nomi Prins used to run the European analytics group at Bear Stearns and also worked at Lehman Brothers. "AIG was acting not simply as an insurance company," she told me. "It was acting as a speculative investment bank/hedge fund, as was Bear Stearns, as was Lehman Brothers, as is what will become Bank of America/Merrill Lynch. So you have a situation where it's [the U.S. government] ... taking on the risk of items it cannot even begin to understand."

She went on: "It's about taking on too much leverage and borrowing to take on the risk and borrowing again and borrowing again, 25 to 30 times the amount of capital. ... They had to basically back the borrowing that they were doing. ... There was no transparency to the Fed, to the SEC, to the Treasury, to anyone who would have even bothered to look as to how much of a catastrophe was being created, so that when anything fell, whether it was the subprime mortgage or whether it was a credit complex security, it was all below a pile of immense interlocked, incestuous borrowing, and that's what is bringing down the entire banking system."

The meltdown is a bipartisan affair. Presidential contenders John McCain and Barack Obama each have received millions of dollars from these very companies that are collapsing and are receiving the corporate welfare.

As these high-rolling gamblers are losing all their banks' money, it comes to the taxpayer to bail them out. A better use of the money, says Michael Hudson, professor of economics at the University of Missouri, Kansas City, and an economic adviser to Rep. Dennis Kucinich, would be to "save these 4 million homeowners from defaulting and being kicked out of their houses. Now they're going to be kicked out of the houses. The houses will be vacant. The cities are going to [lose] property taxes, they're going to have to cut back local expenditures, local infrastructure. The economy is being sacrificed to pay the gamblers."

Prins elaborated: "You're nationalizing the worst portion of the banking system. ... You're taking on risk you won't be able to understand. So it's even more dangerous." I asked Prins, in light of all this nationalization, to comment on the prospect of nationalizing health care into a single-payer system. She responded, "You could actually put some money into something that pre-empts a problem happening and helps people get health care."

The meltdown is a bipartisan affair. Presidential contenders John McCain and Barack Obama each have received millions of dollars from these very companies that are collapsing and are receiving the corporate welfare. President Clinton and his treasury secretary, Robert Rubin (now an Obama economic adviser), presided over the repeal in 1999 of the Glass-Steagall Act, passed after the 1929 start of the Great Depression to curb speculation that caused that calamity. The repeal was pushed through by former Republican Sen. Phil Gramm, one of McCain's former top advisers. Politicians are too dependent on Wall Street to do anything. The people who vote for them, and whose taxes are being handed over to these failed financiers, need to show their outrage and demand that their leaders truly put "country first" and bring about "change."

Amy Goodman is the host of the US syndicated radio news program, Democracy Now! It can be heard on Christchurch community radio station Plains FM, 96.9, every weeknight at 9pm.
This article is republished from


According to the United States government’s own figures, nearly 36 million Americans were living below the poverty line in 2007, including 13 million children.

Yet we continue to see welfare budgets decreased and eligibility criteria tightened.

But while having no money to assist working class America, the US administration has more than enough money to spare when the corporations and financial speculators come calling.

It is now going to give investment giant AIG a staggering $85 billion. This is more than the gross national product of Romania or Nigeria. New Zealand's GDP in 2005 was $107 billion.

The US government can’t help ordinary people looking for secure jobs that pay decent wages, but when Wall Street comes banging on the door it’s an entirely different story altogether.

It was nonsensical then for TV3 News to describe the AIG bailout as offering a ‘glimmer of hope’.

Wall Street has engaged in a frenzy of speculation and greed but now there is a price to be paid. But it won’t be paid by corporate America – no, ordinary Americans are expected to pick up the tab,

The U.S. government is plundering the pockets of ordinary Americans to bail out the large corporations.

These are the very same corporations who constantly promote the virtues of ‘private enterprise' and constantly attack the ‘sins’ of welfarism. But apparently welfare is acceptable when all the money is funnelled towards them.

It was nonsensical then for TV3 News tonight to describe the AIG bailout as offering a ‘glimmer of hope’. It might possibly help ward off disaster for corporate America but it offers nothing for ordinary Americans and ordinary people around the world - just an even more uncertain future. After all, capitalism only knows one way out of this crisis, and that is through slump and mass unemployment.


Just a short few months ago the Minister of Finance was telling us that New Zealand, and the world, were living in economically prosperous times. We had never had it so good was Michael Cullen's message and, of course, he and the Labour Government were all too eager to claim credit for some of the economic bounty.

Just a short few months later Cullen, a man who has never stepped back from promoting the cause of global capitalism and its corporations and institutions, has suddenly decided that he isn't such a big supporter after all.

But, because we're in an election campaign, he's gone one step further - into Crazy Town.

According to Cullen because National leader John Key used to work for the failed investment bank Merrill Lynch, he must carry his share of the blame for the crisis of global capitalism. Pontificates Cullen: - Merrill Lynch have failed, Key used to work for Merrill Lynch - therefore he can't be trusted with the reins of political power. It's a large leap in logic but, hey, who cares when the name of the game is throwing mud and hoping some of it will stick.

After having had his hand in the free market cookie jar for many years Cullen would like us now to believe that, actually, he isn't just another free market politician. Not like nasty John Key! Unfortunately for little Michael the chocolate and cookie crumbs smeared around his mouth tell us otherwise.

This Labour government over the last eight years has, like most western governments, benefited from the world boom. The programme of the government has been pro-capitalist at the general expense of New Zealand workers who have at best been granted minor reforms.

Now, when things are falling apart, its a bit late for Cullen and his Labour Government, to try to distance themselves from the capitalist conflagration and paint John Key as the bogeyman again.

Next Cullen will be telling us he has rediscovered John Keynes! That really would be crazy!


Lehman Brothers is no more. The 158 year old Wall Street giant has collapsed under a mountain of debt. Otto Spengler of the Asia Times looks at the reasons behind the collapse. This article is taken from

Lehman Brothers survived the American Civil War, two world wars and the Great Depression, but today, Monday, the firm that set the standard in fixed income markets will be liquidated. Potential losses are so toxic that none of the major financial institutions was willing to acquire it.

Lehman’s demise follows the failure last week of the two American mortgage guarantee agencies, Fannie Mae and Freddie Mac. It is remarkable that the US authorities, exhausted from their efforts to bail out the mortgage guarantors and other firms, have left Lehman to its fate.

An enormous hoax has been perpetrated on global financial markets during the past ten years. An American economy based on opening containers from China and selling the contents at Wal-Mart, or trading houses back and forth, provides scant profitability. Where the underlying profitability of the American economy was poor, financial engineering managed to transform thin profits into apparently fat ones through the magic of leverage.

The income of American consumers might have stagnated, but the price of their houses doubled during 1998-2007 thanks to the application of leverage to mortgage finance. The profitability of American corporations might have slowed, but the application of leverage in the form of mergers and acquisitions financed with junk bonds multiplied the thin band of profitability.

Wall Street and the City of London rode an unprecedented wave of profitability by providing overpriced leverage to consumer and corporate markets. Led by the financial engineers at Lehman, the securities industry grew an enormous infrastructure of staff, systems, and financial exposure. They were so successful that when the music stopped, there was no way to liquidate this mechanism gracefully. It only could be allowed to collapse.

The Great Crash of 2008 has entered a new phase, judging from the market opening in Europe and US equity futures prices. Lehman’s failure and the sharp decline at other financial firms, notably American International Group (AIG), the world’s largest insurer, have pushed equity values down to their lowest levels of the year.

As I wrote on May 20, the proximate cause of the Great Crash is the enhancement of poor returns to capital through leverage. The decline of returns to capital, though, stemmed from a global imbalance of supply and demand for capital in response to the rapid aging of the world population. The aging pensioners of Europe and Asia must find young people to pay interest into their pensions, and they do not have enough young people at home. Germans aged 15 to 24, on the threshold of family formation, comprise only 12% of the country's population today and will fall to only 8% by 2030. But one-fifth of Germans now are on the threshold of retirement and half will be there by mid-century.

In effect, Americans borrowed a trillion dollars a year against the expectation that the 10% annual rate of increase in home prices would continue, producing a bubble that now has collapsed. It is no different from the real estate bubble that contributed to the Thai baht's devaluation in 1997, except in size and global impact.

It is easy to change the financial system, I argued in my May 20 essay. The central banks can assemble on any Tuesday morning and announce tougher lending standards. But it is impossible to fix the financial problems that arise from Europe's senescence. Thanks to the one-child policy, moreover, China has a relatively young population that is aging faster than any other, and China's appetite for savings vastly exceeds what its own financial market can offer.

An enormous hoax has been perpetrated on global financial markets during the past ten years. An American economy based on opening containers from China and selling the contents at Wal-Mart, or trading houses back and forth, provides scant profitability.

There is nothing complicated about finance. It is based on old people lending to young people. Young people invest in homes and businesses; aging people save to acquire assets on which to retire. The new generation supports the old one, and retirement systems simply apportion rights to income between the generations. Never before in human history, though, has a new generation simply failed to appear.

The world kept shipping capital to the United States over the past 10 years, however, because no other market could absorb the savings of Europe and Asia. The financial markets, in turn, found ways to persuade Americans to borrow more and more money. If there weren't enough young Americans to borrow money on a sound basis, the banks arranged for a smaller number of Americans to borrow more money on an unsound basis. That is why subprime, interest-only, no-money-down and other mortgages waxed great in bank portfolios.

It is tempting to see in the failure of Lehman Brothers and the forced merger of Merrill Lynch with Bank of America a failure of "corporate culture". In the case of a great financial firm that has weathered many storms, the failure of a business culture contains more information. Credit markets connect what we do today with what we plan for the future. Because the future is uncertain we must have faith in the outcome, which is why the word "credit" derives from the same Latin root that denotes belief in the religious sense. We require a certain degree of trust in our counterparties. It is the job of the great financial firms to create trust between borrowers and lenders and establish a link between the present and the future.

It is of small account in the great scheme of things, but in the sad, strange little world of business studies, Lehman’s culture was held up as an exemplar, a beacon to the ambitious and avaricious. Lehman’s demise is a minor event next to the travails of America’s mortgage guarantee agencies, which required a government bailout last week, to be sure, but it is a landmark in the unraveling of American corporate governance.

By a charming coincidence, the two great securities industries failures to date occurred at the extreme antipodes of the corporate cultural spectrum. Lehman is the second great American securities firm to fail this year, following the March demise of Bear Stearns, the shards of which were swept up by J P Morgan Chase.

Bear was a group of scrappy outsiders. Jimmy Cayne, the firm’s president, never finished college and began his career literally trading scrap metal. Bear’s managers played bridge, and prided themselves on having no corporate culture except a piranha’s instinct for the next trade. A book of memos by Bear’s former CEO Alan Greenberg circulated some years ago, including a lampoon in which the Bear chief categorized his competitors who had bit the dust over the years according to the management philosophy each had embraced, e.g., "total quality management" and other shibboleths. Bear proudly rejected corporate culture and management philosophy as a matter of scruffy pride.

At Bear, partners ran their own businesses and hid their best methods from their colleagues to prevent anyone from cutting in on their action. The favorite method of management communication was the one-minute phone call. Lehman held meetings to plan the meeting that would set the agenda for the meeting that would make the decision, and of course every department and interest had to be represented. That was called "teamwork". As a result, all of Lehman’s resources were mustered for the projects to which the firm set its priorities.

Tongues clicked across Wall Street when Bear went down for the last time. "Nobody liked [Bear’s] Jimmy Cayne," a senior fellow at Lehman Brothers offered, "but everybody likes [Lehman Brothers CEO] Dick Fuld. Cayne was not our class, dear; the jumped-up refugee from a junkyard had risen too high and received his comeuppance. The Federal Reserve opened its lending facilities for commercial banks to securities firms for the first time in history, the day after Bear Stearns went down. Lehman and others were the beneficiaries of official largesse that was not offered to Bear Stearns."

Everyone may like Dick Fuld, who presides over a socially-connected, politically-involved, army of networking specialists who have one of Wall Street’s best stock of favors done and collectable in return. But no one likes Fuld well enough to buy his firm, which apparently has been rejected at any prices by a Korean bank, by Barclay’s Bank of the UK, and finally by Bank of America.

Earlier this year, the American authorities allowed financial institutions to mark their books at fictitious values, in the hope that eventually prices for mortgages, consumer debt structures, corporate structured instruments and so forth would come back. If the authorities had forced the banks to mark to the existing market bid, all of them would have been insolvent.

The trouble is that the fundamentals are getting worse, not better - the prices of all this structured product aren't coming back and cash flows in some cases are being impaired. Six percent of American mortgages are delinquent, and recovery on liquidation seems to hover around 50%, rather than the 98% level that prevailed when home prices were rising. The longer you wait, the worse off you are. Everyone looked at Lehman's portfolio, compared it to the market bid, and realized that they might have a black hole of losses. The same is true of Washington Mutual, the American thrift institution likely to go next to the chopping block.

The failure of Lehman and Bear Stearns does not reflect the breakdown of a particular kind of corporate culture. As noted, the two firms embodied radically diverse views of corporate culture. What took both firms down, rather, is a sudden break in the chain of expectations between the present and the future. Today’s savers no longer can have any confidence that they will earn enough to fund their retirements by putting money at risk. They have discovered that in one form or another, their investments have fed a securities market bubble rather than the creation of value.

Market participants are responding by running away from risk, as well they should. That is the stuff out of which great crashes are made. The bouncing-ball pattern of declining stock markets was marked by bear market rallies each time the American and other governments stepped in to bail out the latest victim. The US government’s ability to influence events, however, seems exhausted. The Treasury and Federal Reserve can’t bail out everyone. After Lehman, the insurer AIG and Washington Mutual may be next to fail, followed by several regional banks.

I see no solution except to allow American households to begin the painful process of rebuilding their balance sheets, which implies a slowing economy for the next two years. It is too late to stop the Great Crash of 2008. The question remaining is how best to pick up the pieces.


The latest TV1 opinion poll, released last night, showed that National now has a eighteen point lead over Labour.

Guyon Espiner's take on this poll was that it was a very large lead and it would be difficult for Labour to claw back into election contention. Remember - Espiner gets paid a lot of money for stating the obvious.

Yet, when the last opinion poll showed that National had only just a six point lead over Labour, Espiner told us that we could not write Labour off!

If the next poll shows National to have, say, a nine point lead we can expect Espiner to tell us that Labour is making a comeback.

Such is the lunacy of political poll journalism. But its easier - and cheaper - than going out and doing some real investigative work.

Espiner's sad commentary is perhaps only marginally better than TV3's Duncan 'Scoop' Garner. He confidently predicted that Winston Peters would be sacked by last Thursday afternoon. Nice one, Dunc..


The Alliance Party has released its 2008 manifesto and it offers a fundamentally different vision from the tepid and reactionary market policies of the present parliamentary parties.

It is a manifesto that rejects the free market policies that have wrecked the New Zealand economy and aims to put the interests and concerns of ordinary people first.

The Alliance proposes to increase tax on the wealthiest third of New Zealand taxpayers which will contribute to giving tax assistance to the remaining two-thirds.

The Alliance says:

'The break-even point will be $41,000, that is, a family with two wage-earners each making that amount will pay no more tax than they do at the moment.

The first $10,000 of income would be exempt from tax. This applies to everyone. Almost a million Kiwis who earn between $10,000 and $20,000 would average $1,400 less tax than they do now. Those earning between $30,000 and $40,000 would average $428 less tax. Altogether, 1,380,000 people would enjoy substantial tax breaks.'

The Alliance says it would stop paying into the superfund which it says is preventing necessary social spending.

In another innovative policy the Alliance says it would start phasing out GST, starting with food. GST would be replaced by a Financial Transactions Tax (FTS) at the rate of two cents in every $100. The FTS would only be charged on withdrawals.

Says the Alliance:

'If you spent $26,000 per year and withdrew a weekly total of $500, FTT would be 10 cents. Compare that to GST on a family’s weekly food bill – 12.5% of $200 or $25 a week.

GST is a regressive tax that hits the poor at the same rate as the rich. It also burdens business with unnecessary compliance costs.'

Among its health policies the Alliance says it would increase health funding over three years from 6.8% to 8% of GDP. It would immediately add spending of $1.4 billion to the public health service. This, says the Alliance, would mean free doctors’ consultations, the removal of prescription charges, and reduced waiting lists.

In the area of education the Alliance says it would abolish the Student Loans Scheme and immediately write off all loans. A living allowance for all tertiary students at the level of the Unemployment Benefit would be introduced.

The Alliance says it would fully fund the public education system from early childhood to tertiary level, including removal of tuition fees.

In housing the Alliance would introduce low-interest, no-deposit loans for low-income workers and beneficiaries to enable them to buy homes. It would also increase the number of state houses being built to ensure adequate supply of quality affordable housing.

In another exciting and progressive policy, the Alliance says it would increase the minimum wage to $17 per hour and it would introduce a 35-hour working week with no loss of pay.

The Alliance will increase superannuation to 72.5% of the average after-tax wage and it will be available at age 55 at reduced rates until age 65 to reflect the growing need for public provision from an earlier age.

Means testing will be ended on all senior citizens requiring long term care.

In a rather more specific area, The Alliance in Parliament would push for MPs’ pay to be linked directly to the top of the basic scale for primary and secondary teachers with a 3-year degree and one year of teacher training.

Says the Alliance:

'This is not a reflection of the responsibilities and workload of MPs, rather it is a reflection of the special role they have in our society and the need for our representatives to have an awareness of people’s everyday lives and existence.'

In the field energy the Alliance would re-nationalise the electricity generation, lines and retail companies to ensure that electricity is affordable for all New Zealanders. Free market polices would be abolished.

A copy of the Allaince's full manifesto can be downloaded from its website


Frankly, I find it hard to take the whole Winnie-gate affair seriously.

On one level I guess it can be argued that it demonstrates that our ‘mass’ parliamentary parties have such a narrow membership base that they have to rely on wealthy benefactors like Owen Glenn to fill their coffers.

And there’s always the irony in the fact that Labour – the party that persists in describing itself as ‘the party of workers’ gets as much money, if not more, from big business than National. But it’s a well worn irony now and no longer particularly amusing - if it ever was.

But even so, I lost interest in Winnie-gate some days ago – although it was amusing to imagine Labour Party president Mike ‘I’m on Five Government Boards’ Williams angling for work in the South of France.

It's been a little like a cheap soap opera. Who said what to whom? Mysterious phone calls. E-mails. Dinner functions. ‘Self-serving’ Prime Minister’s. Rodney Hide. Trust accounts. Lawyers. Stormy times in Parliament.

This is all good copy for the journalists who think this is what politics is all about. TV3's Duncan Garner has had a field running around looking for ‘scoops’. (I wonder if he has ever read Evelyn Waugh’s Scoop?) Meanwhile TV1’s Guyon Espiner has been pronouncing gravely on every twist and turn.

John Campbell, who can always be counted on to be melodramatic, yesterday described the Winston saga as ‘momentous’. He also, I think, described it as ‘history-making’. Yeah, right.

And, yes, I did see Linda Clark emerge on TV3’s Sunrise to throw in her grab bag of opinions. I don’t remember anything she said mind you – but I’m sure she thought it was important.

If I sound cynical well, yes, I probably am. But mostly I’m frustrated, but not surprised, that politics has descended to this level where spectacle has replaced substance.

Somewhere in the past I’m told that politics used to be the battle of competing ideas. People would debate and argue about different political philosophies and different visions of society.

Journalists, although I find this hard to believe, actually wrote about ideas. They quoted political theory. They discussed political history.

Intellectualism was not a dirty word. You could talk about Marx’s Capital Vol 1( or Ayn Rand’s Atlas Shrugged if you were that way inclined) and not be shown the door.

These days it’s Linda Clark telling Carly Flynn and James Coleman (those two well known political heavyweights) what Winston's next move will be. (Later on Sunrise Carly shockingly reveals to her co-host that she has, on two occasions, based her hairstyle on that of Victoria Beckham).

Politics has become a light entertainment show. The politicians are the ‘celebrities’ who parade under the spotlight of the various media pundits and spin doctors.

Politics has been emptied of any meaningful substance.

Frank Furedi, Professor of Sociology at the University of Kent, says that western politics hasn’t just got ‘moderate’ and ‘centrist’- it’s gone into early retirement.

Writes Furedi in his book Where Have All the Intellectuals Gone: 'As public life has become emptied of its content, private and personal preoccupations have become projected into the personal sphere. Consequently, passions that were once stirred by ideological differences are far more likely to be engaged by individual behaviour, private troubles and personality conflicts'.

We are living in an age of banality. What do you think, Carly?


It was interesting to hear billionaire and former Labour supporter Owen Glenn claim today that Labour Party president Mike Williams asked him for a job.

According to the New Zealand Herald:

Mr Glenn also said that Mike Williams had asked him for a job on July 10 when he visited him on his yacht in France. Mr Glenn said he had no job for Mr Williams.

Clearly Williams is looking ahead. He presently serves on five government boards and picks up in the region of $200,000 per year for his troubles. When he's not sitting on these boards (ie most of the time) Williams can devote himself to his Labour Party work.

Of course this nice wee arrangement would come to an end if National won the election.

Perhaps he'll have to brush-up on in his interview techniques...


One of the finance companies that failed property developer Dave Henderson owes money to has gone into receivership.

Dominion Finance's trustee, Perpetual Trust says it rejected a proposal by the finance company to gradually sell its assets, saying receivership will be better for investors.

Dominion Finance owes $224 million to over 6000 investors.

It reported a $108 million loss for the year to March, due to the slumping property development market.

And one of the property developers who defaulted on his loan repayments was, yes, that well known ‘visionary’ Dave Henderson.

He also owes own some $70 million to another troubled finance company, Hanover Finance.

Perhaps Christchurch Mayor Sideshow Bob Parker will have a few sympathetic words for all the small investors who have lost money because of the activities of people like ‘Hendo’.

And pigs will fly..


In March I lodged a formal complaint with the Broadcasting Standards Authority. It was a complaint about a nasty piece of Chinese Stalinist propaganda about the Tibetan uprising.

It was broadcast on regional channel Canterbury Television.

Although the Broadcasting Standards Authority, admittedly, receives many complaints I didn’t imagine that some six months later I would still be waiting for a ruling.

The Olympic Games have come and gone and, yet, my complaint is still sitting in a computer somewhere in Wellington.

Such a lenghy delay has not only 'neutered' my complaint, but it has allowed Canterbury Television to quietly move on - seemingly immune from examination and criticism.


Beneficiaries regularly get a bashing from politicians and media alike, but rarely is there any comment on one of the dirty little secrets of the capitalist economy - corporate welfare.

Has ACT's Rodney Hide ever spoken out against business suits ripping off the taxpayer? Has Newstalk ZB's Paul Holmes or Radio Live's John Tamihere ever taken the big stick to business bludgers?

The short answer is a big fat 'no'.

So it comes as no surprise that the usual suspects have ignored new Inland Revenue figures that show that the poor old taxpayer has been subsidising property investors by the tune of nearly $800 million a year.

How is this happening?

Well, property investors - these 'champions of the free market' - are using what are called Loss Attributing Qualifying Companies (LAQCs) to claim tax losses and offset them against personal income.

And this has become a popular pastime among the property investors. The number of LACQ's doubled in the space of four years, largely the result of the recent property 'boom'. In 2007 there were 118,000 LACQs in operation.

Investors using LACQs more than doubled their tax losses in the four years between 2003 and 2007 to over $2 billion.

The use of LACQs has been one of the major reasons for the property investment frenzy of the past six years and subsequently driving house prices to unaffordable levels.

The figures show that the taxpayer is subsidising property investors and others by nearly $800 million.

Last week the Green Party called for the tightening of the rules around LACQs - something that the Labour Government shows no indication of supporting.

Of course the people benefiting from this corporate welfare scheme are the very same people who think the welfare state is a 'brake' on the free market economy.

Don't expect Hide or Tamihere to point out this big hypocrisy though..


It looks like failed property developer Dave Henderson has used some of the $17 million dollar bailout he received from the Chrstchurch City Council to resolve his financial difficulties with two of his properties.

Receivers were appointed for Henderson's Living Space hotels in Dunedin and Invercargill. Equitable Property Holdings Ltd (Auckland), owed an undisclosed sum, had appointed the receivers in July over payment defaults.

Now those receivers have stepped aside because, they say, 'good progress' has been made in 'resolving the issues' with Equitable Property.

Yes, public money is being used to smooth, albeit temporaily, the stormy financial waters of 'Hendo'. This is the very same man who has ranted on and on about people supping at the public trough, about welfare 'bludgers', etc.

Meanwhile people who live in Christchurch City Council flats are having to deal with a massive twenty-four percent rent increase.

Henderson has another date in the High Court on September 8 as creditors pursue liquidation proceedings aagainst him.


I can't say that I, politically, have a whole lot in common with the UnIted Future leader Peter Dunne but, he too, appears to think that the carbon emissions trading scheme will hit the poorest hardest.

He points out that, despite households facing even steeper costs, all we will get is a one-off payment of $112.50 in 1010 - something that neither Labour or the Greens were too eager to admit.

This works out at about $2.15 a week.

Says Dunne: "The effect of this ill-conceived and badly-designed scheme on the ordinary household will be devastating.

"In return for soaring food, fuel and transport costs, the average Kiwi householder will be able to get to the supermarket (probably on foot) where their extra $2.15 a week will be able to buy just over a block of butter or slightly more than one loaf of bread or just over a half a packet of Weetbix or one lamb chop.'

Dunne thinks that the carbon emissions schme will cost New Zealand households something like $50 a week.


It’s no surprise that the Green Party are supporting Labour’s carbon trading scheme. This is what co-leader and former socialist Russell Norman would call using ‘the power of the market’ to address environmental issues.

His party long ago abandoned any notion of fundamental change - ever since former leader Rod Donald invited ‘the captains of industry’ to Green HQ for wine and cheese and an reassuring word or two about not rocking the capitalist boat.

No, the Green Party has definitely acquired a blue hue. The likes of Norman and Fitzmaurice think they can create a ‘kinder and gentler capitalism’by using market mechanisms.

Even Sue Bradford, someone not unfamiliar with socialist politics, is promoting and supporting a ‘market’ solution to ‘global warming’. Hey, stick a tree on top of the whole unedifying capitalist structure and that’s apparently ‘progressive’!

Under carbon trading programs, corporations and others that release greenhouse gases can either agree to reduce their carbon emissions or buy the right to keep polluting.

It is a system whereby polluters are encouraged to take financial responsibility for their carbon emissions rather than necessarily reduce them.

But the reality is that carbon trading schemes simply allow companies who are the biggest emitters of greenhouse gases to continue to pollute.

It is also a new way for corporations to make money.

Trading carbon credits grew to be a $60 billion industry last year, up from just $33 billion in 2006.

It has become as source of windfall profits for the polluters who have invested little or none of that profit in low carbon technologies.

Last year, for example the oil companies like Esso ($30 million) BP ($35 million) and Shell ($43 million) made windfall profits from the European Community’s Carbon Emission Trading Scheme.

Environmental-justice organizations like Carbon Trade Watch argue that the carbon trading schemes are highly flawed. With no regulatory framework to verify claimed reductions, hundreds of credit-generating projects are being realized under corporate self-monitoring, dangerously relying on the polluters’ own integrity. These potential conflicts of interest were at the heart of the Enron and Arthur Andersen scandals, both pioneers in emissions trading.

Patrick Bond, a South African political economist, told the Australian Green Left Weekly in July:

‘Multinational corporations are trying to commodify the air, really, and the pollution in the air. They want the right to do that, and they want to commodify it with the legal language of contracts and put a price on it and get credit for having already polluted.’

In contrast to the tepid and reactionary poliics of the right-wing Green Party, eco-socialists say that the class struggle must be taken into the campaign against global warming.

As Dunedin political scientist Bryce Edwards has pointed out:

‘The carbon trading policy will hit the poor the hardest - which is in line with other Labour-Green-National policies. Transport, food, and electricity costs will rise significantly under the scheme. Power bills will rise by up to 10 percent, and petrol will cost up to 6 cents a litre more.’

While the Green Party see rising prices as a disincentive to consume without any care for the impact that this has on poor people, the eco-socialist movement says that the fight must be about achieving non-reformable reforms like a consumption tax on the rich and free basic electricity and water

Says Patrick Bond: ‘a serious challenge to the capitalist system is what we need now to save the planet. An organised socialist planet is going to be required.’

It’s unfortunate that this message has fallen on deaf ears within the New Zealand Green Party.


Twitter Delicious Facebook Digg Stumbleupon Favorites More