Some predictions using real interest rates

My study of real interest rates has been continuing, though without any publishing on this blog due to data collection. There are some predictions though which I have decided to publish today.

I've broken up nations into four groups.

Group 1 - Plunging real interest rates. These are nations whose monetary conditions have dramatically changed over the previous six weeks to promote inflation. These nations are:

• Britain
• Argentina
• Brazil
• Iceland
• Switzerland
• Mexico
• China
• Russia
• Turkey
  

Now of these nations, the one with the lowest CPI is Switzerland, which means that the inflationary growth will not be as serious, while Turkey and Argentina already have high levels of inflation. High inflation levels are bad for an economy because they act to distort prices which, in turn, leads to more inaccurate "money direction" - the choices money holders have in spending or saving or investing or borrowing currency. This inevitably leads to a "peak" in growth, followed by a trough - inflation usually precedes a deflationary economic downturn.

Group 2 - Real Interest rates dropping moderately. These are nations whose monetary conditions have favoured economic growth over the previous six weeks.

• Japan
• Canada
• Euro Area
• Australia
• Ireland
• Spain
• Germany
• France
• Italy
• Sweden
• India
• New Zealand
  

While inflation may result from these monetary conditions such an increase is not likely to be serious. While these conditions do not guarantee economic growth they do act to either improve growth already occurring or to limit any contraction. Of these nations, Ireland is the only one with a contracting economy experiencing deflation, so it is likely that Ireland will experience only moderate contraction and more stable prices in the coming months. Conditions in the Euro Area are improving, which should affect the PIIGS in a positive way. While India's real interest rates have improved moderately, very high inflation continues to afflict them and there is evidence from my data to suggest that India is likely to have some form of economic contraction (ie either a downturn or lower growth rates) soon. Of the nations on this list, Japan and Germany, with price changes close to zero, are more likely to experience sustained growth.

Group 3 - Real interest rates increasing moderately. These are nations whose monetary conditions have favoured economic contraction over the previous six weeks.

• United States
• South Korea
• Poland
  

Again this is not a prediction of economic decline but a contractionary effect upon growth/decline already being experienced. I have collected more data on US CPI and interest rates than any other nation and the data suggests that conditions in the US are not improving. Growth in GDP for Q1 2010 was 3.2%, following on from 5.6% in Q4 2009, which shows that the Obama stimulus of 2009 has passed its peak and is headed on its way down. Real interest rates in the US declined considerably between July and December 2009. In fact "considerably" is too conservative a word to use - real interest rates declined from 5.7% to 0.62% over that six month period. The US would be in "Group 1" in December last year, which indicates that the US economy is beginning to slow down. Considering the speed of the decline and the growth experienced in Q4 2009 and Q1 2010, I would be very surprised if growth ended up exceeding 1.0% for Q2 2010 (which is now).

Group 4 - Real interest rates increasing substantially. These are nations whose monetary conditions have seriously deteriorated over the previous six weeks.

• Greece

Greece has suffered mainly from the market's fear of a sovereign debt crisis - and such a fear is not unfounded. With increasing austerity measures being put into place, Greece's economy looks set to contract - ie shrink - some time this year. Inflation in Greece is still running a little high (3.9%) but increases in bond rates have more than exceeded this amount. Inflation in Greece is likely to turn into deflation as soon as the economy begins to shrink. Growth in the Euro Area, though, is likely to moderate any Greek downturn (and also help Ireland stop its current economic decline).

And that's Stephan Bibrowski in the picture.

Farm the whales?

Save the Whales! Environmentalists for decades have been closely associated with this particular campaign and are directly responsible for the worldwide ban on commercial whaling in 1986. As a result of this ban, whale numbers around the globe have increased - though they are still a small fraction of the amount that existed in the 19th century and before.

Now, however, there is a proposal to allow Japan to have limited commercial whaling as a way to try to control and regulate the practice. Japan has, of course, been openly flouting international law by continuing to allow whaling for "scientific purposes", though it is clear that such practices are simply a front for commercial whaling - as proved by the presence of whale meat in Japanese restaurants and dinner tables.

Naturally such a proposal will result in an outcry - no! Whales are noble creatures! To use them for food and other commercial reasons is immoral! Allowing commercial whaling will cause the extinction of another of earth's animals! We cannot condone murder!

But the only way for people to adhere to such an argument is for them to be vegetarians, specifically vegetarians who believe that killing animals is murder. The vast majority of us - myself included - are happily omnivorous. Yet it is one thing to eat whale meat - it is another thing to do it and cause the death of a species. Chickens, cows and pigs have all died so that I and millions can enjoy our KFC bucket, our medium rare steak or our bacon and egg breakfast.

The problem is, though, that mainstream society is not vegetarian and is not likely to become vegetarian by choice. Poorer people around the world are vegetarian not by choice but by circumstance - but for us in rich, industrialised countries, we are happy to eat meat. The problem is that the environmental movement contains more than its fair share of vegetarians who morally oppose eating animals so that, if they get their way, no one would eat them. For carnivorous greenies like myself, that is a problem.

I've written previously about our coming vegetarian future, yet this situation will come about simply by necessity rather than choice: the limited space available for farmers to meet future demand will be dedicated to grains and legumes rather than livestock as the food energy output of the former is greater than the latter. Cows, pigs, sheep and chickens will still be used for food in the future - but they will be much more expensive than they are today.

Whales, of course, are no different to any other animal when it comes to consumption. If we can happily eat cows and pigs and fish, we can also happily eat whale. The difference, though, is that whales are endangered while cows and pigs are not. From this we can come to some sort of ethical conclusion which allows mankind to consume animals so long as we do not cause them inordinate suffering or wipe them out completely.

Such a conclusion is not outside the bounds of Christian teaching either. Christian blogger Byron Smith pointed out that Reformation hero John Calvin could be classed as a "greenie" for this teaching:

The earth was given to man, with this condition, that he should occupy himself in its cultivation... The custody of the garden was given in charge to Adam, to show that we possess the things which God has committed to our hands, on the condition that, being content with the frugal and moderate use of them, we should take care of what shall remain. Let him who possesses a field, so partake of its yearly fruits, that he may not suffer the ground to be injured by his negligence, but let him endeavor to hand it down to posterity as he received it, or even better cultivated. Let him so feed on its fruits, that he neither dissipates it by luxury, nor permits it to be marred or ruined by neglect. Moreover, that this economy, and this diligence, with respect to those good things which God has given us to enjoy, may flourish among us; let everyone regard himself as the steward of God in all things which he possesses. Then he will neither conduct himself dissolutely, nor corrupt by abuse those things which God requires to be preserved.

So the idea is then that even carnivores like yours truly (and you too most likely) have a responsibility to care for the earth that God has provided so that we can live, and that those who degrade the earth and make it worse for future generations are committing a very serious sin.

But let's get back to whales. For centuries mankind has sent fleets of ships into the oceans to hunt and kill whales to provide consumers with food and whale oil. Of course there's nothing wrong with utilising these resources - but what happened ended up bringing whales to the brink of extinction. Thanks to the 1986 ban (and to Star Trek IV), commercial whaling has been outlawed - excepting the Japanese and a few others - and whale numbers have begun to grow again. One notable example of this is the Blue Whale, which had dropped to maybe 650 individuals during the 1960s, but has increased to over 5000 today after a whaling ban in the 1960s (though still a fraction of the 275,000 Blue Whales estimated to have been alive before commercial whaling began). Population increases among other whale species has also been noted.

So with all this good news, why consider going back to whaling? The logic behind such a return is similar to that employed by advocates of drug legalisation - harm minimisation is more effective than criminalisation. In the case of whaling, the argument is that a heavily regulated return to commercial whaling is more likely to preserve whale numbers than the current ban. This is because the ban has created a demand for illegal whaling. Allowing a return to commercial whaling - which would be heavily limited by quotas - would reduce this demand and legitimise it. Moreover, quotas could increase as whale numbers increase, or decrease if numbers decrease, so long as the amount of whales killed by commercial whaling is much lower than the amount of whales that are born - preferably by a large percentage (eg 1 whale killed by commercial whaling for every 10 whales born). Linking quotas with whale population will ensure that commercial whaling companies have a financial interest in increasing the amount of whales in the ocean, thus giving them incentive to not hunt illegally (lest a complete ban be reinstated) and self-regulate.

The question is, though, have whale numbers increased to the point where even commercial whaling can be reinstated? While the 1986 ban has led to growing whale numbers, whale populations worldwide will still take centuries to recover from mankind's plunder. Depending upon the species of whale, a return to whaling - even heavily regulated by quotas - may still be unsustainable. While I certainly support a careful return to commercial whaling, my support is heavily qualified.

But all of this may be irrelevant anyway - experts are, after all, predicting an ocean die off once global warming goes too far. Maybe all I'm supporting is simply rearranging deck chairs on the Titanic. Time will tell.

AAAAAAAAA

A blog post with every single category marked (I'm doing this for scribefire)

New Zealand Cricket

With the recent retirement of Stephen Fleming as New Zealand's highest run scorer, now is a good time to examine the history of "The Black Caps".

Fleming's record is interesting because, although he has managed to score 7172 Test runs, he has done so at the rather lowish average of 40.06. Yet Fleming is one of only a few New Zealand batsmen to average in the 40s. A cursory look at the records table shows that the majority of long-term New Zealand batsmen average in the 30s. Of those who have made 3000 or more runs for New Zealand, only Fleming and Martin Crowe average above 40.

New Zealand's bowling records are dominated by Sir Richard Hadlee, whose 431 wickets at 22.29 dwarf Daniel Vettori's 2nd place figures of 244 wickets at 34.49. In fact, of all the New Zealand bowlers to take 100 or more test wickets, only four - Hadlee, Cairns, Collinge and Taylor - have done so at an average of less than 30.

New Zealand's test history reflects this lack of quality. Only Sri Lanka (5-9), Zimbabwe (0-7) and Bangladesh (0-6) have lost more matches against New Zealand than they have won. Surprisingly, the record between New Zealand and West Indies is almost neck-and-neck, but with West Indies leading 10 victories to New Zealand's 9. Against all other Test nations, however, New Zealand has struggled throughout its history to be competitive.

But why has New Zealand failed to be competitive? Well, for starters, New Zealand is a small nation. There are 4.2 million people in New Zealand today, which means that the playing infrastructure is smaller than most other Test playing nations. Let's compare nation sizes to New Zealand:

England - 60.6 million (population of U.K.)
Australia - 21.3 million
West Indies - 5.75 million (encompasses many island nations)
South Africa - 48.6 million
India - 1120 million
Pakistan - 169.3 million
Sri Lanka - 19.7 million
Zimbabwe - 13 million
Bangladesh - 150.5 million

One way to compare New Zealand cricket is to compare it with an Australian state. The best comparison is therefore Queensland, which has about the same population as New Zealand. So what happens when you compare Queensland cricket to New Zealand cricket?

The first thing to remove from the equation is "imported" Queenslanders. Thus any comparison needs to remove long-term players like Allan Border, Greg Chappell and Kepler Wessels, while also ignoring shorter-term ones like Viv Richards, Graeme Hick and Ian Botham. New Zealand has had its share of imports as well, but these basically include Dipak Patel and Roger Twose, hardly players who set New Zealand cricket on fire.

Let's start with batsmen:

Top 10 NZ batsmen (runs scored)
SP Fleming 7172 @ 40.06
MD Crowe 5444 @ 45.36
JG Wright 5334 @ 37.82
NJ Astle 4702 @ 37.02
BE Congdon 3448 @ 32.22
JR Reid 3428 @ 33.28
CL Cairns 3320 @ 33.53
Sir RJ Hadlee 3124 @ 27.16
CD McMillan 3116 @ 38.46
GM Turner 2991 @ 44.64

Top Queensland batsmen (runs scored)
ML Hayden 8242 @ 53.51
IA Healy 4356 @ 27.39
PJP Burge 2290 @ 38.16
GM Ritchie 1690 @ 35.20
KD Mackay 1507 @ 33.48
A Symonds 1031 @ 41.24
* S Law

As you can see, NZ has not produced any batsman that averages over 50 while Queensland, with Matthew Hayden, has. However, it is important also to note that, apart from Hayden, Queensland have not produced any other top-class bastman. Symonds may end up scoring more runs at a good average as time goes by, but that's a work in progress.

One name that I placed on the list is that of Stuart Law. Just as people will always be left wondering how far Martin Crowe could have gone had he not been subject to injury, people will also wonder how many runs Stuart Law could have scored had he been a regular in the Australian side.

The reason why there aren't too many Queenslanders on that list is simple - those who didn't perform (and there were many) were eventually dropped for a player from another state. The best the state had to offer in its history, apart from Hayden, was Burge, Ritchie and "Slasher" Mackay - players who, on statistics alone, are about the same quality as those who played for New Zealand.

Of course there is another name that could be put on the Queensland list - Martin Love. Again, who knows how many runs he could've scored if given the chance?

Given these differing variables, it is probably correct to say that New Zealand has produced batsmen of around the same quality as those produced by Queensland. Now, what about bowlers?

Top 10 NZ Bowlers (wickets taken)
Sir RJ Hadlee 431 @ 22.29
DL Vettori 244 @ 34.49
CL Cairns 218 @ 29.40
DK Morrison 160 @ 34.68
CS Martin 136 @ 32.66
BL Cairns 130 @ 32.92
EJ Chatfield 123 @ 32.17
RO Collinge 116 @ 29.25
BR Taylor 111 @ 26.60
JG Bracewell 102 @ 35.81

Top Queensland bowlers (wickets taken)
CJ McDermott 291 @ 28.63
MS Kasprowicz 113 @ 32.88
G Dymock 78 @ 27.12
AJ Bichel 58 @ 32.24
CG Rackemann 39 @ 29.15

Hadlee dominates, of course. No Queensland bowler has ever had a Test cricket career even nearly as good as Hadlee. McDermott is Queensland's most successful Test bowler, but you can quite easily compare his figures to those of CL Cairns, Collinge and Taylor. Kasprowicz is Queensland's second most successful bowler, yet his career can be compared to that of Chatfield and Morrison.

So, when we compare these two places, what do we see?

1. One world-class player in each.
2. Three batsmen averaging in the 40s or above in each.
3. Three bowlers averaging below 30 in each.

In other words, Queensland and New Zealand are probably comparable in terms of the quality of players they have produced throughout history. However, there are some major differences:

1. Cricket in New Zealand is best played in a 4 month "window" in Summertime. Cricket in Queensland can be played at any time of the year.
2. Sport in New Zealand is dominated by Rugby Union, whose season encompasses 10 months of the year. Queenslanders love their winter sport, but are not dominated by any single code.
3. New Zealand has six first class teams drawing players from a population of 4.2 million. Queensland has the same population, but has only one first class team.

Given these drawbacks, the only reasonable conclusion to come to is that New Zealand has done very well in producing the players that it has, and that it is probably better in nurturing talent than Queensland, and is able to get the most out of the players they have.

In short, New Zealand may never produce a world-class Test team, but what it has produced throughout its history is pretty good, especially when taking into account its small population and other drawbacks.

American Twinkie Farms

From the Department of it-makes-sense-to-someone:

Americans have begun to ask why the farm bill is subsidizing high-fructose corn syrup and hydrogenated oils at a time when rates of diabetes and obesity among children are soaring, or why the farm bill is underwriting factory farming (with subsidized grain) when feedlot wastes are polluting the countryside and, all too often, the meat supply. For the first time, the public health community has raised its voice in support of overturning farm policies that subsidize precisely the wrong kind of calories (added fat and added sugar), helping to make Twinkies cheaper than carrots and Coca-Cola competitive with water. Also for the first time, the international development community has weighed in on the debate, arguing that subsidized American exports are hobbling cotton farmers in Nigeria and corn farmers in Mexico.

I would argue that lowering agricultural subsidies in order to improve overseas trade is one of the positive results of globalisation. Both Australia and New Zealand have reduced agricultural subsidies to zero and lead the world in market-based agribusiness. Not all forms of globalisation are useful - that I concede - but if Western nations removed their agricultural subsidies they would encourage the development of agriculture in third world nations. It would be far better, for example, for places like the Ivory Coast to grow rice or some other form of grain crop than it is for them to harvest coca beans for chocolate production. But, because of the way agricultural subsidies work, rich American farming corporations receive a form of government welfare to grow crops that would not be competitive in a real marketplace.

There are all sorts of benefits of removing agricultural subsidies. The first is a lowering of government spending which, in places like Europe, Japan and the US, would help to balance federal budgets more easily. The second is that farmers themselves get to choose what they want to plant and when, rather than having their work determined by government action. The third is, as I mentioned, the growth of grain crops in the third world (which would help feed their own nations while enriching their economies). The fourth is that farmers would be more easily able to adjust their crop according to climatic conditions. The fifth is that this form of government intervention is encouraging the wrong sort of crop being grown, leading to the example above whereby Twinkies cost less than carrots and Coke costs less than (bottled) water.

As many of you know, I consider myself a bit lefty in my economics. I'm more of a pragmatist. History has proved that food production is best left to the marketplace (although I concede that consumers often make unhealthy choices - consumption is certainly one area the government can modify). Both Europe and the US should look at the experience of Australian and New Zealand farmers, who are now the most entrepreneurial in the world and who survive and prosper because of their own business acumen, not because of government handouts.

Click here to view a summary of agricultural subsidies.

New Zealand moving towards Green Energy

From the department of that-can't-be-done-it's-un-Australian:

The New Zealand government is working on a 10 year ban of new construction of gas and coal fired power plants. State owned power generators are already banned from building gas fired plants and the decision whether to extend the ban to private companies will be made soon.

The goal is to reduce carbon emissions and generate 90% of the country’s power from renewable sources by 2025. New Zealand currently produces 70% of its electricity from wind, hydro and geothermal generators. The hope is the ban will speed construction in wind turbines and steam fields.

The ban affects two gas fired power plants currently under consideration. Genesis Power, the government owned utility, and Contact, New Zealand’s largest commercial power company, had planned to spend NZ$1 billion on the projects. Now the companies will need to look for renewable sources for their investments. Contact’s share prices rose on the Wellington stock exchange with news of the ban.

In New Zealand gas prices have been rising and gas production falling over the last 5 years. The higher gas cost has made renewable power cost competitive and Contact has spend NZ$2 billion on wind and geo-thermal electricity production capability. The company want the government to speed up approval of two new steam plants on the North Island.

What is it about New Zealand? They tore up the ANZUS treaty by standing up to America back in the 1980s; they create for themselves a radically different political system; they refuse to join the Iraq war; they manage to have the expertise to create the Lord of the Rings trilogy... and now they are turning to Green energy.

It's downright un-Australian, that's what it is. How do these people expect to give up their sovereignty and become part of Australia if they keep doing things like this? What impudence!

New Zealand keeps tabs on us

It's always my belief that, around the world, you have "big country - little country syndrome", or "big city - little city syndrome". Such a syndrome would manifest itself in this way:

• People in Melbourne know what goes on in Sydney, but people in Sydney have got no idea what goes on in Melbourne.


• People in New Zealand know what goes on in Australia, but people in Australia have got no idea what goes on in New Zealand.


• People in Australia know what goes on in the United States, but people in the United States have got no idea what goes on in Australia.

And so on. This sort of syndrome can often be proven. For example, what is today's main discussion in The New Zealand Herald? Does a politician's strip club visit lower your opinion of that person?

New Zealand's secret weapon

From the department of one-rule-for-me-another-rule-for-you:

Australian apple and pear growers say New Zealand will fail in its attempt to gain permission to export apples and pears to Australia.

New Zealand will ask the World Trade Organisation to overrule a decision to block its apple and pear sales here, because of the disease fireblight.

But the Chairman of the Australian apple and pear growers fire blight taskforce, John Corby, says fireblight will destroy the domestic industry.

"Bacteria will come in on the apples being imported into Australia," he said.

"This is a bacteria that essentially wipes out pear indutries and has a devastating effect on apple industries," he said.

Those horrible, horrible Kiwis! Threatening to Export their disease infested fruit to our pristine shores! What were they thinking?

Air New Zealand carried troops to Iraq

This is the big story in NZ at the moment:

(New Zealand) Defence Minister Phil Goff has confirmed Air New Zealand carried troops to Iraq.

He expressed his anger at the move saying it was not appropriate for the flag-carrying national airline to be used to cart troops to a war New Zealand did not approve of.

Mr Goff said he understood Air NZ had operated two charter flights carrying troops from Australia to Iraq in Kuwait.

Investigate magazine broke the story, saying Air New Zealand had been flying United States and Australian combat troops across the Pacific to the Iraqi border.

Air New Zealand said it was a commercial operation but as a courtesy had told government officials about the flights, the magazine said.

But Mr Goff told reporters that while Ministry of Foreign Affairs officials had been told, they had not passed this on to the Government.

New Zealand, to their great credit, opposed the invasion of Iraq. For Air NZ to have carried Iraq-bound troops is unfortunate. Moreover, while I'm happy for Australian troops to be transported off to war on high quality New Zealand planes, I find it strange that Aussie ones couldn't be found to do it.

NZ interest rates and monetary policy

Allan Bollard, the governor of the New Zealand Reserve Bank (NZRB), has raised interest rates today by 25 basis points - from 8.0% to 8.25%.

New Zealand has some rather interesting problems. The first is that their current account deficit is a whopping 9.1% of GDP. Essentially, their currency appears to be quite overvalued. The second is that their unemployment rate is very low at 3.8%, which while a sign of economic strength, is also putting pressure on inflation (higher levels of employment lead to higher levels of spending). The third is that, in an effort to devalue the currency, the NZRB intervened in the foreign exchange markets by selling off bonds in NZ dollars, thus causing the currency to drop in value.

So, New Zealand is facing inflationary pressures and a large current account deficit. The NZRB, like all modern central banks, controls inflation by monetary policy - raising interest rates will bring down inflation. The problem is, however, that whenever these rates increase, then the currency becomes more valuable around the world - the rates go up which means that overseas investors see it as a good place to invest money. But when this happens, the country's current account goes into deficit (it buys more from overseas than it sells overseas, and makes up the difference by borrowing from overseas).

But then the NZRB has been selling off bonds to lower its currency - but that runs counter to its inflation controls. It is as though it is trying to solve two problems at once and is doing two things that cancel each other out. Let me make it simpler:

Problem #1 Big current account deficit.
Solution: NZRB devalues currency.
Result: higher levels of inflation.

Problem #2 Higher levels of inflation.
Solution: NZRB raises interest rates.
Result: Big current account deficit.

This problem is not, however, as simple as I make it out to be. The action of raising interest rates also dampens economic growth - which means that the purchasing of goods and services, even those from overseas, may drop off. In other words, even high interest rates and the resulting high currency may result in a lower current account deficit.

I'm a proponent of zero-inflation monetary policy - essentially I believe that central banks should aim for completely neutral price stability.

Let's assume that the NZRB chooses to lay off its devaluation scheme and focuses entirely upon inflation. More than that, let's assume that the NZRB chooses to enact a zero-inflation monetary policy. What would happen?

Inflation in New Zealand is 2.0% and the NZRB's actions today (raising rates to 8.25%) indicate their belief that there is upward pressure upon prices. With a zero-inflation policy, it would mean that the NZRB would continue to raise rates until inflation settled at or around 0%. What would this figure be? I'm not certain, but interest rates would probably be in the range of 9.5 - 10.0%

The effect of a raise in interest rates would be dramatic. Foreign investors would buy up NZ bonds. More than that, investors in the New Zealand sharemarket would begin to sell off their equities in order to buy bonds that offer better returns than some companies. This would result in a sharemarket decline.

But what would the average New Zealander do? Households have a choice between spending or saving their money. Since an increase in interest rates would make saving more attractive, household savings would increase. But this would be at the expense of spending - which would result in a slower economy. With less spending, demand for goods and services - including goods and services procured from overseas - would decline, leading to a drop in the current account.

It sounds counter-intuitive to suggest that a current account deficit can be reduced by having circumstances that promote a strong currency - but the issue is not whether the currency is strong but whether demand is too high. Even an economy with a strong currency can have interest rates high enough to choke off demand and rebalance the current account. The Japanese Yen, for example, is quite strong yet the economy it serves runs a large current account surplus.

But getting back to New Zealand and my proposed zero-inflation model - some of you may be asking why I would even bother suggesting this course of action.

As with Paul Volcker's world recession of the early 1980s, sometimes the best thing to do is to force a recession in order to rebalance everything. New Zealand, as it stands, is living on borrowed money.

At this point I'll re-state a little anecdote I often make to prove my point. Imagine a man who is living beyond his means and borrows money to cover his expenses. At some point, this man's interest payments will become so high that the proportion of his income that he spends in debt repayment results in poverty. In order to prevent this slide into poverty, the man must cut back on his spending and begin to spend less than what he earns. As each subsequent payday goes by, he owes less and less money and is able to pay back his loans more easily. Moreover, he can also afford to spend more as a result of his debt reduction.

Just as this anecdote applies to one man so it can apply to an entire economy. If New Zealand is to stop itself from sliding into debt it must reduce its spending. The best way to reduce spending is to restrict the money supply, which means that interest rates must increase. Despite the extra value this gives to the currency, the effect of higher interest rates will be to reduce all forms of spending, including goods and services procured from overseas.

Tight monetary policy, like tight fiscal policy, has a "J curve" effect. The initial effect will be negative, but as time goes on the effect will be positive. The ultra-tight monetary policy that I am proposing will naturally result in, at the very least, a sluggish economy and, at worst, a recession. But, over time, the economy will rebalance, and will grow again - except this time the growth will be more sustainable over the long term and will coexist with a balanced current account.

Outlawed Baby names

4real, Satan, Adolf Hitler.

NZ Soldier for ANZAC Bridge

The "NZ" in ANZAC is there for a reason.

What to do with New Zealand cricket?

Paul Whiting appreciates my thinking about Australian cricket and wonders if I can offer some level of opinion on the state of NZ cricket. I can certainly give opinions and ideas but at a different level since I am not overly familiar with specific NZ players. Although I will say that, with the retirement of McGrath and Warne, a bowler of the calibre of Shane Bond would likely make it into the Australian team.

New Zealand has a number of natural disadvantages when it comes to producing a quality cricket team. The domestic season is short and the weather is not conducive to play often. Moreover, the lengthy Rugby season (I think it goes for 9 months) prevents many amateurs from playing during "warmer" times.

Having said that, New Zealand has produced players like Martin Crowe, Andrew Jones, Glenn Turner, Mark Richardson, John Reid, Richard Hadlee, Chris Cairns, Bruce Taylor, Simon Doull, Dion Nash, James Franklin and Shane Bond. All of these players bat in the 40s or bowl in the 20s, an indication that New Zealand is capable of producing highly competitive players.

One way to look at it is to compare New Zealand with the Australian state of NSW. NSW has 6.8 million people while New Zealand has 4.1 million. In theory, therefore, New Zealand could, in fact, produce four top class cricketers for every seven that New South Wales produces. Think of the Test cricketers that NSW have produced in the last twenty years: Brett Lee, Michael Clarke, Stuart Clarke, Nathan Bracken, Michael Bevan, Mark Taylor, Michael Whitney, Michael Slater, Adam Gilchrist, and so on. Now ask yourself - has New Zealand produced half as many cricketers of this calibre?

Of course, the answer is no - but that doesn't mean that they can't. Of the 332 Tests New Zealand have played in their history, they have won 62, lost 131 and drawn 139. This indicates that New Zealand cricket has not been as all conquering as their famed All Blacks. In fact, with only around 18% of Tests ending in victory, one would wonder whether they deserve Test status at all.

Now that I've examiend New Zealand cricket in some detail, I now need to look at Australian cricket again.

Australian cricket is very profitable. As a result of Packer's World Series Cricket back in the 1970s, cricket has become a professional sport. Television and advertising rights have made Australian cricket - both Test and One Day forms of the game - into a profitable enterprise.

But along with this profitability came the realisation that in order to maximise profit, there is a tension between building a team that the public want to watch, and providing opposing teams that the public want to watch as well. People flock to the cricket in Australia when they know that the Australian team is likely to win, but against a team that is competitive and likely to cause an upset.

Australian cricket suffers most when the disparity between the two teams is noticeable. Back in the 1980s when Australian cricket was at its lowest ebb, crowds at Test and one day matches were noticeably lower than they are now - especially when it was likely that Australia could lose. Home test series against New Zealand, West Indies and England ended in failure and the public punished the team by not buying tickets and/or turning off the TV. But crowds hardly flocked to the grounds when Zimbabwe toured recently either. The greater the perceived disparity, the less likely the public are interested.

It is therefore in Australia's interest to have a) The world's best team, and b) Matches against quality opposition. It's that second issue that I am now going to unpack because New Zealand has not, apart from a few seasons in the 1980s, provided such opposition.

Let me make it clearer. It is in Australia's interest to have a strong New Zealand Test team. Seeing as that is the case, what can Australian cricket do about it?

We need to take note of the Super 14 Rugby series. In that series, Rugby teams from New Zealand, South Africa and Australia play in a professional series. Why not do it with cricket?

These are my ideas:

1) Merge Cricket Australia and New Zealand Cricket into one organisation.
2) Make it a clear, unalterable guideline that this organisation will oversee two distinct international teams - there will not be a merging of the two test teams. Moreover, the goal will be that both teams be the first and second best teams in the world (without favouring one over the other).
3) Set up a common domestic cricket competition involving the six Australian and six New Zealand first class teams. These 12 teams will play each other once in four-day matches and once in one-day matches throughout a six month season.
4) Have an open-market policy for each team to contract any players they wish to - there will be no rules against international players. Thus Australian players could play for New Zealand first class teams and vice versa - as well as South Africans, Sri Lankans and even English county players. The reason for this is to increase the standard of players in the combined competition - otherwise the quality of play would be diluted. The result would obviously be less New Zealand players in the competition - but they will be the best NZ players and will thrive against quality opposition.
5) Increase the amount of juniors playing cricket in New Zealand and make amateur cricket more competitive. This is of importance since the idea would be to create an environment in which New Zealand cricketers can make it into the combined domestic series on merit.

In this situation, both Australian and New Zealand first class players would learn a great deal. New Zealand players will regularly play on the hard, fast Australian pitches and Australian cricketers will regularly play on the slower, seam-friendly New Zealand pitches. Constant exposure to these conditions will produce well-rounded cricketers from both nations. Moreover, the experience and talent of imports from overseas will enable teams to have quality players when the national team calls upon their players. New South Wales may lose Michael Clarke to Test duty, but may still have Brian Lara coming in at No. 3!

I'll say here that I don't think that this combined competition should include South African teams. This would increase the teams to 18 and would either lead to a two-tiered competition or an oversupply of cricket. English county teams may play 16 or 17 first class matches per season, but their players don't need to spend hours travelling in 747s flying across Antarctica, the Indian Ocean or the Tasman sea to do this. Besides, South Africa as a country is declining and liable to have massive political problems in the next 10-20 years methinks.

So anyway, that's my solution. Pretty radical, but I think it will benefit both Australia and New Zealand.

Nguyen Tuong Van, John Howard, Helen Clark

Nguyen Tuong Van is the Australian who was caught a few years ago trafficking drugs into Singapore. Although he should be punished for his crime, Singapore does itself no favours for punishing drug dealers with execution.

In a way, it is true that Nguyen, as a drug dealer, is responsible for the potential deaths of many through drug addiction. Nevertheless, I do not believe that this crime should result in capital punishment. As an Evangelical, I do believe in justice - but in this day and age there is too much that can go wrong when a person is sentenced to death. If the person is eventually discovered to be innocent, then there is no way to pay recompense to a dead person. No system of justice can be free from corruption.

Singapore, if it is to be regarded as a progressive and strong Asian nation, must put aside the death penalty. If Nguyen has committed a crime (which is probably more than likely), then he should be jailed for a long time for his crime.

John Howard appears to be in a lose-lose situation at the moment. On the one hand, he cannot really do anything short of sending the SAS to rescue Nguyen. On the other hand, he does have a cricket-watching date that just happens to conincide with Nguyen's execution. The Sydney Morning Herald, in particular, seems to frown upon Howard's decision to watch the PM's XI during Nguyen's execution - but then again, what can he do?

Howard and others probably should have got their acts together a few years ago when Nguyen was first arrested. The fact that they are getting all uppity about it now is probably due to public and/or media pressure. Nguyen is the third Australian, after Michelle Leslie and Schapelle Corby, to hit the headlines for drug-dealing or drug usage in an Asian country. Nguyen, however, is unlikely to be given much sympathy because he isn't a young attractive white female. Excuse the cynicism, but it's true.

What was totally unexpected was the sudden work of Helen Clark, the Prime Minister of New Zealand, in taking the matter up with Singaporean authorities. I have often said to people that Helen Clark must be a competent person because there is no way she could have made it politics in personality and image alone. Sexist comment? Maybe, but there is no doubt that Clark is hardly the paragon of good looks.

I will always remember the protests in New Zealand when our John Howard came for a visit just as the invasion of Iraq was about to begin. Most New Zealanders opposed the war and gave Howard heaps when he arrived. Helen Clark also told Howard that her nation would not participate - though in a much more diplomatic way.

For me, that visit was a watershed in my attitude towards New Zealand. The New Zealand people and its leadership stood up to Howard and Australia and openly disagreed with them. New Zealand, always in the shadow of its larger colonial brother, was standing on its own two feet and was confident and sure enough to tell Australia where to go. Helen Clark was the PM at the time and so, in many ways, she represented New Zealand's strength to us in Australia who were taking notice.

The fact is that New Zealand - and particularly Helen Clark - owed Australia no favours whatsoever. Yet Helen Clark has now decided to intervene to try to settle an international incident (the Nguyen execution).

Of course, her actions were hardly altruistic. She would gain some level of political mileage from her actions. Nevertheless, she would have lost nothing had she not acted. In many ways, her actions seem to be consistent with certain values and beliefs that I thought had disappeared altogether: the desire for peace, consensus and mutual respect between nations. Since 9/11 I had thought such things had gone out the window, especially with George Bush in America and the insular attitudes of the Howard government.

In short, it was nice to see good old fashioned Aussie values being exhibited - even though it was a New Zealander that was exhibiting them. Times have changed, especially here in Australia.

From the Department of Wha' Happnin?

© 2005 Neil McKenzie Cameron, http://one-salient-oversight.blogspot.com/




This work is licensed under a Creative Commons Attribution 2.5 License.

David Lange - The face of a tough New Zealand

David Lange died recently. He was Prime Minister of New Zealand from 1984-1989, and will probably go down in history as one of that nation's great leaders.

As an Australian, I have often felt a sort of "big-brotherly" relationship with our Eastern neighbours. They speak English, they beat us in Rugby Union often, and they come to live here a lot. Three members of my church in Charlestown are New Zealanders, and even my wife was born there (although she moved to Australia before the age of one).

More recently, I have worked out that the New Zealand - Australia relationship is akin to the Canada-USA relationship. New Zealand knows everything that happens in Australia, while Aussies have got no idea what is going on in New Zealand. Everyone in New Zealand knows who John Howard is, while not many Australians know who Helen Clark is.

It is this sort of myopic, lazy, condescending attitude on behalf of my own countrymen that ensures that we remain not only ignorant, but also disrespectful towards New Zealand and all that it has achieved. In many ways, New Zealand has advanced way beyond anything that Australia has over the last 30 years.

David Lange is an example of this. Lange did two things that will live in New Zealand's memory for years. Firstly, he stood up to America by refusing to admit nuclear armed warships into New Zealand ports. Secondly, he was involved in a radical overhaul of the nation's economy that has brought greater wealth and prosperity to its citizens.

When David Lange announced to the world that New Zealand would no longer admit nuclear-armed warships into its ports, he obviously got himself and the nation into deep trouble. Imagine it, a small South Pacific nation with a population less than the City of Los Angeles telling the world's greatest superpower - in the midst of the cold war - that they could no longer dock their warships there. American politicans choked on their bagels and coffee at such impudence. But it was an important step in New Zealand's definition of itself. By standing up to the USA, New Zealand essentially asserted itself as a voice on the international stage. It was a courageous move and a gambit that paid off. By doing this, New Zealand also publically disagreed with Australia, and there was the interesting scene of two Antipodean Labour Prime Ministers (Hawke and Lange) with completely different views about American relations. This was more than just underarm bowling or raising average IQs, it was a serious schism in geopolitics. While Australian political leaders continued to simper at their American betters, New Zealand boldly asserted their identity.

But in New Zealand itself, Lange was, somewhat unwittingly, one of the key figures in that nation's economic reform. Rogernomics was introduced because the nation was starting to resemble a South American basket case. Lange didn't agree fully with what went on, but most Australians seemed blissfully unaware of the radical reforms going on to their East. While Hawke and Keating were creating reform of their own, it was nowhere near as radical or as far reaching as that in New Zealand.

Not being a New Zealander has meant that I have not had any personal experience or opinion of the man - I'm sure many New Zealanders would have their own ideas. Moreover, I am certainly not saying that Lange alone created the New Zealand of today - which is beset by all sorts of issues and problems that typify all Western industrialised nations. In this sense, Lange is a figurehead - a point of reference that can be easily identifed.

New Zealand's future is undoubtedly their own. Any talk in Australia about New Zealand joining the Commonwealth or a monetary union is ridiculous. In many ways, while Australia continues to sleep comfortably on America's doormat and happily eat the scraps thrown to it, New Zealand has been able to forge its own, unique, path to the future. Australia - especially its politics - is still mired in the past and is getting more and more conservative. While Howard and Costello preach neo-liberal economic reform, not one of Australia's three major parties has suggested any radical changes to Australia's governmental system. Since 1996, New Zealand has radically changed their system into something called "Mixed Member Proportional". Add this to a unicameral parliament and you have a structure for a better, more efficient, system of Government. Although it is not as good a system as anything I would propose, and although it would naturally have its own problems, it is a step in the right direction. In politics, at least, New Zealand has progressed into the 21st century while Australia seems mired somewhere around 1950 still.

Nevertheless there are still problems. New Zealand continues to lose people who migrate to Australia; GDP per capita is still quite low compared to Australia and other western nations; their own armed forces are pathetically weak; racism between whites and maoris continue; and their Test Cricket team remains only marginally competitive.

Despite these things, the future looks bright for New Zealand. Any nation that brought us Peter Jackson deserves praise.


From the One Salient Overlord Department

© 2005 Neil McKenzie Cameron, http://one-salient-oversight.blogspot.com/





This work is licensed under a Creative Commons Attribution 2.5 License.