Mortgage rates up

Interesting article in the Guardian by Larry Elliot, especially the last bit where he talks about Iceland and carry trades:

"The technical term for what has been going on in Iceland - and other emerging markets - is a carry trade. Inflation and interest rates are low in the leading industrial nations, and their currencies have been moving in fairly tight ranges. Central bankers tend to like this state of affairs, because it suggests economic stability. Investors don't like it nearly so much, because it means returns are not as big as they would like. So, they have been filling their boots with money borrowed in dollars, yen, Swiss francs and euros (at suitably low rates of interest) and buying assets in countries where interest rates are much higher (including Iceland)."

And New Zealand - that is how banks are managing to offer fixed rate mortgages (2yr 7.95%) at substatially lower rates than floating (9.55%) (http://www.interest.co.nz/mortgages.asp).

What these (often Japanese) investors are betting is that the NZD (or ISK) remain stable against their baseline currency (e.g. JPY). If they lose this confidence, then they will either want a higher premium for Uridashi and EuroKiwi (NZD denominated bonds marketed in Japan/Europe) or will bale out of the market altogether - this will send (fixed) mortgage rates up as the banks switch to alternative conventional financing.

When that happens, it could be the tipping point for the housing market.

What's she been smoking?

Anti-crystal meth campaigner Marie Cotter is reported as saying:
"We've got the support of the whole of New Zealand"

Well she hasn't got my support, so she's clearly wrong! I think that all drugs, including methamphetamine, or "P" to give it it's marketing name, should be made legal.

The only reason why NZ has a (much exaggerated) problem with meth is that, being isolated, the authorities are able to interdict the importation of drugs with more success than in Britain, for instance. As a result, drugs like MDMA and cocaine that need to be imported (or made from imported ingredients) are expensive and hard to find. Hence, people (ab)use drugs that can be cooked up locally from common materials - which methamphetamine can be. So instead of taking a drug which makes you happy, people take a drug that makes you psycho (allegedly).

Great idea, prohibition.

Ban everything now!

The Maori party has apparently come out for a total ban on tobacco, similar to the oh-so-successful one on cannabis and other drugs.

A cynic would suggest that this might be a policy ask on the part of the Mongrel Mob and Black Power - who would be in line to make an absolute fortune out of illegal tobacco plantations in every cornfield and forest.

Excessive access costs

There has been much discussion on Telecom's latest broadband products, with Russell Brown raising the issue of contention rates and Paul Brislen of Computerworld (the magazine not the shop) calling for "boots and all" regulation.

Keith Ng, writing last week suggests that Xtra sells to "suckers-who-are-unaware-that-other-ISPs-exist". This might be partly true, but I get my connectivity from Xtra and I *am* aware of other ISPs. Why do I stay with Xtra? Basically because I sort out IT problems all day for a living - I don't want to do the same when I get home. I could see buying connectivity from a Telecom reseller (there are no competitive non-Telecom resellers, such as Woosh, that can provide services to my Auckland inner-suburb residence) resulting in endless circular arguments about whether a fault was with Telecom or Xtra - each helpdesk naturally blaming the other.

The "market" at present seems to work by Telecom setting their end-user pricing a little above the cheapest competitor. This means that the price is defined by the competition's cost of sales (not by Telecom's).

The main difference between Telecom and the rest is that they own a network worth around NZ$11 billion (at cost) or NZ$4 billion (depreciated) (estimate based on Telecom's 2005 results).
This network is largely paid for by Telecom's voice customers - broadband is an added value extra. Because the other ISPs don't own a network like this, they have to buy service from Telecom or build a very expensive alternative infrastructure. Hence the Telecom cost of sales is much less than the competition, thus enabling Telecom to offer a lousy service at high cost because no-one else can afford to sell anything better.

I don't believe there can really be fixed-line competition in an economy the size of NZ - at least not with Telecom around in its present form. The current solution as advocated by Paul Brislen and others (and favoured by most of the ISPs) seems to be for Telecom to be forced to lease out dark copper (or dark fibre) from premises to exchange, along with rack space in the exchanges for ISP equipment. I can't see this working that well - Telecom would still dominate the resale market and be the monopoly provider of wholesale infrastructure.

I can think of two possible alternatives:

Option One would be to force Telecom to divest it's local network to a mutual body controlled by a consumer trust. This would then lease circuits back to all ISPs and telcos - Telecom would be just another supplier working on leased capacity. Two problems with this: firstly, the network would have to be bought with public money (or confiscated from the shareholders, including the Super Fund); secondly, prices for basic telephone service might end up higher than they are today in order to finance the "artificial market" (resulting in poor old grannies with one phone subsidising wealthy geeks with 16 megabit circuits).

Option Two, which I think better, is to recognise that Telecom is inevitably going to be the monopoly provider in NZ. As such, it needs to be strictly regulated. I think international comparison is the best approach. Telecom should be required to price their services (on a PPP basis) to be in the cheapest quartile of the OECD for each bandwidth segment. At the same time, the "full bandwidth" offering should offer world-class bandwidth (as well as matching worldwide best practice for features such as contention ratios and bandwidth caps). The details should not be for politicians to bother with - there should be a new telecom regulator with the ability to enforce the price/delivery regime.

The latter option would not necessarily be welcomed by the ISPs - prices might fall too quickly for many of them to compete. But the purpose of regulation isn't to help ISPs make money - it's to enable consumers and businesses to buy broadband at a reasonable price.

Public Broadcasting II

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UK politics decoded

Why have the UK Lib Dems won a by-election while gripped by a leadership challenge, disarray and infighting?

Easy really, a substantial majority of Brits take not a blind bit of notice of issues, policies or anything else when deciding how to vote:

The working class vote Labour, giving Labour dominance north of the Severn/Trent line and in inner cities everywhere.

The suburban and rural middle class votes Tory, enabling the Tories to win most seats in the South-East outside inner cities.

So, how do Tories in Liverpool or Labour supporters in Winchester vote? Lib Dem - hence their resilience. Ironically, exactly the same factors make it awkward for them to come up with coherent policies when they are an alliance of people as different as socially conservative Northern businessmen and southern polytechnic lecturers.

A model nation?

Helen Clark is reported as saying (in today's Herald):

"[Egypt] does have moderate leadership [and] we should be there," she said. "It [the opening of an embassy in Cairo] fits in with the general strategy we have of empowering the moderates, building up the relationships with the moderate leaders of the Islamic world."

WTF? Where did she get that idea?

Egypt is at best pseudo-democratic. The election last year was to a large extent rigged, with candidates outside Mubarak's National Democratic Party being prevented from standing. (The main Islamicist party in Egypt, which has substantial support, is banned).

Amnesty International also have a litany of complaints about human rights in Egypt. Torture is endemic, with many cases of people, including a lawyer, being tortured to death.

And this, according to a Labour prime minister is "moderate leadership". Apart from any moral aspect, doesn't our government realize that it's the existence of governments like Mubarak's that drives Arab peoples into supporting extremist organisations and adopting fundamentalist interpretations of Islam?

Logical priorities

George Bush has proposes to increase spending on the "war on terror" by 5%, while cutting numerous non-warlike federal programs including cancer research.

In the last ten years, less than 3000 people have died in terrorist attacks in the US. The chances of an American dying in a terrorist attack in any year is less than 1 in 80,000.

In the same timespan, around 5 million Americans have died of cancer. Americans have a 25% chance of dying of cancer.

Go figure.

Blair officially Tory?

The Guardian reports that:

Tony Blair will tonight praise a "new generation" of centre-right leaders across Europe for helping guide the EU out of a "darkened room" into a brighter future.

It strikes me that that is tantamount to declaring that New Labour is henceforth a centre-right party rather than maintaining it's increasingly unbelievable claims to a Social Democrat heritage.

I wonder whether our local wingers will be over in the UK helping "Labour" rather than the (increasingly leftist) Tories at the next election?

More on censorship

The Guardian reports that Die Welt and France Soir have both republished the following cartoon:

This apparently caused riots and diplomatic ructions when first published in Denmark last week.

I guess if you're a Muslim then it's offensive - simple answer to that - don't buy the paper and feel smug in the fact that the authors, like me, will be off to hell in due course..

Anyway, I don't think it's nearly as offensive as a cartoon of Jesus getting a blowjob on the cross - I can't draw so I won't be regaling you with one (unless anyone happens to know of one I can reproduce for the purposes of comment?).

UPDATE: I've changed the cartoon to one that's funny, rather than just offensive. I did think about this article after I pushed it (which is unusual) on a basis that if "the sewer" seems to be agreeing with your opinions, then you should reconsider them. Basically, where I differ from the wingnuts is that I think that just as western media be allowed to print cartoons offensive to Islam, mullahs and others have the right to preach in a manner offensive to us - e.g. praising the perpetrators of terrorism. As I posted elsewhere, tolerance shouldn't just extend to the easily tolerable.

Banned in NZ

An issue of Otago's student magazine Critic has been banned by the official censor, for containing an offensive, but clearly satirical, article that allegedly advocates date rape.

I find it somewhat Victorian that NZ even has a position of "official censor". Censorship of text is not usual in a democracy. This BBC article suggests that attempts to censor text died out in the UK during the 1970's, after a number of failed prosecutions (Lady Chatterleys Lover, OZ, Inside Linda Lovelace). In the US, most recent efforts to censor text have fallen foul of the First Amendment.

Personally, I believe that information should only be suppressed if there was a crime involved in its production (child pornography) or that it consists of specific incitement to a crime that is likely to be acted upon.

I saw the article when it came out and it was none of this - it was a piece of satire intended to shock. I can't unfortunately find it cached anywhere. If anyone does know of a copy then pass it on - I know people outside NZ who might mirror the text.