By Bernard Hickey
Our economy feels like it's about to have a big party, and it's not just a Christmas party.
2014 is shaping up as a stellar year for economic growth.
ANZ's survey this week showed businesses are the most confident they've been since 1994 when the economy was growing at an annual rate of 7%.
ANZ's composite indicator of business and consumer confidence suggested our economy could be growing at a rate of 5% by the middle of next year.
Wholesale milk powder prices are up more than 50% this year and thanks to a warm, wet spring and early summer Fonterra has forecast production will rise 6.4% this season.
Our Terms of Trade, which measures the power of our exports to buy imports, are the best they've been since 1974.
The NZ$40 billion rebuild in Canterbury is cranking into gear and Auckland house building is also starting to wind up.
Home owners feel about NZ$65 billion richer than they did last Christmas because their house values are up 10% and they're returning to the ATMs in their homes to increase their spending.
The ANZ business confidence survey showed businesses are keener to employ people than they've been since 1994. After nearly six grinding years of stop-start recession and timid growth the economy seems set to finally take off.
All the indicators suggest we haven't had it this good since 1994.
Export prices haven't been this good since 1974.
That year seems an awful long time ago now and not just because most New Zealanders either weren't here or can't remember it. It was the last year New Zealand posted a current account surplus, which means it was the last year we paid our own way in the world.
Back then, it seemed like New Zealand had it made.
Colin Meads had just retired from rugby and we were confident that Britain would buy our meat and dairy products. We were rich and happy, but reliant on one market for one type of grass-fed product.
Fast forward to 2014 and we appear rich and happy again, however it is largely because we have become reliant on the export of one product to one country.
This week's GDP and trade figures showed milk powder exports to China have been the driving force behind economic growth surging to its best level in three years.
China is now our largest export market and trading partner ahead of Australia.
Although we are not as directly reliant now on China as we were on Britain in 1974, the indirect reliance is almost as large because our second largest trading partner, Australia, is also reliant on China.
New Zealand's economy is therefore heading into 2014 with an exposure to a single market and single product that is not that different from the one it had 1974.
The difference this time around is New Zealand households have a lot more debt and the nation is expected to run a current account deficit of 5% of GDP.
Household and farm debt has more than tripled to over 100% of GDP since 1974. New Zealand's net foreign debt has more than quintupled to 70% of GDP.
The real test of 2014 will be how the party fares when Reserve Bank Governor does what he has promised to do and take the punchbowl off the table by increasing interest rates.
Most now expect floating mortgage rates to rise from 5.75% now to around 7% by the end of 2014, which would add over NZ$520 a month to the cost of a NZ$500,000 mortgage.
The more sensible older partygoers know their aged (and indebted) bodies can't cope with a big party anymore.
The Reserve Bank will be hoping our much more indebted households think more than twice before they party like it's 1974 and 1994.
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A version of this article first appeared in the Herald on Sunday. It is used here with permission.
80 Comments
Great piece Bernard. Nice to include the debt stats many have recently chosen to ignore when talking up our economic prosperity. Demand is sure to be more elastic in response to rate rises this time around. Lets hope the RB are sensible with their tightening and the party in China doesn't end in tears. .
Yes, one of my contacts in the USA sent me an investment firm's tip-off about what a great investment NZ was, and specifically PGG-Wrightson shares. Asking for my comment. I replied:
I would caution people;
NZ has a large unburst house price bubble.
The “low debt” is low government debt. We all know how quickly this can blow out when a house price bubble pops and politicians start “saving capitalism from itself”.
NZ private debt is among the highest in the world, a common legacy of a house price bubble; and the net external debt is right up there with Greece.
Regarding anything based on NZ agriculture; for most of the last 6 decades, NZ primary produce export has been a helpless “price taker” on international markets. Global terms of trade have declined against primary produce fourfold, which explains NZ falling from the top of the OECD to the bottom over the last 6 decades.
Temporary booms might be enjoyed, and it would be nice for NZ if primary produce returned to being the wealth creator it was before 1955. However, I am massively cynical about this.
Every country in the world wants “food security”. Even countries that will let their manufacturing sector die in the interests of global trade, won’t stop trying to produce their own food. There has been success story after success story over the last couple of decades, with large developing countries achieving food security.
There is still massive potential for primary production in Africa and South America. New Zealand has been historically accustomed to competing against exports from Australia, Argentina and South Africa. There is plenty of scope for the rest of South America and Africa to enter the fray. In fact in the colonial era, Rhodesia (Zimbabwe) was a competitor. Brazil is stepping up its agriculture for export.
Yeah, and it is amazing how little consideration land values have had from mainstream economics, in that crisis.
I just found an excellent data quote:
Between between 1930 and 1940, urban land prices fell 58% in Detroit, 50% in Los Angeles, 46% in Cleveland, 28% in Boston, 27% in New Orleans, 26% in Cincinnati, 25% in Milwaukee and 21% in New York.
Pittsburgh's land prices fell only 11% over the same period because they had not inflated by the insane amounts that the other cities had. This is apparently because Pittsburgh had land taxes.
Stop price bubbles, keep housing affordable and at the same time as achieving social justice goals, you also need not experience busts.
Don't forget it's our Gross external debt at 125% of GDP that has to be refinanced.
Could get real messy real quick once we wake up to the fact that zero interest rates may last a long time but probably not forever.
We need to consider interest costs as a % of exports as the correct metric.
Current account to GDP is meaningless unless you assume exports are a Fn of GDP which they are not. New prisons Leaky homes and schools CH rebuilds are not going to pay our external liabities That can only be done with Exports
A bit old fashioned but that's the way the maths works
Merry Xmas to all
As usual, the relatively good economy (wrt rest of the world) is no cheer for Bernard, another negative glass half empty story. At least we are in a position to party, unlike Europe. You should try it yourself Bernard. Sure there are risks, but in the present safe hands of JK/BE I know I trust their judgement more than morons like Norman/Parker/Cuntliffe.
I have a $300K mortgage so I know that I will be paying more next year, but that is the price we are paying for a relatively good economy.
Anyway, I am sure you are devising your strategy to get a Labour/Green Utopia Government elected next year so we can get rid of this 'shit economy'. If that transpires then watch interest rates go up in 100 bp traunches as the promises made increase inflation.
So the economy is good for you, not so many others,
http://www.stuff.co.nz/national/9544508/Santas-heart-breaking-Christmas…
"...........a Santa at Auckland's Westfield WestCity in Henderson for nine years, said at least half a dozen kids a day asked him for a house because their families were sleeping in cars."
So this "s*** economy" is what we have and its going to go down the pan as the world's economy does.
Sure the Green's are in la la land and are going all out to win votes.Votes based on promises they know the world cant provide....this makes them different to any other politician how?
Interest rates are going to go no where...as inflation will go nowhere, deflation, yes. The idiot who puts up the OCR by 100 points and repeatedly is toast...as he/she will have killed this "s*** economy" and sent us into a depression we wont forget.
You'd better hope that $300K mortgage is on a $600k+ property otherwise you will be well under water IMHO....
regards
Oh dear Steven, if you live in a car as a kid your parents are wankers. The social net in NZ if far and wide. Yet another non story by the Lab/Green biased media.
A question for you, my house is in Greenhithe Village, 1160m2 section, 280sq m, what do you reckon it is worth? I think I am safe.
Vote a Cuntliffe govt and then your eyes will open! You are a fool if you think they will be better than the current govt make up.
Re private debt, which is mostly mortgage debt I don't understand why we don't restructure the market so that kiwis provide more of that debt.
It could go something like this. Currently for new builds a goodly proportion of that debt is for public goods -the 3 three waters (sewage, fresh, and storm), local roads, paths and parks. The developer either provides them and gifts them to Council or the Council charges levies for them. Whatever the end home buyer pays for them upfront probably funded by a foreign owned NZ bank mortgage using debt sourced from overseas.
What if instead the development costs were paid for by a bond following Audit NZ approval, provided by kiwisaver. The bond would then be repaid by a special rate tied to the new residence. This could either be administered by Local government or a new entity like a MUD.
Elderly kiwisavers would benefit by having access to good paying bonds, especially as they near retirement and need to transfer from equity to less risky debt. New Zealand has high interest rates so they would get a good return.
Given the need to rebuild Christchurch and provide new housing for our net migration how we fund this needed capital is an important consideration.
Its still a MUD, its still makes no more sense than the present system. Its still going to be charges at a rate similar to a mortgage rate. So instead of the owner paying and having a debt to one credit point, we now have an extra. So rates and a mortgage and we swap that out to rates. MUD and a mortgage.
Scarfie, PDK and I have said, the debt isnt underwritten bt energy, therefore wont be re-paid. the elderly will have been sucked into what is in effect a risky corporate bond....a ponzi scheme.
Just who btw can pay the "good rate"? say its 7 or 8% yet a mortage is 5~6% right now, the owner would be paying more.
It simply makes no sense.
take a look at say spain where a lot of public(?) pension funds have a lot of council debt, debt that the concils cant pay back...
regards
Steven you are right I am proposing we swap some mortgage debt for bond debt and higher local body/MUD rates on new residences. These bonds to be bought locally by kiwisaver. The advantage is we keep the debt local. I am not making some magic money claim. The debt total and interest rates are the same.
Reducing household debt will requiring changing the zoning laws as Hugh has been saying to make new housing cheaper and through that making existing houses cheaper.
What you are claiming is that foreign debt is better because we can reneg on it later when your supposed energy underwrite arrives. Although I have argued NZ can replace its fossil fuel energy use so we do not have an underwrite problem. The world might be in trouble but not so sure about us. Even if we do arrive at that point then the whole of NZ's society should make an equitable adjustment, rather than force all the adjustment on one small sector of society before the event has even occured.
No, you ware putting up a straw man here. I am not claiming its easier to reneg on foreign debt, if anything I suspect the opposite is true. As far as I am concerned all debt is at serious and probable risk of default.
Bear in mind for a moment though with foreign debt the investor should be a professional who understands the risks unlike a little old NZ lady.
Nz can only replace its fossil fuel needs at a) great expense, b) only partially and c) by sacrificing other things.
EROEI, biofuels are about a 1 to 1 so they are a conversion process. Or economy needs an EROEI of 8 to 1 or more. So that 8 to 1 has still to come from eslewhere. No one has solved that yet, so you are arguing on quicksand.
Us v the world, indeed, we have 65% renewables for electrical power (which is predominatly static).
When you look at our transport energy however we are very heavy users and its mostly fossil fuels with a wee bit of electrification of trains and buses.
In terms of forcing that adjustment, well that will take time, hence you start to do it before its deathly consquence.
What you are sort of saying is we will drive full tilt with a blind fold on and someone will warn us to brake at the last moment avoiding that cliff. note thogh that stopping takes time, warn to late and we go over anyway....
Equitable adjustment, totally agree, however what we are doing at the moment is leaving it to the free market forces, who didnt want to see the GFC coming and are still denying it was/is their fault.
regards
So your argument is that the form of debt doesn't matter much? That all forms of debt is bad? As when the global energy crisis hits debts will not be paid? Not sure then if you are for or against bonds per se, maybe you should be campaigning to ban all mortgages and long term debt?
The little old woman comment is a strawman - I said kiwisaver who is run by professional fund managers. Why local government debt is uniquely vulnerable to the sort of event you describe I cannot understand. Keeping the pension fund and debt local at least gives NZ some ability to control the situation and create the equitable solution for both parties. If the pension fund investment or debt is to/from foreign sources we lose that control.
I understand we should be adapting our society to run without fossil fuels and other non-renewable resources because at some point we will not have them. Unfortunately humans react better to crisis than to slow change. So the major changes will not occur until they are highly visible to all. But then I think you will be pleasantly surprised how quickly people can adapt.
Finland in WW2 had a war all of their own, first against the Soviet Union then against the Nazis. This meant they were economically isolated, including limited oil imports. My wifes family farm -60 hectares mostly rugged forest, a few fields and 6 cows was ordered to go self sufficient to the point of even producing their own clothes -from linen. They kept a wider family of 14 healthy for 5 years no problem and Finland survived the war as a whole, despite some of the worst winters on record -40 C.
I am just not convinced that objecting to any form of change to the housing market puts us in a better position to cope. I would argue it makes the situation worse.
Regards
Ppl should make their own choices, where such a choice does not impact others. I think ppl will shortly learn for themselves how bad debt will be.
Kiwisaver has input and ppl can choose the funds...suppose ppl dont want to invest in these? You yourself said older savers.
It is going to be a very hard grind here in NZ and doable, unfortunately we are not isolated. The sad thing is we could have been adapting gradually with no great cost for 5+ years. eg we could be 100% renewable electricity by now, we could have electrified the main trunk line(s). We could have gone for more trolley buses. We could have built tallow to bio-deisel plants. We could be reducing our population and stopping the inflow of ppl etc etc.
PS I do like the old Nagants, Finish ones are quite collectable.
regards
Brendon;
You just said something that I have been bashing my head on a brick wall for years about, arguing with Steven.
".....I am just not convinced that objecting to any form of change to the housing market puts us in a better position to cope. I would argue it makes the situation worse......"
Ex-freakin-ZACTLY......!!!
Just how does lumbering an average $200,000 more debt onto every 1st home buyer help to "future proof" the economy?
Do you guys know about these presentations that the Unitec people are doing? I am blown away with how onto it they are:
http://www.creative.auckland.ac.nz/uoa/future-proof-podcasts
We could pay for a dam lot of future-proofing with the unnecessary debt we are lumbering our young with.
Another point that Steven refuses to "get", is that it DOES matter whether you fund infrastructure by loading it into the price of new houses, or paying it back out of rates revenue.
"Upfront in new house prices" forces the prices of ALL houses up. Every first home buyer (and even renters, ultimately) are paying an effective "infratsructure levy" only it is being captured by property vendors and landlords, not the public.
It would be better to fund infrastructure by socking every young person $100,000 when they buy their first home regardless what it is and where - and at least using this money to pay for lots and lots of infrastructure to support housing supply and keep the price of houses down.
Oddly, there would be howls of protest at how unfair this is, but the current system is more unfair still and the money gouged out of young people is mostly NOT being captured for "infrastructure spend". I am even more furious than ever about the back-stabbing of all young people, after watching a presentation by Elizabeth Warren on YouTube about the flow-on effects of inflated housing costs. I always regarded opponents of reform as the lowest bottom feeding slime, but things are even worse for the young people than I ever thought.
And the minority who get things right are usually kept in obscurity, deliberately, by the extablishment's gougers and troughers for whom the status quo suits them quite nicely, thank you.
Like, has there been any mainstream acknowledgement of the few dozen people who predicted the GFC?
http://investorhome.com/predicted.htm
It is a handy myth that "no-one saw it coming". The truth is, the establishment is shite-scared of the people who did see it coming, and their solutions, which invariably involve an end to the troughing and gouging.
You are going to die a very disappointed and unvindicated man, Steven, just like Malthus, and just like Ehrlich will, and Lester Brown, and Kunstler, and all the rest of them.
Political madness is the cause of potential collapse of the global economy, not resource scarcity.
The malady that inflicts your type, is an inability to grasp the sheer vastness of planet earth. You seem to have images in your head of the planet's surface teeming with people and cars, below which the cavities containing all the fossil fuels are now almost completely empty.
Matt Ridley, a true genius, puts it like this: people who set out from Ireland for a Saturday afternoon of yachting do not obsess about running aground on Newfoundland just because the Atlantic Ocean is "finite".
Your stance requires you to dismiss all findings of new oil and gas fields and estimates of as-yet-unprospected ones as "cornucopian propaganda". Unlike you, I believe these findings are taking place, and the forecasts of the genuine experts are correct. I believe the concept of the "fossil fuels pyramid" is absolutely correct and that we are now at the tipping point where we have the "cost of energy" problem beaten. We can now go far further in a car at a cost of 1 hour's wage than we could 50 years ago. The cost of crude oil is not the total cost of petrol, and the total cost of petrol is not the total cost of running a car. And the total cost of running a car has risen far slower than incomes.
And because of the fossil fuels pyramid effect, the rate of increase in price of crude oil will be a lot slower from now on. We are also right at the price point where numerous alternatives become viable. I expect technology and free markets to continue to enable us to go further on 1 hour's wage pretty much indefinitely.
Like I said, you will die a very disappointed man, not having witnessed the resource-runout collapse of western civilisation the thought of which has thrilled you all your life.
A new study published this month. The authors tend to disagree with your assertion of everlasting abundance. Here's an summary excerpt from the paper:
In combination, the papers provide a sobering picture of the challenges ahead. Most authors accept that conventional oil resources are at an advanced stage of depletion and that liquid fuels will become more expensive and increasingly scarce. The tight oil ‘revolution’ has provided some short-term relief, but seems unlikely to make a significant difference in the longer term. Even with a more sanguine view of global supply prospects, the large scale, capital intensity, long lead times and constrained potential of the various mitigation options point to the need for a coordinated response.
At present, rising oil prices are incentivizing the development of supply-side options whose large-scale pursuit would guarantee dangerous climate change. Avoiding this outcome requires instead the prioritizing of demand-side options and far-reaching changes in global transport systems. Climate-friendly solutions to ‘peak oil’ are available, but they will not be easy, they will not be quick and they appear unlikely to allow the majority of the world’s population to achieve the levels of mobility currently enjoyed in the West. Lower mobility, in turn, implies a very different direction for future economic development. In sum, adapting rapidly and peacefully to oil scarcity in a manner that does not destroy the global environment provides humanity with a formidable challenge.
Chocked full of good references and data too. I encourage all to read this introduction in its entirety. Damn malthusian scientists, why aren't they screaming abundance?!!?
Yawn. There were studies exactly like this published in 1924, 1937, 1951, 1962, 1970, 1974, 1977, and approximately annually after that, now running at a rate of several per year. Due to post-enlightenment unreason and hysteria, bureaucratic ideological capture, and vested interests, not to any change in reality.
This is from the royal society of engineers and scientists.
So the la la land deniers such as yourself seem to be, well denying it. So the sum of your argument seems to be it hasnt happened yet so it wont....or some mystical engineers obviously not ones like myself or the ones above will discover a "thing" that once put into mass production over several decades will um save us so we can carry on living in la la land.
You really dont get it, or want to. You are not rational, or logical....but then you are clearly fanatical in your politics.
The party is all but over, its 4am and in a few hours the hangover will start...
regards
".... the royal society of engineers and scientists......"
The modern equivalent of upper class twits. Probably totally unrepresentative of its membership, as is the case with most science bodies these days where the twits at the top are paid-up members of the P.C. establishment.
This sums it up very well,
"Climate-friendly solutions to ‘peak oil’ are available, but they will not be easy, they will not be quick and they appear unlikely to allow the majority of the world’s population to achieve the levels of mobility currently enjoyed in the West. Lower mobility, in turn, implies a very different direction for future economic development. In sum, adapting rapidly and peacefully to oil scarcity in a manner that does not destroy the global environment provides humanity with a formidable challenge."
Many pieces I read that see the problem (many such as philb's bigade do not) hold up "solutions" that are a) not b) apparantly allow us to carry on as we do now. Pity they are so shallow.
regards
".....allow us to carry on as we do now......"
We have never carried on as we do now, we have steadily become more efficient. We have had a Jevons paradox rebound from this. At any time if we had to cut back, we would have major slack to be able to take up, especially now that the 1st world is collapsing demographically, and so does every culture that modernises.
Re: Political madnes is the cause of potential collaspe of the global economy, not resource scarcity.
I just had the same conversation with a friend over for Xmas. It is our global/national/local political institutions at fault not our economy as it relates to energy depletion. Specifically we discussed how efficient and agreeable the world would have been to nuclear energy if the super powers had not concentrated on 'dangerous' nuclear technology for weaponary.
With regard to NZ, Geothermal at low cost and wind at higher cost (but potentially at massive volume) can easily replace our private vehicle energy use many times over. Wind and other energy use options might cost up to 30% more than current providers but really it is not a economic altering change as Steven is claiming.
As we use less imported energy from oil we will receive less tax from fuel and will need to tax more elsewhere, if we want to keep energy prices constant. On the big scheme replacing petrol tax with something else is not a big problem.
And hey Merry Christmas Philbest and everyone else at interest.co.nz
I hope we have a good New Year!
I dont know where you get the idea that our electrical energy can replace transport energy as we now use it at a price us and our economy can afford, it simply is not correct.
It will be econimic alterering, indeed that alteration is underway. Already the developed nations car use is declining which should be a big indicator. At the same time we stagger along (as a world) on the edge of a recession/depression, unable to recover despite huge stimulus.
Nixon nixed Thorium as that was jobs for california and yes nuclear weapons, Raygun ditched our second chance for a make believe "morning in america".
You are I think right on the corruption of our political system, sad.
regards
".....Already the developed nations car use is declining which should be a big indicator......"
No it's not. It's reaching saturation. There is a difference. There is a close correlation between incomes, petrol prices, and VMT.
http://wattsupwiththat.com/2013/07/09/pump-price-miles-driven-and-energy-taxes/
Developing nations VMT is tracking that of the developed nations, at a few decades lag.
Short term declines in VMT correlate with income decline following the GFC.
Brendon is correct - this decline is politically induced. Brendon, have you read "The Rational Optimist" by Matt Ridley? That would be one of my picks for "top 3 books everyone should read". Every high school kid should study it as part of the curriculum.
He concludes right at the end, that the only thing we need to be pessimistic about, is politically imposed self-fulfilling prophecies.
I am the first guy who says that Wall Street needs reigning in; the monetary system's symbiosis with the finance sector must end; and zero sum rent seeking needs to be handed a massive defeat. It is zero sum rent seeking that is destroying our economies, and Malthusian-based artificial restrictions on everything, and subsidies of cronies in "approved" sectors, are an inherent part of that.
Henry George was absolutely correct 100 years ago, when he said what a tragedy it is that the political representatives of labour and the poor, spend all their time attacking and tearing down legitimate wealth creators who take risks and use resources and provide employment, while the ultimate enemy of all, the zero-sum rent-seeker in finance and property, escapes scot-free and steadily increases their gains at the expense of everyone else. Often with the ignorant political Left aiding and abetting them.
From Dick Morris:
"......Since Obama took office, 85 percent of all income growth has been concentrated in the top 1 percent of the population. (Under George W. Bush it was 65 percent, and under Bill Clinton it was 45 percent).
The bottom 99 percent have stagnated during the Obama years, but the rich have gotten immensely richer.
This trend is a direct result of his quantitative easing program, in which the Federal Reserve purchases $85 billion of bonds each month, giving banks a windfall of cash to use as they wish......"
“The Great American Bubble Machine” by Matt Taibbi is a classic of informative journalism.
http://www.rollingstone.com/politics/news/the-great-american-bubble-machine-20100405
I noticed Shamubeel Eaqub recommending it on this site a few days ago; a big ups to him for being a Taibbi fan. You have to read "Rolling Stone" to get analysis as good, all the specialist finance and economics media are beholden to the racketeers for advertising revenue and so on.
LOL, tony watts la la land web site.
So you are happy to read such rubbish and believe "him" yet reject any science or engineering sites.
"he won the Hayek Prize, which "honors the book published within the past two years that best reflects Hayek’s vision of economic and individual liberty."
So a libertarian...
"Ridley was chairman of the UK bank Northern Rock from 2004 to 2007, during which period Northern Rock experienced the first run on a British bank in 150 years"
Knows about business then....about as much engineering as well.
"with First Class Honours in zoology and then a DPhil degree in zoology in 1983."
A zoologist....so knows diddly about oil....or engineering.
Hardly surprising he's in "your" la la land is it.
regards
Wow.. six guns blazing Steven... You shot a few messenger there Steven..!!
In regards to peak oil I make a couple of distinctions.
1/ I use the term Peak Cheap Oil....
2/ I percieve a Transitional Economy... as we adjust to expensive oil ..and move away from it.
In this environment we might start measuring energy consumption in the same way we measure GDP... ie. there will be a focus on BTUs' alongside GDP..
You and PDK make Peak Oil sound like some kind of Apocalyptic event... but its' not.. It is just evolution and change... and in an economic sense that change will only strat when Oil get really expensive..
Many ...many things will evolve and change.... maybe there will be a movement back to village style living... who knows... but things will evolve and change.
Maybe it will be a good thing... maybe it will be a movement towards closer communties, locally produced foods, a community focus on the environment... a true focus on conservation... Who knows.... ??? it might not be all bad...
I didnt shoot philB, in terms of the zoooligist its important to understand his background in order to access his opinion. It is afterall an opinion, he has no engineering qualifications and on top of that looks like a libertarian type which tends to put him on the extremisim of politics and hence dubious IMHO.
Peak oil v peak cheap oil, peak signifies a physical limit of production no matter what the cost (in sane terms ie Im sure if we could pay $300 a barrel we'd see a temp blip in output for a few years.
Transitional, yes indeed the problem is we need to start transistioning in order to make the pain less and possibly not lethal.
Apocalyptic event, well for NZ not really, though its going to be a paraddgym shift that is for sure. For other parts of the world I think it will be far worse....
Not all bad, and more local, yes I think thats not a bad thing.
Ironically, Steven's entire comment was an ad hominem attack on each and every one of my sources.
Says a lot about Steven.
For example, if he actually looked at the link I provided to WattsUpWithThat; he would see a very interesting, impeccably presented analysis of data by a scientist named Willis Eschenbach, on the correlation between incomes, petrol prices and VMT. He would see many distinguished names in the comments, discussing the findings and raising questions about it - not just scientists, but urban economists and urban and transport policy advocates.
This is an excellent example of internet "peer to peer discussion", which avoids the potential "cabal" effect of "peer review" and "journal publication".
I can tell you that Eschenbach's thesis is now regarded as authoritative by people at the top in, say, the US DoT. This in spite of the fact that Eschenbach was not a transport expert - nevertheless, he noticed a correlation that the transport experts had not, all these years. And the transport experts have largely said, gee, thanks, it is worth knowing that.
But certain people are too pig shite determined to stay an ignorant child and conduct debates at that level.
One study found that using 1% of total available land for wind farms would produce approximately 100,000 gigawatt hours per year. This is roughly two times the annual electricity consumption of New Zealand.
Cost wise an electrical engineer friend says the new electricity proposals are only marginally more costly than existing projects. There is no massive drop in energy returns. Further that worldwide new advances in wind farms are being made all the time and NZ is the lucky recipent.
New Zealand has massive renewable energy sources, wind is just one of them. There is no need to be fearful of the future...
There is a difference between transport fuels and electrical power. To convert electrical power to a transport fuel, say hydrogen is a 1 to 1 EROEI.
So get your electrical engineer to tell you of consider for himself
a) the cost of building that many wind farms at 50% utilisation.
b) and how long it would take to match our present fossil fuel use in transport
c) and then get him to tell you the cost of converting or buying new hydrogen powered cars.
d) Or consider that a MiEV is $65k, dunno about you but I couldnt afford a $65k car that lasts 10~12years. Even if its interest free thats $6.5k per annum plus running costs.
PS does your electrical engineer an electrical engineering degree? ie highly qualified or or an electrician? huge difference.
Im perfectly happy to work though these points with him/her and see where we get, Im sure I'd learn a lot.
That 1% link is strangely dead btw, yet its from the NZ wind energy association. Though Ive joined up to it....so thanks...
Fearful, from the above points, ie plant to build, consider the time scale to build plant.
So I think NZ can transition, sure, what worries me is the time to do it and the cost and who will be the worst impacted and the social unrest from that.
My friend has a Phd in electrical engineering, his thesis was on harmonics within the power system. He has almost 20 years work experience in Wellington working for various electricity authorities, rising to a management position. I think I could call him an expert on NZ's electricity system. He is aware of interest.co.nz and has met the likes of BH but commenting here is not really his thing.
Regarding electric/hybrid cars, I was talking to a taxi driver recently and for their level of use the economics of electrical/hybrid cars makes sensse. He also said Toyota have been making a lot of profit on their electric/hybrid cars and now all the major car companies are bringing new models. So their is hope for cheaper/better models to come. I think this is part of the transition that Roelof discusses above. Not sure about hydrogen maybe it will come in as a gamechanger maybe not.
Then he has the math to easily understand EROEI and the conversion options. Usually you use electricity to get hydrogen though then it has to be compressed and transported to a fueling point etc, such things should be pretty obvious when you really look, lost of ppl dont want to of course.
I wouldnt take a taxi drivers comments as too hot, though I know one designed ICBM rocket engine fuel pumps, he is bright....but not a big demand in NZ for his skills which is extremely sad as he's wasted as a taxi driver.
Not so sure on the prius's price and bear in mind its very complex and its expected life is far shorter than a conventional car. "The world’s largest seller of hybrid autos is trimming the base price of the 2014 Prius Plug-in to $29,990 (USD)." NZ price has gone up a lot, $55k NZD lets convert the US price, $38KNZ and its expected life is more like 12years v 20 years. Really how many NZers can afford a cost in that range? not me that is for sure. by 12years old the battery pack is probably close to finished with so the car is also close to worthless, hefty depreciation.
The cars to lok at would also be the MiEV as they are proper EVs....$65k NZD, I'd like one but that's way out of my range especially for a 10~12 year life.
regards
I personally haven't looked into the economics of EV's or hybrids but a few months back when I needed to transfer a patient a few times in taxis. I noticed they were all hybrids. So I asked the taxis driver about it and he said they were more cost effective than standard petrol cars. Now I don't expect taxis drivers to understand peak oil or malthusian mathematics but I think they probably know which types of cars are cheaper to run. Of course taxis drivers have different travel patterns to you or I. But as I said before this could be part of the transition away from fossil fuels.
Well they were running Falcons....now customers expect "green" a good marketing thing.
Day to day yes they are cheaper than a falcon, I mean 15mpg? v 45mpg? wonder on the deprecation....but yes town driving suits batteries/ev.
My "problem" would be affording one...as I suspect will many.
regards
PS yes transition indeed, why have an expensive car sitting on the driveway....how often is it really needed.
regards
".....So I think NZ can transition, sure, what worries me is the time to do it and the cost and who will be the worst impacted and the social unrest from that......"
SOOOOO, Steven......
As I have asked you a zillion times before on this forum: how does it help to future proof the NZ economy by making everyone who buys their first home from around 2004 onwards, pay $200,000 too much? That's going to leave a lot of money to pay for high-tech energy generation, isn't it?
Ironically, and only to be expected if you've got half a brain, is the high rate of uptake of new technology in Texas where housing is affordable, and 2/3 of available capital for investment is not being sunk as a dead weight, into urban dirt Ponzi.
Comprendez-vous YET, Steven????
You talk through a hole in your head as they say.
Well if I die today or tomorrow (not literally but within a few years) maybe yes I wont see it.
but disappointed, no.
Vastness of planet earth, LOL....indeed your type treats it as infinite when in fact its not, scale is actually just what you do not grasp.
Oil and gas fields finds peaked in the 1960s, we need to find a Saudi like scale find every 4 years....we have not found one in decades.
The forecasts of genunie experts like ASPO indeed predict such declines, in fact crude has peaked and is showing signs of a decline.
Cost of energy is where you go wrong as in so many things, EROEI not money.
Ditto alternatives, EROEI not money.
Weird on how you think such things thrill me or indeed others...
regards
".....we need to find a Saudi like scale find every 4 years......"
No we don't. All we need to do is find enough energy from "wherever", to keep the economy going at the current cost of energy that we can sustain. And that cost that we can sustain has always risen faster than the actual cost of available energy.
I know there are examples where EROEI does not stack up, but they are not essential to our discussion; they are ALWAYS the result of political meddling. We need to knock this on the head, because it is a hindrance to the real game in town, which is global free market capitalism.
Here's the view from the top of the enlightenment mountain:
Problem is there is no "wherever" Its funny because you cant see the world as a big picture, yet claim I cant see its so big....it isnt, there are 7billion of us all wanting to live like the developed world does and use the energy the developed world does.
The world cannot do that.
EROEI always stacks up, Im not surprised you cannot see that though. Its not a case of specific examples in any event its about fossil fuels and transport fuels in particular.
Mises is a nut job, pure and simple.
regards
Says the guy who obviously does not possess two "economics" brain cells to rub against each other.
You'd be the last person I would expect to be able to tell that Von Mises may well be the economist whose theories are in the process of being vindicated right now, as the cronies at the top continue to wreck the global economy with Keynesianism and money-printing.
You are all over the place intellectually. You condemn the mess the world is in as the result of the very policies that Von Mises is the strongest theoretical opponent of - then you write off Von Mises as a "nutjob".
You are a total waste of space on an economics and finance forum.
Malthus was good at maths. Didn't make him good at predicting the future re resources and population though.
What you Malthusians always leave out, is that efficiency gains via technology, are also exponential. That explains everything all of you have been wrong about in the past, but that has not made any of you actually get the point regarding the present.
Efficiency gains via technology ARE exponential. What do you think a "teleconference" represents, versus the original concept of a gathering of people by aircraft and taxi?
I could give you plenty more examples. Lots of Communist revolutionaries were engineers; that didn't make them good at running an economy. Quite the contrary. The modern Malthusian engineer is a similar threat to humanity.
Nice cherry pick, except we cant move food, or actually produce/make a physical good without using energy. Design it via teleconference, sure.
So take a physical item, a petrol car engine the efficiecny of that is not improving expotentially, if anything its the inverse, you simply hit the laws of physics. Ditto growing food you throw fossil fuels at the ground to make it produce more all the while reducing its natural capability.
Teleconferencing is interesting as is the Internet, its energy use is huge as is the finance industries.
Considering the mess we are in now is the result of 40 years of free market "thinking", I'd say its quite a mess, roll on someone who can do science.
regards
"......we cant move food, or actually produce/make a physical good without using energy....."
Fine, we ship all and any products anywhere in the world as it is. If the cost of freight ever starts going up in real terms, it will merely change the equation in favour of more local linkages between production and consumption. Sheesh...! Don't you know anything about how the global economy works?
The systemic efficiency of "automobility" has to have been growing exponentially so as to more than ameliorate the exponential increase in the price of crude oil. The real cost of "automobility" per km has only ever fallen the longer time has gone on.
OK, this effect might reach saturation. But we proceed in a series of Kondratieff cycles; a new one will take over even as "internal combustion engine based automobility" declines.
The "mess we are in now" is due to urban planners, centrally controlled monetary policy, and crony capitalism, not the free market.
The cronies in the USA are shite scared of Ron Paul and the Tea Party - and real free market competition. It is the Obama Democrats that bother them the LEAST.
From Dick Morris:
".........Since Obama took office, 85 percent of all income growth has been concentrated in the top 1 percent of the population. (Under George W. Bush it was 65 percent, and under Bill Clinton it was 45 percent).
The bottom 99 percent have stagnated during the Obama years, but the rich have gotten immensely richer.
This trend is a direct result of his quantitative easing program, in which the Federal Reserve purchases $85 billion of bonds each month, giving banks a windfall of cash to use as they wish......"
2 failures of logic, 1) attack the messenger b ) Straw man, claim something I didnt say, ie a specifc date/time. I really pointed at an event(s) that so far have not yet occured, so the risk and impact has not gone away.
You are right on one aspect, the World economy's ability to stagger on has surprised me....thank a) the Fed, b) the oil producers ability to keep oil output on a plateau.
For now.
regards
Do you like democracy? Who could tell?
I would prefer a democracy with a bit more freedom of variety of viewpoints in its media. I can't wait for old media to collapse, and I LOVE it that WhaleOilBeefHooked is NZ's biggest blog by a wide margin, and closing in on mainstream daily websites for readership. Systemic frauds like CAGW are close to having had their day, thanks to the ascendancy of wide-awake common-sense non-PC mavericks like Cameron Slater and James Delingpole and Mark Steyn and Matt Drudge.
The ultimate democracy is of course the free market. People vote with their wallets, even if they are suckered into voting some other way in elections. All those Dorklanders who elect Len Brown because they think a train set and battery-hen apartments will solve traffic congestion....... of course not one of them intends to use the train, or to live in an apartment, or for their kids to live in an apartment, or for apartments to even be built at all in their own neighbourhoods. "Other people" and other neighbourhoods are going to make all the sacrifices and leave the roads clearer for me and the proper houses more affordable for my kids. I have not yet met one Dorklander who did not think this way; and when I gently pose the question to them; "what if everyone else who supports Len Brown's policy is exactly like you, and rates go up heaps to pay for empty trains running around and your drive is still congested hell.......?", their face goes immobile for several seconds as the possibility sinks in.......
Yet whaleoil isnt based on any science as such....its a right wing propaganda mouth piece. Not that the traditional media is any better, trying to give "balance" or 2 sides when one is really not based on much.
"CAGW"
http://rationalwiki.org/wiki/CAGW
"As for motivation, it's an attempt to move the goalposts. The ostriches realized they had lost the argument over the plain old "anthropogenic global warming" — the basic physics of the problem have been known since the 19th century,[4] so that rejecting AGW outright casts oneself as a loon. Adding "catastrophic" gives plenty of wiggle room for denialism.[5]Sea level rises a foot? Just some Pacific Islanders getting flooded out; no catastrophe. Sea level rises a few more feet? We lose coastal cities but with a few trillion dollars we can move them inland; no catastrophe. And so on."
My point was not that WhaleOil is anything to do with science; he is everything to do with journalism and the end of the old cosy libbewal-lefty hegemony. The collapse of old media can't come soon enough as far as I am concerned. People might actually find out truth about stuff like CAGW.
It is ironic that someone would describe the skeptics as "looking for wiggle room" when it is the alarmists who have changed their terms from "global warming" to "climate change". Conveniently, nothing now will ever be accepted as disproof of the theory. Floods, droughts, cold, heat, melting ice, increased ice, more snow, less snow, whatever. Sorry, that's not what you alarmists were saying in 1996. It was "global warming".
No-one ever denied "GW" or even "AGW"; that was only ever a favourite smear of skeptics by alarmists. It always was about the "degree of human influence".
Whaleoil isnt journalism, he's a blogger with a right wing slant, nothing more. Ive yet to see he has any designs on the truth whatsoever....but thats fine I dont pay for it or go there often....
Old media is indeed dying, just what follows is an interesting Q.
Actually for many years AGW was denied ie the 1998 peak year was spouted enough by you for one if I recall correctly. Its only recently that that has changed to "yeah Ok a little but not enough to worry about". Really the argument is over its ppls indifference (or economic greater need) to it thats "winning the war" for the deniers.
regards
An event really when it dawns on ppl that energy is the driver of our world economy and the fossil fuel output decreases. The latter time frame is unlikely to be past 2018...at most 2020 and thats not a high.
It might be this year....might be next.
Meanwhile we stagger on with the Fed being the confidence fairy.
Place your bets.
regards
Hello inflation.
in a nut shell - increase the OCR to pay for the latest round of Gov borrowing - we pay that & where else did we think the $ would come from ? The Gov is not money printing (so they say) They dont have to, they are borrowing printed money and throwing the interest of that to us, same thing, only a twist on how.
No we are not richer than last year - our buying power is less !
merry increases
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