In commenting on Wednesday on the US sub-prime mortgage shambles H Clark could not refrain from one of her usual anti-US digs, this time about the “predatory behaviour” of the sub-prime lenders. She was probably relying on her equally sophomoric colleague Dr Cullen.

Cullen’s speech notes included:

“We also know that the excesses that have led to the not-yet-recession in the US have mostly not occurred here. While household debt is a problem in New Zealand and the US, the predatory behaviour of subprime lenders is a uniquely American phenomenon.”

Did he know the contribution of Labour-type law to the shambles?

The [Federal] Community Reinvestment Act of 1977 forces lenders to offer credit throughout their entire markets. It stops them from “redlining” or steering clear of poor credit risk areas and borrower categories.

Clark and Cullen could properly critcise the subsequent packaging for bulk sale of those risky loans to credulous professional investors. Somehow they were considered transmuted into gold by the packaging.

The Northland mayors standing up for their region in this morning’s Herald should be joined by the mayors of Wellington region. We’d then see whether Building and Construction Minister Shane Jones is genuinely concerned about affordability, or just jumping to meet the protesting mayors because they come from his rohe.

There is ample reason for the Wellington mayors to join the protest.  Northlanders are is complaining about the stupidity of forcing double glazing into their houses. It’s just as stupid here.

I’ve had to replace two complete sets of double glazed front windows at 10 year intervals. They fail because the seals can not withstand the flexing and pressures of Wellington winds. After a few years  it looked as if we’d chosen to block our harbour views with smoked toilet window glass. Our warranties were useless. Both times  the manufacturers had gone broke.

I complained to representatives of the joinery manufacturer association. “Bad luck” they said “no one can be sure that double glazing seals will last in Wellington exposed conditions. That’s why people go broke.”

Perhaps H Clark gave Jones his new ministry to keep her only right wing Maori MP small enough to fit his boots. Clayton Cosgrove has bequeathed him a hopeless position. Labour’s hysterical reaction to leaky homes has helped lock NZ’s poor out of getting homes, with the most expensive housing in the world.

Yet it has also created a new protected industry. Builders who have not exited in disgust at the stupid rules that now dominate their working days get the barriers-to-entry benefit of those same rules.

The sensible thing would be to scrap most of the changes of the last 5 years, ensuring instead that our court system worked cheaply and speedily to hold dud builders to account, and to enforce judgments against fly-by-nights.

But now Jones would face howls and dire warnings from those who want to enjoy Cosgrove’s new protections from competition.

Trevor Louden’s blog comment categorising leftists and facists together stirred a cheap and silly headline from Poneke (revealing colours I’d not previously known) but the subsequent debate in both sites has been worthwhile. Worth a read.

Outlandish as it may seem there is a prospect (I hope tiny but no longer negligible) that a risk I’ve warned about for years could be about to mature. Under Australian law, Aussie banks must repay Australian depositors before they repay foreigners.

We are foreigners. Australian governments have refused to remove the provision, or to include New Zealanders.

That’s why Dr Bollard and before him Dr Brash insisted Aussie banks incorporate companies here (subject to NZ law and not Australian law) instead of letting the Aussie banks just operate branches. The two Governors paid a price in fury and bad-mouthing from the bank bosses. I raised the issue repeatedly in Parliament, partly to warn off Dr Cullen and other NZ politicians anxious to curry favour with Australia.

Local incorporation is only a half protection. It should have been backed with a power US regulators exercise. They can sequester foreign bank assets in the US to meet US liabilities. A conciliatory position would have restricted such a power to assuring NZ depositors of at least equality with Aussie depositors. For practical purposes the NZ Reserve Bank might be able to achieve something similar, simply because our pathetic savings record means we owe more to the Aussie banks than they owe us.

Bernard Hickey’s blogs on the skies falling capture the sentiment driving the market glissade of the past 3 weeks, and offers concrete reasons for it to continue. He points to credit insurers losing their creditworthiness.

It is remarkable how little commentary has focussed on the practical consequences here of a world loss of confidence. See how few are the comments on Bernard’s blogs.

When everybody pulls their heads in, “luxury” spending stops first. When homeowners’ equity cushions become fart cushions their spending cuts will not stop at luxuries. If we’re in the world’s most overpriced houses we could have the farthest to fall. Tumbling house prices will be more important politically than the absurd response of Mr Cosgrove and his predecessors to leaky housing (which has done so much to inflate building costs).

I’d be waking especially early worrying about my budget if I was in the tourist industry. Perhaps the low cost domestic market might improve but there are few winners when confidence evaporates.

Dairying might seem doubly blessed as food demand holds up, until world governments panic into dumping green schemes driving up food prices, like the absurd new corn-into-petrol industry.

But Bernard outlines the prospect of a something more dramatic – a genuine panic leading to frozen markets. From insiders I hear our banks are not immune to the world-wide loss of trust in each other. Ubiquitous complex instruments mean they can not confidently price their own exposures so they know not to trust the financial statements of others.

New Zealanders have not had to think about bank risk for generations (the government rescued the BNZ before punters realized how serious things were) but it is not silly to think about diversifying exposure, even to banks.

Financial meltdown will shift political sentiment away from the incumbent leaders unless they manage to look like safe hands. H Clark will try to out-promise challengers irrespective of Dr Cullen’s capacity to deliver. In one part of the floating voter market there’ll be a hunt for messiahs (in NZ Winston Peters could be resuscitated) as the retired and near retired lose confidence in the adequacy of their investments. 

Small employers could have the biggest effect on the economy. They’ll freeze hiring and building plans as they worry about the profitability of extra machines and employees.

There’ll be a temptation to cater to that political market with a bit of Aussie bank bashing. It won’t be entirely undeserved and they’re used to it. It’s what Aussie politicians do whenever things get a bit slack in Canberra.

Spiro Zavos reminds us in today’s DomPost that SPARC’s predecessor was the Hillary Commission. We should revive the discarded name, he says. [I cant find the commentary on Stuff for a link)

Great idea.

Before we got used to Sparc it sounded so close to something the Burmese tyrants would choose (like SLORC – their government) I thought the change rumour was Opposition misinformation, designed to ridicule the people bent on rooting out any honours for aging white males like Sir Ed.

Restoring the earlier name would be an apology from them, and a pleasure for the rest of us.

My firm, Chapman Tripp, helped Wellington Airport defeat Air New Zealand’s attempts to set up a trans-Tasman cartel with Qantas. I worked on that project.

The latest Infratil update reminds me of Air New Zealand’s dire warnings of what would happen if they were not allowed to surrender to Qantas.

“Domestic passenger volumes grew a significant 16.5% in December reflecting the introduction of domestic services by Pacific Blue in mid November. As was the case for November cannibalisation of the existing market was not evident with the Pacific Blue passengers being additions to the market. Average loadings for the month were slightly below the previous year however this is not unexpected given the over 20% increase in capacity. Year to date, domestic passengers are now 3.9% above the previous year”

Legal work can not always be on the side of the angels, but that job just keeps on giving (in satisfaction anyway – though it remains a “dont mention the war” topic with my friend John Palmer).

It keeps giving because virtually none of the fears with which Air New Zealand persuaded Ministers to give them covert support, and tried to bully the Commerce Commission, have proved well-founded.

Even Tasman routes seems to have remained profitable. If Air NZ is not coining it on current loadings they might as well close down.

“Growth in international passenger numbers in December remained modest with total passengers 2.6% above the previous year following a 1.5% decrease in seat capacity. The average airline load factor remained above 80%. Year to date growth in international passengers now stands at 4.6%, with seats having fallen by 4.3%. The continuing high load factors demonstrates the severe capacity constraints existing for Wellington services. Promising comments continue to be made by the airlines but we are yet to see this delivered in terms of flights on the ground. Until this occurs some Wellingtonians will be increasingly forced to travel through Auckland or Christchurch to cross the Tasman, or worse still will not travel at all.”

Wellington’s Infratil led the charge. Wellington councils, and Mayor Prendergast in particular all deserve credit for standing up to the Auckland attacks, and staring down Air NZ’s imaginary wolf.

PS David Farrar’s link to this post generated a string of serious comments

Christmas holiday reading is like the first cold beer after a triathlon. It tastes better than usual. It refills the resevoirs of thoughts and facts depleted by a year of acting on instinct, without time.

A year ago I wasted half a day on the Hollow Men. It was astonishingly naive, but also reassuring.

It’s ‘revelations’ were so trite I’ve now forgotten the detail, but with few exceptions it showed only the ordinary tensions of politics.  I saw them first from the left as a student, and later from the centre right. The authors’ naivety lay in their horror at the gap between internal and external communication, as shown in the leaked emails. 

Perhaps that horror was the dishonesty of feigned alarm, not naivete.  Few groups talk to outsiders the way they talk among themselves. Outsiders don’t know the shorthand – they misunderstand the black jokes that get groups in stressful jobs through the day (ask your doctor or nurse about the hospital insider jokes). Any group which fails to communicate in language the recipients understand deserves to be misunderstood. Lawyers, soldiers and  police have two languages. Teachers perhaps do not, though they should. They turn ordinary words to parents into a code to avoid straight talk. And all those groups can assume the outsiders have some interest in hearing from them.

Politicians can not assume an interest in their messages. They must work at the emotional level, even on complex issues that should not be simplified, but must.

Sure it feels like ‘insincerity’. I hated dumbing down my speeches and letters. But if without it you will not be heard at all, where’s the choice? There are boundaries of course. The key thing for me was to ensure the communication did not become false.

People who can’t stand the fact that the floating voters in a democracy may be ignorant and uninterested should play another game. Sadly those voters may be the major important audience in an MMP election.

The reassurance in the Hollow Men came from what it did not contain. With all that leaked information they disclosed no malign or sinister self interest. Those who were trying to influence politics,  big donors included, were apparently acting from conviction, like other players in NZ politics, about what was best for New Zealand. The authors had the grace to acknowledge that.

I reflected on that as I read “The Eagle’s Throne” by Carlos Fuentes. He is certainly Mexico’s and perhaps Latin America’s leading novelist. An Argentinian friend recommended it as the novel most likely to be accessible to me as an ‘anglo’, yet revealing of the Latino mind.

I found it only marginally less difficult than the standard Latino fare. Carlos Castaneda never did it for me 30 years ago despite my diligence. Others since have been no easier to read to the end. Stereotypical violence and cruelty blended with magic and the surreal is not my cup of tea.

Fuentes is much more engaging. Politicians were the caharacters. Aphorisms pour from his pages. 

But it was not politics as we know it, thank God. In the end The Eagles Throne could not engage me.  The lust (including for power) was too dominant to resonate with my experience of politics.  Cynicism about the disjunct between political posturing and real motive is just too pervasive.

The choices I found most testing in politics were not between good and bad. They’re easy. The hard ones are the unavoidable choices between bad and worse, or between acting now in ignorance or later when it may be too late.

In my political experience NZ political dilemmas are less crude than those of Latin literature. Maybe that makes ours’ just as hard to resolve. Idealism still plays an important part in New Zealand political life as I have seen it, even for those who are so practiced that they may find it hard to recognise in themselves. The public interest matters to our political elite, even if they commonly subordinate it to their own interests.

So for this Christmas holiday Clive James’ “Cultural Amnesia” was my cold beer on a hot day. At 850 pages it lasted many hot afternoons.  I had no idea of the depth of his interest in topics outside the arts. It is superb. I can not do better than the NY Times jacket note “Clive James is a brilliant bunch of guys”.

Tim Shadbolt’s courage has always ornamented NZ politics.  He said “bullshit” memorably more than 30 years ago. The left applauded his ‘free speech’ then. He’s been consistent. They were always hypocrites.

Muriel Newman’s site has an interesting account by Tim of his political journey from the knee-jerk left.

Shadbolt’s council can help the defenders of free speech again later this year. The Electoral Finance Act exempts advertising  on council owned land and buildings from the rules that deem rental to be incurred on hoarding sites even where they are free.

Accordingly billboards on council land will not use up the derisory expense allowances of third parties, parties and candidates.

Tim’s council, and others, could make their Town Hall frontages available for banners supporting candidates for free speech (the repeal of the Act).

Law changes in 2002 allowed local government become politically partisan if they want. Labour and the Greens liked the idea of “community representatives” spending ratepayers’ money on activism. Their arrogance assumed that it would favour them.  Good job if they now rue powers of “general competence”.

I do not pretend to know the signifiicance of the figures, but I’m willing to assume some favour from 32nd place in Tim Selwyn’s ranking of blogs.

I was out of newspaper reach when this list came out. I returned to the net, newspapers and television yesterday. Working through the backlog, the honours list is put aside for the kind of study that may not happen. 

I’m usually thankful it hasn’t disturbed the even tenor of those out of touch days. Perhaps the Order of New Zealand for Johnathon Hunt came at New Year, because I don’t remember feeling the outrage that surely would have come if I had not heard it as old news. He is simply not one of the 20 greatest living New Zealanders.

On the other hand, by missing these lists I’ve probably puzzled or even hurt a few friends by failure to even mention their honours I’ve not heard about.

I was recently canvassed for my views on restoration of the system dumped in 2000 (knighthoods etc).

My answer was unequivocal – apparently an unusual response. The group campaigning for the restoration tell me that most politicians duck the question.

I suspect that many of those asked are still baffled by or indifferent to the new system. I can never remember what the alphabet mysteries mean. But most would equivocate for fear of seeming fuddy duddy – a worse crime to the NZ elite than almost any other.

To me its a no-brainer.  I’d restore the former honours system, but give recipients a choice between that and our new brands. We’re supposed to be honouring them. What about doing them the honour of letting them say what they prefer?

They could get the old description, or its new indigenous equivalent. Over time the preferences of those we’re honouring would prevail.

I believe in collectively giving formal thanks and credit for outstanding contribution. We need heroines and heroes to lift our sights. But praise should be sincere, it should mean something.

So my preference for the known system is ruthlessly practical. The ‘indigenised’ system means virtually nothing, and with the best of intentions it cannot acquire much impact for decades to come.  Power in a brand is acquired only by performance over time. The simple fact is that people are rightly suspicious of honours. Praise is cheap. Until gongs have centuries of provenance, so that their worth can be measured by revealed standards (i.e. the kinds of people who’ve held them) they mean little.

Their creators’ glowing claims will be completely discounted. The wisdom of that scepticism can be seen in our so-called ‘top’ honour – “The Order of [the kakapo] New Zealand” is limited to 20 living persons at any one time . Last time I calculated the most telling feature of that order was its unique recognition of the stunning contribution to New Zealand of Labour party trusties. Surprise, surprise – seven of the 20 were superannuated Labour politicians, of course excluding the truly outstanding one, Sir Roger Douglas.

One of the rewards for us of our veneration of Sir Ed was the fact that we feel the satisfaction of having so clearly recognised him during in his life, with an internationally recognised honorific. 

We inherited a branding system with the kind of brand integrity that can only be built over centuries. It is irrelevant that there were some (and sometimes many) unworthy recipients, purchasers of honours etc. The key thing was that the brand had predictive value – the holder of an honour was much more likely than not to be outstanding. Inevitably there will be merited suspicion about the integrity of application of the criteria from time to time, but the fact is that a British ‘sir’ is still recognised throughout the world as likely to have distinction.

The socialist have never understood that market capitalism needs fewer police and rulers than socialism because its power lies in the market rewards for good reputation, and punishment for bad. It is called brand value, and it can only be built up over time.

The abolition of the old system was a casual phony war skirmish for Labour, conducted to reassure their ‘working  classes’ that Labour was still against privilege. I doubt that it delivered more than a moment’s distraction from the bureacracy and university class privileges they’ve been establishing.

The cost has been high.

We’ve spurned a valuable inheritance, like silly teenagers who reject their family name in a kind of “I’ll show you” gesture. It says much more adverse about them than their family. It can even be a relief to the rest of the family.

If we let those we would honour choose between the two systems, we might learn something similar from their choices.