Public loses $37 billion to private landowners every year

Sang Architects, Auckland multi residential Remuera101We are being robbed. Constantly robbed. And it is the expense of the earners who catch two buses to work early in the morning for a low paid job. We can work out that the public is losing at least $37 billion a year to private landowners. This should more than replace income tax.

There are 1,771,200 private dwellings in New Zealand (Stats NZ) The mean house price rose from $395,530 in April 2014 to $466,665 in 1 July 2011 (Quotable Values)

That is in just under three years the mean house price rose $71,135. Almost all of this was privately captured as capital gain.

So let’s multiply these two figures to get the total of privately captured capital gains on those private residences and we get $126 billion.

This is for a period of just under three years, two months short of three years. So yearly the amount of capital gain is now one third of 34/36 of $126b, or one third of $119 billion = $40 billion. A very tiny fraction of it will have been captured by local authorities in rates. Almost none will have been captured by central government.

The rates revenue of all local authorities in 2013 was $4.5 billion. Suppose two thirds of this was land value (a high figure – more like the Auckland ratio), then local authorities revenue due to taxing of land value would be $3 billion. But if the ratio is lower, then it would be as low as $2billion a year.

So $40 billion figure gets reduced by somewhere between $2 and $3 billion and we have lost in public revenue at least $37 billion a year through failing to capture capital gains, or failing to impose full land rentals, which is essentially the same.

To put this in perspective, the GDP of the country is $227billion in the year to March 2014.

The revenue from income tax is $29.8 billion and the total revenue from taxes $72.5 b. Expenses were $73.1 billion in the last budget.

So $37 billion is being pocketed by private property owners every year when the value has been created by the wider public. This money rightfully belongs to the public. (Compare this: Labour's Capital Gains Tax would yield only $1b a year "in time" and the Greens Capital Gains Tax would yield $4.5 b/ year "in time")

On the other hand, the government has confiscated $30b of our earnings through income tax and taken nearly $18 billion from our expenditure in GST, making everything less affordable. No wonder there is poverty in New Zealand. No wonder there is inequality.

dairy-farm-for-saleBut revenue from land rental would not be the government’s only income. We should be charging rent for the monopoly use of all natural resources, not just land. The principle that we should pay for what we hold or take but not for what we do or make means that we should pay taxes on our monopoly use of the rest of the commons. What is the commons? Everything that occurs naturally or is part of the social or cultural capital – water, fish, forests, electromagnetic spectrum, minerals, oil, gas, as well as the monopoly use of the infrastructure. The latter includes taxes on use of airports, hydroelectric power stations, ports, and so on. It also includes use of the commons for emission of pollutions. The biosphere is used for emissions of greenhouse gases and the rivers, lakes, and seas cleanse the pollutants from farms. We already tax tobacco, alcohol and gambling and would continue to do this.

address_withheld_negotiation_100189170163421799Lifting the tax burden from the productive sector by taking off income taxes, GST, corporate tax and interest revenue taxes would allow productivity but, given the burden of resource taxes, the pattern of productivity would be very different. It would look more like a post fossil fuel economy.

Would the revenue be sufficient to run a country? We currently spend $73.1 billion. (Budget 2014-5). So we would need a further $36 billion. Karl Fitzgerald in his Australian study worked out the other resource tax revenue and managed to match the current revenue. There is no doubt we could too.
I am reminded of a quote from Henry George, author of Progress and Poverty, who said "For this robbery is not like the robbery of a horse or a sum of money, that ceases with the act. It is a fresh and continuous robbery, that goes on every day and every hour. It is not from the produce of the past that rent is drawn; it is from the produce of the present. It is a toll levied upon labor constantly and continuously. Every blow of the hammer, every stroke of the pick, every thrust of the shuttle, every throb of the steam engine pay it tribute. It levies upon the earnings of the men who, deep underground, risk their lives, and of those who over white surges hang to reeling masts; it claims the just reward of the capitalist and the fruits of the inventor's patient effort; it takes little children from play and from school, and compels them to work before their bones are hard or their muscles are firm; it robs the shivering of warmth; the hungry, of food; the sick, of medicine; the anxious, of peace. It debases, and embrutes, and embitters."

What has Precinct Properties buying public land to do with hungry children in our schools?

Anyone notice that 20-22% of schoolchildren in New Zealand are hungry every day? What has this to do with the recent sale by Auckland Council of the most valuable property in the country to a private company, Precinct Properties?

Well, plenty. Let me explain. If Mayor Len Brown had played Monopoly enough as a kid he would know that the way to get rich is to buy properties. Well, read "buy land" actually. When a representative of Precinct Properties spoke on National radio tonight he was open when he said, “Our emphasis is on owning land freehold” Of course. “Freehold” means “free of rent”. How nice.

So instead of leasing the land to a developer, the Auckland Council has sold 2 acres of the most valuable land in the country and thinks it has done a deal. But the "deal" is really Precinct Properties 100: Council 0. Precinct Properties knows it because they know the City Rail Link is about to start and the uplift in land value is theirs to capture – and other land owners near the hubs.

It is not news that land near rapid transit hubs will rise in value. When the Jubilee Line Extension was built in London in the late 1990s, it was discovered that the uplift in land values of properties within 1000 m of a hub was £13 billion. The cost of the extension was a mere £3.5 billion. Yes, that means private landowners get windfall gains from public expenditure. The public loses all round and windfall gains are all privately collected by “freehold” land “owners”. Nice. Thanks!

7215470It's not a coincidence the sale happened right now. Auckland Council was busting to start the link but delays were frustrating them. Imagine the Precinct Properties smooth talk to gullible Mayor Len Brown: “If you let us buy the QE11 Square we will build a wonderful new building and attract huge expansion in Auckland. It will also enable you to start the City Rail Link.” "Wonderful," says Len. And he thinks: "Just what I want. People will remember me as the one who got the City Rail Link and did so much for the development of Auckland."

Of course there will be development. The start of the rail link is just what landowners near the City Rail Link hubs are hanging out for.

Our party says we need more land in public ownership, not less. In fact there should be a law against selling public land. If the government or council want to have land utilised it should lease the land never sell it.

OK, that is at the moment dreaming, as all the momentum is exactly in the other direction.

But there is a partial and realistic solution – get land owners in the area to share part of their windfall gain with the council so the council can gradually pay off the loan to build the link. It can be done through targetted rates under the law. Targetted rates are used extensively by Wellington Regional Council and by almost every council. It is only a fraction of the windfall gains in land value that is targetted. And this is politically acceptable. People understand that they should share their gain with the public purse. If a landowner benefits from public spending they should pay higher rates. Spread over 20 years, it will pay a significant proportion of the cost of the City Rail Link. The Sydney Harbour Bridge and the Melbourne Rail Link were partially funded this way. The process is called Land Value Capture and it exists in various forms all over the world.

So what has this got to do with hungry children? Remember the Campbell Live recently showed that of one class of 28 Year 11 students at Decile 2 Kelson Girls College, 18 of them didn’t have lunch and ten came to school with no breakfast. 8 had no breakfast and no lunch. “Many students are needy. Their parents are really struggling to make ends meet,” said the school principal.

When people and businesses with the most valuable land (think central Auckland) have a windfall rise in land value, money that rightly belongs to the whole public flows into the coffers of the land “owners”. Businesses like Precinct Properties. The propaganda is that it is owned by mums and dads, yes very wealthy mums and dads, but mostly big investors like insurance companies and pension funds. Calculations earlier show that every year the public is deprived of something like $37 billion through the uplift in land values that occurs with development. A real estate agent last week told a friend in Howick that values there were rising by $15,000 a month and he could see no end to it.

Yet the "mums and dads" of the Year 11 students at Kelston Girls College are paying rates or rents and often catching buses to work two jobs. Mostly they will be renting. They won’t be getting any unearned windfall from the uplift in land values. That is how people get rich, not by working. Wherever you find a really rich person or company you will know they are landowners who have received unearned gains from rising land values.

The New Economics Movement – biomimicry in the political economy

A NEW ECONOMIC MODEL

A total transformation of the money and tax system is required to address the multiple crises we face. We need a new economic model that works for all Life.

We want a political economy designed to mimic Nature. Centralisation and monocultures are not Nature's model. In all our policies we try to imitate Nature's model of organisation.

The economic metamorphosis we propose will move away from tax on work and production towards tax on resource use. Our philosophy is that nobody should profit from owning land. Land location values should be shared, so "owners" of land and other natural monopolies must pay an annual rent to the public for the privilege, instead of paying income tax or rates. People currently have their earned income confiscated by government, while they are praised for getting a windfall gain from sale of their property. This is unacceptable. While we continue to allow the private capture of land value gains, both banks and property owners will benefit and the money supply will have to keep increasing. The gap between land "owners" and the rest will keep widening.

We will change the way money is created. The current interest-bearing debt money system drives the world-devouring engine of perpetual growth, causes growing debt and massive environmental harm. The profit making bank-created money system we live with is a monoculture that causes people to behave competitively in a dog-eat-dog world. We want multiple currencies co-existing. We are suggesting that the country's national money should be publicly created at community level and the revenues flow from the periphery to central government. There would be a variety of feedback loops involving strict controls on inflation. Until we change the money system we change nothing. Change it and you help all of the above including climate change.

Equality, according to research, makes everyone happier. Inequality is the greatest predictor of a range of social ills. Other parties draw attention to the growing gap between rich and poor, but so far their proposed solutions usually rely on centralist solutions and do not encourage green business. They also keep wanting to tax work and enterprise. You cannot solve today’s problems with yesterday’s solutions.

We recognise that solving a range of intractable interconnected problems together is a major political challenge. It must be done using systems thinking.

A change to Community Land Trust leasehold land is indicated. Public creation of money without interest bearing debt is also imperative. Public revenues must be shared by using the revenue straight away to issue Citizens Dividends. Solutions are offered on this site including ones which will surprise the reader.

We also want a new paradigm in governance. We want to turn the dominant paradigm of governance upside down. Instead of power being at the centre and distributed to the periphery, we want the power residing in the periphery but distributed to the centre.<p>&nbsp;</p>In this model, the community board would not only have a fundamental right to exist, it would have full sovereignty. Its powers would include:-

In this model, the community board would not only have a fundamental right to exist, it would have full sovereignty. Its powers would include

  1. Revenue gathering powers (imposing rents on the exclusive use of the commons)
  2. Currency creation powers (spending money into existence and designing a circulation incentive)
  3. Welfare/tax reform power, distributing unconditional Citizens Dividends to all citizens.
  4. Rule making power (including the power to choose the tax rules for trade in its currency)
  5. Power to protect its citizens and give them opportunity for growth.
  6. Land purchasing powers.

Many functions, of course, are not possible locally. It is not appropriate for the Community Board to take charge of major roads, rails, the bioregional function of flood protection or the defence of the country. It will delegate this power to a larger organisational group (Council, a larger Unitary Authority or central government)

So instead of having a central authority that overrides the decisions of councils or community boards, the wishes of the community board have precedent for their area.

Our solutions will go a long way to tackling resource depletion, climate change, environmental damage, unemployment and poverty, while at the same time unleashing the human creativity and entrepreneurial spirit required to meet the big challenges ahead.

The post fossil fuel economy, should be what Herman Daly called "a steady state economy". Within that steady state there is constant and dynamic change as old things die and new life is created.  In this system, resilience will bear more weight than efficiency. We need to get the balance right.

Without these fundamental paradigm shifts, the future could be brutal – the old economy will struggle in its death throes while the new one emerges. Our party will be a catalyst in birthing this new economy and give New Zealand a measure of resilience to withstand the shock coming our way.

When talking about the $37 billion that is captured by private landowners every year, we are reminded of the quote from Henry George, author of Progress and Poverty. He said "For this robbery is not like the robbery of a horse or a sum of money, that ceases with the act. It is a fresh and continuous robbery, that goes on every day and every hour. It is not from the produce of the past that rent is drawn; it is from the produce of the present. It is a toll levied upon labor constantly and continuously. Every blow of the hammer, every stroke of the pick, every thrust of the shuttle, every throb of the steam engine pay it tribute. It levies upon the earnings of the men who, deep underground, risk their lives, and of those who over white surges hang to reeling masts; it claims the just reward of the capitalist and the fruits of the inventor's patient effort; it takes little children from play and from school, and compels them to work before their bones are hard or their muscles are firm; it robs the shivering of warmth; the hungry, of food; the sick, of medicine; the anxious, of peace. It debases, and embrutes, and embitters."

For a brief description of our major policy, go here

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Dairy debt dilemma needs solving

1436821666128At the end of 2014 we published a blog asking Why our are farmers farming for capital gain?

In it Andrew Gawith, then Director of Gareth Morgan Investments described the economics of farming in New Zealand as ‘speculative’ as the financial benefits are almost entirely dependent on capital gains. Other than dairy, income is puny and unreliable, he said. Now the focus goes plainly on dairy debt as the price the farmer receives is plummeting and the banks have been recklessly lending, knowing they are only lending on the promise of capital gain. And our country has no capital gains tax and no land tax, so it is a great place to pour investment money from China and other countries. The TPP, if ratified, will not allow our country to ban the sale of land to foreigners.

Gawith pointed out that in the twenty years between 1990 and 2010 the real after-tax return to farmers was something in the order of 7 percent to 8 percent a year,’ and that this was double the return of sharemarkets.

He said farming was the most popular business for banks to lend to. ‘While other areas of economic endeavour are starved of capital, banks have very nearly drowned farming with debt. The ease with which farmers can get capital has helped push up the price of land.’

So with farmers drowning in debt, they can't withstand the drop in dairy prices from a high of over $8 per kilo milk solid to below $4 by March 2016.

Dairy debt was around $32 billion in 2013, up from $8 billion in 2003, which makes a quadrupling in a decade! And by March 2016 it is $37.8 million. Gawith said in 2010 that dairy debt represents two thirds of all outstanding farm debt. According to Federated Farmers in February 2016, one in ten dairy farmers were feeling pressure from their banks. During the time of growing stress the Minister of Agriculture kept urging banks to cooperate with dairy farmers. The price of dairy land averages $39,367 per hectare, and in Taranaki the average value is even higher. Dairy farmland in New Zealand is reported to be the dearest in the world.

Farming is very capital intensive, with only mining and utilities more so. According to an NZIER study, ‘Around three-quarters of value added in agriculture is from capital (land, plant and machinery). This is higher than the economy wide average of around 50%.”

Janette Walker, a rural debt mediator, told John Campbell on Monday 8 March that 85% of dairy farmers are not going to make a cent for the next two years and if land prices drop it will be a train wreck. Overseas land buyers are circling. Banks have lent too much for too long, based on capital gain. They completely missed the cashflow issue. Supply companies, vets, contractors and lawyers are watching closely as they are unsecured creditors.

Paul Glass of Devon Funds Management told a September conference that for every $3.90/kilo dairy farmers get in payout they have $19 debt/kilo on average. For years Glass had been concerned about the high level of debt carried by not only dairy farmers but also by Fonterra, our major dairy company.

Actions required

If dairy farming turns out to be the cause of our country’s Minsky moment, how can we avert a crisis? One Northland dairy farmer who was selling up told Checkpoint that government should let innovations emerge at local level, they were too dependent on outside advisors coming in.

Now the government could do what they did for central Christchurch land after the February 2011 earthquake to avoid a slump in land price – buy up land from distressed dairy farmers. But they shouldn't borrow from a bank for the money. They could issue Treasury Notes; that has been done in other countries before in crises.

There is something else a government could do and that is QE for the People. Give out new money (Treasury Notes) in the form of a Citizens Dividend. This is on condition that any debt must be paid off first.

Or the banks could become shareholders in the businesses they lend to until it is clear which way the business will go.

Given the importance of private debt before a crisis, whatever action taken should not add to overall private debt.You need to reduce the debt level without reducing aggregate demand at the same time. 

But none of this is likely to happen. Pigs might fly. If government will not act and get together with banks and farmers, and the most valuable farm land is in danger of being bought up by overseas buyers, then it is up to local government to do something big.

The first option is that they distribute a Citizens Dividend. To prepare for this all local authorities, and all agencies of local authorities like Community Boards should by now be compiling a list of their citizens, just as Alaska and British Columbia do. Alaska does it to share in the bounties of oil revenue, BC does it to share out the proceeds of their carbon tax. In the case of Alaska, they give the dividend to all citizens who have lived there for a year. They need to buy up the land of distressed dairy farmers with a new currency issued on a par with the national currency. The difference is that it needs to be designed differently as well. If we can’t get to this stage in one leap, then let’s stop there. The next locally created currency will have to take this next leap. Or a Maori incorporation that includes dairy farms could issue a new currency after persuading local businesses to accept it.

They need to buy up the land of distressed dairy farmers with a new currency issued on a par with the national currency. The difference is that the currency needs to be designed differently as well to include a circulation incentive. If we can’t get all the way to this stage in one leap, then let’s stop there. The next locally created currency will have to take this next important step. Or a Maori incorporation that includes dairy farms could issue a new currency after persuading local businesses to accept it.

Whatever happens we must find a way to keep our precious dairy land in our country's ownership. It either has to be owned by government, local government or by a Maori entity, be it an iwi or an incorporation. Whichever body does it, their new income will be derived from land rent. At that stage a lifetime lease contract must be arranged to ensure security of guardianship.

The public must thenkeep a close watch the on public bodies because they will find themselves under political pressure to reduce land rents and effectively hand out free lunches. (this happened in Canberra and government leasehold land rents have been progressively reduced in New Zealand). To ensure this doesn't happen, it is important to give the new currency special benefits to ensure it circulates without deadweight taxes – trades in it should have no income tax or GST. The currency should be designed as a means of exchange only and for this, it is important to build in an incentive for it to circulate quickly.

But this is a whole new matter. It will require some staunchness on the part of local government when accosted by national government. However, considering it now attracts a full land rent, which is fairly high, it is only fair that the new currency must have tax advantages over the national currency to compensate.

Surpluses mean unemployment and deficits bring employment

It's a strange paradox. There is a professor of economics John T Harvey who writes a lot on the fallacy of "getting rid of the deficit." It seems it is his mission in life to educate politicians that the government's budget can't be likened to a household budget and that it shouldn't be a government's aim to get a surplus. He writes in Forbes magazine on why you should learn to love the deficit.

But how little progress he is making! I don't know if he has an equivalent academic in New Zealand, but Australian Professor Steve Keen who now works in UK is also doing his bit. Hs latest article last week was entitled Beware of Politicians Bearing Household Analogies. Then there is a Professor Randall Wray of the University of Missouri and Kansas City doing the same thing.

Despite the shortfall this year, Treasury still backs Mr English to pull the country into the black over the next few years – predicting a $565 million surplus in 2015/16 and $4.1 billion in 2018/19.

Read more: http://www.3news.co.nz/nznews/dont-blame-deficit-on-tax-cuts---english-2014121709#ixzz3M73GczGY

Russel Norman blamed it on 2010 tax cuts and the fact that the Govt borrowed $5b in 4 years.

Treasury’s predictions Budget time: $372 m
Election: $297m
Dec: $572 million

(To year to June 30, 2015)

L Randall Wray:
Whenever a demagogue wants to whip up hysteria about federal budget deficits, he or she invariably begins with an analogy to a household’s budget: “No household can continually spend more than its income, and neither can the federal government”. On the surface that, might appear sensible; dig deeper and it makes no sense at all. A sovereign government bears no obvious resemblance to a household.

Surpluses cause a fall in your net assets. Deficits create private sector wealth while surpluses deplete it. If Government takes in $1000 taxes from private sector but doesn’t spend any of it and they had $100 of their own earnings, their total intake is $1100. The private sector has gone into debt of $1000. Government deficits create private sector wealth while govt surpluses drain it. Learn to love your deficit.

But in New Zealand, as in Australia and no doubt Canada and UK, politicians all believe in surpluses. Here's the current petty interchange from our country.

On Dec 16 on Yahoo the headline was "Don’t blame deficit on tax cuts says English"

"The Government believes a surplus is achievable this financial year despite the Treasury's latest forecast," Mr English said.
"Previous forecasting rounds show the outlook can change significantly between the half-year update and the final accounts."

Opposition parties were quick to describe the forecast as proof of a broken promise.
"Bill English's face is redder than the crown accounts," said Labour's finance spokesman Grant Robertson.
"This is the political test he set himself, and he has failed... the government owes New Zealanders an apology."

The Greens say National's economic credibility is on the line and NZ First's Winston Peters believes the government has been cooking the books for years."

In Australia we see the headline "Australia budget deficit to hit $40.4 billion" with all the accompanying handwringing and blaming of the opposition. And it is the same in the UK.

New Zealand is in dire need of a professor of economics who makes it his (or her?)mission to educate our own politicians on the topic of deficits and surpluses.

And in an interview with Professor Steve Keen on the Greek issue, he said as one of the conditions of the loan, the Greeks run a surplus of 4.5%. That means you take 4 and a half percent of money out of the economy every year and Europe keeps asking why they can't grow. That is cruel and ignorant. Tortuous terms. No wonder Yanis Varoufakis the new Greek Finance Minister would prefer to meet with politicians than the Troika. The Troika says they have to keep on going but it is obviously not working and causing a heap of pain.

Review of Naomi Klein’s book This Changes Everything, Capitalism vs Climate

Book Review by Peter Healy, Marist Priest of Otaki

This Changes Everything, Capitalism vs the Climate by Naomi Klein, 2014, $37

la-ca-jc-fall-preview-naomi-klein-20140914-001
This is a comprehensive and timely book. Klein says in part one, “If there has ever been a moment to advance a plan to heal the planet that also heals our broken economies and our shattered communities, this is it.” In the introduction she says “this is the hardest book I have ever written because climate change puts us on such a tight and unforgiving deadline.”

This book is about our “climate moment” with all its challenges and opportunities. First, Klein says we have to stop looking away. We deny because we fear letting in the full reality of a crisis that changes everything. The need to change everything is not something we readily accept. If we are to curb emissions in the next decade we need a massive mobilisation larger than any in history. She quotes the Bolivian Navarro Llamos who suggests it is time for a “Marshall Plan for Earth”.

The question is posed: What is wrong with us? What is really preventing us from putting out the fire that’s threatening to burn down our collective house? The global economy always takes centre stage. Market fundamentalism has systematically sabotaged our collective responses. Our economic system and our planetary systems are at war. We are faced with a stark choice: “either we allow climate change to disrupt everything about our world or we change pretty much everything about our world to avoid that fate”. We need a radical rethink for these changes to be remotely possible.

Our “climate moment” is accompanied by what she calls a “fossil fuel frenzy”. A wild dig is going on in most nations on the planet. Aotearoa/NZ being no exception. With the “fossil fuel frenzy” Klein says, “We have become a society of grave robbers, we need to become a society of life amplifiers, deriving our energy directly from elements that sustain life. It’s time to let the dead rest.” Our most important task now is to keep carbon in the ground.

To do all this we need to be thinking differently. A new worldview is required, “a project of mutual reinvention” has to be entered into. The door to 2 degrees of warming will close in 2017. We are in the midst of a civilisational wake-up call. This call is coming to us in the language of fires, floods, droughts and extinctions. We are being called to evolve, and the thing about a crisis this big is that it changes everything.

Wealthy nations need to start cutting emissions by 8-10 percent per year. They have to begin this now. We need to consume less and get back to 1970’s levels. Low consumptions activities like gardening and home cooking are good. Changing everything means changing how we think about our economy. Large corporations dodge regulations, and they refuse to change behaviours. No company in the world wants to put itself out of business, their goal is to always expand their market share. Klein talks about addiction rather than innovation when it comes to new methods of extraction. We need to keep all the fossil fuel we can in the ground, at the same time more extreme and innovative methods are being invented to get at whats left. The madness of “extractivism” is a relationship of taking with little care being given to regeneration and the future of life. As Klein says the market economy and the fossil fuel economy emerged at about the same time. “Coal is the blank ink in which the story of modern capitalism is written.”

There are no messiahs. The green billionaires will not save us, we have to change our lifestyles. Our most intoxicating narrative is that technology will save us, and this is one of our forms of magical thinking. There are some fascinating passages about Klein going to a geo-engineering conference in the UK. She describes the attendees as, “a remarkably small and incestuous world of inventors and scientists and funders.” It is all very risky, untested and dangerous stuff that they are proposing. The solution to global warming is not to fix the world, rather we need to fix ourselves.

The book has inspiring things to say about “Blockadia”. This is a broadbased grassroots resistance movement intent on shaking the fossil fuel industry to the core. Indigenous peoples are key in the Blockadia movement, their rights can be a great gift for the revival and reinvention of the commons we all love. Bolivia and Ecuador have already put “the Rights of Mother Earth” into their national statutes. Blockadia asks the question, “How come that a big distant company can come to my land and put me and my kids at risk and never ask my permission?” The corporations come from far away and go everywhere because the fossil fuel industry is one of extreme rootlessness.

Followers of recent global climate talks are well aware of failure and deadlocks. A Greenhouse Development Framework from the Stockholm Environment Institute is an attempt to deal with disparities within and between countries claiming the rights to develop and pollute.

In chapter 13 of the book Klein talks about her attempts to have a child while researching this book. There are some lovely descriptions of Klein coming to realise that earth is facing fertility challenges of her own. Many species are now against “infertility walls” and finding it hard to reproduce. Fertility is one of the first functions to erode when animals are under stress.

The challenge for the climate movement hinges on pulling off a profound and radical economic transformation. In extraordinary historical moments “the usual category that divides “activists” and “regular people” become meaningless, the activists are quite simply everyone”.

So this book is for you and me and everyone. We are all implicated in everything this book is about, so get hold of it, read it and pass it around. As a slogan at the recent climate march in New York said, “To change everything we need everybody.”

I found myself saying to someone the other day, “If any book will push us through and beyond the Great Transition that we all have to make, then this is it!” Along with the film that Klein’s partner is making on the same subject, we can take some hope. We still have our brief window of time. We are inventive and creative. We can join with the tangata whenua as guardians of Mother Earth.

How safe is your bank?

When you have your money in a bank, the money is legally no longer yours. It belongs to the bank and you become an “unsecured creditor”. This is the legal situation and it has been confirmed by the Reserve Bank in an email (27 March from Sonia Speedy) to Sue Hamill of Positive Money. When the bank has your money it can do what it likes with it, including take risks you don’t know about. So putting your money in a bank is a “customer beware” activity it seems. If you have your money in Bank of New Zealand, Westpac, ASB or ANZ, then you run the risk that you don't know too much about what your bank is up to. The latest thing is covered bonds, which is just one of these risks. They are packaging their ‘high quality residential mortgages’ up and selling them off as ‘Covered Bonds’ to investment funds. Then if the bank gets into trouble, the investment funds are ‘secured creditors’ and are ahead of you in line when the liquidator takes over. This means that Kiwi households will be forced to help bail out banks while overseas lenders have their money protected. If you think Kiwibank is an exception, then think again. They started selling off their mortgages as covered bonds in April 2013. But authorisation from Government doesn’t seem to matter to banks. When I rang Parliament on 9 May 2013, I found the Bill on covered bonds was still at committee stage, having passed its Second Reading on 22 February. Then there is the small matter of Interest Rate Swaps (IRS) which all these banks (and the Co-operative Bank too, not sure about TSB) engage in. If you can imagine taking out a variable-rate mortgage and then paying a bank to make your loan payments fixed, you've got the basic idea of an interest-rate swap. They comprise 80% of our derivatives market and are widely used by local authorities to hedge against the risk of interest rate changes. In April 2013 the US futures regulator was reported to be investigating allegations of manipulation of this popular derivatives benchmark and had issued subpoenas to market participants including the interdealer brokerage ICAP and several global banks. It seems the rates are set by 20 exhorbitantly paid brokers at a desk in Jersey City, New Jersey. A year earlier they had discovered that the LIBOR rates were being manipulated and this investigation has now been widened. LIBOR sets the actual interest rate that banks charge each other. Since mortgages, student loans, financial derivatives, and other financial products often rely on Libor as a reference rate, the manipulation of submissions used to calculate those rates can have significant negative effects on consumers and financial markets worldwide. At the time LIBOR was though to be the biggest financial scam ever. Two big banks have been fined for this including the Swiss bank UBS which was fined a record $1.5billion in Dec, 2012. Interest rates swaps are a gigantic market. Would you believe this figure, or even be able to imagine how big it is? It is $379 trillion in June 2012 (Bank of International Settlements website accessed May 1, 2103). The size of the global economy is $70 trillion, so it is more than five times this. The risk manager of the Co-operative Bank told me when I visited him in early 2012 that they were involved in interest rate swaps because it was safe and it saved them money. The Financial Manager of Kapiti Coast District Council told me they had made money from interest rate swaps and had no plans to drop the practice. So this leaves us with the possibility of putting your money with a credit union. Unfortunately all credit unions must use a bank for their overnight transfers, so that one is a dud too. There is one other possibility. When I rang the Reserve Bank some time ago about which banks were involved with Open Bank Resolution (where the customers bail out a distressed bank and which will be in place by July 1 this year) I was told there are two small Indian banks which were too small to be involved in the scheme. So there are the facts. The choice is now yours. I am sticking with the Co-operative Bank and TSB.