But Rachel Elder did need to inform Mr Mayor, since it’s he who opines that [singularly ???] “weightless” manufacturing will one day make Dunedin great.
A while back Mr Mayor lauded expansion at Speight’s, Emerson’s and Greggs ….but recently, dreadfully, when interviewed by John Campbell on RNZ Checkpoint, Mr Mayor had trouble remembering these and other multimillion-dollar manufacturing investments in the good people, raw products and knowhow of Dunedin City. As well, he slipped past the convenient fact that the deputy mayor is a director of Scott Technology Ltd, and his old flower Mr McLauchlan, advisor and confidant, is the company’s board chairman.
Notwithstanding, Ms Elder thought it necessary to set herself a free writing project, an op-ed to ‘tell’ Mr Mayor, as well as advertise her paid work skills. Yes, yes, we’re all for free speech and pumping political mileage; however, we are the converted and connected, we know just how great Dunedin manufacturing is and can be —if not for DCC.
It must be said, though, that Mr Mayor’s speech at the Cadbury protest in the Octagon last Saturday was a large complimentary step up from the fatal Checkpoint phone interview.
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“Messaging that it is too expensive to export from Dunedin and that we are too far away from markets and that manufacturing is best not done here does not support the many families and individuals who work in this sector.”
–Rachel (take that Dave Cull) Elder
### ODT Online Wed, 15 Mar 2017
We have skilled workers and can make it all here
By Rachel Elder
OPINION As an employment consultant and someone who advocates for a wide range of jobs in Dunedin, I am keen for Dunedin to be advertised nationwide as a place that is great for manufacturing and production as this will supply jobs to our skilled workers. The fact is Cadbury is owned by a multinational that has caused its demise. Manufacturing can be done here well and efficiently.
Read more
Comment published at ODT Online:
ej kerr Wed, 15/03/2017 – 7:59pm #
As a city councillor Ms Elder should be overtly aware that the Dunedin City Council-owned power distribution company Aurora Energy Ltd does not and cannot offer a safe and secure electricity supply network for businesses, manufacturers and other large power users (this aside from the now obvious inability to offer safe supply to residential users). The mayor and councillors are not listening and not communicating clearly on the state of Aurora’s burnt asset. Thankfully, the Otago Daily Times has filled that void with strong news reporting. At a cost of one billion dollars to repair and upgrade the existing lines and facilities – not counting the cost of new development work required in Central Otago and Lakes District to meet growth and increasing infrastructural demand – there will shortly be a very heavy impost landing on all local businesses via rates increases. Such an unpopular debating topic at the head-in-the-sand Dunedin City Council.
****
Truly fine examples of the sort of thing your grandmother and mother will tell you about Dunedin that Mr Mayor can’t:
. . . .
McMeeking Manufacturing, 123 Maclaggan St
Jaytee Baking Cups have been a household name since the 1930s, when the company was founded by a printing engineer James Thomas Williamson, hence the name Jaytee. Since acquiring the company in 1979, McMeeking Manufacturing has been the largest supplier of Baking Cups in New Zealand with exports to Australia and the Pacific Islands. Due to the dramatic increase in bakeries, cafes etc, the range of products – all manufactured in the Dunedin factory – has grown to fulfil customers requirements and follow the latest trends. Read more at https://www.jaytee.co.nz/
. . . .
### ODT Online Wed, 15 Mar 2017
Machine tool smart, versatile
By Simon Hartley
Farra Engineering’s latest $1.3 million machining kit not only has the capacity to work 24/7, but can text its progress to operators day and night. The DMG Mori “multi-pallet (work bench) horizontal machining centre”, supplied by a German-Japanese merged company, has been running for about a fortnight, at Farra Engineering, Dunedin, chief executive John Whitaker said. The DMG Mori could work on castings weighing just a few grams, on pieces weighing up to three tonnes, and castings up to 1.4cu m in size. “Being so productive, we’re going to the marketplace to fill the spare capacity,” Mr Whitaker said.
Read more
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Posted by Elizabeth Kerr
This post is offered in the public interest.
*Image: jaytee.co.nz – jaytee baking cups
What if? Dunedin... 
“Weightless Manufacturing” describes a chunk of my business, I design electronics in Dunedin, manufacture and ship from China, the profits end up back in Dunedin. 99% of my customers are offshore.
I could manufacture in Dunedin (I do manufacture a little), but I couldn’t compete on the world market – even forgetting about the other costs of manufacture, shipping small packages from Dunedin by mail would double the cost of my current product making it noncompetitive. You’re competing with a highly efficient China-wide shipping system that optimises its costs by finding empty spaces in the holds of planes on the fly (that’s why ‘air mail’ from China takes “2-8 weeks” but usually arrives in < 3)
The rest of my work is consulting in Silicon Valley – again a "weightless" business – like an increasing number of people I brought my job home with me from my OE – I know of at least 40 people in the Dunedin tech industry who work the same way (I've hired 2 more in recent years), there are probably twice that number in Dunedin (so $10-20M gross per year), we don't join the Chamber of Commerce, we don't show up on anyone's stats, we're incredibly efficient as we don't need to rent an office downtown, we usually work from a home office. We're exporters (of our labour), our costs (real and externalised) are minimal compared with dairy farmers', we're not multinationals so we leave our profits in Dunedin.
Dunedin need more of these 'invisible people' – there are 1000s of 20-somethings "digital nomads" who are working on-line from beaches in Bali, Changmai in Thailand, Bangalore, Iceland, …. – we should be doing something to encourage some to wash up in Dunedin for the ski season, (with the goal that some end up staying a bit longer) – I sort of imagine a bunch of attractive 3-month rental's down the peninsula with fibre marketed to the nomad crowd.
I do think that people forget that the world has changed from the Holyoake era closed NZ economy where a business's entire market was a coastal freighter away – now days you have to scale a manufacturing business around quantities that can fill a container (and worry about where the few ships that stop in Dunedin can unload and where you can transship to from there) – remember that world shipping is slowing down, they're cutting ship speeds to decrease costs, high sulphur bunker fuel's days are numbered. Local manufacturing either needs to service local businesses, or be able to ship to a market that takes large volumes and can tolerate long shipping latencies.
One thing we should be doing is locally processing the raw exports that flow through our port – shipping CKD furniture rather than logs, carpets/garments rather than wool, cheese rather than milk powder – I think that's the real way to save Dunedin's local manufacturing.
The criticism of Cull’s (in effect) ‘weightless only’ export future, amounts to mass laughter. It will never replace other forms of manufacture and export.
Are yours and friends’ home offices rated differently to account for the ‘weightless’ commwrcial activity. Seems to me that something similar to Queenstown’s temporary rates moratorium for those profiteering from the accommodation racket applying to the use of private houses (Air BnB etc), is something we need to eventually apply here for out of zone commercial activity. And like Queenstown, that the council works closely with IRD to do the clean up.
“Weightless commercial activity” is not the only kind that has home offices. Would you like to see builders’ and other tradies’ home offices targeted by IRD too?
As for “profiteering” from the use of private homes, it has been going on forever. When I first came to Dunedin many students as well as apprentices and working adults boarded in private homes. In country towns there was no flatting culture – randoms renting a house together. People with a spare bedroom often took in lodgers, long or short term. In popular places it’s not profiteering any more than any other case where demand exceeds supply – oysters for instance. What turns this fact of commerce into a “racket”? Is it more of a racket than, say, auctions online or otherwise where a banjo desired by several bidders goes for a much higher price than it would have if only one eager buyer was after it at the time?
Yes, pursuing taxes and property rates is important, but sometimes a longer view is more useful, socially and commercially. There are rates rebates and grants for various businesses on what often looks like the basis of cherry-picking (and then there’s rugby and the Fubar, automatic handouts) so it’s not as if pursuing taxes and rates is vital at all times, for all cases. Building flourishing businesses that expand (Paul Campbell: “I’ve hired 2 more [people] in recent years”) and result in more spending, possibly more kids in schools, more partners in jobs or starting their own enterprises, eg making first-class chocolate for the high price discerning market, the opposite to Cadbury practice.
Veblen good – Economics – Moneyterms: investment, finance and …
moneyterms.co.uk/veblen-good/
A Veblen good is a good for which consumers’ preference for the good increases as the price increases, and decreases as the price decreases.
I know you’re not a fan of zoning. Read what’s happening in Queenstown and think more widely to rating and taxation regimes that may help pay for city-wide infrastructure renewals.
Hiring two people is commendable but this in itself does not help run a city.
Luckily Otago Southland has a healthy manufacturing economy (at scale, even despite the big-name closures) and disciplined clued-up people willing to utilise and invest in stable workforces here.
I don’t think we should replace everything with “weightless” sorts of business, I was trying to suggest we not pooh-pooh them because because of the nature of the beast you can’t see a lot of them – in fact I tried to point out that there are sorts of manufacturing that are likely to be more viable here.
I think there’s a reasonable argument for different rating for home offices if you’re using them as a public place – things like having a sign out the front, a space where customers come to during office hours, customers use on street parking etc the sort of thing that annoys the neighbours – I get parcels delivered once or twice a week, that’s about it. It’s not like my business receives any extra services from the council over and above being a residence.
I don’t even get a tax write off on my office (to be fair in my case there’s no real tax advantage)
The point I was making, and indeed which Rachel Elder made, was Cull didn’t acknowledge other successful forms of local export and certainly not ones with larger workforces (of necessity). Like he repeats on groundwater rising and sea level change. One track mind.
That’s an interesting read Paul. It gives me hope for tor the future that small businesses like yours are springing up. You all ‘fly under the radar’ so no-one would know you exist. They tell us it is the way of the future, so it’s nice to know it’s happening at some level. From a ‘big picture’ point of view, looking at society as a whole, it doesn’t explain where the masses are going to find work in Dunedin in future. We still need some large employers to soak up some of the labour pool. The whole gigatown beat up was supposed to result in dozens of businesses like yours employing hundreds. I never thought it was ever going to happen.
I have to comment on the last small paragraph of your piece – a subject I know something about. Yes we all agree that it looks crazy exporting logs and bales of raw wool. But why do you suppose that is? It’s because buyers can process our products far cheaper and more efficiently in their home countries. There used to be woollen mills dotted everywhere (Mosgiel and Milton locally) and they are all now closed – market forces dictated that they were inefficient and buyers didn’t want to pay for our extra costs of processing – even though there would be freight efficiencies shipping processed goods over raw. My prediction, especially since we have seen the sell off of Silver Fern Farms to the Chinese, is that more and more meat processing jobs will be lost and we will go back to the old days of exporting frozen or chilled whole carcasses, which will be processed cheaper in the buyers’ home country than we can do it – or may even be processed at sea en route.
I’m essentially the target market for gigabit fibre to the home – but honestly it’s a bust – there’s no way I can get a gigabit traffic to somewhere other than Dunedin, much less offshore. Fibre-to-the-home (100Mb) is a real boon though (compared with DSL).
I think the big problem we have with losing woolen mills/etc is that we let them end up being owned by someone outside Dunedin – it’s why Cadburys is closing, its why F&P left – if we want new industries they’re not going to be made by companies in Auckland, or Australia, or China – they need to be created here, and funded here in Dunedin – that last thing, the money, is a real issue, some places have industrial development funds, even the DCC used to do a bit of this, before funding the stadium took over all its cash. We do really need some sort of Dunedin investment fund, maybe even a bank that locals can invest in to keep our money invested in our community
It does seem to be the natural life cycle of our successful NZ companies that they’re a bit like our successful children, they grow up and leave (or get bought and moved away) – it means they’re not a stable thing – just like kids we need to be continually making new ones to replace the ones that go.
That’s a nice thought Paul and in a perfect world it would happen. A local bank run ‘not for profit’ where locals could invest spare funds and money would be available as start up capital for local businesses. A lot of people might even accept a lower interest rate if they knew their money was being used for this purpose. But without sounding negative or disrespectful (I am neither of these), I fear it is all a bit ‘pie in the sky’. There would be huge expenses running a bank and what about all the business failures – the stats on the survival of new ventures makes sobering reading.
But yes, produced locally and purchased locally for the benefit of all – that is a great idea. A bit like the farmers market – people like to support local producers. Here’s an idea – we trademark a golden ‘O’ symbol (for Otago) and if you make products in Otago and meet the criteria, you could use the ‘O’ stickers on your products for sale so local people could make an instant choice to support local when they shop.
That might be a first for NZ – and I won’t even charge for the idea!!!
Councillor don’t tell us –
“We” don’t know. “We” (ugh) elected Dave and he doesn’t know that Dunedin isn’t the arse-end of the universe for manufacturing.
“I” didn’t vote for Dave and I already knew he talks what-the-French-tourist-did-in-the-gutter.
However enough people clearly perceived him as competent, reliable and trustworthy enough to re-elect him Dunedin’s mayor. He listens to other people and takes on their messages in what one can only describe as random choice, eg Jim Flynn’s sea level rise message, unrelated to observable facts. Perhaps he will find himself able to take on board the message of someone who was elected by the same population base as elected him.
Or not. With Dave all bets are off.
Personally, I think that Paul Campbell makes a number of reasonable points as to where to target manufacturing. For example, how many jobs could be created here if swamp kauri really was not exportable except in a fully finished form, and maybe a fully finished means to be supported by the rule that fully finished means finished and sold at retail in NZ. After all it’s a unique and highly finite resource – a bit like fish. Portable nick-nacks will eventually add far more value to a log than tables.
We are lousy at value added to our own products and getting worse – even basic stuff. For example, for professional purposes I check NZ products in UK supermarkets. Late last year I came across a NZ wine display in a major UK supermarket. There were 15 wines in the display. All had NZ symbology and NZ sounding winery names on them. On closer inspection the small print revealed that 11 of these were bogus names attached to wine imported in bulk and bottled and branded in the UK. This is simply a top-end example of a common situation that is getting worse. You don’t have to be a rocket scientist to figure out where most of the profits end up…
Country of origin labelling and tracing to the maker through apps will turn some of this (parallel imports etc) around before long. And hey, if it’s drinkable….. meanwhile NZ is working on app development across a number of product lines. Terra (vitae)…….lower case.
A local bank is not necessarily an expensive exercise.
Affiliation with and utilising the platforms of the Bendigo bank network in Australia would lead to considerable savings.
A number of citizens investigated this some 5-8 years ago.
What it needs is the will of Dunedin citizens to support such a desirable alternative bank.
And what was the outcome of the investigation 5-8 years ago? Nothing came of it so it must’t have been a runner. It sounds easy but in reality I don’t know where you would start on such a project.
Interesting how everything goes full circle. Years ago when I was a boy we had the Otago Savings Bank – all the regional banks got gobbled up in the name of efficiency and now we are talking about starting a local bank again.
I guess it was the same thinking behind Kiwi Bank – owned in NZ for NZ’ers benefit. Despite all the ‘warm fuzzies’ I don’t think it has made much of an impact on the major banks.
I don’t think “impact on the major banks” is what’s important here. The point of a local bank is to have an impact on local people and the local community by keeping local money at home. If a Dunedin bank made no difference to Aucklanders – well so what. Important things are would it keep our own savings safe and would profits be returned to our community?
Don’t get me wrong – I didn’t mean that having an impact on the major banks wasn’t important. I was just making the point that the whole ‘kiwi bank’ idea didn’t get a massive groundswell of patriotism that maybe they thought it would. Similarly, a local Otago bank might seem a great idea to you and me, but the masses might not be so excited by it.
For what it’s worth I enclose my submission to the DCC on the LTFP hearings of a few years ago. Needless to say it went off like a ‘lead balloon’, nothing was the outcome. It is conceded that it was only a starter that if there was sufficient coherent thought around the table then it might have grown. We all know the result.
Proposal for Consideration by the LTAP Consultation Process
Submitted by: Calvin Oaten
During the Christmas hiatus, I spent time with local business people and a former councillor, discussing the parlous financial state of the DCC and DCHL conglomerate. We decided to investigate the Community Bank model currently being successfully implemented overseas and, after some deliberation and further research, I now would put forward what I think is a viable proposal. I trust that it will be given due consideration, and not casually disregarded without proper discussion or consultation.
It is proposed that the DCC set up a trading bank, known as the “Dunedin Citizens Bank” or “Dunedin Community Bank” – hereafter known as ‘the bank’. This would be structured as a stand alone operation, fully chartered and bound by a constitution. It would be founded along fiscally prudent and comparatively conservative lines, and the constitution would enshrine that.
The Constitution would state that:
1. The bank would remain totally and utterly independent from the DCC, DCHL, ORC, or any other Local Authority entity; with no management or direction being under any outside influence.
2. No person in its employ in any managerial or directorial capacity shall have any personal or business connection with, nor influence over, any of the DCC councillors, staff and administration, nor with the Dunedin City Holdings Group of companies.
3. With regard to the practice of ‘fractional reserve creation of credit’ – a conservative ratio of not less than 20% (twenty per cent) to be held as deposits / collateral as a minimum tangible level, and the fractional reserve ratio is never to be exceeded.
4. Further, whatever amount of capital is committed to the fractional credit creation, an additional 10% (ten per cent) shall be held as physical gold bullion as a hedge reserve. As the amount varies up or down, so shall the bullion be adjusted. If the spot price of gold were to lower then more shall be purchased to restore parity. Conversely if the price should rise then the appropriate portion may be converted to cash or conserved as an added reserve. This would in effect balance the effects of inflation.
The bank’s main function would be to handle all cash flow transactions of both the DCC and DCHL, under normal banking terms. In return the bank would undertake to fund the DCC and DCHL term debts on the terms most favourable within the bank’s constitutional framework.
Now, on the assumption that the present consolidated debt is rounded down to $600 million (for the sake of mathematical clarity) and is currently attracting interest at 5% pa this requires the parties to pay pro rata $30ml pa interest only. If, on the other hand the bank was to assume this debt, and if it was to abide by its own conditions of 20% fractional lending ratio it would be required to hold the equivalent of $120 million. Plus the bullion hedge of $12m for a total of $132m. Add a contingency cash float sum of $8m and the capitalisation of ‘the bank’ required would $140m. So how could this be effected?
First, the Waipori Fund cashed up would realise around $70m, and the sale of non strategic properties could easily release another $70m. The Otago Community Trust could possibly be invited to invest. All it would require is the initiative.
Once the bank is set up and running then it could assume the debt by issuing credit to the full actual amount of $620m. If both borrowing parties accepted that they would continue to pay pro rata the $30m pa but because the bank does not have to make substantial profits it could settle for covering of the loan servicing only. The bank’s operational costs and profits would be derived from its general banking services.
Maybe we could look at three options “A”, “B” and “C” as examples: $600m where “A” is based on 2.5% pa whilst “B” is 1.25% pa and “C” is zero% – the balances of the $30m+ pa would be for capital reduction. Based on standard Term Loan amortisation rates we see that the following outcomes could be achieved.
Option “A” would take 28 years, “B” would take 23 years, and “C” 20 years, to discharge fully. Obviously, this is only an example of the possible. In reality, the Group’s credit accommodation requirements would vary from time to time as needs were identified. But the general thrust would be towards debt reduction by disciplined governance.
A monumental change to the two groups’ budgets. The conservative ratios of credit creation would imply more discipline required on the part of the DCC, but in the case of DCHL if the bank is unable to meet its immediate needs then, as independent traders they would be free to seek accommodation elsewhere at whatever rates are going. In the case of the DCC, its budgeting would need to become more circumspect and possibly include the deferment of projects. As it is at present, all budgets over recent times have been of the “Spend, Extend, Defend and Pretend” model. This, in effect, is “Spend” it now, “Extend” either the time or the debt, “Defend” the actions, then “Pretend” that all is under control; while the citizens suffer rates and charges escalating way beyond inflation. Not a good recipe for sustained economic or community growth, nor maintenance of the city’s general wellbeing.
Benefits: First and foremost, the bank being community owned would not be required to be profit driven as is the case with the current traditional banks, owned by universal shareholders. Instead, the bank would be in the position of first deciding what is in the best interests of the citizens when assessing its credit dispensing decisions. So, instead of exporting vast sums of interest monies out of the city via the largely overseas owned banks, this interest money would remain in the city’s ‘money churn’. The ability to fund debt at more competitive rates would be due to the shareholders (the ratepayers) getting rates and charges benefits in lieu of dividends.
If, after a period of bedding in, I see no reason why the bank ought not offer normal banking services to local businesses and the citizens. The only stipulation would be that they are Dunedin owned businesses and that they maintain their headquarters in Dunedin. Outside domiciled businesses would not qualify. House mortgages could become available to citizens provided the property concerned was within the city limits.
Who knows what this would do to the city over the next forty or fifty years?
Worth considering? I think so, if the council really wants to progress. I thank you for the opportunity to submit this proposal
Further to my deliberations, I would like to point out that the success or failure of the ‘Community Bank’ scenario would be wholly dependent upon the elected officers and the administration adopting a more conservative approach towards capital expenditure. We have seen over recent times an explosion of development of projects, all funded purely with debt. Sufficient that in the space of ten years the DCC core debt has expanded from $36m to some $360m. Of those projects three alone accounted for some $270m, notwithstanding a constant shuffling between the core and consolidated accounts, which in itself has reached around $623m.
As an example of what I mean by more conservative ‘Spending”, take the case of the Town Hall [Redevelopment Project]. This started at a projection of some $14m, then $18.5m to $36m, finishing at around $50m. At that figure it was signed off on the recommendation of [a] senior manager based on the findings of an independent consultant’s report (Horwath) which brought forward several options. The one chosen was on the assumption of, at conclusion of [the redevelopment] there would be, in 2015, 36 major conferences. This in itself was an increase of 20 over the last year before closure 2008 when there was 16 events. Even if the 36 was achieved the report showed an assessment of revenue over expenditure with a meagre return before depreciation and debt servicing, allowing for those factors arrived at a deficit of some $4.2m pa.
Now what I mean by saying it was reckless to commit at that time, is to compare with the prudent councils of yesteryear. It is common knowledge that the original auditorium was built and opened in 1929 debt free. This was due largely to windfall profits by Dunedin Tramways from the very successful 1925-27 exhibition staged on reclaimed Logan Park. What is not generally known, or published, is that the original concept of the Town Hall was mooted in 1876. Fully fifty years before approval. Always it was the option of councils that it was an unaffordable item. Now I understand that times have changed but the notion of responsible financial decisions should never be underrated. It is that casual attitude which has brought us to the state the city is now in. Parlous to say the least.
If there is not a change of approach to the guidance of this city’s fiscal prudence then no banking system will be able to compensate.
I make these claims without prejudice and remain, Calvin Oaten
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{Lightly edited for consistency. The material variously appears elsewhere times at the website; this is the last version for publication by What if? Dunedin. -Eds}
I think this is a great way keep the money that’s streaming out of our local economy every year to fund the various DCC debts … but it does kind of have a different purpose from what I was proposing which was to keep Dunedin people’s investments in the community – not only do we need to find a way to provide seed and working capital to encourage new Dunedin businesses we also need a way to keep the profits from those companies that are successful in our local economy, if they’re going into the hands of local people there will be more incentive for companies to stay.
I also think Kiwisaver is a long term threat to our local economy, not because I think Kiwisaver is bad per-se (I don’t), but because Kiwsaver funds are largely run out of Auckland, they’re far less likely to invest in Dunedin companies simply because the people who run them wont be socialise with the people likely to be starting companies in Dunedin, frankly from Auckland we’re irrelevant which is why we have to do this stuff ourselves. A Dunedin development bank would also run a Kiwsaver scheme that invests in Dunedin (along with other places) to build an appropriately diverse fund suitable for people saving for their retirements (so longer term, more stable sorts of investments).
You will notice Paul, that I stipulate that all businesses be Dunedin owned and likewise eventually to domestic mortgages. All in Dunedin, owned by Dunedin citizens. Full stop.
Yes and yes, to Calvin and Paul. We should never have allowed control of our banks to move that far away from the people who use them. Merger after merger, it’s like Cadbury with its social conscience >>>>> till it turned into Mondelez, step by step reducing quality and decency, answerable to nobody, its only point being to provide dividends to the (equally divorced from actual individuals) institutional investors.
Yes but I suspect that if you’re a bank holding all of the DCC’s debt that’s going to dominate you’re business – that’s $600m that’s not going to capitalise new Dunedin businesses – besides I kind of doubt you’re going to find $600m worth of money floating around Dunedin anyway. If everyone who could in Dunedin kicked in $20k – let’s say 1/4 of us, 30k – that’s $600m – I honestly don’t think that’s possible
But we don’t need $600m to capitalise new businesses in Dunedin, maybe (lots of handwaving here) $1m a year for new businesses and $5m to help successful businesses grow – done right, the bank gets its money back from each investment plus a profit after 5 years or so – so that’s $6m a year for 5 years – so a $30m total investment fund – so all you need is that 30k of us to kick in $200 a year for 5 years (or 6k of us to kick in $1000) which I think is doable.
Calvin, “1. The bank would remain totally and utterly independent from the DCC, DCHL, ORC, or any other Local Authority entity; with no management or direction being under any outside influence.”
There is in today’s ODT an obituary of an accountant
(cue groans and cried of “boring!”)
whose combination of integrity and imagination and breadth of vision were beyond wonderful for Dunedin.
Murray George Bell administered Healthcare Otago Charitable Trust keeping grubby grabby fingers out of the cookie jar.
“Friend and colleague Dr Brian McMahon recalls a superb organiser who sagely invested local funds, ensuring they were kept safe through the upheaval of the reforms. ‘Each of those organisations would just love to have got their hands on those trust funds, he said, referring to various entities that came and went.'” (ODT Saturday March 19 2017)
Having thought about this when I went for a run, all this discussion about a local bank to fund local start up businesses, assumes that a lack of capital is what is holding Dunedin back. Do you know of anyone that had a good idea and was going to start a business but couldn’t because they couldn’t get a bank to lend them money? I don’t. I would say that at the present point in time capital is fairly freely available and cheap. If a bank turns someone down, maybe it is for good reason and they are actually doing them a favour!!
What we need is people with ideas and willing to have a crack, ideas that would be viable and employ 20 people. I don’t think getting capital would be a problem. Where the bank’s profit goes and who owns it is irrelevant.
Paul, once again you are missing the point. The bank would be capitalised by the sale of the Waipori Fund = $70m plus the sale of properties = $70m Total $140m. That’s it. The bank being a licensed institution can create credit by “fiat”, that’s what all banks do, even nowadays to a level of close to 95% or 100% of capital equity. I say this bank should limit to 20% of capital which gives the ability to create $623 million. It’s called the “fractional reserve creation of credit” and is the daily right of all registered banks, the only restriction is the reserve ratio relative to the capital lodged. An eminently feasible exercise in this instance if there was only the intellect around the table to make the decisions to proceed.
I’m not sure it quite works that way – when you start the bank and receive the $72m you don’t suddenly have $600m to pay off the banks that currently hold the DCC’s debt. Fractional reserve means that you have to keep a portion of the deposits (in this case $72m, 20% so $14.4m) on hand, and are free to loan out the rest (or invest it) – $57.6m in this case, not $600m.
Yes there is a money supply multiplier factor in a fractional reserve system, but only if you reinvest the money in another fractional reserve bank, not if you SPEND the money, to buy debt for example.
Paul, again you are not reading my message. I agree $72m is insufficient, but $140m is. The concept of ‘fractional reserve’ creation, is if based on twenty per cent being the capital, then $600m is covered by just $120m, leaving the balance of $20m for general purposes.
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{Note ml stands for millilitre (liquid measure); What if? accepts m or M for million (dollar value) – or m for metre (linear distance), depending on context. -Eds}
One billion dollars is the estimated cost of building light rail from the Auckland CBD down Dominion Rd to Mt Roskill and on to the airport.
Bingo!
One billion dollars for DCC to fund the upgrade of its Otago power network, as degraded by council-owned companies Aurora/Delta/DCHL.
Sadly Calvin, the major problem with this idea is the good old boys/girls. All they would see here is an additional revenue stream of other people’s money to go along with and replace the other ones that they have already pillaged.
As a consequence all their formidable capabilities and networks in this area would be bent towards capturing it, and securing those revenue streams for their own purposes. These efforts would commence on the day that they realised that its foundation was actually going to happen so that their people could be placed at the top right at the outset, and the correct rules and procedures (for them) incorporated from the outset.
They would succeed. No amount of filtering or safeguards would succeed beyond delaying that process of infiltration for anything other than a very short period of time, and in the end might be counterproductive as these safeguards would then form a screen of pseudo security behind which the stripping could be continued by the infiltrators without interference. While I had my differences with Richard Walls, I do not think that he would have conceived how his creation has eventually turned out.
So you could save in this bank Calvin, and your savings would indeed be used to fund a comfortable retirement in Wanaka – Just not yours.
The sad fact is that when the elite in a society fully morally rots out, then no individual administrator or legal system however ruthless can counter the process of collapse. The Roman Emperor Diocletian was just such a man. So feared that he was the only emperor ever to voluntarily retire alive – but his aims and the legal systems that he devised to support them did not survive him for long.
His system was swiftly destroyed by his eventual successor the Emperor Constantine who replaced it with a system of moral and behavioural conformity that was far more vicious than Diocletian ever conceived – organised state supported Christianity. The Council of Nicaea, summoned by Constantine tuned it up for the task, supported by a good lashing of repression and murder, and Constantine did a good job. It would be a more than a thousand years before Martin Luther mounted a successful internal challenge to it – by which time it has become even more morally rotten than anything that Diocletian had to deal with.
We face a similar situation today, and maybe eventually a similar solution to that imposed by Constantine.
Bring on the Barbarians! As you say Rob, there’s the few at the top, then there’s the rest. But if by some remote chance there was the nucleus of decency somewhere within the building then I believe it could work, and work well for Dunedin citizens. That is my reason for proposing it in the first place. It is also the reason I suggest it has to be totally set aside from council’s controls and be run by ‘honest bankers’ (assuming there’s such an animal) and left to work the best for the people. But then, would the council and DCHL support it or snub it. That needs to be set in concrete, which again needs honesty in the ‘praetorian guard’ doesn’t it? Perhaps we need a Constantine.