John Key has learned nothing from the Christchurch disaster

 

I was struck to read this comment by the Prime Minister in the wake of the Kaikoura quakes:

Key said it was important to show the international community that New Zealand was well equipped to withstand earthquakes and cope with the aftermath.
    "We need to make sure those people … say as terrible as it was, the New Zealanders were brilliant. And that was the experience out of Christchurch."

Frankly, my jaw dropped. That looks as if he’s learned nothing from the experience out of Christchurch. From day one, when brilliant New Zealanders were banned even from rescuing people from the rubble, they have been shut out. From that, this Prime Minister has watched but, evidently, learned nothing

Nothing at all about having locked brilliant New Zealanders, by armed force, out of their own businesses and their central city for years; nothing from the hydra-headed debacle of EQC; nothing at all from how in refusing to tear up their pre-quake plans town planners did their best to shackle the rebuilding that was going on; nothing whatsoever from the lesson never learned that central planning a city actually delivers (and has delivered) the very uncertainty that ‘planning’ was intended to avoid. (The tale of Joplin holds in capsule form the lesson neither learned nor understood by the PM.)

So it looks as if he’s learned nothing at all from the experience out of the Christchurch earthquake how government both central and local has hindered rather than helped the recovery of what was New Zealand’s second-biggest city. So I fear the worst for those seeking to recover from this one.

.

So, is there any reason EQC shouldn’t shut up shop?

EQC is bankrupt.

There, someone had to say it.

EQC is not some benevolent organisation with bags of money ready to swoop down at times of need to dispense capital. It is an organisation with no capital at all that is just a roadblock to those trying to rebuild after disaster.

Even before the Christchurch earthquake, the Earthquake Commission was skating on thin financial ice. Set up by government after the Napier earthquake to pay for earthquake damage out of government savings, rather than by taxing or borrowing, by the time the ground shook under Canterbury the ambition had been reduced to paying only for the first $100,000 of damage per home (setting up a another layer of confusion through which crippled home-owners have to leap before being able to get their real insurance payout) and its coffers had been so reduced that the EQC had only around $1.5 billion of real assets to call on.

Because it turned out that when the earthquake hit and the spotlight turned on this erstwhile small and dusty corner of the bureaucracy, instead of building up the Natural Disaster Fund, governments had been quietly pilfering from the EQC’s jam jar, leaving behind only little bits of paper IOUs. IOUs payable by you and I.

And after the Christchurch disaster, every real asset in the Fund is now gone. The Fund is done. Finished. Empty. Over. The Prime Minister admitted as much yesterday, saying

We know that the EQC fund really has nothing in it from the last, from memory, time I looked at it. But
in essence the Government just backs that up.

See what I mean? The EQC fund has nothing in it … in essence you and I (from whom, in the end,  the Government gets all its dosh) just back it up.

Or to put it in its simplest terms, it’s just a Ponzi scheme that you and I are required to pay into.  A bankrupt bureaucracy, an empty tin, that times of need isn’t there with the necessaries—instead it sends around folk hired to hold a clipboard and with the job to say “No.”

So what is it really there for?

And is there any good reason it shouldn’t be closed down forthwith.  Before we have another real natural disaster in which people have to rely on this buggered and bankrupt bureaucracy .

Question for the day: On the EQC

Given that both the Blue Team and Red Team were respectively defending the Earthquake Commission last night and and promising to give it even more money, here’s the question I’d like you to ponder today:

Is there any good reason for the Earthquake Commission to exist?

Here’s a few things about that question to consider:

• prior to the earthquakes, the EQC was sold as the virtual investment arm of God, with an unlimited pot of money just waiting to repair everything; post-earthquakes however it turned out the pot was virtually empty, and what it mostly contained was government bonds, i.e., billions of dollars of IOUs payable by the taxpayer.
• prior to the prior to the earthquakes, the EQC was sold as being the first port of call in an earthquake with the money to bail out home-owners. What people only realised after the earthquakes however (and quite why it took so long to figure it out, I don’t know), was that $100,000 doesn’t go very far these days.  And that waiting for it from a government department takes forever.
• prior to the earthquakes, the EQC was sold as being well resourced and efficient; post-earthquake however it was discovered that EQC had to actually employ people to do the jobs of assessing and paying out on claims—jobs other insurance companies were already fully staffed to do.  From whence did EQC pull all their new employees to duplicate what other insurance companies were doing? From either those same insurance companies (denuding them of their own trained staff, and slowing down their work) or from the ranks of the illiterate and the innumerate (which explains the content of so many of EQC’s assessments).
• prior to the earthquake, home-owners might have thought the $100,000 payout from EQC  would have been a supplement to their main insurance payout. Little did they know however that they would have to wait for the their main insurance payout until some time after the EQC had got around to deciding whether or not they would get one, and how much (if any). Which has meant months and months and months of delays, and tonnes and tonnes of paper as EQC proves once again that if you want delays and obstructions, then give your task to a bureaucracy.

So with that preamble, what do you think?

Is there any good reason for the Earthquake Commission to exist?

Yes, or no?

Fran O’Sullivan jumps Bernard Hickey’s shark

Every taxi driver, barber and newspaper columnist is the same.

They know how the world works. They know what needs to be done to fix things.  They know, uniquely, what has to happen, and all they need is is big bossy gummint to give them the big stick!

Fran O’Sullivan is no different.

Staring at Christchurch and seeing only months of inactivity brought about by government meddling both central and local (waiting for EQC to sign off houses, builders and buildings; waiting for CERA o demolish what’s left of people’s property in the central city; waiting for council to release its “strategy” for what property owners in the city might be allowed to do;  waiting for government to decide what regulations it might issue mandating how they might be allowed to do it;  waiting (vainly, I might add) to see if council’s District Plan might be relaxed to allow businesses to relocate to new office buildings in different parts of the city, and new housing to be built in places the planners never contemplated) Fran doesn’t draw the obvious conclusion that making the country’s second-largest city a ward of the state is neither sustainable nor affordable.

Instead, she leaps for the same big stick beloved of blowhards everywhere: the gummint must do something! (As if it weren’t already doing enough!)

Fran has a plan. It’s not very complicated, or even very well thought out. Specifically, Fran demands the government:

• nationalise all the private land on the outskirts of Christchurch (i.e,, completing the job CERA have already largely done in the CBD);
• build houses on it (because the government does this so well); and
• raid the pocketbooks of everyone in the country able to afford a Rugby World Cup ticket to pay for it.

Simple as that. A plan that every barber, every taxi driver--every blowhard and Bernard Hickey in the country--could agree with and call their own.

Fran O’Sullivan is a business columnist.

But she has no idea, apparently, how business works. She doesn’t realise that regime uncertainty and a loss of property rights between them have barred businesses from doing what they do best.

Fran O’Sullivan writes about politics.

But she has no idea, apparently, that making the city a ward of the state has caused the very malaise she decries.

It can be undone, but not by making the state’s interference even bigger. It can be done very simply: by letting businessmen themselves rebuild the city businessmen created.

Tell business owners they can relocate wherever in Christchurch they want, and that zoning will be relaxed to accommodate that, and watch businesses start to take off again.

Tell owners of stable land that they can build as many houses on their land as they can provide services for, with neither costs to nor charges from council, and watch a festival of house-building take off.

Let those who own their own property determine between them and their insurance company what they wish their building standards to be. Such a system can be set up very quickly as it already exists in government reports. And then watch the festival start producing innovative affordable homes.

Bus Bob Parker, Gerry Brownlee, Roger Sutton and all the town planners--and Fran O’Sullivan--out of Christchurch permanently, get the hell out of the way, and allow the city and the people within it to reinvent itself spontaneously. This would be a wonder to see.  Call it spontaneous order, if you will, since that’s what you’re trying to kick off. Call it crowd-sourcing, if you like, since that’s what markets and entrepreneurial activity like this are really made of.

In fact, call it an Enterprise Zone and allow some enterprise to happen in the city for the first time in nearly a year.

Make it an Enterprise Zone instead of a Ward of the State, get government out of the way (and provide land-owners and businesses some certainty they’ll stay there), and can I assure you you’ll be surprised what might happen. 

Even Fran might be.

Because Fran O’Sullivan is a business columnist. Or was.

John Boy channels Marx [update 2]

“The ideas of economists and political philosophers, both when they are right and when they
are wrong, are more powerful than is commonly understood. Indeed the world is ruled
by little else. Practical men, who believe themselves to be quite exempt from any
intellectual influence, are usually the slaves of some defunct economist…”
-John Maynard Keynes

I’ve never quite understood why the Prime Minister, John Boy Key, is considered some sort of economic guru.  I’ve seen no evidence of it, despite his obvious predilection to meddle as if he knows what’s going on.

He’s certainly got no handle at all on what to do in the present crisis—allowing his deputy to keep borrowing and spending as the economy collapses and NZ’s second-largest city is allowed to die. (He was happy for example to boast about how flush EQC was straight after the quakes, $15 billion of good assets he said; turns out it only has $6 billion, and most of those in the form of IOUs from the government.)

Even in his supposed area of expertise for example, currency trading, I can remember him telling a business journo a while back that the New Zealand dollar would soon decline and “have a four in front of it” in relation to the US dollar—whereupon almost it began its climb to where it now has double that number against the American.

And yesterday he reinforced his credentials as a chap with about as few economic clues as that last big-time economic meddler, Robert Muldoon. Speaking to Newstalk ZB’s Mike Hosking about the minimum wage—the existence of which has driven an explosion in youth unemployment all round the world, not least in NZ—Smile and Wave told Hosking “cutting the minimum wage rate to what the market can bear would lead to some very low wage rates in New Zealand.”

"It's the classic neo-liberal [sic] economic theory that you pay what the market can bear, and I think you would see very low wage rates on that basis," Key said on Newstalk ZB when asked about his view on the ACT Policy.
"You would definitely see some companies that would say, well ok, I'll hire you at two bucks an hour," Key said.

This is ignorant on at least three fronts.

First, this is not “neo-liberal” economic theory, whatever that actually means. (I’ve only ever heard the term used by people forced to study under Jane Kelsey.) It is economic theory reinforced (as all good theory must be) by economic fact: Price things above what people are willing and able to pay for them, and you won’t sell as many as if you lower your price; and when you have a whole lot of things left on your shelf that you simply can’t sell, only a moron (or a Prime Minister) would raise the price.

Second, does he really think that NZ labour is so bad that two dollars per hour is all they’re worth? And if he does, how does he think producers manage to make any profit at all when they have to pay them six times that amount? [What an idiot!]

Third, and most fundamentally, this just flat-out Marxist nonsense. Yes, Marxist. The idea that in the absence of legislation saying otherwise, employers can gleefully exploit workers by paying them whatever they feel like, right down to the level they need to just stay barely alive—i.e., the Exploitation Theory of Wages—was widely promoted by Marx and his followers, even as it was being soundly debunked before that century was even out by that great economist Eugen von Bohm-Bawerk and his [see here and here].

Since the exploitation theory “is one of the most powerful factors that have been operating to lead the world down The Road to Serfdom” it is worse than disappointing to see a Prime Minister lauded (for some reason) for his economic intelligence peddling this particular poison pill.

Especially so since it is so easily debunked, as George Reisman does here in explaining the irrelevance of both worker need and employer greed in setting wages: essentially “the payment of higher wages in the face of a labor shortage is to the self-interest of employers because it is the necessary means of gaining and keeping the labor they want to employ.”

The Marxian doctrine of the alleged arbitrary power of employers over wages appears plausible because there are two obvious facts that it relies on, facts which do not actually support it, but which appear to support it. These facts can be described as “worker need” and “employer greed.” The average worker must work in order to live, and he must find work fairly quickly, because his savings cannot sustain him for long. And if necessary—if he had no alternative—he would be willing to work for as little as minimum physical subsistence. At the same time, self-interest makes employers, like any other buyers, prefer to pay less rather than more—to pay lower wages rather than higher wages.
    People put these two facts together and conclude that if employers were free, wages would be driven down by the force of the employers’ self-interest—as though by a giant plunger pushing down in an empty cylinder—and that no resistance to the fall in wages would be encountered until the point of minimum subsistence was reached. At that point, it is held, workers would refuse to work because starvation without the strain of labor would be preferable to starvation with the strain of labor.
    What must be realized is that while it is true that workers would be willing to work for minimum subsistence if necessary, and that self-interest makes employers prefer to pay less rather than more, both of these facts are irrelevant to the wages the workers actually have to accept in the labor market…

Read on here for the economic lesson that Smile and Wave never got. And then, in the name of every young person out of work and struggling to gain employment at the rates that have been set for them by the ignorance of this Prime Minister, send him a copy.

UPDATE: Eric Crampton runs the rule here and here over the economic facts regarding youngsters being priced out of work—and says:

While we're talking youth unemployment, I'm going to be charitable and interpret John Key's assertion that, in the absence of minimum wages, youth pay rates would drop to a couple of dollars an hour as his just opening up room on the right for ACT. Employers do have to compete with each other for employees.

Indeed.

UPDATE 2: Since we’re talking about morons and the minimum wage, check out the shill for big government Obama’s just appointed as Chairman of his Council of Economics Advisor—a man who made his name faking minimum wage research.

No wonder the union bloggers at the Sub-Standard here in NZ like him.

Hurricanes, broken windows, and the EQC

We have it reconfirmed this morning, as if we needed reconfirmation, that earthquakes, hurricanes, tsunamis and other natural disasters are not good for economies, or for people.

First of all, we’re now told (nearly a year after the fist quake, that’s how “fast” these people move) that the liability of the Earthquake Commissionalone after the Christchurch Earthquakes has now more than doubled to $7.1 billion.  Not bad when the EQC has only around $1.5 billion of real assets to call on. The rest of the bill rests on you and me and every other taxpayer—calling into question the reason for this blundering bureaucracy to even exist.

And second, after the damage caused by Hurricane Irene we’re starting to see the realisation spread that destruction really isn’t good at all. Jeff Jacoby, for example, writes in the Boston Globe that Disaster isn't a stimulus package, even though mainstream economics still teaches that it is:

Consider the massive earthquake and tsunami that devastated Japan earlier this year -- a catastrophe that killed more than 22,000 people, caused the worst nuclear crisis since Chernobyl, and pitched the already sagging Japanese economy into recession. Three days after disaster struck, the Huffington Post published California intellectual Nathan Gardels's essay celebrating "The Silver Lining of Japan's Quake." Urging his readers to "look past the devastation," he rejoiced that "the need to rebuild a large swath of Japan will create huge opportunities for domestic economic growth" and observed that "Mother Nature has accomplished what fiscal policy and the central bank could not." …     "The result of all the new wealth creation," Gardels concluded, "will be money in the pockets of Japanese."
    Japanese who survived, that is. The tens of thousands who died won't be pocketing any new wealth… True, trillions of yen will be spent to repair, rebuild, and restore. But equally true is that all those trillions will no longer be available for everything they would have otherwise been spent on…
    Yet the conviction that devastation is really a boon never seems to go out of fashion.
    "It seems almost in bad taste to talk about dollars and cents after an act of mass murder,"wrote Paul Krugman in The New York Times less than 72 hours after the atrocities of 9/11, but the terrorist attacks could "do some economic good." …    The same was said of Hurricane Katrina, one of the severest calamities in US history. Barely had the storm subsided when J.P. Morgan economist Anthony Chan was assuring CNN/Money that hurricanes tend to stimulate growth…
    In 2007, immense wildfires in southern California consumed more than 1,600 homes, burned 500,000 acres, and forced the largest evacuation in state history. A senseless tragedy? No, a blessing! "This will probably be a stimulus," University of San Diego economist Alan Gin told the Los Angeles Times… [hat tip Jeff Perren]

You can see lots more examples of this rank insanity after the Christchurch earthquakes, including from a Prime Minister who said the destruction would create “tremendous stimulus.”

Where’s that stimulus now, Prime Minister?

But as Jacoby points out to these numb nuts, the money and resources spent on fixing the destruction has to come from somewhere.  From capital. Or from savings. And this money he money spent to repair destruction is not bein g used for now the purposes its owners had previously planned. “This  represents a loss of wealth, not an economic gain.”

Astute readers will notice that this is just our old friend the Broken Window Fallacy again. As Jacoby writes,

More than 160 years ago, the French political economist Frederic Bastiat skewered such attitudes in a now-famous parable:

A boy breaks a shopkeeper's window, and everyone who sees it deplores the pointless destruction. Then someone insists that the damage is actually for the good: The six francs it will cost the shopkeeper to replace his window will benefit the glazier, who will consequently have more money to spend on something else. Those six francs will circulate, and the economy will grow.
  The fatal flaw in that thinking,Bastiat wrote, is that it concentrates only on "what is seen" -- the glazier being paid to make a new window. What it ignores is "what is not seen" -- that the shopkeeper, forced to spend six francs repairing damage, has lost the opportunity to spend them on better shoes, a new book, or some other addition to his standard of living. The glazier may be better off, but the shopkeeper isn't -- and neither is society as a whole.
    Broken windows aren't economic stimulus. Hurricanes aren't either. There is no silver lining in useless destruction. Not even if "experts" say otherwise.

UPDATE: Oh, by the way, the government’s deficit is now “expected” to be around 18 billion dollars.  Eighteen billion large ones.  And that’s at present exchange rates, which can change very quickly. And for a country with just one million taxpayers.

Just thought you’d like to know what this “responsible government” is loading onto your shoulders without your say so.

And speaking of economic fallacies, here’s another one on display in Bill English’s announcement of EQC’s increased liability:

The increased liability will have a one-off impact on the Government's books this year. But English said he still expects a return to surplus by 2014-15.

Remember, that expectation is based wholly and solely on a Treasury forecast making some rather heroic (not to say “imaginary”) assumptions about “growth” between now and then. And you know now what shysters economic forecasters are.

If we had a decent opposition, this guy would be being battered about now.

Unfortunately, however, we have an opposition wants to borrow and spend even more…

TANSTAAFL [update 2]

TANSTAAFL: There ain’t no such thing as a free lunch.

You wouldn’t have thought a tragedy like Canterbury’s to be a time for politicking. But then you wouldn’t have been thinking about Chris Trotter or Catherine Delahunty.

Delahunty tweeted last night (Tuesday night) on the events of the day:

A grim day with the horror earthquake and
welfare report came out worse than I ever imagined

Thank goodness the sour old witch was restricted to just 140 characters since, as Liberty Scott points out, it takes a special kind of person to equate the government's welfare report as being equivalent to an earthquake that killed scores of people and left thousands more homeless.

Then there was dear old Chris Trotter, who burst into print less than two hours after the earthquake to inform readers:

The implications for the New Zealand economy are daunting. [Ya think, Chris?]
    Rebuilding Christchurch cannot now be left to the Market’s invisible hand. It will take all our hands, working through the public instruments of our common purpose, to make good this tragedy.

Let me re-read that for you.  “Rebuilding Christchurch cannot now be left to the Market’s invisible hand. It will take all our hands, working through the public instruments of our common purpose…” The “public instruments of our common purpose” being of course Chris’s beloved State, the very visible mailed fist of threats and pocket-picking, which would (if the delightful Mr Trotter had his way) choose “our” purpose for us all.

All Hail the State. (And don’t miss a chance to worship it.)

“The implications for the New Zealand economy are daunting.” They sure are. There ain’t no such thing as a free lunch. Those who perished in this disaster will never and can never be replaced. But there’s a bill of around $16 billion or so to be picked up by someone if Christchurch itself is to fully rebuild. 

If it is.

If people want it to.

If EQC and private insurance is sufficient, and individual savers and investors and wager-earners value its rebuilding enough to want to put their savings and resources towards it.

Because, let’s note, these “public instruments” Mr Trotter wishes so blithely to redistribute are not un-owned, or just lying around waiting to be tapped. They are people’s private property, some of which is already winging its way to Christchurch through the wires of NZ’s private banks; more of which will heading that way in coming days; and much more of which will be heading that way in the longer term voluntarily if Mr Trotter and people like him don’t poison the well.

The “invisible hand” of Mr Trotter’s  nightmares is simply a metaphor for people voluntarily buying and selling, in which process is discovered who values what the most—who is prepared to put their money where their values are, and how much that makes resources worth. 

And contra Trotter, that is the only real place and process in which to discover exactly how much (or maybe how little) the rebuilding of Christchurch is worth to those whose resources he would have taken by force to rebuild it.

Because in the end, it properly comes down not to “common purpose,” but to the same sort of individual choices that built Christchurch in the first place.

How many home-owners will want to use their insurance cheque to fully rebuild?

How many commercial property-owners?

What will the owners of damaged buildings do with their cheques? Will they see reinvestment in the Christchurch CBD as a good proposition for them?

What will those who chose to be uninsured do without theirs—will they see using their savings to reinvest in Christchurch as a good proposition for them?

And based on choices like these, which then is the most important infrastructure to begin building or rebuilding with the insurance cheques incoming to pay for this? 

And which regulations that stop or stall recovery should be relaxed? (This is a National Emergency; if homeless home-owners can’t have regulations relaxed now that make home-building so expensive, then when can they?)

The knee-jerk reflex to look to the State in times like this is not going to pull people through. Looking instead to what people really do value (especially at a time of diminished resources) and allowing those choices to happen just might.

In his piece sent to me for his regular weekly column (with which I conclude) Dr Richard McGrath writes:

It is perhaps timely to remind readers that although it is almost a reflex action to expect assistance from the state when a natural disaster occurs, the proper role of constitutionally limited government is to maintain the rule of law and thus allow agencies trying to assist the displaced and distressed victims of disaster to do their work with minimum interference.
    It is not appropriate for a government to use coercive force in transferring wealth from taxpayers to victims of the earthquake. On the other hand, it is appropriate for people to act out of concern for others to pitch in with their time and money, to whatever degree they wish, to help those affected by yesterday’s earthquake.
    Here is a link to an interesting webpage called ‘Natural Disasters – Destructive Statism Versus the Heroic Free Market.’
    It explores the possibility that:

1. Statism (i.e. government intervention) perpetuates poverty, stifles progress
       and creates unintended consequences);
2. Theft is always wrong, even if it under the pretense of government “aid”;
3. Free market capitalism creates the means and the ability to help others.

There are links to several articles on various websites that discuss the U.S. government’s response to Hurricane Katrina and the tsunami in Asia a few years back. And if you thought John Lott was only interested in guns, he has written a piece on why the free market should be allowed to work even – and especially – in times of disaster, so that limited resources can be allocated to those who need them the most.
    To all those involved in the rescue efforts in Christchurch, thank you for the tremendous work you are doing.

"The only freedom deserving the name, is that of pursuing our own good
in our own way, so long as we do not attempt to deprive others of theirs,
or impede their efforts to obtain it." 
- John Stuart Mill

UPDATE 1: Sadly, Mr John Key is already floating the idea of raising taxes to stifle recovery  make the rebuild too expensive  make taxpayers stump up yet again.  And some people say it’s too early to start shooting down balloons like this.

UPDATE 2: And more nasty politicking in the Trotter/Delahunty vein, this time at The Sub-Standard.

The disaster that is the Earthquake Commission

There’s been debates on this already at both Public Address and Kiwiblog, and probably elsewhere too, but there’s a lot of bullshit being talked about the government department that is the Earthquake Commission (EQC)—mostly about its liabilities after the Christchurch quake and what it calls its assets. Speaking frankly, there’s some numbers that don’t quite stack up, and a real question about why this particular government department even exists.

Christchurch itself has a big bill.  JP Morgan reckons there’ll be around a $4.3 billion bill to put New Zealand’s second-largest city back on its feet, or at least pull it up off its knees, of which Treasury Secretary John Whitehead calculates the government’s Earthquake Commission will have to stump up nearly half—even with their liability amounting to no more than $112,000 ($100k+GST) per house—with reinsurers and taxpayers picking up the balance.  (Nice of the taxpayer, don’t you think?)

Now, the EQC was set up after the war to socialise losses in time of earthquake or war damage. It’s like an ACC for houses: taking risk away from insurance companies and placing it squarely onto this government department. (Nice of the government to assume this liability on your behalf, don’t you think?)  Paid for by a compulsory levy on home insurance. (Nice of the government to take away your choice in the matter, don’t you think?)

So just to summarise: the government decided to assume the risk of earthquake damage, giving you (in your capacity as home-owner and insuree) no choice at all about joining their scheme, and (in your capacity as taxpayer) no choice at all about assuming the risk should the government department’s investments fail to pick up its tab. So, since the scheme is a sunk cost, you really have to hope their appointed bureaucrats would have the smarts to do the job required, wouldn’t you. Wouldn’t you? (Stop laughing at the back.)

Well, you can see just by that $100,000 figure that those bureaucrats are not exactly on top of their game; while there was a time when $100,000 would build you a replacement home (which is what the figure was supposed to cover) that time is very long ago. The grey ones at the EQC haven’t quite caught up with the inflation of the last few decades.

Since it’s had no major payouts since its inception, however, there’s been no major questions about its operations. Until now.  Cometh the disaster, cometh the questions.  Because while the drop in its liability per home means EQC is less exposed than it would be, leaving reinsurers and taxpayers to pick up the tab for which you’re paying your compulsory levies, the EQC will supposedly have built up for itself a large lump to pay for The Big One that everyone and his favourite geologist knew would be coming some time. A lump large enough to pay for this one and the one that might come soon after that, without putting the taxpayer (i.e., you and I) at risk.

So has it?

Well, “not so much.”

John Key told Q+A, and I quote,

the Earthquake Commission has enormous funds, 15 billion dollars, largely invested offshore… [including] about six billion in cash.

So it all looks good, then. The taxpayer won’t be called on. Phew.

Except it hasn’t got $15 billion at all.  Or anything like six billion in cash.  This is is just (what’s the word I’m looking for here?) flat-out bullshit. Because as the EQC’s on Annual Report reveals,

EQC has custody of the Natural Disaster Fund, around $5.6 billion of public money…[and because reinsurance kicks in after the first $1.5b of costs, this gives] an estimated value of up to $8.1 billion before having to call on the Crown Guarantee.

Oops.

Still, that should still cover things, shouldn’t it? We taxpayers are safe?

Except when you read more closely you discover that

approximately 67 percent of EQC’s portfolio is invested in NZ Government Stock and NZ Government inflation-indexed bonds.

And as you’re probably aware, this is where the word “invested” is something of a misnomer. Because NZ Government Stock and NZ Government bonds are nothing more than little bits of fancy printed paper backed by nothing more than … the NZ Government’s ability to tax you and me.

So much for those “enormous funds.” Because when all’s said and done, on the first occasion when it’s drawn on, we discover that the Earthquake Commission has—not $15 billion—not $8 billion—not even $5 billion—but little more than $1.5 billion of actual investments to draw on, the rest of their “assets” consisting only of a promise to make you and I pay.

Nice, huh.

So while the government quietly goes about starting the printing presses to avoid us working out how we’re being fleeced (producing fancy bits of government paper they call cash to back those other fancy bits of paper they call bonds to pay a bill with which you and I should never have been faced), can we please, just as quietly, get rid of this bureaucratic encumbrance (i.e., the EQC) and leave risk and insurance where it belongs—with the insurance industry. Because once they’ve made this pay-out, the EQC is an organisation with no funds, no backing, and no reason to exist. Let the people who do know what they’re doing do it. And stop the grey ones adding an avoidable man-made disaster to an unavoidable natural one.