Wednesday, 11 July 2012

Kiwisaver Con

Are the asset sales necessary to suck up money being taken from working kiwi’s through the Kiwisaver scheme to fund their retirement? 

It seems so because Stephen Joyce thinks supporting our capital markets is more important than retaining state ownership of our power companies.

It seems most unusual that a Minister of the Crown would consider that supporting capital markets a key responsibility of government and the provision of energy infrastructure a key responsibility of investment markets.

"I don't believe the government's going to back down on that at all," Mr Joyce said on TV One's Q+A programme on Sunday.

He said the role the policy would have in strengthening New Zealand's capital markets had not been discussed enough.

"Now, the New Zealand capital markets actually historically, certainly over the last 10 years, have performed very poorly relative to the rest of the world, and that's because there's been some breaches of faith historically."

The sale of stakes in the energy companies would be an opportunity to list strong companies.

"That's an opportunity to actually strengthen the capital markets and get more kiwis interested," Mr Joyce said.
No backdown on asset sales, says Joyce NZ NewswireUpdated June 24, 2012, 2:13 pm

It is interesting to note that Mr Joyce comments that “there have been some breaches of faith historically” with reference to the capital markets not always acting honestly. Not only is this a profound understatement but Mr Joyce now expects this den of thieves to be trusted with these assets.

Power companies are nothing less than a pipeline straight to the wallet of every kiwi.  It is easier to avoid paying tax than it is to avoid paying the power bill. 

And this turkey also intends to rely on the Electricity Commission to regulate the “electricity market” which is about as useless a guard dog as any burglar could wish for.


Bill English also openly acknowledges on his National Party Webpage that the asset sales are simply another way of putting your savings in the share market's pocket at your expense.

As well as reducing the Government's debt, the mixed ownership companies will also provide New Zealanders with another investment option for their large and growing pool of savings.

In fact, New Zealanders are telling us they're hungry for other options as they look to diversify their investments away from highly-leveraged property and finance companies.

Kiwi investors have about $100 billion sitting in term deposits. And there are tens of billions of dollars invested by other New Zealand investors from KiwiSaver providers to the NZ Super Fund, ACC, Government Superannuation Fund.  
A mixed ownership model for state assets by Hon Bill English, Finance15 February 2012

Why Bill is so keen to give your assets to the share market?

The reason is that the quantity of money flowing into the capital markets from enforced savings is artificially inflating the value of the whole share market. Bill has acknowledged that in recent press comments. Bill needs more assets to be put in the market to soak up the enforced transfer of your cash in the form of your household savings plus your Kiwi Saver investments and ACC into the share market. You then pay the profit on these investments through your power bills. 

This is the circular idiocy that is Kiwisaver.

Kiwisaver and other retirement saving schemes are at the root of why the investment markets are so unstable and dishonest. The money is going into the share market because investment funds need to put the money somewhere and there are few other options that can absorb the vast volume of cash that these enforced schemes introduce to the market each year.

When there is no increase in the scale of the market – when new assets are not being created - but there is a constant inflow of cash, then there can only be an inflationary response in asset values.

The retirement fund managers also play the market as they attempt to generate decent returns and this reinforces the speculative behaviour. The investment advisors working for these firms are also not putting their own money at risk so they have no moral balance to their investment decisions. All they are interested in is producing paper returns on assets and so they play bidding wars with their fellows.

In effect what Silly Bill and even Sillier Steve are doing is using your hard earned spare cash to subsidise the very destructive behaviour that has brought the world to the precipice of a financial disaster.

Bill is old enough and rural enough to remember when farming was subsidised and the wreckage that happened when that distortion was corrected. He doesn’t seemed to have learned anything from that experience. Subsidising farming at least produced salable goods even if at a loss. Subsidised capital investment and subsidised banking just creates a vast and destructive waste.

Right now the best investment is getting rid of debt both private and public. It might have a low rate of return but it has a very high degree of certainty as to outcome.

Debt repayment also has the benefits of avoiding inflation risk. The chances of ever getting the real value of your Kiwisaver money back is slight. History provides good evidence of the erosive risks of both inflationary forces and share market under-performance. The future for both only looks bad in the longer term particularly as your money is, as Stephen Joyce acknowledges, being placed in the hands of thieves and the swindlers.

There is also a demographic issue with Kiwisaver. That issue is the same one that government raises for the impossibility of funding pensions from taxes and that is that there will be too many retirees and not enough taxpayers.

The same effect occurs when there are too many sellers and not enough buyers in the share market. When the bulge of baby boomers seek to withdraw their cash from the market it will collapse for want of buyers. Indeed the wisest long term investment strategy for both retirees and for future taxpayers is to build an essentially debt free society.

We need to be building an investment in the future. Instead we have loaded our children with debt. We have either run the assets we inherited from our parents into the ground or sold them off and we have not prepared ourselves, or our children for the future.

It is not too late to resolve this situation but there is very little time left and the best years for doing this have passed.

And the orthodoxy does not have the answer it just provides more fuel for the problem.


  1. I'm yet to see a good argument that disproves the hypothesis that asset sales are outright theft, under the cover of enabling legislation.

  2. It is far worse than theft AC. The theft bit is just the veneer, it is crass stupidity and unthinking ideology that is used to justify it that is the real crime.