50 Comments Posted

  1. The problem with any small-scale power system is usually balancing supply and demand, and unless both are already fairly even, this requires storage. Although batteries are an obvious answer, they are – as Janine has already observed – expensive and need replacing all too often. To store power economically requires a cheap – preferably free – medium which is separate from the generating hardware so that the total storage can be increased at relatively little extra cost. Suitable media include elevated water (hydro systems including pumped storage systems), hot rocks (including geothermal systems) and compressed air. Flow batteries can also compete at lower power and energy levels. The common factor is that small systems tend to be prohibitively expensive. Economies of scale mean that these are utility level rather than domestic-sized systems, i.e. part of the grid.

    New Zealand has a wealth of good hydro storgae sites, mostly already taken and mostly in the South Island. However our need for storage is in the North Island, so the solution currently being implemented is a grid upgrade including upgrading the HVDC sustem between Benmore and Hayward to 1400MW. However there is around 3000MW or more of fossil fuelled thermal plant in the North Island to replace so this upgrade won’t be enough to allow all that thermal plant to be retired, even if we had enough renewable generation to meet our total yearly energy needs. Geothermal will help, and will meet a good proportion of the need, but we are still likely to need more dependable power to replace the rest of the thermal stations.

    We may need to consider a second HVDC link.

    We may also need to consider building a gravel battery, probably in Northland or North Auckland. See http://www.ecogeek.org/power-storage/3171-gravel-batteries-offer-a-solution-for-renewable-en.


  2. I see the most attractive uses of solar photovoltaic systems in New Zealand being firstly sites or areas which by necessity are off-grid such as Stewart Island or just mountain-top radio systems. Sites which are grid-connected in general have a lot of extra expense converting the DC solar output into the required synchronised AC required by the grid. Therefore sites which have a steady power demand and which can accept DC power can take the output of the solar arrays with must less fuss and have a natural advantage. These include cell-phone sites, radio repeater stations, telephone exchanges and data processing centres. If the power output of the solar panels does not exceed the continuous power demand of the site, then no power needs to feed into the grid and a whole lot of issues are avoided. Usually these sites have battery-backed equipment that must continue running through a power outage, and the solar panels would also allow this equipment to run longer before the batteries run down or before the generators need to cut in, while the battery system provides a convenient injection point for the DC solar power.

    Using solar power to reduce one’s electricity demand without attempting to feed power back into the grid avoids the whole messy power pricing issue and the compliance costs associated with being a supplier.


  3. No Gerrit. You haven’t read the article closely enough. They have added one wind turbine to the wind farm which they have paid for from borrowed money and are selling ALL the generation into the National Grid, along with the rest of the output of the wind farm. (The revenue from the other turbines goes to the other owner(s) of those turbines.) The revenue goes into paying off the loans and the surplus goes to the community. They then buy whatever power they need from their local supplier. There is no independence from the grid, as they don’t have any storage for when the wind isn’t blowing. I would also guess that the wind turbine’s output is at a much higher voltage than their local distribution lines.

    It is a good system but it isn’t microgeneration and it isn’t separation from the grid.


  4. I like the transition town ideas of energy independence – the biggest hurdle is much less likely to be the RMA or the council, than the community itself. It takes a very long time to get everyone agreeing to such a thing, not a reason not to do it, but a reality of small communities.

  5. Trevor,

    Yep. They can make money while there is a grid to link to. The windfarm is community owned and paid for.

    They have surplus energy to make money from while they can plus have room for community expansion.

    You need to look further then simply raising objections. The small windfarm is a local initiative that enables the community to be independent from the grid (if they so choose to).

    They are getting electricity so cheap (only a 15 year payback period) that if the innitiative was implemented world wide the corporates/state will be far less intrusive into the lives of the all communities.

    I guess what price freedom?

    Interestingly I wonder if a community like Dargaville or Kaitaia were to implement just such an innitiative, how much RMA dificiulties would be placed in front of them?

  6. I think we need a combination of the economy of scale of the grid system and appropriate micro-systems. Having done the complete off-grid thing with its attendant problems of storage (huge batteries and they don’t last forever) and now on the grid, I’m looking at solar that feeds into the grid. Wind would be great for our small local community, but not individual households – our place is too sheltered.

  7. Bio-mass digesters producing methane are a good use of waste bio-mass materials providing the minerals, etc aren’t lost. However the methane produced would be better used as a transport fuel than for cooking, heating or power. If it is used for power generation, it is better used in peaking plants rather than base-load generation.

    Wind, wave, tidal and run-of-river resources are only usable for power generation, and it is easy to use that power for heating, water heating and cooking. Without a major change to our transport fleet (which will take at least a decade), electricity won’t power our transport but at least some of it can be converted to methane (CNG) or can run on ethanol (alcohol).


  8. Another good green reason to keep pressure on for micropower is the resources and energy required to build and maintian a nationwide grid.

    Energy required to mine iron ore, coke, limestone, bauxite, clay, zinc.
    Energy required to create steel, aluminium, ceramic (insulators) and for the galvanising process.
    Energy required to transport and erect.
    Energy required to maintain.

    While some units are large enough to feed whole streets and villages, others are small enough for individual homes. Each community creates its own resource depending upon situation.

    Many coastal villages and small towns decide on local wind power


    Farming communities may band together to create community biodigestors


    There is another powerful argument for doing away with the national grid.

    if you want to fight corporate/state dominance in the lives of the community you must break that power by not feeding it.

    Divest oneself from the reliance on the corporate/state and community self sufficincy and self determination is possible.

    Is that not a Green innitiative?

  9. Systems such as this one
    may be good for countries with high electricity prices and supplies of natural gas. The combined heat and power systems are more efficient overall than separate gas-fired power generation and gas-fired heating systems. However they still need that natural gas and still release CO2. We don’t need to use natural gas for either if we can tap our renewable resources such as wind, wave and tidal.

    Notice the scale of this beast though – 200kW. That is institution-sized not the size needed for a single home. That is why I suggested that bio-mass fired systems could have a place in schools, hospitals and rest homes and the like. The economies of scale favour larger systems than systems that only generate a few kiloWatts.

    Of course smaller systems have a place if you want to go off-grid, or don’t have a choice.


  10. In fairness, loss of a micropower system WOULD be a local event though Trevor. Not so likely to have 30000 go off line at once. Point that you make is valid as the infrastructure cost is larger in total than the cost of the lines. Which is part of the reason we have lines.

    I don’t think there is a “winning” strategy here… both have validity in appropriate circumstances.

  11. Burning waste lubricants and other hydrocarbon fluids just for power generation is a huge waste. Better to keep it for transport fuels or plastics manufacturing, or recycle the lubricants and similar fluids to reuse for their original purpose.


  12. Roofs were lifted off houses and power poles damaged. How many micropower systems would have survived that? Solar panels fixed on top of roofs would have been similarly vulnerable and wind turbines which need to stick up above everything else would have been more vulnerable than the power poles.

    However it would take a lot longer than 24 hours to repair hundreds or thousands of micropower systems.


  13. Micropower has another advantage in terms of resiliency.

    What if we are totally reliant on our grid which we have made really smart and really flexible and



  14. One of the exciting things about local micro-generation is the new solar cells which can be used by households and the resulting power fed back directly into the grid, instead of going to expensive storage. The power company pays a per-unit price for this and it is deducted from the household power bill. Depending on the price offered, this could be more than the bill, so you get a dividend. At the moment, the price is comparable to what the consumer pays, but the about-to-be partially sold power companies say they will lower it.

  15. Trevor,

    Never said that macro power would be replaced for major user.

    What I said was

    The future is in micropower electricity generation (home, street individual business) and it would be advantages to me, as a potential component supplier in that field, to not have corporates involved.

    Did you follow any of the links provided on on the development of micro power?

    How about this link about solar power in very poor areas in India and Africa.


    Feminist will love this as men are considered to be untrainable and too arrogant to be able to implement the initiatives!! Maybe you fit into the untrainable and too arrogant catogory?

    It may well be true that our current retail household electricity use will be unable to be supplied by micropower, we may have to start turn off some applicances.

    One thing I’m convinced about is that micropower will eroded the current retail consumers dependency on the national grid.

    And without the high paying retail consumer, electricity generated for business will increase in price. Those increased electricity prices will enable new generation micropower units to be upscaled to meet commercial requirements.

    Worth a look




    Micro is not dependent on wind or solar, any liquid (wast lubricant) or sold fuel (waste wood) can be used to run a turbine.

    It would be possible in the future to see a combination solar, wind, gas turbine unit, with computerised control to select the most economical power source to generate electricity.

    Another free source is rain water running a turbine in the down pipes from the roof or a simple pipe from a stream (no need to dam).


    Sure one is not getting enough at this stage to run the typical NZL household electricity requirements.

    But in the future who knows what technological advances can be bought to bear.

  16. Gerrit is wrong in thinking that micro-generation will take over from large scale generators and distribution systems. The outputs of micro-generation schemes are usually overestimated and the long term costs underestimated. Usually the problem is intermittancy of the resource and storage of the power for when demand exceeds supply. Storage systems are inefficient and costly in materials, maintenance and expected life, although different methods have their advantages and disadvantages. Storing water behind a large dam is one of the cheaper and low maintenance approaches and if that water comes from river flow rather than being pumped up from a lower level, there is little additional loss.

    What are the resources that Gerrit’s micro-generation systems are going to harness? Wind power at a local level is much more expensive than a large wind farm because large wind farms can be sited where the winds are stronger. The output of a wind turbine is proportional to its swept area multiplied by the cube of the wind speed. Large turbines put the blades higher into the air where the wind is faster and less turbulent than close to the ground, giving a significant increase in their output power and capacity factor. The installed costs of large turbines per Watt are lower than an equivalent micro-generation unit too as much of the costs do not scale directly with output power level.

    Perhaps Gerrit is thinking solar. Our peak demands are in winter, when the power from solar systems is at its lowest, and in the mornings and evenings, again when solar systems have little or no output.

    Large scale generation can harness rivers, tides or waves for energy. For obvious reasons, these are not available to most people who might consider a micro-generation system. Geothermal is almost in this category too.

    Biomass could be considered, but the economics of a large number of small bio-mass powered systems are not as attractive as larger bio-mass powered systems for say schools, hospitals, rest-homes, etc.

    We may be approaching the end of the large gas or coal fired generation plant in New Zealand, but we are not going to see our long-distance transmission lines disappear any time soon. Rather they will continue to take power from where it can be generated cheaply to where it is needed.

    And the Cook Strait cable (HVDC link) will continue to transfer power between the islands, but more of the flow may be from North to South during times of low demand in the North Island.

    I do see a possible place for micro-generation, but it will supplement large scale generation, not replace it.


  17. Gerrit

    There is just as likely to be even bigger discounts for volume users when we have real competition in the market.

    How will the partial asset sales of our power companies increase competition in a natural monopoly situation Gerrit?

    The thing you seem to ignore old bean is that with private ownership requiring a higher return on their investments, power prices will increase. There are also other factors involved that mean higher electricity prices will be inevitable with a MOM privatization model. There will be no benefit to the shareholders in discounting electricity for bulk users and there is no guarantee that the government will retain a controlling interest. In this respect the current John Key led government is working against the policy directives of previous National governments.

    Do you really think foreign shareholders care about the interests of New Zealand’s commercial sector?

    One could take the view that an upside to asset sales in the electricity market is the state getting out of macro scale electricity generation /distribution when the future is micro generation.

    One could take that view if it was in fact a reality. There is no large input from micro generation that would impact on the business viability of macro generators. Mores the pity.

    Pretty soon the only customers for macro electricity generation will be large businesses and the railways.

    I wonder how viable they will become with rising fees while at the same time people have less expendable income. You can only squeeze the public so much before it becomes economically detrimental to the country.

    And even large businesses like NZ Steel already have electricity generation plants utilising kiln heat to partly power the mill.

    I’m well aware of the power generating capabilities of places like Glenbrook and Kinleith etc… so no need for a lecture.

    Should the state be pre-emptive and get out while it can still generate some cash from old and unwieldly electricity generation/distribution assets?

    I’ve not seen any reports showing that our power companies are going to not make a profit. In fact, as I have already mentioned, the return from the percentage of the assets National is proposing to sell is more than the interest payable on the debt they hope to pay off. Our power companies will continue to increase their profits as more power is being consumed, and that trend is not likely to change.

  18. The Wall Street Journal (rhymes with) is not exactly the best place for reasoned discussion. One can understand it best by examining its important sponsors (the corporations) …

    “In The Corporation, the corporation is compared against the WHO’s psychopathic diagnostic checklist. Corporations meet the criteria.”


    These are the “people” who control not just the WSJ but also the USA…

    Which is why the Journal (rhymes with) is such a pesthole of denialist fantasies. It isn’t bad enough that they do this, but they have so manipulated the conversation as to make THEIR experiment on OUR climate THEIR right to do unless we prove it is unsafe.

    Morally and ethically and in most countries LEGALLY, it is the responsibility of the person making changes to prove that they do not pose an undue risk to their neighbors.

    They need to prove that what they are doing ( in terms of the re-release of as much CO2 as was sequestered in the last 3 million years in the last 150, at rates 50 times faster than we see in any of the Ice records ) is safe. They don’t think they have to do this because they DO in general meet the clinical definition for a Psychopath. Want the rights of a person, take the responsibilities.

    If there is doubt, it has to be laid at their door and be measured against THEIR arguments. Not the scientists.

    We all live in Bhopal now. The plant operators are still not listening to our complaints about their safety procedures. We cannot move away.

    What are our rights compared to theirs?


  19. Do you support asset sales when they will likely mean an end to the discounted electricity large manufacturing businesses in New Zealand have been receiving?

    Why would there be an end to the discounts? Single billable, large entity volume users at a single point on the distribution network will always get a better price then multi billable, widely distibuted retail consumers (that is why retail line charges are so high).

    There is just as likely to be even bigger discounts for volume users when we have real competition in the market.

    One could take the view that an upside to asset sales in the electricity market is the state getting out of macro scale electricity generation /distribution when the future is micro generation.

    Pretty soon the only customers for macro electricity generation will be large businesses and the railways.

    And even large businesses like NZ Steel already have electricity generation plants utilising kiln heat to partly power the mill.

    The days when large volumes of electricity flow from the South Island to the North are clearly numbered, should the state not take the strategic decision to remove themselves from the liability of owning a redundant Cook Straight cable?

    Should the state be pre-emptive and get out while it can still generate some cash from old and unwieldly electricity generation/distribution assets?

  20. Finally Gerrit sees why there is sense in retaining our power companies.

    Only because I have an ulterior motive.

    The future is in micropower electricity generation (home, street individual business) and it would be advantages to me, as a potential component supplier in that field, to not have corporates involved.

    Be this solar, micro hydroflow generation, combustion systems such as this http://www.whispergen.com/main/HOME/, or even the science fiction like http://www.engadget.com/2010/02/22/the-bloom-box-a-power-plant-for-the-home-video/ , etc.

    Have already made a creek powered water wheel where the use of space age prelubricated plastic bearing materials relieves much of the mechanical drag properties of roller or ball bearings. Less friction equals less water required to turn a wheel, or more wheels for the same amount of water flow.

  21. Gerrit

    What I would like the Greens do is paint a picture of how retaining the (for example) electricity generation-distribution asset and how by doing so, will deliver a lower price the retail and business consumer pay for electricity.

    OK! Although I do not speak for the Green party, here goes: Electricity will be an even more widely used form of power genertion in a green focused future economy. New Zealand has a somewhat unique opportunity to utilize our already established and growing clean energy market to promote an environmentally sustainable economy. The Green future is dependent on securing affordable environmentally friendly power generation, which will be lost with the sale of our main power generators. Electricity will be even less affordable, and will therefore stagnate any move towards a future focused economy that is sustainable. Therefore it is not only a financially silly plan that National has developed, it is at complete opposition to the Green’s policy of a sustainable future developed with green technologies.

    And higher tax revenue as increased productive in industries who are no longer hamstrung by high electricity prices.

    Finally Gerrit sees why there is sense in retaining our power companies. You are forgetting though that industries in New Zealand have effectively been receiving a huge discount for the electricity they use. I would be interested in how you see private ownership of which most will be foreign will enable New Zealand businesses to continue to be discounted?


    The more this goes on, the deeper my anger towards the Labour Party rises.

    I think your anger is somewhat misdirected. The media, which is being manipulated to a great degree by the right wing, controlled what the pre election debate focused on. I recall Phil Goff saying that he was not interested in their questions re the teapot tapes, and wanted to talk about National’s plan to sell some of our best performing companies. I’m pretty pissed off there was little truth revealed about National’s defunct policy prior to the election as well. I’m pretty sure if it was, John Key would not be Prime Minister.

  22. D’y’know Gerrit, that would have been a really smart idea prior to the election.

    Perhaps if Labour had made asset sales understanding the centerpiece of it’s campaign and done something very similar we wouldn’t be having this discussion now.

    The more this goes on, the deeper my anger towards the Labour Party rises.

    (How can I have deeper and rises about the same thing in the same sentence?)

    Anyone seen any coverage of the Lawless debacle recently? Disappeared almost instantly.

  23. The Greens though are missing a vital leadership position here with the asset sale debate.

    What I would like the Greens do is paint a picture of how retaining the (for example) electricity generation-distribution asset and how by doing so, will deliver a lower price the retail and business consumer pay for electricity.

    The Greens could say that the current SOE will be disbanded and placed back into the an organisation like the old electricity department. The need to show a profit will be recinded.

    Electricity will be charged per usage, no more line charges that negate any electricity savings regime.

    Upgrades to the electricitry system will be paid for out of loans covered by general taxation (or higher electricity charges that will reduce once the expenditure has been recouped – like tolls on roads once paid for).

    The reduction in SOE contributions to the tax paying tradeable sector will be covered by better utilisation and efficiencies in the amalgamations if the SOE’s.

    And higher tax revenue as increased productive in industries who are no longer hamstrung by high electricity prices.

    Not saying some or any of the ideas above are the be all and end all but are just a train of thought.

    The Green party should not blankely be against state asset sales but instead formulate how state retention and reorganisation will reduce electricity pricing and the benefits this will provide to the NZL economy.

    Time to take a pre-emptive, positive lead.

  24. Greenfly.

    I guess there is logic somewhere in your argument. Sometimes the strongest objection is reached by simply walking away. No one can argue with an empty chair. Disdain is a powerful tool.

  25. Gerrit – Jackal merely commented that MC’s comment wasn’t worthy of a reply. That doesn’t preclude making one. I often reply to comments that aren’t worthy of reply. Like yours, for example. I jest.

  26. Yeah, let’s not go down the “My argument is so strong I don’t need to talk about it” path.

    That should remain the exclusive preserve of the ACT Party.

  27. Jackal,

    Your comments are so idiotic Misanthropic Curmudgeon, they are not worthy of a response.


    That is a response.

    A nill response is silence. And silence is golden.

  28. I like this bit:
    “the blatant hypocrisy of Lawless in driving for miles to protest drilling for the fuel that got her there”

    Clearly and obviously, the fuel Lucy used in her vehicle did NOT come from the Arctic, the site of the fuel Lucy is protesting about. How Misanthropic Curmudgeon could make such a basic mistake of logic is revealing.
    It seems that MC is nauseated by the stench that emits from his own imagination.

  29. Jackals attempt at a diversion – that someting he holds dear should be above and beyond the laws – is noted, as his his avoidance of my comment “I somehow doubt Jackal would be saying “keep up the good” work if he was on the receiving end!”

    Further, Jackal overlooks the blatant hypocrisy of Lawless in driving for miles to protest drilling for the fuel that got her there, her driving a Mercedes she boasts is “unPC” in its fuel (in)efficiency, paid for by an industry notorious for using fossil fuels to generate its lighting, her previous shilling for Shell, and her own consumerist lifestyle and globe-trotting carbon footprint that puts most people to shame.

    The stench of the hypocrisy and double standards from both Lawless and Jackal is nauseating.

  30. What about the Arctic Misanthropic Curmudgeon… isn’t that worth more than a bit of old rusty metal? Btw, being charged with something does not mean you’re guilty, which you would know if you had half a brain.

    Parata steps over the bounds of decency

    It is despicable that National is trying to gain political ground and public support for the Privacy (Information Sharing) Bill over such an issue, especially when it’s ultimately the Ministers responsibility to ensure such failings do not occur.

  31. jackal also appears to condone illegal behaviour, in saying “Keep up the good work” in reponse to their breaking and entering and destruction of property.

    I somehow doubt Jackal would be saying “keep up the good” work if he was on the receiving end!

  32. Speak to the machine

    National have announced that many Housing New Zealand personnel are going to be replaced by an answer machine. There’s one main reason for this, and that’s to lessen the amount of people applying for state houses. National are making the application process even harder, so that people are deterred and have to rent in the private sector.

  33. Given the synchronisation of the story in the Listener with the focus in the Dominion Post this week on local government reform, one can only conclude the government has something to declare in this year’s budget. Perhaps it is time for some questions in the House?

  34. The Minister Paula Bennett denies that she is a hypocrite.

    Explaining why that is the case when people today do not get TIA or the right to study full-time at university when their child is over 5 – said “they actually get more services and more support now than I certainly got back in that time,” … “they get substantially more, as far as even a CPI [Consumer Price Index] increase, and everything else that goes into benefits. They certainly get more in childcare assistance (fact check anyone), and that helps them with that study. They have access to interest-free loans.”

    They got CPI increases back then, this is not an innovation just because National promised something that had always been given, the amount that can be borrowed (has to be paid back) is less than the TIA for one year, and so they get more in child care assistance – what good is that, if they cannot be available for work part-time between 9 and 3 and study full-time at university?


  35. @graemek@hotmail.co.nz 3:45 PM

    Personally, I would abolish the seat threshold completely – even with one seat it is prone to rorting, as we have seen with United Future, ACT, and Jim Anderton’s progressives, each of whom over the years have got 2 votes for respective Governments on the basis of a popular vote that deserved only one.

    And I would drop the List threshold to 2%. While I disagree with more of their policies than I agree with, the supporters of both NZFirst in 2008 and the Conservative Party in 2011 deserve to be represented, rather than marginalised as irrelevant.

    Personally, I would rather they not be in Parliament, but democracy demands they should be – they represent views of a significant share of the population, however repugnant I may personally find some of their views.

  36. The undue Parliamentary influence of ACT NZ arises from former Premier Jim Bolger encouraging National MPs to form splinter parties. This plan was to provide National with potential coalition partners under MMP, from 1996. Getting Winston 1st as Deputy PM was poetic justice! I recommend citizens now make a short Submission on the MMP Review, stating that the Seat Threshold be TWO Electorate seats; before any Party gets a List share of total votes cast for that Party. How about setting the List Vote at 4%; allowing Parties with moderate support to represent their constituency in the Parliament of an increasingly pluralistic society ?

  37. Seems that too many corporate Directors are being convicted of offences of dishonesty, so John Key’s Government plans to make it more difficult to convict them:

    Chapman Tripp partner Roger Wallis says the Lombard case is one of several in recent years to highlight the risks associated with being a director.

    But Mr Wallis says things might have been different, had a proposed new law been in force.

    He says the Financial Markets Conduct Bill states that it’s only the most serious, deliberate, intentional misconduct that should trigger the criminal law when a company is preparing a prospectus.

    Mr Wallis says that, on any view of what the judge has found, the Lombard case is not in that category.

    He says it’s very likely that if the bill had been in force there would have been no criminal action over Lombard at all.


  38. I’m hearing rumours from a couple of quarters of an intention to disband DOC, at least in its present form, and have its functions incorporated into another department or among other government agencies.

    While I’d have criticisms of DOC, especially its present more commercial trajectory, I think in the past it has managed to reasonably balance the need for infrastructure to allow access to natural areas with the environmental impacts of doing so. It’s also been a huge asset to the both New Zealanders and tourist industry – pretty much everywhere has mountains and forest, but New Zealand’s great draw card has been access to relatively unspoilt areas, and a nationwide agency operating the infrastructure and providing the information to enable people to do so easily and safely. I don’t think anywhere else has a track and hut system that comes close to New Zealand’s.

    It would seem mad, even if you can only think in pure dollar terms, to tamper with an agency doing the job DOC is doing, but good sense seems to be lacking amongst our present leaders.

  39. Hickey at the Herald on why we should be printing money.


    I agree with him and here is one reason why.

    A lot has happened since Bretton Woods, the end of the gold standard for one. But our response to the GFC by the governments of the 1% has been inadequate. It would seem that a real response will have to come from the people, not from those beholden to contributions of money (USA) and power (of France and Germany in Europe/EU/ECB) for their positions.

    There is the tradition of debt cancellation in most cultures – whether it be for the bankrupt of today or the debt slave of the past. Only a decade or two ago there were debt write offs of varying types for developing countries (that were lent money by banks on-lending money deposited by the oil exporters after the 70′s price rise on a presumption that countries would be a good debt risk). More recently Argentina (which got into trouble by linking their currency to the American dollar) defaulted and has since recovered economically. Their situation was similar to that today of weaker European national economies linked to the stronger economies within the Euro. This is why people have raised the idea of some European nations defaulting and restoring independence to their national curtrency as Argentina did.

    If Europe is not to face continual low growth as Japan has done since 1990, then there needs to be significant change there and some of this change can and should occur at a global level.

    We have all heard the line that the west has lived beyond its means and such as this – for the sake of the global economy of the 1% those with capital have to be reassured about the fiscal management of national debts. That the people of the European Union and USA have to make sacrifices so the economic system works for those with capital. This is the somewhat similar to the thinking during the Great depression – if governments cut their spending and if wages were reduced, if only there was more fiscal responsibility and people made enough sacrifices then things would go back to normal. The thing is, fiscal responsibility does not solve the problem. It only means continuing recession and continuing recession means continuing deficits.

    This thinking is wrong.

    There is simply a shortage of capital (because of the GFC) to fund the inevitable government deficits of nations during this recession (as banks have to re-capitalise after the GFC). Because the consequences of retrenchement makes things worse and governments cannot borrow in the capital market as easily as they would have in past recessions, we need a new Bretton Woods.

    1. EUROPE

    This is a particular problem all of its own as the Euro was poorly designed and Germany and France as the power brokers in Europe are preserving their privilege within the existing system by refusing to allow the reform required.

    The stronger economies get all the advantages of the Euro and the weaker economies all the disadvantages. They get a currency lowered down to the average and thus they can sustain their international trade competitiveness, whereas the others find the average is too high for them to remain competitive at all. Then there is the much lower national debt cost of nations such Germany at 2% and France at 3% compared to Italy at 7%. The error was establishing a Euro without common debt financing for the national debts of the member countries. Some member countries cannot afford the now higher rates of national debt finance on their historic debt – and no amount of tighter fiscal management from this point on will resolve that. And nor will fiscal responsibility of itself change the underlying problem. With a common currency zone the strong get stronger and the weak get weaker – and this is destructive to those nations.

    What they need to do is simply replace this existing national debt with Euro bond issues – this would bring in an common debt cost as with the common currency. This will reduce the deficits (debt financing costs) of weaker nations and reduce their need to continue to borrow. This means higher debt finance costs for Germany and France and other stronger economies – to take this course they will have to support a Euro that is good for all of Europe rather than just one that delivers a cheaper currency and borrowing cost for themselves at the expense of others in the south and east and the wider world economy that is impacted adversely by this instability in Europe.

    The IMF needs to act to impose this necessary change on the Euro zone and ECB.

    2. NATIONAL DEBT FINANCING in the modern capital markets

    The ECB and national reserve banks such as the Federal Reserve Bank in the USA should introduce a new approach to financing the deficits of national governments – to become less reliant on private capital during recessions. This involves direct financing of the deficit of national governments. Procedures around the level of such finance – as per GDP level should be agreed to at some international level (given nations have tradeable currency). Limits with exemptions to these limits being authorised at say IMF level when some devaluation of a currency is probably necessary.


    The concept of national reserve banks issuing money to banks to re-capitalise in return for a share in the ownership of the banks is another option for both recovery from this GFC and also returning to a new equilibrium as possible.


    Only replacing existing national debt within Europe with Euro bond issues and establishing common debt cost (as with the common currency) builds greater security into the economic system for both the national economies concerned and private lenders.

    Further to this, to ensure the problem does not recur the ECB (and national reserve banks such as the Fed Res Bank in the USA) would finance at least some portion of a countries budget deficits and also the re-capitalisation of banks to float the boat of the world economy out of this and subsequent recessions – recessions generally result in budget deficits (effectively on the one hand inflate out of the debt crisis while on the other reducing dependence on private capital to finance national budget deficits during recessions).

    The debate should not so much be about debt limits, or even government budget deficit limits to GDP, but the extent to which these relate to deficit financing from the national reserve bank of a nation state (or ECB in Europe).

  40. Think again, Paula Bennett. This is where privatising welfare to work services leads:

    David Cameron’s millionaire ‘back to work’ tsar Emma Harrison dramatically quit yesterday following a string of fraud allegations against her firm.

    She said she was stepping down immediately as the Prime Minister’s ‘family champion’ to avoid becoming a ‘distraction’.

    Her company A4e, which earns hundreds of millions of pounds from Government contracts, is at the centre of two police investigations.

    Yet incredibly the firm has been named this week as preferred bidder on a £15million contract to rehabilitate prisoners in London.

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