Blog description.

Accentuating the Liberal in Classical Liberal: Advocating Ascendency of the Individual & a Politick & Literature to Fight the Rise & Rise of the Tax Surveillance State. 'Illigitum non carborundum'.

Liberty and freedom are two proud words that have been executed from the political lexicon: they were frog marched and stood before a wall of blank minds, then forcibly blindfolded, and shot, with the whimpering staccato of ‘equality’ and ‘fairness’ resounding over and over. And not only did this atrocity go unreported by journalists in the mainstream media, they were in the firing squad.

The premise of this blog is simple: the Soviets thought they had equality, and welfare from cradle to grave, until the illusory free lunch of redistribution took its inevitable course, and cost them everything they had. First to go was their privacy, after that their freedom, then on being ground down to an equality of poverty only, for many of them their lives as they tried to escape a life behind the Iron Curtain. In the state-enforced common good, was found only slavery to the prison of each other's mind; instead of the caring state, they had imposed the surveillance state to keep them in line. So why are we accumulating a national debt to build the slave state again in the West? Where is the contrarian, uncomfortable literature to put the state experiment finally to rest?

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Tuesday, September 15, 2015

Overall Good News re Silver Fern Farms Re-Capitalisation.

Our debt-moribund meat processor Silver Fern Farms now has a 50% Chinese investor. Copying my comment to NBR:

The major argument against it, surely, is equity financing is dearer than debt ... until you have so much debt you can't make your own decisions anymore which seems to be where SFF is at. So this injection is a bonus, especially if it gives them avenues into new markets, including Asia. (And perhaps a different set of oversight disciplines at Board Level through the new shareholder may bring invigoration also.)

Better still there’s an injection of cash direct to our rural sector with this investment by way of a special 30 cent dividend (a boon to the rural communities suffering on the low dairy payout).

For the mercantilists and economically illiterate who will raise the fallacious argument against dividends flowing to a Chinese investor, no, you need to read my below two posts and answer the questions therein on why there are no detrimental effects on New Zealand at all – this investment is pretty much all good.

For convenience, here’s the question posed in that post:

… say that I’m a Mexican, and I buy a shareholding in one of the energy companies here when it is floated. After the first year I’m going to be distributed a dividend of NZ$100k. You call this a ‘foreign dividend flow’, and seem to think it bad for New Zealand. However, think about it, I can’t spend NZ dollars in Mexico, the drug lords just don’t want them, so the only way I can spend this dividend is to first exchange my NZ dollars with pesos, that is, I have to find someone to sell my NZ dollars to. The only person who is going to buy those dollars from me will be doing so to spend back in New Zealand, that’s the only place they can be spent, ultimately. So, where’s the outflow of physical dollars from New Zealand? Explain it to me.

I make further points on this post:

Particularly, while a dividend flowing to China still has to be exchanged for New Zealand dollars and thus spent in New Zealand, a dividend going to the Kiwi farmer investors is probably going to end up in Japan, Europe or even China to buy that new Hilux, Range Rover or plasma set. [Just a little sleight of hand there ;) ].


  1. I'm not so sure its that simple in the long term. This being a co-op also makes it different to buying into a listed or private company. Maybe the Chinese don't want to exchange the NZ$ for another currency? Being cash rich they will simply buy more assets, including the co-op's farms here. The kiwi farmer can have a new Hi Lux this year but it may cost far more than the sticker price long term.


    1. Okay, the Chinese may want to use the $NZ here to buy more, but that's fine - indeed that's my point ... long term all that money still gets spent in NZ.

  2. True but does it get spent gradually removing the means of production from those residing here? I would argue that a long term interest in the well being of something counts for something - the $ is not all that matters. Once the produce has left NZ and is marketed by the Chinese in China we have no real knowledge of the ethics and accounting. That may impact the returns to NZ by siphoning off profits to the Chinese externally - clipping the ticket I guess via other solely owned enterprises within China. Time will tell but I remain of a view that owning the means of production is a sensible goal long term but only the Chinese seem to be pursuing it.


    1. I don't know why everyone jumps to the conclusion the Chinese are going to 'buy all the means of production'? Even if they did - assuming every business owner wants to sell out (which they won't) - that doesn't affect jobs, etc. Conversely, there is some Chinese wealth (brought into this country) getting destroyed in dairy farms they paid silly premiums for (but carry on employing kiwis, regardless) ... perhaps some of those farms will be bought back cheaply by Kiwis.

      But we're way outside my post. Overseas dividends still 'must' be spent in New Zealand. I still believe the Chinese investment in SFF is overall good. That industry and that firm, did need a circuit breaker.