Friday, November 25, 2005

Sideswipe

Instead of bothering with 111, this truck-driver took the initiative and made haste to the nearest fire station with his flaming rubbish collection vehicle.

By Ana Samways

Bird-brained: Bird flu paranoia? Animal cruelty? Or stress relief? You decide. The Choke-A-Chicken flaps and waddles round doing the Chicken Dance. But wait, there's more. According to the blurb from Australian retailers Jaycar Electronics, "grab him by the neck and he will squawk and cluck like mad, flapping his wings and feet wildly as if he is really being choked".

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The Marc Ellis effect: Sir Richard Branson wants to make fallen waif Kate Moss the face of Virgin Mobile. Even though Moss was quickly dumped by other big-brand companies after evidence of her recreational drug binge became public, the savvy Branson figured the publicity generated by this victimless crime can add a certain je ne sais quoi to a high-profiler's image, and hence up their post-snort popularity. The same could be said of Ellis, who only a few months after his conviction for having five tabs of Ecstasy in his pocket, was named New Zealand's favourite male personality at the Qantas Television Awards with a public vote and looks set to be welcomed back to the Charlie's juice company board.

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When the Olympics come to London in 2012, members of the "Olympic family", including athletes, Government officials and corporate sponsors, will have special traffic lanes set aside for their use, which will be monitored by police and traffic cameras. The commoners will be herded into the remaining lanes and face 5000 ($12,400) fines if caught in the Olympic lanes. That's 33 times the fine for driving in a bus lane, according to the Sunday Times of London. (Source: Reason.com)

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Two weeks ago, Marion Roberts of Rotorua travelled with friends from San Francisco to Lake Tahoe. "En route I inquired at a fast-food outlet as to what town we were in, just to make sure we weren't lost. The girl serving told us that she didn't know and would have to ask someone out the back, which she so kindly did!"

Editorial: Apec fails in global trade crisis

Just over a decade ago, when Apec was in its infancy and still needed to be written at first reference as Asia Pacific Economic Co-operation, it played an important part in bringing a world trade round to a successful conclusion. Then, as now, the global talks were deadlocked, mainly over issues of agricultural protection, and needed a concession from Europe to release the log-jam.

At that time East Asia and the Pacific rim were the world's most promising zones of economic growth and the new Apec forum was gung-ho for free trade. There was much talk that if the Uruguay round failed the world would divide into trading blocs. The prospect of a bloc spanning the Pacific seemed to concentrate European minds fruitfully.

Sadly, the comparison with the present stops at the deadlock. The sticking point is still agricultural protection and a concession from Europe is needed. The Pacific, having the United States on one side of the ocean and China and Japan on the other, is still a powerful economic axis. But, sadly, Apec has missed an opportunity to do for the Doha round what it did a decade ago.

At the Apec summit in South Korea last week, leaders of the 21 member countries failed to agree on a declaration that might have added to the pressure on the European Union to produce something meaningful for an all-important meeting of the World Trade Organisation in Hong Kong next month. Herald correspondent Fran O'Sullivan reported that the consensus of Apec leaders at Busan was to prepare for lower expectations from the Doha round. A consensus was developing, she found, that the round would not deliver the rewards to developing countries that were pledged when Mike Moore, WTO director-general at the time, got it under way six years ago.

The present director-general, Pascal Lamy, previously the EU trade commissioner, was at Busan but his meetings with Apec trade ministers did not produce anything that moved the summit. The prospect of regional alternative trade deals no longer haunts the WTO talks; the risk now is rather that a global failure will see trade liberalisation pursued instead through bilateral free trade agreements. It is not so much a threat as a trend already under way, led by the most powerful Apec members, the United States and China.

Free trade can be advanced on three fronts, global, regional and bilateral, but only the global negotiations offer a reasonable assurance that all countries can trade under rules of non-discrimination and enjoy the same access to lucrative markets. Regional and bilateral agreements are supposed to be compatible with WTO principles and open to outsiders to join on the same basis. But inevitably they favour those inside the deal and distort trade patterns.

A further risk in bilateral agreements, particularly the way the Bush Government is doing them, is that they are made primarily for strategic rather than economic purposes and are unlikely to help to make the world economy function as efficiently as it can. The actual trade openings, as the Australian deal showed, can be very one-sided. At best, regional and bilateral agreements are a poor substitute for progress on the global front.

Apec's reduced expectations for the Doha round are particularly disappointing because two of the countries present, China and India, have, with Brazil, led the drive to put the interests of developing nations at the top of the Doha agenda. Dissatisfied, they collapsed the talks at Seattle and at Cancun, Mexico. A third failure at Hong Kong could be terminal. But a deal that does little to help poorer countries would be not much better. Trade, not aid, after all, is the lasting answer to poverty.

Peter Griffin: Blurred vision over future of high-definition TV

New Zealand used to have a reputation for its early adoption of new technology. I say used to, because it's clear by now that we've well and truly lost it.

There's no better example of that than in our lacklustre approach to introducing digital terrestrial television and so-called "high-definition" (HD) broadcasting.

If you hadn't noticed, the world is going HD. From the new Xbox 360 games console, which goes on sale here in March, to the flat screen TVs and projectors we're buying, to the movies we will soon be renting on DVD and downloading via the internet, HD is the future standard.

It allows for better picture quality than currently available and Dolby 5.1 surround sound to be delivered in broadcasts. The better use of radio spectrum that comes with HD broadcasting means more channels can be offered, more choice, more options for interactive services and ultimately a better viewing experience.

The world is moving to HD, but we trail just about everyone in its uptake. That fact was brought home to me last week as I sat in the audience at the Screen Production and Development Association's annual conference in Wellington.

Of the international producers who breezed through for the conference, most were bemused at our laggardly approach to going digital.

Take for example Tom Gutteridge, a Los Angeles-based consultant who used to head Freemantle Media, the producer of American Idol.

"I've checked. You've got the technology, you've got the transmitters.

"It's not as expensive as you might think," said an incredulous Gutteridge, who pointed out that American broadcasters hoped to turn off their analog transmitters by the end of 2008.

"There are European countries much smaller than New Zealand with a digital platform," he said.

In Britain, digital terrestrial television was given a huge boost by the formation of Freeview, a coalition of broadcasters like the BBC, Channel 4, ITV and BSkyB.

Thirty free-to-air digital TV channels are offered to subscribers with Freeview decoders. Even Gutteridge's 84 year-old mother has a digital Freeview box which she uses to watch BBC 4 documentaries.

Advertisers want to spend more money on spots across more channels, not more on the same few channels, said Gutteridge, who pointed out that HD also has the potential to be the first global TV format, the same content capable of being shown anywhere that has switched to HD.

The same message came from Patrick Younge, the executive vice- president of the Discovery Channel's popular travel channel.

He never gets ideas for travel TV shows pitched at him from New Zealand but he's keen to receive them.

The only catch is that Discovery is increasingly looking for shows shot in the HD format.

Our producers, by and large, aren't set up for HD yet because there are no HD broadcasts. Unless the industry hurries up and goes digital, they will find themselves cut off from export opportunities.

Currently New Zealand broadcasters receive some content from overseas in HD but have to convert it standard definition so it can be broadcast. In effect, they have to degrade high-quality content so our obsolete infrastructure can handle it.

As far as the roadmap for the move to HD goes, the Government has been looking at it for some time but has no firm plan of action.

John "Barney" Barnett, the head of South Pacific Pictures, the production company behind Shortland Street and Whale Rider, pointed out the absurdity of the situation in his SPADA conference keynote address:

"So the people who are ready and capable of switching, have to wait until the Government does its review to work out that, yes, we will have to switch, and we're now going to tell those companies how to do what they already know," said Barnett.

As the respected producer points out, the move to digital will degrade the value of TVNZ's current analog assets.

The company's balance sheet will take a hit, something a reeling board is unlikely to want to deal with in the current environment.

But Barnett points out something even more frustrating about our troubled state broadcaster - the fact that in 1990, TVNZ paid less than $50 million for a stake in Sky TV. By 1999 it had sold out for around $150 million.

"In plain economic terms, 35 per cent of Sky is worth about $850 million today," said Barnett.

And with an interest in Sky, TVNZ would have had a foot in the digital satellite camp and a platform to deliver more and better programming.

Sky currently delivers digital TV via its satellite service, but it's not a HD service.

TVNZ for its part, said at the conference it will table a paper on the digital subject with the Government "in the next month or two" but wouldn't say what it proposed to do.

Sky TV in Britain confirmed last week that it will launch high-definition satellite in the middle of next year. There'll be six channels offering HD sports, movies and entertainment programmes.

Sky subscribers have to upgrade to a new decoder and have an HD-ready TV to get the superior feed.

Hopefully Sky TV here will follow in the footsteps of the United Kingdom and soon.

But getting producers and broadcasters on the same HD page is only half the story. TV viewers need the HD-capable TV sets to get the high-definition feeds. Most of the TVs sitting in lounges around the country are not high-definition.

But around 40 per cent of new TVs sold are now flat screen TVs and many of them are HD-capable. That proportion will be more like 60 per cent this time next year.

We're being pushed towards the inevitable, but the lack of a solid plan for digital broadcasting will soon hold the TV industry back.

Te Radar: Throat-cutting is tame stuff beside self-mutilation

I have no idea whether any of those who saluted Hone Harawira's maiden speech in Parliament with a haka from the public gallery drew their thumbs across their throats while eyeballing other members of Parliament.

Certainly, there are those who would have found the whole display little more than a demonstration of barbaric savagery that has no place in the hallowed halls of Parliament. Of course, Winston Peters may say the same thing about press conferences.

Nevertheless, the haka, and the trilling waiata that followed the oratory, made for superb listening on the wireless.

It is at moments like this that one wonders why Parliament isn't broadcast to the nation through a series of speakers in the streets of this island paradise. No doubt it would inspire the public, but possibly only to petition to have the speakers removed to escape the banality of what usually emanates from the House.

Many folk in the Northern Hemisphere, it seems, have similar feelings about the All Blacks' haka, and are calling not only for the evocative throat-slitting finale of the new haka to be banned, but any haka before games as well.

These cultural naysayers believe the haka is overly aggressive and gives the All Blacks a psychological advantage. In reality, it is merely a simple ritual that says, "Hello, put the kettle on, we are here for business".

We shouldn't underestimate the passion of Northern Hemisphere fans.

Readers may recall that several months ago Geoffrey Huish, a Welsh rugby supporter, made an off-hand comment to his chum that he would sever his "Clarksons" if Wales beat England. They did, and so he did. With blunt wire-cutters.

This gave Geoffrey and the game a moment of brief notoriety, before fading into rugby folklore. Now the saga is back in the news, as Geoffrey has finally commented on why he performed this self-emasculation.

This question is perhaps the second most troubling one of the year, next to why Winston thought becoming Foreign Minister would lead to stable Government.

Geoffrey states: "I think about what happened every day and still haven't come up with a good reason why. I'd had a lot going on and felt a bit down."

More disturbing is his description of the process. "The cutters were blunt," he declared, "so I had to keep snipping."

Having performed the procedure, he carried the offending orbs to his local social club, where shocked friends placed them in a pint glass with some ice, and rushed them, and Geoffrey, to hospital.

Unfortunately his testicles couldn't be reattached. I have no idea what became of them, but given the behaviour of some of our parliamentarians in recent days, they could have been put to good use here.

Brian Rudman: Bureaucrats spend $200,000 getting it wrong

Top art dealer Gary Langsford was leading with his chin yesterday with his sneering dismissal of the Khartoum Place suffragist memorial as having no aesthetic merit and belonging "in a 1970s craft shop".

Is this the same Gary Langsford who flogs Goldies for a living?

He sniffs at the tile mural's "garish colours and simplistic floral and bird motifs", saying such works "have had their day".

Does this mean he'll be cleansing his stable of anything by Don Binney and Karl Maugham as well?

In an age when the arts Mafia tell us a Trekka van and a braying dunny are icons of New Zealand art, I've come to the conclusion that art is anything an artist or dealer says is art.

But exactly what is art is beside the point as far as Khartoum Place is concerned. The 2000-tile work was erected and unveiled in 1993, not as a public art work but as a memorial to the pioneers who achieved universal suffrage for women a century before.

For reasons best known to the Auckland City bureaucrats involved, it is they who have insisted, throughout this debate, on the misnomer "artwork". If I was of a suspicious nature, I'd suspect it was done so the work they wanted destroyed could be dismissed as bad art and aesthetically displeasing, and therefore much easier to be rid of.

If they'd succeeded, it would have been a very bad precedent for memorials. If bad art was the criterion for "decommissioning" them, what war memorial would be safe? As for Pania of the Reef of recent controversy, she'd have been melted down long ago.

Standing around on Wednesday at the "victory over the bureaucrats" rally, clutching my white rose and listening to the celebratory speeches, I couldn't help thinking that, every now and then, the politicians do win one over their bureaucratic masters.

Mayor Dick Hubbard was there to promise assorted women leaders - and the odd chap - that the memorial, tiles and all, would stay.

Backing him up was his deputy, majority leader Bruce Hucker, eager to tell me that he had the numbers to ensure this happened.

It will have been glum news for the bureaucrats, even if they must have realised the game was up some time back. But now they're going to have explain how they could have wasted $200,000 of ratepayers' money getting it so wrong.

After ploughing through some of the documentation obtained under the Official Information Act, I've found the explanation stands out. Throughout the process, the only reference to the dominating feature of the square, the $75,000 suffrage memorial, is about how to get rid of it.

The breathtaking disrespect for it is what stands out, particularly as it was an exercise driven by women bureaucrats. The design brief is full of gorgeous gobbledegook, calling on applicants "to achieve a space people can identify with and experience as an exemplary open space ..."

In one breath, it calls upon the designers to build on Auckland's "sense of place" and "reflect its people and their society [and] its history ..."

Then, in a dismissive afterthought, it says the existing water feature and artwork "may be removed".

It's a flabbergasting direction. Reflect the people's history by destroying the historic monument. On second thoughts, that is a so-very-typical Auckland thing to do.

In this case, the emphasis was on turning Khartoum Place into a grand entrance for the planned $90 million extensions to the public art gallery up the hill on Kitchener St. The existing stairway would be too narrow and pokey for the hordes they envisioned flowing up from Queen St once the gallery was enlarged. Yeah, right!

This disrespect is not new. The tiles were hardly set on the memorial back in 1993 before the architects of the New Gallery, which forms one side of the square, were bashing a hole through one part of the mural to insert a steel girder to support the obligatory coffee bar balcony. At ground level, a loading bay was created to further degrade the people-place ambience. To our shame, in the excitement of getting a new gallery, we were diverted from the first assaults on the suffrage memorial.

Now it's time to repair that damage, and give this memorial, and the activists it honours, the respect they deserve.

The mayor's even suggesting a renaming. Could I suggest we twit the bureaucrats for all time and call it "Exemplary Open Space".

Jim Hopkins: Forsooth and gadzooks, Winston is sore wounded, sire

It is sad to see a newspaper and an eminent person so vehemently at odds, especially so soon after the splendid news about the Rugby World Cup.

Clearly, some form of reconciliation is, as the great Wiremu Shakespeare put it, a consummation devoutly to be wished.

And here it is. Noting that the Bard himself frequently wrote plays that praised their patrons, the Harold has elected to emulate this practice (in style and substance) by commissioning its own theatrical peace offering.

Penned by the extinguished poet laureate, Mr Jam Hipkins, the tribute to the wounded Winston is simply called A Midsummer Knight's Dream.

Scene One: Two envoys beneath a tower.

Herald 1: What light through yonder window breaks?

Herald 2: It is the east and Winston is the sun ...

Herald 1: Okay, son, if you sayeth so, I shan't call thee treason's brat. But this I ask, gadzooks, forsooth. If I lend you my ears, wouldst thou tell me the truth? What doeth the great one within?

Herald 2: Methinks the Titan doth relax; perchance perhaps, perhaps perchance. And, whyth not? For just as common folk do need relief, so too doth greatness need a respite from its rigours. And is not greatness chambered there?

He turns to the crowd behind him.

Friends, Romans, rugbymen, I come to praise Winston, not to bury him

(Loud cheers)

Scene 2: Inside Winston's chamber. Hearing noises, Winston climbs out of his relaxing bauble bath, clearly troubled. Winston: To see or not to see, that is the question. Yet question it is not. For who could be so blind as to deny my greatness? Only ranting scribes would cut me thus. A pox on them, I say! Tis outrage and foul treason!

He stares into the mirror.

Figh! What be this blemish on my countenance? Out, out, damned spot. Thou shalt not mar perfection.

Aide: Alas, sire, this bodes ill. I fear yon wart bespeaks the Avian flu.

Winston: It cannot be! For I've not been to Avia, fool! Only to Korea. But lest the malady hath struck, fetch me quick my Tamiflu.

Aide: Alas, sire, thou art without Cabinet and thus thy name doth not on special lists appear. Thy friends would have thee take pot luck, methinks.

Winston: Gadzooks and tally ho! Thus is true treason's face revealed. A nurse! A nurse! My kingdom for a nurse!

Aide: A nurse you shall have, sir, and forthwith, but let us to our meeting hie.

Scene 3: An international gathering of very important people. Winston arrives and spots a familiar face.

Winston: Is this a Digger I see before me?

John Howard: Egad, you have me, Sir. Thy knowledge of foreign leaders is most excellent!

Winston: All the world's my stage , and I bestride it like a colostomy.

John Howard: As thou seeist thy bestridement, so do we, great Seizer of Baublelon.

Winston: Bite thy tongue, base varlet. 'Tis clear thou art pead of brain and not aware Seizer was a Roman! There never was a Seizer of Baublelon, poltroon.

John Howard: Nay, Sir. and there never was a Foreign Minister outside Cabinet either, till thou didst stitch thy deal malign and cast thy pearls before us swine.

Scene 4: The Merchant of Venus, a seedy tavern in London.

Falstaff: Landlord! Landlord! Fetch me a firkin of ale and fetch it firkin quickly!

Herald 1: Privy, Sir? What brings you to our petty play?

Falstaff: I bringeth comic relief, you pillock. Some humour for the groundlings.

Stranger: Then get thee hence, fat yokel, and take thy haka with thee.

Falstaff: Who be thou, Sir?

Stranger:Why, Jones of the Times I be, and beast I be to boot. But not so beastly as thy crazed thugs who did, in this septic isle, descend to cheatings craven barrage on Twickenham's fair field. Forsooth, I say, If England had summoned just the occasional shaft of genius when they were totally dominant throughout the second half, then they would have won with something to spare!

Falstaff: Ahhh, Jones, true journalist thou art, bellowing the obvious as if it wert a miracle. All thou sayeth is, If things had been different, they would have been different!

Falstaff tears off his wig and reveals his true identity.

Begone, foul dolt or I, King Henry (also known as Graham) shall cut thy gibbering throat. And staring at that flaccid flesh, methinks a finger would suffice!

Scene 5: Meanwhile, back at the Beehive, a worried Press Secretary is advising the Prime Minister of Winston's troubles.

Secretary: Come here, come here, Queen Lear, my dear. For trouble's looming now, I fear. Young Winston's in a frightful mess. He's locked in conflict the press.

Helen: This news doth make me burst with glee. At least his conflict's not with me. So let him strut and let him fuss, it means he is not troubling us.

Secretary: Thou hath a knavish cunning, Queen. The cunningest I've ever seen.

Helen: Enough, I say. Your rhyme's a curse. From now on only use blank verse.

Secretary: I shall your grace, yet beg thee please to grant but one exception. Blank verse for Winston, Queen, I crave. It mirrors his perception.

Helen: Oh, suit thyself. Just don't tell him we've got any Tamiflu, that's all!

Gwynne Dyer: Light in Middle East tunnel

Can the old war criminal really want to end his political career by making peace with the Palestinians?

Israeli Prime Minister Ariel Sharon has broken with the hard-right Likud Party that he helped to found three decades ago and is starting a new centrist party that will, he says, negotiate a peace deal with the Palestinians. Has the Age of Miracles returned?

No. Sharon is only quitting Likud because it became clear that he would lose the party leadership next year to his old rival Binyamin Netanyahu. Too many of Likud's settler supporters are still outraged by his evacuation of the Gaza Strip last summer.

The peace deal that his new party would offer the Palestinians is no better than the one he offered as head of Likud. He still intends to keep much of the occupied West Bank permanently.

Nevertheless, something big has changed in Israel.

Sharon did not choose the timing of his dramatic moves. They were forced on him by the newly chosen leader of the Labour Party, Amir Peretz, who promptly pulled out of the Likud-Labour coalition through which Sharon has governed Israel.

It is Peretz who is setting the agenda for the election that is due in late February or early March, and his agenda is genuinely about peace.

Peretz does not pull his punches. Israel's poor have done so badly for the past several decades, he says, mainly because so much public money has been wasted on the Jewish settlements in the West Bank and the Gaza Strip.

And despite the past five years of violence, he has never wavered in his conviction that Israel must make peace with the Palestinians.

Not just a Sharon-style imposed peace, either, with Palestinians corralled in more or less self-governing cantons whose borders are defined by Israeli security concerns and settler land-grabs.

Peretz believes that the Palestinians must have a real state with enough land and power that they actually have something to lose.

He supports Israeli withdrawal right back to the 1967 borders, and is contemptuous of Sharon's too-little-too-late withdrawal from the Gaza Strip. It is as if Yitzhak Rabin had come back to life.

It is 10 years since an extreme right-wing Jewish fanatic assassinated Rabin, the Prime Minister who agreed to negotiate a peace settlement with the late Palestinian leader, Yasser Arafat.

Rabin, a tough former general, was murdered because he was willing to let the Palestinians have their own state in the occupied territories in return for a permanent peace - and the brutally ironic result was that Israel has been ruled for most of the time since by two Likud leaders, Sharon and Netanyahu, who never truly accepted Rabin's goal.

They had to give it lip-service, since the rest of the world, and most important the United States, supported it.

But in practice they sabotaged every peace initiative and went on expanding the settlements to establish Jewish "facts" on Palestinian land. The Israeli population of the occupied territories has more than doubled in the past decade.

And for most of that decade Rabin's Labour Party was led by Shimon Peres, now 82, who moved it sharply to the right on economic issues and took it into coalitions with Likud, where it merely echoed Sharon's policies.

Now Peretz, a trade union leader who grew up in poverty after emigrating from Morocco, is taking Labour back to its left-wing roots on domestic policies like social welfare, which is likely to bring many former Labour voters back to their old loyalties.

On peace with the Palestinians, he could not be clearer. Standing by Rabin's grave two weeks ago, he said: "We will not rest until we reach a permanent agreement that would secure a safe future for our children ... in a region where people lead a life of co-operation and not, God forbid, where blood is shed from time to time."

Peretz' rise comes at a good time. Sharon, the master manipulator whose specialty is wrecking any peace initiative that threatens his plans by goading Palestinian extremists into yet another atrocity, has lost control of Likud.

His proposed new centre party must fight an election in only three months, and it could easily be caught in the crossfire between a revived left-wing Labour and a hard-right Likud led by Netanyahu.

This could be the 77-year-old Sharon's last hurrah.

By a fortunate coincidence, the Palestinian parliamentary elections scheduled for 25 January will see the largest of the Islamist movements, Hamas, enter politics at the national level for the first time. Hamas still formally rejects any permanent peace with Israel, but in practice it will have to be part of any future negotiating process. That might transform both the nature of the process and Hamas's own views of what is possible.

There have been too many false dawns, but if you squeeze your eyes tight shut you can imagine that Yitzhak Rabin has risen from his grave and that the stupid and bloody waste of time and life over the past 10 years was just a long detour on the road to a Middle East peace.

Even now the enemies of peace on both sides are mobilising, but maybe there is a little hope.

* Gwynne Dyer is a London-based independent journalist whose articles are published in 45 countries.

Jenny Ruth: Riskiness warnings tar all with same brush

It is questionable how useful to investors it has been for the likes of the Securities Commission, FundSource and others to issue generalised warnings about the riskiness of finance companies without identifying specific firms with demonstrable problems.

The general effect has been to tar the entire sector with the same brush.

There's no doubt some finance companies are riskier than others or, at the other extreme, that some are more conservative than many banks.

It is also true that a sector which has grown as exponentially as finance companies have over the past few years certainly bears some scrutiny.

A positive outcome of the warnings has been that several finance companies have been looking for ways to differentiate themselves from those in the worrying category.

Capital + Merchant Finance, which lends on property, particularly property developments, has come up with an innovative way of reassuring investors in its debentures. Not only has it paid for an independent rating of its debenture offerings, it also offers an option whereby its lending is insured by Lloyd's of London.

In some respects, the company is operating at the upper limits of its own safeguards and those safeguards themselves are at the riskier end of the spectrum.

At March 31, it had only $1 million in paid-up ordinary shares and a further $2.1 million in retained earnings supporting $176.4 million in total assets. It also had $5.8 million worth of capital notes that mature in September 2008 - the company has the option of then converting the notes into ordinary shares, which is its intention. So it is reasonable for the company to treat the notes as equity, bringing that total to $8.9 million.

That still means total assets are 19.8 times equity and that total liabilities of $167.5 million are 94.95 per cent of total assets, just inside the 95 per cent limit of the company's trust deed.

To put that in context, international rules require banks to carry at least 8 per cent equity and most banks carry considerably more.

It is evident the company's fast growth has been requiring repeated top-ups of capital notes to keep it within that 95 per cent ratio. There were $1.29 million notes issued in the latest year and $4.5 million the previous year.

As for that growth, total assets jumped 38.8 per cent in the year ended March, from $127 million in March 2004, and had more than trebled the previous year from $38.6 million in March 2003. Capital + Merchant has only been operating since early 2002.

But investors in its capital secured debentures have the added comfort of the Lloyd's insurance. Under the conditions of the policy, Capital + Merchant can lend up to two-thirds of valuation up to 75 per cent with specific approval from Lloyd's, and can claim as much as $20 million back from Lloyd's in any one year on loans that go sour.

Investors pay a price for that protection in that they receive considerably less in interest than those who opt to invest in the ordinary debentures. Currently, someone investing less than $5000 in the capital-secured debentures for a year would get 6.95 per cent interest, compared with 7.98 per cent if they invested in the ordinary debentures.

The effect of the Lloyd's policy also means there's more fat in the company left to protect investors in the ordinary debentures if loans develop problems.

Given its relative youth, it isn't surprising that Capital + Merchant hasn't had any bad debts. It has had one loan that got into difficulties, a problem it solved by taking over the development after it ran into delays. That development was in its books at $8.1 million at March 31, but was sold in September and the loan fully recovered.

Capital + Merchant's major shareholders are directors Wayne Douglas and Neal Nicholls, who also own most of the notes.

Douglas says he finds the criticism of finance companies "disconcerting", and says a lot of it has come from competitors for investment funds, such as fund managers - some of whom have little to crow about in terms of recent performance - and ASB Bank.

"It seems that in the finance industry, the non-bank finance companies are the soft belly," Douglas says.

In the past 15 years he has only known of two finance company failures, and compares that with the ups and downs investors have experienced in the equities market, most recently in the bursting tech bubble.

Douglas explains his company's fast growth on the contacts he and his partners made in previous property-related ventures - he previously ran one of the larger contributory mortgage companies, which has since been wound up.

Capital + Merchant does have a high dependence on a few borrowers. Its six largest borrowers accounted for nearly 44 per cent of its total loan book at March 31. Douglas says that's by design.

"We like to roll with people we know as much as possible on the basis that we're used to dealing with them, we understand their psychology and there's a level of trust and communication that you can rely on."

But Capital + Merchant's own debenture profile doesn't suggest its investors are overly worried about security. Its shorter-term and ordinary debentures have grown much faster than capital-secured debentures.

While investment in capital-secured stock maturing in less than a year rose 20.3 per cent to $67.3 million in the year ended March, investment in its ordinary debentures maturing in the same period jumped 133 per cent to $54.1 million. Investment in longer maturities of the capital-secured debentures actually fell 1.5 per cent to $31.7 million in the year but investment in longer-term ordinary debentures rose almost 60 per cent to $12.5 million.

Douglas says that rising interest rates have made the rates on the capital-secured debentures less competitive with what the banks can offer. He also says it is logical when interest rates are rising that investors "go short".

As investors and advisers have gained greater experience of the company, they've begun to feel safer going for the higher, although less protected, option, he says.

The company's rating is by Australia-based Property Investment Research (PIR), which gives it four stars out of a possible five.

New Zealand-based Grosvenor rates its debentures G5, on par with Dominion Finance, Fisher & Paykel Finance and Sky City's capital notes. Grosvenor says G5 means "adequate ability to meet current obligations, but uncertainty about levels of security over the longer term, particularly under adverse business conditions".

Capital + Merchant also owns 66 per cent of another New Zealand finance company, Numeria.


Capital + Merchant Finance

* Results: Net profit rose to $2 million in the year to March 31, from $1.3 million the previous year.
* Total assets: $176.4 million at March 31.
* Total liabilities: $167.5 million at March 31.
* Management: Executive director Wayne Douglas and chief executive Owen Tallentire.
* Major shareholders: Wayne Douglas and Neal Nicholls.

Graham Reid: Hallowed halls and street walls

We were - with a few exceptions - exhausted foot soldiers in the Art Wars.

The small cafe where we found ourselves that late afternoon, on the corner of Rue de l'Universite about 15 minutes' walk from the Musee d'Orsay in Paris, was our r'n'r refuge for an invigorating pastis, cold Belgian beer or coffee.

Time to recover from a day of big ticket Impressionism: Van Goghs by the dozen - and a special exhibition of Russian art (which I never got to). And there had been all the usual pre- and post-Expressionists, sculpture, drawings and blah blah. More great art, anyway.

For all of us the day had been arduous, as hard on the feet as it had been rewarding for the head.

So by chance we strangers, with only our art fatigue in common, ended up in the same cafe: the couple from Western Australia, the New York matriarch with her daughter and college-age granddaughter, and the two of us.

Megan and I were relaxing over our Leffe beers when the New Yorkers arrived. We'd been talking about Paris, a city where Megan had lived and worked. My experiences had been more transitory - a week here and there over the years - but we agreed, Paris can be both beautiful and ugly, irritating and uplifting, hectic yet relaxing, full of noise but with plenty of places for quietness. And, we also agreed, constantly surprising.

For instance, just minutes before we had been walking down the nondescript Rue de Verneuil, a narrow street lined with little more than rubbish bins, flat walls punctuated by small and anonymous doors.

Then we came upon a wall blasted by multicoloured graffiti, slogans, snatches of poetry and drawings. It was unexpected but specific: it covered the wall outside one dwelling but didn't encroach on those at either side. On close inspection the poems were snatches of song lyrics, the drawings all of the same man.

This had once been the home of singer/actor/director Serge Gainsbourg, and his admirers had covered the wall with loving tributes which the current occupants had chosen not to obliterate with bland paint.

Cheered by this unexpected sight, we made our weary way to the nearest cafe, ordered beers and relaxed to consider our day.

When the Americans arrived the matriarch knew exactly what she wanted.

"Get me a drink," she laughed at the barman who seemed to know the needs of Musee d'Orsay survivors.

She took her beer and slugged it back in a manner which denied her elegant appearance. We art-stuffed tourists began to chat and the Australian woman asked the matriarch - who spoke a smattering of heavily American accented French - if she was familiar with Paris.

"Yeah," she laughed, and in a phrase which captured our bone-weary mood perfectly, added, "but I came anyway."

Peter Lyons: Monetarist ideas cost us dearly

Money can be regarded as a commodity just like tomatoes. The suppliers of money are lenders such as banks and finance companies. Their customers are borrowers. The price of money is the rate of interest.

If the Government set a guaranteed price for tomatoes of $20 a kilo, New Zealand would soon be awash in tomatoes.

The Reserve Bank of New Zealand has set a high interest rate for money compared to overseas interest rates. Consequently New Zealand has an abundance of easy credit. Unfortunately, this credit is not cheap.

Finance Minister Michael Cullen has requested Treasury and the Reserve Bank to explore measures for controlling the price of inflation in the housing market. Solutions that have been floated include restrictions on lending ratios and even the vague possibility of a capital gains tax.

But no mention has been made of the fact that the operation of monetary policy itself may be contributing to the housing bubble.

The Reserve Bank is required to keep inflation between 1 and 3 per cent. New Zealand pioneered the use of an explicit inflation target.

The Reserve Bank sets the official cash rate to achieve this target.

The official cash rate (OCR) is the base interest rate for the economy. If the OCR increases then most other interest rates also increase. This should reduce the level of demand in the economy and prevent price rises.

This method of operating monetary policy has created a benevolent trading environment for banks, finance companies, mortgage brokers and other lenders.

If tomato growers had the same degree of certainty about the price at which they could sell their tomatoes they would be rubbing their hands in glee.

Movements in the OCR are reasonably predictable. When inflationary pressures are pushing the top end of the inflation target range it is more than likely the Reserve Bank will increase the OCR.

This allows banks and other financial institutions to get their funds at lower interest rates from overseas and pump this money into the New Zealand loans market at the higher rate.

This has been a major contributing factor to the surging house prices in recent years. People continue to borrow to buy houses regardless of the higher interest rate. Some borrow for speculative reasons but many others just want to own the roof over their heads.

Alan Bollard, the Governor of the Reserve Bank, has lamented the actions of banks and other lending institutes as being mercenary and disregarding the long-term consequences of their lending practices. This is like the Minister of Health suggesting that cigarette companies cut back production to improve health statistics.

The operation of monetary policy by the Reserve Bank is a key contributing factor to the easy availability of credit in New Zealand. This is fuelling the housing inflation. To a large extent we are using overseas funds to bid up our own house prices and creating huge profits for banks and other lenders in the process.

Having such an explicit inflation target provides financial institutions with an easy trading environment that few other businesses in New Zealand enjoy.

Economic history contains several orthodoxies that have not stood the test of time. Before the Depression in the 1930s, classical economists believed that an economy would always gravitate to full employment in the long run.

John Maynard Keynes famously stated that in the long run we are all dead. He advocated government intervention though public spending to create demand to ensure full employment.

After the Depression and World War II, Keynesian economics became the new orthodoxy in many countries. Through to the 1970s, Governments tried to manage the level of demand in the economy to ensure full employment.

Keynesian economics was undermined by the inflationary pressures of the 1970s and 1980s. Governments sought to reduce unemployment by increasing spending. But firms and unions, anticipating inflation, increased their wage demands and raised their prices, leading to an inflationary spiral

In the 1980s and 1990s many countries adopted monetarist policies to battle this inflationary pressure. Inflation became public enemy No 1.

Controlling the money supply, credit and interest rates was regarded as the best way of curbing inflation. Low or no inflation was a key goal of macro policy regardless of the costs. New Zealand became an advocate of stringent monetary policy to control inflation.

It may now be time to question this monetarist orthodoxy. It is starting to cost us dearly.

The influx of borrowing from overseas has overvalued our exchange rate against our trading partners. This is slowly throttling our export sector.

In providing such a favourable trading environment for banks and other lenders, our stringent monetary policy has also contributed to a debt mountain and rocketing house prices.

Rather than exploring clumsy methods for reigning in house prices, the Finance Minister should be inviting an examination of the costs and benefits of maintaining such an extreme monetarist approach to managing the New Zealand economy.

* Peter Lyons lectures in Foundation Studies at Otago University.