New Onion

After my recent posts of relative skepticism about the Bermuda real estate market I think it’s worth outlining the bull case for Bermuda real estate. It can be located right here: Royal Gazette Employment Classifieds.

As long as the government continues to allow population growth then Bermuda’s economy will continue to grow largely independent of the rest of the world, and despite poor government (really terrible government could still cause a local recession/depression). However this population growth fuels the decline in standards of living as more of us are packed into condos/human filing cabinets, and spend more of our lives sitting in traffic. This population growth also shields government from responsibility and side effects of having a government producing large numbers of (mostly black, mostly male) people who are only employed because we are building as fast as we can to provide housing for the growing population, so as long as the government continues to keep the demand side for housing growing by allowing net immigration, and as long as they continue to artificially constrain the supply side through incompetent management of urban planning and building control, then we should see prices remain firm.

Of course, we are building a social house of cards by leaving the lower income Bermudians chronically under-housed, and by keeping prices and rents high are transferring wealth from the young and poor to older (mostly white) home owners.

Anyone who claims the PLP is the party of “social justice” is clueless.

An interesting article in the paper today: Car sales concerns.

With car sales dropping 24 percent in May alone, dealerships said it was hard not to notice a lack of customers.

This is not only an indication of economic weakness, but it’s also going to show up somewhere else where it hurts. The government takes a large tax on every car sold. Fewer sales means less tax revenue.

Since our government has presided over massive increase in spending which have not been fatal thanks to almost matching gains in tax revenue, we can expect nothing good from the combination of poor financial control, economic slowdown, and a Finance Minister who would have been fired if she was a company CFO.

Edit: Changed the link from a duplicate of the car sales story to Bob Richards’ response to the audit.

Since Bermuda’s government is picking up on the American right-wing’s penchant for outsourcing of government functions it’s probably worth it to start asking the question: Are government contractors more efficient than the civil service?

From the Wall Street Journal opinion section a somewhat slanted view:

One fact about government outsourcing is settled: It sure doesn’t save money. A Washington Post reporter who scrutinized Katrina reconstruction contracts in 2006 found that “the difference between the job’s actual price and the fee charged to taxpayers ranged from 40 percent to as high as 1,700 percent.” To cover damaged roofs with tarps, certain contractors billed the government $1.50 per square foot of roof covered; some of the people who actually did the work got under 10 cents per square foot. Guess who kept the difference.

The issue in my books are incentives – what are the incentives we create when we contract out government functions?

Here’s a neat interactive side by side comparison of healthcare systems internationally. Just something I stumbled across.

As I’ve said before – the only conclusion that an honest economist can make about healthcare is that one that is for fully private and for-profit is the worst possible solution and Japan, which from an economic perspective is one of the best healthcare providers is also the worst for the doctors. This is not a coincidence, and it looks remarkably like the Bermudian system.

From The online Royal Gazette.

“We talked about Bermuda. He was interested in how we were doing in tourism and understood our rationale for rebuilding tourism and not having a one-legged economy.

Essentially shows one thing: The Premier, the President, or both do not understand international business.

As I have said before, we do not have a one-pillar economy, not even close. We have insurance/reinsurance, investment management, trusts & fiduciary services, and a number of others. Each of them is a completely different industry and each of them is highly efficient at bringing in revenue from overseas into Bermuda and depositing it into our economy in the form of salaries, rental payments, services, taxes, tourists, etc.

Each of these international industries can offer Bermudians completely hilariously high salaries in comparison to competing jurisdictions and other industries. If we do things right then these salaries funnel through to the service sectors and keep our blue collar workforce enjoying a good standard of living and unlimited opportunity for their children. Why? Because Bermuda has a sustainable competitive advantage of being a historically stable, well-run country with a legislative framework far more nimble than large countries (although a number of countries are gunning to take us down).

All of our pillars are suffering from the bad behaviour of Dr. Ewart Brown and his cronies and the utter mismanagement and corruption that is their standard operating procedure.

Unknown to most voters, and despite the politician’s best efforts to derail international business, in the background the machinery of the Bermuda regulatory system continues to do an acceptable job of keeping legislation up to date without the clown show of some of our competing jurisdictions.

So it looks like the government is going to start making good on some hastily thought out election promises. I have a sneaking suspicion that we, the Bermudian taxpayers, are about to find out that no matter how poorly managed, any project can be completed if given an unlimited budget. Again.

Not that we’ll be able to tell exactly what they’re spending our money on thanks to the 36 page embarrassment of a government budget… when the budget is shorter than the Auditor General’s Report we have a problem.

There’s a quote somewhere that management is “Doing the right things well.”

We all know that governments are not good at doing the right things… but it’s always a shock to find out just how badly things can actually be done.

Staff are said to be angry with the increasingly dilapidated state of the building and no longer consider it safe.

The letter is believed to have complained that a proposed multi-million renovation of the 300-pupils school never materialised — and as a result it will shut in June.

Honestly, is this a joke? Or are we going to see a contractor suddenly step up and do the work at the last minute at great expense?

It’s so hard not to get completely cynical.

Hint to Dale: Here’s a link to some research, because “Just say No” doesn’t work.

Mr. Butler said: “Our campaign entitled ‘Stand Up’ calls for each person in the community to stand up and be accountable for the successful reduction in the supply and demand of and for drugs on our Island.”

Ah yes, the magic “accountability” once again showing up without any actual accountability to anyone and where the incentives are overwhelmingly skewed to make sure people have good reason not to be accountable for the actions of themselves or others.

Realistically the only way to keep people out of the drug distribution business is to make sure they:
a) have good alternatives, and
b) have something to lose.
If you are a 20something uneducated single male then you are very likely to have neither. Of course, the government’s failure to manage housing, education are the two big causes. People who can afford a place to live, and have the skills to have a good job tend not to need to sell drugs. Secondary causes have been the failure by government to provide expanding social, education, and vocational services and instead piss away record government revenue through incompetence, corruption, poor financial control, and pet projects.

Realistically the only way to make people take responsibility for other’s actions is to make sure they won’t get chopped or shot for hurting someone else’s drug distribution business.

I can’t make this post without wondering if it’s too much for the politicians to prove that they’re not on drugs themselves *ahem*.

In the spirit of Dennis’ post here’s a nifty link on hypermiling.

And here’s a question: What are the problems we’re going to have 20-30 years from now?
- Rising sea levels?
- Coastal erosion?
- Coral bleaching?
- Changing ocean currents?
- Expensive air travel?

I’ve already suggested a transition to New Urban living principles and Human Architecture, both of which are by nature far more sustainable than current urban patterns that are relying more and more on cars (as it becomes more dangerous to use other forms of transport)… and for me personally, unlike the politicians who are looking as far as a few years ahead, I am looking a lifetime ahead. As with US housing, Bermuda is suffering from an incentive mismatch, I wrote about the consequences a while ago.

If you saw someone sitting in a hotel bar reading a finance textbook and laughing that was me.

Why?

Because I was revising the principles of capital budgeting and putting it in the context of the Bermuda government’s decision making.

Capital Budgeting Process in the Bermuda government
1. Generate Investment Ideas (How can we funnel ourselves lots of money but make it look like it’s not stealing?)
2. Analyzing individual proposals (How much can we funnel to ourselves?)
3. Planning and capital budgeting (How can we do this so that nobody notices, or if it has to be public how can we make it look not completely crooked?)
4. Monitoring & Post Auditing (Let’s keep Larry too busy with other things.)

*facepalm*