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Housing affordability

12 Jun

Chuckling at this cynical but very apt line from Tony Alexander of the BNZ in his Weekly Overview today:

Sorry young folk, but much as you may feel the future belongs to you and your smartphone tapping ways, for now the wealth and the power belongs to us – the Baby Boomers. And you my dears form part of our retirement packages. So don’t expect any of the radical suggestions which I have thrown into this section of the Weekly Overview every now and then for solving the housing affordability crisis to actually gain traction.

Tony Alexander has previously listed many ways in which housing affordability could be addressed; many radical and most of which I understand he does not personally support. The problem could be addressed, but we seem to be frozen in the headlights of competing interests.

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Cost of wood pellets vs firewood as fuel

6 Apr

For those who were wondering…

According to US publication Mother Earth News, the heat output of 1 ton of wood pellets (907kg) = approximately 1 cord of wood.

Note, this is the US regulation definition of a cord, which is efficiently stacked, not loosely tossed as in NZ. Fortunately, to help us out here, under Maine law, stacked and loose cords are defined as 128 cu ft vs 195 cu ft respectively. This amounts to a ratio of pretty much 1:1.5. Therefore a standard Christchurch-purchased cord of firewood (tossed, not stacked) equates to approximately 600kg of pellets.

At $0.58 per kilo, you are paying $348 to buy pellets in Christchurch equivalent in heat output to a tossed US cord of wood.

As of today, a cord (3 cubic metres) of a mix of dried pine and oregon in Christchurch is $285. Converted to a US cord of 3.6 cubic meters, you get a cost of $342.

Assuming the above assumption on heat output equivalence is based on a pine & oregon firewood mix, $348 of pellets = $342 of firewood.

On this basis, heat from a pellet stove is equivalent in cost to heat from a firewood stove. This ignores the minor electrical cost of running the fan in a pellet stove.


Sources of assumptions that went into this calculation:

  1. Relative heat output
  2. Stacked vs loose cords defined in Maine
  3. Cost of pellets in Christchurch
  4. Cost of firewood in Christchurch



Paul Krugman on the ratings agencies

27 Apr

In my role as Chair of NZCU South, I have recently been a participant in a credit rating process conducted by Standard and Poors on our credit union.  We ended up with a respectable BB rating.

Forced on us by recent government regulation, it was an interesting process.  I will spare you my grief over a small $100m South Island financial cooperative being forced to spend members’ equity on an expensive international credit ratings regime.  What I will say is that I was pleased to see Standard and Poors working to a clear and unambiguous assessment framework as they worked through the process with us.

Sadly, a recent New York Times column by Nobel Prize-winning economist Paul Krugman suggests that this has not always the case with ratings agencies.  Krugman points to the fact that:

…of AAA-rated subprime-mortgage-backed securities issued in 2006, 93 percent — 93 percent! — have now been downgraded to junk status.

His column cites rating agency emails uncovered in the US Senate’s Permanent Subcommittee on Investigations.  These show clear conflicts of interest in ratings agency work.  Wall Street firms would:

…direct their business to whichever agency was most likely to give a favorable verdict, and threaten to pull business from an agency that tried too hard to do its job.

Krugman briefly considers what can be done to avoid the same scenario developing again, though without coming up with a firm recommendation.  Read his column on the New York Times site here.