I finally got round to watching the film “V for Vendetta“. Shades of 1984 and more recently Children of Men. It’s quite topical given the current issue of domestic terrorism and how to deal with it.

In New Zealand we are still experiencing protests against the mass raid on people suspected of unlawful activities under the Supression of Terrorism Act. What constitutes terrorism on a domestic scale? And more to the point how far can the authorities go in their protective capacities?

This is not an easy question to answer. Intelligence services are meant to forewarn and forestall any action against the State. This will always lead to a presumption of guilt even though an act may not have been carried out. This leaves a bit of a vacuum in the traditional legal process of innocent until proven guilty.

The authorities are stuck in a tight spot here. Blamed for not preventing an attack and blamed for arresting innocent people.

For activists of a more moderate nature this presents potential pitfalls. How far can you go? Certainly for activists with a bent for civil non-violent disobedience this can put them squarely in the firing line.

It seems to me that New Zealand is better than most. At least the media, with their general liberal bias, have no problem in reporting openly what takes place. In the US this may not be so easy. There is considerable concern over the loss of civil liberties and privacy for even the average citizen.

There’s no easy answer. That’s why governance and participation in the democratic process is so important. As long as there are clear sanctions against governments and those in power, through the ballot box, and freedom to air grievances then there is a balance.

However, when fear takes over then there is a big problem. If this is really happening in the US then one can only hope for some change and for the issue to be aired openly in the electoral debate.

Fear and freedom have a lot in common. You cannot be free if you live in fear.  Whilst I think we are still fortunate in NZ in our openness we still need to keep an watchful eye.

Meanwhile be careful out there on the 5th November

On a recent trip back to the UK I was fortunate enough to visit Salisbury Cathedral and the site of the Battle of Naseby. Both are significant historical sites but linked together by virtue of their place in the development of democracy as we understand it today.
Salisbury Cathedral holds one of the four remaining originals of Magna Carta, the founding document which spells out the relationship between King and Subject. It’s a magnificent piece of history.

The Battle of Naseby, in a Northamptonshire field, was the key to the English Civil War, as the King’s Men were routed by the Parliamentarians. 4 years later Charles I was executed and England became a republic of sorts until 1660. This period was a test of Magna Carta, a rebuff to the over zealous monarchy and a statement by the people that they would not have their rights trampled over.

The reason i mention this is because of this post by Gareth Morgan who is chugging is way around Africa and writes a very neat piece on the continuing disaster that is African democracy (not in all countries of course).

Whenever we grumble about our political system a quick dip into the history books should quickly remind us of  how we got here. It’s a shame history is not taught seriously anymore but it often helps us develop a sense of context when we lose our perspective.

Surely this is a joke? The White House is disappointed over the recognition of the 1915 Armenian Genocide by Congress because it might effect trade issues and the war on terror.

Oh the irony.

The Turks have reacted predictably by recalling their ambassador.  And they want to be in the EU?

It makes Alice in Wonderland look sensible.

I just heard this news an hour ago and frankly was astounded. The Bank of England will ,if necessary, guarantee all deposits held with Northern Rock. This a major change to the current depositors insurance scheme.

Wow! In a stroke they have just removed any risk from the banking system. They have in effect nationalised Northern Rock without actually doing so.

Actually this is a good thing since it further exposes the myth behind our banking system. Mind you they didn’t rush to bail out the depositors of BCCI  when that failed.

So where to from here? Well that’s anyones guess but this wont finish here even with the  blank cheque provided the the Old Lady.

Max Hastings writes a lovely piece here. Finally as the party comes to an end and the hangover kicks in, will there be some reason?

I hope so. It is a great opportunity to look closely at the money system we currently have. Do not look to our central bankers to provide the lead or even our politicians. We the people will have to provide ideas, answers and solutions on how to proceed. The monetary reform movement has been growing by the day and now it is time to stand up and be heard.

For those who haven’t read it yet here is link to the complete report on the future of search. It’s an eye opening read and hopefully will give rise to new ideas, new research and even new businesses.

For me it is the democratic nature of the web that excites me. For now i’ve just focused on the delivery of the architecture that will make us form the web around us rather than having to shop through designated ports.

I think that is well on the way to happening.

I’m also thinking about the impact on governance. By this i mean the way we allow ourselves to be governed: our electoral processes, our engagement and involvement in political systems and how we make ourselves heard.

The coming versions of the web will not just make business more efficient, or general life but our political systems, our governments who eat up 30-50% of our GDP depending where you live.

The ultimate political feedback and citizen engagement system is going to rise up from the web. The powers that be are not likely to embrace this as many of them will be out of a job.

E-government is a web 1.0 framework. Imagine what it could look like in future versions. Maybe we can set up a  dream team for that?

There has been a lot of hand wringing over the recent Reserve Bank’s intervention in the currency market. So what’s the story here?

Well the RB has a clear mandate to keep inflation, as measured by the CPI, between 1-3% on an annual basis. According to them they also say that,

“The Bank is required to ensure that, throughout the economy, money works as well as possible as a mechanism for making transactions, storing value, and keeping account.”

So let’s say they are also responsible for price stability in a general sense i.e. no serious asset bubbles or major deflationary shocks.

So how are they doing?

Since 1998 the CPI has risen 20.7% to December 2006. So an average of 2.5% per annum which is within the prescribed band.

But the key worry, or so they keep repeating, has been the housing market which in the same period has risen 143%.

So what have they done about it?

From Mar 04 to Dec 06 they raised interest rates by 2%, from 5.25% to 7.25%. That doesn’t sound like a great deal by historical standards and clearly has not had any impact.

From Mar 04 to Mar 05 rates went up 1.5% as inflation took off towards 3%. However, they stopped when they should have kept going. When CPI hit 3.4% and stayed above, the bank should have got really serious and jacked rates up very quickly.

They didn’t. CPI was above 3% from Sep 2005 to Sep 2006 and they moved only 50bp. This was their big mistake. With house prices on the march as well they should have had rates up to 8% by June 06. They are a year behind the curve and that could cause some major problems.

Alan Bollard has been soft in his approach and this may well stem from the false comfort that low global rates has brought. The great inflation crush of the late 1990s has seen global rates fall into ranges not seen for many a year. Central bankers have been playing in a very small range and have been lulled into a false sense of security.

All around us we witness the asset price bubble caused by cheap global credit. The Japanese are still at it pumping out cheap yen that no one really wants. This is a major disaster waiting to happen. We’ve seen it before when USD/JPY fell to 79.65 back in 1995 on the back of US trade concerns and Asian Central banks dumping their US$. For now the flow out of the yen and into the kiwi continues with a rise of over 15% in the last 6 months.

Yesterday Winston Peters called for an amendment to the Reserve Bank Act asking that the Reserve Bank take a more rounded approach to managing monetary policy. I have to agree with him that a major review is needed and that simply using the OCR to control the economy is not working.

Submissions for the inquiry into a future monetary policy framework close on 19th July. I will post my submission up here in due course. It’s a great opportunity to throw open the arcane nature of our monetary system and make proposals that may lead to a more productive and stable economic system.