“Poll finds people like ‘free’ money”
Well, that wasn’t the real headline, but it may as well have been.
Both The Age and the News Ltd websites report that 59% of respondents to an AC Nielsen poll approved of the bail out to the banks, the billions spent (and to be spent) on infrastructure projects, and of course the $900 cash bribe.
We’ll assume the first home buyers grant is in there as well.
Interestingly, 52% said they were in a similar position financially as they were last year. While 20% said they were better off.
What do we make of that?
The biggest financial and economic catastrophe since the 1930s, and 72% of the population is no worse off today than they were twelve months ago.
Either the government really is that good at fixing things up, or, there’s more to the story. I’m guessing it’s the latter. But it got your editor thinking…
It just so happens it was a busy weekend in the Sayce household. Saturday involved attending about six hours worth of presentations for the kids’ netball teams, and a swimming graduation.
By the end of the day your editor was exhausted.
So on Sunday it was relaxation time. And what better way to relax than settling back in the lounge room to watch Terminator 2 on video.
Yep, there’s no better way to relieve tension and wind down than watching Arnie and his chums trying to destroy each other and everything around them.
But did you realise that all the action isn’t real? I know it may surprise you to know, but the clever folks in Hollywood use computers and animation to make it look real. They call it Special Effects. Oh, you knew that already.
Of course you did.
It’s obvious that you can’t really make a robot from a liquid metal. And anyone can figure out a metallic robot couldn’t really change its appearance to look like an LA cop, or a ‘mom.’
Just as we all knew that Christopher Reeve wasn’t really flying as Superman.
It looked like he was – or at least it did to a 7-year old in the 1970s – even though we knew it couldn’t be so.
Do you remember watching “The Making of…” shows where they revealed how Hollywood could make Superman fly? A blue screen and some wire. That’s all it was.
Who’d have thought it could be so simple. Superman flying around Metropolis is actually just Christopher Reeve suspended by wires in front of a Blue Screen at a studio in Buckinghamshire.
Well, this morning, as we were reading the news about the success of the Fairy Ruddfather’s spending spree, we wondered whether it was possible that the ‘Great Stimulation’ of 2008/2009 was real.
After all, if 59% of the population love being stimulated, and 52% believe being stimulated has improved their lives, then surely it has been a success.
Who are we to say these people are wrong? Wouldn’t they know for themselves whether they are better off or not?
And why should we be so arrogant to think that Money Morning knows better than the combined brain power of the Fairy Ruddfather, Wayne Swan, Dr. Ken Henry and Glen Stevens?
I mean, these people have thousands of super qualified academics (including some PhDs we expect) and public servants crunching numbers day and night. They concluded the government needed to step in and fill the space recently vacated by the private sector.
But they’ve had external support too. Almost every economic commentator in the mainstream press has approved of the spending measures. How can all those people be wrong and Money Morning right?
Going by their argument, the crazy capitalists and free-marketeers took so many risks that it almost killed the global economy.
So let’s suppose we agree with that – which we don’t – what would be the solution? Well, you’d think if risk-taking and leverage and spending too much were the irresponsible actions of the free market, the appropriate action would be to do the opposite…
Not take risks, not use leverage, and not spend.
But of course, the stimulation hasn’t done any of those things. Instead, the Great Stimulation has encouraged more risk-taking, increased leverage, and advised everyone to spend early and spend often.
Hang on, that can’t be right. We thought it was only extreme capitalism that did those things.
We’re scratching our bald head here and wondering exactly how today is any different to one year or two years ago.
Do you know what? There’s a real chance the polls have got it right.
Maybe those 52% of respondents are no worse off than last year. And maybe 20% of respondents are better off than last year.
So, does that mean all the stimulating has worked? Or does it mean something else?
If we go back to our Terminator 2 and Superman story, the boffins in Hollywood were able to make robots melt and reform, and make a man in tight blue pants fly. If they can do that, then anything is possible.
Therefore it makes us think that when we look at the Australian and global economies, we only think we are seeing an economic miracle. The stimulus is creating a vision which isn’t entirely true.
We look at the economy and it looks fine. We don’t see boarded-up shops. We don’t see queues at the unemployment office (or whatever it’s called), we don’t see millions of people being turfed out onto the streets.
But what if it’s all just an illusion? If we take away the strings and blue screen to the Australian economy, there’s a real chance ‘Superman’ will smash to the ground.
You see, what’s been created isn’t a fantastic new economy at all. And the stimulus packages aren’t helping either. All that’s happened is something Hollywood should be proud of.
We’re experiencing ‘Wealth Special Effects.’
The problem is the economy was boosted to a level it should never have reached. That was done so, not by extreme capitalism or the free market, but by extreme government manipulation and extreme banking.
Both of which are continuing to exert their disastrous ‘Wealth Special Effects’ on the economy. The two ‘organs’ most responsible for the collapse in financial markets are now more in charge than they’ve ever been for guiding us to safety.
The trouble is, they’re just leading us further into danger.
So, if we all know that Superman can’t fly without the aid of some pretty strong string, why does the majority of the population believe you can spend your way out of debt?
Isn’t it obvious that government spending and government debt is actually worse than personal spending and personal debt? Isn’t it obvious that the government has to get the money from somewhere? That somewhere is your pocket.
But that doesn’t matter when we’re being given $900 of our own, or someone else’s money by the government. Money for you to spend, while it wastes about $4,000 per taxpayer on the rest of its stimulus package.
Yeah, you don’t see that figure quoted anywhere often. That’s just our rough estimate of the cost of the stimulus programme per taxpayer. In fact it’s probably a lot more than that if we did the numbers properly.
Even if you managed to get your hands on the $900, the odds still are that your $900 cheque from the Fairy Ruddfather has cost you around $4,000. Is it worth it? We wouldn’t have thought so.
It doesn’t sound like a good return on your ‘investment.’
But that’s the problem. The mainstream press and most people in general tend to focus on what they can see, not what they can’t see. What they can see is $900, and Superman flying through the air.
What they can’t see is the $4,000 cost per taxpayer and the strings attached.
The stimulus and the current state of the global economy – including Australia – is a fraud right now. It has been inflated to an unsustainable level over the last forty-odd years.
When finally we had the opportunity to deflate it and get some sense and reality into the economy, governments and special interest groups – and indeed the public – thought things seemed much better when it was inflated.
So, while it may appear as though things are looking rosy right now, it is little more than the same mirage the world was looking at two years ago.
The ‘wealth’ back then was little more than debt covered by an overvalued ‘asset.’
Today we find ourselves in exactly the same position.
Nothing has changed. The ‘Wealth Special Effects’ look impressive, but strip away the façade and once again we’ll also see that it’s not possible for humans to fly unassisted and it’s not possible for real wealth to be created just by going further into debt.
Other Stuff on the Markets
The S&P/ASX200 climbed 0.55% on Friday, while on Wall Street the Dow Jones Industrial Average added 96 points. In Europe the FTSE100 added 0.47% and the CAC40 gained 0.87%.
The price of gold in Australian dollars is trading at $1,165.40, while in US Dollars it is trading at $1,005.70. Silver in Australian dollars is $19.43 per ounce, and in US dollars is $16.77 per ounce.
The Aussie dollar remained steady versus the US dollar and Japanese Yen, trading at USD$0.8621, and JPY78.30.
Crude oil closed at USD$69.29.
For the biggest movers on the market yesterday click here…
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BB – that’s a very poor analogy (sorry to spoil a good story)
In the village, the wealth of each person was $100 asset minus $100 debt = $0. The overall wealth of the village was also $0, before and after the rich tourist.
Nevertheless, every villager was expecting to use the interest income from their debtors to retire early to a canal side estate with cheese & wine lifestyle. Obviously this was a hallucination in a zero sum economy. With all the “debts” written off they also wrote off the future income streams that propped up the house of cards.
This is what debt repudiation has not been explored as real solution to the ongoing crisis. We all must believe that we can get rich by selling ourassets to each other at ever higher prices, funded by ever higher levels of debt. That delusion will eventually fall apart.
BB, as unlikely it is for something sensible like that to happen, it even less likely that we will have the additional two elements we should have for shaking ourselves to our own senses:
1. Sound money, not this cheap sh!t that banks conjur into existence on their keyboards.
2. Decent and fair guidelines on lending, so that availability of credit is equitable, and not porked to connected interests.
Something along these lines would make a vast financial industry to shrink and those working in it would easily find work in other, productive areas of a booming economy that would be likely to result. A bloated finance industry, just like a bloated government and public service sector, are more of a dead weight on the economy than anything else. You need some of both, but not like we have at the moment.
But I must admit that I am no expert in this area at all, and these are just my vague impressions, and not a worked out and seriously held view or position.
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