Fool enough of the people, enough of the time

Whether we like it or not, we live in a world of specialists. People who pursue a career which is narrowly focussed. This applies from Joe 6-pack right the way through to our leaders. Everyone is pursuing a career choice with their own motivation, be it wealth, fame, security, or any other reason. Where a person has limited influence, their motivation is not too important. However as the level of influence increases, I maintain that the motivation becomes signifiacntly more important.

When we get to elected officials, that motivation is critical because the actions of these individuals shape the lives of many others. As people we have a blind spot. We can only view other peoples motivation from our perspecvtive. If it is inconcievable that we would act in a certain way, we find it hard to believe that others could. How does this relate to politicians and politics?

First we have to consider our political system - Democracy. What is Democracy? I googled this and found this definition.

Democracy ~ the word has a number of meanings (source)

1. Government by the people, exercised either directly or through elected representatives.
2. A political or social unit that has such a government.
3. The common people, considered as the primary source of political power.
4. Majority rule.
5. The principles of social equality and respect for the individual within a community.

I maintain that it is a fair description, however I have maintain that point 5 is at odds with point 4, but that is a topic for another day. Lets focus on the idea that it is the rule of the Majority, overseen by people elected in some fashion by the populace. We have an election and then a government. What now? In an ideal world, the Government would do what the people wanted. But which segment of the people? Here in lies a fundamental flaw. It is impossible for everyone to accept the decisions, so the system becomes a contest between those elected and the governed to do what is most popular.

Note that I have said popular, not right. You see politics is a popularity contest where the only way that a politician can stay in his career is to win the next popularity contest. This means that he is obliged to make decisions that appeal to the majority of the electorate. These decisions may not be in the best interest of the country, but that is not important as long as they are in the short term interests of the majority of voters.

I’m sure everyone has heard the famous quote

You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time.

Now consider it in light of this discussion. If a politician can fool enough of the people enough of the time, democracy will provide the governors with unlimited power. All they need is a compliant media and enough people with a vested interest in the direction chosen and you have a dictatorship by a select few with the implied consent of the populace.

How do you get the population to have a vested interest in status quo? Simple. Make enough people dependant on Government subsidies and you have in effect bought their votes. You own them, and as long as they stay happy, growing fat suckling on the promises, they will always vote for the goose that lays the golden egg.

Too much debt - lets borrow some more.

Reading an article in the NZ Herald, I happened upon two interesting comments. First from the OECD report

The problem there is that the country as a whole, as distinct from the Government, is already heavily in debt to the rest of the world, to the tune of 93 per cent of GDP even after allowance for New Zealand investment abroad.

Much of that is the legacy of the housing boom, in which house prices doubled since 2000 but incomes, of course, did not. Between 2000 and 2008 the ratio of house prices to disposable incomes rose by two-thirds, more than in any of the 18 other developed countries for which comparable figures exist, the OECD says.

I guess we all knew that this was an issue. However further down the list there was a comment by the opposition finance spokesman.

He noted the OECD’s observation that tax cuts tend to be less effective than increased Government spending (if judiciously chosen) as a boost to demand.

The tax cuts at the start of this month were especially impotent, Goff said, as they were targeted at those on higher incomes who would be more inclined to save them than spend them.

What is wrong with this picture? We have too much debt and yet we shouldn’t give tax incomes to those people who would not spend it immediately. What bollocks!

It is the over-spending that has got us into this mess, so how can spending more help? Savings are the key to wealth, and the seed corn for future growth.

When you all of your inomes goes to servicing debt - life stops. Think about this for a bit…

~ Mr Z

Of interest to New Zealand Readers

I found that this was particularily interesting. I had felt that the New Zealand market was starting to roll over and die. I was picking one year behind, but 18 months is probably right due to the fact that property does worse in the winter.

Some market estimates suggest a figure in excess of $200 billion. But because there’s really no way of knowing for sure how big investors’ bets against the low-yielding yen really are, Hiroshi Watanabe’s guess may be as accurate as any, but the evidence is against him. Mr Watanabe would be well aware that tiny New Zealand, a country of about 4 million people had borrowed at least $50 billion on the London sourced but Yen funded Uridashi trade alone. That’s what fueled the great Down Under property bubble, now running about 16 months behind the US timeline but threatening a center stage performance in the new year.

In other news from Down Under, this from the NZ herald

People have spent $2.7 billion across the Paymark network so far in December in 51 million transactions.

Last year, people spent more than $4 billion through the network in the weeks before Christmas.

Transaction volumes are up 5 per cent on last year but this is only half of what the company expected to see normally in terms of year-on-year growth, said Paul Whiston, Paymark’s head of sales and customer relations.

Do the maths.  $4 billion in approx 48.45 milion transactions (95% of 51 million tx) is an average sale/transaction of $82.50 v’s $2.7 billion in 51 million transactions is an average sale of $53.00. Net result is a 36% decline in revenue, which will have a cascading effect across the whole economy.

Enjoy the Christmas of 2008, it  may be the best for quite some time.

Service Economy

Have you ever pondered what it is that we in the western world do to be productive? We are a consumer lead economy. Our economy is dependant on consuming things. How many of today’s workforce actually produces anything? In 1900 90% of people were self-employed. Today 90% of people are employees. Modern day serfs, working for the land owners!

What clarifies us today as a nation? We do not build anything. We do not produce anything. What do we call ourselves today? A service economy. What a load of bunk. We serve only ourselves playing financial games that will only benefit ourselves. Is it any wonder that our factories all have left our shores to find more fertile ground? What is America’s number one goal today as a people? To retire with a rich 401K portfolio when we are even too old to enjoy it. What a moral waste.

The quote above was from David N.Vaughn. While it is American focused, it surely applies to all of the Western  World. What a sad indictment on us as a society. We are expected to live our lives as slaves to a system that consumes, and yet to be expected to derive some satisfaction and sense of achievement. Is it any wonder that the world feels so bleak and heartless? We as nations have sold our souls and are only just coming to realise that it doesn’t feel very good.

Unable to Ship

This from another blog.

I’ve been on the road almost all day and have one hour before the next leg of my trip so this will be short. Yesterday I learned that sixty-four countries cannot issue letters of credit necessary for international trade and likewise cannot insure import/export shipments since no one knows if the insurance companies are good for it. It is an understatement to say this makes international trade almost impossible. The reason is the credit crisis and the fact that banks don’t trust each other, or anyone else for that matter. This demonstrates that the US credit crisis has now become a global issue and there are no easy solutions.

When shipping is stopped by this credit crisis, people will starve. It is that serious. We are really in the shit!