Received from Calvin Oaten
Are we coming to the end of the ‘Golden Weather’? I say this, not in the meteorological sense, but rather in the sense that perhaps our society and its economic construct might be on the verge of a catastrophic change. Why? Well it seems that many signposts are pointing to an approaching collapse of the present model of the economy as constructed. This requires constant growth in order to sustain an ever increasing social budget. That in turn requires full or near full employment, a buoyant consumer market and a consequent ever increasing supply of energy and raw materials. None of these are finite, neither in New Zealand nor the Planet. The current model has, in order to foster this growth, taken upon itself to ‘jazz up’ consumption by cultivating a culture of instant gratification, fueled by intensive marketing, planned obsolescence, and last but not least, very easy credit.
This easy credit has been promoted heavily by governments, local bodies, banks, retailers and all manner of financial institutions. This has brought about a dynamic shift in society’s attitude to debt. It has encouraged folk to spend beyond their immediate ability, to the point where their indebtedness is assuming dangerous proportions. This is manifested by ‘economic bubbles’ forming, none more so than our own housing market. The people in the industry, real estate companies, banks, financial institutions all rev up the market by convincing people that property is a great investment which will always hold its value. But we only have to look at Ireland, the UK, the USA, and lately Australia to see the lie of this claim. Property can always go down just as it can go up. Take a look at Japan. Its property bubble burst in 1989 and has never recovered. Off by as much as 70-80%.
The result of all this is a hugely indebted developed world, including NZ. What caused this to happen? It seems to date back to around 1971, when then President Nixon was experiencing difficulty in financing the Vietnam war. At that time printing of money was constricted with the dollar being pegged to what is known as the gold standard. This meant that the amount of currency in circulation was limited by how much gold was held by the federal government. By leaving the gold standard the federal treasury was free to set its own parameters and to print accordingly. That resulted in a vast increase in all paper currencies around the world with a burst of inflation throughout the 1970s and 1980s.
Historically, all monies eventually revert to the mean, and this has always been to a standard unit of value, GOLD. Throughout history, even before Roman times this has always prevailed. Trust in paper currencies sooner or later fail and there is a collapse.
We’ve seen it in modern times with Germany (in the 1920-30s), Argentina (several times), Greece, and very recently Iceland. The USA federal government has just breached its self-imposed debt ceiling of $16 trillion. If anyone wonders what $1 trillion represents, look at it as a time equivalent. Let’s say one was to repay $1 trillion at the rate of $1 per second. Working 24/7, 360 days per year it would take “32,000 YEARS”. So multiply that by 16 and it is easy to see that this debt will never be repaid. Worse, it is growing as we speak.
Those with the power are unbalancing the fairness factor.
This reckless attitude has permeated into the human psyche and we see evidence of it here in little old Dunedin. Our society has degenerated into a selfish me world. Those with the power are unbalancing the fairness factor.
Take remuneration for example, fewer and fewer people are taking a greater share of the economic cake, and are quite blatant about it. Wealth is flaunted while many are moving into poverty. Financial rewards are all out of line with production balance.
It is noticeable that many of the highest remunerated are drawing their rewards from the public’s purse, without so much as a blush. Here in Dunedin we have a local MP tabling a bill in Parliament seeking a minimum wage of $15 per hour. This, on a 40-hour week equates to $600 per week. It would be up from $13.50 per hour or $540 per week. This is being vigorously opposed by many. But on the other hand we see public servants and others receiving enormously higher rewards. We have seen several instances in the last few weeks.
The retiring CEO of the Otago Museum with a salary of $310,00 per annum (pa) or $5,961 per week (pw). The DVML CEO receives $250,000 pa or $4,807 pw. The council owned company Delta, where the CEO is paid $380,000 to $390,000 pa or $7,500 pw. 41 additional staff paid over $100,000 pa or $1923 pw. Our own DCC CEO is rewarded with between $340,000 and $360,000 pa or $6,730 pw. The Vice-chancellor of our University of Otago receiving over $500,000 pa or $10,000 pw. Our DCHL group of companies last year paid its 7 directors $725,444 for what would optimistically involve about four weeks equivalent work each. This is repeated up and down the country and if anyone thinks this is sustainable they have to be in “cloud cuckoo land”.
On our local public scene we have seen the city’s debt burgeon from $212.486 million as at 30 June 2005 to $602.008 million at 31 December 2011. We now know that this has considerably changed for the worse, since. The stadium is a financial disaster, in serious damage control, the Otago Settlers Museum is over $40 million, the Town Hall/Conference Centre is over $50 million, and we are looking at somewhere near $100 million for the Tahuna upgrade. No-one in office seems to either understand, or simply passes it off as someone else’s problem.
We elect these people to conserve and look after our treasure, and what happens? It just goes from bad to worse, with all manner of rascals leaching off us in different ways. If only someone in office had the intestinal fortitude to stand up and say, “enough, this has got to stop”. But sadly, it gets back to that culture I mentioned. “I’m OK Jack”, never mind anyone else.
Is all this sustainable? Ask yourself. We don’t know when the situation will break, but it is certain that it will. The whole developed world is awash with debt and frantically creating more by the day, in a desperate move to save the situation. But it is pretty simple, how can more debt solve a chronic debt malady? It is pretty much synonymous with supplying a chronic alcoholic with more whisky. We are in for very interesting times.
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Posted by Elizabeth Kerr
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