As our Socialist overlordess' treasurer-henchman likes to tell us repeatedly, Australia (supposedly) has survived the GFC with one of the strongest economies in the world - thanks of course to their brilliant fiscal management (y'know, like destroying the roof insulation industry with huge subsidies both suddenly introduced and suddenly removed, leaving long-term players in the industry devastated).
Oh sorry - I got sidetracked.
So yes, this fiscal management, and behold, we're doing so well!
So well in fact that John Giaan (who runs an Australian investment email list), in one of his regular emails just yesterday said the economy's going so strong that he's leaving the sidelines and getting back in the action.
Nice, nice. Nice for him. Bla bla bla.
He mentioned the GFC II / Global Financial Meltdown by name, saying "where is it? I reckon it's not coming at all".
A bit like the guy who said "tsunami? what tsunami?" and hit the beach, just hours before the beach was hit.
Or is he right?
He, and Gillard and her team are the ones in error. (Or of course, in Gillard's case, perhaps merely propogating error without quite so strongly believing it...)
The signs are all around, and getting worse and worse as the months go by.
Lots of others have commented on the situation, and for time's sake, I'm not going to repeat information about the challenges facing our retail sector, or the geographic disparities in our nation at present. Nor will I touch on the very relevant issues of over-inflated house prices due to interest-bearing loans and government intervention.
Instead, I'm going to just focus on the evidence on the ground all around me personally.
For years I've been in business, and hardly ever has a client had a hard time paying.
But over the last 12 months, it's been escalating. And escalating. Clients who appreciate my work, but have been unable to even pull together a mere $1k or $2k when it comes time to pay. When some years ago, they could easily pull together $10k and $20k deposits and milestone payments.
The economy isn't just "tight" - it's strangling. Two businesses close to mine have recently become behind on, or are just about to be behind on, employee payroll - when normally they're going strong.
Another client still owes us from over six months ago - and he's not disputing the invoice or anything, in fact he's even made at least one part-payment towards his debt and keeps reaffirming his intention to pay in full - but he just can't.
This isn't retail. These are companies from diverse industries. Dying. Insolvent or borderline insolvent. And newly so. And oftentimes businesses that have been around for many years or even some decades.
So I add my comment : Australia's economy, despite our national treasurer's boastful comments otherwise, is in tatters. Oh sure, we'll find "a way" through, whatever that means, even if half the businesses across this nation end up closing or some other widespread change affects us all.
But don't let them kid you : we're dead and dying. Not everyone of us. But enough for me to confidently say : it's a mirage - Australia is NOT in good shape economically - it's in a period of catastrophic financial turmoil, and I doubt we'll pass the next two years without extreme and difficult changes.
And based on what I'm seeing at the moment, a lot of that pain will hit long before two years from now.
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Thursday, 9 February 2012
Friday, 23 January 2009
Deflation is upon us
Inflation limits your buying options.
Deflation increases them.
Inflation makes the dollar in your hand worth less relative to the goods & services you may wish to consume.
Deflation makes it worth more.
What most people forget is that neither inflation nor deflation ever work uniformly across an economy. Different sectors of an economy - and even individual businesses (and thus individual products and services) all respond to the same inflationary/deflationary forces in a staggered manner, with prices in one sector increasing/decreasing before other sectors are affected.
Various governments have verbally committed themselves to "fighting deflation" (why? - but that's another story...).
The point of my present article is simply to show that deflation has already set in, and quite strongly so.
Oh - perhaps the "feds" will successfully "fight deflation", and bring inflation back online. But it'll take a while. And in the meantime, deflation is here, and some places in a big way.
Example : Flights from Melbourne, Australia to Auckland, New Zealand - cost around $550 return just 12 months ago (purchased in advance, low season). Today, all taxes, fees and surcharges inclusive, you can buy the same flight for $254. The cheapest I ever saw such flights was around $450 - and that was ten years ago. So $254 return is practically unheard of.
But that is only representative of an incredible collapse in flight prices across the board. A year ago one would not have imagined such cheap flights - cheaper than I have ever previously seen.
Every airline is participating.
This means that the purchasing power of the Australia dollar has increased relative to the services offered in one sector of the Australian market. And not a small increase either - up to 100% increase.
This is powerful deflation.
Retailers are seeing fewer customers.
Their response?
Run more sales, give bigger discounts.
The effect?
The same dollar can now buy more.
Or stated more technically : "The purchasing power of the dollar has increased."
In a word : deflation.
House prices are lowering. Oh - in Australia, they've been hit (so far) very mildly - but decline they have. Maybe only around 5% across the board. But what is this? Fewer Australian dollars are required to purchase an Australian house.
i.e. the purchasing power of the Australian dollar has increased.
i.e. deflation.
Note that deflation hits different sectors of the economy at different rates. Flights : 50% deflation. Houses : 5%. And individual suburbs will vary - some have (reportedly) even increased in value.
In other words : deflation is inherently non-uniform. It works its way across the economy in fits and starts.
But it definitely is here.
And in a big way.
And it'll take a mighty big "stimulus" from governments to stop it. (But again, why not let it run its course, instead of "fighting it"? - but that's a story for another day...)
And if the governments do succeed in creating such an immense stimulus in the short term that a massive tide of deflation is reversed... then we will overshoot heavily into inflationary territory. Or so I speculate...
At any rate, it's kinda fun to watch... :o)
Deflation increases them.
Inflation makes the dollar in your hand worth less relative to the goods & services you may wish to consume.
Deflation makes it worth more.
What most people forget is that neither inflation nor deflation ever work uniformly across an economy. Different sectors of an economy - and even individual businesses (and thus individual products and services) all respond to the same inflationary/deflationary forces in a staggered manner, with prices in one sector increasing/decreasing before other sectors are affected.
Various governments have verbally committed themselves to "fighting deflation" (why? - but that's another story...).
The point of my present article is simply to show that deflation has already set in, and quite strongly so.
Oh - perhaps the "feds" will successfully "fight deflation", and bring inflation back online. But it'll take a while. And in the meantime, deflation is here, and some places in a big way.
Example : Flights from Melbourne, Australia to Auckland, New Zealand - cost around $550 return just 12 months ago (purchased in advance, low season). Today, all taxes, fees and surcharges inclusive, you can buy the same flight for $254. The cheapest I ever saw such flights was around $450 - and that was ten years ago. So $254 return is practically unheard of.
But that is only representative of an incredible collapse in flight prices across the board. A year ago one would not have imagined such cheap flights - cheaper than I have ever previously seen.
Every airline is participating.
This means that the purchasing power of the Australia dollar has increased relative to the services offered in one sector of the Australian market. And not a small increase either - up to 100% increase.
This is powerful deflation.
Retailers are seeing fewer customers.
Their response?
Run more sales, give bigger discounts.
The effect?
The same dollar can now buy more.
Or stated more technically : "The purchasing power of the dollar has increased."
In a word : deflation.
House prices are lowering. Oh - in Australia, they've been hit (so far) very mildly - but decline they have. Maybe only around 5% across the board. But what is this? Fewer Australian dollars are required to purchase an Australian house.
i.e. the purchasing power of the Australian dollar has increased.
i.e. deflation.
Note that deflation hits different sectors of the economy at different rates. Flights : 50% deflation. Houses : 5%. And individual suburbs will vary - some have (reportedly) even increased in value.
In other words : deflation is inherently non-uniform. It works its way across the economy in fits and starts.
But it definitely is here.
And in a big way.
And it'll take a mighty big "stimulus" from governments to stop it. (But again, why not let it run its course, instead of "fighting it"? - but that's a story for another day...)
And if the governments do succeed in creating such an immense stimulus in the short term that a massive tide of deflation is reversed... then we will overshoot heavily into inflationary territory. Or so I speculate...
At any rate, it's kinda fun to watch... :o)
Monday, 11 August 2008
Economics
Modern economic theory is the voice of fools trying to create absolute certainty in a world where uncertainty is inherent and inescapable.
The Marxists try to create absolute certainty of income to every worthy citizen.
They fail.
More recently, the Greenspans pronounce they have perfected economic theory, and that we will never experience a major recession again.
It sounds ominously like the makers of the Titanic, who purportedly quipped that even God Himself couldn't sink it.
God didn't bother. It only took an iceberg.
Even as Greenspan utters his senseless rhetoric, a great gaping hole has been ripped in the side of the ship of the U.S. Economy.
So much for certainty.
Some things are inherently uncertain.
Minimise the uncertainty, sure. But you're an idiot if you think you can eliminate it.
Life is uncertain. Always has been. Always will be.
Those who thrive will be those who learn how to live with inherent uncertainty.
My own wife was desperately impatient to find out if she's pregnant or not.
Waiting until five days before the first missed period to use the pregnancy test was just too painfully long.
Others, for thousands of years, amazingly managed to wait for days after the missed period, and even then not be totally sure.
And amazingly, the human race survived.
What's wrong with not knowing for a while?
What's wrong with finding out a little down the track?
Science can tell us more things sooner, but we're less patient than ever, even for the things that we can find out quicker than ever before!
The real problem is that patience requires trust. Trust that things will work out OK.
The more you trust, the less a bit of wild uncertainty will bother you.
But what's to trust?
For Greenspan and Marx, not much. Human incisiveness. That's about all.
If I can't trust that somehow, things will work out OK, then I have to force things to work out OK. Without trust, fear compels us to convince ourselves that we've worked God out of the picture, and that our clever policies or special programmes will guarantee the end result.
At such times, God doesn't need to lift a finger. Nature itself comes and devastates our plans. Or God rewards us with the fruit of our own ideas. We got what our programmes guaranteed us. Only it wasn't what we thought.
Amidst the wash of competing ideas, there is one idea that holds true. It doesn't guarantee fiscal success to every applicator. But it does guarantee general success, societal success, success over time to the vast majority of average adherents. And even for what few don't "succeed", it does provide a place. And not a place of exploitation. A system where all can prosper, and if any don't, they still are cared for.
The idea is embodied in the Biblical principles of economics. Ideas as old as the world itself, but as relevant as the sun.
Give. Create. Produce. Invest.
Avoid debt like the plague.
Treat others in all transactions as you would want them to treat you.
There is enough to go around. And Biblical principles would go a long way to ensuring all are fed.
In fact, they'd guarantee it. If only we all followed them. But of course we won't.
God's idea of certainty is "do it My way, and I'll see to it that your needs are met as I see fit".
But we don't like that.
"If it doesn't involve a fixed salary, a certain quality of goods on my table, and a night at the theater at least twice a month, I'm not interested."
We want our T.V.
But more than that, we want to see the mechanisms by which our livelihood will be preserved indefinitely into the future.
If we can't see it, we don't trust that God can figure it out.
So we resort back to our halls of folly, fiddling with numbers, debating ideas, creating "perfect" systems that fail catastrophically, time and again.
Uncertainty is inherent. God promises to provide - if we follow His ways - and that provision does not necessarily mean we'll get exactly what we want, and it especially means we will not always be able to see where tomorrow's food will come from!
So we have a choice :
- do it God's way? Inherent uncertainty but the certainty of overall progress and God's provision at least for our most elementary needs - not necessarily enough to keep us in the manner to which we've become accustomed! But an environment in which goodwill, companionship and universal charity prevail.
- or follow yet another scheme, supposedly destined to give us certainty at the level of comfort we set for ourselves, without reliance on an external God. Nice idea. Never works in practice. Death and misery are the common results.
So what are these "God's ways" of economics that supposedly lead us to a higher plane if applied universally and consistently?
I thought you'd never ask.
They're principles that I apply in my business and family life. And so do thousands of others.
They don't work overnight miracles. But they do work lifetime cures, and intergenerational and societal transformation.
It involves looking at how God designed things, and - shock-of-shocks - actually fitting in to the overall design, instead of fighting against it!
* God never designed man to be in debt. Avoid it. (In stark contrast, every modern monetary system is predicated on debt.)
* God never designed man to be lazy. Get up and invent something. Or help someone else. There is unlimited potential wealth if we would all just rally to a good cause - whether the menial cause of growing vegies for ourselves and our neighbours, or the mammoth cause of fighting the exploitation of women. If you don't know where to start, just start somewhere! Take initiative, and support others in their initiatives.
* Consume moderately.
* Produce more than you consume, and give and sell and save the balance. Savings are not selfish - they increase your ability to help others around you - whether by direct gifts at times when their own resources are insufficient, or by investment in production infrastructure which results in greater production output which results in more to give.
* Respect the land. Grow some of your own vegies. Plant some fruit trees. Support natural and organic farming methods. God designed us to live off well-balanced land. Treat land in the way God designed!
* Give. You never have too little to share.
* Follow God's principles of morality. Murder and other crimes bring natural and supernatural retribution. You might not believe it, but history shows it. Innocent blood defiles land. Kill innocents -> nation ruined. Cambodia. Russia - with all of Stalin's purges. Nazi Germany and Germany's current economic misery. Oh - don't get me wrong. There are myriad factors involved. But morality is certainly one of them. And God's morality was designed for optimal human health and happiness.
* Whatever you want people to do to you, treat them the same way.
And there are many more, or at least, the preceding could be broken down into many sub-points.
If we live as God intended, we can embrace life's inherent uncertainty with the certainty that in the end, everything will work out OK. Fight that, and your "certain" castles will sink in the sand.
The Marxists try to create absolute certainty of income to every worthy citizen.
They fail.
More recently, the Greenspans pronounce they have perfected economic theory, and that we will never experience a major recession again.
It sounds ominously like the makers of the Titanic, who purportedly quipped that even God Himself couldn't sink it.
God didn't bother. It only took an iceberg.
Even as Greenspan utters his senseless rhetoric, a great gaping hole has been ripped in the side of the ship of the U.S. Economy.
So much for certainty.
Some things are inherently uncertain.
Minimise the uncertainty, sure. But you're an idiot if you think you can eliminate it.
Life is uncertain. Always has been. Always will be.
Those who thrive will be those who learn how to live with inherent uncertainty.
My own wife was desperately impatient to find out if she's pregnant or not.
Waiting until five days before the first missed period to use the pregnancy test was just too painfully long.
Others, for thousands of years, amazingly managed to wait for days after the missed period, and even then not be totally sure.
And amazingly, the human race survived.
What's wrong with not knowing for a while?
What's wrong with finding out a little down the track?
Science can tell us more things sooner, but we're less patient than ever, even for the things that we can find out quicker than ever before!
The real problem is that patience requires trust. Trust that things will work out OK.
The more you trust, the less a bit of wild uncertainty will bother you.
But what's to trust?
For Greenspan and Marx, not much. Human incisiveness. That's about all.
If I can't trust that somehow, things will work out OK, then I have to force things to work out OK. Without trust, fear compels us to convince ourselves that we've worked God out of the picture, and that our clever policies or special programmes will guarantee the end result.
At such times, God doesn't need to lift a finger. Nature itself comes and devastates our plans. Or God rewards us with the fruit of our own ideas. We got what our programmes guaranteed us. Only it wasn't what we thought.
Amidst the wash of competing ideas, there is one idea that holds true. It doesn't guarantee fiscal success to every applicator. But it does guarantee general success, societal success, success over time to the vast majority of average adherents. And even for what few don't "succeed", it does provide a place. And not a place of exploitation. A system where all can prosper, and if any don't, they still are cared for.
The idea is embodied in the Biblical principles of economics. Ideas as old as the world itself, but as relevant as the sun.
Give. Create. Produce. Invest.
Avoid debt like the plague.
Treat others in all transactions as you would want them to treat you.
There is enough to go around. And Biblical principles would go a long way to ensuring all are fed.
In fact, they'd guarantee it. If only we all followed them. But of course we won't.
God's idea of certainty is "do it My way, and I'll see to it that your needs are met as I see fit".
But we don't like that.
"If it doesn't involve a fixed salary, a certain quality of goods on my table, and a night at the theater at least twice a month, I'm not interested."
We want our T.V.
But more than that, we want to see the mechanisms by which our livelihood will be preserved indefinitely into the future.
If we can't see it, we don't trust that God can figure it out.
So we resort back to our halls of folly, fiddling with numbers, debating ideas, creating "perfect" systems that fail catastrophically, time and again.
Uncertainty is inherent. God promises to provide - if we follow His ways - and that provision does not necessarily mean we'll get exactly what we want, and it especially means we will not always be able to see where tomorrow's food will come from!
So we have a choice :
- do it God's way? Inherent uncertainty but the certainty of overall progress and God's provision at least for our most elementary needs - not necessarily enough to keep us in the manner to which we've become accustomed! But an environment in which goodwill, companionship and universal charity prevail.
- or follow yet another scheme, supposedly destined to give us certainty at the level of comfort we set for ourselves, without reliance on an external God. Nice idea. Never works in practice. Death and misery are the common results.
So what are these "God's ways" of economics that supposedly lead us to a higher plane if applied universally and consistently?
I thought you'd never ask.
They're principles that I apply in my business and family life. And so do thousands of others.
They don't work overnight miracles. But they do work lifetime cures, and intergenerational and societal transformation.
It involves looking at how God designed things, and - shock-of-shocks - actually fitting in to the overall design, instead of fighting against it!
* God never designed man to be in debt. Avoid it. (In stark contrast, every modern monetary system is predicated on debt.)
* God never designed man to be lazy. Get up and invent something. Or help someone else. There is unlimited potential wealth if we would all just rally to a good cause - whether the menial cause of growing vegies for ourselves and our neighbours, or the mammoth cause of fighting the exploitation of women. If you don't know where to start, just start somewhere! Take initiative, and support others in their initiatives.
* Consume moderately.
* Produce more than you consume, and give and sell and save the balance. Savings are not selfish - they increase your ability to help others around you - whether by direct gifts at times when their own resources are insufficient, or by investment in production infrastructure which results in greater production output which results in more to give.
* Respect the land. Grow some of your own vegies. Plant some fruit trees. Support natural and organic farming methods. God designed us to live off well-balanced land. Treat land in the way God designed!
* Give. You never have too little to share.
* Follow God's principles of morality. Murder and other crimes bring natural and supernatural retribution. You might not believe it, but history shows it. Innocent blood defiles land. Kill innocents -> nation ruined. Cambodia. Russia - with all of Stalin's purges. Nazi Germany and Germany's current economic misery. Oh - don't get me wrong. There are myriad factors involved. But morality is certainly one of them. And God's morality was designed for optimal human health and happiness.
* Whatever you want people to do to you, treat them the same way.
And there are many more, or at least, the preceding could be broken down into many sub-points.
If we live as God intended, we can embrace life's inherent uncertainty with the certainty that in the end, everything will work out OK. Fight that, and your "certain" castles will sink in the sand.
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