Wednesday, September 24, 2008

The facade of the economic cycle

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The Australian tax system has been assessed as one of the unfairest in the world. If you pursue the wrong course of action, take the wrong line of work, live in the wrong place, you get all these tax penalties, and if you live in a remote part of Australia, work for the government, you are a farmer, have a baby, then you will get a lot of tax concessions. But it does not stop there.
The economic cycle is perhaps the best best example of financial fraud. If any other person were to engage in such scamming they would be shut down and put in prison, but because its perpetrated by the government, its fine. There is utterly no accountability. Why? Because the courts are not going to here any grievance because no law has been broken, and there are effectively no constraints on what the governments can dream up to screw people up once they have been elected; and no judge is going to say anything because they are paid by the government, and of course the government has a monopoly on the Australian court system, so its not likely that a defiant judge will do anything if they want to work in the country. Not many other countries around the world practising Australian law.
So what is the fraud I am alluding too. Well, its the cause of the current financial crisis. Central to the scheme is the USA, but its not a new scheme. Governments have been using such trickery for centuries. People live under the mistaken idea that governments exist to perform a 'public service' but that's nonsense. The government exists to serve itself, and it does it with impunity.
The current state of the US debt ($14 trillion), the under-funded Japanese pension system are examples of government breaching the interests of the people, collectively and as individuals. In Japan, the government uses the proceeds from the Postal Savings scheme to fund recurrent government expenditure. If the money was to earn a commercial return it would get 6% overseas, but instead it earns just 1% in Japan. Hardly enough provide for the needs of Japanese people in retirement. The Japanese trust in their government, but this is a huge problem. Any Japanese person living outside of the city is sitting on very little house equity.
Another aspect of the same fraud is the governments underwriting of private sector debt creation. When the private banks want to lend money they can freely do so. The result has been a blow-out in inflation, a debt crisis. This allows the government to finance new government expenditure to keep them in power, as well as allowing business leaders to make huge profits on their performance options. It was not their 'performance' at all, it was a financial fraud which overstates asset prices. The flipside is that business finances the government's election efforts which entrenches the 2-party system, so basically there is no chance of getting good government. Voters accept the notion that these parties are competing, but really the rules already serve them because we just get crap from either party. If a party goes to far, we vote them out and just get less crap than we wanted, but we still get crap. If one party is voted out because it adopted a new tax, the opposition might get voted in and just change the nature of the tax, or just reduce the burden. But who is to say that tax was warranted? This system is VERY WRONG. Executives get corporate option deals they don't deserve, politicians in Australia vote for their own pay rises. Sounds impartial doesn't it. What about the very attractive pension payout for the public service and the military, even if they see no war.
The final chapter of this is that the Fed and government is lobbying Congress to provide support for the banking system after the Fed/US government decimated it over the last 10 years. Reagan ran up the debts, Clinton paid it off, now the Twin Bush's have run it up again. Taxpayers will need to provide the financial bail-outs that benefited government and CEOs. And the response of Congressman was:
1. We want the CEOs to not get paid as much this year - after making huge amounts on their stock options over the last decade. In most cases the money is probably siphoned off into some Bermuda bank account. They have probably set them up for the politicians as well. I don't believe the nonsense that Australia is the 9th least corrupt country in the world. The difference is that they are just better at hiding it than the third world, who are less accountable.
2. Congress is only dealing with this issue after the horse has bolted. Congress has been warned about this problem for a decade but ignored it, but now they are against supporting CEOs. What political doublespeak. More silly still is the fact that they come from the same political parties.

Its all rhetoric to pretend that we have an adversarial political system. They are both on the side of the money and power. There is an alliance between government, which includes executive government (principal agents are the ministers & shadow ministers of both major parties), the leaders of big business. There are also favourable conditions for union leaders, the police chiefs and the military. Anyone who poses a threat. Those with no power are disorganised salarymen, wage earners and consumers.
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Andrew Sheldon www.sheldonthinks.com
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