Is Australia Sleepwalking into Crisis?

An interesting quote from the article below:

After the stock market collapse earlier this month, former federal government economics adviser John Adams, said we were staring at a coming “apocalypse”.   Debt and record low interest rates, he warned makes us vulnerable and Australians “should be concerned about what lies ahead”.

It appears the tax cuts are influenced by the United States.  That does not surprise me. I smile at the credit the Coalition takes for its economic management  (I like the pun there ‘credit’).  No new ideas.  This is not a criticism it is more a reflection of mindsets that cannot think of creative ways to do this differently.  I would say actions taken are based on fears of economic downturns as the agenda.

Does it all come down to debt, greed or survival?  Further drilling down explores household debt (approx. 200% of GDP)as the standard of living falls (real wages fall, price increases [inclusive of housing, users pay, fines, tolls, education etc.]).  Australia has the highest debt in the world according to the Australian Bureau of Statistics (ABC) Refer http://www.abc.net.au/news/2016-06-01/australia-debt-to-gdp-ratio/7466376

So does this come down to poor planning to re-balance economics with social and ecological policy to smoothly ride the rippled oscillations of global markets?  The key in my view is overtime to unhitch the conditional wagon train from global market volatility (circling horses) and generate increasing self reliance, national competiencies (resurgence), personal development (wholistic) and to find an optimum point of maintaining a standard of living that is calculated to ensure the optimum ecological footprint.  This is the reality outside of global trends, economists, commentators, business as usual and the false economy we live in that appears abundant and stable. It is not. Credit is the magician that maintains that illusion.

I believe we need to completely reconfigure economics to become organically calibrated to the natural world and social wellbeing. I call this wholistic economics (see my pdf book A Fool for Peace, I have some inspired ideas there). Refer http://www.academia.edu/27265551/A_Fool_for_Peace_1_A_FOOL_FOR_PEACE_A_Fool_for_Peace_2

Economics is a masculine conceptual structural framework made popular by Maynard Keynes (Keynesianism, fiscal policy, government spending) and Adam Smith (market forces, low regulation, invisible hand [free market supply and demand]) and Milton Friedman (monetarism, interest rate policy) based on demand and supply to fulfil needs and wants.  Both economists come from different schools, one focuses on government spending to pump prime together with welfare support the other is about the money supply and the invisible hand allocating resources given signals.  I would like to note that Adam Smith’s philosophy of the invisible hand was in response to control exercised by mercantilists (trading companies).  It was evident that the people were facing fixed prices, so he wanted the market to become flexible so that demand and supply would ensure a fair price.  However, he is often used to justify deregulation and public asset sell off.  Thus the foundation to economic rationalism and the idea of market forces providing the trickle down effect to ensure business dominance in government for financial advantage.  The purpose of economics was a method of efficiency and stability to ensure production, wages and consumption.  GDP is calculated from consumption plus Investment -plus Government Spending plus Exports minus Imports (GDP=C+I+G+(X-M). It doesn’t take into account ecological collapse or real costs of externalities, unhappiness and overworking etc. In respect of expenditure on economic ills this gets added in as activity that is good e.g. oil spills, pollution, poor health (pharmaceuticals), war (industrial military) as people are paid to clean up (income, wages injected into economy) and so on. GDP is not a measure of wellbeing which is why we are blind to what we do.  In this system growth is rewarded rather than social growth/wellbeing and balanced consumption (without toxins, externalities).  Growth and individual wealth is favoured at the expense of those who are not the winners in the economic game and increasingly become exhausted, disillusioned and alienated as they are cogs in a wheel and operating as individual silos cut off from their humanity.  The environment degrades incrementally in a compounded calculation given unabated imbalance as we move into a uncertain future of our own making.  We do this as the title espouses ‘sleepwalking’.  We are not awake to what is really happening, we are unconscious and programmed in languages that are devoid of real meaning. We are distracted, soothed and assured by media spin when we really need to discuss the reality of life on earth and what we truly need and want not only for our selves but for future generations and all sentient life on this planet.

Indeed, the global economy is collapsing given economic infinite growth modelling ‘normalised’ as growth seen as success whereas economic contraction is perceived as failure rather than true economy.  This generates a world committed to  infinite growth (diminishing) and expanded materialism (heating, ecological imbalance).  The latter (ecological) is a mirror of the former (economy). We are out of balance with nature in reality. This we appear unable to see. Thus our collective blindness resultant from unquestioned beliefs and suppressed differences.

If I was in governance I would encourage radically different approaches that build social resilience, social skills, ecological understanding, sustainable innovation, a global basic income (sustained social stability, equality) job share (work, leisure) and a national orientation towards Gross National Happiness (GNH).  As we become happier innovation and new ideas arise as aha moments increase, abundance as a state of mind not a material gain, excited passion inspires productivity and motivation. In this worldview there is more leisure time to reflect on life, family and purpose.  This optimises human talent and brilliance. This vision gently moves away from the unquestioned beliefs that we must work full time and that life is about survival of self interest and the fittest.  It is unquestioned economic ideology, masked global influencers, distorted price settings, clever and dishonest accounting, unhealthy industry concentrations of influence and wealth that have configured the current state of play.  In truth prices should have fallen years ago given technology improvements to productivity, instead the cost of living have risen as the consumer price index (basket of goods) is set to rise each year and this ensures prices rise are fixed (interest rates etc) in endless cycles of spiraling expansion as industry sectors ensure expand, contract or become redundant (market changes).  The competition is fierce as greed and insecurity fuel activity and personal needs of meaning are sought but not realised.  Integrity and ethics are seen as threats rather than aspirations rewarded to encourage citizenship and good governance.

The state of play is that we are facing collapse in my view and this is due to greed and environmental changes that circuit break natural signals to homeostasis.  The environmental changes are serious and we haven’t changed at all because we haven’t solved the problem of our own imbalance and dysfunctions. Denial is very powerful. To resolve these issues requires a deeper look within, the last place most people will go as we stare outside the window believing answers are out there. Until we understand our own nature we cannot change the external paradigm.  However, nature will force us to change one way or the other.  That brings me peace as there has to be a global reset if we are to continue in a Hobbesian worldview.  It is like when you see a destructive person continuing on in a behaviour that you know is destructive and dangerous, it is out of love that you must stop them for their own good and that of others.  The same applies around our world, we are on a trajectory that is not sustainable nor healthy yet it appears many are on hamster wheels that they are unable to get off.  I understand this as there are stakeholders and power players who do not want change, but if the wheel comes off, what then?  Often media use the analogies of ‘brakes’, ‘gears’, ‘wheels’ like driving a car.  However, the global situation is not about mechanical solutions, we have to look into ourselves, what we think and then ask is this working?  If we are unhappy we have to ask what will bring happiness?  If we are concerned about the environment we have to focus on what creates homeostasis?  It is to focus on what we are wanting and move towards that rather than the constant fear that drives growth without any real understanding of the impacts, particularly on children and grandchildren.  Responsibility moves us to change and lead by example.  What will you do to proactively change your world or indeed to awaken the fool to realise a peaceful world?

Here is an ABC article from another economist’s perspective in respect of our complacency as we stand on this precipice.

http://www.abc.net.au/news/2018-03-01/australias-zombie-economy-sleepwalking-into-danger-gfc-china/9492868

Does Australia have a ‘zombie economy’ that is at risk of a crash?

By Matter of Fact host Stan Grant

Updated 1 Mar 2018, 1:30pm

We are complacent, we are blind and we are ignoring the lessons of history at our peril.

These are the warnings of some doomsday economists who fear we are heading towards the same financial cliff that hurled the world into a crisis from which we are still emerging.

Very few experts saw the global financial collapse coming less than a decade ago. Some of those who did are warning that we stand again on the same precipice.

They say the countries that are most at risk are the ones who dodged the bullet in 2008: among them China, South Korea, Canada and Australia.

We are trapped in the crosshairs and it all comes down to debt.

Steve Keen is head of economics, politics and history at the UK’s Kingston University, writing last year in The Conversation he said “mainstream economists need to get their heads out of the sand”.

His focus is personal debt: how much credit we as householders are taking on and what happens when we can’t pay it back.

Professor Keen says when too much credit is generated by banks debt piles up against the wealth generated by economic growth: debt to GDP (gross domestic product) balloons and that makes countries vulnerable.

The Great Depression of the 1930s, he says, was triggered by a debt fuelled US stock market bubble; in 2008 it was debt again that sparked the crisis this time mortgages.

Look to China, he warns, “whose credit bubble is easily the fastest growing in the history of capitalism”. Indian economist Amit Kapoor sees history repeating, saying: “China is on a path eerily similar to the pre-crisis US.”

The key is how much debt is required to generate economic growth, Mr Kapoor says when the last crisis hit the US needed up to $5 of debt to generate $1 of growth: China, he pointed out, now requires up to $8 of debt for a dollar of growth.

Should Australia be worried?

The alarm bells have been ringing for years.

In 2016 The Economist magazine warned that China’s total debt to GDP ratio had risen from 150 per cent to 260 per cent in a decade, “the kind of surge that is usually followed by a financial bust or an abrupt slowdown”.

When the global financial crisis (GFC) hit, China turned on the taps to prop up growth, The Economist said “it was wrong not to turn them off again”.

Australia did the same: government stimulus and China’s hunger for Australian resources staved off the worst of the recession.

But Professor Keen calls Australia a “zombie economy”, sleepwalking to crisis.

He points to our level of household debt about 200 per cent of GDP, Professor Keen says “you can’t avoid a debt crisis today only by putting off till later”.

After the stock market collapse earlier this month, former federal government economics adviser John Adams, said we were staring at a coming “apocalypse”.

Debt and record low interest rates, he warned makes us vulnerable and Australians “should be concerned about what lies ahead”.

Mr Adams cautions us to reduce personal spending, increase savings and pay down debt.

Reserve Bank governor Philip Lowe has cautioned that household debt should not exceed income growth: that comes at a time when wage growth is sluggish.

The International Monetary Fund has also warned about the worrying levels of household debt and its potential impact on economic stability.

On the up side…

Is it all gloom? Not really. The IMF is forecasting an uptick in global economic growth to just under 4 per cent this year stimulated by company tax cuts in the United States.

How long the sugar hit lasts, is another question.

And while concern persists about China, its economy is still growing strongly — albeit down from the double-digit growth of the past two decades.

Ann Lee in her book Will China’s Economy Collapse? reminds us that while many in the West have concerns about the health of China’s financial system and how reliable are its growth figures, Lee says China’s “broad economic health actually appears rather stable”.

She says China has high personal savings rates and low external debt; China’s banks have a low number of non-performing loans.

The Chinese Communist Party has been adept at identifying and reacting to crises — learning from the problems of the West.

But The Economist fears now “the government is not so much guiding events as struggling to keep up with them”.

Amid the gloom we may take some solace from the fact that those who see potential disaster have been warning of the next crisis ever since the last one.

Mohandas Gandhi

“You must be the change you wish to see in the world.”

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