The Road to Serfdom

What is it with the Financial World? There never seems to be a shortage of things to commentate on. This becomes explicitly more exciting when politics decides to tangle itself into the capital markets. Truth be known, Governments of the world will always try and influence finance through taxes and legislation as they try and manipulate constituents voting behavior.
This week has seen some massive events. These events are all manufactured in one way or another but basically have the same theme. Governments around the world have been too generous with their spending and its time to pay the piper.
Let’s start at home. Our government sprays money about in a manner that looks irresponsible. Suddenly it is time to start funding that expenditure (repaying the debt? That will have to wait for another day). Let’s look for an easy target. Mining! Lets tax the “super profits” of the Mining Industry who are largely “foreign owned”. This policy is deeply flawed and looks like it may have been stolen from the One Nation policy handbook (One Nation would like to curb foreign investment in Australia).
The reality is, Australia relies on foreign investment. It is not hard to forget this when you look at our Gross Foreign Debt which stands at over $1.2 trillion (as at end of December 2009). If we upset foreign investors we might just face a Financial Armageddon of our own.
Speaking of which, how about the Greeks! They are protesting in the streets regarding the “bail out” package put together by the European Union. They have to face the facts here. The Greeks don’t want their “standard of living” cut by the harsh budget measures but the reality is that the Greeks never should have had the standard of living they enjoyed because it was all built on Debt – which is not sustainable – clear and simple. So now they have to take the medicine, which looks much like Castor Oil and it will not taste good. This is however, better than the alternative, which is death.
There are many democratically elected governments around the world that now have to make the harsh decisions. The current low taxes against a back drop of high public funding of health and pensions and benefits for all those with their hands out crying for more (symptoms of a “Nanny State”) are about to cumulate in a very sharp reversal of political and economic fortunes.
Julian McLaren is a Representative of the Shadforth Financial Group (AFS Licence No. 318613) Julian may be contacted on 69317488. This is general advice and readers should seek their own professional advice in regards to their individual circumstances