The Baby Boomers’ Legacy – An Open Apology

When I was a fledgling student, we baby boomers were taught that we were the generation with the opportunity to affect real change, make a difference, make the world better; we had our fish cookin’ in the right place! Then, before I knew it, after a lot of water had flowed under the metaphoric bridge, our kids became that generation’, because we had squandered our chance, we’d stuffed it up. I was a little miffed, what didn’t I do or what should I have done differently? Time to re-evaluate, where did we go wrong?

Baby boomers grew up informed by a generation of Australians, a large proportion of which had served in the Second World War and their values were pretty straight forward. We learnt from people who had essentially volunteered to risk their lives for their country. As far as they were concerned, all that mattered when considering the political and social issues of the day was that the outcome had to be good for the country. It wasn’t about patriotism. The welfare and future of your country ‘matters’ when you risk your life for it!

After years of conflict all everyone wanted was to see a way forward, to coexist in peace, perhaps with a legacy of prosperity. So in post-war multicultural Australia, people ‘got on with it’ living by basic rules like not publicly discussing religion, money or politics. Don’t get me wrong, this was a society where people harboured deeply opposing political views, dealing with the left-right divide like no other generation, but generally people outwardly extended a degree of courtesy to those with an opposing opinion.

It was perhaps a simpler time when people lived within their means. They learnt how to save and while they didn’t have much, they owned assets, not debt. It was a time when people didn’t only think what’s in it for me?’; they were not a fractured ‘self-interest’ society. They cared about the country rather than running it into the depths of debt by wringing whatever they could out of the ‘lucky country’.

There just existed an awareness to engage with a greater level of respect for all sides of an argument without the prerequisite menacing outrage, nasty vitriol and spiteful abuse we witness today. They focused on what brought their communities together rather than what divided them, living by social rules that did not foster or provoke animosity and intolerance, an ethos I think we have lost. By contrast and with a small measure of irony, it is incomprehensible that now a simple online exchange quickly demonstrates the veracity of Godwin’s law.

So what have the baby boomers done with their rich inheritance and why should they apologise?

At some future point academics will assess the legacy of the baby boomer generation: social, environmental and financial. They will conclude that measured against any historical benchmark, they left a far poorer world for future generations than the one they inherited: massive national debts and unsustainable budget deficits, the consequences and realities of which are so overwhelming and unpalatable that the period may well be labelled the ‘age of denial’.  We could not have our heads buried deeper in the sand.

Whatever happens, our nation will be forced to eventually live within its means: the burden of preceding generations will possibly fall on the iGeneration, who may be left, unfairly, to ‘pick up the pieces’ and endure the economic and social division of inevitable austerity measures. Someone will be held accountable for decades of self-indulgent lifestyles and unsustainable behaviour: all because baby boomers were not satisfied with the best our country could afford.

The baby boomers have acquiesced to the flawed concept of ‘growth at any cost’ which will ultimately bring the pyramid economy unstuck. Whether it’s due to the so-called Malthus Theory or the current trend where incomes are falling in real terms while costs are climbing sharply, escalating out of control. Taxes are also increasing, with the tipping point coming when interest rates eventually rise.  The mounting evidence of chronic ‘debt stress’ is just another way of gauging the continual decline of our ‘standard of living’. Surely, that’s worth an apology!

So, as well as the unsustainable economy, the baby boomers also need to apologise for the state of housing affordability in this country. It was not that long ago that ownership was considered an attainable goal, however economic and recent & proposed policy changes will mean that home ownership will become ever more difficult to achieve.

We are seeing our standard of living continue to decline in Australia, while it is significantly improving in neighbouring countries in our region. As a result, more and more property will be acquired by foreign investors, driving up valuations and pushing domestic buyers out of the market. (It was recently reported that foreigners acquired 25% of newly completed supply in the State of New South Wales).

Worse still, politicians are now making it even harder for ordinary Australians to buy a home. There will be consequences as a result of legislation to reduce the incentives to ‘save’ and the new proposals to remove the incentive to diversify investments (negative gearing). As a result, the family home will become the last asset to offer a material tax concession, creating an inducement to over-invest in a single non-productive tax-free property, which is also exempt under the Government’s welfare ‘asset test’. This will have the effect of further inflating house prices.

Building even bigger homes at a time when we have already seen the ‘area under roofline’ double in the last 30 years, makes no sense particularly as the size of the average family continues to decline. We are incentivising the wrong behaviour! The baby boomers legacy will be that ‘housing affordability’ is out of reach for ordinary Australians and now we are going to make it even harder for them!

Baby boomers also need to apologise for the excessive cost of utilities in this country, power and gas. How did the Baby Boomer generation allow a country so rich in natural resources end up with electricity prices out of the reach of the average Australian? On current trends, demand will outstrip supply (which means blackouts) at which point it won’t matter how expensive electricity is. It is not a coincidence that policymakers have been indecisive on this issue for 10 years, as we witness a small number of very wealthy energy suppliers (potential political donors) being allowed to gouge millions of dollars from consumers, an outcome not too dissimilar to the Enron induced California Energy Crisis. Again, we have made it unnecessarily hard for ourselves.

What of the baby boomers legacy with health services in Australia? Like education, the availability of quality services is in decline by virtue of the fact that costs continue to outstrip funding, mainly because of misguided policies of population growth at any cost. Capital expenditure and capital works (hospitals and infrastructure) are already lagging behind by approximately 20 years, yet we continue on an unsustainable course.

However, the most appalling legacy in respect to our health policy is the failure to adequately invest in the medical experts and doctors necessary to meet our needs in Australia, even though we have some of the better Universities and hospitals in the world. Why are we happy to lend billions of dollars for more Arts Degrees but can’t fund sufficient hospital training placements to meet domestic demand?

To make up for this shortfall we effectively import a significant number of doctors from developing countries. Imperialist behaviour is hard to break! We are too indolent, lack the foresight to plan for our needs and choose not to have a conscience about the health care needs of countries less fortunate than ours. We prefer to keep the medical care standards of developing countries repressed by effectively stealing their doctors, robbing them of their intelligentsia and in doing so, impeding their ability to lift and improve their own countries’ quality of life. The baby boomers legacy is to keep these countries health services and standard of living wedged firmly in the third world.

Baby boomers also need to apologise for our legacy to Indigenous Australians. Why do we spend more than $30 billion a year to keep Indigenous Australians (2.8% of the population) hidden in isolated and remote communities, in what can only be described as squalor, with limited education, restricted opportunity, and appalling health care standards? Are there vested interests (black & white) hiding behind discrimination laws to prevents any meaningful action against the perpetrators in remote communities who freely assault, rape, sexual abuse children, and murder indigenous mothers? Are the authorities so fearful of being accused or labelled ‘racists’ that these criminals escape prosecution? (See Human Rights, 8 Commissioners & 18C’s).

Blindly throwing more money at Indigenous affairs without accountability under the Government’s strategy to reduce Indigenous disadvantage, simply does not work. The ‘Closing the Gap’ initiative is a program of ‘failure by design’ simply by virtue of bureaucratic involvement. Liars can craft their truth, but the real truth lies in the outcomes, which continue to deteriorate. The reality is that this farce does not absolve us from the immorality of unconscious genocide.

It is too convenient not to care about Indigenous Australians; the phrases ‘ignorance is bliss’ and ‘out of sight, out of mind’ are really just stand-ins for ‘denial’! Our politicians have been purposely distracting from the real issues by officiating over self-interested, superficial, obscure and irrelevant issues. Is the distant isolation of Indigenous communities from the halls of power far-flung enough that we can satisfy ourselves with soft causes because they provide a safe excuse to turn a blind eye to the real issues, the pressing problems like the deplorable situation depicted in the following visual? https://www.youtube.com/watch?v=gkZ8_kIjmYQ

We Baby Boomers have failed future generations of Australians. How can the baby boomers and the politicians that represent them, claim equal allegiance to all Australians with this level of disparity in our communities. Look at what politicians have done to this country and in return they insist that we address them as ‘Honourable’ with delusional expectation that we pay obeisance to them?

Meanwhile Australians remain preoccupied, totally consumed and openly hostile about being given ‘the say they were promised on same-sex marriage, yet won’t get off their arse to demand change for an entire generation of Australians whose very existence is being threatened.

That we don’t care is painful and shameful… On behalf of the Baby Boomer generation, I offer my sincere apology!

21 August 2017

Our lives begin to end the day we become silent about things that matter. – Martin Luther King Jr

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Trump Card Played in Leadership Vacuum – A Symptom of Political Apathy & Why It’s on You!

Whether it’s the political, corporate or commercial landscape, I cannot remember a time when there was such a void of inspirational, dependable and quality leaders; leaders worthy of our respect, who are motivated to act for the benefit of all citizens and stakeholders.

Today our leaders seem totally disconnected from those they represent. They lack foresight or innovative thinking, they linger in the superficial, pander to hysterical minorities, blindly obey dubious orders and are bereft of humanity. They just seem to do a very ordinary job, feed their egos, take the bucks and do a runner. Where are the great visionaries, communicators, those with a strategic plan beyond their tenure, those who have the sound judgement to care about the future, who can implement and be accountable?

Our leadership has lost the wider community’s esteem and confidence. Is this just a reflection on social evolution, where we are fully connected in a virtual world but totally unengaged in the real spaces we live in? So what has caused this degeneration that has spawned the greatest leadership vacuum of our times?

I believe we need to better understanding what it is that we have done to discourage good candidates from standing for office and why we don’t elect them when they do. But first, we should closely examine the behaviour of our leaders and see if that provides an insight into why ‘we the people’ put them in power.

There are certain orthodox behavioural qualities that our leaders appear to exalt; a similar heartless air of superiority while oozing a miasma of decaying authoritarianism. They are all so similar right down to the same tailors, same stylists, all talking the same indecipherable gobbledygook, promoting the same mistakes while adopting the same bad habits.

They are all students of related institutions like the Harvard Business School, society’s brain trust, the analytical and strategic warlords of the free-market capitalist economies of the world. Minds ‘lost in blind logic’ peddling on the road to nowhere in a fragile global economy, which is essentially a pyramid scheme where viability depends upon the world population doubling every 30 years.

This is the leadership that keeps doing what they did yesterday and we wonder why nothing changes. They continue to govern with no imagination, no vision beyond their current term, standing for nothing, scared of being bold, no empathy, emotion, or wisdom, excelling only in personal postulation. They are just conscience minds living unconscious lives! Management completely indoctrinated in the ‘smile as you kill’ culture of fear, anxiety, intimidation and loathing, their creative skills muted, in a society where we suffer profoundly due to the prolonged under-representation of the feminine influence and sensibilities in leadership roles.

We cannot afford to continue to have sleepwalkers marching in time with the corporate music, blindly obeying callous orders without question or care for the harsh personal consequences of their insipid actions. Look where it has got us, living in denial, existing in a state of amnesia, disengaged, disinterested and dislocated! People are turning off, tuning out and dropping off; the reverse of the Human Be-In sixties counter-culture’s catch phrase.

Meanwhile, the leadership continues to be rewarded for failure, mediocrity and bad results. These executives are the beneficiaries of the global pyramid scheme, receiving usurious remunerations from the ‘wall of borrowed money’; the billions of dollars pouring into Western economies which has the effect of artificially inflating the value of financial markets while masking management’s commercial failings and incompetence.

So what can be done to improve the standard and quality of our leadership? It is ultimately up to us provided we are prepared to engage in the process and make sustainable choices.

It is interesting that in Western societies we champion democracy; in fact we enthusiastically and sometimes forcibly promote it along with the associated benefits of good Corporate Governance and free markets. Yet, we barely exercise our rights to participate in the democratic process and when we do, it’s begrudgingly. It’s no secret that potential leaders take full advantage of our illogical political apathy!

Look closely at who we vote for. We vote for or appoint individuals who promise more than the other candidates. The highest bidders appeal to what we want not what we need. We vote for ‘what’s in it for me’ and don’t care that we will spend our children’s future today and leave them a debt legacy tomorrow. These populists know our human weaknesses and failings, as they make grandiose promises to appeal to our greed and self-indulgence. They are not leaders, they just have despotic ambitions with the characteristics of contemptible parasites, yet we empower them because of our apathy, inaction and selective ignorance while wondering why it feeds our discontent.

The reason we don’t vote for real leaders is that only real leaders promise what we can afford, what is sustainable, what is achievable, what is deliverable, what is responsible, and what is fair and equitable. What chance do we have when greed, complacency, recklessness and foolishness plagues the constituency? It will lead to the eventual failing of the democratic system if we are not prepared to participate in the process and support leaders who advocate for responsible and sustainable policies.

The alternative, ultimately, is to witness democracy have its ‘wall come down’ and that will be very untidy (catastrophic) for everyone with anything to lose!

“Our scientific power has outrun our spiritual power. We have guided missiles and misguided men.” – Martin Luther King Jr.

18 August 2017

Australia Creates a Power Supply Crisis

One thing I have learned over the last 40 years is that if you set the wrong targets, you get the wrong behaviour and, in turn, the wrong outcomes.

If you want to fix a problem, you look at what actions are necessary to resolve it. Setting Renewable Energy Targets (RET) will not resolve a Power Supply Crisis, only action will!

So what is needed? We need Power Stations that produce reliable ‘baseload supply’ when renewal energies sources do not… and we need them built now! What we don’t need is further delays talking about fanciful targets, while power stations continue to be closed without being replaced. 

It is simple supply and demand economics: the lower the supply the higher the price, the greater the chances of power blackouts and that’s what we have now, prices soaring at a rate of 20% pa!

I want to be clear: I am in favour of renewable energy and clean energy technology and I’m certainly in favour of lowering greenhouse emissions. However, the priority must be a top-down solution where we secure a reliable baseload power source to cover demand when intermittent renewable supplies are inadequate to meet peak loads or when weather conditions are unfavourable.

Build what we need not what we want! Wanting to build a power supply network based on Renewable Energy Targets has managed to bring the system to its knees, it has not worked, it has failed. We clearly have the wrong outcomes, all because Australia has taken a bottom-up (arse-about) approach to resolving a simple supply problem.

Build clean energy power stations. There are plenty of options for a country of only 24 million people and ample raw materials like coal and uranium, which can easily supplement renewable power sources, which still only accounts for approx. 40% of the energy supply when weather conditions permit.

What a moronic mindset; Australia exporting its coal to fuel the rest of the world’s ‘clean coal’ power stations, yet we refuse to build them at home! Is that how Australia achieves its Targets, by exporting their greenhouse emissions overseas and then taking the high moral ground for having a lower carbon footprint? Meanwhile Aussies are literally suffering in the dark through a long cold winter, particularly the youth, poor and disadvantaged!

Now, I know the solution sounds too simple and sensible, so I’ve probably lost the Green anarchists, the academic left, the wealthy and the under 35s; the politically apathetic demographic who are more likely to whinge the loudest when the system fails.

How can Australia get something so simple so completely wrong? “She’ll be right!”… I don’t think so!

See also Governments eliminating Greenhouse Emissions by shutting off the Power.

8 July 2017

Nothing in all the world is more dangerous than sincere ignorance and conscientious stupidity. – Martin Luther King, Jr.

Trump – Making Australia Great-er!

In virtually every conflict since World War II, Australia’s military has followed our allies the United States of America into almost every significant war: Korea, Vietnam, Iraq (1 & 2) and Afghanistan. Our continued mutual support is a World War II legacy, when our US friends sacrificed thousands of lives in the Battle for Australia against the Japanese, at a time when our own so-called ‘mother country’, Great Britain, was prepared to let us fall to the enemy, just as they did with their colony in Singapore.

The 1951 pact, the ANZUS Treaty, cemented our relationship and commitment to the conflicts that followed and I feel it reasonable to suggest that at that time most Australians were in favour of our unquestioning support for our US allies, to the point that we now have thousands of US personnel stationed in Australia.

However, more recently Australians are starting to seriously question our military marriage with the USA and are nervous about where this relationship may take us in the future. This scrutiny and re-examination is courtesy of the somewhat unpredictable behaviour of the new US Commander in Chief.

Now, some say ‘the country doesn’t change just because the President does’ or ‘not to worry because the bureaucracy still runs the country’, however, this is simply not true. The reality is that the society, values and principles of the USA have changed drastically since we signed the ANZUS Treaty in 1951, particularly and understandably since 9/11… so we can speculate whether the President’s conduct is a product of, or reflects the shift in the country’s behaviour, ideology and standards and not the other way around.

One questions whether ‘we the people’ can recognise these vicissitudes? As an observer, I’m left perplexed. Oliver Stone’s recent ‘The Putin Interviews’ provided a fantastic insight: that the US actually has more in common with Russia than not. It reminded me of JFK when he said on the subject ‘Our most basic common link is that we all inhabit this planet. We all breathe the same air. We all cherish our children’s future. And we are all mortal.’ Yet perversely, the documentary seemed to be dismissed with somewhat spurious criticism that Stone’s questions were not tough enough!

Even when you apply the normal filters, Putin made some valid points. Why is the US more preoccupied with who leaked emails leading to the resignation of the Chair of the Democratic Party, rather than being outraged that insiders attempted to hobble the campaign of one of its own Democratic candidates. See, US Election: Democratic Party chair Debbie Wasserman Schultz resigns in wake of email leaks.

We hear all about the ‘land of the free’ and then watch a documentary like ‘Killswitch’ (2016) where Governments autocratically control the internet, or a film like ‘Snowden’ (2016) or another documentary like ‘Silenced’ (2014) about how the Government prosecutes whistle-blowers who disclose illegal activity relating to internal surveillance against the world’s citizenship. (The reality is that government agencies already know exactly who leaks what to whom, but obviously don’t disclose, dare they reveal which allies they are spying on)!

These examples reflect the societal changes in America. This is not the same ‘freedom’ Australians fought for alongside our American allies in the past. Australians are now starting to see a different ‘home of the brave’ and we can thank President Trump in part for that increased scrutiny, as I believe his behaviour will be the catalyst for Australians to wake up and very closely analyse what we stand for (and what we are seen to stand for) when we align ourselves with others.

5 July 2017

We are the United States of Amnesia, we learn nothing because we remember nothing.

– Gore Vidal

See also ‘Media Trumped’  and ‘Sinking Globalisation with Oil’.

 

 

 

 

Global Financial Crisis – When Will We Do This Again?

As we approach the ten-year anniversary of the Global Financial Crisis (GFC), I thought I’d get in early with a few ruminations, before the experts who didn’t predict the crash write their moot editorials.

I keep reading about the GFC and the predictable question: will it happen again? Well, history has the answers. It was only 20 years prior to the GFC that the US faced the ‘Savings and Loans Crisis’ where the failure of bureaucratic ‘regulatory and enforcement agencies’ ended up costing $160 billion, predominantly funded by taxpayers. Even the learnings from the 2001 Enron scandal were quickly forgotten; where corporate fraud contributed to the company filing for an approx. $63 billion bankruptcy.

When you look back at our historical track record, you realise how heedless we hominids are, as we continue to allow the same fraudulent behaviour to reoccur. Perhaps the answer or reason WHY can best be explained with a closer examination of the judicial system and incarceration rates. There is no doubt that white collar crime pays. The financial sector’s punishment for transgressions seems to be highly remunerated senior executive positions in government, where they get to set the future policy agenda and protect their ill-gotten wealth by recommending taxpayer-funded bailouts.

So, let’s look at what happened ten years ago and compare it to where we are at now, ask if anything has materially changed and wonder who will pay for the next round of bailouts.

The catalyst for the GFC started with the misguided concept that pretty much everyone should be able to afford a home, much like the present ‘Housing Affordability’ debate in Australia, about how to interfere in free markets to artificially influence affordability. The consequences were higher prices, with exuberant growth generated in the housing sector creating a false and inefficient market which inevitably collapsed with a subsequent correction (as free markets do).

The so-called crisis in the subprime mortgage market in the US was fuelled by readily available and cheap credit, honeymoon deals and high-risk loans where financiers massively misrepresented applicants’ capacity to repay loans. Again, a regime existed where there was a complete lack of regulatory compliance and enforcement, allowing Financial Institutions and Banks to lend unabated, fuelled by commissioned staff who were immorally motivated by their employers; employers who set the wrong Key Performance Indicators (KPIs), the wrong remuneration models and therefore unsurprisingly, we saw the wrong behaviour.

Meanwhile, the Financial Institutions and Banks were generating obscene profits as they actively promoted high-risk lending, but without having to carry the associated risk. They simply shifted the risk to the mortgage insurance companies, who covered the banks against loss in the event of default. The rot set in when the insurers collapsed, with a central insurance player in the US eventually requiring a taxpayer-funded bailout, reportedly around $180 billion.

Financial Institutions and Banks had to find creative ways to get these junk loans off their books before they defaulted. Their solution was to bundle and package up these rubbish mortgages and sell them off as defensive or low-risk income investments i.e. monthly income mortgage funds (backed by property, what could go wrong?)! The target market was conservative investors and retirement/pension funds, looking for a regular monthly income stream.

The question is: how do you convince conservative investors to buy junk mortgages i.e. how do you ‘window dress’ high-risk mortgages as low-risk income investments? This deception could only be perpetrated with the assistance of a complicit rating agencies industry, who sell the desired credit ratings for the right price and that’s exactly what the rating agencies did. They rated ‘junk’ as ‘investment grade’ effectively giving licenses to Financial Institutions and Banks to credibly disguise and sell rubbish investments in the open market.

They knowingly ripped off consumers, because they knew these instruments would fail when the underlying loans inevitably defaulted. This was an orchestrated fraud and collusion on a scale never seen before! If the rating agencies’ actions were not fraudulent, then they were certainly complicit, yet somehow they managed to deflect responsibility and have never been held to account. Keep in mind that these agencies are responsible for rating the sovereign risk of our country! Why has their behaviour gone unchecked and how do they get away with it? Why is there still no meaningful regulation around rating agencies?

These rating agencies continue to control and influence the investment and advisory industries and, as a direct consequence, investor behaviour. How can they possibly be trusted when investment fund managers are still buying favourable ratings for a negotiated price? As a consequence, investors are still losing money on underperforming investments, while the money managers and credit rating agencies never lose. The credit rating system is corrupt and totally ineffective as a management or due diligence tool for consumers to gauge the worthiness or suitability of any given investment.

The next level of greed and deception perpetrated by the Financial Institutions and Banks was to orchestrate additional profits from the junk mortgages they sold to retail & wholesale investors. How? Manufactured products! A number of these Financial Institutions and Banks were so confident that the bundled junk investments they sold would be worthless, that they took out insurance on them failing (derivative positions) and then collected when they imploded.

So when the loans defaulted, they collected twofold, once when they sold the junk product and later from trading their derivative position. Talk about benefiting from the misery of others when you can make twice the money from ‘engineering failure’ than you can from honest trading and all at the expense of the consumers who believe that their governments have the right governance, compliance and enforcement controls in place to protect them. We poor misguided citizens!

This is what happens when our trusted Financial Institutions and Banks are left unchecked as government regulators fail to enforce the law. What is the value of paying thousands of ineffective bureaucrats for not holding the Financial Institutions and Banks executives to account, perhaps because most of these executives are now bureaucrats themselves? What a great system: governments act as enablers for institutional theft and then use our taxes to fund the corporate bailouts.  How do we keep losing the same dollar twice? We need to improve regulation but more importantly, we need government to start enforcing the current laws.

How is it that a corporation can go bust after losing our money and then expect taxpayers to bail them out because they were ‘too big to fail’? If a corporation is ‘too big to fail’ then governments should legislate to unwind conglomerates and reverse the ‘bigger is better’ trend, because it is not!

I believe change is urgently needed if we are to minimise the risk of future financial losses at the hands of institutions. Start, as I have emphasised above, by dealing with credit rating agencies. It’s a flawed model and there needs to be a mechanism in place to hold them accountable for their performance i.e. some transparency around the accuracy and value of research, rather than just being allowed to sell a rating without recourse.

Favourable credit ratings give Financial Institutions and Banks, fund managers and stockbrokers a licence to print money, even when the underlying investment fund, equity or product, fails to meet the performance expectations as set out in the rating agencies initial report. All these ill-gotten profits are funded from money lost by investors who were given misleading or inaccurate information right from the start.

Secondly, there needs to be a closer look at how Financial Institutions and Banks use mortgage insurance companies. Basically every loan approved conditional to mortgage insurance means that the Financial Institutions and Banks recognise that the risk is too high to carry on their balance sheet. So the Financial Institutions and Banks subrogate control and responsibility of the ‘loan default’ process to the insurance company. That leaves the borrower without any capacity to negotiate with their financiers, who are now beholden to the insurance companies.

Unlike banks, insurance companies do not have the same legislated capital reserves, so what are the potential risks in the event of rising defaults? What is the cost of making housing more affordable in the short term when there is no long-term contingency plan when interest rates and unemployment rise? History tells us that if the housing sector is artificially stimulated, then you can expect with a high-degree of certainty that a correction is a foregone conclusion. It’s just a question of whether you’ll be one of the many little people who end up bailing out the big end of town so they can maintain their hedonistic and privileged lifestyles.

I keep hearing that banks are bastards; well wait until you have to deal with insurance companies!

23 April 2017

“I sincerely believe… that banking establishments are more dangerous than standing armies”. Thomas Jefferson

Government keeping ‘Financial Advice Services’ Affordable for the Wealthy

In the past, I have written about how the financially disadvantaged in our communities are the demographic that would probably benefit most if they were able to access affordable financial advice services. However, the costs of such services are so expensive that it has effectively been priced out of the reach of those who need it most: the young, vulnerable and working poor. (See: Government Absent on Credit Act-Disadvantaging Vulnerable, Youth & Working Poor).

The high-price factor is due to the massive costs associated with unnecessary, excessive and ineffective legislation, compliance, regulation, governance, licencing etc. plus the expense of supporting multi-layers of inefficient reactive government enforcement agencies/bureaucracy. The whole structure is broken because the system favours the wealthy and ‘enforcement’ is incapable of preventing those who are not members of the industry (i.e. the unlicensed criminals) from ripping off consumers, which is the main source of losses.

When will policymakers realise that new legislation does not make criminal activity more illegal, when it was illegal in the first place. So whats the point? The impact of more legislation is simply that it causes additional compliance obligations, which increases the cost for honest business operators, who pass on the added expense to consumers, pricing services out of the reach of those who need it most. (It won’t change the behaviour of criminals)!

This knee jerk response from Government is a case of being seen to be doing something because they are not prepared to acknowledge that government compliance agencies have failed to enforce the existing laws. The reality is enforcement agencies are not doing their job to identify criminality. The bureaucracy is such a protected species who align themselves with Government, while pointing the finger of blame at industry in order to hide their incompetence. So as a consequence all we get is more costly ineffective compliance and regulation.

Would it not be better if the industry, the policymakers, the enforcement agencies and even the product providers and ratings agencies all worked together for the benefit of consumers, rather than the opposite: instead of all the parties being ‘hostile’ with the industry isolated. As a result, the product providers and rating agencies are taking control of the industry unabated, yet no one is receiving the right advice and consumers are the losers. What a mess!

Mind you, the Financial Services industry has not helped itself. Those representing the industry have the difficulty of managing a weak and indecisive body that has limited influence, direction and control. They busy themselves trying to convince the public that they are a Profession, not an Industry, desperately trying to pitch the ‘value of advice’, yet deriving little revenue from it. In reality, they are lorded over by their commission-driven masters, the product providers, who actually pull all the strings. Finance advisers are just facilitators for the Product & Platform providers, Insurance companies and Fund Managers, predominantly controlled by the five major Australian banks.

As with all business models, the emphasis is always on what drives revenue and the problem for the advice industry is that they just can’t sell ‘advice’ as a value proposition. The pity of it is that, in truth, the right strategic financial advice is the most important and essential cornerstone to successful planning and should always be the first step. A consequence of appropriate advice may, at a later point, involve some type of investment product but unfortunately the forces that control and drive the industry influence the wrong behaviour (and therefore outcomes) as the weak advice industry allows the ‘trail commission tail’ to wag the dog; yet one cannot do without the other unless you sidestep regulatory protection altogether, which is exactly what has started to happen.

The Government needs to look at measures to abridge the present prohibitive governance and compliance red tape, as these costs make the provision of services unaffordable for consumers and unviable for the advice industry. Something must be done to preserve the advice industry, if not, control defaults to the Banks and insurance companies, and that would be like giving the foxes the keys to the hen-house. Another consequence of the ludicrous levels of Government compliance, regulation and bureaucracy is that the product providers are finding new ways to move their wares without providing appropriate advice i.e. avoiding the industries’ compliance regime.

A perfect example of this is the personal insurances industry. You don’t have to watch too much free to air television to notice that in recent years we have been overrun with commercials for all types of personal insurances. The reason for this is simply that the insurance industry had to find a new ways to move product when the ‘advice industry’ stalled due to bureaucratic and regulatory overload and Government indecisiveness.

The problem with mass product marketing is that consumers end up with the level of cover that they want, not what the need! The outcome is that most consumers are now significantly under-insured, or have no insurance at all. Many are paying for cover they don’t need or have the wrong policies.

These policyholders are then conditioned to believe they need to increase their cover (and premiums) annually by some obscure or irrelevant indicator such as CPI, when in reality they should be reducing the amount of cover in line with their needs, which generally declines annually as we gradually approach retirement (the obvious exception being Income Protection Cover).

Something needs to change in order to make financial advice more accessible for those who clearly need it most. Otherwise unscrupulous product providers and their enablers in the media will continue to take advantage of the financially vulnerable.

Unfortunately, Governments use the passage of legislation as a benchmark of their success; they actually need to reduce the red tape around compliance if they really want to assist those consumers needing help. That’s counter-intuitive and therefore a major hurdle as it’s a concept that is extremely difficult for Government to grasp. They all need to stop making the finance advice industry the enemy and engage with them to find a workable solution for those who currently cannot afford these types of services.

I’m not against regulatory controls, but it only works if enforced, otherwise it just increases the cost of services and makes it impossible for the industry to reasonably compete against unlicensed, dishonest and fraudulent shysters who continue to rip consumers off carte blanche. The Government, compliance agencies and the industry all need to start working together for the benefit of the consumers. What a novel idea!

The conventional view serves to protect us from the painful job of thinking. – John Kenneth Galbraith.

23 February 2017

Governments Eliminating Greenhouse Emissions by Shutting Off the Power

One of the biggest disadvantages of minority governments is that in the middle of all the madness nothing actually gets done. We are now realising the consequences of decisions made at the ballot box, yet another gigantic, predictable and foreseen cost for the ‘constituents of Australia’, as we enter a prolonged period of irregular and unpredictable power supply blackouts. The inconvenience, cost and consequences for the public and the economy are the obvious inevitabilities, following decades of indecisive politicians with injudicious policies.

Every political party argues about which idealist has the biggest renewable energy target (RET) as if the award goes to the Party with the most short-sighted and unachievable target without consideration for the long-term consequences. They talk about intangibles i.e. ‘targets’ but no one is held to account for the lack of a viable plan to implement and achieve a workable outcome. Let’s not even consider the costs, because you can’t cost a plan that doesn’t exist.

I’m not against renewable energy or reducing greenhouse emissions, but I’m not in favour of reverting back to third world standards because a bunch of indecisive elected suits are incapable of doing their jobs. From what I can see coal generates approx. 73% of our power, natural gas 13%, so common sense would dictate that we secure an alternative supply of ‘constant’ or base load power source before we started shutting down power stations. What ideology is so blind that they can’t see that?

The alternative to base load power supply is, of course, renewable energy technology; hydro 7%, and intermittent power from wind and solar 7%. Broadly intermittent power can only be relied upon about 30% of the time, essentially dependent upon the right weather conditions.

The point is that when there is no intermittent power, we essentially have a 100% reliance on coal and gas. Even if wind farms could produce 100% of our power 30% of the time, it’s apparent that we still need coal and gas to produce 100% of supply when weather conditions prevent intermittent power generation. So why can’t the impaired see what is plainly obvious? It seems that vested interests line political pockets!

Why are we closing power stations before replacing them with alternative facilities to guarantee supply as the main priority? Would it be stating the obvious to say we should first guarantee supply before investing in unreliable renewable alternatives to the point of dependency?

Australia has some of the world’s largest deposits of uranium and coal yet somehow ‘blackouts’ are preferable to considering nuclear or clean coal technology. Why not get a return on the hundreds of millions of dollars invested by government into carbon capture and storage technology? Meanwhile, we fail to acknowledge that intermittent energy with current technology cannot be relied upon no matter how many wind farms we litter the landscape with, unless storage technology can be commercially adapted.

The truth is that there needs to be room for both renewable and traditional sources of power production, but first you must guarantee a reliable supply. So what is the right balance in a world of commercial imperatives and what chance do we have that those with extreme views will ever take their blinkers off for long enough to consider reality, rather than hold us all to ransom by literally keeping us in the dark? How much inflicted grief must we endure before there is a sensible debate?

Australians need to understand their voting responsibilities when they exercise the privileges provided by our democracy, after all, if you are looking for someone to take responsibility for this debacle then we need to focus inwardly and not blame some of the blind, intemperate and fanatical activists we put in office. The reality check is coming. We are facing a massive increase in the cost of power and we will all pay for their idiotic ideology. Unfortunately, the biggest losers will always be the working poor, disadvantaged and the youth, the demographics with no voice, the politically disenfranchised.

Forethought we may have, undoubtedly, but not foresight. – Napoleon Bonaparte.

21 February 2017