Debt, Destructive Debt

Initial reports are in and this weekend's Black Friday / Thanksgiving spending is up almost 10% over last year's holiday. On the surface this sounds like great news! Perhaps the economy is improving and a recession can be avoided.

Not so fast.

I'm ready to predict that at least 50% of that spending was made by people who are already in debt that they can't handle. Further, another 25% of the spending pushed families that had manageable debt or no debt at all into debt. In other words, virtually none of this consumption was advisable.

Why is debt-spending bad, especially in tough economic times? There are lots of reasons. Carrying a debt erodes or eliminates the ability of an economic unit (person, family or state) to handle crises. By casually increasing debt these people have placed themselves dangerously close to ruin (or bankruptcy). It will only take one piece of bad news to break the proverbial camel's back. A lost job. Heck, even a reduction in hours can spell disaster. A health crises could do it. Debt itself contributes to health problems! Debt means stress, stress leads to disease.

What happens when an economic unit reaches or crosses the breaking point? The typical response it to declare bankruptcy. Bankruptcy is like a financial nuclear bomb strike to the economy. Sure, bankruptcy helps put the ruined economic unit in a position to recover, but every single person or agency that was owed money is forced to take a loss. The hit each takes depends on the size of the economic unit that failed. Those incurred loses can be large enough to lead to them becoming bankrupt themselves.

And therein lies the danger of bankruptcy: it is contagious. Bankruptcies resemble dominoes in that one falling can lead to hundreds (or even millions) of others falling. Bankruptcies are like nuclear reactions, they can achieve 'critical mass' where they become common enough to cause the system to produce an endless chain of bankruptcies. If that ever happened the economy wouldn't just flounder, it would fail outright. With nearly every government in the world (except China's) also carrying significant debt the ability of government to stimulate or rescue the economy is almost nil. The demand on the Welfare System would bankrupt governments. A country to go from being a G7 or G20 nation to resembling a third world nation in short order.

This all becomes possible because individuals cannot or will not behave responsibly. Further, those that choose to behave irresponsibly will not even take ownership of their own behaviour, they will place the blame on others. A refusal to say 'no' to luxuries we can't afford, an unquenchable desire to fulfill 'wants' rather than merely our 'needs' will be our undoing.

What about the banks and other credit-offering agencies? We are addicted to debt and they are our pushers. It's not just an analogy, it's the reality! If there is a record of your existence (like an e-mail address) and they can attach an address to that record they will send you junk mail inviting you to obtain a credit card. Lure them in with small tastes of their drug of choice -- credit. There are family pets with their own credit cards! How were the banks supposed to know that 'Roscoe' was a Dachshund or a Siamese?

Once you have a credit card they will continuously 'reward' you with additional credit. It would be bad enough if they only did this for people who pay off their monthly balances without fail but that isn't enough for them. Giving more credit to someone who has their addiction under control is a blind hope that they will eventually lose control. Banks keep upping the ante for people who constantly carry a balance! What are they thinking!? They're thinking "You've got a bad habit and we can make more money on interest payments by encouraging you to increase your debt load." If you liked smoking weed, try some of this heroin, it's so much better! They are gladly handing a depressed person more and more rope and crossing their fingers that you won't go ahead and hang yourself with it right away. If you do it too quickly, they lose money. However, the vast majority of us take a while before we bite down on the debt cyanide pill which allows the bank to make enough money in the process to justify the loss they must take at the end. We don't go quietly into the dark night, we struggle to make payments as best we can, funneling money to the banks as fast as we can earn it.

I knew that this was coming when the first 'Money Mart'-type payday advance stores opened. They are blatantly charging usury to let you have access to your own money a few days ahead of schedule and stupidly, we are willing lambs led to the slaughter. (It's bad enough that banks service charge us near to death to access our own money without payday advance leeches!) The marketing strategy of sellers is to whip us into a frenzy of consumption. They convince us that we 'need' things that we won't even use once we have them. Buyers remorse is rampant, but good luck returning things. So, in the banks we have drug (credit/debt) pushers on every corner and in the sellers we have unrelenting peer pressure to abuse drugs, i.e. spend without any consideration of our means. So, now we have an entire society addicted to obtaining credit and using every last damned bit of it.

All the while, the government has sat back and 'let the market' decide how things would proceed. Just a small amount of regulation on interest rates for lenders would have curbed this economically destructive industry. A little regulation on what kinds of marketing is and isn't allowed might have helped us retain a modicum of self-control in spending. Instead, we have neither. Marketers can say virtually anything about their products, even blatant lies. The more outrageous the claim, the less likely that a court will find that the marketing crossed the line! Courts have decided that the public should already understand that the claims made for products aren't true so don't need to be protected from the lies. They should expect the lies and act accordingly. Even catering to addictive behaviour in children isn't off limit! Child marketing attacks self-esteem and the brain's pleasure centre, so no wonder kids are the ultimate consumers and want everything. Numerous toys, especially virtual toys/pets, and social networks engage in psychological practices that are so influential that they are known to be manipulative at best, and 'brain washing' at worst, especially for unsophisticated minds -- like those of children. Parents complaints fall on deaf ears. The companies voices (i.e. money) are too loud for parents to be able to sway politicians.

Actually, governments are making things worse. Instead of attacking the real problem hurting the economy they encourage the public to spend. Spending is the traditional way out of a recession. However, historically all the instances of spending out of a recession have entailed families dipping into savings to spend and governments running deficits after having run surpluses. Now, we have families already in debt being encouraged to spend, and the government is limited in how much it can help stimulate the economy through job creation incentives, tax cuts and other services like retraining and welfare because it too is choking on debt! We can't spend our way out of this one.

Europe is having the same problem and is trying the opposite solution, and that is also failing. Greece and Portugal are both experiencing massive unemployment and rapidly shrinking economies. No amount of austerity can combat that kind of financial disaster, in fact, it feeds the problem of shrinking economies and increasing unemployment.

So, if you can't spend your way out and you can't save your way out, what can you do? You can address the real issue affecting economies around the globe. Stop encouraging the rapid concentration of greater and greater amounts of money in fewer and fewer hands. The greater the portion of a nation's wealth that sits in the top 20%/10%/1% personal financial empires the greater the drag on the economy. In that sense, governments are right, spending IS the way out of recessions, but so much surplus money is sitting unspent in the hands of the world's billionaires that the economies are running on fumes! The bigger the fortune, the higher the relative amount of idle money, so is it any wonder that the global economy is dying? With every financial/economic hiccough the rich get richer and the poor get poorer and the middle class gets squeezed farther and farther down the standard of living scale.

The last global financial crisis in 2008 was caused by greed in the banking/financial system. Those companies and their owners (other than the ones that failed) have gotten bigger and wealthier as a result of the crisis. The next crisis is on the doorstep and guess who is driving it...the bloated banks and financial institutions and their obscenely wealthy owners are siphoning money from the middle class and poor at a record-breaking pace and we're letting them. Not only are we letting them, we're choosing to help them fleece us! Credit is a great thing to have when you have no debt. It allows you to weather emergencies. Carrying debt, especially at the all-time high levels carried today, is the single greatest financial emergency on the planet and we're generally ignorant of the fact that our behaviour is not only breaking our backs, but the entire economy's back. And the banks? Well, they're laughing all the way to the bank, of course.

Soon enough, the world will be openly run by corporations. With lobby groups being what they are, corporations pretty much already are, but from the shadows. What governments that remain will be figureheads, puppets. They will rubber stamp the decisions made in the boardrooms powerless to do anything else. Even the greatest nations will be poorer than and beholden to corporations. The United States of Microsoft. Exxon Arabia. The Siemens Economic Union.

There's still time to prevent this dystopic nightmare from happening. but not much. The Occupy Movement is right, and there is a real urgency to it. Economies will grind to a halt as greater and greater proportions of the world's wealth get siphoned into private vaults, where it does nothing. Uncle Scrooge McDuck is happily swimming in his money while the common duck is getting accustomed to malnutrition and hunger. As the money concentrates further, the economy shrinks further still, the number of jobs drops, and thus the cost of labour takes a dive. With so much competition for every available position there will be desperation and people will offer to work for less and less. Unions will be utterly powerless. With so many unemployed and dead broke, demand for just about everything (except food) will bottom out further reducing the size of the work force. The minimum wage will be eradicated. Eventually, all the wealth will be in the hands of 20%/10%/1% of the population with the remaining 80%/90%/99% homeless or on the fast track to ruin. The ultra-wealthy won't be any more motivated to be charitable then than they are now. They'll give whatever they can to reduce their tax burden and not a penny more. Of course by then, they may not even be taxed -- only the poor will be taxed. We'd be back to the feudal system, with people being dragged off to the dungeon for not being able to pay the Lord's taxes. It never mattered if there was a drought and the crops failed leaving the farmer with nothing for himself let alone for the greedy and petty Lord.

Sure, the banks are driving this phenomenon, but there's enough blame to go around. The governments are greasing the gears of the system enabling it to reach record levels. We are just as culpable as we are willingly rushing into the arms of ruin in order to enrich the already wealthy. Just a tiny bit of intelligence, forethought, reasoning and restraint would have prevented this from happening in the first place. If we used a reasonable portion of our brains' potential we would recognize that we are being used and abused by a money-mad system and might even find the strength of will to do something about it! Instead, we dance like puppets on strings throwing our ever-shrinking share of the world's wealth into the hands of those that have more than they can count, or spend, in a lifetime and we're doing it faster and faster all the time! We're in a hurry to realize the plutocratic vision of dying with all the toys and leaving us with none.

Wake up people! Force your government into enacting policy that is sustainable. What they are doing now sure isn't! And Mr. and Mrs. Billionaire, you should wake up too! If you think your lives are going to be comfy and cozy once the majority of the population has nothing -- and therefore nothing to lose -- you're sadly mistaken. Besides, if you're in the lower tier of the ultra-wealthy you'll eventually get sucked into the economic black hole as your more wealthy 'cousins' begin to prey on you once there is nothing left to take from the poor and middle class! And last, but perhaps not least, Mr. & Mrs. Billionaire, if there is an afterlife and you think you're pittance of charity will get you into Heaven, that it somehow absolves you of the sin of grand larceny taken to the ultimate degree -- your fleecing the world of its wealth for your own personal fortune -- you are sadly mistaken. You'll spend eternity trying to get used to the smell of brimstone and the pain of unending torture. I guarantee it. You have to decide whether it is worth it. Clearly, you've already decided. You have chosen...poorly.

Election Day in Ontario

It's election day in Ontario and I haven't blogged nearly enough about the issues and smokescreens that have been bandied about by the politicians vying for your vote.  This post is likely too late for you, but there's always the next election.

I see no rational reasons to vote for the Progressive Conservative Party (or the Conservative Party federally) other than pure unadulterated greed.  Yes, the PCs have successfully branded themselves as champions to various special interest groups and religions but that branding is largely based on fiction.  I'm sorry if you fall under that category and you voted PC -- don't expect any return on your electoral investment because it won't be coming.

Last I checked, greed is one of the Seven Deadly Sins of Man.  If you're OK with having a Deadly Sin as your motivation for voting then you probably don't deserve a vote.  Still, you have one, and you've exercised your right to do as you please.  Unfortunately, we all pay for your selfishness and folly.  I hope you don't consider yourself a good person because you just failed that test.

If you're looking for a Centre-Right party to put your vote behind and don't want to buy into the ridiculous agenda of the PCs look no further than the Green Party.  Surprised?  The Green Party actually has a Centre-Right fiscal policy behind their environmentalist central theme.  The Green Party has been looking for a break in Canadian politics but our stupid First-Past-The-Post system makes it next to impossible for them to do so. Instead, this system gives us majority governments that received support from about 20% of eligible Canadian voters.  What's worse is they call this 20% 'landslide' a mandate for their Right Wing agenda.  Of those that actually voted, about 70% said 'Hell no!' to the Conservative Party, yet they have received their fictitious 'mandate' and they are now equipped to muscle through absolutely anything.

If you are more pragmatic and insist that your vote have a chance of affecting the outcome of the election, I have two pieces of advice.

First, leave Ontario.  While you're at it, leave Canada.  The electoral system here does not empower the voter to make a difference in the outcome of the election.  In my 25 years of adult life I have never cast a ballot that mattered in the slightest.  By that I mean that in none of the elections of the past 25 years, at any level of government, have I voted for the winner in an even remotely close election.  Either my candidate wins by a landslide making my vote superfluous, or my candidate lost meaning my vote had no part at all in affecting the ultimate outcome at all.  At least federally each vote translated into funding dollars, until the Conservatives squashed that, which of course was in their best interest to do given the fact that their supporters are mostly rich people and corporations who have the means to donate generously while the other parties have supporters of more moderate means and have to scratch and claw to pull together party money.  Was it in the best interest of Canadians?  Not even close!  So much for fairness, hello to pure ideology, on our way to pseudo-dictatorship?

Even if/when you do get lucky enough to affect the outcome in your riding/ward/district/constituency you still have virtually no say in the outcome as a whole.  Case in point, in past elections more than 50% of Torontonians voted Liberal compared to about 25% (Progressive) Conservative support -- an overwhelming result.  Unfortunately, the rest of Ontario/Canada had results predominantly for (Progressive) Conservatives with most of these results close races.  Taken to the extreme, it is quite possible in our electoral system to handily win the popular vote and lose the election by a landslide.  The fact that the Centre-Left vote is split between two parties and the Centre-Right is wholly represented by one (until the Greens break through, whenever that is) biases the system for (Progressive) Conservative results.  The fact that Liberal and New Democratic governments have been elected at all says much our overall political leanings.  All it takes for the (P)Cs to win are a few people here and there swayed by charismatic figures, lies, borderline slander and promises of tax cuts... tax cuts which along with a flood of service cuts will see them worse off than before they cast a ballot for big Blue.  Unless of course you own a significant chunk of  a major corporation or two, and/or happen to be among the very top earners in the province/country -- then, the tax cuts pay off in spades, as if the loopholes/tax shelters you are afforded weren't already enough for you to (largely) shirk your responsibility to the community as a whole.

Second, vote for a party that actually cares about the country/province as a whole and not just what their country/province can do for them.  By and large, we have two of them to choose from: the Liberal Party and the New Democratic Party.  If you live in Quebec and have a separatist preference the Bloc/Parti Quebecois is a better, more responsible choice than the plutocrats and oligarchs that make up the (P)C Party.  These parties have shown the willingness to temporarily carry policies that run counter to their general ideological framework if doing so is in the best interest of the province/country.  It was the Liberals that balanced the budget and orchestrated surpluses.  It was (mainly) the (P)Cs that squandered those surpluses and turned them into record deficits and debts.  Perhaps we can give ALL the political parties a free pass for the events of the past several years.  If you weren't paying attention, the entire global economy has tanked in historic fashion and our provinces & country were not immune to this phenomenon.  Deficits were strategic buffers against bigger, deeper recessions.  (And if ALL western governments of the past 40 years hadn't been in the back pocket of corporations, slowly but surely killing the economy by eroding the wealth and earnings of labour and the Middle Class down, while at the same time creating ever more profitable environments for corporations, this strategy might have worked.)

Not so for the (Progressive) Conservatives.  They are married to their ideology regardless of what might result from sticking to their guns (pun intended).  The abolition of the long gun registry in spite of every police force across the country being in support of maintaining the registry is a prime example.  What do the police know anyway?  So what if the registry has actually helped in solving crimes?  Only the convenience of the gun owners matters.  And, after their gun is stolen/lost/sold it's no loner their concern so they don't care at all.  The police do.  And they would too if they were the victims of the crimes committed with their long guns.  Sadly, the gun owners largely live in the burbs and in 'God's country' whereas the crimes committed using their guns largely happen in the cities.  NIMBY at its best.  Thank you sportsmen/hunters for absolving yourselves of responsibility for gun ownership.  I have no respect at all for people who are all up in arms (pun intended) about their rights but are nowhere to be found when it comes to responsibilities. Here's an idea.  Love you gun so much?  Move South where guns are the state religion.  You'll fit right in and our society will be better off for your absence.

So, now that you've heard my take on Ontario & Canadian politics.  Go vote if you haven't already.  (And if the ballots haven't closed.)  I predict a tiny majority government for the Progressive Conservatives because they market themselves better than Apple, Coca-Cola, McDonalds, Microsoft and Nike combined and most voters are sheep, following the most obvious carrot -- even when they know it is poisoned.  Fortunately, or unfortunately depending on your point of view, this government will last less than a year before a non-confidence situation forces another election.  Just what we needed was to spend more money deciding which incompetent, egotistical and self-interested boob we want to represent us.  Sadly, this is the best system we can can come up with... at least for now.