It's a wrap

Last updated 08:44 20/10/2010

Over the last two years, I have been deliberately controversial on a number of issues to spark readers to debate. To a degree this has been successful.

I have also endeavoured to counter-balance popular theories, proven of course by much research which as a result is then dressed up as fact. All theories are nothing more than well develop opinion and some research is commissioned, meaning it has a purpose which is not always what it seems.

I have tried to encourage readers to develop a healthy cynicism, and also to provide an alternative view of the world of finance economics and wealth creation.

Why have I done this? Because the world is dressed up as way more complex than it is, and the purpose of this complexity is to employ people to manage your finances, to make rules, police them, snitch on people and otherwise consume needless resource.

And why do we need the policemen and snitches because the created complexity has disempowered people thus allowing those who pretend to know how to play the game to skim an enormous amount of wealth off the top.

I kid you not in 2008, 40 percent of the USA's GDP was consumed by the financial services sector, no wonder the bank bosses banked such enormous bonuses.

If banking is about the means of exchange, and the facilitation of productive capital, this cost is obviously unsustainable.

The cost of the mess is being borne by taxpayers through bailouts funded with the socializing of borrowing, and by savers through printing money and debasing money denominated assets. No wonder gold has such appeal.

Starting at that top, the world

Global warming, yes it appears to be an issue, but the pompous attitude that humanity can do anything about it is unbelievable.

The planet has warmed before; Greenland..let me see..when it was discovered it was green.

Why are we so fixated on this?

Simple really, because we have got nothing else to worry about that we can be convinced that we can do anything about.

Ok, so parts of the planet may in 100 years be uninhabitable. This has happened before, and the answer was simple, people moved, if they moved into other people's lands they fought it out.

Big difference this time is there are just too many people and they are too well armed. I have written a number of blogs on this.

Population is the problem. My blog on assisted euthanasia and fourth trimester abortion was a challenge to start thinking about how will we ration scarce resources.

Under developed countries still ration by survival of the fittest, so eventually will we.

Assuming the financial system survives, financial resources will be the rationing agent, those that can pay will get treated and those that can't will die. Brutal, but face it, we will have to eventually.

Financial resources are inherited from people who cared about us, or we earn them.

Thus the issue will be usefulness; those that are not useful will not live. You could argue that the bottom end of society already have no quality of life, it is a short step to determine that they should have no life at all.

The alternative is that we will have a World War over land water and resources, and the useless will as has always been the case be eliminated in battlefields with the useful taking a bit more collateral damage that in the last World War.

And let us not be precious about this either, the racial Genocide factor in such a world will be an issue as well.

Concentration camps will happen again. Human nature is what it is. Look no further than recent history, in even civilised countries, eg: Bosnia.

Human beings are capable of unbelievable atrocities at a personal and collective level. Why is this? At its very base it is scarce resources, survival and distrust of people who look and sound different to us that drive these things.

Paul Henry is flirting with a point, but absolutely the wrong forum.

The west, and the weakened "Rome"

The world domination of the west after nearly 1000 years looks near its end. The parallels with Rome are pretty stark if you want to look for them.

The west core belief system and its spirituality have substantially been undone.

As a result the anchor of its societal values is unwinding itself.

Corporate crime and fraud, and malfeasance are simply able to occur at the levels that they do because society has lost its sense of community and even personal values.

Now before I recommend a regression to a church-led society, which I won't and don't, understand that what I did in capital markets was motivated by the common sense of the long term sustainability of societies that have a value set and frame work in which to function which is based on the protection of the whole, and each individual in it.

My value set is do unto others as you would have them do unto you, and say what you will do and do what you say, avoid hypocrisy.

If business could adopt these values eventually it would lead society to the same outcome. God I was naïve.

Business is easy to lead but society is not. Why? Because we are on the cusp of poverty, the whole west.

We don't like it and we continue through the auspices of democracy to vote for a continuation of a fool's paradise. I have blogs on universal suffrage as well.

Like Rome we have lost a focus at an individual level on society and nation. We have also lost a pride in ourselves and our society. (Not all of us but enough to leave the west on the verge of anarchy).

The focus on self has lead to extreme consumerism, crime and depravity. Prostitution, drugs, are all a symptom of a society in decay when these vices reach the level they have in the west.

And the final tangible sign of the parallel is the failure of the west's military in the field.

Vietnam was the beginning of the last 100 years, so we have around 50 to go.

Iraq version 2 was another nail in the west's end.

Not because its was a military failure, the jury is still out on that, but what it was, was the first major division of Rome into smaller self lead sub states since the USA took the leadership of the west from Britain.

Europe refused to endorse the action if you recall, and Rome (Washington) lost the moral right to lead the west and now the west in relatively leaderless.

The next big destabiliser of the west is the talk of the collapse of its currencies.

The next ingredient in the West's collapse is demographics. Simply put too many old people and not enough babies.

And like Rome, to sustain itself immigration is required. In Rome's case they came as slaves in our case they come by invitation.

Compared to Global Warming the challenges facing western society which we can do something about are just as enormous, but we have no will to confront the issues, as they get pretty close to home and personal.

Consumerism can be dealt to if people can be focused on needs rather than wants. I have blogged extensively on that.

Drugs can be dealt with but it needs a real hard hand, have a look at my thoughts on drugs.

Make them legal and refuse all medical treatment for those who use them, let them die.

Within five years there would be a much reduced problem.

Again we could argue that drug users have no life anyway.

Employers now can drug test, and sack drug users, so they have no job, no income, dependant on the taxpayer, it is a short step to a vote to let them die. Gee, this is government choosing who lives and dies. Dam unacceptable politically, who might they choose to kill eventually, who might they decide is useless when it suits them, you or me, because we oppose them.

Probably and thus we would have to give up democracy which is one of our surviving values to deal with this issue. Haven't we already started this slide on account of the other big bogie man, the war on terror?

On legalising drugs, have a read of Ben Elton's, satire "High Society".

But seriously we can beat the drug problem if we want to, but we will have to give up some civil rights to do it.

We will have to have leaders we can trust. Does modern politics deliver up such leaders? We need to examine our political and leadership frame works. I have blogged on that too.

Focus on self rather than community, we can change as well, but to do so we have to develop a set of objectives that will capture the imagination of the whole of society.

We need a Moses and a promised land.

OK, that is not going to happen, so what we need to rediscover are our core beliefs and core values, if you like our community ethics, and we have to rediscover the integrity to live those ethics daily.

The World War II legacy and the west's possible demise as a result.

World War III is already underway, it is economic. We consume, the east produces. We borrow and sell assets, they lend and buy assets. We don't bred, they do; they export us people to fill the void.

I doubt that they see it as a war, for them it is just doing what they do and playing the world economic and political systems as they are and we allow them to be.

Why is this happening and happening now? The legacy of WWII, which is playing out and will accelerate over the next 20 years. This is the phenomena of the baby boomers, born from 1945 to 1964. This is a once in history, at least so far, event.

A bunch of kids were born in the 1950s mostly, and as a result nappy valleys appeared all over the western world, schools were built.

Now many schools are closing down, as we have fewer kids than we had at the peak.

Then they became young adults, these baby boomers bought cars and houses, and a consumption-led boom bedded in, the baby boomers gave the world their best shot in their 20s to 40s and produced significant wealth for the west. Now they are moving into wind down mode, and consuming their wealth.

Their kids, however, are a different bred, instead of the generation X and Y stepping into the productive cycle, many have not yet jumped out of the dependant cycle. They stay at school and home longer, and when they do work they over value their worth because PC nonsense has convinced them that everyone's a winner...blah, blah. And they spend every dollar they earn. No wonder we have a balance of payments deficit.(Facilitating economic warfare from the surplus economies.)

Soon the baby boomers will be moving into expensive health care and retirement living, notice the booming retirement villages, in 40 years these too will be empty shells like the schools of the 50s as this wave of post war babies moves through to death.

This demographic wave combined with low birth rates is our undoing; it is the Achilles heal of our society, as the only way to keep up our lifestyle is to import labour and capital and the only way for politicians to get elected is to keep us happy by obliging.

Baby Boomer thinking

They are healthy and working longer, sometimes out of choice sometimes out of necessity. They also to a degree behave as if they will live forever. They deprive the young of jobs.

In Spain unemployment among the under 25s is 45 percent!

They are holding their wealth longer and unlike past generations are inconveniently not dying and passing their wealth to their kids, thus the risk taking portion of the population is starved of independent capital.

As the boomers get older they will become even more risk adverse, and fearful, moving to ever increasingly risk adverse strategies, property, bonds, finance companies, and fund managers to spread it all round, feed in the belief that this is the path to security through the auspices of portfolio theory in turn built on efficient market theory and many other investment and economic observations.

In the words of Buffet, a generation has been taught to do "average".

So not only do the risk takers have none of their own capital, it is hard to convince the baby boomers to give it to them either. There is a series of blogs that sparked some debate on portfolio theory.

Now while we are spending up large, we are also migrating away from risk taking, ensuring the emerging economies who are happy to take risk build strong businesses that can then take over the local ones starved of risk capital.

The baby boomers have also been conditioned, again by portfolio theory to believe that a wide enough spread eliminates risk and thus also the need to do any work on any individual investments.

Thus the baby boomer owners have gone on holiday and mangers have become lazy and over paid due to the ownership vacuum that now exists in western societies.

Go have a look at the NZSA website and download an early thought piece "Modern Capitalism".

How about NZ?

There is no point worrying about the world, global warming, war, pestilence and all these things as 1: they may never happen and 2: no individual or nation can do anything about it anyway.

So focus on yourself, your family and your community (or nation).

New Zealand has its share of all of the above common western problems, demographics and baby boomers, high levels of consumption, low investment rates, high migration flows and high dependence on foreign capital (read growing debt and foreign ownership tensions).

In addition, we have a bloated welfare state that perpetrates generations of dependency, and it seems even now drives the behaviour and we have nurtured racism (negative racism some would argue) and separation thus undermining the development of any common values.

There is a growing sense of division. We have an electoral system that has transferred power to the noisiest minority and corrupted the representation of the people into a system that represents Ideology. (MMP).

These are things that we can do something about if we have the will, but we don't have the will because we don't have a system that allows leadership to emerge.

We are also a sparsely populated country, there are not many of us, and we lack any capacity to defend ourselves.

We are isolated and suffer the tyranny of distance to markets. We can't do much about these.

We have opened our economy up to the ravages of the world markets with free currency flows, a floating dollar and free trade arrangements, sure these have been advantageous but I have done a number of blogs on counting the costs.

We have had a light handed regulatory framework which has contributed to the destruction of investor confidence and this has created huge distortions in our economy, and huge losses and lost opportunities harder to quantify.

We can do things about these issues if we want to.

I said we, which means there has to be a collective will, that requires thought leadership, where do we get that from, individuals, so that gives you a clue about what you can do if you want to.

Now down to Nano economics, you and your personal decisions

Macro economics is a high level view of what each of us does and to a point, thinks daily. Change the thinking change the behaviour change the collective outcome.

While we all need to be aware of the activity around us, we each need to focus on what we can change. We cannot change the fact that there is a bear outside of the cave, waiting to eat us, we can however change our habit of not looking before we leap out of the cave.

* Individually we need to stop looking to parents, government and others to provide for our daily lives and our future, we need to start thinking about how to provide for our own future individually. Independence rather than dependence has to be our objective for ourselves individually and thus collectively.

*The path to independence and freedom is earning a dollar, spending less and avoiding debt, see the blogs on this.

*Once our personal house is in order we need to care about our community and its future, and focus on the things we can do something about.

*We need to talk openly and without fear of the PC police coming to take us away, and we have to be prepared to confront issues.

*We get to vote, use it wisely. Do not vote for any politician who wants to spend our nation's wealth on needless misguided welfare, vote for any politician who will stand up and actually develop inspirational policies. We want an aspiration, not a desperation, society.

*Pressure politicians to adopt a representation regime of people.

*If you have found a way to a secure future share your thinking with others and help them to find a way to a life that is useful (leave them to define useful).

*Write letters and send an email to politicians on what you think is important, they are slow but they do respond to this eventually.

So when I analyse the world as it is and the plight of humans at a micro level the answer is always the same - be useful, save, encourage rational investing in our own country and the rest looks after itself. Re-read Vision leadership and governance.

What have I done to imbed savings and investing?

* The NZSA was formed to "enable protect and reward ownership" ( with hindsight anyway). The barrier to saving in New Zealand was in part the belief that people didn't know how, this is knowledge, that they were not safe, the world was full of thieves, and that the outcome even before thieving was not so crash hot. Thus the objective.

*I then wrote extensively to politicians about the need to develop a savings culture in New Zealand. After a private letter to Michael Cullen before the Kiwi saver budget, it was clear to me at least that he got the point when he used the words "I claim my place in history...." words I used in a private letter to him.

We now even have a taskforce on savings to augment the taskforce on welfare.

These two taskforces are attacking the same problem, significantly reduce the safety net, and the incentive to self help (saving) is self evident.

This however will take considerable political will. If means testing is introduced, to reduce the incentive to spend everything to quality for assistance, the assistance has to be starvation level.

*I have worked hard on developing financial literacy channels that are free from conflict and have also tried to simplify the complex.

*I now have the opportunity to work with right other like-minded individuals on crafting a regulatory outcome for NZ that should help with the confidence to invest.

If we do get savings right these outcomes should follow:

*More households will be independent and self reliant, and as such they will have more pride in themselves and more confidence in their future.

*More will have an economic stake in society and will be participating in its economic processes, and thus generally will be less inclined to crime (a stake holder society).

*Financial literacy will improve and the middle men and fraudsters will find it harder to skim the pot.

*If the savings are deployed in New Zealand, we will build business in New Zealand and create opportunity at home which will keep our people here paying taxes and employing people, or better encourage New Zealanders home.

*If we collectively do this we will export more, have higher incomes and generally we will reverse the national poverty cycle ( we are earning less per capita in real terms every year).

*We will progressively retire foreign debt and will reclaim ownership of our businesses or create new ones that we own.

*We will become a vibrant nation that both we and our trading partners will value and this will be our best defence to world pressures.

It all starts with savings, and rational domestic investing.

To change the habits of the last 40 years requires courage and leadership a three year election cycle makes it impossible but lobby them none the less, the squeaky wheel does get oiled in my experience.

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