PHYSICIAN, HEAL THYSELF

Everybody’s got a villain, or three, in the current worldwide financial crisis. There are plenty of people and institutions to blame. President Bush, Wall Street, greedy bankers’ bonuses, the Federal Government, the Reserve Bank, the fuel companies, the super fund managers. You name it.We never blame ourselves. It’s true some things like interest rates are officially out of our control but they always were. In the midst of all this have you said: We’ve been living beyond our means. The day of reckoning had to come.

How many people not only use but abuse their credit cards? The expression
‘maxed out’ didn’t even exist a few years ago. I know people blame banks for offering them an increase in their card limits. But you don’t have to take it.

And when it comes to buying houses. When interest rates were going up did new buyers realistically look at their budgets and income levels and think: Can we still afford to meet the repayments if the rates go up by one or two per cent?

(The current generation of home buyers, bleeding when the rates nudged close to 10%, could not even imagine the hardships of the 1980s when interest rates were 18% and business overdrafts were closed to 25%).

We had to have the bigger house, the plasma TV, the double garage, the new cars, the overseas holidays on credit. And I’m not just talking about Generation Y whop have been spending $50 billion a year on the good life.

It is true that the latest worldwide crunch has focused attention on money and the fragility of our fiscal lives more than at any time since the Great Depression nearly eighty years. And few of us were alive then or remember the unemployment lines or the soup kitchens.

Now we try to comprehend the incomprehensible. We know our super funds have shrunk but we don’t know what if anything we can do about it. We have to trust our political leaders even if we don’t understand exactly what they are doing and fear they don’t know either.

Last night, Kevin Rudd hosted a program on Channel Seven called An Audience with the Prime Minister. Sounded like 100 people were meeting the Pope. He was relaxed, confident and conversational. But the sub-title to the show was Managing Your Money. The first question was from a woman who simply asked what should she do with her shares. Should she sell or should she sit. The PM said he couldn’t advise her on managing her money and I thought what was the point to it all.

In fairness he tried to simplify things. He likened the economy to a car running out of petrol. ‘You can say the gauge is getting down a bit; let’s whack in some fuel. That’s what we’ve done, but done it responsibly and early’.

Funny, a few weeks ago Rudd and Swan were denying we were running on empty. While American and European were crashing they were saying the little Aussie car would just keep going and going. These mechanics had better know what they’re doing.

 And a Postscript:  When politicians start making speeches on the economy you know your eyes are going to glaze over. Just a never-ending stream of buzz words.  President Lyndon Johnson crudely got it right.  He once said:
 ‘Did you ever think that making a speech on economics is a lot like pissing down your leg? It seems hot to you, but it never does to anyone else.’

Monday, October 20, 2008

© Copyright Derryn Hinch 2008