Australian Election - Latest Bribes

Why "Free " Health Care Isn't Free

It might seem somewhat churlish of me to pick on a policy announced by the Australian Labour party at a time when so-called conservative administrations are spending money like the proverbial "drunken sailor" (i.e. Bush in the USA with record deficits and Howard in Australia going for the record in election giveaways). However, the policy promising free hospital care to the over-75s is irresponsible in the extreme.

Firstly, one of the problems with "free" health care of any sort, is that the removal of the price mechanism opens the floodgates to an almost inexhaustible demand. This is one of the main reasons why pretty much every public health system sees costs escalate way beyond what was expected and why they become a black hole sucking in funds.

Secondly, already the biggest strain on public finances in the coming years will be pensions and health care costs arising from the ageing population. This policy simply adds fuel to the flames!

Like all government spending, socialised health care is inherently wasteful and results in a misallocation of resources. By coincidence, today's "Sydney Morning Herald" carried an article entitled "Make Medicare's billions work for the sick, not for the doctors".

"A wrong-headed funding regime is keeping doctors out of general practice and rural areas, writes John Ferguson."

The article talks about how it's more lucrative for doctors to go into such areas as cardiology rather than general practice because Medicare pays more for cutting people up rather than keeping them well. No surprise that when bureaucrats decide on resource allocation, rather than leaving it to the market, we get these sorts of problems.

How Governments Destroy Prosperity

Another Example of Politicians Acting Against the Public Interest

I was enraged(!!) when I read this article in today's "Sydney Morning Herald" (see here) - "After a shunt or three, off the rails." The article relates the case of a proposed road-rail freight transfer depot that has been held up for four years! Anyone who still clings to the misguided belief that governments are the solution rather than the problem needs to read this!

"It started in August 2000, when Patrick Corporation lodged with Campbelltown City Council a proposal for a road-rail freight transfer depot beside the Ingleburn rail line. It was actively supported by policy at every level - and yet, for four years, Patrick awaited an answer. Any answer."

Why the delay? Read the article for the full story but it basically boils down to the local Labour government wilfully acting to obstruct Patrick Corporation, presumably as part of a political "grudge" against the company (Patrick was the company that took on, and beat, the waterfront unions in a bitter dispute a few years back).

Yet another example of the evil consequences of government and over-regulation. This particular tale seems like something out of "Atlas Shrugged". I've sometimes thought that Rand drew a somewhat extreme caricature in that book to make her point, but the frightening thing is that many of the things she talked about are happening right before our eyes!

Getting Rich Your Own Way

New Book From Brian Tracy

The very prolific Brian Tracy has another new book out, "Getting Rich Your Own Way - Achieve All Your Financial Goals Faster Than You Ever Thought Possible". I haven't finished reading the book yet, but I would like to share an extract that I found very moving and inspiring.

"I had a real eye-opening experience some years ago. I was speaking to an audience of about 1,200 people on success. I was telling them that I believed that anybody could be successful if they just did certain things in a certain way. At the break, I was surrounded by about 30 well-dressed men and women who were asking me questions and sharing their own stories. At that moment, a mentally retarded young man who had been sitting in the audience pushed his way through the crowd. He said in a very loud voice, "Mister Tracy. Mister Tracy, can I be a success too?"

I was a bit taken aback. I stood there looking at him while all these people watched me to hear how I was going to answer his question. I didn't exactly know what to tell him. My mind was racing. My credibility and my message, "Anyone can be successful," were being put to the test. Fortunately, he continued speaking. He said, "Mister Tracy, I live in a group home. Mister Tracy, we repair furniture. Every month, I buy a hundred-dollar savings bond. if I continue doing that, will I be a success too?"

As it happened, I had just been reading about how much someone would have to save to become financially independent. I knew that a person who saved $100 per month from the age of 21 to the age of 65 and earned an average return of 10 percent on the savings over that time period would be worth more than a million dollars at retirement. I suddenly realized that the young man, living in a group home, repairing furniture, with no advantages or opportunities, could actually become wealthy. If he just kept saving $100 every month, he would retire wealthier than 95 percent of the population."

To me, this story is about a lot more than just the magic of compound interest (wonderful though that is!). The real magic is in the power of the human spirit.

Have a GREAT day!

In Praise of the Entrepreneur!

The "BRW" Young Rich

In contrast to the somewhat gloomy tone of some of my posts(!!!), today is an upbeat celebration of the entrepreneur. In particular, the young entrepreneur!

The Australian business magazine "BRW" (www.brw.com.au) recently published it's annual Young Rich issue. To make the list, you need to be under 40 years of age and have a net worth of at least A$10m. This year, 96 Australians made the list and at the top is John Ilhan, the founder of mobile-phone retailer "Crazy John's".

"The son of an immigrant family, he started with no contacts, no university degree and no experience, but he did have a burning drive to succeed. Fifteen years ago he was selling electronics in suburban obscurity. Now, at 39, he is worth A$300m."

It's a fascinating issue to read and well worth checking out. It's interesting to see the areas where the money is made - Retail, Services and Technology are the top 3 sectors, making up 70% of the total wealth represented by the list.

An inspiring issue!

It is Not Evil to Want Lower Taxes!

The Cancer of the Anti-Prosperity Meme

One of the reasons for starting this blog was to provide a counter to the collectivist and anti-prosperity thinking that has become so prevalent in western societies. For some reason the UK seems particularly infected with this cancer and a today's "Daily Telegraph" has an excellent opinion piece that illustrates the sort of thing I mean. The article "It is not evil to want lower taxes. Get it?" (see here) talks about how resentment about paying high taxes has been manipulated into a form of guilt, equating this natural and understandable desire with being somehow immoral and selfishly hard-hearted.

Anyone familiar with Randian ideas will be astonished that this concept ever gained any credence, but so degraded have morals become in the UK as a result of over 50 years of the welfare state that, in fact, it is the perceived wisdom. To quote from the article:

"I remember when William Hague first took on this mythology, in a brave little speech entitled something like "The Moral Case for Lower Taxation".

He was not treated as if he were opening a challenging debate, or putting forward a contentious but intriguing proposition. His proposal, which was based on assumptions that were commonplace - almost banal - before the post-war consensus rewired the brains of Britain's governing class, was regarded as lunatic.

He had said something that was so out of step with received wisdom that it seemed to defy the rules of modern thought. It was as if he had claimed that the moon was made of green cheese. The idea had to be either mad or shamelessly, unapologetically bad: an apologia for greed and blatant callousness. And, at the time, popular opinion seemed to be completely snowed."

It's astonishing to read this and yet, tragically, it's true. However, there is a ray of hope. The rest of the article goes on to talk about a poll published by the Centre for Social Justice where people were asked about what they would do if they had money to donate to a good cause. The results?

"The two most popular choices were: give it directly to a person or family in need (31 per cent chose this), and, give it to a local charity or church working for needy people (another 31 per cent). Among the list of possible beneficiaries was "a local authority to spend on fighting poverty" and "central government to spend on fighting poverty". The local authority got one per cent support, and central government got none. "

Conclusion?

"What does this tell us? That people actually do understand that the state is not the most ethical or effective medium of generosity and community responsibility. Give them a morally acceptable way of saying that out loud, and we might have an honest debate about taxation and its effects on society."

Perhaps people are beginning to wake up and see through the "con" of the welfare state.

Crash Course for the Independent Investor

Practical Applications of the Elliott Wave Principle

For those readers interested to learn more about what lies behind a lot of my thinking about financial markets, "Elliott Wave International" are offering a free course to introduce people to the ideas behind the Elliott Wave Principle and to show some of the practical applications of this approach.

You can find the details here. You need to register to access the course but it's free and you get access to some great material in addition to the course.

Check it out! You'll get a different perspective on the markets that will be very helpful when looking at what's going on in the markets. Like any forecasting approach, it's not right all the time but EWI have an excellent track record with notable calls this year including being bullish on the US Dollar (from January this year, when you may recall everyone was predicting further weakness in the greenback!).

Anarchy in the UK?

The First Steps Towards the English Civil War 2006-?

Imagine the following scenario. The Labour government goes ahead with the legislation to ban fox hunting. The ban is ignored in the countryside and at the first attempt by the authorities to enforce the ban, there are pitched battles between the police and the hunt supporters (who I will refer to hereafter as the Countryside Alliance). The police are forced to retreat, although there are arrests and many injuries on both sides. Attempts to enforce the ban continue, with the police going ahead with the plan to install CCTV in country areas. Not surprisingly, this ploy fails as the equipment is destroyed by locals almost as soon as it is installed. A nasty incident occurs when a van sent out to repair damged equipment is ambushed and set on fire.

Protests spread and the hated "speed cameras" in many areas are also destroyed. Blockades are instigated in some places, similar to those seen during the fuel crisis protests seen a few years previously. Some parts of the country are becoming virtual "no-go" areas with police refusing to patrol some districts and remote police stations are abandoned.

The government loses patience and decides to call in the Army to enforce the legislation at the start of the new hunting season. The troops are deployed, but when ordered to arrest protestors they refuse. Some even switch sides and desert! The simmering resentment in the Army over repeated budget cuts and meddling by the government (together with bitterness over the Iraq war and the poor treatment received by troops) boils over.

Chaos ensues as the government finds it cannot enforce its writ in large parts of the country. The Countryside Alliance starts to evolve as an alternative administration.....

Far fetched? Certainly. Impossible? Here's an extract from today's "Daily Telegraph" in an article "Hunt demos halt minister's roam" (read here):

Alun Michael, the minister responsible for the Hunting Bill, announced last night that he would not attend this weekend's "national celebration" of the start of the right to roam to avoid pro-hunting demonstrations. [NOTE: This was on the advice of the police]

Tim Bonner of the Countryside Alliance said: "There is now the interesting prospect that the countryside will become a no-go area for the rural affairs minister."

Lucy Ferry, 45, the mother of Otis Ferry, one of the eight men arrested in the Palace of Westminster, said: "In the next 40 days there is going to be chaos and non co-operation."

David Redvers, one of the Commons invaders, said: "There are any number of things we could do. It could be shutting down the M25 or shutting down London. In this day and age you do not need a bomb to create havoc."

This might sound "crackpot" stuff, but there are a number of factors at work here. Firstly, as previously mentioned, the "social mood" is turning negative at the start of a long-term bear market. In these circumstances, a student of "Socionomics" would expect division and dissent to emerge, with societies and politics becoming increasingly polarised (As an aside, we are seeing signs of that in the Australian election with talk of "Class Warfare" re-emerging).

In addition, the current Labour government has actually aggravated a lot of these tensions and by its constitutional "reforms" has actually weakened the ties that have held the UK together. It's also becoming clear that Blair's administration is a very ugly and nasty piece of work, in the traditions of the worst kind of collectivist government.

Civil War? Isn't that far-fetched? Well yes, but remember there's been an insurrection going on in Northern Ireland for over 30 years and in the mainland UK there have been periodic riots in inner city areas (Brixton, Toxteth, Bradford etc). It's not so long ago that people would have thought it was impossible for ex-Yugoslavia to fall apart.

Another Government Spending Debacle

Why Governments Should Not Be Trusted With Your Money

This story isn't new, but today's "Daily Telegraph" (see here ) carries a story about the report into the fiasco over the new Scottish Parliament building, for which the budget spiralled from an orginal estimate of around GBP 50 million to GBP 431 million (so far!!). Hope it's a nice building!

Seriously, this is just another scandalous example of the waste that occurs with government spending.

"The officials took "catastrophically expensive decisions" to satisfy their political masters' desire for speed, the inquiry found."

Reading further, the concerns of the "political masters" (primarily, the then Leader of the Parliament, Donald Dewar) were driven by ego and self interest (as usual, why am I surprised?).

"Lord Fraser suggested that Mr Dewar urged the need for speed because he feared that without a permanent symbol of devolution a future Conservative government would repeal the Scotland Act."

and, even worse

"Lord Fraser quoted evidence claiming that Mr Dewar wanted to become the "most important patron of the architecture of government for 300 years" "

Needless to say, the cost of this fiasco will be borne by taxpayers (predominantly in England), not the pampered politicians and civil servants.

UK Hunt Ban Protests

What the Hunt Ban Protests Tell Us About the Social Mood

The protests over the bill to ban fox hunting and the extraordinary intrusion into the House of Commons by protestors (see today's "Daily Telegraph" here) are very interesting to a student of "Socionomics" for what they say about the gathering bear market. Leaving aside protests over the Iraq war (which in themselves were interesting in revealing the extent of the division of opinion), disorder on this scale hasn't been seen since the Poll Tax protests in the last years of the Thatcher era.

"The scale and intensity of the protests - which drew comparisons with the poll tax demonstrations when Margaret Thatcher was in power - surprised and alarmed many MPs."

This sort of disorder and division is typical of a bear market period and these incidents confirm what the stock market has been telling us and also foreshadow things to come.

"It was seen as a sign that many members of a normally law-abiding "middle Britain" could be prepared to conduct a campaign of civil disobedience if the ban goes ahead."

As this comment indicates, it's extraordinary that a segment of British society could be provoked to take this sort of action.

It will be very interesting to observe the UK over coming years and see how much of a backlash develops from the English middle classes. During the Labour administration, this segment of society has borne the brunt of Labour's "reforms" and has also suffered the increasing burden of taxation. All this when it's questionable whether the enormous extra money being thrown at public services is being well spent and crime continues to be a major issue for ordinary people.

Under Labour, the English middle class really has been plundered and exploited. Devolution to Scotland and Wales has left England overtaxed and under-represented (in 1776, a similar situation led to explosive results!). Quite frankly, I think it's a disgrace that Scottish MPs are so over-represented at Westminster and can legislate on English affairs. Of course, this was part of the agreement when the Union went ahead, but now that Scotland has a parliament of its own, that no longer applies, in my opinion.

Disorder and polarised opinion (as evidenced in the US election, as well) are hallmarks of a bear market and things are likely to get much worse as the bear market progresses.

More Problems in Pension Land

Why You Need to Be Financially Independent

Interesting item today that US Airways (which went into Chapter 11 bankruptcy last week, again!) missed a $110m payment due to it's pension scheme. Employees do have some backup, in that the scheme is supposed to be insured by the Pension Benefit Guarantee Corp ( a US Federal Agency). The bad news is that the PBGC would be "insolvent" if it were a private insurer, according to a recent report!

This is just another indication of the looming pension crisis in the Western world. Governments are not going to be able to make the payments they have promised (from today's "Daily Reckoning" - "The Social Security Board of Trustees has come up with a new measure of the unfounded “fiscal gap” between what the federal government can expect to receive in revenues and what it has promised to pay. The number - $72 trillion - comes to nearly seven times the size of the nation's annual GDP and nearly 50% more than the value of all the assets tucked away in every burg and backwater in the entire country. In technical, accounting terms...as the Great Mogambo might say...the whole freakin' country is broke...") and even private pension schemes will be under stress, particularly in the USA.

What's the solution? As Robert Kiyosaki ("Rich Dad, Poor Dad") says, you need to build your own "ark". Check out "Rich Dad's Prophecy" for more on this topic. I don't agree with everything Kiyosaki says, but his analysis is spot on and all his books contain valuable material.

The Consequence of Government Regulation

What Happens When Government Regulates Industry

Fascinating article in today's (Sep 13) "Financial Times" - "US Railroads Creak Under Weight of 21st Century". Couple of extracts from the article.

"But much of the rail infrastructure in the US dates back many decades. Some of the lines are single track, built to move troops during the Civil War, unsuited to the modern era in which trains generally use double tracks that allow travel in both directions.

The rail system's weaknesses have been cruelly exposed this year as the US experiences all-time record freight volumes."

Basically, the rail system is suffering from a massive lack of investment. And the reason for this?

"The STB acknowledges that the rail industry cannot invest on a large scale, pointing out that its cost of capital is about 9.4 per cent, yet its return on invested capital is only 6.8 per cent."

The STB is the government regulator, the "Surface Transportation Board". For decades, if not more, the industry has been hobbled by government regulation with restrictions on profitability. Not surprisingly, if a business is not allowed to make an acceptable profit, people will not invest! We're now seeing the result.

The same dynamic is at work in other industries such as the power business. The blackouts in the USA earlier this year were largely the result of lack of investment as a consequence of government regulation.

The consequences of over-government and the welfare state are starting to emerge and the bills from past folly are starting to be presented.

More About That $25bn Surplus

Too much tax + too few services = $25bn surplus

A storm of letters in the "Sydney Morning Herald" (here) about the larger than expected surplus in the Australian budget revealed last week. The citizens are not happy and typical of the comments are:

"Gee, all that surplus and my husband has to go on a waiting list of six months to have his broken tooth looked at by the government-run dental program. Yup, the economy is doing it for us."

and

"It is time for the Federal Government to rebuild our wealth industries and begin investing in sustainable employment to avoid crippling tax rates and economic recessions brought about by an ageing population."

The last comment, in particular, I find fascinating in so far as it reveals just how prevalent is the thinking that government somehow has the answers! This when the evidence shows just what a failure government has been when it meddles in the economy and gets involved in things it has no competence or right to be in (basically anything outside law and order and defence).

People are getting sick and tired of being over taxed and not having much to show for it. However, the penny hasn't dropped yet that our current form of government is itself the problem. It can't be fixed, it needs to be radically reformed and power handed back to the people.

On a different topic, yet another example of the "Tyranny of the Majority" that mis-representative democracy creates. In the UK, the Labour government is about to go ahead and ban fox-hunting. Now, this is a pretty emotional subject, but a rational look at the issue shows that this isn't really an animal welfare issue, but a political issue. Essentially, the rights of a minority group (who, unfortunately for them, are predominantly white and middle class) are being trampled on because of political expediency. This might seem a minor issue, but it's just one more example of how individual liberties are being attacked by meddling and oppressive governments.

"Certain to Win"

The Strategy of John Boyd, Applied to Business

Possibly, the best book I have ever read on the topic of strategy (both military and business) - and I have read quite a few!

Chet Richards has done an excellent job of taking the ideas and concepts of John Boyd (OODA loops etc) and applying them to the business arena. He illustrates his points with a number of examples, notably Toyota and SouthWest Airlines. Basically, Boyd's ideas boil down to the idea that the key to strategy is flexibility, the ability to react quickly to changing events. In business, this flexibilty is more the ability to respond (and to some extent anticipate) what the market wants, ahead of the competition.

Some insights for me are, for example, why "me-too" products invariably don't do very well.

The approach can pretty much be applied to almost any area of human endeavour. Personal success, for example. Drawing from a different source, Tony Robbins' "Ultimate Success Formula" is

1. Decide what you want.
2. Take massive action towards that goal.
3. Be aware of feedback (are you getting closer to the goal?)
4. Change your approach if necessary until you reach the goal.

There are some obvious parallels with Boyd's work here.

Anyway, a great book,only 187 pages (including notes etc) so it's easy to read and there's no "filler". Like all classics, simple and to the point but incredibly profound. Buy it! You'll be glad you did!

Treasury Has $25bn Prize For Poll Victor

To Paraphrase "Alien versus Predator", Whoever Wins We Lose!

The headline was from an article in today's "Sydney Morning Herald (11 Sep 2004 here ). The first paragraph reads:

"The dynamics of the election campaign have been dramatically altered with the revelation by the Treasury and Finance departments of a $25 billion war chest to fund new promises by the Coalition and Labor."

Now, I guess I shouldn't be surprised that the automatic reaction to the discovery of "more money" is for the politicians to think of more ways to spend it. However, it is rather frightening that the bias is towards more spending rather than cutting taxes and letting us make up our own minds about what to spend it on. However, doing that would, of course, mean that there was less money available for the politicians to "bribe" their way back into office.

We've had a brilliant example of this from Prime Minister John Howard this week, as he throws yet more money at the elderly and the "grey vote". Alan Ramsey shows in his article today why he was once a great writer, as he disects the electoral numbers and shows very clearly how Howard's spending is designed to deliver the maximum electoral benefit to him.

Should we be surprised? Not really, I guess, but there persists this fantasy that politicians act in the interests of "the greater good" rather than simply acting to maximize their own welfare. Of course, it's not quite as "black and white" as this, but the primary motivation for politicians will always be their own welfare. This, of course, is natural and human nature. So the solution is not to get "better politicians" but rather have a political system that limits the damage and encourages better government.

Back to the economics. The increased surplus is the result of two main factors:

1. A healthy economy, so as growth has continued, tax revenues have increased (with GST playing a large part in this); and
2. A large effective increase in taxes under the current government (see GST again).

Neither of these factors are necessarily sustainable. So the danger of increasing spending is that when circumstances change, financial stress arises. We've already seen this in the USA (California's financial problems are largely the result of increasing spending to match the windfall tax revenues that arose from the "dot.com" boom , which were not sustainable) and closer to home in NSW where the budget is under stress because revenues arising from the long property boom are now tailing off.

Talking about NSW property, I couldn't help laughing when there was a report during the week that the new "vendor tax" on property has raised much less than expected! Of course, the property market was already coming off the boil (politicians are typically w-a-a-a-y behind the curve when it comes to recognising the realities of the market) and what did they expect? If you're going to penalise people for making money, then they will stop doing it!

On a more sinister note, the property tax is a warning of things to come and why property may be a dangerous place to keep your wealth. As and when times get difficult, governments will grab any source of revenue that they can. The problem with property is that you can't pick it up and move somewhere else! So, property is a "sitting duck" for governments to tax. As always, "The Sovereign Individual" explains this at greater length.

Couldn't happen here? The odious Bob Carr and his gang of thugs (eg Costa) is a great example of the complete contempt that most politicians have for the ordinary people.

Finally, a chilling warning from the UK (and why I will probably vote Liberal, despite my misgivings). The "Daily Telegraph" reported a study that showed that under Labour, the tax rate for the average father of two earning GBP 40,000 a year (i.e. a typical middle class, hard working, decent individual) had gone from 35% to 50%!!! Stealthily, taxes have been hiked dramatically and, of course, in recent years the Labour government in the UK has let spending rip. So much so, that despite the tax hikes and a relatively strong economy, the UK now runs a huge budget deficit. Couldn't happen here, of course!

Intergenerational Conflict

The Evil Legacy of the Welfare State

The topic of intergenerational conflict has been coming up quite a bit lately. Finally, of course, the truth is beginning to dawn upon people. The welfare state was built on the basis of making promises now but putting off payment into the future. Otherwise known as "pay as you go", that was OK as long as there were more people paying taxes than were drawing benefits. Now, however, the demographics of the western world mean that the number of people expecting benefits is increasing (as the baby-boom generation nears retirement) while the number of people active in the workforce is decreasing.

To fund the promised benefits, the tax burden on those in the workforce will have to increase significantly in most western countries (and that begs the question as to who will pay for benefits further in the future!). This will be happening as governments are forced to cut back on the benefits promised to those taxpayers! Doesn't take too much imagination to see that there are going to be a lot of very upset taxpayers!

In all likelihood, governments are simply not going to be able to deliver on the promises they made. When that happens, a lot of pensioners are going to be very upset and will complain that they paid taxes all their lives and expect what was promised. The dirty truth, of course, is that their taxes didn't go towards funding those promised benefits but were wasted on needless government spending.

So, we can expect a lot of squabbling between different groups as they all struggle to get their share of the spoils. This is another evil aspect of the welfare state - it sets up conflict between different groups. This intergenerational conflict wouldn't happen, of course, if individuals took responsibility for themselves and there wasn't forced redistribution via the government.

This particular post was prompted by an article in this week's "Economist" ("A Future Meltdown? - The ageing of the baby-boomers casts doubt over asset prices too) which contains an interesting discussion over the impact of demographic change on the stock and property markets.

More Economic Illiteracy

Comments in the "Chanticleer" column of the "Weekend Australian Financial Review" illustrate just how pervasive "collectivist" thinking and muddle-headed economics has become (even in supposedly informed publications!).

In talking about the Australian election and the policies of the Labour party, Chanticleer makes this comment.

"Both parties have fallen into the nonsense of promising budget surpluses - which may be good politics (doubtful) but is certainly bad economics.

There is nothing wrong with budget deficits. Indeed, they may be desirable if the economy slows dramatically".

Such is the extent of the infection of collectivist thinking and Keynesian economics! On the most charitable interpretation, there is an argument for running short term deficits in tough times, provided, of course, this is balanced out by surpluses when things are better. Unfortunately, this second part of the equation seems to get overlooked by most governments!

Later in the article, Chanticleer refers to Labour plans for increased spending on services such as education and health and regards these as a self-evidently good thing (with some more muddle headed thinking and justification).

The point of this comment is simply to point out just how corrupted "conventional wisdom" has become, even among people who should know better. Contrast Chanticleer with Gary North's comments from his newsletter today.

"Thrift. This is the way to wealth. This is the road out of personal poverty. This is the means of improving the output of other workers and therefore the means of overcoming their poverty. It's a win-win deal.

To the extent that you create a permanent comfort zone as a consumer -- contentment with most of what you already possess -- you create the means of dealing with your discomfort zone as a producer. You build up a nest egg of savings. You invest in your education. You improve your productivity. You acknowledge that you are not entitled to a comfort zone as a producer. You must become content with life in a discomfort zone.

When most producers accept this, freedom is secured.

Whenever they refuse to accept this, freedom is at risk. A nation of comfort zone-seeking producers will provide money to elect politicians who see their task as putting consumers into the straitjacket of the status quo.

When the consumer is in a straitjacket, he is in a discomfort zone. So is liberty."

In a nutshell, the great contest of ideas in our time is between thrift and productivty, on the one hand, and consumption and sloth on the other. Unfortunately, the curse of mis-representative democracy means that consumption and sloth has become the prevailing public policy in the West! The Brian Tracy book ("Something for Nothing") that I mentioned the other day discusses this further.

Wayne Rooney Transfer

What It Says About UK Soccer, the Economy and the Social Mood

Big news of the week in the world of UK soccer was the long-expected transfer of teenage sensation Wayne Rooney from Everton to Manchester United. For those who don't follow soccer, the 18 year old Rooney is currently one of the hottest properties in soccer after some attention grabbing performances at the Euro 2004 tournament. What's most interesting to me is the economics of the deal and what it says about soccer finances.

The transfer fee is apparently GBP 20 million, with another GBP 7 million payable if certain conditions are met. Of the GBP 20 million, however, only half is payable now, with the balance payable in a years time. The following points stand out for me.

1. If Manchester United (one of the richest and most successful clubs in the world) have struggled to raise the funds, what does that tell you?
2. Only 2 clubs were actually in the running to sign Rooney, Manchester United and Newcastle United. Where were the other big clubs (Arsenal and Chelsea) and what about overseas clubs?

My read of all this is that the bubble has burst for soccer and things are tough financially (and going to get tougher). The fee paid for Rooney is much lower than originally suggested (originally, Everton were talking of GBP 40-50 million!) and is just the latest in a number of transfers going through at much lower levels than expected (for example, the transfer of Michael Owen to Real Madrid). This trend has been evident for a while but was disguised by the big spending of Chelsea after the arrival last season of new owner Roman Abravonich (the fabulously wealthy Russian businessman). Now, even Chelsea appear to be adopting a more cautious approach.

Soccer has long been a terrible business from a pure investment point of view. The economics of the game changed dramatically in the 90's with the injection of huge amounts of money from broadcasting rights and the "Bosman Ruling" (which changed the balance of power in the game towards the players and away from the clubs). During the boom times of the 90s, fans lived with higher ticket prices, paying to watch games on the new pay-TV channels and getting ripped off by the clubs with their "commercial activities" (club shirts etc). So, for a long time, things have, on the surface, been rosy.

Socionomics students will be familiar with the connection between the bull market and various sports in the USA. Soccer itself ("The Beautiful Game") would appear to be a bull market sport and the latest cracks in it's finances would appear to be another indication of the gathering bear market and a changing social mood.

Interestingly, Euro 2004 was won by the complete outsiders Greece. Their playing style was negative to say the least. This too is an indication of a bear market. Negative, defensive teams tend to dominate in such times.

Expect further financial distress among soccer clubs, lower transfer fees and (horror!) probably lower wages for players. The game is likely to become less attractive to watch as defensive minded teams dominate (think of Leeds United in the 1970s!) and the 2006 World Cup is likely to be controversial and antagonistic, with crowd troubles likely to be a big issue again.

The "Something for Nothing" Disease

New Book by Brian Tracy - "Something for Nothing"

Every so often, a book comes along that puts into words what you've been thinking but can't quite express. This is one of those books. It sets out with stunning clarity the principles for personal success and for a productive and healthy society. In doing so, it spells out exactly what's wrong with welfare capitalism - the "Something for Nothing" mentality that has infected our society at every level. So many times, you know instinctively that something is wrong, but you can't express the reason why clearly and concisely. This book provides those clear and concise explanations.

It points out in stark terms what the real meaning is behind various collectivist ideas. For example, redistribution of income policies. This is a quote from Richard Gephardt, the Democratic senator.

"Those who have been successful at the gaming tables of life, must be forced to share their winnings with those who have not done so well."

Leave aside the coercion implied in this statement, and think about the inplicit assumption. If someone has been successful, it's all down to luck! What nonsense, and yet this is the kind of thinking that lies behind much of the policy making in the Western World.

Towards the end of the book, Tracy goes a little astray, in my opinion, as a result of his loyalty to the US Republican Party. However, this does not detract from the overall value of the book.

To get the e-book, head over to www.briantracy.com. It's available for just US$2.49 as an intoductory offer.

Lack Thinking and Envy

Alan Ramsey's column in today's "Sydney Morning Herald" (article "Class Crimes Writ Large in a Prison of Privilege") is a great example of "lack thinking" based around envy (disguised as social conscience, of course). Now, I don't know what happened to Ramsey, but he comes across to me as a very bitter and twisted individual, with a definite chip on both shoulders. Probably the result of a basically decent person who has been a political correspondent for too long! There's an "Anti-British" tone to a lot of his writing which, needless to say, grates a little with me! Ramsey (and people like Peter FitzSimons) still seem to think that the British Empire is alive and well and the cause of many of Australia's current problems!

Anyway, back to the article. After a swipe at private education (ignoring the fact that public education gets a disproportionately large share of government spending) and not bothering to ask the question as to why parents are so keen to send their children to private schools, the bulk of the article is devoted to an attack on Scotch College in Melbourne. Basically, the point they are trying to make is that private education is evil, it perpetuates a class system and entrenches the "haves" at the expense of the "have nots".

Couple of things here. Underlying the attack is envy. There's the idea that rich people somehow have advantages that are denied to poor people, who stay poor as a result. Well, I don't buy that argument to start with (rich people certainly think and do things differently to poor people) but, as well, Ramsey wouldn't care about the private schools if money wasn't involved. He is basically seeking to put blame on someone else for some perceived wrongs. This lack of personal responsibility is an example of "lack thinking".

There's also the issue of freedom of choice (Does the government know better than parents? Personally, I don't think so.) and also the quality of what the government produces. I'm no expert on the Australian public school system but it was interesting to read a recent article on education in the U.S. which contained the following:

"By 1940, the literacy figure for all states stood at
96 percent for whites, 80 percent for blacks. Notice
that for all the disadvantages blacks labored under,
four of five were nevertheless literate. Six decades
later, at the end of the twentieth century, the
National Adult Literacy Survey and the National
Assessment of Educational Progress say 40 percent of
blacks and 17 percent of whites can't read at all. Put
another way, black illiteracy doubled, white illiteracy
quadrupled. Before you think of anything else in regard
to these numbers, think of this: we spend three to four
times as much real money on schooling as we did sixty
years ago, but sixty years ago virtually everyone,
black or white, could read."

(see here for more)

Now, of course, those stupid Americans may simply not know what they are doing, but somehow I think it's more to do with the involvement of government.

This idea that governments know what's best for us has become entrenched in our society and is perpetuated by people like Ramsey in the established media. "The Elections come and go, politicians come and go, and pretty much all of them turn out to be disappointments one way or another. But the "Fourth Estate" is a big part of the unelected Permanent Government that in many ways does more to run the country than the politicians."

People like Ramsey and the rest of the left-wing media are a bigger threat to our prosperity and liberty than private schools.