The Festering Culture Of Debt

In Canada, a recent poll manifested that one-third of their residents does not have enough savings.

From Yahoo,

Nearly one-third of Canadians that responded to a recent survey backed by a major Canadian bank said they didn't have enough money to cover living expenses.

An online survey completed for TD Canada Trust (TSX:TD) also found that 54 per cent of the 1,003 people who answered said it was a real struggle or impossible to save.

The report, released Wednesday, says that 38 per cent of respondents said they had no savings and 30 per cent said they didn't have enough money for their living expenses.

In other words, a big segment of Canada’s population has been living on debt.

And the culture of debt has been a festering pandemic since Nixon Shock where the gold anchor was severed from the world’s monetary system.

As the Economist points out in the crisis year of 2008,

Throughout the 1980s and 1990s a rise in debt levels accompanied what economists called the “great moderation”, when growth was steady and unemployment and inflation remained low. No longer did Western banks have to raise rates to halt consumer booms. By the early 2000s a vast international scheme of vendor financing had been created. China and the oil exporters amassed current-account surpluses and then lent the money back to the developed world so it could keep buying their goods.

Those who cautioned against rising debt levels were dismissed as doom-mongers; after all, asset prices were rising even faster, so balance-sheets looked healthy. And with the economy buoyant, debtors could afford to meet their interest payments without defaulting. In short, it paid to borrow and it paid to lend.

Like alcohol, a debt boom tends to induce euphoria. Traders and investors saw the asset-price rises it brought with it as proof of their brilliance; central banks and governments thought that rising markets and higher tax revenues attested to the soundness of their policies.

The culture of debt signifies symptoms of accrued policies shaped by the dominant economic ideology which sees spending as the key force for promoting prosperity or keeping society “permanently in a quasi-boom”.

The war against savings, which is being channeled through policy-based low interest rates (“The remedy for the boom is not a higher rate of interest but a lower rate of interest! For that may enable the boom to last”-General Theory) punishes savers and rewards speculative activities which benefits the wards of central banks—added profits for the banking industry cartel and expanded government spending for politicians.

Never mind the law of diminishing returns on debt to an economy (such as in the US; see right window of the above chart).

Past ephemeral successes [plus sustaining a debt based political economy] will lead global authorities towards path dependent policy choices (which is why I think that global QEs will continue)

Besides, politicians and the bureaucracy sees such policies as even more beneficial to them even if the markets suffer from the convulsions of debt overdose: people will be more captive to them which expands their control over the society.

As Mises Institute’s President Doug French aptly points out, (bold highlights mine)

Those with no savings are more dependent on government and others when the unexpected occurs, whether it's job loss or the washing machine quits. Professor Paul Cantor reminds us in his article, "Hyperinflation and Hyperreality: Mann's 'Disorder and Early Sorrow,'" that "money is a central source of stability, continuity, and coherence in any community. Hence to tamper with the basic money supply is to tamper with a community's sense of value."

When the Fed makes saving seem futile and immediate pleasure seem rational, the world has been diabolically turned upside down. Just one step away from hyperinflation, the central banks' actions are threatening "to undermine and dissolve all sense of value in a society."

"Thus inflation serves to heighten the already frantic pace of modern life, further disorienting people and undermining whatever sense of stability they may still have," Cantor explains.

The government sponsored debt culture fundamentally erodes society’s moral fibers.

Yet most people have either not been cognizant or simply refuses to see (out of blind reverence on government) the deleterious effects of false prosperity (turning bread into stones) policies.

Nevertheless, in the fullness of time, the world will see that the emperor has no clothes.

Pornography: How Social Signalling Beats Prohibition Laws

A major reason why pornography can’t be stopped at all by prohibition laws has been poignantly captured by this New York Times article... (all bold highlights mine)

Around the country, law enforcement officials and educators are struggling with how to confront minors who “sext,” an imprecise term that refers to sending sexual photos, videos or texts from one cellphone to another.

But adults face a hard truth. For teenagers, who have ready access to technology and are growing up in a culture that celebrates body flaunting, sexting is laughably easy, unremarkable and even compelling: the primary reason teenagers sext is to look cool and sexy to someone they find attractive.

Indeed, the photos can confer cachet.

“Having a naked picture of your significant other on your cellphone is an advertisement that you’re sexually active to a degree that gives you status,” said Rick Peters, a senior deputy prosecuting attorney for Thurston County, which includes Lacey. “It’s an electronic hickey.”

One: This is not even an issue of commerce but of voluntary exchanges by a niche community where self esteem is at stake.

Two: Some people see pornography as a way to project personal issues-here sexuality in order to command social attention! Yes I know they are minors, but this doesn’t mean they are amoral or can’t distinguish between right and wrong. For them, social acceptance serve as their highest personal priority (value preference) to fulfil.

So what is construed as generally an immoral act is seen by some as a tool to broadcast social status—whereby consensual participants see such as acts as providing social “utility”.

In short, morality is subjective.

Three: This serves as example why it is an act of futility to legislate away exchanges between willing and voluntary suppliers, and eager audiences.

Legislating away self-esteem needs won’t solve this issue.

Four: I would say that perhaps most people are NOT engaged in voluntary exchanges like non-commercial pornography, yet the political imperatives (like the undertone of the article) are directed towards using the fallacy of composition as an instrument towards exercising political censorship.

In short, deviant behaviour of some segments of the society will be used as an excuse to control the public’s flow of information. The implied message is to shoot the messenger (cellphones, web, etc…) when the problem is one of behaviour.

China’s Real Estate Bubble: Using Divorce As Regulatory Arbitrage

The cat and mouse game between the regulators and the markets or regulatory arbitrages have not been limited to institutions.

Even individuals practice them for profit reasons.

In China, one way to elude government administrative controls on the ballooning property bubble has been for families to apply for divorce.

Writes Teresa Kong of Matthews Asia, (bold emphasis mine)

Real estate risks are still big concerns for investors in China. The central authorities have been trying to dampen property speculation, but as the saying goes in China: “for every government policy, the people have a counterpolicy.” Trying to control demand through administrative means leads people to devise some novel ways around the rules. This begs the question of just how effective China’s new regulations may be in moderating property prices. In September last year, the Chinese government announced that all mortgages on second homes would require at least a 50% down payment, and mortgages on third homes were banned. While on tour at one of the developments, I heard one property manager say that he and his wife got a divorce to get around this rule. It was simple, he explained, a divorce certificate required 10 yuan (US$1.50), and a visit to city hall. That way they would be considered two households and his wife would be able to finance her “first” home with a traditional first-home mortgage—practical, though not exactly romantic.

And it is no wonder why China’s divorce rate has recently skyrocketed.

Yet China’s government controlled media has blamed the accelerating divorce rates on “rising wealth and independence” according to the China Post.

As earlier mentioned, governments and their apologists, as well as the media, employs such deep-seated bad habits of mistakenly treating symptoms as the underlying cause of the unfolding events.

That’s why governments end up not only having regulations that prompts for an economic backfire, but importantly, become direct promoters of the decline of a nation’s moral fibre.

Halili Kho Sex Video Scandal: A Case of Political Opportunism

A short commentary on the Katrina Halili-Dr. Hayden Kho Sex video scandal.

It is quite dumbfounding how media and politicians have turned in haste an isolated problem into some sort of a collective spectacle or "national" crisis-as Senators and the Palace has joined the fray. And some of them have used the opportunity to scream for new legislation/s to curb so called abuses.

This isn't about "offensive to public morals" - the cyberspace has hundreds if not thousands of sites that cater to pornography, sex videos or "voyeurism". And these include some locals.

Moreover, through the years police enforcement hasn't been able to contain the sale of lewd "illegal" DVDs as scandals upon scandals have emerged.

Besides, this problem isn't anything new-anyone remember the Betamax scandal of a local politician and a sexy movie star?

This only goes to show how our officials have little understanding of the cyberspace or they are not being forthright or have other latent interests.

The main difference in this scandal is that those involved have been public personalities, if not celebrities. And given the proximity of the national elections, the sensationalism surrounding the incident seem like an egregious opportunity to generate broad publicity mileage.

Going back to the case, the issue again is NOT about morality but about the violation of the aggrieved party's private property.

If it can be established that the perpetrator willfully deceived the other party to broadcast their private tryst in breach of trust then there should be an indictment.

And it can also be seen from the context of client-confidentiality if such circumstances have existed.

For instance, the recent sex scandal in Hong Kong saw the arrest of a computer technician who spread the private videos he illicitly obtained when his actor client brought the computer for repair; where the so called "voyeurism" or sex video wasn't disseminated by the participants but by a third party.

In any case, passing fickle laws to curb "this" and "that" has only worsened the problems by creating legal loopholes, fostering bureaucratic inefficiencies, opened opportunities to extortion, bribery and corruption, and has increased profit margins for politically backed operators which sustains the business of "illegality".

Moreover, the proposed law is a form of state expansion which could be utilized as an instrument to suppress the freedom of speech and expression.

Don't forget that each new law comes with attendant expenses that funds the bureacracy for its implementation-all at the expense of the taxpayer and the costs to do business here.

In short, people pay for the mischiefs, profligacy, grandstanding and wrong policies by politicians through higher consumer prices, lack of jobs and poverty.

What may be seen as a popular may in fact be an illusion, learning from Thomas Sowell, ``Televised congressional hearings are not just broadcasts of what happens to be going on in Congress. They are staged events to create a prepackaged impression.

``Politically, they are millions of dollars’ worth of free advertising for incumbents, while campaign-finance laws impede their challengers from being able even to buy name recognition or to present their cases to the public nearly as often.

``The real work of Congress gets done where there are no cameras and no microphones — and where politicians can talk turkey with one another to make deals that could not be made with the public listening in.

``To be a fly on the wall, able to listen in while these talks were going on, would no doubt be very enlightening, even if painfully disillusioning. But that is not what you are getting in video footage on the evening news.

``Some might argue that, in the absence of the cameras, many people might not know what is going on in Congress or in the courts. But being uninformed is not nearly as bad as being misled.

``For one thing, it is much easier to know that you are uninformed than to know that you are being misled."

Don't be misled.