Could it be possible that the world faces a bigger catastrophe than the Global Financial Crisis? Yes, a truly frightening scenario (and it has nothing to do with nuclear warfare). The challenge we face – and which must be brought under control with great urgency – is spendthrift politicians! No, this is not a joke. Wish it was.
One of the unintended consequences of the GFC is that we gave politicians unofficial emergency powers. At a time of crisis – after they had thought about things for a couple of days and realised that they were unlikely to be re-elected unless they pulled a rabbit out of a hat – they resorted to their usual remedy for all things threatening their job security: spend like drunken sailors. It seemed like a good idea at the time, too. This is because they lavished largesse on us. They were giving us handouts. How could that be bad, we asked ourselves while trying to pretend the squeamish feeling in the pit of our stomachs was not there.
Now we are starting to realise why we felt concerned. It’s because politicians have behaved as though it were Christmas Eve and they suddenly remembered two dozen presents they hadn’t bought and no-one was telling them their credit card had run out of funds. So, they bought four dozen – just to be sure they had everything covered. Now, the monthly statement has come in. The politicians couldn’t believe the first invoice and queried whether there had been some mistake in adding up.
So the card issuer sent a new statement to us, the ultimate guarantors of all these cards. Now we really do feel queasy. And there’s good reason to be. There is a hangover creeping up on us as the euphoria of the handouts wears off and reality creeps in on our consciousness. Going to be the mother of all hangovers too as public debt soars in almost every economy across the globe.
Spend, spend, spend has been the mantra of salvation but now comes the time to settle the bar tab.
The Obama administration probably gave up counting after the first trillion of debt (where do they get calculators that big?). Even tiny Australia has racked-up a third of that – an estimated $350 billion of debt. And still the politicians are looking for ways to stimulate the world’s economies. We must stop them before it’s too late.
It will take years, if not decades, to recover the surplus positions many economies were enjoying before the crash. Sadly, our children will bear much of the weight of this millstone (though we certainly won’t escape unscathed).
The danger is that administrations which get into a spending binge, almost never have the courage – or the intelligence – to work out that restraint is the necessary antidote. Right across the globe we have scores of these governments all staring with a fixed gaze at the hypnotist’s watch that carries just one word: stimulus. If we don’t stop them spending we may even teeter over the precipice into a Depression truly worse than the 1930s.
It’s time we raised our voices because it is our future prosperity that is being sprayed up against a wall.