COST OF LIVING AND OTHER ‘STUFF’ By David Horrocks

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Well you don’t need to make a Google search to begin to know that financial things are changing and not for the better but other than experiencing a visit to the supermarket how do we get to know more as we empty our wallets and purses at the checkout?

Now in that first paragraph there might just be a glimmer of what could be going on. Senior economists, public servant bureaucrats and elected government figures by and large don’t do supermarket shopping. You work at the coalface; they don’t. Now one of these ‘elites’ will likely scoff at such a comment saying that of course they have staff who gather all the information which they then use to macro manage the complete economy based on a assembled picture of how the country is facing current economic hurdles. But you do know the facts when standing in the aisle looking at heftily rising shelf prices; you feel the hit and the fear. You know that the bank is going to increase your mortgage payments as the interest rates rise, this will leave less money from your budget to pay for the food now in your trolley at its increased prices. No amount of written reports and statistics on a screen can impact in the same way.

If you remember back to the TV interview of Philip Lowe the governor of the Reserve Bank you might remember how he stated that he understood the difficulties faced by ordinary citizens as he announced another interest rate rise. He actually giggled as he made the statement whilst walking away from camera. Now I don’t think for a minute that the man is callous and was making light of the matter, I think that he just didn’t know and knew that he didn’t as he made the statement. The giggle was a show of embarrassment.

You are probably aware of the term ‘capital’. Most folk think that it mostly is used in a monetary sense, which is correct, however capital can mean much more. The wider term ‘human capital’ refers to the total worth, abilities, knowledge, experience and skills of a group of people, a state, a nation, a sub group or indeed the whole world’s population. It is generally accepted that 90% of the human capital of any group, resides in the general population, the remaining 10% is held by the elites in a society.

The general population do the ‘doing’. Elites offer ideas and ideologies for which, they pay no price if they are proved wrong. The ‘doers’ do pay the price if they get it wrong. If a politician announces a project and it goes toes up he/she just moves on. If an engineer builds a bridge and it collapses she/he is ruined. If you consider this then much is revealed as to why so many poor decisions get made. The poorer equipped entity is forcing the decision making process.

Ordinary citizens are often perplexed at decisions made by authorities be they at federal, state or local levels. The term ‘common sense’ so often banded about is what’s known in language as an oxymoron – a contradiction in term, in this instance the ‘sense’ mentioned is not at all ‘common’. You don’t have to search too deep into your own experience to come up with examples of this.

I am not claiming any great knowledge of economics or how the authorities make their decisions as to the management of our country’s finances but I do know that economics like all sciences has many opinions within its boundaries. In the current instance it could well be that because Mr Lowe does not directly manage a household economy he is unaware of the short term effects of his policies on real people. He doesn’t know that you will change your shopping methods to better suit your budget if the prices just get out of kilter. Your actions will have profound effects on businesses over the short term. Lowe must wait for his myriad minions to gather the statistics of rising or falling demand which will translate in all good time to sales of goods, then to unemployment figures as businesses rise or fall against his interest rate barriers. He is maybe working way behind the eight ball and won’t know what is really going to happen. If I were a gambling person, which I’m not, my bet would be that he’s overshot the mark after his earlier actions or inactions and he’s now putting us in the way of a recession that can only to be handled by dropping interest rates again.

If you read the financial pages you can pick up that major bank economists are predicting a continuing rise in rates this year and then a winding back of the same over the following couple of years. This could indicate that these guys are also betting that it’s all been overdone and will need future adjustment rather than the bank just letting things even out naturally; in other words allowing time to elapse before you strike again and cause hurt. In the first case of the up/down method, we the common folk will do the suffering and Mr Lowe and his compatriots will suffer nothing but will in time tell us that they have done the right things and have successfully guided us through a difficult time. All this being in line with the previous idea, that the ‘elites’ carry no consequences for their actions.

There is nothing you or I can do in all this but try to protect our own from the worst of the tumult, but I’d suggest that you owe no thanks to the elite – they’re nothing to be much admired. Being a little bit naughty there’s a quote from Thomas Sowell that goes:

“Some of the biggest cases of mistaken identity are amongst intellectuals who have trouble remembering that they are not God”