Chasing the dots ... Money does Grow on Trees
By: Chris Smith
MONETARY numbers have become meaningless to the normal human. In the early ‘90s billions were occasional speak, Namibia’s budget was about N$2 billion, GDP about N$20 billion and personnel expenditure about 30% of total, with a population of near 1.3 million! 2013/4 we (will) spend, with 2.2 million people, over N$40 billion from a GDP of about N$120 billion from which some interesting numbers can be crunched! But meaningless to most.
Add weight to the discussion! If we take these numbers and turn them into weights of N$100 notes. N$2 billion spend equals 20 tons of money and N$40 billion 400 tons. So in 2013/4 GRN will spend approximately 20 eighteen-foot containers full of money; in 1990/1 it was one.
What fun! But on a more serious note it brings into a visual context the shift in expenditure emphasis from a true job- and wealth-generating economy to an economy where political process is absorbing more and more of resources available to create jobs, support initiative and improve equality.
A closer analysis shows our similar property price risk, overpriced and declining ability to pay! The near impossible debt load upon our middle-income classes to afford accommodation has arrived. A property bubble is in progress driven by outsiders. But the real shift is in the balance of the “money” creation processes. Are we on the road to disaster?
Let’s remember that in a normal stable economy the interaction of trade, exchange rates, markets and competition means that most “money” is created by a banking system balancing risk and return to create credit based on modest leveraging of bank deposits. The only way governments can create money is by printing it and selling to banks.
This system has been put in jeopardy by external banks making over-leveraged loans stupidly to people who cannot pay with the support of weakening governments failing to regulate as they score political points, and keep their jobs. Fine until the defaults started and now “the crisis”. Space prevents a more critical review but ...
This idiotic extension of credit and globalisation of power puts the world (and sometime Namibia?) in the present position where globalised entities are awash with cash, banks cannot find reliable borrowers with who to do business and world growth collapses. Gone are middle-class consumers with “purchasing madness”. Global companies do not need, SMEs are too risky and consumers (65% of GDP) have gone into debt reduction mode and stopped spending.
Banks have no profitable business, incredible levels of bad debt, vaults full of increasingly useless cash; as they get broker! Then governments take more off middle class to bail out banks. Our language now uses trillions as the numbers escalate in a failing global pyramid scheme for “the people”.
The perfect example is Greece that essentially represents Europe. It has had €240billion in bailout money and defaulted (sorry, credit event) on €107billion and has another €360billion shortfall (at least). But they fool the Euro zone with lies, false promises and governmental games (elections, sick leave). But 10 million Greeks have a debt of (equivalent) US$750billion with a (shrinking) GDP of about US$35billion. Idiot European leaders think they can repay. Watch that space, also Spain, Italy, Belgium.
The lesson for Namibia? World political madness needs us to act now to improve spend and to avoid the need for future austerity as an act of failure and prevent the danger of social instability.
Remember the US debt is US$16 trillion or 160 000 tons of US$100 (8000 containers) or if money was all paper 3 360 000 trees. Money trees?
csmith@mweb.
com.na