If You Receive Welfare or Are Employed by the Government, You Should Not Be Entitled to Vote

Markets are behaving nicely of late. The All Ords is up over 5% in the past two weeks.

The Dow Jones has broken through the 18,000 point barrier, edging closer to its all-time high.

Gold is up to US$1,250 an ounce; and the Aussie dollar has breached the 78 US cent level.

Everything is up.

What could possibly be wrong with the world?

Well, it depends on which world we are talking about.

As I see it, there are two worlds out there. The make-believe world…and the real world.

US markets are operating in the make-believe world…completely divorced from economic reality, courtesy of the Fed’s accommodative policies.

In Australia’s make-believe world, official unemployment has fallen to 5.7% seasonally adjusted…which is bureaucratic code for statistically altered.

The media and politicians trumpet this as a good result. But when you look at the ABS (Australian Bureau of Statistics) definition of what constitutes unemployment, you have to wonder why the figure is so high. From the ABS:

To be classified as unemployed a person needs to meet the following three criteria:

– Not working more than one hour in the reference week;
– Actively looking for work in previous four weeks; and
– Be available to start work in the reference week.

All you have to do is work 15 minutes a day, five days per week, and you’re statistically employed. Congratulations.

This sort of useless official data provides little insight into what’s really going on in the economy.

In the real world, around the same time the latest ‘good news’ on employment was released, ABC News ran this story (emphasis mine):

More than 7,000 Australians went bankrupt in the March [2016] quarter, according to the latest figures from the Australian Financial Security Authority (AFSA), showing the fastest rate of Australians going broke since the global financial crisis.

There is no new way to go broke…it always comes down to too much debt. People may be statistically employed, but if they’re not working sufficient hours to generate income to support that debt, they become a non-seasonally adjusted statistic of another kind.

The ‘good’ employment numbers are something I’m sure our PM will spruik as an achievement in the upcoming election campaign. Psst…Malcolm, if you want to get even better employment numbers, order the ABS to lower the employment bar to 10 minutes a day.

Back to the auction, sorry I mean election…no I don’t, I really do mean auction.

According to The Weekend Australian front page headline: ‘One in two reliant on public purse’…

To qualify as being on the public purse you are either a public servant, wholly dependent on welfare, or you receive more in welfare payments than you pay in tax.

We’ve developed this make-believe world where half of society expects to be entitled to share in the wealth produced by those in the real world…irrespective of whether they’ve contributed to the production of the wealth.

To be fair, there are very deserving people in need of welfare, and we do need some staff in government offices.

However, with an estimated seven million or more people being classified as reliant on the public purse, my guess is that there are a few million who don’t deserve to enjoy the fruits of another person’s labour.

In this fantasy world of little effort and all reward, votes are available to the highest bidder.

A politician running on a platform of reducing our debt and deficits by taking a sharp knife to the public sector, cutting back welfare, and demanding a co-payment for the health system, is unlikely to win any vote-buying auction. In fact, they’d probably attract fewer votes than Clive Palmer…and that’s saying something.

This sort of prescriptive fiscal medicine is exactly what our country needs — especially after Moody’s recent warning to get our house in order or risk a ratings downgrade — but there’s a snowball in Hell’s chance of it ever happening…voluntarily.

People may accept we have an unsustainable debt and deficit problem, however, the solution is most certainly not coming from their share of the spoils. Go tap some other bugger…preferably a rich one.

Making the rich pay was France’s genius solution to fund their failing socialist experiment. How’s that going? As CNN Money reported on 1 April, 2016:

Millionaires are fleeing France. Around 10,000 millionaires left the country in 2015, according to a report by New World Wealth, which provides analysis on the global wealth sector.

If enough wealthy people say ‘au revoir’, then who’s making a net contribution to the public purse?

Parasites cannot survive when the host is shrinking.

The make-believe world we find ourselves in is one Alexander Tyler, a Scottish history professor, warned about in 1887:

A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.

Those reliant on the public purse have a conflict of interest…defined by businessdictionary.com as:

A situation that has the potential to undermine the impartiality of a person because of the possibility of a clash between the person’s self-interest and professional interest or public interest.

With so many people on the government payroll, self-interest is placed ahead of national interest.

But who am I kidding? The self-serving, all-about-me dishonourable representatives we have in parliaments around Australia are hardly an inspiration for anyone to ask ‘not what our country can do for them, but what they can do for our country.’

So, absent any genuine leadership, it’s every man, woman, cross-dresser and transgender for themselves.

My benevolent dictator solution to the problem would be to grant the right to vote only to those who qualify as NOT being reliant on the public purse.

The auction for their vote would be a completely different one. The candidate who promised to act with restraint, prudence, living within the nation’s means, and imposing severe jail terms for union and corporate corruption, would probably end up warming the prime ministerial chair. I can only dream of such a world.

After that all-too-brief period of wishful thinking, I am back to reality.

And the reality is the make-believe world is on a path to self-destruction.

All we need is a bigger-than-average economic shakeout and it’s back to the real world with a resounding thud.

In a world that’s experiencing low unemployment, rising markets and economic growth, that doomsday scenario seems highly improbable.

Remember, stability breeds instability.

The more the government tries to convince us the make believe world is real, the more people will vote to enrich themselves with money from treasury.

Every Western government is facing the same debt and deficit issue. In this socialist chain, all you need is the weakest (the most indebted) link to fail and the whole chain is compromised.

Every day that chain is being put under greater pressure from mounting debts, deficits and, in Europe’s case, the influx of refugees. One day soon that chain is going to break.

When it does, the actions we (as a society) chose not to undertake voluntarily will be forced upon us by a brutal dictatorship…a market that will take no prisoners.

Vote with your feet and take defensive action with your portfolio while people still think the world of make-believe is real.

Vern Gowdie,
Editor, Markets and Money

Vern Gowdie has been involved in financial planning since 1986. In 1999, Personal Investor magazine ranked Vern as one of Australia’s Top 50 financial planners. His previous firm, Gowdie Financial Planning was recognized in 2004, 2005, 2006 & 2007, by Independent Financial Adviser (IFA) magazine as one of the top five financial planning firms in Australia. He has been writing his 'Big Picture' column for regional newspapers since 2005 and has been a commentator on financial matters for Prime Radio talkback. His contrarian views often place him at odds with the financial planning profession. Vern is is Founder and Chairman of the Gowdie Family Wealth advisory service, a monthly newsletter with a clear aim: to help you build and protect wealth for future generations of your family. He is also editor of The Gowdie Letter, which aims to help you protect and grow your wealth during the great credit contraction. To have Vern’s enlightening market critique and commentary delivered straight to your inbox, take out a free subscription to Markets and Money here. Official websites and financial eletters Vern writes for:

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