Tuesday, October 14, 2008

Head Spin...

Hmmm, well, this morning when I was lammenting being bored, I had NO IDEA of the bombshell Kevin Rudd was about to drop on the Australian public...

I've just spend two hours in a head spin!

It seems that because of the world economic crisis, created by greed and the need to "profit, profit, profit", our economy is slowing down... Well, when something has grown out of sight for a few years (thanks Johnny for your legacy of "feeding the economy" - aka, spend, spend, spend, even if it means putting yourself into more debt than you can rightfully handle), sooner or later the growth has to slow, or even revert...

So, yep, people are suddenly scared to spend money, and RIGHTFULLY SO in my opinion, too... It really IS time to learn how to live within our means... But this isn't good for The Economy. So, businesses are set to be negatively impacted, people will be laid off, and unemployment will rise...

All yucky stuff, I don't deny that!

So, Kevin's solution seems to be to chuck a heap - and I mean a HEAP of money at people in a one off payment. People are encouraged, nay EXPECTED to SPEND this money over Christmas to prop up the economy...

Hmmm, but ok, what if you're not the kind of person to mindless go out and buy stuff. What if, after years of living on or under the official poverty line, you've learned that things will never make you happy... For our family the "windfall" is going to be quite substantial because we'll have 4 children, and I'm on a disability pension... There is no way we could live with ourselves just spending all that money, not when we know that lean times are likely to be ahead *at some point* as they always are... Besides which, having a new baby ALREADY means a substantial windfall, which is being used on those current bigger purchases that we've been planning for for a while now - including completely erradicating our personal debt!

But what about all those families who decide to use the money to buy those big things they only usually dream off. The plasma tvs, the new couch, the new second hand car, or a dream summer holiday to the gold coast? What happens to those families in the New Year when the money is gone? What happens in the New Year to the economy, when suddenly people realise they're back to square one, and they need to tighten their belts anyway... Won't THAT slow the economy? Isn't this one off injection into the economy just forestalling the inevitable?

I'm no economist, I'll admit that. There may be things I'm just not getting about how all of this works, but it seems to me that bust follows boom, and giving people money to keep the boom going can only last so long - the bust is inevitable, sooner or later...

Isn't it?

5 comments:

katef said...

I don't get it either... how is giving people money who need it just to make ends meet going to help the economy? Even if some people go out and spend it all over Christmas, it is a one off thing... I don't understand how that will help the economy either... except in the extreme short term, if that?
I am not sure if we will get anything, it sounds like we will but I can't understand why.... not that I am not grateful and not that we can't use the money, sure things are tight but we are not on the poverty line, we are managing to live within our means, pay our mortgage and I seriously can't understand how any family with a similar income to us could be considered to be really struggling... unless they buy things they don't really need with money they don't have and are crippled by debt, but then isn't this just encouraging that kind of stupidity?... but hey some extra cash will help pay for the extras like ballet lessons etc... so I am not looking a gift horse in the mouth, and I am the first to admit I know less than nothing about global finances... but yeah... I don't get it either

Sif said...

*Nods head*

We would be fine without this money because we choose to live within our means. No we don't have savings, and this will now ensure we do have savings, LOL, but other than that, if you NEED to spend this money in the short term to make ends meet then the Govt. is really only offering a bandaid solution anyway, and a greater temptation to live with a false sense of security...

Bin said...

Totally agree Sif. I'm no economist either, although I've done 1st and 2nd year subjects at uni, but still pretty basic stuff. I can't help but think they'd be better off putting this money aside for now, earmarked for those who do end up losing their jobs, to save their homes, to help with retraining if that's what would be useful, etc. I can't see how it's anything more than prolonging the inevitable. It's better by far than what the US have done though, which is give their bailout package directly to big business.

Btw, putting the money into savings actually does help the economy, but in a more long term than short term way, so if you do create savings with it, you will be helping :)

Stephanie said...

I can see both sides. We need money flowing otherwise the whole system crashes.

However, as an individual family, we are better off paying those big bills that pop up straight after Christmas, getting rid of as much debt as we can, and then possibly adding value to our home.

My Christmas list has not changed at all, but, if we did not have large bills that cause things to get tight, debt, and a house that needs renovating, I'm sure I could find room for a plasma ROFL.

Sif said...

Yeah, it's good for paying bills, I do agree! I guess I just thought that wouldn't be what was "expected" of us...

Rofl, the ironic thing is, I'd love a bigger tv, so I didn't need to sit 10cm from it like I do with our current 48cm one, but now that I actually have the money for one, I'm just not inclined to get one - there is more of my paternal grandmothr in me than I care to admit, pmsl!!!

Change, and then change back...