Debt, The Real Picture

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With accounting there are some very creative ways of presenting information in a way that can make something bad seem not so bad.

One of these creative ways of accounting that is accepted by reputable financial institutions and experts everywhere is the government debt to Gross Domestic Product (GDP) measurement.

This method is actually considered quite acceptable to use but isn’t the best representation of how things really are.

I have selected Australia and United States for this to help demonstrate how this creative accounting is used and what the real picture is. Both are major economies and have debt.

The figures used are approximates as various sites list the figures with some variation on the amounts. The amounts used however are close enough to help get the point I want to convey across.

In Australia the debt to GDP comparison is around 30% of GDP.

That puts Australia’s debt at around $250 billion compared to a GDP of around $1.23 trillion.

Doesn’t sound too bad does it?

The United States debt is around 15 trillion compared to a GDP of $14.58 Trillion. It’s slightly over 100% of GDP.

Not good but not hopeless right?

And remember, this is the accepted and respectable way of gauging debt and helping show possible impacts on the economies in question.

Thing is governments do not possess their countries entire yearly GDP, the governments actual revenue stream is only a small portion of it.

From the Australian GDP of around $1.23 trillion the Australian federal government ends up with around $250 billion.

From the United States GDP of around $14.58 trillion the United States federal government ends up with around $2.6 trillion.

A debt to revenue stream measurement is a much more realistic way of measuring debt. After all if you borrow money the amount you can borrow is measured against your own income which is the revenue stream at your disposal, not, for example, against a combined income figure such as the income of your neighbourhood or of the company you work for.

A GDP is a combined national income figure. Since no one person or entity has that combined amount at their disposal no one person, entity’s or governments borrowings should be measured against it.

Based on an actual ‘revenue in possession’ measurement Australia’s federal government debt is at 100% of actual revenue and the United States federal debt is around 500%.

Now the debts sound worse than the previously mentioned measurements against GDP don’t they? That’s because it is a more realistic presentation of the debts and of the real impact on their countries economies.

Which is more realistic and paints an honest picture of the current fiscal situation?

The Australian annual interest payments of over $5 billion measured against the GDP of $1.23 trillion or the Australian governments’ actual revenue of $250 billion?

And for the United States, annual interest payments of over $148 billion measured against the GDP of $14.58 trillion or the United States governments’ actual revenue of $2.6 trillion?

And that’s the interest only, to reduce the actual debt it costs much more.

Now what do you think the real impact is of the borrowings of governments is having on their nations’ economies and the world’s economy in general?

How many problems in Australia such as hospital waiting lists could $5 billion fix? Or maybe it could help fund the construction of much needed infrastructure.

What could $148 billion fix in the United States?

Despite what some would have you think these are massive sums of money. Sure it doesn’t sound much when you talk in the amounts of trillions of countries’ economies but the reality is these are substantial sums of money leaving with others getting the benefit, not the people it’s supposed to belong to.

Government debt is not a bad thing when the money is borrowed to get something needed such as a bridge or helping the economy during economic or natural disasters but care needs to be taken.



And while these debts mentioned here are technically 30% and 100% of GDP respectively they are realistically presented as 100% and 500% of actual available revenue and don’t include the debts of states and councils.

Include those debts and the money going towards them and it’s a wonder any money is left in our economies.

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Lest We Forget.

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Lest We Forget

A Picture Always Tells A Story...

Nashville Newborn Baby Photographer | Landon

Taken by Inara Studios

04.01.2011

 

There are days when the honor of being a photographer is elevated to a whole new level.
Landon was just 12 days old when I met him for the first time. Just a few weeks before he was born, the unbelievable happened: his daddy passed away while serving his country in Afghanistan. It breaks my heart to think that Landon will never have the opportunity to meet his daddy, this side of heaven, but I am so thankful for men like him who willingly risk their lives for our safety.

It was truly a joy to capture this sweet baby’s first photographs.

It's A Piece Of Cake

There's always one which is why the 99% are not the full 100%.

Well if you are promised cake............

Who Has Integrity?

Unfortunately there are those who think doing the right thing actually means doing the wrong thing right in front of everyone.

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Save Christmas

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I have read various reports that Santa Claus was banned from a school because the non Christian children would feel left out.

I don’t know how anyone can come to that conclusion.

Santa Claus is not a Christian icon, he is a symbol of what Christmas has evolved into. For many people Christmas is a day for being with your family and friends and also giving them presents.

Quite simply while some Christians still celebrate Christmas as the birth of Jesus Christ many people don’t look at that side of it.

Christmas with Santa has been part of Australian tradition and culture for many years and there is no genuine reason for trying to suppress it.

Unless perhaps you’re trying to get your name in the news.

Demands are made for people to show tolerance to other cultures and traditions. For that to be taken seriously it has to work both ways.

Tolerance and respect must be shown for the culture and traditions that are already here and have been for a long time.

I don’t want a tradition I have enjoyed for many years to be suppressed because someone can’t tell the difference between a religious icon and a commercial one.
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Some Attitudes That Undermine Safety And Supervision.

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There's unfortunately a long list of tragic accidents that have happened through a simple lack of care or the use of self serving logic.

One such recent tragedy was in NSW where an 8 year old girl drowned at a swimming carnival. The teachers there were supposed to be supervising and there were some lifeguards there as well whose duties also included manning the pools canteen at the time.

If they are manning the canteen they aren't lifeguards, they're only lifeguards when they are they are watching over the people in the pool and doing nothing else. And I do not believe teachers receive lifeguard training so they aren't lifeguards either and therefore not qualified to supervise large numbers of children in a pool.

There's no real excuse for many of the tragedies that happen because we have all of human experience to draw upon to tell us what we should and shouldn't do.

Unfortunately other tragedies have happened and keep happening because some people will ignore the absolute basics that will prevent mishaps because they end up ignoring certain established safety guidelines or using self serving logic to justify to themselves unsafe behaviour.

Here’s a few of those attitudes and the reality of what can happen if these attitudes are adopted.

“It’s only for a second” as in a door that should be shut being open or children left unsupervised.

It’s not for a second, it’s always for a longer period. The only thing that takes a second is a child getting into some sort of trouble.

“It’s unlikely to happen” as in a particular type accident, bad situation or an abduction.

This “unlikely to happen” appears to be translated into “It can’t happen” because the “unlikely to happen” attitude is used to justify behaviour that undermines safe practices. Then what is unlikely to happen does actually happen.

“It hasn’t happened yet”, also as in a particular type accident, bad situation or an abduction.

The “It hasn’t happened” attitude is also used to justify behaviour that undermines safe practices. Then what hasn’t happened actually does happen it is too late to take the measures to stop it happening to begin with.

Be safe and be realistic, it really takes very little effort and can save a lot of grief.
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Private land to be seized for housing

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From the Sydney Morning Herald
MATTHEW MOORE URBAN AFFAIRS EDITOR
March 12, 2010

THE state government is rushing to prepare laws to create a development authority with sweeping powers to compulsorily acquire and rezone privately owned land for resale to developers.

With Sydney's population set to grow 40 per cent to 6 million in the next 25 years, the government has decided it needs a metropolitan development authority to buy privately owned land near rail and bus routes for medium- and high-density housing.

Legislation for the new authority, believed to be the first of its kind in Australia, will be introduced before June in an attempt to increase housing construction rates, which are the lowest on record even though the city's population is growing at the fastest rate since the 1960s.

(Full Story)

Stephen Albin, the chief executive of the Urban Development Institute, a developer group, said while landowners should receive some compensation for increased value from rezoning, they should not receive it all.

''Developers are taking the risk … these landowners are not taking risk. Government has decided for the good of the city, for the good of the community, development must occur.”

Someone can own something but he thinks they have to get less than is fair for it so someone else can make a profit from it.

Developers are taking the risk? Of course they are, that's how capitalism works, if they want the profit they take the risk. It's not down to private land owners to subsidise someone else’s enterprise.

These landowners are not taking risk? Well why would they? They didn't ask to be part of the venture.

The rationale behind the authority and the compulsory acquisition provision is community benefit?

Something that is for the benefit of the community is usually paid for by the community, not just a few of its members, in this case private land owners.

It's the same as acquiring land for a road or a railway?

No it's not, it appears it's mainly for the benefit of a developers profit.

People don’t buy homes so developers can benefit.

Taking someone’s land should only be for a genuine benefit to the common good such as when they built the Harbour Bridge or if the army urgently needs land during war time and the owners involved should be compensated fairly for the inconvenience such a venture places upon them. Such decisions shouldn’t be taken lightly and it should not be done just so someone else can profit.

Whether or not the housing developments can be considered for the greater good is debatable, one thing is certain and that is a developers profit is not for the common good and that profit is no one else’s responsibility but their own.

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Super Idea?

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There are still calls out there for Superannuation (Super) funds to be forced to invest in infrastructure projects despite the fact that Super funds are in reality accounts held in trust and therefore private money.

To force that money to be invested in specific areas is something for a planned economy which is something Australia doesn’t have.

Unlike other financial accounts that are available such as term deposits Super does not come with a fixed interest rate. That being the case Super needs to be free to be invested where the highest return can be gained.

In any case I’m not sure how there can be a return for money that is ‘invested’ in infrastructure projects, especially ones that lose money. (Lane Cove Tunnel faces sale as losses spiral)

What would they say to people whose money was forced to invest in a failed project? How would they tell someone their retirement money is a much lower amount than what it should have been? Would it be “Whoopsie, my bad!”?

Whatever was said it wouldn’t help the people who would lose out on such a deal.

Super isn’t just sitting there doing nothing, Super is doing something, it is doing exactly what invested money is supposed to be doing and that is growing wealth for the holders of the accounts so their retirements can be better funded.

Super has no other function outside of this.

You can’t offer an IOU to people either, the money has to be invested to get a return. Uninvested money does not make money and if you’re paying outgoing fund members using money from incoming members then it would appear you are operating a ponzi scheme.

I for one don’t want any less of a return on my Super to pay for the wish lists of others.

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ANZAC Day, Honour The Brave, Honour The Fallen

The Enterprise Part 2

Following on from ‘The Enterprise Of The World’ article regarding Collective Employee/Enterprise Agreements and the sleight of hand that appears to be used in those agreements where the claim is made by employers that if they are supposedly paying more money then the employer should gain something from that like increased productivity and/or have working conditions or employee rights altered in the employers favour.

In trading off conditions for a pay rise it may help to think of the conditions in question as having a monetary value as well.

Just say each condition is worth $20,000. You are then asked to give up some of these conditions to pay for a pay rise that’s worth maybe $500 a year.

In other words you are giving your employer something of yours, and well below its true value, to pay for a pay rise that won’t keep up with inflation.

Basically you pay for your own pay rise, sort of like if you have to buy your own birthday presents.

And when there are no more conditions to trade off what will you do then?

Remember the true value of money is in the purchasing power it has. If you can’t buy as much with your wage as you could the year before you are being paid less in real terms.

Businesses don’t give more of the product or the service they offer when they raise their prices, nor do they trade anything off for that extra money so why should anyone else?

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