It must be pretty easy being a headline writer these days.
‘Stocks rise on stimulus hopes’
‘Stocks fall on stimulus worries’
Here’s the latest with a shot of flair from the Wall Street Journal:
‘Stocks Rise as Trump Appears to Soften Stance on Stimulus’
It was enough for the major US indices to rise nearly 2% overnight.
It’s a sad reflection of where markets are these days: Completely dependent on some form of sugar hit. For years the sugar was in the form of monetary policy. But now interest rates around the world are at rock bottom and quantitative easing is increasingly ineffective, the addicts in the equity market are turning to fiscal policy.
In Australia, the hit from the massive fiscal deficit announced on Tuesday was well received. Our market rallied strongly on Monday and yesterday, and looks set for a positive performance today too.
The size of the fiscal deficit for FY21 is a record breaking $213 billion. It is a reflection of a big fall in tax receipts and a big increase in spending.
People should be given the freedom to decide
The Rum Rebellion is an advocate for small government. It believes people should be given the freedom to decide what’s best for them, accept responsibility for their actions, and have the government only play a minor role in their lives.
By minor role I mean ensuring the safety and protection of their citizens’ property, as well as protect and support the vulnerable.
Normally, I’d be outraged that such a huge burden has been placed on our kids and grandkids. They will pay for this, if not through higher taxes, then through higher inflation.
Australia’s debt levels have been higher than this before. At the end of the Second World War, gross debt as a percentage of GDP reached 120%. But following that period, we had massive immigration and years of strong economic growth to lower the debt burden.
Notably, Robert Menzies was in government for much of this time (1949–66). His government ‘got out of the way’, and let the people get on with it. He was rewarded with a record time in government for it.
More on Menzies in a moment…
But this deficit isn’t a one-off. The red ink stretches out for a decade.
I said I’d normally be outraged at such huge government spending.
But here’s why this situation is so different.
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A government-caused crisis
This is a government-caused crisis. You can argue either way on whether this was absolutely necessary. But the fact is the government mandated the shutdown of the economy. Should we expect those who suffered the most and lost their businesses and jobs to just suck it up?
I don’t think so. If the government takes away someone’s livelihood, they have a responsibility to provide at least some compensation for that. The compensation will never be fair (some will get more than others, some will continue to suffer) but the spending is necessary.
Having said that, it doesn’t make it any easier to cop.
Especially given Australian governments (both state and federal) have been amongst the most heavy handed in the world in managing this virus.
Everyone has their opinions, but in my view, the role of government here should have been to protect the most vulnerable from the crisis, and to ensure the health system didn’t get overrun.
While things started off that way, management of the virus has morphed into a shameless political game. People’s livelihoods have been sacrificed for political gain, masquerading as care and concern.
And if we’re to believe the polls, people have largely bought the con. They think the government cares about us!
If that thinking permeates our society, we are done for. Our country was made great by the actions of free-thinking men and women, not by government. If we all sit back and expect the government to care for us, it’s all over.
Oh for another leader like Menzies at this time. Although he wasn’t prime minister when he made his famous ‘The Forgotten People’ speech of 1942 (when debt levels were sky-high) the sentiment clearly resonated.
Menzies’ forgotten people were the vast middle classes, the:
‘…salary-earners, shopkeepers, skilled artisans, professional men and women, farmers and so on. These are, in the political and economic sense, the middle class. They are for the most part unorganised and unself-conscious. They are envied by those whose benefits are largely obtained by taxing them. They are not rich enough to have individual power. They are taken for granted by each political party in turn. They are not sufficiently lacking in individualism to be organised for what in these days we call “pressure politics.” And yet, as I have said, they are the backbone of the nation.’
At the time, Australia was clearly under pressure from the war effort. There were people out to create divisions in society. But Menzies’ speech reminded people we are all largely one class.
He finished on an upbeat note. It is the people, not government, he said, that makes a nation what it is…
‘But I do not believe that we shall come out [of the war] into the overlordship of an all-powerful State on whose benevolence we shall live, spineless and effortless — a State which will dole out bread and ideas with neatly regulated accuracy; where we shall all have our dividend without subscribing our capital; where the Government, that almost deity, will nurse us and rear us and maintain us and pension us and bury us; where we shall all be civil servants, and all presumably, since we are equal, heads of departments.
‘If the new world is to be a world of men, we must be not pallid and bloodless ghosts, but a community of people whose motto shall be, “To strive, to seek, to find, and not to yield.” Individual enterprise must drive us forward. That does not mean we are to return to the old and selfish notions of laissez-faire. The functions of the State will be much more than merely keeping the ring within which the competitors will fight. Our social and industrial laws will be increased. There will be more law, not less; more control, not less.
‘But what really happens to us will depend on how many people we have who are of the great and sober and dynamic middle-class — the strivers, the planners, the ambitious ones. We shall destroy them at our peril.’
Editor, The Rum Rebellion