Preview Mode Links will not work in preview mode

Financial Understanding + Responsibility Yields Independence

WE BREAK FINANCIAL INDEPENDENCE INTO SIMPLE, MANAGEABLE PIECES

Finance and Fury will be focusing on helping you define your aims, and increase your knowledge and ability so you can make the best financial choices.

Jan 11, 2019

Welcome to Finance and Fury the Furious Friday edition. This is part 6 in the series, the second last episode of the series. So this is 2 more than expected in the series, which I guess is good for me. To do the last subject justice, I have broken it into 2 episodes otherwise it is just too much information all at once.

When we started the series:

How lucky we are lucky to live here and now. Today I want to start winding things up, break down what system got us here and why it works

Core question behind why there are political fights.

Different people’s beliefs in what part of progress the government should have

  1. Also, people have different solutions to different problems
    • Socialism: Government solves all problems. Whereas in Anarchy: No Government to solve problems
      • I don’t think either is good. Already gone through why on Socialism, I don’t like people starving or having no freedom
        • Government policy is meant to help, but ends up hurting: China in 1958, they killed all the sparrows to spare their consumption of grain so more people could eat. As a result, locus swarms emerged because there were no sparrows naturally keeping order, and 30m people starved between 1959 – 1961. This was as a result of 70% government policy. Regardless of if the policy was in place to improve, it did the exact opposite.
      • Anarchy would end up devolving into a narco-capitalism or corporatocracy. E.g. Escobar or Jeff Bezos. Starts with freedom, but maybe too much. It develops to a point where they get drug kingpins or mega-wealthy people ruling. But they would be new, possibly those who own food, water, would become wealthy and paper money would mean nothing, and the resources become valuable
        • Eventually go back to feudalism where we have lords of water and wheat
  2. Need to look for something in between these: What is the best option?
    • What is a governmental system meant to do? Solve problems! Some simple problems are:
      • Protection of the population: Military/States and borders to reduce predation
      • Violence: Laws and people to enforce them
  3. What problems (or needs) do we have? Maslow’s hierarchy of needs
    • Physical needs met: food, water, warmth
    • Safety needs: shelter, further warmth and rest, (public housing for $100 p.w) also protection: police and law enforcement
    • I know that those who favour a ‘social democracy’ mean well. It can work, for a while until the money runs out. And it always does. Spending always has to increase and if an economic crash happens it becomes a very fragile system.
    • But what about the rest of our needs beyond physical and safety? Can the government provide the rest?
      • Removed need for community and belongingness (social). Living in apartments, you don’t need anyone else if something goes wrong. However, with farmers in the outback, they may live kilometres away but they know each other in case something goes wrong.
      • Little left to get esteem in for individual achievements, as asking for things and not earning them doesn’t give much satisfaction
      • Self-actualisation through development, creativity, and happiness. Further discussed in the next episode.
        • Can never achieve self-actualisation when people are always looking down the pyramid at safety and physical needs. But just for more of it, better food, shelter, and security
    • This process will be different for everyone because we have differences in what makes us happy
    • We all have different solutions to every problem. So does outsourcing problems to the government work?
      • Typical cycle: Problem identified (what is a problem for some, isn’t for others)
      • The problem is identified by some groups, sometimes these are government bodies who are funded to find problems
      • This is the issue with group reform
    • We all want the classical progressive dream: A good education, a safe environment and workplace, and healthcare needs met

 

Who provides it is the thing that has changed:

How did it use to work? Where did it work the best?

Classical liberalism: Go through a few points that apply today which are more relevant

  1. Liberty as the primary political value, within reason. Freedom for the individual is the goal
    • Rule of Law; non-aggression principle, but they still need to be enforced. But when using spying as an enforcement tool, it is a total loss of freedom of privacy
    • Individualism is looking after the ultimate minority. It's these individuals that form groups. So you’re able to improve groups from individualism
  2. Free Markets: Economic exchange should be left to voluntary activity between individuals. That is why private property is necessary, first and foremost. We need private property to be able to do that. History shows us that leaving things to free markets rather than government planning or organisation increases prosperity, reduces poverty, increases jobs, and provides goods that people want to buy
    • Taxation, regulation, restrictions: Having superannuation contribution caps, and increasing the retirement age gives a boost to the government, at a cost to you
    • What is at the core of this? Freedom works. What is one way to know if freedoms lead to wealth?
    • Proof? GDP per capital purchasing power parity up against economic freedom
    • Government Expenditure to GDP has no effect on improving score. The last 5 countries are: 2 socialist, and 3 dictatorships

    • Bail in bill, on the 14/2/18 it got passed. It’s about the government not bailing out distressed institutions, like in the GFC using tax payer’s money. Sounds good? Allows APRA to step in and run distressed banks, then use the creditors of the bank to bail itself out, which are asset holders or maybe depositors. If so, may just spark bank runs.
      • I need to do a deep dive into this and do an episode in the future about going through the legislation
    • What do we see now? Speech laws, on a quest for tolerance you become intolerant
  3. Toleration: Toleration is the belief that one should not interfere with things on which one disapproves. It’s a question of having certain moral principles (“I think this action is wrong”), but I will not try and force my opinions. For example through the government to stop the things I disapprove of.
  4. Scepticism about power: The individual is the best judge of their own interests, and not to be forced into it
  5. Limited Government: The government is needed: Law, Peace, and Infrastructure. Government intervention levels: Classical liberals argued for what they called a minimal state, limited to the following functions:
    • A government to protect individual rights and to provide services that cannot be provided in a free market.
    • A common national defence to provide protection against foreign invaders.
    • Laws to provide protection for citizens from wrongs committed against them by other citizens, which included protection of private property, enforcement of contracts and common law.
    • Building and maintaining public institutions.
    • Public works that included a stable currency, standard weights and measures, and infrastructure
      • Building and upkeep of roads, canals, harbors, railways, communications and postal services

What does this all provide?

Let’s go back to Maslow’s needs, it doesn’t meet many needs beyond security and the framework for freedom to meet your needs how you want. But rights extend further today than what they did over history

  1. Lot of good work from the 1200s with Magna Carta, then in the 1600s with the Bill of Rights in England, then in the 1700s the US get their own, then Jefferson helps France with their own rights.
    • What were they all based on? John Locke and the natural rights of man, freedoms from rules and oppression
    • Natural rights are those that are not dependent on the laws or customs of any particular culture or government, and so are universal and inalienable (they cannot be given or taken away by human laws).
      • Life, Liberty (freedom), property (private ownership)
    • Legal rights are those bestowed onto a person by a given legal system (they can be modified, repealed, and restrained by human laws).
  2. Natural and legal rights: Require Legal Rights to uphold natural rights or ‘right to have rights’
  3. Not all rights are made equal. There are negative and positive right. Oblige either action (positive rights) or inaction (negative rights)
    • Negative rights: are the first generation of rights. Positive rights: second and third generation rights. These were a new thing
  4. Negative rights: Civil and political rightslike freedom of speech, life, private property, freedom from violent crime, freedom of religion, habeas corpus or a fair trial, and freedom from slavery were not enough
  5. Introduce positive right: Theright to be subjected to an action or another person or group; 
    • Positive rights permit or oblige action. You have to do something, compared to not doing something with negative rights
    • Food, housing, public education, employment, national security, military, health care, social security, internet access, and a minimum standard of living
  6. These frequently conflict and it's carrying out positive rights often infringe upon negative rights.
    • The positive right of social welfare = government needs to provide services.
    • Funding of social welfare = increasing state expenditures which requires raising taxes = infringe upon the negative right of private property
    • The right not to have their money taken away from them, positive rights are generally harder to justify and require more complex ethical substantiation than negative rights.
  7. Rights differ on political orientation. Positive rights such as a "right to medical care" are emphasised more often by left-leaning thinkers, while right-leaning thinkers place more emphasis on negative rights such as the "right to a fair trial"

 

Equality 

Often bound to the meaning of "rights" and depends on one's political orientation as to the definition of equality

  1. Right (Libertarians); Free market for equality of opportunity, fair rules for all, but leads to unequal outcomes.
  2. Left (socialists); Identify equality by equality of outcome, as there is fairness when people have equal amounts of goods and services, and therefore think that people have a right to equal portions. Like economic assistance and housing
  3. See the issue? Freedom versus ‘fairness’ or negative verse positive rights. One requires taxes, which cancels out negative rights (private property and keeping what you earn)
  4. As freedoms are reduced, average individual wealth declines over time. As shown by the freedom index.

This is where ‘One Government to Rule them all’ fails. Individuals have different problems, removing freedoms from all to solve a small group’s problem can be very harmful in more ways than one.

Asking one powerful entity to solve all of your problems has been done throughout history in different forms time and time again. In medieval times the church was the state

  1. “God Wills It”. Watch movies about the Crusades and The Last Kingdom. There is no free choice. Which is what monarchs taught (no separation between church and state). It was to keep people subverted, God wills that the king rules, that their lives are all pre-planned out
    • There can be no pursuit of happiness if you never make a choice. Authority is always telling you what to do.
  2. Thinking about the government as an entity that will solve all problems, is a modern-day determinist view. Determinism is the doctrine that all events, including human action, are ultimately determined by causes regarded as external to the will
  3. Implies that individual human beings have no free will and cannot be held morally responsible for their actions or circumstances
  4. The only way to make things equal is through some powerful entity to help those who had a worse roll of the dice
  5. To have the power of a god to click your fingers and make things fair. And you need a lot of power/authority.

 

Final issues with authority:

Anything with authority/powerful entity to provide everything for you:

  1. Is corruptible (simple), absolute power corrupts absolutely
    • "You either die a hero, or you live long enough to see yourself become the villain." – Harvey Dent
  2. The more power they have, the more they are fought over
    • Political power: some of the population are addicted to power. Regardless of who has it, like the church as an example
    • Only one religious war going on right now. Is it a coincidence that there is no separation of church and state within that religion? Those nations with absolute power over the population constantly have issues where people will fight for the absolute control, as its been set up that controllers of the country have absolute power.
  3. Removes accountability to individuals. As seen through the Milgram experiments, where he demonstrated that people will kill if told to by authority
    • Increasing shocks to wrong questions
    • Participants thought it was for the greater good, and that the scientist would take responsibility.
    • That’s why you see war atrocities with any form of authoritarian government. For example, the Nazi guards were probably decent people before the war but during the war, they did terrible things.
  4. Causes population ‘behavioural sink’. It would be nice to have everything taken care of for us. But, what does this do?
    • Mouse Utopia: Every need met (threats, food, etc) and within 2 years the population was dead. In one experiment that could have housed 3840 mice
      • Only ever reached 2200 as highest population. Population turns in on itself and split up
        • Males/females started fighting,
        • Beautiful ones: were a group of mice who took themselves off and spent all the time grooming and not mating at all
      • Not overpopulation like originally thought, giving the mice something to do (purpose) prolonged experiments
    • When all your needs are lavishly met, one creates struggle for a purpose to live. That explains the real housewives TV series. Where all their fights and problems are self-made, because what else are they wanting for. compared to a kid in Africa, all these issues seem trivial
    • This comes back to that concept again of the “pursuit of happiness”. Always making choices on what action will add to our well-being (make us happy)
      • Choices is the pursuit of happiness. But the results of choices are not all equal. Some momentary pleasures (impulses) lead to pain (not happiness)
      • Learning from these choices, means you avoid those that caused pain, and keep trying new things
      • Foresight, where you can recall past experiences. Where we learn to postpone immediate gratification and see what choices are really in our interest. Thus, learning self-control based on experience is essential to happiness.
      • Part of moving up Maslow’s hierarchy of needs as well
    • Locke talked about the continuous process of choosing as a part of human beings’ unchangeable nature. Choices about what we believe gives us well-being
      • Our right to make these choices is inalienable, and, unless our actions attack the rights of others, it is wrong for the government to interfere. 
  5. What happens when the money runs out? House of cards falls down
    • Becomes very fragile. Very much so here, we are in a position not too self-sufficient and need to give the government more power. Which would make the situation worse.

 

Counterbalance:

Don’t know if it would work or not. My view is that it is better for people to figure out the best way to help themselves (and have the tools to do so) Which is why this show exists.

The government cannot solve your problems. They can provide small band-aids solutions. Generally the majority of Australians agree.

  1. Trust in government/politicians is at the lowest level since 1993. Only 5% of Australians trust the government,
    • 74% exhibit a critical perspective,
    • 25% trust government ministers and satisfaction with democracy in Australia is now at its lowest level since 1996

The original question of the series was what should the government be in charge of? The world has changed. So there are more elements involved, but we will cover these off in the final next episode. Like, what the government does really well and what they don’t do so well throughout history.

Thanks for listening to this episode guys, if you want to get into contact go over to the contact page here.

 

Resources:

Trusting the government: https://theconversation.com/nowfor-the-big-question-who-do-you-trust-to-run-the-country-58723

Solution to money in politics: https://grattan.edu.au/wp-content/uploads/2018/09/908-Who-s-in-the-room-Access-and-influence-in-Australian-politics.pdf