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Monday, December 10, 2012

Climbing out of a Fiscal Hole and not a Fiscal Cliff

Economic Wisdom from the Himalayas

In recent years there has been much discussion about the one- per- cent i.e. the small percentage of the world’s population that possesses and controls most of the wealth of the world. However, there is one- per- cents in numerous other arenas of human life and perhaps if one examined carefully enough each one of us probably falls in the one-per-cent in some category or the other. One of my neighbors would probably meet the criterion when it comes to ugliness and a friend in the size of his ---   :)  nose.

Each one of us is unique and special in some way or the other for sure. If I turn my gaze towards myself, I find that I fall in that category as regards education is concerned. One consequence of this privilege is that one often develops a view point that is different from what ever is being upheld by the ninety nine percent from time to time on all sorts of issues. I have continued to persist with the habit because over the past decades, I have found to my delight that my one per cent view was eventually upheld as the correct one, perhaps because of King Solomon who said some three thousand years ago – lying lips are but for a moment ( read decades here), a truth is forever.

My most recent one percent view is on what is being bandied about as the Fiscal Cliff that USA is going to fall over on December 31st of this year, unless of course the Mayans were right all along and the world will end ten days before that  :0) .

My own one per cent view is that what is being touted about as the Fiscal cliff is actually a Fiscal escape out of a deep hole that many countries are already in because of debt and it is not really falling off a fiscal cliff. Perhaps one famous person who would agree with me is on this is Warren Buffet ( Perhaps Barack Obama too agrees secretly within his heart). Incase this measure reduces the prospects of inflation in future as it surely will; it will compensate for the hundred dollar or so a month increase of tax.

If one looks at it carefully, what does the fiscal cliff imply? It is about a five percent cut in expenditure and a tax rise of between a hundred to two hundred dollars a month for most Americans and much more for the one-per-cent rich – good for them. Greece, Ireland etc. have recently been obliged to make cuts that are larger than 15 per cent. By undergoing these measures USA would begin to take its first steps towards tackling its burgeoning debt. It would be the first baby steps back to living within one’s means and the possibility of averting massive inflation or even economic collapse sometime in the future.

The downside is that growth and job creation would be slowed down somewhat, but who needs that growth if it leads to massive economic problems that will occur by kicking the can down the road?

In the past, governments of developed and other countries have recklessly depended on debt under a false assumption, and that assumption is that economic growth will continue forever. Aaron Heslehursrt a friend and BBC news presenter once remarked a few years ago during the News Broadcast, “One grows one’s way out of debt.”

A growth forever depends on increasing consumption forever and this is only possible if Earth’s resources are infinite. That is not going to happen especially as the rest of the world globalizes. Other countries (China and India for example) with abysmally low per capita consumption of the world’s  resources such as energy compared to similar consumption in developed countries are following the footsteps and increasing their consumption by the day.

The question that arises is if growth does not take place where will the new jobs come from? The answer lies in some of my earlier posts, there is even one on how to create ten million jobs in USA. It is to do with life style changes that accompany a simpler style of living, some by returning to the land, rather than in increasing consumption. Certainly humans do not budge from their rears easily and it would take a push or a shove by father Universe before that happens.

Therefore, my own considered and admittedly very different view is that the much feared Fiscal cliff is actually a much desired for climb out of the Fiscal hole and the four of us mentioned in this post – Aaron Heselehurst, Warren Buffet, Barack after his term is over and me – would perhaps raise a toast to that in a quiet lovely Himalayan retreat while the rest of the world perhaps sinks deeper into the abyss, unless they get their act together.

UPDATE:  1  JUNE  2013: Reviewing this post again, it does seem that what was written here back then made more sense for the US economy than what the fiscal holes were saying. It has been like that with many other posts of this blog too a bit of prophecy because that is an unavoidable symptom of a bit of spirituality. Some that i removed after the deed was done like the referendum of Falklands to avoid political controversy, and some that are being done now in Mexico like legalising Cannabis to prevent deaths from making it illegal.I am quite certain the US economy will sooner or later get to the job creation plan of this blog as in AM farms that can be searched.

For the concluding note on a series of notes on the economy do read this final one
http://someitemshave.blogspot.in/2011/01/paradox-of-modern-life-and-economy.html

2 comments:

हरि चंद said...

Sir
Growth means the growth of the 1% rich at the cost of Earth's Resources and at the cost of the rightful stakeholders in these resources.

ashok said...

You are quite right Hari Chand ji especially as far as this Millenium is concerned; while growth has taken place it has increased the rich poor gap and the ration of rich/poor incomes. There is an urgent need for corrections in this area. A much older post of mine - the rule of ten - mentioned this and pointed out to Sweden where this problem has been controlled (there is a search box on top left of blog to find an older post quickly) . it is a living example of how this issue can be addressed, while still achieving high standards of living.