No one really doubted that the American
leaders would in the end take the easy option and raise the debt ceiling. The
alternative route of reducing the debt by cutting spending and increasing taxes
was never going to catch on.
The
ability of governments to spend more than they earn is legendary. No more so
than in the case of the fellows in Washington. So, to cover the deficit between what goes
out and what comes in they borrow money to pay the wages, meet the bills and
quite importantly to service the debt. Any nation that does not scrupulously
attend to this last item gets dealt with harshly by the all-powerful ratings
agencies that quickly mark you down from AAA to AA and so on until the dreaded
“junk” status. Most national treasuries would feel obliged to take the view
that having to borrow too much is a bad thing. The common standpoint is that
deficits are merely temporary and that just as soon as the economy improves
then tax inflows will surge sufficiently not only to meet the spending
requirements but also to have a bit extra to pay off some debt. In the US their
commitment to this belief manifests itself as a political act of setting a
prudent upper limit (the ceiling) to the total debt. Needless to say reality overtakes
hope and before long another opportunity for political grandstanding and
brinkmanship is created. Some estimates have suggested that the next ceiling
resetting event may arrive no later than February
Only
the smartest analysts are able to understand how the policy of spending more
than you earn and accumulating ever more debt is wise and sensible. And since markets are steaming ahead on the news it must be
concluded that investors are all definitely smart analysts too.
So far
the county's newest political party’s biggest impact will have
been on the suppliers of those fetching red berets that the leader and his
supporters wear. Although the origin of this natty headgear is undoubtedly
Eurocentric, presumably they are entirely local in manufacture and so are deemed acceptable and appropriately revolutionary. Speaking
at the launch party, Mr. Malema unsurprisingly made promises and demands that delighted
his supporters but puzzled some crusty old tax payers. Figuring large among
these was the charge that all privately owned land was stolen (from whom is
unclear) and must immediately be returned to state ownership. Naturally no one
present asked if local governments would interpret this sudden hiatus in rates
income as a welcome aspect of Economic Freedom. The country’s mayors would
immediately have to scale back on the number of trigger-happy body guards they
seem to need when speeding down the freeway to another meeting.
Another threat to government income could
emerge from the ban on all liquor advertising. The full ramifications of this asinine
“we know what’s best for you” legislation have clearly not been thought
through. What about the huge sums of money that the booze industry would no
longer be allowed to spend on sponsorship, promotion and advertising? Would
they return it to shareholders in which case both SAB and Distillers might be a
screaming buy on the JSE. Or alternatively would they slash their product
prices so that we could all buy much more. Either way, the jobs and taxes lost
from the cutback in those advertising industries will hurt many people. And it
is very unlikely that there will be any discernable change among us citizens in
those habits and behaviours for which the state has now taken responsibility to
modify.
I need
both the Golden Lions and the Sharks to win their semi-finals tomorrow so that
the Currie Cup will be won by a team I support. Fortunately there is no space left
to discuss test cricket.
James Greener
World Vasectomy Day 2013 (truly!)
