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Making the right choices can be hard
Last year I went through a period of reckless eating and the result was I put on 5 kilos. When I realised that I can no longer fit into my size 10 jeans, I had two choices – either buy new size 12 jeans or lose weight. The first choice seems like the easy choice but if I don’t change my eating habits, I will put on more weight and I will have to keep buying new jeans. I will also eventually become obese and this will affect my long-term health. The second choice seems like the hard choice as there would be some degree of pain involved. There are many weight loss plans I could go on and I can choose to lose the weight fast or slowly but in all cases, I need to eat less and exercise more in order to lose weight. When I lose these extra kilos, not only can I wear my size 10 clothes again, I will also look and feel better. The second choice is obviously the correct choice and the longer I put off making that choice, the harder it would be for me as losing 5 kg is easier than 10 or 20 kg.
Many countries in the developed world have gone through decades of reckless spending and have always chosen to take the easy way out by taking on more debt to fund consumption. Both individuals and governments have accumulated so much debt and this is affecting their long-term wealth. Some individuals have realised they have a problem and are starting to make the right choice to spend less and save more and to pay down their debts. Governments on the other hand don’t seem to feel the same way. They don’t want the pain that would be involved in reducing consumption which in political speak is “negative GDP growth” as it makes them look bad and possibly lose the next election. I remember in the early 1990s, Paul Keating, the then Treasurer of Australia saying something about a “recession we had to have”. I did not understand what he meant then but now I think I do and I think Australia owes a lot to this man. Twenty years down the track, I can see he did many “right things” like the introduction of a national superannuation scheme, implemented to address low national savings, even though those things probably cost him a victory in the next elections. John Mauldin said it so well in one of his writings An Uncomfortable Choice where he likened government spending habits to teenager spending habits (those of us with teenagers know how “wise” they are with money). There has been so much damage already done that there is no painless solution. Luckily, there seems to be a growing group of responsible individuals who are standing up to tell the government to put a stop to this reckless spending. For sure there will be short-term pain in doing this as nobody would like their budgets cut but this is necessary for long-term gain.
I see some pain coming as the world deleverages but it will be good for all of us in the long run. When I look at house prices today, I feel sorry for my children because it would be so unaffordable for them if things stay the same. It would be good for them if prices came back down to a more reasonable level but of course it would hurt people who bought at the height of the boom. We should challenge our governments if we feel they are not making good decisions that can affect our future and the future of our children. I applaud entrepreneur Dick Smith for speaking up against the government’s plan for a Big Australia. The government want more immigrants to help to fund the pensions of the aging population. Dick pointed out what I thought was pretty obvious which was we won’t have enough water or food for 35 million people. Those were my initial thoughts as well. Ever since we came in to live in Melbourne in 2006, we have always had to live with water restrictions. I cannot take a long shower without feeling guilty and I cannot remember the last time I had my car washed. I think back fondly of my clean and shiny car in Kuala Lumpur when I used to have a maid who washed my car every morning. We used water freely and my monthly water bill was only around AUD10 per month. People move to Australia to get away from the overcrowded cities in their home countries. If we also overcrowd our cities, then why would anyone bother to migrate here? Big Australia sounds like a solution to one problem that would create a lot more problems.
Thanks for putting up with my ranting today. To reward you for your patience, here is a funny rap video that has been making rounds on the financial blogosphere.
Do feel free to leave a comment if you strongly agree or disagree with anything that your government has been doing.
* Image courtesy of Elvinstar
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