The Power of History
I’m alarmed at how stupid we can all be. There is so much focus on “green shoots” and recovery at the moment that we are failing to look back at what caused the current mess so we can make the necessary changes to ensure it doesn’t happen again. The media is focused on credit growth, economic growth and getting things back as they were – do we really want to be back as it was?
If an intoxicated patient arrived at a hospital and needed stitches it would be considered irresponsible for a Doctor to stitch the patient up and send him or her on their way without finding out what had happened. Is the person an alcoholic? Is the person a serial drink driver? Is the person in an abusive relationship? Stitching the wound and getting it to heal does not address what may have caused it to happen in the first place.
We have looked at the fact that companies have collapsed and it has been stated that debt levels are too high but that is about where things have stopped. The focus now is on getting things back on track – the problem is to get things back on track is to allow the same problem to manifest again.
Our level of debt is unsustainable relative to income and debt accumulation will need to be negative for us to progress as a global economy. Consumers are more leveraged than ever before and as inflation and unemployment increases so will pressure to deleverage. The problem I am hearing in the media is the reporting of credit growth as a positive outcome. How does this allow for the necessary deleveraging that households must undertake? Have we ignored how we arrived here in the first place?
In Australia I am concerned by the ignorance and silence of the Howard/Costello led coalition Government (1996-2007) regarding the level of household debt accumulation. So much was made of the fact that they paid off the Government debt of $96 billion AUS in 10 years. There is no mention of the fact that they allowed household debt to rise from around $700 billion AUD to more than $3.5 trillion AUD in the same period.
Why didn’t the Labor-led opposition (1996 -2007) make the public aware of the mess we were getting ourselves into? Why wasn’t legislation put forward to steady the growth of private debt? If so much noise was made about paying off $96 billion AUD, why was there silence on the accumulation of $3.5 trillion AUD of debt? And my final question is why has the current Labor led Government remained silent on the same issue?
These questions and many more need to be answered for us to ensure we don’t let history repeat itself.