I agree. Our system results in some ridiculous incentives.

Financial system - If workers take excessive risks and fail then the shareholders cry and the fund manager looks at their peers. If they succeed, the worker wins.

Welfare system - If people can't or don't want to work, they go to the government for "free money". Just in case you want to work, the progressive income tax provides very good incentives for less work.

If we look to the Eastern way, they often have no safety net. If you can't or don't work, you better know someone who can support you. Otherwise, you're in trouble. This means they are less likely to overspend.

Inflation - I believe the reported CPI figures may be consistently underestimating the cost of living. So I believe the non-worker is receive less in real welfare and, even if they are not underestimating, the worker is being taxed silly (bracket creep).

While bludgers think they're gaming the system, they're not. They have less financial freedom and rely on the government; they may have financial freedom if they break the law but they're the exception. These people are capping their income and their prospects if they ever decide to work. Unless I had lost my mind, I would not trade my job for no job and welfare payments that are capped and indexed to reported CPI.

The really interesting problem for Australia is pensions with an ageing population. Superannuation has been tax-effective for the rich. But the pension is for the poor, who by definition have limited savings and often limited income. Since there is no way that the workers could support the pensions that the baby boomers expect, the political ramifications will be a neat spectacle.

You do have a good point Jason

What annoys me is that the Gov. tends to promote non-workers - eg: $5000 baby bonus? This bonus means nothing at all to the parents who earn good incomes, but a lot to single pensioner mums who want some up-front cash for a new tellie.
Then give them a pension for the rest of their life whilst they instill a welfare attitude into their children, who promptly become non-workers themselves.

I read a comment from one person complaining about the $10.4Billion cash handout by the Gov. and he was saying how he spent the best part of a year saving up for a new TV and hates the thought of a woman with 9 kids waltzing in to the same shop and buying the biggest TV with his Tax dollars. Socialism sure doesn't feel so good if you are not benefiting from it.

Sometimes I wonder if Australia won't become a country of bogans with only 5% intellectuals. Has anyone seen the movie Idiocracy?
Yep, like that :)

Oh, it isn't so bad.

1 The government collects funds from the workers.
2 The government hands out funds to the non-workers and needy.
3 The non-workers and needy consume these funds on needs and wants with little remaining.
4 The workers collect dividend payments and capital gains from shares in companies which provide the non-workers and needy with their needs and wants. Return to 1.

I would rather be a worker than a non-worker and needy.

In a deflationary environment the government loses, because it taxes nominal interest rates.

You hold cash at 6% interest during times of 5% inflation (real gain 1%), yet get taxed as if you made 6% profit. However, during times of deflation you hold cash at 0% while inflation is -2% and even while you are gaining purchasing power - you pay no tax at all.

We sure are...the gov. makes the rules.

Here's to the gov. handing out more of my Tax dollars to people who have done nothing to earn them! ;)

hi, ed,

It looks like, in an inflationary environment, the government wins by taxing via printing money. In a deflationary environment, the government still wins, because cash is the king.

Are people always at the losing side?

Problem is accounting standards allow upward revaluations, so equity and assets might be overstated by some bullshit calculations representing present value of future inflows.

Grand time to be in insolvency though.

If inflationary fiat money creation has overpriced assets and everyone is holding on to assets in a deflationary environment and hyperinflation is just around the corner, when is it time to buy?

Pete, it's not that I disagree with him. His comments are kinda useless. Like this one. Other times, I have no idea what he's got against this blog. You can't use logic to argue against useless comments. Eg how to argue against this one? He's wasting my time and everybody's time. He doesn't seem serious at all. To me, he's taking pot shots for his whatever ulterior motives. He should be banned.

It's okay Daltica. For some of the things dyork says, other people who read this blog may also be thinking. Just because we don't agree with it does not make his opinion of value.

If people make comments that go against what Ed says, then we get the opportunity to use logical analytical reasoning to argue against those comments. What this serves to achieve is to strengthen our position and add clarity to our own thoughts and ideas.

Besides, a bit of fire adds some life to these comments. Sometimes a theory is born from these kind of things.

Dyork, if you don't like this blog, why are you visiting everyday to pollute the comments? Most people like you would not bother to come back again. I think you have an agenda. You seem to be doing the same at Steve Keen's blog.

Surely this is what Ben Graham said over 50 years ago?