Law of unintended consequences #364

We will live to regret this stimulus payment KRUDD handed out so easily.

Just after 9/11 George Bush had an approval rating of 84% and right now Barack Obama has an amazing 83% rating.


And these two scenarios have much in common: Bush AND Obama are responding to a situation within the context of the available information and the prevailing mood of the public.


The trigger is different (Global war on Terror vs Global Financial Crisis) but the constraints are the same: limited knowledge and a desire to be populist.


The GFC is not a sign that the capitalist system is broken; it is a sign that it is working.




  • · Business was greedy & took unacceptable risks = GFC

  • · Home buyers were stupid = GFC

  • · Consumers with unrealistic expectations = GFC


It’s harsh if you know (or are) the person losing their house or job. We want to lash out at the ‘system’ – anybody but us – or our friends. That is human nature.


The unpalatable truth is that the financial system imploded for good reason: it was abused. Just like any system (our bodies for instance) the financial system had to buckle. Instead of letting it break and then heal itself, we are putting band-aids on the puss.


All governments, Australia included, are guilty. With delusions of godliness, the politicians are responding in their own short-sighted way, driven by popular opinion to:




  • · (effectively) take over banks

  • · limit executive incentives

  • · guarantee loans, etc.


If smart, well-paid people could NOT do all of that right (run global corporations), what hope do the bureaucrats have? (Wait, I forgot, they can just print more money.) What they are actually doing is perpetuating a bad system with their stimulus payment band aids and ‘disincentivising’ the ingenuous entrepreneurs who could solve the conundrum.


We will end up with is a hyper-regulated system that will stifle growth that affords more power to politicians, and with less chance of delivering good, healthy growth in the future. In principle they are taking innocent tax payers’ money to prop up poor corporate investments; i.e. taking money from the people who did everything right and giving it to the people who did everything wrong under the guise of it being for the greater good.


(Caveat: I am not talking about criminals and Ponzi scheme artists like Madoff who willfully deceive people.)


This government intervention means a shorter period of intense pain. But we achieve that by doing exactly what every responsible parent teaches their children NOT TO DO; using your mortgage to fund a trip to Fiji.


The banking system in Australia is now suddenly seen to be some sort of model for the rest of the world because it hasn't produced a failure. Here is a newsflash: they haven't failed because they have been ripping us off for so long that they have plenty of fat.


That does not make them SMART it just makes them FAT.


This raises questions for us the public and as business owners:




  • · Is this really good, responsible leadership?

  • · How much difference will once-off stimulus payment make to your business… next month or the month after?

  • · Are we sacrificing short term gain for long-term gain?


A politician with an 83% rating can do whatever they like but soon we’ll realise that the unintended consequence is that we have lost our freedom to try and fail.

And t my friends, is what true freedom is all about: the YIN of our freedom to fail is counterbalanced by the YANG of ability to CREATE something awe-inspiring.

And now we shall live with MEDIOCRITY for a generation.

I weep for this death by a thousand cuts that will stall the engine of our children's futures...