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Raffique Shah


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A fool and his money

May 07, 2006
By Raffique Shah

For a simpleton like me, the warped world global economies, of how seemingly rich countries end up steeped in debt, of persistent poverty in countries that are resource-rich, remain a mystery. Last Friday, for example, the Dow Jones industrial average climbed 110 points to a new six-year high. The explanation given by the "experts" was a slowdown in employment numbers, hence a dampening of fears that the "Fed rate" would increase. Now this happens in a country that is steeped in debt, as I mentioned last week. Since Bush took office in 2001, the US national debt climbed from $5.662 trillion to $8.170 trillion. This debt, which averages out at around $27,000 for every American, does not include personal debts that have climbed to over $1 trillion.

Warren Buffet, the third-richest man in America, said recently: "If the country does not change course, within ten years the rest of the world would end up owning $15 trillion worth of the US, equivalent to owning every share of American stock."

AlterNet's John Ince concludes: Simply put, Americans have become mired in a culture of debt. He adds: America has been able to get away with it largely because of cheap foreign capital, cheap labour in China and India, and relatively cheap energy-all of which are now on the rise. These increased costs are biting into people's savings or increasing their debts, and it will get worse. Already mortgage foreclosures and personal bankruptcies are approaching record levels; if the trend continues, as consumers continue their spending sprees, and Bush raises spending on war ($800 billion and counting in Iraq and Afghanistan), banks could be in jeopardy. Thereafter, the mighty USA will enter uncharted territory.

Let us examine what's happening in Trinidad and Tobago. The country is swimming in oil and gas dollars, and although our debt is manageable, bear in mind that we, too, are on a wild spending spree. Inflation is moving upwards, with food prices climbing by an unprecedented 24 per cent last year.

In 2006 we can safely predict that construction costs (materials, labour) will rise significantly. Soon, except for the very wealthy or those who enter into multi-generation mortgages (meaning your children and grandchildren will inherit mortgage payments for that house you bought), people will not be able to afford housing. And since we import 90 per cent of what we eat, we can expect ever-rising food prices.

Still, you go to the supermarket and have to queue up to pay for your trolley of basics that will have cost you more than the last one did. Motor vehicles, appliances, plasma television sets, cellphones (yes, I'm onto that again!) are being snapped up like hot hops. While we, who are part of this spending spree, condemn the Government for its own "wastage of public funds", we are ourselves guilty of fuelling the fires of consumerism. The Government justifies its many mega-projects by saying it now has the money to build, build, build, and buy, buy, buy, so like most citizens, it has become part of the problem. What's happening here is we, too, dazzled by our new-found wealth, are steeped in the consumer culture that could, in a few years, turn into a culture of debt.

So what does a good Government, nay, a good Prime Minister, do in such situation? Does he allow the country to walk blindly into the debt trap? Or does he counsel his people on their spending habits? What is the Consumer Affairs Ministry doing about curbing this wildness that can only lead us into the (Ken) Valley of debt? The leader exhibits qualities that will stem the tide of a looming disaster.

But in order for the leader to have others follow him, he must first never ask others to do what he himself cannot or will not do. That may sound very militaristic, which it is, but it also applies to good governance.

The leader cannot himself go on a spending spree and ask others to make sacrifices. And sacrifices are not quarantined to bad financial times, but also to good times. We must be prudent in our spending lest we end up mired in our own mess. This is the time for the country to seek to eradicate our ills-poverty, crime (partly linked to poverty), our failing systems, corruption and more.

Instead, what do we get from our leaders? One is preoccupied with playing puppet-master, pulling strings the way we boys used to when playing "kite fights". Other would-be leaders come across more like court-jesters than kings or queens. And the man who is charged with the responsibility to lead us out of temptation pouts at those who dare disagree with him. I feel sorry for us all. If we do not call a halt to this madness today, we shall live to rue the day oil the price went past US$50 a barrel. Like the fool and his money .. I say no more.