Welcome to Finance and Fury, The Furious Friday edition

Continuing SDGs – today we are covering Economics or SDG 8

First, look at the economics of the UN itself

– something never talked about

  1. Who pays for the UN – Member states – A complex formula – US pays most at 22%-28% of the UN’s different budgets
    1. Aus – Regular budget for AUD – $86m (rough estimate) in 2016 – $58m USD – not too much
    2. But the official budget doesn’t include other donations – Gov agency voluntary contributions (specified or unspecified) – all revenues from government donors – Total was $747m p.a. USD ($1.1bn) – across 21 UN organisations
    3. A lot of money being shipped to UN when we have a desperate need to more infrastructure and helping create more liveable areas outside of Cities – Up from $601m in 2014 – massively increased – UN revenues massively increased –
  2. What does the UN spend money on? 2016, the organisation’s total expenditures was nearly $50 billion, with the US financing about $10 billion, or one fifth, of that.
    1. Even with costs surging fourfold in the last 20 years – expenditures have been compounding at 7.8% p.a. since 1976
  3. UN plans – Economic growth and decent work – SDG 8
    1. Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.
    2. World Pensions Council (WPC) development economists have argued that the twin considerations of long-term economic growth and infrastructure investment weren’t prioritized enough – Plan is growth through full employment on infrastructure projections
      1. 2020 Target – to reduce youth unemployment and operationalise a global strategy for youth employment. Implementing the Global Jobs Pact of the International Labour Organization is also mentioned.
      2. 2030 target – to establish policies for sustainable tourism that will create jobs. Strengthening domestic financial institutions and increasing Aid for Trade support for developing countries is considered essential to economic development (not for us though, but other nations).
      3. Implementing an Enhanced Integrated Framework for Trade-Related Technical Assistance to Least Developed Countries is their method for achieving sustainable economic development
    3. UN say that $5trn a year is needed – mobilise a lot more than currently being spent – essentially mass redistribution

 

At this economic model’s core – Global redistribution of GDP – push out lower-paying jobs to be outsourced by AI or by globalisation

  1. Built around David Ricardo’s Comparative advantage theory from 1817 – Spent 4.5y doing Commerce – Finance also Economics – International Trade and Finance – Knew the right answers on the tests – That comparative advantage should benefit both parties if done right
  2. How the theory works – which argued that countries should specialise in the production of goods in which they have a relative advantage over other countries in production – promoting benefits of international trade
    1. Example – Back then a mutual trade benefit would be realised between China and the United Kingdom from China specialising in the production of porcelain and tea and the United Kingdom concentrating on machine parts.
    2. Makes sense right? In the 90s China for low wages in manufacturing/production and west for Service-based economy
  3. But what the theory doesn’t account for – Not 1817 – Capital (money) is easy to transfer across borders – Technology as well – With Capital comes technology (FDI) –
    1. China as an example – FDI and increase in tech – outproduce across board – but slowly wages rise in china – so do costs – so production leapfrogs to another country with lower wages – so previous country stagnates in wages and growth – then new country goes through the same cycle – so on – race to the bottom – takes a while –
    2. Has been happening since 1975 – Lima Accord – set the framework for the movement of capital and technology to developing nations – which are the labour cost in comparative countries
    3. Modern Robin Hood – But you are the rich when compared to the third world
  4. UN has engineered the decline of the Comparative Advantage efficiency – simply a beggar thy neighbour policy now that creates downward pressures on wages globally – Name of Globalism
    1. The offshoring of jobs has reduced Australian (USA, UK, other 1st world nations) manufacturing and industrial capability and associated innovation, research, development, supply chains, consumer purchasing power, and tax base of state and local governments – technology comes from engineering and not science (especially climate science)
    2. Comparative advantage Creates a Focus of Multi-national companies on short-term profits at the expense of these long-term costs – Effect of moving our economies to the developing world
    3. Currency and taxes come into this – Today Media calling tariffs a trade war – There is no trade war – simply the US trying to protect their industries by placing tariff barriers on the import of cheaper products from foreign countries
    4. The irony is half of the imports from China are imports from US companies – US at war with US companies – go figure
  5. Evident that our economies are in decline – GDP growth slowing as over decades our manufacturing/industrial/engineering capability has been transferred abroad.
    1. Our demise is what is fuelling countries like China – owes it faster than expected rise as a world power to the transfer of jobs, capital, technology, and business know-how to China
    2. Jobs have been declining for years in terms of value-added and pay – creates aggregate demand decline (lower GDP growth)
    3. Proof from listed companies using profits not for investment in new plant and equipment, but to buy back their own shares or make once-off dividend payments
  6. Economic growth comes from a rising labour force participation rate and engineering innovation – More people earning more money – better productivity than more money on top –
    1. Governments tried Aggregate demand model of redistribution (UBI proposed) – more likely Government work programs (infrastructure projects) –
      1. Gov projects force minimum wages – offer $15 in USA – employees have to now compete with gov – unfair as they are contributing through taxes to fund their own demise – What if the work isn’t worth $15 USA an hour?
      2. In USA – offer insurances and benefits – making it even harder for small businesses to complete
    2. But this wage capped and unaffordable –has to come from taxes – and would also be taxed – making it an inefficient redistribution – but does increase size and importance/reliance on Gov
      1. Perfect socialist world we would all get $100k p.a. for not working – but resources aren’t infinite
    3. As costs of labour increase in developing countries (i.e. china wage rises) – to maximise profits – wage regulations in developed countries further compound the decline in employment and wages
  7. Which is where it gets worse when combined with the implementation of recommended policies within the higher labour cost countries
    1. Decent work – the work that is funded by the Gov- limits free-market choices when Government competes –
    2. Almost like having a Communist Nation and fee market operating at the same time –

 

From the club of Rome – Watched their online lectures – available on the LinkedIn learning centres – not hiding it – just have to look

  1. Shorten the length of the work year and raise the retirement ages
  2. Redefine ‘paid work’ to cover those who care for others at home and Increase unemployment benefits
  3. Increase the taxation to redistribute profits – introduce death taxes
    1. Tax fossil energy to make low-carbon energy more competitive – higher prices (no different to tariffs)
    2. Shift taxes from employment to emissions and resource
    3. Increase death taxes to reduce inequality and philanthropy while boosting government income
  4. Expand the use of green stimulus packages by printing money or raising taxes to help governments respond to climate change and the need for redistribution
  5. Encourage unionization and restrict trade and business where necessary

 

With no employment or wage growth – where will growth come from? Same as last 30 years – Mostly debt –

  1. Some UN current donations from Governments – Also have infrastructure spending access from Supers, tax – next ep
  2. Mostly debt fuel growth through massive government infrastructure spending – employ people in the employment plans at higher than market wages with insurances and benefits (higher super counts) – all at additional costs to Gov budgets
  3. Plus more and more regulation – John Stossel did a great interview with entrepreneurs in Africa –
    1. Inequality they face is competition from the West through free stuff (can’t compete with free) and Government regulations – which leads to corruption – only way to get things done is through bribes or having millions to get around regulations/paying the fines
  4. The whole of Economic growth in 21st century is expansion through Government spending and debt – cheap credit
    1. but consumer income has not kept pace and consumer debt expansion has reached its limits – at 120%

 

The core is to try and keep the debt-based economy going –

  1. IMF SDRs spending massive amounts of money on the next great social program – some referred to it as the great leap forward – create higher inflation again, then inflate the current debts away over time – also is the next step in a one-world currency – if they gain legitimacy and become the global reserve currency like China and Russia want
    1. Governments try to increase asset prices through printing money
    2. But this doesn’t increase production, as jobs and economic activity don’t exist anymore
    3. Just makes the property and other assets more expensive for us – while pushing up costs of living
  2. Next is to drive growth through reindustrialisation – global infrastructure works and climate change action –
    1. Growth driven by debt – FDR style – Great Society programs of mass Gov employment – at expense of population and companies paying for those wages – Gov spending comes form you or borrowing in your name
  3. Last next part is to merge Governments and companies – Fascism 101 – but only approved companies – create a completely controlled economy
    1. Through the consumption and production outlines in the circular economy

Take away – Governments have proved to only be economic destruction houses – long history of getting it wrong and creating economic decline slowly over time with equilibrium policies

So why give them even more control and power over the economy and our lives?

Other take away – Policies to fuel world GDP growth through more ‘beggar they neighbour’ policy –

Take advantage through investing in Asian/developing markets and infrastructure companies – more on this next Friday

 

Thanks for listening – Next week – go through infrastructures and the inequality angle 

If you want to get in contact, you can here.

 

UN Revenue by Gov data –

https://www.unsystem.org/content/FS-D00-02

https://www.unsystem.org/content/FS-D03-01

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