Looking at 2014
I do not pretend to be able to see the future. Nor do I pretend to be able to read all the signs to see the bigger picture. I have only my gut feeling to go by.
The year that has just begun is on the one hand a difficult year to view in advance and on the other hand somewhat predictable.
The given factors that we have to contend with are firstly that 2014 is an important election year in Namibia as well as in South Africa. The result of both these elections will have a profound impact on the daily lives of just about all of us.
In South Africa it seems to me as if the ruling ANC will have its work cut out to protect and maintain its current majority in parliament. The new party of Mr Malema is going to do rather better than what a lot of people think because of the populist speeches he and his Economic Freedom Fighters have been making to an audience that is largely unemployed and poorly educated. Good voting material for the EFF.
In Namibia we also have a huge unemployment problem and our national education system also needs some thoughtful interference to churn out voters who are able to give current issues more thought and some caring attention.
The country that impacts on all of us in an economic sense is the USA and things there do not look very comforting. The USA has statistically just emerged from a bear market and America is supposed to enter a bull market that will feel to the average American the same as a recession.
Quantitative easing that was implemented to ease over the bursting of the housing bubble, is supposedly coming to an end soon, although I will believe it only when I see it. Their government is merrily continuing to print dollars to revive the economy but in effect is just killing the purchasing power of the US dollar. The general term for this is inflation.
When the financial crisis began in 2008, the US national debt stood at $9.2 trillion. The US government now reckons that the national debt will reach $20 trillion by the end of this decade – about 140% of their current GDP. This much debt is not paid back or reduced to manageable levels in one lifetime.
So, where does this put us? I think we have definitely seen the bottom level of interest rates and that when rates start increasing, they will increase rapidly.
This is of course good news for the pensioners who have been suffering badly from very low interest income levels the past few years.
For the economy as a whole it is not good because the cost of borrowing money will be passed on to the consumer who will have less money to spend in the economy.
What is also worrying is that this will also result in a smaller income for government as less taxes will be paid because less money will be earned. With elections coming up we have already heard some majestic promises being made to the voting public which will put additional pressure on the state coffers if such promises will be kept.
We as individuals are already taxed at a very high rate through direct as well as indirect taxes and our mirror economy costing us an arm and a leg. This is not likely to take a breather.
This brings me to to a definition of tax money that I have read recently and which I think is very true. The story goes like this: Very few people understand the fundamental concept of TAX. Tax is not simply an unconditional payment. The only unconditional payments are THEFT.
Tax money is handed to a government in good faith – by-and-large, if not exclusively, to deliver collective services that cannot, or cannot efficiently be achieved by individual entities.
A simple example is street light – one person cannot put up street lights, as everybody uses the street, so money is placed in a pool and it is used for collective services.
Anything else is THEFT – tax money belongs to the PUBLIC, notably to the de facto tax-paying public, NOT those so-called tax payers who work for the state, the government, municipalities, state-owned, or semi state-owned companies, BEE-companies surviving on state tenders, etc. – they simply regurgitate tax-money.
The tax regime conceptually functions in exactly the same manner as that of a body corporate of a sectional title community or building.
To wrap up, I think we will see much of the sameness on the economic front and that it would be prudent not to loosen the belt just yet.