Pondering my rates bill at breakfast this morning has got me thinking on the true black magic of compounding interest...and pigeons.
I don't know where you live but over here in middle earth Mount Albert we have experienced rate raises over the last 3 years of 10% per year, compounding. In 3 years my rates have gone from $3000 to $4400.
Slithery Len adroitly extols how much 'fairer' the system is and how he and his band of merry men have sweated blood and moved mountains to ensure that the average rate raise is only 2.5%.
Oh I know, our Civic masters hasten to explain that much of the actual rate hike is being driven by absurd and exploding residential asset values. But it only serves to obscure a greater truth.
The truth they are less willing to convey is the burden that the blossoming expense of past borrowings for 'great ideas' is now imposing on the Council's budget. Did you know that nearly 25% of your rates bill and mine is now going to service existing debt. That's 'servicing' the debt, not actually paying any of it off you understand?
And with this wonderful community-spirited commitment by our wise leaders to keep rate increase under 2.5% they only want to borrow, oh another 2 or 3 billion or so over the next wee while for some more much needed infrastructure. They want to take net debt from about about 6.5 billion to about 9 - lets make it 10 billion. Whats a billion between friends. But don't worry though. You and I will only have to pay 2.5% more each year, Ok, even though we are talking about increasing the overall debt by 40 or 50%.
[You can insert your own TUIS here if you have one.]
So while you sip your coffee this morning come with me, just for a moment. I want to take you off to a parallel universe.
Imagine a world where a Government, Local or Central, was only allowed, by LAW, to spend what it is prepared to tax its citizens to give it in any one year. i.e if they don't tax it they can't spend it.
Can you see it? Can you grasp the implications of this simple change? Can you get your head around that notion, Petal? How long would an unpopular government last come election date unless it had popular support for its ideas?
Consider how much more power such a system would offer its citizens if they were not able to be bribed with their own or others money. Sure, for such citizenry to prosper it would require people to take a good deal of individual responsibility for their lives. No where to hide in such a world. No Politicians to blame afterall. But how much better would we be served if our leaders were forced to live within OUR means or convince us why we need to spend more before they spent more. Imagine the battle of ideas that might ensue. Scary thought for many taking such responsibility I'm sure. Most prefer the cradle to grave comfort of Government.
But back to reality and my luke warm coffee.
Who can I blame for the fact that most of the 33% Rates increase over 2010 - some $1,400- I am paying this morning is going to service the interest on past spending largess? Is Lenny also screwing me? No. The financial mess Auckland finds itself in is entirely because We and those before us allowed them or accepted 'bribes' with our own or our children's money. Rather than face the real world and take responsibility for our own society we have let them spend up big time and agreed to let them foist it on future generations of tax payers.
Now, inevitably, WE have become our CHILDREN and the debt pigeons we let fly are now coming home to roost. The debt bailiff out in the street can be heard scraping at the door with an IOU in his mitts with our names on it.
Perhaps I should just up and leave. Sell up my huge nominal capital gain and move to somewhere else, like Up North, where the local government is not so fiscally inept?..........oh that won't work. Just the same up there too. Besides its full of the whinging Rats that have already left the ship and who now gleefully call me a Jaffa.
There's only one solution of course Go on. You know it.
King Billy, your neighborhood benevolent dictator.
(Ready and willing to serve it up)