Jill Kerby

WHERE’S THAT CRYSTAL BALL WHEN YOU NEED IT?

What I wouldn’t give for a genuine, functioning crystal ball. 

I’d love to see how 2011 evolves:  after all the tax hikes and spending cuts, will it be enough to restore bank lending, consumer confidence, jobs growth?  Will there be a global trade war?  Will the dollar and sterling keep devaluing? Where is gold going?

The economists at the Department of Finance, the ESRI, various stockbroking firms and the world’s central banks all claim to have crystal balls, hence their endless forecasting.  But either they’re telling more porkies or there is a mass malfunctioning of crystals. What other explanation could there be for how every prediction they’ve made has turned out wrong?

No, I’d just like one of the old-fashioned crystal balls, like the wicked Witch of the West had in The Wizard of Oz, or the ‘Red Eye’ that Sauron kept at his lair in The Lord of the Rings.  Each of them churned with stormy, sulphurous clouds that eventually cleared to show exactly where Dorothy and her companions were on the Yellow Brick Road, or where Frodo and Sam were hiding from the Ringwraiths on their journey to Mount Doom.

Since no one seems to have any genuine route map to get us from here to the end of our perilous economic journey, a crystal ball would be such a help.  Or, come to think of it, maybe all we need is a pair of ruby slippers or a gold ring.

Now there’s an interesting thought.  The good Witch of the North, Glinda, gave Dorothy the ruby slippers to protect her from the evil witch, but, unbeknownst to Dorothy, they were always her means to getting home, so long as they stayed on her feet.

Gandalf, the good wizard, gave Frodo the last gold ring forged by the elves and he too would be lost if he parted from it, no matter how heavy the burden became.   These were rare, precious things and when in the possession of ‘good’, innocent wearers or bearers, they became instruments not just of their personal salvation, but of those they loved.  

As pop philosophy goes, this isn’t bad stuff.  I’m a sentimental old movie fan so Dorothy’s ruby slippers and Frodo’s gold ring appeals to me a lot more than the X-Factor or National Lottery school of salvation that so many of our young adhere to and the IMF one that some cynical, older people, who should know better, favour.

Even without a crystal ball, it’s clear to me that this country’s salvation lies in only one direction and along one path:  debt repayment/forgiveness, hard work, self-sacrifice, prodigious amounts of saving, investing and risk-taking (as opposed to borrowing, spending and speculating) and an acknowledgment of personal, not just collective responsibility for every decision taken.

Where mistakes were made, they must be corrected, even if it means the dismantling of every state institution, every line of our flawed tax code and the monolithic welfare state that permits and rewards indigence and a universal sense of ‘entitlement’. It also means reforming our peculiar form of democracy, which encourages and highly rewards otherwise stupid, unsuccessful people to achieve public office, while entirely discouraging intelligent achievers in the private sector from ever considering a period of public service.

I could go on for hours here, but try to imagine a government run like a really great business with a product of essential services that people both at home and abroad voluntarily want to buy or use, with a tight group of well trained and rewarded staff who enjoy their jobs.  Because we are still talking about government, this service is unlikely to ever produce a profit – it still requires the collection and redistribution of a portion of the people’s earnings - but ideally, it won’t generate layers of losses either.  Meanwhile, the people who own this great company of state, get to keep the vast bulk of their own money to spend as they wish, not as the company of state dictates. 

Since none of the above has any chance of happening -  the vested interests are just too great and voter intelligence just too small -  I am going to guess (for that is all any of us can do regarding the future) that the year 2011 will end up looking pretty much like 2010, and 2009…only worse. 

Where does that leave us?  The vested interests are still everywhere and include the political morons we keep electing; the-overpaid, over-pensioned civil servants that prop them up to keep their own rice bowls full; the super-rich and rich whose government-gifted privileges, like 183 days worth of non-residence status and most of the quangos they run, are still with us too. 

Let’s not forget the last bastions of the corrupt Social Partnership process.  The wage-setting cartels – the employer groups and trade unions and their labour sector agreements - are still in place. So are the ‘entitled’ recipients of the great welfare state, from the third generation unemployed teenagers happily collecting their dole, to working parents getting child benefit, to wealthy pensioners who will fight to keep every state entitlement, even at the cost of losing productive younger workers already indebted by the massive transfer of wealth (in higher property values and pensions) that happened during the so-called ‘boom’ years. 

Benefits may have been reduced, but the entitlement mindset remains, even as the state continues to go broke. 

I love a happy ending.  Dorothy clicks her heels three times and finds herself back in Kansas.  Things are not perfect back home on the farm, but the tornado is gone, the sun is streaming through her bedroom window and she has survived her great adventure in Oz. 

Our adventure continues.  Like Dorothy and Frodo, we will need love, courage and intelligence, represented by our families, friends and communities to get us through the worst times. 

And ruby slippers… and a gold ring.

BUILD AN ARK IN 2011

Those of you running your own businesses know what you have to do to keep trading. On the personal front you should be building an Ark for yourself and your family as well this year: 

-       Try to reduce personal debt.  So long as the country is tied to EU debt requirements that raise personal taxation and cut services the domestic Irish economy will remain depressed. This means asset values and incomes will continue to fall.  Your capital debts remain the same but servicing those debts could rise. 

-       Prepare for price inflation.  The massive escalation of the global money supply and debt and rising demand for commodities in developing countries that are not indebted, means that we will see more price inflation here, especially for those goods that are oil-based or are foodstuffs.

-       If you have savings or investments, review them now. Don’t leave all your personal wealth in a single asset class.  Diversify.  Consider a mixture of cash, precious metals (‘real money’), value equities, bonds (some of which should be inflation-linked), commodities and property. Use the services of a good, independent, fee-based advisor.

 Ensure your personal savings is in a secure deposit account in a solvent bank.  These days it pays to think not just about what kind of return you can get on your money, but also the return of your money.

-       Keep in mind the effect that rising DIRT rates and inflation could have on your cash holdings.

-       Learn about emerging investment markets in developing countries.  Invest in them for the long term. Start teaching your children Chinese, Hindi, Malay, Spanish and Portuguese.