We are living in a precarious time. Inflation is having a lasting impact on the food products we love around the globe, and shrinkflation is being covertly employed to hide some of the inflationary pressures. The whole world has a debt problem, where the Debt to GDP ratios are at an unsustainable level. Australia, which is doing quite well by comparison, owes around $1 trillion, which is quite sustainable at near 0 interest rates. As 1% is 10 Billion dollars of interest repayments. But 4% is $40 Billion in interest repayments. In 2022-23, Medicare cost about $40 Billion.
This raises the worrying question that many governments will have to ask, "How do we afford our social security schemes with rising debt obligations?" It can be hard to imagine on such a grand level as a nation, but consider a small income family who earns $6,000 after tax each month. Their mortgage, credit card, and other personal debt was $3,000 per month when interest rates were 1%. The remaining $3,000 went to medical expenses, children's school fees, clothes, food, and a small holiday fund. Now that interest rates are near 4%, their debt costs have skyrocketed to $4,500 per month, and the family now has to decide whether to change the kids' schools, skip meals, or forgo their medical expenses. While their cost of debt is increasing, the cost of all their expenses is also being hit by inflationary pressures. School fees are feeling the flow-on of costs and have subsequently increased their prices. Medical expenses have had to increase to cover rent, overhead, and the cost of living increase. Food and consumables continue to challenge the family week in and week out.
Sacrifice is necessary, but there will come a time when savings are being used as a stopgap to continue affluent lifestyles. There is a pincer happening at the individual level, debt and inflation. But due to the pincer happening at the governmental level, another needle of taxation will eventually try to extract its pound of flesh from the public to ensure the government can repay its debts. A balancing act is necessary to maintain trust in the public by setting an example for repaying debt without adding too much pressure or stress to the cost of living crisis.
While this is happening, we have rumors of bank collapses, where individuals are trying to protect their savings by withdrawing portions of it each time they're at the bank. But in turn, this slowly dwindles the deposits necessary for a bank to continue to maintain its lending portfolio. The more the public takes out of the bank, the faster the time bomb of default allows the big fish, the largest banks, to consume the smaller banks. Just as JP Morgan has done with US First Republic Bank after regulators seized control in late April.
The world is in a few pickles. We have ensured through regulations that the big players are not able to create artificial monopolies for themselves, as it creates a power structure that is untenable to society's continuation. It allows greed to dictate societal decisions, and no higher values get a voice. Similarly, to the battle that happens within individuals, the battle of virtue and vice, where you have eight pieces of pizza and eight people, and each person recognizes that there is a limited supply displays the virtues that mean everyone can have a slice. Whereas in a monopoly, or perhaps better yet a corporate dictatorship, it would allow the fattest child at the table to eat seven slices and offer, not out of virtue but out of self-preservation, one of the slices for the remaining seven to share.
At the rate we're going, the largest companies will eventually act as the last remaining pillars holding up society's house of cards. But to draw from another analogy, the worry is that with all these smaller companies which have created an ecosystem of diversified competition, like an ocean of fish, they will eventually be eaten by the largest fish, creating a monoculture of sharks. Slowly but surely, as the debt becomes more and more unaffordable, the general public will have to suspend their excessive consumptive habits and refocus their energy on repaying their debts.
This will lead to the previous companies they purchased from not being able to repay their debts, and over a few short years, all these micro-companies will be gobbled up by the big fish in the game. Until we're left with one or two major companies in each sector: Walmart, Amazon, Google, Disney, Apple, JP Morgan, Vanguard, BlackRock… the conglomerates will become humanity's last bastion of hope, yet we would have unwittingly fallen into their trap. Sitting atop each of these companies will be less diversity, with a concentration of wealth and power coming to a precipice the world has never seen. Governments will have lost their power, the public won't trust them, and these corporations will begin to enact their social credit programs to ensure their 'customers' continue to purchase and continue to lubricate their systems.
Instead of this being a beautiful tapestry and intricacy of millions of companies working together to organically grow as the free market promised, we would have entered a monopolistic wasteland. A world where the largest corporations wield immense power, and a lack of competition stifles innovation and reduces consumer choice. If we can avoid this dystopian future, it won’t be through self-preservation, nor from selfish ideals. It will be through following the wisdom of the ages. Reducing our desires, and helping others within our communities to satisfy their needs. The more selfish we become, the greater the violence that will emerge. If we want to avoid a reciprocal cycle of ‘I’, we need to learn to live within our means, to develop the skills necessary to grow our own food, mend our clothes, and develop the virtues to help others as much as possible such that when given the chance, they can return the favour for another.
