Lessons you won’t learn during Money Week
It is, of course, not PC to blame victims for financial crimes, but ...
It is, of course, not PC to blame victims for financial crimes, but ...
The launch of the first Money Week prompts thoughts that New Zealanders are among the world’s least financially literate.
This observation is based on the level of public debate about things financial and the issues I raised last week about fraud, finance company failures and the proliferation of Ponzi-style schemes.
The latter, as I have previous outlined (such as this 2008 piece on How to Spot a Fraud), are dependent on gullible and willing victims.
It is, of course, not PC to blame victims for such crimes (and it should definitely not be extended to violent crimes). But confirmation has come in a new academic work in the US called The Ponzi Scheme Puzzle (available for about $US15 from Kindle if you’re in a hurry to read it).
In it, Boston Law Professor Tamar Frankel presents a decade’s research analysis more than 100 Ponzi schemes, in which investors are lured by unrealistic returns by fraudsters using implausible financial methods.
But rather than just outline how the fraudsters' false constructs operate, she emphasises the role played by those with an insatiable appetite for money-making and risk-taking in unorthodox ways; how trust gives way to gullibility; and those who believe the more unique and hard an investment is to get, the more valuable it is.
Asked by the New York Times why her analysis of victims came close to blaming them, she replied:
"I think we would agree that a person who suffers from heart disease after years of overeating and smoking may bear some responsibility for his or her illness. I empathise with victims and I feel for them, even as I assign some responsibility to them."
Financial illiteracy is not confined to susceptibility to fraud. It also applies to those who believe that “we already own state businesses so why should we pay twice” or that the low cost of government borrowing means those businesses also have cheaper access to debt. And if government is therefore better able to run businesses more cheaply than the private sector, why shouldn’t it own and run all businesses, thus providing less expensive goods and services.
Yet these are key arguments made against the mixed ownership model (forgetting the greenmail by the water rights tribes) and back up a deep-seated antipathy to business in a large proportion of the population.
Make workers, not jobs
A Labour MP’s private bill on raising minimum wages is further evidence, if it was required, that financial ignorance goes all the way up to lawmakers as well.
The euro could have been save a long time ago, The Economist says in a leader,
“had the politicians agreed on who should pay what and or on how much sovereignty to surrender.”
On another front, politicians are only now catching on to how to reduce unemployment. This is the German “mini-jobs” policy, which has allowed that country to halve its youth unemployment rate against protests from unionists.
The “mini jobs” scheme allows workers to earn €400 a month tax-free on the condition that they can be sacked at any moment.
"Germans can have as many such jobs as they like but only one with the same employer. The official figures show that, within a year of [the policy’s] introduction, there were 500,000 more part-time jobs, with a good record of leading to full-time employment."
The solution came when Volkswagen director Peter Hartz, charged with changing Germany’s employment law, realised the problem wasn’t the supply of jobs but producing a supply of willing workers.
“Better to cut taxes on low-paid work and create a proper incentive for people to take the jobs that were actually going,” as writer Fraser Nelson put it.
“Every jobs market needs a ladder and, at present, the bottom rungs of that ladder have been sawn off by a welfare state that has trapped the people it was designed to help. The waste of taxpayers’ money is as nothing compared to the waste of human potential.”
Every New Zealand politician should study those sentences before they start raising minimum wages, opposing measures to stop the tax system favouring benefits over wages and preventing employers from sacking unsuitable employees.
Conservatives like movies, too
Two non-Hollywood movies have shocked critics and media commentators in the US, where politically conservative content comes with a prescription warning.
But eager audiences have flocked to these films, known in the trade as “indies,” that run against Hollywood’s usual fare. They are also unlikely to find their way to cinemas here but could turn up on Sky or through other channels (though we are still waiting for Atlas Shrugged: Part I to surface).
The documentary 2016: Obama’s America is about what the US will be like if the president is re-elected. It pulled in more money at its national opening last week than a slew of Hollwyood movies, such as Premium Rush, starring Michael Shannon and Joseph Gordon-Levitt.
2016 is the brainchild of Dinesh D’Souza and John Sullivan, both well known in conservative circles. Their film, based on its performance, will out-gross Michael Moore’s Capitalism: A Love Story, which pulled in an inflation adjusted $US51.1 million from audiences at the other end of the political spectrum.
IMDB, the movie world’s online encyclopedia, has just five critic reviews, none from mainstream newspapers or magazines, but dozens of user reviews and this from Variety.
By comparison, the based-on-fact drama-thriller Compliance has 53 critic reviews for the first effort by writer-director Craig Zobel.
It is based on a real-life episode at a McDonald’s restaurant in 2004, when a caller, posing as a police officer, ordered the store manager to strip search a young female worker and subject her to other forms of abuse – all because she was suspected of a theft.
The hoax was finally exposed, and the perpetrator arrested, though he escaped punishment because he was a prison officer and despite evidence pointing to dozens of earlier attempts. But McDonald’s was hit with a $US6.1 million damages writ.
The Huffington Post reviewer describes it as a “psychological thriller grounded in an almost documentary level of reality and will probably hold up as one of the most well-paced, brilliantly acted films of the year.”
He also says it is “without a doubt, the most uncomfortable film experience of my life.”