IGR-2015: Australia on-course to become the Cheap White Trash of Asia

Amanda Vanstone succinctly summarised the LNP worldview being pushed by Hockey's IGR.

 “The Rich aren’t to blame for being Rich, It’s Policy" (stupid)

Abbott/Hockey could balance the budget, increase Productivity, deflate housing prices and improve the 40-yr outlook with a low-cost, high-impact Policy: Reduce Tax Expenditures, the Treasury keeps tabs.

• $45B/yr is spent of Capital Gains exemptions on main residence. The USA doesn't do this, why do we?
• $30B/yr is spent on Superannuation tax discounts: the majority going to the top 10%. Equity suggests a cap.
• $5-6B/yr now goes on Negative Gearing. If you earn a Salary, you're not in Business, don't ask for business deductions.

Compare to $6.4B/yr for GST on Food and $3.9B/yr for GST on Education.

Which is fairer: $80B taxes lost for most wealthy or $10B for everyone?

There are massive structural problems with the Australian economy that aren’t mentioned in Hockey’s IGR, nor being raised by the ALP.
Anyone under 40 has to be deeply concerned for their financial future as a result.

According to the Government:

The Intergenerational Report is the social compact between the generations – with our children, grandchildren, parents, grandparents and each other.

Yet there is no mention of Housing, Housing Affordability, Rental or Mortgage Stress, First Home Buyer rates, or even Household Disposable Income.

The Hockey IGR is the biggest con-job is Australian Political History. The average working Australian is being shafted so badly, they can’t imagine the outcomes. It’s the Great Australian Dream, not Workchoices or Co-payments, that is “dead, buried and cremated”.

Only for the brave? Doom and Gloom analysis of "USA Inc" + solutions.

This report, co-authored in early 2011 by Mary Meeker of KPCB (Kleiner, Perkins, Caulfied, Byers) the legendary Silicon Valley Venture Capital firm, is deeply challenging.
Long PDF and Short PDF available as well.

It's not your average "Doom & Gloom" report or "The Sky if Falling, all is lost, get to the Bunkers" shrill fear-mongering.

This is solid analysis backed by good research and unrelenting numbers.

These folks know their way around a balance sheet, their record speaks for itself. If you can't refute it, you have to believe and act on it.

The headlines for me are dual:

• If nothing changes, within 15 years the USA won't be able to pay its bills [like Greece and Spain], and
• these folks are very positive. They layout the strengths of the US Economy and its people and a game-plan for getting back into the black.

So, look at the video [43mins] and pull down one or more of the PDF's if you like, I'm not only suggesting that this is not something that everyone should read, but that people should carefully consider beforehand if they even want to read this. It's not said, but the GFC was just the beginning...

Be prepared to read some deeply disturbing and challenging data/analysis, I found it quite sobering.
The authors pointedly don't dwell on the negative outcomes or consequences inside the USA and for the rest of the world. There will be many commentators only too glad to bang that drum and instil "Fear, Uncertainty and Doubt" into a wider audience.

BUT, the whole reason Mary and her team spent a small fortune constructing this report, is they, the acknowledged experts in analysing the operations of any business, not only think there is hope, but think solutions are possible and achievable. This comes from a fundamentally positive 'frame'.

That they did the research, produced the analysis and published it, is a massive vote of confidence by some of the world's best financial minds in the resilience and capability of "USA Inc" and that solutions are within the grasp of Americans. The solutions may not be easy or palatable, but they are achievable.

This report is about Hope and Inspiration, don't lose sight of that when you read it.

The Budget, The Promise, The Dividend

Australia is about to pass a pivotal milestone:
 the last Federal ALP budget to run full-term for perhaps a decade.

It is already notorious because of the commitment Kevin Rudd made in 2008 that this budget would be in Surplus and the Coalition's constant carping and criticism about the ALP's "incompetence" in every area, including financial management. The clamour from economics commentators that it is not just unnecessary, but unwise, is just part of the lead-up to this event.

So, my comments on why we are getting, The Surplus We Had to Have.


The Budget

With the Australian Federal Budget under a week away, the ALP is attempting to bring down a Surplus, seemingly only for Political reasons.

We'll only know the result in 18 months, at which point, believing current trends, the Coalition will be in power and will pick a figure that:
a) makes their case that the ALP were "incompetent at everything" and
b) uses the usual rhetoric of "the situation was much worse than we were led to believe, we have to make much deeper cuts and reduce or defer some or all of our promises".

I can't add to the debate over the economic pros and cons of "The Surplus we had to have", but can point to a deeper set of concerns.


The Promise

The Rudd/Gillard governments backed themselves into a corner a number of times by making unwarranted unequivocal statements (e.g. "there will be no tax on carbon" and "we will have a surplus in 2012/13").

But leaders before have done exactly this, or made outrageous gaffs, and not felt the same need to Keep The Promise. The current ALP leaders are holding themselves to their statements and in this, having the Opposition pursue them on their promises.

• Hawke: "No child (need/will) live in poverty by 1990".
• Keating: "The recession we had to have" and "Banana Republic".
• Howard: "That wasn't a 'core' promise".

This could be the result of a generational change. All Prime Ministers up to and including Howard (e.g. Whitlam, Fraser, Hawke, Keating) literally had to have "town hall meetings" and learn to deal with hecklers without the assistance of microphones, effectively what every stand-up comedian has to learn.

Younger ALP leaders, Latham, Rudd and Gillard, differ in two important ways:

• they've had limited experience dealing with hecklers and antagonistic crowds (think of the difference between TV-only comedians and stand-ups), and
• they joined the Party Machine (or the Union movement) almost straight from school. Unlike Ben Chifley, who had a career as an engine driver before moving into paid politics.

There are other effects, such as the logical/absurdist extension of Sampling Theory and Statistical analysis of surveys invented by Gallup and used in 1936 to predict FDR's upset election.

This 'surplus', head-line or underlying, real or faked, is entirely for Political reasons, and as such is an "own goal" for the ALP. At the very least, they've shown they are inflexibly wed to any and all their policy statements and can't see a way around themselves to "adapt, improvise, overcome" in response to changing circumstances and needs.

But the real concern for every elector/taxpayer is the overwhelming message from both major parties:

Politics trumps Public Good. They don't care what harm they cause in the pursuit of a short-term political advantage or goal.

This is our future, our jobs, our money they're playing with so cavalierly. There is no "Government Money" to spend, only taxpayers wages.


The (Efficiency) Dividend

[My previous piece on the "Triple Whammy" effects of waste in I.T. is useful background for this.]

Keating introduced the Efficiency Dividend, or really Automatic Budget Reduction, to Federal Government in 1986. Notionally, it was a systematic attempt for Departments and Agencies to be forced to realise, and hand back, the productivity gains due to Technology, I.T./I.C.T. particularly.

Which is fine sounding until you pick apart the assumptions and implementation.

I was caught up in the first I.T. Recession in Australia, at the end of 1990. Westpac laid off 500 contractors (for the abandoned project CS90) at Christmas. It was 1994 before Computing and I.T. graduates were back to 100% employment. For a while, a Chemistry or Geology graduate had a better chance of finding work in their field - very different to the industry cries beforehand of "we have a staff shortage crisis" and "I.T. it's a job for life".

That first I.T. Recession was because all the low-hanging fruit was picked: all Australian businesses and Government Agencies had hired more I.T. staff to automate their back-office functions and replace (low-level) clerical staff.

In 1990/1, I.T. staff were cut, just like all other staff.

Why is this problematic? Consider these three related points:

• If this was 1965 and government Agencies had to supply all now current services, would we ever have an unemployment problem? [How many people would it take for Centrelink, ATO, Medicare, etc to do their work and handle 800,000 unemployed?]
• I.T., like Marketing, is an intangible and an indirect cost. We do them both for a Business Benefit. But we don't measure, report or analyse I.T. benefits.
• I.T. is a Cognitive Amplifier. We use it to automate business processes and increase staff productivity. Rough estimates suggest a 10-100 times 'amplification'.

The Keating Efficiency Dividend is recognising all three points:  from all the money invested in Federal Government I.T. Systems, rather large savings should have been realised.

The workload, and notionally the workforce, of many or most Federal Government Agencies should scale with population size - growing at a long-term average of 1.5%. [18M in 1996, five times the 1901 size]

But after 30+ years of I.T. Automation, for the Public Service to have only achieved a 1% total savings either suggests:

• gross incompetence in either failed or unproductive/irrelevant projects,
• management fakery in reallocating savings to increasing empires, or
• an increased level of service, either numbers served or complexity and number of services provided.

But we don't know what's happened: what staff productivity or organisational efficiencies have been realised?

This is a massive management and reporting failure on behalf of the permanent Public Service, but an even greater failure of governance and insight on behalf of the Parliament they report to.

This leads to another set of points:

• Not all Government Agencies can achieve the same efficiencies as their workload and workforce are dependant on different factors,
• Different areas within Agencies cannot be expected to yield the same "efficiency gains" for the same reasons, their inherent workload scales from different factors, and
• "Percent maximum potential efficiency" is not calculated nor taken into account. The past improvement by individual Agencies, and the future savings possible, are seen as irrelevant.

The Productivity Commission [2004] reported that ICT was still the single largest factor driving (staff) productivity growth, yet there appears no intensive study of the APS (Australian Public Service) to which it has special access and interest, nor does there seem to be a recognition or refutation of this is Agency management practice.

If investing in I.T./I.C.T. is still the most cost-effective way of improving productivity, and hence of meeting the Efficiency Dividend, why are any Government Agencies apply the full 4% 'dividend' across all their organisational units?

If I.T./I.C.T investment is judged as not improving productivity, where is the evidence?
Pointing to a glaring omission of all Government Agency Annual Reports. Although they all have detailed reporting against "Key Outcome Areas", there are no output metrics.

Productivity is a measure of Output per unit of Input. Within the APS reporting schemes and managerial system/requirements, only Inputs (staff numbers and on-costs) are measured. Failing to even notice this gap, let alone address it, seems to me to be another monumental failure of the APS's management and culture.

Politicians, as managers of the APS, make decisions/directions are unpredictable, capricious and irrational. This is simply the nature of the beast. Politics is the Art of the Possible.

Which means senior managers in the APS have to deal with this insane world.

Down the organisation structures, staff never learn to relate their time input into economic value output. The simple cost/benefit equation at the heart of every business transaction that any 16-yo at MacDonald's learns is missing: wages have to be paid for.

This has led to an incredible blind-spot within the Public Service, resulting in systemic management and reporting failures such as not defining and collecting/reporting staff output data so year-on-year Productivity can be tracked.

What we can absolutely say about the 4% (1.5%+2.5%) Swan/Gillard Efficiency Dividend:

• it should not be evenly applied across all Agencies, but has to be because the necessary management data is missing.
• it should not be evenly applied within Agencies because the necessary data is missing.
• without evidence, APS managers are blindly acting. Should they be investing in more I.T./I.C.T. or reducing I.T. staff/budgets more than 4%?
• There will be uneven and disproportionate effects on the delivery of Government services.

Just because Politicians live in an extreme world is no excuse that they don't properly fulfil their Fiduciary Duty towards their constituents - the people who've entrusted to them their future livelihoods and living standard.

We, as taxpayers and electors, need to be demanding a much higher standard of management and governance from the Politicians representing us.

Is there any reason that the Public Service is not the best organised, best managed and provably most productive and efficient/effective organisation in the country? Why should the Public Service be less than the definitive model of good management and good governance? The standard that every organisation is judged by.

The only reason is that we haven't held our Politicians accountable for their performance.

We have let them get away with putting their interests ahead of what they are elected and paid to do:  husband the public purse, the taxpayer dollar, for the best possible outcomes and sustained benefits to the citizenry.

King Cotton reprised: The End of the Uncle Sam Brand as a Universal Currency

I really hope that Mit Romney and the Republicans win the next Presidential election. That way when the fruits of years of the excesses of Republican Presidents (Bush I & II notably) come to fruition (around 60% of the current $14,300B public debt), the general public, and GoP voters in particular, will not be able to easily pin the blame on Obama.

The point about "discontinuities" is they are disruptive events that happen very quickly and to most, without appreciable warning. Think the fall of the Berlin Wall at the end of 1989 and the dissolution of the USSR and Communist Eastern Bloc shortly afterwards.

It is more than likely that the USA is now heading to its own economic "discontinuity", a reprise of the Confederate States discovering that "King Cotton" wasn't a match for the manufacturing power of the Northern states Union.

I've only recently become aware that oil transactions are increasingly being done outside US Dollars. A random selection of articles returned by a quick Google search:
Jan 2012, India transacting with Iran,
Jan 2011, The dominant dollar no more by US economics professor,
Mar 2012, The Renminbi  as Reserve Currency (+ part 2)

The accounting definition of money is "a unit of exchange", it is the basic building block of commerce and trade. But only if both sides of a transaction put the same value on it and it is liquid and holds its value with others.

For international trade to work, there has to be a common unit of exchange: a currency benchmark against which everyone sets their exchange rate and in which markets set prices for traded commodities and goods.

Once the world rested its trade on "the gold standard", but when the fiction evaporated that every dollar printed was backed by a unique piece of gold in a vault somewhere, the world moved to paper currency, eventually the US Dollar assumed the role of the world's common or reserve currency.

What happens to the US economy and Government budgets when they can't raise loans for the current 40% of the budget not covered by taxes?  If the US currency does lose its universal trade currency status and its "AAA" credit rating, the cost of money (interest on loans) will suddenly rise, throwing further strain on the US Government budget.

Can the USA survive its 16% of GDP spend on Healthcare? What happens as this rises 40-50% with the ageing of the Baby Boomers and their end-of-life care needs funding?

01-May-2012: Alan Kohler provided a chart, sourced from the UN 2010/11, of global Military spending.
The USA, at ~$700B, spends 43% of Global military spending.
China is next at $120B with UK, France and Russia around $60B each and Japan around $55B.

Since 1961 when Eisenhower coined the term "military-industrial complex", the USA has been committed to a very large military budget, and in the way of things bureaucratic, it rarely falls.
Will they ever be able to reign in their Military spending? How quickly can they do that? The tap cannot be shut-off quickly...
What will the Government decide to de-prioritise if they are forced to reduce their expenditures?
More importantly, how will the electorate act?
[end 01-May]

When, not if, the Uncle Sam Brand loses its special status as the global currency of trade and settlement, for the first time the automatic economic system re-balancing mechanism, falling exchange rates, will kick in. This won't be any gentle or leisurely correction. Once it starts, it will feed on itself into an avalanche, which must of necessity, overshoot on the first round.

What happens to the collective psyche of American Business and the public when they discover the true worth of their goods and services?  It will be a crushing blow, but one that many sectors and individuals will respond to with vigour and enthusiasm: America earned its place as a super-power and traces of that same energy, drive and capability remain.

This won't be pretty to watch, let alone be a part of.
And those most affected, the almost two decades worth of Baby Boomers, who will have their retirement plans destroyed and most basic needs like healthcare put in jeopardy, how will they react?

These are the same generation that din't just opposed the Vietnam War, they flooded into the streets and demonstrated. Many liked to "stick it to The Man" and to actively voice their discontent.

How will they react when told they have to pay for the excesses of the top 1% and a very cosy relationship between the Republicans, the wealthy and the Big End of Town?
Especially now that they have a lot more experience and a set of very powerful tools in the Internet?

I've no idea of estimating the When or How Deep of a crash like this.
Nor do I know how I'd survive in such a scenario - obviously with a very cheap US Dollar, it will become a prime travel destination.

But the really important thing I've not got a clue about: How can I make money from this insight?

It's not enough to "have a good idea", but to be taken seriously, you've got to back your hunches with cold hard cash...

Another worse GFC is coming

Without a Nobel Prize in Economics, or even a degree in it, how can I make this assertion:
There will be another GFC, and it will be worse than 2007, and make it confidently?

Because we didn't see the last one coming nor did the controls to prevent such disasters, work.

The 2007 GFC was initiated by the inevitable, predictable collapse of the US "sub-prime" mortgage market. ["sub-prime" is disingenuous double-speak for 'very risky' or 'junk'. People buying houses with this money couldn't afford to pay it back, the lenders knew it and still loaned them money and resold the debt as quickly as they could, collecting a tidy profit along the way.]

We saw this before at the end of the 1980's with the rise and collapse of "Junk Bonds".

Why weren't "sub-prime" mortgages a problem, or even a market, before 2000?
Because of the economic slow-down when the "Dot Boom" turned to the "Dot Bust", the US reacted to prevent a recession.

The US Federal Reserve, with the backing of the US Government and Central Banks around the world, dropped interest rates to near zero on US Government Bonds, the benchmark "risk-free" investment. That created the conditions for the next "market bubble".

There are two points in there that need to be unpacked from that:

• "Zero" interest rates are not numerically "0.0", they take inflation into account.
  If inflation is at 3% and you're getting 3% interest, your wealth increases by NIL over the course of a year. You can buy exactly the same number of burgers or cars at the start and end of the year.
• Economic Theory for judging the proper return from investments is based on the Risk/Reward principle.  Higher Risk translates into higher Reward (or interest rates).
  But compared to what? The equations that describe the valuation of financial "instruments" assume a baseline or benchmark: the "risk-free" rate that everything else is compared to.
  Which is the Government Bond rate. If the Government can't pay interest when due or redeem its bonds, you have bigger problems.

How did a reasonable and well-proven response to an economic slow-down convert into a massive "Market Bubble"? The usual suspects of "Fear and Greed", the same drivers of the 1980's Junk Bond bubble and all before it.

With "safe" investments offering no returns, investors looked for other avenues to get good returns: this was the environment which created a bubble in just 10 years.

There were/are a number of special conditions in the USA that created this particular scheme. Be clear: the same investors and the same money would've chased any of the other myriad schemes possible.

The peculiarities of the markets in the USA:

• Mortgagees can walk away from their debt with impunity. Banks, not borrowers, bear the risk of default (the norm in the rest of the world).
• Mortgage Debt wasn't held by banks, but resold to one of two "Government Sponsored Enterprises" (Freddie Mac and Fannie Mae) at a small discount, allowing the banks to relend the same money over-and-over again.
• The two Federal Mortgage consolidators resold their debt into the larger US and global markets.

There were two inventions that allowed the explosion of this "commercial paper" to be sold by the Investment Banks:

• CDO's, "Collaterized Debt Obligations". Individual mortgages were bundled together (aggregated) and sold together as a single lot.
• CDS's, "Credit Default Swaps". These are a form of commercial insurance. They were used to convert the highly risky CDO's into "AAA" (risk-free) debt.
• Investment Banks are not regulated like normal "Deposit Taking Institutions": Retail Banks.
  They can sell what they like because they deal with "Sophisticated Investors" who fully understand the risks they are taking and the deals they are entering into.

Which brings in another critical player: the Investment (or Credit) Rating Agencies.
Standard and Poor and Moody's are two of the largest global players.

Credit Rating Agencies are thought to be impartial and expert assessors that investors can rely upon.
As events transpired, all those "AAA" rated high-yield bonds were both too good to be true and entirely wrongly assessed.
And that the notional risk implied by the high returns were massively understated.

How could a catastrophic mistake on a massive scale and as-wrong-as-it-gets be made?
This was a systemic fault - it applied everywhere to all the Rating Agencies.

Why?
As in Why could that happen at all, and Why did it not get noticed by oversight bodies?

The simple answer is that the Ratings Agencies didn't understand the real risks: they were incompetent in their work (or more politely, unaware of the full implications), were deluded or duped, knew and didn't properly inform investors, or were complicit or negligent.

The central conflict is the Rating Agencies are paid by the Seller, not Buyer. They could only make money by assessing instruments as "very low risk", very wrongly as it turns out, and they did.

One of the contributing factors in all this, globally as well, is that individuals responsible for each part of this process bear no consequences for losses, but do gain from all sales and often share in the profits.

This asymmetry, there is no personal downside for actors in Finance and Investment, is a monumental systemic flaw that will only lead to more problems.

If you think this isn't so or doesn't matter, ask this question:
 Did any of the people who personally benefited from the bubble have to pay back their profits or make any reparations?

In most other areas of Commercial Law, fraudulent or suspect transactions can be "unwound" or reversed. At least for the last 7 years.

• Would the impact of the GFC have been nearly as bad if 7 years of faulty transactions have been reversed? [No]
• Could Governments and Financial Regulators around the world have done that? [Yes]
• Would recovery have been complete? [Not nearly]
• Would more people have been personally affected? [probably]
• Would those involved in Finance/Investment now be more cautious? [Yes]

One of the major weapons now against selling drugs is the seizure of assets and "proceeds of crime".
Losing your improperly acquired wealth is a far more potent penalty than even jail-time.

But obviously Governments don't hold this view for "white collar" crime, preferring to spread the pain to the innocent and less wealthy.

So what's my thesis?

• None of the responsible professions foresaw the 2007 GFC, nor acted to warn Governments, Investors or the Public.
• Not Accountants, Economists, Auditors, Valuers, Investment Advisors, ....
• The existing Regulatory Framework was wholly inadequate.
• The oversight bodies and control mechanisms failed completely - they didn't warn of the building problem and failed to prevent the collapse.
• The Guilty kept their ill-gotten gains, the rest of us paid through failed banks and Government bailouts - and will pay for decades to come.
• Those responsible for outright fraud and deception have not been brought to book.
  Those who's inaction, negligence, incompetence or indolence created the economic maelstrom have been allowed to escape unnoticed and without consequence.
• Systemic problems of inherent conflict of interest and lack of personal consequences remain unchanged.

As a global community,
we don't know precisely what elements, apart from greed, led to the GFC,
nor what changed to trigger it.

Without knowing the causes, we are helpless to prevent more recurrences.
There have to be more financial meltdowns simply because we don't know why the 2007 GFC happened.

In the Military, generals are always fighting the last war.
In Government and Economics, they are always fighting the last crisis.

---

From the New York Review of Books:

How They Killed the Economy

March 25, 2010

Roger E. Alcaly

Partly this was because the most serious economic crises are centered in the banking and financial system, the basic source of credit, and none of those that occurred during this period involved the banking system in a major way.

The list of crises that were contained is long and impressive,
including the stock market crash of 1987,
the junk bond collapse of 1989–1990,
the Asian crisis of 1997,
the Russian default in 1998,
the failure of Long Term Capital Management—a large and hugely leveraged hedge fund—later that year, and
the collapse of technology stocks in 2000–2001.

 Quick and effective responses to these and other dangers by Greenspan’s Fed appear to have induced banks and investors to rely unduly on its ability to stave off collapses that threaten the system, and to ignore the serious malfunctioning of the financial markets.

These same successes may have led Greenspan himself to believe that he actually was, in the words of the Financial Times, the “guardian angel of the financial markets.”

The general pattern of those years was similar to earlier extended periods of growth and great optimism.

Missing element of Economic Models

A piece I was sent, "The Quiet Coup"  by Simon Johnson in The Atlantic:

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

I think it goes much deeper, I'm much less optimistic.

Summary: Henry Ford got it right when he consciously decided to pay his workers enough to afford his products. Forgetting this is Arrogance & Hubris.

The way we're heading, there is a real chance we won't just muddle through.
My scenario is the huge US Government debt causes the collapse of the US dollar causing rampant inflation there & elsewhere and the Chinese needing to break lose.

At which point, the Australian dollar, currently tied to the Chinese economy, goes into free-fall.
I don't know the timeframe.

Solutions without knowing the Root Cause?

Friends have talked to me about "Economists" and the apparent lack of solid Economic Theory.

I think a root cause is they, academic economists, don't understand what Money is.
Which means they don't model it well or properly, either statically or dynamically.

What's the impact of 'frictionless' trading with instantaneous communications, automatic trading systems and single global market? As a side effect of a single global market, I would've thought that arbitrage would be impossible with the lack of secondary or distant markets.

Frictionless, automatic trading results in infinite amounts of cash flowing infinitely quickly.
A really, really Bad Idea.

Only this is not monopoly money. It's Real Life with Real consequences.

Burning Other Peoples Money (OPM) to the ground will get even the most self-satisfied, complacent & apathetic electorate out and manning the barricades...
Or not - I get this sort of thing wrong more often than not.

Lack of Accountability or does effective control require Skin in the Game?

There's a common problem underlying CEO & Director Salaries and Financial Planners/Advisers:

• There's wildly asymmetrical personal upside & downside.
  In fact a complete lack of downside.
  There is an inherent structural bias in the system.
  The feedback effects when control and assets are conjoint are missing.
  

   
Couple this with "Institutional Investors" and compulsory savings (Superannuation, 401(k), Pensions, ...)

All us worker drones are forced to pool our money (Anonymous Capital) husbanded by these Institutional Investors, but don't get a say in what they do or how they influence those big companies, directors and CEO's... That at least half of us work for.

"No Taxation without Representation"? might now be:

"No Investment without Responsibility"?

The Limits of Taxation

Where are Governments going with Tax?
How much of GDP will they

C. Northcote Parkinson made a bunch of Postulates in the 1950's & 60's:
http://lawsoflife.co.uk/author/cyrilnorthcoteparkinson/
http://everything2.com/index.pl?node_id=740233
http://en.wikipedia.org/wiki/Parkinson%27s_Law_of_Triviality
http://en.wikipedia.org/wiki/C._Northcote_Parkinson
http://en.wikipedia.org/wiki/Parkinson's_Law

Notably, Parkinson postulated:

• Work expands to fill the time available.
• Expenditures rise to meet income.

Which nicely explains the on-going ratcheting up of Tax rates and Government Expenditure.

But what's the Limit? Where does it end?
Governments cannot tax more than 100% of GDP, in fact a lot less..

What are the Optimal Tax Rates under certain operating conditions & assumptions??

Too little Government investment in infrastructure, or "Common Wealth", and Commercial Output declines.

Too much taxation and available Customer Expenditure and Saved Capital declines, starving Enterprises of funds, reducing growth and leading to reduced tax collections.

That modelling should be a priority of Governments, Political Parties and Economists in every Democracy (and other type of Government).

The systemic and long-running misallocation of resources caused the implosion or collapse of the USSR.

No Country is immune - large, small, new, old, Democratic or not...
For more than half a century, the U.S.A. has been the global economic standard and its currency the defacto Global Standard - replacing the Gold Standard before.
But this is nothing written in stone to say it will always be thus.

Rather, these things do not stand still.
Just as "The Sun never set on the British Empire" in the Nineteenth Century and the British Pound reigned supreme, within 50 years the Empire was gone and Britian broke after World War II.

Maybe Parkinson predicted the current situation in 1960, or at least he foreshadowed it, as demonstrated in this review of his work:

INJELITANCE: A vital Parkinson contribution was his diagnosis of why certain organizations suddenly deteriorate: the rise to authority of individuals with unusually high combinations of incompetence and jealousy ("injelitance").

Perhaps permanent solutions to cyclic Economic Crises lies in better understanding backed by good Governance, rather than more regulation.