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Financial anxiety is up around the globe

Survey suggests that many people are perilously unprepared for a major economic jolt.
Image: Shutterstock

As the world reels from the fiscal shockwaves of Covid-19, a new 26-country survey suggests that many people are perilously unprepared for a major economic jolt.

According to the Organisation for Economic Cooperation and Development’s 2020 International Survey of Adult Financial Literacy, 42% of the 125 787 adults polled reported worrying about meeting everyday expenses; 40% were concerned about their financial situation; and 37% reported they were just getting by.

Most concerning, given the threat of mass long-term unemployment, in response to the question, “If you lost your main source of income, how long could you continue to cover your living expenses, without borrowing any money or moving house?” 28% said about a week; 25% said about a month; 15% said about three months; and 18% said more than six months. The remainder, just over 14%, reported not knowing — which the study’s authors suggest is “revealing of either unpreparedness to consider such eventuality or lack of resources for a financial cushion.” And the financial precariousness in this increasingly unstable world is far from evenly distributed.

Although the OECD survey did not include the US, a recent National Public Radio report indicates that many Americans are in the same boat: At least half of all households in the four largest US cities — Chicago (50%), New York (53%), Los Angeles (56%) and Houston (63%) — reported facing serious financial problems, including depleted savings, trouble paying bills and affording medical care.

© 2020 Bloomberg

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Scary stuff. Also, within the upper and upper middle income levels there is a dramatic lifestyle adjustment and a higher percentage drop in house prices.

A society can either have a large public sector age bill, where government employees enjoy comfortable financial security, or a strong private sector, where entrepreneurs and workers in the private sector have financial security. Society cannot have both, because the former uses the progressive tax to grow at the expense of the latter. Governments cannot create jobs, because government projects do not add any value, it merely redistributes the value that was created by entrepreneurs and private-sector workers.

Therefore, a large government with an increasing public sector wage bill destroys the very entrepreneurial activity on which it depends. The socialist uses progressive taxation to destroy his ultimate employer, the one who funds his salary, namely the entrepreneur in the private sector. This brought us to this unsustainable situation, where even in “free-market societies”, people in the private sector suffer under increasing financial stress. More and more people are forced to look at the government for assistance, thereby strengthening the negative feedback loop of socialist destruction.

We need a small government with irrelevant politicians and a large and financially strong private sector that can provide job security and financial freedom to citizens. The alternative, where politicians parade as rock-stars and present themselves as the saviours of the universe by promising to rob Peter to pay Paul, is simply unsustainable and financially destructive. Large governments and powerful politicians lead to an impoverished society.

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