Self-reliance + Resilience = Inequality.

We have established that only about 40% of the population, after taking out the young, 80% of retirees on a pension, the disabled, the unemployed and those that pay no net tax, are self-reliant.

Obviously, within that 40%, there is a continuum between those that rock-solid in self-reliance and those that are struggling to stay there. Some of the figures on mortgage stress would indicate that a substantial number that are now self-reliant may get tipped over the edge in the near future.

Those that are safe are the ones that are well ahead on their mortgages, have no credit card debt and probably have started to build a capital base. Those that are at risk have been struggling to pay off the mortgage, are paying school fees on their credit cards, have no savings, no sick leave and no long service leave.

Now we come to a time in history when the world gets turned upside down.

Some of those that are now self-reliant are going to fail, a few that are not now will become self-reliant, my guess is this will not be a big number. It seems self-evident that if you are not self-reliant now you are not going to have the ability or the intention of becoming self-reliant in the future. This has a substantial effect on just how many are going to have enough resilience to come out of the next 12 months in a self-reliant from.

It is my firm belief that John Roskam is spot on the money. The days of the highly paid, low productivity worker are over. Business paid because it could, but we are starting to find out that we have been living beyond our means.

The result is that when we come out of this most people will be in deep debt and having to pay off mortgages loans and more for the foreseeable future. At the same time, there will be a period of high growth, there always is after a depression. During that period of high growth those with capital left will invest it and make good returns because capital will be scarce. When capital is scarce interest rates will rise. 

That means we have the self-reliant who will have their mortgage under control, investments earning a good return and their capital base will be building. On the other hand, there will be those struggling to make payments and unable to save.

This will lead to a much greater degree of inequality than we have seen in the last few decades.