Free Markets, Free People

Knee-capping Recovery

Dale makes an incredibly important point about investment below – investors aren’t going to commit their money to industries which are being manipulated by government for political goals and payoffs.

And, the Wall Street Journal makes a similar argument about corporate taxation and the Obama administration’s apparent plan to compound the problem he hopes to “deincentivize” by driving both investors and US companies off shore..

The energy picture is no rosier. Because there is no comprehensive and clear-cut, long-term energy plan from government, and because it is clear to many that the present administration’s plans for energy involve achieving political goals dictated by government vs. a straight market based plan which would see decentralized signals and decisions determine the energy future, investors are sitting on the sidelines. As Sen. Murkowski said, too many in national government today see the energy sector, and especially the oil and gas industry, as an “ATM to pay for other programs”.

When government is so deeply involved in picking winners and losers, investors are not going to invest. Especially given the example of the car and financial industries.

You can guess what that means in terms of economic recovery, not to mention economic growth. Investment is the engine of economic growth. Without it, nothing sustainable happens. Government can make all the make-work jobs in the world, but until investors commit to the economy, we only mark time economically speaking. If anything government should create a climate that provides incentives for private investors – low taxes, favorable investment rules, etc. to encourage investors to risk their money here in the US.

Instead, we have at least three critical areas where government intrusion and manipulation is having exactly the opposite effect.


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11 Responses to Knee-capping Recovery

  • <i>When government is so deeply involved in picking winners and losers, investors are not going to invest. </i>

    The risk for normal investors is ghastly, but for those in favor, there’s no risk at all. 

    What’s interesting to me is that this administration is trying to make very wealthy enemies. What does it take to politicize your average multi-billionaire? I don’t suppose even Emmanuel can stir up a coalition of enemies equal to Soros in both wealth and neurotic malevolence, but it’s nice of him to try. 

    In any case,the administration’s goal here has very little to do with encouraging or discouraging investment. It’s about establishing control. A crippled zombie auto industry is the best kind, from where they sit. Its weakness is an excuse to seize control, and it’s ongoing dependency on the government is an excuse to maintain control. You and I think it’s a bad thing, because a zombie industry ties up resources and skilled workers who could, otherwise, be adding value somewhere. But this administration doesn’t understand that. If they ever thought about it, they’d think this country has a fixed supply of goods and services, like sunshine, and food appears on grocery store shelves the same way the grass grows in the back yard. 

    These guys don’t fully understand that the auto industry is where cars come from. And they don’t think they need to care. All they care about is establishing control over everything in sight. I think they sincerely believe that nothing they control can go wrong. When, inevitably, it goes horribly wrong, they’ll retreat into the classic third-world thug excuse: It’s not their fault! Wealthy opposition forces are conspiring against them to make everything go wrong! They will demand more power in order to defend the People against the Landed Interests or whatever, and screw things up even worse. Lather, rinse, repeat, collapse. As goes Venezuela, so goes the Smartest Administration Ever. 

    • Seize control of the auto industry ?  No way.

      Both Chrysler and GM are dead.  Who, except a government controlled bank, will loan them a dime ?

      Obama et al has destroyed the trust that is required for them to ever get any private sector financing ever again.

      • If there aren’t enough zombie banks to “lend” the money, the administration will make more. Or they’ll subsidize the zombie automakers directly. One thing they might do is slap punitive taxes on private-sector automakers in order to “protect the American People’s Investment” in the zombies. They’ve got a whole galaxy of lunatic moves they could try. 

        It might be a good idea to buy a low-mileage Honda or Toyota within the next year or so. Once these guys start interfering with an industry, they’re not going to stop. Every “fix” will make it worse. Every problem will require another “fix”. 

        Imagine an ER doctor with a hammer who thinks your broken bone looks like a nail. The other bones he breaks, they look like nails too. 

    • I guess my next car will be a Ford

  • For someone supposedly so smart and so intelligent, Obama is acting like the class dunce when it comes to the basics of economics.  Does he really believe that he can “will” the economy back into shape or is he playing with the dice knowing the economy will recover regardless of the political favors he stirs the pot with.  In either case he is playing with the lives and fortunes of the American people and that is unforgivable. 

    • We’ve turned our executive branch into a stage where a narcissist acts out a superhero adventure fantasy. The lives and fortunes of the American people are stage props. 

  • Obama is passionate about reducing income inequality

    Isn’t this a big warning to anybody with money who even thinks about joining in with the Obama/Geithner Toxic Assets Reduction Plan. I mean, why should anybody with money not fear that in the end they won’t have it any more ?

  • There will be capital provided to the zombie industries from two sources: large banks that are controlled by the government (this is the Atlas Shrugged model) and by firms willing to accept increased returns for increased risk. The latter would be the market driven model. Remember, US banks and other financial institutions have a long track record of lending money to anyone willing to pay the freight. The secret to success is evaluating the risk versus the return. And you just have to be right 51% of the time, more or less.

    In a perfect world, our energy policy would be the same policy we pursued for over 100 years. What resources can provide consumers with the least costliest supplies that meet their needs?

    I’m not particularly sanguine about what will happen in the next four years. I don’t think the Republicans have spent enough time in the wilderness to begin any sort of resurgence. While the administration and their acolytes are engaged in the largest over reach of power since at least the 1930s, I think the wages of those sins will be a long time coming. I do often think we are embarking on a re-d0 of the 1970s, only this time without the platform shoes and extra wide bell bottoms. And we are doing at at 45rpms, not 331/3.

    I do think we may start to see the seeds of separation between the formal large economy and a less centralized entrepenurial economy. In the 70s communication and coordination were dominated by the mail, the Bell system and the need to physically travel. Today many of those functions can be done virtually. While large corporations continue to be dominated by bureaucracies, mostly designed to keep honest people honest and create “information” for regulators, the Silicon Valley model of the 80s and 90s has shown how it is both possible and desirable to flatten companies. Think about it in terms of waste. How much “productive” work is done by middle managers in office towers? Flat organizations can generate a much greater profit margin for the same price. Outsourcing, IE focusing on core competency, provides opportunities for other small flat organizations.

    I will stop at this point, because my comments are starting to sound like something out of Wired Magazine. But to summarize.  I think smaller will be the way ahead and hopefully, the way out.

    • “firms willing to accept increased returns for increased risk”

      You mean those “evil speculators” ?  I guess if they’re friendly Democrat speculators it would be OK.

  • People who don’t have jobs don’t drive and hence don’t contribute much to global warming.

    People who don’t have jobs rely on government charity to put food on the table and keep the house warm in winter.

    From the perspective of liberal trash (redundant), what’s not to like about this situation?

    • Yep, they don’t plan on having to eat the soylent green/red/yellow.   The nomenklatura will be exempt of course.