We came across two documents yesterday.
One contained the thoughts of one of the world’s most well-known and biggest investors…a man who manages over USD$263 billion of investor funds.
The other contained the thoughts of a university lecturer.
One focused on the core of investing, entrepreneurialism, and what makes an economy tick.
The other was a sad indictment of what investing has become…
In these pages we’ve explained how fortunes are made in recessions. That half of America’s Fortune 500 companies were formed during recessions or depressions.
And as Professor Andrew J. Razeghi, at Northwestern University, Chicago, points out:
‘Moments of economic turbulence provide the unique opportunity to start new businesses, launch disruptive new products, and strengthen customer loyalty — often at a discount…I offer you a tribute to organizations who have successfully innovated through the “worst of times”. When the going gets tough, the tough innovate.’
It would be nice to think an Aussie professor could write so passionately about innovation and free markets, but we won’t hold our breath waiting for it.
We’d also like to think entrepreneurs are making the most of the current global downturn to innovate the world economy back to prosperity.
We’re sure a bunch of entrepreneurs are doing just that. But thanks to the attempts to prop up failing businesses, there are much fewer opportunities for new businesses to break through.
And unfortunately there doesn’t seem to be an end to the meddling. As Bloomberg News reported yesterday:
‘Bill Gross, who runs the world’s largest mutual fund at Pacific Investment Management Co., said the U.S. is approaching a recession as Blackrock Inc. (BLK) expects the Federal Reserve to take more steps to support growth.’
It’s a sad state of affairs when investors aren’t looking towards innovators to boost the economy…people who create jobs, improve living standards, and discover efficiencies.
Instead, they’re hoping a bunch of bureaucratic pen pushers will push ‘Print’ and bingo…economic recovery.
In other words, when the going gets tough, the weak cry for a bailout. They cry for more government intervention, and the guidance of central planners.
Comrade Bernanke
It seems to us that many have forgotten what it means to live under a centrally planned economy. If you need a reminder we suggest you check out some of these fascinating videos of the Soviet Union.
Brezhnev, Andropov, and Gromyko appear on the platform and the crowd obediently applauds…‘Tell us leader, what shall we do?’
Earlier this morning, US Federal Reserve chairman, Dr. Ben S. Bernanke appeared before Congress. Investors will dissect every word. But what they really want is for their ‘leader’ to tell them what to do.
‘Tell us leader, what should we buy?’
‘Buy US government bonds my children…and keep buying them until I tell you to stop,’ Comrade Bernanke replies.
No wonder US government bond yields are making new lows nearly every week.
Of course, that’s not the way an economy works. An economy needs innovators to supply the demand.
Unfortunately, most folks have too much faith in the ability of fallible humans to be infallible. And that includes having too much faith in corrupt fascist democracies.
(Tonight we’re off to hear John Hirst, historian and Scholar Emeritus of La Trobe University, giving a presentation titled, ‘Why Australia Should Abolish Compulsory Voting’. We’ll give you our take on it tomorrow. But as someone who hasn’t voted in more than 20 years, you can probably guess our view on voting.)
When a Choice is No Choice at All
Last night we saw a commercial on TV by an insurance firm called iSelect. The ad was for health insurance. The tagline was, ‘Get health insurance or get taxed’.
That’s the kind of innovation you get from an elected democracy. Where you’re forced to buy a product from certain companies. And if you don’t, the government will take your money anyway.
It’s called Morton’s Fork — a choice between two unpleasant alternatives.
Do you buy inflated health insurance that you don’t need from a private healthcare firm? Or let the government tax you, supposedly to pay for public healthcare you don’t need either?
Although it’s not just in private healthcare where you get the State and corporations joining forces to rob individuals blind.
It happens on a daily basis throughout the Welfare State. Look inside any government department and you’ve got corporate parasites sucking money from the taxpayer: health, education, military, finance…you name it.
Rather than consumers having cash in their pockets to spend on the new ideas created by entrepreneurs, the cash is in the government’s coffers.
The government then spends this on its own pet projects…whether consumers want or need what the government provides.
For instance, spending $370 million to host the G-20 meeting in 2014. We wonder how many Aussies would voluntarily hand over the money to pay for this pointless talkfest?
Not many, hence why the government has to forcibly take the money from Aussie taxpayers through taxation to pay for it.
So, what does this all mean for you as a person and an investor? Is all hope lost? Should you just give up?
No. All isn’t lost. Just because government is stifling innovation and competition, doesn’t mean innovation and competition are dead.
Fortunes are Made in Recessions and Depressions
Small Aussie firms are still doing great things. You can see that in some of the companies we look at each month in Australian Small-Cap Investigator.
And you can see it in the pages of one of our favourite mainstream columns: Entrepreneur, in the Fairfax papers.
It’s only a matter of time before the Welfare State system of government and central bank intervention is completely discredited…even by the mainstream drones.
At that point the global economy will be in the depths of the worst depression in living memory. But remember, fortunes are made in recessions and depressions.
That’s when entrepreneurs and the free market will show the Statists how an economy really works.
Cheers,
Kris.
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