It is starting to get scary. Politicians all over the world are congratulating themselves for tackling the crisis (a debt and gearing crisis) with more debt and more gearing. Threatening banks to intervene if they don’t lend, threatening companies to intervene if they don’t lower prices below their cost of production, threatening hedge funds for using shorts to hedge long positions, threatening to close borders to save domestic industries. Nice.
The stock market falls again in January and hedge funds are to blame again (de-leveraging and sell-out of long-only funds never was a problem)…. As if banning shorts helped the market in any way.
It is easy. Governments have found in this crisis the perfect storm to do what they always wanted to do and found difficult: intervene everywhere, regulate to death. And that would not be a problem if the governments and their advisers had constructive solutions and were made accountable and audited. But as a recent cartoon stated, we are bailing out the iceberg to save the Titanic. Governments have created this crisis by giving mass incentives for companies to grow beyond normal levels of debt (in many cases, like in Spain, to fulfill egotistical empire-building desires), by allowing abnormal lending to people that could not afford it, by massively increasing public expenditure and promoting “high growth” industries like construction and subsidy-driven energies. Debt was solved with more debt and now it is expected to be solved with more debt, more money printing and, icing on the cake, government intervention. So who takes care of the revenue problem? You and I and the poor companies that actually made money and good returns without gearing themselves to death.
Wait a minute, so in order to bail out the auto industry, the over geared renewable energy sector, the banks and the construction companies the perfect solution is to tax the oil and gas sector (20% net debt to equity average) and tax the population to cover the opex of the ever increasing government?. Who is going to invest? Who is going to take the risk of being entrepreneurial if the solution is to subsidise unsuccessful irresponsible management by taxing successful business models?. Why do we have to save jobs in the auto industry and not save any in small businesses and new enterprises?.
Remember, “a government that is big enough to solve your problems is also big enough to create them”. More and more countries (particularly in Europe) are constantly brainwashing the population into believing that the ones (the Governments) that caused the problems will solve them, and gradually asking them to “let go” of their economic and deciding freedom to “allow the government to undertake the necessary actions”. Obviously, they are not to be monitored or controlled, they are not held responsible for what they do with your (our) money. They just want you to trust that in the end everything will be alright. If it is, the economy will be driven by semi-state owned oligopolies that drown any entrepreneurial opportunity, if it’s not, the world leaders will shrug off the blame and point at someone else. Pity that hedge funds might not be there to lay the blame. Next task: find the scapegoat. It’s urgent. Suggestions welcome.