Monday, December 15, 2008

A nice little earner ...

The U.K. government's use of a buy-out (re-capitalisation) strategy rather than a bail-out strategy has taken a lot of flak in the last month. I wholeheartedly support this Keynesian approach because it is a form of future wealth redistribution from the market to the state, assuming that we don't sell out too quickly when the market recovers (something which the laissez-faire vultures will obviously try hard to encourage).

Contrary to popular belief, most businesses are not the paradises of economic virtue and good management that they attempt to portray but are often haphazard structures prone to waste, incompetence, politics and simplified forms of management (often to ridiculous extremes). Dorian Gray would be proud.

It is the rare business that lasts fifty years without being seriously challenged by a couple of blokes in a garage start-up. If the military was run like most businesses, then we'd probably be on our twentieth regime change by now.

The government should be exploiting these weaknesses. The most obvious example of this, is the plans for more public building. Rather than making shareholders wealthy, we should be buying up the likes of Taylor Wimpey (on the cheap) and funnelling building projects through a part or wholly nationalised building company. Give people jobs rather than shareholders easy pickings.

It's worth remembering that money trickles up and not down, so if you want to get things going then start with those at the bottom of the social scale.

On the same note, the time has never been better to join the Euro. At such a low exchange rate, the potentials for investment and strengthening our manufacturing and export businesses are exceptional. Many pundits are asking the government to prop up the pound, however this form of interference is not only doomed to failure it also results in a transfer of wealth from state to market. Wrong way guys.

The debt burden maybe high but if we're buying out good future assets on the cheap then we're going to come out of this smelling like roses.

This is definitely not the continuing odour of the financial markets given the latest Ponzi scheme extravaganza. $50 billion in a pyramid scheme, talk about financial wizardry! You have to ask, who was auditing the books and signing off the accounts? Was it one of the big four again, the same gang who were also responsible for auditing many of the banks that have now collapsed.

We really should start asking ourselves whether we need a national owned auditing company and legislation that all company books have to be signed off by the government?

It'll be a nice little earner and we can always privatise it when the economy recovers.