March 31, 2014
As the owner of a construction company, I am all too familiar with the concept of insolvency. Any company that assumes irresponsible risks, makes poor judgments, or that mismanages its cash flow, (in the sense that its current liabilities exceed available cash), is or will shortly be bankrupt. I’ve seen it all too many times, and I am all too familiar with the negative ramifications of such an event for every other entity doing business with such a company. I’ve personally been stiffed by insolvent companies more frequently than I care to remember or admit.
While I am familiar with bankruptcy, insolvency and corporate overreach, I am completely unfamiliar with the concept of a “bailout.” In the real world, where cash flow and debt are irrevocable entries in an accounting ledger, there is no miracle “bailout” waiting in the wings, and there are no angelic figures or agencies waiting to step in to help out the incompetents. In the world in which I live and work, people who make forecasting or accounting errors are ruthlessly punished by the market. Those of us who can forecast accurately, satisfy customers, and manage cash flows survive and possibly even prosper, if we work hard enough. Those who cannot are relegated to bankruptcy or some non-ownership position in a company that shields them from risk and responsibility. There is no third alternative.
I am thus seriously perplexed and enraged to read about government “bailouts” occurring on a regular basis all over the modern world. The Ukrainian junta is apparently going to be “bailed out” with money stolen from men like me, because the previous Ukrainian government racked up enough debts to render the entire society insolvent. Goldman Sachs, GM, and AIG were all effectively “bailed out” because their previous executives were so outstandingly incompetent and corrupt that they rendered their institutions insolvent by orders of magnitude. The morons at the U.S. Postal Service were once again “bailed out” by the federal government because they are so completely clueless and worthless that they cannot profitably move folded pieces of paper around. The same holds true for Social Security and Medicare, which are both being rewarded for their insolvency by being “bailed out” with tax money from the U.S. government’s general fund. The list is almost endless: Citi, Chrysler, Long Term Capital Management, Mexico, Fannie and Freddie, the ECB, Greece, Spain, China’s shadow banks…
What the hell is a “bailout,” other than a reward for incompetence or criminality and a slap in the face (and the wallet!) to honest and responsible people all over the world? I literally cannot fathom what would occur to my industry if every moron, crook and gambler was gifted underserved money or credit as a reward for his disservice to the global market, yet this is national and even global policy at the moment. The more criminal or incompetent you are, to more “bailout” money you should expect.
The hideous immorality of government “bailouts” has been obscured by the professional apologists of the state: the academics and the policy wonks. To a professor of political science or economics, stealing money from honest, hard-working men in order to rewarding crooks and morons is labeled “moral hazard.” This lofty-sounding word is used as a cover for a massive crime, in the same way that academics use the innocuous sounding term “rent-seeking” to refer to voracious robbery by the political classes.
“Moral hazard” in common English means that it will cause massive problems down the road to reward idiots and criminals for being idiots and criminals. Duh. Concealing this obvious truism with the ambiguous term “moral hazard” allows the academic and journalistic classes to endlessly debate whether or not the so-called costs outweigh the so-called benefits, freeing up room for politicians and their cunning advisors to dabble in the practice whenever profitable or convenient.
Meanwhile on Mainstreet, owners of construction companies and landscaping companies warily eye their cash flows in the hope of avoiding insolvency. Owners of restaurants and bars battle every day to retain and serve their customers and keep their doors open, because they know they lack the political clout to get a “bailout” from the state legislature, the U.S. congress, or the Fed. And owners of every other imaginable type of company across the country struggle every day to keep afloat in the beautiful and honest part of the economy that is still relatively free.
Their reward for their hard work, thrift and sound business acumen will be to fork over a part of their earning to “bail out” the Ukrainian junta, of all people. If that doesn’t demonstrate for once and for all that taxation is theft, and that government is nothing but a marauding gang of thieves, then nothing will. If that doesn’t demonstrate to the American Working Man that he is nothing more than a draft horse for the parasitical political classes, then nothing will.
Think about that tomorrow morning when you get saddled up to earn money, not for yourself or your family, but for the Ukrainian junta and the U.S. Postal Service.