So, I think it's rather funny that you guys want to lecture me on science, but you don't spend a minute thinking about the humble science of Economics.
Here are the Cliff Notes: people work and save and that money gathers together to form investment funds run by evil fund managers who vote Democrat, BTW, but let's put that to the side. Think of these funds as pools of money, they can be moved around the world by a simple keystroke.
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| http://www.freestockphotos.biz/stockphoto/5788 |
The fund managers are, let's just stipulate, evil and are motivated by what, anyone? They are motivated by money, to pay off their college loans and to buy fancy things so they can keep up with the other fund managers who are all looking for an edge. Don't forget, they are smart, above 130 IQ generally and they have worked like dogs for many, many years to succeed in a highly quantitative academic discipline and in order to reach that echelon, they have to have gone to very expensive schools and only a handful come from money and are that talented. But, what are they really motivated by? Once you have gotten the right education and have the amazing mid-six figure job and everything you could possibly need, what are you missing?
Beauty. This satisfies a deeper need to procreate or to make sure your offspring have the best chance in life. Now, some of these guys look like Brad Pitt and Joe here, some are less lucky, they look like me and Mike Bochetti, regular guys. The regular guys with brains have to work that much harder to attract really valuable beauty...good genes, right network, great looks, killer bod, etc., etc. and all that is necessary to keep their edge.
So, let's call this hypothetical guy, Brad. Brad goes to work for Tad who was Brad 5, 8, 10 or 20 years ago
and he's on the high side of 50 and he's got billions and billions of dollars under management. And he hires smart, hungry, aggressive young whelps like Brad to make sure his fund has the highest, most stable return on investment for his rich clients (who are not only individuals, but also pensions, annuities, insurance companies, retirement funds and 401Ks, etc.). Tad needs to hold onto his expensive beauty, who by this time is so bored with Tad's act, she's practically throwing his money away at the Metroplitan Opera and MOMA and the Sierra Club, so she can hob nob with Hollywood celebrities and get invited to the right parties. Tad also has to put his spoiled, anti-capitalist, pot-smoking, transgendered son who tortures small animals through a string of expensive, non-competitive colleges while also keeping the waste of humanity out of prison.
So, after a couple of years, Brad has worked harder than his peers and is given $100 billion to manage. And, in his first year, Tad sets a target return of 8.00% on the $100 billion given certain risk parameters. But in that first year, Brad exceeds the target by 0.25%, which equates to $25 million. Tad is very happy and gives Brad a $5 million bonus which makes him and his his wife very, very happy because now he can buy that vacation fixer upper in the Hamptons. But, If he comes in below his target in a single year, his reputation is tarnished if not ruined and his ascendance is slowed considerably --- and he and everyone in his life has very high expectations. A single miss of an expected $5 million bonus can put a damper on things. And, Brad
doesn't just compete with other fund managers in America, he is competing with the cream of the crop in London, Geneva, Singapore, Hong Kong and so on. So, Tad is under enormous pressure to give funds to managers who consistently demonstrate high returns. And, if Brad can't do it, well too f**king bad, someone else will get Brad's position.
This whole, rank, unseemly, human process is how "resources" are allocated in a free society. It may stink to high heaven, but the alternative is too horrible to contemplate, namely state allocation of resources, which has caused death and starvation everywhere it has been tried, every time it has been tried, most recently at the VA. The long and short of it, is that capital (money) flows to where it will receive the highest reward.
So this is where a hypothetical company enters the market for capital. If a company, located in Detroit is generating income below expectations for that industry sector, it will find it's access to capital reduced or eliminated. If it can be shown that the company can return industry average or better returns by relocating to the Philippines (a major ally) or China or Togo, well how can that manager ignore the opportunity? He can't. In fact, to do so would be to neglect his fiduciary (legal) obligation to his shareholders, because it endangers the very survival of the company. Don't forget, companies are managed by guys and gals like Brad, just not quite as smart, they too have pressures on them to perform, quarter after quarter.
So, there are only two ways to make people invest in Detroit, 1.) through coercion, i.e., the barrel of a gun, and 2.) through subsidies, that is government deciding to make it more attractive to do business in Detroit by actually subsidizing their operations. Well, that's a nice idea, but then the
government is taking an active role in the allocation of capital, which can lead to cronyism. Don't forget, government bureaucrats want beauty too, and so they are subject to the same drives, desires and pressures Brad is. Remember the GSA scandal (see picture)? Plus, politicians are now involved, so they will use that power to reward friends in exchange for campaign cash. For example, Tom Steyer may want to save the planet, but he will make a boatload of money if the U.S. continues to invest in his industry, which is why he's pledging $100 million to help elect Democrats this year, don't fool yourself. It also means that less investment capital will be available for other, perhaps riskier or worthier industries which often provide breakthroughs in medicines and technology, which is called malinvestment and "crowding out.".
And that, children, is why it's called the "dismal science."
Beauty. This satisfies a deeper need to procreate or to make sure your offspring have the best chance in life. Now, some of these guys look like Brad Pitt and Joe here, some are less lucky, they look like me and Mike Bochetti, regular guys. The regular guys with brains have to work that much harder to attract really valuable beauty...good genes, right network, great looks, killer bod, etc., etc. and all that is necessary to keep their edge.
So, let's call this hypothetical guy, Brad. Brad goes to work for Tad who was Brad 5, 8, 10 or 20 years ago
So, after a couple of years, Brad has worked harder than his peers and is given $100 billion to manage. And, in his first year, Tad sets a target return of 8.00% on the $100 billion given certain risk parameters. But in that first year, Brad exceeds the target by 0.25%, which equates to $25 million. Tad is very happy and gives Brad a $5 million bonus which makes him and his his wife very, very happy because now he can buy that vacation fixer upper in the Hamptons. But, If he comes in below his target in a single year, his reputation is tarnished if not ruined and his ascendance is slowed considerably --- and he and everyone in his life has very high expectations. A single miss of an expected $5 million bonus can put a damper on things. And, Brad
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| Tab (not Tad) Hunter |
This whole, rank, unseemly, human process is how "resources" are allocated in a free society. It may stink to high heaven, but the alternative is too horrible to contemplate, namely state allocation of resources, which has caused death and starvation everywhere it has been tried, every time it has been tried, most recently at the VA. The long and short of it, is that capital (money) flows to where it will receive the highest reward.
So this is where a hypothetical company enters the market for capital. If a company, located in Detroit is generating income below expectations for that industry sector, it will find it's access to capital reduced or eliminated. If it can be shown that the company can return industry average or better returns by relocating to the Philippines (a major ally) or China or Togo, well how can that manager ignore the opportunity? He can't. In fact, to do so would be to neglect his fiduciary (legal) obligation to his shareholders, because it endangers the very survival of the company. Don't forget, companies are managed by guys and gals like Brad, just not quite as smart, they too have pressures on them to perform, quarter after quarter.
So, there are only two ways to make people invest in Detroit, 1.) through coercion, i.e., the barrel of a gun, and 2.) through subsidies, that is government deciding to make it more attractive to do business in Detroit by actually subsidizing their operations. Well, that's a nice idea, but then the
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| U.S. General Services Administration regional commissioner Jeffrey Neely (a big fan of the Fifth Amendment) enjoying our money. |
And that, children, is why it's called the "dismal science."