Q: I am appalled by the amount of corruption in the USA government. Does this always happen when an empire is in its last days? And, how does it affect your trading strategy going forward?
A: Good questions. Keep in mind a basic economic law: all value is subjective. It is never the corruption that matters. It is people’s reaction to the corruption — their subjective judgement — that controls events.
Q: Could you elaborate?
A: Certainly. Empires are profitable at the beginning because the conquest of new territories means land to steal and new slaves or taxpayers to exploit. This is highly profitable for the persons running the empire. When empires stop expanding, the new revenue disappears and administration costs begin to exceed incoming revenue. So, the central governing body borrows money until finally, there’s a financial collapse. Then the empire ends. The largest amount of theft occurs at the beginning, and nobody objects to the corruption. It is at the end when there isn’t enough loot to satisfy most that people become morally righteous about corruption.
I’ll give you another example: USA radio and TV licenses — worth many billions. The average return on invested capital for TV stations during the 1950s was 100% per year. About half the licenses were issued to current and past members of Congress and their families. The remaining licenses went to political donors, executive branch members, and related parties.
How many people went to prison for this massive theft of government assets? Zero! Nobody bothered to even raise the issue. A gallon of gas cost 25 cents. Detroit offered new cars each year with more chrome and bigger fins. Corruption has never been the determining issue. It’s objective valuation that counts.
by Arthur Fixed
[box type=”info” style=”rounded” border=”full”]Commentary from Arthur Fixed the author of the Art of Speculation during Civil War – Sun Tzu Meets Jesse Livermore is a private manuscript copyrighted 2012 by Art Fixed.[/box]
Photo credit: K.G.Photos via Visualhunt / CC BY-NC-ND
Leave a Reply