From the category “I can’t believe what I’m hearing”, comes a statement by Margrethe Vestager, Executive Vice President of the EU and Commissioner for Competition, who said that EU states should now nationalise companies in the fight against China.
Consider, that the European Central Bank has been buying stocks in selected blue chip companies, which flies in the face of fair market competition and her role, but I will let that one slide. Just don’t whine that Apple got a tax deal in Ireland.
Let me tell you something about nationalized industries, as I was a born and raised in a communist country. Nationalized companies are painfully inefficient and uncompetitive. They go down in flames in a matter of time, there is no exception. There is only one way for them – down.
Back in the Iron Curtain days, the joke was that if they introduce our economic model in the Sahara, they would run out of sand within a month.
If a ship is going through a storm on the ocean, do the passengers make decisions by committee, or do they let the captain decide what to do? You need a boss, not government running businesses.
But there is more to the statement by Ms. Vestager, and it’s serious.
Who in their right mind would invest in European companies if they were to be nationalized? The stock market sell off would be brutal at the first indication of this idea getting traction. This would ruin retirees, who already suffer from ultra low bond yields.
If a long bond (say 30 years) pays 5% coupon, for every million you save in your retirement fund you get $50K a year. If, as right now in Switzerland, the same bond yields -0.129%, you simply are getting taxed, there is no income (a bond yields negative if the market price exceeds the face value of it and all coupon payments combined).
It’s quite possible that I am losing touch with reality, I just have trouble getting it anymore.
As Mark Knopfler had it “the right becomes the left and the left becomes the right.”
Perhaps the Covid-19 scare is here to keep us at bay and focused on something else. Somehow Bill Gates is outspoken now and he is voicing his concerns about overpopulation and availability of vaccine to fight the virus.
Well, you can’t have both, you can’t be long and short the same trade (in market terms).
He is also a contributor to WHO, an organization that has been asleep at the wheel, and president Trump is right pointing out this fact and cutting payments ($116 million a year). This should kick the organization into a higher excitement, as money is the language everybody understands.
Meanwhile, countries opted for flat-out medical Gestapo action. Stories are coming out of Switzerland that a doctor, Thomas Binder, who has spoken against the coronavirus fraud, was arrested. He’s been brutally attacked by the Swiss SWAT team in his medical practice.
I am of the opinion that we have become utterly intolerant of uncertainty.
This is not good, it kills the entrepreneurial spirit and appetite for risk taking, both essential factors of a successful economy.
But in the absence of certainty, that age-old human cognitive skill called pattern recognition, which has made us such a successful species, kicks into high gear scanning the field-of-view for answers. They will not be pretty, but this is the way out from current mess – life will eventually find a way to normal.
Tom Kubiak is the author of The Traveler