Return on the Dollar vs. Return of the Dollar

There is a big difference between a  “Return on the Dollar” and a “Return of the Dollar“. You need to realise the difference if you are to understand how our retirement nest eggs might perform in the future.

In “normal” times before the government dinosaur ruled the earth, it was all about  return on the dollar. If you invested your money you tries to do it so you would maximise the returns on that investment. You understood there was a chance of a loss on your investment. (Forget about the investment bankers here, they weren’t normal either.

Now the government believes they need to control the economy and protect the public by spending your tax dollars and printing more money to spend in order to prop up the economy.

The hope is they can do this until “we the people” become “we the consumers” and start borrowing and spending again.

However as with all public money it is politically correct to tell you the people, that all the money being spent is for your benefit and will be fully accounted for. It’s politically all about the return of the dollar, in particular your tax dollars.

Political survival depends on showing the people that the government is responsibly accounting for all the public money it is spending, or presenting a good spin on why not. Vice President Biden said when talking about the political backlash the Democrats might face from supporting the stimulus package in 2010,

“If we do everything right, if we do it with absolute certainty, there’s still a 30 percent chance we’re going to get it wrong.”

With governments it’s all about right and wrong. It’s about being right more often that wrong. That’s how politicians see things. With private business it’s all about profits and losses. For them the aim is to make bigger profits than losses over the long term.

Politicians cannot afford to be wrong and hope to still survive over the long term because the focus is always on what went wrong at election time. Private business can make a loss as part of business as long as the business is making bigger profits over the long term. The focus is on profits.

Governments are not expected to make profits, in fact it is frowned upon. Instead they are expected to protect the taxpayers money.

So when governments take over a large part of the private economy in the long term they will fail because they are not focused on making profits to offset losses and leave some profits to grow the business in the long term.

Even if they tried, they’d be accused of profiteering at the expense of the taxpayer. They cannot win politically when they try to run private enterprises profitably.

This is why governments should not be in the business of running businesses. They can’t win in the long term.

Running a business just to ensure the return of the dollar is doomed to failure. If you as a politician don’t, can’t won’t try to make a profit then you won’t have any profits to help you through the inevitable losing periods that occur in the business cycle.

So over the long term governments will lose money.

Their motive is political survival whilst a business man’s is maximising profit, pure and simple.

Governments are supposed to protect taxpayer money and prevent any loss – the return of the dollar.

Business are supposed to invest your money and that carries with it the risk of loss which we all accept – return on the dollar.

Governments are all about being right or wrong over the short term – between elections. It’s unavoidable.

Business is all about profit or loss and the size of either in the short term is what makes for success or failure in business over the long term.

Politicians see things in terms of right or wrong. Politically they are not allowed to be half-right.

But a business man can make a large or small profit or loss and it is acceptable.

Until government realise they are constrained by short-term political objectives and should not try to run private business which require long-term objectives you can expect nest egg investment returns to be low at best.

At worst any dividends paid out of government-run or controlled businesses may well be your own tax dollars just being returned to you. It is not a good investment climate so keep your money safe.

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