4 Year of Socialism May Cure America of that Disease

Socialism slows down economies and reduces investment returns. It taxes the very people who create the wealth that gives you the returns on your nest egg. In a Socialist state risk taking is punished. America seems likely to become a Socialist State in November and this will seriously affect Baby Boomers retirement nest eggs.

I just finished watching Dr Zhivago, The new version. It was good but Julie Christie who played Lara in the original version made the movie for me .

I recall the scene where Yuri Zhivago is arrested and taken to see Strelikov the Revolutionary leader. Yuri complains about the senseless shooting of a young boy. Strelnikov replies, “individual people don’t matter”, and a little later he adds, “the end justifies the means”.

Fast forward to today with Obama talking to “Joe the Plumber” telling him he should support wealth distribution. Can you see it ….

Individual Plumbers don’t matter; the ends justifies the means.

In this case Joe the Plumber is a surrogate for all hard-working Americans. He is expected to just give some of his hard-earned money to other Americans who may not be as well off or may not work as hard as Joe does.

True Capitalism (Not Bush’s and Congresses version) is about business opportunity, self-help and self-reliance. It’s about trading value for value without government interference or favour and between people and businesses in mutual respect of each other.

Socialism is all about “helping” people whether they can help themselves or not. It’s about trying to re-distribute wealth (Obama’s words) from those that have earned it through honest work to those that haven’t, with a percentage going to the government, their cronies and the chosen few.

There is a role to assist people who suffer hardship and capitalism recognises this. The role  is to help get them back on their feet and supporting themselves as quickly as possible, not living off government hand-outs fro ever.

I’m not that happy with McCain either as he wants to spend tax payers money too to bail out people and institutions that got into trouble through greed and ignorance.

In the UK the Labour Government had done what it wanted to do for a hundred years, nationalise the banks. They have even talked of sitting on the boards of those banks. Can you believe they will not use their influence to force banks to do their bidding at election time?

Socialism is about favourites and that leads to picking winners and losers, which in the end leads to the big money going to those that do the governments bidding. If you don’t believe me take a look at Putin and Russia. After the big bailouts were announced the Russian stock market went down. The investors believe Putin and his cronies will funnel tax payers money to the quasi government enterprises and the billionaires that made him powerful.

How well did the Russian people live under Stalin’s socialism? How well did the government and the chosen few live under socialism in Russia in their private enclaves with all the latest western mod-cons?

It can’t happen in America you might say. But it can. If you have a Democratic President, a Democratic Congress with possibly a super majority and Government controlled banks you have the makings of a Putin Socialist state. Modern socialism in action. Did you know Putin considered a  change to the constitution to keep himself as President for a third term. He is the de facto President in the role of Prime Minister.

What will it do for Baby Boomers? It will mean poor returns and a much slower recovery to get your money back. Socialism will control capital in the banks it now owns. It will force capital to invest in good-sounding project for the “common good” – like sub prime loans for people who can’t afford to buy a house. It might be capital from your pension fund too.

Personally I do not believe the government will be able to keep its hands off pension funds if the US goes into a severe recession.

Right now the Australian Prime Minister, Kevin Rudd from the Labour Party (Democrat)  is “talking” with the large Pension Funds to ask them to get involved in Infrastructure Projects – for the good of the country.

Socialism will select which companies they will favour to work on these project and those companies will get rich by pandering to the government.

That will translate into poor returns on your investments. Indeed your retirement nest egg might be used to invest in these unprofitable ventures for the common good.

Many true socialists are not driven by money and profit but they will employ companies and people who are. As such capital will flow from the tax payer to favoured pro government enterprises. So there will still be a massive disparity in wealth but it will be between the poor and the chosen rich, not the poor and the privately wealthy who put their money to work productively.

It has been said that 95% of the money is controlled by 5% of the people. Even if all the money is divided equally (Obama talking to Joe the Plumber) after a time 5% of the people will still control 95% of the wealth.

There will be a flight of private capital out of America if socialism takes hold. At the very least private capital will not be put to work by true capitalists unless they have control over the enterprises they invest in and know government is not involved.

In a capitalist society it is the rich private sector who believe in competition, investment and profit. In a socialist society much of the capital if not owned by the government is controlled by the government. Companies will be reluctant to invest for fear of offending the government unless it is sanctioned by government. Banks too will wait for the government to tell them where to spend their money especially if they are now owned by the government.

Socialists believe businesses just grow like trees and can be taxed more and more each year for the public good. People like “Joe the Plumber” are likely to not bother risking their capital in such a society, where Obama tells you it is fair to re-distribute your wealth to people less fortunate.

We’ve already seen how Congress forced banks to make sub prime loans to people to “help them out”. If the economy goes into a severe recession it is almost certain all business will be expected to make financial sacrifices through higher taxes to “help people out” rather than trying to grow their businesses.

For Baby Boomers this can only mean lower returns for your nest egg investments and a much slower recovery. Maybe after 4 years of low or no returns Baby Boomers will vote as a block for capitalism next time round.

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