Thursday, October 23, 2008

A word to be wary of


You'll see it being used by politicians of all stripes. Labour, National, the Greens, NZ First, Maori Party etc etc. They all want to "invest".

However, when have you ever gained a return from one of their investments better than you would with your own money?

I invest. It involves a simple concept:
- I use my own money;
- I choose where I want to invest it, seeking a return that increases the value of my initial investment;
- I use that return to invest more, or purchase something else;
- If I get it wrong, I lose my own money, learn something and move on.

When politicians say "invest" they mean:
- They use YOUR money;
- They wont ask you before they take it, and will use force to make you pay it;
- They choose where they want to invest it, and they are almost always not seeking a return that increases the value of the initial investment;
- Virtually none of their investments mean you get any of your money back, let alone more;
- If they get it wrong, they don't compensate you, they keep getting paid well above the average wage and face virtually no accountability for it.

Want an examples?

Dr. Cullen buys the Auckland rail network. Treasury valuation at best NZ$20 million, Dr Cullen pays NZ$81 million. Current market valuation? About NZ$20 million.

John Key promises to invest in the Waikato Expressway. Net financial rate of return zero. Economic benefit/cost ratio, 1:1 over 25 years (in other words you - by which I mean everyone on average, will only get your money back after 25 years, except you wont really, some people will save a lot of money on time and fuel, but you - by which I mean you and everyone else - will have paid for those people to get that).

Green party promises to invest in housing. Net financial rate of return zero. If you own a property already it will depress the price. You wont get any money back from that.

So next time you hear a politician talk about investing, ask them what rate of return you'll get from them spending your money.

It isn't an investment to spend someone else's money on something they didn't approve of and which wont see them get any of their investment back.

It's called spending other people's money.

So I am calling for some simple honesty. Don't say invest, when you just mean spend. You are campaigning for people to elect you so you can spend everyone's money on what you think is best for them.

That's not investment. It's being Nanny.


Peter Cresswell said...

And there's more.

If you invest in production goods -- a machine for your factory say, or a washing machine for your laundrette -- then you can pay for the replacement machine out of the receipts of the consequent production.

That's investment. That's what investment is.

But what government does isn't investment. What they do is consumption. They take your profits, and they consume them -- as you say, with zero return.

And every year they consume nearly 50% of what New Zealanders produce.

That's one of the primary reasons factories can't afford to invest in that marginal machine -- because the government is consuming their profits.

Talk about turning gold into lead.

ZenTiger said...

I disagree, you are simply investing in a managed fund.

OK, well I agree that the funds are largely mismanaged. And it's all done by compulsion. And they don't offer any consumer guarantees. And they use more of your money to convince others to go with the managed fund approach and lock you in deeper. And...

OK, I'll stop defending them now.

Madeleine said...

It is much like the terms "raise awareness" and "educate". Whenever the state says these it usually means that they don't like what you are doing so, for your own good, they force you to fund them to tell you to stop doing it.

Libertyscott said...

Seen how much these words have all been used?