This is an idea that has been flashing in my brain for some time. Probably since I have reached maturity, for lack of a better word.

The most obvious thing is people fight, preach, talk, elect new leaders, but things, really, do not change much. Markets take us where we need to be.

I find it particularly interesting how we have the same objectives such as helping the needy. This is a marvelous priority. It is like the Mezzoggiorno (the South) of Italy. Italy and now the EU have committed huge amounts of money for decades to that area, but little has changed the Spanish influence of 300 years ago.

What really changes is the size of the bureaucracy which has to administer the efforts. Bureaucrats travel in first class to reach the needy. The purpose of bureaucracy is to transfer power from us to them. Marx had a good idea. We are all equal. Great! What he ignored was the nomenklatura gained too much power. And the markets won. The CCCP collapsed. Extreme power is bound to fail. The markets always win.

No matter what we plan or how good our intentions are, if the idea is a bad one, the markets have a wonderful way of teaching us a lesson. Always.

Now our government makes a big deal about energy (industrial dirigisme) and gives lavish sums of money to “farmers”. The bureaucracy strives in transferring money from us to them. The more ideas they get, the more powerful they become. At our expense. The markets become distorted, planning becomes more difficult, and the economy slows down. The markets win.

The Treasury is getting record revenues (more than 19% of GDP). Yet taxes have to be changed. Why? To help the needy. The government already has the money and cannot get more of it because the market system cannot produce tax receipts of more than 19% of GDP.

The markets will solve healthcare. A socialized system of poor quality and one for those with means. There have been and will always be two systems. The only way to beat the markets is to raise the standards of the population as the Swiss have done. There is no easy way. There is no free lunch. The markets always win.

(This Observations appeared in the 7-09-2007 issue of The Peter Dag Portfolio ).

George Dagnino, PhD Editor,
The Peter Dag Portfolio.
Since 1977
2009 Market Timer of the Year by Timer Digest
Portfolio manager

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The article is interesting and provocative. However I can not agree with the statement that we all are equal. How can we be equal if we have different skills, knowledge, the level of necessities and desires. Some people can work hard during all their life, while the others just like to relax and do not strain. Of course I can agree that the level of bureaucracy is too high and powerful and rich people have gained all the power, but unfortunately we can do nothing. And to be honest do you think that if we eventually change everything there will be no people who will set the same rules in future. I think it just describes the total level of our society, we are not ready to the better world. Today people can check this option and solve their monetary problems easily, and this shows the great difference between all the people.

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