Monday, October 17, 2011

Solyndra: the moral hazard of big government excess, corruption, and corporate cronyism, not to mention ‘fair share’ duplicity.

Our lavish spending big government is afflicted with a multitude of pathologies that threaten the core founding principle of ‘self-governance,’ and hence the American experiment.  There may be no finer exemplar of the phenomenon than the recent Solyndra fiasco.

This is, we believe, a critical teaching moment.

Do you know what moral hazard is?  And how it relates to ‘Other Peoples’ Money?’

We began to hear ‘moral hazard’ in common usage just a few years back, and although the words ‘moral’ and ‘hazard’ are simple enough in meaning, we weren’t sure what they meant when joined together.

‘Moral hazard’ is easily illustrated by the rental car business.  When someone rents a car from Avis, or Hertz, or whomever, they are not likely to have the same sense of responsibility for the rental car as they have for their own vehicle.  “Hey, it’s not my car!”  “Floor it; let’s see what it will do; hell, it’s just a rental car!”

In other words, moral hazard exists when two parties to an arrangement have widely different personal stakes in the deal. The concept of Other Peoples’ Money dovetails perfectly with the idea of moral hazard.

To expand on this further, here are two principles we’ve posted before, each from a publication of the Mackinac Center for Public Policy:

1) What belongs to you, you tend to take care of;
what belongs to no one or everyone tends to fall into disrepair.

If you think you’re so good at taking care of property, go live in someone else’s house, or drive their car, for a month. I guarantee you neither their house nor their car will look the same as yours after the same period of time.

If you want to take the scarce resources of society and trash them, all you have to do is take them away from the people who created or earned them and hand them over to some central authority to manage. In one fell swoop, you can ruin everything.

(The best example we can think of locally is how the schools are allowed to slip into deferred maintenance status in favor of rising salary and benefit expenses, and ‘suddenly’ become a crisis.)

2) Nobody spends somebody else's money as carefully as he spends his own.

Ever wonder about those stories of $600 hammers and $800 toilet seats that the government sometimes buys? You could walk the length and breadth of this land and not find a soul who would say he’d gladly spend his own money that way. And yet this waste often occurs in government and occasionally in other walks of life, too. Why?  Because invariably, the spender is spending somebody else’s money.

When you spend other people’s money to buy something for someone else, the connection between the earner, the spender and the recipient is the most remote — and the potential for mischief and waste is the greatest. Think about it — somebody spending somebody else’s money on yet somebody else. That’s what government does all the time.

Nobody — repeat, nobody — spends someone else’s money as carefully as he spends his own.

(Add quid-pro-quo to the equation, as in campaign donations in exchange for favors, and the danger increases exponentially.)

Now on to the Solyndra file.  In a nutshell, this case brings into play the wealthy, non-profits, fair share, SOBs ne plus ultra, and all the rest.  In other words, all the wondrous things that have dominated public discourse in recent months, and much of the recent posting here on Side.

Oil magnate George Kaiser: "There's never before been more money shoved out the government's door in world history."

Here are two articles you should read:

Solyndra and a Billionaire’s Guilt Trip, and The Solyndra Economy.

Cutting to the chase, what these articles reveal is:

  • Billionaire George Kaiser, who feels a profound sense of guilt for his circumstances, but nevertheless has his family’s fortune set up in a non-profit foundation, which minimizes tax exposure for their vast wealth.
  • The Kaiser family fortune derives from oil, the morally depraved energy source that is the villain in the solar/green/renewable energy phantasmagoria.
  • Even though paying his ‘fair share’ seems not to be a priority, Kaiser has visited the Obama White House 16 times, or on average, every two months or so.
  • The non-profits’ funds are staged in such a way as to be the primary private stake-holder in the failed Solyndra gamble.
  • Willful irresponsibility of the administration in matters of due diligence on giving taxpayer money to Solyndra, and allowing said funds to be put in a lower position than private funds should bankruptcy occur, which it has.
  • The benefits of having your Son of a Bitch being the SOB ne plus ultra.
  • The rampant corporate cronyism practiced in the highest levels of our government.

In a word, the absolute moral bankruptcy of government when it goes so far beyond its legitimate boundaries as to be out of control.  Frankly, the more we think and write about this, the more we are at a total loss of words to express our concerns, and more so, our outrage.

As we said some days ago, be afraid, be very afraid.  We certainly are.

Summary: Speculation vs. Investment

Just the other day, we heard a news report about oil speculators.  Surely you remember them. 

Gasoline prices at the moment are roughly twice what they were three years ago.  When the prices began to rise after the new administration took office, the increases were blamed on greedy and irresponsible private sector ‘speculators.’  Meanwhile, government at both state and federal levels repeatedly told us about the need for taxpayer ‘investments’ to restore economic growth from the doldrums of “the great recession.”  No matter how much it might cost.

The recent report from the CFA said that oil prices now would be between $60 and  $75 per barrel if not for the effects of speculation in the worldwide oil market, which has resulted in 2011 prices of $80 to $100 per barrel.

As we reflect on the speculation in the public sector, that being government, particularly as exemplified by Solyndra and similar wildly unsuccessful uses of other peoples’ money, we are troubled by a nagging question.

Just how much of an effect has government speculation, which necessitates reckless printing of money and lavish issuing of debt instruments, had on the price of government, as reflected in taxes, inflationary loss of purchasing power, and the personal share of the national debt we and our progeny all carry on our shoulders?

And how much lower could our taxes be, and how much more our dollars worth, if not for all this reckless speculation in the name of political cronyism of the vilest sort?

By comparison, those who invest in oil futures look downright innocent, if you don’t mind me saying so.  Somehow, when you’re operating with your own money, not that of anonymous others, and you aren’t looking to guarantee your re-election, things seem much clearer. 

And almost childishly innocent by comparison.

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