The World’s Worst Money Manager

What if you were forced to use a money manager who:

  1. Rarely asked for input from you before investing your money.
  2. Had a track record of poor investment performance for many years.
  3. Took money from your account and gave it to colleagues and friends.
  4. Never said thank you for keeping them in business.

You would probably do everything possible to rid yourself of this relationship and begin to look for someone with integrity, intelligence and a sense of stewardship.  After all, it’s your money, not theirs.

Well, if you are a taxpayer, you have such a manager, our politicians.  This occurred to me while I was reading about the debate regarding the pending increase in the interest rate for Government Student Loans.  (More on that subject later.)

If you asked most taxpayers if they thought government subsidized student loans were a good idea, most would probably agree and not give it a second thought.  But what if you asked a taxpayer if they would like to pay part of the college expenses of their neighbors’ kids- they might have a different answer.

The point is, we, the taxpayers, are becoming less connected with our government as each year goes by.  Governments have become, in essence, the investment manager, for a significant part of the wealth we create.  Whether or not you agree that government subsidized student loans are a good idea, you need to start thinking of the taxes you pay as your money.  It does not belong to the politicians.

We need to think of the words “taxpayer” and  “government” as synonyms. We need to substitute the word “taxpayer” for the word “government” when debating how our tax dollars should be spent.  Instead of a “government bailout” we should debate whether or not to have a “taxpayer bailout.”   Instead of  “government subsidized student loans” we should be talking about “taxpayer subsidized student loans.”

Simply changing the language would make the whole process a lot more personal, and perhaps we would start to pay more attention.  If we don’t, the poor performance of our “government money managers” is going to take us down the road to bankruptcy.  You would not put up with an investment advisor or a money manager with such a poor tack record.  You would hold them accountable which is precisely what we need to do with our politicians.

2 Comments

Filed under Investors, Politics

2 responses to “The World’s Worst Money Manager

  1. Jeff Wain

    Love your work Dan. Unfortunately I knew it was only going to be a matter of time before you got me started. Politicians freely spending other people’s money in breach of their fiduciary duty to their constituents is a great tragedy.

    I still vividly recall my abhorrence on learning all those years ago during my university studies about the arcane world of public finance. In this weird environment fashioned by economists, the sum of money that a government graciously allows its citizens to keep of their hard earned is called a “tax expenditure”. That’s right – in the government’s accounts if they don’t confiscate it they call it an expense! For example, here in Oz the money that people are squirreling away in superannuation so that they don’t become a burden on the public purse in their retirement years is currently one of the major costs to the government.

    Reminds me also of the agency issue of excessive executive compensation and indifferent / impotent shareholders bearing all the risk for a diminishing slice of the pie and a token chance to vote at the AGM.

    Unfortunately, the problem seems to be that in the name of economic progress we have all become very good at specialisation of labour. Worse still, there are far too many individuals who have succumbed to “learned helplessness” – which might go some way to explaining the protest vote during the recent Greek elections. Given the choice between (i) taking responsibility for their own destiny or (ii) outsourcing the decisionmaking about their future welfare, many people seem to prefer the latter – foolishly trusting their politicians to turn straw into gold.

    We can only hope that the current events in the birthplace of democracy are not the portends of what lies ahead for western civilisation as a whole.

    Keep up the good work.

  2. I just returned from seeing Eugene Fama and Art Laffer in Chicago. Mr. Fama foretold of states’ bankruptcies being the next thing, but, on a happily more lighter note, Mr. Laffer spoke of exciting socio-economic times coming with the old “out-with -the-old; in -with the-new” political scene. Both mens’ points, however, had the same undertone as Dan’s article: personal responsibility and accountability going both ways, vertically. Great article, Dan. Keep ’em coming!

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