The G20 Central Bankers and Finance Ministers met in Cairns, Australia, Sept 21st, 2014. This Summit reflects the attitudes about manipulating the economy where they just do not get it. Christine Largarde, head of the IMF, announced “I congratulate the G20 for significant progress in strategies for medium-term growth.” However, Lagarde is a lawyer – not a trader, economist, money manager or anything that has any experience whatsoever to do with the economy. It amounts to me trying to be a obstetrician, gynecologist, or a divorce lawyer no less a brain surgeon. Yet she would be the first to say anyone without a law degree cannot understand the law. I dare say the same to her – you are not qualified. Such positions should be reserved for ONLY people with experience – not even university professors.
I warned what Obama was up to with the pension funds in trying to create a Infrastructure Fund. Calpers, California pension fund, is selling off $4 billion of hedge funds to divert that money to be wasted in Obama’s dream project – infrastructure fund. This idea was floated and endorsed at Cairns. “We have agreed to come away from government-financed growth measures to more private investment,” said Australia’s Finance Minister Joe Hockey. These are being called Public Private Partnerships (PPP), and will be extremely critical in the future for here lies the final destruction of the pension funds precisely as Japan bankrupted the Japanese Postal Saving Fund using that private money for political purposes to try to stimulate the economy, which failed. With PPP, private funds will be used as public and this will be justified as being a highly professional long-term investment. However, this will only further shrink economic growth and liquidity. Such schemes cannot possibly work.
Those in government think that if they simply spend money, this will “stimulate” the economy. Governments will NEVER simply just reduce regulation and taxes to encourage people to start their own business. Small business employs 70% of the civil work force in general yet banks will lend only to big companies and the real economic engine has been slowly turning down for years since 2009. Small business creation is down in Europe significantly where 2 out of 3 jobs are small business (defined as 50 employees or less). Nonetheless, the numbers appear to be far better than they really are. As unemployment rises, many are simply fending for themselves in various manners but this is really the micro business market defined as less than 10 employees. Unemployed are compelled to become self-employed.
Obama’s idea of a Global Infrastructure Initiative to increase quality investment in infrastructure is merely to displace government spending with using pension money. In this manner, government will not have to do the work and hopefully any tax increases will go to just filling their pockets. How do pension funds make money on repairing infrastructure? Tolls will pop up everywhere. The governments are using pension funds to avoid the image that someone like Goldman Sachs or Berkshire Hathaway will be collecting tolls. Politically, that would be suicide.
