goldman sachs new york roundup, page-7

agree Fix, that 09 will be the year of many companies going bust, and hopefully that should see their inefficiently used resources going to the more efficient producers - good old Austrian economics which i subscribe to despite it's seemingly 'cold' view of letting the losses lie where they fall...

but beyond these at times doctrinal arguments, and there still persists the view in the markets that bailouts are pure evil - well that may be the impression to those not receiving handouts and we taxpayers who will be paying for them, however what people seem to lose sight of is the fact that government is a part of the market - indeed many markets would not exist in their many incarnations were it not for the presence of government - which then begs the question, if government is understood to be a market participant, then like any other investor, why can't this large participant invest in struggling sectors just like any parent company that believed in one of it's struggling subsidiaries, where that parent company may choose to invest in that subsidiary, particularly if that investment decision is sound and later proves to be of benefit to the shareholders of the parent company and subsidiary alike?

that really should be the proper focus i believe for government intervention - is the government making a good investment decision in those companies and sectors it is assisting, and what are the real likely upsides for taxpayers who fund these assistance packages and efforts?

some time ago i reviewed all the major instances where the US government has thrown it's largest 10 packages of money to assist faultering or failing industries or sectors in crisis - from memory all but one returned in due course a more than favourable profit to the US government, and in turn the taxpayers who supported those measures - then as now a chief ingredient was always the government taking some form of security or equity in those it was supporting back to health - a straight forward investment strategy by any measure

so again we return to whether or not the investment decision is sound, and whether there is a secure manner for the government to recoup futures gains realised by those it has supported

for so long as any government follows these basic measures then that government has a ligitimate role to play in the market as far as i am concerned

of course it is when a government does not follow prudent investment strategies and places tax payers' money at risk and that risk is realised, then that government, like any non-performing board of a company, needs to be replaced - and as we have seen historically, most western governments are easier to replace than most company boards - with at least the somewhat comforting thought being that any new government generally has the security of continued tax receipts despite any previously bad investmnet decisions by previous governments - a company that realises risk and replaces it's board doesn't always have the benefit of continued receipts...

anyway, this is my new year day thought

good luck