Reaffirm or Collapse

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JCHarper Posted: 05-06-2009 4:03 PM

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Unless the current powers that be in Washington DC reaffirm the sanctitiy of constitutional property rights and contract law unequivocally and immediately, the USA will collapse like the old USSR. That is my opinion.

The reaffirmation (in deed, not just talk) is necessary because recent government actions cast serious doubt on support for those basic principles. In the name of political expediency and ideological commitment, the federal government has:

1. decimated investors by forcing stock dilution (Banks and financial institutions)
2. interfered with management at non-government institutions (GM, AIG)
3. regulated and legislated retroactively (oil and gas leases on federal lands)
4. forced allocation of capital to politically favored individuals at the expense of those out of favor (union activities, "green" projects, Fannie and Freddie)
5. spent public funds to achieve political ends and campaign financing ( ACORN, Fannie and Freddie)
6. threatened to subordinate private senior debt (GM, Chrysler)
7. forced mergers not approved by the owners (B of A - Merrill)

I could go on but that covers enough for now. Similar things have happened in the past, but never with the speed, breadth and scope we are seeing now. As far as I can tell (I am not a lawyer but I have read the constitution recently) there is no constitutional authority for the federal government to do any of these things.

These things have not been debated or legislated. They have been done by federal bureaucrats run amok in the absence of elected oversight and direction.

At the beginning, I said that if property rights and contract law were not reaffirmed forcefully and soon, the USA will collapse like the old USSR. I would add that it will be for the same reasons too.

That won't happen overnight. The US is a huge economy. It took over twenty years for GM to be looted by labor and management acting in collusion. It will take a lot longer than that to loot the entire nation. But, there is a point of no return in the looting process where it will take on a life of its own and cannot be reversed or stopped. In my opinion, we are nearing that point.

As an individual investor who has managed my own money successfully for almost 30 years, I can manage risk, hedge, trade, and  find opportunity and bargains under most market conditions. I can hold winners and dump losers without batting an eye. In 2008, we managed a 2.5% return in a market that cost my retired contemporaries 40% to 100% (Stanford investor) of their life savings. So far this year, we have about a 4% unrealized loss. That may be nothing to brag about but I am proud of it.

What I can't do is invest when the laws governing lending, borrowing and shareholder (owner) rights suddenly change by federal decree.

Any comments or ideas?