Editor’s Note: Marc is on vacation this week, so today we are sharing an article from our friends at Investment U, written by The Oxford Club Editorial Director Andrew Snyder. We hope you enjoy it!
Free money… $2,072 for every resident. Folks who live in one unique state know exactly what I’m talking about.
The government’s impact on the economy has been a big theme in Investment U over the last couple of weeks. Whether we’re weighing in on Yellen’s latest move or the latest superlatives from the mouth of Donald Trump, it’s clear the government’s outstretched hand is tickling the “invisible hand” of the economy.
The folks who call Alaska home are learning that tough lesson this week.
On Monday, the governor made the announcement residents have been awaiting all year. He revealed the latest dividend payment for the state’s Permanent Fund – the fund that collects the state’s oil and gas revenues.
Despite a huge slump in energy prices, it’s a record payout… $2,072 to every man, woman and child.
In all, the government will hand its citizens $1.3 billion. But here’s the funny part: The state is getting crushed by a whopping $3.5 billion budget shortfall.
It’s like giving the pretty waitress a fat tip… when your house is in foreclosure.
Don’t think the politicians haven’t noticed the irony. The governor warned this week that record payouts like this aren’t likely to happen again.
We say, “keep dreaming.”
As the conservative mantra goes, “When the people find that they can vote themselves money, that will herald the end of the republic.”
While we don’t think the great 49th state is going anywhere, we have a hunch its residents won’t be voting to eliminate their annual payday anytime soon.
In fact, the political rhetoric has already begun.
“The thought outrages me. That’s the word – it angers me at a core level,” a state representative told reporters this week when asked if the dividend payout should instead be used to lower the state’s deficit. “If that money gets spent on snow machines or drinking or whatever, that’s the right of the people. It’s a property ownership issue – the dividend, we don’t want to mess with it.”
Anybody who’s paid attention knows what will happen to this statewide entitlement.
Just like tax increases… once they start, they’re not going away. Keep drinking, Alaska.
Call it the Greece-ification of the U.S. or call it handouts gone amok, but there’s no debating the end result: an economy out of balance.
We’ve written a lot about the Fed and interest rates lately. But it’s not monetary policy we really care about.
It’s the addiction to stimulus that has us concerned.
Alex Green summed it up well for readers.
“In my view, however, there is something different about this sell-off,” he said of the August 24 plunge, “a lurking fear that something is amiss with our free market system.
“It starts with the fact that we really don’t have one. What we have is a mixed economy, one that features characteristics of both capitalism and socialism.
“And the latter is hurting us.”
If you’re a serious investor, you have to be aware of what’s going on. It’s costing you money.
Whether it’s increased taxes… slow business growth… or the trap the Fed’s caught in… it’s costing you money.
Our advice is first and foremost to pay attention and vote accordingly. And, as investors, to understand there is no such thing as free money… only other people’s money.
I urge you to read some of the columns we’ve recently published on the subject:
- “How Our ‘Mixed Economy’ Created These Mixed-Up Markets”
- “An Easy Strategy to Survive and Prosper in These Markets”
- “Lessons From a POW.”
As investors who are focused on building and keeping our wealth, we must understand that no government will help us achieve our goal. Just as the referee in a football game can’t score a touchdown… although they can certainly slow the game and take points off the board.
Government intervention and state-sponsored paydays are bad news. But sadly, they aren’t going anywhere.
Enjoy those snowmobiles, Alaska. Your grandkids will be glad you had fun… as they pay the tab.