Recent Reads | What Went Wrong with Capitalism

What Went Wrong with Capitalism

By Ruchir Sharma

Ross’ recommendation

Today, we are going to talk about the informative, well-considered What Went Wrong with Capitalism by Ruchir Sharma. I first considered posting this review more than six weeks ago, when the huge tax and spending bill, passed today, was moving through Congress. I hesitated because an effective response to this bill was exclusively the province of Senators and Representatives.

What Went Wrong with Capitalism is worth the time it takes to read it (or, in my case, listen to it on Audible) because it provides extensive history on how we arrived here, at unprecedented budget deficits. The book details government decisions dating back to at least the Nixon era that funded corporate bailouts with unlimited and growing budgets. The S&L crisis. Long Term Capital Management. Fannie Mae and Freddie Mac in the 2006 housing crisis. The Great Financial Crisis. PIGS (Portugal, Italy, Greece, Spain). More recently, Silicon Valley Bank.

Taxpayers have been expected to pay for these rescues. Through the process, the Federal budget deficit has swollen to previously unimagined dimensions.

As clear-minded investors, we have no political affiliation or agenda. Instead, we look at history and respect that businesses that have neglected to consider the costs and consequences of taking on too much debt have often failed. It seems that at present, our lawmakers are giving too little consideration to our debt load. The bill just passed by Congress is forecast to increase our debt by trillions of dollars. The service expense of debt determines the viability and performance of markets that trade that debt. As debt grows, we are inching ever closer to understanding the limits investors will impose on our credit risk.

We hesitated review of this book pending approval of the now passed tax and spending bill. After all, unless you were a member of Congress, you had no vote on the matter.  The book provides ample history on how we arrived at our too levered state.  Reading the book will provide an ample accounting to inform your decisions as voters in the approaching mid-term elections.

We openly recommend fiscal conservancy.

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