How to Make Money off of Big Government

July 7, 2016

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You can imagine the eye-opening conversations I’ve had when people approach me and declare, “We need the deficit right now” and I respond, “I agree, I really enjoy stealing your money”.

In 2013 the regulatory environment for Canadian cell phone providers had a revolution. The CRTC (a government authority in charge of regulating broadcasting and telecommunications) increased regulation of cell phone companies; and Canadians were ecstatic the sentiment was that finally the cell phone companies wouldn’t get away with borderline extortion thanks to government intervention.

Unfortunately the fates had other plans. Cell phone companies had cheap plans and cheap (but high-performance) phones for two year contracts, and expensive plans and expensive phones (Samsung and the iPhone) for three year contracts. The CRTC mandated that the cell phone companies no longer allow three year contracts and the results were predictable. We were given expensive plans and terribly expensive phones on a two year contract; the price of the iPhone doubled overnight. The consumer lost and the cell phone companies won the amount consumers were spending on cell phones and plans increased but so too did the telecoms’ profit margins. The government regulation allowed the cell phone companies to reach into the consumer’s pocket and take more money out. To make matters worse the CRTC was actually taking out ad revenue, at the taxpayer’s expense, explaining how they had battled and defeated the evil cell phone companies and surprisingly the public bought it and were excited over the CRTC regulations.

But here comes the surprising twist that I never saw coming: survey after survey showed the Canadians were happy with the regulations. Given that I worked for Rogers, Canada’s largest cell phone provider, I was desperate to find some positioning to speak to customers who would inevitably ask about this government-endorsed theft, so I researched only to find out Rogers was behind the CRTC’s proposal in the first place. Canadians were so frustrated with cell phone companies and Rogers used the hatred the public had of them to further increase their profit margins. It was a brilliant campaign on Rogers’ part, perhaps the most brilliant I’ve ever seen. It was beautiful from an investment perspective. People gave thunderous applause to their own impoverishment.

It’s problematic and frustrating for the consumer. Frustration isn’t a healthy state of mind, so how does one transition from being infuriated by a cell phone company’s profits to happy with them? The transition can be completed instantly. Consumers can invest in the cell phone companies. They’re publicly-traded companies. Their profit margins being a source of frustration become a source of happiness. The frown has effectively been turned upside down.

This lesson can be applied elsewhere as our dollar is being mercilessly devalued. If you take a small town, worth $1 million, and to stimulate cash flow their leaders print an additional $1 million to pay for the same goods and services. So now $2 million dollars purchases the same level of goods and services that $1 million used to purchase. If an individual had $1000 in his bank account, after prices adjust to the new money supply, their $1000 will only purchase what $500 used to purchase. The poor individual lost purchasing power.

So where did the purchasing power go? The individual traveled halfway on the road to poverty, so who took his money? There’s a number of people that gained at his expense. Obviously the recipients of the additional $1 million gained; if the government spends money in additional road paving contracts, it helps to be in the road paving business and to have been a honor to the ruling party to receive such generous, progressive-thinking in government spending.

But there’s a further point to governments increasing the money supply through debts. Via bonds and debentures the government adds new money to the economy from nothing at all. Banks finance the creation of money from nothing, they take cash reserves we each leave in our accounts and lend those out to people as new money. The money supply increases, devaluing the dollar, but where does the purchasing power go? As governments’ spending appetites increase, so too does the wealth gap.

Everyone else is being impoverished, but the people financing the debts are siphoning the purchasing power from each of our bank accounts into their own via government intervention. My Canadian countrymen were promised a massive debt by Mr. Trudeau and we gave him a majority government. Every public opinion poll suggests that our neighbours to the south have a popular president in spite of the fact that he plunged America into over 100% debt-to-GDP.

It’s an infuriating situation to be placed in. It boggles the mind that anyone would support their own impoverishment. Ethically libertarians don’t desire this situation but we’re handed this situation. We have every right to be stoic and invest in those who finance the debts; we can be stoic and invest in commodities that appreciate as dollars depreciate. Bank profits can be our profits (although banks will be the first to fall if our economy approaches a fiscal cliff so be alert).

I’ve urged from the mountain tops to anyone who will listen that no more than 40% of our gross monthly income should go to paying off debt, no more than 25% toward housing costs, 10% should go to charity, and 10% should go to our investments. I have followed these rules living in grungy basement apartments on minimum wage, also I have followed these rules when I’ve had more money than I know what to do with, and that 10% going towards investments can ensure our purchasing power increases even if the economy is deteriorating. I reiterate that ethically we should oppose this every election, but thunderous applause is sonorous to the point of deafening.

If the economy is to thrive and we are to continue to enjoy prosperity then libertarian philosophy must rise. If it doesn’t, we can at least let our and our family’s prosperity rise.

* Brandon Kirby is a philosopher, financial adviser, a founder of a local investment club, and he hosts regular symposiums in philosophy. He is also a member of Canada’s Libertarian Party.

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Brandon Kirby

Brandon Kirby has a philosophy degree from the University of New Brunswick and is a current MBA candidate finishing his thesis. He is an AML officer specializing in hedge funds in the Cayman Islands, owns a real estate company in Canada, and has been in the financial industry since 2004. He is the director of Being Libertarian - Canada and the president of the Libertarian Party of Canada.