Tuesday, May 21, 2013

You’re Bailing Out Incompetence

"Japan faced problems such as we’re facing now, and they refused to let people go bankrupt, they propped up the banks, they propped up a lot of companies, and they came to be known as the zombie banks and zombie companies, and as you know the Japanese talk about the 1990s as the lost decade. But now you’re talking about two lost decades. Their stock market is down 75% from where it was 23 years ago. That is not a typo, it’s down 75%. We’re going the same way. We refuse to let people go bankrupt, prop up everybody in sight, and the problem with that is you’re rewarding incompetence, you’re bailing out incompetence, rather than allowing new people, new energy, new capital, and new competition. It’s called the green shoots, from Joseph Schumpeter. One of the great beauties of capitalism is creative destruction, which allows the green shoots of new energy, and new capital, and new ideas to develop. They’re not allowing that in the United States these days, just as Japan refused to allow it for the last 23 years."

- Source, Investors Guide: