The main reason most Canadian companies have financial problems comes from Government regulations – May 9, 2020,
A reminder of what a market economy is, a market economy and capitalistic economy is allowed to inflate and deflate, in market economy, it’s a known fact that there will be good times and bad for well-run companies, one of the main reasons bailouts even exist is because the government got involved in the free market.
The government which is the public sector differs from the private sector in that, politicians and public sector employees just like cops in the movies, have no incentive to be efficient. Most of the best television shows in case you’re not paying attention are the television shows that ignore economics.
In cop shows the really good cop movies, the cops are often destructive, wasteful, and inefficient. Governments, public sector workers do things inefficiently mostly because they’re not in business and imagine themselves to be above the law while working in their position.
So when government people pass price and wage-related regulations that they believe in their hearts of hearts will benefit the poor, what they usually forget is that most businesses make very little profit. How the government remedies companies making very little profit is the creator and promote a central bank that can hopefully provide liquidity, well this is nice, but a liquid bank regulated by the government allows bad businesses to distort the market.
A lot of companies deficit spend with the intention of being bailed out, why? Because the government made it almost impossible for them to turn a profit. What’s the main reason companies can’t turn a profit? Inflated wages! By inflated wages I mean a company can’t barter with its employees who have become accustomed to a fixed wage that will never deflate!
A fixed wage that’s only supposed to go up, a wage in which a minimum exists, and an employee who can sue their employer for discrimination and a whole bunch of other reasons equates to a company that is not allowed to DEFLATE! The government is also not allowed to deflate, austerity measures will lead to protests, the size of government can’t shrink, once an entity is not allowed to deflate, their only other option is a bailout or bankruptcy.
Private companies don’t have the government printing press to save them, the government is in fact in competition with them, hoping that eventually, the company will become large enough to be worthy of a bailout! That’s the government welfare system we’ve created in a nutshell and although the system we live under now is clearly socialists, it’s labeled capitalist and that’s a shame because at least under capitalism goods and services, prices and wages can deflate!
If you’re not aware of how capitalism works, consider watching the video below, this is what happened to the marihuana market when the government is NOT involved!
Above is a just a small example of how FREE MARKET capitalism is supposed to work! The individual not the government creates value. If individuals can’t create value deflation takes over and the true value of things is exposed! Once the true value of something is shown, resources can be better used in areas where resources are needed! This is one of the reasons how you get quality products and services!
Most drugs don’t have much of any value, the government gave them value by regulating them! Imagine how many people killed by drugs could be alive today if the government didn’t regulate them!
Interesting times ahead!