The US bailouts in which people received barely anything to make any difference in their life whatsoever during the pandemic. $600 per person making under $75K based on 2019 income… that doesn’t make sense.
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USA COVID-19 Relief Bill totaling $2.4T in funding with only $900B going to Americans as individuals. So much was typical waste and favoritism for projects contributing to the givers of said money it is hard to watch the sheer disregard for the value of USA currency being depleted in such large chunks (and other world currencies along with it). No requirements were set on measures to curb losses or deal with expected shortfalls of tax revenue and no government employees were layed off, however still given the same subsidies as those citizens who were layed off. The same goes for the payments to all employees who were not layed off.
“The Senate passed the massive year-end legislation combining $900 billion in pandemic relief with $1.4 trillion to fund federal agencies through fiscal 2021,” Bloomberg reported. “The House passed the legislation earlier Monday night. The total bill is worth more than $2.3 trillion, including support for small businesses impacted by the pandemic, $600 payments for most individuals, supplemental unemployment insurance, regular funding for federal agencies and a bevy of tax breaks for companies.”
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Investing into electrical powerd cars could be a bad investment. Even if the costs for an electrical car will fall, the infrastructure for recharging electircal powerd vehicles isn´t in place yet, which makes a mass addoption almost impossible. We also might ask ourself, if buidling new produkts + the environmental effect of already existing cars might increase the ‘‘bad’’ environmental effects further, hence leads to no addoption at all.
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The Dot Com bubble. Apparently the people invested too much capital on no real grounds. The intrest was probably low and people could take risks and loans to jump into the bubble.
What immediately comes to mind right now would be the international travel industry, at least short term, due to the current travel restrictions and coming vaccine passports that will be required for travel and lack of uptake of the vaccine due to it being an experimental gene altering procedure and heavy censorship of world leading scientists condemning it.
On the other side of the coin, a sound investment would likely be the likes of holiday parks etc and the motorhomes or campervan retail and rental industry which I have no doubt are set to explode when local restrictions are eventually lifted.
Fracking and the shale oil industry.
While this topic can be hotly debated on a number of different points, the economic data of the shale boom paints a dismal picture of malinvestment. The weak dollar and loose monetary policy can be argued as a major reason why the price of oil got as high as USD145 per barrel. Prices at these levels made even the poorest performing wells viable, and thus exploration boomed.
In the 10 year period between 2007 and 2017, inflated oil prices resulted in a capital expenditure explosion in the industry to the tune of some USD280 billion in negative cash flows. During this time mountains of debt were piled on to finance this malinvestment. Much of the sector was and still is fundamentally unsustainable without the high prices caused by cheap funding and a weak dollar.
Research an investment (could be a public company, private company, government agency, infrastructure project, etc) that you believe meets the definition of a malinvestment (past or present) and argue why you think it’s a misallocation of capital (3-5 sentences).
Belgium built the ‘National Redoubt’ from 1859 to 1914, a double ring of defensive forts around the port city of Antwerp. The idea was that it would be the military capital in case of war. It also was a case of medieval thinking in a rapidly changing world. The forts were formidable and the cost was huge, but advances in artillery weren’t taken into account.
By 1870, it was already established that artillery could fire shells upto 7km, but they just kept building more forts and thicker walls.
In WW1, the Germans started shelling the forts on September 4th and destroyed several forts within a month. By October 9th, the Belgian army had to abandon the position.
From 1918 to 1939, the forts were rearmed and improved with reinforced concrete and an anti-tank ditch of 33km long and 6m wide was added.
In WW2, one fort was taken within a day by airborne German troops since it had no air defences. The rest of the forts was abandoned a couple days later since it could not compete with German artillery.
Today, several forts are public parks. The entrances to the fortifications have been sealed.
Our prime minister of Thailand is the best example i can think off, he booked 3 submarines…
The total cost of the three vessels is 36 billion baht.
Totally unnecessary, and should be invested in projects to decrease poverty. to my opinion at least.
I immediately think of the dotcom bubble. With the release of mosaic web traffic increased 1000% a month after release leading entrepreneurs to jump on this. With interest rates at all time lows dotcom companies begin popping up everywhere you look. Companies were spending all funds in order to grow their business. On march 13th 2000 when Japan announced they have entered a recession the NASDAQ slips spooking investors. When the funding stops dotcoms began burning through cash and promised profits failed to materialize. This resulted in many companies ceasing to exist or becoming shadows of their former self.
Research an investment (could be a public company, private company, government agency, infrastructure project, etc) that you believe meets the definition of a malinvestment (past or present) and argue why you think it’s a misallocation of capital (3-5 sentences).
This topic is a bit complicated in my country. I see malinvestment mostly in the government-related projects because being a developing country, projects can easily be manipulated towards the group or conglomerate that works with ruling group. From my view, for example the speed train from and to Bangkok’s International airport can be considered malinvestment because it does not live to expectation. I would expect this train to serve the purpose of transporting passengers and involved personnel back n forth to the airport effectively and efficiently. I would assume the effectiveness to be the connection to other transport links, parking lots and availability to handicapped demographic. Efficiency being that anyone traveling internationally can check in from the city like in HK, provides other related services, etc. None of this has materialized. I hope this qualifies as “malinvestment”.
Guys am i the only one that is having trouble with this? i didnt understand much if any of the reading and am not sure how to do this assignment… please dont be mean but if anyone could give me a simplified breakdown of the reading/assignment id appreciate it.
I have observed over time that the US Government has been abusing “pork” projects at an alarming rate. Every Bill that gets passed in Congress is full of these “pork” projects and they are ALL Malinvestments. One of the most famous is called “The Bridge to Nowhere” and I think that title says it all…politicians are wasting the People’s money and resources on pointless “investments” that only serve to enrich themselves and their corrupt cronies!
Lernout & Hauspie Speech Products was a speech recognition company founded by Jo Lernout and Pol Hauspie , that went bankruptin 2001 because of a fraud engineered by the management. The company was based in Ypres, Flanders, in what was later called Flanders Language Valley. Lots of people even friends and family lost alot of money here.
Bitconnect. It was an epic ponzi scheme get rich quick cheezeball pyramid lending scam designed to appeal to the lowest common denominator in investing without demonstrating any real value to humanity. The ads they ran on youtube were just awful. It was a boom to bust cycle all within one year during 2017. They promised 400%+ annual returns, and of course, in the end delivered nothing. It reached a peak of over $2bb market cap before it crashed, causing 1.5mm shall we say unsophisticated investors to lose everything.
Softbank is the company that screams the loudest to me as a perpetrator of malinvestment and the possibility of creating a negative bubble in the start up sector. The influx of the 100 billion into startups around the world ultimately lead only to an obscene amount of debt for both Softbank and a number of the companies they invested in. They are now focusing on the “Vision Fund 2,” that now has $10 Billion in capital from Softbank itself and is substantially less than the $38 Billion that it initially proposed.
I must admit that I am not able to see the purpose of this assignment. I believe if people or companies or whatever invest in say a project, that they have some particular interest they want to pursue. Of course one can disagree how beneficial that project might be, and of course the investment can lose track completely or the situation can have changed significantly over time so that in hindsight it turned out to be not fitting any more. As Kierkegaard said, Livet forstås baglæns, men må leves forlæns..
Anyways, if I must give an example I would say the Danish Railways buying IC4 trains back in 2000. There were many problems involved in implementing them. It did cost a very big amount of money to repair them and change them. And then the problem was that very few of trains still didn´t work in a satisfactory manner. Then even more money was spent reparing them and waiting for them. In hindsight it was problematic that politician didn´t want to admit the error, and still kept believing in them. And all the while the public trains had to be substituted by another, older train model. And for Danish economy some big train manufacturers, for instance Scandia in Randers, with more than 1000 employed back in the good old days when they produced the more succesful IC-3, had to close or a small part of them could do the reparings and adjustments of the IC-4. All in the name of the Tender Procedures ordered by the EU.
First example that comes to my mind as far as malinvestment goes is one that directly impacted me. My father worked for General Motors. The crash of 2008-2009 they filed for bankruptcy. The government then bailed them out and GM changed to “New GM”.
He had many coworkers that last A LOT of money from this. They were heavily invested into GM before the bankruptcy and lost it all.
I feel like this is a malinvestment by the government and by his coworkers. The U.S. Treasury ended up losing about $11-$12 billion and my coworkers lost all of their investment money they had put into GM.
https://en.m.wikipedia.org/wiki/General_Motors_Chapter_11_reorganization
The subsidizing of sugar by governments.
A subsidy is a benefit given to businesses in the form of cash or tax reduction.
Although it is sold as to be in the overall interest of the public, it raises prices artificially for the end consumers who pays more taxes over this higher consumer price. Remember that the subsidy for sugar companies, who are production capped at the same time, is already paid for by that same consumer. Subsidies to these businesses simply sustain an inefficient allocation of resources.
A great example of it, I think, it’s England’s furlough scheme. It is a loose loose proposition in my opinion.
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It creates an enormous amount of money printing. making the national debt grow.
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ZOMBIE FIRMS. Even before the pandemic, “zombie firms” were being kept alive by the rock-bottom interest rates in the years after the 2007-09 financial crisis. Furlough [has arguably further] propped them up when a shakeout [would have been]healthier. The outlay could instead have been focused on firms whose markets are sure to return, and the [many self-employed workers] unable to access government funding, who may not stay afloat long enough to see their markets reopen.
https://theconversation.com/furlough-scheme-uk-has-to-extend-it-but-there-are-serious-risks-156058strong text
Banks bailing out oil companies and airline companies are a sure form of malinvesment and not in the best interest of tax payers. Easy jet received £600m loan , even though it paid out £171m in dividends.
It goes against the need to reduce air pollution and reduce green house gases. Carbon offsetting schemes aren’t enough. Taxpayers money should be used to save companies that are in line with the countries promise of give climate change the priority in needs .