Nearly every investment of the goverment in germany is a malinvestment. They throwing out so much money in the corona-crisis for advisors and nothing was running fine. There are so many other malinvestments like that Berlin-Airport.
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blockbuster. people thought that this was the only way that you would be able to get movies back in the day. they quickly got the rug pulled out from under them when netflix came out and completely displaced blockbuster.
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Interesting thought, but I think it’s quite unlikely. The Dutch government has explicitly stated that they don’t see nationalisation as an option. They see nationalisation as undermining Air France-KLM’s competitive position. In addition, there isn’t any public support for nationalisation. We had a bad experience with the nationalisation of ABN Amro after the financial crisis.
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Good remark. I guess this is where the French approach seems to differ from the Dutch’s.
The French state just increased their ownership from 14,3% to 28,6% while saying they are unlikely to go higher . At the same time saying they might in case of an catastrophic economic situation and subscribing 100% to a newly issued AF KLM 3 billion Euro bond without a date for reimbursement.
While I do not know if that would lead to a nationalization it strikes me as a step further towards malinvestment .
Interesting time ahead!
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CD at a bank. oftentimes the yield is lower than the inflation rate. this causes one to actually loose purchasing power on their money.
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I don’t have a lot of experience with investments outside of crypto so this is very hard to answer for me. But I think that a lot of investments into “growth stocks” is a malinvestment because I don’t believe that those companies have the capability to put that much capital to proper use. Neither in terms of manpower or enough avenues of development. If money is not being put to use then it is wasted, essentially. But I don’t know any alternative, though.
Within crypto there is a huge amount of malinvestment. Meme coins, for instance, the king of which is Dogecoin. But it is kind of natural to have malinvestment in such an environment because who can really say what is a malinvestment and what is not? At this point it’s hard to get a grasp on what’s actually valuable, although there are some egregious examples of money being thrown at projects that are just ridiculous. One such example being Dogecoin.
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I genuinely believe that the recently passed stimulus package in the US is a textbook example of malinvestment. With the Federal Reserve keeping interest rates near zero, the gov’t is more inclined to borrow money, despite being unlikely to ever pay it back in full. It’s the sub-prime mortgage crisis all over again, except instead of consumers borrowing from a traditional bank, it’s the US government borrowing from the Federal Reserve. The “solution” they have come up with is to print the difference and use that printed currency to “repay” the Federal Reserve, causing an unhealthy rate of inflation/loss of purchasing power.
Don’t get me wrong: as a recipient of each of the 3 stimulus checks the US has issued, I understand the temporary bandage they have been for many middle-class people. The problem isn’t necessarily the spending itself (although I do believe spending needs to be reigned in); rather it’s the fact that the government is borrowing the money at a shockingly low interest rate without any concrete plan in place to repay the debt. Now that they’ve already spent the money, they’re scrambling to figure out ways to “pay” for it or have it appear that they’re “paying” for it. It’s completely bass-ackwards; you can’t have a chicken without first having had an egg.
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Nikola motors is a nice candidate. This was supposed to be a electric vehicle company. Fake adds, strange cashout from boss when stock pumped, even the name…
This is a YouTube video for this from a guy I respect
https://www.youtube.com/watch?v=XQA0WVNz6Fs&t=216s
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I’m from Brazil. During the last World Cup there was an excessive misallocation of tax payers money into building new stadiums and other structures that were not even used. So much money wasted. Not to mention the corruption going on. I could go on and on about the malinvestments in Brazil.
Another example: buying a new car instead of a pre owned.
My first introduction to the cryptocurrency world company was when a friend encouraged me to invest with a company called Beurax. You were to deposit Ethereum, Bitcoin, and US dollars and was promised a 1.4% to 3+% depending on your investment amount. Additionally, you were paid a huge bonus for encouraging others to join. Of course, I lost all my money and now consider this one of the biggest malinvestments I have ever undertaken. The system could never last with the huge bonuses the company offered and the high return rates. I have learned my lesson and from this experience, I came across Ivan On Tech Academy. Nothing beats education. Now that my eyes are open, it would take much more to be scammed again.
One great example of misallocation of capital is the EU agricultural sector. The European Union’s common agricultural policy (CAP) accounts for about a third of the EU budget, with some €54 billion ($64 billion) in farming. The targets of climate change adoption and economic growth are not achieved although the budget is remarkable high.
@Simenv Interesting remark on Dogecoin !
I am wondering if centralised stable coin do not follow the same lead of malinvestment or borderline fraud. One example I have in mind is Tether that went in the space of 15 months from being backed by 74% cash and equivalent to 2,9% (check latest video from Ivan).
it looks to me that history is repeating itself in centralised monetary system wether it is with a being paper or digitalised currency…
Any further thoughts on that?
2008 market crash is a good example. First, the banks malinvest exponantially in sub-primes mortgages which when the bubble burst, they couldn’t afford the losses. Secondly, the government who bailouts the banks, occur a market crash and government had to recover the economy with QE. It was the beginning of all the problems they experience today !
That is a very good point, especially in regards to the “Black Swan event waiting to happen” Tether.
In fact, Tether is probably more of a malinvestment than Doge because at least Doge is not hiding anything.
Here’s a quote on malinvestments from Wikipedia:
“In Austrian business cycle theory, malinvestments are badly allocated business investments, due to artificially low cost of credit and an unsustainable increase in money supply.”
The 49% backing of commercial paper (promissory notes) can possibly be viewed as an artificially low cost of credit. I don’t think that as many exchanges would buy Tether if they were paying for it in actual dollars.
I think you are right about that. Unfortunately, we may have to learn this painful lesson several more times before the danger of centralised issuance of money becomes clear to us.
I remember I read something by Nietzsche. He thought that in prehistoric times the only way humans could learn basic morals was that over thousands of years we were subjected to horrible punishments by nature and by other people. Starvation, murder, freezing, etc. Only after thousands of years were some basic moralities drilled into us: “Store food”, “Don’t steal”, “Prepare for winter”, etc. I don’t actually think he was correct in a concrete sense, but I do think humans as a group learn slowly and only when it is necessary.
I don’t know what the situation is with USDC but I do consider it safer than Tether. Still, I would prefer to use programatically issued stables such as DAI.
Hmm… yepp there might be pain coming.
Good luck with USDC.
On my side I am exploring the Terra USD as a stable coin and testing their DeFi protocols on Anchor Finance and Mirror Finance. Going over the DeFi 101 course now to make sure I understand what I am getting into 
The opulent military spending of the USA. We do not need to police the world and I do not want my tax dollars fueling an engine of pain.
National wealth should not go towards spreading hurt and making the ruling class richer!
The controversial Keystone pipeline that was to be built in Alberta and tie into existing lines in the U.S. is first to come to mind as it’s recent and directly affects me. Joe Biden voiced his stance on cancelling all permits in regards to this project prior to becoming president. With this information well known, our premiere of Alberta, Jason Kenney still went ahead with a 1.25 billion dollar investment primarily sourced from tax payers just six months prior to the U.S. elections. Shortly after Biden became president, he did as promised, and cancelled all permits which stopped construction. Instead of waiting for confirmation of presidential results, Jason Kenney basically wagered a 1.25 billion dollar bet on Trump winning the election.
Enron.
They had very complex financial statements and were engaged in unethical practices. This created a false narrative around the success of the company. The result was a severely inflated stock price, this was deliberate for those at the top to benefit the most. This would have been a clear misallocation due to it not being a fair market value based on manipulation behind the scenes.
New York City’s Citi Time project. The project was supposed to automate payroll operations.The project was supposed to cost around 68 million. It was abandoned when they hit 700 million. Many say it had poor oversight, also a fraud case of at least 40 million. I feel anything should have a cap limit the to take it to 10 times the initial only to abandon the project shows great failure and lack of care. Most don’t care if its not their money.
An investment that I believe meets the definition of a malinvestment are shit coins with basic blockchain technology which provide no utility value to the industry nor the individual who holds them, such as those currently being marketed by popular culture like Dogecoin and, even more particularly, Safemoon. I believe these are a misallocation of capital because, although there is potential to make a dollar, it will be at the expense of some other not so fortunate individual - which also arises the moral dilemma, that if to say, the individual holding empty bags at the end of the trend isn’t actually you.