53. Buy Good Projects.

Buy Good Projects.
Bob Komives
::

A good project is a good investment;
a bad project is a bad investment--
whether building life,
species,
family,
association,
or nation.

A good investment pays
yet bears no debt.
What would the biosphere owe
(and to whom?)
for the inter-galactic loans
that financed its development?
Did the Gulf of Mexico
ever repay its debt to the Mississippi River?
Who could tell Mahatma Gandhi
that he had repaid all investments in his life?

Good Projects Are Good Investments

A good project, a good program, raises the value of the nation. It can lead to deflation even if paid for with newly printed money. A bad project or program causes inflation even when paid for with money in hand. If the government of the United States of America happens to have a million excess dollars, to waste them on a failure would damage the economy and the value of the dollar. Even if the Guatemalan government happens to have four million excess quetzales, wasting them on a failure would damage both the value of the quetzal and the Guatemalan economy. A money-in-hand project puts no new money into circulation, it does use and alter resources and produce inflation as the old amount of money chases after reduced resources.

If failure is to be paid for with an international loan it will cause even more inflation. In order to pay off the loan the borrowing nation has to export resources equal in value to those invested in the project plus an additional amount to cover interest. The net reduction or alteration of resources is greater than if the same failure were paid for with money-in-hand; the value of national currency falls more.

Now, consider a good project. The Guatemalan government has plans for a four million quetzal project. All analyses indicate the social, moral, and environmental results will range from acceptable to beneficial. Analyses also show that the project should increase the wealth of the nation well beyond the four million quetzal investment. Unfortunately, the treasury does not have four million quetzales on hand.

This project should proceed. It will be deflationary even if Guatemala prints new money to pay for it. If analyses are close to correct, this good project raises the value of the nation beyond the current market value of the new money to be spent on it. That is deflation. If Guatemala were to borrow foreign money to pay for the project, the result might also be deflationary. However, the interest payments added to the project cost will lower net national worth below that achieved through the issuance of new money for the same project.

:: Bob Komives, Fort Collins © 2006-2008 :: Plum Local IV :: 53. Buy Good Projects. ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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