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They believe that dollars spur the economy in proportion as they can be spent. Economic growth is enhanced through taking money from people with a high “propensity to save” and giving it to people with a high propensity to consume.

In these bizarre economic models, saving is believed to destroy wealth and consumption to build wealth.

Poor persons spend all they receive, while billionaires such as Musk keep it invested in illiquid projects. Thus taxing money from Musk and giving it to others is believed to “stimulate” the economic growth.

This demand-side fantasy prevails among Democrats and fuels the fervor for redistribution in Washington. All around the globe, the countries that save most grow fastest.

But the parochial accountant Keynesians in Washington believe in the “paradox of thrift,” whereby one person’s savings may increase an individual’s wealth but many peoples’ savings destroys wealth.

But capitalism works not because capital goes to those with the greatest propensity to spend it but because it goes to those with the greatest ability to expand it.

Today in the US, capital is flowing toward government to be liquidated and spent. Billionaires thrive by trying to align their investments with government priorities such as the climate change delusion.

Today’s Prophecy

Musk’s pinnacle thus is precarious. He must indulge the fantasies of Washington politicians while at the same time ruthlessly pursuing the realities of markets and technology. 

All we can say, is “so far so good.” But Musk’s electric vehicles cannot finally prevail if the politicians’ and professors succeed in banishing both CO2 and nuclear power. Solar and wind cannot sustain a world of Tesla’s. That’s the paradox of Musk’s pinnacle of wealth… and America’s.

You cannot tax wealth away and rebuild it by orgies of spending. You cannot abolish an effective energy system and replace it with sunbeams and volatile breezes without bringing down Musk’s fortune.

In general, the more illiquid the investment the more it is oriented to the future, and the more it spurs durable growth. Governor Newsom in California, like the entire new Washington crowd, will soon discover that entrepreneurs such as Elon are the world’s most “essential” citizens.

Compared to the realities of physics and information theory, the immutable testimonies of time-prices and inventive surprises, the delusions of politicians offer a poor and perilous path to enduring wealth.

That’s why in this time of trial — in nearly all our publications — we favor finding the most promising new technologies, wherever they may be, and making long-term investments in them that can survive all the vicissitudes of politics.

Regards,

George Gilder
Editor, Gilder's Daily Prophecy