Infrastructure plans? What does it mean to you?
Have you ever heard on the news the buzzwords like “stimulus checks” since COVID? If you do, now we hear a new vocabulary “infrastructure plans”. So as a regular citizen what should you hear from this? A bit of explanation.
So here we are printing trillions of dollars, lowering the interest rates to near-zero rates to fight against deflation. Doing so isn’t enough, so we have infrastructure plans. What is it? What does it represent in the bigger picture?
So infrastructure plans are part of the government spending. It is financed by printing money (selling obligations). The government hopes that doing so will have a trickle-down effect on all of us. The government makes a public auction (who wants a piece of the cake?), a contractor wins the auction, its employees get money from the project, and its employees spend the money to buy electronics, to eat at restaurants, travel, so the money goes to everyone, this is good right?
Well in theory yes. The contract attribution is kind of … godfatherish in the sense of there’s a cartel who fixes the price and it's kind of an insider game. If one has a lower price for the same job, the other one will tell him, if you put your price above mine and let me win, I’ll give you some money.
Besides these shady contract deals, I believe that the person benefiting the most from these funds are people holding the shares of these infrastructure companies.
So better for us as individuals to pick a contractor stock and hope that this company is the right one and its price will skyrocket because it will have the government infrastructure contract. Without having any scandal exposed.
Or we can simply be a subcontractor of these large companies, I believe that they don’t have the capacity to handle everything themselves. But beware, they would have already taken their cut and you will be left with a thin margin. So make good calculations of your operating costs and your capital investment.
So as a regular citizen this infrastructure plan may not directly affect us. We won’t get any dollars directly from it. But we can access it either by working in the construction industry or servicing the construction industry. Or we can buy stocks that are exposed to the checks from the government. Yeah sorry, it’s not as fun as you may think.