Failures of Capitalism

[Broodwich]

the reason why capitalism is the most successful system is because it is designed to work with greed. Socialism fails because it is designed to work with good will and cooperation

when it comes down to it, people look out for #1

edit: watched the video, good stuff but been posted here before

[Orion]

Pure capitalism is just as @#(! as pure socialism though. The middle way is best, IMO - until some technology comes along that completely breaks capitalism, if that ever happens.

[Broodwich]

well obviously, but we are way more capitalist than socialist

[Camaro]

I find it ironic that he brings up Keynes. Mostly because it is currently Keynesian economics at work that brought about the crisis and CONTINUE to be followed. Classical economics would have allowed for a collapse of the market and then allowed it to rebuild itself in a more structurally sound way... such things are not allowed by Keynesian economics who believes that government has the power to alleviate fluctuations in the market, no matter how severe.

He is entirely correct about the US obsession with home-ownership, however that isn't the fault of capitalism itself. It is the fault of intervention in the markets by entities such as Fannie Mae, Freddie Mac, the Fed, and government in general - think tax code.

Systemic risk is greatly affected by an arbitrary interest rate. While instability can and will occur even in the absence of a central bank, it will typically resolve itself quicker than perpetuating a failed policy... which is what Central Banks excel at.

I agree with what he was saying about credit cards and excess of financial institutions and whatnot, but all that shows is that it is INTERFERENCE in the markets that helps to create these situations. Such things are far harder to come by when abysmal or negative savings rates drives MASSIVE interest rates as a function of the market. Since government is a massive contributor to savings or debts, it also alleviates government of responsibility by allowing the Fed to simply keep interest rates low artificially, allowing the debt to grow and the government to continue to operate in an irresponsible manner... which further destabilizes our economy.


In short, it was what I expected it to be. An entirely correct framing of the issues and problems, yet the insinuated "fixes" for it are even more prone to abuse and thus failure.


Of course, as you all know, I am not exactly a Free Trader type of guy and my economic theory isn't the most conservative at a State level so I may not be the best representation on videos such as these.


In the end, this is how it is. Pure Capitalism cannot function in an environment where there are external forces interfering with the market. Thus government steps in to ensure this happens. Unfortunately by doing this pure capitalism cannot be obtained and you are now in the realm of mixed economies. Mixed economies may have somewhat less systemic risk, but when they fail they fail very badly.

Likewise, Pure Socialism cannot function properly in an environment where a government exists at all, as there is now some entity who is operating outside of their means and needs.

Capitalism and Socialism are not two entities on opposite sides of the line. Both operate their best, theoretically, in an environment where there is no governance. Neither is an actually workable solution. Our economies are, and have always been since the beginning of time, mixed economies with traits of Capitalism and Socialism picked out to develop what is usually a mildly confused and slightly inefficient economy... that philosophers and sociologists have coined the terms Socialism and Capitalism to describe features inherent in economies is nearly irrelevant and serves only to obfuscate peoples vision of problems and what needs to be done to resolve said problems in a responsible manner.

[germloucks]

QUOTE (Camaro @ Oct 25 2011, 07:37 PM) I find it ironic that he brings up Keynes. Mostly because it is currently Keynesian economics at work that brought about the crisis and CONTINUE to be followed. Classical economics would have allowed for a collapse of the market and then allowed it to rebuild itself in a more structurally sound way... such things are not allowed by Keynesian economics who believes that government has the power to alleviate fluctuations in the market, no matter how severe.

He is entirely correct about the US obsession with home-ownership, however that isn't the fault of capitalism itself. It is the fault of intervention in the markets by entities such as Fannie Mae, Freddie Mac, the Fed, and government in general - think tax code.

Well, i have to disagree with you that government intervention caused the economic crisis. Its pretty much settled that a lack of government regulation allowed significant parts of the crisis to get much worse than necessary. If government regulation was up to par, they would have noticed and subsequently corrected the trend of banks taking on increasingly risky assets (such as giving out mortgages to people who cant afford them) as well as the credit default swaps and consolidated debt obligation crap.

Its generally conceded that these things make up most of the crumbling pillars that caused the crisis. If you remember correctly, Keynes advocated for government intervention because he believed the markets left to their own devices will cause doom.

As far as the subsequent sovereign debt crisis, this would have also been avoided if Keynesian economics was the law of the land because government spending is supposed to be counter-cyclical. Of course there are going to be booms and busts, but you have to PAY OFF THE DEFICIT DURING THE BOOMS. Then, you can comfortably deficit spend during the busts to help kickstart things in the right direction.

The problem with that is the competing powers we have in this country with different ideologies that make it so that we cant implement EITHER strategy.


QUOTE I agree with what he was saying about credit cards and excess of financial institutions and whatnot, but all that shows is that it is INTERFERENCE in the markets that helps to create these situations. Such things are far harder to come by when abysmal or negative savings rates drives MASSIVE interest rates as a function of the market. Since government is a massive contributor to savings or debts, it also alleviates government of responsibility by allowing the Fed to simply keep interest rates low artificially, allowing the debt to grow and the government to continue to operate in an irresponsible manner... which further destabilizes our economy.[/quote]

I am not smart enough to comment on the interest rate stuff, so ill just *homer face* at you for a bit.


QUOTE In short, it was what I expected it to be. An entirely correct framing of the issues and problems, yet the insinuated "fixes" for it are even more prone to abuse and thus failure.[/quote]

I disagree. In fact i think leaving the welfare of the nation up to people that are not under my control or influence is much more dangerous. The financiers make bad decisions, they get greedy, they make short-term decisions that have consequences down the road and i have zero influence on them because essentially i cant even boycott them. They make money off of money of which i dont have much.

The government is where these things should be solved, but my fear is that we've lost our influence there too. the corporations have grown so powerful that they call many of the shots. They have the lobbyists, they have the millions of dollars in campaign contributions. They have, even more interestingly, the science behind what makes humans tick. The old theories of consumer driven markets is misleading, because consumers are more and more being treated as robots and easily influenced/tricked beings that will spend money on things that they would not normally spend money on. Our human weaknesses (impulsivity, undereducated, fond of flashy colors etc) are exploited as a matter of profit.

So in a way, camaro, you are right. But not in the way that you've argued so far about Keynes. Keynesian economics only works if the government can meaningfully and consistently corral and regulate the markets. But if the government is so worthless, inept, and corrupt that it cant perform those functions, then you might as well just have a pure capitalist system. If the corporations have more power to influence the government than the other way around, we as people really dont have as much say in the whole thing as we might imagine.


QUOTE Likewise, Pure Socialism cannot function properly in an environment where a government exists at all, as there is now some entity who is operating outside of their means and needs.

Capitalism and Socialism are not two entities on opposite sides of the line. Both operate their best, theoretically, in an environment where there is no governance. Neither is an actually workable solution. Our economies are, and have always been since the beginning of time, mixed economies with traits of Capitalism and Socialism picked out to develop what is usually a mildly confused and slightly inefficient economy... that philosophers and sociologists have coined the terms Socialism and Capitalism to describe features inherent in economies is nearly irrelevant and serves only to obfuscate peoples vision of problems and what needs to be done to resolve said problems in a responsible manner.[/quote]

Not much to argue with here, except that i think no definition of capitalism/socialism is complete without a complimentary form of government. If some economic theory doesnt in some way deal with government it is deficient in many ways, in my opinion.

[JimmyNighthawk]

We have too many central banks - THAT is the PROBLEM.

You do not believe me? Check this out: http://www.freeallegiance.org/forums/index...st&p=607464

[Camaro]

QUOTE (germloucks @ Oct 25 2011, 09:23 PM) Well, i have to disagree with you that government intervention caused the economic crisis. Its pretty much settled that a lack of government regulation allowed significant parts of the crisis to get much worse than necessary. If government regulation was up to par, they would have noticed and subsequently corrected the trend of banks taking on increasingly risky assets (such as giving out mortgages to people who cant afford them) as well as the credit default swaps and consolidated debt obligation crap.

Its generally conceded that these things make up most of the crumbling pillars that caused the crisis. If you remember correctly, Keynes advocated for government intervention because he believed the markets left to their own devices will cause doom.

As far as the subsequent sovereign debt crisis, this would have also been avoided if Keynesian economics was the law of the land because government spending is supposed to be counter-cyclical. Of course there are going to be booms and busts, but you have to PAY OFF THE DEFICIT DURING THE BOOMS. Then, you can comfortably deficit spend during the busts to help kickstart things in the right direction.

The problem with that is the competing powers we have in this country with different ideologies that make it so that we cant implement EITHER strategy.

Sorry Germ, I didn't mean to imply that government caused the crisis itself. Of course, it was paved with good intentions. That everyone should own a home, that everyone should have a higher standard of living. Keynes teachings are misused, of course. But... Keynesian economics are UNWORKABLE in America. During the bad times government will spend to counteract a contracting economy, unfortunately this leads to slower growth in the long run, which necessitates higher levels of spending to prop back to "where it should be." And that is the main issue I have with Keynesian economics, it ASSUMES where the economy should be. And then there is always the fact that the voting populace "votes the treasury" which ensures that surpluses will rarely be kept because that is money that can be used to buy more votes by creating X program.

Classical economics don't do that, they are passive. When the economy goes bust, there is no intervention in it. It is allowed to implode upon itself and then be reborn like a Phoenix from the ashes. It is NOT a pretty picture, but historically when economies do this, they rejuvenate quite quickly... it doesn't linger on. And no, the Hoover administration was NOT a good example of this. Why? Well you had a central bank intervening in the market and Hoover himself launched what would become the largest expansion of Federal power (thus intervention in the economy) at the time.

But really, when it comes down to it. Money is king. He who controls the money supply controls the country. What Congress does with its stimulus packages is child's play that has no real impact in the grand scheme of things. You cannot imagine what this financial burst would have looked like without a central bank to prop it up. It would have been utter mayhem. BUT, it was this very same central bank that allowed the crisis to occur in the first place (government merely contributed to it, but didn't really cause it. Really it all comes down to one thing:

INTEREST RATES SHOULD BE SET BY THE MARKET, NOT BY A CENTRAL BANK. DOING THIS CONTRIBUTES GREATLY TO THE BOOM AND BUST CYCLE THAT WE ALL HAVE COME TO BELIEVE IS NORMAL.

Until such time that this power is removed from the Fed, we will continue to have problems like this that no amount of government regulation will ever settle. Monetary policy needs to be made a constant... whether that means you have to EXPORT goods to bring cash into America or that the money supply simply grows at the same pace with population growth... it is irresponsible to continue to allow one entity such control over our lives.

[HJ_KG]

,

[Camaro]

QUOTE (HJ_KG @ Oct 26 2011, 04:36 AM) http://www.youtube.com/watch?v=d0nERTFo-Sk

Thats... thats actually pretty damn good.

Thanks for finding this HJ_KG

[nafaho7]

QUOTE (germloucks @ Oct 26 2011, 02:23 AM) Well, i have to disagree with you that government intervention caused the economic crisis. Its pretty much settled that a lack of government regulation allowed significant parts of the crisis to get much worse than necessary.

May I recommend that you look up the size of the Code of Federal Regulations? In the United States, a lack of relevant rules is not the problem at hand. There are rules and committees for seemingly everything. For extra fun, examine the powers and scope of the Securities and Exchange Commission. You can not even buy a corporation without the consent of the SEC.