Is this the end of capitalism in its current form

[sacky]

i really hope it is. :roll: :roll:

[oecarb]

i really hope it is. :roll: :roll:


I think it is the end of American style Capitalism.

No respect for the worker. No responsibility towards other citizens. No regulations. Do waht the hell you want. Grab grab grab.

And when you in trouble, run to the taxpayer and beg. :evil:

[greall]

Capitalism will bounce back but Americans need to take stock of how 'the other half lives' on this planet.

Please note that the ECB's holding its hand on raising interest rates in the Eurozone where the German and French national economies are slowing but RBL raised its prime interest rate to 13.00% effective today.

Greg

[sacky]

well that means the ideals practiced by a lot of former commonwealth countries,i.e.owning houses which is really the main stay of the american stlye politics will have to go ?

[oecarb]

well that means the ideals practiced by a lot of former commonwealth countries,i.e.owning houses which is really the main stay of the american stlye politics will have to go ?

Sacky, as I see it, owning houses is not the problem. The problem is expecting the price of these houses to keep going up forever and borrowing aginst the rise in equity to purchase consumer goods.

Then the banks sold on these mortgages so, after a while they couldn't care less whether the brrowers could afford to pay up and the borrowers didn't mind because their houses were going up by thousands a year and they could borrow for a new car, fridge, vacation etc.

It had to crash sometime.

[greall]

I think that this is what they call 'self correction'.

Greg

[oecarb]

I think that this is what they call 'self correction'.

Greg

Yes, normally, Greg.

Problem is that a multi-trillion dollar market was build up on house price inflation - expecting house prices to keep going up forever. Structured Investment Vehicles (and other complex derivatives) were sold on to insurance companies, pension funds, investment institutions etc around the world. Any defaults (and since, by definition these mortgages were sold to people who did not have stable incomes etc, there have been many defaults) - these defaults meant that all those institutions are now facing big losses. The Fed and the US Govt has already spent about $600 billion trying to sort out the mess and this extra $700 billion might still not be enough.

http://www.bloomberg.com/apps/news?pid= ... DIq9yO0vzY (http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a8DIq9yO0vzY)

Add to that Credit Default Swaps which many people are thinking will be the next crisis point. For years now, banks have attempted to protect themselves from bad loans by a form of insurance called a credit swap arrangement where an insurance company or another bank agrees, for a fee, to pay for any defaults. This has, apparently grown into a 55trillion dollar market - bigger than the GDP of the entire planet.

So you have falling house prices, defaulting purchasers, foreclosures, failing banks, pension funds, investment institutions, rising unemployment, more defaulters, more foreclosures, more house price drops, more failing banks and businesses, more unemployment.........

And once the toxic debt starts to unfold and institutions that had become involved in Credit Default Swaps are faced with the bills.......Oui foute!!!!! :evil:


http://money.cnn.com/2008/09/30/magazin ... /index.htm (http://money.cnn.com/2008/09/30/magazines/fortune/varchaver_derivatives_short.fortune/index.htm)

[mammadon]

I think explaining why this credit crisis thing is happening depends on whom one talks to. A free market economist would say it's the government's fault. A keynesian might say it's laissez-faire's fault. It's a moot point really.

I do think the writing was on the wall for a long time though. Economic growth in the US is based on debt. Look at all the credit card debt! I personally think they should ban credit cards, since people cannot use them responsibily.

[miktay]

I think that this is what they call 'self correction'.

Greg

And in some places its called a ponzi scheme.

[Scorpio]

Capitalism as we know it will be severely wounded, but will not die.

[greall]

I think that this is what they call 'self correction'.

Greg

And in some places its called a ponzi scheme.

The power of greed...

Greg

[gainesvillej]

i really hope it is. :roll: :roll:


I think it is the end of American style Capitalism.

No respect for the worker. No responsibility towards other citizens. No regulations. Do waht the hell you want. Grab grab grab.

And when you in trouble, run to the taxpayer and beg. :evil:


"Respect for the worker" is what got the US into this problem in the first place. For the past 40 years the labor unions of the US have been forcing companies to have production moved oversees to account for overseas companies coming here. The unskilled worker (King of the Non-Capitalist market system) can only rape his company for so long before it folds. Workers in Detroit fought and fought for higher wages that their company could not pay. Look at Detroit now, it's a ghost town.

"No responsibility towards other citizens" What does that mean? Am I suppose to think about how taking out a loan on my house will affect my neighbor. Come on buddy.

People need to regulate themselves.

I love when people like Sacky say they hope it's the end of capitalism. Really? Sounds cool right. Well look around you. Most every advancement you have in life came out of the desire for people to invent and create wealth. If you get rid of the REWARD for putting in the work, people won't work long ours researching new drugs, technologies or work on their business plan for the pizza shop down the road. Don't like capitalism huh? Well are you writing me from your typewriter in Cuba? Do they even have typewriters?

Are you people honestly trying to point to the mortgage crisis of the 2000s and use it as an example of 'US greed' and 'the evils of the free market'. Sorry if it effected the rest of the world, but hey, we didn't force them to buy mortgage backed securities. It's a market, there's no guarantees.

[discipuli]

Definately not the end of capatalism , what , you expect the US to turn socialist overnight ? All those multi billionaire republicans and big interests won't let it happen either.

But a big change is coming, towards what i'm not sure.

[oecarb]

"Respect for the worker" is what got the US into this problem in the first place. For the past 40 years the labor unions of the US have been forcing companies to have production moved oversees to account for overseas companies coming here. The unskilled worker (King of the Non-Capitalist market system) can only rape his company for so long before it folds. Workers in Detroit fought and fought for higher wages that their company could not pay. Look at Detroit now, it's a ghost town.

"No responsibility towards other citizens" What does that mean? Am I suppose to think about how taking out a loan on my house will affect my neighbor. Come on buddy.

People need to regulate themselves.

I love when people like Sacky say they hope it's the end of capitalism. Really? Sounds cool right. Well look around you. Most every advancement you have in life came out of the desire for people to invent and create wealth. If you get rid of the REWARD for putting in the work, people won't work long ours researching new drugs, technologies or work on their business plan for the pizza shop down the road. Don't like capitalism huh? Well are you writing me from your typewriter in Cuba? Do they even have typewriters?

Notice I said American style Capitalism. There are other flavours of Capitalism.

let us take a look at Western European style Capitalism.

Think worker participation. Think publicly funded health care schemes so firms do not have to offer expensive health schemes to their workers. Think other publicly funded care facilities for workers with young children or disabled children and other dependents. Think publicly funded education, housing, poverty reduction schemes and job creation. Think Government ownership of the shares in your company. Think union representation on your board of directors. Think Corporation Tax and income tax helping to pay for all this. Think Government Aid for companies if they need it.

Then look at, let's say, European cars. Think Rolls Royce - half a million US dollars for a car and full order books for the next four years. Think Mercedes Benz - $100,000 minimum for a car and rich Americans and Arabs and Chinese lining up to buy them. Think Porsche. Think Ferrari. Even Volkwagen Audi, Volvo, Peugeot, Saab, Fiat all have their aficionados. American cars? Definitely Nope. Toyota, Honda and Nissan made in Britain, maybe.

Western European governments know that Capitalism creates wealth. So they help the Capitalists as much as possible and expect the Capitalist to contribute to a fairer society. Americans might say that their brand of Capitalism is superior but some people (including Americans) are beginning to wonder about that.

[miktay]

Selective socialism is thriving on planet Amerika...

But despite all of this propping up, the market beast w/bite the hand that feeds it.


AP
Fed to buy massive amounts of short-term debt
Tuesday October 7, 10:33 am ET
By Jeannine Aversa, AP Economics Writer
Fed in bold move to thaw credit markets says it will buy massive amounts of short-term debt

WASHINGTON (AP) -- The Federal Reserve announced Tuesday a radical plan to buy massive amounts of short-term debt in a dramatic effort to break through a credit clog that is imperiling the economy.
The Federal Reserve, invoking Depression-era emergency powers, will buy commercial paper, a short-term financing mechanism that many companies rely on to finance their day-to-day operations, such as purchasing supplies or making payrolls.

In more normal times, about $100 billion of these short-term IOUs were outstanding at any given time, sold by companies to buyers that included money market mutual funds, pension funds and other investors. But this market has virtually dried up as investors have become too jittery to buy paper for longer than overnight or a couple days.

That has made it increasingly difficult and expensive for companies to raise money to fund their operations. Commercial paper is a way of borrowing money for short periods, typically ranging from overnight to less than a week.

The unstable situation has left many companies vulnerable. The notion under the plan is for the government to provide a "backstop" that would give companies a new place to get cash, the Fed said. The action makes the Fed a crucial source of credit for nonfinancial businesses in addition to commercial banks and investment firms.

The Fed's action initially helped lift investors' spirits, although concerns about the economy dampened their enthusiasm. The Dow Jones industrials rose 45 points in morning trading, a day after a huge selloff put the Dow below 10,000 for the first time in four years.

The Fed said it is creating a new entity to buy three-month unsecured and asset-backed commercial paper directly from eligible companies. It hopes to have the program up and running soon, Fed officials said.

Fed officials said they'll buy as much of the debt as necessary to get the market functioning again. They refused to say how much that might be, but they noted that around $1.3 trillion worth of commercial paper would qualify.

"The commercial paper market has been under considerable strain in recent weeks as money market mutual funds and other investors" have become increasingly reluctant to buy commercial paper, especially longer-dated maturities. As the market for commercial paper shrank, the Fed said rates on the longer-term debt "increased significantly," making it more expensive for companies to borrow.

The Treasury Department, which worked with the Fed on the program, said the action is "necessary to prevent substantial disruptions to the financial markets and the economy."

The Treasury will provide money to the Federal Reserve Bank of New York to support the new program, the Fed said. Fed officials would not say how much but believed it would be substantial. The money would not come from the $700 billion financial bailout President Bush signed into law on Friday.

http://biz.yahoo.com/ap/081007/financial_meltdown.html

[oecarb]

"Respect for the worker" is what got the US into this problem in the first place. For the past 40 years the labor unions of the US have been forcing companies to have production moved oversees to account for overseas companies coming here. The unskilled worker (King of the Non-Capitalist market system) can only rape his company for so long before it folds. Workers in Detroit fought and fought for higher wages that their company could not pay. Look at Detroit now, it's a ghost town.

"No responsibility towards other citizens" What does that mean? Am I suppose to think about how taking out a loan on my house will affect my neighbor. Come on buddy.

Update on the German car manufacturers. This is where respect for the worker can get you :lol: :


Toyota Falls to Four-Year Low, Slipping Behind VW
By Naoko Fujimura

Oct. 7 (Bloomberg) -- Toyota Motor Corp. fell to the lowest in more than four years in Tokyo, losing its spot as the world's largest automaker by value to Volkswagen AG amid rising concerns that global growth is slowing following the collapse of the U.S. mortgage market.

http://www.bloomberg.com/apps/news?pid= ... refer=home (http://www.bloomberg.com/apps/news?pid=20601213&sid=ankDOwTJriVM&refer=home)

Oh, and Germany is second only to China in exports.

[Harry Williamn]

No. Capitalism has always rebounded because human beings are always greedy it seems and as long as there is

human greed there shall be Capitalsim!

[oecarb]

No. Capitalism has always rebounded because human beings are always greedy it seems and as long as there is human greed there shall be Capitalsim!

I agree. But not American style capitalism.

[snowbird]

No. Capitalism has always rebounded because human beings are always greedy it seems and as long as there is

human greed there shall be Capitalsim!

Agree with you there Harry, and who has done a better job of showcasing this greed to the world in recent times than ....... The USofA, take a look at the Enron type scandals of late; little John Q Public is getting a ring side seat as scandal after scandal unfolds. John Q is now learning terms like ..... 'goldern parachute', 'soft cushion' etc.
Take a look at any recent trends in TV viewing, we sit there and marvel at what the Donald Trumps, and the Real Estate Mougals pull off; we plunk down big bucks to attend some seminar on .... how to 'flip' property because this multi-millionair tells us how easy it is to become him. Man, the US has been 'marketing greed' for a long time..... only now it's come back to bite them. But you are correct, because in this market as some loose home and savings, others (like me :oops: ) are hoping to 'capatilize' ..... my lament of late has been..... 'if only ah had ah little extra, ah wud clean-up'

[oecarb]

Un-American? Definitely, I think. Whatever happened to the Free Market - the darling of American Capitalism? :evil:


Oct. 14 (Bloomberg) -- Barack Obama and John McCain, both laying claim to the populist ground, have different approaches to implementing the financial markets rescue plan. The Democrat is focused on recapitalizing banks while halting foreclosures and creating new jobs, while the Republican wants to purchase and refinance mortgages of troubled homeowners.

http://www.bloomberg.com/apps/news?pid= ... refer=home (http://www.bloomberg.com/apps/news?pid=20601087&sid=agoIVK3xOols&refer=home)


Oct. 14 (Bloomberg) -- The Bush administration will invest about $125 billion in nine of the biggest U.S. banks, including Citigroup Inc. and Goldman Sachs Group Inc., in the government's latest attempt to shore up confidence in the financial system.

The proposed cash injections in exchange for preferred shares are part of a $700 billion rescue approved by Congress and follow similar moves by European leaders to unfreeze credit markets by helping beleaguered banks. The other companies are Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp., Merrill Lynch & Co., Morgan Stanley, State Street Corp. and Bank of New York Mellon Corp., said people briefed on the plan.

http://www.bloomberg.com/apps/news?pid= ... refer=home (http://www.bloomberg.com/apps/news?pid=20601087&sid=a0DqEDw4VVzE&refer=home)

American Capitalism is feeling the chilly hand of Populism and State Capitalism/Socialism. What next, I wonder? The socialist policies of FDR?


Roosevelt's first act as president was to deal with the country's banking crisis. Since the beginning of the depression, a fifth of all banks had been forced to close. As a consequence, around 15% of people's life-savings had been lost. By the beginning of 1933 the American people were starting to lose faith in their banking system and a significant proportion were withdrawing their money and keeping it at home. The day after taking office as president, Roosevelt ordered all banks to close. He then asked Congress to pass legislation which would guarantee that savers would not lose their money if there was another financial crisis. ....

......The government employed people to carry out a range of different tasks. These projects included the Works Projects Administration (WPA), the Civilian Conservation Corps (CCC), the National Youth Administration (NYA), Farm Security Administration (FSA), the National Recovery Administration (NRA) and the Public Works Administration (PWA). Other schemes adminstered by the Works Projects Administration included the Federal Writers Project (1935-39) Federal Theatre Project (1935-39) and the Federal Art Project (1935-43).

As well as trying to reduce unemployment, Roosevelt also attempted to reduce the misery for those who were unable to work. One of the bodies Roosevelt formed was the Federal Emergency Relief Administration which provided federal money to help those in desperate need.

Other legislation passed by Roosevelt included the Agricultural Adjustment Act (1933), National Housing Act (1934), the Federal Securities Act (1934). In August 1935 the Social Security Act was passed. This act set up a national system of old age pensions and co-ordinated federal and state action for the relief of the unemployed.

During the 1936 presidential election, Roosevelt was attacked for not keeping his promise to balance the budget. The National Labour Relations Act was unpopular with businessmen who felt that it favoured the trade unions. Some went as far as accusing Roosevelt of being a communist. However, the New Deal was extremely popular with the electorate and Roosevelt easily defeated the Republican Party candidate, Alfred M. Landon, by 27,751,612 votes to 16,681,913.

http://www.spartacus.schoolnet.co.uk/USARnewdeal.htm

[mammadon]

No. Capitalism has always rebounded because human beings are always greedy it seems and as long as there is

human greed there shall be Capitalsim!

Why is it greed? Human beings like to think that time is best spent and that inputs receive proper rewards. In that sense capitalism is natural, to a degree.

I mean. yuh set up a doubles stall, why go to all de trouble to make de bara, channa, sauces and ting if no one is going to buy it? This is the classical definition of profit, in that it's the reward for producing something.

[miktay]

Anyone who believes that contemporary financial markets are really free should send me several cases/cartons of whatever they’re drinking +/or smoking.

This idea is whimsical fancy at best, and at worst self perpetuating capitalist propaganda for the naive.

Take an everyday example: short term deposits at US financial institutions.

Were this a real "free" market why w/it be necessary for Federal Deposit Insurance Corporation guarantees of $100K?

Instead a free market for bank deposits would allow profit maximizing entities to offer a range of interest rates & terms. Over time some would prosper, rewarding their depositors, while others would fail inflicting financial pain 'pon its members.

To put it another way, a truly "free" market is chaotic ; but few investors have the fortitude to handle the swings of this type of dynamic system.

But a dynamic market is the best system to allocate capital to its most productive use, within certain bounds.

Markets, then, need to be “relatively” free to operate within the confines of govt regulation ; the amount of regulation dependent on the type of govt.

And this regulation has to be enforced. Otherwise, as weve all seen recently, it will lead to chaos.

[IN-A-QUANDRY]

All economists I see on Youtube speak doom and gloom for the american economy.

Conspiracy theorist have talked about gov't secret meetings about the imminent collapse of the american economy and the resultant civil unrest. They have deployed some troops for homeland security

[oecarb]

Why is it greed? Human beings like to think that time is best spent and that inputs receive proper rewards. In that sense capitalism is natural, to a degree.

I mean. yuh set up a doubles stall, why go to all de trouble to make de bara, channa, sauces and ting if no one is going to buy it? This is the classical definition of profit, in that it's the reward for producing something.

Trillions of dollars are invested in futures where actual bets are placed on the future value of stocks, shares, bonds, commodities, money etc. Then there are the derivative markets where trillions more are invested in packaged loans etc on behalf of pension firms, state governments and even foreign governments and citizens. Then there are the default swap options where firms are prepared - for a fee - effectively to insure other firms against any debt they might incur in their dealings on the stock market. This is reckoned to be about 55 trillion dollars or equivalent to the GDP of the entire planet.

These traders get seven and eight figure salaries. Yet how much all this money is actually involved in producing anything? :evil:

And, in fact, the venture capitalists would often buy a company, close it down and sell its assets to make a profit. Reward for producing what, again? :twisted:

[mammadon]

It's economics 101. Whether the definition applies in all cases to the real world is moot, but nonetheless it still is how profit has traditionally been justified.

[miktay]

Trillions of dollars are invested in futures where actual bets are placed on the future value of stocks, shares, bonds, commodities, money etc. Then there are the derivative markets where trillions more are invested in packaged loans etc on behalf of pension firms, state governments and even foreign governments and citizens. Then there are the default swap options where firms are prepared - for a fee - effectively to insure other firms against any debt they might incur in their dealings on the stock market. This is reckoned to be about 55 trillion dollars or equivalent to the GDP of the entire planet.

These traders get seven and eight figure salaries. Yet how much all this money is actually involved in producing anything?

And, in fact, the venture capitalists would often buy a company, close it down and sell its assets to make a profit. Reward for producing what, again?

To answer your question, for producing hot air.

About a year ago read of a 32 yr old GSachs London trader who rcd $30MM in annual bonus: almost $1MM for every year he's been alive !

The underlying issue is the 3 decade old expansion of credit has driven the financial sector share of GDP to expand fm 10% to 40%.

And it is in this inflation that frankenstein finance has run amok, w/mathematical models of asset valuations that attempt to predict the unpredictable, namely human behavior.

Clearly this is going to change. Finance needs to shrink. And in this deflation it would not be surprising to find once high flying financial gurus, become charges upon the state. (read: unemployed)

[oecarb]

Clearly this is going to change. Finance needs to shrink. And in this deflation it would not be surprising to find once high flying financial gurus, become charges upon the state. (read: unemployed)

I don't know, Miktay. My wife's cousin's son has a friend (a trader) who retired at 27 - a millionaire. She was exceedingly happy after making her second million and couldn't see why anyone would ever need more than that. She is on a world cruise at the moment and enjoying every minute of it. A girl after my own heart.:lol: :lol: :lol:

[oecarb]

All economists I see on Youtube speak doom and gloom for the american economy.

Conspiracy theorist have talked about gov't secret meetings about the imminent collapse of the american economy and the resultant civil unrest. They have deployed some troops for homeland security

Even I half-jokingly posted this on the politics thread: :twisted: :twisted: :twisted:



too quiet in here :o

I just waiting for the stock market to fall a little more so Bush could declare a state of emergency and postpone the elections. Indefinitely :evil:

[miktay]

Clearly this is going to change. Finance needs to shrink. And in this deflation it would not be surprising to find once high flying financial gurus, become charges upon the state. (read: unemployed)

I don't know, Miktay. My wife's cousin's son has a friend (a trader) who retired at 27 - a millionaire. She was exceedingly happy after making her second million and couldn't see why anyone would ever need more than that. She is on a world cruise at the moment and enjoying every minute of it. A girl after my own heart.:lol: :lol: :lol:

She marrid? :D

Truth be know had I had same opportunity I'd have milked the system for all it twas worth and w/now be planting peas in Tobago.

But not everyone made out like bandits...the back office ppl, the clerks, custodial, receptionists etc...where will they be when finance retrenches?

As with Enron, the "stars" will find alternate/continued employment/golden parachutes, but the everyday working slobs who pull 9-5 for small $ will find themselves pon the breadline.

Hope that Mr. Paulson's plan has made adequate provisions for their loss of wages.

But sadly, it probably does not.

[Harry Williamn]

snowbird: Canada is no different than the USA when it comes to Capitalism because has not the extreme greed

of the " Imported" people into Canada deprived the native Indians of their Homeland ?

Is not Canada a place where the rich get richer and the poor get poorer or and Canada is is run by " Old rich

white men !" Just like Europe and America so please,give me a break here and be impartial!

[TRVC]

And, in fact, the venture capitalists would often buy a company, close it down and sell its assets to make a profit. Reward for producing what, again? :twisted:

Sorry, I can't let this one slide. Venture capitalists do indeed invest in companies to make a profit. They do so, however, by investing in the shares of the company. They only make a profit if those shares become worth more after they have invested. That happens only if the company increases in value.

Quite frankly, I have never heard of a VC investing into a company with the purpose to shut it down.

[oecarb]

And, in fact, the venture capitalists would often buy a company, close it down and sell its assets to make a profit. Reward for producing what, again? :twisted:

Sorry, I can't let this one slide. Venture capitalists do indeed invest in companies to make a profit. They do so, however, by investing in the shares of the company. They only make a profit if those shares become worth more after they have invested. That happens only if the company increases in value.

Quite frankly, I have never heard of a VC investing into a company with the purpose to shut it down.

I will seek out examples. But there have been cases here in the UK where a long established company might have their factory on land that could get permission for housing, for example. A VC would value the land as worth more than the business and would then acquire the business over a certain period, close down the business, apply for planning permission and sell off the land, making a hefty profit and putting dozens of people out of work.

[Harry Williamn]

Think again about the greedy and fraudlent VC who engages in "shorting the stock" so he may not litterally

destroy the company out right but simply work to push down its value to maximize the "shorting stock "profit."

[TRVC]

Think again about the greedy and fraudlent VC who engages in "shorting the stock" so he may not litterally

destroy the company out right but simply work to push down its value to maximize the "shorting stock "profit."

I think you are confusing VC's with hedge funds. They are very different animals. VC's do not, in fact cannot, short stocks. It's simply not a part of the VC business model.

[oecarb]

What I find ineresting is that this mess started with people borrowing more than they could afford or being inviegled into borrowing more than they could afford and then withdrawing equity from their homes to live a life they could not afford unless house prices keep going up forever.

Now the whole thing comes cashing down, people are saying that the cure is to get the banks lending again and to get people spending again and, hopefully to get house prices moving again.

It's like trying to cure an alcoholic by giving him a couple of barrels of beer. :twisted: :twisted:

Personally I can't see it working. :evil: :evil: :evil:

[miktay]

A majority of the financial crises of the last century, the great Depression, LTCM, S&L Crisis, Dot Com bust, were precipated by a "new" idea (aka this-time-its-different )and fueled by the availability of easy credit.

Human nature is a hellofating...

[oecarb]

A majority of the financial crises of the last century, the great Depression, LTCM, S&L Crisis, Dot Com bust, were precipated by a "new" idea (aka this-time-its-different )and fueled by the availability of easy credit.

Human nature is a hellofating...

Yep. But some people get very rich every time. :twisted: :twisted: :twisted: