The Lotus

eroonman, Free Markets correct themselves?

Is this Smith's Invisible hand  - to this day invisible and even less tangible?

Even IF markets corrected themselves, at WHOSE EXPENSE and FOR HOW LONG!?!

Every fascism is an index of a failed revolution - Walter Benjamin

there are so many naive

there are so many naive comments from so many. Must be all those new arrivals living in US.

A couple just for illustration.

"In the case of the US banks it is the government bailouts that is
causing the problem. Had the fear of bankruptcy remained on the table,
the banks would NEVER have risked everything on the questionable
practices which were legislated into being by the Republican Senators"

first off when I last checked the "bailouts"were loans. the major banks  paid back with interest and warrents. Taxpayers averaged about 15% for less then a year.  Second the heart of this crisis started in 1999 when Fannie and Fredie issued guidelines for "undocumented loans"  As a note when those evil Republicans sent an auditor to Capital Hill, it Was Chris Dodd and Barney Frank that said they were financially secure. This is important because 95% of loans goes through them.

Next, democrats get more money from Wall St then Republicans..and lastly the pary in majority during the formative years of this were Senators that were democrats

Look it up

Lastly, capitalism works best in free markets. There are no "free" markets anywhere. Don't kidd yourselves. Most of the time as you noted above politicans try to redirect capital by doing stupid things to tax code or punitivety raising fees. When government says it can do something for the same price , you have to remember one thing. The same price yes, but government pays no taxes, does it the same way for the next 50yrs with no improvement and never is accountable.

======================

"markets essentially are political inventions"

this ranks as one of the most foolish statements ever written. From the time of ancient civilization markets were places where buyers and sellers met.  Politics come after the success of markets. Whether its a crossroads, or an exchange its success has politicans following them and exploiting, not inventing them.

someone said" free market corects itself."

But who pays for it?

"While the burgeoning extrapolative criticism of capitalism ..."

the poster must be chairman of federal reserve bank or something to propose such unabated theory about accomplishments of capitalism.

love to see some sort of proof.

Niloufar,While the

Niloufar,While the burgeoning extrapolative criticism of capitalism is understandable, it is anecdotal giving us erroneous impression about this system. Enigmatic reoccurring ups and downs are known to be the inherent features of capitalism with distortionary consequences. We know their causes; however, we are unable to predict them reliably.  This crisis should not be taken as a litmus test for capitalism nor should it create a mental incredulity for us, excoriating the system. Capitalism is based on sound principles it has worked remarkable well in recent decades and will work to restore itself. We need to take a solace in waiting. Please read this article:

 //iranian.com/main/2009/nov/limits-capitalism

Eroonman

Part of what you say is true. In addition if Fanny Mae and Freddie Mac were not there home values would not have been inflated.

However the other side is a very brutal jungle as you point out. I don't want to be in the jungle. I dare say most people do not want it. The process of free market boom and bust is incredibly painful. It destroys people and families. I rather not have free market and what goes along with it. Just my personal preference.

WRONG! Free Markets Correct Themselves!

The main problem with Capitalism is when the players cheat. Cheating is usually done to get around a law that the market doesn't like or finds a loophole around. Additionally, the involvement of the government to police the market often causes the problems we associate with a mis-labeled free market.

In the case of the US banks it is the government bailouts that is causing the problem. Had the fear of bankruptcy remained on the table, the banks would NEVER have risked everything on the questionable practices which were legislated into being by the Republican Senators who were on the payroll of the banks and bribed to create the laws allowing derivatives on mortgages.

Look it up.

Had Greece been left to finance itself on the open market, and not been forced to join the EU and adopt the vastly over valued Euro instead of it's own Drachma, it would be much better leveraged, and could barter it's own way out of this mess, instead of requiring the trillions from Germany and the richer nations who have to pick up the tab now.

The comfort of knowing you will be bailed out, and not market forces, it seems, is the cause of the current crashes and risky or immoral behavior we like to blame on capitalism. When Capitalism is entangled in governments and "creative banking" laws, it of course, fails.

The key thing to remember when applying the law of the jungle is that sometimes a cute furry creature has to die a horribly painful death, so that the rest of the system can go on healthier. This hasn't happened with the current spate of corruption and failures.

If just Lehman Bros. had been allowed to die, and the rest of the banks known there was no bailout, they would have cleaned up their act very quickly. They probably would not have had an act to clean up in the first place.

If Greece were now cut loose from the teat of the EU, Portugal and Spain would clean up their act immediately instead of trying to get in line for the next big handout.

So it's not the fault of capitalism, per se. But the fault of governments and a social service that seems eager to taek care of thigns that really don't need that much care. Don't get me wrong, there is a need for government and laws, but I don't think it is regulating or bailing out banks. You and I can do that far better by taking our money elsewhere, and not believing the broker who spouts BS.

Niloufar, ha!

You stopped me in my tracks with your succint post! ;) 

But fear not, there is more! ;)

Afterall that, I expect that my point was (which you were hinting at? but not quite) there isn't and cannot be  a "limited liability", because that would include other concepts, eg responsibility and a form of (how shall I put it) 'utilitarian/humanitarian economic pragmatism'...And we'd get back to "Capitalism with a human face" again.

Free market Fundamentalism and that supercilious idiocy called "market democracy", cannot (together with corrupt global  institutions), under any legalized concept be limited.The concept of the savage creature currently running amock, simply changes location, but it does not change per se. It is forced to rot, it doesn't even rely on capital anymore, but fictitious, insane, imaginary credit and derivatives! It's beyond a$$strology!

It can only be contained and moved elsewhere. Limited or Unlimited. It's the nature of the beast...( Some analysts say that this is why Iran as a sovereign nation is in such trouble, not because of its alleged independence...)

So yes, let's call in the beast and get it to behave, but let's also think
of other ways to run the planet, which doesn't require all the
atrocities...

Again thanks for the blog.'Been on the forefront of my mind lately...Teenage years, early twenties catching up with me...

Every fascism is an index of a failed revolution - Walter Benjamin

The Capitalist

market like any other system needs to  regulated. There needs to be rules and boundaries. The problem in the US in particular is Libertarianism gone amok. Its proponents traded regular religion for free market religion. Big companies then managed to socialize risk while privatizing gain. Not a bad deal for them. 

Recent behavior proves that not even the stock holders benefit. The only ones who gain are the people running the show all others get messed up.

thanks marjaneh

yes indeed i am staying within the boundaries of the system.

and 'limited liability' is probably the system's main liability right now. :)

Peace

Great blog Niloufar ;)

I'll have to look into it more in detail later, but suffices to say, that in a way, you are still in the process of showing the many different faces of "capitalism with a face". Some faces being more ugly than others.

Surely, "limited liability" is in fact part of the current "global free-market"  "libertarian" fundamentalism ?

(somehow within libertarian ideology its utilitarian aspects have been forgotten or totally misinterpreted and endocrinated otherwise, or decided it was good enough to impose a form of 'soft fascism' of solicited desires in 'planned obsolescence '....and other idiocies...e.g. not even "growing" on capital but imaginary insane credit....)

Capitalism feeds on crisis. It isn't rotten fruit within its own system. It has to feed on crisis and catastophes ,by its own definitions.It's based on two very distinct mental illnesses: greed and competition. Other hominids aren't this sick.

Oh and in fact, shareholders are very much responsible, just not held to account....

and I'd take the "limited liability" notion even further. Large chunks of  land are being bought by nations all over the globe. Big business is buying up copyright to natural seeds of crop etc.. The list goes on! 

And no global authority to hold them to account or to enforce existing laws.

It's damned and damned dangerous.

Every fascism is an index of a failed revolution - Walter Benjamin

As simple as that!

Equating the ills of stock markets which are the brokers' casinos, with the nature, and the spirit of capitalism is a grave mistake.

The progress of humankind is, without a doubt, the direct result of the free market.

Midwesty e aziz

ghorbanet

Abarmard jan!

Chakereem!

Fair enough

I take that :)

hamsadeh jan,

Sometimes I think I caught you on the bad mood, or maybe it was my own twisted perception.

Have you noticed when the US prime rate for interest is 0% still you can't find money with a 0% interest rate? I've seen the minimum of 5%. If each bank in the circulation of the money adds just .5% then there is about 10 banks sitting between me and the Fed.

I hope I got my facts right. Let me know if I am confused.

Abarmard jan! Exactly!

It's the perception! Something might look primitive to you but it is simple to me! :O)

midwesty

i don't think i've ever beaten you or tried to kill you.  making money off of someone else's money is called a ponzi scheme (google for definition).  making money off of someone else's money without risk is called arbitrage (google for definition).  both are illegal as far as i know.  i'm not familiar with the scenario that you described but it seems to be missing a piece.  remember, it's ok to make money off your own money (capitalism) which always holds some sort of risk.  even in a ponzi shceme, you can make money (if you're the initiator or one of the first members).  but there's a risk of losing money if you're a late-comer.  arbitrage is slam dunk cheating and is not allowed (at least on the books ;).  if there were dual interest rates in this country and the bank had a lower rate, you can become infinitely rich (if the bank keeps loaning you money and you keep paying back penalty and keep the banks happy)!

Simplicity vs primitive

They are not the same.

Abarmard jan,

In my experience in the most sophisticated machines with computers and even more sophisticated control systems, the last resort is always something primitive and mechanical like, pull this, push that, kick up or something... ;O)

Nilu jan,

Sorry I am a new convert to red-neckism, there might be still a slim hope that I can be converted back. B^)

Midwesty

In a very short and compact way to explain:

Capitalism is based on private ownership. That combined with Adam Smith ideas of "invisible hand" where indicates that people behave best when they consider their own interests. Also coming from utilitarianism ideologies, where you do everything based on your own self interest. It is primitive at best.

Free market goes hand in hand with capitalistic societies because ownership rights and competition.  Technically there is no such a thing as a free market. Free market has failed historically and during recent market failure that once again proved without a precise government intervention and policies, market can not function. An idea feared by libertarians and neo-conservative camps.

To give you a better understanding about the difference, the Islamic Republic of Iran is a capitalistic system (not purely) but doesn't follow free market rules and regulations (not all by choice).
Hope this helps.

Hamsadeh jan!

Don't beat me again if I ask this. You said:

"case in point, the banking crisis in iran where many loans have been
defaulted is because many who borrow large sums of money (at low
government rates; typically irgc companies), and rather than paying
their loans back, they prefer to get penalized (by the bank) and in
turn, loan their money at higher market rates.  basically, making money
off of money.  e.g. take a loan at 5% rate, get penalized 1%, and earn
10% = 4% return.  that's just an example, i'm not going to research
actual numbers."

Isn't it the case that also US banking system works where the fed lends money to the second hand bank except the 10% reserve and then the next bank does the same thing and loans the money to the next bank with the exception of 10% reserve and so forth until it gets to the consumer?

Hyper Capitalism and its intended consequences

The Melancholy Deconstruction of a Once Great Society

, Mr. President, "Find Your Inner F.D.R."

Apparently, of the 300,000,000+ million people in the United States, approximately 100,000,000 million of them are poor -- and half of them are malnourished:

100 million people, fully one-third of the entire U.S. population, are at or below "200% of the federal poverty line of $21,834 for a family of four", which is a needs-measure made lame by the fact that no family of four can actually comfortably live on such a low annual income.

• Pluto's diary :: ::

//www.dailykos.com/story/2010/5/24/869332/-The-Melancholy-Deconstruction-of-a-Once-Great-Society

midwesty

you really are such a total red neck! :) super!

my discussion is from within the system, not as a message of subversion. during the .com crisis, there was not much mention of major fraud or bonuses paid to those who designed a crash. people did not lose their homes. this is not the same thing. the crisis of legitimacy is real in my view. people are questioning it more and more on both continents. the riots in greece were basically motivated by taking on the banks.

Peace

hg: Loved your title.

hg: Loved your title.

These posts by IRI fan club are getting funnier!

The "problem with Capitalism" has been well defined, analysed and published from a scientific perspective - not based on some mumble jumble uttered by a certain hallusinating arab 1400 years ago- by a guy called Karl Marx, nearly 100 years ago. Islamic Republic's "ideology" and "economic [policy" (for want of a better words..." are based firmly in a gone bye feudal system. Islamic Republic fan club must first wait for their beloved "republic" to reach the capitalism stage before complaining about it, and the way things are going, fat chance of that......

midwesty

the privileged class that traditionally held power (and capital) in the economy do not like a market system where wages are determined and where there is economic uncertainty through market adjustments.  you can still be a capitalist in a market economy; however, today's market economy is much more sophisticated where capital is not the necessary ingredient to succeed.  for example, human capital (education) and innovation (novel ideas) may even trump the traditional capitalist (money holder). however, in places such is iran where there are high unemployment and underemployment rates and where innovation is stifled by lack of patent and copyright protection, the economy operates more in the pure capitalist sense than in the u.s.

case in point, the banking crisis in iran where many loans have been defaulted is because many who borrow large sums of money (at low government rates; typically irgc companies), and rather than paying their loans back, they prefer to get penalized (by the bank) and in turn, loan their money at higher market rates.  basically, making money off of money.  e.g. take a loan at 5% rate, get penalized 1%, and earn 10% = 4% return.  that's just an example, i'm not going to research actual numbers.

in iran, you need money (capital) more than education and innovation.  that's capitalism for you.

Hamsadeh jan,

Please elborate. I am confused. I thought the capitalism was an outcome of freemarket policy? Don't kill me, just a simple question.

Well Nilu...

"in both the us and europe there is a serious crisis of legitimacy that
must be tackled or there may be consequences for the regimes in place".

No there is not. The "crisis of legitamacy" is fake. The "finical crisis" however is real.

The difference is:

Democrats to justify their economic policies ( i.e. to curb the market as much as they can and to regulate everything) have created a fictitious legitimacy crisis. By the way I am not mentioning adding insult to the injury that Obama did by rolling out his massive Bail Out plan. 

So you might ask, what about the real problem? The real problem has a cyclic trend that pops up now and then from one sector or another. In 2000 was in communication industries, now is in financial.

Should the communication industry collapsed we had to close down all the .com industry or more regulate them? So then we do the same thing to the financial sector?

One can argue that this is the way the free market operates to cleanse itself. AT LEAST it's better than crating an avalanche of problems after 70 years. Are Chinese senseless or primitive to move to the free market?

I know it's not the best system but I believe it's better than others.

This is from my red neck point of view!

Thanks!